A Happy Life~I

 Some Western international agencies bring out annual indices of happiness to rank different countries according to parameters devised by them. These rankings only reflect their own cultural, racial or civilisational bias without bearing an iota of truth, and are intended to generally demonstrate the so-called superiority of the West which is now slowly decaying politically, morally and also economically over the rest of the world.

All human beings ~ men and women, young and old, rich and poor, well and unwell, want to be happy, so much so that happiness has been equated with the meaning and essence of life, reason of our existence, our ultimate destiny.

“The purpose of our lives is to be happy”, as the Dalai Lama has said. The idea of power and wealth, fame and recognition, position and status, all become meaningless before that supreme state of being called happiness, even though these very things often bring happiness to the minds of ordinary mortals.

But many also believe, like Marcus Aurelius that, “Remember this, that very little is needed to make a happy life.” If you are happy, that is an end in itself and nothing else is needed in life.

But what is happiness, that impossible and unreachable El Dorado we all seek and strive to reach at every turn of our lives? To be able to analyse anything, we need first to define it, and here we find that it is impossible to define happiness.

There are many definitions available though, and most of these are clichéd, like the oft-quoted definition given by 19th century preacher Charles Spurgeon: “It is not how much we have, but how much we enjoy, that makes happiness.” Philosophers and spiritual leaders have told us that one’s happiness is derived not from material possessions, neither from sensual pleasures and nor from anything outside of oneself, but relates to one’s state of mind. William James, regarded as the founder of American psychology, wrote in 1902: “If you can change your mind, you can change your life.”

But the problem is that the mind cannot be permanent in an equilibrium state ~ it is ever changing. Hence happiness cannot be a constant state of euphoria, but rather a balance of emotions that somehow brings a sense of meaning, purpose and fulfilment. It is not an end or a goal, but only a state of “being”. Happiness is often equated or confused with “well-being” which is produced by interplay of a number of extraneous factors like income, health, education, basic liberties, choices available, relationships, physical and social security, etc. But even then, it is a subjective sense of well-being, which is neither measurable nor quantifiable.

Yet some Western international agencies bring out annual indices of happiness to rank different countries according to parameters devised by them. These rankings only reflect their own cultural, racial or civilisational bias without bearing an iota of truth, and are intended to generally demonstrate the socalled superiority of the West ~ which is now slowly decaying politically, morally and also economically ~ over the rest of the world.

A New York-based agency called Sustainable Development Solutions Network brings out an annual World Happiness Report, whose 2023 version has ranked India at 126th position out of 136 countries, much below strife-torn countries like Palestine (ranked 99), Iran (101), Sri Lanka (112), Myanmar (117) or Ethiopia (124), many of which ruthlessly suppress the civil liberties of their people. Their rankings depend on six parameters: per capita income, social support, life expectancy at birth, freedom to make life choices, charity, and perceptions of corruption.

It does not require superlative intelligence to divine that all these parameters are derivatives of a single parameter, i.e., wealth of a nation, and hence will always favour rich nations over poor ones. So, the richer you are, the happier you are; in other words, income is synonymous with happiness, an assumption not validated by facts, just as happiness cannot be equated with success in material terms. Happiness research is primarily based on people’s perception which can be assessed through surveys.

The mind is influenced by social and cultural factors; hence how we perceive happiness also depends on these factors. In collectivist societies like Japan, people reckon happiness more as a shared experience rather than individual satisfaction with life, whereas in individualistic societies, people perceive happiness more in terms of individual satisfaction, and also in comparison to others. Happy people increase the happiness of others around them; hence bonding within social groups and families contributes positively to happiness. But is happiness a choice in the sense that we can exercise control over it?

Buddhists believe mediation gives one control over one’s mind and hence over happiness. There are infinite websites that tell us how to be happy through mindfulness, feeling of gratitude towards “universe”, focusing on the “inner self”, replacing negative thoughts, etc., none of which sounds practically very convincing. Sociologists, scientists and economists bring another paradigm ~ they believe happiness is more the outcome of institutional and economic forces shaped by power differences between groups rather than a matter individual choice.

Thus, black people in America are less likely than whites to feel happy, a fact corroborated by studies. Groups with lesser power, income, wealth or influence are generally less happy than those who have more of these. Studies have found that income inequality is one major cause of unhappiness of people at the lower end of distribution.

A 2011 US study found that as income inequality grew, people in the lower half of the income range felt less happy. In recent times a movement called positive psychology, which treats happiness as “subjective well-being”, is gaining ground by focussing on the positive events and influences in life, rather than the negative and dysfunctional ones.

It lays emphasis on positive experiences like joy, inspiration or love, positive traits like gratitude or compassion, and positive institutions that apply and encourage these principles. But positivity has its own negativity too, as Edgar Cabanas and Eva Illouz explored in their book “Manufacturing Happy Citizens:

How the Science and Industry of Happiness Control our Lives”. They showed how happiness has been woven into the very fabric of power by a neoliberal alliance of psychologists, economists and self-help gurus.

Propped by influential institutions and multinational corporations, these “experts” often force governments to use oppressive policies and interventions to change people’s behaviour for what they believe are more successful, meaningful and healthier lives. In her 2007 book “The How of Happiness”, the positive psychology researcher Sonja Lyubomirsky describes happiness as “the experience of joy, contentment, or positive well-being, combined with a sense that one’s life is good, meaningful, and worthwhile.” Each of the terms here lends itself to varying interpretations.

To avoid such possible confusion, Aristotle had said much earlier, “Happiness depends upon ourselves.” Without trying to define, the British-American anthropologist Ashley-Montagu had said, “The moments of happiness we enjoy take us by surprise. It is not that we seize them, but that they seize us.” It is perhaps a functional definition, because we all experience such “surprise” moments that bring happiness.

Thomas Hardy has said, “Happiness is only an occasional episode in the general drama of pain” surrounding us, like tiny islands of hope in a vast, dark and desolate ocean. There are many who think that happiness consists in having a stream of small joys and pleasures to fill our days, and that happiness can be understood only on a daily basis, because there is no enduring, permanent, everlasting happiness.

“And they lived happily ever afterwards” is only a cliché, much too overused and meaningless. Most of us have everything we need to live happily ~ a nice family, successful kids, a good home, maybe a car too, a reasonable income, a reasonably good professional career ~ yet we are very unhappy at times. Events outside our control, like natural calamities, disruptive technologies, global financial crises, mental health issues etc. can completely overtake us, ejecting us out of our orbit of happiness. There is no linear pathway to happiness that can insure against all insecurities, and, in fact, it has ceased to be an individual choice.

Happiness is today measured by society, not by the individual. Society measures happiness by one’s ability to achieve more, accumulate more, hoard more, consume more, display more. In this unknown and enchanting land of “ever mores”, there is no rulebook, no ethics, no morality, no bounds whatsoever.

The brave new world equates happiness with success and success with happiness, and success is equated with limitless “more”, to keep pace with a restless world that is changing too fast ~ indeed, much faster than our ability to adapt and find peace in its swirl of uncertainty. Penny Locaso, an Australian entrepreneur and author of the book “Hacking Happiness: How to Intentionally Adapt and Shape the Future You Want” said, “Happiness is not a destination. It’s a state of mind, and you don’t need to be in it every moment of every day. Not only is that impossible, but it’s also unhealthy. Life is complex and uncertain. Ups and downs are normal….

How do you experience happiness if you don’t know sadness and pain?” Is sadness and pain, then, integral to happiness? It would be the ultimate incongruity if to understand happiness, first you have to go through pain and suffering, despair and frustration.

But the reality is that many people who have suffered devastating financial or emotional catharsis, have overcome their losses and their fears of uncertainty, and learnt to live simpler, balanced and fulfilling lives.

Psychologists refer to this as “emodiversity” ~ the ability to experience a diverse range of emotions in equal measures. But it is always the human connections that play a definitive role in human happiness.

GOVIND BHATTACHARJEE

Source: The Statesman, 25/05/23

Economic Survey: What is it and what to expect in 2023

 

Economic Survey 2023: Though the assessment and recommendations of the survey are not binding on the Budget, it remains the most authoritative and comprehensive analysis of the economy that is conducted from within the Union government.

On Tuesday, the Chief Economic Adviser (CEA) will release the Economic Survey for the current financial year (2022-23). The survey is always presented a day before – typically January 31 since Union Budgets are scheduled for February 1 – the Finance Minister unveils the Union Budget for the next financial year (2023-24 in the present case).

What is the Economic Survey?

As the name suggests, the Economic Survey is a detailed report of the state of the national economy in the financial year that is coming to a close.

It is prepared by the Economic Division of the Department of Economic Affairs (DEA) under the guidance of the CEA. Once prepared, the Survey is approved by the Finance Minister. The first Economic Survey was presented for 1950-51 and until 1964, it was presented along with the Budget. Similarly, for the longest time, the survey was presented in just one volume, with specific chapters dedicated to different key sectors of the economy – such as services, agriculture, and manufacturing – as well as key policy areas – such as fiscal developments, state of employment and inflation etc. This volume carries a detailed statistical abstract as well.

However, between 2010-11 and 2020-21, the survey was presented in two volumes. The additional volume carried the intellectual imprint of the CEA and often dealt with some of the major issues and debates facing the economy.

Last year’s survey reverted back to a single volume format, possibly because it was prepared and presented while there was a change in guard in the CEA’s office and the current CEA – V Anantha Nageswaran – took charge when the survey was released.

What is the Economic Survey’s significance?

Even though it comes just a day before the Budget, the assessment and recommendations carried in the survey are not binding on the Budget.

Still, the survey remains the most authoritative and comprehensive analysis of the economy that is conducted from within the Union government.

As such, its observations and details provide an official framework for analysing the Indian economy.

What should one look for in this year’s survey?

The Indian economy has been struggling to grow at a fast pace since the start of 2017-18. The years immediately after Covid may have registered fast growth rates but that was just a statistical illusion. Many outside economists have argued that India’s potential growth itself has fallen from 8% to 6%.

Along with a deceleration in growth, the economy has also witnessed historically high unemployment and a sharp rise in poverty and inequality during the Covid pandemic. The survey is expected to diagnose the true extent of economic recovery in the Indian economy and whether India’s growth potential has lost a step or not.

The survey can be expected to paint future scenarios and also suggest policy solutions. For instance, what can be done to boost manufacturing growth in the country? How can India continue to grow fast at a time when both global growth and world trade is likely to remain muted.

Source: Indian Express, 31/01/23

A manifesto for social progress

 We are threatened simultaneously by poly-crises from war, climate change, technology, social injustices, and geopolitical rivalries. There is no super prophet available who has the sufficient moral and credible standing to lead us all out of the current wilderness.

We are threatened simultaneously by poly-crises from war, climate change, technology, social injustices, and geopolitical rivalries. There is no super prophet available who has the sufficient moral and credible standing to lead us all out of the current wilderness.

Change is coming so rapidly and bewilderingly from all directions that in a world of specialist experts, each in their own narrow fields, no single person has the breadth and depth of knowledge to explain simply to 8 billion people how to act for social progress.

Young climate activist Greta Thunberg has 2 billion followers, but no concrete plans on how to make change for climate warming. Just saying Net Zero by 2050 is just blah blah blah does not make serious change. In 2018, 300 leading global social scientists (International Panel on Social Progress) worked together to produce a multi-disciplinary three-volume report called “Re-thinking Society for the 21st Century”, considered then the cutting edge thinking on what is social progress and how to achieve it.

Since the report was highly technical, Cambridge University Press brought out a simpler version called A Manifesto for Social Progress: Ideas for a Better Society. Nobel laureate Amartya Sen’s foreword recalled that 170 years ago, the era of social injustices from industrial capitalism produced a Communist Manifesto that claimed “the history of all hitherto existing society is the history of class struggles.” The new Manifesto argues that social progress can be enhanced through reforms in institutions and behavioral changes. The difference between the two Manifestos is that the newer version is based on the latest empirical data and research.

The core idea of a good society starts from the premise that every human being is entitled to full dignity, irrespective of gender, race, religion, education, talent, and productive capacities. Since human activity is changing the planet (the Age of Anthropocene), humans should be in the driving seat of change. Indeed, the mantra of Environment, Social, and Governance (ESG) means that improvements in the environment and addressing social change must involve better governance.

Since governance quality determines the final delivery of social progress, politics is all about how to achieve the three pillars of social equity (reduce inequalities between and within nations), freedom (expand and deepen basic liberties, rule of law, and democratic rights for all populations); and environmental sustainability (preserving the ecosystem for future generations). Conventional thinking about governance is often presented as a binary choice between state versus market.

But in practice, there are many variants of mixed economies and political systems, in which state and markets are symbiotic, simultaneously working and fighting with each other. Whatever modes of governance, all must have bottom-up legitimacy and accountability, in which the link between leaders and communities have feedback mechanisms of empowerment, representation, participation, and deliberations that mobilize change-makers for social progress.

The alternative is social regression. Amidst all the polarisation and contention, the book draws common lessons about social change, which can come from revolution or evolution, depending on the degree of imbalances.

First, deep social change often comes from people, social movements and civil society organisations, rarely from top down.

Second, democratisation and empowerment require the participation of and pressure by those stakeholders who are affected by change.

Third, many experiments are needed to explore how to implement and adapt general ideas to local needs and possibilities for change to be accepted. In short, the consensus of 300 social scientists is that there is no single model, no single recipe for transformation. Social change comes from diversity and openness to different paths to change, but it is important to adapt general principles of human dignity and needs to local contexts and possibilities, and to exclude all forms of dogmatic approaches.

The latest mid-term elections in the United States reflect this complex but deep shift after nearly six years of Trumpian politics that deeply divided the nation. Past mid-term elections have always been against the incumbent party, but this time round, the “red wave” shift back to the Republicans winning both the Senate and the House of Representatives did not happen. The Democrats did well to retain narrowly the Senate and lost narrowly to the Republicans in Congress.

A new Republican leader in Ron DeSantis has emerged as an alternative Republican candidate to Donald Trump for the 2024 Presidential elections. The election results signal that American voters prefer a move towards the centre after years of traumatic polarization. In Bali this month, the success in their respective elections by President Biden and President Xi gave both the mandate to begin to calm down rhetoric after months of escalating US-China tensions. Differences will always exist, because progress comes from continuous work on change from individual to community to national and then global levels.

To expect top leaders of state or corporations alone to do the heavy lifting will not work. The social scientists’ manifest has six ideas to change one’s own life and the world. Climate change is a complex system change, and there is no silver bullet or instant change possible. First, one could change through family, especially listening more to the young. Second, change can come from the workplace, as one contributes through jobs. Third, we can effect change through community.

Fourth, we can change the market through our consumption and savings choices. Fifth, we can be a torch bearer to all we meet by caring and sharing. Lastly, each of us should be an active citizen, open and adaptive to change. Change must take time, which means often painful or tortuous transitions that cannot be avoided. Each generation must make their own mistakes or create their own opportunities for betterment. Change or be changed. This is an opportunity to either make lunch or be lunch.

ANDREW SHENG 

Source: The Statesman, 2011/22

Viewing growth

 The word, ‘development’, is usually associated with a change for the better, a progression towards an improved state of affairs. When used in the context of an economy, it usually means material enhancements in the standard of living of some, if not all, members of that economy. The essence of the matter revolves around the word, ‘change’, towards something more desirable or preferred. There are many difficulties that arise when we use the word, development, in a loose fashion. A number of questions crop up. When we say that, for instance, the economy of the United States of America is more developed than that of India, do we merely compare national incomes or national wealth? In most instances, we do so. However, the deeper question is this: why should we always take material wealth or consumption of goods as the ultimate criterion of economic development?   

A simple example will suffice. Consider the two economies, China and India. If we are to compare the state of affairs at a point of time in the two countries, can we say that China is more developed than India? Has it progressed more than India? Towards what end? Consider an alternative situation — India in 1947 and India in 2022. Can we say India has developed during this period of time? We are comparing China and India now, or we are comparing India  circa  1947 and India now? The points of comparison show differences. How do we evaluate these changes? The changes can constitute progression, stagnation or regression. Hence development, as change, is dynamic, and requires an evaluating criterion (or a set of criteria).

There are many ways in which socio-economic change can be viewed and evaluated. There are a number of economists who argue that development is about growth in the availability of goods and services. To produce more, industrialisation and the use of science-based technology are considered the best instruments of change. The institutional apparatus that facilitates this growth is usually assumed to be parliamentary democracy and free markets with voluntary exchange. Hence, according to this view, the end state of development is a materially rich country with free markets and democracy. The future is best handled by keeping these quantitative changes going: more goods, more incomes, and more consumption. Progress is purely quantitative and material.

There are other economists who believe that an end state will arrive in the process of economic development, but there will be substantial qualitative changes leading to transformations in the market economy and the distribution of political power. For instance, Marxists would tend to believe that the current structure of market economies is inherently unfair and unstable. A classless worker’s state would be the end result of economic development. There are other scholars who tend to argue that development is uneven, unpredictable, and changes occur in a non-linear fashion over time and geographies. Hence, there is no predictable end state of development, and there is no progression to a better or more desirable world that humans could create.

There are problems associated with each of these intellectual positions. Consider the belief that the market economy and its wealth creation apparatus are the ultimate economic structures in human history. It is now clearly evident that such an economy cannot progress and develop in a purely quantitative way without bringing about its own collapse. The inability to factor in natural resource constraints and the failure to control waste emissions would bring about a downfall in the economy. The capitalist market economy, the way it functions now, is patently unsustainable.

The ideas of radicals and other scholars who dreamt of some utopia different from the capitalist order have been unable to demonstrate that such worlds could be actually sought after and created by human agency. Indeed, some of the efforts to create such worlds, like the twentieth-century experiments to create socialism, have failed resoundingly. Those who believe that history has no meaning and development is a kaleidoscopic pattern of endless variations of the same components might have difficulty in explaining the massive changes that human societies have witnessed since the recorded history of humankind. Substantial change has occurred over time, and that change cannot be captured by mere material improvements or some convergence towards a predictable end state.

A number of scholars have emphasised the expansion of freedom and liberties in a society as the hallmark of development — more freedom to do things an individual or society chooses as well as greater freedom from constraints to a good life, such as freedom from hunger or ignorance. This view is the most acceptable in terms of justice and fairness and does not talk about a final end state of development. However, this view, too, has some limitations when we consider the sustainability of the process of expanding spaces of freedoms. This worldview does clarify that individual and social freedoms cannot restrict the space of freedom of other individuals or other societies. However, it does not clarify that freedoms and liberties cannot encroach on natural processes so as to damage them in irreversible ways.

Human history started when change was perceptible in society and was different from nature, which was considered to be changeless, static. Humans began to perceive time through a series of social events with broad consequences. In most of these cases of momentous change, human knowledge about the planet and about themselves increased significantly. Humans were able to bring about substantial changes within small periods of time because they were able to transmit accumulated knowledge from one generation to the next. This was the real well-spring of human development. This helped tear asunder human history from the larger planetary history of evolution. Biological development is about transmission of genetic inheritance and occurs over millennia. Economic development is about the social acquisition of characteristics that can occur within a generation. For instance, the human brain of modern humans is about the same size as that of humans 5,000 years ago. But the effectiveness of human thinking has multiplied manifold.

One might argue, then, that human development is the accumulation and transmission of knowledge over generations. This cannot be measured through material progress alone. Human beings are part of the biological evolution story too, and they are just another (albeit smart) species in the animal kingdom. Hence the history of humanity cannot be completely independent of the planetary story of evolution. If history, in this bigger framework of the planet, is a journey, then the accumulated human knowledge must sustain this journey. Changes brought about in economy and society ought not to lead to a series of crises and disruptions in the forces of nature and natural processes.

One can view history as a voyage of development of knowledge that makes humans free from debilitating constraints of hunger and disease and provides freedom to do things of their choice, such as leading a preferred lifestyle. No story of economic development can be meaningful if it is inconsistent with the planetary history of evolution. Hence, development must be sustainable — the use of human knowledge must do no harm to destroy nature. Yet, the human ability to cause harm to nature is much more than the ability to conserve and create. Economic development must be viewed as a progression of ideas and understandings that protect and preserve nature in its entirety, yet making human life easier and more enriching. Achieving it is not easy even though we are a clever species. The big question remains: are we clever enough?    

Anup Sinha is former Professor of Economics, IIM Calcutta

Source: The Telegraph, 4/11/22

Enduring crisis : The world economy in the doldrums

 Over a century ago, the Marxist revolutionary, Rosa Luxemburg,  had argued that the capitalist economy needed  “outside” markets to keep its growth going; and she had seen pre-capitalist (colonial) markets as providing that stimulus. Some of the conclusions she had drawn were later criticised, but her overall insight was perfectly valid, as Michal Kalecki, the well-known economist, was to show later. The argument went as follows: imagine an economy with zero growth, where net investment too must be zero; since there is zero growth, the market is not growing and hence there is no incentive to add to capital stock; this continues to keep net investment at zero and perpetuates the economy’s stagnation. A stagnant capitalist economy, unless there is some stimulus for investment from “outside” and not just from its internal market, will, therefore, continue to remain stagnant.

The history of metropolitan capitalism can be analysed with this insight into “outside” market. The period before the First World War which had witnessed a prolonged boom had relied on colonial markets. The exhaustion of colonial markets and the encroachment by a newly-industrialising Japan into Britain’s Asian markets had caused the prolonged Great Depression of the inter-War period. The post-Second World War years, however, saw a new market being opened up “outside” of the capitalist sector proper, namely State expenditure; and this underlay the long boom, sometimes called “the Golden Age of Capitalism”, that lasted till the mid-Seventies.

This boom, however, was accompanied by large accumulations of finance in metropolitan banks and other financial institutions, which went global in their quest for investment opportunities. And since finance is always opposed to any State intervention for boosting aggregate demand (for it undermines the social legitimacy of capital, especially of finance capital), this newly-globalised finance put pressure on countries to pursue neoliberal policies and eschew fiscal activism. The neoliberal period, therefore, left world capitalism without any genuine “outside” stimulus, because of which the growth rate of the world economy slowed down compared to that of the “Golden Age”.

There was nonetheless a sort of pseudo-stimulus even under neoliberalism. This was the formation of asset-price bubbles, which operated in this manner: speculation in some asset markets pushed up their prices far above their true value; everybody knew that these prices would collapse, but people still bought these assets at such highly inflated prices in the belief that they would be able to sell them at even higher prices before the inevitable crash came, that is, before the bubble burst. This increased the apparent wealth of those who held these assets, and the euphoria of being rich caused them to spend more than they would otherwise have done, thereby raising activity and employment.

Two such bubbles in the United States of America boosted the world economy during the neoliberal era: the ‘dot-com’ bubble, which saw sky-rocketing share prices of dot-com companies, and the housing bubble. But with the collapse of the US housing bubble in 2008, even this pseudo-stimulus has come to an end. The growth rate of the world economy during the decade before the pandemic was lower than for any other decade since the Second World War.

The pandemic, which entailed serious economic disruptions, was superimposed upon this underlying structural crisis, of a growth slowdown caused by the drying up of “outside” stimuli for the system. Colonial markets can scarcely play this role now; State expenditure is not allowed to play this role under neoliberalism because of the hegemony of globalised finance; and even the pseudo-stimulus provided by asset price bubbles has become elusive as the dangers of asset-price speculation loom particularly large at present. And now, the Russo-Ukraine war, which has pushed up food and fuel prices, above all through commodity price speculation, has added to the woes of the world economy, where even the International Monetary Fund is talking of the prospect of the worst recession of the last fifty years.

Even after the war in Ukraine gets over, even after the pandemic recedes, there will still be this underlying structural crisis of neoliberal capitalism, about which, predictably, ‘establishment’ economists are silent. The point is: how can the system overcome this structural crisis? It turns out that it cannot, without transcending the neoliberal regime.

If any individual country wants to reduce unemployment through fiscal stimulation (since monetary stimulation via low interest rates, as experience shows, is too feeble), then the opposition of finance will take the form of flight of capital; the country will, therefore, have to impose capital controls. But then financing current account deficits on the balance of payments will become difficult, necessitating trade controls as well. In short, that country will have to roll back the neo-liberal regime.

A group of advanced economies could undertake a coordinated fiscal stimulus, that is, they could synchronously raise State expenditure by increasing the fiscal deficit. Then the incentive for finance to flow out of any one of them will be less. But this would be politically opposed by finance; and what is more, it would revive the sort of inflation in the world economy that had characterised the early Seventies (of which the current inflation provides a foretaste). The way to combat such inflation without squeezing third world absorption of primary commodities is through enhancing the supply of such commodities. For this, however, third world states will have to play an active role, which again will entail a roll-back of neoliberalism. Thus, neoliberalism has brought the world to a crisis from which there is no escape without transcending it.

Prabhat Patnaik is Professor Emeritus, Centre for Economic Studies, Jawaharlal Nehru University, New Delhi

Source: The Telegraph, 3/08/22

What the budget needs to do

 

Naushad Forbes writes: It must deliver on economic inclusion, incentivise job creation, invest in education and skilling

The last two quarters have seen a substantive recovery in the Indian economy. As growth has rebounded, so too has every indicator of the formal economy. Corporate profitability of our largest firms has hit a new record this year. So have GST collections, another indicator of the formal economy, with an average monthly collection of Rs 1.2 trillion in the second and third quarters. The budget deficit is expected to be well under what we forecasted last year. All of this is good news.

The glass though is half full. As many commentators have pointed out, the informal economy was particularly badly hit by Covid and its associated lockdowns. Small enterprises, retail, hospitality, and construction were all hammered. These were our main source of recent employment growth. Agricultural employment has risen in the last year-and-a-half, while manufacturing and services employment has fallen — this is the opposite of development. Informal urban employment has led to first-time buyers of everything from toothpaste to two-wheelers. This consumption story has driven our economic growth for the last 30 years. Informal service sector jobs may not seem like great jobs to us, but they are greatly prized relative to eking out a marginal existence in agriculture.

Covid and its associated restrictions have been a perfect storm for the informally employed. A study by researchers from Azim Premji University tells us that both earnings and employment fell for those at the bottom of the urban employment pyramid. We need to insure the most vulnerable against such shocks, but even more, we need to create good job opportunities for the unskilled, equip people at all levels to participate more fully in the modern economy, and systemically promote wider policies of inclusion. What can the budget do?

It needs to create good jobs for the unskilled. The way it can do so directly is through accelerating spending on infrastructure. The National Infrastructure Pipeline has identified a good set of projects. The government should be complimented for its intention and ambition; what we need now is implementation. To have a bigger impact on the economy, we need to invest quickly and at scale. A credible time-bound implementation plan is what we should hear about in the budget.

Most countries developed by putting millions to work in labour-intensive manufacturing. Millions of the unskilled and less-educated can be employed in good manufacturing jobs where average productivity is 15 times the national average. We do not have the huge firms in export-oriented labour-intensive sectors that employ millions in China, Vietnam, and Bangladesh. Foxconn’s largest factory in China, making iPhones among other products, reportedly employs 4,00,000 people. It employs over 1 million in the country overall. Compare that 1 million with 15 million employed in all larger manufacturing companies in India. Samsung employs 1,00,000 people in its largest phone assembly plant in Vietnam. These giant factories are missing in India.

Take another example of labour-intensive manufacturing. A company we visited in Vietnam manufactures agarbattis. They learnt by sending 10 workers to a factory near Chennai for training. Today they employ 10,000 people making agarbattis, which they mainly export to India. Even when the technology is Indian and the market is India, mass manufacturing seems to be more efficient 4,000 km away from the country. The economics must be fixed — we need labour reform, so employing people is less expensive and improved logistics to move goods around more cheaply.

We need not look too far to learn how. In 2020, Bangladesh overtook India in per capita GDP. Bangladesh has thrived by putting millions to work in manufacturing. A booming garment sector employs 4.4 million. A large garment factory in Bangladesh employs 30,000-50,000 people — 10 times what you’d find in India. As 80 per cent of those employed in garment factories are women, Bangladesh has twice the female labour force participation ratio of India. In June and September 2020, the government passed four labour laws that are a major step forward in helping balance flexibility with protection for labour, formal and informal. These laws have since been left dormant. The budget should announce a time frame for implementation, notification by the Union government and then by the states.

The budget must also look at investments in education and skilling. In the absence of massive employment in unskilled occupations, we must depend on education and skills. India has among the least skilled workforces in the world. Under 5 per cent of our workforce is formally skilled, compared to 96 per cent in South Korea, 75 per cent in Germany and 52 per cent in the US. That is why the work of the National Skills Development Corporation is so important and must go much further and faster. Can the budget specify how it will be empowered to function as originally designed: An independent entity controlled and run by the private sector that is then held accountable for delivering on our skilling targets?

Education is even more important, especially primary education. Pratham’s education reports make for sobering reading. Their last comprehensive report says that just 44 per cent of children in Class V can read a text meant for Class II. And just 23 per cent of children in Class V can do division. With schools closed for the last year-and-a-half in most states, education outcomes have fallen further. The New Education Policy has a proposal that every second standard child should be able to read and do arithmetic at the second standard level as a foundation for further education. This welcome initiative must receive greater dedication and focus from both government and industry. School education is a state subject, so the Union budget can at best incentivise states to do the right things, say by linking the flow of additional funds to those that demonstrate improved second standard learning outcomes.

Industry can help too. As a part of CSR, many companies work actively with schools. Education is already the largest single area for CSR spending, accounting for one-third of the Rs 9,000 crore spent by the top 100 companies. My best estimate is that the top 1,000 firms in the CII membership work with around 30,000 schools. Assuming an average second standard student body of 50 per school, if every CII company worked on this one goal of ensuring a child entering the third standard can read and do arithmetic at the second standard level, we could improve education outcomes for 15,00,000 children a year. Can the budget incentivise companies to go beyond their mandated 2 per cent CSR spend by deducting the increment from profit before tax?

Other policies for economic inclusion must go beyond social inclusion. These include measures like reducing tariffs to benefit millions of consumers instead of thousands of firms. Industrial policies that help all firms such as the ease of doing business, instead of incentivising a selected few. For more on these, I would refer the reader to my book, The Struggle and the Promise: Restoring India’s Potential, published this month. A good budget would be an inclusive budget.

Written by Naushad Forbes

Source: Indian Express, 19/02/22

India needs a new rural-centric development model | Opinion

Go back to Gandhi, Kalam, and Deshmukh; use technology, create jobs; issue self-reliant village bonds

Migration has accelerated exponentially over the last decade in India. Current estimates of the total number of migrant workers range from 72 million to 110 million. India has the second-largest migrant worker population in the world, second only to China. One in four workers in India is essentially a migrant. The lack of authentic data on their numbers, their living and working conditions and perpetual uncertainty in their livelihood prospects have been brought in to sharp focus with the coronavirus pandemic.

Despite the best effort of both the central and state governments, the mass movement of nearly 10 million migrant workers has brought into sharp relief the urgent need to shift to a new paradigm of economic development and urbanisation in which migration under economic distress or due to the lack of amenities is brought down. This can be done if we can convert the Covid-19 crisis into an opportunity to rethink and reimagine our development model. Fortunately for us, an alternative model that minimises migration is available in the works of Mahatma Gandhi, the late president APJ Abdul Kalam and social activist and Rashtriya Swayamsevak Sangh (RSS) ideologue Nanaji Deshmukh.

The aspiration for self-reliant development at the village level began with the Gandhian model of swaraj. From the time of his return from South Africa, Gandhi immersed himself in village movements in Champaran (1917), Sevagram (1920) and Wardha (1938). He visualised a comprehensive programme of constructive work, which included economic self-reliance, social equality and a decentralised political system at the village level.

For Gandhi, the model of self-reliant villages was the basis of a free democracy. He declared, “My idea of village swaraj is that it is a complete republic, independent of its neighbours for its own vital wants, and yet interdependent for many others in which dependence is a necessity.” His was not a model of a closed economy and a village economy perpetuating itself at the lower levels of income, but one in which local populations could be employed locally but with rising incomes and higher productivity. It is not well known that in his quest for technological improvement, Gandhi had put out an advertisement for a better version of the charkha in British and Indian newspapers in 1929, and even offered a handsome reward of Rs 1 lakh for it (about ~2.5 crore today).

Kalam, the missile man, had his own model called Providing Urban Amenities in Rural Areas (PURA). His vision was to develop rural India through a cluster development system where 50-100 villages with common competencies and/or mutual markets could be horizontally or vertically integrated as PURA complexes. These villages would be linked through “four connectivities” — physical, electronic, knowledge and economic. The goal was to provide income and quality of life opportunities to all within PURA complex. While some rural-rural migration would be acceptable, rural to urban migration would be minimised. He envisioned 7,000 PURA complexes at the cost of Rs 130 crore per unit built through public-private partnerships.

Deshmukh called for self-reliant villages based on a model of integral humanism where harmony was also a pivotal force. In his work across 500 villages in India, especially in the Chitrakoot area, the successful implementation of the model called not just for zero unemployment and no one below the poverty line, but also zero internal legal disputes and no widow being denied remarriage. In Deshmukh’s model, the collective social consciousness that promoted collective well-being was considered to be a cornerstone to next-generation rural development.

Prime Minister (PM) Narendra Modi implemented the model of rurban development when he was chief minister of Gujarat. This was sought to be replicated at the pan-India level through the launch of the Shyama Prasad Mukherji Rurban Mission in 2014. The model follows a cluster development design to create social, health, education and economic infrastructure across villages.

In order to make 650,000-plus villages and 800 million citizens self-reliant, technology will have to play a critical role. We need to create a rural knowledge platform through active collaboration between the public and private sector. This will provide the expertise to take cutting edge technology deeper into villages and generate employment. Today, the Internet and artificial intelligence are being used extensively around the world to facilitate sustainable agriculture. Large-scale and real-time data collected from farming practices and collated with global price and production numbers can be used to offer more profitable choices to our farmers.

In a survey of urban migrant workers, 84% of them reported that their primary source of livelihood in their villages was casual work. Only 11% stated that agriculture was their primary source of income. This indicates that there is a need to create jobs in rural areas far beyond just augmentation of agriculture. In fact, agriculture itself will shed jobs with the addition of technology.

To finance this ambitious re-engineering of our development model, Atmanirbhar Village bonds could be issued to raise resources. Part of the mandated priority sector lending by scheduled commercial banks could be used to finance these bonds. We need to prioritise self-reliant village projects to be funded from such lending. We need to create a fresh curriculum in engineering, medical colleges and business schools to train the workforce to operate in villages.

The capacity of India’s youth to innovate needs to be unleashed in villages. India needs to build the nation, village upwards and not city downwards. We need to eliminate the division between Bharat and India. This can be achieved bringing Gandhi’s and Kalam’s ideas of developing a rurban India to the centre of the development model.

Rajiv Kumar is vice-chairman, NITI Aayog

Srijan Pal Singh is CEO, Dr Kalam Centre, Delhi

The views expressed are personal

Source: Hindustan Times, 24/06/20

Crisis also brings opportunity for building a nurturing economy

Our economic and political policies must not be ends in themselves, but instruments for building a society that is secular, inclusive and nurturing, where people of all religions, caste, race and gender feel wanted and at home.

The appearance of the COVID-19 pandemic has turned our familiar world upside down within a span of barely a few months. As governments the world over struggle to contain it, unemployment is shooting up, supply chains of food and essentials have been disrupted, and we see dark clouds of economic recession. Amidst such misery, it is natural to feel despair. But at the same time, we must realise that this is a critical moment for reflection, for re-examining our way of life, and striving to emerge from this with hope.

People have many reasons for disappointment. The world over, several political leaders have flip-flopped over policy, causing uncalled for surges in infection rates and mortality. In many countries, the disease continues to spread, and we live in the shadow of a second wave.

As Indian citizens we are especially concerned about the fact that in India, not only has the incidence of COVID-19 continued to surge, our workers, the migrants, and millions of small, self-employed individuals, have been hit by an unprecedented economic crisis. While the visible cost of the pandemic in terms of the lives lost are being counted by the day, the invisible cost of hunger and impoverishment of the most vulnerable sections of our society is yet to be effectively addressed. The way we treated our workers, the poor and the migrants, particularly women, is tragic. Many of them had travelled great distances, driven by abject poverty, to find work. The compulsion to leave one’s own land, village and home to barely make ends meet is sad. The fact that with the sudden lockdown, we left them stranded without work and pay, and let them walk hundreds of miles to get to their families and homes, with many of them collapsing on the way, will go down as a low point in our nation’s history. This is a matter of collective shame for all of us.

This is not the time for politics. It is a time for us to come together and marshal the best ideas and actions to build a safety net for the most vulnerable people in society, and to transform the structures of our economy so that, when we come out of the pandemic, our economy can grow and prosper for all.

The pandemic came at one of the worst possible times. India’s economy has been in deep trouble since 2016. In 2019-20, even before the pandemic happened, our GDP growth had dropped to 4.2 per cent, the lowest growth seen in the last 11 years. With oil prices at a historic low, this should never have happened. By December 2019, the growth of non-food bank credit, which is a good indicator of overall economic robustness, had dropped to below 7 per cent, the lowest India has seen in the last 50 years.

After the pandemic arrived, matters, of course, got worse. In March, $16 billion of foreign capital exited the country, which is an all-time record for India. After the lockdown, India’s unemployment rate shot up to a record high of 23.8 per cent in April. In the same month, Indian exports dropped by 60 per cent, one of the biggest drops seen in any emerging market economy in the world. There is a genuine risk that this year our growth will plummet to an all-time low since India’s Independence, beating the record plunge of 1979-80.

We write this article to remind ourselves that a time of crisis is time for empathy. In the words of Mahatma Gandhi, this is time to “recall the face of the poorest and weakest man you have seen and ask yourself if this step you contemplate is going to be any use to him.” This is a principle that has made its way into modern philosophy via the work of John Rawls. Clearly, the way we acted in protecting ourselves and our friends, as the pandemic broke, leaving the working class to fend for itself, took us far away from Gandhiji’s principle.

We write this article with the hope of building a nurturing economy. Our economic and political policies must not be ends in themselves, but instruments for building a society that is secular, inclusive and nurturing, where people of all religions, caste, race and gender feel wanted and at home. None of us would be here if we were not nurtured in our infancy and childhood. Yet, so often we forget this and are blatantly exploitative in our interactions with society, impoverishing others to enrich ourselves and creating our own economic wealth at the cost of the ecosystem’s wealth. The outcome of such behaviour is a threefold crisis which describes India’s current predicament — rising poverty and unemployment despite abundance, rising intolerance and violence, and environmental catastrophe.

We have hope for India’s future. There is a lot in the nation’s culture and wisdom that we can draw on and try to lead a life that nurtures the soil and creates an environment which sustains future generations. We should strive to create a society that respects knowledge, science and technology, and culture. We must try to live life by Immanuel Kant’s Categorical Imperative: Act only according to that maxim whereby you can, at the same time, will that it should become a universal law.

We are ambitious for India. But our ambition is not to make India the richest nation in the world. We want India to be an example of an equitable society, where people are not abandoned without income and work, where no one feels the insecurity of being a minority, and of being discriminated against. We are aware that there have been injustices in history, injustices of one group against another. But it would be a tragedy if we remained forever victims of history, extorting an eye for an eye. Let us hope that through the suffering and pain of this pandemic, from amidst the despair of our current times, will emerge such a nurturing world.

This article first appeared in the print edition on June 19 under the title “A time for empathy”

Basu is Professor of Economics and Carl Marks Professor at Cornell University. He was formerly Chief Economic Adviser to the Government of India, and Chief Economist of the World Bank. Bhatt is the Founder of Self-Employed Women’s Association (SEWA), Chancellor of Gujarat Vidyapith

Source: Indian Express, 19/06/2020

Maths helped Einstein; it can help the economy too

The theory of relativity is regarded as the pinnacle of mathematical elegance, more than a century since its formulation

Can policymakers plan to make India a $5 trillion economy in five years without worrying about the basic mathematics of economic growth? Some of our leaders seem to think that wishful thinking can take us there. Albert Einstein’s discovery of gravity has been invoked as a successful example for achieving seemingly unattainable goals through “out-of-the-box” thinking. Two obvious questions arise. First, did Einstein indeed explain relativity sans any inputs from mathematics? And, two, can economic growth models be devoid of mathematics?

Einstein’s general theory of relativity is the most accurate theory of gravity available to us at present. True, Einstein was certainly not the first one to make contributions to our understanding of gravity. More than two centuries prior to him, Isaac Newton had proposed a universal law of gravitation. However, Newtonian theory of gravity, though remarkably accurate most of the times, had its limitations. When gravity was extremely strong or when the motions involved were extremely fast, the calculations became imprecise. For example, the theoretical calculation of the orbit of Mercury — the planet closest to the Sun — turned out to have a small disagreement with the actual observations of Mercury’s motion. Einstein’s theory not only predicted the orbit of Mercury accurately, but also predicted a number of interesting phenomena not anticipated earlier.

A theory of ‘space-time’

Einstein’s description of gravity was radically different from that of Newton. Newton assumed the existence of an absolute space and universal time. According to Einstein, space and time are part of a single entity called ‘space-time’. What we identify as space or time heavily depend on the frame of reference of the observer. However, space-time is universal. And gravity is the manifestation of curved space-time. Any massive object would curve the space-time around it.

It is hard to imagine a curved space-time, an entity that spans four dimensions — three spatial dimensions and the time. Typically we can see the curvature of a surface when we have access to a higher dimension. For example, we see the curvature of the surface of a football because we have access to a third spatial dimension. It is impossible to directly observe the curvature of the space-time since we don’t have access to a fifth dimension. However, it is possible to infer the curvature of a space without accessing extra dimensions. All the familiar axioms of Euclidean geometry cease to be valid on curved spaces. For example, according to Euclidean geometry, two parallel lines always remain parallel. However, this is not true, for example, on the Earth’s surface. Consider lines of constant longitude: on the equator, meridians are parallel to each other; but on the poles all of them meet. Thus, one could do a measurement to check whether lines that are originally parallel remain parallel. If they don’t, this is an evidence that the space-time is curved. Several astronomical observations conducted in the last century confirm that space-time is indeed curved in the presence of massive objects.

Einstein himself was not well-versed in the geometry of curved spaces. Here, Einstein turned to his friend, mathematician Marcel Grossmann, to master the necessary techniques and tools. Armed with these tools, and driven by some unique physical insights which are marks of a genius, Einstein was able to construct an elegant mathematical theory of space-time.

However, mathematical elegance is not the primary touchstone of a theory of nature. The key yardstick of success is the theory’s ability to describe the natural phenomenon that it seeks to describe — in this case, gravity. General relativity remained inaccessible to most of the scientists during its initial years. However, Einstein and many others were able to extract specific observable consequences of the curved nature of space-time by mathematically solving the equations. Even though space-time itself is not directly observable, all of these observable predictions were verified by a variety of astronomical observations and laboratory tests.

Is math useful?

Not all areas of sciences are able to construct theories or models that have the level of mathematical rigour that theories of physics enjoy. This is due to the highly complex nature of the phenomena they seek to describe. Most of the social sciences are in this end of the spectrum, due to obvious reasons. However, economics is probably one notable exception, where models and techniques employing higher mathematics have proven to be highly fruitful.

However, “math” is also commonly used as shorthand for quantitative reasoning, which is the backbone of all scientific enquiry. Ideally, planning and policy should be largely informed by quantitative reasoning, including the purported goal of doubling the size of Indian economy in five years. Wishful thinking and ideological propaganda are poor substitutes to quantitative reasoning.

Parameswaran Ajith is a physicist at the International Centre for Theoretical Sciences, Bengaluru. Views are personal

Source: The Hindu, 20/09/2019

The fourth industrial revolution will further marginalise the subaltern

The new economic reality demands more tech skills and creative thinking for which the segment is not equipped

The fourth industrial revolution promises to transform the entire economic structure as we know it. By changing the economic basis of social organisations, technological revolutions fundamentally transform the entire social structure. In India, apart from economic classes, we also have caste and the intricate web of relations between castes. In simple terms, castes are endogamous social groups organised around hereditary professions.Even though hereditary professions are breaking down in the past few decades, there still exists a strong correlation between the caste and broad professional category with forward castes concentrated in the upper echelons of the value chain in the production process while backward castes are at the lower end.

And as the old village economy melts away in the face of urban-industrialisation, many of these caste-based professions have become obsolete, already throwing millions of people into a crisis of survival. Since India has failed to invest in social goods like health and education, these sections of society have been unable to move to different professions ,which require educational capital. This lies at the root of the “late convergence stall” in India. Late convergence stall refers to the phenomenon of a late comer being unable to make the jump to a higher-income status and remaining stuck in the low-income category. One of the main reasons is the increasing technological divide between countries and the inability of the late comers to bridge the gap by investing in human capital. It is extremely difficult to train an illiterate and unskilled workforce to handle new hi-tech production processes.

The problem is daunting in India. The advent of the modern capitalist economy under the colonial rule and acceleration of the industrialisation after independence reinforced the economic and social distance between castes. The backward castes stayed where they were while forward/dominant castes leapfrogged into the modern economy due to higher social and educational capital. The difference between them was now overlaid with the urban-rural divide as well as with the divide between high-productivity modern and low-productivity traditional sectors of the economy. This process exaggerated the intercaste inequality far beyond what was possible in the rural-agrarian economy where all the castes shared the same, albeit an unequal, space.

Now Artificial Intelligence and the fourth industrial revolution may herald another phase where those with requisite skills due to the higher social and educational capital can further move up the economic value chain under the new structure of production leaving those at the bottom further behind. This can lead to mass social antagonism and unrest, which can potentially become a breeding ground for radical and anarchist ideologies and groups. Already the old stable permanent jobs are disappearing, which so far have been the most crucial and, for some castes, the only way up the socioeconomic ladder. The new economic reality demands more flexibility, technological skills and creative thinking for which a large section of the marginalised castes is unequipped. The technological disruptions also demand frequent retraining, which involves an economic cost that might be unaffordable for those who are already marginalised.

But the political discourse in India, especially of the champions of social justice, remains oblivious to these developments. There is no focus on how to train the subaltern for the new economic structure or how to ensure social security when permanent jobs can no longer be guaranteed. What we fail to understand is that rhetoric is no substitute for a policy roadmap. And it is time that we start demanding it from our politicians. What is the reason that in states like Uttar Pradesh and Bihar, political parties ruling for decades in the name of the subaltern and social justice failed to invest in quality health and education?

What India needs is a new political discourse which locates social justice in ensuring universal health and education, skill development, easy market-entry for entrepreneurs from the subaltern castes, and next-generation social security delinked from the job and place of work. What we need is a fundamental rethinking of our social and economic future. Twentieth century ideologies and discourse can no longer work.

Abhinav Prakash Singh is an assistant professor at SRCC, Delhi University

Source: Hindustan Times, 27/03/2019