Fourteen

# The Problem of Unemployment in India

## A talk to the India Development Group in London

When speaking of unemployment I mean the non-utilisation or gross under-utilisation of available labour. We may think of a productivity scale that extends from zero, i.e. the productivity of a totally unemployed person, to 100 per cent, i.e. the productivity of a fully and most effectively occupied person. The crucial question for any poor society is how to move up on this scale. When considering productivity in any society it is not sufficient to take account only of those who are employed or self-employed and to leave out of the reckoning all those who are unemployed and whose productivity therefore is zero. Economic development is primarily a question of getting more work done. For this, there are four essential conditions. First, there must be motivation; second, there must be some know-how; third, there must be some capital; and fourth, there must be an outlet: additional output requires additional markets.

As far as the motivation is concerned, there is little to be said from the outside. If people do not want to better themselves, they are best left alone -this should be the first principle of aid. Insiders may take a different view, and they also carry different responsibilities. For the aidgiver, there are always enough people who do wish to better themselves, but they do not know how to do it. So we come to the question of knowhow. If there are millions of people who want to better themselves but do not know how to do it, who is going to show them? Consider the size of the problem in India. We are not talking about a few thousands or a few millions, but rather about a few hundred millions of people. The size of the problem puts it beyond any kind of little amelioration, any little reform, improvement, or inducement, and makes it a matter of basic political philosophy. The whole matter can be summed up in the question: what is education for? I think it was the Chinese. before World War II, who calculated that it took the work of thirty peasants to keep one man or woman at a university. If that person at the university took a five-year course, by the time he had finished he would have consumed 150 peasant-work-years. How can this be justified? Who has the right to appropriate 150 years of peasant work to keep one person at university for five years, and what do the peasants get back for it? These questions lead us to the parting of the ways: is education to be a 'passport to privilege' or is it something which people take upon themselves almost like a monastic vow, a sacred obligation to serve the people? The first road takes the educated young person into a fashionable district of Bombay, where a lot of other highly educated people have already gone and where he can join a mutual admiration society, a 'trade union of the privileged', to see to it that his privileges are not eroded by the great masses of his contemporaries who have not been educated. This is one way. The other way would be embarked upon in a different spirit and would lead to a different destination. It would take him back to the people who, after all, directly or indirectly, had paid for his education by 150 peasant-workyears: having consumed the fruits of their work, he would feel in honour bound to return something to them.

The problem is not new. Leo Tolstoy referred to it when he wrote: 'I sit on a man's back, choking him, and making him carry me, and yet assure myself and others that I am very sorry for him and wish to ease his lot by any means possible, except getting off his back.' So this is the first question I suggest we have to face. Can we establish an ideology, or whatever you like to call it, which insists that the educated have taken upon themselves an obligation and have not simply acquired a 'passport to privilege'? This ideology is of course well supported by all the higher teachings of mankind. As a Christian, I may be permitted to quote from St Luke: 'Much will be expected of the man to whom much has been given. More will be asked of him because he was entrusted with more.' It is you might well say, an elementary matter of justice. If this ideology does not prevail, if it is taken for granted that education is a passport to privilege then the content of education will not primarily be something to serve the people, but something to serve ourselves, the educated. The privileged minority will wish to be educated in a manner that sets them apart and will inevitably learn and teach the wrong things, that is to say, things that do set them apart, with a contempt for manual labour, a contempt for primary production, a contempt for rural life, etc., etc. Unless virtually all educated people see themselves as servants of their country - and that means after all as servants of the common people there cannot possibly be enough leadership and enough communication of know-how to solve this problem of unemployment or unproductive employment in the half million villages of India. It is a matter of 500 million people. For helping people to help themselves you need at ]east two persons to look after 100 and that means an obligation to raise ten million helpers, that is, the whole educated population of India. Now you may say this is impossible, but if it is, it is not so because of any laws of the universe, but because of a certain inbred, ingrained selfishness on the part of the people who are quite prepared to receive and not prepared to give. As a matter of fact, there is evidence that this problem is not insoluble; but it can be solved only at the political level.

Now let me turn to the third factor, after motivation and after, knowhow, the factor I have called capital, which is of course closely related to the matter of know-how. According to my estimates there is in India an immediate need for something like fifty million new jobs. If we agree that people cannot do productive work unless they have some capital - in the form of equipment and also of working capital - the question arises: how much capital can you afford to establish one new job? If it costs Pounds 10 to establish a job you need Pounds 500 million for fifty million jobs. If it costs Pounds 100 to establish a job you need Pounds 5,000 million, and if it cost Pounds 5,000 per job, which is what it might cost in Britain and the USA, to set up fifty million jobs you require Pounds 250,000 million.

The national income of the country we are talking about, of India, is about f15.000 million a year, So the first question is how much can we offer for each job, and the second question, how much time have we to do it in. Let us say we want fifty million jobs in ten years. What proportion of national income (which I identify as about Pounds 15,000 million) can one reasonably expect to be available for the establishment of this capital fund for job creation? I would say, without going into any details, you are lucky if you can make it five per cent. Therefore, if you have five per cent of Pounds 15,000 million for ten years you have a total of Pounds 7,5000 million for the establishment of jobs. If you want fifty million jobs in those ten years, you can afford to spend an average of Pounds 150 per workplace. At that level of capital investment per workplace, in other words, you could afford to set up five million workplaces a year. Let us assume, however, that you say: 'No. Pounds 150 is too mean; it will not buy more than a set of tools; we want Pounds 1,500 per workplace', then you cannot have five million new jobs a year but only half a million. And if you say: 'Only the best is good enough; we want all to be little Americans right away, and that means Pounds 5,000 per workplace', then you cannot have half a million new jobs a year, let alone five million, but only about 170,000. Now, you have no doubt noticed already that I have simplified this matter very much because, in the ten years with investment in jobs, you would have an increase in the national income; but I have also left out the increase in the population, and I would suggest that these two factors cancel one another in their effect on my calculation.

It follows, I suggest, that the biggest single collective decision that any country in the position of India has to take is the choice of technology. I am not laying down the law of what ought to be. I am simply saying that these are the hard facts of life. A lot of things you can argue against, but you cannot argue against arithmetic. So you can have a few jobs at a high level of capitalisation or you can have many jobs at a relatively low level of capitalisation.

Now, all this of course links up with the other factors I have mentioned, with education, motivation, and know-how. In India there are about fifty million pupils in primary schools; almost fifteen million in secondary schools: and roughly one and a half million in institutions of higher learning. To maintain an educational machine on this kind of scale would of course be pointless unless at the end of the pipeline there was something for them to do. with a chance to apply their knowledge. If there is not, the whole thing is nothing but a ghastly burden. This rough picture of the educational effort suffices to show that one really does have to think in terms of five million new jobs a year and not in terms of a few hundred thousand jobs.

Now, until quite recently, that is to say, some fifty to seventy years ago, the way we did things was, by present standards, quite primitive. In this connection, I should like to refer to Chapter II of John Kenneth Galbraith's The New Industrial Estate. It contains a fascinating report on the Ford Motor Company. The Ford Motor Company was set up on 16 June 1903, with an authorised capital of $150,000 of which $100,000 were issued but only $28,500 were paid for in cash, So the total cash which went into this enterprise was of the order of $30,000. They set up in June 1903 and the first car to reach the market appeared in October 1903, that is to say, after four months. The employment in 1903, of course, was small - 125 people, and the capital investment per workplace was somewhat below $100. That was in 1903. If we now move sixty years forward, to 1963, we find that the Ford Motor Company decided to produce a new model, the Mustang. The preparation required three and a half years. Engineering and styling costs were $9 million: the costs of tooling up for this new model were $50 million. Meanwhile the assets employed by the Company were $6.000 million which works out at almost Pounds l0,000 per person employed, about a hundred times as much as sixty years earlier.

Galbraith draws certain conclusions from all this which are worth studying. They describe what happened over these sixty years. The first is that a vastly increased span of time now separates the beginning of an enterprise from the completion of the job. The first Ford car, from the beginning of the work to its appearance on the market, took four months, while a mere change of model now takes four years. Second, a vast increase in capital committed to production. investment per unit of output in the original Ford factory was infinitesimal; material and parts were there only brie8y; no expensive specialists gave them attention; only elementary machines were used to assemble them into a car; it helped that the frame of the car could be lifted by only two men. Third, in those sixty years, a vast increase of inflexibility. Galbraith comments: 'Had Ford and his associates (in 1903) decided at any point to shift from gasoline to steam power, the machine shop could have accommodated itself to the change in a few hours.' If they now try to change even one screw, it takes that many months. Fourth, increasingly specialised manpower, not only on the machinery, but also on the planning, the foreseeing of the future in the uttermost detail. Fifth, a vastly different type of organisation to integrate all these numerous specialists, none of whom can do anything more than just one small task inside the complicated whole. 'So complex, indeed. will be the job for organising specialists that there will be specialists of organisation. More even than machinery, massive and complex business organisations are being tangible manifestations of advanced technology.' Finally, the necessity for long-range planning, which. I can assure you, is a highly sophisticated job, and also highly frustrating. Galbraith comments: 'In the early days of Ford, the future was very near at hand. Only days elapsed between the commitment of machinery and materials to production and their appearance as a car. If the future is near at hand, it can be assumed to be very much like the present', and the planning and forecasting is not very difficult;

Now what is the upshot of ah this? The upshot is that the more sophisticated the technology, the greater in general will be the foregoing requirements. When the simple things of life, which is all I am concerned with, are produced by ever more sophisticated processes, then the need to meet these six requirements moves ever more beyond the capacity of any poor society. As far as simple products are concerned - food, clothing, shelter and culture - the greatest danger is that people should automatically assume that only the 1963 model is relevant and not the 1903 model; because the 1963 way of doing things is inaccessible to the poor, as it presupposes great wealth. Now, without wishing to be rude to my academic friends, I should say that this point is almost universally overlooked by them. The question of how much you can afford for each workplace when you need millions of them is hardly ever raised. To fulfil the requirements that have arisen over the last fifty or sixty years in fact involves a quantum jump, Everything was quite continuous in human history till about the beginning of this century; but in the last half-century there has been a quantum jump, the sort of jump as with the capitalisation of Ford, from $30,000 to $6,000 million,

In a developing country it is difficult enough to get Henry Fords, at the 1903 level. To get Henry super-Fords, to move from practically nowhere on to the 1963 level, is virtually impossible. No-one can start at this level. This means that no-one can do anything at this level unless he is already established, is already operating at that level. This is absolutely crucial for our understanding of the modem world. At this level no creations are possible, only extensions, and this means that the poor are more dependent on the rich than ever before in human history, if they are wedded to that level. They can only be gap-fillers for the rich, for instance, where low wages enable them to produce cheaply this and that trifle. People ferret around and say: 'Here, in this or that poor country, wages are so low that we can get some part of a watch. or of a carburettor, produced more cheaply than in Britain. So let it be produced in Hong Kong or in Taiwan or wherever it might be.' The role of the poor is to be gap-fillers in the requirements of the rich. It follows that at this level of technology it is impossible to attain either full employment or independence. The choice of technology is the most important of all choices.

It is a strange fact that some people say that there are no technological choices. I read an article by a well-known economist from the USA who asserts that there is only one way of producing any particular commodity: the way of 1971. Had these commodities never been produced before? The basic things of life have been needed and produced since Adam left Paradise. He says that the only machinery that can be procured is the very latest. Now that is a different point and it may well be that the only machinery that can be procured easily is the latest. It is true that at any one time there is only one kind of machinery that tends to dominate the market and this creates the impression as if we had no choice and as if the amount of capital in a society determined the amount of employment it could have. Of course this is absurd. The author whom I am quoting also knows that it is absurd, and he then corrects himself and points to examples of Japan, Korea, Taiwan, etc., where people achieve a high level of employment and production with very modest capital equipment.

The importance of technological choice is gradually entering the consciousness of economists and development planners. There are four stages. The first stage has been laughter and scornful rejection of anyone who talked about this. The second stage has now been reached and people give lip service to it, but no action follows and the drift continues. The third stage would be active work in the mobilisation of the knowledge of this technological choice; and the fourth stage will then be the practical application. It is a long road but I do not wish to hide the fact that there are political possibilities of going straight to the fourth stage. If there is a political ideology that sees development as being about people, then one can immediately employ the ingenuity of hundreds of millions of people and go straight to the fourth stage. There are indeed some countries which are going straight to the fourth stage. However, it is not for me to talk politics. If it is now being increasingly understood that this technological choice is of absolutely pivotal importance, how can we get from stage two to stage three, namely from just giving lip service to actually doing work? To my knowledge this work is being done systematically only by one organisation, the Intermediate Technology Development Group (ITDG). I do not deny that some work is also being done on a commercial basis, but not systematically. ITDG set itself the task to find out what are the technological choices. I will only give one example out of the many activities of this purely private group. Take foundry work and woodworking, metal and wood being the two basic raw materials of industry. Now, what are the alternative technologies that can be employed, arranged in the order of capital intensity from the most primitive, when people work with the simplest tools, to the most complicated? This is shown in what we call an industrial profile, and these industrial profiles are supported by instruction manuals at each level of technology and by a directory of equipment with addresses where it can be obtained, The only criticism that can be levelled against this activity is that it is too little and too late. It is not good enough that in this crucial matter one should be satisfied with one little group of private enthusiasts doing this work. There ought to be dozens of solid, well-endowed organisations in the world doing it. The task is so great that even some overlapping would not matter. In any case, I should hope that this work will be taken up on a really substantial scale in India, and I am delighted to see that already some beginnings have been made.

I shall now turn to the fourth factor, namely markets. There is, of course, a very real problem here, because poverty means that markets are small and there is very little free purchasing power. All the purchasing power that exists already, is, as it were, be- spoken, and if I start a new production of, say, sandals or shoes in a poor area, my fellow-sufferers in the area will not have any money to buy the shoes when I have made them. Production is sometimes easier to start than it is to find markets, and then, of course, we get very quickly the advice to produce for export, because exports are mainly for the rich countries and their purchasing power is plentiful But if I start from nothing in a rural area, how could E hope to be competitive in the world market? There are two reasons for this extraordinary preoccupation with exports, as far as I can see. One is real; the other not so good. I shall first talk about the second one. It is really a hangover of the economic thinking of the days of colonialism. Of course, the metropolitan power moved into a territory not because it was particularly interested in the local population, but in order to open up resources needed for its own industry. One moved into Tanzania for sisal, into Zambia for copper, etc., and into some other place for trade. The whole thinking was shaped by these interests.

'Development' meant the development of raw material or food supplies or of trading profits. The colonial power was primarily interested in supplies and profits, not in the development of the natives, and this meant it was primarily interested in the colony's exports and not in its internal market. ~his outlook has stuck to such an extent that even the Pearson Report considers the expansion of exports the main criterion of success for developing countries. But, of course, people do not live by exporting, and what they produce for themselves and for each other is of infinitely greater importance to them than what they produce for foreigners. The other point, however, is a more real one. If I produce for export into a rich country. I can take the availability of purchasing power for granted, because my own little production is as nothing compared with what exists already. But if I start new production in a poor country there can be no local market for my products unless I divert the flow of purchasing power from some other product to mine. A dozen different productions should all be started together: then for every one of the twelve producers the other eleven would be his market. There would be additional purchasing power to absorb the additional output. But it is extremely difficult to start many different activities at once. So the conventional advice is: 'Only production for export is proper development.' Such production is not only highly limited in scope, its employment effect is also extremely limited. To compete in world markets, it is normally necessary to employ the highly capital-intensive and labour-saving technology of the rich countries In any case, there is no multiplier effect: my goods are sold for foreign exchange, and the foreign exchange is spent on imports (or the repayment of debt), and that is the end

of it.

The need to start many complementary productive activities simultaneously presents a very severe difficulty for development, but the difficulty can be mitigated by 'pump-priming' through public works. The virtues of a massive public works programme for job creation have often been extolled. The only point I should like to make in this context is the following: if you can get new purchasing power into a rural community by way of a public works programme financed from outside, see to it that the fullest possible use is made of the 'multiplier effect'. The people employed on the public works want to spend their wages on 'wages goods', that is to say, consumers' goods of all kinds. If these wages goods can be locally produced, the new purchasing power made available through the public works programme dos not seep away but goes on circulating in local market and the total employment effect could be prodigious. Public works are very desirable and can do a great deal of good; but if they are not backed up by the indigenous production of additional wages goods, the additional purchasing power will flow into imports and the country may experience serious foreign exchange difficulties. Even so, it is misleading to deduce from this truism that exports are specially important for development. After all, for mankind as a whole there are no exports. We did not start development by obtaining foreign exchange from Mars or from the moon. Mankind is a closed society. India is quite big enough to be a relatively closed society in that sense - a society in which the able-bodied people work and produce what they need.

Everything sounds very difficult and in a sense it is very difficult if it is done for the people, instead of by the people. But let us not think that development or employment is anything but the most natural thing in the world. It occurs in every healthy person's life. There comes a point when he simply sets to work. In a sense this is much easier to do now than it has ever been in human history. Why? Because there is so much more knowledge. There are so much better communications. You can tap all this knowledge (this is what the Indian Development Group is there for). So let's not mesmerise ourselves by the difficulties, but recover the commonsense view that to work is the most natural thing in the world. Only one must not be blocked by being too damn clever about it. We are always having all sorts of clever ideas about optimising something before it even exists. I think the stupid man who says 'something is better than nothing' is much more intelligent than the clever chap who will not touch anything unless it is optimal. What is stopping us? Theories, planning. I have come across planners at the Planning Commission who have convinced themselves that even within fifteen years it is not possible to put the willing labour power of India to work. If they say it is not possible in fifteen months, I accept that, because it takes time to get around. But to throw up the sponge and say it is not possible to do the most elementary thing within fifteen years, this is just a sort of degeneracy of the intellect. What is the argument behind it? Oh! the argument is very clever, a splendid piece of model building. They have ascertained that in order to put a man to work you need on average so much electricity, so much cement, and so much steel. This is absurd. I should like to remind you that a hundred years ago electricity, cement and steel did not even exist in any significant quantity at all. (I should like to remind you that the Taj Mahal was built without electricity, cement and steel and that all the cathedrals of Europe were built without them. It is a fixation in the mind, that unless you can have the latest you can't do anything at all, and this is the thing that has to be overcome.) You may say, again, this is not an economic problem, but basically a political problem. It is basically a problem of compassion with the ordinary people of the world. It is basically a problem, not of conscripting the ordinary people, but of getting a kind of voluntary conscription of the educated. Another example: we are told by theorists and planners that the number of people you can put to work depends upon the amount of capital you have, as if you could not put people to work to produce capital goods. We are told there is no choice of technology, as if production had started in the year 1971. We are told that it cannot he economic to use anything but the latest methods, as if anything could be more uneconomic than having people doing absolutely nothing. We are told that it is necessary to 'eliminate the human factor',

The greatest deprivation anyone can suffer is to have no chance of looking after himself and making a livelihood. There is no conflict between growth and employment. Not even a conflict as between the present and the future. You will have to construct a very absurd example to demonstrate that by letting people work you create a conflict between the present and the future.

No country that has developed has been able to develop without letting the people work. On the one hand, it is quite true to say that these things are difficult: on the other hand, let us never lose sight of the fact that we are talking about man's most elementary needs and that we must not be prevented by all these high-fainting and very difficult considerations from doing the most elementary and direct things. Now, at the risk of being misunderstood, I will give you the simplest of all possible examples of self-help. The Good Lord has not disinherited any of his children and as far as India is concerned he has given her a variety of trees, unsurpassed anywhere in the world. There are trees for almost all human needs. One of the greatest teachers of India was the Buddha who included in his teaching the obligation of every good Buddhist that he should plant and see to the establishment of one tree at least every five years. As long as this was observed, the whole large area of India was covered with trees, free of dust, with plenty of water. plenty of shade, plenty of food and materials. Just imagine you could establish an ideology which would make it obligatory for every able- bodied person in India, man, woman and child, to do that little thing - to plant and see to the establishment of one tree a year, five years running. This, in a fiveyear period, would give you 2.000 million established trees. Anyone can work it out on the back of an envelope that the economic value of such an enterprise, intelligently conducted, would be greater than anything that has ever been promised by any of India's five-year plans. It could be done without a penny of foreign aid; there is no problem of savings and investment. It would produce foodstuffs, fibres, building material, shade, water, almost anything that man really needs. I just leave this as a thought, not as the final answer to India's enormous problems. But I ask: what sort of an education is this if it prevents us from thinking of things ready to be done immediately? What makes us think we need electricity, cement, and steel before we can do anything at all? The really helpful things will not be done from the centre; they cannot be done by big organisations; but they can be done by the people themselves. If we can recover the sense that it is the most natural thing for every person born into this world to use his hands in a productive way and that it is not beyond the wit of man to make this possible, then I think the problem of unemployment will disappear and we shall soon be asking ourselves how we can get all the work done that needs to be done.