Robots! Clear and Future Danger For Economies

I was at a conference recently and there was a speaker who was extolling the power of robots, technology, automation and artificial intelligence (AI) in the modern workplace and how it was going to revolutionise the global economy.

There was quite a catalogue of achievements as a result of increased robotics and AI including lower ‘FTE’ (or ‘Full Time Equivalent’ of human labour) requirements and greater efficiency, productivity and decreased errors and mistakes. These were achievements that were backed by undisputed statistics and data.

The ability to create consistently high economic value using systems, robots and AI which do not make mistakes, which do not break down often, which can even be self-correcting becomes very appealing.

However amidst the glories of robotics and AI, I felt increasingly concerned about where the world was heading with the increased introduction of automation, robotics and AI and the impact this was going to have on employment, social mobility and income equality.

My concerns

Technology as a displacer of jobs.

Technology, automation and robotics initially replaced blue-collar jobs and roles from the economies. Increasingly greater sophistication of AI means that white-collar jobs are also being replaced. We read various reports about the jobs of the future being technology-related roles that help create, maintain and repair robots and their related technology, but I postulate that robots can fix themselves (and their ‘peers’) better than people ever can and over time, robots can create other robots to do the tasks which they need done.

In the past, technology was an enabler. It was a great source of enhanced productivity for nations’ economies.

However, technology has now become a replacer or displacer – of jobs, of people, of roles. It has now become a tool to enhance economic output but ends up depleting people and their earnings.

This is going to be a longer-term fundamental problem and challenge to societal and economic growth and development.

The impact on developing economies

Let us consider Philippines and India. They have spent billions of dollars investing in the infrastructure and ecosystem to help create thriving shared services and business process outsourcing (SSCs / BPOs) businesses. This was to help meet the needs of multinational companies. However, with AI and automation increasingly taking on a majority of the roles and jobs that are currently being done by millions of people in both countries, it is going to lead to a significant job loss and risk the potential collapse of the SSCs and BPO sector in both countries.

Over time, with increasing automation and AI, multinationals need not outsource various roles to locations of lower labour cost. They will instead seek to outsource the roles to nations with the lowest tax and the best technology infrastructures in which they can base their systems and robots. 

The moral obligation and income inequality

With increasing AI and automation, I struggle to see how the job losses faced by millions as a result of robots taking on their roles are going to be mitigated. There also seems to be little alternative sources of formal employment.

Whilst it is easy to highlight how automation can reduce expenses by 66% and reduce ‘FTEs,’ I think we need to look at people beyond merely being an ‘FTE’ or as a mere factor of production.

 

Over time, it is going to also exacerbate the issues of income inequality which is already one of THE pressing moral issues of our time. I’ve covered this topic at length previously.

The factors of production, the technologies, the AI and robots are going to be in the control of a very small segment of society. Whilst it may create vast economic growths, it does not lead to growth in income or wealth for the majority of the people. This will lead to societal fractures which can be devastating to nations and society.

What then the moral obligation to people and society?

Possible solutions?

Leaving this issue to be dealt with purely by market forces will not result in resolution and frankly will be disastrous in my opinion. There needs to be a concerted governmental approach to resolving this and finding solutions that work.

Using levers such as tax policies will be ineffective, particularly in a world with little tax harmonisation. For instance, increased taxation for robotics-led solutions will only encourage a beggar-thy-neighbour policy and in a world with little tax harmonisation, it becomes a useless endeavour.

 

If we accept that robotics and automation are an inalienable part of the development of society, then we need to accept that the current economic models  will not be best suited for what the world needs. Maybe it is time for us to seriously consider and contemplate universal income as a way to mitigate and tackle some of the problems coming our way as a result of robotics and automation.

Universal income is something a number of countries are experimenting with to tackle income inequality which as I’ve explained earlier will only be growing with greater automation and robotics. Finland for instance has started a pilot programme, the Swiss held a referendum in June 2016 to consider universal basic income which did not pass as only a quarter of the Swiss agreed with it, the Dutch will be carrying out a pilot programme this year, and this is just a start.

What is increasingly clear is that it is not enough to simply hope the challenges brought on by AI and robotics are going to go away, there needs to be a concerted and strident efforts made to mitigate them.

FW: INCOME INEQUALITY RE: MAJOR PROBLEM

 

“I believe this [income inequality] is the defining challenge of our time.”
Barack Obama (2013)

 

“One of the leading economic stories of our time is rising income inequality, and the dark shadow it casts across the global economy.”
Christine Lagarde (2015)

 

There is a clear recognition of the risks, dangers and the pain which income inequality imposes on society. Despite the recognition, it is a problem which seems to constantly be forwarded on to successive generations to resolve rather than finding a decisive set of solutions.

We will all do well to pay heed to the US Senator John Sherman who in 1890 when he introduced his landmark Sherman Antitrust Act said that he sought to “put an end to great aggregations of capital because of the helplessness of the individual before them” and also because he fundamentally believed that amongst all of the nation’s problems, “none is more threatening that the inequality of condition, of wealth and opportunity.”

So why does inequality matter? Why is it important that we all strive towards resolving it? Societies that are hugely imbalanced and unequal ultimately become fractured which in turn lead to painful social and economic consequences that affect everyone. Neither the rich nor the poor will be able to avoid the huge social costs of a fractured society.

The stark facts

  • 62 of the richest people in the world own what the bottom 50% of the world’s population own.

  • 1915: The richest 1% of Americans earned 18% of the national income.
    1930s to 1970s: The share plummeted and remained below 10%
    From the 1970s: The share has increased to almost 30%

  • 1980: The top 0.1% wealthiest Americans controlled about 9% of all household wealth
    2015: The top 0.1% own 22% of all household wealth.

  • USA: The top 1% of America control 40% of America’s wealth

  • Germany: Poverty has risen by half since 2000.

  • 1965: CEO pay at the largest 350 U.S companies was 20 times as high as the pay of the average workers
    1989: The figure is 58 times as high
    2012: The figure is now an astounding 273 times as high.
    (It is worth bearing in mind that Peter Drucker argued that the pay ratio between the top executive and the humblest worker should be no greater than 20 to 1.)

  • OECD: The gap between the rich and poor is now at its highest level in OECD economies in 30 years according to a report produced in 2014. The overall increase in income inequality has been driven by the richest 1%.
  • 2008: The United Nations University (UNU) and the World Institute for Development Economic Research (WIDER) estimate that the global Gini coefficient (a measurement of inequality between 0 – representing complete equality and 1 – representing complete inequality) was 89.

    An alternative way to interpret this is that in a population of 10 people, if one person had $1000, the other nine have only $1 each.

  • 2014: The Credit Suisse Global Wealth report estimates that that the richest 0.7% (who hold over US$1 million in wealth) held 44% of the global net worth.

Some context

The economic success stories of many countries hides a dangerous truth – that a significant majority of economic gains are going to those at the very top of the income distribution whereas those lower down have seen real incomes stagnate or diminish.

This has in turn perpetuated further inequality as those in a position of privilege often use their wealth and influence to shape policies that further increase their concentration of power. These policies have not necessarily been in the interests of those lower down the income ladder.

A research conducted by Martin Gilens, a political scientist at Princeton, lends credence to the notion that the US government responds more positive to the most affluent ten percent of Americans whilst “the preferences of a vast majority of Americans appear to have essentially no impact on which policies the government does or doesn’t adopt.” (A video of Gilen’s lecture can also be viewed here.)

The erosion of the social compact

This wasn’t always the case though. Whilst there has always been inequality, it has never been to this extent or been as pervasive. There was also more concerted effort to reduce the level of inequality and dampen its deleterious impact on society.

The experience of the First World War revolutionised American attitudes towards taxation and redistribution of income. When the War Revenue Act of 1917 was passed, there was talk of “conscription of income” and “conscription of wealth” at a time when young men were enlisting en masse. “Let their dollars die for their country too,” one congressman said. The call for fiscal patriotism helped legitimate the progressive income tax in the United States, and by 1944 the top marginal rate had risen as high as 94 percent.

Across Europe, a fear that the lack of reform could lead to social and political turmoil and the horrors of two World Wars meant that policies such as social insurance, minimum wage, a strong welfare state and progressive income tax were implemented leading to more egalitarian societies and economies.

inequality 2The experiences of global ears produced visions of a social bond holding countries together and nurtured the notion that every single person owed a debt to the welfare of the broader community and society.

However since the 70s, the disappearance of these conditions has meant that the support for egalitarian public policies has also diminished.

We now live in a world where even high skilled jobs are being commoditised so that even highly educated workers are not making sufficient progress as gains in economic growth are limited to a very elite group of financiers, entrepreneurs and managers. In the past only unskilled workers lost jobs to automation, now even highly skilled occupations are at risk with the advancement of artificial intelligence, robotics and automation.

The social structure of Silicon Valley provides us with an instructive view of the future: One where expert systems have replaced the majority of people and a tiny but well-remunerated minority direct the economy whilst the majority exist to serve them alone.

The conflict is no longer just between the working class and the middle and upper classes – it is now between a tiny elite and the great majority of citizens. As the majority develop a sense of common interest, or what Marx may have termed ‘class consciousness’, the need to resolve inequality will become more acute as the resentment of it intensifies.

 

What happens when income inequality starts to become entrenched?

  • Health: Societies that are more unequal tend to have lower life expectancies, higher infant mortality, higher levels of infant mortality and high levels of diseases and conditions such as HIV/AIDS.
  • Human capital development: As inequality rises, scores on the UNICEF index of child well-being become significantly worse. Literacy rates are also lower and youth unemployment also becomes a major issue. A higher level of equality also leads to a greater level of innovation as a result of greater access to opportunity.
  • Social mobility: Inequality restricts social mobility – equality of opportunity is enhanced by greater income equality. Reduced social mobility further exacerbates income inequality and this becomes a vicious spiral from which an effective functioning economy becomes more and more difficult.

    inequality1 2
    (C) Walt Handelsman
  • Economic progress and stability: An IMF report highlights that by reducing inequality and bolstering longer term economic growth are “two sides of the same coin.” In both rich and poor countries, inequality is strongly correlated with shorter spells of economic expansion and growth over time. Unequal economies are also more susceptible to severe boom-and-bust cycles leading to greater volatility and crisis. Extreme levels of income inequality depress economic growth. An OECD report estimates that inequality has had a cumulated loss of GDP across OECD economies of 8.5% over twenty-five years.
  • Social challenges and issues: Inequality breeds corruption. Unequal societies also lead to greater economic instability. If one considers the root causes of the Arab Spring, the lack of economic opportunity or equality is one of the main drivers leading to revolt.

A blueprint for change and resolution

The solution and change required for income inequality is not a zero-sum game. There will be those who are impacted more than others, but it is essential in calibrating the world in a more equal way.

It is very easy to be dangerously complacent and ignore equality, but chronic economic inequality hurts everyone, both the rich and the poor.

Resolution of a problem like inequality requires a revolutionary approach. We need to accept a fiscal revolution or risk a social one.

I’ve highlighted below briefly some key practical steps that need to be considered as we seek an urgent resolution to the problem of income inequality.

  1. Tax reforms – Income taxes need to be more progressive (the way they were previously in times of greater equality). There needs to be a reform in the way the transfer of wealth is also taxed. The OECD has suggested that attempts to reduce inequality tax and transfer policies will not harm growth as long as the chosen policies are well designed and implemented. The OECD further argues that redistribution efforts should focus on families with children, on the youth and the improvement in human capital investment through the promotion of skills learning and development.
  1. Continued focus on economic growth and employment – Policies targeting economic growth need to continue as growth ensures jobs are created and ensures employment. Employment will support social mobility which is essential to the reduction of inequality.
  1. Ensure emphasis on social mobility – Social mobility is a key driver towards the reduction on inequality. Emphasis on education, skills learning and development is vital to support social mobility.
  1. Support small savers and small businesses – Policies should not be tilted towards just merely taxing the rich but also be aimed at increasing the wealth of small savers and businesses. For instance we should consider the introduction of accounts for small savers and businesses that guarantees positive returns in excess of inflation. It is also a widely observed phenomenon that lower income families borrow more to support their consumption and this in turn creates a systemic risk.
  1. Enhanced social policies – Governments and policy makers should also consider more directed interventions to enhance the social conditions of lower income families. For instance, in the UK, the Child Benefit offers a weekly allowance to parents for every child they raise. The transfer could be better targeted by making the income taxable as personal income, which will reduce the size of the benefit for those in higher tax brackets or who do not have face any other mitigating circumstances. In the UK, child poverty has dropped sharply whilst in the USA; it has risen by a third between 1969 and 2013. A child-benefit programme will help make a major dent in child poverty and also represent a powerful investment in the future. Introducing a child-benefit program in the US will make a major dent in child poverty and represent a powerful investment into the future.
  1. Minimum wage – Governments should also take an active review of the minimum wage policies in their countries and recalibrate them to local conditions. There is always a temptation to keep minimum wage lower because neighbouring countries are keeping theirs lower, but this beggar thy neighbour policy will not benefit anyone in the long run. Countries that make the effort to ensure greater equality will be healthier in the long term.
  1. Automation and technological change – Governments should take an active interest in the direction of technological change. It is mostly governmental grants and labs that are responsible for the underlying research that has led to the progress in automation and technology and they therefore have the right to ensure a clear review is undertaken to mitigate the social impacts of technological change through appropriate fiscal and taxation policies.

It is crucial that we as a collective rise up to face the challenges of income inequality and work closely to create a more equal society. The corrosive impacts of inequality will affect us all and the sooner we can find solutions to achieve an equal society, the better, for all.

Challenging poverty the Brazilian way

An amazing revolution has been taking place in Brazil over the last decade – one that could save the world. This revolution was done against the advice of experts from leading institutions such as the World Bank and leading academics.

This revolution, named Bolsa Família has had a huge transformational shift in the fight against inequality and poverty across Brazil. It was based on a simple premise that if you place cash in the hands of the extremely poor and have faith that they will do the right thing, then good things will happen and transform their lives and fortunes.

It was rolled out by a President, Luiz Inacio Lua da Silva (or Lula), who was of the poor and understood what it meant to be poor and therefore had the belief that the Bolsa Família scheme will shape the life of millions.

There is a fantastic article written about it in the Foreign Affairs magazine (by J. Tepperman) for those who want to find out more (this post was inspired by the article). Below are some key highlights about how the Bolsa Família works, how it helped move millions out of poverty, reduce income inequality and radically transform a society.

First – the situation in Brazil before the Bolsa Família

  • In 2000, a third of Brazil’s population of 175 million people lived below the poverty line (under US$2 a day) and 15% were deemed to be indigent (living under US$1.25 a day)
  • By 2010, over 40 million people had moved from below the poverty line to the middle class.
  • Income inequality has also dropped significantly in that time

What led to the birth of the Bolsa Família?

In 2003, a man who was born into an extremely poor family and started his professional life as a shoeshiner became the President of Brazil. This was the time of Luiz Inácio Lua da Silva, or Lula for short.lula-bolsa

When Lula was campaigning for Presidency, he was reviled by the business community and foreign banks. Foreign investors were backing off and international banks were cutting credit.

Goldman Sachs even came up with the ‘Lulameter’ – a meter that predicted an inverse relationship between Lula’s popularity and Brazil’s economic future.

Lula was committed to social policies that benefited all of Brazil rather than just the elite and launched a far-reaching social programme called Fome Zero (“Zero Hunger”) and at the centre of this campaign was the Bolsa Família or Family Grant.

This was a revolutionary and ground-breaking anti-poverty effort that transformed a society and has inspired many similar programmes.

How does the Bolsa Família work?

Rather than provide the poor with perks and benefits which sometimes has the effect of increasing the layers of corruption and bureaucracy, the idea was to simply give the poor money.bolsa_familia_foto_felipe_gesteira_0067

In most developing countries, the poor are given subsidies or physical items such as food or basic tools and equipment which tended to be a largely inefficient process that only engendered a culture of patronage.

The Bolsa Familía was a programme which was easy to qualify for.

If a family proved that it lived in extreme poverty and earned less than 50 Brazilian reais ($42) or 100 reais ($84) per person per month, they will be eligible for the scheme.

An average family gets $65 cash and the benefits tops off at $200. To obtain the cash, families needed to go to a bank and draw the money from their own accounts There were no middleman handing them the cash and they had full control over the receipt and expenditure of the cash.

Whilst getting into the programme itself was easy, staying in required that the beneficiaries signed up to a range of conditions or contrapartidas (counterpart responsibility). Some of these included:

  • Ensuring all the children between six and fifteen years old attended school at least 85% of the time
  • All children got immunisation
  • Both mothers and children got regular medical check-ups
  • Pregnant women needed to get prenatal care and breastfeed their children.

President Lula was determined to break the intergenerational trap – and ensure that parents gave their children a better head start and advantages which they themselves may not have enjoyed.

This social contract between the government and the beneficiaries meant broadly there was a greater adherence to the conditions.

There were also strict penalties for those who did not comply and non-compliance meant being first suspended from the programme before being completely struck-off for continued transgressions.

 

The initial sceptics

When Lula launched the programme, he faced very highly qualified cynics and naysayers, economists and development agency experts who thought the notion of giving cash directly to the poor will be misspent and be ineffective as they felt it created a culture of dependency and that the poor will spend the money on alcohol and other demerit goods.

However, the visionary Lula had the right idea when he mentioned to J. Tepperman:

“The number one teacher in my life was a woman who born and died illiterate: my mother. With all due respect to experts and academics, they knew very little about the poor. They know a lot about statistics, but that’s different, sabe?

To an intellectual, putting $50 into the hands of a poor person is charity, an academic has no idea about what a poor person can do with it. But that’s because at university, they don’t teach you how to care for the poor. And it’s because most experts have never experienced what the poor go through every day. They’ve had to work without breakfast. They’ve never lived in a flooded house, or had to wait three hours at a bus stop. To experts, a social problem like inequality is only numbers.”

 

A policy that favours the poor favours all

Whilst Lula and the policy’s opponents and economists were convinced this hugely controversial policy was going to be a terrible idea, Lula was convinced in his belief that this was the right thing to do. He also had a strong notion that putting cash into the hands of the poor will help them participate in market economics and help the economy grow.

Lula remarked: “When millions can go to the supermarket to buy milk, to buy break, the economy will work better. The miserable will become consumers.”

The premise was simple: If the poor start spending, businesses benefit, social ills go down and society as a whole improves.

 

The fantastic outcomes that transformed a society

  • Bolsa Familía now supports 14 million families (or 55 million Brazilians)
  • It has reached a quarter of Brazil’s population and 85% of the poor.
  • The small payments have helped double the incomes of Brazil’s most destitute.
  • In the first three years of the programme, extreme poverty was cut by 15%.
  • Income inequality has also reduced by a third as a result of the Bolsa Familía. The poorest 20% saw their incomes rise by 6.2% while the richest 20% saw growth of only 2.6%. (In contract, in the US, the richest 10% grew their wealth by 2.6% while the poorest 10% actually saw their wealth decrease by 8.6%).
  • Vaccination rate has increased to 99% of the population.
  • Malnutrition amongst children has reduced by 16%. Infant mortality dropped by 40% over the last decade, with deaths from malnutrition dropping by almost two-thirds – the sharpest decline anywhere in the world.
  • Children of Bolsa Familía recipients have graduation rates that are double that of poor Brazilian children who are not in the programme.
  • The number of children forced to work has reduced by 14%.

When the Bolsa Familía was originally launched, opponents of the programme were of the view that it was going to drain the national coffers and be a huge drain on public finances. However, the entire programme has cost the government less than half a percent of Brazil’s annual GDP. In 2011, a study by the British Government also demonstrated that cash-transfer programmes like the Bolsa Famiía cost 30% less per person than traditional aid programs.

Further evidence has also shown that for every real disbursed by the government towards the Bolsa Familía programme, it has increased Brazil’s GDP by 1.7 reais!

Where next?

Ultimately the recipients of the Bolsa Familía have said that rather than feel stigmatised and shamed, they have felt pride in being enrolled into the programme. The programme has allowed parents to give their children a good life and in the process given them greater autonomy, independence and above all, dignity.

This is an important facet of development which sometimes gets lost when viewed through the lens of economic analysis and statistics – that people need a sense of dignity and a programme that recognises this will ultimately be successful and be a driver of societal benefits.

The Bolsa Familía has become a pioneering programme that is inspiring many more countries and cities around the world – indeed Brazilian government officials responsible for the Bolsa Familía delivery are providing training and seminars for others seeking to emulate them. It is not just the emerging economies of the world learning from Brazil, but even major American cities like New York, which only goes to show that addressing poverty and inequality is THE policy issue that needs to be urgently addressed.

Social mobility and breaking intergenerational poverty and illiteracy traps are fundamental areas that need to be addressed by leaders and policymakers, in countries rich and poor.

bolsa familia 10

The Singapore Budget 2016 in a nutshell

The Singapore Budget 2016 was announced on the 24th of March 2016 by Finance Minister, Heng Swee Keat.

Below is a simple view of the budget (please click here to download high resolution version):

budget 2016
A summary of the Singapore Budget 2016

Some have claimed that this budget represents a ‘game plan for the next 50 years’ but my view is that this is a very functional budget that sets out a 5-year planning approach.

The budget itself can be split across five areas: support for small and medium sized enterprises (SMEs); Economic Transformation; Social support; Infrastructure Investment; and Individual Taxation.

The main focus of the budget has been primarily around partnership (particularly between government and industry), internationalisation (and support for companies that seek to establish Singapore as a trusted brand) and a transformation of the economy, towards greater efficiency and focus on high value drivers.

Theme of the 2016 Budget: Clarity, Consistency and Compassion

The aims of the government seems to be very much around providing clarity to businesses across a number of areas (from finding relevant grants, to addressing their pressing issues and providing them with the right information to ensure their alignment to the government’s wider aims).

There is also significant consistency with previous policies and measures and little deviation to what has already been established. This includes buttressing of existing policies around SkillsFuture or other social policies.

It is the final theme of compassion that strikes me the most. There is a tacit acknowledgement that social mobility is a critical matter that needs to be addressed urgently. The Deputy Finance Minister in a speech has indicated as much.

Looking at the slew of social-focused policies and support pillars designed to help the underprivileged and support social mobility is important as Singapore enters her 51st year.

Income disparity and social mobility remain the biggest threat to our social systems and to any country’s progress. Putting into place the pillars to enhance mobility is an important investment to ensure the harmonious development of society and nation.

Climate change

One area that could have been addressed in more detail is the impact of climate change and the government’s wider approach to addressing this important area – particularly given the severe consequences this has on Singapore. In time to come, I suspect, governments around the world will start devoting more of the government budget and resources towards addressing this and report on the developments.

The government touched on tax rebates for companies for CSR practices. I hope over time this extends to wider sustainability measures adopted by companies to reduce their carbon footprint.

Big Data and Planning

Another interesting development is the development of the National Trade Platform (NTP) that seeks to integrate all business and finance data of companies. This is going to support the predictive ability of the government in understanding the various levers of economy and also develop more timely and appropriate interventions to support businesses. If done right, the type of data and the insights gained from this initiative could be hugely  influential and something other nations will sit up and take note of in order to have a better handle on their wider economic affairs.

 

Greece – Defiance in the wake of economic and policy waterboarding

The events overnight in Brussels have been nothing short of what can only be considered as a brutal attack against the Greek government and its people.

Watching the images of the embattled Tspiras and Tsakalotos, the new Greek Finance Minister, struggling in meetings with Merkel and the rest of Europe’s leadership, while doing their best by the people who elected them and also gave them a clear ‘No’ vote last weekend, was painful.

However, despite the struggles, I cannot but feel a deep respect for the Greek government who are trying valiantly to hold things together in the face of such steadfast adversity.

Germany and a raft of other nations are demanding that Greece pass a whole series of legislative reforms in the next 72 hours before they extend any credit lines. Some of the bills being demanded include:

  • VAT reforms
  • Changing the pension system
  • Implement spending cuts
  • Increasing the tax base
  • Establishing greater independence for the national statistics office
  • Privatising the electrical grid.
  • Return of the ECB, IMF and the European Commission to Athens

How this is meant to all be realistically debated, agreed and passed by the Greek Parliament in 72 hours is ludicrous. In essence, a gun is being held to Athen’s head and a series of demands are being made which, if not met, will lead to an economic and social collapse in the country. In circumstances such as these, what options do the Greeks really have?

Privatising national assets worth €50B

Amidst these changes, there is also a plan by the European Commission to privatise €50B worth of Greek national assets and use it as a trust to pay off their debt! Again, this is an example of a country that’s down being crushed in an absolute and merciless manner.

This call towards privatisation is worrying. If all basic services are privatised, who is going to buy over these national services and run them? The Greek people, already suffering from a 25% contraction of their economy over the last few years, massive unemployment and falling pensions, will be dealt with possibly higher prices and debt! How is this going to realistically alleviate the conditions of the Greeks?

The word ‘Europe’ is Greek

Where is the famed European solidarity? The European experiment was meant to be a showcase of unified achievement, progress and development. It was meant to highlight how Europe, as a whole, is greater than the sum of all its parts. However, tonight’s events have hardly been a ringing endorsement.

To their credit, Hollande and Dragi have been fighting Greece’s cause and maintain a united Europe, but it is a fight they are surely losing.

The IMF is also seeking to replace the Tspiras government with one that is more likely to carry out the painful reforms which are being demanded of Greece. If this does happen, it does make a shambles of the whole notion of democracy, ironically, in the birthplace of democracy as we know it!

What hope of espousing the values of democracy, fair-play and justice to the rest of the world which will see this and realise that in the end, the might of economic power will trample over the notions of decency and support every time.

It is no coincidence that #ThisIsACoup is trending on Twitter right now.

The inequities of India’s proposed Land Acquisition Bill

The Indian government led by Modi has proposed a series of wide-ranging reforms to the Land Acquisition Bill which, in my personal view, will have a deleterious effect on the nation and her people.

The long and the short of this new Bill is that it will allow for the government to take over land from landowners without sufficient due diligence or understanding the social impacts in the name of ‘public interest’ whilst not actually defining what this ‘public interest’ may mean.

The proposed Land Acquisition Bill fails the most material principles of the Indian Constitution – that of democracy, welfare, justice and equality.

The context

Flawed analysis – leading to incorrect conclusions

The problems with the proposed amendments

Conclusion

Paddy Fields in India
Paddy field in India

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The context

For almost one hundred and twenty years, India’s land acquisition was governed by the Land Acquisition Act of 1894 which was a fundamentally exploitative, oppressive and inherently unjust piece of colonial legislation. Since Independence, over 50 million people have been displaced in the name of development. A large segment of the displaced includes entire scheduled tribal communities. The vast majority of the displaced have faced declines in the quality of life, received inadequate compensation and have ended up being marginalised in their own lands.

The Land Acquisition, Rehabilitation and Resettlement (LARR) Act of 2013 was subsequently passed with the official mandate to support the twin objectives of farmer welfare along with the strategic development of the country.

When Modi and his government took over, they decided that they wanted to amend a number of major aspects of the LARR as one of their core priorities. The proposed amendments have drawn widespread condemnation and flak, not just from the opposition, but from within the ruling party itself and more importantly the majority of the populace, particularly those within the rural community.
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Flawed analysis leading to incorrect conclusions

Part of the problem arises from the fact that current Indian administration’s economic analyses predicated on the notion that greater freedom by the State and large commercial interests in acquiring land and property will promote accelerated economic growth. Land acquisition is often cited as an impediment to India’s growth and India’s policymakers and a number of corporate-sponsored industry bodies would have us believe that having a draconian bill to confiscate land is the panacea to India’s economic ailments.

On the contrary, according to a Ministry of Finance-led Economic Survey of 2014/2015, it is less than 1% of projects that have stalled in India as a result of land acquisition issues.

India’s true obstacles to economic progress include corruption (which imposes a cost of between 1% to 3% of total GDP), tax evasion and ultimately a lack of a consistent and coherent economic policy.

Land grabs by the State actually have a huge cost, both economic and societal, for India. An unfair and unjust land acquisition campaign will only serve to further exacerbate the problem of rising income inequality and social disparity that remains a stain on India. The economic, social and environmental cost of displacement and conversion of forests/agricultural land towards industrial assets have never been truly understood or analysed by the government.

The ownership of land is a fundamental basis of livelihood and subsistence for a majority of Indians. Mere monetary compensation, without a resulting benefit in the form of employment will have devastating consequences for farmers, farmhands, artisans and other individuals whose livelihoods depend on agriculture and farming. Forest tribes, adivasis (large segments of tribal and aboriginal groups in India) and dalits (the most marginalised segments of the Indian population) who have been impacted as a result of past land acquisitions will in turn be even more marginalised and suffer even more inequity and exploitation.

The current Indian government is pushing for its “Make in India” slogan. There is no point making in India, if it does not benefit the majority of Indians and only serves to undermine and taint India.

“Make in India” – but not for Indians’ benefit?

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The problems with the proposed amendments

There are a number of serious problems with the amendments being proposed by the government.

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First and foremost is the deletion of the clause to consider the social impact assessment of the land acquisition. Without the ability to assess the possible adverse impact a potential land acquisition has on people in an area, how can we truly understand the externalities (negative or otherwise) and make an informed judgement about the wisdom of acquiring the land. How will we be able to say, to a high degree of comfort, that the benefits of the land acquisition will indeed be substantively higher than the resultant costs and consequences and benefit a broader segment of society?

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Secondly, agricultural land has to be viewed as strategic assets designed to support the development of the nation in order to preserve food security. We have seen countless nations, who in their rush to convert viable agricultural land into vast sweeping industrial or tourist outposts, have lost their ability to feed and serve their people and have had to resort to food import in order to sustain themselves. It can be argued that agricultural efficiencies have improved and that the same output can be delivered with a smaller land area – but in order for this to be truly understood, there has to be a clear understanding and assessment of impacts, which this government does not want to do either. India cannot surrender her independence in her ability to feed, serve and protect her people.

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Thirdly, the previous Act had a provision which required the consent of 80% of affected individuals prior to the land acquisition. The amendments proposed will allow for the government to unilaterally acquire land without the permission of the people who depend on the land. The principles of democratic conventions are being violated here. Unlike a few other countries, India’s rule of law is not enforced by a dictatorship of some nature or under a command economy where all ownership belongs to the State. India is a democracy – a government of the people, by the people, for the people. With the proposed amendment, the state will be a government of a very small group of people, by the faceless/nameless corporates and industries, and certainly not for the people.

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Fourthly, the amendments themselves are vague and, it appears, intentionally ambiguous. ‘Public purpose’ has not been clearly defined and no indicators are being proposed to indicate whether the nation benefits and aids the welfare of all. Five categories of projects are being proposed (national security and defence; rural infrastructure; affordable housing; industrial corridors; and infrastructure (including public-private partnership projects (PPPs)) which are being defined in the broadest possible way which will allow for the government and their industry and corporate partners to acquire/confiscate land without a robust case. It is the absence of a sufficiently strong check and balance that is the biggest cause for concern here.

As the law stands, if no development takes place on acquired land within five years, it has to be returned to the people. This has also now been amended and the land can be held on indefinitely from the time of purchase with no recourse made available to the people who are being impacted. Under the amendments, more land than is required can also be acquired by the government, including the purchase of an additional one kilometre of land on both sides of an industrial corridor – which again will have severe debilitating effects on farmers and small land owners. There is also no consideration of efficiency on the part of the industries and the state looking to acquire the land for their uses and it does not spur or promote more efficient use of the land and instead ends up subsidising the absence of efficiency improvements made by industries.

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Finally and most fundamentally, the proposed amendments to the Land Acquisition Bill violate the principles of individual liberty and human rights. What this Bill does is redistribute land away from the poor and the most vulnerable to the richest and most privileged segments of society. The principles of prior consent and recognition of the societal and economic impacts on the people most directly impacted by any land acquisition is essentially a land grab by those who can from those who cannot do anything about it.


Land Grab

Conclusion

Land is not just a mere economic commodity or factor of production to a large number of people who will be affected by the proposed amendments of the Land Acquisition Bill. Land is a source of life, of sustenance, of faith and of hope. It is a function of the culture of the people who depend on it, be it the farmers, the forest tribes or the dalits. It is a source of livelihood, of dignity through employment and of a symbol of progress and growth.

India can only truly progress, economically and socially, if there is an improvement in the lives of all Indians and not just a select and privileged few.

A nation must be judged not just on what economic progress it has made but on how it has enhanced the welfare of its most vulnerable constituents.

The proposed amendments violate the principles of the Indian Constitution which dictate that India remains a sovereign, socialist, secular and a democratic republic. Socialism and democracy will be the first casualties if this Bill comes to pass – for how can a nation claim to be democratic when it tramples over the rights of its own people to own land without a proper recourse and safeguards.

The amendments to the Land Acquisition Bill must be opposed at all costs. At stake here is not just about India’s principles of fairness and equity for her people but about the future of a prosperous India which benefits all and not just a select few.

 

References:

http://www.dnaindia.com/india/report-land-acquisition-bill-implies-deep-trouble-2072222 (Shivani Chaudhry)

Supporting social mobility – a lesson from Croatia

Our friends in Croatia undertook an interesting experiment, codenamed, “Fresh Start,” a couple of months ago in February 2015. They decided to write off the debt of 60,000 of Croatia’s poorest citizens. This debt write-off was a one-time move by a leftist government (incidentally a government that faces a key election and one can therefore take a cynical view that this is merely an election ploy but I’ve chosen to focus on the wider social/economic benefits this initiative can provide).

“Fresh Start” was essentially a programme that was designed to help the poorest and most vulnerable citizens cope with an economic crisis for which they had little or no responsibility.

The initiative in brief:

Croats whose debts do not exceed 35,000 Croat Kuna (or 4,800 Euros) and whose bank accounts have been frozen for over a year can apply under the scheme to have their total debts written off.

Under the plan, only those with a monthly income in the last three months that did not exceed 2,500 kuna (340 Euros) are eligible.

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