The Palimpsest of Sawbones Surio

Pessimism of the Intellect, Optimism of the Will

Archive for March 2011

“Worker-Bees” of the world, unite? Part-III

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Minor Prologue:

Continuing with the multi-part series of my objections to modern trade as being practised here and now. As I tried explaining in the comments, throughout the series, I am trying to a) to hold a mirror from a slightly different perspective on the (evolution, leading to currently being practised) form of trade today and its benefits and b) to chronicle history from this context. And I would like to reassure you for the nth time, these are not the writings of someone yearning for socialism/communism! I particularly like this definition of Socialism and Communism by Davis:

Reducing the infinite permutation of human society and consciousness to a simple opposition of owners and workers, capitalist and proletariat, Marxism, formulated by german philosopher in the Reading room of the British library, was in a sense the perfect triumph of the mechanistic view of existence inspired by Descartes. Society itself was a machine that could be engineered for the betterment of all.

Unfortunately, all it ended doing was causing, among several // other // casualties, death of 3 million Cambodians and 40 million Chinese.

I am more in concurrence with these tenets: a) Be the change you want to see in the World, and, b) anyone who thinks they alone can change this world is both wrong and dangerous. Indeed what drives this series of posts is a culmination of thoughts and my concurrence with the following philosophy:

“The myriad of cultures of the world are not failed attempts at modernity, let alone failed attempts to be the West”. They are unique expressions of the Human imagination and heart, unique answers to the fundamental question: What does it mean to be Human and alive?

There’s a tendency for those of us in the dominant Western culture (Surio adds: and its more militant recent converts/clones) to view traditional people—even when we’re sympathetic to their plight—as quaint and colourful, but reduced to the sidelines of history, while the real world, which of course is our world, continues moving forward. We see these societies as failed attempts at modernity, as if they’re destined to fade away by some natural law, as if they can’t cope with change. That’s simply not true. Change is the one constant in history. All societies in all times and in all places constantly adapt to new possibilities for life. It’s not change per se that threatens the integrity of the ethnosphere, nor is it technology. The Sioux Indian did not stop being a Sioux when he gave up a bow and arrow, any more than an American farmer stopped being an American when he gave up the horse and buggy. It’s neither change nor technology that threatens the integrity of the ethnosphere. It is power—the crude face of domination (*).

(*) Ermine/HSpencer, once again I’ve nodded to the point you both raise, but I hasten to add, it is not the only issue here.


OK, in my previous posts, I had tackled the points mentioned below:

  1. Trade is a great thing. You can get the best product at the best price from the most efficient producers (Part-I) in the world.
  2. Billions of people in developing countries have been lifted out of poverty by trade (Part-II)

Moving on, I like to address that other “myth” associated with trade (OK, OK, very heavily qualified)

Trade between nations is very good. It is vital to the interests and progress of the entire world

Reading into World histories and into the chronicles of (for lack of a different word) indigeneous societies, I have discovered to my startlement that: This point is neither cast in stone, nor is it a must, but this sentence above has entered our collective conscious very strongly. Essays such as “I, Pencil” have fostered this thought strongly and provided a lot of traction to this line of thought. Indeed assayists of this school of thought have threadbare cupboards from USSR/North Korea to wave as the immediate and only alternative universe to that above remark. Sigh!. Therefore, at the onset, I am aware that this is a very loaded and contentious statement with some truth in it, if viewed at face value. Especially in the context of the very same “Historical facts”, such as spread of cultural thoughts, religion, etc., etc.

But I am going to point out that in the last few 100 years, this statement has become hollow and has been flipped over its head. I submit that modern trade is the same old wolf in new sheep’s clothing that was carried over from the age of Imperialism/Manifest Destiny! While this thought was previously dismissed as the usual “anti-colonial rant” (and the ranters sometimes had themselves to blame!), this thought is gaining more traction within mainstream thinkers as well (see nber.org for some samples).

In fact, lately the word trade has become so generic and commonly used, it can mean anything from “trading favours” to “multi-lateral trade”! Therefore, before we go forward, I want to introduce a few definitions used in connection with trade for comprehension:

  • Subsistence economy based societies: In such economies, money played a minor role, and is typically used, but primarily for luxuries —- jewellery, silver, and gold. Basic needs such as food, clothing, and shelter were provided for without money. More critically, in such societies, the labour one needed was free of charge, and was part of an intricate web of human relationships
  • Money economy societies: Typically, this begins as an “apparent improvement” over the above, i.e., Since money traditionally had been a good thing by bringing luxuries from far away, more of it seems to be an unconditional improvement! Subsistence economy is typically practises in villages, and people tend to be conscious of the limits of resources and of their personal responsibilities. Mostly, if not always, money economy is practised in the cities where paradoxically, you cannot see the water and soil on which your life depends. It is just a question of how much money you have. More money will buy more food. And it can grow much faster than wheat or barley, which are dependent on nature with her own laws, rhythms, and limits. Also, in such economies, the birth rate is no longer significant.
  • Resource Frontier: A region containing renewable and non-renewable natural resources in high demand by domestic and/or world market. Resources extracted here are usually exported outside of the region and sold in the intl. marketplace.
  • Regional exogenous integration: The incorporation of a region within the World economic system. This process is accelerated in resource frontier regions.
  • Peripheral Capitalism: The economic process in states which participate in the World economic system but have little control over the dynamics of that system. These economies are characterised by a spatial concentration of economic activities, and economic dominance by merchant capitalists (*) and a decline in reciprical and redistributive economies.
  • These are just a few, and are relevant for this post. Reader’s interest should unearth more terms and definitions.

(*) “World-Mart” (TM) anyone?

All those definitions may have been a mouthful, so let’s all lighten the mood a little bit! 😉 Been a while since Calvin and Hobbes made an entry in my blog, so here’s a humourous strip about how money based societies typically tend to operate:

A money economy is stimulated at every level, and usually the government subsidizes a number of imports.

Rhetorical question: Isn’t trade all about goodwill, freewill, choices, and all other revolting happy-happy sounding phrases that everyone wants us to believe? Indeed, is this “trade”, “so very important to the interests and progress” that it needs to involve gunboat diplomacy? Confused? Let me lay it out in a littl more detail for you. As Kunstler puts it in his inimitable style ” History doesn’t care if we fail as a civilization” (but faithfully records it!) 😉

  • China, a nation that was quite self-sufficient in all its wants and needs, was forced into “trade” through “Opium Wars”
  • Korea was forced into “trade” by the famous “fake” General Sherman boat incident
  • The Americans forced Japan to open up with gunships.
  • The Indian colonisation is also well known, whereas India was one of a key players on the Silk route not so long ago (see Part-II of my post for graphs)

OK, OK…. by now, I hear all your collective “Whoa, hold your horses there, things are so different now” at this point! To which I am wont to say: Whoa! Not so fast to the defence there.

Side-Note: While my writing keeps alluding to concentration of power, I want you to helpfully remind yourselves that all things said and done, trade is what corporations do at the end of the day, and they’ll do anything, all, and more to keep it that way. Caveat Emptor!

I submit, (somewhat controvertially, I agree) that most of the World’s trade activity has reduced most if not all the “players” to the roles of either a) Resource Frontier, or b) Peripheral Capitalism! I am now going to take up two case studies to point out these. If where you live doesn’t fall into these categories, thank your lucky stars. It is highly likely the place will fall in one of those categories (and chances are slim they won’t), click on any one of the links on my blogroll/Links for ideas and escape strategies! I will highlight two case studies (one for each) to easily wrap around the idea. You may find parallels within your own system.

  • Resource Frontier: Balikpapan/Samarinda (in connection with Samboja Lestari)
  • Peripheral Capitalism: Ladakh post-1970s

Resource Frontier, ruined: Balikpapan, (Samboja Lestari)

I suspect, most of you who’s seen Dr. Willie Smit’s talk in TED may have heard of the place. Here’s the fast introduction:

Balikpapan

Prior to the oil boom of the early 1900s, Balikpapan was an isolated Bugis fishing village. In 1897, a small refinery company began the first oil drilling. Construction of roads, wharves, warehouses, offices, barracks, and bungalows started when a Dutch oil company arrived in the area. Then Balikpapan became a war theatre between the Japanese army and the Allied Forces, resulting in heavy damage to the oil refinery and other facilities. Then, the Royal Dutch Shell company continued operating in the area until Indonesian state-owned Pertamina took it over in 1965. Lacking technology, skilled manpower, and capital to explore the petroleum region, Pertamina sublet petroleum concession contracts to multinational companies in the 1970s. Although the policy was heavily criticized for uncontrolled environmental damage and corrupt bureaucrats and politicians, it significantly boosted urban development in resource-rich cities. In the 1970s, Balikpapan experienced 7% population growth annually, while exports of timber and petroleum increased dramatically. Today, it is the second-largest city in East Kalimantan, after the capital Samarinda.

Samboja (Lestari)

The small town of Samboja near Balikpapan, was founded about a century ago in what was then rainforest when oil was discovered in the area. Dutch oil workers moved into the area to work for a company that was later taken over by Shell and later still by Pertamina. The oil company began cutting wood in the 1950s and as people came flooding into the booming oil town of Balikpapan they cleared the surrounding forest.

Pollution over Indonesia and the Indian Ocean on 22 Oct, 1997

Pollution over Indonesia and the Indian Ocean on 22 Oct, 1997

With the pronounced El Niño of 1982 and 1983 the worst firestorms then known in a tropical forest ravaged the area, destroying what small pockets of forest that remained. Following the pattern of deforestation in Borneo as a whole, the area was now vulnerable to the dry years that followed. In 1997 and 1998 the fires enveloped the region in smoke. The thick choking smog darkened the sky and caused respiratory problems throughout the region and beyond.

Samboja in 2002 (note: before Willie’s reforestation efforts) was the poorest district of East Kalimantan, with 50% of the population unemployed and a high crime rate. There had been climate change, with severe droughts resulting in crop failures, along with almost total extinction of plant and animal life. Flooding occurred five or six times a year and there were annual fires. Almost a quarter of average income went on buying drinking water. The land no longer sustained any agricultural productivity and was covered with alang-alang grass (Imperata cylindrica) which produces hydrocyanic acid that prevents the germination of tree seeds. There were many nutrition and hygiene related health problems and life expectancy was low, with high infant and maternal mortality.

In 1985, William Bruce Wood investigated for his PhD thesis the subject of “Intermediate Cities in the Resource Frontier: A case study of Samarinda and Balikpapan“. The thesis focussed on the functions and roles of those two cities above within an international economic system, and analysed the urban changes catalysed by the arrival of multi-national timber and petroleum corporations. Primary concern was to study how the interaction between the world economy and resource exploitation affects the regional and urban development process. The above summary of the two cities leave no doubt about what changes did the companies wrought, but I will quote a few observations from the thesis:

Resource-frontier cities are characterised by rapidly growing populations, inflated economies, infrastructural shortages, and little control over their futures. Why?

Because, growth of a resource-rich frontier city is dependent on the World market demand for those resources, rather than on existing regional and national linkages. (and the type of resource being exploited plays a key role too)

Since Historic times, East Kalimantan was never economically isolated. For 100s of years it had produced commodities held in high value by other cultures (rattan, damar, reptile skins, birds’ nests, and many other exotic products bringing a high price from distant lands). Chinese traders roamed the coast and traded with the dayaks in exchange for forest products (porcelain, opium, tools, salt, slaves, weapon, cloth). The trading network was extensive but there was almost no industrial activity – apart from the Anglo-Dutch petroleum industry.

Even by 1964 census, less than 5000 were involved in manufacturing, and only food, wood or leather industries employed over 50 persons.

When Indonesia went into petroleum business themselves in the 60s, it was so engineered that they were forced to contract out drilling activities to large foreign oil companies because they lacked the necessary capital and technology (deliberately not shared?). In the 70s (OPEC crises onset?) production sharing contracts with foreign companies were renegotiated to encourage drilling of further offshore fields. Two major importers of oil: USA and Japan.

Until 1960s, all timber taken from East Kalimantan was consumed locally. However, due to inadequate reserves in their own lands, Japan, Taiwan and South Korea escalated demand for tropical hardwood. Through production sharing agreements, the Japanese provided the capital required to carry out the widespread logging within the “concession areas” and rafting them to ports. To ensure this, the central government restricted the provinces to granting concessions to no more than 100 ha., thereby eliminating them (local govts.) from the decision process. This move transformed the timber industry from low-tech, small-scale into very large scale, high-tech and capital intensive. Local firms were outlawed and foreign timber firms were encouraged to bid for large concessions.

There is considerable discussion about how expectations of continuous subsidies, growth coupled with curbs introduced on wholesale “raw exports” of timber forcibly crippled the timber industry (in Samarinda). Additionally, the forest fires of 82-83 and its socio-economic impact is also discussed. Ironically, Indonesia was importing logs from Sabah, Malaysia (which is also a tragic story in its own right) to prop its local plywood industry :-o! This is an ironic twist for the local economy because it removes the main justification of locating factories in Samarinda to provide local employment!

Chapter 4 is a brilliant expose of how property bubbles operate in resource frontiers. I replaced Samarinda with Bangalore (Chennai, Gurgaon at the appropriate places) and saw absolutely no difference in stories between Samamrinda’s timber boom with Bangalore’s/Chennai’s IT boom with subsequent disenfranchisement of all parties concerned (except the expats whose over-inflated tabs were picked up by the heavily subsidised foreign corporations)! This Chapter is recommended reading if you’re Indian “middle class” living in the so called boomtowns and wondering WHT is your mortgage bleeding you dry month-after-month! 😦

In Chapter 5, by juxtaposing Balikpapan’s oil exploitation history with Mexico of the 80s, the thesis goes to show how the oil economy went on to polarise the local economy between those employed by the oil industry and those not — other problems include shortages of food, housing and infrastructure due to rapid in-migration of job seekers and very inflationary prices! 😮 Again, if I replaced Balikpapan with Bangalore (or Hyderabad) and oil with IT, the Chapter was a reading into contemparary events! 😐 As it it was not enough, then there was speculative property prices bubble sub-plot that read eeerily like the US property price expectations of 2008! Eeeerie! :-o!!

The sub-plot on water scarcity documented in 1985, made for scary reading in the thesis. Things have gone from bad to worse since: “Almost a quarter of average income in Balikpapan went on buying drinking water.”

Even more ironically, despite all the petroleum industry in Balikpapan, only 46% had electricity, and nearly 35% used firewood for cooking. All the oil company owned/leased houses however had electricity, either from the city or from their own generators! (Anyone with a passing knowledge of Bangalore will identify parallels in this story!)

The work goes on to highlight much more issues that such lop-sided trade/development activity brought to the region – basically the activity damaged more than it developed. Returning to today, to counter the damage caused by timber and petroleum, part of the Balikpapan area was reforested into an Orangutan reserve, no thanks to those “trade enabling corporates”, but wholly due to the conservation efforts of Dr. Willie Smits at great risk to his life and limb! Enjoy the talk. Inspiring is a mild word.

Peripheral Capitalism, lays havoc: Ladakh

Ancient Futures: Lessons from Ladakh for a Globalizing World

Ancient Futures: Lessons from Ladakh for a Globalizing World

About the Book:
A gripping portrait of the western Himalayan land sometimes known as “Little Tibet,” Ancient Futures opens with author Helena Norberg-Hodge’s first visit in 1975 to idyllic, preindustrial Ladakh. She then tracks the profound changes that occurred as the region was opened to foreign tourists and Western goods and technologies, and offers a firsthand account of how relentless pressure for economic growth precipitated generational and religious conflict, unemployment, inflation, and environmental damage, threatening to unravel Ladakh’s traditional way of life.
Energized by the fate of a people who had captured her heart, Norberg-Hodge helped establish the Ladakh Project (later renamed the International Society for Ecology and Culture) to seek sustainable solutions that preserve cultural integrity and environmental health while addressing the hunger for modernization. Since then, other Ladakh-based projects have proliferated, supporting renewable energy systems, local agricultural methods, and the spiritual foundations of Ladakhi culture.

In this book, Helena Norberg-Hodge documents with detail and clarity, what trade can be, what trade tends to be and what havoc it can create to the innocent bystander! Unfortunately, the blame for the trouble and havoc that Ladakh went through has to be laid squarely at the feet of the Indian Government. India threw open Ladakh for tourism, mainly to send a message to its neighbours (Pakistan and China) that Ladakh was its backyard and its own territory! Just goes to show, stupidity isn’t the privilege of a select few! 😦 Hoo boy!

OK, back to the book, Helena points out:

I came to realize that my passivity in the face of destructive change was, at least in part, due to the fact that I had confused culture with nature. I had not realized that many of the negative trends I saw were the result of my own industrial culture, rather than of some natural, evolutionary force beyond our control. Without really thinking about it, I also assumed that human beings were essentially selfish, struggling to compete and survive, and that more cooperative societies were nothing more than Utopian dreams.

It was not strange that I thought the way I did. Even though I had lived in many different countries, they had all been industrial cultures. My travels in less “developed” parts of the world, though fairly extensive, had not been enough to afford me an inside view. Some intellectual travels, like reading Aldous Huxley and Erich Fromm, had opened a few doors, but I was essentially a product of industrial society, educated with the sort of blinders that every culture employs in order to perpetuate itself. My values, my understanding of history, my thought patterns all reflected the world view of homo industrialis.

Mainstream Western thinkers from Adam Smith to Freud and today’s academics tend to universalize what is in fact Western or industrial experience. Explicitly or implicitly, they assume that the traits they describe are a manifestation of human nature, rather than a product of industrial culture. This tendency to generalize from Western experience becomes almost inevitable as Western culture teaches out from Europe and North America to influence all the earth’s people.

Every society tends to place itself at the center of the universe and to view other cultures through its own coloured lenses. What distinguishes Western culture is that it has grown so widespread and so powerful that it has lost a perspective on itself; there is no “other” with which to compare itself. It is assumed that everyone either is like us or wants to be.

As everywhere else in the world, development in Ladakh means Western-style development. This process has consisted primarily of building up the so-called “infrastructure”—especially roads and the production of energy. Power represents the largest expense in the government’s budget. Western-style medicine and education form the other basic cornerstones.

The book clearly points out how the peripheral economy is at every stage not in control of its economy, its monetary system or its own policies:
“Now, suddenly, as part of the international money economy, Ladakhis find themselves ever more dependent—even for vital needs—on a system that is controlled by faraway forces. They are vulnerable to decisions made by people who do not even know that Ladakh exists. If the value of the dollar changes, it will ultimately have an effect on the Indian rupee. This means that Ladakhis who need money to survive are now under the
control of the managers of international finance. Living off the land, they had been their own masters.”

Development policies for Ladakh are formulated in the state government of Kashmir and the central government in Delhi. Ladakh sends one M.P. to Delhi and one representative to the state government. In Ladakh itself, government programs are administered by officials who generally are not Ladakhi and do not speak the language. The head of the administration, or Development Commissioner, is an officer in the Indian administrative service and spends an average of just two to three years in his job.

The money economy is stimulated at every level, and the government subsidizes an increasing number of imports. From 1985 to 1986, 6,000 tons of wheat and rice were brought into Leh district alone, while 900,000 pounds of hard coke and 50,000 cubic feet of firewood are imported annually. Most of this is subsidized.

In one day a tourist would spend the same amount that a Ladakhi family might in a year. Ladakhis did not realize that money played a completely different role for the foreigners; that back home they needed it to survive; that food, clothing, and shelter all cost money— a lot of money. Compared to these strangers, they suddenly felt poor. During my first years in Ladakh, young children I had never seen before used to run up to me and press apricots into my hands. Now-little figures, looking shabbily Dickensian in threadbare Western clothing, greet foreigners with an empty outstretched hand. Besides giving the illusion that all Westerners are multimillionaires, the tourist also helps perpetuate another faulty image of modern life—that we never work. It looks as though our technologies do the work for us. In industrial society today, we actually spend more hours working than people in rural, agrarian economies. But that is not how it looks to the Ladakhis. For them, work is physical work, walking, and carrying things. A person sitting behind the wheel of a car or pushing buttons on a typewriter doesn’t appear to be working.

Every day I saw people from two cultures, a world apart, looking at each other and seeing superficial, one-dimensional images. Tourists see people carrying loads on their backs and walking long distances over high mountain passes and say, “How terrible; what a life of drudgery.” They forget that they have travelled thousands of miles and spent thousands of dollars for the pleasure of walking through the same mountains with heavy backpacks. During working hours they get no exercise, so they spend their free time trying to make up for it. Some will even drive to a health club——across a polluted city in rush hour—to sit in a basement, pedalling a bicycle that does not go anywhere. And they actually pay for the privilege.

Development has brought not only tourism, but also Western and Indian films and, more recently, television. Together they provide overwhelming images of luxury and power. There are countless tools and magical gadgets. And there are machines—machines to take pictures, machines to tell the time, machines to make fire, to travel from one place to another, to talk with someone far away. Machines can do everything for you;
it is no wonder the tourists look so clean and have such soft, white hands. For the young Ladakhis, the picture they present is irresistible. By contrast, their own lives seem primitive’, silly, and inefficient. The one-dimensional view of modern life becomes a slap in the face. They feel stupid and ashamed. They are asked by their parents to choose a way of life that involves working in the fields and getting their hands dirty for very little or no money. Their own culture seems absurd compared with the world of the tourists and film heroes.

But it didn’t mean the Ladakhis lived in isolation. They had a dynamic balance between the urban and the rural, the one complementing the other. While some people made a living from trade with the outside world, most economic activity was based on local resources. Here’s how trade/development ended up tearing Ladakhi framework:

In Leh these days, for instance, building with mud is becoming prohibitively expensive, whereas the relative cost of cement is falling. This is a good example of how Western-style development operates to undermine local systems. It seems impossible that a heavy and processed material that has to be transported over the Himalayan Mountains can compete with mud, free and abundant, there for the taking. And yet that is exactly what is happening.

What is more, as mentioned earlier, the majority of “educated” people have not learned how to build a house, and the engineers work with cement and steel. As a consequence, the skills required to build with mud become ever more scarce, and thus more expensive. There is a psychological dimension as well: people are afraid of seeming backward—and everything traditional is beginning to be seen that way. They want to live in a modern house. A mud house is bad for the image.

Two more observations from the book before I close this reeeeally long post!

As mutual aid is replaced by a dependence on faraway forces, people begin to feel powerless to make decisions over their own lives. At all levels, passivity, even apathy, is setting in; people are abdicating personal responsibility. In the traditional village, repairing irrigation canals was a task shared by the whole community. As soon as a channel developed a leak, groups of people would start working away with shovels patching it up. Now, people see it as the government’s responsibility, and will let a channel go on leaking until the job is done for them. The more the government does for the villagers, the less they feel inclined to help themselves. I remember talking to a government official about a hydroelectric plant that had been installed in the village of Nurrla. “I just can’t understand it,” he said. “They always looked after their old water wheels so well, but this thing they don’t seem to care about. Earlier this summer, some rocks got into the turbine, but no one bothered to do anything about it—and now they don’t have lighting.”

Most of the skills Ladakhi children learn in school will never be of real use to them. They receive a poor version of an education appropriate for a New Yorker. They learn out of books written by people who have never set foot in Ladakh, who know nothing about growing barley at 12,000 feet or about making houses out of sun-dried bricks. In every corner of the world today, the process called “education” is based on the same assumptions and the same Eurocentric model. The focus is on faraway facts and figures, a universal knowledge. The books propagate information that is meant to be appropriate for the entire planet. But since only a kind of knowledge that is far removed from specific ecosystems and cultures can be universally applicable, what children learn is essentially synthetic, divorced from the living context. If they go on to higher education, they may learn about building houses, but these houses will be of concrete and steel, the universal box. So too, if they study agriculture, they will learn about industrial fanning: chemical fertilizers and pesticides, large machinery and hybrid seeds. The Western educational system is making us all poorer by teaching people around the world to use the same resources, ignoring those of their own environment. In this way education is creating artificial scarcity and inducing competition.

The book repeatedly takes an apologetic tone that one shouldn’t romanticise traditional societies. I beg to differ; there’s nothing romantic but everything practical about how traditional societies operate and exist. All societies primarily evolve and find ways to survive, and traditional societies have repeatedly shown to us, that key aspect we now burn jet fuel to Copenhagen for — SUSTAINABILE LIVING!

But before we disperse for the day, I like to finish with another TED talk.

Anupam Mishra travels across water-challenged India studying rainwater harvesting methods and learning from the people behind them. He presents his findings to NGOs, development agencies and environmental groups, pulling from centuries of indigenous wisdom that has found water for drinking and irrigation even in extremely arid landscapes through wells, filter ponds and other catchment systems.

A founding member of the Gandhi Peace Foundation, Mishra is working to bridge the gap between modern water management technology and India’s heritage of water harvesting, so that every community is self-sustainable and efficiently safekeeping an increasingly scarce and precious resource.



While I was composing this, I was reminded of an old cartoon from the small society cartoon strip.

Oil politics from the 70s



If we all become customers like this, we will stop creating more Balikpapans in this world… … … we hope!

Read Part IV here.

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Written by Surio

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“Worker-Bees” of the world, unite? Part-II

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Greetings! Back after a brief lull, which I had explained here. Moving on to Part-2 of a multi-part post that concerns my thoughts on “trade” as practised today in the “flat” world. If you wish to refresh your memory, or you’ve joined me from here, you’ll find Part-I here.

In Part-1, I placed a rather polemic argument, “trade is like slavery in its current form”. A few well-meaning arguments against that bellicose remark was pre-empted by me, and I tackled the argument “Trade is a great thing […] best product/best price/most efficient producers” in my last post. I had a lively exchange of views with the regulars (my chocks ;-)) Here, I submit my response to the second (pre-empted) objection made in favour of trade, based on my polemic remark. But before that, I wish to clear the air on certain points that seem to have formed on account of my earlier post.

I don’t live in the past, nor do I consider myself a Luddite! I am comfortable with and around technology and effectively acknowledge the happenings around the World. However, having rolled in the juggernaut for a while, I am beginning to appreciate more and more, the idea of “appropriate technology” and self-sufficiency.

Speaking of the past, it has become convenient to dismiss History with remarks of “This time it’s all very different”, or “it’s time to move on from all that”. Well, agreed (to a point). But an undeniable fact of today’s life is that the platform of co-existence of today that everyone seems quite eager to maintain and justify, was effectively built from that history. So if we are all brothers and sisters and can live peacefully like these, can we all start the counter from scratch then, please? Two pictures ought to paint a few dozen words:

Percentage population living on less than $1 a day (2007-08):

https://i0.wp.com/upload.wikimedia.org/wikipedia/commons/1/1d/Percentage_population_living_on_less_than_1_dollar_day_2007-2008.png

Percentage population living on less than $1 a day (2007-08)

Human Development Index (HDI): a composite statistic used to rank countries by “human development”:

https://i0.wp.com/upload.wikimedia.org/wikipedia/commons/5/5d/UN_Human_Development_Report_2010_1.PNG

UN Human Development Report 2010

Well, colour me stupid (pun intended), but is it an ironic coincidence that virtually all the countries with “bad marks/colours” on both images are erstwhile colonies (or were controlled – like China) of some Imperial power or the other? Another thing: Exhibit B keeps changing its colours every year (actually, they have been changing the formulas for calculating the HDI, so time will tell if it is a bikini thing or a “true” statistic) but even that exhibits the same trend. Like it or not, most human beings are products of their times, and when Imperialism was discarded, “Socialism/Marxism” was the only “other big alternative” in the horizon at that point in time to continue with “business-as-usual” and keep the “nation-state” dominant paradigm. In one of those ironies History dishes out from time to time, Socialism collapsed before Capitalism did, and today, we are where we are on account of that. But the important question being pushed aside in all this is “Why did so many (select group of) countries en masse choose to specifically embrace Socialism in the first place?” A point to ponder, No? (Hint: A (knee-jerk?) response to Imperialism in the first place {taking cue from Russia of course!})

I mentioned in my discussions in the first post, and I will repeat it here: *Trade* in its strict definition being conducted as recent as the Silk route times, is quite fine by me. But I have serious reservations about how it is carried out today. I do not view self-sufficiency as “deprivation” either, as many in this day and age are wont to do.

Share of World GDP: Way back to 1500

https://i2.wp.com/www.visualizingeconomics.com/wp-content/uploads/percent-world-gdp-1500.jpg

Share of GDP: Going all the way to 1500

Share of Population Growth: Way back to 1500

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Share of World Population growth going all the way back to 1500

Since the graphs are fairly self-explanatory, I don’t need to expand on the above graphs themselves. Of note is the observation that India’s population had been proportional to its share of GDP in the world and its share of population growth hasn’t changed from the past. While I am least interested in jingoism/patriotism at this stage of planetary evolution, reading the thought experiments from Part-I might put this graph in perspective. Right. On with the show now.

Billions of people in developing countries have been lifted out of poverty by trade

With the above graphs as a gentle reminder, might I ask people to reconsider the remark itself with another question: “What did cause the poverty that you speak of in the first place?” There’s no easy answer, so we’ll leave it at that. I don’t know if those billions of people have been lifted, but certainly we’ve had a burst of billionaires(!) emerging from India and Russia!

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Copyright: www.visualizingeconomics.com. Where are the billionaires?

Lies, Damned Lies and Statistics

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Assumed fair use.

A corollary to that “What people see is only part of the story” illustration above is the other famous quote:

Statistics are like bikinis. What they reveal is suggestive, but what they conceal is vital. — Aaron Levenstein 

I. Firstly, this notion of somehow participating in trade, and thereby contributing to the act of “alleviating someone else’s poverty” is one of the oldest [[emotion]] that has tugged our heartstrings (and has been successfully exploited for a long time now). Oscar Wilde has writtencritiqued it as follows:

The majority of people spoil their lives by an unhealthy and exaggerated altruism. They find themselves surrounded by hideous poverty, by hideous ugliness, by hideous starvation. It is inevitable that they should be strongly moved by all this. The emotions of man are stirred more quickly than man’s intelligence; and, as I pointed out some time ago in an article on the function of criticism, it is much more easy to have sympathy with suffering than it is to have sympathy with thought. Accordingly, with admirable though misdirected intentions, they very seriously and very sentimentally set themselves to the task of remedying the evils that they see. But their remedies do not cure the disease: they merely prolong it. Indeed, their remedies are part of the disease. They try to solve the problem of poverty, for instance, by keeping the poor alive; or, in the case of a very advanced school, by amusing the poor.[…] The proper aim is to try and reconstruct society on such a basis that poverty will be impossible. And the altruistic virtues have really prevented the carrying out of this aim. Just as the worst slave-owners were those who were kind to their slaves, and so prevented the horror of the system being realised by those who suffered from it, and understood by those who contemplated it […]

Considering the fact that this (empiric) observation still holds true since the times of Oscar Wilde, I will simply submit that this “notion” of trade somehow pulling everyone into another better world is a somewhat flawed point. After all, if people have been helping the “poor” out of poverty since those times (and perhaps before), there shouldn’t be any more poor left in this world, so to speak. I am aware this is a sweeping statement, but either way you want to take this argument forward on this premise, you will realise that the broader implications of the point is still valid.

II. Secondly, what people forget is that “poverty” used in its conventional sense is always a relative term. I am “poorer” when compared to a person who owns a bungalow and an expensive car(s) and who sends his children to an expensive private school, etc., etc. The other person might consider himself poorer to someone else who might lead a more extravagant lifestyle to person B. And so on. (But, Jacob has punctured this notion in one of his really early posts!). However, this condition (of poverty) is largely a human made epidermic and will exist as long as humanity will continue to exist! What do I mean by that? Let me tell you one of those “Zen” stories I read a while ago!

A samurai, a very proud warrior, came to see a Zen Master one day. The samurai was very famous, but looking at the beauty of the Master and the Grace of the moment, he suddenly felt inferior.


He said to the Master, “Why am I feeling inferior? Just a moment ago everything was okay. As I entered your court suddenly I felt inferior. I have never felt like that before. I have faced death many times, and I have never felt any fear — why am I now feeling frightened?”

The Master said, “Wait. When everyone else has gone, I will answer”. By evening the room was empty, and the samurai said, “Now, can you answer me?”


The Master said, “Come outside”. And he said, “Look at these trees. This tree is high in the sky and this small one beside it. They both have existed beside my window for years, and there has never been any problem. The smaller tree has never said to the big tree, ‘Why do I feel inferior before you?’ This tree is small, and that tree is big — why have I never heard a whisper of it?”

The samurai said, “Because they can’t compare”.

The Master replied, “Then you need not ask me. You know the answer.”

With this kind of (prevalent) mindset among much of humanity, I don’t carry any hope of “alleviating poverty” to begin with! Do you? Now when this story is told, people decide to qualify their remarks to actually mean “absolute poverty”, then we are muddling the waters/mixing up semantics, because here trade matters not! Why? I’ll explain by and by.

III. Thirdly, being a cynic at times (with good reason), I’ve always wondered how much of “lifting out of poverty” is what World Bank would like us to swallow and how much of it is true. There are some fundamentally flawed assumptions behind this “axiom” stated above. Closer reading of the mechanics behind “trade” reveals that the above “axiom” completely hinges upon two models:

Here’s the clanger! As early as 1951, Leontief paradox disproved the H-O model by using data from that self-proclaimed “free-trade champion” the USA! Indeed, Wikipedia says: “Various attempts in 1960’s and 1970s to “solve” the Leontief paradox and save the Heckscher-Ohlin Theory failed. From 1980’s a new series of statistical tests had been tried”!. Further reading tells you this: “Although H-O model is normally thought to be basic for the international trade theory, there are many points of criticism against the model”. Well, call me Karl and brand me a Luddite if you want, but: To use a failed model (became known by 1951 itself!) as the basis to force everyone to play the “same game” and furthermore, insisting that this is the “right” model for all? Now, how many of you want to get off this train-wreck?

Now, the second clanger: In this paper, it is clearly shown through studies conducted in the various “liberalised” Latin American countries that wage inequality actually rose rather than what S-S theorem predicts (In an anecdotal way, the reality observed in the trenches here in India, also confirms this view). A newly formed consenseus (compromise?) based on Latin American studies is to recognize that technically the Stolper-Samuelson theorem predicts a relationship between output prices and relative wages. I don’t think I ever consented to wanting a “cheap” doo-daah at the expense of somebody else’s wages, did you?


Further, another paper by Robert. H. Wade from the LSE also deals with the question “Is Globalization Reducing Poverty and Inequality?”. First the paper points out some commonly heard pro-and-con arguments:

In the last 20 years, India, China, and the rest of East Asia, experienced fast economic growth and falls in the poverty rate, Latin America stagnated, the former Soviet Union, Central and Eastern Europe, and sub-Saharan Africa regressed.

Evidence from the current long wave of globalization thus confirms neoliberal economic theory—more open economies are more prosperous, economies that liberalize more experience a faster rate of progress, and people who resist further economic liberalization must be acting out of vested or “rent-seeking” interests.

Left assumption, in contrast, is that the rich and powerful countries and classes have little interest in greater equity. Consistent with this view, the “anti-globalization” (more accurately, “anti-neoliberal”) argument asserts that world poverty and inequality have been rising, not falling, due to forces unleashed by the same globalization.

Sounds like the usual rhetoric, isn’t it? But the paper points out the following, in a nutshell: “This paper questions the empirical basis of the neoliberal argument. In addition, it goes beyond the questions to suggest different conclusions about levels and trends, stated in terms not of certainties but stronger or weaker probabilities. Finally it explains why we should be concerned about probably-rising world inequality, and how we might think about the neglected subject of the political economy of statistics.”

1. The paper points out several flaws in World Bank’s strategies that are designed to swing the bias in favour of the World Bank’s arguments:

a) “A recent study in India suggests that a switch from the standard 30-day reporting period to a seven-day reporting period lifts 175 million people from poverty, a nearly 50% drop. This is using the Indian official poverty line. Using the higher $1/day international line the drop would be even greater”.

b) “the shape of income distribution near the poverty line is such that, in most developing countries, a given percentage change in the line brings a similar or larger percentage change in the number of people below it. Recent research on China suggests that a 10% increase in the line brings a roughly 20% increase in the poverty headcount.” Now, go back and read the neoliberal argument on India/China once again. 😉

2. The paper also highlights that “A comparison of two recent Bank publications suggests how the Bank’s statements about poverty are affected by its tactics and the ideological predispositions of those in the ideas-controlling positions.”. And then goes on to point out all the contradictions in its projections and numbers over a period of time.

3. Further, Wade writes: “To the question: ‘What is the trend of world income distribution?’ the short answer is, ‘It depends on which combination out of many plausible combinations(*) of measures and countries we choose.’ Whereas we could get better data on the poor to the extent that the poverty headcount would command general agreement, there is no single best measure of world income inequality.”.

(*) Robert Wade then goes on to demonstrate many “official” measures that prove to be biased towards policy statements. In fact, this is found, towards the conclusion: “One combination of inequality measures does yield the conclusion that income inequality has been falling––PPP income per capita weighted by population, measured by an averaging coefficient such as the GINI. But take out China and even this measure shows widening inequality. Falling inequality is thus not a generalized feature of the world economy even by the most favourable measure.”

I suggest that you read the paper yourself in order to find many such clangers on the “bikini”. Well, if you want my summary of the paper, the overall conclusion is bleak, to say the least. If you wish to continue your studies in this matter may I suggest www.nber.org for some fairly involved and entertaining reading along these lines. Perhaps, you could even suggest some optimistic reading material for me to lift my spirits! 😐

So far, the only highlight about this entire exercise for me is to enlighten my readers, the fact about Stolper-Samuelson theorem which, as a matter of fact, goes to confirm a relationship between output prices and relative wages. In other words, when we have a “low price guarantee” (cue jingling coins), someone else doesn’t get a decent enough pay!

Addendum to Second Point: In all the studies on impacts of “liberalisation” on Latin American economies, it was found that “liberalisation led to greater demand for skilled workers and pushed unskilled workers into unemployment/informal activities“. A contradictory point to be borne in mind along with the above, is that one of the prerequisites of the “liberalisation package” offered to many of the countiries is that most services that were once state-controlled ought to be privatised (a profit motive) as part of the liberalisation. This includes most utilities (electricity, water (remember Bolivia?), sanitation), education, collective agriculture, subsidised housing etc. Put the two together, and you’ll find the dispossessed have a very slim chance to get back into the system of “rising tide”. They effectively become the “lost workforce”, and slowly descend into the so called “absolute poverty” level. In what way can trade ever lift them from here? Most of them will be reduced to manual work of lifting, cleaning, etc. Indeed, this is the contradiction that I pointed out in the “muddling of semantics” remark earlier.

In other words, while people with some skill-sets *can* participate in the “job lottery” and therefore, trade may (mostly not, as per the data above) lift the lifestyles of these categories of people. Ironically, the type of people the World bank claims trade will benefit, namely the poor people that live on under $2/day, will almost never be (maybe not directly) impacted by the consequences of trade. They will mostly be subject to the whims and fancies of the local economic framework which does not necessarily dance to the tune of macroeconomic levels all the time. This realisation came to me when I read the book, “Portfolios of the Poor: How the World’s Poor Live on $2 a Day”. Don’t click yet. I discuss this in greater detail further below.

A story that probably deserves a mention in the context of people being left behind (forever) due to goose-feeding the same “Western” business model to all and sundry deals with Maharashtra. Some Excerpts!

Every time an aircraft flew over Pen in Maharashtra’s Raigad district, children in the tribal village would look at it and say Bharti Sheed, one of their own, was on it. Sheed, 24, had made it to the first batch of a course specially designed by the state government for the tribal community at the privately run Air Hostess Academy (AHA) in Pune. Three years on, those dreams have rudely crash-landed for Sheed and more than 100 other tribal youngsters who had joined AHA. None of the students who passed out of the first batch of the course in 2008 or the second one a year later has got any aviation jobs.
[….]
Maharashtra’s Minister for Tribal Development Babanrao Pachpute blames the students themselves, saying they were lacking on many fronts — particularly physical assets……
“They are not physically appealing and because of their strong local accent they are not good communicators too.”,…. adding that the government would consider implementing the project by trying to get the girls jobs in the hospitality sector.

“Despite being poor we spent money to buy blazers, high-heel footwear and cosmetics. Now we have to throw them all away,” Sheed said, speaking for her classmates.

Last year, Sheed applied for vacancies advertised by Air India under the ST quota but didn’t make it. “I was rejected on grounds of not having the mandatory three-month experience in the industry,” she said.

Students say far from getting mandatory in-flight training, they were not even shown a real aircraft. They could not even intern as cabin crew and had to settle for internships as ground staff, hotel receptionists and in call centres. What the year-long training included was effective communication, hosting and serving and life-saving skills, plus knowledge of first aid and customer care. The girls learnt to shed their inhibitions, from speaking in English without an accent to wearing make-up and short skirts with stockings.

IMO, it is very fortunate for those girls/women, that they did not end up in brothels and as other dangerous pawns of disenfranchisement! Certainly I despair to think how badly we will scar the entire world with the intention of “educating, clothing and jobbing them”, and then finally turn the tables and point out “once a savage, always a savage”. 😥

More recently (also from Maharashtra), it was heartening to note that people no longer buy the horse manure touted behind the “job-creation” rubbish! Here’s a recent article that came up on the news:

Martala Sarpanch (village head), Mr Madhav Dhepe told Business Line that MIDC (Maharashtra Industrial Development Corporation ) is offering about INR 80,000 per acre as compensation, while the market rate is INR 2 million per acre. He said that “Boys in our village are educated till High School but MIDC requires educated work force. Only jobs for our boys would be as peons or casual labourers. We don’t want such development.”

Another local farmer, Mr Dadarao Yede said that some years ago farmers would have sold their land to MIDC, as they were not getting good income from their farms. But today the situation has changed, we are getting good rates for cotton. My earlier yield per acre was 300 kg but today it has increased to about 800 kg due to better variety of cotton seeds. Today the villagers have an annual income of INR 1 to 0.15 million per acre.

NOTE: I deliberately kept the second paragraph to point out the vagaries of “trade”. In a good way, it is ironic(!) that prices picked up at the opportune moment and saved those poor “boys” from a life of subservience and resentment (not to mention the girls too!). Times like these, I feel “There’s someone up there that likes some people sometimes”!

Over 2.7 billion people in the world manage to put food on the table, keep a roof over their heads, plan for medical emergencies, and even save for retirement on $2 or less a day

Over 2.7 billion people in the world manage to put food on the table, keep a roof over their heads, plan for medical emergencies, and even save for retirement on $2 or less a day

To finish, I am returning to the book, “Portfolios of the Poor: How the World’s Poor Live on $2 a Day” to highlight some of the real “facts” about the “dirt poor”. An ‘unputdownable’ book, it humbled me to the point where I don’t sympathise with them in the “Ohhhh, the poooah peeopple! Howwww saaaadddd!” anymore. I am filled with respect and awe for them. The “dirt poor” live such sophisticated financial lives, they put us rich people to shame (Yes! If you have time enough to blog/read a blog, you are rich! Accept it!)

There’s only one thing that I do get mad about in the status quo of things! It is about the fact that these ‘beautiful people’ live in abject squalor in slums within the cities, which in themselves are huge resource sinks!. That’s clearly an injustice perpetrated by the business/politic collusion. No other way of putting it! Most of the inhabitants are migrants from rural areas because of the wilful neglect of the Government and in collusion with business (*). It needn’t be so. A common misconception that is encountered is that all “jobs” are to be found in the cities, which force the rural populace into long exoduses!

(*) For example, Curitibas slums stemmed from a huge rural exodus caused by the mechanization of Parana state’s agriculture(^)

In this connection there’s already commendable work that has been done in India. If you’ve heard of Hernando de Soto’s work on property rights in Peru, this had already been achieved in India long ago! But de Soto’s work is only partial, in the sense that it doesn’t close the loop completely. Here also, there has been some impressive prior art for the World to take lead, namely, the idea of forming cooperatives (based on Marxist/Socialist themes! Surprise! Horror!) around small scale producers. Asika, India Coffee House are a few successful instances that come to mind. Overseas readers might empathise with Mondragon Corporation in Europe! There’s wilful ignoring and sabotaging of such movements in India (see here) as well as in many parts of the World by the political machinery. Such locally proactive approaches would actually prevent the poverty and deracination problems that “bare-naked” trade offers to solve, from occuring in the first place! Once again, I say this: Trade? Yes, but definitely not the way it is carried out right now! About the book’s takeaways:

  1. The dataset involved tracking the daily and financial lives of over 200 families in Bangladesh, India and South Africa for more than a year.
  2. A “Triple Whammy” effect that affects the poor is quoted to death throughout the book! Actualy, I began hating it after a while. OK, OK! you’ve made your point! Not only are their incomes small and infrequent, but the majority of the very poor lack access to reliable, flexible financial tools that allow them to save their small funds over a long-period of time. They also lack access to reliable loans. Ironically, for all the emphasis on the “whammy”, the last point becomes a non-sequitur, as the book goes to prove later: The poor have an an impressive variety of savings clubs, savings schemes and credit instruments. No seriously! This itself will take a complete post! In one scheme, the poor pay interest to others to hold their savings because few banks will hold the small amounts the poor save!
  3. The poor borrow large amounts for school, weddings, funerals, health, business relative to their net worth and truly enjoy their lives! Grim lives? Ha! And ironically, us “sophisticated types” would consider them lacking in collateral.
  4. One thing was clear: health costs, either in the form of a sudden event or a long-expected death, was a huge strain, because of a) lost income potential and b) cost of treatment.
  5. I am a media victim, in the sense that I was led to believe that money-lenders were loan sharks preying on the poor. Boy, was I wrong! Most data is annualised to allow ease of comparison with “institutions”, which is where all the confusion arises. These loans are actually held no more than a month! Indeed, many participating familes deliberately choose a more expensive moneylender because the looser repayment schedule fits their needs better, or because the money must be found quickly!
  6. Grameen bank gets a whole chapter, but I suppose this is old news today
  7. Social capital is their saviour pretty much all the time (interest free loans from friends, relatives and neighbours). However, the book suggests that there’s a lot of social anxiety and tension revolving around this, despite itsprevalence. Having interacted with this spectrum on and off, I believe that the “Western bias” i.e., disbelief in the functioning of the type of social cohesion seen in Asia led to some “leading questions” to the families, which the participants then answered in the affirmative to “please the officials”!

Final Comments

Ermine and HSpencer had challenged me if it was trade or if it was concetration of power within the corporations that I was opposed to in the first place. Between those two points, I conceded that it was the latter, but then again with the muddling of semantics everywhere, I am simply going with the use of the word trade to capture the essence of what corporations do at the end of the day. The point they were trying to make is best illustrated with this infographic from here.

The illusion of diversity: visualizing ownership in the soft drink industry. Three firms own 89% of US soft drink sales!

The illusion of diversity: visualizing ownership in the soft drink industry. Three firms own 89% of US soft drink sales!


A Robert Solow quote to end the day with the hope it is still not too late to adopt this message in parts at least!

“Over the long term, places with strong, distinctive identities are more likely to prosper than places without them. Every place must identify its strongest most distinctive features and develop them or run the risk of being all things to all persons and nothing special to any…Livability is not a middle-class luxury. It is an economic imperative.”

But unfortunately trade today has decided to do the opposite! Hoo Boy! See you in Part-III.

Read Part III here.


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