We want to add jobs, raise incomes, and over a period of time, reduce income inequality. Government policies like ‘Make in India’ are geared towards these goals.
But are these goals achievable? Perhaps not.
- We are largely dependent on the manufacturing sector to create more jobs. Unfortunately, the role and contribution of the manufacturing sector in creating jobs & incomes seems to be peaking and/or declining, not just in India, but globally.
- Assuming we somehow are able to create sufficient jobs in manufacturing & other sectors, can the incomes of the huge mass of low-skilled labor force be raised to satisfactory levels? Another herculean task. The experience of developed and other developing nations are not encouraging. Furthermore, this human experiment in industrial revolution, job creation & increasing incomes is still nascent at 100+ years. No guarantees on outcomes.
- We now have 2 events with low probabilities – our manufacturing sector may not create sufficient jobs and we may not be able to suitably raise incomes. Also, these two events are possibly inter-dependent. If so, our ultimate goal of reducing income inequality becomes more remote.
Citing examples of Japan & Scandinavian countries, which have been able to build egalitarian societies with low-income inequalities, may be futile as these countries are facing blizzards like aging, immigration, slowing economic growth etc. These challenges threaten the short run of egalitarianism they have enjoyed in the last few decades.
Modern economic growth is based on the twin engines of investments & consumption. But both these engines have their own minds and often don’t work in sync. They often speed-up, sputter & stall at different times, thereby destabilizing growth, which ensures periodic bouts of unemployment, reduced incomes and volatile income inequality. That seems to be nature of the beast.
Youth, entrepreneurship, selfish motives and innovations help drive economic growth. But the nature of the beast may not change significantly to allow us to achieve lasting income equality and egalitarianism.
We have a long way to go before we can generate enough jobs to feed our millions. We may not have the luxury to target income inequality for the next few decades. We need to generate enough income first. Even as we ride on the train of modern capitalistic wisdom, its worthwhile to observe how other trains, which had started much before us, are faring.
What can we learn from them?
Should we pursue their growth model? Are those models dying?
Perhaps the twin engines have to be replaced. If we need to be dependent on investments & consumption to keep growing, where & how do we end up? Are there limits to such a growth? Should we really worry about limits now, or just keep doing what we are doing?
What are the alternatives? Can we slow down investments and consumption? Can a slower, but equitable and inclusive growth be more sustainable? Can we afford such a slower growth? Is it doable?