Monday, March 22, 2021

What's the use of economic growth without prosperity?

"The birth rate of the European Union (EU) in 2018 stood at 1.54," wrote Vivek Kaul. "The birth rate of Japan in 2018 stood at 1.42." This is much below the replacement fertility rate of 2.1. "As a March 2006 paper released by the European Commission put it: 'Never in history has there been economic growth without population growth'." "Thanks to a lower birth rate, the total population in Japan peaked in 2010 at 128.1 million. It has since been falling, and in 2019 stood at 126.3 million." But, while Japan's population has been falling its per capita GDP has been rising, from $479 in 1960 to $40,247 in 2019. The per capita GDP was rising even as Japan was suffering from deflation from 1991 to 2001, when asset prices were falling and people were saving more while spending less. Starting from Bermuda, with a per capita GDP of $117,089, down to Argentina, with $9,912, every country has a small population. India's per capita GDP was just $2099.6 in 2019, according to the World Bank. "The dystopian world of jobless growth has been staring the world in the face for decades now," wrote R Jagannathan. "First, for the most part, growth is the result of increasing use of technology and not human labor; and second, the excess of capital sloshing around in the world economy ensures that more technology will be used rather than labor in most new enterprises, whether they are in manufacturing or services." "It is easy to see why new technologies are increasingly viewed as a major threat to labor markets. Some estimates even claim that a staggering 80 percent of jobs run the risk of being automated in the coming decades," said a United Nations report. While destroying jobs, new technologies will create new opportunities, described as a process of "creative destruction" by economists. However, "Technology is one of the reasons behind the growing disparities within the workforce in many countries, with middle wage-earners losing ground. Internationally, the lack of access to new technologies in least developed countries and the rapid gains by manufacturing powerhouses threaten to increase inequalities between countries." "In India, thanks to rigid factor markets (land, labor) inherited from the licence-permit-raj era, we are still to fully transition from agriculture to manufacturing; in fact, we practically skipped the manufacturing stage of development and went straight into services, which is what drives GDP growth for us today," wrote Jagannathan. "Unemployed, illiterate, school drop-outs arrested for the first time -- these are common threads that connect every person arrested for snatching in Delhi since 2018, highlighting how one of the most serious concerns on the streets of the national capital is also its biggest gateway to crime," reported Hindustan Times. Neighboring state of Haryana has ordered private companies to reserve 75% of jobs for local youth. "It is also a truism that a big underlying problem in India is a staggering lack of good hobs. With approximately a million new people entering the workforce every month, there are simply not enough well-paying and productive jobs to which these would-be workers could be matched," wrote prof Vivek Dahejia. The labor force participation rate of women in India is down to 20%, even as India is predicted to become the most populous country in the world by 2050. Forget Japan and the EU, India needs a drastic reduction in population. Not just in growth rate but in absolute numbers. Otherwise, disaster.           

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