Transcript systemic problem

Some Numbers:
Can you reconcile them?
Rethinking Development,
Sambhaavanaa, 2015
India: Food and Nutrition


Average normative food (energy) requirement
per capita (per WHO ): 2200 kcal/day
Availability via domestic production - ever since
the 1990s: ~2400 kcal/day
And yet

40% children malnourished: Double of sub-Saharan Africa

Global Hunger Index: India ranks 16th out of 120 countries

78 of 81 developing countries studied improved their
hunger situation between 1996-2011; India in remaining 3!!
The situation of the entire world is not very
different…

850 mn people undernourished (1 out of
every 8)

World food availability today: 3000 k cal /
day / person:
We do not need any new scientific
breakthroughs to feed all the people on
earth!
Question worth asking:
Why do we have abundant food
and
hungry people at the same time?

Food is a basic necessity.

But similar trends would be found for water,
housing, sanitation, lifeline electricity and
many other fundamental needs… both in
India, and across the world
Question worth asking:
Is the problem a problem of production,
or is it a problem of distribution?
In any economic system, What
determines ‘Who gets what?’
India: Income distribution

Indian GDP in 2014: Rs 115 lakh crores (approx.)
GDP per capita (population 1250 mn)= Rs 92000 / yr

Average Income for a family of 5 = Rs 38,500 / month

And yet

Poverty line (for a family of 5): Rural Rs 4080 / month,
Urban Rs 5000 / month

People below poverty line: 22% in 2012, i.e. 1 in 4 families
(With an abysmally low definition of poverty line, and the
serious under-reporting of poverty in government data)
Income Distribution in India
Popn. quintile
Monthly Household (hh)
Income
Per day hh
spend
Lowest 20%
Rs 100 – Rs 2,750
Rs 20-90
20-40%
40-60%
60-80%
Rs 2,751 – Rs 4,636
Rs 4,637 – Rs 7,400
Rs 7,401 – Rs 12,500
Rs 91-155
Rs 155-245
Rs 244-415
Top 20%
> Rs 12,500
> Rs 415
Top 0.001%
Rs 6,60,000 (Average)
Rs 22,000
(= 2.5 lakh families)
Source: The Hindu thne.ws/1ijR7sm accessed 21/5/14
IHDS survey , NCAER: using 2011-12 data
0.0001% Row: My estimate based on World Top Incomes Database, IE 13/5/14
(1.3%)
(13%)
(30%)
(56%)
Just a random thought experiment:


80% of families in India today live with less than
Rs 12,500 income per month
If we were to assume an inequality of 1:5
between the poorest 5th, and richest 5th families,
even today’s national income could be potentially
distributed as:
Lowest
20%
20-40%
40-60%
60-80%
80-100%
Income today*
2750
4636
7400
12500
>12500
Redistributed
Shares
X
2X
3X
4X
5X
Potential
Income
13000
26000
39000
52000
65000
As with income, so with wealth…
India: Wealth ownership by Population deciles
80%
74%
70%
60%
50%
40%
30%
20%
10%
5.70%
3.80%
2.60%
0.20% 0.40% 0.80% 1.30% 1.80%
9.40%
90-100%
80-90%
70-80%
60-70%
50-60%
40-50%
30-40%
20-30%
10-20%
0-10%
0%
Source: Credit Suisse Global Wealth Databook, 2014
India: Wealth Ownership Distribution



In the top 10% that owns 74% of all wealth,
the top 5% own 65.5% and the top 1%
owns 49%
5 billionaires in late 90’s, 53 in 2013
4th largest number (of billionaires) in any
country after US, Russia, Germany; ahead
of China, UK, Japan…

Wealth of Top 35 billionaires is more than the
combined wealth of bottom 800 mn people of
the country
Source: ET Oct 23, 2011 using IAMR Report
India: Trajectory of Wealth share
80
75
70
65
71
68
66
74
74
74
%Share of
Top 10%
60
55
50
45
49
49
48
45
%Share of
Top 1%
40
40
37
35
2014
2012
2009
2006
2003
2000
30
Source: Credit Suisse Global Wealth Databook, 2014
‘Middle class’ in India: Who? How many?


One definition says family consumption
expenditure of more than $10 per day: By
this estimate, top 5% of the population
Another estimate says $4-$10 per day:
then about 12% of the population (150 mn
people)
Is the term ‘middle class’ just a misnomer
for a small privileged elite of the country??
What about the world’s
income and wealth
distribution?
The telling world income ‘Wine Glass’
Source: Data from Dikhanov, Y. (2005).
Trends in global income distribution, 1970–2000, Data for Year 2000
As with income, so with wealth…
Top 8% people own nearly 84% of the world’s wealth;
Bottom 70% own less than 4% !!
US, the epitome and the aspiration of the
rest of the world
Top 10% people own nearly 71% of the total wealth;
Bottom 60% own less than 5% !
Bottom 18% have zero or negative net worth!!
Middle class and above in the world: 29%
< $2
$2 - $10
$10 - $20
One of the things we often hear when we
talk of these problems is:
GDP growth is the cure to these ills.
‘Enlarge
the pie’ so that we can
have more for the poor
‘Wealth shall trickle down’
Distribution of additional income from
global GDP growth, 1990-2010
Source: UNCTAD Policy Brief Post 2015 – No.2, Nov 2013
Share of world labour income in world
gross output: 1980-2010 (in %)
Source: UNCTAD Policy Brief Post 2015 – No.2, Nov 2013
India: Low Job Growth despite high GDP
growth (1999-00 to 2011-12)
Jobs in
% of
2011-12 total
225
48%
61
13%
51
11%
54
11%
% Yearly
growth
since
New Jobs
1999-00 by Sector
-0.001
0
4
23
17
43
4
20
% of
New
Jobs
0%
19%
36%
17%
Agriculture
Manufacturing
Construction
Trade, Hotel
Transport, Storage,
Communication
24
5%
6
12
10%
Other Services
54
11%
4
20
17%
TOTAL
468 100%
2.2
117
100%
Source: NSSO Reports 554(2011-12) and 458(1999-00)
New Jobs in 12 years
Number of new people entering workforce
119
150-180
Nature of ‘new’ jobs: Employment or
exploitation?

GDP growth: ~ 7-8%; Job growth: at a mere 2%

Most new jobs are in the so called ‘Services’ sector
 very low paying
 often seasonal
 mostly contractual
 with minimal facilities or benefits
 And, tough jobs!

Trade, Hotel includes all petty shop-keepers, hawkers,
roadside food sellers

Other services includes personal services like cooks,
maids, guards, washermen etc

While these people do not get counted in ‘unemployed’, but
their employment is barely subsistence level
Now,
Let us have a look at how the world
spends its money…
Global Spending Priorities,
1998 (in US$)
Cosmetics in US
8 bn
Ice cream in Europe
11 bn
Perfumes in Europe&US
12 bn
Compared to what was
estimated as additional
costs to achieve universal
access to basic social
services in all developing
countries:
(in US$)
Basic education for all
Pet foods in Europe&US
6 bn
17 bn
Water and sanitation for all 9 bn
Business Entt. (Japan)
35bn
Cigarettes in Europe
50 bn
Reproductive health for all women
12bn
Alcoholic drinks Europe
105 bn
Basic health and nutrition
Narcotics drugs (World)
400 bn
13 bn
Military spending (World) 780 bn
Source: UNHDR 1998, Ch1, pg 37
Website http://www.globalissues.org/article/26/poverty-facts-and-stats#src31
Another such paradox:
Military spending in the world today
Military spend: better uses?

World Population : 7.2 bn

World Military Expenditure (per day): $4.79 bn

World Population below $2 / day poverty line:
3.2 bn
Ever thought why we need to spend so
much on military?
US military spending: An enigma, or is it?
Why is 5% of the world population having to
spend 42% of the world military spend?
 Is it because they need to ensure their usage of
25% of the world’s resources?

To recap, mainstream economic theory
says that GDP growth is the answer to
many of these ills…
But: GDP growth at what ecological cost?

Climate change, new diseases, polluted airwater-soil: How will we live?




Eg, Delhi today: Dengue, swine flu, Fatal air pollution, less
rain
Increasing incidence of Cancer, Hypertension, diabetes in
India, and worldwide
What about other living species? What about
future generations?
Also, while the benefits of the growth accrue
very unfavorably to the poor, they bear the
ecological costs far more acutely!
Essentially,
the cost of this ‘development’ is being
borne –
by nature, by some of the humans,
however,
the benefits only accrue to a small few.
This phenomena is called
‘Externalisation of Costs’
Question worth asking:
Why does our Economic /Political System
allow this
‘Externalisation of Costs’
on to some humans, and,
to rest of nature?
More importantly,
Why aren’t our leaders heeding to these
warnings of ecological catastrophe??
Is not a Democracy = Rule of the demos
Demos = the people
??
We elect our leaders…
…or do those who fund the political
parties elect the leaders?
One person one vote, or one dollar one
vote?
Is it easy to float a political party
today?
What is the state of ‘the balancing pillars
of democracy’, namely the ‘free’ press,
and the ‘independent’ judiciary ?
Is the press ‘free’ press, or is it just
another business driven by the
pursuit of profit?...
…what about the state of the judiciary
today?
Are we witnessing a
‘Murder of Democracy’?
Are we living in a Democracy, or
is it a Corporatocracy?
If not, then how do you account for:








Development: Costs to whom? Benefits to whom?
Dispossession without consent of people, and without
adequate compensation / rehabilitation
Suppression of the right to associate, right to dissent,
freedom of speech
Governments needing to deploy police and the army
against their own people
Corporate – Politics nexus
 Election funding: one man one vote or one dollar one
vote?
 Corporate Lobbying: Institution and Policy capture
‘Free’ press ? Or another business with profit pressures
Dependence on private savings for Investment –
Capitalists hold economies, governments to ransom
Why does a fall in sensex elicit an express response form
the highest powers, while much larger calamities go
unheard of?
Is GDP, or higher incomes what we
aspire for, or are they a means to some
other end?
Are we even measuring the right
thing, or have we confused the
means for the end?
What could be a right measure for
‘development?
Isn’t human well-being what we should
be looking for?
What could be better, more holistic
measures of human well-being?
So why did we begin this discussion?

We are trying to understand why we have…








Poverty, amidst plenty
Rising Inequality
Environmental Degradation
Unemployment, and overwork
Murder of Democracy
Financial Instability
Growing GDPs, decreasing Wellbeing
No limits to ‘How much is enough?’
And our hypothesis is:
1.
2.
These problems have their roots in our
current ‘development’ model
These problems are not isolated to India,
or the Developing countries:
They are there in pretty much every country in
the world – with slightly different flavours and
varying intensity
3.
They are ‘systemic’ problems
That’s all for now 
NOTES SLIDE

3-4 short films that can be shown
1.
2.
3.
4.
5.
Does Growth equal progress? [5.44min]
GNH Explained [3.48 min]
Going Beyond GDP -3:18min [~TV report]
Mismeasuring the Economy [James Joyce
I’view on RNN – very good, 9 min, but requires
careful listening ]
Global Wealth Inequality
Backup Slides
Many of our grave problems today, like…
1.
2.
3.
4.
5.
6.
7.
8.
9.
Poverty, amidst plenty
Rising Inequality
Environmental Degradation
Unemployment, and overwork
Murder of Democracy
Financial Instability
Growing GDPs, decreasing Wellbeing
No limits to ‘How much is enough?’
Naxalism, Terrorism, War
… are systemic
NOTES SLIDE

Problems can be put under 3 categories



Directly linked to cap’m, as on prev slide
Those like communalism (racism/migrant issues)
that tend to get used when society is in stress
Third not very directly linked to cap’m
What is a systemic problem?

A systemic problem is one that arises from
the structure of the system and thus affects
the general behavior of the entire system.

If every dog at doggy daycare has fleas, it's a
systemic problem
What is a systemic problem?



A systemic problem is a problem due to issues
inherent in the design of the system itself, rather
than due to the behaviour of some specific
individual(s), isolated factor(s).
It is a not a problem that has occurred because of
some accident, malfunction or inefficiency in the
system – it is a necessary feature or corollary of
the system (yeh to hona hee tha!)
A change to the structure, organization or policies
in the system is thus essential to the alleviation of
the systemic problem
Why is this important?


Because, systemic problems can be solved only
by changing the structure of the system itself
I.e., Systemic problems require systemic
solutions.



Systemic solutions are solutions that aim to redesign,
reconfigure the system itself.
In other words, they understand the root causes of the
problem and aim to resolve the root causes themselves
And more importantly, they cannot be solved by
doing ‘more of the same’ – in fact, that would
worsen the situation!!
An example:
Systemic issue, symptomatic solution

A systemic issue of a high crime area could be
the high unemployment rate, low educational or
skill qualifications, low income of residents.
So, if your solution is to increase police presence
in a high crime area, that still won't solve the
issues driving people to do things out of
desperation.
In fact, such superficial fixes lead to shifting of
symptoms, and a worsening of the original
problem!

Not recognising a systemic problem, and
not addressing it via a system overhaul is
akin to…
“Putting off our date with reality”
And some more…


Why are countries rich or poor, developed and
under-developed?
Have the same countries been rich or poor
throughout history?
Share in world GDP (1700-2000)
Share in world
GDP`
1700 1820 1900
1950 2000
India
24.5 16.1 8.6
4.2
4.0
China
22.3 33.0 11.1
21.8 22.9 34.2
4.6
26.2
7.0
Western Europe
~20
(estimated)
US, Canada, Aus, 0.2
NZ
1.9
17.6
30.7
~35
(estimated)