WHY DOES LOW INFLATION AND HIGH GROWTH IN THE SAME BREATH GOT TO BE AN OXYMORON

Why is it that when there is a high growth the inflation also has to go up. This is a false dichotomy. In my view, over the longer term there is no conflict between lower inflation and higher economic growth. In fact, higher economic growth can be sustained only in an atmosphere of reasonable price stability. So high-inflation- high growth strategies are simply temporary boosts to economies which can’t sustain themselves. They’re not two pals who can bed together.

Governments & central banks across the world find a tough time balancing these. Governments fall and rise when either of the two is not under control. As we all are aware that high growth is because of growing demand and inflation is because of insufficient supplies. In order to curb the demand often governments raise the lending rates, instead of increasing supplies. In short term that may seem a reasonable option but at the cost that of lower growth is not justified.

There is a school of thought that believes that price stability is a luxury for a developing country with a primitive private sector. So, governments have to do everything regarding economic development and inflation is one of the supporting instruments. Developing countries need basic infrastructure for continuous development and the private sector cannot provide it. So, governments can fill the vacuum by funding them. Hence, inflation is the inevitable cost, but is paid back by immediate high economic growth.

Price stability is required for promotion of savings and investment. Sometimes there could be a conflict in the short run. But, that should not be utilized as an excuse for letting inflation go out of hand.

So is high growth and low inflation possible. If we see around we see many a countries which have achieved this. Singapore is the best example. In fact, they openly declared that money cannot produce prosperity. So, they didn’t allow the government to print money and undertake capital expenditure programmes. The result was miraculous. Within a matter of 25 to 30 years, Singapore managed to uplift itself from a poor country to a developed country. Another example is New Zealand in 1990s. Now of course European Union countries and Australia also have joined the bandwagon.

So, what’s the secret of continuous high economic growth?
Low inflation and hard work by people.

Poverty

POVERTY
Poverty is much more than absence of money. Often generations in poverty lead people to a sense of utter hopelessness and deprive them of their sense of self-respect and dignity. They are deprived of access to essential assets and opportunities such as education, healthcare, employment, land and other natural resources, services, infrastructure and credit. They have little say in their polity and society. They are not empowered to participate in making the decisions that shape their lives. They become increasingly marginalized, excluded and vulnerable to exploitation. This exploitation manifests in several forms such as bonded labor, child labor, inadequate compensation for work if and when they get work, ill treatment and deprivation of basic rights.

It will be naïve to believe that we can solve the problem of poverty by providing access to computers and telecommunication to the poor of the world

We have always lived in an unequal world, but now the gap between information “haves” and “have-nots” is widening fast. As Kofi Annan has noted, ‘there is a real danger that the world’s poor will be excluded from the emerging knowledge-based global economy.’

When a person is hungry don’t feed him fish instead teach him fishing
If one feels that poverty can be eradicated through charity, then think again. For more than 50 years World Bank, donor nations, various aid agencies, national governments and lately civil society organizations have all done their best, but were unable to eradicate poverty

There are 4 billion people who are living at les than 2$ a day, these are the people at the bottom of the pyramid.

As the famous writer C.K.Prahalad suggests that these four billion people can be the engine of the next round of global trade and prosperity, and can be source of innovations.

Prahlad presents his new view regarding solving the problem of poverty as co-creation solution towards economic development and social transformation (figure) of which parties involved are:

• Private Enterprises
• Development and aid agencies
• Bottom of the pyramid consumers
• Bottom pf the pyramid entrepreneurs
• Civil society organisation and local government

While market opportunities do exist corporate may refrain from adopting this model as the market at BOP is generally too small monetarily to be very profitable for most multinationals. At the same time, the private sector can play a key role in poverty alleviation by viewing the poor as producers, and emphasize buying from them, rather than selling to them.

By adopting either of the above two strategies poverty can be eradicated sooner than later.

PlanetKR

Planet KR is the idea of an ideal world we all want to live in.

We shall try and figure out the various problems/evils we are facing in the world today and way to overcome these dificulties