Free Economics Summary Critical Thinking Sample

Land distribution in 1980s prevented development of landless poor. It also meant that the poor only had land as their safety net. Fiscal decentralization at the beginning of 21st century meant that local governments did not have any continuous source of revenue. Thus they resorted to selling land rights. It is understood that corrupt practices which arose from such selling of land rights meant that land was grabbed from poor families without providing adequate compensation.
The proportion of household consumption forms a small part of the total GDP and this share has been shrinking too over the last decade. On the other hand, the share of investments and reliance on exports has gone up. This has created major imbalance in the economy.
The contribution of labor income has come down in total income while investments have increased continually. Some of the causes of growing investment and declining personal income are negative real interest rates, high proportion of household savings etc.
Another concern in financial stability of the country is the growing rate of non performing bank loans. In 1990s huge transfer of wealth from households to banks had lifted the pressure on banks. But the expansion since has meant that the problem has risen again.
Low wages coupled with weak social security has meant that consumption has not grown in the country. This has meant that progressive rebalancing of the country’s GDP contribution is required which focuses more on household consumption by putting additional capital in the hands of people.
But obstacles to rebalancing exist in terms of vested interest from industries and banking sector, poor financial condition of local governments, high incentive for investment driven economy, weak governance system etc. In the last few years, the economy has slowed down and the government has been trying to revive public spending in order to boost the economy, but it has not been very successful yet.