Arthvyavastha? - A Social Perspective
"Thou shalt earn as per thy ability", said the Christ of Capitalism.
- Ability! Ability to do what?
- Quite simple. Ability to earn.
- Ability to earn! But then that's tautological! What's the logic of that?
- Hmm... well, that's how it is.
######################################
The Sanskrit word for Economy is Arthvyavastha - an Order or Arrangement (vyavastha) of Resources and Wealth (arth).
Quite interestingly, Arth also happens to mean 'Meaning' or 'Significance'. Or the coincidence is deliberate?
Anyways, I see little meaning or significance in present Arthvyavastha. And this absence of meaning ensues horrible repercussions; so horrible that I am inclined to call it Arth-avyavastha (mis-arrangement) or even Anarth-vyavastha (an arrangement that dooms a disaster).
Let's talk about the present arthvyavastha regarding remunerations and awards. We'll see the failures of Society as an organization, its implications and the conflicts engendered.
From the point of view of the commercial organizations, this arrangement is simple and straightforward. The salary of an employee is decided, in textbooks, as per the value he/she adds in the organization in terms of revenue, using the curves of Marginal Revenue and Marginal Product of Labor. So the more you give, the more you are given.
Practically, however, it's only partially true, or sometimes completely untrue.* (Detailed discussion on this issue will be continued after the completion of the present discussion.)
However, we must keep in mind that the value that one adds to his organization has no linear relationship with the value that he adds to society. Sometimes, as we know well, an individual or an organization prosper at the cost of society. These are two different things.
Coming back to the topic and looking at this arrangement from the other perspective, from the macroeconomic or social perspective, the current state of affairs is rather puzzling to my mind. I observe that those who actually serve the Society are often poorly rewarded in return. For example, the Farmer who feed us doesn't get enough food for himself. To allude that he is not efficient is adding insult to injury, because a farmer suffers not because he is a bad farmer, but because he happens to be a farmer. This is the tragedy!
Is it really a fault on someone's part to be a farmer? Do we dare to say 'Yes', even light-heartedly, without feeling a revolt inside? Then why can't he lead a life of dignity? Doesn't he add value to the society? And who adds more value than him? And then what does he get in return from us, except poverty and disdain! I know that price and value are two different concepts, but what makes up for such a huge gap between them, in the prevailing arthavyavastha?
Not just the poor farmer, those who fit in this shameful pattern could be noticed everywhere around us. The Teacher who teaches us and builds the foundation of society - the type of support that he gets from us is nothing but a cruel mockery to his profession! Why should he be allowed to suffer in poverty? Because he doesn't have the ability to earn!
What do we deserve when we, as a society, blatantly treat our teachers like this, without remorse? Where has our moral sensitivity gone? What is this arrangement that punishes the very people who sweat for it and sustain it? What are we encouraging, and at what expense? Can we escape these questions? All this observation leads to believe that society has become a defunct organization, with little or no management, deserting its most loyal members to the idiosyncracies of Fate.
Organizations like investment banks, on the other hand, pay huge salary to their members. Now, an employee of an organization is, ultimately, a member of society. So, in effect, Society is rewarding those who generate maximum value for their firms and not those who generate maximum value for their people. Do I need to repeat that these things - the interest of people and the interest of firms are not always the same, and can be poles apart? These two different identities of man - organizational identity and social identity have two different, and often conflicting, roles to play. We see that the former has eclipsed the latter in recent times. The Man has transformed into a Professional and he has gotten rid of his social values to get what he thinks he wants.
Let's ask the investment bankers - what do they contribute to their society? Listen to what they say. Perhaps they'd be able to rationalize their grotesquely large income, if they care to. To best of my knowledge, they are neither investors nor bankers. Trading is NOT investing, if we go by textbook definition. They produce nothing, serve nobody, and create no wealth. They don't fulfil the function of a bank, that is to bring together Savers and Investors, and thus facilitate the process of growth (the ultimate alibi). They don't even have the enterprise that is said to be the justification of profit; enterprise that digs iron ore from earth and makes it steel, and creates jobs and makes life better for people.
What they do have is arrogance of capital and a skill to exploit the loopholes in the prevalent mis-arrangement I was talking about. They 'invest' the money in trading, which is always at their disposal, and earn billions of dollars everyday by fiddling with things as petty as arbitrage! Think! Where does the money come from? Who gets robbed? How come the people who grow nothing hog the biggest pie? And how those who grow, starve!
In the philosophy of Islam, there is a word for this type of earning - Haraam. Profit by interest is forbidden in Muslims; it is considered a lowly business, a sin because this practice degrades the lender and exploits the debtor. Such ideals, buried in hardbound coffins, ought to be understood and internalized in our life. We can not keep on doing Bad thinking that Good will be done automatically by some invisible force. It is insane to expect that an 'invisible hand' will help a blind woman cross the road. Invisible hand is a modern superstition - it does not exist!
And even if we suppose that it does exist, it is degrading on our part to shirk our responsibilities, which is also our most precious privilege as human beings. It'd be like retracing the evolutionary path we've walked. We must accept responsibility for our neighbor too because that's what makes us human. We can't afford to trade it for anything. That would be like exiling our gods from our hearts.
I know I am not making much economic sense, in conventional sense of the word. But do we have time to argue over that? Look around yourself, you'll see the jungle we live in. Men living like beasts! Look at that vulture sitting at the neck of the poor cow, head half-buried in blood, feeding on its flesh! Look at him, the rich guy! He will gulp the poor man down in two minutes, wipe his blood-stained fingers in his rags, do his tie and move on with his genteel smile to the bowling club.
The main question is - what makes us tolerate this jungle around us, this horrid mis-arrangement, this Arth-avyavastha, which leads to this horrendous state of affairs?
Or do we too secretly harbor a hope to get at the top of the farmer?
######################
*contd...
The salary offered to a software professional in ABC Ltd(India) is hardly commensurate to his counterpart's salary in ABC Ltd(USA), even after adjusting the purchasing power parity (PPP).
Why? Each of them add approximately the same value to the company. And we have reasons to believe that sometimes the Indian add more than the white fellow, because of the difference in working hours.
In India, I say from my personal experience, the companies decide their employee's salary not by using those curves but by using data from other companies. And the professors know it! They should be fired if they don't. The system works very smartly - they look at your appraisal report, your market price, and even your (in)ability (some elasticity again!) to leave the company (based on your academic and professional records) etc.
In goods market, any sharing of data or interest that could influence the price of a commodity is illegal, as it hampers the economic efficiency. The price is supposed to be decided only by the fair interplay of demand and supply in a free market, and any collusion or cartel is thoroughly discouraged by the antitrust laws.
However, in labor market, it seems to me that such laws are not made or not enforced. Mighty corporate feels free to freeze the 'market price' or wages of the workers without any fear of legal system.
What do we do with those textbooks? and those journals which serve no one else but the author? I am increasingly getting convinced that this discipline - Economics has sold itself cheaply to corporate and has assumed the role of the medieval Church, using its authority to pronounce the Divine Right of the contemporary King - The Board of Management from its altar. The priests have contructed thousand Bibles after exiling Christ; and they suck your attention in trifle details so that to distract your mind from God.
Reformation is urgently needed.
###############################
Socrates drank poison to defend Reason; and I adore him for that. Today I think he'd fight reason with rhetoric, precisely because reason has become Rhetoric of our times. This struggle is Sisyphian in nature, relentless and ruthless, and Socrates will have to drink poison again and again to defend Reason, so that we may not forget to think.
- Ability! Ability to do what?
- Quite simple. Ability to earn.
- Ability to earn! But then that's tautological! What's the logic of that?
- Hmm... well, that's how it is.
######################################
The Sanskrit word for Economy is Arthvyavastha - an Order or Arrangement (vyavastha) of Resources and Wealth (arth).
Quite interestingly, Arth also happens to mean 'Meaning' or 'Significance'. Or the coincidence is deliberate?
Anyways, I see little meaning or significance in present Arthvyavastha. And this absence of meaning ensues horrible repercussions; so horrible that I am inclined to call it Arth-avyavastha (mis-arrangement) or even Anarth-vyavastha (an arrangement that dooms a disaster).
Let's talk about the present arthvyavastha regarding remunerations and awards. We'll see the failures of Society as an organization, its implications and the conflicts engendered.
From the point of view of the commercial organizations, this arrangement is simple and straightforward. The salary of an employee is decided, in textbooks, as per the value he/she adds in the organization in terms of revenue, using the curves of Marginal Revenue and Marginal Product of Labor. So the more you give, the more you are given.
Practically, however, it's only partially true, or sometimes completely untrue.* (Detailed discussion on this issue will be continued after the completion of the present discussion.)
However, we must keep in mind that the value that one adds to his organization has no linear relationship with the value that he adds to society. Sometimes, as we know well, an individual or an organization prosper at the cost of society. These are two different things.
Coming back to the topic and looking at this arrangement from the other perspective, from the macroeconomic or social perspective, the current state of affairs is rather puzzling to my mind. I observe that those who actually serve the Society are often poorly rewarded in return. For example, the Farmer who feed us doesn't get enough food for himself. To allude that he is not efficient is adding insult to injury, because a farmer suffers not because he is a bad farmer, but because he happens to be a farmer. This is the tragedy!
Is it really a fault on someone's part to be a farmer? Do we dare to say 'Yes', even light-heartedly, without feeling a revolt inside? Then why can't he lead a life of dignity? Doesn't he add value to the society? And who adds more value than him? And then what does he get in return from us, except poverty and disdain! I know that price and value are two different concepts, but what makes up for such a huge gap between them, in the prevailing arthavyavastha?
Not just the poor farmer, those who fit in this shameful pattern could be noticed everywhere around us. The Teacher who teaches us and builds the foundation of society - the type of support that he gets from us is nothing but a cruel mockery to his profession! Why should he be allowed to suffer in poverty? Because he doesn't have the ability to earn!
What do we deserve when we, as a society, blatantly treat our teachers like this, without remorse? Where has our moral sensitivity gone? What is this arrangement that punishes the very people who sweat for it and sustain it? What are we encouraging, and at what expense? Can we escape these questions? All this observation leads to believe that society has become a defunct organization, with little or no management, deserting its most loyal members to the idiosyncracies of Fate.
Organizations like investment banks, on the other hand, pay huge salary to their members. Now, an employee of an organization is, ultimately, a member of society. So, in effect, Society is rewarding those who generate maximum value for their firms and not those who generate maximum value for their people. Do I need to repeat that these things - the interest of people and the interest of firms are not always the same, and can be poles apart? These two different identities of man - organizational identity and social identity have two different, and often conflicting, roles to play. We see that the former has eclipsed the latter in recent times. The Man has transformed into a Professional and he has gotten rid of his social values to get what he thinks he wants.
Let's ask the investment bankers - what do they contribute to their society? Listen to what they say. Perhaps they'd be able to rationalize their grotesquely large income, if they care to. To best of my knowledge, they are neither investors nor bankers. Trading is NOT investing, if we go by textbook definition. They produce nothing, serve nobody, and create no wealth. They don't fulfil the function of a bank, that is to bring together Savers and Investors, and thus facilitate the process of growth (the ultimate alibi). They don't even have the enterprise that is said to be the justification of profit; enterprise that digs iron ore from earth and makes it steel, and creates jobs and makes life better for people.
What they do have is arrogance of capital and a skill to exploit the loopholes in the prevalent mis-arrangement I was talking about. They 'invest' the money in trading, which is always at their disposal, and earn billions of dollars everyday by fiddling with things as petty as arbitrage! Think! Where does the money come from? Who gets robbed? How come the people who grow nothing hog the biggest pie? And how those who grow, starve!
In the philosophy of Islam, there is a word for this type of earning - Haraam. Profit by interest is forbidden in Muslims; it is considered a lowly business, a sin because this practice degrades the lender and exploits the debtor. Such ideals, buried in hardbound coffins, ought to be understood and internalized in our life. We can not keep on doing Bad thinking that Good will be done automatically by some invisible force. It is insane to expect that an 'invisible hand' will help a blind woman cross the road. Invisible hand is a modern superstition - it does not exist!
And even if we suppose that it does exist, it is degrading on our part to shirk our responsibilities, which is also our most precious privilege as human beings. It'd be like retracing the evolutionary path we've walked. We must accept responsibility for our neighbor too because that's what makes us human. We can't afford to trade it for anything. That would be like exiling our gods from our hearts.
I know I am not making much economic sense, in conventional sense of the word. But do we have time to argue over that? Look around yourself, you'll see the jungle we live in. Men living like beasts! Look at that vulture sitting at the neck of the poor cow, head half-buried in blood, feeding on its flesh! Look at him, the rich guy! He will gulp the poor man down in two minutes, wipe his blood-stained fingers in his rags, do his tie and move on with his genteel smile to the bowling club.
The main question is - what makes us tolerate this jungle around us, this horrid mis-arrangement, this Arth-avyavastha, which leads to this horrendous state of affairs?
Or do we too secretly harbor a hope to get at the top of the farmer?
######################
*contd...
The salary offered to a software professional in ABC Ltd(India) is hardly commensurate to his counterpart's salary in ABC Ltd(USA), even after adjusting the purchasing power parity (PPP).
Why? Each of them add approximately the same value to the company. And we have reasons to believe that sometimes the Indian add more than the white fellow, because of the difference in working hours.
In India, I say from my personal experience, the companies decide their employee's salary not by using those curves but by using data from other companies. And the professors know it! They should be fired if they don't. The system works very smartly - they look at your appraisal report, your market price, and even your (in)ability (some elasticity again!) to leave the company (based on your academic and professional records) etc.
In goods market, any sharing of data or interest that could influence the price of a commodity is illegal, as it hampers the economic efficiency. The price is supposed to be decided only by the fair interplay of demand and supply in a free market, and any collusion or cartel is thoroughly discouraged by the antitrust laws.
However, in labor market, it seems to me that such laws are not made or not enforced. Mighty corporate feels free to freeze the 'market price' or wages of the workers without any fear of legal system.
What do we do with those textbooks? and those journals which serve no one else but the author? I am increasingly getting convinced that this discipline - Economics has sold itself cheaply to corporate and has assumed the role of the medieval Church, using its authority to pronounce the Divine Right of the contemporary King - The Board of Management from its altar. The priests have contructed thousand Bibles after exiling Christ; and they suck your attention in trifle details so that to distract your mind from God.
Reformation is urgently needed.
###############################
Socrates drank poison to defend Reason; and I adore him for that. Today I think he'd fight reason with rhetoric, precisely because reason has become Rhetoric of our times. This struggle is Sisyphian in nature, relentless and ruthless, and Socrates will have to drink poison again and again to defend Reason, so that we may not forget to think.
posted by Abhishek* at 5:21 PM
1 Comments:
I am not aware of other Economics scholars but Milton Friedman had this to say
"The Social Responsibility of Business Is to Increase Its Profits."
source[http://www.reason.com/news/show/32239.html]
That makes him one of the few who stands by his convictions, unlike other scholars who hide behind politically correct statements.
Yes, the amount of money a CEO of any fairly large organization earns is ludicrous.Others have rationalized this by claiming that this huge compensation serves as an incentive to those who dream of making it to the big league/executive team.
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