Fixing Rules of Economy

Context: While India suffers from an income crisis- where incomes of the lower half of the pyramid are too low, the solutions provided by the economists currently favour wealthy investors and not workers or small companies. 

Then Three Solutions to the issue of Income crisis:

• Free up Markets: for agricultural products (to get higher prices) and labour (to attract investments by reducing the burden of wage costs).
• Improve productivity (a ratio of input and output): There are two ways for the companies to improve their productivity -
  • Through Capital Investment: leading to an increase the total output while maintaining the number of workers through induction of required capital (machines).

• • Total Quality Management: through enhancing workers’ skills which maintains a continuous improvement in the factory. (The reason for Japan’s industrial success in the ‘60s and ‘70s.)

• Application of technology: in turn, increases the productivity of a company and reduces wage costs.

Critical Analysis of the Three Solutions:

• Issues with free markets:

• Human is considered a commodity: While good markets enable smooth transactions, it considers humans as a commodity like agricultural produce and minerals.

• Impact of financial globalization: It has made the lives of migrant workers more precarious, increased inequality and the rules are manipulated by wealthy investors.

• Issues in improving productivity: 

• A ‘’hire and fire’ strategy: Companies and government employ the strategy to improve a nation’s productivity, leading to unemployment and out-migration.

• Defining productivity: Productivity is overly focused on subsidizing capital and machines rather than augmenting the skills of workers.

• Issue with the application of technology: 

• Destruction of traditional workspaces: due to the attempt of the developing nations to adopt Western Technologies, neglecting the cheap indigenous ones. (COVID-19 has pushed the trend further.)
• Produces a ‘dual economy’: marred with mass employment and mass migration.

Way Forward

• Strengthen the Social contract: A contract between workers and society for ensuring good jobs where workers provide products and services in return of dignity and adequate incomes.

• For, E.g. Government must regulate employee and employer contracts (gig economy).

• Employ correct usage of productivity: which should be defined as output per unit of capital, which could help capital scarce and human resource-rich nations like India (as it had helped Japan).

• Induce firms to employ more numbers of less-skilled workers: and avoid the destruction of indigenous small industries and mass unemployment caused due to Westernisation.

• Shifting the power balance: Small enterprises and workers must combine into larger associations/unions; using technology to tilt reforms towards their needs and their rights.