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Old 21st December 2017, 10:45   #241
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Re: Understanding Economics

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While democracy is not perfect, it is the best system we have. And it is the job of such a democratically elected government to correct the imbalance/inequality created by capitalism.
Guess who else is concerned about income inequality? The man who was in-charge of Federal Reserve for 18 years.

https://www.newsmax.com/Finance/Stre.../25/id/554685/

I wonder when business schools start addressing this seriously. Right now they are busy ignoring it as a social problem. But the truth is their alumni are making the inequality worse and worse, year by year.
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Old 10th January 2018, 10:47   #242
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Re: Understanding Economics

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Free market feels like a good idea, but is not a fair one in the globalization era because the playing field is not level. Companies talk about free market only when it benefits them.
I posted this a year ago. In the last 2-3 years, it has started to occur to me that globalization is now hurting more than helping. Globalization is a win-win for businesses, but a zero-sum game for people.

Yes, it is hypocritical of me to say that. Primarily because I personally benefited immensely by globalization, which brought so many IT jobs to India, it let me live in USA for close to a decade, and now it lets me serve clients around the world, while staying in a small village. My career is built on globalization, it will continue to be so.

But now I am able to see beyond what personally benefits me. I guess age does that.

Here is a nice article explaining the impact of globalization world-wide.
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Old 10th January 2018, 12:34   #243
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Re: Understanding Economics

Is that because globalisation is inherently flawed as a concept from a public well-being perspective, or because businesses have been allowed to turn it into a race to the bottom?
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Old 10th January 2018, 13:04   #244
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Re: Understanding Economics

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Is that because globalisation is inherently flawed as a concept from a public well-being perspective, or because businesses have been allowed to turn it into a race to the bottom?
Because it allows wage arbitration, where labour from cheaper countries can undermine richer countries. Businesses that can outsource work to cheaper countries benefit because they can cut costs. But the middle class of richer countries will see wage depression and eventually become poor. The middle class of the poor country will benefit until they their lose advantage to even poorer country.

While Globalization does spread jobs all around the world, especially to poorer countries, it also sends most of the profits to MNCs. While USA lost most of their service/manufacturing jobs to poorer countries, US companies have grown richer exponentially. While the middle class is fast becoming poor, the top 1% is becoming richer and richer. This cycle will visit every country as they lose their wage advantage.

Globalization temporarily benefits poorer countries until they increase consumption, then the jobs will move out leaving much worse income inequality.

Globalization is mainly about profit maximization, which businesses love. But it comes at the cost of human development.
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Old 10th January 2018, 15:30   #245
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Re: Understanding Economics

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Because it allows wage arbitration, where labour from cheaper countries can undermine richer countries. Businesses that can outsource work to cheaper countries benefit because they can cut costs. But the middle class of richer countries will see wage depression and eventually become poor. The middle class of the poor country will benefit until they their lose advantage to even poorer country.
Pretty much what we did to the West, and what's being done to us from cheaper markets now. We haven't hit the wage depression stage in India yet, but we'll get there eventually.

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Globalization is mainly about profit maximization, which businesses love. But it comes at the cost of human development.
Any real alternatives? I guess going back to local economies is a no-go, nobody will give up profits for the common good.
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Old 10th January 2018, 15:51   #246
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Re: Understanding Economics

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Any real alternatives? I guess going back to local economies is a no-go, nobody will give up profits for the common good.
Strong domestic market along with financial incentive to buy local goods/services. Easier said than done.

Just take the IT services industry, the domestic market doesn't pay enough to cover the current cost of software services. Unless Indians are willing to pay for more for Software, and IT salaries come down significantly, domestic market for IT services will remain weak. Similarly, each industry will have such challenges.
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Old 10th January 2018, 17:19   #247
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Re: Understanding Economics

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While the middle class is fast becoming poor, the top 1% is becoming richer and richer
This is a damaging trend and is likely to lead to a lot of social unrest. More so for countries like India. I just came across a report (see URL below), that shows the wealth inequality in various countries / regions.

http://wir2018.wid.world/executive-summary.html

In 1980 the top 10% of Indians held 32% of her wealth. Today the top 10% Indians hold 55% of her wealth. This validates the fact that the rich get richer and the poor get poorer. Not a good trend.
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Old 10th January 2018, 17:24   #248
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Re: Understanding Economics

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While Globalization does spread jobs all around the world, especially to poorer countries, it also sends most of the profits to MNCs. While USA lost most of their service/manufacturing jobs to poorer countries, US companies have grown richer exponentially. While the middle class is fast becoming poor, the top 1% is becoming richer and richer. This cycle will visit every country as they lose their wage advantage.

Globalization temporarily benefits poorer countries until they increase consumption, then the jobs will move out leaving much worse income inequality.
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Strong domestic market along with financial incentive to buy local goods/services. Easier said than done.
Not necessarily. There are many Chinese corporations which have grown immensely because of globalization. So it has definitely not been a one-way street.

I wonder what "temporarily" means here. China has brought millions of their population out of sheer poverty, thanks to Globalization. Yes, if wages grow in China and manufacturing moves to still cheaper locations, they will have the same problems that US/Western Europe is now having but they will still be better off than pre-Globalization era of 70s.

Strong domestic market is the result of Globalization, prime example being this - China is the biggest market for Indian owned Tata Motors to sell Jaguar Land Rover cars/SUV.
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Old 10th January 2018, 20:34   #249
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Re: Understanding Economics

There's a lot of negativity against the 1%. During Socialist era in India, we only had state enterprises. Move to present scenario & very few big State Enterprises if not listed. Both Ambani brothers were around 40 Billion each, when they parted. Move to present and you get your answer. Paytm founder Vijay Shekhar Sharma is a new age Billionaire, and did I mention Jeff Bezos overtaking Mr. Gates by a healthy margin. This is not to deflect the rise in inequality among citizens, across the world. Billionaire club or '1%' churning is very healthy for a nation. All 1% wealth is stock related and a notional value, fluctuating daily.
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Old 10th January 2018, 21:15   #250
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Re: Understanding Economics

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In 1980 the top 10% of Indians held 32% of her wealth. Today the top 10% Indians hold 55% of her wealth. This validates the fact that the rich get richer and the poor get poorer. Not a good trend.
Growing inequality doesn't mean that poor are getting poorer. It just means that the poor are not proportionately getting the same benefits as the rich. The pie is getting bigger but the poor are getting less percentage of the growth. In fact the article you linked clearly says this:

"At the global level, inequality has risen sharply since 1980, despite strong growth in China.

The poorest half of the global population has seen its income grow significantly thanks to high growth in Asia (particularly in China and India). "
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Old 10th January 2018, 21:25   #251
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Re: Understanding Economics

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Not necessarily. There are many Chinese corporations which have grown immensely because of globalization. So it has definitely not been a one-way street.
Hmm, China is the biggest beneficiary of globalization, much more than India. So I am not sure how you are differing from my premise.

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I wonder what "temporarily" means here. China has brought millions of their population out of sheer poverty, thanks to Globalization.
And what will they do when automation takes away those jobs? Last year, Foxconn alone replaced 60000 employees with robots. Chinese economy was built by becoming the world's manufacturing hub. As automation increases, robots need not run in China. Manufacturing will move back to consumer countries to reduce transportation cost, unless China has a strong demand for their own goods.

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Strong domestic market is the result of Globalization, prime example being this - China is the biggest market for Indian owned Tata Motors to sell Jaguar Land Rover cars/SUV.
Strong domestic market means Indians buying India made products. Indian products selling in China is not an example of strong domestic market.

Countries with cheap labour don't tend to have a strong domestic market. Since their income is less, they usually can't afford to buy the products they make. So they export and slowly build their economy, thus benefiting from globalization. Both India and China did that, and still doing it. But globalization beneficiary countries also see their wages increasing much faster than expensive-labour countries where the labour demand is very less. In the same MNC, when US employees were getting 1-2% hikes, Indian employees were used to 15-25% hikes. This increases consumption and starts building a strong local demand. If this local demand is met by local production, then slowly the country can sustain itself if outsourced jobs vanish someday.

How many of the electronics/software you use daily is made in India? That will give you an idea how healthy we are as an economy.

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Billionaire club or '1%' churning is very healthy for a nation.
Can you elaborate on this using economic arguments?

Last edited by Samurai : 10th January 2018 at 21:27.
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Old 10th January 2018, 21:26   #252
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Re: Understanding Economics

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There's a lot of negativity against the 1%. During Socialist era in India, we only had state enterprises. Move to present scenario & very few big State Enterprises if not listed. Both Ambani brothers were around 40 Billion each, when they parted. Move to present and you get your answer. Paytm founder Vijay Shekhar Sharma is a new age Billionaire, and did I mention Jeff Bezos overtaking Mr. Gates by a healthy margin. This is not to deflect the rise in inequality among citizens, across the world. Billionaire club or '1%' churning is very healthy for a nation. All 1% wealth is stock related and a notional value, fluctuating daily.
Two very important tenets of economics
a) One person earning Rs 100 VS ten people earning Rs. 10 each -- the second option spurs more economic activities. This is proven time and time again, and in the last century, this tenet was used to create the middle class.

b) Economics has nothing personal. Bill Gates turning to Jeff Bezos or Ambani bros switching between each other does not prove anything for economics. That the 1% is churning itself just shows that the faults in the system are preserved across generations.

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Growing inequality doesn't mean that poor are getting poorer. It just means that the poor are not proportionately getting the same benefits as the rich. The pie is getting bigger but the poor are getting less percentage of the growth. In fact the article you linked clearly says this:

"At the global level, inequality has risen sharply since 1980, despite strong growth in China.

The poorest half of the global population has seen its income grow significantly thanks to high growth in Asia (particularly in China and India). "
Income growth is just one factor ( a convenient one for the market and inflation driven economies) used to evaluate growth. A nurse in the 90s in India would have earned 1/10th of what a nurse earns today. Does that prove poverty is eradicated ?
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Old 10th January 2018, 22:27   #253
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Re: Understanding Economics

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Can you elaborate on this using economic arguments?
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Two ?
This is only for Market economy.
We all, when we start our day our aim is to provide services/produce effectively/ efficiently in a market. There are local, regional, national & international market where we provide our services. There is competition and competitors, competing for the same pie. If the set of billionaire is constant i.e. devoid of competition or oligarchy or Google 'oligarchy countries'. A similes as in the stock market where companies compete.

10 person earning 10 or one person earning 100. Booth have very different needs and wants. An example is the Govt providing for toilets in rural India. Survey found that the toilets were being used as store rooms.


https://www.washingtonpost.com/world...=.4daa64dc1a9e
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Old 10th January 2018, 22:53   #254
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Re: Understanding Economics

Sorry, you are not making an economic argument. In fact, I don't understand your post.
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Old 10th January 2018, 23:10   #255
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Re: Understanding Economics

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....10 person earning 10 or one person earning 100. Booth have very different needs and wants....
Of course, but the point there is the 100 earned by 10 people is likelier to end up as circulating capital back in the economy via spending, while the one guy making all of it is likelier to stash a significant chunk of it as stored wealth in some form.

Handing wealthy people/corporations more money is yet to demonstrably make the economy or middle class fare better anywhere in the world. US has been trying that for 4 decades, and the income disparity is only growing worse.

Robust economies are driven by demand and spending (predominantly need-based spending), not supply and accumulated wealth.

Last edited by Chetan_Rao : 10th January 2018 at 23:12.
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