Everlasting growth.

Like everlasting life everlasting growth is an illusion. Unfortunately, politicians and business leaders seem incapable of understanding this. Or maybe they do not want to. China has been growing at over 10% for 2 decades but is now beginning to slow down although a growth rate of 7.5% is still enormous. China's growth was due to a one party state which could enforce a one child policy and grab land at will to set up factories, housing and infrastructure projects. Vast numbers of women could join the workforce, because they were not hampered by having to bear many children, which kept labor costs down and China could grow at 10% with an average inflation rate of 4.27% from 1994-2012. Inflation reached 6.5% in July last year but the government acted quickly to bring it down to 1.8% today. In 2008 the government reacted to the global slowdown by stimulating the economy but this resulted in a property price bubble and a rise of inflation. The Chinese see high growth as a means of dragging people out of poverty but are afraid of inflation which hurts the poor. So they are trying to stimulate the economy cautiously. They have brought down the interest rate twice already and have announced an investment of $150 billion in infrastructure projects. The Chinese GDP is at $12 trillion and a 7% growth means $840 billion but still they are not satisfied. The larger the economy grows the more will be its effect on world commodity prices which will rise, resulting in increased costs. Workers are demanding higher wages as they see industrialists getting richer. In 2010 there was a spate of suicides at Foxconn, which makes the IPad among other things, forcing the company to increase wages and overtime payments. This will gradually raise labor costs and as the population becomes older so the reduced numbers of workers will mean still higher salaries. At some point growth rates will have to slow to 2-3% as in developed countries. Indian politicians are incapable of learning because their sole effort is to win elections because with power comes the ability to loot. Instead of concentrating on keeping inflation down by reducing expenditure and gradually reducing subsidies, while spending on infrastructure, they have been throwing money on social schemes apparently to help the poor. Now they are unable to control deficit or inflation, which hurts the poor the most. Fiscal deficit will be 6% this year, much higher than 5.1% forecast in the budget. WPI has gone up in July to 7.5% and CPI is 10.03%. The stupid Private Public Partnership results in increased costs and high taxes, to reduce deficit, results in high prices. People do not drive because of frequent tolls on highways, avoid flying because of rising ticket prices and now the number of telephone users is falling. To make profits companies will be forced to increase prices even further resulting in still fewer consumers. Reduce population, reduce taxes and reduce expense. It is easy. Sadly we have a World Famous Economist in charge who has a growth fetish. And there is no way to get rid of him till 2014.