 “When one's intelligence, mind, faith and refuge are all fixed in the Supreme, then one becomes fully cleansed of misgivings through complete knowledge and thus proceeds straight on the path of liberation.” (Lord Krishna, Bhagavad-gita, 5.17)
Religious life is hard. Following principles requires discipline, which immediately attacks at the tendency towards accepting the path of least resistance. The pitcher on a professional baseball team must always be mindful of his mechanics, for otherwise he will develop bad habits in his pitching motion, which in turn will lead to poor performance. As in every type of endeavor the natural tendency is towards a lack of discipline, in order to meet a desired end, one needs to accept regulations and follow them. In the realm of spirituality, the highest state of enlightenment is not one where activity ceases. Rather, processes like meditation, which are built upon renunciation, are meant to establish a proper consciousness, which then automatically creates the conditions necessary for finding happiness in life.
And isn’t that what it’s all about, finding happiness? To reach this end, one must follow guiding principles. Say, for example, that our goal is to find an absence of activity. I have worked so hard at the office that when I get home I don’t want to do anything. My goal is to ease my mind by sitting in relaxation, perhaps watching some television, i.e. doing any activity that doesn’t put stress on the brain. Attaining this objective requires some discipline. Seems strange in a sense because the identified goal is to loosen restriction, to feel pleasure from the lack of pressure. Nevertheless, to realize the stated objective one must instill some regulation, which automatically introduces pressure.
Take falling asleep each night. Sleep is the essence of laziness; it is the lack of activity. Of course the vibrant spirit soul never ceases to be; so during times of rest the brain continues to operate. Sleep is supposed to be effortless though; no pressure at all. Ah, but when there is a stated objective to be reached, there must be discipline. If I have to wake up early the next morning to get ready for work, I must lay down in bed at a specific time the night before. In addition, real sleep requires falling into a state of slumber, preferably where there is rapid eye movement, which is the deeper sleep that provides the necessary rest. Simply sitting in bed wide awake will not do the same magic that falling asleep will.
So you’re lying in bed, just waiting to fall asleep. You have to reach the state of slumber at a certain time in order to get enough hours of proper rest. Proper rest allows you to be fully functional the next day. The longer you lay there in bed awake, the less time you will have for deep sleep, as the time for arising the next day is not up for negotiation. It is a fixed moment that must be respected, regardless of whether or not you actually fell asleep the night before. Being cognizant of this, you feel the pressure to fall asleep. You have to follow regulation; you must be disciplined in order to rest properly.
This also helps to explain why the casual nap is so much appreciated. In a nap, there is usually no set time for waking up or falling asleep. Should you lay down for a few minutes, that’s just fine. If you’re feeling really tired, you can rest for a few hours. No worries at all; no pressure. The same doesn’t hold true with the longer slumber that occurs each night as part of a routine.
The Vedas present several varieties of spiritual practice to be implemented by the living entity according to their maturation. For instance, if I don’t know anything about God and why I should worship Him, perhaps my initial regulation is to attend a house of worship on a regular basis. Become familiar with the process, see what practices others follow, and then hopefully spark an interest. If right from the very beginning someone were to tell you about Brahman, reincarnation, the properties of the spirit soul, the inclination towards service within every life form, and how material nature creates illusion for those who want it, the information could be too much to handle.
 On the more advanced levels of spiritual practice, one follows meditation, which has a requirement of renunciation that is strengthened through knowledge. If I tell you to sit quietly on the floor for hours at a time and focus on a specific sound vibration, you may not be so willing to accept the instruction. “Why do I have to do this? I want to have fun? What is sitting like this and forcing myself to be quiet going to do for me in the long run? My time will be better served enjoying.”
Knowledge, or jnana, helps in accepting the need for renounced meditation. With jnana, one learns that the temporary enjoyments in a life filled with fruitive pursuits do not represent the pinnacle of existence. If I take part in an activity that I know will provide misery in the end with a little excitement sprinkled into the beginning, why should I waste my time? Every activity that is not related to the essence of identity, to meeting the needs of the spirit soul, will reach a similar destination.
If there is skepticism on this point, look at every successful person, spanning all the different modes of activity. The sports star who was ranked number one for so many consecutive weeks eventually falls off the radar, with every future introduction beginning with, “former world number one” or “this many time past champion”. The business mogul also must relinquish their title as wealthiest person in the world, as the stock market regularly fluctuates and no large venture is guaranteed interminable profits. Should one be fortunate enough to make it to the end of life without encountering too many failures, they still have to renounce everything upon quitting the body.
Through study of Vedanta, one learns that they are spirit and not matter. The individual has no business with something temporary, just as the adult knows they have no use for the toy blocks they used when they were a child. To feed the needs of the self, one can sit in quiet meditation and recite and hear the sacred syllable om, which represents the Supreme Absolute Truth. With jnana, the dedication to renunciation is solidified, making the meditation easier to follow.
 Is meditation the end? Should everyone renounce activity and not do anything? The meditation has a purpose. Though the Brahman realized soul at the end of life no longer has to accept rebirth, they don’t retain a spiritual identity. As spirit craves activity, eventually the same liberated soul will want to take action. Meditation in renunciation is actually not the end, but rather a means.
A means leads to an end, so what is meditation supposed to bring about? Just as jnana and vairagya, or renunciation, go well together, Brahman realization and dedication to bhakti-yoga, or devotional service, go hand in hand. If you realize Brahman through study of Vedanta and meditation coupled with renunciation, understanding the validity of devotion to the Personality of Godhead, Bhagavan, will be less difficult.
In the Bhagavad-gita it is said that it is rare for someone to endeavor for self-realization and even more rare for the people in that small set to actually attain full success. The reason for the difficulty is rather obvious. The tendency towards lethargy, contentedness, complacency, and overall lack of effort is stronger than the tendency towards accepting discipline. The meditational yogi and the jnani show discipline in their dedication to concentrating on Brahman and Paramatma, the Supersoul residing within the heart. Through study of Vedanta one can learn Brahman, and through breathing exercises and sitting postures, one can realize the Supersoul, but only in devotion can one get the eyes to see Bhagavan, the complete representation of God.
 Why the need for connecting with Bhagavan? Take every desire you have and aggregate them. Take every beneficial condition you’ve wanted to reach and know that they are rooted in the desire to connect with Bhagavan. Hard to notice that when you’re covered by illusion, but through following the authority of aspiritual master dedicated to Bhagavan, you can not only understand who Bhagavan is, but you can serve Him as well.
That service goes against what we’ve previously been taught. From the time of birth the general instruction is to seek out personal sense satisfaction or give service to our fellow man, but both are rooted in illusion. The personal senses belong only to the temporary body and the service offered to man is based on a distinction in external features. A poor man is materially impoverished while a wealthy man is well off, but this doesn’t mean that only the poor man should be served. Both groups are spirit souls, so service to bodily forms is based on a mistake.
The real aim of life, the purpose to having an existence, is to taste the sweet fruit of loving devotion to God. Love must manifest through activity; otherwise it only exists in a potential or unreal state. The activity doesn’t have to be carried out right away, but the sincerity of purpose must be there. If a helpless individual imagines themselves offering up service to the deity manifestation, the offering is as good as made. On the other hand, someone who says they love God but never thinks of Him, never worships Him, and never desires to please Him, is considered a pretender only.
King Janaka was an expert mystic who qualified himself for service to God. He did not desire the cessation of action. On the contrary, he continued with his occupational duties, carrying them out with detachment. He knew that he was Brahman, so there was no need for attraction or aversion. Through his practice in yoga, he became eligible to have the vision of the Supreme Lord in His form as ShriRamachandra, the jewel of the Raghu dynasty. Janaka’s eyes feasted on the sight of Rama as the Lord entered the kingdom of Videha to take part in the bow-lifting contest to determine the husband for Janaka’s daughter Sita. Janaka made the best offering to God by giving away his precious daughter to Him. When Sita reached an age appropriate for marriage, the king felt like he was losing all of his wealth, but he still made the sacrifice. Through it he got to think of Rama constantly and continue his devotion in that way.
 For the distressed, the end to the burden of action seems appealing, but there is no fun in losing your spiritual identity. What we’re really searching for is the purification of action, an enlivening occupation that keeps us connected with the reservoir of pleasure. As the conditions today are not conducive for practicing meditational yoga in the fully renounced spirit, the recommendation is to start with bhakti right away, even if one is in a contaminated state. The holy name is the pure representation of the personal form of Bhagavan, so whoever keeps company with it eventually sees the need for bhakti and basks in its open-ended nature. Regularly chant, “Hare Krishna Hare Krishna, Krishna Krishna, Hare Hare, Hare Rama Hare Rama, Rama Rama, Hare Hare”, and accept that dedicated engagement of bhakti-yoga, which was once thought to be unacceptable due to its perceived difficulty.
In Closing:
At start path of devotion difficult to accept,
From ignorance, divine path we right away reject.
Meditation is a way to give us a good chance,
To reach a better end, enjoyment to enhance.
Regulation must be followed in any pursuit,
To reach desired end must take discipline’s route.
Know that knowledge and renunciation should lead,
To God’s feet, spiritual senses to feed.
Previously unacceptable thus to become,
The only path, towards Shri Krishna run.
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Wednesday, April 11, 2012
Accepting the Unacceptable
Researchers use brain-injury data to map intelligence in the brain
A new study found that specific structures, primarily on the left side of the brain, are vital to general intelligence and executive function (the ability to regulate and control behavior). Brain regions that are associated with general intelligence and executive function are shown in color, with red indicating common areas, orange indicating regions specific to general intelligence, and yellow indicating areas specific to executive function. Credit: Aron Barbey
Scientists report that they have mapped the physical architecture of intelligence in the brain. Theirs is one of the largest and most comprehensive analyses so far of the brain structures vital to general intelligence and to specific aspects of intellectual functioning, such as verbal comprehension and working memory.
Their study, published in Brain: A Journal of Neurology, is unique in that it enlisted an extraordinary pool of volunteer participants: 182 Vietnam veterans with highly localized brain damage from penetrating head injuries.
"It's a significant challenge to find patients (for research) who have brain damage, and even further, it's very hard to find patients who have focal brain damage," said University of Illinois neuroscience professor Aron Barbey, who led the study. Brain damage – from stroke, for example – often impairs multiple brain areas, he said, complicating the task of identifying the cognitive contributions of specific brain structures.
But the very focal brain injuries analyzed in the study allowed the researchers "to draw inferences about how specific brain structures are necessary for performance," Barbey said. "By studying how damage to particular brain regions produces specific forms of cognitive impairment, we can map the architecture of the mind, identifying brain structures that are critically important for specific intellectual abilities."
The researchers took CT scans of the participants' brains and administered an extensive battery of cognitive tests. They pooled the CT data to produce a collective map of the cortex, which they divided into more than 3,000 three-dimensional units called voxels. By analyzing multiple patients with damage to a particular voxel or cluster of voxels and comparing their cognitive abilities with those of patients in whom the same structures were intact, the researchers were able to identify brain regions essential to specific cognitive functions, and those structures that contribute significantly to intelligence.
"We found that general intelligence depends on a remarkably circumscribed neural system," Barbey said. "Several brain regions, and the connections between them, were most important for general intelligence."
These structures are located primarily within the left prefrontal cortex (behind the forehead), left temporal cortex (behind the ear) and left parietal cortex (at the top rear of the head) and in "white matter association tracts" that connect them. (Watch a video about the findings.)
The researchers also found that brain regions for planning, self-control and other aspects of executive function overlap to a significant extent with regions vital to general intelligence.
The study provides new evidence that intelligence relies not on one brain region or even the brain as a whole, Barbey said, but involves specific brain areas working together in a coordinated fashion.
"In fact, the particular regions and connections we found support an emerging body of neuroscience evidence indicating that intelligence depends on the brain's ability to integrate information from verbal, visual, spatial and executive processes," he said.
The findings will "open the door to further investigations into the biological basis of intelligence, exploring how the brain, genes, nutrition and the environment together interact to shape the development and continued evolution of the remarkable intellectual abilities that make us human," Barbey said.
Provided by University of Illinois at Urbana-Champaign
"Researchers use brain-injury data to map intelligence in the brain." April 10th, 2012. http://medicalxpress.com/news/2012-04-brain-injury-intelligence-brain.html
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Robert Karl Stonjek
Robert Karl Stonjek
Personality, habits of thought and gender influence how we remember
University of Illinois researchers Sanda, left, and Florin Dolcos studied how personality, gender, and emotion-regulation strategies appear to influence the recall of emotional personal memories. Credit: L. Brian Stauffer
We all have them – positive memories of personal events that are a delight to recall, and painful recollections that we would rather forget. A new study reveals that what we do with our emotional memories and how they affect us has a lot to do with our gender, personality and the methods we use (often without awareness) to regulate our feelings.
The study appears in Emotion, a journal of the American Psychological Association.
"We're looking at traits that are associated with the way that people process the emotional world and the way that they respond to it," said University of Illinois psychology professor Florin Dolcos, who conducted the study with postdoctoral researcher Sanda Dolcos and University of Alberta postdoctoral researcher Ekaterina Denkova. "We wanted to look not only at how personality traits might influence what and how people remember, but also to examine how that impacts their (subsequent) emotional state."
Previous studies of personality and its relationship to autobiographical memory have tended to focus only on women and only on negative memories, Florin Dolcos said. They do this because women are more likely than men to be diagnosed with emotional disorders such as depression or anxiety, which are associated with an increased focus on negative emotions.
Previous studies have found that people with high neuroticism – the tendency to focus on negative emotions, particularly in times of stress – also "are more disposed to become ill with affective disorders like depression and anxiety-related problems," Dolcos said. But these studies have not looked at differences between men and women, the relationship between positive and negative memories, the frequency with which individuals recall specific memories and the vividness of their memories, he said.
Nor have most such studies examined the strategies people use to regulate their emotions when calling to mind positive and negative autobiographical memories. Such strategies include suppression (trying to blunt or hide negative emotions) and reappraisal (trying to adopt a new perspective on unpleasant memories).
The new study examined all these variables, and the findings offer a first hint of the complex interplay of factors that contribute to mood in healthy young men and women.
The researchers used questionnaires and verbal cues to assess personality and to elicit more than 100 autobiographical memories in each of 71 participants (38 of them women). Their analysis revealed that both men and women who were high in extroversion (gregarious, assertive, stimulus-seeking) tended to remember more positive than negative life events. Men who were high in neuroticism tended to recall a greater proportion of negative memories than men who were low in neuroticism, while women who were high in neuroticism tended to return to the same negative memories again and again, a process called rumination.
Rumination is known to be associated with depression, Florin Dolcos said.
"Depressed people recollect those negative memories and as a result they feel sad," he said. "And as a result of feeling sad, the tendency is to have more negative memories recollected. It's a kind of a vicious circle."
None of the study subjects had been diagnosed with depression or other emotional disorders, but, as might be expected, both male and female participants were likely to experience a lower mood after recalling negative autobiographical memories. (Positive memories generally preceded a more positive mood, but the association was indirect and mediated by extroversion, the researchers reported.)
The most pronounced differences between men and women involved the effects of the emotional strategies they used when recalling negative autobiographical memories. Men who engaged in reappraisal, making an effort to think differently about their memories, were likely to recall more positive memories than their peers, while men who used suppression, trying to tamp down their negative emotional responses, saw no pronounced effect on the recall of positive or negative memories. In women, however, suppression was significantly associated with the recall of negative memories and with a lower mood afterward.
"I think that the most important thing here is that we really need to look concomitantly at sex- and personality-related differences and to acknowledge that these factors have a different impact on the way we record our memories, on what we are doing with our memories, and later, how what we are doing with our memories is impacting our emotional well-being," said Sanda Dolcos.
The findings are instructive for both men and women, she said. Being more outgoing, interrupting rumination and using reappraisal seems to work best for men and women as a strategy for dealing with negative memories and cherishing the positive ones, she said.
Provided by University of Illinois at Urbana-Champaign
"Personality, habits of thought and gender influence how we remember." April 10th, 2012. http://medicalxpress.com/news/2012-04-personality-habits-thought-gender.html
Economic policy governance: Listen to sane voices before it heads for disaster
Citizens should make a noise
The Central Bank’s former Assistant Governor and its long-time Director of Statistics, Dr. Anila Dias Bandaranaike, at a recently held exporters’ forum, expressed the view that the business community should make it their business to discuss, debate and deliver their views on economic policies being formulated by the country’s policy authorities.
As reported by this paper in its edition on 29 February 2012, the veteran Central Banker has elaborated her point as follows:
As reported by this paper in its edition on 29 February 2012, the veteran Central Banker has elaborated her point as follows:
“On the macro side from a business perspective, we really need to be aware of the big picture. We can no longer afford to just look at our own areas only. We cannot just look at the exchange rate only; we need to instead look at credit growth, import growth, reserve decline, key price increases such as fuel price increases, inflation and see what is happening in all fronts to round up on what will happen next.”
Bandaranaike then advised the exporters: Monitor the movements and make a noise when necessary since if everyone keeps mum policy makers will go on a course heading for disaster. But then, to make that noise, access to correct and timely information by everyone is a must. Bandaranaike in her presentation emphasised on this vital requirement too. She said that: “Right to information is something that needs to be pushed. Consistent information is needed to make informed decisions. As citizens of the country, you are entitled to know these numbers to make business decisions.”
The good economic policy governance practices
Bandaranaike’s call for ‘making a noise based on timely and correct information’ is indeed a part of a broad subject which I would like to term ‘Economic Policy Governance’. In modern representative democracies, the elected governments and their policy authorities are mandated to make economic policies for the benefit of the citizens of the countries concerned.
These policies have wide repercussions on the respective economies: in the short run as well as in the long run; on the people who are directly targeted by the policies as well as those who are not; on the domestic economy as well as the global economic partners and so on. Hence, when these policies are made, it is of utmost importance to consider all these aspects to minimise their harmful effects and maximise the benefits to the society.
The policy authorities are expected to follow a course of action that ensures this vital goal of a policy. For that, they should make the policy known to everyone, give the public an opportunity to discuss and debate it, revise the policy on the basis of public’s views and implement the policy accordingly. Thus, a public policy is not something implemented by policy authorities at their discretion but a policy which receives a consensual approval from the society.
However, such a governance system requires deep and wide public consultation, toleration and accommodation of opposing views, transparency in decision making as well as in implementation and assigning clearly defined accountability for the action taken. These are subjects that come within the purview of economic policy governance.
If good economic policy governance practices are not adopted by policy authorities, as warned by Bandaranaike, the policy authorities may set themselves on a course heading for disaster and once that disaster has hit a country, the costs of the failed economic policies have to be borne by everybody. It is therefore in the interest of people themselves to close all possibilities of the occurrence of such undesired outcomes. Making a loud noise as advised by Bandaranaike is one such preventive course of action which the business community as more knowledgeable society leaders could take.
Kautilya’s advice to king: listen to people’s voices
Fostering public dialogues on any matter affecting the public and the environment they live in is a sign of a healthy and growing society. Kautilya, the 4th century BCE Indian Philosopher and Statesman, advised his king to spend one and a half hours every morning to hear the voices of people who would do so in an audience with him, personally submitting their petitions to seek justice against wrongful decisions of the king himself or his officials.
In ‘The Arthashastra,’ to make such public hearing effective, Kautilya further advises the king as follows: “When in court, he shall not make petitioners wait at the door, but attend to them promptly himself. When a king makes himself inaccessible to his people and he is seen only by those near him, wrong decisions are bound to be made; the people will become angry and may go over to the enemy”. So, according to Kautilya, listening to public voice is a way to avoid making wrong decisions. It, therefore, allows a king to examine all aspects of a policy being formulated by his officials before it is implemented.
Self-interest may distort the public voice
Public voice is important, but there are some prerequisites for making such voice effective and good for social development. It is quite natural for individuals, guided by their self-interest, to raise the public voice to promote their personal causes. There is nothing wrong in voicing one’s views for his own self-interest as long as such satisfaction of self-interest leads to a greater public benefit as well.
Apart from this, those who make public voices can also be motivated by fake or false propaganda that has been lavishly thrown upon them by some interested individuals or parties. On such occasions, the voice loses its true value because its objective has been to bring about an outcome that satisfies a narrow objective of some crafty individual or a group of individuals. They can also be guided by ignorance or misrepresentation of facts. If a public dialogue is marred by these deficiencies, it is more harmful to the wellbeing of people than not having a dialogue at all.
Reason to guide the public voice
The key to a productive public voice is that the ensuing public dialogues should be guided by reason, free of self-interest and toleration of opposing views so that one could amend his views later based on more factually correct information. ‘Reason’ is nothing but sanity in behaviour. The sane behaviour requires those who engage themselves in public dialogue to be objective, impartial and unbiased. In other words, views expressed by anyone on a public policy should be based on evidence and not on emotions, prejudices or biases.
When there are two or more groups critical of each other, then, the ensuing dialogue becomes a debate and debates are again a healthy sign of a growing society as long as their objective is to seek the truth. However, when conducting a debate, one may be tempted to win the debate by crafty methods thereby denying everyone the opportunity for ascertaining the truth. Hence, it is necessary that debaters are guided by some ethical rules of conducting debates for resolving disputations. Fortunately, there have been many wise men in human history who have pronounced such ethical rules for debaters to follow.
The Buddha’s advice: do not meet a charge with a counter charge
The Buddha for instance in the 6th century BCE has laid down the ethical principles of debate when one bhikku is accused by another bhikku which eventually becomes a debate to ascertain the truth. In the Anumana Sutra in the Majjima Nikaya, the Buddha has preached that one should not try to cover up the charges against him by making counter charges or diverting the debate to some other irrelevant aspect or expressing anger, hatred or displeasure or insulting the character of the debater opposed to him.
In other words, when a public debate takes place on a public policy, the motive should be to ascertain the truth and not to win the debate by any means. It would help all those who participate in the debate and those who watch it end up wiser. Four hundred years after the Buddha, Emperor Ashoka who later became a Buddhist disciple codified these principles to laws in Ashoka inscriptions and one such principle he has laid down is that ‘the opponent in a debate should be duly honoured in every way on all occasions’.
The Nobel Laureate Amartya Sen in his 2009 book ‘The Idea of Justice’ has explained how the Mughal Emperor Akbar approached public policy through the promotion of free public dialogue that relied on ‘reason’ or objective knowledge and not ‘the marshy land of tradition’ or fragile and prejudiced whims and fancies of people.
Emperor Akbar’s love for ‘reason’
According to Sen, Akbar insisted that even customs should be examined by using reason only. By following this principle, he abolished all special taxes that had been imposed by custom by previous Mughal rulers on non-Muslims because those taxes were discriminatory and did not treat all citizens as equal. He also decided to release all imperial slaves because it was beyond justice and good conduct to benefit from work obtained through force. This was in the late 16th century CE and at that time slavery was a thriving business in other parts of the world.
But Akbar was a pragmatist too. He did not approve of religious rituals and neither did he participate in them personally. But when his second son, Murad, suggested to him that all religious rituals should be banned, he immediately disapproved of it on the ground that “preventing that insensitive simpleton who considers body exercise to be divine worship would amount to preventing him from remembering God at all”.
What it meant was that society should begin to tolerate even the bizarre practices of the uneducated and the insanely devoted because it did some good for such persons. Akbar, believing that reason to be supreme, argued that even in disputing reason one should use reasons. When he was attacked by those who believed that unquestioning and instinctive faith in the Islamic traditions should be the best, Akbar is said to have confessed to his friend Abul Fazl, as reported by Sen, that the pursuit of reason and the rejection of traditionalism are so brilliantly patent or clearly obvious as to be above the need of the argument. Accordingly, Akbar having equated the ‘path of reason’ to the ‘rule of the intellectual’ has concluded that reason must be the basic determinant of good and just behaviour.
Akbar’s worship of reason as the guiding principle of conducting public debates is valid even for today.
Make a noise but be objective and impartial
Hence, the public has a right and should exercise that right to discuss and debate public issues with a view to making a noise about the public policies. Making such a noise is indeed helpful to policy authorities too to practise and foster good economic policy governance in a country. It enables people to feel that they are a part of the economic policy making and share the ownership of economic policies implemented in a country. Therefore, it is in the interest of the policy authorities to promote free discussion of the economic policies pursued by them so that they could avoid, as Bandaranaike has warned, heading for disaster.
While those who make the noise about the economic policies should guide themselves by ‘reason’ or ‘sanity’, the policy authorities too have the obligation of making available consistent and accurate information to the public and then listening to those sane voices. This means that when policy authorities make decisions on economic policies, projects and other economic plans, all the details of such activities should be disclosed to the public to facilitate them to discuss and debate the same in a fruitful and constructive manner.
Hiding true facts or giving misleading or fabricated information on economic policies by policy authorities is a serious crime committed by them against the society. When the public demands accurate information or challenges the accuracy of information released by policy authorities, it should not be viewed as a hostile act on the part of those who raise their voice. The policy authorities should cultivate modesty and humbleness even when the critics are harsh and curt.
Two cases from the recent history where policy authorities have failed to listen to sane voices are worth being quoted.
The first is the bankruptcy and the subsequent liquidation of the Central Bank of the Philippines in 1993. The second case is the charges made against the incumbent Governor of the Bank of Thailand at the time of the East Asian financial crisis in 1997 for criminal negligence by way of losing the valuable foreign exchange reserves of the country. In both cases, it ended up in disaster and it could have been avoided had the policy authorities took some time to listen to the sane voices of the critics.
The liquidation of the Central Bank of the Philippines
The Central Bank of the Philippines throughout 1980s had maintained an overvalued Peso to please the political authorities, despite the high domestic inflation, widening trade and current account deficits and the pressure for the Peso to depreciate in the market. To support the Peso, the Central Bank first used its foreign reserves and when those reserves fell to a zero level, started borrowing from abroad and selling in the domestic markets.
Pretty soon, the Central Bank’s foreign reserves became negative, it could not pay interest on the dollars borrowed from abroad and its net assets became negative. So the Bank became bankrupt and with the support of the US Treasury, Japanese Government and IMF, the Bank was liquidated in 1993 and a new central bank under the name of Bangko Sentral ng Pilipinas or BSP was established. The Filipino government was permitted by the international creditors to pay the previous Central Bank’s liabilities in 25 years meaning that the government would be paying that debt till 2018.
Thai Central Bank Governor could have avoided disaster had he listened to sane public voices
The second case relating to the Bank of Thailand is more pathetic because it triggered the 1997 East Asian financial crisis dragging many other countries in the region to disaster. The Bank of Thailand Governor Rerngchai Marakanond, despite the advice given to him by many both within and outside the Central Bank, stubbornly tried to maintain a fixed value for the Thai currency, Baht, at 25 Bahts to a Dollar. When there were no Dollars in the market to sustain the value of Baht at that level, he sold Dollars from the Central Bank’s foreign reserves. But the market’s demand for Dollars was much more and when the Central Bank lost about $ 30 billion, it could not go along the vain practice anymore and had to allow the Baht to find its own value in the market. In 2005, Rerngchai was found guilty by the Civil Court of Bangkok for criminal negligence by way of losing the country’s valuable reserves and was ordered to pay a fine of Baht 180 billion or $ 4.61 billion plus interest. Six years after that original judgment, on appeal, he was cleared by the Appeal Court in 2011; but by that time as he had told the Bangkok Post, his mental and emotional well-being had been shattered needing him to seek refuge of Dhamma meaning that it was Buddha’s preaching that rescued him at last. Hence, to avoid future disasters, the adherence to good economic policy practices is a must. In terms of these practices, the public should make it their business to raise sane voices on economic policies. The policy authorities should also make it their business to listen to such sane voices.
(W.A. Wijewardena can be reached at waw1949@gmail.com.)
Bandaranaike then advised the exporters: Monitor the movements and make a noise when necessary since if everyone keeps mum policy makers will go on a course heading for disaster. But then, to make that noise, access to correct and timely information by everyone is a must. Bandaranaike in her presentation emphasised on this vital requirement too. She said that: “Right to information is something that needs to be pushed. Consistent information is needed to make informed decisions. As citizens of the country, you are entitled to know these numbers to make business decisions.”
The good economic policy governance practices
Bandaranaike’s call for ‘making a noise based on timely and correct information’ is indeed a part of a broad subject which I would like to term ‘Economic Policy Governance’. In modern representative democracies, the elected governments and their policy authorities are mandated to make economic policies for the benefit of the citizens of the countries concerned.
These policies have wide repercussions on the respective economies: in the short run as well as in the long run; on the people who are directly targeted by the policies as well as those who are not; on the domestic economy as well as the global economic partners and so on. Hence, when these policies are made, it is of utmost importance to consider all these aspects to minimise their harmful effects and maximise the benefits to the society.
The policy authorities are expected to follow a course of action that ensures this vital goal of a policy. For that, they should make the policy known to everyone, give the public an opportunity to discuss and debate it, revise the policy on the basis of public’s views and implement the policy accordingly. Thus, a public policy is not something implemented by policy authorities at their discretion but a policy which receives a consensual approval from the society.
However, such a governance system requires deep and wide public consultation, toleration and accommodation of opposing views, transparency in decision making as well as in implementation and assigning clearly defined accountability for the action taken. These are subjects that come within the purview of economic policy governance.
If good economic policy governance practices are not adopted by policy authorities, as warned by Bandaranaike, the policy authorities may set themselves on a course heading for disaster and once that disaster has hit a country, the costs of the failed economic policies have to be borne by everybody. It is therefore in the interest of people themselves to close all possibilities of the occurrence of such undesired outcomes. Making a loud noise as advised by Bandaranaike is one such preventive course of action which the business community as more knowledgeable society leaders could take.
Kautilya’s advice to king: listen to people’s voices
Fostering public dialogues on any matter affecting the public and the environment they live in is a sign of a healthy and growing society. Kautilya, the 4th century BCE Indian Philosopher and Statesman, advised his king to spend one and a half hours every morning to hear the voices of people who would do so in an audience with him, personally submitting their petitions to seek justice against wrongful decisions of the king himself or his officials.
In ‘The Arthashastra,’ to make such public hearing effective, Kautilya further advises the king as follows: “When in court, he shall not make petitioners wait at the door, but attend to them promptly himself. When a king makes himself inaccessible to his people and he is seen only by those near him, wrong decisions are bound to be made; the people will become angry and may go over to the enemy”. So, according to Kautilya, listening to public voice is a way to avoid making wrong decisions. It, therefore, allows a king to examine all aspects of a policy being formulated by his officials before it is implemented.
Self-interest may distort the public voice
Public voice is important, but there are some prerequisites for making such voice effective and good for social development. It is quite natural for individuals, guided by their self-interest, to raise the public voice to promote their personal causes. There is nothing wrong in voicing one’s views for his own self-interest as long as such satisfaction of self-interest leads to a greater public benefit as well.
Apart from this, those who make public voices can also be motivated by fake or false propaganda that has been lavishly thrown upon them by some interested individuals or parties. On such occasions, the voice loses its true value because its objective has been to bring about an outcome that satisfies a narrow objective of some crafty individual or a group of individuals. They can also be guided by ignorance or misrepresentation of facts. If a public dialogue is marred by these deficiencies, it is more harmful to the wellbeing of people than not having a dialogue at all.
Reason to guide the public voice
The key to a productive public voice is that the ensuing public dialogues should be guided by reason, free of self-interest and toleration of opposing views so that one could amend his views later based on more factually correct information. ‘Reason’ is nothing but sanity in behaviour. The sane behaviour requires those who engage themselves in public dialogue to be objective, impartial and unbiased. In other words, views expressed by anyone on a public policy should be based on evidence and not on emotions, prejudices or biases.
When there are two or more groups critical of each other, then, the ensuing dialogue becomes a debate and debates are again a healthy sign of a growing society as long as their objective is to seek the truth. However, when conducting a debate, one may be tempted to win the debate by crafty methods thereby denying everyone the opportunity for ascertaining the truth. Hence, it is necessary that debaters are guided by some ethical rules of conducting debates for resolving disputations. Fortunately, there have been many wise men in human history who have pronounced such ethical rules for debaters to follow.
The Buddha’s advice: do not meet a charge with a counter charge
The Buddha for instance in the 6th century BCE has laid down the ethical principles of debate when one bhikku is accused by another bhikku which eventually becomes a debate to ascertain the truth. In the Anumana Sutra in the Majjima Nikaya, the Buddha has preached that one should not try to cover up the charges against him by making counter charges or diverting the debate to some other irrelevant aspect or expressing anger, hatred or displeasure or insulting the character of the debater opposed to him.
In other words, when a public debate takes place on a public policy, the motive should be to ascertain the truth and not to win the debate by any means. It would help all those who participate in the debate and those who watch it end up wiser. Four hundred years after the Buddha, Emperor Ashoka who later became a Buddhist disciple codified these principles to laws in Ashoka inscriptions and one such principle he has laid down is that ‘the opponent in a debate should be duly honoured in every way on all occasions’.
The Nobel Laureate Amartya Sen in his 2009 book ‘The Idea of Justice’ has explained how the Mughal Emperor Akbar approached public policy through the promotion of free public dialogue that relied on ‘reason’ or objective knowledge and not ‘the marshy land of tradition’ or fragile and prejudiced whims and fancies of people.
Emperor Akbar’s love for ‘reason’
According to Sen, Akbar insisted that even customs should be examined by using reason only. By following this principle, he abolished all special taxes that had been imposed by custom by previous Mughal rulers on non-Muslims because those taxes were discriminatory and did not treat all citizens as equal. He also decided to release all imperial slaves because it was beyond justice and good conduct to benefit from work obtained through force. This was in the late 16th century CE and at that time slavery was a thriving business in other parts of the world.
But Akbar was a pragmatist too. He did not approve of religious rituals and neither did he participate in them personally. But when his second son, Murad, suggested to him that all religious rituals should be banned, he immediately disapproved of it on the ground that “preventing that insensitive simpleton who considers body exercise to be divine worship would amount to preventing him from remembering God at all”.
What it meant was that society should begin to tolerate even the bizarre practices of the uneducated and the insanely devoted because it did some good for such persons. Akbar, believing that reason to be supreme, argued that even in disputing reason one should use reasons. When he was attacked by those who believed that unquestioning and instinctive faith in the Islamic traditions should be the best, Akbar is said to have confessed to his friend Abul Fazl, as reported by Sen, that the pursuit of reason and the rejection of traditionalism are so brilliantly patent or clearly obvious as to be above the need of the argument. Accordingly, Akbar having equated the ‘path of reason’ to the ‘rule of the intellectual’ has concluded that reason must be the basic determinant of good and just behaviour.
Akbar’s worship of reason as the guiding principle of conducting public debates is valid even for today.
Make a noise but be objective and impartial
Hence, the public has a right and should exercise that right to discuss and debate public issues with a view to making a noise about the public policies. Making such a noise is indeed helpful to policy authorities too to practise and foster good economic policy governance in a country. It enables people to feel that they are a part of the economic policy making and share the ownership of economic policies implemented in a country. Therefore, it is in the interest of the policy authorities to promote free discussion of the economic policies pursued by them so that they could avoid, as Bandaranaike has warned, heading for disaster.
While those who make the noise about the economic policies should guide themselves by ‘reason’ or ‘sanity’, the policy authorities too have the obligation of making available consistent and accurate information to the public and then listening to those sane voices. This means that when policy authorities make decisions on economic policies, projects and other economic plans, all the details of such activities should be disclosed to the public to facilitate them to discuss and debate the same in a fruitful and constructive manner.
Hiding true facts or giving misleading or fabricated information on economic policies by policy authorities is a serious crime committed by them against the society. When the public demands accurate information or challenges the accuracy of information released by policy authorities, it should not be viewed as a hostile act on the part of those who raise their voice. The policy authorities should cultivate modesty and humbleness even when the critics are harsh and curt.
Two cases from the recent history where policy authorities have failed to listen to sane voices are worth being quoted.
The first is the bankruptcy and the subsequent liquidation of the Central Bank of the Philippines in 1993. The second case is the charges made against the incumbent Governor of the Bank of Thailand at the time of the East Asian financial crisis in 1997 for criminal negligence by way of losing the valuable foreign exchange reserves of the country. In both cases, it ended up in disaster and it could have been avoided had the policy authorities took some time to listen to the sane voices of the critics.
The liquidation of the Central Bank of the Philippines
The Central Bank of the Philippines throughout 1980s had maintained an overvalued Peso to please the political authorities, despite the high domestic inflation, widening trade and current account deficits and the pressure for the Peso to depreciate in the market. To support the Peso, the Central Bank first used its foreign reserves and when those reserves fell to a zero level, started borrowing from abroad and selling in the domestic markets.
Pretty soon, the Central Bank’s foreign reserves became negative, it could not pay interest on the dollars borrowed from abroad and its net assets became negative. So the Bank became bankrupt and with the support of the US Treasury, Japanese Government and IMF, the Bank was liquidated in 1993 and a new central bank under the name of Bangko Sentral ng Pilipinas or BSP was established. The Filipino government was permitted by the international creditors to pay the previous Central Bank’s liabilities in 25 years meaning that the government would be paying that debt till 2018.
Thai Central Bank Governor could have avoided disaster had he listened to sane public voices
The second case relating to the Bank of Thailand is more pathetic because it triggered the 1997 East Asian financial crisis dragging many other countries in the region to disaster. The Bank of Thailand Governor Rerngchai Marakanond, despite the advice given to him by many both within and outside the Central Bank, stubbornly tried to maintain a fixed value for the Thai currency, Baht, at 25 Bahts to a Dollar. When there were no Dollars in the market to sustain the value of Baht at that level, he sold Dollars from the Central Bank’s foreign reserves. But the market’s demand for Dollars was much more and when the Central Bank lost about $ 30 billion, it could not go along the vain practice anymore and had to allow the Baht to find its own value in the market. In 2005, Rerngchai was found guilty by the Civil Court of Bangkok for criminal negligence by way of losing the country’s valuable reserves and was ordered to pay a fine of Baht 180 billion or $ 4.61 billion plus interest. Six years after that original judgment, on appeal, he was cleared by the Appeal Court in 2011; but by that time as he had told the Bangkok Post, his mental and emotional well-being had been shattered needing him to seek refuge of Dhamma meaning that it was Buddha’s preaching that rescued him at last. Hence, to avoid future disasters, the adherence to good economic policy practices is a must. In terms of these practices, the public should make it their business to raise sane voices on economic policies. The policy authorities should also make it their business to listen to such sane voices.
(W.A. Wijewardena can be reached at waw1949@gmail.com.)
Fixing the external sector crisis: Viable long-term strategy is now necessary
The impending release of a tranche of $ 400 million by IMF out of the earlier abandoned SBA in April will also add to Central Bank’s foreign reserves thereby helping the country to build confidence among the market participants about the availability of foreign reserves.Beware of the emerging comfort zone
The external sector crisis which Sri Lanka has been facing since early 2011 has now been temporarily fixed by
allowing the rupee to depreciate against the US dollar by about 18 per cent since late November, 2011.
The gravity of the problem has also been eased by the expected higher inflow of remittances by Sri Lankans working abroad during the festive month of April and the slowed down import payments in this month since most of the imports targeting the festive season have been effected in February and March.
The external sector crisis which Sri Lanka has been facing since early 2011 has now been temporarily fixed by
allowing the rupee to depreciate against the US dollar by about 18 per cent since late November, 2011.The gravity of the problem has also been eased by the expected higher inflow of remittances by Sri Lankans working abroad during the festive month of April and the slowed down import payments in this month since most of the imports targeting the festive season have been effected in February and March.
These developments may temporarily release the pressure for the rupee to depreciate in the immediate future. The danger of such salutary developments is that the Sri Lanka’s policy authorities may fall into another comfort zone thinking that the problem has now been permanently fixed.
Yet, the root cause of the ailment is still very much active and can paralyse the patient at any moment of time when the system becomes weaker. Hence, it is only a temporary breathing space for Sri Lanka and it should use this breathing space effectively to think and adopt some long term strategies to fix the problem permanently.
The crisis which has hit Sri Lanka today had many manifestations from around early 2011though they were not noticed by the country’s policy authorities.
Ignored manifestations of the crisis
Beginning from January 2011, there were signs that the gap between the country’s exports and imports, known as the trade deficit, was on the increase to a record high level. When exports were rising in dollar terms by about 20 per cent, imports were rising at a phenomenally high rate of over 50 per cent.
Yet, there was complacency on the side of authorities because, according to the statements issued by them, the gap did not pose an immediate problem and it could be financed out of the moneys sent by Sri Lankans working abroad, known as foreign remittances, and higher inflows to the government and the stock market. Besides, the rise in imports was considered beneficial and the warning sign was grossly ignored on the claim that they supplied raw materials for the country’s prospective high economic growth.
With the increase in the trade gap which surpassed the level in 2010 by mid-2011, there was pressure for the rupee to depreciate in the market. But the authorities were again complacent in the belief that the country had adequate foreign exchange reserves to meet that eventuality.
By end July 2011, the country’s gross foreign reserves, that is, the amount of foreign assets available without considering its payment obligations, were more than US$ 8 billion and it was considered a safe level to meet that eventuality. The gross assets were in fact sufficient to pay for four and a half months’ prospective imports in the twelve month period beginning from mid-2011.
But the reserves started to fall drastically since then and, by December 2011, the country had lost about $ 2 billion of reserves pushing down the reserve level to some $ 5.8 billion. Prospectively, these reserves could finance only less than three months’ imports.
Sri Lanka’s Government budget too had a major weakness in the sense that, to pay interest on the foreign loans and repay the principal of maturing ones, it was necessary to borrow more money from the foreign sources. This contributed to increase the amount of foreign borrowings by the government, but again, foreign borrowings as a ratio of the country’s total output, called GDP, showed a decline due to the faster rise in money GDP than foreign borrowings which are now converted to rupees at an unchanged exchange rate of Rs. 110 per dollar.
The failure to notice these manifestations was deadly: The crisis knocked violently at the country’s doors and eventually, the rupee had to be allowed to depreciate against the dollar in a free-fall since mid-February 2012.
Now that the value of the rupee against the US dollar has stabilised at around Rs. 130, it is natural to be complacent once again that the country’s problems are over. But, that is not the case.
Depreciation has established only salutary ground conditions
The depreciation of the rupee has removed one of the bottlenecks which exporters had been facing in the international markets, namely, the loss of competitiveness of the local products when compared with Sri Lanka’s close competitors. It also has encouraged the migrant workers to send more money to Sri Lanka because they now get more rupees for every dollar they send at the new exchange rates.
On the other side of the country’s external payments, its imports are now more costly and there are all the incentives for the local producers to supply many of the products at a competitive price. But these are only favourable ground conditions which the depreciation of the rupee has established.
This could be explained by an analogy. Suppose that a student is unable to study because of the disturbance made by an offending noise. Suppose further that the source of noise has been found and effective action has been taken to put a stop to it. But, does it mean that the student would necessarily study? No, because the main incentive to study comes from motivation to pass the examination and not from the absence of the noise.
Similarly, the depreciation of the rupee is like the removal of the noise. It helps a country to fix its problems temporarily by creating the suitable ground conditions for it to search for a permanent solution. Hence, there is a lot more to be done to attain that goal. That is where a viable long term strategy is needed.
Permanent solution: Go for high tech exports
The viable strategy requires Sri Lanka to concentrate on developing an export structure that would rise faster than its imports and thereby reduce its currently high trade deficit. The development of such a structure requires the country to diversify its industrial exports to new areas, namely, high tech exports.
Since the opening of the Sri Lanka’s economy in 1977, there has been a remarkable transformation in the country’s external trade. In 1977, about 79 per cent of the country’s exports consisted of tea, rubber, coconut and other minor agricultural exports, an insignificant diversification from its position in 1948 where these products accounted for 90 per cent of its exports.
Industrial exports in 1977 were just 14 per cent of total exports. By 1996, industrial exports had risen to 73 per cent and agricultural exports shrunk to 24 per cent. In 2011, the share of industrial exports rose to 76 per cent and that of agricultural exports fell to 22 per cent.
A similar transformation took place in the import structure as well. In 1948, consumer goods accounted for about 52 per cent of total imports. Even in 1977, they had a share of 42 per cent. But by 1996, their share fell to 19 per cent and continued to be around that level since then. The combined share of intermediate and investment goods imports increased from 48 per cent in 1948 to 56 per cent in 1977 and further to 77 per cent by 1996. In 2011, they accounted for 79 per cent of imports.
This transformation that has taken place in Sri Lanka’s external trade since 1977 is salutary. But it is not enough in terms of the changing external trade pattern of the world and, therefore, it is not sustainable either.
Low tech exports can easily be copied
Though the share of the industrial exports in total exports has increased significantly, those industrial exports are basically low tech products like garments and textiles and rubber products that have gone through simple manufacturing processes. The risk which a country faces when such low tech products dominate its export structure is that its competitors and those who enter the export market anew could easily copy them. It is simply a matter of getting the required machinery and raw materials and training the staff to operate those machines.
As a result, the country starts facing stiff competition from the prospective new entrants to the market. Further, when the labour costs in the country increases due to increase in income and inflation, its competitive edge is gradually eroded eventually driving it out of the export market. Hence, if a country desires to sustain its market place, it should necessarily go for products which cannot easily be copied by others.
Jack Welch: Driving of GE to high tech manufacturing
A good example in this regard is provided by Jack Welch, CEO of the US giant General Electric, popularly known as GE, in 1980s and 1990s. In his 2001 autobiography “Straight from the Gut”, Jack says that when he became GE’s CEO in 1981, the company was sailing in stormy weather toward bankruptcy because it could not compete with cheap Japanese products that had invaded its markets at home as well as abroad.
The company had made a name for itself for decades for its low tech electric household implements like ovens, cookers, refrigerators, irons and deep freezers. The success story it had in those products for so long had built a ‘comfort zone’ around it and no one had anticipated a change in the market conditions putting GE to peril one day. But the problem with those products was that they involved simple technology and could be easily copied by anyone. In 1970s, the Japanese did it and the result was the ailing American giant’s fast move toward bankruptcy due its being unable to compete with cheap Japanese products.
Jack says that he made a strategic plan to attack the very source of the problem. The Japanese had succeeded in penetrating its markets because its products could be easily copied. Even if GE succeeded in competing out the Japanese, it would not have solved the problem because in the next round, South Koreans would beat GE by copying them.
After South Koreans, the Singaporeans, Malaysians, Thais and Filipinos would join the line to compete out GE. Hence, the permanent solution for GE rested on moving into a product line which cannot be copied by others easily. That product line came from high tech industries. So, Jack says that GE concentrated in producing only three items which involved advanced technology and therefore could not be copied by others.
These three products were advanced medical equipment like MRI machines, jet engines and power generating turbines. For these products, GE has only two or three competitors worldwide and the entire global market is being shared by GE with them. Within a few years, according to Jack, GE had market dominance over these products and was successful in converting it from a vast electrical product manufacturer to a vibrant high tech US corporation.
Sri Lanka has low high tech exports
Sri Lanka’s future lies in transforming its industrial base from low tech to high tech industries. It cannot have all types of high tech industries, but only some selected ones to begin with. The likely candidates are new generation computers and office equipment, pharmaceutical products, telecommunication equipment and some of the chemical products for which the country can get the necessary technology and technical knowhow by teaming up with the world’s giant corporations. But it is not an easy and a quickly achievable goal. It therefore requires the country to go for a long term strategic plan and create the necessary ground conditions for moving toward that goal.
Sri Lanka’s high tech exports as reported by the World Bank (available at: http://data.worldbank.org/indicator/TX.VAL.TECH.CD) have been peanuts in the past. In 2007, its high tech exports amounted to US $ 107 million or 1.4 per cent of exports in that year. This number fell drastically to $ 44 million in 2009 accounting for a mere 0.6 per cent of exports in that year.
Neighbouring India has increased its high tech exports from $ 5 billion in 2007 to $ 10 billion in 2009. As a per cent of total exports, the share has jumped from 4 per cent to 8 per cent. India was able to raise its high tech export content in total exports by acquiring the necessary technology from American, European and Japanese companies.
Sri Lanka should be a partner of Western high tech companies
What should Sri Lanka do to promote its high tech exports? It has to acquire technology from abroad since it cannot develop technology at home in the immediate future. It also has to train the needed workforce to get employed in those industries. Above all, it should have an open mind toward foreign countries, especially the Western countries, so that companies in those countries can come and set up their industries here.
Who has the ever changing advanced technology in the world today? It is the countries which spend a greater proportion of their income on research and development in the first place and research and marketing later. The countries which come within this category are the US, EU, Canada, Japan and Australia, which are traditionally known as the Western world. Then, what about India and China? They too are engaged in research and development to some extent, but not to the extent of the Western world.
Singapore and China: Give up slogan-muttering and collaborate with the West
Knowing this global reality, Singaporean authorities at the turn of the new millennium instructed all the higher educational institutions in that country to concentrate only in four areas with generous support from the government: genetic engineering, information and communication technology, nano technology and entertainment. The reason was that in the next 100 years, it is those countries which would master in these areas that would rule the world.
At that time, it was the US and the UK which had a leading edge in them. So, Singapore’s strategy was to jump the bandwagon of the US and the UK and be an associate of the global leadership. Since technology is developed by the world’s leading universities and the universities in China have been lagging behind them, Chinese President Hu Jintao, as the chief guest of the Tsinghua University’s centenary celebrations in 2011 advised the university authorities to work toward upgrading that university which was 58th in the global league at that time to be within the first 10 universities in the world.
Since it was a gigantic task to come within the first 10 universities, a long time line was given to Tsinghua University to attain that goal in collaboration with the best of the US and the British universities. That is to join the league of top 10 by 2050. So, instead of ranting offending and self-defeating slogans against the Americans and the West, both Singapore and China have chosen to collaborate with them.
Sri Lanka too should learn lessons from Singapore and China. It should develop its university system in association with the world’s leading universities to supply the needed manpower to the high tech industry it should establish in the country as a permanent solution to its external sector crisis.
This requires seeing beyond the temporary inflows to the foreign exchange market and strategising on the broader macroeconomic picture to be a collaborating partner of global development.
(W.A Wijewardena could be reached at waw1949@gmail.com.)
More and better jobs: Policy prescription for South Asia
South Asia: the promise of the future
To many, South Asia is indeed the ‘promise of the future world’. Its population is about a little higher than one fifth of the world population. Its middle class is growing and even larger than the combined middle classes in North America and Europe thereby creating a huge regional market for its products.
It had a comfortable economic growth rate compared to the growth rates maintained by most of the economic superpowers in the last decade.
To many, South Asia is indeed the ‘promise of the future world’. Its population is about a little higher than one fifth of the world population. Its middle class is growing and even larger than the combined middle classes in North America and Europe thereby creating a huge regional market for its products.It had a comfortable economic growth rate compared to the growth rates maintained by most of the economic superpowers in the last decade.
Its Diaspora which had left its shores long ago seeking fortunes in the Western world are now returning like doves with money, knowledge and experience filled with bubbling entrepreneurial spirits to set up businesses in their respective homelands.
Asia is becoming integrated to the global economy now more than any time in history acquiring advanced technology and developing access to markets. Combining with the fast growing China’s super economic achievements, many have even termed these new developments as ‘the return of Asia’ to the global economic dominance.
Creation of more and better jobs should be a priority
Yet, something is amiss in this good storyline as the latest World Bank study titled ‘More and Better Jobs in South Asia’ reveals. The World Bank’s Chief Economist for South Asia Region, Kalpana Kochhar, has summarised this missing part in her Preface to the publication.
South Asia is adding from one to 1.2 million new entrants to the labour force every month in the next two decades, says Kalpana. That is a big number because it will account for about 40% of all the new entrants to the global labour markets.
True that South Asia has attained significant achievements in growth, poverty reduction and job creation in the last two decades. Yet, there is no room for complacency because the challenges before South Asia are enormous.
“Not only do a large number of jobs need to be created, but the jobs also need to be more productive and make workers less vulnerable” Kalpana has opined. What are the risks, if South Asia fails to do that? She has cautioned that joblessness on a large scale may “trigger political instability and unrest” as it has happened in the Middle East recently in the style of ‘Arab Spring’ that was responsible for bringing down the long surviving regimes in the region within just a few weeks.
So, create more jobs and see that those jobs are better jobs.
Sri Lanka has more jobs, but not better jobs
This is exactly the problem faced by the US President Barack Obama today. His country has to create jobs and make them better jobs. More jobs in the sense that the unemployment rate in USA is around nine per cent of the labour force and it does not show signs of abating.
Better jobs in the sense that the growth rate in USA is less than two per cent per annum and people who are presently employed and those who get new jobs should raise that growth rate significantly to take USA out of its current economic depths.
But a country like Sri Lanka in South Asia may have to grapple with only one part of the problem: Its unemployment rate has fallen to a historical low at below five per cent of the labour force and continues to further fall with each new labour force participation survey being conducted by the country’s statistical bureau, Department of Census and Statistics. With an economic growth above eight per cent, its challenge may be to sustain that growth through better jobs.
Is a better job a decent job?
More jobs are of course easy to understand: Create a new job and fill it with a worker who is presently unemployed so that he gets a means of livelihood. But a contentious issue is what a better job would mean.
The World Bank study has used two criteria to define a better job, one a primary criterion and the other a secondary criterion. The primary criterion is that a job is a better job if it carries a higher wage for wage workers and lower poverty levels for the self-employed persons.
The secondary criterion is that a job is a better job if it reduces the risk of low and uncertain income for the most vulnerable group of workers. Thus, the first has to be satisfied first before moving to the satisfaction of the second and a mere satisfaction of the second or for that matter either one will not make those jobs better jobs.
But a trade union leader who was a panellist at the launch of the study in Colombo last week had a different opinion on a better job. According to him, a better job is a decent job in which the worker’s dignity, rights and career development are properly safeguarded and ensured. Just by giving a wage to lift a worker above the poverty level or reducing his vulnerability to risks will not make it a better job.
Both the World Bank and the trade union leader have looked at better jobs from the point of view of individual workers and self-employed people though the two parties have looked at two different social aspects associated with them. Hence, the two contentions of what a ‘better job’ would constitute can be combined without harm to either one. Such a definition of a better job would be ‘high wage, poverty crossing and low risk jobs with decency’ for the workers and the self-employed.
But is it what South Asia needs today to sustain its growth and become respected partners of the global economy? It appears that something is amiss in this definition of a better job from the point of view of sustainable development in the region.
Joseph Schumpeter: A better job produces more with same labour
One hundred years ago in 1911, Austro-American economist Joseph Schumpeter resolved the issue of what a better job should constitute from the point of view of sustainable economic development when he published his masterpiece ‘The Theory of Economic Development’.
According to Schumpeter, economic development was a process that underlay several achievements simultaneously. The economy should be producing more each year (continuous economic growth), its structure should be evolving into a more sustainable production base (structural change from agriculture to high tech industry and sophisticated services), its workers should be more productive (better every year), its industries should be more specialised (producing one or two quality and easily uncopyable products) and its financial system should be more sophisticated (developed financial system pooling risks and meeting every needs of customers).
The rising living standards through this process were the outcome of development. A nation like India or China could produce a bigger output with their huge populations. But that will not necessarily lead to an improvement in living standards unless the real incomes of the people rise along with the continuous development. Hence, the yardstick for measuring development and ensuring a higher living standard for the people was the increase in the productive power of the people of a country.
That came, according to Schumpeter, by producing more and more output with the same resources. In today’s parlance, this could be rephrased to say ‘producing more output with lesser amount of resources’ because technological improvements would enable workers to do wonders.
So, a better job is a job that would enable a nation to produce more continuously with lesser employment of workers. In other words, the workers should be able to produce more by engaging in production in shorter time periods and using lesser amounts of resources.
There are two obvious enemies of such better jobs.
Enemy one of better jobs: Providing jobs for the sake of providing jobs
The first is creating jobs for the sake of providing employment to people to diffuse socio-political tensions. When a large number of people are unemployed and cannot find jobs to match their aspirations, a government may provide jobs to them in the government at the cost of the tax payers.
People appear to be employed and even earn an income above the threshold of poverty line and get decent treatment by the employers, but they do not make any contribution to the creation of wealth of society. The result is that year after year they become poorer because the system cannot sustain them on account of their not producing any worthwhile output.
The Sri Lanka Government’s absorption of unemployed graduates to the already overburdened Government service is a very good example of employing people for the sake of providing employment to people.
Enemy two of better jobs: Rent-seekers
The second enemy is the creation of jobs that earn an income for the individual but do not make any productive contribution to the national wealth. In other words, even if they are not there, the nation’s wealth is totally unaffected.
These are the people who benefit from the prevailing rules, regulations and licensing systems of the government. For instance, if the government introduces price controls on rice, it also has to create a bureaucracy to man such price controls. The price controllers would raid shops and bring the offenders before courts of law. To adjudicate their cases, the government has to strengthen the judiciary too with judges and other court officials. Then, it provides a good income source for the lawyers.
If the convicted parties are unable to pay their fines, they would be jailed and the government will have to strengthen the prison system too. So, with one decision to control prices, the government creates so many other jobs in the system and these people’s services are not needed if the market system is allowed to determine prices.
These types of jobs do not add to the wealth of the society, but enables those engaged in the work to earn an income for which they do not make any contribution to the economy. Economists call such incomes ‘rents’ because the recipient of income does not make a matching contribution to the national wealth.
When an economy is governed with rules, regulations and licences, it automatically pays people to seek occupations in the licensing authorities and eventually the whole economy becomes a huge ‘rent seeking society’ as described by the Columbia University Economist Jagdish Bhagwati in reference to India’s economy.
So, if a society is bent on creating better jobs, it should first defeat the temptation to create jobs for the sake of creating jobs and introduce unnecessary rules and regulations that prompt people to become rent seekers.
Improve productivity of capital
So, a sustainable economic development has to be ensured in order to create more jobs and also make them better jobs. In this respect, does the current high economic growth experienced by South Asia will guarantee a continuously high economic growth as has happened in some of the East Asian countries like Singapore, South Korea, Taiwan and Hong Kong? Yes, provided the countries in South Asia are able to improve the productivity continuously.
The World Bank study has identified two sources of productivity improvement: the accumulation of physical capital leading to a higher use of quality capital in production and the leaps made in improving human capital on a continuous basis. Since all countries in South Asia have to depend much on global markets to sell their surplus outputs, it is necessary to use high tech capital combined with better human capital resources.
While high tech capital can be acquired at a price from the global markets, its use productively to remain in competition with rivals will depend on the managerial skills and the nature of workers a country has employed for producing goods and services.
One good example is the airline industry in the South Asia region. The national carriers in the region have acquired the most modern aircraft and they are not second to any airline in the developed or even in East Asian countries. But due to poor management and unproductive workforces, airline in India and Sri Lanka have incurred significant losses compelling the governments to bail them out at the expense of tax payers and other priority development activities. So, those workers in national carriers in South Asian countries may have better and decent jobs, but they are not sustainable since they live on the output produced by others.
In Sri Lanka, this argument is valid for almost all the State sector enterprises which have been incurring heavy losses for many years and which have been bailed out from time to time by the Government.
Human capital development
Human capital development comes from continuous research and development, education, training and learning. Research and development is the key to future prosperity and the creation of more and better jobs.
In the case of Sri Lanka, universities which have to carry out this function are basically engaged in producing graduates. Other research institutions are under-funded or caught up in internal conflicts associated with bureaucratic rules. Hence, no worthwhile technological development takes place in Sri Lanka. On top of this, the education system has failed to produce graduates who are employable from the point of view of employers.
The World Bank study has reported survey results on the perception of employers on various job attributes of recently graduated engineers on a scale from totally irrelevant to extremely relevant. While attributes like integrity and reliability have commanded very good, but not extremely good, all other attributes are ranked in the middle level, that is, at a ranking which says that the attributes are somewhat relevant.
India is a country with the best education system in the South Asia region. Yet the graduates produced by its educational establishment are ranked in the middle wanting further talent and skill improvement.
The situation relating to Sri Lanka is in fact appalling. When the unemployed graduates were absorbed by the Government in 2005 under a graduates’ employment scheme, the State had to train them for another four years before they were offered even lower positions in the Government service.
This factor was emphasised by a representative of employers’ federation at the launch of the study. According to him, those who seek private sector jobs have multiple paper qualifications. But when it comes to delivering the products needed by employers, they need further training.
Create jobs to produce more with less
So, there are several important issues which countries in South Asia have to reckon when it comes to creating more and better jobs. That is, while refraining from providing employment to people for the sake of providing employment, attention should be paid to create jobs which would enable the region to produce more with less. It will require the countries to use advanced technology, spend money on research and development and improve the quality of the educational institutions to produce quality graduates.
Without this in place, a job will just be a job and not a better job that assures sustainable economic development.
(W.A. Wijewardena can be reached at waw1949@gmail.com)
Asia is becoming integrated to the global economy now more than any time in history acquiring advanced technology and developing access to markets. Combining with the fast growing China’s super economic achievements, many have even termed these new developments as ‘the return of Asia’ to the global economic dominance.
Creation of more and better jobs should be a priority
Yet, something is amiss in this good storyline as the latest World Bank study titled ‘More and Better Jobs in South Asia’ reveals. The World Bank’s Chief Economist for South Asia Region, Kalpana Kochhar, has summarised this missing part in her Preface to the publication.
South Asia is adding from one to 1.2 million new entrants to the labour force every month in the next two decades, says Kalpana. That is a big number because it will account for about 40% of all the new entrants to the global labour markets.
True that South Asia has attained significant achievements in growth, poverty reduction and job creation in the last two decades. Yet, there is no room for complacency because the challenges before South Asia are enormous.
“Not only do a large number of jobs need to be created, but the jobs also need to be more productive and make workers less vulnerable” Kalpana has opined. What are the risks, if South Asia fails to do that? She has cautioned that joblessness on a large scale may “trigger political instability and unrest” as it has happened in the Middle East recently in the style of ‘Arab Spring’ that was responsible for bringing down the long surviving regimes in the region within just a few weeks.
So, create more jobs and see that those jobs are better jobs.
Sri Lanka has more jobs, but not better jobs
This is exactly the problem faced by the US President Barack Obama today. His country has to create jobs and make them better jobs. More jobs in the sense that the unemployment rate in USA is around nine per cent of the labour force and it does not show signs of abating.
Better jobs in the sense that the growth rate in USA is less than two per cent per annum and people who are presently employed and those who get new jobs should raise that growth rate significantly to take USA out of its current economic depths.
But a country like Sri Lanka in South Asia may have to grapple with only one part of the problem: Its unemployment rate has fallen to a historical low at below five per cent of the labour force and continues to further fall with each new labour force participation survey being conducted by the country’s statistical bureau, Department of Census and Statistics. With an economic growth above eight per cent, its challenge may be to sustain that growth through better jobs.
Is a better job a decent job?
More jobs are of course easy to understand: Create a new job and fill it with a worker who is presently unemployed so that he gets a means of livelihood. But a contentious issue is what a better job would mean.
The World Bank study has used two criteria to define a better job, one a primary criterion and the other a secondary criterion. The primary criterion is that a job is a better job if it carries a higher wage for wage workers and lower poverty levels for the self-employed persons.
The secondary criterion is that a job is a better job if it reduces the risk of low and uncertain income for the most vulnerable group of workers. Thus, the first has to be satisfied first before moving to the satisfaction of the second and a mere satisfaction of the second or for that matter either one will not make those jobs better jobs.
But a trade union leader who was a panellist at the launch of the study in Colombo last week had a different opinion on a better job. According to him, a better job is a decent job in which the worker’s dignity, rights and career development are properly safeguarded and ensured. Just by giving a wage to lift a worker above the poverty level or reducing his vulnerability to risks will not make it a better job.
Both the World Bank and the trade union leader have looked at better jobs from the point of view of individual workers and self-employed people though the two parties have looked at two different social aspects associated with them. Hence, the two contentions of what a ‘better job’ would constitute can be combined without harm to either one. Such a definition of a better job would be ‘high wage, poverty crossing and low risk jobs with decency’ for the workers and the self-employed.
But is it what South Asia needs today to sustain its growth and become respected partners of the global economy? It appears that something is amiss in this definition of a better job from the point of view of sustainable development in the region.
Joseph Schumpeter: A better job produces more with same labour
One hundred years ago in 1911, Austro-American economist Joseph Schumpeter resolved the issue of what a better job should constitute from the point of view of sustainable economic development when he published his masterpiece ‘The Theory of Economic Development’.
According to Schumpeter, economic development was a process that underlay several achievements simultaneously. The economy should be producing more each year (continuous economic growth), its structure should be evolving into a more sustainable production base (structural change from agriculture to high tech industry and sophisticated services), its workers should be more productive (better every year), its industries should be more specialised (producing one or two quality and easily uncopyable products) and its financial system should be more sophisticated (developed financial system pooling risks and meeting every needs of customers).
The rising living standards through this process were the outcome of development. A nation like India or China could produce a bigger output with their huge populations. But that will not necessarily lead to an improvement in living standards unless the real incomes of the people rise along with the continuous development. Hence, the yardstick for measuring development and ensuring a higher living standard for the people was the increase in the productive power of the people of a country.
That came, according to Schumpeter, by producing more and more output with the same resources. In today’s parlance, this could be rephrased to say ‘producing more output with lesser amount of resources’ because technological improvements would enable workers to do wonders.
So, a better job is a job that would enable a nation to produce more continuously with lesser employment of workers. In other words, the workers should be able to produce more by engaging in production in shorter time periods and using lesser amounts of resources.
There are two obvious enemies of such better jobs.
Enemy one of better jobs: Providing jobs for the sake of providing jobs
The first is creating jobs for the sake of providing employment to people to diffuse socio-political tensions. When a large number of people are unemployed and cannot find jobs to match their aspirations, a government may provide jobs to them in the government at the cost of the tax payers.
People appear to be employed and even earn an income above the threshold of poverty line and get decent treatment by the employers, but they do not make any contribution to the creation of wealth of society. The result is that year after year they become poorer because the system cannot sustain them on account of their not producing any worthwhile output.
The Sri Lanka Government’s absorption of unemployed graduates to the already overburdened Government service is a very good example of employing people for the sake of providing employment to people.
Enemy two of better jobs: Rent-seekers
The second enemy is the creation of jobs that earn an income for the individual but do not make any productive contribution to the national wealth. In other words, even if they are not there, the nation’s wealth is totally unaffected.
These are the people who benefit from the prevailing rules, regulations and licensing systems of the government. For instance, if the government introduces price controls on rice, it also has to create a bureaucracy to man such price controls. The price controllers would raid shops and bring the offenders before courts of law. To adjudicate their cases, the government has to strengthen the judiciary too with judges and other court officials. Then, it provides a good income source for the lawyers.
If the convicted parties are unable to pay their fines, they would be jailed and the government will have to strengthen the prison system too. So, with one decision to control prices, the government creates so many other jobs in the system and these people’s services are not needed if the market system is allowed to determine prices.
These types of jobs do not add to the wealth of the society, but enables those engaged in the work to earn an income for which they do not make any contribution to the economy. Economists call such incomes ‘rents’ because the recipient of income does not make a matching contribution to the national wealth.
When an economy is governed with rules, regulations and licences, it automatically pays people to seek occupations in the licensing authorities and eventually the whole economy becomes a huge ‘rent seeking society’ as described by the Columbia University Economist Jagdish Bhagwati in reference to India’s economy.
So, if a society is bent on creating better jobs, it should first defeat the temptation to create jobs for the sake of creating jobs and introduce unnecessary rules and regulations that prompt people to become rent seekers.
Improve productivity of capital
So, a sustainable economic development has to be ensured in order to create more jobs and also make them better jobs. In this respect, does the current high economic growth experienced by South Asia will guarantee a continuously high economic growth as has happened in some of the East Asian countries like Singapore, South Korea, Taiwan and Hong Kong? Yes, provided the countries in South Asia are able to improve the productivity continuously.
The World Bank study has identified two sources of productivity improvement: the accumulation of physical capital leading to a higher use of quality capital in production and the leaps made in improving human capital on a continuous basis. Since all countries in South Asia have to depend much on global markets to sell their surplus outputs, it is necessary to use high tech capital combined with better human capital resources.
While high tech capital can be acquired at a price from the global markets, its use productively to remain in competition with rivals will depend on the managerial skills and the nature of workers a country has employed for producing goods and services.
One good example is the airline industry in the South Asia region. The national carriers in the region have acquired the most modern aircraft and they are not second to any airline in the developed or even in East Asian countries. But due to poor management and unproductive workforces, airline in India and Sri Lanka have incurred significant losses compelling the governments to bail them out at the expense of tax payers and other priority development activities. So, those workers in national carriers in South Asian countries may have better and decent jobs, but they are not sustainable since they live on the output produced by others.
In Sri Lanka, this argument is valid for almost all the State sector enterprises which have been incurring heavy losses for many years and which have been bailed out from time to time by the Government.
Human capital development
Human capital development comes from continuous research and development, education, training and learning. Research and development is the key to future prosperity and the creation of more and better jobs.
In the case of Sri Lanka, universities which have to carry out this function are basically engaged in producing graduates. Other research institutions are under-funded or caught up in internal conflicts associated with bureaucratic rules. Hence, no worthwhile technological development takes place in Sri Lanka. On top of this, the education system has failed to produce graduates who are employable from the point of view of employers.
The World Bank study has reported survey results on the perception of employers on various job attributes of recently graduated engineers on a scale from totally irrelevant to extremely relevant. While attributes like integrity and reliability have commanded very good, but not extremely good, all other attributes are ranked in the middle level, that is, at a ranking which says that the attributes are somewhat relevant.
India is a country with the best education system in the South Asia region. Yet the graduates produced by its educational establishment are ranked in the middle wanting further talent and skill improvement.
The situation relating to Sri Lanka is in fact appalling. When the unemployed graduates were absorbed by the Government in 2005 under a graduates’ employment scheme, the State had to train them for another four years before they were offered even lower positions in the Government service.
This factor was emphasised by a representative of employers’ federation at the launch of the study. According to him, those who seek private sector jobs have multiple paper qualifications. But when it comes to delivering the products needed by employers, they need further training.
Create jobs to produce more with less
So, there are several important issues which countries in South Asia have to reckon when it comes to creating more and better jobs. That is, while refraining from providing employment to people for the sake of providing employment, attention should be paid to create jobs which would enable the region to produce more with less. It will require the countries to use advanced technology, spend money on research and development and improve the quality of the educational institutions to produce quality graduates.
Without this in place, a job will just be a job and not a better job that assures sustainable economic development.
(W.A. Wijewardena can be reached at waw1949@gmail.com)
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