Strategy, Transformative Technologies, Jobs, Economic Growth and Taxes - Part II

US Economic Growth and the Borders Within

“The external deserts are growing because the internal deserts are so vast.” ~ Pope Benedict; Pope Emeritus 

The extent of poverty in the US and in the world has just been redefined. Previously the UN had defined the level of poverty in countries as whether one subsisted on more or less than $1.90 a day. It occurred to economists that the ability to subsist is affected by weather and the need for childcare and transportation, among other needs.* To reiterate from Part I, “According to the World Bank, 769 million people lived on less than $1.90 a day in 2013; they are the world’s very poorest. The standard has been revised to reflect the needs of those who live in such places as the US., where childcare and transportation figure among the necessities of life and work. $4.00 a day determines whether one is poor or not in the US. Does this include entertainment? Of these, 3.2 million are in the US, and 3.3 million are in other high income countries (most in Italy, Japan and Spain).

The world Bank adjusts its poverty estimates for differences in prices across countries, but it ignores differences in needs. An Indian villager spends little or nothing on housing, heat or child care, and a poor agricultural laborer in the tropics can get by with little clothing or transportation. Even in the United States, there are more homeless people sleeping on the streets in Los Angeles, with its warmer climate, than in New York.”

China, India, the Youth Glut and Economic Growth

China has lifted hundreds of millions out of poverty by a combination of strategies. Part of China’s strategy is Mercantilist. The R4I strategy of exploiting the commodity resources of other countries, mostly African countries and Venezuela in exchange for infrastructure investment by China has served mainly to provide jobs and opportunity to the Chinese. Premier Xi Jinping’s  OBOR or One Belt, One Road economic development strategy is a continuation of R4I along different routes. It will be interesting to see whether China or Russia will have the greater geopolitical influence on Central Asia, the Silk Road, as China pursues R4I. 

The second strategy of China’s could be called OSSR for One Strategy, Several Roads. China is also pursuing a strategy of encouraging reciprocal global trade with Alibaba and Tencent. Alibaba has delivered lectures in places as disparate as Detroit and Jakarta in order to spread its gospel of reciprocal trade and economic development along the cloud.

It will be crucial for humanity to see how India conducts its transition from a largely agricultural society. During its “Cultural Revolution,” Mao killed as many as 60 million people, outdoing Stalin who killed an estimated 20-40 million people during the Soviet Union’s “economic” transformation. In the U.S., the native Indian population has been decimated. The remaining native American Indians live in ever diminishing reservations, in poverty, beset by alcoholism, diabetes, glaucoma and other diseases. "Life breaks all of us and some are strong in the broken places," says Hemingway: many are not. Economic transformation is cultural and strongly associated with respect and reverence for life. 

India 

Whether India, the world’s most populace democracy can sustain its economic growth, is strongly affected by its demographics. Two-thirds of India’s 1.2 billion people (twice the U.S.population), are below 35 years of age. The working age populations of Japan, China and Europe, India’s is growing and is estimated to become the world’s largest. 

Prime Minister Modi’s $1.8 billion skills initiative to train mainly farm laborers into electricians and plumbers has produced an insufficient number of jobs. 

In Part III, I will suggest how India can sustain rapid economic growth, in accordance with its unique culture.

* Angus Deaton -Professor Emeritus of Economics, Princeton University