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India’s Lack of Entrepreneurship is Due to its Culture

Saurabh Malkar

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I came across an article shared on a Facebook group, describing Apple co-founder, Steve Wozniak’s, take on Indians’ lack of creativity and the resultant dearth of innovative enterprise. The article was met with a lot of pushback and hate-posting, mostly arising out of national and cultural chauvinism.

But Woz’s words were like music to my ears. He is certainly not the first person to have lambasted Indians for their lack of creativity and innovation, but he is one of the few ones who touched on points that subtly implicated the culture, straying away from the oft-cited bogey man – the Indian educational system.

I will try to swing further Woz’s wrecking ball and try to break down (pun intended) the shortcomings of Indian culture that stymie creativity, innovation, entrepreneurship, and individual progress.

For this rant, I shall use everyday examples and observations, while eschewing citing scientific literature. This is, thus, an opinion grounded in empiricism.

Low Expectations

Entrepreneurship is the pursuit of a lofty goal, often, with scant resources. The challenges are not merely of an infrastructural or a monetary nature, they are first and foremost of a psychological kind. The individual has to place his personal life and tertiary goals on the proverbial altar that will serve as the foundation of his venture.

Unfortunately, such goals and aspirations have no place in a culture of low expectations. Indian culture encourages playing safe just so one gets to check off a centuries old check list of ‘success.’ The check list comprises of education (in select disciplines), employment (in select industries), matrimony, a mortgage, and a car loan.

With the bar set to keeping up with the Joneses, setting off on an almost monkish, backbreaking entrepreneurial journey is off limits.

Group Think

Starting a business or being innovative requires a person to make critical decisions that can either make it or break it. Such critical decision-making needs one to be self-aware and accustomed to make independent decisions from a young age.

A culture that puts a premium on defining one’s identity in the ethnolinguistic group in which one was born is not at all geared for the rigors of independent decision-making.

To add to the burden, individuals are perceived as part of a group and are expected to be in lockstep with group conventions, practices, and thought. For a maverick, this can be stifling and self-isolation is the only counter-measure.

A sub-malady of group think is that individuals get painted with a rather broad brush. Group outliers, viz. future mavericks, tend to be ridiculed, jeered, and in some cases, ostracized due to the misalignment of their compass with the group north star.

A combination of group think and steep penalties on renegade behavior means that the raw creative energy, the fuel of entrepreneurship, is lost or discharged in hackneyed pursuits.

Identity Politics

Group think and ethnolinguistic segmentation segues into identity politics. People tend to judge individuals by their default identities, issued at time of birth, by no virtue or fault of their own.

While this pathology seems to be at its peak in the US, fortunately, there are counter voices that rail against it.

In India, it’s part and parcel of the routine life. Preferential policies and biases towards hiring folks of similar ethno-linguistic groups as that of the employer is rampant in most parts of the country.

Identity politics can creep into fraternizing, segmenting the populace along ethnolinguistic fault lines. This can be extremely counterproductive to the process of information exchange and making beneficial acquaintances – essential pre-requisites to entrepreneurial beginnings.

Lack of Grassroots Innovation

Entrepreneurship has become such a money-minting buzzword that universities now run courses that teach folks how to bootstrap their ideas into successful businesses. Big to medium sized cities see at least one event dedicated to discussing and fostering entrepreneurs. Magazines beat the entrepreneurial drum at least once in their publication cycle and Youtube is chalk full of videos on entrepreneurial hacks.

 

But really, entrepreneurship and innovation is not a gala affair and certainly doesn’t result from a structured top-down plan. It’s more akin to the randomness and meandering trajectories of Brownian motion. Over time, a few of these random trajectories lead to success.

Rockefeller’s success with oil, Henry Ford’s successful application of the assembly line, modern day advances in fracking, the smartphone, and all the petty things that make our domestic life convenient have one thing in common. They are the cumulative result of the effort of average individuals, with great minds and even greater dreams, who wanted to innovate contemporary processes and systems to bring about a greater good.

Indians, for a variety of reasons, lack the innovative mindset. Outliers apart, most Indians don’t think of upgrading existing ways of doing things to make their own lives better. To demonstrate this, I will use two extremely routine, but telling, elements of our lives – house cleaning and food packaging.

House cleaning involves sweeping, mopping, and wiping down surfaces.

The Indian broom hasn’t undergone any significant upgrade since its inception. It’s still made of long fibers of processed grass, held together by a plastic casing which doubles up as the handle. From head to tail, the broom measures around 3.5 feet. The result: poor cleaning and significant strain on the back from bending over. No thought has ever been put into upgrading this tool. It’s only through the entry of products from the West that urban Indians are being introduced to the ‘real’ broom – one with greater work efficiency and optimized for use in upright posture.

Mopping in the average Indian household is performed with a rag and a bucket of water. One has to squat and use their bare hands to mop the floor with the wet rag. Only recently has a mop and a purpose-built bucket been introduced into Indian homes. But to much dismay, this convenience is the result of globalization and trade, not local innovation.

It’s routine to wipe down surfaces with a damp rag. The process requires frequent rinsing and wringing of the rag. Not only is it time consuming, it also produces poorer results. To date, there is no alternative to this, as there is nothing like Clorox wipes on the market.

Food packaging is my pet peeve. I was particularly wowed by food packaging in North America. There is a great emphasis on three criteria – ease of opening, resealability, and ease of dispensing. Cue food packaging in India, and except a few multinational brands, most food packaging is dismal. None of it meets the above three criteria and situation hasn’t changed much over the past few decades.

It seems, at least empirically, that the driver of innovation and entrepreneurship – the individual – is missing in action. This very much explains, partly, the state of shambles India has found itself in.

Lack of Infrastructure

I won’t detail on infrastructural quagmires affecting at a macro level like GDP and public transportation. This is an individual-centric harangue, so I will touch on the micro effects.

Innovation or entrepreneurial pursuit needs contemplation, solitude, and some spare time to etch out the road map. The above elements become unattainable due to the way infrastructure is (mis -)set up in India, at least in urban India. (These problems don’t occur in rural India because there is no infrastructure to begin with.)

The Indian infrastructural setup is for the most part pre-industrial. This accompanied by a pre-industrial culture and way of life throttles any serious contemplation and self-reflection.

Following has been my observation.

Poor roads and dismal traffic management often result in urban Indians spending over 3 hours commuting one-way. While one could theoretically brainstorm and introspect while stuck in traffic, the co-existent cacophony from honking and outdated car motors makes this theoretical prospect unfeasible.

But what about using ear plugs and reading up on relevant issues on the Internet while stuck in traffic? This unfortunately is made impossible due to poor Internet speeds/bandwidth – a characteristic flourish of digital India.

The same lack of quiet is continues on into the urban residential setup, thanks to poor city planning, resulting in noisy vehicular traffic streaming right down the middle of the township. The problems get compounded, every now and then, by cultural and social events, where making the most noise and being inconsiderate to others seems to be the end goal.

With a lack of privacy, quiet, and uninterrupted me-time, it’s hard to think about anything, except the most trivial matters.

Inverse Logic

Part of the goods and services tax in India is also the culprit for not affording the average Indian sufficient downtime. Elements that free up time and make daily routine convenient – frozen and canned foods, processed foods, packaged foods, and household appliances like dishwashers, refrigerators, washers, and ovens – incur a steep tax.

The rationale: the above goods and products are luxury items, hence, should be steeply taxed.

The counter-rationale: how can these conveniences become mainstream if they cost a lot?

The result: most Indians continue to live pre-industrial lives, with household chores occupying a significant chunk of their daily schedule.

Introspection, contemplation, and brainstorming, then, are prerogatives of post-industrial cultures of the West, which is where most innovation and developments occur. This is not serendipity, it is cause-and-effect.

Parental Baggage

This might become a contentious issue.

Exceptions aside, adults in the West are expected to bear fewer parental responsibilities than adults in India. While helping parents out occasionally and tending to their health in times of need can certainly be accommodated in the life of a young adult, there is a threshold to such accommodation, beyond which it adversely affects the adult’s life.

Indian children are not only expected to take care (read middle age to grave) of their parents, they are also expected to fulfill some of the latter’s dreams and expectations. In some unfortunate cases, adults are expected to live with their parents, in line with long-standing cultural norms, despite having the means to move out.

The externalities of such a setup: young adults live a sheltered life and become encumbered with expectations and demands that can put their personal pursuits in a chokehold.

Such young adults can hardly be expected to become trailblazers and mavericks.

Indians are Philistines

Granted India has its own philharmonic orchestra and hosts art exhibitions and cultural festivals. Upon analyzing closely, one finds that such events draw out only the uber-elites of Indian metros – the real bourgeoisie with Ivy-league education and refined tastes. Unfortunately, they are a niche minority.

Most of the the Indian population, including inhabitants of metros, despite their university degrees and corporate careers, couldn’t care less about the arts. Patronage to the arts is considered so superfluous that it doesn’t even brush past the mental orbit of an average Indian.

The arts play a vital role in that they encourage creativity, out-of-box thinking, and open intellectual dimensions that cannot be opened by rote lessons that are the forte of the Indian K-12 system.

Case in point: the user experience on Apple products wouldn’t have been so definitively distinct had Steve Jobs not dropped in on a calligraphy course at Reed College.

It would be almost blasphemous and heretical for an Indian to wish to study the arts or want to build a career in humanities. Not only will he/she incur the wrath of their parents and the ridicule of a vacant society, they will remain cash strapped for the rest of their lives. The culture and the resultant economic system isn’t built to nurture artistic pursuits.

Notable Takeaway

The common thread running through all the above listed reasons is culture. It’s not the lack of money, or the burgeoning population, or poor governance – oft-cited culprits – that result in a dearth of entrepreneurship, lack of innovation, and a miserable existence.

In Closing,

While I would like to end on a sanguine note, I prefer realism to optimism. Cultures are difficult to change. Cultural upheaval results from the efforts of individuals who have seen the light and hazard walking towards something better.

There is a genuine dearth of rugged individualism in the Indian culture. With the engine for change, innovation, and entrepreneurship non-existent, there cannot be a cultural shift or individual progress or creative enterprise in India.

An ex-dentist and a business graduate who is greatly influenced by American conservatism and western values. Having born and brought up in a non-western, third world country, he provides an ‘outside-in’ view on western values. As a budding writer and analyst, he is very much stoked about western culture and looks forward to expound and learn more. Mr. Malkar receives correspondence at saurabh.malkar[at]gmail.com. To read his 140-character commentary on Twitter, follow him at @saurabh_malkar

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Economy

Is Your Neighborhood Store Safe? Amazon and Store Closings

Meena Miriam Yust

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Amazon has reached the far corners of the earth… and the highest elevations.  Delivery men venture 11,562 feet up in the Himalayas to leave a package.  While the company may serve a useful purpose in remote regions, its phenomenal growth also reveals that no town is immune from its less desirable consequences.  The online retailer’s omnipresence has been all too apparent in Chicago, New York, and London in recent months, where stores have been closing in droves.

Treasure Island Foods of Chicago, a family-owned business started by Christ Kamberos in 1963, announced at the end of September that after 55 years it was closing all remaining stores in just two weeks.  Now, the lights are out and the shadows empty shelves are all that remain, with the scent of fresh sourdough and gyros cooking on the spit only in shoppers’ reminiscences as they walk by the darkened windows.

Julia Child once described Treasure Island as “America’s Most European Supermarket.”  In my memory, it was unforgettable.  The stores always had treasure troves for every season, from delicious green picholine olives from France, to liver pâté and English Blue Stilton at Christmas, and of course, Marmite.  Not to mention exotic cookies and chocolates from all over the world: marzipan and chocolate from Switzerland and Austria, shortbread from Scotland, and crisp butter wafers from the Netherlands are a few examples.  It was a haven for special gifts during the holidays.

Treasure Island was not alone in the struggle to survive amidst food delivery apps and Amazon.  Not only were customers buying goods online, but Amazon was also shifting into the grocery market by taking over Whole Foods.  Not surprisingly, Chicago’s other local grocery chain Dominick’s closed in 2014.  The city lost one of its most beloved bakeries too in 2017 when the Swedish Bakery closed after 88 years in business.  Gone were the days of mouth-watering rum balls, Princess Torte laden with green marzipan, and toska cake.  In its final days an estimated 500 customers per day flocked in to have one last tasty treat.

Purchasing items online might be convenient but the trend has serious costs for many industries, not only food.  Retail has been hit hard.  Sears recently filed for bankruptcy and is closing 142 stores.  So did Toys R Us, shuttering its outlets last summer.  Luxury goods retailer Henri Bendel announced in September that its stores will be closing too, after 123 years.

What’s more the change is not just in the United States.  In the UK, Marks & Spencer plans to close 100 stores by 2022.  Debenhams and House of Fraser in London are also in trouble.  In March of 2018, Sweden’s H & M reported the lowest first quarter profits in more than a decade, down 62%.  When large international stores are being squeezed, one can understand how local shops are struggling to keep afloat.  A recent Atlantic article observes that Manhattan is becoming a “rich ghost town.”  So many store fronts once filled with interesting items are now empty, a trend that the author predicts will move to other cities.  Will the choices for future shoppers be restricted to chain stores and dark unrented windows?  Local small retailers unable to afford high rents are gradually being nudged out of existence.  They need help.

Could Local Currencies Save Our Neighborhood Stores?

The answer may be introducing local currencies.  Studies have shown that municipal currencies stimulate the local economy.  They serve as shock absorbers and protect in times of recession.

Switzerland has had the WIR since 1934 and Ithaca, New York introduced its own currency known as Ithaca Hours in 1991.  Ithaca Hours started out with 90 individuals who were willing to accept the currency as a payment for their work, and expanded to become one of the largest local currency systems in the U.S.  Ithaca’s example was an inspiration for municipal systems in Madison, Wisconsin, and Corvallis, Oregon.

The UK also has several local currencies including the Bristol Pound.  The former Mayor of Bristol accepted his entire salary in Bristol Pounds, and more than 800 businesses accept the local currency.

Once local currencies are in circulation, consumers can continue using their national currency to purchase from large retailers and from online giants like Amazon.  Their local currency, though, is typically used at local businesses.

As an example, were a Chicago currency implemented, consumers might use their U.S. dollars to purchase goods online but would use their Chicago currency to buy locally.  Legislators and communities could thus lend a helping hand to local gems that remain in our towns.  Lutz Cafe and Pastry Shop, for instance, established in 1948, is unique to Chicago, and creates some of the most delicious cakes in the world.

By 2003, there were over 1,000 local currencies in North America and Europe.  Yet this is a mere fraction of the total number of cities.  If local currencies expanded to a majority of towns, perhaps our beloved neighborhood stores would be able to survive the online onslaught.

The Benefits of Preserving Local Shops

Consumers lose a service every time a small shop shuts down.  A local paint store, for instance, can provide advice on what paint to use for a particular purpose, how to use it, etc.  Nowadays, in many towns, these stores have closed.  Consumers’ options are limited to buying online without input from an expert, or from a large national chain, where they will be lucky to find advice comparable to that from a specialized store.  The same holds true for many kinds of home repair.

Then there is the charm of familiar faces at the corner store.  Growing up near Treasure Island as a child, I could scarcely forget the cherry-cheeked cherub-like server at the deli counter.  After noticing this eight-year-old’s tendency to gorge on free olive samples once a week, he would always laugh heartily with those chubby cheeks and remark with a chuckle that I would end up eating all the olives before reaching the check out line.  Ordering specialty olives online is just not the same.  There may be no checkout line, but also no one to talk or joke with.  The same is true for the automated Amazon Go stores.  The nice deli server today is out of a job after decades of service.

Another hidden cost of online purchases is environmental.  Aside from fossil fuel emissions, delivery of a parcel requires packaging, and often bubble wrap, made of low-density polyethylene, a form of plastic that comprises 20% of global plastic pollution.  Reusable bags and a neighborhood store within walking distance are clearly better for the environment.

Amazon’s reach extends to places like Leh, India, high in the snow-covered Himalayas, where many of its goods may not be available in town.  And one can appreciate and understand the value of online purchases in such rural communities.  In fact that was exactly the original purpose of Sears with its iconic catalogue.

Yet in cities where one can readily buy the same items in stores nearby, we have to try to refrain from the convenience of one-click shopping.  The more we purchase online items, the more we pollute the environment and kill local stores.  Without small businesses, cities will eventually become homogenized with block after block of chain retailers, or dark empty windows, as has started to happen in Manhattan.  The character of a quaint town or a trendy metropolis becomes obsolete.

Gone will be the unique gift shops and the luxury tailor.  When the British high street becomes indistinguishable from U.S. ghost towns and when the only place to eat is a chain burger joint, the fun of traveling and the adventure of new places will be lost forever.  The vibrant world of new flavors and experiences will be no more.

So please think twice before clicking an online purchase.  You may be signing your local store’s death warrant.

Author’s note: this piece first appeared in CounterPunch.org

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Azerbaijan: Just-in-time support for the economy

MD Staff

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Over the last two decades, oil has been the defining factor for Azerbaijan; not only for its economic growth but also for its development. During the first ten years of the millennium, Azerbaijan experienced an explosion in wealth. As oil GDP, comprising half of the sectoral share of the economy, grew by an average of 21 percent per year, fueled by global upsurge of oil prices and increased production. Total GDP grew more than tenfold: from US$6 bn to US$66 bn.  This was accompanied by rapid decline in poverty, from 49.6% to 7.6%, increase in real wages, and middle-class growth.

However, after the decline in global oil prices in 2014, nearly by half, the reduction of oil revenue caused a domino effect in the economy. The double devaluation of the Azerbaijani manat in 2015 erased half of the manat’s value against US dollar. and subsequent fiscal adjustment together with ongoing banking sector distress led to a 3.8% contraction in GDP (2016). This was accompanied with the rising of traditionally low levels of government debt (from 8.5% in 2014 to 22% in early 2018) primarily due to devaluation of manat.

On December sixth, 2016, Azerbaijani President Ilham Aliyev has signed a decree approving the “Strategic roadmaps for the national economy and main economic sectors.” The decree for reforms spanned across 11 sectors, from tourism to agriculture, and aimed to decrease the over-reliance to the oil and gas sector.

Azerbaijan – World Bank Partnership

Under very tight deadlines, Azerbaijani ministry of finance started working on a roadmap, that would reform the economy which had been impaired by a number of negative shocks such as lower oil prices, weak regional growth, currency devaluations in Azerbaijan’s main trading partners, and a contraction in hydrocarbon production. As a long-term partner of the World Bank Group (WBG), they reached out for support in developing a public finance strategy for the medium term at the beginning of 2016. To be able to broach such a broad project, different teams within WBG worked together closely to provide just-in-time support and to cover various facets of the macro-fiscal framework. Government Debt and Risk Management (GDRM) Program, a World Bank Treasury initiative targeting middle income countries funded by countries funded by the Swiss State Secretariat for Economic Affairs (SECO) worked on the debt management portion of the issue. The Macroeconomics, Trade and Investment Global Practice advised on macroeconomic and fiscal framework and debt sustainability analysis.

Providing a macro-fiscal outlook, analyzing debt sustainability and proposing debt management reforms

The ministry of finance and WBG joint teams had a thorough review of the macro-fiscal and borrowing conditions and honed in three interlinked issues:

  • The need for sustainable financing: While the level of direct debt was expected to remain modest, the sharp increase in the issuance of public guarantees would lead the public and publicly-guaranteed (PPG) debt trajectory to be higher in the next five years.
  • Fiscal Rules: Azerbaijan was exploring fiscal rules involving the use of the country’s oil assets, based on recommendations from the IMF.
  • The country was facing high exchange-rate and interest-rate risks, due to 98% of the central government debt being in foreign currency and two thirds in variable interest rates.

With that in mind, the teams tested different borrowing strategies to cover the 2017-2021 period under baseline and different shock scenarios, analyzing debt sustainability, and the composition of the public debt portfolio weighing it against the national risk tolerance. They also recommended several measures to better enable the debt management operations: revising and submitting the Debt Management Law to parliament; improving the reporting system; improving the coordination between the ministry of finance; the central bank and the Sovereign Oil Fund; developing a credit risk assessment capacity in the ministry and improving the IT system, and eventually looking at developing a domestic debt market.

Azerbaijan develops the public finance strategy

In December 2017 Azerbaijan ministry of finance shared the debt management strategy, with the President’s office. The proposed strategy comprised a macroeconomic policy framework, a borrowing plan, and associated institutional and legal reforms. In August 2018, President Aliyev enacted and published the “Medium to long term debt management strategy for Azerbaijan Republic’s public debt”. The strategy outlines the main directions of the government borrowing during 2018-2025 based on sound analysis. It puts a limit of 30% of GDP for the public debt in the medium term, with a moderation to 20% of GDP by 2025. The authorities also envisage gradual rise in domestic debt, to develop the local currency government bond market. To reflect the changing macroeconomic outlook and financial conditions, the strategy document will be updated every two years.

“As World Bank, our mission is ending extreme poverty and building shared prosperity,” said Elena Bondarenko, the Macroeconomics and Fiscal Management team member. “It is our privilege to provide just-in-time support to our member countries when they most need it. Especially if we can help build resilience to the economy before further shocks cause major damage.”. “The work doesn’t stop here,” said GDRM Program Task Team Leader Cigdem Aslan. “The GDRM Program will continue its support through the implementation phase of the recommendation and help build capacity for the development of the domestic market for government securities.”

World Bank

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Economy

Knowledge economy and Human Capital: What is the impact of social investment paradigm on employment?

Gunel Abdullayeva

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Social policy advocates claim the development of the European welfare state model on three phases as follows: traditional welfare state until 1970s; neo-liberal welfare state until the mid-1990s and finally social investment state model afterwards of the mid-1990s.  At the first time, on the European Union level, to bring the social investment policy to the political agendas after the 1990s economic hardship, the European Council adopted the Lisbon Strategy in 2000. In fact, the Lisbon Strategy was successful with respect to the employment. In the latter, the social investment state paradigm has fostered once more in the Europe with the “Social Investment Package: Towards Social Investment for Growth and Cohesion” in 2013 by the European Commission that targeted to “prepare” individuals, families and societies for the competitive knowledge economy by investing in human capital from an early childhood together with increase female participation in the workforce.

Generally, social investment idea emerged as a link between social insurance and activation in employment policies and upgrading human capital. Hemerijck (2014) defined the concept of the social investment state to facilitate the “flow” of labour market transitions, raising the quality of human capital “stock” and upkeeping strong minimum income guarantee as social protection and economic stabilization “buffers”. The underlying idea of the social investment strategy has been argued to modernize the traditional welfare states and guarantee their sustainability in line with the response to the “new social risks” such as skill erosion, flexible market, insufficient social insurance and job insecurity.

Economic aim of social investment paradigm is divided into two types by Ahn& Kim (2014),in the following way:The social democratic approach based on the example of the Nordic countries and the liberal approach of the Anglo-American countries. To make the distinguish more clear, the social democratic approach aims to increase the employment for all working classes and strength human capital. On the other hand, liberal approach applies selective strategy which is more workfare policy oriented and covers vulnerable class. In this regard, cross country analyses show that the Scandinavian countries have been the forerunners of social investment and perform the childcare and vulnerable group targeted policies at their best.

Studies have viewed the social investment state approach as a new form of the welfare state and reshaped social policy objectives that addressed to promote labour market participation for a sustainable employment rather than simply to fight against unemployment. Since the beginning, the social investment strategy directs to protect individuals from social and economic threats by investing in human capital through labour market trainings, female (family – career) and child care policies, provision of universal access to education from the childhood. On doing so, the social investment as a long term strategy aims to reduce the risk of future neediness in contrast to the traditional benefit oriented welfare state that focuses on short term mitigation of risks. Or to put it differently, the social investment “prepares” children and families against to economic and social challenges rather than “repair” their positions in such problems later. In short, social investment policies are characterized as a predictor rather than a recoverer. Mainstream social investment argument is that redesigned welfare state model more focuses on work and care reconciliation policy as strengthening parental employment in the labour market is an important factor to exit poverty and support families especially mothers. On the other hand, human capital measures such as education and trainings improve life course employability, particularly for market outsiders as well as human investment guarantees better job security in today`s more flexible job market.

In reality, an economic development and employment is friendly to each other. Thus, income comes from the market through employment as a paid employment is foundation of household welfare. Likewise, a welfare is purchased in the markets. Arguably, unemployment leads to the poverty and social exclusion in the societies. Hereby, work based policy regarded as a sustainable anti-poverty strategy. The welfare states in order to guarantee households` net income and well-being in the post industrialized labour market have turned to invest in preventive measures such as human capital. The human capital (cognitive development and educational attainments) is a must for the dynamic and competitive knowledge economy. Educational expenditures yield on a dividend because they may/make citizens more productive but we need to push the logic much further (Andersen, 2002). In fact, social investment state by being more female and child care policy oriented predicts an importance of the education for a well-being of society and more developed economy in the future. Thus, employment policies need to link with family policies to be more effective in response to the unemployment, poverty and social exclusion. Social investment state as a new shape of the active employment policies invests in education particularly of women and children to prevent unemployment and poverty from the beginning. One hand, addresses to the ageing problem of European societies social investment strategies aim to mobilize motherhood with an employment. On the other hand, by promoting family polices, social investment strategy directs to reduce child poverty and safeguard child welfare in the line with better social and economic conditions of childhood.

What is certain that, social investment state implies human capital strategy. To increase an employment and long term productivity of individuals, social investment policies interchanged with the provision of social insurance. In other words, the social service policies took over the place of the cash benefit oriented policies. It is probably fair to say, the human capital strategies link social investment policies to employment outcomes. Simply, to see the correlation between the social investment paradigm and employment, human capital policy measures (education and trainings) are needed to be checked as a direct labour market value.  Since they are the most effective activation measures in skill investment to respond to the knowledge economy, more educated and skilled manpower boosts the labour supply in turn results income equality which is a traditional goal of the social democracy.  In this context, social investment state is addressed to reach high quality employment by its human investment orientation. As Andersen, (2002) argues, “We no longer live in a world in which low-skilled workers can support the entire family. The basic requisite for a good life is increasingly strong cognitive skills and professional qualifications”.

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