As economic activities become active, people and services can be produced more and more, and people can be enriched by being used in the hands of companies and households. In that sense, it can be said that economic activity continues to be active, that is, the economy continues to grow. The future is uncertain, but households and companies should think about the future and consider planned consumption and investment. Rather than repeating rapid growth and contraction of the economy, it is easier for those who grow steady and sustainable rather than rapidly to conduct the planned actions (consumption and investment), so how can the economy be stable and sustainable Whether it can achieve growth is an issue of economics. In the real economy, it is hard to achieve stable and sustainable growth. Even if there is a time of positive growth, we can not grow plus with negative growth, or it will not last long and we will end up with negative growth, repeat rapid growth and sudden descent. If you use the word economy, it seems that economic cycles and recession alternate cyclically. It is studied why the economy circulates and why it can not keep on booming.
There is a theory that the economy circulates as a representative thing, if the economy overheats, it will be too cold due to that reaction. When the economy is growing rapidly, both households and companies think that this state will continue for a while and will further expand production and consumption. Prices will rise as consumption increases. Even in consumption, things like durable consumer goods will not be purchased for a while when purchased. Also, purchase can be refrained when price increases exceed wage level rise. For these reasons, it will come time for consumption to retreat. Companies that have continued to expand production will have a large inventory when they are aware of the recession of consumption. Careful investment in raw material procurement and capital investment to expand production, production of goods and services, consumption and investment will also decline. This is recession. However, the recession will not last forever. After a certain period of time, consumers will replace old durable consumer goods, and if companies continue to reduce production, stocks will run out. Eventually, consumers begin to increase consumption and producers start to increase production. The economy recovers and returns to the state of the original boom. This is the business cycle. The keyword here is the change in consumption. In addition to things that are constantly consuming food and daily necessities, utilities and other expenses, things that require demand at certain intervals, such as home appliances, automobiles, etc., unnecessary things (travel, leisure, jewelry items , Real estate), consumption is not fixed. Even on the part of the enterprise side, as production plans are produced and produced by looking at consumption trends and economic conditions, production volume will also change. Changes are also seen in financial markets. Stocks, interest rates, and exchange rates are changing everyday. In other words, the state of the economy seen by economic indicators is constantly changing.
If the economic indicator turns into independent disjoints, it may be averaged over the whole and there may be no macroscopic change. However, if the change in the economic indicator does not become independent separations, and if some indicators move in the same direction by chance, and because some indicators have declined, other indicators will be linked by the influence If it becomes a situation of falling, the whole economy can change dramatically. There are the following which can trigger the entire economy to change.
Circulation of increasing or decreasing production side inventory caused by consumers' consumption, such as durable consumer goods, there is a wave, consumers are catching the wave of consumption, there is a delay in adjusting the production plan etc. It is that. When consumption diminishes and stocks are accumulated, production declines and inventory decreases as consumption recovers. Inventory has periodicity. The normal slow economic cycle is thought to be explained by this.
Capital investment, once invested, will not be renewed until facilities become obsolete or aging. The average amount of investment will not change if each company performs capital investment on a time-to-time basis, but at a certain timing (eg, economic recovery period, technological innovation period) many companies will If you do, waves will occur in the investment amount of the entire economy.
Although the above circulation gives an explanation of the case where circulation of economic cycles and economic cycles are repeated "in a regular cycle" in a so-called fixed cycle, when looking at past history, sudden and sudden economic recession (economic shock) There are not many cases that have been hit by. In Japan, there are three economic shocks: oil shock (1973), bubble collapse (1990), and Lehman shock (2008). After a relatively long period of high growth, the economy suddenly declined. The cause is caused by external shock rather than inventory factors and capital investment factors like the normal business cycle. Oil shocks caused by oil price hikes by oil producing countries, land transaction regulation and the collapse of the bubble due to land price / stock price plunge, and the collapse of financial institutions in the United States and the collapse of US shares, such as the Lehman shock.
The growth of the economy is that GDP continues to rise, the economic boom continues, but how can it be said that it is a good thing? The ideal of society is that people live happily. This is spiritual and it is irrelevant to economic growth measured by production volume. It can be said that it is desirable to measure people's happiness and increase it. However, how to objectively measure the amount of happiness is a challenge. Measurement of happiness amount and measures to expand it are studied also in economics. On the other hand, there is research that uses economic richness as a proxy variable of happiness degree which is difficult to measure. Analysis of the level of happiness and the level of GDP generally means that the higher the level of GDP, the higher the degree of happiness in consciousness survey is. In other words, it is thought that raising GDP will also increase the happiness degree. Because GDP is measurable, measures to grow GDP are indirectly measures to increase happiness. The argument that the increase in GDP is positively correlated with happiness can also be considered from the viewpoint of Maslow 's self - actualization theory. Humans have a desire to survive as the first desire. Economically speaking, it is whether the daily necessities of clothing, food and dwelling are sufficiently supplied. The next step is social desire. This involves things and services such as communication means, transportation and information equipment. In the third stage there is a self-realization desire. Various things and services can be thought of as a tool for that. If a certain desire with a high priority is satisfied, another desire at the stage above that is born. Economic richness is a necessary condition to satisfy it. Of course it can not be said that sufficient conditions (economic wealth can not affirm that people's needs are satisfied and happiness).
Economic growth is an increase in the amount of products produced by the economy. Then how do they increase? Economic activity is moving in circulation. People earn money by labor at the company, so they buy goods and services. Revenue is earned because the income of the company is distributed. So where is the income of the company .... This is because people purchase the company's products and money enters the company. Then where does the fund for people purchase are from ... · · ·. We will provide labor to the company and receive pay as compensation. After all, it is a circulating argument that chicken is the tip or egg is ahead. Just because money and goods are circulating in a row, does not anything come out from there? Households and companies act as producers of labor, something or service at one time and as consumers of goods and services, sometimes as goods and services. B consumes what A produces and A consumes what B produces. Meanwhile, money moves from A to B or B to A, not money will be produced. However, things and services are produced and consumed. In other words, what people want to consume is produced and consumed.
Suppose that two people produce two a and two b, respectively. Two people can get two of a and b if you take one for yourself and barter one against the other. If we extend this barter, even if each person produces one thing, if we produce more than we consume, we can get many things by barter. If you hand things you made to others and receive money and you get the goods with that money, money exists only as an intermediary. Money can be exchanged for goods to create value. The work is produced by labor. You can produce more at the same time by using tools in labor. If you introduce more advanced tools you can produce even more with the same working hours. Advanced tools are. We will create new products and services that could not be produced without using it. If the input of labor is increased, if you introduce more tools to sophisticated tools, you can produce and consume more valuable items and services with more quantity. The value produced by the economy is made possible by increasing labor input and increasing the amount of capital (tool) input.
There is a limit to the working hours of the day. An increase in labor input is achieved by an increase in labor participants (labor force) rather than an increase in the working hours of a single person. When the number of workers (labor input) becomes 1.2 times, distribution per capita will not decrease if the product is 1.2 times or more. However, labor input has physical restrictions. By increasing the amount of capital input, we can further increase production volume. In addition, even if the amount of labor input is constant, we can produce more products and services even in the same working hours in workers training and training. Even for equity the input is measured in terms of the amount, so if equipment with higher production capacity is available at the same price as before, even when the amount to be put in the capital is constant, every time the equipment is replaced with new equipment Production will increase to. Even if labor input and capital input are constant, there is a possibility of increasing production, which can be interpreted as advancement of science and technology. The conditions for increasing the production volume are three, labor input and increase in capital input, advancement of science and technology. What will be the driving force for sustained economic growth? Labor input will increase as the number of workers increases, but there is a limit to the increase in the labor force. Also, increasing the number of hours worked will result in less leisure time, which makes it less affluent. Regarding capital input as well, there is a limit to expansion as long as it is land and building machine equipment. Also, as capital becomes obsolete, capital wear loss will increase as capital expands and maintenance costs will increase if you try to maintain the scale. Therefore, there is a limit to expansion as well. On the other hand, science and technology has no limits of progress. It can be said that the economy has achieved sustainable development through technological innovation.
How has the economy continued to evolve? What is most needed for people is food, which has been produced from foodstuffs. The most primitive form is to produce your own food (cultivation, hunting etc) and consume it yourself. In this case, each person is produced only as much as he needs. Suppose you are handling some of the things you produced to others by barter and instead receiving what you do not produce. It is an incentive to produce more than you consume. Even if there is no change in the physical quantity that gets food, the kind of food will increase.
If people only want food, the scale of production will stop here. People's desire is that when food is filled, the desires of clothing, housing grows, and when it is satisfied, the desire for another thing increases. Depending on the desires of people, not only foodstuff production, but also clothing production, housing production and living supplies production are added, production increases. Increase in labor, capital, science and technology can increase production. The reason that economic growth continued is due to the expansion of types, rather than increasing the amount of things people want. When the grocery is filled, desire clothing, residence, and it spreads to some extent, desire to expand to home appliances, education, health, travel and entertainment. Recently, information equipment and information itself are consumed by people. Expansion of the products produced is made possible by increased capital and technological innovation than by increased labor input. In food production, each individual produced, each production had its limit. Then the manufacturing industry will develop. The manufacturing industry is a labor-intensive industry, which has improved labor productivity (the amount of work produced by one worker) by concentrating workers, injecting capital, the power of technological innovation, and the economic effect of scale. The development of labor-intensive industry promoted migration of population from rural areas to urban areas, changes from agriculture to manufacturing industry, changes from rural to urban areas became the driving force for economic growth.
When it is materially satisfied to some extent, the service industry will develop as the next stage will become the desire for education, health, travel, entertainment etc. Many kinds of goods and services are delivered to people by transferring production from agriculture to manufacturing industry and to service industry. Since knowledge such as ingenuity and technical innovation has accumulative ability, labor productivity improves with time. Education and training also improves labor productivity. Does economic growth have limitations? The manufacturing industry is susceptible to technological innovation, but service industry is not so. Although higher value added services will be developed through trial and error and idea proposals, people's time (24 hours) is limited, and there is a limit to expanding the service industry's production due to high added value. In developed economies, where the service industry has become mainstream, it is difficult to keep up with high growth and low growth. In the manufacturing industry, the volume of production can continue to grow with the development and diffusion of higher added value products through technological innovation, and production technologies that can be mass-produced at a lower cost. However, when society is filled with goods, growth may slow down. In the service industry, there are many parts intervening by humans, technological innovation based on the use of natural law is ineffective, development of new high value added services, development of production technology enabling mass production at lower cost It is not as much as manufacturing. Therefore, in the economy centered on the service industry, growth will be moderate. In summary, economic growth can be explained in four stages.
Agriculture is at the center of the economy, relatively small farmers produce agricultural products throughout the country. The wage level is low.
Labor intensive industries (mainly manufacturing industries) develop in urban areas, local rural farmers flow into urban areas as labor-intensive industry workers. Employees move from primary industry to secondary industry. By developing secondary industries with high productivity, both economic power and wage level will improve.
As the manufacturing industry develops, among the manufacturing industry, it shifts from light industry to heavy machinery industry and high-tech industry. Production of industrial goods expands, and when it produces more than domestic consumption, it will become exported. By using cheap labor in rural areas you can export industrial goods with price competitiveness. With the development of industries with higher productivity among secondary industries, economic power and wage level are further improved.
Consumption of services (entertainment, travel, eating and drinking, education, medicine) expands not only foodstuffs, industrial goods (such as home appliances), but also consumption increases as the standard of living of the people increases. As demand increases, tertiary industry develops. As the domestic wage level rises, manufacturing costs increase, export competitiveness, imports of overseas goods increases as domestic consumption increases, and the state shifts from the state of export excess to the state of import / export balance.
As a driving force for growth, there are demand side factors and supply side factors, and they can grow only when there is power of both the demand side and the supply side. On the demand side, there is a desire to have many more kinds of things and services. As long as there is no need for goods and services, they will not be produced and the scale of the economy weighing will not increase. If there is a desire and a company expects to be able to sell at a price that exceeds the production cost, it is produced and provided to consumers. Consumption will increase. On the supply side, technological innovation will make it possible to offer products that meet consumer needs, production will be possible at a production cost below the anticipated market price, or physical production per unit time can be increased Well, these factors increase supply. Stable growth can be realized only when both demand expansion and supply expansion are complete. Expansion of demand alone leads to price increases, expansion of supply alone leads only to price reductions, not increasing the amount of social wealth (accumulation of production).
Whether the manufactured goods and services are consumed (consumed by the consumer) of the products and services are made to be almost zero or invested by companies (whether the economic value of the investment is not zero, others It is either to produce economic value of the. If consumers consume more, if more companies invest, the production will increase according to demand and the economy will grow. Consumer's desire can be thought of in the development stage theory. First of all it is food necessary for survival. Next is clothing and housing required for daily life. When it becomes satisfied, you will want to have goods and services such as things, comfortable daily life, hobbies / entertainment, leisure, education etc. Before the economy grew, household expenditure was dominated by food items. As the standard of living improved, the demand for non-food items increased, which led to the expansion of production of various goods and services.
It is hard to grasp what needs consumers have. It is even more difficult to grasp the latent needs of goods and services that do not exist at present. New products and services are constantly produced by companies repeating the cycle of introducing new things and services into the world in search of profits, and only those that have won the support of consumers and then survive and production is continued It will grow and make the economy grow. However, one day is limited in 24 hours, people who are not infinite in both physical strength and intellectual power can not consume a lot of things and services at one time. Even though it is possible to consume more attractive products at the same price, the economic statistics calculate by the amount, so the improvement of quality of life does not appear as an increase in the amount of money. However, even if monetary economic growth can not be obtained, the qualitative improvement of living can continue to rise due to the company's product development and technological innovation. The economy has a cyclical cycle, but the existence of goods and services necessary for survival and living alleviate fluctuations. No matter how bad it is, a certain amount of food and daily necessities are consumed, so the economy will be kept above a certain amount as long as there is consumption.
As a factor on the supply side, improvement in productivity can be mentioned. Productivity is defined as the amount of product per labor input (eg per hour per person). It is interpreted that productivity has improved as the amount of products increases. How can we compare productivity of different products? We compare at the market price of the product per labor input. Market price is the economic value that consumers attach, so if you produce the same economic value even with the same labor input, you can interpret that productivity is higher.
Changes in the consumer's desire according to the improvement of the standard of living have become a power to improve productivity for the supplier as well. When foodstuffs were at the center of consumption, improvement in productivity of food products stipulated the productivity of the economy as a whole. Food products are traditional products, and in modern times productivity gains can not be said to be small. The weather factor is also large, and productivity can not be monotonically increased. However, when consumers ask for something other than foodstuffs, for example, if it is an industrial product, the economic effect of scale, the economic effect of division of labor, the effect of production innovation are easy to work and the productivity can be dramatically improved I can do it. Even if there are certain limitations on the economic effects of scale and the economic effects of division of labor, technological progress will continue constantly, so sustainable productivity improvement is possible. After that, the service industry developed. In the service industry, productivity improvement in quantitative terms is moderate, as economic effects of scale and innovation in production technology are difficult to work like industrial products. However, various services that took into account the needs of consumers were developed, and when a high market price was attached to it, productivity improvement in terms of monetary value was aimed. Recently, the IT industry has greatly developed. In the IT industry, information is produced and supplied, but the additional production cost of information is very low, and we can supply a large quantity of services at low cost. As a result, even if the amount of information to be produced is increased, the market price will remain low, and productivity gains in terms of monetary value conversion will be gentle.
Rather than making everything that you need, you can produce more as a whole by mass-producing and exchanging things specialized for one thing and made by others. By specialization, acquisition of expert knowledge, learning effect of production, economic effect of the scale described below can be obtained. However, the effect of division of labor was recognized in the historical old economy (providing simple items such as food items and services), but modern times where the provision of complicated and high added value products and services is mainstream In the economy of Japan, excessive specialization is also a negative factor. Even in corporate management, attention is more focused on diversifying, economies of scope by providing a wide range of products, and economic effects of consolidation.
The more you make a lot, the lower the cost per unit, the more the production volume per unit time is called the economic effect of the scale. If the fixed cost, which does not depend on production volume, is large, the average cost per unit can be reduced by mass production, and the economic effect of the scale appears. In addition, it enables more efficient production (cost reduction, increase in production amount per hour) due to the experience effect of mass production. In the manufacturing industry in recent years the economic effect of the scale is large, and it can be said that many things often become oligopolistic markets by large companies.
Knowledge in production is learned by actually producing it, know-how is recorded, widely shared by diffusion, and it will be handed down to later generation by inheritance. Some of them are obsolete, but obsolescence is brought about by new technological innovation, so production know-how accumulates as time goes by, so production techniques will improve. R & D of production technology also improves production efficiency by improving existing technology, discovering more efficient method, etc.
Economic growth will generally expand in size through changes from agriculture to industry and service industry. Long ago, when agriculture was the main focus, workers were hand-producing small amounts. Production per capita (labor productivity) also remained low per unit area (capital productivity). Industry can concentrate workers and improve productivity by using machinery equipment. It was easier to receive the benefits of advances in science and technology than agriculture, and we were able to further improve the productivity that was deemed to have limitations. Meanwhile, with the progress of mechanization, some of the labor that has been done by conventional workers has been replaced by machines. Workers engaged in mechanized work resulted in job deprivation, but the number of labor did not decrease. Work was generated to surpass and exceed the work reduced by mechanized, as the need for the workers as a whole was not reduced by the progress of mechanization. The meaning of improving productivity is to make the same production height with less labor input, but that does not mean that labor input will not be reduced. Workers will be released from physical labor. Human physical labor has something physically limited, but in machines the limit is higher where higher productivity is obtained.
As an extreme example, consider a factory that can be manufactured with machines only. "Workers" are just looking at the way machines are producing while drinking coffee. The products are bought by consumers, so the company gets sales. A human trying to produce a machine to produce it Sales will not change. If part of sales is distributed to workers, you get wages even if you do not have a job. However, managers do not need to hire if they can produce only with machines, so sales will be all of the company's profit. Workers can not earn wages.
I wonder what motivates a company to hire workers. It is because companies anticipate that they can increase profits by hiring labor and hiring labor. Whether the profit increases will be the condition that the increment (marginal profit) of the expected profit when employing one additional worker is more than the wage payment for that person. Even if 100% of the production is mechanized, there are many areas where mechanicalization is impossible in the future, such as machine management and monitoring, repair of troubles, accounting, purchasing, design and design. Even in a mechanized environment, there is a marginal profit for labor input, rather the marginal benefit for labor input expands with the effect of mechanization. This means an increase in wages.
Increasing labor input will increase production. Even if you increase the capital input amount, the same result will be obtained. In order to grow the economy, it is only necessary to increase capital investment and labor input, but both the capital investment and the labor input are determined by enterprise decision making. If we decide the amount of input so that the private sector will maximize profits, introducing more than that will result in overdosing and lowering profit levels. In the past, since the collapse of the bubble, companies were overloaded with equipment, excessive labor and excessive debts, which resulted in delays in corporate reform and performance recovery.
The growth of the economy will generally take place from the primary industry to the secondary industry and to the tertiary industry. In the process of transition from the primary industry to the secondary industry, migration of population from rural to urban areas, improvement of income level was attempted, and in the process of transition to tertiary industry, improvement of living standard, Stable economic growth will be realized. However, looking at past history, countries around the world do not grow economically in the same process. There are both countries in which the economy grows bigger and those that do not grow much. The country that has grown earlier is a so-called developed country, and developing countries have started to grow behind advanced countries. Although there is a time lag in the timing of growth, there is a difference in the degree of growth though history history. In other words, there are countries that continue to grow among developed countries, countries where growth has stopped, countries that are growing fast in developing countries, and countries with low growth. How will this difference be born? The following three elements are necessary for economic growth.
Stability of society and politics, such as no war, no security problems, no political confusion, is an essential condition. Without this premise, economic activity can not be done. Moreover, if it is not stable, there is no credibility of the country's currency, money does not circulate, sudden inflation is hit, the economy becomes unstable and it does not grow.
In the primary industry, there is a limit to improving productivity. The development of secondary industry and tertiary industry is necessary.
Labor productivity rises with the improvement of educational standards, training of workers.
For the development of the industry, maintenance of electricity, energy, water supply, railway and road is necessary. If the economy develops, social infrastructure will be improved, but if it remains social infrastructure that is inferior to the economic scale, it will be a factor in restraining economic development.
Terrain, climate, traditional social customs, etc. will restrain productivity and industrial development.
As inflation advances, the value of the currency that forms the basis of economic activity declines, the future economic uncertainty increases, and investment is suppressed. The high unemployment rate brings down social unrest and consumption and brings down economic activity.
The economic growth process can be grasped by the movement of trade balance and income balance that make up the current account balance. Before economic growth, it is generally agriculture country. We export agricultural products and import industrial products. The trade balance is in the red. The current account is also in deficit. As the economy grows, livelihood improves and imports of industrial products increase, so the trade balance will increase the deficit. Afterwards, as industrialization progresses, the export of industrial products will start and the trade deficit will shrink. Investment from foreign countries will increase, income balance will be in deficit. As industrialization progresses further and the export of industrial products expands, the trade balance will become a surplus and the surplus will expand. Investment from foreign countries will further increase, income balance will increase deficit. If the economy further develops, the surplus of the trade surplus will exceed the income balance deficit and the current account will turn into a black surplus. Foreign investment will increase due to the current account surplus and income balance will turn into black. Late in the aftermath of industrialization, due to the improvement of people's lives and consumption, the imports will increase, the trade surplus will shrink the surplus, the deficit will be made. Although the income balance continues in the surplus for the time being, the current account surplus continues, but the current account deficit also becomes deficit due to expanding trade balance deficits, foreign investment is suppressed and the income balance is also reduced. After that, the income balance will become deficit, trade balance, income balance and current account will be in deficit.
In emerging countries, economic growth can be expected by political stability such as democratization. Advancing industrial policy with developed countries as a model, with reference to success in China, advancing industries from introduction of foreign capital, from agriculture to manufacturing industry, to service industry, to increase labor productivity and improve national income We can stimulate consumption and we can expect sustainable growth by virtuous circulation. In the manufacturing industry, there was no competitiveness in industrialized countries in the past, but as represented by digital products, the generalization of parts and the modularization of products advanced, importing advanced technology parts and assembling processing in their own country Doing business It was able to develop the manufacturing industry with a business model of exporting to developed countries. Here, it is important that labor costs lower than high technical strength are important, exporters of constant quality industrial products can be exported at cheap prices, economic growth pattern to increase national income by accumulating employment, productivity, capital stock in export Has been established. As a result of attracting foreign invested factories with incentive measures and advancing technology imports, many manufacturing industries advanced to foreign capital seeking cheap labor. The manufacturing industry absorbed the surplus labor force that agriculture had, and since the manufacturing industry has higher labor productivity than agriculture, the national income has improved. The introduction of foreign capital, from agriculture to manufacturing industry, expanding national income by export is a keyword of economic growth. Supporting that was economic globalization.
Manufacturing industries in developed countries have expanded their investments that were closed in their own countries to the world, and are searching for optimal production areas at the global level. With modularization of products, emerging economies do not have high technology, but if they are inexpensive, they are competitive in assembly processing. Both companies agreed that cheap labor and emerging countries have economic growth due to the development of the manufacturing industry, and the ideas of both agree with each other, rapidly dispersing and optimally arranging the factories on a global scale has progressed. If inexpensive products are exported from developed countries to developed countries, in developed countries, expensive consumption of low-priced imported goods, price competition with that resulted in lowering prices of home goods, and it was a period of low inflation. Expansion of consumption and low inflation in imported goods in developed countries will result in monetary easing (interest rate reduction, liquidity expansion) to revitalize their economy, and foreign currency earned by emerging economies will be advanced By increasing the purchase of government bonds in the country, interest rates declined. Meanwhile, in emerging countries, due to the development of the manufacturing industry, raw material imports increased, international commodity prices of raw materials rose. On the other hand, the international price of industrial products has declined. In emerging economies, economic development has made infrastructure development and technology improvement easier, making it easier for advanced country capital to enter the factory.
The economic development of emerging economies has increased attractiveness not only as a production place but also as a consumption site. With the improvement of national income due to economic development, consumption became active, exports to emerging countries and factories (locally produced territory) expanding for sale in emerging countries became popular. Even though we are exporting to emerging countries, it will soon change to factories to sell locally for sale in emerging countries, so that in industrialized countries the manufacturing industry has come apart. Even in advanced countries, countries where the transition from manufacturing to service becomes smooth smoothly does not pose a problem because the service industry absorbs the employment that the manufacturing industry lost, but in countries where the service industry does not develop, the economy will be stagnant became. This is Japan. In emerging countries, inflation tends to be caused by expanding consumption due to the improvement of national income, expanding investment to expand production, rising asset prices and rising raw material prices, and it becomes a high interest rate in monetary policy to curb inflation. Development of the economy and high interest rates will make it easier for foreign funds to gather, bringing in currency appreciation and further inflation.
Due to this trend, advanced economies advanced low inflation, low interest rates, low growth, fiscal expansion for economic revitalization, and budget deficit. Emerging economies, on the other hand, had high inflation, high interest rates and high growth. Companies that overseas expand globally in developed domestic markets have gained profits from overseas, especially emerging markets business, even though they have little profit from the domestic market, so corporate earnings have expanded. In other words, the domestic economy and business performance of domestic enterprises no longer interlock. Some developed countries have a declining population, but the population is increasing on a global scale. Income is increasing mainly in emerging countries. Capital stock has increased on a global scale, and labor productivity is also improving. Looking at the Earth as one economic zone, both production and income will rise and economic growth will continue. If this turns into a turning point, the following will be the trigger.
National income will improve with economic development. If personnel expenses (wages of workers) rise, developed capital has advanced to the factory because labor costs are less expensive than developed countries, but advancement will be suppressed. If the production cost rises and the product price rises, it will result in weakening competitiveness both in the domestic market and in the international market. As the value of emerging-market currencies also rises, the labor costs seen in dollar terms will rise further. Eventually, if labor costs are on par with those of developed countries, investment in developed countries' capital in emerging countries (factory advancement) will decrease and economic growth will be suppressed.
People who were engaged in primary industry in rural areas moved to urban areas to become engaged in secondary industry and tertiary industry phenomenon is a developed country that fulfilled economic growth in the past It is the sight seen. Since secondary industries and tertiary industries are more productive than primary industry, migration of labor force to industries with higher productivity produced economic growth. Even in emerging economies, economic growth will proceed through the movement of labor force to industries with high productivity while population migration from rural areas to cities continues. However, when the rural areas become so populous and soon the urban areas become overcrowded population movement stops. This time will be a turning point for economic growth.
If you do economic growth, people's incomes will rise and price levels will rise. Although the cheapest price level cheaper than the developed country has produced competitiveness of export domestic products, price price competitiveness weakens as export price rises and export stagnates. In addition, the economic development will increase the currency value through the increase of money demand in domestic economic activities and the increase of money demand for investment by foreign companies. This will restrain exports, increase imports, and will negatively affect economic growth.
The actual labor volume and capital stock are substituted as parameters of the theoretical model, and GDP calculated as theoretical value is called potential GDP. This is GDP seen from supply side. On the other hand, the actual GDP measured as economic statistics can be said to be the GDP seen from the demand side. There is a method to compare the two and analyze the actual economy from the degree of the supply-demand gap. Since the potential growth rate is stable at any time and the actual GDP has a wave of a booming economic recession, the supply-demand gap is positive and the supply-demand gap is positive when the economy is in a good condition, and the supply-demand gap is negative when the economy is in recession and the demand is insufficient. The idea of the potential growth rate is based on the hypothesis that even though the actual economy is causing a business cycle, as a long-term trend, it moves on a constant stable growth trajectory.
Growth accounting analyzes the extent to which economic growth (change in GDP) can be explained by economic growth factors, labor input, capital input, and science and technology growth with measured data. For example, if GDP increased by 3%, we analyzed that contribution of 1% in labor increase, 1% in capital increase, 1% in science and technology development as breakdown of 3% increase factor It is. Labor and capital can be measured, but science and technology can not be measured. It is necessary to be aware that science and technology contributes to parts that can not be explained by labor and capital increase. In the case of Japan, the former high economic growth period can mainly be explained by contribution of capital increase. The subsequent low growth period is the advancement of science and technology, and in the zero growth period after 1995, we are compensating for the negative contribution of labor reduction with progress of science and technology.
Analysis of economic growth from a theoretical model is economic growth theory. In this theory, The economic scale can be expressed as a production function of capital input and labor input. The capital stock for the current term is the sum of the capital stock of the previous term plus the investment for this term and deducting depreciation. The increase in capital input by investment exceeding depreciation and the increase in labor input due to the increase in workforce are the driving forces of economic growth. The per capita national income (the value obtained by dividing the production function by the population) can be grown by increasing the capital input. As capital increases, depreciation that is regarded as a certain percentage also increases. An increase in capital will lead to economic growth, depreciation will also increase, and if depreciation increases to the same size as new investment, capital will stop increasing and economic growth will stop. In this theory, the economy will stop growing over time as time goes on, but the actual economy continues to grow even if there is a difference in the degree of growth for each country.
To explain this, we are introducing growth factors other than capital and labor, such as improving labor productivity through education and training, improving productivity through science and technology, and so on. Even if the number of workers does not increase, it is possible for two or more people to work effectively by one person in education and training of workers. With the development of science and technology, we can increase the production amount even if the amount of capital remains unchanged by discovering new means of production and acquiring efficient use of capital. In addition, the tools used by workers by science and technology evolve, effectively enabling two or more people to work alone. In this way the power of science and technology is great as the driving force in economic growth. Indeed, it is said that the world economic growth in recent years is more greatly due to the development of science and technology than the increase of labor and capital. However, since science and technology can not physically measure quantities and economic statistics can not measure general amounts, it is not easy to objectively measure the degree of influence of science and technology in real economies. In the economic growth theory, it is not the number of physical workers, but introduction of the concept of execution labor taking into consideration the effects of education and training, introduction of science and technology parameters into production function, expansion of models We are. In any case, growth factors in economic growth theory will be investment, education and training, science and technology. However, these are factors on the supply side, and the impact on demand side economic growth is not clarified. Those that are produced by the production function and are not consumed are saved and invested. Regardless of the demand, the amount of the product is decided by a given labor input and capital input, and the less the amount to be withdrawn by consumption, the more it will go into investment and lead to future economic growth.
In the economic growth model, the relationship with capital, labor force, and income is Y = F (K, L) Y = income, F = production function, K = capital, L = labor force. The function F is a monotonically increasing function, and income will increase if more capital and labor are put in. Labor force, which is an input factor, is determined by the labor force population (of the population, the number of people who want to work or working) and will not increase year after year without population increase. On the other hand, it is possible to increase capital input (capital investment, etc.) year by year, so economic growth is possible by increasing capital. Capital K K = K -1 + I - σ K -1 Here K -1 = capital before one term, I = investment, σ = capital wear . Capital K is increased by increasing investment I more than capital wear statement, and as a result income Y also increases and economic growth continues can do. It is natural to think that capital wear σ is proportional to the amount of capital K . Also, when considering that a certain percentage of income Y turns to investment I , the equity calculation formula is K = K -1 + s F (K -1 , L) - a K -1 . In this model, K -1 (K -1 , L) = a K -1 , the economic growth stops there.
There are voices that people should pursue the happiness of the people rather than economic growth. We estimate the total domestic happiness that summed up the "happiness amount" of the country, and argued that we should aim to improve domestic gross happiness over GDP (GDP). However, objective quantification of happiness is not easy. There are many that simply add up statistical values that are likely to be related to happiness on mathematical expressions. The calculated value will change depending on which statistical value is emphasized. It would be better to pursue economic growth of objective indicators (such as gross domestic product), in reality, to improve people's lives, rather than seeking subjects based on subjective indicators. The globalization of the economy is progressing, and the gross income (GNI) added to the gross domestic product is also more appropriate as an indicator of economic growth than the gross domestic product (GDP) that has been emphasized in the past than the loss received from overseas. As economic indicators are influenced by short-term economic fluctuations, we need to look at trends that eliminate short-term fluctuations.
According to economic theory, once the high growth era continues to a certain extent, it is said to be the era of low growth after that. Production standards and living standards can not rise infinitely, and reaching a certain level will make it harder to grow any further. In theory, as well as continuing investment, as the size of capital increases, the amount of wear increases, and as the increment of capital and the amount of wear by investment eventually reach the same level, no further capital accumulation is possible and further growth It will be explained when it stops. Now developed countries are in the era of low growth. The industry has also shifted from primary industry to secondary industry and to tertiary industry. Is not it growing any more? Even if we look at the history of long human beings in the past, we do not see the times when the economy continues to grow and is at the final stage of economic growth. Is the final phase that I could not find in the past history is coming now? If the tertiary industry becomes the central economy, can not you expect a rapid growth?
This is affected by how economic statistics are taken. The value of gross domestic product, which is the basis for showing economic growth, is measured by the amount of the product. In the era of the primary industry and secondary industry centers, it is easy to measure because the growth of agricultural products and industrial products increased economic growth. In the economy centered on tertiary industry, the production price is integrated as the production price instead of the production volume. With low inflation, if there is constraint on the consumption of services that people receive, the production volume of services will not increase. As in the case of products, the number of domestic gross production is raised by making more and more, whereas the production of services is hard to be linked directly to the rise in value. Furthermore, in recent years, social information has advanced and the information industry is developing, but information is unclear in price, many are provided free of charge, even if "production" of information increases, the effect Will raise the figure of GDP will be small. In other words, when the economy develops, becoming the third industry center, especially the information industry center, the economic indicator of gross domestic product which was used as a measure to promote economic activity traditionally represents economic development and actual appearance It is not becoming things. There is no rise (low growth) if you are only following the figures of gross domestic product, but in the "quality" of the economy, it can sometimes continue to rise greatly.
In recent years, services using the Internet are expanding due to the progress of information technology. There are a lot of free or low price services, it is possible to provide services to many people at the same time, and the production cost of the service is low. Although it can be said that productivity is high, the effect on the economy is quite different from the manufacturing industry. Consumers can spend 24 hours a day, and there is a limit to the consumption of goods and services. As time spent on Internet service increases, usage of other things and services, that is consumption is suppressed accordingly. Although the whole will increase if the economically added value which changes suddenly rather than the economically added value which loses is increased, the consumption and the investment amount are also small in terms of money conversion as a feature of the Internet service, It will not lead to the expansion of. Information exchanged on the internet is information. Because it can be easily copied, the manufacturing costs such as automobiles, home appliances, and traditional labor services are unclear. The market price is also unclear. When people's consumption changes from "things" or "traditional services" to "information", the conventional economic statistics that measure with production consumption tend not to reflect actual conditions.
It can be said that the economy should grow steadily. If it grows steadily, it is the best, but in the past history, if there is a period of high growth, low growth and negative growth tend to occur with the reaction, high growth has problems with sustainability. It is unclear which one will achieve economic growth as a result of repeating high growth and low growth and continuing stable growth. However, unexpected fluctuations in economic growth mean that there are unexpected fluctuations in consumption and investment, and this unexpected fluctuation makes it difficult for companies to make production plans and creates excessive inventories and under-stocks I will. Household consumption plan will not go according to plan as well. As production, investment and consumption progress as planned, it is economically efficient as optimization is planned for the plan in advance, but if it is not in line with the plan, it will be inefficient. Therefore, if there is unexpected fluctuation in economic growth, production, investment and consumption will be inefficient, weakening economic growth.
Unexpected fluctuations make it impossible for consumers and enterprises to take planned optimized actions, but will not they transition to more productive situations due to fluctuations caused by fluctuations? For example, in biology, it is as evolved with mutation and fitness. The wave of moderate economic recession is to bring out companies that have been kept low in economic value and services, low productivity, from the market, emergence of more value-added products and services, high productivity companies There is a possibility of becoming a trigger to development. Even in business management of companies, cost reduction activities that tend to be unclear at times when good results are continuing, efficiency of the organization, review of business, etc. tend to be triggered by deteriorating business performance. Performance worsen → management reform → elevating to a high productivity enterprises → good performance and going through a cycle of productivity improvement. There is also an advantage that if there is deterioration of the economy, incentives for management improvement activities such as strengthening corporate structure and reviewing business will be enhanced.
It is unknown whether it is better to grow at a certain growth rate or if there is a change in the growth rate due to the economic cycle. Where actual data shows, there are waves in the economy, and growth rates are fluctuating and growing as a long-term trend in many cases. However, this is a degree problem, and considering that there are many cases in which recoil plummets after recovering rapidly, it can be said that the fluctuation is within a certain range. Even if it grows, it can not be said that it was unreasonable high growth if it plummeted afterwards. Why does excessive growth occur, and will it lead to a sharp fall? It can not be said unconditionally that what percentage of growth rate is impossible growth rate. When a sharp fall in the growth rate occurs, it can be concluded that it was a posteriori bubble.