In reaching an apt conclusion to the debate, it is important to understand the scenario that has been projected by this question. First, this displacement of labour is by way of automation. The process of automation, in such early years, is not capable of mirroring the creative, interactive and managerial capabilities that humans possess, therefore meaning that the predominant displacement of workers will be in blue-collar jobs[i](Bakhshi and Winsor, 2015) such as factory workers and builders. Second, the question highlights the viable use to Universal Basic Income (UBI) ‘in the coming years.’ This alludes to a greater focus on the short-term benefits of distributing a UBI as opposed to making it a permanent obligation for the government to act upon. Lastly, the question asks for the assessment on UBI for ‘large scale displacement’ suggesting that automation has been commonly equipped by firms and that UBI should strive to encourage predictable outcomes for workers and firms in a ‘large-scale’ point of view.

Knowing that the displacement of labour, here, is following a boom in automation, it must be said that the introduction of a UBI would be the best suitable response in the coming years. Why?

1.    As mentioned before, automated production procedures specifically displace blue-collar positions of employment, positions where there is deemed to be a lack of creative ability and creative output. This displacement is therefore predictable since, as research has shown, creativity is inversely related to computerisability.  ‘87% of highly creative jobs are at low or no risk of automation, compared to 40% of jobs in the UK workforce as a whole.’[ii](Knowles-Cutler et al., 2014) Principles of economics suggest that the lack of skills required in such jobs, where robots are more productive than humans in mundane repetitive tasks, may potentially lead to a state of occupational immobility for those whom have been made redundant via rationalization, and will consequently find it more difficult to find new jobs where their skills will be put to better use than the automated alternative.

This is where UBI may be effective. Through UBI, those who have been made redundant will theoretically be greater incentivised to pursue job-training courses since they are more economically capable of doing so. In such a circumstance, the government could make the transition between jobs more efficient by recommending potential paths of employment and provide a range of courses that would best train and prepare workers. This assertion is relatively realistic in the current day given the average age of a blue-collar worker to be at 40[iii]signifying a strong reliance on income suggesting that employment would be pursued. In this scenario, UBI provides a tool to facilitate the effective reallocation of labour to short-term job positions where automation may not be prominent. 

Not failing to consider UBI in the hands of employers, we can interpret this large-scale displacement in workers to provide an opportunity for cheaper labour that could be manipulated by smaller enterprises. Considering the 2010 case study of Iran were, by receiving 29% of the median income, there was a growing trend for Iranians employers to reinvest into their private/small businesses.[iv](Annie Lowrey, 2018)This occurrence accounts for a whole new breeding ground for potential employment for displaced workers because such enterprises wouldn’t be willing to invest in technologies. By way of UBI, such employers are similarly more economically capable of hiring a stronger workforce, which would go further to handle the crisis.

2.    By referring to the aforementioned point, we can also justify why UBI would be best suitable, particularly for ‘large-scale’ displacement in the coming years. As opposed to rival theories such as a greater incentive placed on reformed education for the future workforce or subsidising the interaction between robot and human workers (cobotics), the imposition of a UBI would be cost-effective with a relatively low maintenance cost as it holds a flat value. It would be considerably more sustainable for the government to hold further expenditure additional to the existing UBI cost for ‘the coming years’ since they would already be under tighter financial strings due to less tax revenue.

Therefore, under this proposed scenario, UBI would be provided for a short time frame, suitable to handle the immediate pressing situation facing workers and the economy. Perhaps, additional labour developments and the creation of new human-adapted jobs would take place to ensure that the economy is not solely held together by this unsustainable approach.

Is UBI the most promising approach to handle the projected scenario?

To answer this aspect of the debate, we must begin by placing ourselves in the mindset of the key stakeholder, the (blue-collar) worker made redundant, having a consistent flow of income despite their position of work. In any case, there is reason to believe this financial aid would reduce the incentives carried by the worker to continue their search for work since they are already in a supposedly stable position financed further by a distortionary tax system.[v](Robert Rycroft, 2017) A BBC interview with few participants of a sizeable experiment in Finland where, for 2000 unemployed, they introduced a temporary UBI of $500/month for 2 years, realized that participants became happier but remained jobless.[vi](BBC, Ashitha Nagesh) By this, it is unrealistic to argue that a UBI will directly form paths for the reallocation of labour away from automation-made redundancies.

To find fault with UBI also requires for this debate to be taken beyond economics, to a platform where we are able to understand the trajectory formed by the development of technologies in the workforce. Influential thinkers namely Mike Roberts, an Internet pioneer and leader with ICAAN, argued that automation is about to get much worse and that ‘the situation is exacerbated by total failure of the economics community to address to any serious degree sustainability issues that are destroying the modern ‘consumerist’ model (…) there is great pain down the road for everyone as new realities are addressed. ’[vii](Smith and Anderson, 2014) Linking this back to the notion of UBI, there is certainty that such a proposal will fail to inherently solve the issue of human incapability in matching the feats of technology, and leads thinkers to believe this situation may be out of the government’s capability to fix.  In such an inevitable scenario, UBI will provide terms of complacency by the government and amalgamates an economy with high virtual human spare capacity but lack of short-term policies to tackle the issue. 

Ultimately, this side of the debate asks us for a better alternative to a UBI to which many ideas have been put forward. A profound line of agreement that exists between optimists, pessimists and realists is the notion that modern education fails to prepare the next generation of workers effectively, or outright correctly. Bryan Alexander, a senior fellow at the National Institute of Technology in Liberal Education wrote ‘the education system is not well positioned to shape grads to “race against the machines.’[viii](Twitter, Bryan Alexander) This alludes to a wider consensus that the education systems fail to focus on the profound importance of learning and interpreting machine technology, thereby rendering future workers incapable of working ‘alongside’ technology.  

Coming back to economics, although disputed for its long-term effects, reform for the prioritisation of education, placing a greater focus on machine application and understanding would go so far as to allow for better innovative capability as the future generation:

-Will be better aware of the threats of automation, therefore, encouraged to innovate, but more importantly, 

–  A prioritised education will provide better insight into the potential areas of human involvement alongside the automated process. 

To compensate for the aforementioned time lag in this policy, the government may choose to subsidise current research that endeavours to focus on similar issues that the future workforces may take upon themselves. An example of a recent point of discussion has been ‘cobotics’ where in many cases, the technology carries out arduous and dangerous tasks whilst humans innovate and manage.[ix]

Is a UBI the best solution?

A universal income has the potential to be highly effective but is disputed on the grounds of how humans will choose to act upon being offered money, an interesting yet recurring problem that exists in economics. What is most important to consider is whether it is useful in both 1) large scale circumstances and 2) in the coming years. My assumption, although optimistic, is that it depends. To a certain extent, it has to work since no other current alternative provides an even theoretical mechanism to reallocate redundant-made labour back into the economy in the short term. Nevertheless, it depends on the decision–making the capability of the government to realize the blaring crisis in the education system and act for reforms to better equip the future working 

[i]The creative economy and the future of employment: https://apo.org.au/sites/default/files/resource-files/2015/04/apo-nid208166-1133726.pdf

[ii]Agiletown: the relentless march of technology and London’s response: https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/uk-futures/london-futures-agiletown.pdf

[iii]Online statistics by Elcosh of worker average age:  http://www.elcosh.org/document/1059/242/d000038/sect13.html

[iv]Online article published by Forbes: Does UBI discourage work?: https://www.forbes.com/sites/adigaskell/2018/03/05/does-a-universal-basic-income-discourage-work/#3ee91428541b

[v]The American Middle class: An economic encyclopedia of progress and poverty, pg. 314-316

[vi]BBC article and interview on Finland experiment:https://www.bbc.co.uk/news/world-europe-47169549

[vii]Survey by Pew Research Centre on the future of Automation: https://www.pewinternet.org/2014/08/06/future-of-jobs/

[viii]Bryan Alexander Twitter post: https://twitter.com/intent/tweet?url=http://pewrsr.ch/1rN9ta8&text=.%40BryanAlexander%20thinks%20the%20education%20system%20is%20not%20well%20positioned%20to%20shape%20grads%20to%20“race%20against%20the%20machines”

[ix]Vinci energies webpage: https://www.vinci-energies.com/en/its-already-tomorrow/towards-smart-industry/cobotics-when-people-and-robots-work-together/

The World Trade Organization, formed as a globalist incentive at the Bretton Woods conference of 1944, has already been held crippled to the isolationistic approaches of America during the times of the League of Nations. In modern day, it is yet again at the mercy of decaying international relations. America is currently embroiled in a trade war with China, which involves tariffs worth billions of pounds and the WTO is merely a bystander of the crumbling system it was set to oversee. 

To one extent, we can argue it is not plainly the fault of the WTO for the recent failures, namely because since joining the WTO in 2011, China has not turned towards markets, as the west expected. Instead, it has distorted trade on a scale that is far bigger than the dumping and other causes of disputes between market economies that the WTO was designed to handle. China’s state owned firms and its vast opaque subsidies have distorted markets and caused gluts in supply for commodities such as steel. It is for this reason that the EU and other developed countries share America’s desire to constrain China’s mercantilism, which results in foreign firms operating in China having to struggle against heavy-handed regulation, and are required to handover the intellectual property as a condition of market access.  According to sources, the WTO is currently aiming to plug these gaps by reforming government distortions and broadening the scope of banned subsidies but even the optimist would see it’s naïve to fathom China accepting such reforms that would jeopardise its state-run economic model. 

However, as far as I can see, it is in China’s interest to preserve the global trading order because, if isolated, the communist party cannot achieve the prosperity that cements its legitimacy. The benefits to China of its WTO membership has come not from lower tariffs in America but from the certainty of stable trading relationships.  Sure enough, China and the EU agreed on July 16th to cooperate on enforced WTO reform. 

For many, there is a much better strategy than wrecking China’s economy, one of which that is very well regarded is forming blocs so large that China would have to choose between compliance or isolation. Not to mention, ‘a WTO fit to handle complaints about unfair competition would be a gift to the world’, nevertheless a  world  in which China is pursued by critics through the WTO and faces proportionate retaliation when necessary, is preferable to one in which a tit-for-tat trade war can escalate without limit.

The WTO is currently a system far from perfect and has drawn criticism from both within and outside its ranks of users, however I believe with adequate reform the world trading system may yet be saved or even improved.

There are a plethora of ways in which someone can save and make money. And frankly, there are many things one would want to save up for. Whether it is through stocks and dividends, or simply saving in banks, nothing can be of safer investment than into the bond market.  It is partly due to that reason that the total value of internationally traded bonds roughly equated to $18 trillion. In this short paper, I aim to discuss the mere power and historic tale of the mighty bond.

Regarding its power, it is important to note that the bond market affects everyone, in two ways. Firstly, consider the fact that a large part of all money set aside for the future, ends up invested in the bond market.  Secondly, due to its large-scale operations, and given that government are seen as the most reliable borrowers, the bond market is what sets long term-interest rates. As we learn in economics, when the price of bonds fall, banks become more protective of their positions, and therefore interest rates skyrocket.

So where can we see it’s power shown in history?

In an engraving, by Pieter van de Heyden, the ‘Battle about Money’, he has tried to show that without money and funding, a war is simply a “chaotic free for all”The ideology of funding war by the mechanism of the bond market was, in fact, the cause of the Italian Renaissance. During the 15^thand 16^thcentury, the states of Florence, Pisa and Siena were at war. But why did Florence flourish in such times of turmoil? Simply put, they found an effective way of borrowing. They had wealthier citizens oblige to lend to their own city, and in return, they received interest. In effect, Florence turned citizens into major investors and at one point; two-thirds of the households were funding the public debt.

Nevertheless, when the bond market is heard, the first name that comes to mind is Nathan Rothschild. This is not due to the fact that the Rothschilds go down in and amongst the richest of British history, but wholly his involvement with the bond market, making shy of $600 million, during times of conflict against Bonaparte. An experienced gold smuggler, Rothschild had built up the connections to raise and transport gold, at a moment the British needed to transport it throughout Europe to fund their war against Bonaparte. He raised 1.2 Million GBP by 1814 and got a good commission for it. The biggest bet he made was at the moment Napoleon escaped from Elba. Rothschild bought all the gold he could find in the assumption it would be needed in another long war. But Napoleon’s quick defeat in Waterloo meant the gold price was bound to fall. This was when he had his eureka moment. He realised that after the victory of Britain, government borrowing was likely to fall, meaning that bond prices ought to rise. And they did. After buying bonds relentlessly via all his gold, Nathan Rothschild realised profits roughly equating to $600 million, allowing the Rothschilds to dominate the international for half a century after Waterloo.

The examples of Florence and Nathan Rothschild have proven the bond market to be a powerful yet beneficial financial resource. With the First World War, this changed. Governments had to rapidly increase their supply of bonds to cope with the towering fiscal deficit. In my opinion, this seemed to be their only viable option, and the past successes of such endeavours into the bond market would have fuelled their confidence. Especially Germany and its allies did not have access to the world’s bond market and found it increasingly difficult to raise money. After their defeat, a weak authority and great spending lead to a surge in, between 1913 and 1923 prices rose by 1.3 trillion per cent.

Either way, my zeal for discussing the power of the bond market has shown to be justified. As far as I can see, the manipulation of the bond market can have tremendous benefits and catches, for both the manipulator and the greater public.

 It was James Carville, the adviser to President Bill Clinton, that once said if he were reincarnated, he “would choose to return as the bond market. He could then intimidate anyone”.

Chinese Progression

Most of China’s increased share of global trade has occurred after a period of reform in 1978. In this paper, I plan to summarise China’s trade liberalisation efforts during the reform period prior to the WTO. To an extent, it is evident that China transformed from what is still widely assumed to be an inclusive economy, to increased transparency and openness, whatever the consequences look like.

Prior to the 1970s, Chinese commodity trading was effectively determined in its entirety by state economic planning, covering short of 90% total imports. A significant portion of exports, furthermore, didn’t enjoy a comparative advantage in production either, meaning that, as theory dictates, exporters had little incentive to monopolise on international sales. This consequently amounted to China’s inability to finance imports embodying advanced technologies, which would have encouraged development and growth. There was a strong manifestation of these inefficiencies as highlighted by how their share of world trade dropped markedly between 1953 and 1977 from 1.5% to 0.6%.

Predictably, with new approaches adopted by reformist Deng Xiao Ping such as encouraging micromanagement within smaller enterprises, the system of marked planning of the economy began to die down in 1974. And while the government still supervised operations via nationalised firms, trade was increasingly decentralised and was greatly focused on by the free-market. As direct-trade controls were phased out, the system was far more subject to natural trade barriers(an expected change due to free market adjustment), and thus the trade system in China was modernised. After a series of reformations, China had managed to shift the trade process toward manufactured goods where the so-called ‘extractive economy’ invested predominantly into cheap labour and efficient processes; China’s share in global transports quadrupled.

Recently, alongside the momentous growth in demand of technology, China has become the important location manufacturer of electronics, popular in the microchip industry, posing a significant threat to the USA (that’s another discussion) and cements the Republic’s public image as the potential for the next superpower.

China’s trade growth has, however, been faced with new competition, which can be measured via the import: GDP ratio. This ratio grew from below 15% in 1990 to 30% in 2003. Given that this is 3 times that of Japan and 2 and a half more than India’s ratio, it is very possible to question their ‘cemented’ status as the trading hegemony. Between 1995 and 2002, employment in the state sector had depleted by 40 million and the shrinkage of the state sector has highly evident. The detrimental effect of competition in China goes hand in hand with the multiply in inventory accumulation (proportion of output unsold) given that it had averaged a frightening high of 6% in the light of the Asia Financial Crisis (1997-1999), but has since returned to shy of 1%. Huge debate also surrounds the ability of the CCP(Chinese Communist Party) to maintain capitalism in a one-party state. As drawn attention to in ‘Why Nations Fail’, Acemoglu and Robinson highlight that the inability of China to foster innovation will prevent them for sustainable future growth.

In conclusion, China can easily be used as an example of the prosperity that follows from rigid state control, and has progressed to open their economy to search for tackle on America. I believe, the benefits of international trade and competition namely the greater efficiency in responding to international demand will manifest itself upon all other ready sectors of the Chinese economy.

In reaching a well-defined verdict to this question it is fundamental to clarify that, in all cases, politics will affect economics. Nevertheless, several debates exist within the focus of this question. Do politicians trigger economic constraint? Is politics required to assume the role of ‘an invisible hand’ to allocate resources in an economy? Does politics provide a mechanism to facilitate international relations and growth? Political systems and policies clarify a path to which domestic economic growth may be achieved, under certain specific proposed constraints. This paper will assess, with reference to the debates that exist under this topic, whether the presence of political systems and enforced democratic policies ultimately have a negative impact on economics.

Let’s rid of politics, and those who come with it

Politics, behind the wall of accountability promised to the electorate by their representatives, is plagued by self-interest and thus poses an inevitable threat. As highlighted in a speech by Dr Eamonn Butler, director of the Adam Smith Institute, modern-day politics is run on a pursuit of individual demands. Why is this important? It signifies, beyond the lack of healthy consensual politics, that proposed policies are blunt and have little significance. Through this lens, politics solely provides a mechanism to voice the demands of an individual party. In his speech, Dr Butler places focus on the very legislative of the House of Commons, claiming ‘even the perfect policy would [be transformed into] a self-interested policy’ making reference to the several stages where MP’s have the opportunity to debate and add additional clauses. Self-interested policy foreshadows insignificance and potentially damaging effects for distinct parties of the economy.

Secondly, there are the evident threats posed by way of the over-arching influence of politics and politicians on domestic firms. Named the ‘politicisation of the economy’ this has been a recurring impact in case study of the Indian economy. ‘The problem of [India has been] inefficient and politicised public banking (…). This is an example of the absence of deep reform. The government is also accused of distorting price statistics’ (Martin Wolf, 2019). Political factors namely anti-trust law, trade controls, regulation and corruption level all have the capacity to incentivise the allocation of resources within a company. In any case, a political influence upon an enterprise accentuates the inability of firms to expand when at the grip of intense regulation.

We may need it after all

 To justify the presence of politics within an economic system, it would be most important to highlight its fundamental role in facilitating an ‘economic flow.’ Joseph Schumpeter says, ‘even if markets often do “work” the way they are supposed to, they are also highly disruptive and prone to periodic breakdowns’. (Skidelsky, 2018) Contrary to Dr Butler, politics has the essential role of coordinating market signals. Elsewhere, research suggests that assumes an integral factor for attracting FDI into an economy. Studies by Biglasier and Staats suggest that fair   legal systems and strict enforcement and adherence to law encourage a certain degree of hot-money inflow. (Biglasier and Staats, 2010) Does this empirical relationship illustrate that the political system also indirectly encourages the prosperity of an economy?

Secondly, beyond the influence of politics on our own firms, we need to ask ourselves if it is key for international growth and interaction with other economies (globalisation). It seems plausible that a political system would be more democratic or effective in other words, in re-launching globalist policies that might see the economy well, instead of having that decision at the hands of the self-interested private sector. Yet again we see ourselves in a position to accept the claim that politics may be the essential co-ordination system all thriving economies requires. Standing by the claim that globalisation is ‘good’; we can refer to Michael O’Sullivan who says ‘Politicians could yet try to avoid the “end of globalisation” (…) by taking real action to distribute its benefits more equally. The perceived consequences of globalisation – inequality, the power and profitability of large corporations, and environmental spillovers to national jurisdictions – trigger political realignments.’ (O’Sullivan, 2018) O’Sullivan suggests that politicians may be the key to maintaining international prosperity that would otherwise fall in demise.

To support politics, the last straw would be to consider the reality of politicisation. Looking back into China, there lies an answer to whether the dominance of politics in an economy could be sustained in the long-term. The reforms by the then leader Deng Xiao Ping, since 1978, had significantly reduced the role of the political system upon economic actors, by providing greater economic liberty. Starting at the bottom by bettering micro-management enterprises, it reached a point where politics and economic co-existed to ensure the greatest social optimum with minimal corruption and unofficial influences. (Lardy,2003) It depends on whether economies, at whatever stage in development, are capable of reform to ensure maximum proficiency in the interaction between the economic and political system.

Verdict?

` The economy, nor the state, is blind to the threat to politics on the economy. After all, all they have to do is look back to India, China and indeed Britain, where actors in the economy are indefinitely bound by the restrictions poses by the government. The final remarks, however, of many economic thinkers namely Dr Eamonn Butler of the Adam Smith Institute are short-sighted and naïve when claiming that politics ultimately ruins economics. In essence, both sides of the argument should not fall short of considering the capacity of the economy, not only in formulating decisions but enforcing them. If politics is able to act upon one of one of its fundamental requirements of supplementing the economy, without being bogged down by individual pursuit, there is no question in the scale of benefits that would exist. For the reasons discussed, politics is necessary. Contrary to Butler, trade blocs and global associations, in their current state, will not to able to facilitate the ‘channelling’ of demands efficiently, meaning that politics has to be a do or die for the economy.

Bibliography

Article from the Financial Times on the Progress of Indian growth- Martin Wolf, 2019-https://www.ft.com/content/8e660642-2891-11e9-a5ab-ff8ef2b976c7

Article on the relationship between politics and economics by Robert Skidelsky, 2018- https://www.neweurope.eu/article/good-politics-bad-economics/

Research paper carried out by Glen Biglasier and Joseph Staats named, ‘Do Political Institutions Affect Foreign Direct Investment?’ published in 2010

Online research article on the relationship between politics and globalization by Michael O’Sullivan in 2018 called ‘Globalization and Politics’- https://www.credit-suisse.com/corporate/en/articles/news-and-expertise/globalization-and-politics-201801.html

Research paper on the experience of Chinese trade liberalization by Nicholas R.Lardy in 2003 called Trade Liberalization and Its Role in Chinese Economic Growth.  

It was the American economist Arthur Bloomfield that once said, ‘a substantial measure of direct control over private capital movement, especially of the so-called hot-money varieties, will be desirable for most countries not only in the years ahead but also in the long run.’ In this article I would like to assess the principle having a strategy (a confirmed approach) for pursuing economic trajectories and their effectiveness.

To begin with, let us consider the case of the case of Myron Scholes and Robert.C.Merton, two Nobel Award winning ‘quantitive analysts’ whom felt, as I did before writing this, that financial markets can be regarded as perfectly efficient. They assumed whilst living on ‘Planet Finance’[1] that markets where fully adaptable to crises, had no influence of investor biases and where also fully continuous. For that reason, in 1933, these two quants developed a revolutionary profitable strategy to price options which would adapt itself via 5 variables: the current market price of the stock, the future price at which the option could be exercised, the expiration date of the option, the risk-free rate of return of the economy and most importantly, the annual volatility of the stock. With the big expectation that people, whom were clueless on how to price an option, would dominate the market, they ventured to create Long Term Capital Management. This diversified portfolio fund tended to attract big banks, the likes of Merrill Lynch and UBS with a minimum investment of $10 million since with a four-year investment, that minimum $10 million would have been converted shy of $40 million.  As evident, by 1997 the net-capital stood proud at $6.7 billion. Importantly, a majority of capital used by LTCM was in fact borrowed; nevertheless the mathematicians were adamant their strategy would only post returns considering their incredibly diversified portfolio of up to different 7,600 positions. Long-term capital management flourished on the general premise of price inconsistencies. Their strategy grasped on to identical assets with fractionally different price points.

As mentioned before Long-Term Capital Management were living on Planet Finance, and in 1998 the real world caught up. After a series of economic and political failures, Russia was driven to default thereby having sequential effects on other emerging and developed markets. Predictably, as stock equities plunged, volatility has gone through the roof to 29% and later to 45%.  Despite their reassured confidence and diversified strategies to prevent losses at any cause, LTCM has posted a loss of $550 million in a week’s time. To buy back some assets the quants scrambled searching for large sums, they were in dire need of help and even contacted the likes of George Soros.

George Soros was the embodiment of the message that quantitative analysts advocated against. He was a firm believer of the theory of reflexivity which was built upon the foundation that feedback loops existed within markets, and the volatility of prices were dependent on perceptions of reality. ‘According to Soros’s theory of reflexivity, financial markets cannot be regarded as perfectly efficient, because prices are reflections of the ignorance and biases, often irrational, of the investors.” Not only do market participants operate with a bias”, Soros argues, “but they’re bias can also influence the course of events”.[2] Via the mechanism of perception, Soros profited largely from taking numerous short positions, his most remarkable being his bet against the British pound in the 1990s. In this historic case, Soros was adamant that the rising reunification cost for Germany would drive up the Deutschmark. He linked this to the ERM where Conservative policy dictated that the pound would shadow German currency, and concluded that when Great Britain would forcefully remove itself from the ERM that the pound would fall.  His confidence, a trait we saw with LTCM, led him to bet  $10 billion on this depreciation. He was correct. Britain left the ERM and Soros’s fund earned over $1 billion in a single transaction.

The question we ask ourselves is who was triumphant. On the one hand, Soros earned what can only be seen as a fraction of LTCM’s initial revenue via prediction. On the other hand, whilst Soros maintained this, LTCM   had lost theirs due to calculation.  To an extent, we can we can argue they both parties used strategy, albeit different forms. The problem, however, laid in the timely effectiveness other strategy. The Scholes-Merton formula had only considered the previous five years of data. Have they gone back another 11 years, their formula would have stumbled upon 1987 stock crash, and a further 80 years would’ve captured the Russian default.  This leads us to think that a more pragmatic approach to formulating strategy in economics can lead to a far greater deal of success. Nevertheless, it is imperative to point out that is pragmatism will always be fuelled by perception. 

The meaning the ‘defined’ strategy is tenuous, however considering these two examples, a strategy insofar as being eloquently adaptable is well worth the bet.

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By Rishi Varghese

Following a prolonged period of slow and non-liberalistic growth with low levels industrialization and lagging productive capital, the last two decades have proven to be prosperous for the developing economy since India has virtually doubled in economy size between 1980 and 2001. In terms of GDP on a purchasing power parity (PPP) basis, it had ranked fourth on a table of major economic powers. However, since population in India had risen some 63%, the immense growth in the country has been somewhat undermined. In this paper, I intend to analyze the causes of growth and potential sources of how this growth has been undermined.

How can we objectify this growth?

Growth Theory implicates that initial conditions of an economy can act as a promoter or a mere hindrance for growth. As predictable, poor countries can grow faster that rich countries as they have available to them a wider shelf of potential technological opportunities available to them. Similarly, studies have suggested that countries with abundant resources tend to perform less effectively than those well-industrialized economies. Nevertheless, India’s experience did not bear this convergence; countries richer and poorer (China) grew faster, most critically and surprisingly in the manufacturing sector.

Two other key differences between India and the other economies are as follows

1. India’s human capital development, which can be measured by literacy rates and productivity rates, were far poorer, with 67% of the population classes as illiterate in 1961, as opposed to 47% in China and 13% in Korea. Furthermore, the other countries had accelerated in reaching full literacy rate whereas India was considered stuck in Nehru’s government(74.4% in 2018).
2. There has been a significant debate around liberalisation, in India, as an inclusive economic growth strategy. Income inequality has deepened since 1992, economic growth was at it’s lowest in 2012-13 and consumption has remained low in the poorer classes. Economic reform have failed to tackle developmenal issues within the economy thereby restricting it from future sustainable growth. This may provide further insight into why other economies, namely S.Korea and Indonesia have begaan to approach the industrial ouput and capacity that India prides. Paul Romer, Nobel Prize winner of 2019, says ‘the source of growth in a few Asian countries was their ability to extract relevant (…) knowledge from industrial economies and utilize it productively within the domestic economy.’

I feel it is important to point out some key obstacles that India continues to face in labour market growth. One renowned criticism of the Indian economy is evidently the politicization of the free-market. In effect, no one major corporation is independent from political influence, and can/will be held to account for any margin-extending policies they may decide upon, by ministers. The has led to the spill-over effect the general economy where there is a lack of restructuring that is necessary for the business system to be compatible with the complex network of globalization.

Second to that, there exists a growing concern over Indian demographics and the consequence of an unofficial constraint on growth. Despite India’s dependency ratio fallng by 8 percentage points each decade since 1990 (faster than the 6 percentage points it dropped between 1978 and 1990), however by 2030, India could see an increase its workforce by upto 200 million. This therefore contitutes for the overwhelming dependence on foreign loans to contain the possibilty of an economic disaster. A clarifaction is needed on the debate about whether India is able to enforce the required guidelines that ensure disasters are prevented.

Speaking of politics, it is also considered that India, to date, it yet to have a Prime Minister who has developed fully effective policies to ensure a positive deviation toward a prosperous economy. Unlike in China where, the integral reformist, Deng Xiao Ping developed ongoing plans (1978 to 1989)that helped propel China to what can be considered a hegemon, India has never catered for such reform. 

Nehru(1947), the first PM, is known for manipulating and incentivizing the agriculture market as a mechanism to promote international cooperation. When Indira Gandhi took over as prime minister in 1966, after a delayed time period she vigorously followed the economic paradigm of her father and, in the addition, adopted a new program of ‘green revolution’. This changed when the Vajpayee government of 1998 demonstrated to resolve and carry forward reform, in terms of accelerating growth, rationalizing regulatory framework, and further liberalizing trade and financial network. We can infer that, due to the conflicting objectives of past Prime Ministers, India has been left with nothing more than a tangled web of ideologies, each individually meant to be follwed.

Conclusion

It is factually evident that India has demonstrated the ability to grow faster and economic reforms have been given a chance to showcase its competitiveness. Nevertheless, growth has been impeded by factors we have now analysed; therefore we can only hope that the right objectives are met so that best is still yet to come.

“You don’t start out writing good stuff. You start out writing crap and thinking it’s good stuff, and then gradually you get better at it.

That’s why I say one of the most valuable traits is persistence.”

― Octavia E. Butler

Welcome to my new blog. My name is Rishi, and despite a profound hatred for writing I developed a liking for expressing my own ideas and viewpoints within the field of economics. And thus, Economic Relate. Since beginning to learn economics, I was given a much clearer understanding, not only of the way humans think, but importantly better insight into the element of interaction we may oversee in our daily lives. This grew into a more macro interest, toward topics such as China & India, automation, and the politcal economy. This blog simply serves the purpose of preserving some of those ideas I develop and what I hear(and potentially critique).

Join me in gaining this insight, I’m sure it won’t bore too much. If it does, I’m always looking for feedback on how to improve, and inspiration on what to draw the light upon.

Thanks for reading!!