Opinion | We need a people-centric approach to economic policy4 min read . Updated: 16 Oct 2019, 10:23 PM IST
Citizens at the bottom of the pyramid must be the focus of reforms for sustainable growth
It takes a child to tell the emperor he is not wearing any clothes. Sixteen-year-old Greta Thunberg challenged world leaders at the United Nations: “When people are dying and entire ecosystems are collapsing, you can only talk about money and fairy-tales of eternal economic growth. How dare you!" She challenged the dominant paradigm of economic growth driving policies everywhere, including in India. A more humane and ecologically sensitive paradigm is required. “How dare you turn to us [the children] for hope," she said.
No child need tell India’s leaders that a change in narrative has become imperative. On one hand, the supreme goal is to expand the size of the economy to $5 trillion and beyond. On the other, NITI Aayog projects that India’s requirements of fresh water will be double the availability by 2030. On one hand, cities are getting more polluted, with life dislocated by floods. On the other, trees are being cleared and water bodies filled to build urban infrastructure. On one hand, regulations are changed to attract foreign and domestic investors to stock markets. On the other, less than 3% of Indians earn and save enough to invest in stocks or mutual funds. While incentives are being rolled out to encourage more investment in business, companies say demand is declining and so it is unwise to invest now. We cannot muddle along with a failing paradigm any longer. A new, human-centric and ecologically sensitive paradigm of progress is necessary.
The words we use reveal the way we think. Expressions like “first we must grow the pie before we can redistribute it" and “trickle down is slow" show the belief that economies grow from the top down. Therefore, more incentives must be given to those at the top to grow their own wealth so that there will be enough to go around. Meanwhile, demands from the bottom for higher wages must be curbed because these will restrict the profits of those at the top and reduce their incentive to get wealthier.
When economic growth slackens and belts must be tightened to balance budgets, tough economic reforms are demanded by financial markets. In the top-down growth model, austerity programmes invariably demand the reform of labour laws to make it easier for employees to be fired, curbing the power of unions to press for fair wages, and a reduction of government expenditure on social protection programmes. Higher taxes on wealthy people would be counter-productive, it’s argued. Therefore, those at the bottom who are the hardest hit, and not those on top, must tighten their belts further to enable a growth recovery.
In an alternative model, the central narrative driving all policies is not the size of the economy, but the growth of employment, skills and incomes of citizens. Singapore’s remarkable development since the 1970s, and its “whole of government" approach, was driven by this narrative. Lee Kuan Yew declared that Singapore would become a “developed" country very fast. The incomes of common citizens would be taken to developed-country levels. For this, citizens must have jobs with good wages. To earn good wages, they need skills. As wages rose in Singapore, companies would move production to other countries. Therefore, enterprises and people there were encouraged to be fast learners who could move up the value chain. Lee insisted that investors provided with land and incentives to operate in Singapore must also set up world-class training facilities.
No policy is perfect. Each is a compromise in its own way. To choose between good and bad compromises, you must have an ideal as a reference. This ideal policy must be envisioned from the perspective of the poorest citizens in a human-centred development paradigm.
Delhi’s Aam Aadmi Party government has directed its efforts to improving common citizens’ ease of living by providing them basic necessities like education, healthcare, electricity and water at little or no cost. It estimates savings per family of ₹4,000 per month. The increase in disposable incomes has resulted in additional consumer buying power, placed at ₹24,000 crore per annum. Its policies are improving Delhi’s economic fundamentals. Employers in India complain about the poor quality of India’s human resources, a fundamental cause of which is poor education in government schools. The Delhi government’s mission to improve education in state-run schools, which serve the masses, has produced impressive outcomes. Parents are even switching their children to them from more expensive private schools.
One parameter on which India ranks very high (third in the world) in the World Economic Forum’s Global Competitiveness Index is the potentially large size of its market. On almost all other parameters of ease of doing business, including the availability of skilled workers, India ranks near the bottom. The principal cause for the slump in India’s growth, economists now agree, is the slackening of consumer demand even for basic things like packaged foods. India’s policies must be refocused on creating more jobs with better incomes by producing more locally for its market needs. The country’s market potential would be realized once people at the bottom earn and save more.
Think of people first. How dare you think otherwise, said Thunberg. The top purpose of economic reforms must shift to improving the “ease of living for citizens" instead of the “ease of doing business". Businesses should be reassured that what’s good for people is good for them, too, in the long run.
Arun Maira is author of ‘Transforming Systems: Why The World Needs A New Ethical Toolkit’