There are instructive elements in the so called anti capitalism movements across the west. They reflect public anger over the increasing rich-poor disparity that was exposed in the wake of the 2008 recession. The main reason is that while the rich did suffer during the downturn, they also rebounded very strongly. And despite losing large sums through investments in commodity, bond and equity markets, they have recollected well enough for most to record impressive increases in their net worth. However, the same can’t be said of the middle and lower income groups, who have seen their incomes and purchasing power suffer, while employment generation has not nearly been strong enough.
Significantly, those protesting this uneven income distribution also realise that the very system whose excesses they are mobilising against has the capacity to restore economic balance if used in the right manner. While the economic pendulum has been allowed to swing sharply to the right, the system has an inbuilt self-correcting mechanism that can remedy such income disparities. Our problems, while also revolving around a constantly widening have-have not cleavage, are a strikingly different mix. We are without a credible planning process that can provide a viable blueprint for progress. Even constitutionally mandated institutions like the planning commission have been destroyed.
Without an institutional planning mechanism, were continue to tread along without a credible long-term vision, which invariably means short-term decision-making is reactionary and ad hoc, failing to address structural weaknesses. Therefore our economic, social and security outlook remains compromised. It bears noting that even during our recent decade of growth, disparities were seen sharply increasing with the rich getting phenomenally richer while poverty could not be addressed meaningfully.
Going forward, we need to channel debate towards adopting a near and long term vision in keeping with our particular economic demographics. Yet relevant quarters are without necessary capacity to identify and pursue planned goals. Our mainstream political parties no longer develop think tanks and strategic structures within themselves. They continue to be dominated by individuals and there seems little effort to alter a status quo that has survived and thrived over the years.
Our present dilemma is that not only does the political system not address the economy’s most pressing issues, there is also no political will at the highest level. And without proactive institutional planning, our performance will remain haphazard. Already we have lagged far behind regional economies as Asia’s higher-yielding emerging markets lead the international effort to bottom out of the recession.
Not only have we failed to posture towards addressing our structural problems as a nation, there is also no individual will, be it at the social or political level. In such circumstances, we cannot possibly hope to grow beyond a sub-optimal 3-4 per cent of GDP annually, which is not nearly enough to arrest our unemployment levels. This means the economy cannot accommodate the six odd million entrants in the job market every year. This will bring its own negative social spillover, wasting the population dividend due to lack of proper planning.
Without achieving higher growth, we will be left even further behind in the comity of nations. According to recent research, our per capita income is projected to grow to $8,500 by the year 2050, while India’s is expected to balloon to $42,000, magnifying the importance of setting our house in order. With such abysmal growth while contemporaries leapfrog ahead, our economy, social structure, and especially the strategic security position will come under immense strain. Not only will we be caught in a low growth cycle, our immediate security will also be compromised.
Like those demanding a fairer distribution of resources and income in the west, we must also demand our power centres to develop a planning mechanism that will deliver greater fruits to the middle and lower income groups. When their participation in the economic process increases, investment, saving, spending and job creation also benefit.
The writer is a former finance minister