Are There Any Successful Economic Models?

The world of economics is less than 10,000 years old. Structured move from barter to “ government issued “ money and commodity markets in a crude early form are believed to have originated in Sumer between 4500 BC and 4000 BC. Sumerians first used clay tokens sealed in a clay vessel, then clay writing tablets to represent the amount of commodities—for example, the number of goats promised to be delivered. These promises of time and date of delivery resemble futures contract. Thus began futures trade.

The introduction of metal coin currency less than 5000 years ago, allowed for some people to move beyond manufacturing or providing services, which directly impacted living. If coins can be exchanged to buy food, I don’t need to focus on growing food only on earning coins, as long as someone is focussing on growing food.  Thus began selling of art and thoughts.

Sure this is a simplistic way to look at the world of trade thus far. But consider the fact that anatomically modern humans evolved from archaic Homo sapiens in the Middle Palaeolithic, about 200,000 years ago.] The transition to behavioural modernity with the development of symbolic culture, language, and specialized lithic technology happened around 50,000 years ago according to many anthropologists. On an Earth that is over 4.5 billion years, man has existed for about 50,000 and has traded using currency for less than 5000 years. And yet, we are so confident about our thoughts that we take sides with capitalism or socialism with such passion that one would wonder why anything ever goes wrong in this world…after all we know it all.

I write this today thanks to all that have read on the regressing India economy brought on by socialist methods supported by people like Sen and Dreze. Let’s face it, we still have no clue what really works.

So far while capitalism has many supporters, their quiet acquiescence to bailing out of American banks and car companies is enough to show that it is more cronyism than capitalism that attracts them. I did not see as many frantic indignant emails and posts on social media when they were happening.  In a purely free market, General Motors would have ceased to exist several decades ago not just in this decade.

The fact that the richest 2% in the world have more assets than the lower 45% shows how it is a rigged market where the rich support each other at the cost of the poor who are destined to remain outsiders. The book “Plutocrats – the rise of the new global super-rich by Chrystia Freeland” documents how the global super rich are now like a nation to themselves, isolating themselves even from others in the country where they purportedly belong. 300 years of British in India also showed how it is possible to keep most of the rich on your side and isolate the poor driving them to death or poverty. The erstwhile royal families still have way more land and money in India than most of their erstwhile subjects. Documentaries that show how these Indian Royals kowtowed to the British Monarchy, just to keep much of the wealth secure while their subjects were taxed beyond belief, are often found still airing on BBC at the right occasions.

Today as Detroit files for bankruptcy, you wonder why was bailing out Bear Sterns more important than bailing out a city administration that provides basic amenities to its citizens? Will the solution be to sell Detroit to a magnate as his personal fiefdom?

On another side, you have the failed experiment of manufactured socialism of the USSR where, all was run by the state and supposedly divided equally amongst all. Anybody who objected to the thought was just eliminated. But unfortunately, the human mind took charge ant there was no equal division with those with power taking a much larger share. Did the factories not manufacture enough bread because nobody was interested in running an efficient bread operation or because there was not enough for all or because someone was stealing, we will never know. All that will remain is our memory of pictures of people standing in long queues for bread. The collapse and the move to capitalism has brought forth immense inequalities in those societies. Their export of the sex trade, through the globe is sufficient to show what a badly managed transition can do to a society, where earning a living is tough but people are aspirational.

One could point out to the Chinese Model that in the last 30 years has supposedly merged both capitalism and socialism. The jury is still out on the level of equality that has been achieved and whether capitalism here too is backed by cronyism or not.  Not only this, the Chinese model is the backed by its autocratic polity, with Singapore probably as its role model, but Singapore does carry out a lot of socialistic measures including making reasonable housing available for all.

On yet another side, we have some of the most peaceful and most developed societies in the world – the Nordic countries. There is free enterprise as well as the welfare state that implements welfare policies through the public sector. Universalism, equal access, non-discrimination are the fundamentals of the welfare state in all three countries. It seems to work for them. The Nordics generally are at the head of tables of everything from economic competitiveness to social health to happiness.

The Economist in its survey of the region says (http://www.economist.com/news/leaders/21571136-politicians-both-right-and-left-could-learn-nordic-countries-next-supermodel)

“ This may sound like enhanced Thatcherism, but the Nordics also offer something for the progressive left by proving that it is possible to combine competitive capitalism with a large state: they employ 30% of their workforce in the public sector, compared with an OECD average of 15%. They are stout free-traders who resist the temptation to intervene even to protect iconic companies: Sweden let Saab go bankrupt and Volvo is now owned by China’s Geely. But they also focus on the long term—most obviously through Norway’s $600 billion sovereign-wealth fund—and they look for ways to temper capitalism’s harsher effects. Denmark, for instance, has a system of “flexicurity” that makes it easier for employers to sack people but provides support and training for the unemployed, and Finland organises venture-capital networks.”

Or take Iceland for another instance. The ENTIRE banking system collapsed in 2008 and yet it has managed to survive beyond it. Whether it has merely postponed its final collapse is up for debate, but isn’t that really true for the US, Italy and France as well?

Despite being home to innumerable resources, Africa is yet to see sustainable economies as a norm. Monarchy, dictatorships, civil wars and other malaise have been rampant. Combined with foreign FDI, it is possible to see a De Beers alongside the abject poverty of the diamond miners.  The Middle East with its Oil resources do just enough socialism to ensure no major outburst from its citizens. The foreign oil companies and the sheikhs keep bulk of the profits for themselves.

All these models co-exist in this world today. None of them are THE model to follow, yet. Hence my surprise at the level of conviction with which people seem have on what needs to be done and why food security or land acquisition bills are wrong in every manner.

Yesterday one of the headlines in a TV channel was “can we afford to provide food security?”. No, it did not end with a YET in the end. It is possible that the journalist typing it in missed it, but I seriously doubt it because the discourse in the civil society is not bringing in debates of what are the benchmark economic levels where we should be looking at providing food security. It is truly a discourse of “if you don’t have food, it’s not our problem, it’s the incumbent government’s as long as they do not take anything away from me.” I have not had a day in my life when I have had to worry about my next meal. Not even my next cooked meal ( as the youngest of siblings someone always cooked and I ate for the first 15 years of my life and there after I did not even need to look for that as I then had “pocket money”). While we were not rich, we had sufficient. But that did not mean I was not aware that I was privileged in this respect.  Stories of life before the Green Revolution abounded in my family when even the rich who did not own sufficient grain producing land, could not access quality food.

Latest statistics say that 80% of us have now sufficient to eat on most days of the year. Of this 20 % are vulnerable to changes in their lives or the economy and could slip back into destitution. The PDS system was set up and later amended  to provide for these classes. I would find it difficult to believe that most of us have not been to a PDS outlet in the last 40 years. Many of our families no longer require the system and hence we do not take sufficient interest in it. There are NGOs working in the area and much of the reforms in Tamilnadu and Chattisgarh are led by such NGOs which used the RTI Act and support of the right officers at the right place at the right time to use computers and mobile phones to monitor stock movements. So should the debate be on “let’s not do this” or on “how to we ensure it is done the way it is supposed to be”?  no political party has shown a principled stand on the subject precisely because they are aware not only of the vote bank but also the fact that they cannot actually wait for trickle down benefits to work because it just may not ever. We just don’t know the answer yet.

My favourite theme is always of why India should forge its own path. Why should we be following one or the other models that have already been shown to be only partly successful? Can we compare ourselves to an America which was built by immigrants to a rich landscape over 500 years, when we started 65 years ago having been impoverished systematically over 300 years? We never did follow the Soviet Model completely, and we have survived thus far; we have not succumbed to an autocrat (yet) and have brought in reasonable growth;  we have fought some wars but most of our growth came in peace time as to be expected. We have not become a civil war ridden country despite all the challenges to our internal security. We are muddling through but then which country is not?

If the urban discourse is going to be all about itself and the corporates all about their needs, the society will fracture and the politicians will play one against the other to stay in power. The need of the day is a debate that looks at both the long term and the short term of the economy, the society, the people and the polity. Not knee jerk reactions based on convictions that have not yet stood the test of time.