In order for human society to exist, the process of producing goods and services must be continuous. The process of production, seen as a continuous, renewable, repetitive process, is reproduction.
Reproduction can be: individual – when considered within the framework of the household or entrepreneurial firm; public – taken on the scale of the entire national economy.
In any society, the process of reproduction includes the following basic elements:
reproduction of the means of production, which means the replacement and repair of the means of labor worn out in the production process, the construction of new buildings, structures, the restoration of stocks of raw materials, materials, fuel, etc .; reproduction of the labor force. To participate in the production process, the employee must constantly restore his physical and mental ability to work, improve his qualifications. The reproduction of the labor force in a broad sense also means the training of a new generation of workers who have professional qualities; reproduction of economic and production relations, i.e. relations between people arising in the processes of production, distribution, exchange and consumption; reproduction of natural resources and human habitat. We are talking about the constant restoration of soil fertility, forests, maintaining the cleanliness of the air basin; reproduction of the results of production, i.e. social product.
Thus , reproduction contains some features that distinguish it from production. It includes the conditions for the resumption of production; after production itself, it involves the distribution, exchange, and consumption of the social product.
Depending on the volume of the social product achieved, the following types of reproduction are distinguished:
• simple reproduction, when the size of the gross national product (national income), the quality of the product created remain unchanged in any subsequent cycle (repetition of production in the same size);
• Expanded reproduction, when the size of the gross national product (national income), as well as the quality of the product, increases.
In the process of reproduction, factors of production also undergo changes. The source of extended reproduction is the surplus product. The modern economy is characterized by expanded reproduction. It assumes that new investments in production not only compensate for the raw materials and materials used, worn-out equipment, but also increase productivity through the introduction of additional or more efficient means of production. Thus, the accumulation of capital is ensured, i.e. its consolidation due to additional capital investments in production. Thus, a prerequisite for expanded reproduction is the division of the surplus product into a consumption fund and an accumulation fund. Such a division takes place both within the framework of the company and within the framework of society.
Although the modern economy is characterized by expanded reproduction, in some periods of time there is a narrowed reproduction. The latter represents a reduction in production. Sometimes there is a decreasing reproduction in society: a decrease in production as a result of natural disasters, wars and destruction, when a decrease in production occurs due to increasing failures in the functioning of the economic system, the economic mechanism, etc.
The material basis for the resumption and development of production is the social product, which in a market economy is of a commodity nature.
Reproduction structure and conditions for the realization of the social product
A social product is the result of the work of the entire production of the country for a certain period of time. In the process of reproduction, the social product goes through 4 main stages: production, distribution, exchange and consumption.
Production is the initial beginning of the reproduction process, the scope and process of creating a product. That is why it plays a decisive role in the life of society. Without production, the existence of the remaining phases is inconceivable.
Distribution is the stage of reproduction, at which the distribution of the created product between the subjects of society in certain proportions occurs.
Exchange is the stage that mediates distribution and consumption and signifies a simple or commodity exchange of activities or products.
Consumption is the stage of reproduction, which means the use of a product to meet certain needs of an individual or society as a whole. In a market economy, the consumption stage is of particular importance, since it determines demand, and hence future production.
The social product in its natural-material form consists of the means of production and consumer goods, and in value form, the value of the material costs of production and the newly created value or national income.
In the process of reproduction, each part of the social product performs a certain functional role (Fig. 5.1.). In order to ensure the repetition of production, it is necessary to reimburse the spent means of production. This part of the social product acts as a reimbursement fund. According to the natural (material) composition, the reimbursement fund is represented by the means of production (machinery, equipment, raw materials, fuel, etc.).
The second part of the social product is the consumption fund. It ensures the satisfaction of personal and social material and spiritual needs. With simple reproduction, it is equal to the entire national income (pure product) and consists only of consumer goods.
With expanded reproduction, an accumulation fund is formed from a part of the national income, which is used to expand production, build social and cultural facilities, and form public reserves and insurance reserves. According to its material and material content, this fund consists of the means of production (in addition to those included in the reimbursement fund), as well as consumer goods necessary for additional workers involved in production. The accumulation fund is a necessary material condition for increasing the economic potential of the country on a new technical basis, progressive structural shifts in social production and increasing its efficiency.
For the continuity of production, that is, to ensure the production process, society must ensure the implementation of the product created in the national economy. The problem of realization is to ensure the reimbursement of each part of the social product both in value and in kind. Simply put, it is necessary to find a buyer for each product.
Depending on the economic use of the various parts of the total social product, all social production is divided into two divisions:
1) production of means of production (I division);
2) production of consumer goods (P subdivision).
The implementation of the social product involves the observance of certain proportions between units and within these units. Without this, the normal implementation of the reproduction process is impossible. So, with simple reproduction:
• The means of production (products of Division I) should be equal to the reimbursement fund in both divisions (ISP+NP+PP=ISP+IISP);
• Consumer goods (division II products) should be equal to the net product created in both divisions (IISP+ NP + PP = IPEN + PP + IINP + PP);
• the net product, i.e. the amount of the required and surplus product of division I, should be equal to the reimbursement fund P of the unit (IPEN + PP = IISP).
With extended reproduction, the implementation conditions will be as follows:
• Division I’s product should be greater than the amount of reimbursement funds in both divisions (ICA+NP+PP>ISP+IISP) by the amount of the means of production accumulated in them;
• Division II’s product should be smaller than the net product created in both divisions (IISP+NP+PP
• The net product of Division I should be larger than the Division II Reimbursement Fund (IP+PP>IISP) by the amount of the additional means of production that are required for accumulation purposes in both divisions.
As a result of expanded social reproduction, the volume of the product produced increases, which is expressed in economic growth.