Since the actual total supply is a production capacity, what determines it? This is where macroeconomics and microeconomics are related. The productive capacity of a society is influenced by factors such as technology, capital, education level of workers and institutional conditions. The concept of potential aggregate supply is also the concept of social productivity, which is where macroeconomics is linked with other disciplines. Technology has improved the system and efficiency, from the past 5% to the present 8%, or other factors have improved the potential supply capacity. We use the concept of graph to say that with the improvement of efficiency and the progress of technology, the actual capacity will increase, not only every year, but also the speed of expansion.
We study management, research system, research policy, capital market or factor market, and all the promotion is related to our ability. But please pay attention to one problem. When we talk about improving social productivity, technological progress, system reform and management improvement are long-term things, especially system reform and technological progress, while supply fluctuation is short-term. For example, technological progress in the United States increases productivity by 3-4% every year, while our technological progress is 1-2%. It may take hundreds of years of investment in education and scientific research to catch up with the American level. The fluctuation of production and macroeconomic research is a short-term problem. Economics assumes that in a special period, such as 2004 or 2005, the potential supply capacity is certain, but in reality, the production capacity fluctuates and will exceed or be less than the production capacity to produce things. What if the actual production capacity is lower than the potential production capacity and the actual supply is less than what we can provide? Unemployment and coolies are idle and waste of production capacity. In the first two years of deflation, the idle equipment of enterprises stopped production by about 30%-40%. And beyond, that is to say, the production capacity can be overloaded and used overtime in a short time, and the normal maintenance can be postponed. The production capacity is flexible in a short time and will exceed the sustainable level. The phenomenon we have seen in recent years is the overload operation during the period of overheating. A reporter asked me this question in an interview. Why are there so many accidents in the mine now? It may be related to the delay of mine foundation overhaul, equipment fatigue and over-exploitation, and the current international supply and demand relationship of various minerals can not be alleviated for a while. The key now is that the previous exploration is gone, and all the reserves that can be developed are used. Therefore, the supply is not a fixed number, but will fluctuate more or less in the short term, and the actual supply will be different from the so-called sustainable supply. We'll talk about the consequences of differences later.
What are the important issues that we should be aware of? That is, the concept of dynamic efficiency. Economic fluctuations are relatively small. As we said earlier, there are many aspects related to efficiency in the economy. One is how to make the best use of resources, produce the most things at the lowest cost, and allocation efficiency. The limited money of this project is used to maximize the profit rate, and the dynamic efficiency mentioned by macroeconomics is large, and the final efficiency is low. The growth we can finally achieve is actually low, with little fluctuation and the highest macro efficiency, because the loss is small. We can see that the fluctuation of growth rate will cause two aspects of efficiency loss. The first loss of efficiency is fatigue use and over-exploitation during the overheating period. Originally, a thing can be used for many years, and a mine can be opened for many years. Now the maintenance has been delayed, and many accidents have happened at once. Many equipments are tired and will be scrapped in advance, resulting in low efficiency. Strictly speaking, this inefficiency is still a fraction. Where is the real loss? When the bubble bursts, if turbulence or oscillation occurs, it will fall from the high valley, causing a large number of equipment and personnel to be idle and the resources cannot be fully utilized. Just like the deflation in the previous two years, we clearly know that we can produce this and that, but there is no demand in the market. When the economic crisis comes, it will also destroy production capacity. This loss is the most important problem of dynamic inefficiency. Bubbles always burst, and how big the bubble is will eventually have a flute. This is fluctuation. Losses before and after small fluctuations are small, and losses before and after large fluctuations are large. If the fluctuation is large, your actual final growth will be low; If the fluctuation is small, you will lose less, waste less, and your final social welfare and economic growth will be high.
Take China as an example. Compared with the 1990s, the 1980s felt that the economy fluctuated, but in retrospect it was basically stable, so it grew better in the 1980s. In addition, in the early days of reform and opening up, in the 1980s, there were1.700 million new jobs every year. Now everyone says that development is people-oriented. In the 1980s, due to relatively stable growth and good dynamic efficiency, non-agricultural employment increased by17 million per year on average. The situation in the 1980s, as shown in the figure, is the curve above. What about the' 90s? There was a big bubble in the early 1990s, and there was a big overheating in 1992 and 1993. At that time, it could provide 20 million new jobs every year, and then macro-control began immediately and the economy began to decline. Coupled with some mistakes in macro-control policies, it was over-regulated in the last two years, until real deflation appeared in 1997 and 1998, including the government's expansion of domestic demand, fiscal deficit and the start of fiscal policy, which never started, but started again. The big fluctuation was finally settled in the general ledger. In the 1990s, the average annual increase in employment was only 8 million; In the 1980s, it was17 million, and 8 million was just enough for urban population growth. In the late 1990s, workers were laid off on a large scale. How big is it? In the late 1990s and early 2000, there were 25 million laid-off workers in China. The biggest layoffs in human history have nothing to do with our job creation. We should make the fluctuation smoother and the overall level higher. If the fluctuation is large, the final level is actually low.
The question to be studied below is why the actual supply and actual GDP production are higher or lower than what the social supply capacity can provide. This is determined by demand and the relationship between supply and demand. Demand determinism in macroeconomic theory means that the size of demand determines whether the actual curve is higher or lower than the potential curve. Macroeconomics should study the relationship between supply and demand. How much is the potential total supply in reality as an established premise, and under this established premise, we study why it is high for a while and low for a while. Macroeconomics does not study how many things I can produce, but microeconomics and institutional economics. Macroeconomics studies why I produce too much and too little, why the economy is too hot and too cold, and macroeconomics studies fluctuations, that is, the relationship between supply and demand.
We explain "economic fluctuation, macro efficiency and long-term economic growth" around this picture. From the point of view that demand is greater than supply, what will happen if demand is greater than our production capacity, that is, the so-called inflation situation, where demand is greater than supply, inflation will occur, and demand is less than supply, deflation will occur. There are always people who say that inflation is nothing to be afraid of, but prices have changed. As long as the economy is booming, what is the fear of high employment? The problem is not to treat the losses caused by high prices in a static way. For example, the price of grain products rose last year, and some low-income classes obviously felt that their income was reduced. In the past, 100 yuan could buy 10 Jin of grain, but now only 5 Jin of grain can be bought, which will lead to social unrest or something. But we won't discuss it today because the consequences are not serious. What will really happen?
First, all kinds of tensions, all kinds of supply and demand tensions and rising prices, sometimes all-round tensions, sometimes a small amount of tensions, lead to a few industries or some industries, such as fatigue use, overproduction. Judging whether it is hot or not in recent years depends on whether this shortage relationship has occurred. The most prominent shortage relationship in previous years was power failure and power shortage. In 2003, 24 provinces were blacked out, and in 2004, 26 provinces were blacked out. Zhejiang usually stops for three days a week, and Fujian stops for four to five days a week. Many people are unconvinced that the lack of electricity is the result of the wrong power policy. Is there any mistake? Yes, but by 2003 and 2004, the total potential power supply in China was so large. However, the background of not building a power plant for three years and five years is that there was a power shortage in the last round of fluctuations, and when the power plant was desperately built in the 1990s, and then the electricity could not be sold, the policies formulated by the central government, together with the expected mistakes, did not expect that China's heavy chemical industry would become a competitive industry in 2 1 century, and we could sell chemical products all over the world. In addition, we are engaged in urbanization. The whole country is a big construction site, and the whole country is a development zone and a university town. The scale of investment has expanded, and everyone should use steel and cement. Suddenly, the power is tight, and there is a gap between supply and demand. The total supply does not reflect that all products are in short supply. First of all, there are some bottlenecks in the economic structure, such as electricity. We say that according to Konigkin's law, a wooden bucket is tied one by one, and how much water can be held in a wooden bucket is determined by the shortest wood chips, so now our electricity is the scarcest and in short supply. The growth in 2003 and 2004 was first manifested in the tight relationship between power supply and demand. Some people are still unconvinced, saying that if the power plant is built in recent years, the supply and demand of electricity will not be tense. Well, let's assume that there is no shortage of electricity and enterprises are producing at full capacity. What will be the next shortage? Steel. In the case of such a lack of electricity, steel is still very tight and the price has been soaring. At present, the iron and steel industry is developing so fast because the price is good, the iron and steel projects are desperate, and the world's steel raw materials are desperately rising. It is reported abroad that the manhole cover of London sewer has been lost. Why? Because China wants to import scrap steel. China is short of electricity, even the manhole cover in London will be gone. If you are not nervous, even the manhole cover in new york may be gone.
Total supply and macro-control
The question now is when the tension will be lifted, and our demand will come down, but there will be an increase of 8-9%. Now the international community is discussing how long the cycle of the raw material market will be, and the most important issue is how the total demand in China will be. When the demand is high and the total demand is greater than the total supply, there will be all kinds of supply and demand tensions, such as inflation, high prices and commodity shortages, and the first shortage is the means of production. As I said just now, the first thing to observe is the growth rate of investment, and the second thing to observe is the price of investment products, which is an indicator of macroeconomic fluctuations. The price of consumer goods is still very backward. A few years ago, some people said that the price of consumer goods did not rise, and China's economy did not overheat. However, the price of consumer goods is far away in the whole cycle. After the demand expanded, various phenomena appeared. Assuming that the relationship between supply and demand has been relatively stable since the past, or that we have just come out of the deflation period, from the perspective of supply, the first thing that happens in various economic activities is far from the change of consumer goods prices, but the decline of inventory. Inventories have been digested. In the first half of 0 1 year, the proportion of inventory decline in GDP dropped from the original 1 1% to 4%, and the first half of 0 1 year was the beginning of recovery. Then the demand rose further and the operating rate increased. At this time, there is no investment growth in the original equipment. The original operating rate was 60%, and now it is 80%. Then the operating rate is further improved. At this time, investment will be started, and it is necessary to increase equipment and expand production capacity. If prices go up further, investment will go up. As soon as the investment of the whole society rises, the scale of investment will further expand and the price of investment products will begin to rise. Therefore, the prices of means of production will rise, and the prices of means of production will start to rise in the second half of 2002, which will lead to further increase in investment. This is the price increase of steel, cement and electrolytic aluminum, and everyone's profits will rise, and the investment in these scarce industries will further rise. There are two factors in the rise of consumer goods prices. On the one hand, the expansion of investment leads to the growth of employment, and consumer demand will further expand. On the other hand, the price of investment products will rise, leading to an increase in costs. Only in this way will the price of consumer goods rise.
This is a long chain. The total demand is greater than the total supply, not necessarily greater than the initial average. It may be caused by some departments, which drives the whole economy into such an overheated period and makes the whole economy fluctuate. In the past two years, there has been a great debate. One is that the price of consumer goods has not risen, and the overall situation is not hot. Is it hot in just a few departments? This is not true. The boom of steel, cement and electrolytic aluminum is firstly due to the expansion of total investment, and secondly, because overheating in one department will have a chain reaction, which will drive the whole economy into the process of overheating and spread continuously. In history, most bubbles and most economic overheating were driven by one department. The recent expansion of macroeconomic demand in the United States and the imbalance between total demand and total supply are due to the fact that the information industry bubble, automobile bubble, aerospace bubble and chemical bubble in history were all promoted by one department and caused by one part. The earliest economic cycle in history, the earliest prosperity to the flute, was the 17 issue in tulip bubble, the Netherlands. Flowers may make the whole economy turbulent again.
In the case of China, several departments have their own expansion cycles. Apart from our overall investment, in terms of total investment, various investments, including government infrastructure investment, have accelerated the scale investment in steel, cement and electrolytic aluminum. The other two are relatively independent. One is textiles, which are growing desperately because of the good prospects for orders after exporting to WTO. Once, someone from the Textile Federation told me that in the first half of 2003, the investment in textiles increased by 600%. There is another problem with the car. The 50% or 60% growth of cars in the first two years led to over-investment. These excessive investments have led to the expansion of the entire investment scale. Every industry is a problem, and it is even more problematic when put together.
It is very important to study various phenomena in the whole process of demand expansion. If China's economy is not too hot, we must explain why the electricity in China is so tight and why the prices of the means of production have risen so high. Macro-control has come, and the inland areas have rebounded very badly, which is called the most severe. The coast is overheated, so we are not hot. We all work in coastal areas. We are poor at first, but whether it is hot or not, think about it. Are you nervous about electricity? What about your production? If the bubble bursts, will your industry suffer the biggest impact first? This is the overall problem. Changes in these things will have an impact on every aspect, every industry, every enterprise and every place. We should see the trend of economic overheating through these phenomena, judge what state the total supply and demand relationship is in, and judge whether there is overheating.
What's wrong with the boom? It's not that there is anything wrong with the boom, shortage, high growth rate, increased employment and tax revenue. As mentioned above, overheating itself has not caused much loss to the economic cycle, but the real problem is the next round and the next stage. What's the problem? Overheating itself will lead to overinvestment, which is the most important thing. Because of the high price and the shortage of products, we invested. At this point, the investment seems reasonable. With such a good price and such a good opportunity, I expanded my production capacity. The real problem occurs at this time, which will lead to transitional investment. And there will be a phenomenon at this time, and the cycle of high prices will be longer. As mentioned earlier, the production capacity cannot be alleviated or changed in a day or two, and it needs investment. Even from the beginning of exploration, mining, plant construction and equipment introduction, it will take two or three years to build a power station. In these two or three years, there will be a shortage of CLP. Everyone has been investing in these two or three years. Now there are all kinds of mineral resources and raw materials in the world. I have attended several meetings, and mining giants all over the world are also having meetings. We will accept the price decided by more than a dozen people, because this is a real oligopoly industry. According to these people, it will take at least three or four years to expand production now, and the production capacity of the mining industry can be expanded to be more balanced with the current supply and demand relationship. What do you mean? After three or four years, the price will be higher and the shortage will be greater. Everyone will seize the opportunity and vote and vote. The disadvantage of oligopoly is to wait for high prices without investing. In order to maintain high prices, oil monopoly organizations will not expand production capacity and keep prices high. Of course, he is not against competition, but he will restrain it. This is not good for us. But the advantage is that these people will make the investment more stable and will not be ups and downs. But in most industries, there are not so many people and everyone doesn't know them. If they desperately invest in it, there will be over-investment and future overcapacity. This is the biggest harm of economic overheating, which has planted seeds for the future economy. The biggest problem of overheating is that it will create future overcapacity during overheating.
Total supply and macro-control
This is the case all over the world, and so is the process of market economy development. Because of the high economy, high demand and tight supply and demand, everyone invested, which led to the bursting of the bubble and the emergence of flutes. Recently, the IT bubble in the United States burst because the initial investment was overheated, such as broadband. At this time, IT technology is mainly reflected in the development of the network. Therefore, it is predicted that the demand for broadband will increase in the future, and the future economy is the network economy. When this technology first appeared, when everyone needed broadband, broadband was really tight, so everyone invested in laying broadband. In those years, all kinds of IT equipment, including IT broadband, were overheated. In the case of overheating, the price is high and the prospect is good. Everyone laid it. At a certain stage, they suddenly found that, in the words of Americans, the broadband laid by Americans 1999 could not be used up in a hundred years. Of course, some people later argued that it was not a hundred years but fifty years. Anyway, they invested too much broadband at once. Then the economy declined, the demand for broadband equipment suddenly stopped, the investment of the departments producing these equipment and materials suddenly stopped, the demand of other departments suddenly decreased, and the economy began to play the flute. At first, no one invested, the demand began to shrink, and the price began to drop sharply. So overheating is not terrible, overheating itself is not terrible, and the consequences of overheating are the most terrible.
At the end of the year before last, some economists thought that China's economy was afraid of cold and heat. I said that I also agree that all enterprises are afraid of cold and heat, but we should think about how the cold comes. All economic crises in the world are caused by overheating, and all colds are caused by overheating ahead. This is the core concept of studying the dynamic process, and all the surpluses in the world are caused by all the surpluses. The bubble is about to burst, and all economic crises are caused by previous bubbles. The former has a small bubble and the latter has a low economic coolness, while the former has a large bubble and the latter has a greater economic coolness. Japan's real estate financial bubble took 20 years 15 years, and it hasn't come out yet. It just came out two years ago, with three consecutive quarters of negative growth. It took several years for the Asian financial crisis to emerge. The last bubble in China was in 1992. The premise of cold protection was heat protection. We should think about this problem from a dynamic process. Moreover, it should be noted that once the relationship between supply and demand is unbalanced, it will have an acceleration effect, which is called a vicious circle and you can't stop it. What is acceleration and what is a vicious circle? Everyone knows this in life. The greater the demand, the higher the price. The more things I buy, the greater the demand, the greater the price, the more input, the greater the demand and the higher the price. This is a vicious circle. Therefore, it is necessary to prevent the occurrence of a vicious circle and the emergence of a real surplus. As long as one department stops investing, eventually the whole society may stop investing, and then unemployment will become a problem.
When studying the relationship between supply and demand, we should see that they are interactive. They are two stages of a dynamic process and a cycle, and the front overheating and the back supercooling are related. The imbalance between supply and demand was not only a static phenomenon at that time, but also had a series of dynamic consequences. During the morning break, some people said what caused the dynamic fluctuation, whether it was caused by government policy mistakes, and there must be. I will talk about the government's policy mistakes later, and the market's mistakes may be even greater. In the past two years, there has been a saying that now we are engaged in a market economy and will not overheat. In the past, our economy was overheated because state-owned enterprises spent everyone's money and public money, and we didn't care anyway. Demand is overheated and investment is always hungry. Now it is a private enterprise, spending its own money, not overheating, no demand and no investment. This statement is wrong. The market economy in western economic countries for hundreds of years is one cycle after another, one fluctuation after another, and one crisis after another, all created by private enterprises. Keynes explained that the reason for economic fluctuations is the irrational expectations of entrepreneurs, which will also cause fluctuations, and the market economy itself will also fluctuate.
There is also a saying that when it comes to the market economy, let it fluctuate, let it survive the fittest, and the market economy will not fluctuate. Therefore, the government does not care. Regardless of the government, the government can indeed make fluctuations. But can it be done without government macro-control? There is no government macro-control, only a market economy. How big will this fluctuation be and what will be the consequences? I think it needs analysis. If there is no government, there will be no macro-control by the government. In the history of western market economy, there was no government for most of hundreds of years. It was not until 1930 that macro-control was implemented and the government intervened. Before that, it was the economic prosperity of 1978, with economic prosperity and investment prosperity in two or three years, then it entered a crisis prosperity in two or three years, came out of the trough in two or three years, and then another round. What is an economic crisis? Economic crisis is the process of destroying part of production capacity and balancing supply and demand. The phenomenon is the phenomenon of smashing machines and pouring milk in history. Why is this? Forced elimination of part of production capacity, re-balance and re-increase, this is the essence of the economic cycle. Destroying part of production capacity belongs to enterprises, that is, destroying some enterprises, especially small and medium-sized enterprises. Large enterprises have 1000 ways to defend the past, and small and medium-sized enterprises bear the brunt, and the survival of the fittest will be eliminated first. This is the development process of market economy without government. Until 1930, the big and small bars finally eliminated 50% of the productivity of all mankind. Coupled with World War II, supply and demand finally balanced, and the world economy grew again. This is the result that there is no government in the market economy, and the market economy itself fluctuates. This is a problem that mankind has not solved. If competition is to meet people's needs efficiently, if we want to engage in a private market economy, the result is
Fluctuations come and go, and when they fluctuate, people feel uncomfortable. The basic problem of Keynesian economic theory is to create jobs, and the most painful thing for people is to feel useless. There are several ways to solve this problem in human history, but it is not the way to keep fluctuating. The flute has been annoying once in seven or eight years. There are two ways that have the greatest impact on the development of human society. One way is Marxism and socialist planned economy. If we plan to work together, the total supply and demand will not be unbalanced and there will be no fluctuation. The socialist planned economy was the first to solve the fluctuation of market economy, and it was unreasonable to see that there were still so many poor people who could not eat. Finally, we found that this system has its defects. Everyone has no enthusiasm and creativity. In addition, this economy will have ups and downs. There are two reasons. First, planners have to make mistakes themselves, and the consequences are even greater. When the Great Leap Forward came, more people died than when the market economy fluctuated. One is that state-owned enterprises have no property rights constraints and always want to invest more. In the past, under the planned economy, our economy was always overheated and always wanted to spend more money. No one thinks from the perspective of loss, and it is always overheated after a period of government regulation, which is inefficient at the micro level and actually inefficient at the macro level. So the whole world agreed to return to the market economy. This is a historical process, provided that the market economy fluctuates.
Then, in Keynes's 1930 s, an English economist wrote such a book. In the process of eliminating 50% production capacity, Keynes wrote "General Theory" in 1936, which talked about macroeconomics, explained why the flute appeared, and put forward macro-control policies. Since then, Greenspan has been transferred there every day, and the most developed market economy countries still have macro-control, thinking that the market economy mechanism itself is good, but the market economy itself fluctuates, which requires some government intervention as a government public service to create a stable growth environment. Through the government's adjustment of the total supply and demand, we can smooth economic fluctuations, achieve economic growth, create a relatively stable growth environment for everyone, and avoid economic turmoil, so that we can have what we now call macro-control.
The market economy itself needs macro-policy adjustment, and it is necessary to realize that the market economy in the early stage of development needs government macro-policy adjustment more. We shouldn't go back to China to travel through history like Western Europe and North China. 1978 had an economic fluctuation, and 1978 had an economic crisis. To tell the truth, it is really easy for us to enter the state of economic crisis, even the state of big flute. When we encounter a crisis and a vicious circle comes, we don't know what to do. Can our economy still exist? Of course, the situation in the first two years was not too hot. Now everyone says that steel has not been affected. According to the strength of steel at that time, if a thick rod and a tube were not inserted, the capacity of steel would not be known. There will be a surplus of power projects under construction in two or three years, and now there is a surplus of cars. If all walks of life do not intervene, for example, there is such a huge surplus of automobiles, and if there is no government, the automobile production capacity will be very obvious from June 5438 to October 2003 10, and major automobile manufacturers will start to reduce automobile production. A coastal province submits 40 automobile factory investment projects to the National Development and Reform Commission for approval every month, and none of them is tens of thousands. At present, there are millions of automobile factories in Shanghai, all of which are billions of investments. It is the same tune to reach one million vehicles in a few years, and a province adds 40 projects every month. How many automobile projects have been carried out in many provinces and months in China? What if China's car bubble bursts? The car bubble in the west burst, and so did the car bubble in China. If we don't study now, a big project will go up. Work shall not be started without approval. In this case, a little intervention is really needed, which may be wrong. But without the government to look at the relationship between supply and demand, it is too easy for China to make big moves. Last year, it reached an increase of 14%. Without macro-control, I am afraid it will still be 15%- 16. It's hard to imagine how many bad debts banks can have. The financial crisis is too easy. China's financial system is in the early stage of development, and entrepreneurs' understanding of market economy under the first generation of market economy. Many economists believe that the market economy will not fluctuate and there will be no bubble. In this case, it is too easy to have crises and troubles. In our case, there is no need to go through it again in the early stage of development. Many backward countries are inferior, but one advantage is backwardness. We don't have to bear the pain that others have already suffered, nor do we have to make the mistakes that others have already made. We can take shortcuts and develop faster.
Now everyone realizes the necessity of macro-control, but the next question is, how to control it? When did the regulations start? What means are used for regulation? What are the consequences of supervision? This needs to be discussed.