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.

Is Decentralized Economy A Necessity

Why decentralized economy

Let me start with some questions.

Why cities have to bear the load of the development? 

Why prices are rocket high for real estate in cities while there is ample land available in villages and towns? 

Why people are leaving their parents in villages and other small towns in their old age and settle in cities themselves? 

Many cities are going through water shortage and many are suffering with excessive water deluge?

Why are we trying so hard to increase exports while we have such a large population, which can be consumer of those goods? 

Why we have to agree to uncalled conditions laid by rich nations and we have to import their finished products, killing our market?

Why are we facing industrial slowdown even though we have such big consumer industry?

Why people are so dependent on government for their development? Even the government’s Adarsh Gram Yojana, one of the ambitious projects of Govt of India has not brought any significant change. Down to Earth’s report says, 78% MPs have not yet identified villages for the development.

India is now a big country but there were many small kingdoms earlier and people lived more happily. Every small kingdom tried to achieve self-sufficiency by producing or manufacturing goods in their own kingdoms. This led to better wealth distribution amongst people where kings were good and India was known as golden bird (सोने की चिड़िया). Should we follow the similar pattern of development of every state or socio-economic units to make them self-sufficient?

Currently, the economy functions in centralized economic mode. Most of the raw materials are exported and being used for centralized production and then finished goods are imported from these centralized factories. The idea is to keep the production cost lesser. But greed of huge profit margins, rising transportation and other variable costs not only keep the price of the product at higher end but kills the jobs at local level as well. For example; toys, mobile phones, electronic items, textiles are being manufactured in China and imported everywhere across the globe.

 Decentralized Economy

PROUT, acronym for socio economic theory Progressive Utilization Theory, contrary to the existing centralized economy emphatically advocates for decentralized economy (विकेन्द्रित अर्थव्यवस्था). In decentralized economy, local people has control over raw materials, production units will be established there and finished products will be consumed locally or can be exported. The industries should be set up where the raw materials are available rather than exporting them to industries set up at farther locations. To achieve the balanced economic development, employment to local people and a rational wealth distribution, economic democracy is a must. Locals should have the right to utilize their resources rather than giving away licenses to big corporates or crony capitalists. Kindly refer to previous blog for more info on the subject.

I just talked about self-sufficiency. For self-sufficiency, we have to manufacture maximum possible products in our own socio-economic unit. We should also utilize and rotate the money in our socio-economic unit by employing local people on jobs and purchasing local goods. The fast rolling of money is very important in economic growth as well as keep increasing the purchasing capacity. Kindly refer to my previous blog for more info on the subject. 

A socio-economic unit will be formed based on common economic potentialities, common economic problems, cultural legacy, language and customs of the people. Within socio-economic unit, multiple blocks need to be identified. One block will consist of around 1-2 lakh people population. Planning should be done for development of those blocks and industries should be set up accordingly as per the resources available there. We have to utilize the resources judiciously and manufacture products required for consumption. When the development will reach to every block / villages, load on big cities will automatically decrease as people will get jobs in their respective socio economic unit and need not to migrate. No need to leave their parents in their old age. 

Different states’ administration will monitor the goods being produced in different socio-economic units. Since it’s not possible to produce everything in everyone’s economic unit, this administration can suggest what goods should be produced in how much quantity in different socio-economic units.  How much excess from local consumption should be produced in unit A such that it can be exchanged with other socio-economic unit B for different products (which can’t be produced in unit A). Maintaining an equilibrium is important rather than production for the sake of profit. When the production will be balanced and local consumption will increase due to better distribution of wealth, we need not depend on exports.

Many people see India’s large population as deterrence to its economic growth but Prout philosophy guides otherwise. PROUT says; more the people, more the consumption and more economic growth. It also means more workforce to contribute to growth. The world sees India as a big market but Indians themselves don’t realize this potential. We need to judge our consumption or demand and produce accordingly. Production for consumption is important rather than production for profit. I will explain this further in coming blogs.

Employment

With looming mechanization and automation, many people are becoming jobless. PROUT encourages having co-operatives so that more people can share the profit and wealth can be more widely distributed. It promotes automation and encourages that human working hours should be reduced so that they can spend their energy in mental and spiritual pursuits. Currently people work for 10 - 15 hours a day. Applying Prout’s concept of cooperative a person might need to work 6 hrs a day or lesser by leveraging machines and not firing the people. Extra labor force can be utilized for producing other goods. Wealth will be widely distributed bettering everyone's purchasing capacity. Current capitalistic system believes in employing minimum number of people by using machines to maximize their profits. They put pressure on government for relaxing labor laws. PROUT’s vision of co-operative only can solve the employment problem. I will discuss co-operatives in forthcoming blogs.

Local Sentiment

For the success of decentralized economy, employment to the locals should be preferred. Local sentiment like; 'Be local and buy local' should be encouraged. Buy goods that are produced locally and the manufacturers also have to improve on the quality based on feedback. Try to remove non-local products (which can be produced in your own socio-economic unit) from the local market. Production and distribution should be managed through cooperatives to keep check on price. Profits can be standardized for these cooperatives. Many people complain it is difficult to employ local people as they get into unions and create problems. In such cases, it is better to have profit sharing on co-operative model. 

Swadeshi, Desi, Videshi

There are 3 important terms –“Swadeshi, Desi and Videshi”.

Swadeshi- Goods which are produced locally or nearby.

Desi- Goods which are produced in our country.

Videshi- Goods which are produced outside the country.

We should prefer Swadeshi for promoting and strengthening decentralized economy. Online e-commerce website should also be allowed to sell only local goods produced in their socio-economic unit. 

In decentralized economy, minimum wages should be fixed in such a way that minimum requirements of the family can be met. When everyone will have decent livelihood, then crime will decrease and people’s thought level will increase. Society will progress together. Today with online shopping and long commuting and working hours, we have been so engrossed in our personal lives that we don’t bother to meet dear and near ones. With reduced working hours, we will be able to visit our acquaintances, nearby shoppers, know more people, to get more socially engaged with our neighbors rather than merely social media engagement.

One of the recent examples of non-judicious usage of money is Installation of Sardar Patel’s statue (statue of Unity) in Sadhu bet. Around Rs. 3000 crore was spent on it. If government would have spent around 3 crore for at least 1000 villages in various states to set up industries based on local produce in partnership with local people, many people would have got employment. Government could have withdrawn its capital by selling the shares to those locals only later. Many people argue that statue of unity is giving profit but first we need to meet the basic necessities of one and all and then only we should think of beautifying. If we are sick, first we need essential nutrients to make our body healthy, then only we can move to beautification. 

The concept of decentralized economy is vast and, in my limited capacity, I have tried my best to explain it, albeit in brief. 

Please post your queries and views in comment section.