Economy

Optimism in the Midst of a Crisis: Keynes’s Legacy

Published

2 years ago

December 28, 2020

Perhaps the current crisis will contribute to transformation of the world economic benchmarks towards the prioritisation of the development of “human capital”, particularly healthcare and education, writes Yaroslav Lissovolik, Programme Director of the Valdai Discussion Club. John Maynard Keynes’s optimism and legacy give us reason for hope, not only regarding the possibility to overcome the crisis and increase consumer welfare, but also regarding the possible transformation of the “moral code” of the development of the world economy.

In the context of the unprecedented crisis of the current year, which is commonly being compared to the Great Depression, one often hears apocalyptic predictions about an imminent crisis in consumption and living standards. In this regard, in order to soberly assess our prospects in the context of the current crisis, it seems appropriate to look at the processes of economic transformation that have taken place over the last century since the Great Depression. Indeed, despite world wars, geopolitical conflicts and economic crises, the world economy has demonstrated high rates of growth in the well-being of the population and technological progress. Moreover, such a growth scenario for the development of the world economy was largely foreseen by John Maynard Keynes, a leading economist of that crisis-wrought time, who is considered the main ideologist responsible for the strategy used to lift the world economy out of its deepest depression and build a new world economic architecture for the post-war period.

In his work Economic Possibilities for our Grandchildren (1930), Keynes described his thesis about the transformation of economic benchmarks for future generations of consumers in connection with a significant increase in the welfare of the population. This work of Keynes is interesting primarily as an example of a long-term forecast for the growth of the well-being of the population of developed countries, which was made in the midst of the Depression, the most severe economic crisis to hit the developed world during the 20th century. Despite despair prevailing among his contemporaries, for whom the economic background was high unemployment and a decline in living standards, Keynes had the courage to suggest that “we are suffering just now from a bad attack of economic pessimism”, and dismiss those who had hastily concluded that the era of rapidly growing standards of living had come to an end.

In particular, in his work, Keynes writes “I predict that both of the two opposed errors of pessimism which now make so much noise in the world will be proved wrong in our own time: the pessimism of the revolutionaries who think that things are so bad that nothing can save us but violent change, and the pessimism of the reactionaries, who consider the balance of our economic and social life so precarious that we must risk no experiments.”

Keynes’s optimism is based on the thesis about the enhancement of the technological equipment of labour, and the growth of its productivity — as Keynes notes, “In quite a few years—in our own lifetimes I mean—we may be able to perform all the operations of agriculture, mining, and manufacture with a quarter of the human effort to which we have been accustomed.”

As a result, according to Keynes, “If capital increases, say, 2 percent per annum, the capital equipment of the world will have increased by a half in twenty years, and seven and a half times in a hundred years. Think of this in terms of material things—houses, transport, and the like…” Based on the data that we have at the moment, Keynes’s forecast can be considered accurate— for the period from 1930 to 2020, according to the OECD, the general level of well-being of the population of the advanced economies (such as the US) as measured by GDP per capita, staged a 5-fold increase. Further scenarios of GDP per capita growth until 2030 (to track the forecast accuracy over the horizon of all 100 years) are unlikely to significantly change the correctness of Keynes’s conclusions — in all the most probable scenarios, the growth in the well-being of the population of developed countries should fall within the interval assigned by Keynes.

But perhaps an even more important thesis of Keynes is what will happen to the benchmarks of economic development in developed countries as the new standard of living can guarantee the satisfaction of almost all the needs of the population. According to Keynes, due to economic progress, the population of developed countries was destined to work only three hours per day or 15 hours per week, which would free up a significant part of their time for leisure. Many economists have been led to criticise him for this kind of prediction of an “era of general idleness” — in the end, it turned out that the population of developed countries still finds something to do with themselves — moreover, the more prosperous an employee is, the less free time he has in comparison with less highly-paid workers.

However, in noticing Keynes’ blunder regarding the choice of the modern world between work and leisure, these modern economists lose sight of the deeper conclusion that Keynes defends in his famous work, namely, that with the growth of the well-being of the population, the very essence of the economy, economic development and economic science, will change.

All of these areas, he predicted, will increasingly focus on ensuring a better quality of human life. As Keynes notes, “it will be those peoples, who can keep alive, and cultivate into a fuller perfection, the art of life itself and do not sell themselves for the means of life, who will be able to enjoy the abundance when it comes.”

This kind of “humanisation of the economy” according to Keynes, will also be based on the fact that the growth of well-being will lead to the transformation of morality and ethical codices of society: “when the accumulation of wealth is no longer a key social priority, significant changes will occur in the moral code of society … When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals…I see us free, therefore, to return to some of the most sure and certain principles of religion and traditional virtue — that avarice is a vice, that the exaction of usury is a misdemeanour, and the love of money is detestable, that those walk most truly in the paths of virtue and sane wisdom who take least thought for the morrow. We shall once more value ends above means and prefer the good to the useful.” (John Maynard Keynes. Economic Possibilities for our Grandchildren, 1930).

One can argue with Keynes about how much more moral the society of developed countries has become in comparison with the previous century; however, one cannot fail to note the relevance of Keynes’s conclusions regarding how important the issue of the quality and guidelines of human life will become for the entire economic machine of developed and developing countries. As the level of development and prosperity of a country increases, the share of the service sector grows, while in recent decades, industries related to human capital have been developing especially actively in the service sector.

Perhaps the current crisis will contribute to the further transformation of the world economic benchmarks towards the prioritisation of the development of “human capital”, particularly healthcare and education. Keynes’s optimism and legacy give us reason for hope, not only regarding the possibility to overcome the crisis and increase consumer welfare, but also regarding the possible transformation of the “moral code” of the development of the world economy.

From our partner RIAC

Economy

Brick By Brick, BRICS Now a New Bridge for a New World

Published

2 days ago

May 30, 2023

Naseem Javed

Measuring BRICS in single decades, in 2001, BRIC started as an acronym for Brazil, Russia, India, and China; Goldman Sachs economist Jim O’Neill claimed that by 2050 the four BRIC economies would come to dominate the global economy. So South Africa was added to BRIC in 2010. The following countries are now expressing interest in joining: Afghanistan, Algeria, Argentina, Bahrain, Bangladesh, Belarus, Egypt, Indonesia, Iran, Kazakhstan, Mexico, Nicaragua, Nigeria, Pakistan, Saudi Arabia, Senegal, Sudan, Syria, the United Arab Emirates, Thailand, Tunisia, Turkey, Uruguay, Venezuela, and Zimbabwe. Is this now the awakening of BRICS+ or BRICS power?

BRICS+ by 2030 will add dozen new members and carve new indices, and by 2040, it will lead to new intellectualism on geopolitics and socio-economies for the super complex 2050 age of smart living.

Historically, BRICS nations pushed on their people-power agenda over super-power titles. They made extreme value-creation economic models over focusing on powerful military-industrial complexes. They focused on nation-building and avoided special mandates to manage global affairs. They have been on a quest to upgrade them. They were feeding hungry mouths, as they were population rich, constantly up-skilling, and improving value creation as they were SME rich. They kept a steady watch to create multilateralism to uplift humankind.

They, too, made mistakes, as did the rest of the world

In the third decade of the third millennium, come 2020, three transformations erupted. First, futurism changed the rules on the ‘physicality of work’ and created a new imbalance with the ‘mentality of performance’; this has divided the workforce of world; the old system of over a billion commuting daily to the center of a complex maze to arrive daily at the sanctum of the company and create climate change. So now, in response, some 50% of the world’s workforce has chosen to stay away and work remotely in the surroundings of wide-open choices. Furthermore, technology uplifted micro-power-nations and exposed Western economies now stripped naked in bubble baths on slippery floors, they tippy-toe practicing conga-lines

Newly magnified economy: Behold, what microscopes exposed the magnified inner workings of the body. Similarly, the integrated networks have exposed the digital connectivity and working of millions of villages, cities, and nations with additional billions of people to interact, trade, improve grassroots prosperity and create a well-informed and opinionated citizenry. Some 100 years ago, if only 1% of the world’s population knew what was happening, today it is a dozen times more, and by 2030 double again. Why would these numbers change the global economic matrix when translated into micro-trading, micro-manufacturing, and micro-exporting? International opinion today is already strong enough to crush any national opinion of any nation still lingering under the illusion of a self-promoted victory.

When the SME sector already exists within each nation, the global markets are always hungry for good quality goods and services, and the rains of almost free digital technologies make such transformation a quick turnaround. Therefore, mindsets are critically essential; the need to define the difference between the job seeker mindset that builds the organizations and the job creator mindset that originates and creates that organization in the first place.

So what are the lessons, key features, and blueprints in sight?

Mistakes and new lessons: Last many decades, as the new world was rising, Western citizens felt like China experts, and their regular visits to local China towns restaurants in each city misguided them that Laundromat trained Chinese could only produce some chicken fried rice. Ever since the advent of the camera, the East was always projected as poor and dysfunctional; mesmerized by the media coverage during the last many decades, the West was equally convinced that India, a land of only snake charmers and fakirs, finally someday speak better English. The general perceptions about Asia, besides eating rice, if they could ever make cheaper products for the West. The rest is history, mistakes, and lessons.

After the big ding-dong nights of 2000 New Year’s Eve, today’s new story starts from the 20th chapter. Now China and India alone have created some 500 million new entrepreneurs, not by a magic pill or meta-crypto-wand but by National Mobilization of Entrepreneurialism, a slow, painful deployment of SMEs across the nation, and by creating mobilization protocols to identify, classify, and digitizing based on multiple factors from type and size to the evaluation of their “respectable” role in future communities and economic factors. This methodology was far more advanced in strategy and stern management over the globalization frenzy from the West, where sudden exporting of manufacturing of the industrial plants to kill manufacturing and destroying the middle class out of the West already declared globalization a great success.

The other mistake is to assume this is an economic or an academic study, at best, like an Oscar Slap on sleepy rotundas occupied with endless printing of money across the Western economies. Instead, this is an entrepreneurial response for the entrepreneurial nations to awaken hidden entrepreneurial talents in up-skilling SMEs and re-skilling manufacturers at national levels.

Recommendations and warnings: No airline can survive with only Flight Engineers and Frequent Flyers stuffed inside the cockpits; that space is only reserved for highly trained pilots. Henceforth, across the world, any economic development of any size, shape, or authority may find other more suitable alternate paths of occupation if they still cannot demonstrate any levels of understanding, applicable skills, or mobilization mastery on the National Mobilization of Entrepreneurialism to up-skill exporters and re-skill manufactures and uplift national SME sector as the most prominent economic contributor of the nation. Study the biggest error of economic thinking

Underestimating the hidden powers of early thinking and starting a tiny unknown SME is a mistake of mindsets; here, entrepreneurialism like a saga unfolds, like a voluminous piece of literature but demanding literacy, understanding the job seeker mindsets and the ability to differentiate with entrepreneurial job creator mindset is already winning half the battle. Study the Mindset Hypotheses

Nations failing to realize the power of the billion SME rising in Asia and still unable to declare a national agenda of national mobilization of SMEs now must acquire an understanding of the 4B Factor: a billion displaced due to the pandemic, a billion replaced due to technology, a billion misplaced in wrong jobs now a billion on starvation watch. Furthermore, this 4 billion ever digitally connected mass of people ever in the history of humankind is now the most significant force of global opinion. Notice nations are already intoxicated with joy over the popularity of their national public opinion while having just an opposite international opinion on the world stage.

Recommendation; everyone is born an entrepreneur; our system chips away at this talent. Nevertheless, 10% to 50% high potential SMEs of any nation once are identified, classified, and digitized within 100 days. The uplifting digital platforms of up-skilling exporters and re-skilling manufacturers will result in 10% to 50% quadrupling their performance, productivity, and profitability. Imagine how much-regimented efforts will activate a positive national economic revolution based on real value creation, uplifting grassroots prosperity. How soon is a nation ready for a significant change? The rest is easy.

Economy

Promoting Economic Security: Enhancing Stability and Well-being

Published

5 days ago

May 27, 2023

Ayesha Binat-E-Umar

The stability and well-being of people, communities, and countries are critically dependent on economic security. It covers a range of topics, such as access to necessities, work opportunities, stable incomes, and defense against economic shocks. The need of guaranteeing economic security has increased significantly in the modern world, which is characterized by technical developments, geopolitical shifts, and unexpected disasters. The importance of economic security is examined in this article, along with important tactics for promoting adaptability and preserving people’s quality of life.

The value of economic security to individuals, communities, and countries cannot be overstated. By fostering an atmosphere where people and families can achieve their basic needs without suffering undue stress, it promotes stability. Because of this stability, people can recuperate and start over after severe shocks like economic downturns, natural disasters, or health crises.

Furthermore, economic security contributes to social cohesion by reducing inequality and fostering inclusivity. When individuals feel economically secure, they are more likely to actively participate in society, contribute to their communities, and engage in productive endeavors. This sense of security leads to greater social harmony and a collective feeling of prosperity.

Moreover, economic security is vital for long-term sustainable development. It enables individuals and societies to invest in education, healthcare, infrastructure, and innovation. These investments drive economic growth, improve overall well-being, and create the foundation for a prosperous future. By ensuring economic security, countries can build resilient and sustainable economies that benefit their citizens and contribute to global progress.

To enhance economic security, several key strategies can be implemented. Firstly, governments and businesses should prioritize diversifying their economies by promoting sectors with growth potential and resilience. By reducing reliance on a single industry or market, countries can mitigate the impact of economic downturns and build a more robust and diversified economy.

Investing in education and skills development is another crucial strategy. Governments and organizations must focus on providing quality education, vocational training, and lifelong learning opportunities. Equipping individuals with the necessary tools and knowledge enables them to adapt to changing economic landscapes and remain competitive in the job market.

Strong social safety nets are necessary to protect people during times of economic upheaval. The most disadvantaged populations should be given priority in the design and implementation of comprehensive social welfare systems by the government. Creating a safety net for all citizens entails implementing programs for income support, healthcare coverage, and unemployment benefits.

Promoting entrepreneurship and innovation can create new opportunities for economic growth and job creation. Governments can support aspiring entrepreneurs by providing access to capital, mentorship programs, and favorable regulatory environments. Embracing technological advancements and fostering a culture of innovation further enhances economic security, particularly in an increasingly digital world.

International cooperation is essential since economic security is a global issue. Cooperation between nations is necessary to advance ethical business practices, lessen economic inequality, and improve financial stability. Initiating discourse, coordinating policy, and assisting nations in economic crises are all important functions of multilateral organizations.

Societies can improve their economic security and create a more secure and prosperous future by putting these strategies into practice: diversifying the economy, investing in education and skills, creating social safety nets, encouraging entrepreneurship and innovation, and fostering international cooperation.

Having economic security is crucial in a world that is uncertain and changing quickly. Governments, corporations, and individuals may all work together to create an environment that promotes economic security by putting a priority on stability, resilience, and inclusivity. We can create a more resilient and prosperous future for everybody through diversity, education, social safety nets, entrepreneurship, and international cooperation. By making investments in financial stability, we build a more just and sustainable world.

Economy

The Impact of Globalization on the South Asian Economy

Published

5 days ago

May 26, 2023

Karar Ali Shah

Globalization refers to the process by which economies, societies, and cultures from different countries become integrated with one another. The economies of the countries that make up South-East Asia, which include India, Pakistan, Bangladesh, Nepal, and Sri Lanka, have been significantly impacted by the spread of globalization in recent decades. The effects of globalization on the economies of South Asian countries have been mixed, with some positive and some negative results.

Positive Impacts of Globalization on the South Asian Economy

The expansion of South-East Asia’s trade and investment opportunities is one of the aspects of globalization that has had the most positive impact on the region’s economy. Because of its large consumer base, low labor costs, and strategic location, the region has become an attractive destination for foreign investors. As a consequence of this, the level of foreign direct investment (FDI) in South Asia has significantly increased, which has led to the development of new industries and the production of new jobs.

The expansion of the service industry in Sout-East Asia can also be attributed to the effects of globalization. South Asian countries have emerged as a hub for the outsourcing of services such as information technology (IT) and business process outsourcing as a result of the emergence of new technologies and the increased availability of skilled labor (BPO). As a direct consequence of this, the area has benefited from an increase in both the number of available jobs and the amount of money it brings.

Last but not least, globalization has facilitated greater cultural interaction and integration throughout South-East Asia. The region possesses a significant cultural legacy, and the advent of globalization has made it possible for South Asian music, films, and cuisine to become popular all over the world. This has not only contributed to a greater awareness of the region’s cultural heritage, but it has also opened up new doors for the travel and hospitality industry.

Negative Impacts of Globalization on the South-East Asian Economy

Even though there have been some positive effects, there have also been some negative effects that globalization has had on the South Asian economy. The widening gap between rich and poor is one of the most pressing problems that we face today. The advantages brought about by globalization have accrued almost entirely to a relatively small number of people, which has contributed to a widening income gap. As a consequence of this, social unrest and a wider gap in incomes have emerged.

Another significant obstacle that has been presented is the displacement of workers and traditional industries. Due to the effects of globalization, many smaller businesses have been forced to shut down, and their employees have been relocated to larger companies that are more productive. As a consequence of this, there has been an increase in unemployment as well as social unrest, particularly in rural areas.

Globalization has contributed to the deterioration of the environment in South Asia. The region has seen a growth in industries such as the textile industry, both of which have had a significant impact on the environment as a result of their expansion. The population’s health and well-being have suffered as a direct result of environmental degradation, which can be traced back to the increased consumption of natural resources and the improper disposal of waste produced by industrial processes.

Conclusion

The economy of the South-East Asian region has been affected in both positive and negative ways by the phenomenon of globalization. While it has resulted in the growth of industries and increased cultural exchange, it has also resulted in the displacement of workers and the widening of income inequality. While it has contributed to the growth of industries and increased cultural exchange, it has also resulted in the displacement of workers. In order to address these challenges, policy interventions that foster inclusive growth, protect the environment, and create new opportunities for the population will be required. By acting in this manner, countries in South Asia will be able to take advantage of globalization’s positive aspects while mitigating some of its more damaging effects.