Sunday, September 4, 2011

Jobs, Inflation, and South Asia

  Its funny how I typed this essay just a couple of days ago. And today, after a drive to West Virginia, I feel repelled by my very own arguments. One thing is (un)certain: drive to West Virginia, and awaken the Republican within.
Err. What?

   Anyway, getting to the point, what is the key to ignite a more-and-better-jobs-in-South-Asia vehicle? Numerous keys, I'm guessing, but what is upsetting is the carefree way with which people (especially high-ranking officials and leaders) apply the "growth-growth-growth" oil to the engine. Obviously, the vehicle doesn't perform well with inferior oil. At the outset, I'm critical of the consequences of an unchecked ‘more-and-better-South-Asian-jobs’ agenda.

Before I construct my argument, let me quickly throw some light on what my problem with mindless – unfortunately how it is today – economic growth is. When I returned home to India this Summer, after a year, I noticed a stark disturbing trend in prices of common goods. A pack of chips worth Rs 10, a year ago, is now worth Rs 15. A simple McDonald’s burger has gone from Rs 20 to Rs 25. Chewing gums worth Rs 2 are now worth Rs 5. So much so, I got my shoes polished at a Mumbai railway station for Rs 7, instead of 5 rupees as I paid a year ago.  All these simple costs have increased by 25%-150%, just within a year. The government, meanwhile, congratulates itself for a fierce 8-percentage point growth of the economy during the same fiscal. (Although credit must not be taken away: India’s Central Bank, the RBI, recently raised interest rates to manage inflation.)

If prices are rising, are incomes rising proportionately? If not, then we have something worrisome to deal with. Yes, incomes of those working in the private sector are rising. But the private sector, largely responsible for the success of this India-growing phase, employs roughly 8% of Indians. (It is interesting to note that the list of Indian billionaires and High Net worth Individuals, who comprise ~0.01% of the total population, has swollen by 20% over the last decade.) On the other hand, the average Indian struggles to cope with price rise. Let’s not forget what 41% of Indians, living below the poverty line, must go through each day to have just one meal. If not curbed, inflation yielding price trends will narrow the access to basic resources and, thus, amplify societal disturbance. While growth is beneficial to some, it has a slow and subtle negative impact on the masses.

The reason I’m critical about a ‘more-and-better-South-Asian-jobs’ agenda is that it has a favorable probability of straying into mindlessness. This is evident from the history of the free-market capitalism where growth has come from consuming resources faster than the rate of natural replenishment. While this growth, as pointed out above, is beneficial to some – about 2% of humans own 50% of all wealth – it has a negative net impact on society.

Having set this caveat, what should the next chain of thought be, so as to generate ideas for mindful more-and-better-jobs in South Asia? It is time to turn to sustainable economic growth. The advantages of pursuing sustainability and economic profitability together, despite the limiting factors, are multi-fold: better living conditions, as that’s what business models will focus on to begin with (for instance, wouldn’t reducing the rate of waste-generation, that cannot be absorbed by the ecosystem, result in healthier living conditions?), preservation of natural habitats, sustainable consumption, and of course the potential for returns on investment and employment, et al.

The idea of deriving opportunities through sustainable development, as a concept, can seem vague. While some business models depend on technological breakthrough - that is yet to take place - a glaring (and sizeable) opportunity is waiting to be grabbed. What is called, efficiency. Humankind can either achieve growth by consuming more resources, or by consuming lesser resources with greater efficiency for the same result. Consider the way we drive cars. Our vehicles today – driven on the Internal Combustion Engine – use only 15% of energy per unit fuel (so to say, have 15% fuel-to-energy conversion efficiency.) This means, 85% of the energy from that unit of fuel is simply wasted. New Hybrid technologies increase this efficiency by 5%-85% (depending on the technology). And this is just one specific market for commercial vehicles There is a vast, largely untapped, pool of opportunity in resource-consumption efficiency gains – energy production, waste management, agricultural production, among a horde of others. Think about it.

Lastly, a ‘more-and-better-jobs-in-South-Asia’ solution must incorporate the agricultural sector. Not only is it a source of food, but also the major employer in all South Asian economies (fishing, for countries such as the Maldives). While the private sector may be responsible for economic growth on paper, agriculture is responsible for the day-to-day sustenance of a country. At this point, let me exemplify my social entrepreneur friends from the Bihar region in India, Shashank and Manish Kumar. The Kumars work towards increasing the efficiency of farm produce per acre of cropland. They do so by implementing scientific farming techniques as well as eliminating the middleman networks. Not only have their endeavors resulted in greater income for farmers, but also will go a long way in lowering/holding food prices for consumers. Such agro-based business models better the lives of many millions of farmers that are the under-appreciated lifeline of South Asian economies.   

To be fair, a number of macro-variables need to coherently converge to establish a solution to the better-jobs challenge. These include a new wave of entrepreneurism, supporting policy frameworks for first-generation entrepreneurs, regulatory frameworks to penalize inefficiency, measures to manage inflation, to name a few. There is no easy way out. Neither is it impossible.