Saturday, September 19, 2009

On Economic Growth

Yesterday I had a great dinner with some tofu teriyaki (I'm a vegetarian). It was fun to see how the cook made the food in front of you. I enjoyed the meal, the process, and was fully satisfied at this interesting experience at the end. Part of the fulfillment also comes at the cheap price: the meal costs about USD $3 and included all-you-can-eat fried rice. On my way back on the bus, it came to me that this is the meaning of economic growth: on average, everyone in the society consumes more, but also becomes more skillful to produce more, so that everyone's consuming / producing ability increases. And when everyone's consumption / production increases, the economics grows.

So indeed economic growth can be seen as a form of progress: making more, having more, and consuming more. But is such thing always better? As some of the productions may do harm to environment or people? Or the exchange might be unfair / unlawful (labor exploitation, or extreme poverty / richness caused by unfair distribution) But then I realize this is a question of “what do you consume?” You can also consume spiritual / knowledge goods (which I do.. mostly) and lower your material production / consumption (to lessen the environmental impact). So the ills in modern societies may not be inherently the fault of economic growth (as protesters of WTO or G8 believe); but rather, what the society chooses to produce and consume. For example, if society chooses to spend resources and focus consumption / production on education, on social work, on caring for the sick / poor / old. Then there may still be quite some economic activity (more social workers and exchange of their productivity), but in a service fashion with minimal environmental impact. In fact, one may argue that the growth of service sector in developed nations, reflects our shifting needs from the material world to the mental / psychological, or even spiritual. So for my verdict, perhaps economic growth isn't inherently bad after all. From another point of view, growth is inevitable as humans always want to become more / have more / enjoy more, or become better at certain things. This pursuit is relentless and likely will never end. However, while 'growth' is unstoppable, I think we can choose in what aspect shall we grow: for material collection / production, or for other types of activities / services? (for example, do shopping in the virtual world instead of real-world shopping, invest in education / learning instead of buying bigger houses or furnitures).

If so, we might actually enjoy the benefits of growth, without having to cause harm or make permanent damages to the environment or other living beings in the process.

Wednesday, September 09, 2009

Let Social Works Become a Noble Form of Consumerism

This morning while jogging, I spotted a homeless sleeping by the river bank of my usual jog route. It was probably the first time I saw a homeless near the riverbank, to my recall, and so I was somewhat surprised, at how poverty seems to have grown to affect people in new places. It also reaffirms the widening gap between the rich and poor, reported in the news.

How to help the poor and needy (and I meant really help, not just giving them some temporary assistance), has been something on my mind for a long time. And as I try to understand poverty and solutions people have proposed (an excellent reading is Redesigning Distribution, where the concept of basic income is explained. The idea is that a monthly allowance for basic living should be given to all citizens as a basic right, much like public education, health case, and pension), a recurring theme in my discovery is that poverty does not have to be a permanent state in society, but rather, it relates much with 1) how much the society can make/produce, and 2) how those wealth/goods are being distributed. In fact, one view (and one that I personally subscribe to) holds that in modern societies where per capita income exceeds USD $10,000, the total amount of wealth produced by the society is enough to allow everyone to live a relatively secure and comfortable life, even with some people not working at all!

Why then? Does poverty still exist, and there are still extreme poverty, even in very well-developed nations such as U.S.? The simple reason would be the disproportional distribution of the wealth generated. It's quite common that wealth is concentrated on a small rich and powerful group of people, who accumulate and also decide how wealth should be allocated. Of course, in most modern societies, wealth is being generated and distributed via some form of market mechanism, which is probably the most efficient known form of wealth production and distribution. And then we have one of the three certainties in life: the tax system that also re-distributes wealth to make public works (roads, schools, hospitals) possible. But apparently, having a highly efficient market, or even a well-intention government, still does not solve the poverty problem, where some unfortunate souls are bound to suffer and not benefiting from either the market or the tax system. They either do not have enough skills or motivations to earn a good income in the job market, or are too shy or physically / mentally incapable to seek help from the government (let along the inherent ineffectiveness of governments).

It seems then, that until some form of basic income-like social security system can be put in place (which is another story, but even so, it'll remain a government-sponsored program with all the pitfalls and problems), the best hope for solving poverty remains with the private sector, at the hands of the people, or some willing members of the society.

There are numerous examples of how the private citizens, through the forms of non-government organizations (NGOs) or non-profit organizations (NPOs), have helped to improve social welfare. One well-known recent example is the Bill and Melinda Gates Foundation, which has become the largest humanitarian organization on Earth in only a short few years, simply due to the commitments and managerial skills of its founders. During one trip to Australia, I talked with a IT professional next to me on the airplane, who told me that in Australia, because labor jobs are very well-paid, if a blue-collar worker is willing to work a few extra hours each week, he/she can earn even more than what he makes as a white-collar professional. This discussion let me to believe that poverty really is not an unsolvable problem, but something that directly relates to how a society chooses to spend its money. If the society accepts and ensures that wealth be more equally distributed, then we may bring better social welfare to everyone, as already happened in Australia.

So if we accept that poverty is caused by unequal distribution of wealth rather than the insufficient production of wealth, and we still wish to retain the current market economy and tax systems (assuming they won't change any time soon), how can we make wealth better distributed so that poverty may no longer exist?

One possibility is through higher taxation, especially from the well-to-do. But given the human nature of preserving wealth at our own hands, and the general distrust of government's transparency or efficiency, raising enough tax so that basic income can become universal may still take a long time. A more practical and feasible way seems to be the well-to-do people's own willingness to re-distribute. But how would this be possible?

The insight I had this morning was that all it takes is really a change in attitude and mindset. During my most recent trip to Japan, I was amazed at how expensive a piece of paper or cloth can cost, simply after some small thoughts and designs are put onto it. Obviously the material cost of the paper or cloth is not much. However, after adding a little artistic design, its price / value increases such that the affluent would still be willing to pay the higher price.

It's probably no secrets that the rich consumes / buys at a different level than ordinary citizens, and that people with different incomes have different spending patterns on the types of goods. For the rich and affluent, simple and basic material consumerism can no longer satisfy their needs and desires, so they seek higher-value products that could bring either atheistic enjoyment, pride, or social status to them (think of LV bags and brand products). Shopping or consuming no longer is a material activity, but a social, artistic, even spiritual one.

The change in attitude and mindset that we need thus is if the rich can see buying and spending for social welfare, is actually a noble, atheistic, and even spiritual thing to do. Instead of shopping for sports cars, luxury home and boats, jewelries and LV bags, if the rich can actually shop for, say, helping 50 kids in developing nations to go to school, or helping stray dogs and homeless a place to stay. Then our social welfare may be much improved, by simply consuming more of these Social Welfare Goods.

However, one important trick here is that these social works or social benefits, need to be packaged, branded, promoted, sold, and even be displayed (as trophies), just like any other existing consumer products. Because otherwise, the rich will not have access or ways to actually buy these products as consumers. This will take some experiments and quite some ingenuity. However, if it can be done (packaging and selling social welfare), then it may bring a much needed change to the landscape of social welfare or wealth distribution.

Just like sub-prime mortgage was creatively and ingeniously packaged as bonds to be divided and sold in global market (which subsequently caused the largest economic disaster in recent years), perhaps we need ways to package and sell social welfare services and products to the rich people in easily accessible and promotable forms. The key here is packaging and productizing, so that all the usual marketing stuff can be applied, except this time they are for the social welfare of the less fortunate members in our society.

I don't yet know the specifics of how this might be done, but it looks promising to bring changes to an issue that is as old as humanity.