Jobs vs. Infrastructure

Jan 23, 2011 Features / Columnists, Ravi Dev

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When I was a student in the US in the early seventies, I noticed what to me then, was a very strange phenomenon.
There were sections of downtown Detroit, complete with skyscrapers, stores, paved streets and all the amenities of a modern American city that had been left abandoned.
A combination of the urban riots and a prolonged slump in the automobile industry (the economic mainstay of Detroit) had produced an eerie ghost town effect.
What it taught me – a young man from a third world country that was desperate for “development” – was that a country can have all the infrastructure in the world, but if the people do not have jobs, then that country will go down the tubes.
And all the infrastructure will simply collapse and revert back to the jungle.
I have been reminded of this truism as I witness the continued stress on building infrastructure by the PPP administration in its budgets.
Don’t get me wrong; there’s nothing wrong with infrastructure in and of itself.
Schools, roads, bridges, hospitals are all good. (The fact that they are built with loans that have to be repaid sooner or later is another matter that we will skip over for the moment.).
But of what use are schools if the graduates cannot find jobs with their “education?
Of what use are roads if the ordinary citizens cannot afford the price of gasoline much less the price of a car to get from here to there, because at best they are stuck at subsistence wages if they’re lucky enough to have a job? Of what use is electricity when the poor housewife can’t even pay her “light-bills” (which, according to a local wag, are anything but “light”)?
When a person has a job that can provide the basic needs of his family – food, shelter, clothing and perchance, transportation – then this is the beginning of a life of respect and dignity.
Handouts, even in the form of remittances, can never accomplish this. Even if one does not have all of the infrastructure, once there are jobs, the infrastructure will come. Jobs mean businesses and enterprises, and these mean taxes – both personal and corporate – for all levels of government.
People with jobs will assert themselves and demand that the government use those taxes to provide the amenities of infrastructure. The people may even create the infrastructure for themselves. It’s quite a virtuous circle.
Now it’s not that the government does not want to create jobs. We believe that it is just that the neo-liberal model of economic development that was foisted on it by the IMF/World Bank combination, has literally not delivered the goods.
They insisted that if we liberalised our economy, privatised the state corporations and kept a tight rein on our macro-economic fundamentals, investment would pour in to generate jobs. Well it has not worked out this way.
That our economy has not collapsed like, say, the Irish’s, vaunted as the epitome of the neo-liberal model, may be due to the possible dragging of feet by the left-leaning PPP in certain areas. But the liberalisation continues, for instance, as we begin to implement the terms of the EPA signed with Europe.
What we have been pointing out is that countries in our situation cannot stand on dogmas, but must tailor their policies to their own circumstances.
Even the IMF/World Bank had grudgingly conceded this after the global economic crash. Our circumstance – whether due to political instability or other factors – is that even though we are awash in cash (the government had to sterilize $100 billion last year because of “excess liquidity”) the latter is not being intermediated into investments that deliver high-paying jobs.
The countries that have succeeded in pulling themselves out of poverty, most recently China, all have governments that were much more engaged with custom-tailored, job-generating industrial policies.
These governments adopted a catalytic role; set strategic goals and then did whatever was necessary to back into them. For instance, Korea, Singapore and now China followed the Japanese example and explicitly tied assistance to selected private industries, based on their commitment and ability to export.
This strategic decision had two significant and faithful results that differed from the old “import substitution strategy”.
Firstly, the assisted firms were subjected to the market discipline of the competition of international trade.
This was the most intense competition and ensured that efficiencies and productivities had to be raised to the highest levels.
These firms not only couldn’t afford to be fat and lazy; they had to become world-class – and they’ve remained world-class.
The second benefit, of course, was that the exports brought in foreign exchange and there was no need to ban anything to save foreign exchange.
We know that under our present mentality there will be much griping when certain firms will be selected for governmental backing. But once the criteria are set and applied objectively, it can be defended. Especially when jobs are created.

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