The Dilemma of Economic Development.

The Dilemma of Economic Development.

The problem, if it can be said that there is a problem with Economic Development (ED), is the points of perception. The perceptions of what it is, what it is for and how to recognise improvement; (if that is what one assumes to be the outcome) against any measure applied as a bench mark. On these points there is a large degree of context variability that relies on an assessment of quantifiable values and the fundamental elements of those values are generally located in the easy financial measures that can be quantified but which invariably leaves out any non ‘valuable’ characteristic such as social cohesion or stability, sustainable infrastructure, realms of degradation, fairness of wealth distribution, expertise and labour degradation or contentment in a work life balance etc.   

ED has in some large measure been achieved in opportunistic periods and in a generally disorganised way with the occasionally controlled input of expedience, necessity and limited strategic guidance. The outcome benefits of ED; the improvement in the GDP, revenue / capital, income vs. expenditure, living standards, employment, infrastructure and a country’s disposable largess, are perhaps the visual if not measurable effects that might be the inclusive evaluations by which a judgement may be made i.e. ED has been a good thing.   With this view of ED being a good thing, the conclusion of how this opinion is obtained might be seen from two different perspectives and could give rise to an apposing view even though each supporting arguments will have gained, to a varying degree benefits, accrued within the overall milieu.

Those that are at the say “Coal Face”,  that do the physical work to make productive output, may have composite views that might be taken from the prime operators of practical ED; the businesses, the workers, the consumers, and the disposable earnings from imports /exports and profits all guided in normal times by the old hoary idea of supply and demand that plays out to vacillate between disharmony, balance and equilibrium; to use modern purveyed parlance, for economies to work efficiently there is a need to remove barriers to free enterprise and competition, e.g. cut regulation, taxes and state intervention. In a free market, the price signals of profit / loss and uncontrolled volatility of prices will enable a return to market equilibrium. Without subsidies in all its forms, full employment is possible, zombie business that are not competitive will be taken out releasing opportunity and locked reserved capital that is unproductive will be put to better use by other contenders and used for other demanded ‘consumer’ commodities. The variability cost of raw materials is a cost that is reflected in the end sale price and an additional intrinsic component within this variability is wo/man power cost and in less cultured times this cost of labour itself was seen as the prime irritating commodity (it still is) to exploit and if can be got for nothing, bingo, you have full employment and loads of profit. To use a now often expressed metaphor, labour can price itself into a job.

The views taken by coal face about what does generate the positive or negative effects on the economy are often defined by their posturing in contention and how favourable or not the overall situation is to the requirements. Their situation is modulated by the pressures endemic in the social order of society that generally acts in concert to create a representational ‘fair’ outcome an outcome that although it may contain stress factors has never the less been moderate, despite some element of the system occasionally having a militantly stronger position than a majority. Over time, labour where it is free to negotiate, has given rise to unusual civilised social structures of a few developed countries. Within the limits of cultural parameters – what is thought allowable, feasible and acceptably systemic by the levers of controls, lets negotiations continue to shape how the benefits of an economy is shared out but it has to be said benefits have to often be fought for against great vested self interest from those that are cajoled to perhaps reluctantly to give.

On the other hand the authorised view of ED, those within it that take an academic and often wholly speculative interest in the mechanic of ED; (economist, politicians, financiers, bankers and elements of industry etc) tend to only consider the bigger economy picture with much greater emphasis on the monetarist and foreign views of economic mobility as generally they see them-selves and their action as being largely outside and unaffected by the machination of those that actually make the system work (the consumers?). The power of such people and their influential authorised views are the rentiers of the economy, these are the people who are controlling the flow of capital, assets, excess money and resources both internal and external playing with and for the ‘market’. Their sole purpose is to maximise the difference between the buy and sell of supply and demand and to take as much advantage of the uncertainly, disharmony and fragmentation created by trade shifts or geopolitical dynamics with the help of seasonal climactic(s), culpable induced commodity stress or environmental trauma. They undertake this market dealing and present their case for doing so as a means to mitigate the fluctuations of adverse ‘market’ pressures, smooth corporate annual productive cost / investment, enhance and add value to the nuts and bolt to the economy with ‘earnings’ that feeds back into the (real?) productive economy and to those that are in the consumptive and investment divisions like pensions, share holders and of course jobs.  Sitting over these powers is the political machination that generally likes to takes no direct active part in the game being played so long as it can extract revenue from all to excrete in any fashion that political policies inspire them to do so, often for their own political ambitions. Now in this they (governments) endear very close association with the big corporate businesses and financial manipulators to secure the flow of funds, derive and shape policies as needed to grease the continuation of the illusion of overall wealth generation. Wealth generation it holds that eventually benefits everyone within ED via the trickle down conviction held by the rentiers of the economy.  

In all these influential authority positions, there is a huge measure of self determination, to be the controlling expert and only see the big picture i.e. the maintenance of a fiat monetary system, the increase of profits take, GDP, the continuation of tax revenue, shareholder value, market development-expansion-penetration-exploitation and the minimisation of any downstream “coal face” inefficiencies that are considered a hindrance to their economy growth view. That this maximisation strategy has been immensely successful and has come at a cultural cost may be debatable, what though unfortunately can be also be seen as unhealthy is in the rapid rise of financial institutions and their power, the financial resources extracted from the productive economy, the current polluted state of the banking /financial structures, the unnecessary rises in debt and deficit and more importantly the wide divergence of equitable wealth reach and the hollowing out of the economic generators upon which they rest vis-à-vis the decline in disposable incomes of those at the coal face; does not evidence that the system is healthy enough to continue to sustain itself with free market principles nor progress without ‘the dead hand of state intervention’, if every it (the market) ever truly sought to be free in times of anxiety. As has been the case in the past, power needs to insure it retains power and will introduce steps to maintain its position and when one sees increasing steps taken to influence and control directly the direction of the flow of wealth to the ultimate disadvantage of those unable to influence its course, is generally an indication that one of the functions of good ED is seriously impaired.

In both these set positions, (the two diverse views of ED) it is invariably not in their own best interest to have a system that is wildly dysfunctional or increase the proportion of inequitable situation to raise discord in the population that may act a precursor to un-sustainability, fragmentation, disinvestment and chaos, so some form of amelioration over time must take place to have equitable distribution. To achieve any state of equitability in ED it should have liberty to operate in the ‘negotiation market’, matching opposing pressures with occasional intercession by democratic power to gain rewards that aid the raising of the overall wealth of social standards for the majority. This is what is assumed to be the ultimate benefit of ED.

In systems that function in actual resources distribution, the commodities that people use or consume, the ability to match the marketability of such products against investment and return can be played with using the canon of supply and demand. However over time and now explicitly with the strange over generous support given to the market operators via QE and with the extraordinary latitude certain markets have had and enjoyed over recent decades by sectarian complicit governments, the role of a simple supply and demand structure attached to an unregulated markets now needs to be questioned. Of all the trading activity that take place in the London market less than 20% has anything to do with the movement or acquisition of commodities for productive purpose. The bulk of the transaction are simple a maze of managing the gains that can be gotten from trading in differences in currencies, the speculation of anticipation in share movements on the developed global market and commodity volatility due to geopolitical or ecological effects. It has virtually no ‘trickle done’ benefit to the host economy other than a few positioned people in the financial sector and ‘markets’ that facilitate the transfers of capital resources. In addition to this there is the system of high frequency trading that does absolutely nothing but gamble with an algorithm in fraction of a second to make a margin in everything that can be priced with no responsibility to the item that is ‘traded’. This is a system that is clearly failing productive capacity and it has a direct impact on the continuance of productive ED reliant as it is on the exportability of cost.

All commercial and industrial business are rapacious by design and nature, driven by the creeds of market forces rule OK, laissez faire, supply and demand to maximise profit for themselves. Where there is an opportunity to ‘game’ the system in its own favour ‘it’ will do so to the extent of applicable governing laws and when possible circumvent if not actually break such law restraints until caught. Such laws are often too slow to catch up with the practices of business trends, often lack real teeth and generally are reticently enforced. Large corporate businesses have become extensive users of the laxity of controlling laws and demonstrate a morally corruptive stance in extracting profits from the supportive consumer structures of a country, seeking means of loading debt onto the host business generator and then exporting the extracted profits to a low tax heaven to avoid paying corporate tax at the rate applicable to all other indigenous traders that do not have the benefit of internationalism. Fairness, equitable trading, ingenuousness or redeeming recompense etc are not ingrained trading factors and it is always a matter of buyer beware.  

With the above backdrop can the prime advocates of the effectiveness of ED claim to have achieved real ED? In a consumer sense yes, as exampled with the measure of having more material things, in the consumptive quality of life, health, life opportunities, complex infrastructures or educated social order perhaps but this is only for modern developed countries and by achieving all this has it come at a cost? And is that cost hidden in the erosion of sustainability for a developed economy and a creeping impoverishment of a section of their own populations, all derived from wealth previously subsided by those countries that are undeveloped?

In order to feed the ‘demand’ of ever higher rewards and consumption, the market has taken control and moved away from attaining a balance of supply and demand but has concentrated on the usury elements of transaction, it has moved to a purely monetary gain system for its own sake driving companies and their productive output to have one eye on the financial market and the other on short term competitive gains. One of the early motivation to sustain the drive for ‘more for less’ was to disinvest in indigenous productive capacity in favour of exported investment for imported production.  Later with the near evisceration of manufacturing, the rise of unemployment and deskilling, administrations sought to fill the investment, productive, exports gap. This was advanced by the chase for Foreign Direct Investment (FDI) to attract the lowest set up cost provider, restrained tax regime, open market access, inducements, and the pliability of a labour force, all required to mop up the excess labour from a ruined manufacturing base, most evident in the UK.

One can have economic enhancement by purging of unproductive underutilised jobs, maximising efficiency, ‘sweating’ the residual assets, extending external supply at the most advantageous cost ignoring the environmental perspectives, circumventing social supports and adulterate the consumer wherever it is to the point of  exhaustion. However in doing so it raises a multitude of degrading factors that increase over time such has undermined investment in indigenous education, productiveness, skills, future expectation in the obtainable pursuit of a decent standard of living to the point; why pay for higher education if you cannot get a job afterwards, how do you become a consumer of extras if you do not have a decent income that allows for a disposable element? The answer to both these points is being made clear now and will have a profound affect on the shape of education, health, social networks and the general course of consumerism affecting housing, energy, food and clothing. The constant drive for extortionate efficiency must result in less employment overall and from this comes the diminishing of consumer numbers and withholding spare disposable finance resources as a safe hold in a time of propagated austerity.

Over the past 4 decade governments with industry, have gone for the easy options in seeking growth. It has let confidence in capital national expenditure be destroyed in favour of expensive private guaranteed no risk projects of fast easy profit returns, racked shareholder value, minimal strategic positional planning, ignored debt and deficit control and abrogated via ‘privatisation’ the need for long term resource replication.

For all the chasing around after it ED, especially foreign direct investment (FDI) the result and benefits are ultimately ephemeral, under the current architecture of governmental design and the implication of how financial structure are implemented it is a race to the bottom of a social and economic level to be the provider of the cheapest and most profitable resources application that can be sourced for the betterment of corporate interest. It is no solution to continue on this path in the blind belief that technology and ingenuity can continually develop new modes of wealth creation at such a pace and with affordable consumptive demand, that all will be well. It is simple not feasible that sufficient resources are available to give every single human held on earth all of the best of these resources that can be obtained nor is it practical that a wealthy country will diminish its capital capacity base to the cheapest provider of labour resources and not expect a painful resounding flash back.     

So without taking too harsh a pejorative view, as far as ED is concerned there is increasingly little scope to look favourably on the free trade system producing any great leap in further ED for any country that will not invest in self sustaining development, or overly relies on imports, disposes control of it assets, lacks the willingness or power to self-invest, ignores the malevolent malfeasance of public opportunistic corporate structures or for those countries that consumes more that it can replace. ED as practiced over the past decades cannot be said to have achieved long tern peaceful sustainable ED for all. The effect of it in purely western terms might be seen as being eventually ruinous to the state of the wealth of the nations, particularly in the UK case, one might say if reality was actually visible, that most of the developed countries are economically bust by taking a path of imported ED that was subsidised by the poverty of others. They are now carrying such overburden of debt, having lived beyond their productive means that an ‘austerity’ programme repositioning to a balanced state is near impossible. Given that state of the global capital system, a system that has grown without much intelligent design at a time when exploitation of all assets was too easily possible and from which a number of generational pressure have been created, is now being masked by a financial fiduciary confidence trick of such proportion that it now camouflages the extraordinary shallowness of FDI & ED, its opportunistic mobility and the potentially fatal weakness of the whole capitalist dogma. Far too much pain will be required to redress the balance of a states viability standing, compared with the weakness of the so called developing countries, that only a radical reinterpretation of what, in western terms ED means, its purpose and the means by which it is sought, will aid the urgent need for ultimate nation sustainability. There are two solutions to the ruinous chasm in sight but they may not be via business as usual with outmoded authorised economic dogma; the path of one resets peoples mindset, the other resets the whole milieu.

© Renot 2012

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