How to get a 'Congress-mukt' economy

India is a shining example of this politico-economic folly

Until the current tsunami of mindless empiricism dislodged it, economics used to be dominated by mindless mathematics. This fetish had developed after the Second World War when, thanks to Paul Samuelson, economists started to think of their discipline as a once-removed cousin of physics.
 
They overlooked, however, the most important difference between maths and physics on the one hand, and economics on the other. The former, especially maths, recognises that some problems can’t be solved.
 
You can see the very long list of these unsolvable or unsolved problems here :https://en.wikipedia.org/wiki/ List_of_unsolved_problems_in_mathematics
 

Economics, sadly, has a very short list. And employment is as good a problem as any to add to it because of its huge socio-political implications, mostly acquired after the Bolshevik revolution in 1917. Before that no one really cared.

 
Indeed, it is the political implications that, in the second quarter of the 20th century, led Keynes to argue for government intervention in capitalist economies. The alternative was Communism — or so they all thought and got properly scared.
 
But now politicians even in non-capitalist, non-communist, hybrid economies like India’s think they must intervene to create employment. The result — yes, you guessed it — is more unemployment. To see how, just imagine the counter-factual.
 
India is thus a shining example of this politico-economic folly.
 
Too many to employ
 
Compassion aside, the 21st century problem of unemployment is simply not solvable. It can’t be done, period.

 
This is because, first, world population today is over seven billion whereas in 1900 it was around one billion and even then unemployment was a big problem; and, second, even if half the workforce of just China were to find factory employment there would be no factories left anywhere else in the world because China by itself would meet the manufacturing needs of everyone.
 
This has already happened in some measure. It is going to go on happening.
 
This means two things. One, some of the workforce in the rest of the world will move up the Kuznets sequence and start providing services. The developed countries are doing this already, as is India in some measure. Two, the rest of the world will remain mostly where it is in the Kuznets sequence, that is, in agriculture or near it somewhere.

 
India is firmly in the second camp, as are Latin America, Africa etc. No amount of government intervention is going to move 500 million Indians into industrial employment, even if such employment were to somehow come about.
 
And, can you even to begin to imagine the level of investment that would be needed to make that happen? Not just money but also land and infrastructure?
 
This, in turn, means two things. One, base incomes will fall even further in real terms in the organised sector. And two, in the unorganised sector, they will go very close to zero, again in real terms.

 
Indeed, much of this has already happened since 2008 and it will go on happening. Another name for it is ‘wage slavery’.

21st century question
 
Therefore the question we need to be asking in the first quarter of the 21st century is whether politicians and government can solve the problem; and if not, what can?
 
In the 1930s Keynes asked this question of the existing system and came up with an output stabilisation mechanism for preserving employment. It was heavily dependent on higher government spending. This legitimised higher taxes.
 
But the time for that kind of policy orientation is now over for far too many reasons to enumerate here. Now the new orientation has to the exact opposite of Keynes.

 
In fact, thanks to 50 years of overspending governments are anyway exhausted and therefore what I am suggesting is happening already without anyone deliberately trying.  But be that as it may, politically we need to go back to the time when there was no support for government-mandated stabilisation, that is, back to the pre-Great Depression era.
 
This means that the government must withdraw from microeconomic activity which everyone agrees should be done. This in turn means the lowering of taxes, less government investment, and completely flexible markets. Nothing less will do if we want more jobs per rupee spent.

 
Sadly, the BJP is unlikely to choose the economic route of laissez-faire for achieving a Congress-mukt Bharat. It just doesn’t have the political courage to do so.