INFLATION AS AN IMPEDIMENT TO DEVELOPMENT

Many countries aspire to achieve development. Development is defined as the process of transferring from one state to another better state. In a macro and microeconomic perspective, development is defined as the increase in the gross national product of a country or GNP. Gross national product is the total of amount of goods and services produced by a country. This includes the net factor income from abroad. This concept of development, which co-equates development with the GNP of a country, has often been criticized as too broad and oblivious of the effects in the individual economic forces in the economy. This can be shown by the fact that a country can experience high rates of gross national product but at the same time high incidence of poverty. Some economists thought that the effects of a high gross national product will trickle down to the lower class of society so as to improve their economic standing, however, this did not occur in most cases. Thus, in the branch of development economics, a different perspective was given to the concept of development. Unlike the other perspective, development is seen as the improvement of the quality of life of the people. Development is not anymore associated with quantity such as the rate of the gross national product. The concept of development was made more personalized and delved more into the lives of the people.

Development, based on the perspective of development economics, is often affected by the increase in the prices of goods and services. This increase in the prices of goods and services is known as inflation. Inflation serves as an impediment on the goal towards development. People cannot afford goods and services because of the increasing prices that are imposed on them. Thus, their overall quality of life is not improved. In addition, inflation discourages any further investments on the part of businesses. This will result to lack of jobs because the lesser the investment, the lesser jobs are created. In turn, low rate of job creation leads to high unemployment rate. Indeed, inflation must be solved in order to stop it from being an impediment to development.

Commodity Inflation

What we are beginning to see again is commodity inflation. After copper bottomed out in the $1.20 per pound range a couple of months ago it is up about 75% since then. We read a couple of interesting posts on inflation about this, one here and the other here. It seems like we may be looking at cost push inflation coming down the pike. I guess the net result really doesn't matter. The bottom line is we are looking at higher prices for most raw material based goods.

Copper is still about half of what it what less than a year ago so the prospect if rising wire and cable prices is real. It may not be a bad time to stock up a bit on items you know you will need over the next 3-6 months if you can afford to lay out the money. Another solid resource to help you keep up on what is going on with the economy and inflation is InflationBomb.com. You can sign up for no cost right now.