The economics of tomatoes and cement!

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On evening not long ago, I had a pleasant conversation with a businessman friend whom I had not seen for a very long time, and with us was his driver who was an Arab national. My friend asked me about the latest news of the economic situation. However, the driver intervened and said: “I am a very simple man and the economy is a complex subject and difficult to understand. So I use a simple method which is to follow the price of tomatoes. He explained: “If the price of tomatoes is stable, then the economic situation is good. If it is not, then it means that the situation is worrying. Tomatoes are essential ingredients in cooking a meal and they are grown locally. If the price of tomatoes increases, then there is an increase in the prices of different things.

I thought a bit about the man’s words and recalled the historical “status” of the tomato in the cultures of Mediterranean countries, such as France, Italy, Spain, Greece and Turkey, which consider it the mother of vegetables. In the Arab world, one economist has even tried to establish an economic tomato index to measure inflation.

Then my friend intervened and said that he also had his own method of measuring the economic situation. It depended on analyzing the status of cement companies, because the rate of production, sale and profitability of cement companies was related to the success of contracting companies and real estate developers, and, of course, also of companies dealing with building materials, iron, furniture, lighting, ceramics and others.

Whether the desired approach in evaluating the economic situation is “populist” or “elitist”, what is important is to have a practical realization of the concept of the simplification of meaning. In examining the approach of states in managing their financial resources, especially in the preparation and launching of their financial budgets, it is clear that there are two schools of thought or approaches that are taken.

The first school is the financial accounting method that analyzes data according to internationally recognized standards and determines what is achievable on a scientific basis.

There is a second school that is completely different. It is a school of economics. It uses different criteria along with economic theory to try to understand the financial situation and attempt to find effective solutions to economic problems.

Financial accounting attempts to measure past financial performance but without economic prudence it will not be able to provide the decision-maker with a forward-looking view. There is a delicate and required balance in carrying out any financial planning for the individual, company or state. It is the balance of accounting and of economics, and both are needed to make sound financial plans for the future.


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