Employment versus Production

Why does India lag behind among developing nations? Our economic policies are at least partly to blame. Our policy of stressing employment is one such misguided step.

It has been observed by some that one of the most fundamental causes of India’s poor economic performance is because of an unholy preoccupation with ’employment’. Employment is a good thing but one should remember that employment is not the goal of an economic system—it is an instrument for the real goal of the economy which is to produce goods and services for the population and to distribute them in some reasonably fair way. I for one would be happy to be unemployed if only I get the stuff that I need to keep b and s together.

Production, rather than employment, should engage our policy makers more than it currently does. Why? Because if you don’t produce — irrespective of how many people you employ — you cannot distribute. Even if you distribute scanty production very evenly, you are left with a system that fails everyone.

Production is a necessary but not a sufficient condition for a good economic system. Getting everyone employed, on the other hand, is neither a necessary or sufficient condition for a good economic system. Like I said, I would be happy to be ‘unemployed’ if, say, the economic system was run by robots and it produced the goods that I need and if the economy simply gave me my ‘share’. I would spend my time contemplating the universe and eating lotus, I guess. And I suspect that there are others like me who would be happy to let the job of producing to others — human or non-human.

Production is a precondition to distribution. Fair distribution is a problem in itself but only arises after we produce enough.

Mechanization and automation expands the ‘production possibilities frontier’ and thus we can get more out of less — mostly less labor. Is that good or bad? Let me use a simple example. You can have 10 rickshaw pullers delivering transportation services through back breaking labor 12 hours a day. Or you can use auto rickshaws and employ only 2 people who work in relative comfort to provide the same services. Hypothetically you could have every one of those 10 former rickshaw pullers work only one day every 5 days and earn the same as before. On the other four days they could (1) spend time with family, or (2) learn to make pots, or (3) learn arithmetic, or (4) play the santoor, or (5) take care of his aging parents, or (5) contemplate the universe, …

Now if you are more interested in ’employment’, of course the hand pulled rickshaw is a more attractive system for you. To some, those were the good old days when you did not have the ‘dark satanic mills’, when you had simple country living with horse carriages providing the transportation, and the cooling was done by fans hand-pulled by shapely maidens as one reclined on a divan eating grapes, I guess. But in those days scanty little was produced and of that, the rich and the powerful got the lion’s share and the unwashed masses simply starved.

What has happened since those good old days? The economy has changed structurally. And that structural adjustment has produced more goods and services and having produced more, more people have a shot at living a less brutish, short, nasty and mean life.

However, adjustments don’t come for free. There is a cost and that cost mostly falls on those whose services become redundant in the new production system. Typist and shorthand pools have disappeared. Instead we have web designers.

People who are concerned about employment alone would have advocated the banning of research into computers and electronics to save the livelihood of typists and stenographers.

For my money, I would go for a system that is hell bent upon production and having produced, hell bent upon an equitable distribution. Given scarce resources, the most efficient production method is most desirable. If that means more computers in banks, so be it. So you have to lay off bank clerks. But if you look around, humans are somewhat inventive and entrepreneurial. The system adjusts — not smoothly or costlessly — but eventually. And if done with sufficient forethought, without too much pain.

Now on to the specific case of India. We need to recognize that it is the organized labor sector that has the clout to derail whatever chances we have of increasing production. And that organized sector is a small — very small — share of the total employment.

A few years ago, only 300 thousand employees of the Department of Telecommunications could hold the entire country of a thousand million people at ransom by derailing liberalization because they wanted to hold on to their cushy jobs. The loss to the country as a result of delays in opening up the telecom sector can only be measured in hundreds of billions of dollars in lost production if one calculates the compounded impact of their recalcitrance.

In the end, economic policies matter. We have to get away from this fixation with employment and get more focused on production. We have to use the most efficient and effective tools that modern technology can provide to increase our production. And there will be enough people left over who can use their time to figure out how to distribute most equitably the stuff that is produced.