Part3 :101 Basic current economies

Part2: Why I disagreed with my friends

Before I can go to next 3 articles, I need to mention Basic economies on which India, and USA and most of the world is operating and what they mean. They are 4 important pillars in a free market economy

1st one is of course government, do you know what is your biggest monthly expenditure? It is financing the government thru income tax and all other taxes you buy when you eat, shop, see movies. Government is the richest and is the Emperor of the village. US govt is the Monarch of all these emperors

2nd most important is Inflation. there are lot of concepts of Inflation, but when you hear the word inflation ,it always means two things

- Government is spending more than others ( this is the true meaning of inflation)
- price are not stables, that means people who live on the borders, have to provide more for food or shelter , that means people are going to become poor.
Indeed it can proven mathematical at stable price and stable price increase ( say 1%) , poverty rate falls faster.

Tools to control inflation are a) interest rates, govt squeezes peoples spending b) capitail convertability or floating the currency, you export your inflation like US is doing to gulf countries/Indian Outsourcing firms/China

3rd most important is called fiscal deficit in India or balanced budget in USA/most other countries
- When Government borrows, as it is soveriegn , it gets the most money and it skews the whole systems
and when government spends , it skews the systems , for eg if government decides to buy a mobile phone, it buys them in millions (and not one or two like in a family ) that means a million "similar" lcd display, million "similar" keys, million "similar" sim cards and are all going to be required over night, that is going to create a major shortage and short term price hike or inflation in that particular product lines. compare it to million or even 1000 of people/organizations, it will all be different. Some go for style , some for features, some for price, increasing depth of the market.


4th most effective tool in current economic situation to remove poverty as been technology, indeed technology has played the greatest leveling factor in poverty allevation across centuring. Technology has been often replaced by words like education and militrary power,

But Government is always poor follower of technology, Being a behemoth , it is never nimble to advance/exploit technology. Technology is best exploited by risk takers, individuals, private enterprise. As you can see, In Regimes of less freedom, generally dictators pay the price for poor technology.
like USSR failed to convert their technology and had high poverty
while Saudi arabia,Iran has no new technology and has high poverty , unemployment inspite of record exports
while the reverse is true in korea, singapore, australia
Even china is no front runner in exploiting new technology nowadays.

NEXT :part 4 PC and BJP