The keynote address at this year’s annual convention was delivered by Mr. Arun Maira, Thought Leader, Author, Former Member of Planning Commission of India, and Former India Chairman, Boston Consulting Group
At the outset, let me put some facts on the table. I will compare some vital statistics of the world’s two largest economies—the US and China, and the world’s two largest democracies—India and the US.
Firstly, their populations. India and China have around 1.4 billion humans each living in them. The US, with 331 million, has around one -fourth India’s and China’s populations. Compare their land areas. China is 9.7 million square kilometers. The US, only a tad smaller, is 9.4 million square kilometers. India is much smaller: 3.3 million square kilometers. Thus, Indians have only one-third as much land as Chinese have, and one-twelfth what US citizens have. Therefore, Indian citizens must husband their land and water resources with much greater care than US and Chinese citizens. Now let’s compare the sizes of the three countries’ economies in 2022. The US was $21 trillion; China $15 trillion. And India, $2.7 trillion. China has come into the same league as the US. The Indian economy is far behind: one-seventh the size of the US’ and less than one-fifth the size of China’s.
It wasn’t always like this. Let’s go back to 1990. Then, the US economy was $6 trillion. China was $396 billion and India a little less at $326 billion. Per capita incomes in China and India were comparable then. Now incomes in China are five times higher than in India: Chinese citizens are much better off than Indians. India’s pattern of growth must change. Growth must be much more inclusive to raise the income levels of all Indian citizens, not only those at the top. Also, it must be more environmentally sustainable. Assessments of the growth patterns of countries in 2011-12 revealed that the growth of the Indian economy, though amongst the fastest in the world then, was the least environmentally sustainable, and the least inclusive.
The growth of countries in South Asia, S.E. Asia, and BRICS, was compared using the international Sustainable Economic Development Assessment framework (SEDA). It measures growth along three tracks: economic growth, inclusion in growth, and environmental sustainability. The assessment revealed that, with every unit of GDP growth, India’s natural environment was being damaged more than in all other countries. Ground water levels were dropping fastest in India; soil quality was degrading; and Indian cities were the most polluted.
Every unit of India’s GDP growth was also producing the least number of additional jobs compared to all these countries. This was an ominous warning. With its vast population of young people who were expected to provide a demographic dividend to India’s growth, the economy must generate jobs for them. Because, unless they are employed and earn sufficiently, they will not provide the required big boosts to consumption and savings. The warnings were not heeded. Ten years later, slow growth of farmers’ incomes, and unemployment and under-employment, have become the Achilles Heel of the Indian economy. Sadly, the warnings from SEDA were not heeded. The paradigm of first: More economic growth. We will see how the redistribution of its benefits, continued: More capitalism, less socialism. This was the global economic paradigm; our economists followed along.
After the global financial crisis in 2008, when millions of citizens in the US and Europe lost their homes and livelihoods, policymakers vowed, never again. A few lifeboats were put out. However, the Titanic did not change course. The furniture on the upper deck was plushed up, and inequalities within countries increased further. Then came the even larger Covid crisis. While millions lost their livelihoods, stock-markets boomed.
In 2008, a high level, international commission chaired by Noble Laureate economist Michael Spence brought together 22 policymakers, academics, and business leaders to examine various aspects of economic growth and development. Montek Ahluwalia, Deputy Chairman of India’s Planning Commission was a member. It published its Growth Report in 2009. Spence, presenting the findings in New Delhi said that prevalent market liberal economic theories explained how to make economic growth faster. They don’t explain how to make growth inclusive at the same time. Thus, the theory of first increase the pie and then wait for the trickle down continues.
India must adopt a new strategy to ensure that inclusion happens much faster along with faster growth. India also needs a competitive growth strategy to catch up with countries that are ahead of it.
A good competition strategy must be based on the resource that a corporation or a country has more of than its competitors. If a country sits on large petroleum resources, its national strategy must be founded on the use of hydro-carbon resources for growth. Indeed, this is how Saudi Arabia has become very wealthy. It has world-scale, and world-class, petroleum refining and petrochemical industries. A country with larger copper and mineral resources than other countries can build its economy on the strengths of its mineral extraction and process industries, as Chile has.
What is the resource India has more of than any other country in the world? It is young people. India’s growth strategy must be founded on the employment of larger numbers of human beings in its economic enterprises. They are abundant, willing to work, and willing to learn. Our large population of people seeking employment can be India’s assets: they can provide Indian enterprises a competitive advantage.
However, in conventional corporate accounting, human beings do not even appear on the asset side of the register, along with other assets, like buildings and machinery. Human beings are accounted for on the cost and income side. To be used only when required for production.
The values of all assets on the balance sheet depreciate over time. Accounting law requires that companies report depreciation of their assets’ values.
Human beings are unusual assets. They are the only assets whose value can increase over time. Human beings have an ability to learn and to improve their own capabilities. Provided of course they are enabled to. Not only can human beings improve their own capabilities; they can also improve the performance of the company’s machines, and efficiency in the use of other materials if they are motivated to.
Thus, human beings are the only appreciating assets a company has, and a country has. Japan does not have petroleum, mineral, or chemical resources. Despite this, Japanese companies in many industries became world-beaters because they made Japanese workers their competitive advantage.
In 2013, the Planning Commission asked Bain and Company to look at the HR strategies of Indian companies spread across several industries and several regions of the country. Companies were separated roughly into two categories. Category A were those who considered their employees as assets and invested in them. For Category B companies employees were costs. Category B companies demanded more flexibility in labor laws. They employed large numbers of workers through contractors to reduce their own costs. They spent less on training too.
Bain compared the financial performances of companies in the same industry and in the same region so that no external factors would vitiate the comparison. They found that Category A companies had more sustained, and stronger, growth in revenues and profits than Category B companies.
A dictum of management is that you manage what you measure. “Productivity” is a central concept in national and company economics. Productivity is a ratio of input and output: a measure of how much input is required to produce the desired output. The output is the numerator and the input the denominator. There are two ways to improve any productivity ratio. The easier way is to reduce the quantity in the denominator. The more difficult way is to keep the denominator constant, and yet produce more output.
The most important productivity ratio any manager should be concerned with is how to get the most output from the scarcest or most expensive resource the enterprise has. A universal practice, in corporate, as well as national accounting, is to measure productivity as output per unit of labor. This presumes that human labor is the scarcest resource and that it should be substituted by other resources, such as capital.
However, labor is the most abundant resource India has, and the least utilized unfortunately. Whereas financial capital is relatively scarce. Therefore, the productivity of the Indian economy should be measured by how many good jobs each unit of financial capital produces. Companies too should re-examine their strategies for global competitiveness. Value the potential of Indian people. Engage them, nurture them, care for them. They will be your competitive advantage. Nurturing Indian citizens as appreciating assets, not as burdens, will make India’s growth more inclusive and faster too.
The entire world needs, and India too, a new paradigm of progress founded on three pillars: People, Planet, and Profit.
People are not merely resources for Profit.
Let us turn to environmental sustainability. In the drive for faster economic growth, we are building more man-made infrastructure—more roads, more dams, more ports, more urban infrastructure. In the process we are damaging the infrastructure that Nature provides for taking care of itself and of us too.
Land is flattened and water bodies are covered to build modern urban infrastructure. The consequence is both, diminishing water resources, as well as floods that overwhelm cities. Mountain slopes are cut to build roads and towns. The consequence is landslides that destroy property and lives. River sand is mined for urban construction, and rivers change course and flood. Breakwaters to build ports are causing beaches to erode pulling down buildings along the shore.
The economic activity for altering Nature’s infrastructure—cutting of slopes, levelling the land, filling water bodies, etc. adds to GDP. Adding man-designed, and man-built concrete and steel infrastructure on top adds even more to GDP. Finally, even activities for clearing the rubble after disasters and rescuing people add to GDP. GDP keeps going up with more modern, man-made, infrastructure while Nature’s infrastructure is destroyed.
People, Planet, and Profit represent three forms of capital: human capital, natural capital, and financial capital. In the economy, financial capital prevails. People are resources to create more financial capital. Nature’s capital—its soil, minerals, water, and vegetation—are also resources to be extracted and exploited to produce more profit for financial capital.
Some business lobbies are changing People, Planet, and Profit, to People, Planet, and Prosperity. Under Prosperity they put technology, business, and market economics. They seem to have high-jacked the meaning of Prosperity, leaving out the thriving of human beings and Nature from the concept of prosperity.
Francis Bacon, a founder of the European scientific enlightenment, said that science and technology has given Man the power to put order into unruly Nature. Science and technology have advanced too far ahead of wisdom. Now Nature is fighting back against human hubris.
We should be seeking more wisdom and less technology to save the world. We must learn again that the minds of humans are a small part of a very rich and complex natural system. The system sustains us. We cannot, with our small minds, redesign the system.
The sciences have advanced greatly since the seventeenth century, by breaking out into silos of knowledge. As medical science has advanced, specialists know more and more about less and less of the human body. As the social sciences have advanced, they have split into economics, sociology, and political science, and many sub-specialties amongst them. Humanity has lost the ability for enlightened systems thinking: the ability to understand the whole of which each of us is only a part.
The global agenda for saving People, Planet, and Profits is being driven by experts in their disciplines—each within their scientific silos. Climate scientists research the physics of climate change. They have located carbon in the atmosphere as the physical cause. They advocate technologies to reduce carbon emissions. Economists and business managers are experts in methods for increasing and deploying financial capital to produce more profit and more GDP. Those who care principally for the well-being of humans seem to have their own sciences.
The experts in their separate disciplines do not understand each other’s jargon. In fact, they don’t even like each other: because they fear that the others are interfering in their solutions. They are in different political formations with different ideologies: socialists, environmentalists, and capitalists.
The world needs a paradigm shift for solving the systemic problems of increasing inequities, continuing climate change, and collapsing global financial and trade systems. These problems are inter-related. They cannot be solved separately.
Top-down universal solutions will not work because these problems take different shapes in different parts of the world. A universal solution for reducing carbon, for example, will make problems of poverty and inequity worse in many places. Designs of social security systems must be based on the shapes of local economies.
The world needs a new paradigm for solving systemic problems, to solve the inter-related problems of People, Planet, and Profit, which have been caused by a wrong theory of economic growth.
We need local systems solutions cooperatively implemented within communities. We need to listen to each other within our communities and in our countries, with respect for each other. By listening to other points-of-view we will be able to understand our own realities, and we will learn what we must improve together to make the world better for everyone.
The world is being divided into fragments by narrow domestic walls. Social media is poisoning our minds against our own neighbors. We must learn to listen. Especially to people who we think are not like us. Then only will we learn to live in harmony.
I will end with a simple, but powerful solution. It is a poem on Listening.
It is time to press the pause button;
Put our smartphones on silent.
Shut out the tweets, trolls, and soundbites;
And stop the windmills in our minds.
It is time to listen.
To listen to the whispers in the trees;
To the caring in our hearts;
And most of all, to the voices of People Not Like Us.
Then we will learn;
And find solutions for living together.
On our shared Earth.