The technology is driving down prices, and this is not always good – EXAME.com

Sao Paulo – Have you ever heard of technological deflation

It is far from being a threat in Brazil (where inflation hit double digits and remains well above target), but it is a theme? serious debate in the developed world.

the best example is Sweden, where GDP grows 3.9%, wages rise 2.2% and credit grows 7.3% while inflation remains in scarce 0.1%.

Inflation too low or deflation can turn risk as consumers defer consumption, expecting falling prices, which can lead to a vicious circle.

on the other side of the border, we have the opposite situation: a Norway slowing, but with annual inflation hitting 2.5%.

This puts these central banks in a dilemma, since a part of the numbers asks for monetary tightening – to avoid bubbles and financial risks -. While prices call for relaxation and lower interest rates

Several factors work in this dynamic, including the oil price fall. The importing Sweden, that helped bring down costs while the export Norway, led to a sharp devaluation of the currency, pushing inflation. But this is only part of the story.

According to a recent report by HSBC Global Research, low inflation in Sweden can be explained in part by foreign competition, since its economy is very open, and part by technological advancement.

“the impact of technology on inflation can not be underestimated, especially in rich countries and highly dependent on technology such as Sweden. we see the impact through various channels, most notably by the notion that consumers are better informed about prices, meaning that the competition rises sharply. This even before we consider the lower costs associated with online sales and subsequent deflationary pressures, “said the text signed by James Pomeroy.

95% of Swedes use the internet regularly and almost half of the population is in intensive jobs in knowledge. For HSBC, the central bank should see this new deflationary force as something already structural.

But the debate goes well beyond the short term. For some authors, the world economy is coming out of “scarcity” toward “plenty” as is increasingly based on information that the limit does not cost anything to play.

And scarcity has always been the force number one for any price increase.

“Robots and cheap and powerful software allow companies rely less on traditional inputs of labor, buildings and heavy equipment, building lean operations that generate large margins. in all these forms (and indeed others), technological progress has the effect of lowering prices and wages, “says a Financial Times article written by Andrew McAfee, MIT center for digital business and author of book on the new digital revolution.

companies like WhatsApp drive revenue and market value with much less need for investment and employee than large companies in the past.

This means that the technology can be a major contributor behind the curious economic situation in developed countries, where historically low interest rates and monetary expansion programs are unable to bring inflation closer to the target.

innovation Cribs

Are Paul -. Since 2001, the World Economic Forum publishes a report showing what countries have done to prepare for a digital future

in the ranking of 2015, Singapore became the Finland but the first places remain similar, especially European and Asian countries

for Brazil, bad news:. decrease of 15 positions in one year and 19 positions since 2012, which left us behind nations like Ukraine, El Salvador and Rwanda.

Brazil did not enter the top 50 in any of the 10 pillars divided between environment (regulatory / political and business / innovation ) technological readiness (infrastructure, prices and skills), use (by governments, individuals and companies) and impacts (economic and social).

143 countries were analyzed. Here are the top 12 and some highlights and points of attention in each: