All of these factors are deflationary. They enable both an increase in productivity and a decrease in price. The competitive pressure has spurred innovation in products and service support. It is this relationship that has powered global economic growth for a generation.
One of China’s greatest contributions to Western economic growth over the past 30 years has been deflation that has driven massive increases in productivity. That is correct. Read it again and then cast your eyes around your office.
Thirty years ago, I purchased an LCD projector. It cost nearly US$8,000, but now something of the same quality costs less than US$300. My “nothing special” laptop was in the US$3,000 range and can now be replaced with a machine costing less than US$1,000. My Blackberry cost an arm and a leg, and delivered horse and-cart technology. The price may not have dropped as much as those of other products, but the functionality is probably 10 times greater.
