Monday, June 28, 2010

Future of World Economy (Part 2)

As wealth can nether be neither created nor destroyed, just imagine how much of prosperity can be gained if there is no violence and terrorism. However, factors like increasing population can say that in timeline gross wealth can be increased, but at any given limited time frame gross wealth of the world is constant.* There will be more money allocated to remove poverty. Purchasing power of people will go high and loss of property and lives will be minimized. There will be more investments in infrastructure and obviously standard of living in the third world will be upgraded. But, this is an unlikely scenario in the present world. Every nation is unsecured by its neighbor. 

The firework dilemma*:

With so much money spent in the fireworks, once a thought appeared; what if people stop wasting money in the firework. So much money can be saved. But economy is interdependent. Macro economy is an integration of all such micro economies. If firework industry will go busted, dependent workers will lose jobs. For many they may not be compatible skill wise to migrate to other works. Those who will manage to migrate with their skills or to other skills will dilute the net workforce demand of corresponding sectors. This will influence lower pay scale among people in the interdependent economies. Same effect will be observed in the dependent sectors of firework economy. This is an effect of job loss in one sector. Same is happening at the Gulf of Mexico. An Oil Spill has ruined so many lives. Same happened in the recent recession aftermaths.

Secondly, where the saved money has gone? It could be invested in other sectors, could be dormant and out of the circulation, or money saved could create extra demand for certain commodities and hence will be responsible for inflation.

Gradually, economy has the potential of adaptability. It is a complex debate, how any sector busted will upgrade or degrade economy as a whole. Certainly, a strategic thinking can make this sustainable and acceptable to the economic ecology. 

Afghanistan is now said to be sitting on the wealth of buried minerals under those rusted Russian Tanks and opium poppies. The Afghanistan economy can witness a boost, if these minerals are accessed. The access will result in investments in infrastructures, better livelihood and millions of jobs to Afghan people and inflow of foreign exchange for the poor economy. Hopefully the clouds of a war struck nation will fade away for their prosperity. In the same way Gaza blockade removal can boost that many sectors in the region which are now under not allowed list by Israel.

The previous blog post discussed how BRIC has evolved as emerging economies and how they are going to influence decision makers for coming decades. These economies are also facing challenges to overcome and become World Powers. 

Poverty is primary among them. These nations are not homogenously developed. As Western Russia is developed, but remaining part is underdeveloped. People still live nomadic life in the interiors of Russia. Same with China, western part is not that prosperous in comparison with Eastern part having the coastline. Same is with Brazil and India. The wealth transferred doesn’t reach everyone in the same ratio. 

Infrastructure is another challenge. This is the area where BRIC nations have started investing into, so that they can make their selves ready for the forthcoming growth. Infrastructure plays a really big role in a nation’s progress. Imagine how a small railway station where only few all stop trains halt in 24 hours contributes towards the micro level economy of that village. When the tracks were being laid and station was built many locals got involved in the construction work. Some people got an opportunity to have a part time income of selling food stuffs when train halts. Some people took this as a full time vacation to reach distant places as train vendors selling food and local crafts. Some educated also got job at the station for some different roles. That village stations served nearby villages too. Those who had bulls with them will earn livelihood by providing transportation facilities. Those were the benefits to count but listed few. They were all new vocations created by single tracks of railway line with couple of platforms. Point of emphasis is the role of infrastructure, enabling wealth to reach those places where it was not before. With infrastructure reaching interior parts of the economy, it will result in increase of gross consumption and hence will guide growth in GDP. That will be the payback or return on investment in the economy.

Defense investment is a necessary evil, as it safeguards investments done throughout the economy. But, lesser this evil more is prosperity. That is why USA is ridiculed by its own mass for heavy investments in Afghan and Iraq wars. Terrorism and internal violence is a major challenge for all economies in todays world.

Illiteracy is a challenge and Education is a weapon to eradicate the evils of an economy and lead it to the path of prosperity. If people are educated and dignified of knowledge they will not be brainwashed to con tribute devil’s underground economy. Underworld is also a parallel economy, which sucks the wealth out of the white system. Any contribution in grey economy doesn’t ads to the GDP of a nation.

Corruption is another devil which really blocks the economic growth. The World Bank loan becomes a Swiss Bank deposit. World Bank or IMF receives their paybacks by hard earned Income Tax or GST or VAT paid by common mass who are still deprived of those benefits which were actually meant for them. If economies owners will go honest, imagine how much of prosperity can be gained.

Communist philosophy of Marx was based on this ideal scenario where everyone got its equivalent share of his/her contribution towards economy. Where state did all the earning and does equivalent distribution of wealth among people. However, this philosophy upon its implementation went on extreme resulting in exploitation of folks and corruption by officials. It is now ended in Russia, transformed in China. Communist ideology is now only confined to lesser know regions like N.Korea or Cuba who have minimum connectivity and responsibility towards world economy. 

*Fireworks dilemma is writetr's own hypothesis, welcome your responses on this dilemma

Part 3 will feature the Economic Hopes of Africa.

Sunday, June 27, 2010

Future of World Economy

Part 1

10 years ago, 80% of world wealth was produced by the developed world, viz. North America and EU. In 2010, scenario has changed 75% of world wealth is now produced emerging economies. Among emerging economies BRIC is the building block of ‘The Change’ in the economic pattern in past decade and the forthcoming decades. BRIC (Brazil, Russia, India & China) is growing like anything. These emerging economies have their own features which distinguishes it from other. And these features are responsible for theirs’ own sustainable growth. By virtue of this growth, there is a demand for these economies to have a commanding voice in International financial agencies like the World Bank and the IMF.

The developed economies themselves are in a recovery mode. Reforms are there everywhere. Europe is undergoing a phase of cuts and high taxes to reduce their liabilities. Greece and Spain are under crisis. Great Britain has also induced toughest economic reforms to avoid being another Greece or Spain. Euro may be split in future, as Robust economies (France, Germany, etc) in Euro Zone wants to avoid economic dangers from weaker economies in Euro Zone (like Greece, Spain, EU members from Eastern Europe)

According to UN Sec Gen, Mr. Ban Ki Moon (In World Global Summit, a CNBC show), vision of United Nations is to create 420 Million new Jobs by 2015 for the sustainable world economic growth. Around that much of job had been lost by the global recession last year. Flow of money from developed economies will be directed towards developing economies. This flow of money will be in the form of investments to set up new ventures in such areas. Emerging economies like BRIC, will be the direct beneficiaries. There will be changes and economic reforms all over in the coming years. Emerging economies are poised to deliver financial recovery in coming years to follow.

Now the question is what are the unique features of BRIC economies which is making them performers and gradually evolving policy makers of the world economy. India has itself a vast potential consumer base. It has a potential to sustain in deeper recessions only by serving the demands of their domestic consumption. India had been eyed as a market of interest for many. And hence, India is witnessing FDIs. Political instability had been a blockade of economic growth in India. Now it doesn’t seems. China has a potential for its huge manufacturing base, which is delivering to every continent. Chinese policy disallows money invested in its land to go out for a certain period of time. This is resulting in higher purchasing power of its people and hence strengthening their demands by theirs’ domestic consumptions. Similarly Brazil is a manufacturer for the world and witnessing economic prosperity with an influx of foreign investments on its land. Russia so far known as an economy based on its raw material resources has now opened its arm to the world to diversify their economy. Now Russia will no longer dependent on its Coal, oil and Natural gas supplies to the Europe. Indeed, Russia is on a way to be an economic supreme by investing in other industries like the new Silicon Valley. Russian Silicon Valley will definitely bring a revolution to the world economy. They are going techie and will produce value addition of Russian creativity.

Wealth is like energy. Neither created nor destroyed. If any country will print extra currency bills it will increase purchasing power of people, raise demand for commodities, reduce monetary value and hence inflation. Therefore, the gross Global wealth is constant. Now the emerging economies have started taking bigger shares of this wealth every year. China and Brazil majorly catering to the consumption of the globe, BRIC economies extracting the natural resources are pulling the flow of wealth towards their respective regions. The European economies by virtue of their consumption more than production have witnessed the debt crisis. Now, they are focusing on the cuts and reducing social liability to balance out the difference between consumption and production. In the past decade flow of wealth is shifted.

Loss of some is the gain of others. BRIC is enjoying a prosperous growth rate by virtue of this. World economy is progressing towards a balancing equilibrium, already developed economies loosing and developing one grabbing. But, how long this will continue?

If we analyze the economic history, after the industrial revolution post renaissance; current developed economies created wealth for themselves by manufacturing of goods on a larger scale. With the economies growing and labor cost becoming higher, they began outsourcing from several developing locations worldwide. These economies became developed because of manufacturing. Now USA is also targeting to further invest in the manufacturing sector. If the invest in manufacturing will go high, BRIC can witness a reduction in the demands for the supply from their respective regions. This is going to be a way ahead of future scenario. Because in present World of West, the production cost will be really high. To start a manufacturing based economy, they first have to go that low to meet the sustainable requirements of a manufacturing based economy.

To secure wealth, Intellectual Property is one such means. With the globalization, technology is no more one economy’s advantage. Now, everyone has an access to it. Success of BRIC lies over here. They are prospering because of the technology they got shared by west, and development of their own indigenous method which got acceptance of worldwide consumption. Mainly China, Chinese goods are made for worldwide consumption. China is now doing both outsourcing and exports.

Information Technology had been an Indian success story. Mainly an outsourcing of skills, Industries growing all around the world require a support of Information Technology, and now these support services have become a major contributor to Indian GDP. India is also a diversified economy. The green revolution of 60s, has not only made India self sufficient but also supplying to the demand outside.

End of Part 1

Saturday, June 26, 2010

G8, G20 and the World Today

At the time of writing this article G8 summit has begun in Canada, which will be followed by G20 summit later on, this weekend. Developing economies are going to play a vital role in strengthening and restructuring world economy. Reforms for IMF and The World Bank are already in the pipeline. Economies like India, Brazil, China and Japan have a major role to play in making a prosperous world economy which is being under a constant unstable equilibrium. Global Recession originated in USA is over, but flaws of several economies like Greece, Spain and Japan had been exposed in the recent past. Features of Macro economics are prevailed in the cluster of theirs’ corresponding innumerous micro economies. However, Global economy is a cluster of such Macro Economies. Globalized economy where all economies are inter-related, setbacks or reforms on one will influence others with respective effects. However, North Korea is an exception to that, an unknown isolated part of the globe.

North Korea, these days featured in FIFA #WorldCup and observing 60 years of the #KoreanWar; memories of the forgotten war between the two Korean nations is being done these days. That was a war, which involved USSR, China, USA and western allies supporting theirs’ respective ideologies. The Korean War indeed a war between democracy (or Capitalism) and Communist ideologies, in the early ages of cold war era. (Recommendation- Watch 71 into the fire; A south Korean Movie based on the true story of 71 student soldiers who heroically provide resistance to North Korean army’s invasion)

Hopefully, someday North Korea will be open to the world. Like other nations of communist ideologies like China and Russia who have a wider influence on world politics and economics.

#G8 and #G20 summits, there are so many hopes associated with it. Greek or Spanish economies are undergoing tremendous reforms through tough decisions and protests. The brokenness of these economies has alarmed the world. That is Japan is also undergoing reforms and China is consequently revaluating its currency to be more open and secure to the world. Indian economy is supposed secured, no wonder it could be a mirage not noticed in a fabulous growth rate in GDP of 8+ % per annum.

Economy is the main focus of this summit, overshadowing the concern of climate change. Rebalancing of World economy is the primary focus. America has announced more economic reforms to come in coming days, in the form of new banking laws. These reforms will be toughest since the reforms implemented in 1930s after the great depression of USA. Last year G20 summits concluded with a vision to prosper Africa. Investments has been made, work in progress and results yet to be delivered.

In today’s world, we still have war wound territories like #Gaza, #Afghanistan and Iraq along, failed states like Somalia and isolated economies like North Korea. Gaza, it is sad to learn about the miseries of people, who have got many commodities, almost, everything blockaded by Israel. Knowledge of Afghanistan’s potential mineral wealth is good but sarcastic news. The war struck land lock country, deeply addicted by Taliban and opium. India and China are desperate to grab these wealth and opportunity for prosperity for the locals. For India, it won’t be that easy by virtue of dependency on Pakistan for the transportation route needs.

Economy is also catalyzed by peace. Sadly, we have weaker states like #Kyrgyzstan who are witnessing ethnic violence and humanitarian loss all around. The Gulf of Mexico, has also suffered huge job loss by virtue of the BP Oil Spill. Effect on the Environment is another major concern in this region.

Russia is now opening its arms to the world. They have realized dependency on energy sources and raw materials alone will not let them to prosperity in the world today era where emerging economies are at sprint. The Russian #SiliconValley will certainly open avenues not only for Russians but also for many economies.

Last but not the least; football for a hope has really out played every bit of concern among all of us. This Euphoria is amazingly celebrated by not only by 32 countries, in fact every country. Football #WorldCup has certainly grown bigger than Olympics in popularity. #WorldCup is certainly the bigger summit which has woven people from different nations into a single fabric.
Hopefully, this G8 + G20 summit will have a remarkable mark in the world history, in the years to come. Current Affairs

Friday, June 25, 2010

For My Parents

For My Parents

Even on phone I can see tears of happiness, which is evident in Mummy’s voice. She all the time felt sad whenever one reason or another not allowed me to visit my home town. But mom never let me know what she felts and encourages me to focus on my work. I always feel being pampered, miles apart on the phone call. We talk about so many things, family matters, how I am doing, my future plans, climate and precautions on its change, stories from mythology on random references, etc. Papa, we always do technical discussions like how to save Income Tax under section 80C & 80D, what are my plans pursuing MBA? Scope of 1 year programs after getting more experience, etc; but there is always a hidden message of missing and loving me.

I miss my parents too. Twinkle in mummy’s eyes when she saw me so happy after we bought that Red Jacket in a garment shop. That was my favorite apparel then. My graduation days, every time Mummy came to railway station for ‘see off’, on my train to Kolkata. With the train accelerating away from the platform, me watching through the window, followed by standing at coach’s entrance saw mummy standing there and waving me. In between pallu of her saree gets directed to her eyes by her left hand. I can see mummy standing there till the platform is visible to me. And She remains there till the last coach of train is visible to her. This happens always. Indeed, A very loving moment. This is real love, immortal. I wish if I had more days of vacation in those semester breaks. Mamma’s love is evident in those hands knitted sweaters, or that woolen cap which covered my head and tied around my #ShinChan cheeks when I was 5. Love is knitted in those apparels, which she finished while teaching in school, watching TV and basking the Sun in winter days. That time our studies were monitored. I remember I pretended but not studied, caught and then taught by Mom herself. And I studied Mathematics from Papa, subject to his availability. Surely that’s a legacy I have. I had marathon mathematics days whenever Papa got time to be at home. Still remember in class X, We together cracked one such haunted problem of quadratic equations once. Certainly, teamwork began from home.

Papa seldom plays cricket. He was a volleyball player in his time. One day it was a big surprise to me when I discovered Papa is a left hand batsman. Mummy and Papa are very good in storytelling. So many short stories with high value moral, really these stories are the legacy.

I am a proud Mamma’s boy! Thanks for your patience and serenity to accept that there are no more semester breaks in my job. Miss u mom! Miss u dad!

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