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Mainstream, VOL LX No 36 New Delhi, August 27, 2022

First, Talk About Employment Creation Not For A Few, But For Many | Sunil Ray

Friday 26 August 2022, by Sunil Roy

Introduction

Let me begin by quoting of what I wrote a couple of months ago in an article titled “Reinventing the spirit of freedom” published by Mainstream on November 27, 2021.

“Perhaps the next wave of the resistance movement (after farmers’ movement against farm laws had begun) is in its embryonic stage. It is against unemployment and new labor laws to be followed by barbaric social discrimination that manifests in all forms and holds back civilizational progress. The parade of the deprived will continue. Victims of unemployment are going to join the march. The cry for annihilation of caste and end of gender and religious discrimination is going to echo on all sides. The resistance movement of the deprived, the solidarity movement, will reinvent the spirit of freedom from deprivation sooner or later. The footprint of alternative organizing principles of our economy and society is palpable”

The next wave of resistance movement against unemployment is no longer in its embryonic stage. The violent opposition against “Agnipath” is pointer to a massive upheaval of the youths of the country who are seeking employment. However, it may be wrong, I argue, if such uprising, though short –lived, against the central government is being brushed aside as it lasted only for a few days. Although agitation against it goes on as splinter force here and there, but then the nation must be awaiting for its fusion in to a long-drawn battle.

This battle, as I perceive, is not directed against the current ruling dispensation alone. It is against the system, the economic system I argue, that all ruling dispensation nurtures irrespective of which political party rules the nation. While ‘Jobless Growth’ of the previous political regime haunts every one of us even today, it is never considered as a serious development issue by government –sponsored economists and of course mainstream market economists (the neo-liberals) in general to debate on. To them, it is pain that lasts for some time and the society has to bear with it only to have a permanent solution. This is what was also told by the protagonists of neo-liberalism during the onset of liberalization and globalization of our economy. We have spent more than 30 years or so since then. Results are before us when the same protagonists continue to echo the same voice with no regard to what all scientific studies observes. The studies observe, to express it simply, economic growth creates employment opportunities less than proportionately and, many a times it is too less to count. For instance, impact on total employment over the last decade for every one percentage point increase in GDP has been just 0.1% (Azim Premji University).

What does it imply? Accumulation of stock of unemployed people over time. If CMIE’s April 2022 are to be believed, its data on job showed 50% unemployment for male in the 15-19 age group, and 38.7%for the 20-24 cohort. Unemployment was as high as 76% for 15-19 cohort in Bihar, the epicenter of protest against the introduction of ‘Agnipath’ in the recent past. There may be several other estimates that show much worse than what CMIE shows. Even if methodological differences between different sources are admitted no source has ever underestimated magnitude of the unemployment problem which is rising at a frightening scale. And, on the top of all, if we add up disguised unemployed persons in agriculture which is dominated by the small and marginal farmers in terms of land holdings, it is simply impossible for one to imagine how precarious unemployment problem that the country is grappling with is.

Solutions?

It is market-centric solution that the market fundamentalists or the neo-liberals (modern mainstream Economics which is a version of Neo-classical Economics) bank upon and no way different from what the graduate students of economics learn from their text book. It is simply excess supply of labor over demand that exerts downward pressure on wage/ gross receipt of the labor. As the latter declines, more labor is absorbed. It means more employment of the unemployed. Hence, labor market finally clears the stock of unemployed persons by employing more in response to the declining wage rate Even if we assume employment increases at low wage rate in practice, the irony is that it is not sufficient enough to pull up the labor from the subsistence/ need-based economy to demand- based economy. This includes all categories of low paid wage earners in India such as those working in the unorganized sector, workers under government –sponsored (non-market) wage employment programme such as NEREGA, etc. Besides, no one knows about the duration of jobs at such low wages and the extent to which other privileges that have monetary implications are compromised. Whatever be the gross payment received by the employed person under such condition, ability to increase command over goods and services fails to rise above survival level. In other words, it fails to raise the effective demand that leads to expand the home market that, in turn, creates potential for employment opportunities. The worst is when the gross receipt in real terms declines as result of inflation. It pushes wage earners of this category, the largest group in the country, to relentless struggle to ensure their survival and survival alone. What can explain such a precarious condition better than close to 80% of the vulnerable in India as revealed by the survey report of the Hunger Watch conducted recently suffers from chronic food insecurity?

Hence, the therapeutic cure of Keynesian benevolence to raise effective demand of those working under state- sponsored wage employment programme is an illusion. Not to talk about those who are working in the unorganized sector earning too less to count in this regard. Is there any other solution from the neo-liberals than this one that can extricate around 70 per cent of Indians from the trap of subsistence living? If yes, is it deliverable within the fiscal limit? And for how long? Besides, one is curious to know how many of the unemployed could be employed even at low payment against the backdrop of continuous stockpiling of educated unemployed, leave alone uneducated unemployed. It is an employment crisis to be understood as the crisis of neo-liberalism itself. While government does not see beyond Keynesian benevolence ( subject to the fiscal limits) to combat the crisis, a series of benefits (direct tax cut etc.) is provided to the capitalists assuming that they will invest more which, in turn, could boost up employment opportunities. However, this is not happening. What is happening, on the contrary, is that they are investing much less due to the lack of expansion of the market. And, market is not expanding due to lack of effective demand which, in turn, is the result of lack of employment creation and rise in income. It is a contradiction that the economy is now caught up with. The inflexible economic structure has no means to resolve it. Thus, where does the solution lie?

Kingdom of falsity

Firstly, no solution is in sight within the same box. Secondly, if at all it exists, it is mystical market solution about which nobody knows how and where to dig it up in practice. But its greatest virtue is its enormous ability to create smokescreen to hide the truth. It is, of course, irreconcilable which is why it trigger off confrontation against the ruling party once exposed. The ruling party in no time gears up its propaganda machinery to propagate false news, spread false promises, beliefs and conviction. The purpose is to cover up the same bitter truth so that they remain unchallenged and continue to stay in power.

What is this bitter truth? It is the economic system which is structurally constrained to meet employment needs of the millions for a decent wage, a system that works primarily to the advantage of the corporate capital, a system that has been creating income inequality since economic reforms in 1991. For instance, capital’s profit share in the net value addition in the organized manufacturing sector increased during the last 30 years or so while that of labor’s wage share declined. And, a system that works to the disadvantage of the unorganized sector but survives on it as the largest employer of low paid workers. Notwithstanding its enormous contribution to generation of livelihood to millions, its vulnerability to disaster is shocking. Covid 19 crisis was a case in point in that it exposed how deeply flawed the economic structure is. In other words, the structural bias against the low paid workers was so outrageous and inhuman that it defied systemic resilience to any acceptable degree when one –third of the Indians (around 45 crores of labor working in the unorganized sector) were forced to go back to their homes at the cost of their job and livelihood after the outbreak of the pandemic
It suggests overhauling of the economic structure to the complete dismissal of neo-liberal approach whose key understanding of employment creation rests on the logic of ‘derivative’ market. The logic is hijacked, in practice, by large capital that dominates the market economy and determines the nature and scope of employment creation. And, by doing so, it glorifies the theoretical projection of the same logic as ‘win-win situation’. The market fundamentalism of the neo-liberals being made to work in an inefficient economic system like ours emboldened by feudal values is yet to gain tenacity. Its repulsion against the degenerative forces is confined to a few specific activities of specific sectors without having much of its ramification in the job market. Gaining back resilience was a distant proposition even when the economy was not ravaged by the Covid 19 crisis

The irony is that in many academic debates and discussions, I joined, that took place after the outbreak of the pandemic attempts were made consistently by the neo-liberals to attribute unemployment crisis in India to pandemic. The latter, as it were, was solely responsible for this crisis to occur. Otherwise, everything was hunky-dory with the economy before the onset of the pandemic and its economy was performing quite well to turn itself to one of the fastest growing economies of the world. It is a great cover-up of a ‘failed state’ given by the neo-liberals who leave everything to the market as a clearing agent to determine No wonder if they claim such a huge stock of unemployed persons in the country as ‘natural’ following the footsteps of ‘natural rate’ of unemployment of Michel Freedman . Nobody knows how to configure the natural rate of unemployment to suggest where its ‘tolerable limit’ lies in real life situation (even in the long run). It is ‘notional’ and thanks for being so. And, so long it continues to be so it works to the advantage of the ruling party to cover up its failure.

Macro-stability Vs. Structural Transformation

The failure can be traced in the government’s approach towards macro management of the economy rooted in the monstrous derivative market. Since the government approach is more pro-business to fulfill the corporate interest than being pro-market social outcomes are different. The stockpiling of unemployed is one such glaring examples of this social outcome. It is needless to mention that entire management exercise for the economy, for example annual budget preparation etc, undertaken by the government is primarily aimed at stabilizing the macroeconomic parameters. Employment creation (barring a few state-sponsored employment programme namely NAREGA) is assumed to be the natural outcome of the logic of ‘derivative’ of macro- economic stabilization efforts. No matter where the derivatives finally lead to and why millions lose.

The moment of truth is that the local economy that has a strategic significance for employment creation in a country like India is deprecated. No compensatory principle works against the forces that continuously push the same to development limbo. The local economy needs structural transformation at the decentralized level in order to harness its potential for employment creation. The construction of ‘niche structure’, as I have argued elsewhere, is a desirable option in this transformation. It is a development of collective enterprises at the decentralized level with small capital base in all fields of activities including manufacturing, processing, trading, marketing, servicing including repairing, transport, storage, education, health etc, in the form of self-organization as a part of commons. It is associated producers’ self-organization. They are collective enterprises, but not cooperatives. They are capable of trigger off indigenous growth process while maintaining their relative autonomy.

The same market will now be shared by goods and services produced by the enterprises with small capital base. Its obvious implication is that such a pattern of growth at the micro-level around agriculture will restrain big/corporate capital to monopolize and concentrate wealth at their hands. The distributional implication is considerably large particularly when development potential is harnessed to generate activities by small capital as is conceived here and create new employment opportunities. In addition to job creation, local economy will have environmental benefits since the small projects are energy efficient, non-polluting and community oriented. Besides, investment in green technologies that decouples growth from material needs will open up new avenues hitherto untapped for employment creation at the local level.

Neo-liberals may argue that such a trajectory of growth is inefficient because it will lead to result in lose of economics of scale due to adoption of inferior technology. While one has reasons to contest the efficiency argument, it is arguably true that the cost economy incurs due to superior technology in terms of environmental degradation, lack of employment creation, oligopolistic control and concentration of wealth in a few hands is more than it gains on account of economics of scale. Against this backdrop, argument in favor of economics of scale as a result of adoption of superior technology in the field of activities we are concerned with appears to be flawed.

Land reforms, the lost development agenda, is another components of structural transformation at the decentralized level must be brought back. One must not ignore the telling experience of some south Asian countries a few decades ago that shows how they created massive employment opportunities through structural transformation at the decentralized level being brought about by land reforms. The logic of expansion of the home market with the rise of wage employment above subsistence level is built in to the construction of niche structure and land reforms. Once both are in place, they will tend to maximize both forward and backward linkages with the agriculture. Reforming market structure with the introduction of minimum support price for all agricultural goods and elimination of exploitative intermediary system may reinforce the process of reconstruction.

This process of reconstruction, I argue, will propel the economy to harness the untapped development potential that, in turn, as an offshoot, open up new routes to employment creation. In other words, stabilization of micro economic parameters based on what is outlined here in terms of structural transformation of the local economy is a necessary condition to create employment opportunities for the unemployed and transform the lives of those who are living at the edge. In its absence, development potential of the local economy will continue to be harnessed to the advantage of the corporate sector.

Conclusion

The only way to stop losing potential for employment creation is to lift the veils of development delusion. No alternative seems to exist than to overhaul the economic structure at the local level. The most desirable social outcome of economic management that the country is looking forward is income distribution. And, we all know how employment creation not for a few, but for many, can help to achieve this objective. The movement steered by the unemployed youths against Agni path’ epitomizes their violent reaction against the state for not being able to fulfill the objective. While one may have reservation against violence in any form, a massive democratic movement is likely to unfold sooner or later as an expression of their solidarity and turn it into a solidarity movement. It is this movement, as the recent history of the movements around the world teaches, that can demystify development delusion and script an alternative development trajectory.

* (Author: Prof Sunil Ray is Former Director, A.N.Sinha Institute of Social Studies Patna and adviser to Centre for Development Communication and Studies, Jaipur and Impact and Policy Research Institute, New Delhi.)

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