By John P. Reisman at 23 October, 2010, 6:30 pm
Accounting is essential for business and governance, or even a family, to understand what ones capacities are in order to make better decisions. Balancing the budget gives us precision in understanding where we stand with deficits and surpluses.
When considering our economies, we need to understand these economic capacities and deficits in order to know where we are, and what is possible in the near future, or long term. This allows us to determine how healthy our economies are, and their respective capacities. We need to know if we are overdrawing on economic capacity, or if we will be able to afford accumulated debt in consideration of future economic capacity to sustain operations. This of course is risk/ratio analysis and general accounting based on relevant factors. And we need to balance the books and make sure we can stay in business.
So what are we really talking about?
The global economy of course. But it’s not what you might think. It’s not about the money. It’s about the resources we trade in markets to build our buildings, provide our services, and manage the food and water supply for our communities.
The economy is a combination of our ‘resources, and capacity‘. It includes minerals, chemicals, food, water, and all the systems that support or supply us, and our needs. It also includes services, and that includes knowledge and understanding. Intellect, expertise and understanding is a resource that can be bought and sold on a supply/demand basis. So there are ‘many’ components to our global economy that are not monetary. Money, is merely our means of exchange.
In effect, our economy includes ‘systems and materials’ that keep ‘us’ alive and functioning.
What are these systems?
First there is our immediate environment: land, ocean, atmosphere and solar energy to power it all. Without the sun, we would not have energy to burn anyway. Besides, fossil fuels are really just stored solar energy.
Then you have our elements, which we use in manufacturing processes. Of course land and water to produce food. The atmosphere is an exchange system to transport energy and water to different regions supporting biological and agricultural systems. Then you have human productivity. This is our interaction with all these systems to take the benefits of the resources and turn them into products we make, sell and use.
So, what would happen if we overtaxed our resource economy? Let’s say we overtaxed an economy to the point of it’s demise. Well, that just means we don’t have that economy anymore (unless other economies that were dependent on that economy also failed due to the loss).