WIKIPEDIA DEFINITION: An economy consists of the economic system of a country or other area, the labor, capital and land resources, and the economic agents that socially participate in the production, exchange, distribution, and consumption of goods and services of that area.
The above definitions are extraneous. The goal of this article is to define the economy and outline it's structure in basic terms.
BASIC DEFINITION: The production, consumption, and distribution of goods and services of a region.
Simply stated:
- the production is the output* or the value added to the economy
- the consumption is the intake of production or the cost to the economy
- the distribution is the outflow of production or the allocation of output* to citizens of the economy.
To outline it's structure, we need to quantify the economy's Production and Consumption by determining each of it's citizens consumer/producer status and social demographic and grouping them accordingly as
- Children/Students net consumers
- Public Service Sector
- Private Service Sector
- Construction net producers
- Manufacturing net producers
- Agriculture net producers
- Cash Economy
- Unemployed with benefits net consumers
- Unemployed no benefits net consumers
- Social Assistance net consumers
- Retired Pension Plans net consumers
- Retired Social Assistance net consumers
Note that the groups above not noted as net producers or net consumers can vary between net producers or net consumers group type Group types are defined as
- net producers produce more than they consume
- net consumers consume more than they produce
The Service Sectors groups can be classified as net producers only if the services of the group provide sufficient efficiency savings to the UN-leveraged values of all their related products and/or services. During the last 50 years, the Services Sector proportional share size of GDP of most developed democracies increased dramatically. Subsequently, they increased the leveraging levels of products and services in their economies. Deservedly, their economy's Services Sectors are net consumers.
Below is the revised grouping for these democracies
- Children/Students net consumers
- Public Service Sector net consumers
- Private Service Sector net consumers
- Construction net producers
- Manufacturing net producers
- Agriculture net producers
- Cash Economy
- Unemployed with benefits net consumers
- Unemployed no benefits net consumers
- Social Assistance net consumers
- Retired Pension Plans net consumers
- Retired Social Assistance net consumers
SUMMATION: In-order to mitigate outflows of capital and the loss of jobs in manufacturing, the economies of most developed democracies became more serviced based and credit dependent. As outsourcing and advances in manufacturing technologies exasperated the losses of jobs, governments stimulated sectors of their economies and expanded their size. As a result, these democracies are subsidizing their economies and indebting their future generations.
CANADIAN PERSPECTIVE - The decline of net producers and rise of net consumers
The Services Sector as a percentage of GDP has increased from about 50% in 1960 to about 70% today.and now employs over 75% of workers. Meanwhile, the share of Manufacturing as a percentage of the Canadian GDP has been declining since the early 1940's.
The Canadian economy has undergone a broad structural shift. To illustrate this, the Village of Canada Microcosms below quantifies the decline of net producers and rise of net consumers in Canada.
Village of Canada
The population of Canada was approximately 18,500,000 in 1962, 25,000,000 in 1982 and 35,000,000 in 2012. Listed below are the 1962, 1982 and 2012 village representations of a 100 person Canada. Each person listed in the 1962, 1982 and 2012 village columns is the equivalent of 185,000 (1962) or 250,000 (1982) or 350,000 (2012) Canadians with similar social demographic.| 1962 | 1982 | 2012 | ||||
Children/Students Public Service Sector Private Service Sector Construction Manufacturing Agriculture Cash Economy Unemployed with benefits Unemployed no benefits Social Assistance Retired Pension Plans Retired Social Assistance Net Consumers Net Producers |
23 5 14 0 0 0 2 2 2 1 13 4 66 |
0 2 5 5 17 4 1 0 0 0 0 0 34 |
21 7 17 0 0 0 2 2 2 1 14 4 70 |
0 2 5 5 14 3 1 0 0 0 0 0 30 |
21 10 21 0 0 0 3 3 2 2 14 4 80 |
0 2 5 5 6 1 1 0 0 0 0 0 20 |
SYNOPSIS
The citizens of the Village of Canada are citizens of the Village of the Damned.
HIERARCHY OF THE ECONOMY
When thinking of the economic distress afflicting major democracies, 'house of cards' may come to mind. But, if you think in terms of hierarchy of economies, 'thick stone mansions with thin wood foundations' is more applicable. This analogy will make sense after reading below to the end.
What is the hierarchy of the economy? Essentially, it's the evolutionary order of economic activities determined by the needs of early humans and/or human communities.
- food, water
- shelter
- clothing
- manufacturing
- education
- transportation
- banking
- retail
'Every service owes it's existence to production. There are no exceptions.'
The level of wealth generated in an economy are dependent on 2 factors.
- efficiency
- credit
The growth of the service sector industries of major economies are attributed to credit expansion policies of their central banks. Subsequently, their services sector industries have over leveraged the wealth from their production sector industries. They are too big to sustain.
Production is the foundation of an economy. Services are the walls and roof of an economy. Most major economies are like 'thick stone mansions with thin wood foundations'.
Research sources
http://en.wikipedia.org/wiki/Economy
http://www.claimingourfuture.ie/wp-content/uploads/What-is-the-Economy-COF.pdf
https://www.cia.gov/library/publications/the-world-factbook/geos/ca.html
http://www.statcan.gc.ca/daily-quotidien/120907/dq120907a-eng.htm
http://www.servicecanada.gc.ca/eng/qc/job_futures/statistics/8431.shtml
http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/govt62a-eng.htm
http://www.canadianservicescoalition.com/CanadianServicesSectorANewSuccessStory.pdf
http://www.statcan.gc.ca/about-apercu/plan2010-2013/demograph-eng.htm
http://en.wikipedia.org/wiki/Population_of_Canada_by_year
http://www.international.gc.ca/trade-agreements-accords-commerciaux/services/canada-ts.aspx?view=d
The views and opinions expressed in this article are strictly those of the author.
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