There are many subjects which are floating in front of the economist eyes and we are getting confused regarding which one to be analyzed and to what extent. I have tried to present a gamut of the same. I have just picked two economic measures of policies being adopted by the two different economies and their long term and futuristic movements. I have also tried to present Entrepreneurship= Poverty Alleviation theory in a simple way. The hunger for consumption eats the long term behavior of the society. We have witnessed historically that how exploitation of an asset class leads to a worldwide recession. We all want short term growth and that is killing the long term base of the economy. Recent move of negative interest rates and more negative interest rates to be included in the various countries is being motivated to drive consumption and where people will save less and will be compelled to spend. This is the economy policy which is being adopted to get inflation and manufacturing to continue its upward journey and deny people from savings. If a economy don’t have much savings and in between a natural calamity hits the ground then just imagine the depth of the income inequality and society imbalance being created. We are forcing people to become poorer and asking the rich to become richest. My concern is that Negative interest rates will hurt the long term pension funds and the old aged people who will get added over the next 10 to 15 years.
China and the world commodity market of iron ore will find its price climbing further and by 2017 and 2018 it will be better year for the commodity. Few of the rationales would make the story very clear. Developed economies have shut down the steel and iron ore production capacities due to the pressure of supply from China. Now all the worst part of excess production has been curtailed. Further China in its recent policy has said that it will cut down its excess capacity. This will help developed economies to grow their business in mining and steel production. But at the same time the pains of over exploitation of resources will burn many Chinese citizens. The shorter Boom and the Long Term Burst comes into play for the economy. Around 1.3 million Jobs will be lost in coal sector, 500000 jobs in steel industry and another million in mining. Hence slowdown of the economy in china in terms of consumption is bound to happen. Hence savings is important for the rainy days for the citizens where as others will find paths to get consumption growth. During the short term time frame Chinese government did not went for cut down in its production and when the global economy is struggling at that point of time these measures are being implemented. Taxpayer’s funds are also being doled out to save the mass by providing unemployment benefits. Amount of $15.3 billion will be spent for the next 2 years for the unemployed segment coming out from all these policy actions. The point of discussion is that aren’t we being fooled that short term growth and happy spending and then cut down on production leading to unemployment and increase of social benefits and then again negative interest rates to get consumption back and ask people not to save.
We need consumption to be alive. We need short term profits at the cost of long term and now at the cost of social benefits. We are not focusing on poverty reduction measures and policies and their real time implementations. If we look into the formula “Entrepreneurship= Poverty reduction” then we can get lot of macroeconomic support which will get growth for the overall economy in the long term. We are looking for options of bailout and bond purchase and then again default of bonds. We need poverty alleviation policies which will bring circulation of capital and formation of assets, employments for the economy in the long term. The government will be able to get revenues but they will get consumption also as more Small and Medium Enterprise opens up. The problem is allocation of resources which the government is not doing properly and has kept it reserved in the hands of few capitalist. For example a SME born in Europe can design an online platform to supply goods from NGO’s to China or to Africa where the people are in the poverty zones. For example in China many villages don’t have proper cinema halls to watch movies. Hence many people can come together to develop some business where these people can watch cinemas. Advanced agricultural information and production knowhow could be shared for improving the crop cultivation in remote villages where people are in the poverty lines and bringing growth for them. Advanced quality fertilizers and seeds could be transported to develop these places. Well the world has abundance level of poverty and we are doing only meager things to bring growth. Alleviation of poverty can make enough gross capital formation and also investment climate. Now a question might come up that this is an easy subject to know but then why it is not being implemented. Well we all need exponential growth and within very short span of time. This mindset have killed all the growth opportunities and now we are struggling to get inflation and consumption back.
INDRANEEL KRIPABINDU Sen Gupta