The purpose of the national economy is to make the people happy. Poverty is fundamentally an economic phenomenon caused by the uneven distribution of wealth. Poverty arises from economic structures. It results from the imbalance between the production goods a country produces and the consumption goods it needs. Such imbalances cannot be resolved without correcting the economic structure.
Economic distortions between nations also affect the lives of their citizens and create poverty. If a nation cannot self-sufficiently produce the resources necessary for its survival, it must procure them from other countries. The means are either trade or war. In other words, either through money or by force. Force is irrational.
Thus, the shortage of resources is addressed through trade, which involves monetary transactions. Wars cannot be initiated solely by the ambitions of a single dictator; economic reasons are always hidden in the background. Without correctly understanding these economic reasons, wars will not cease. War is an extension of politics and economics.
For the citizens of the conquering nation, it may be glory, but for the conquered, it is humiliation. The causes of economic distortions between nations must be corrected through structural changes that address the imbalance in distribution. Otherwise, it will only widen the gap between the rich and the poor.
The reality of the economy is determined by the relationship between production and consumption. Integrating currencies will not eliminate poverty because poverty arises from economic distortions. Without correcting these distortions, poverty will not disappear. Particularly, poverty resulting from international distortions may accelerate and become more pronounced with currency integration.
The essence of the economy lies in how much is produced and consumed. The true nature of the economy is the activity of living, producing, and acquiring the resources necessary for people to live, and how these resources are distributed. When viewed this way, the reality of the economy becomes clear. Few countries can produce all the resources needed for their citizens to be self-sufficient domestically.
There are tangible and intangible production goods. Tangible goods are visible items necessary for living, such as meat, fish, oil, and buildings. In contrast, intangible goods are invisible and formless, like finance and services.
Russia is strong because it can procure most of its resources domestically. In contrast, Japan’s self-sufficiency rate is remarkably low. This point needs to be correctly recognized.
Here, the utility of money is crucial. Resources that cannot be self-sufficiently produced must be procured from other countries. Money demonstrates its power in such situations. This is the utility of money.
Money is a means of distribution. It is also a means of exchange and payment. Ultimately, it comes down to money. In other words, the only way to procure scarce resources is by producing surplus resources and selling them to other countries to obtain money.
The reality of the economy becomes obscured by the movement of money. When considering a nation’s economy as analogous to company management, the reality of the economy becomes clear. If the economic value produced by a company is constant, and income rises annually, profits will be squeezed by costs unless prices are raised, eventually leading to deficits. Constant economic value means constant sales.
To maintain profits, prices must be raised to cover rising costs. However, even if prices are raised, if sales volume does not increase, the economic value remains constant.
The movement and circulation of goods are driven by income and expenditure. Cash sales, taxes, costs, income, and living expenses are all elements composed of the inflow and outflow of money. Cash sales are income for the seller and expenditure for the buyer. Taxes are income for the government and expenditure for taxpayers.
When tangible goods are insufficient, they must be supplemented by intangible goods. It is essential to distinguish between cash flow and profit and loss. Profit is a concept in profit and loss, while the balance is crucial in cash flow.
The market is a mechanism and place for distribution. Capitalism and market economies cannot be understood without understanding accounting. Goods bought in the morning are sold, and the difference between sales and purchases is profit. However, in modern accounting rules, profit is not called profit. Profit is the balance.
The perception of debt has also changed. For money to function effectively, its utility must be widely recognized. Taxes were utilized for this purpose, and paying taxes with money spread its utility (tax currency theory).
Some managers and politicians mistakenly perceive costs as a hindrance and aim solely at cost reduction as an economic goal. This is a significant misconception. Costs are essential. Therefore, indiscriminate discounting and cost-cutting will cause the economy to lose its substance and weaken.
This is because costs are labor costs. Costs are a lump of labor costs. Even products are lumps of labor required for their production, and the same applies to raw materials. Understanding this reveals the essence of the economy. The purpose of costs is distribution. The nature of labor costs reflects the nature of the economy. The function of labor costs is primarily living expenses. The current economy is based on wages.
What is important is that labor costs are wages and living expenses, meaning they are a means of distribution. The key here is distribution. It is essential to consider the impact of labor costs on management. The modern economic system’s consistent trend is to manage labor costs at a constant level. This trend is the same in liberal, socialist, and totalitarian economies.
Ultimately, the goal is to unify labor into wage labor. How many people must be supported by the income earned by one person? A company centered on people in their twenties will have a center of people in their sixties after forty years.
If sales remain unchanged, meaning production volume remains unchanged, but labor costs rise, the conditions differ between times of growing sales and stagnant or declining sales. This is a matter of preconditions.
The crucial point is that income is labor costs on one hand and the source of living expenses on the other. The economy should be considered based on a person’s lifetime. The fundamental economic issue is balancing the economic value a person can produce in their lifetime with the consumption goods necessary for living. If a person cannot obtain the consumption goods necessary for living while still alive, it means the economy is not viable.
The issue is that there are periods in a person’s life when they can engage in productive activities and periods when they cannot. The fact that the period during which a person can engage in productive activities is limited means that, at any given time, there are people engaged in productive activities and those who are not.
The problem of declining birthrates and aging populations is symbolic. The key is the part of life where one cannot earn income through work. In a family-oriented society, the family has supplemented this part. After the war, the state took on the responsibility of old age, but with declining birthrates and aging populations, it is becoming uncertain how much longer the state can support the elderly. In reality, companies are taking on the responsibility of people’s lives.
As people age and can no longer earn income, they become anxious about the future and try to balance the books within a single year. They act based on economic rationality.