Growth: The elusive enigma
Friday, 9 July 2010
Mahmudur Rahman
WITH jobs becoming redundant, numbers travelling not up to expectation and severe cost-cutting the reported slowdown in remittances growth figures was not unexpected. That has to be a matter for concern for policy planners in that this sector was one of the major under-pinning factors of the country's growth. Apparel export has recovered somewhat but maybe it is time for a re-look at the concept of growth.
For decades developed countries marched ahead with rosy growth rates that created wealth and resulted in major consumer spending. The US ruled the roost and Europe followed. Smaller countries focused on allowing private businesses and banks to do what they were deemed to be good at while tending to the more obvious issues of health and population. People in the west now live a lot longer and suddenly realisation has dawned that that isn't necessarily good for the economy. More pensions and health benefits for a larger number only put further pressure on debt. Lower or minus child-birth rates in societies where the individual rather than the family has gained importance is beginning to pinch negatively on the economy. They now have fewer productive people but ones that have to be paid much, much more. The balance has been lost.
Higher taxation, pay-freezes and benefit cuts are all combining to create a new polarisation in the world economy whereby consumption will inevitably fall. The western world will now begin to appreciate that the days of splurging on luxuries are over. The spill-over effect on goods and services are significant so to say. This does not bode well for countries that seek to boost their exports. Growth can only happen when people have more disposable income and when population growth is at levels that are sustainable. In between is the precious balancing act between domestic and international consumption. It doesn't require any major analysis to know that people numbers are growing in the wrong parts of the world.
China moved decisively to curb its population growth with a carrot and stick approach while India didn't. Combined the two countries boast of close to 40% of the world's population and that has what essentially helped them weather the global economic storm. Now the picture is clearer why China and Russia had been so eager on bilateral rather than international treaties. They were thinking ahead. Perhaps we need to do that as well.
Meaaanwhile, in the United Kingdom, within weeks of presenting an 'emergency budget' containing draconian budget cuts David Cameron's coalition government has rolled back its sleeves and is delving deeper. Their target is to seek 20-40% budget cuts within ministries and departments that have no barriers sans International Aid and Health.
The objective is to address the country's spiralling debt but is also a neat way of proving to the electorate that the previous Labour government was guilty of 'unrealistic budgets and projects'. In terms of implications ministers and MPs will have many privileges curtailed and the concept is that they are expected to 'walk' rather than be driven around. Police services, budgets of which have gone skywards in recent years, may be rationalised and even education is undergoing a massive one billion pound revision. Revamping of structures of 119 out of England's 3500 schools has been cancelled due to 'massive overspends, botched construction projects and needles bureaucracy'.
Even the Lib-Democrats' avowed election pledge of reforms in the election process has come under consideration in the guise of budget cuts. Nick Klegg is pushing ahead with a proposal to reduce parliamentary seats from 650 to 600, thus saving nearly 12 million pounds, and changing delimitations of constituencies. This has come about following the observation that under the current set-up, votes count more in some parts of the country than others, and millions feel that their votes don't count at all. Elections are won and lost in a small minority of seats. Klegg has been adamant in pushing his agenda through by saying "We have a fractured democracy, where some people's votes count and other people's votes don't count." The plan is for a referendum on the issue but one in which the Lib-Dems will accept the Conservatives' opposing it.
The new government's view on non-EU migration has also been made clear and already steps have been taken to reduce the number of work-permits to such nationals by half. There are ramifications. Britain was becoming an alternative education destination following the 9/11 situation in the US and now that too must be under threat. Pay freezes and higher taxation for the well-paid is inevitability. What that does to consumption is for the government to figure out and weigh. For now it's the numbers that appear to be important.
.................................................
The writer is a former Head of Corporate & Regulatory Affairs of British American Tobacco Bangladesh, former Chief Executive Officer of Bangladesh Cricket Board and specializes in corporate affairs, communications and corporate social responsibility. He caan be reached at e-mail: mahmudrahman@gmail.com
WITH jobs becoming redundant, numbers travelling not up to expectation and severe cost-cutting the reported slowdown in remittances growth figures was not unexpected. That has to be a matter for concern for policy planners in that this sector was one of the major under-pinning factors of the country's growth. Apparel export has recovered somewhat but maybe it is time for a re-look at the concept of growth.
For decades developed countries marched ahead with rosy growth rates that created wealth and resulted in major consumer spending. The US ruled the roost and Europe followed. Smaller countries focused on allowing private businesses and banks to do what they were deemed to be good at while tending to the more obvious issues of health and population. People in the west now live a lot longer and suddenly realisation has dawned that that isn't necessarily good for the economy. More pensions and health benefits for a larger number only put further pressure on debt. Lower or minus child-birth rates in societies where the individual rather than the family has gained importance is beginning to pinch negatively on the economy. They now have fewer productive people but ones that have to be paid much, much more. The balance has been lost.
Higher taxation, pay-freezes and benefit cuts are all combining to create a new polarisation in the world economy whereby consumption will inevitably fall. The western world will now begin to appreciate that the days of splurging on luxuries are over. The spill-over effect on goods and services are significant so to say. This does not bode well for countries that seek to boost their exports. Growth can only happen when people have more disposable income and when population growth is at levels that are sustainable. In between is the precious balancing act between domestic and international consumption. It doesn't require any major analysis to know that people numbers are growing in the wrong parts of the world.
China moved decisively to curb its population growth with a carrot and stick approach while India didn't. Combined the two countries boast of close to 40% of the world's population and that has what essentially helped them weather the global economic storm. Now the picture is clearer why China and Russia had been so eager on bilateral rather than international treaties. They were thinking ahead. Perhaps we need to do that as well.
Meaaanwhile, in the United Kingdom, within weeks of presenting an 'emergency budget' containing draconian budget cuts David Cameron's coalition government has rolled back its sleeves and is delving deeper. Their target is to seek 20-40% budget cuts within ministries and departments that have no barriers sans International Aid and Health.
The objective is to address the country's spiralling debt but is also a neat way of proving to the electorate that the previous Labour government was guilty of 'unrealistic budgets and projects'. In terms of implications ministers and MPs will have many privileges curtailed and the concept is that they are expected to 'walk' rather than be driven around. Police services, budgets of which have gone skywards in recent years, may be rationalised and even education is undergoing a massive one billion pound revision. Revamping of structures of 119 out of England's 3500 schools has been cancelled due to 'massive overspends, botched construction projects and needles bureaucracy'.
Even the Lib-Democrats' avowed election pledge of reforms in the election process has come under consideration in the guise of budget cuts. Nick Klegg is pushing ahead with a proposal to reduce parliamentary seats from 650 to 600, thus saving nearly 12 million pounds, and changing delimitations of constituencies. This has come about following the observation that under the current set-up, votes count more in some parts of the country than others, and millions feel that their votes don't count at all. Elections are won and lost in a small minority of seats. Klegg has been adamant in pushing his agenda through by saying "We have a fractured democracy, where some people's votes count and other people's votes don't count." The plan is for a referendum on the issue but one in which the Lib-Dems will accept the Conservatives' opposing it.
The new government's view on non-EU migration has also been made clear and already steps have been taken to reduce the number of work-permits to such nationals by half. There are ramifications. Britain was becoming an alternative education destination following the 9/11 situation in the US and now that too must be under threat. Pay freezes and higher taxation for the well-paid is inevitability. What that does to consumption is for the government to figure out and weigh. For now it's the numbers that appear to be important.
.................................................
The writer is a former Head of Corporate & Regulatory Affairs of British American Tobacco Bangladesh, former Chief Executive Officer of Bangladesh Cricket Board and specializes in corporate affairs, communications and corporate social responsibility. He caan be reached at e-mail: mahmudrahman@gmail.com