-By Shri Achyut Godbole
Published in “Lokarang” 28th December 2008
This is a translated version of the original article published by Shri. Achyut Godbole in his column, “Arthat” which is based on economics in the supplement, “Lokarang” in the Marathi daily “Lokasatta” on the 28th of December 2008. Translated with due permissions of the author.
"Now a days, economics implies applying/exercising the principles and rules of the market. This meaning has been accepted as a norm as though it has been there since the conception of the subject. People keep on studying about the functioning of the market, its intricacies, its loopholes, the ways to improvise upon them and then formulate complicated equations about it. But very few ask the most important of all the questions- which is the question of the common people, of poverty, of unemployment and which in fact, should have been the chief aim of economic study.
There is a great puzzle in the economics of the market. Production happens as per the demand. But demand isn’t just the desire for any product. It also includes the ability and willingness to buy it. Without all of these, there won’t be any demand. Of the 65 crore people who are deprived of drinkable water, 33% are in India. So they do not add to the demand of “Bisleri” water. Most of the people cannot afford it. Same is the case with food, medicines and houses. In the last two decades, the service sector in India grew. Infotech, banking, hotel, tourism- in these sectors a class of people who were English-speaking and earning fat incomes came into existence. Then, to fulfill their desires products like branded items, cold drinks, malls, high rise buildings, water parks, luxury homes, golf clubs, etc came into being. In creating all of this besides mechanization of industries and their centralization, increase in the gap between the rich and the poor; hazards like pollution and excessive use of energy occurred in great proportions. As 75% of the population below the poverty line could not afford these products, they did not add to their demand and nor was there a regard for them in the market too. Big companies did not suffer losses in producing products for the common man. Therefore the questions of the common man were not going to be solved by the principles of the market. C K Pralhad’s. “The Fortune At The Bottom Of The Pyramid” and Mohammed Yunus’s, “Experiments Of The Rural Bank” suggest ways of developing a market for this 75% of population and eradicating poverty amongst them. Though these suggestions are welcome, they cannot solve the problems of a country like India in totality- this is known to all.
In fact, if we happen to observe, technology has developed to such a great extent and the world has become so well informed, that poverty should have been eradicated a long time ago. But just the reverse happened- because, all this progress was only for the rich. In the US the percentage of population below the poverty line is 13% and in the current recession period it might raise to 20%. In the past two decades the divide between the rich and the poor has widened.
According to Paul Krugman, the increase in the production which happened in the 80th decade of that, 70% was consumed by 1% of rich families. In the 90th decade, in the US, of 1% of all the rich people, 42.2% of shares, 55.7% of bonds, 44.2% of trusts and 71.4% of big-small trades were with them. Branco Milanovich, an economist of the World Trade Organization, is of the opinion that the prosperity of the 1% of the rich class is equivalent to that of the 57% people below the poverty line. The wealth of the three richest families is more than the sum of the national income of 48 poor nations. The production of 225 rich people is more than that of 47% of people in the world. If only 4% of their tax is increased then everyone in the world will get food, pure water, education, and health services.
The situation in India is graver. In fact, after liberalization, from the year 1991 to 2007, the economic growth of the government which took place (6.23%) was a little bit more than that of the year 1980 (5.38%). But the percentage of poverty eradication; which, before the year 1991 was always 0.85% reduced to 0.7%. Even now, around 50% of children in India are malnourished. 50% women and 70% children are anemic. The proportion of infanticide in India is huge. Even Bangladesh is better than India in this aspect. According to the Human Development Index (HDI) of the year 2003, we ranked 127th amongst 175 countries. We lag behind underdeveloped South American and African countries like Al Salvador, Guatemala and Botswana.
In the last two decades, all developing (in fact underdeveloped) countries were burdened with the phenomenon of unidirectional awareness. The products which were sold by the developed nations in the developing countries were made to reduce the rate of duty imposed on them and those which were imported from the developing countries into the developed countries had duty imposed on them. Four times the rate of duty imposed while trading amongst the developed countries themselves was levied on the goods being imported from the developing countries. America and Europe levied heavy subsidies on their agricultural produce against the principles of free trade. Due to that, they could sell their products at extremely low prices in developing countries like India. As against this, under the term of free trade, WTO imposed the restriction that developing countries should not give subsidies to their farmers as the production becomes expensive for the customers and also, it cannot be exported. That apart, as the prices of seeds, fertilizers are increasing day by day, their production rates are also increasing. As a result, the farmers here are becoming indebted and are compelled to migrate to other places. Earlier, in such a situation, nationalized banks used to give loans to farmers. But after liberalization, banks shifted their focus on making profit and commercialization and the small farmers did not get any loans. Then they turned t money lenders. Instances of indebtedness and suicides happened on a large scale. Every half an hour someone frustrated of indebtedness commits suicide. Surprisingly, Bhagvati Chakar who has written, “In Defence of Globalization” does not utter even a word about it. Though 57% of people in India are dependent on agriculture, its contribution to the GDP is only 17%. Naturally, there is great unemployment and partial unemployment in argriculture.
If one gives up agriculture and comes to the city, are there enough job prospects for them? To stay ahead in the race of globalization whatever (little) growth in industries and companies happened only rendered joblessness due to mechanization. Edward Louis of Financial Times, after studying Tata Steel Plant at Jamshedpur said that in 1991 85, 000 labourers used to produce 10 lac tons of iron in TISCO. In 2005, the production became 50 lac tons which was five times than the earlier production. But, at the same time, the rate of employment reduced to 44, 000 much more less than the previous rate which meant that the production increased almost ten times. Same is the story in TATA Motors and Bajaj Motorcycles and many other industries.
That apart, now-a-days a person adept at handling technology, able to read and understand English is qualified to become an employee. That is why it is difficult for an uneducated villager to come and get a job in the city. Hence, what they do is stay in hutments and delivers newspapers, milk, and work as chauffeurs, watchmen, carpenters or set up a vadapav or tea stalls. These people being self employed do not count as unemployed. But nor is their condition any better than that of the unemployed.
If that does not help, then people register their names in the Employment Exchange. But no jobs are got even there. In the year 1971, of those who had registered their names only 10% got jobs. This figure reduced to 8% in 1981 and 2% in 2005. Because of this, people don’t register their names out there anymore. Therefore, the real figure of the unemployed is more than what is projected and even more than that is the figure of the partially unemployed.
As there is no guarantee in the agriculture and industrial sector, then what is left is only the service sector. It is this sector which is rising rapidly in India (GDP 60%). In sectors such as infotech, call centers, BPO’s, insurance, tourism, hoteling, media only people wearing neck ties and speaking fluent English get jobs. Will a poor farmer, a household cleaner, or a Dalit from Parbhani get a job in these sectors? In short, this economic set up is not meant for the common crowd. This set up does not provide jobs which these people can do.
In India, this crowd consists of almost 70-80% of the population. This crowd is undergoing unimaginable suffering and pain. As per Arjun Sengupta Ahwal of 2004-05, 77% Indians spend less than Rs.20/- a day. This is an appalling amount and there should have been a discussion on this report for days and months together. But the TV channels were busy airing saas bahu sagas, cookery shows, reality shows, laughter challenges, dance shows, interviews of some less known and even less important celebrities. This is a matter of shame. Never was there so much of frivolousness, degradation of the culture ever seen before.
Whatever little economic progress happened was profited only by the 20% people of the upper class. It did not trickle down to the lower class at all. It is possible only if everyone is educated, gets health services and employment. But it is not possible in the current economic set up. The sad part is that if our economic policies are not changed soon, they won’t develop any further too. Besides, the pollution that is happening as a result of it, the social conflicts, political conflicts, westernization, increasing crime rates, unemployment, degradation of the young generation, the masked ness, and pretension and cultural setback- what of all this? Is this to be called progress? I feel that as long as a single man is malnourished and broke in our country, none of us should be at ease. Stiglitzon has written about it wonderfully in his book, “Making Globalization Work”. The question is, what is the use of an economic set up which blindly imitates the West and which only contributes to centralization of industries, pollution and wastage of energy? Will be accept an alternate set up which will provide decentralization of industries, create employment opportunities, incentives that will help save energy, produce necessary goods, education and health services to one and all and give right to employment to all? (Though the GDP growth may be 6% instead of 10%) Instead of just putting forth equations and principles of economics, if we give a human face to globalization, start a movement for this, then the knowledge of economics will truly be put to use. "
About the author:
Shri Achyut Godbole has 30+ experience in software development. His columns in Loksatta are very popular and are also available in the form of books. He has authored 5 books in Marathi on various subjects like information technology, music, economics, science, literature, and management.
Published in “Lokarang” 28th December 2008
This is a translated version of the original article published by Shri. Achyut Godbole in his column, “Arthat” which is based on economics in the supplement, “Lokarang” in the Marathi daily “Lokasatta” on the 28th of December 2008. Translated with due permissions of the author.
"Now a days, economics implies applying/exercising the principles and rules of the market. This meaning has been accepted as a norm as though it has been there since the conception of the subject. People keep on studying about the functioning of the market, its intricacies, its loopholes, the ways to improvise upon them and then formulate complicated equations about it. But very few ask the most important of all the questions- which is the question of the common people, of poverty, of unemployment and which in fact, should have been the chief aim of economic study.
There is a great puzzle in the economics of the market. Production happens as per the demand. But demand isn’t just the desire for any product. It also includes the ability and willingness to buy it. Without all of these, there won’t be any demand. Of the 65 crore people who are deprived of drinkable water, 33% are in India. So they do not add to the demand of “Bisleri” water. Most of the people cannot afford it. Same is the case with food, medicines and houses. In the last two decades, the service sector in India grew. Infotech, banking, hotel, tourism- in these sectors a class of people who were English-speaking and earning fat incomes came into existence. Then, to fulfill their desires products like branded items, cold drinks, malls, high rise buildings, water parks, luxury homes, golf clubs, etc came into being. In creating all of this besides mechanization of industries and their centralization, increase in the gap between the rich and the poor; hazards like pollution and excessive use of energy occurred in great proportions. As 75% of the population below the poverty line could not afford these products, they did not add to their demand and nor was there a regard for them in the market too. Big companies did not suffer losses in producing products for the common man. Therefore the questions of the common man were not going to be solved by the principles of the market. C K Pralhad’s. “The Fortune At The Bottom Of The Pyramid” and Mohammed Yunus’s, “Experiments Of The Rural Bank” suggest ways of developing a market for this 75% of population and eradicating poverty amongst them. Though these suggestions are welcome, they cannot solve the problems of a country like India in totality- this is known to all.
In fact, if we happen to observe, technology has developed to such a great extent and the world has become so well informed, that poverty should have been eradicated a long time ago. But just the reverse happened- because, all this progress was only for the rich. In the US the percentage of population below the poverty line is 13% and in the current recession period it might raise to 20%. In the past two decades the divide between the rich and the poor has widened.
According to Paul Krugman, the increase in the production which happened in the 80th decade of that, 70% was consumed by 1% of rich families. In the 90th decade, in the US, of 1% of all the rich people, 42.2% of shares, 55.7% of bonds, 44.2% of trusts and 71.4% of big-small trades were with them. Branco Milanovich, an economist of the World Trade Organization, is of the opinion that the prosperity of the 1% of the rich class is equivalent to that of the 57% people below the poverty line. The wealth of the three richest families is more than the sum of the national income of 48 poor nations. The production of 225 rich people is more than that of 47% of people in the world. If only 4% of their tax is increased then everyone in the world will get food, pure water, education, and health services.
The situation in India is graver. In fact, after liberalization, from the year 1991 to 2007, the economic growth of the government which took place (6.23%) was a little bit more than that of the year 1980 (5.38%). But the percentage of poverty eradication; which, before the year 1991 was always 0.85% reduced to 0.7%. Even now, around 50% of children in India are malnourished. 50% women and 70% children are anemic. The proportion of infanticide in India is huge. Even Bangladesh is better than India in this aspect. According to the Human Development Index (HDI) of the year 2003, we ranked 127th amongst 175 countries. We lag behind underdeveloped South American and African countries like Al Salvador, Guatemala and Botswana.
In the last two decades, all developing (in fact underdeveloped) countries were burdened with the phenomenon of unidirectional awareness. The products which were sold by the developed nations in the developing countries were made to reduce the rate of duty imposed on them and those which were imported from the developing countries into the developed countries had duty imposed on them. Four times the rate of duty imposed while trading amongst the developed countries themselves was levied on the goods being imported from the developing countries. America and Europe levied heavy subsidies on their agricultural produce against the principles of free trade. Due to that, they could sell their products at extremely low prices in developing countries like India. As against this, under the term of free trade, WTO imposed the restriction that developing countries should not give subsidies to their farmers as the production becomes expensive for the customers and also, it cannot be exported. That apart, as the prices of seeds, fertilizers are increasing day by day, their production rates are also increasing. As a result, the farmers here are becoming indebted and are compelled to migrate to other places. Earlier, in such a situation, nationalized banks used to give loans to farmers. But after liberalization, banks shifted their focus on making profit and commercialization and the small farmers did not get any loans. Then they turned t money lenders. Instances of indebtedness and suicides happened on a large scale. Every half an hour someone frustrated of indebtedness commits suicide. Surprisingly, Bhagvati Chakar who has written, “In Defence of Globalization” does not utter even a word about it. Though 57% of people in India are dependent on agriculture, its contribution to the GDP is only 17%. Naturally, there is great unemployment and partial unemployment in argriculture.
If one gives up agriculture and comes to the city, are there enough job prospects for them? To stay ahead in the race of globalization whatever (little) growth in industries and companies happened only rendered joblessness due to mechanization. Edward Louis of Financial Times, after studying Tata Steel Plant at Jamshedpur said that in 1991 85, 000 labourers used to produce 10 lac tons of iron in TISCO. In 2005, the production became 50 lac tons which was five times than the earlier production. But, at the same time, the rate of employment reduced to 44, 000 much more less than the previous rate which meant that the production increased almost ten times. Same is the story in TATA Motors and Bajaj Motorcycles and many other industries.
That apart, now-a-days a person adept at handling technology, able to read and understand English is qualified to become an employee. That is why it is difficult for an uneducated villager to come and get a job in the city. Hence, what they do is stay in hutments and delivers newspapers, milk, and work as chauffeurs, watchmen, carpenters or set up a vadapav or tea stalls. These people being self employed do not count as unemployed. But nor is their condition any better than that of the unemployed.
If that does not help, then people register their names in the Employment Exchange. But no jobs are got even there. In the year 1971, of those who had registered their names only 10% got jobs. This figure reduced to 8% in 1981 and 2% in 2005. Because of this, people don’t register their names out there anymore. Therefore, the real figure of the unemployed is more than what is projected and even more than that is the figure of the partially unemployed.
As there is no guarantee in the agriculture and industrial sector, then what is left is only the service sector. It is this sector which is rising rapidly in India (GDP 60%). In sectors such as infotech, call centers, BPO’s, insurance, tourism, hoteling, media only people wearing neck ties and speaking fluent English get jobs. Will a poor farmer, a household cleaner, or a Dalit from Parbhani get a job in these sectors? In short, this economic set up is not meant for the common crowd. This set up does not provide jobs which these people can do.
In India, this crowd consists of almost 70-80% of the population. This crowd is undergoing unimaginable suffering and pain. As per Arjun Sengupta Ahwal of 2004-05, 77% Indians spend less than Rs.20/- a day. This is an appalling amount and there should have been a discussion on this report for days and months together. But the TV channels were busy airing saas bahu sagas, cookery shows, reality shows, laughter challenges, dance shows, interviews of some less known and even less important celebrities. This is a matter of shame. Never was there so much of frivolousness, degradation of the culture ever seen before.
Whatever little economic progress happened was profited only by the 20% people of the upper class. It did not trickle down to the lower class at all. It is possible only if everyone is educated, gets health services and employment. But it is not possible in the current economic set up. The sad part is that if our economic policies are not changed soon, they won’t develop any further too. Besides, the pollution that is happening as a result of it, the social conflicts, political conflicts, westernization, increasing crime rates, unemployment, degradation of the young generation, the masked ness, and pretension and cultural setback- what of all this? Is this to be called progress? I feel that as long as a single man is malnourished and broke in our country, none of us should be at ease. Stiglitzon has written about it wonderfully in his book, “Making Globalization Work”. The question is, what is the use of an economic set up which blindly imitates the West and which only contributes to centralization of industries, pollution and wastage of energy? Will be accept an alternate set up which will provide decentralization of industries, create employment opportunities, incentives that will help save energy, produce necessary goods, education and health services to one and all and give right to employment to all? (Though the GDP growth may be 6% instead of 10%) Instead of just putting forth equations and principles of economics, if we give a human face to globalization, start a movement for this, then the knowledge of economics will truly be put to use. "
About the author:
Shri Achyut Godbole has 30+ experience in software development. His columns in Loksatta are very popular and are also available in the form of books. He has authored 5 books in Marathi on various subjects like information technology, music, economics, science, literature, and management.
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