10 Things That Tell You The World Ain’t What It Used To Be 

All’s not well with the global economy we have known, since 2008 when Lehman Brothers crashed and the global financial crisis (GFC) erupted. But we are still not accepting the reality that the system – and almost everything in it - is broke. Conventional remedies are not working, and growth, when it happens, is happening without jobs.

But it is not just the global economy that is broke; the politics and social processes that underpin it are also nearly broken. Consider what is not working in the global political and social economy right now.

First, and the most obvious, monetary policy is not working. After offering near-zero cost credit and flooding the world with printed money, the central banks are even trying negative interest rates. This is a sign of desperation, not an astute strategy. Large parts of the financial system are simply not working and are parasitical in nature. Excess financialisation is killing the real economy.

Second, fiscal policy is also broken. Most countries have excessive public and private debt, and without deleveraging, which can decelerate growth, there is not a snowball’s chance in hell that more debt will solve anything. Governments need to go back to basics – earn before they spend, and save before they invest. But no government has actually gotten around to acknowledging this reality.

Third, currencies no longer reflect their true worth. The US has run the worst fiscal and monetary policy in decades, but its currency is the strongest. As Eswar Prasad, author of The Dollar Trap, said in an interview, “In international finance everything is relative. It’s not that the US has especially good policies or growth prospects, it’s that the rest of the world looks weaker when it comes to putting together the powerful financial institutions that the US has.” In other words, the US gets to borrow on the cheap because the world trusts the rest of the currencies even less. The reality is that the dollar is overvalued, and till it is dethroned as the currency of choice, this situation will not correct itself. The world needs a new non-fiat currency – or several of them issued by private parties, whether it is gold or Bitcoin.

India is an affected party in this. For the last four years, its GDP has hovered around $2 trillion, even though it has been one of the few economies with real, positive growth stories. The dollar-denominated GDP is the villain. In terms of purchasing power parities, India is four times larger than it seems.

Fourth, the world is not creating enough jobs anywhere. Near-free capital and major technological leaps make it ever easier for innovators to make money with less and less people. Whatsapp, which was valued at $19 billion when Facebook acquired it in 2014, had all of 50 engineers working for it. Uber, the world’s largest app-based taxi hailing company, was valued at $62.5 billion last December, and it has less than 2,000 employees. All the drivers using its app are not employees.

In manufacturing companies, robots are taking over, even in India. According to this Economic Times report, in car manufacturing, robots have replaced workers and they are actually doing a better job. The report says Ford’s Sanand plant uses 450 robots, Hyundai’s Tamil Nadu plant 400 and Volkswagen’s Chakan plant in Maharashtra 123. The violence in Maruti’s Manesar factory a few years ago would have done nothing to make the management believe in increasing its headcount.

Fifth, even as jobs are getting scarcer, the quality of jobs available is getting worse. Jobs are turning contractual and project-oriented in many industries, and skill requirements are changing faster than ever. This means workers have to constantly upskill, and there are no jobs for life – except in some parts of the government. The idea of a fixed time cycle of education is no longer relevant beyond universal schooling for basic literacy and numeracy. Post-school education has to become continuous, skill-oriented and online, so that anyone can school or skill herself at a time of her choosing.

Our universities and higher educational institutions are T-Rexes producing unemployable people by the million. They have not adjusted to this change in what the job market of the 21st century demands. Educational institutions have to be more nimble than companies, as customer needs are changing even faster than in industry and services. In future, you may have to alternate between work and college for a greater part of your life, with work not marking the end of education and skills. Educational institutions still offer multi-year courses whose content was decided decades ago.

Sixth, like education, health too needs a revolution, As people are living longer, the world’s healthcare systems are becoming costly and unsustainable. Patent and monopoly-driven drug discovery is no longer relevant (except at the margin) as new diseases and lifestyle ailments multiply. Healthcare costs are soaring, and new drug research clearly cannot be funded purely by granting patents and monopolies.

New drug discoveries will, in future, have to become crowd-funded and crowd-developed, something like a Linux OS or other IPR-free processes. Aged people need different solutions to problems related to aging, and working lifetimes have to be steadily extended as no country can afford too many pensioners living off the working age population.

Seventh, multilateral institutions are becoming irrelevant, and bilateral ones based on trade and political forces are being forged across the world. The World Bank and the IMF are becoming less relevant to the world’s financial future, as new banks (BRICS Bank) challenge their supremacy following the shift in economic powers to Asia from the Occident. Global trade fora such as the WTO have not lost relevance, but the rise of narrow trade blocs and free trade areas is shifting power away from multilateralism.

Eighth, the growth of global terrorism and slower growth have made countries less willing to encourage immigration. Labour, like capital, is a key factor of production. If capital can move freely, labour too needs to move relatively freely. But xenophobia and cultural factors prevent this. Offshoring and outsourcing, where jobs move to where labour resides rather than letting labour move to where the jobs are, were seen as acceptable alternatives to this restriction on free movement of labour, but the big economies are growing uptight even on this limited form of labour mobility. The world is turning nationalistic and mercantilist in both trade in goods and in services. Countries that preached free trade are turning protectionist.

Ninth, the world’s governance structures are broken even in the largest of economies. In the US, political polarisation between Left and Right has led to repeated gridlock and bad policy-making. The European Union went into a tailspin when it failed to coordinate fiscal and monetary policies after agreeing to a common currency. Semi-autocracies have taken power in much of the former Soviet Union, and China itself runs a market economy with political commissars in command. Much of Africa is ungovernable, and large parts of West Asia are heading for failed-state status, as terror defeats existing regimes. Even in Europe, Belgium is seen as a failed state, and hence ideal home for future jihadis. In India, the state is weak and uses draconian laws to prevent things from slipping out of control.

The old binaries of democracy and dictatorship are no longer relevant to describe countries and their regimes as democracies are acquiring more lethal powers of surveillance and pre-emptive arrests, and dictatorships are embracing partial forms of power sharing. The state, once seen as the ultimate invention of civilizational progress, needs re-invention. Democracy has not progressed beyond counting votes. Asking people to vote when solutions are complex is beyond the scope of first-past-the-post electoral systems.

Tenth, traditional forms of media and communication have lost their power and influence as both news and opinion have been “disintermediated”. Non-specialists and bloggers can create their own news, and social media has become a publication platform that blurs the line between fact, fiction and make-believe. This has empowered millions as the power of the old News Ayatollahs is reduced, democratising debate and discussion. But there is also information overload and anarchy, and this flux helps create new social forces that we can barely comprehend. Social media brought down a government in Tunisia, but it also empowers an ISIS to create self-radicalised “lone wolf” terrorists whose potential violence cannot be predicted.

The world ain’t what it used to be, and we need to reinvent it.