We constantly hear that the real sector of the economy is the most important sector, which must be supported and developed by all means. However, the question immediately arises of what is meant by this term? What gives us the development of the real sector of the economy? We will try to give answers to these questions in our article.
The concept
The real sector of the economy is a combination of industries producing goods and services. The concept appeared after another sector was finally isolated - financial or speculative. Many financiers argue that the real sector of the economy is a collection of industries that produce only tangible goods, i.e. only those that you can feel in your hands and see with your own eyes.
Why is it important to develop production?
Recent economic crises have shown that those countries that lacked real production suffered the most from them. This is especially true for those countries in which the IT industry was highly developed. The crises have shown how much this sphere is “bloated” and that prices in this market have been greatly overestimated in the past. In such industries, it is impossible to create reserve funds, an “airbag”, since physically it is impossible to accumulate goods in them. Therefore, many economists believe that the real sector of the economy is only the production of goods, and this term cannot be applied to those areas that provide services.
Countries in which a large percentage of workers are involved in budgetary non-productive spheres (officials, army, police, etc.) also suffer greatly from economic shocks and crises, since they have no alternative development options. You can “sit on the oil needle” for a long time and develop the police, army and navy. However, there will be nothing to feed them when hydrocarbon prices collapse. $ 50 per barrel of oil is still a normal price on the market, but Russia is already experiencing serious economic problems with it. Many are confident that at a price of $ 30 per barrel, we will have to completely disband the entire existing contract army, since there will simply be nothing to feed it. Recall that the price of oil under the “bad Yeltsin” was $ 10 per barrel, and the chances are good that it will return, since there is a worldwide rejection of hydrocarbons.
Macroeconomic indicators of the real economy
In order to characterize the state of the real sector of the economy, macroeconomic indicators such as gross national product (GNP) and gross domestic product (GDP) are analyzed. The GDP indicator is preferable, as it shows the level of production within the state. So, we give the definition of GDP and GNP.
Gross domestic product - the aggregate market value of all goods and services produced by citizens of the state within the country
Gross national product - the aggregate market value of all goods and services produced by citizens of the state both within the country and abroad.
The gross national product includes gross domestic product.
The real sector of the Russian economy can be analyzed by these two macroeconomic indicators. GDP and GNP are always calculated in monetary terms. We will say more about this in the next paragraph.
Cost or volume?
It would seem that the main macroeconomic indicators of real sectors of the economy should be measured in the volume of output, for example, last year 5 tons of grain were threshed, in this - 6, etc.However, for an objective analysis of the economic situation of GDP, GNPs are calculated in monetary terms.
Politicians know how to apply such a trick. When the country's economy grows, they report in their reports that there is a growth in GDP in foreign currency. During periods of crisis, prices generally go down. Manufacturers begin to include additional production capacities in order to at least somehow stay afloat, since they receive less profit per unit of goods while maintaining credit obligations in the same volume. But politicians “switch” from indicators in monetary terms to production volumes and report figures in physical terms - they have released so much, threshed, etc. This gives rise to false ideas about the economic situation.
Let us recall the resentment of the Belarusian president when he learned that Belarusian producers increased their exports to Russia in 2016, but at the same time they significantly lost profits. Officials reported to him about the first, but did not mention the second. However, A. Lukashenko himself “got to the bottom” of the truth and expressed his indignation at this “pride in success”. “What kind of growth is this? We supply more goods now, but have begun to receive less money for them? What is the benefit then? ”Asked the Belarusian president of officials of the Ministry of Agriculture. These fair questions make it clear why the volume of production is expressed in monetary terms and not in kind.
Further in our article we characterize the real sector of the Russian economy.
The real economy in Russia: deliberate deception or delusion?
We have already given an example above how Belarusian officials know how to manipulate numbers. However, their “omissions” are nothing compared to the recent reports of Russian officials.
The Federal Statistics Service has published official data on the situation in our country. The development of the real sector of the economy was not even discussed. Rosstat figures tell us that GDP for the second quarter of 2016 "slightly" decreased - by about 4.5-5%. In real terms, this is about 1 trillion rubles.
Federal media and government officials have begun to trumpet that sanctions and crises are causing “minor” damage to our economy. And statistics confirm this thesis. The real sector of the economy is primarily an indicator in numbers. But the facts, as they say, are stubborn things, and you can not argue with them.
Many experts have questions about whether the media controlled by the authorities and many politicians really do not understand the real situation. Or are they deliberately misleading Russian citizens without provoking panic and discontent? No one has answered these questions yet.
Nominal and real GDP
So, Russia's GDP “slightly” fell - by 4-5% in 2016, although this is already a disaster for the macroeconomics as a whole. But compared with what is happening in the world - a drop in oil prices, sanctions, the global crisis, etc. - such numbers are "success." However, such indicators are a real manipulation and have nothing to do with the real state of affairs.
The fact is that for an objective analysis of the situation it is necessary to use monetary expression, we have already mentioned this above. The concept of "monetary expression" in the economy means the objective economic equivalent of exchange. Today, this equivalent is considered to be foreign currencies - the dollar, euro, yen and yuan. They are that objective measure by which one can understand the real state of any economy in the world. The ruble, unfortunately, does not apply to such currencies today, as it is subject to many non-economic factors.
We have come close to the concepts of nominal and real GDP. We give them a definition.
Nominal GDP is a numerical expression of the state of the economy without reference to external objective indicators.
Real GDP is an indicator of the objective state of the economy as a whole.
To understand, simulate the situation.
An engineer at the plant last year received a salary of 30 thousand rubles. The next year, his salary remained unchanged. It follows from this that the nominal wage at the same level is 30 thousand rubles. And does this mean that his standard of living has not changed? No, because for objectivity it is necessary to take into account other indicators. And if in a year the prices in the store increased, payments for utilities increased, gasoline and others rose in price, this means that the real wage of our engineer decreased.
The actual state of affairs in the Russian economy
From 2014 to 2016, the Russian ruble fell by half against the dollar. Consequently, 17 trillion rubles in 2014 and 2016 are completely different figures. If you translate them into currency, it turns out that our economy lost not 4-5% in 2016, but 45-50%. We agree that the numbers are simply shocking. Even in the Great Patriotic War and after the collapse of the USSR, we did not have such depressing economic indicators. The accumulated reserves of previous years save us from starvation of our citizens, but if the situation does not change in the next two or three years, then people will again begin to buy salt and matches for the future and stand in line for humanitarian aid. We hope that investments in the real sector of the economy will begin in the near future.
What's next?
We just did that we developed the raw materials industries: oil production, logging, metal production, etc. However, the real sector of the economy is many other industries that will replace the traditional ones in the future: biofuel production, production of cars on renewable energy sources, genetic engineering, capable of 1 square. km to grow tens of times more food, etc. All this is actively developing in the West today, and in the coming decades it may happen that Russia will no longer be needed as a "raw materials appendage." Today we are already witnessing the beginning of the decline of the hydrocarbon era: solar-powered cell phones, smart homes, biofuel vehicles - these are just the first examples of future production. The security of the real sector of the economy depends on investment, modernization, the development of new manufacturing sectors, and the abandonment of the “oil and gas needle”.
Summary
To summarize. Production is one of the important factors in the development of the economy. However, do not forget that the real and financial sectors of the economy are closely interconnected. Both of them cannot function in isolation from each other. Therefore, balanced balanced development of all sectors of the economy is necessary at once.