Does capitalism destroy jobs?

If by capitalism one means “free market exchanges and production through the use of privately owned capital”, then indeed capitalism destroys jobs — those jobs that are made redundant by increasing the productivity of labor.

Imagine an economy which only produces food, and the only input to food is labor. Further imagine that the productivity of labor is such that on average, one persons’s labor produces only one’s person’s demand for food. In that economy, all the jobs will be in food production.

Now imagine someone invents a machine (that’s capital — a produced means of production) that doubles the productivity of labor. Let’s call it the Great Invention. Now only half the workers are required to produce food for everybody. That’s destroyed half the existing jobs in our economy,

After the Great Invention, half the labor of the entire economy can now make clothes. Clothes were not available to anyone before the Great Invention. Now the clothes makers can trade some of their clothes for food. There are jobs for people making clothes, and on average the consumption bundles includes both food and clothes.

More great inventions follow that make both food and clothes production more efficient. Further loss of jobs from food and clothes production. But now some labor can be devoted to making shelters. Fewer jobs in food and clothes production but more jobs in shelter construction. You get the picture.

The main point is that it is not jobs that we are primarily interested in. What matters is production. And production matters because we are interested in consumption. Were the world so that everything we need fell like manna from the heavens. In that world, we wouldn’t need to work at jobs. We’d spend our time like the lotus eaters of Greek mythology.

The Industrial Revolution released the power of human ingenuity and created wealth (stuff that we value) unimaginable to our ancestors. Untold number of old jobs were lost, and in exchange we gained leisure, and all manner of stuff what we enjoy — from smartphones to air travel to medical services and comfortable homes. That’s capitalism working its magic.

Here’s how rich we have become:

That per capita GDP growth becomes all the more astonishing when you consider that the world population has exploded around 20 times what it was in the 14th century CE.

That, ladies and gentlemen, friends and colleagues, boys and girls, is the amazing truth about the world we live in. Three cheers for capitalism.

The Panchatantra — Textbook of Niti

The following is an extended edited excerpt from Arthur Ryder’s introduction to his translation of the Panchatantra. What’s the book about? Ryder begins his introduction with:

“The Panchatantra contains the most widely known stories in the world. If it were further declared that the Panchatantra is the best collection of stories in the world, the assertion could hardly be disproved, and would probably command the assent of those possessing the knowledge for a judgment.”

The editing consists of removing quotations from the main text. Even if you don’t get around to reading the translation, you must read the introduction in full. And if you don’t want to do that either, you must read this shorter version.  Continue reading “The Panchatantra — Textbook of Niti”

Did Britain Impoverish India?

Asking “Did Britain impoverish India?” is like asking “Is water wet?” Of course, Britain impoverished India during their rule as the colonial masters of India. To extract wealth from a colony and exploit its people is the primary motivation for colonization.

Expecting the colonial masters to be a benign, self-sacrificing force is delusional. Colonization is not a win-win exchange relationship. It’s a milder, gentler form of slavery; not quite as cancerously malignant but severely chronically debilitating.

British rule had two phases: first the Company Rule which began around 1757 when the British East India Company gained control over parts of the Indian subcontinent; the second when the Crown Rule began in 1858, and nominally ended in 1947. I say “nominally” because while the British Raj more or less came to a formal close in August 1947, India continued (and continues) to be governed by laws that were made by the British during the Crown Rule.

So you could say that the Britain raj lasted nearly two centuries, and that’s enough time to loot a country. But here’s the point of this piece — contemporary India’s poverty has little to do with the crimes the British committed. They committed crimes not just in India but around the world that it dominated. Pressed for time as we are, we can’t read the piles of history books written about that but we can get a sense of how terrible those crimes were by reading the twitter account titled “Crimes of Britain.”  Continue reading “Did Britain Impoverish India?”

Saving and Investment

To understand the relationship between producing, consuming, saving and investment, it is useful to start with a simple story.

Imagine a Robinson Crusoe economy — just one person in it. RC’s consumption is limited to what he can produce by fishing, hunting and gathering. He allocates his time either laboring or enjoying leisure. If he consumes less than what he produced during a particular period, he can save that for later consumption.

For example, if he has saved some fish, he can forego fishing and instead use that time to fashion a spear for hunting. That means, his savings allowed him time to invest in creating that spear. He “converted” his saved fish into a spear. The spear is what is called “capital” — something that is not directly consumed but is used for producing goods for consumption (or even more capital.) His spear will increase his productivity in hunting, thus enlarging his consumption possibility. Continue reading “Saving and Investment”