Again on the economic time bomb

Economists assume that by the ever expanding spiral of more consumption and more jobs, economic growth and prosperity could be kept on growing.

In some countries, there is a statutory regulation that furniture in offices should be replaced by new pieces even if the old ones could be used for a number of years more. The aim is to promote the furniture industry. During the Great Depression of the thirties, Roosevelt’s exhortation to common people was to spend more. By increasing the money circulation he hoped to increase consumption and thereby bring about economic recovery.

All throughout human history, this has been the story of economic growth: more consumption, more production, and more jobs. Even today, governments around the globe apply this method to stimulate the economy. They pump into the system more funds, causing a spurt in consumption and thereby energising the economy.

There is the story of Pakistani agents dumping fake currency notes in the border districts of India, hoping to ruin the Indian economy. The outcome astonished not only the Government of India and its Pakistani antagonists. The border areas rained with fake currency notes witnessed a brisk economic growth.

We hear a lot about economic stagnation in developed countries like Japan and the US. What is the actual reason? Consumption has reached a peak, so that further increase in consumption and creation of more jobs become difficult.

The economists of all hues assume that further increase in consumption in any economy is possible and a decent growth rate can be sustained. But this may not be possible under all circumstances. On the other hand, it is possible that a sufficiently important but unexpected event can sent back the global patterns of consumption and consequently, job opportunities, to those prevalent a hundred years back. Such a catastrophe has never happened before, because the present level of globalisation and interlinking of world economies is something new. Besides, consumption at the present rates has never before been achieved.

The table below gives the patterns of consumption in Kerala, the South Indian state, now, and a century back. The rates of consumption are not as high as in the wealthier countries, but, definitely higher than those prevailing in most developing countries. However, a hundred years back, patterns of consumption in most parts of the world were similar except in footwear, clothing and housing. Cold climates always called for more sophistication in these areas.

Item	Consumption now	Consumption in 1910	Remarks
Housing	Units built by skilled labour using industrial products	Units built mostly by the user, using locally available materials	Job opportunities created in these areas are tremendous. They are not proportional to the growth in population. The percentage of people engaged in the production of foods has fallen sharply. Food self sufficiency is a thing of the past.
Electricity	Universally used	Use was not known
Footwear	Everybody uses	Only a selected few used
Phones	Almost everybody owns a phone	Use was not known
Clothing	The cost and quantity of clothes used by men and women are on a par with those used by the people in the West. .	Scarcely. Only young women wore upper garments
Transportation	Vehicles powered by petroleum fuels are used for travel and transportation of goods.	People mostly travelled on foot. Vehicles drawn by animals were used in the transportation of goods.
Farming	Most people have abandoned agriculture and those who are still in the profession have shifted to cash crops.	Majority of people were engaged in agriculture

In my previous article on the subject, I pointed out that some great event of global impact may send the demand of most goods as well as stock indices plummeting ruining the world economy. Just imagine the extent of job loses if the economy suddenly slid back to 1910 levels.

The fate of the world depends on how far the level of consumption may go back in a crisis. If it goes back to 1910 levels billions of people around the globe will be thrown out of employment and the fate of humanity will be doomed. It may take another millennium to regain the present level of industrial production and employment generation.

No government can totally prevent a global catastrophe caused by the sudden shrinkage in demand. However, by ensuring regional food security, much can be done. Food production should be heavily subsidised so that farmers may be dissuaded from straying into more lucrative areas such as rubber and soy cultivation.

Many of the cottage and village industries everywhere in the world used to produce goods with locally available raw materials. Industries using coconut fibres, jute, bamboo plies, etc. gave employment to millions of workers. Surky, a mixture of sugar and lime was used even in building dams. Invention of cement and plastic has ruined these industries. Government policies can revive the old industries ensuring employment to millions of workers in the event of a collapse of the present industrial culture and consequent loss of jobs.

In half a century, we have forgotten, discarded or destroyed the survival methods evolved through millennia and it is impossible to fall back to the old ways overnight. A gradual reinvention of the age old methods may ward off a total ruin.

Mahatma Gandhi advocated for the revival of the rural small-scale industries in India But the intellectuals of that time like Russel mocked the idea. A global crisis will show how prophetic and wise the ‘half clad fakir’ was.