NOTWITHSTANDING chronic conditions of sub-normal economic activity, as some economists put it, much of the world is still largely governed by conventional wisdom.
But the view that one cannot get different results by doing the same thing has gained much currency, backed lately by the experience of a couple of big firms in distress that deviated from business-as-usual mode to achieve a turnaround.
The overarching issue at the moment is to realise the full growth potential of national economies by putting surplus, idle population to work, empowered by skills, to develop the countries’ natural resources, reduce foreign dependence and usher in shared prosperity.
In many countries, policymakers remain focused on sustaining low-quality economic growth without real development and expect its trickle-down effect to take care of the rising inequality. They tend to forget that mainstream economic activities have been creating surging inequality over the last few decades.
Observing that development is about transforming the lives of people, Joseph E Stiglitz says true prosperity is shared prosperity.
For a better tomorrow, the voter’s responsibility cannot end with the mere casting of votes — the dynamic democratic process of ‘the people lead and the people are led’ just starts from the electoral mandate
While the rapid expansion of social safety networks to provide relief to millions impoverished by Covid-19 has generally helped an early rebound of economic activities, there is no surety the fragile recovery would be sustainable for the medium to long-term. Much of poverty, joblessness and inequality persists.
One can also see the disruption and reconstruction being wrought by the latest evolving technologies, acting as the harbinger of social change but without creating enough jobs in the current phase of their development.
Apart from the critical shortage of decent jobs, young professionals getting big pay are disenchanted with long hours of work and overwork. A review of the imbalance between work and life is underway in developed markets like the United States.
“There is an urgent need to rethink the foundations of the economy,” says the former chief executive of Best Buy, Hubert Joly as “the world we live in is not working. We have multifaceted crises — a health crisis, economic crises, societal crisis, racial crisis, environmental issues and geopolitical tensions.”
As his observation indicates, the situation is ripe for a transformational change to build a better world. The historical record shows, slow or fast, changes are constant while resistance to required change, however stubborn, finally turns out to be a passing phase.
The major issues to be addressed include: making capitalism progressive, promoting people-centred development, (mainly through participation of organised, active citizenry), evolving an economic model that does not produce abnormal inequality, and creating a state structure in the service of the common good.
Some important features of the role of progressive capitalism have been spelt out, among others, by Mr Joly. He calls for an end to profit maximisation at all costs, a restoration of the social compact between employers and workers, and an approach to business that takes human dignity as a starting point.
Crises are triggered by market failures and the price is largely paid by the common citizens. It is argued that the fate of the rich is bound with the rest of the population and capitalism needs to work for the benefit of most citizens. While working for reasonable profits, the main objective of the private sector should be to increase output and productivity to meet the needs of the teeming millions at affordable prices and not, as Mr Joly said, to maximise profit at all costs.o Production should not be restricted to increase prices and nor to indulge in profiteering.
Some believe that it is time to ‘ fix capitalism’ quoting such examples as that of a turnaround in Best Buy. In 2012, Mr Joly took over as the chief executive of the company whose sales and profits were sagging and its stock price had crashed. It was facing tough competition from Amazon and Walmart. In any revival plan, the company was expected to slash wages and cut costs to increase profitability. That did not happen.
Eschewing conventional wisdom Mr Joly started investing in the company. He gradually increased the minimum salaries and perks of workers and reorganised the floor plan. With welfare taken care of by the management the labour was motivated, and upskilled, to work for the company’s defined objectives, creating more shareholders value. The company also teamed up with Amazon.
For gradual improvement of peoples livelihood and quality of life, some political leaders like former US president Obama and analysts have long held the view that an active public citizenry, kept well-informed by a free and diverse news media, is necessary for having the citizens’ voices heard in the corridors of power. For a better tomorrow, it is argued that the voter’s responsibility cannot end with the mere casting of votes. The dynamic democratic process of ‘the people lead and the people are led’ just starts from the electoral mandate.
Notwithstanding the recent bottom-up initiative, Pakistan’s case is no different from the rest of the world and its policymakers are struggling with conventional wisdom to come out of the frequent boom and bust cycles. Even if growth, projected at 4.8 per cent for this fiscal year, is achieved, despite building up of external pressures, it would be short of the 7-8pc required to absorb the large number of unemployed people and eradicate poverty.
On the other hand, the sporadic outburst of frustration by the coalition of peoples’ organisations against common grievances are gathering momentum.
More than 200 marginalised associations, trade unions, collective bargaining agents, community-based organisations, social groups and non-governmental organisations have recently formed Coalition 38 which is aiming to make ‘Principles of Policy’ and Article 3 of the 1973 Constitution as a driver of social change in the country, according to National Coordinator for Pattan Development Organisation Coalition Sarwar Bari.
Article 3 provides “the state shall eliminate all forms for exploitation and ensure the gradual fulfilment of the principle, from each according to his ability, to each according to his work.” The principle is elaborated in similar provisions of the Constitution such as one that lays down: ‘the state shall reduce disparity in the incomes and earnings of individuals.’
The article 3 issue has cropped up in recent weeks in pubic discourse with some independent tax experts suggesting how revenues can be raised and social activists pleading the cause of social justice.
Published in Dawn, The Business and Finance Weekly, August 1st, 2021