Chapter one: Value & Subsistence wage problem
Economic system is formatting by two gears demand and supply-;- marketing is set between the contact of two gears demand and supply, supply gear is rounding on organization axon, organization is turning the separated factors to one merged product. Demand gear is rounding on need axon, need is wanting benefit, determining what this benefit specifically that what we called desire, desire determining according to psychological and sociological factors. Circulation in economic refer to the production factor return quantity of product´-or-income. The income is the person share of products as service´-or-goods able to exchange with other product by money interaction. The people’s income can achieve by two entrances, as returns of capital´-or-as returns of work. The least income which enabling of necessary needs for life that what called subsistence wage. The incomes levels are very vary from the least necessary amount enabling of life to the highest welfare life. The political economy´-or-social economy is the science field that interest of community activity around product benefits and value to achieve community welfare. For that, Marshal called it the welfare science, in difference of classics that called it as wealth science, in considering wealth is the way of economic welfare. Later Marginal School by Lionel Robbins leadership year 1932 in his Essay on the Nature and Significance of Economic Science describe economic as rareness science, that interest of rareness resources efficiency exploitation to create the most amount of wealth to achieve welfare with the sustainable of resources. Paul Anthony Samuelson in 1948 considered economic is the orientation. Alternatively, the science that interest of human activities orientations to get what others create of products, as we see all of political economy concepts are rounding on how we can create wealth to achieve welfare. The end vision of economic is the individual´-or-community welfare, which achieved by most maximum capable of products (income), whether capital income´-or-labour income. The problem we addressed in this book is how we can get over of subsistence wage and unemployment, how we can raise the capital´-or-labour income to all community individuals to get welfare life whether in Developed´-or-underdeveloped countries?
Section One: Entrance for economic value and it’s money relationship
The economic value is an able to measure social and human evaluation of benefit object valid to exchange. Value is determined from supply side on base of cost, cost related of availability of sources (whether natural resources, human resources, industrial resources….). On the demand side value is determine by the urgency level and capability. Capability is the both of demand separated and power-purchasing capacity, demand separated´-or-value is circle of product demand, is this circle-limit-ed narrow,´-or-national´-or-international? The determine base of demand power-purchasing capacity is productivity and marginal propensity to save. Part of production amount of today oriented to meet low cost needs and desires, other part of production oriented to saving for future meet of high cost needs and desire often. So saving is not -function- of low consumption, but in contrary -function- to capability of purchasing specially for high cost products.
Value´-or-power purchasing generated in all communities, whether slums backstage underdevelopment communities´-or-developed communities. People in each place are producing productise what they want and appreciated. The producing benefit appreciated arises in case of positive effectiveness of others. For example, the sociocultural and geographic people relatedness with some places may turn house value level in slums community near with house value level in same size at advanced community, the people (demand) in each place may don’t appreciated the house (supply) in other place, but the local people in each place appreciated it regardless of great variation of style.
There is no free market neither completely planned. The completely free market is a myth, did not realized in any reality as the planned market. What we most describe about market policy´-or-what world has witnessed that market closer towards liberalization´-or-towards planning.
We should not determine previously what we should be about market policy, for our believing that one better than other, but we must forming our policy by defining our present situation about the components of resources and economic performance, and what we want to achieve, to determine the intervention´-or-non-intervention policy we should follow to achieve this vision.
However, the current international markets we cannot absolutely categorized as closer market towards liberalized, tendentious,´-or-socialism, because liberalization´-or-planning policies are always-limit-ed in certain dimensions. The market may tend to inflow´-or-outflow physical capital liberalizes, repeal all taxes´-or-put low rates. While at the same, time tends to restrict foreign labours entry closer to full planning, by did not´-or-minimalistic foreign labours inside flow, to maintain´-or-decrease the level of national subsistence labour to avoid quality decreasing´-or-unemployment increasing. This does not mean this policy will prevent the illegal immigration
The most economies tend to liberalization we also cannot absolutely described as liberalization market, though it abandoning the ownership of production factors´-or--dir-ectly sector intervention, but in the same time it was in-dir-ectly intervening across regulations as base of formatting business, Also it was get a bart of production by taxes policies. The socialist´-or-planned market realistically does not mean except image of Conflict of Emperors, which production factors ownership transferred from feudal lords´-or-capitalists’ hands towards other conflict and power holders’ hands.
About of production, income, and national expenditure concepts
Production is immaterial´-or-material benefit object contain -dir-ect´-or-embodied work, -dir-ect work is physical´-or-mental human effort, in-dir-ect work is embodied human effort in previous immaterial´-or-material product. The product is created by a combination of elements called production factors, such as labor, land, physical and Intellectual capital.. The embodied amount of these elements can be determined by value´-or-benefit perspective. Economic science interest of these embodied elements in value perspective, as it more measurable by monetary units. Value perspective mean product content work is the quantity of factors production cost whatever this factor-;- human, land, Intellectual, physical, technology.., products we can categorized as high land density products, high human capital density products, high intellectual capital density products,´-or-high technology capital density products.., more than any of other it’s capital factors content. Agricultural products have high density of land, may mobiles have high density of intellectual and technology capital, food and beverage are high density human capital products, and so else.., the product competitive advantage centered on heavy factor production density. Technology is production capability embodied in previous products, the technology products competitive advantage related with technology capital, but the competitive advantage hospitality products more related with human capital. So for competitive advantage raising we must focus on factors production weightiness center, which represent the most cost of factors productions.
The economy production has distributed on participated factors production in income form´-or-return on equity form. Sell´-or-buying is an individual enabling process to exchange their shares of products for satisfaction their needs through money no more. Sell and buy deals are trading volume indicator, equal money supply multiplication turnover rate, the national deals are not the Gross national expenditure GNE, expenditure is income, is production whether as macro´-or-micro level scale. Production´-or-income is the “added value” part on production input, whether consumption´-or-investment expenditure unable to exceeds of income´-or-accumulative production except debt cases. Buying merchant´-or-producer by commercial short-term circle inputs to add value isn t expenditure, because the inputs value returned back at less than year, if this value returned back at more than year it calculated as investment expenditure returned as depreciation costs. Gross Domestic Production´-or-Income GDP/GDI is the total of factors production added value, costs´-or-income in country. Net Gross Domestic Production is GDP minus imports as an interacted national production inputs in macro transformation chain and lead to National production appear. For that the ability of domestic production sector for expansion suspended on demand expansion and pull inputs capability (power purchasing), which depended on increasing international competitiveness position, and enabling trading national with international products.
For macroeconomic measurement of gross production we have two standards, first the state geographic standard, that measusre all of production inside the state borders, wheather producers were hold nationality´-or-foreign, that what called Gross Domestic Production GDP, the second is the producer nationality standard, that measuse the production of state nationality holder producers, whether live inside country´-or-abroad national companies, then that called Gross National Production GNP.
Equity´-or-balance income either be production income such production land yield, then it categorized as capital and its income as factor production income,´-or-balance income be non-production income as non-allocated production land, then it called money and raising its value called money gains. Value whether loaded in money´-or-capital asset it able to one´-or-both sides growth´-or-degrouth. Production land operation may lead to yield income´-or-loses amount of its value, also non-production land value exposed to growth´-or-degrouth by changing PESTEL dimension such like macroeconomic climate, assets value also exposed to decreased by depreciation (material assets)´-or-consumption (immaterial assets).
National wealth is the net accumulative material and immaterial production balance after discount depreciation and consumption. Necessarily any nation even it was the poorest one must have national wealth, it appears in existing material´-or-immaterial surplus part accumulated over time. Increasing expenditure over income is myth impossible in any reality even the most-poorest nation, if that possible then we must see poor nations as desserts didn’t have anything even knowledge. But in fact we see always never the nation expenditure surplus part appear in exist material forms such like real estates, movables assets,´-or-in immaterial forms such like experience, knowledge, information and culture.., the existence surplus real estate’s constructions´-or-movables is one nation wealth side, the other side of nation wealth is the immaterial balance, what we can described as structure of social relations, psychological, behavioral, cultural, science experiences.., that embodied in community and appeared clearly in its individuals. Both of material´-or-immaterial structures are two sides of one currency, if constructions are shapeless it will reflex on immaterial structure social relations, psychological, behavioral, cultural, science experiences.., and vice versa.
Money supply definition
Money is the state bank notes issuance given to producers due what products state taken in justification of expend it in public interest, for opposite of producers givin up their products to government they use this guaranteed by the government nots to facilitate exchanges their products´-or-preserve value. In past money was issued as part of rare metals contain its economic value, so mony notes was represent credite notes due from issuing authority promise to return rare metal by return credite note, but in present the credite -function- of notes issuance were changed to get government part of production beside currency price control. In 1944 year the governments were according to “Bretton Woods Agreement” to fixed exchange rates to to ensure economic stability and political peace, states agreed to cooperate to closely regulate the production of their currencies to maintain fixed exchange rates between countries with the aim of more easily facilitating international trade, they also agreed to take partially off “gold standard” policy, they agreed of exchange ability of -dir-ect national currencies gold cover to in-dir-ect coverage with dollars as it absolutely covered. On that system the governments’ situation were continus by issuing its’ national currencies as much as what it gold´-or-dollars have until (Nixon shock) year of 1971, as Unites States Richard Nixon declaration year of 1971 announce Unites States cancellation of the -dir-ect international -convert-ibility of the United States dollar to gold, and freely floating fiat currencies.
Since this date to present the money gold standard turned history dose not exist in real, so it shouldn’t be spoken except as past, Governments nowadays dosen’t commited to returned credit taken’s products to producers by returnd credit’s notes as past, but becomes optain this products as ownership right due non valuable banknotes issuance in real except political and law mandatory power inside its’ political influence as verifiable generally accepted payment for goods and services, by four -function-s, a medium of exchange-;- a Standard and measure as unit of account-;- a store of value. The gross issuance banknotes is the total -print-ed banknotes in country, the supplied monetary in wide range concept includes market money liquidity (currency in circulation) plus demand deposits (depositors easily accessed assets on the books of financial institutions) didn t include long-term deposits, creature monetary is the supplied monetary multiply it’s turnover which determine the generally prices level. Gross production is the total supplied production multiply purchasing rate, production is the achieving added value (Gross profit), which include labour, organization, capital, land… added value by sold products, but dose not sold totally´-or-partially products did not economically classified as production.
Relation between money, production and prices
Macro level value is associated with economic policies, economic policies is production process influence of state intervention. Financial policies is state intervention of distributions affairs by impose taxes´-or-support tools, monetary policies is the policy concerned on volume amount, movement and value of banknotes money. Economic policies dose not separated on financial policies´-or-monetary policies, inasmuch (monetary policies) national currency value is determined on the equilibrium of created amount of money and production volume, demande and supply also related with national currency value, the national currency value is determined on equilibrium supplied production level and monetary supplied multiply its turnover level (created monetary) base, the production demand rate is the level of individual their own money takes off for get product, money demand rate is the money need level´-or-product benefit take off to own money.
Value = (supplied monetary × its turnover) × (production demand rate + 100% - monetary demand rate).
V_r^ch=(SM×Turn)×(D_P^r+(100%-D_SM^r )), whereas V value, V_r^ch value change rate,
SP supplied production in R price base (price before market factors interaction), CM created monetary is SM supplied monetary multibly T turnover, PD production demand, D_SM^r Supplied Monetary demand rate (the demand seller need for money), D_P^r Production demand rate (the demand purchase need).
For example: product price 100 LE, the demand purchase need (D_P^r Production demand rate) is 90%, the demand seller need for money is 90%.
V_r^ch=(SM×Turn)=(90%+(100%-90% )), V_r^ch=100%
But if product price is 100 LE, the demand purchase need (D_P^r Production demand rate´-or-the buyer need of product) is 100%. The demand seller need for money is 90%, then cost will rises by 10%.
V_r^ch=(SM×Turn)=(100%+(100%-90% )), V_r^ch=110%
If product price is 100 LE, the demand purchase need (D_P^r Production demand rate´-or-the buyer need of product) is 90%. The demand seller need for money is 100%, then cost will decreases by 10%.
V_r^ch=(SM×Turn)=(90%+(100%-100% )), V_r^ch=90%
The national currency value level at macroeconomic range is associated with Grosse Domistice Production GDP and created monetary, monetary Supply´-or-money supply (or money stock) is currency in circulation and demand deposits (depositors easily accessed assets on the books of financial institutions), created money is money supply multiply turnover, accumulative production balance is all of existan domestic economic value material´-or-immaterial in state formatting all over the time depth.
In economic the production wealth will be equivalent by gross money mass (money supply plus long term deposits), gross money mass refer to the embodied gross domistc prodution value of this monetary vessels (banknotes). Tha national currency value rate is determine on the meeting of production supply part with the trading money supply part, duplicated production with existing money mass that mean duplicated money power purchasing, the cash paper which was paid for one product will be equal with double, national currency value also may be duplicated without any increasing of production rate, but with increasing money benefits need way, decreasing production need rate (increasing production take off). The gross production supply including new production ratio in addition of production balance ratio, in case of individuals absolutely production wealth benefit take off´-or-accumulative national production wealth with absolutely money supply that mean unprecedented increasing of national currency value, the only one unit of cash will meet many doubles of what products it was paid for.
So, why prices usually decreases? That because of the money mass walking in one -dir-ect way (issuing), the production mass was walking in two opposite ways. The governments didn’t executed issuing money (other than replacing cases), while gross accumulative production balance changed by inflow´-or-outflow, with each labour force performing, spinning machine, new agricultural bring up plant, created service…and so on. The gross production balance is increased. In the opposite with each physical depreciation, building, machine, food…and so on,´-or-non physical asset consumption the gross production balance is decreasing.
How we can solve the employment problem and achieving economic welfare?
The national political of wages and employment - Research of Subsistence wage in view of political economy analysis
Dr. Tamer El-Batrawy