Opinion     

Emerging economies need sustainable development

People's Daily, January 6, 2015

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  Some emerging countries have significantly increased their minimum wage standard, but their productivity and general output have not risen dramatically. A significant rise in wages will make a dent in savings and investments, hamper economic growth, and increase the risk of inflation.

  The significant raise in wages in Southern African countries is a result of large-scale and frequent strikes. South Africa, whose GDP used to account for one quarter of that of the whole African continent, is now in recession.

  There is no doubt that these nominal wage rises are caused by excessive inflation. When inflation is high, workers tend to resort to strikes or job-hopping to maintain their standard of living. However, increasing wages will not resolve problems caused by inflation. The best way to curb inflation is through the appropriate monetary and financial policies. Curbing inflation will ensure that the real incomes of workers are protected, and can also stimulate economic growth and investment in the real economy.

  The ultimate purpose of economic growth is to meet the people’s material and social requirements. Once inflation erodes national savings and investment, the momentum for economic growth will quickly decelerate. Many western countries became enmired in excessive welfare after World War II, which wore away the vitality of their economic growth. Emerging countries should beware of falling into the same trap.

   

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