Why Balanced Economy

Why Balanced Economy

In global economic narration, we always hear about developing and developed countries. Some countries are very rich while in some countries people are scarce of minimum requirements.

Going through below referenced image, I saw some conclusions or criteria regarding developed countries;

1.       Large portion of labor force in manufacturing and service industries

2.       Higher contribution of industrial and service sectors to national income or GDP

3.       Export of industrial services and products

4.       Infrastructural development and capabilities

5.       Use of modern and advanced technologies in production and services

Source- https://coggle.it/diagram/WaZ_86w1JwABCBmA/t/characteristics-of-developed-and-developing-countries

But why these developed countries are going after trade war?

Why are they trying to influence other countries to allow them to do business?

Why do they lobby to impose sanctions on other countries?

While searching answers for above questions, let’s look at concept of balanced economy first.

Balanced economy means a system where everybody gets employment opportunities and can live a dignified live without depending on others or government’s doles. His minimum requirements (food, cloth, housing, education and medical facility) are fulfilled.

1. 30-40% of people should depend on agriculture.  In India, around 60-70% population is dependent on agriculture, which is too high.
2. Around 20% should depend on agro-industries (post-harvesting industries which depend on agricultural production such as flour mills, paper mills, medicine from plants, sugar mills etc.)– Raw produce should be processed in local areas rather than exporting them and getting it processed elsewhere.
3. Around 20% should depend on agrico-industries (pre-harvesting industries which promote the rapid growth of agricultural products, such as shovels, axes, picks, spades tractors, etc.) With modern age technology. This sector needs a boost in India as still lot of manual labour is deployed. Much research is needed to increase productivity.
4. Around 10% should depend on general trade and commerce such as general goods stores, stationery shops, restaurants, repairing or service centers etc.
5. Around 10% should be engaged in intellectual or white collar jobs such as clerks, bank employees, administrating officials. This number is very high in developed countries and it takes away required labor force from other areas.
6. Around 20% to 30% should depend on non-agricultural industries (such as steel, cement, metal, auto, electrical and electronics, non-plant pharmaceutical etc.). The percentage of people engaged in such industries should be formed by reducing the percentage of people depending directly on agriculture and other aforesaid industries.

These percentages can vary slightly depending on kind of resources available. Like agriculture could be difficult in Saudi Arabia.

The concept of balanced economy is a special feature of PROUT. This principle needs to be adopted not only at national level, but also at state, socio-economic unit and block levels. These concepts are part of decentralized economy for which you can read here.

The motive of capitalistic economies or countries is production for profit not for consumption. 

(For more details, refer to my previous blog on production for consumption)

Impact of imbalanced economy

1.  If a country has surplus labor force in one sector and its own population can’t consume the output; then this country will depend on other countries and tries to flex its muscles. Like, Britain got heavily industrialized and invaded India through East India Company. Money from developing or under developed countries move to developed countries.
2. If these highly industrialized countries don’t get a market to sell their finished goods then they will have to suffer from economic recession and growing unemployment. Therefore, they become more aggressive in their imperialist approach.  They pressurize developing or under developed countries to consume their finished goods or allow these developed countries to invest in developing ones. Like US is pressurizing India to open its market for US companies. At one side, they are shouting for shooing away non-Americans, waging trade war against China and on the other hand, they are asking developing countries to give access to their markets. In international diplomacy, there is nothing like 'free lunch'. Definitely, this corporate sponsored 'Howdy Modi' program is not a free lunch. There must be lot of bargaining done by US, sacrificing the interest of India. Why Trump become suddenly soft on India while he was shouting against India for duties levied on imports?
3. Over Industrialization also creates psychic diseases and people of those countries ignore finer expressions of life by being highly materialistic.
4. If the country is industrially less developed, then per capita income and purchasing capacity cannot be high. Their standard of living will not be high. They will be exploited by developed countries and war like situation arises. Developed countries create conflict between developing countries, so these countries depend on them for weapons. Like USA supplying arms to both India and Pakistan.

I think government should try to boost sectors which require more manpower like agrico-industries and agro industries. The income should become decent in these sectors. It should also setup career counselling programs to motivate people to required sectors instead of everyone running after white collar jobs.

But will the governments adopt the concept of Balanced Economy? There is always hope at the end of the tunnel and this hope is of 'Mass Awakening and Circumstantial Pressure', which will compell governments to adopt and implement the balanced economy.

Some References for world trade export/ import

https://knoema.com/cduhihd/world-exports-and-imports-of-agricultural-products

https://wits.worldbank.org/CountryProfile/en/Country/CHN/Year/2017/TradeFlow/EXPIMP/Partner/All/Product/16-24_FoodProd

Why production for consumption

Why production for consumption is essential for healthy economy

Production for consumption is one of the basic and essential principles of PROUT’s Decentralized Economy. The motive of production should always be for consumption not for profit.

What!! No profit!! No, it doesn't mean no profit. It means production should be based on demand and not just putting money where there is profit. There should be reasonable profit, to have entrepreneurial motivation and innovation, but it should not be exorbitant.

Take the example of real estate in Delhi NCR. Prices of real estate were increasing and people started investing more and more money for profit's sake. Numerous projects were launched without doing any feasibility prospect that how many actual homebuyers or end users are. Now, we are witnessing that in absence of bonafide buyers projects started with much fanfare are in tatters and incomplete. 

This industry demands heavy investment and such huge number of half built inventory is lying unused. It means, money invested is stuck and these inventories can’t be utilized for any purpose. People are paying EMIs for something, which they can’t use and they are compelled to minimize their other genuine expenditures. This is not the story of real estate only but from biscuit to motor cars everywhere unsold products are lying in showrooms and warehouses. Even a layman knows when such huge money is stuck, economy will weaken and prone to invite recession.

Another burning example is of stock market where people pump so much of money in speculative trading. This pumped money isn't utilized in economic development and growth but for profit motives only. The stock prices are too high as compared to book value or actual equity value of company because of speculation.

Another example is there are so many engineers passing out every year in India and most of them are unemployed. There are other fields which require lot of manpower like agriculture, animal husbandry, health care etc. but people are not interested opting other fields. This process of excessive engineers need to be pruned to avoid unemployment and it should be balanced in such a way that the labour deficit industries should get adequate and qualified workers. Life should be made more comfortable for those in the field of agriculture and animal husbandry as food is the first and foremost priority of human beings.

Another example is we have excessive supply of readymade garments but there are not so many consumers in that proportion, which culminates in to unsold garments incurring loss to many in the supply chain, from production to shop owner.

For a healthy and welfare economy, resources should be utilized first for utmost important things or basic necessities and then for semi essentials followed by luxury things. Every resource has multiple usage but it needs to be prioritized based on necessities.  

If there is fertile land, it should be used to produce food instead of growing flowers and carnations. If there is sufficient food in the socio-economic unit, then go for producing flowers.

Another glaring example is of Thamirabarani river in Tamil Nadu where farmers were protesting that they are not getting sufficient water for farming whereas the government has given rights to big industries to withdraw the water for softdrink makers. We must prioritize the need and accordingly resource should be utilized.

In my previous blog of 'Decentralized Economy', I explained that every socio-economic unit should try to be self-sufficient. It’s not possible that everything be grown or found in every socio-economic unit. Suppose Rajasthan produces good amount of copper but is not able to produce tea. In such a scenario, Rajasthan can get into agreement with Assam to get tea in lieu of copper. In this way of barter system, money will remain with respective socio-economic unit and an economic equilibrium will be maintained between production and consumption. In nutshell, production without consumption should be avoided for healthy economic development and growth. 

I don’t think Adam Smith’s capitalistic theory will work in current scenario where he says that markets will adjust automatically based on demand and supply. I am not an economist but I feel when people are just profit oriented, money is pumped into the fields from where they can earn excessive profit, based on artificial demand generated through advertisements, hype and hoopla.

Money can’t be utilized to its value and we face recession cycles. We all know that millions of people are scarce of food whereas deodorant and perfume industry is doing business of thousands of crores.

There should also be balance between nature and human beings. We should utilize our natural resources judiciously and avoid over exploiting it. Recently we have witnessed the floods in most of the states and these are resultant of excessive exploitation of riverbeds or are ill managed manmade disasters resulting in to loss of crores of properties along with untimely death of people and cattles. Hence, we must have to go in a planned way to avoid any further disaster or recession.

Please let me know your views in comment section.