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The notion of the economy

  • Published at 12:45 am November 23rd, 2021
Economy concept

Explaining a term much bandied, but essentially unexplained 

Dear reader, you may recall the clarion call of a generation ago by a political strategist to a certain Bill Clinton who, from the periphery of the Democratic Party, unseated George Herbert Walker Bush from his seemingly unassailable position as pillar of the establishment and incumbent president. 

Fresh from victory in Gulf War One, and felicitated with the ultimate American accolade of the ticker tape parade, President Bush could do no wrong. The successful demonstration of military might have been sufficient to usher in a Cold War cynic for a second term, but in 1992, young Bill made the economic recession, bolstered by a call for change and democratization of healthcare -- one of the three prongs of a campaign which captured and rode the groundswell of discontent into the White House.

What, then, is this thing called the economy, a word much bandied, but essentially unexplained? 

A simple definition suggests that it is the process or system by which goods and services are produced, sold, and bought in a country or region. A similarly beguiling definition of the prime engine of the modern economy has it that money is something (such as coins or bills) used as a way to pay for goods and services and to pay people for their work.

Let us then presume that an amount of physical or intellectual effort deemed valuable to the collective commercial human enterprise needs to be expended for an individual to participate in this notional undertaking. 

Therefore, the moment “the guy” picks up the box, and places it on the kitchen slab for the convenience of the woman of the house he has participated in this endeavour which should, with luck, earn him reward by way of a negotiated sum of money. So, where there is recognized and desired human effort, it converts into a unit of value measured by money. 

If there is no effort, or the effort is not deemed valuable, then the corresponding value fails to be generated.

And how much are you willing to spend? Money must flow, and cannot remain dormant in the designated account. If a hopefully steadily increasing amount of money is periodically credited, then there must be sufficient incentive for the account holder to inject a correspondingly larger portion into the fundamental activity of sale and purchase. 

There is no dearth of people with money, but the indices of the public exercise of the economy depend upon how much of the stuff is in circulation.

In the late 1980s, India teetered on the edge of bankruptcy. But in a classic example of successful human endeavour typically remaining irreconcilable to the requirements of the regulatory and legal framework, the manipulation of banks and under-capitalized stock exchanges by the likes of Ketan Parikh and Harshad Mehta created a world of growth and wealth hitherto unimagined.

Illustrative of another facet of the economy, an eventual transformation occurred in the salary structure at every level of the working population, thanks in great part to the presence of the multinational corporation, now a permanent fixture of the corporate and commercial world. 

The MNCs stamped their imprimatur on the burgeoning economy. Rather than purchase eventually sluggishly performing assets, they created expenditure. And by paying rent, they created a property market that eventually triggered a booming buyer’s market. Owning a home was no more the pipe dream of our parents.

India is today largely self-dependent, which includes a still substantial self-reliance in agriculture. As another example of the lack of logic that is the economy, wealth and circulation of money have grown enormously in the last 18 months, thumbing a nose at the universal scourge of Covid-19. 

While being the sixth-largest in terms of adding value to the stock market, the essentials of traditional growth also display an upsurge. Production of iron and steel is unprecedented, there is confident growth in defense research and production, and steps are taken towards maximization of agricultural output.

However, we in the subcontinent, can definitely do better in casting far-sighted plans for reduction of dependency on fossil fuel, as witnessed in Sweden, Germany, and Finland, and emulate the extraordinary entrepreneurial and risk-taking willingness that is the bedrock for the spectacular commercial success of the People’s Republic of China. 

We have taken gigantic steps in creating the “thought economy”, which will power services for the next generation. Huge swathes of unaccounted capital are now a formal part of the official tender that circulates today, and hard-copy banknotes are being steadily supplanted by electronic transactions as a testimony to the willingness of a population that accepts this invisible mode of commerce as the next frontier of trust.

Let us be cynical and presume that the money-driven economy of today is the highest art of creative manipulation. We may accept the inherent illogic of the wisdom that the economy goes into recession when spending is depleted, but are simultaneously forced to bear disbelieving witness to the reality of millions of vehicles clogging the highway and burning petrol. 

Let us presume that the average citizen of any country shall never receive a fair wage in the age of statistics, which boasts of huge reserves and circulation of money, but which, tragically, reduces to nothing when calculated on a per-individual basis. 

Let us also presume that the woman in the house shall never be adequately rewarded for her key role in powering the money juggernaut. But, dear reader, the actual unavoidable stupidity is that we have been simultaneously born into and inherited the most creative and colossal exercise of human cooperation.

Therefore, adopt your immediate locality, because we as somewhat more privileged individuals, can intervene successfully in the plight of those less fortunate and build the economy in microcosm. We can do well to optimize and make the best of an imaginary thing for those around us.

Sumit Basu is a freelance contributor based in India.

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