The Illusion of Economic Development

Part – I

The current trend of our economic development has confirmed what has psychologically been felt for a long time – the illusion of money and wealth without any real happiness or satisfaction. With the way things are going, it has become obvious that what we conceive of as economic development is really an illusion. Logically, it can easily be proved that, under the present conditions, not only will there be no increase in welfare and income of people, but people will progressively become worse-off and incomes will actually decline as the current system spreads its tentacles.

At the heart of this system lies,

• The spirit of selfish individual utilitarianism that will undermine all efforts to provide quality goods and services.
• A spirit of commercialization in all fields and services that will take captive the collective psyche under its self-destructive yoke.
• And, central to all this, the expansion of the baser vital and mental expressions of the purely physical compulsions, attachments and bondage under the garb of science, machinery and intellectualism.

Scientific advancement, machinery and institutions or rules are simply mediums and not the godheads we have made them out to be. They are a double-edged sword whose use depends entirely on the living consciousness that is handling them. If that consciousness is itself polluted with giant vital monstrosities, it is inevitable that we will lose control over these mediums and be destroyed by them.

This process of destruction of our established society is already well on its way. With the core being eaten away, the outer symptoms are also becoming visible now. And economic field, which is the natural abode of the modern utilitarian person, is where the effects of destruction will be felt most closely.

The modern economy consists of goods and services, and economic growth and development is measured in terms of exchange and accumulation in these two areas. While goods can be measured in terms of volume, services – like education, health, law and order, defence, community or social services, consulting etc. – cannot be quantified. They are measured purely by the amount that is spent on them. These measures cannot capture the quality of the service delivered or whether the service is happening at all.

Yet, the services sector* (*To see the share of various services in the real GDP of India from 2008-09 to 2012-13, refer to the Appendix.)constituted 70.5% of the world economy in 2013*,(*World Bank national accounts data n.d.) and is increasing by the day. It accounts for about 60% of world employment, making our incomes and well-being dependent on this sector.*(*Loungani and Mishra 2014.)

In India, the financial industry contributes the largest share to the real GDP, followed by community and social services. Both are significant areas in terms of assessing the well-being.

Since services sector forms such a large part of the economy, it is reasonable to analyse economic development and well-being by looking, mainly, at this sector.

Why is economic development an illusion?

To see why economic development is not happening, let us suppose that the economy consists only of services – an assumption that is nearly true in the present context. In such an economy, one person’s expense is another person’s income, since there are no goods involved.

If, however, everyone begins to charge ten times for their services – the expense of all services like medicine, education, counselling or consulting, law and order, defence and NGOs goes up by ten times – will our income increase? The answer is clearly no. Only the cost of the service is increasing, but our income is still the same, and the well-being also remains the same or, in fact, becomes worse depending on the quality of the service being offered.

The only way to really increase the welfare is to improve the quality of the service. The quality of service defines what the real income is. Because one person’s expenditure is another person’s income, you cannot get any better-off. Therefore, there is no other way of knowing whether income and welfare is actually increasing or not.

Cost is never an indicator of the quality, and neither is its outer packaging. Both can be increased and made to look fancy while the seller actually compromises the quality to earn extra profit. Or, the seller can severely compromise the quality and lower the price to earn additional competitive advantage in the market. If one seller uses these dishonest means to sell his product, other sellers will be forced to follow suit. This is what is meant by the dictum of the bad coin driving the good coin out of circulation. And, this principle is the basis on which the utilitarian economy functions.

In today’s utilitarian society, “More and more individuals are increasingly finding that the situation in their life and the field of work has become such that they must consent to the use of more and more unethical and degrading means to succeed or even to survive.

For example, let us assume that A and B are two competitors in a business and A resorts to the practice of avoiding paying of government taxes (whenever he can get away with it) and starts selling his articles a little cheaper. Even if B is a man of scruples, when he finds it increasingly difficult to stay in business he copies A. Now, to do better A decides to undercut his competitor by taking out of the product, in quality and substance, all that could be taken out ‘safely’ – without affecting the appearance, i.e. without the risk of the consumer finding out. This lowers the costs and enables A to further reduce his price. Now B must do something similar or if through his experience of so called ‘realities of life’, he gets exceedingly groomed in the commercial spirit he may even do better and discover novel ways of cheating customers and undercutting his competitors.

Thus the disease percolates to deeper and deeper levels. Even people who begin with good intentions in any business or profession are either thrown out or begin sinking to ever lower levels in ethics and morality.

[This] utilitarian spirit…has already made deep inroads in the area of services that practically must remain – as they traditionally have been – free from the commercial spirit if they are at all going to be able to perform their sacred task. Education, health and medicine, justice and not even philanthropy and religion are any longer immune from the corrosive action of this rust of the human soul…Close family ties and intimate personal relations have so far remained largely free from the grosser forms of this commercialism because India has strong family ties and a spiritual tradition. However, a turn towards it has already been made – particularly in the urban areas – and it may not be too long before it spreads and India begins to catch up with the Western gospel of each man for himself.”*(* Team Resurgent India 2012.)

Thus, it is clear that, in such a society, welfare and income increase is an impossibility because it depends on the quality of the service and you cannot deliver quality services unless the spirit and attitude towards social relations itself changes. And, this spirit and attitude depends on the consciousness of the person.

We should be under no illusion that there is an alternative to a change in consciousness. As gross human beings, we suppose that if technology, infrastructure and equipment get better, then the service rendered is better. This is not true. Science and technology are double-edged swords whose use depends entirely on the consciousness that is using them. There are numerous examples all around us that prove this. For instance, “[a]t present things have reached such disgustingly low levels that one hears of big drug companies producing and having ready large stock of necessary medicine for containing an epidemic before they secretly disperse the microbes that would spread it.”*(*Team Resurgent India 2012.) It is the same in other fields as well. It is quite commonplace to hear that big software companies not only create anti-virus programs for computers, but also create new viruses so that computers get infected and people are forced to buy upgraded and more expensive anti-virus programs. With technological advances, more and more sophisticated and expensive equipment is available to doctors, who in an effort to cover costs, or worse to generate more income, create an atmosphere of fear and insecurity among their patients in order to make them undergo unnecessary but expensive tests and treatments.

How would such transactions constitute welfare? In the long run, it is clearly leading to a loss of income, as the people are spending more on curing artificial human-made ills and hiked expenses in the name of services even if the income remains the same. Unfortunately, in the current scenario, despite this loss of income, such spending will count as economic development as it will add to the GDP of the economy.

Paradoxically, under the present conditions, this faster rate of deterioration has been labelled as a high growth rate. Effectively, then, we are measuring rising deprivation, and counting that as our growing GDP.

That there is something wrong with the way we measure our economic growth is something that economists have recognized but only at a superficial level.

Rising discontent with current pattern of economic development

It is increasingly being acknowledged that measuring well-being and real income of people through the Gross Domestic Product (GDP) and Gross National Product (GNP) is no longer workable. This has been brought home by the rising economic and social discontent and inequality among people and the multiple financial crises that erupted world-over after 2008. GDP and GNP have become measures of deprivation rather than income or growth.

This has provoked some re-thinking among the welfare economists. They have reached a general consensus on why there is a lack of well-being. Unfortunately, their thinking is based on the assumption that there is a problem only with the current ‘measures’ of national well-being, like the GDP and the GNP.

At a superficial level, the following general problems have been identified:

• GDP is simply based on quantitative addition and subtraction. It cannot capture the quality, the well-being or the real benefit to the people. There are numerous everyday examples around us that bring home this fact. For instance, if parents care for their children themselves, they are not contributing to the national income. But if they hire and pay a nanny to do so, they are contributing to the national income, even though the result is that they are becoming more selfish. To take other examples, traffic jams, incredibly, contribute to the GDP, because of the extra expense of vehicle fuel people have to bear, and, murderers contribute more to the GDP by buying a knife or a gun and other equipment, than a person who chooses not to commit murder.

Similarly, in the health sector, the rising number of diseases contributes more to the national income by increasing people’s expenditure on medical services. But if people were to lead a healthy life, the GDP would effectively go down.

In the education sector, the more the money people spend on getting higher degrees, the more they are contributing to the national output, even if they do not get employment through those degrees, or are not able to pay their debt on education loans (ironically, taking education loans is also contributing the national income by leading to the growth of the banking sector).

• How can the GDP measure well-being and income increase when it cannot measure the rising inequality? Per capita GDP – which is computed by dividing the GDP by the total population – is regarded as an indicator of the average national income per person. Therefore, it is assumed that when per capita GDP increases, it indicates that more number of people have higher incomes and, therefore, a higher standard of living. However, recent studies* have admitted that this is not true. For, if the increase in inequality is large as compared to the rise in per capita GDP, it would mean that more number of people are becoming worse-off even though the average national income may appear to increase.

Economists have argued that we need to develop measures that can account for the invisibles or rising risks to future generations along the lines of sustainability, happiness and equality. At the global level, organizations like UN and OECD are taking the lead in developing new approaches to well-being, and individual countries like France**, Bhutan*** and UK are following actively.

*Stiglitz, Sen and Fitoussi 2009.
**France commissioned, in 2008, the report by Stiglitz, Sen and Fitoussi (2009).
***Bhutan talks about preferring GNH (Gross National Happiness) as an index rather than the GDP or the GNP.

However, the big problem with these attempts is that they work on a similar assumption as the economic approaches based on GDP and GNP measurement:

The new methods – and this is happening in various countries – have started trying to measure ‘quality change’ or real output of the service. This means that instead of just measuring the service in terms of quantity of inputs and the expenditure on them (e.g. number of classrooms, better school infrastructure, number of courses and teachers and number of students), they are trying to see whether, for instance, education as a service is actually increasing competencies of students or whether medical service is actually increasing health output of people. Some of the results show that accounting for quality or output of the service rather than only for expenditure on the service has led to decreased numbers of economic growth. For example, if you measure output or quality, then the UK economy grew only 2.75% between 1995 and 2003, whereas if only expenditure on the services is accounted for, then the economy grew higher at 3%.* (*Bhutan talks about preferring GNH (Gross National Happiness) as an index rather than the GDP or the GNP.)

While the data is revealing of the superfluousness of economic growth numbers, it is not practical to think that quality can ever be fully measured. For, the practical way through which such an output can be measured is by measuring the marginal contribution of these services (like education) to a certain output, keeping all the other factors constant. In reality, however, it is impossible to exclude all other influences. Even if you are able to control the material influences – and even those will not be exhaustive – how can you control the psychological or subjective factors that do not always confine themselves to assumptions of ‘rationality’?

The only conclusion that can emerge from the current economic debates on well-being is that there is no real welfare and that there is no real increase in people’s incomes. Current measures like GDP and GNP – and even ‘net’ measures like NDP and NNP – tend to inflate factors which lead to a loss of well-being (such as, crime rates etc.) and term that as high GDP growth. Solutions to this problem are not available – taking ‘net’ measures by accounting for depreciation and taking account of ‘defensive expenditure’ are not addressing the core issue of quality of service rendered or of well-being. In fact, one can never fully measure the ‘quality’ since there will always be material and psychological invisible factors that cannot be captured by economics.

However, irrespective of whether it grasps the problems with the way we measure economic development, the folly of the current economic thinking is to believe that we can actually find alternatives under the present system. The economists think that the problem lies with measures and statistics – that GDP is a flawed approach which captures wrong data and leads to wrong policy intervention by the government. They assume that by coming up with new measures and approaches they can tackle the problem and lead to better policy to enhance well-being.

This reasoning is completely misplaced. If we analyse deeply the causes of lack of well-being, we will understand that, under present conditions, no matter what measure is used and what policy and institutional interventions are put in place, there can be no real increase in income and welfare. In fact, with the way things are going, there will certainly be a fall in income as time passes, because this fall in income and welfare is related to something other than material deprivation and has psychological roots. It is the very crisis of the consciousness that is causing it.

We will now present cases to show that the increasing expenditure on services is not only not leading to rise in income or well-being of the people, but can never ever do so, under the present conditions of human beings.

The case of education: The higher your education, the worse-off you become

Take the case of the education sector. Education is considered one of the most important services provided by society today, both in terms of providing material security and in defining individual personality and roles. It is a field in which the present generation and their parents come with a mixture of aspirations and ambitions. We see all kinds of people in higher education – hopeful young graduates who think they will bring about a change in the society, energetic young people ‘driven’ by the need to be at the ‘top’ of their careers, and, finally, their families and society which egg them on and create an atmosphere in which a student cannot imagine anything wrong with these ambitions. They also believe that being educated will enhance one’s material well-being, by leading to a better society and the personal and financial well-being of the student.

All these assumptions are completely misplaced. Not only will the current education system not lead to any welfare through any rise in income, but it is also geared to kill all chances of individual well-being and happiness. This is because ‘commercialization’ is finally nearing its zenith in the education system. It is no longer a process which we can safely denounce in our drawing rooms, while we participate in it actively. Instead, it is now affecting us personally. The reality of the education system is that it is shrouded in glamour only from the outside. From inside, it has become a rotting system that is producing more liability than welfare.

At an immediate and superficial level, we can analyse this by looking at a few telling measures: the number of people in higher education prone to increasingly suicidal tendencies and psychological depression; the increase in the number of unemployed people who had chosen to go for higher education degrees; the number of highly indebted people who cannot afford to pay their education loans.

First, the amount of expenditure on higher education has become nearly unaffordable for the students in the world’s leading universities hub, America. Since 1978, the college tuition fees has gone up by 1120% and the student debt has gone up dramatically compared to even basic debts like credit card and auto debt, with the average debt total at the time of graduation being nearly 27,500 USD.*(*Watson 2013.)

Second, if we are spending so much of our money on student loans and tuition fees, there should be at least some minimum material payoffs. But even this cannot be seen. In fact, the income invested in higher education has actually become a material and psychological liability for both parents and students.

No matter how educated you are, the chances of getting a job – forget about getting a decent job – are becoming less. This is seen through the rising graduate unemployment world-over. In major South Asian countries like Bangladesh, Pakistan and India, unemployment among graduates is 4 to 9 times higher than the total unemployment in the country.*(*Economist Intelligence Unit 2014.)

In India alone, youth unemployment among people possessing degrees at the graduate level and above is higher than people with lower education degrees. Recent reports reveal*(*Times News Network 2014.) that between 2004 and 2012, the rank of jobless Indians with a higher education degree (Bachelor’s and above) swelled by 9%. The table below shows the condition at a glance.

Table 1: Youth unemployment (18-29 years) in India according to education level:

Source : Data taken from Labour Bureau, Ministry of Labour and Employment (2013-14)

Third, added to this high graduate unemployment is the increasing psychological depression and suicidal tendencies among our educated youth. In fact, the higher the degree you get, the more likely it is that you will be prone to depression. This is seen in the case of PhD students in major research disciplines of social sciences.

A recent survey*(*University of California, Berkeley 2014.) by University of California, Berkeley, which made the news, reported that, 47% of its PhD students and 37% of its Master’s students are suffering from depression.*(*Otani 2015.) The lack of employment even after PhD has been cited as the main reason. In the academic field, ‘tenure-track’ or permanent positions have become increasingly rare. According to reports*(*American Association of University Professors n.d.), non-tenure-track positions account for about half of all faculty appointments in the American higher education system. These non-tenure-track positions are what are commonly understood as ‘casual faculty’, who have to spend the better part of their life in constant insecurity. Worse, even among casual positions, about 38% are part-time and only 20% are full-time appointments*.(*American Association of University Professors n.d.) Another survey conducted in US, among 301 graduate students, found that about 22% students were on medication for depression or anxiety and 19% were in counselling.*(*DeClementi 2015.)

Under such conditions, how can one speak of well-being, no matter how educated you are? And, this does not simply happen because of material factors like student debt and tuition fees and lack of job. There are purely psychological reasons for it – unfulfilled ambition, increasing work pressure masquerading as sincerity, and, a complete commercialization of academics, and its invasion by intellectuals.

In today’s society, the service of education is so deeply corrupted that it serves only two purposes:

First, either it is simply geared – right from children’s school education to the higher education system – towards training people to be ambitious and successful. The reason is that our society – imitating the West – values ambition or “drive” and a good career as the hallmark of judging a person.

Second, in the higher education system, the yoke of the intellectuals has sowed natural conditions for depression and loss of well-being. Besides constantly being under a pressure to succeed and perform, here, people are also under the illusion that they are gaining ‘knowledge’.

The illusion of work

The biggest example of the failure of modern services sector can be seen by the recent state of the education system in our own country. Looking at the state of employment and research in the higher education system in India, it is clear that there is absolutely no work that is really being done. The amount of work done is deliberately inflated to create opportunities and money and jobs disbursed all round. The outcome, in terms of quality of research and integrity of work is zero. How, then, can there be well-being? And, as far as the incomes are concerned – the entire edifice of incomes will come crashing down as soon as this artificial education bubble is burst and unemployment takes root, since there was no real ‘academic’ work to begin with.

As the Modi government formulates its new education policy for the higher education system in India, it has taken drastic steps to cut down the amount of ‘work’ that academic teaching staff gets paid for – precisely because that work was considered unnecessary by a government which pays very little attention to the cult of ‘intellectualism’. According to information available with certain ‘secular’ academics, the government, in its overhaul of the higher education sector, has drastically reduced the course content by, not only removing a lot of Left-wing agenda but also reducing the number of core papers in Delhi University undergraduate syllabus from 21 to 14. The government, by reducing the workload, has left the universities like DU with no option but to stop hiring teachers despite the fact that there are still 4500 vacancies. This cutting down of workload, according to some professors, has led to about 1000 ad-hoc teachers losing their jobs. More than anything else, it shows how the illusion of work has been created in India’s higher education sector.

This is just one aspect of the drastic higher education policy changes the government is coming up with. Even though it has produced the expected revolt within the ‘intellectual class’, yet, it reveals how much waste-load was being produced in academics for the past several decades. In the name of unnecessary and useless work or research, employment was being given. The system resting on all kinds of corrupt intentions – politically and ideologically motivated and couched in impressive language to delude the layman or driven by ambition – has been producing everything but quality education. It is not surprising. How can a system which drives people to depression and suicide and makes selfish research ‘projects’ the source of random income here and there produce well-being in any real sense of the word? The kind of thinking that the higher education system in India promotes is based on a corruption of the soul – the disdain for nationalist thinking, the tyranny in the name of ‘secular’ and ‘liberal’ thought etc. They are the kind of institutions that eat up the very people who work in them, leaving no scope for coming out of it or going deeper, leaving no option but depression.

It is a step in the right direction that this system may now be exposed in India.

To be continued…

Appendix

Services	Share in real GDP in (%)
	2008-09	2009-10	2010-11	2011-12	2012-13
Construction	8.0	7.8	7.9	7.9	7.8
Trade, Hotels, Restaurants	16.6	16.5	16.9	16.9	17.5
Transport  and Communication	9.4	10.0	10.4	10.6	10.3
Financing,Insurance,Real Estate and business services	16.9	17.1	17.2	18.1	18.7
Community,social and personal services	13.1	13.5	12.8	12.8	13.0

Series Navigation

The Illusion of Economic Development: Part II >>