- 15 Dec 2008
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This is a Macroeconomic problem and easily explained if two things are understood. Modern and classical economies are made up of the efficient use of Land Labour Capital and Enterprise. The GDP of an individual nation is made up of 3 broad items, population, technology and capital, that are used to classify a variety of sub-terms. Population size determines GDP size, if population grows, GDP grows. Advances in technology also increase GDP. As an example consider this, 10 years ago it took 1 minute to make 1 CD. Now in the same time you can make 20 CDs or more. It's not time that has changed, it's technology. Finally, capital, which can be your capital investment. One factory with 2 assembly lines will perform better than an identical factory with one assembly line.
China Example
Ever wondered why China is growing so fast? Most people straight out say population. But the problem is, this population has exploded during Chairman Mao's era due to his economic policy of "a strong nation is one with a large population". Counter to today's one child policy, people were encouraged to have more children. He has in fact grasped only one aspect of GDP growth, population, but has neglected the other 2 important aspects. Today China is enjoying a sudden influx of foreign capital and technology and these two factors alone are the cause of China's rapid growth. Consider this, of all capital investment in China, at least 50% is foreign.
Japan's GDP must shrink
Consider this, Japan's population is not growing, yet GDP is barely continuing to grow. Ever wondered why? The answer is, the Japanese government has kept Japan's economy just from sinking. The rate to borrow monies to invest in new capital is at an all time low. Also, the Japnese are almost obsessive with technological advances. In short, Japan is using extreme capital and technology policies to maintain the GDP from falling due to Japan's shrinking population. How long can this go on before the Japanese GDP eventually shrinks in both potential and real GDP? And what are the answers to this problem? Immigration? Population boom? Free flow of labour with other developed countries? Do know that even if Japan does eventually master the art of robots, robots are not known to be big spenders.
Do also read my other thread under the section of Japanese politics.
China Example
Ever wondered why China is growing so fast? Most people straight out say population. But the problem is, this population has exploded during Chairman Mao's era due to his economic policy of "a strong nation is one with a large population". Counter to today's one child policy, people were encouraged to have more children. He has in fact grasped only one aspect of GDP growth, population, but has neglected the other 2 important aspects. Today China is enjoying a sudden influx of foreign capital and technology and these two factors alone are the cause of China's rapid growth. Consider this, of all capital investment in China, at least 50% is foreign.
Japan's GDP must shrink
Consider this, Japan's population is not growing, yet GDP is barely continuing to grow. Ever wondered why? The answer is, the Japanese government has kept Japan's economy just from sinking. The rate to borrow monies to invest in new capital is at an all time low. Also, the Japnese are almost obsessive with technological advances. In short, Japan is using extreme capital and technology policies to maintain the GDP from falling due to Japan's shrinking population. How long can this go on before the Japanese GDP eventually shrinks in both potential and real GDP? And what are the answers to this problem? Immigration? Population boom? Free flow of labour with other developed countries? Do know that even if Japan does eventually master the art of robots, robots are not known to be big spenders.
Do also read my other thread under the section of Japanese politics.