You have arrived at www.whyitdoesnt.com
where Professor Arty Farty likes to joke and amuse.
He explains economics in 5 parts using wacky pictures.
PART 1 Hello and welcome
His web site shows,
Professor Arty Farty keeps it simple.
He says that services are provided such as
window cleaning, banking and nursing.
He says that stuff is made such as
ships, ice cream, computers, lollipops, hair curlers,
houses, dog collars, and popcorn.
How is all this OUTPUT financed?
Investors raise money.
Money is found to pay for workers' wages.
He says that money has also to be found
to pay for ingredients such as
wood, iron ore, chemicals and fertilizer.
On top of that money has to be found to pay for
factories and equipment needed for producing output.
Professor Arty Farty sums it all up by saying
money is invested and
Output is sold ............
.............. making a profit.
Profits are reinvested with the aim of
making more profit if things go well.
Round and round
INVESTMENTS produce OUTPUT
which is SOLD,
which are then INVESTED,
which produces OUTPUT
which is SOLD
which are INVESTED,
There is a flow round the economy.
PART 2 Output
HOW IS OUTPUT USED?
The grain could also be stored away in a barn.
However it must eventually be
CONSUMED or INVESTED.
There is no other choice.
The saved grain, in the end, gets eaten or sown, unless it rots.
Output can be consumed.
Output can be invested.
Some output can be bought and then used to make more output.
The output that is bought such as factories, buildings, raw material and equipment are investments.
The money used to pay for them is also seen as an investment
The Professor says that OUTPUT must be one or the other,
But what about savings?
They get recycled back into the economy by the banks and other financial institutions,
when they are lent out again for consumption or investment.
Round and round. Investment, output, consumption and more investment.
The flow round the economy should all work well.
But instead the economy is on life support
PART 3 Waste
The problem with the world economy is an uneven distribution of money.
Output must go to investment or consumption
too much money is available for investment
too little is available for consumption.
There is a lack of CONSUMPTION.
The rich have so much money
that there is a limit to
They invest instead. Too much output is recycled to INVESTMENT ..............
...........and not enough to CONSUMPTION.
Lack of spending by everyone else is the other side of the coin.
Most people do not have enough money
so sales suffer.
Too many people,
are in the position that
they CAN'T consume more.
have everything that they could desire,
so they DON'T consume to the limit of their wealth.
The very rich have no option but to INVEST
when are they run out of
things and services to CONSUME.
What else can they do with their
Too much wealth is available for INVESTING
and not enough for CONSUMPTION.
This is the problem with
the World Economy.
The flow round the economy looks like this, with too much going to waste.
More INVESTMENT leads to
and when OUTPUT cannot be sold,
because of inadequate CONSUMPTION,
the OUTPUT goes to WASTE.
The waste is seen in stagnation, projects abandoned before completion, factories run below capacity and failed businesses.
It results in unemployment, the worst waste of all.
For the world economy to prosper
CONSUMPTION and INVESTMENT
have to increase in tandem
and be kept in the right proportion to each other.
But this is seemingly impossible to achieve.
So the result is waste.
PART 4 Debt
Continuous unrelenting waste is generated by the world economy.
Professor Arty Farty emphasises
inequality as the underlying cause,
reminding us again of the Oxfam 2017 report.
Oxfam said that eight billionaires,
own the same wealth as the 3.6 billion people
who form the poorest half of the world's population.
Inequality makes for too much investment and too little consumption.
More is produced than can be sold.
Waste is the inevitable result.
More evidence of extreme inequality is debt.
World debt has become absolutely huge and is growing.
Global debt has reached more than three times yearly world output.
World debt rose to a record of more than $200 trillion by the start of 2017.
This huge debt arises because of the enormous mountain of wealth that is owned by the big players.
Many giant corporations and multinational companies
have much more money than they need for investment.
They hold the money back.
Their huge unused funds are stashed away.
These large savings are then loaned out by banks and financial institutions as debt.
Debtors owe over $200 trillion. Debtors are not only the poor but also banks, companies or governments.
Debtors owe over $200 trillion. Wealthy creditors have over $200 trillion saved.
Debtors owe money that must be paid.
Creditors are owed the money.
Some owe money and are also owed money.
THE DANGER IS WHEN DEBTS CANNOT BE PAID
Excessive debts make the economy fragile,
so a small upset can spark a crisis.
They do so when economic growth is slow.
World growth is slow because it is tied to the growth in spending on consumption.
But why is slow growth such a problem?
It is a problem
if insufficient new wealth is produced
to pay off the debts.
Those forced to pay debts often have to sell off assets, as in a fire sale, at a loss.
Debts that cannot be paid will not be paid and then those that have made loans lose out.
In a complex integrated world....................
......................... where banks and others are both lenders and borrowers.....
......................... debts unpaid can, like falling dominoes, cascade through the system causing economic crises.
PART 5 End points
And the future?
More destructive crises will probably come unexpectedly.
The present world economic system is causing harm and is very unstable.
Without change we are all going to hell in a handcart.
We are very sorry for the miserable ending.
All of us at "why it doesnt" wish that Prof Arty Farty would lighten up on the economics but he insists on his logic.
But we hope, at least, that you enjoyed the illustrations.
This website explains the mismatch
between investment and consumption
and why this has serious repercussions
for the world economy.
That is all it does. No more and no less.
It does not explain why
inequality continues to rise.
Nor does it discuss the political,
social or ecological dimensions
or what might be done.
But Professor Arty Farty can help.
He welcomes you to see more of his antics
at his other website.
where he explains the consequences of inequality on the world economy.
Pete, sometimes known as PEET, has another website.
It is a gallery of some of his cartoons.
to get to the Cartoon Gallery .
Suggestions and feedback welcome.
Please forward this website to your friends.