How to be a Good Lemming

November 30, 2007 at 4:12 pm | Posted in communism, culture, developing economy, economy, fairness, filthy lucre, free market, global evils, God's kingdom, goods and services, human-performed, industrial evolution, justice, kingdom ethics, kingdom of God, mammon, market, MNC, multinational corporartion, per capita, poverty, real value, redundancy, socialism, trickle down, value addition, wealth distribution, world GDP | Leave a comment
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‘Tis the season to be jolly… would be quite frivolous if it were not at the same time also so profoundly real.
The Christmas season in the West is a time especially set aside for spending, purchasing, buying, gifting, and generally being very, very, jolly.

25k.jpgIn the U.S. the spending season kicks off with a bang at Thanksgiving, but all over the world, common sense will lead us to suspect that the jolliest of traditional seasons will begin soon after the annual harvest. Give a couple weeks or a month for all that excess to start getting distributed, and then them holidays, and that spending will ensue – it makes good sense.

In India we have that grand ‘festival of lights’, Diwali, that is strategically placed after the first harvest in October or November and then, in the South of India, there is a second celebration (Pongal) that comes right after the second monsoon season in mid-January and that forms the very exciting and satisfying climax to our times of splurging.

Economies and spending cycles that keep them vibrant have to be based on the presence of excess, and most times that excess is only available for a short while right after the harvest. Holidays are also timed to help to distribute all that ‘excess’ and just as efficiently as possible! Any great delay between when the excess arrives and the application of peak marketing pressure to get people to spend may result in that excess getting channeled into savings accounts – economists don’t like that at all. When we have plenty, and so much that we can even think in terms of excess, the purse strings will be at their loosest. Marketing has to strike while the iron is hottest but that is not the end of the story. We too help out by apparently just temporarily choosing to collectively forget that the upcoming year may hard and long.

Marketing the world over, is geared to maximise its hype just at these times. Spend – buy – purchase – CHARGE IT – or the ubiquitous EMI with 0% interest!

This year, the absolutely essential gadget is…

Everybody simply HAS to have this!

The teaser SAAALE! drags you out, ‘pushes’ you over that last little hump of caution, and then…inflation US

Insidiously, we also might not notice that we will really have to shell-out just a bit more this year than we did last year to get that ‘absolutely essential’ something. Economic cycles rely on the feeding frenzy to slip into the inflation mode too, for this is the one time of year that folks will be blithely unaware that the essentials just got a bit dearer. The small incremental adjustments will slip quietly into place in the corners of our subconscious even before we have time to register them, for there is so much else of an exciting nature to capture and hold our collective consciousness in thrall.

banknote-euro-usdollar.jpgValue addition is one culprit, but the yen for bigger profits is certainly another. For the corporates, turnover should increase, and so too should the return on investment, the profit margin. Balance sheets will be anxiously prepared as the financial year draws to a close. At stake is the size of the share price pie for that depends on ‘the figures’.

To the economist, inflation is a godsend. Deflation, when prices actually drop, (do you see red in the diagram above?) is an absolute disaster and must come straight out of hell. Modern economies rely on inflation to create the space in which value addition creates levels of work both in manufacturing/marketing and in services/marketing. More jobs, more earning, more spending, more money – MORE

Those little entries on corporate balance sheets called profit (net after taxes) quietly also rely on inflation. The trend is paradoxically opposed by innovation and new technologies! The whole complex process works together to keep standards of living on a slow rise that is slightly worse than what the actual inflation level would lead us to expect.

At some point people do question whether this all adds up. Of course it doesn’t, not nearly, but it sure looks good while it’s flowing along. Pension plans will be the most obvious harbingers of the bad news that eventually inflation catches up with you.banknote-rupee.jpg Other painful reminders include the cost of health-care, health insurance, and medicines. Long term savings plans and incremental investments will yield something but much less than they should when compared to the damage that inflation has quietly been inflicting.

Money and easy credit are the end of a very long road that has separated our spending from the realities of our actual contributions to life. Think about it, as it is you’re just the last stop between the ATM and the corporation that owns the store that you’re heading to with the plastique in hand!

What would happen if inflation were to stop? What would happen if our governments printed just enough notes to maintain a fixed amount of money in circulation? What would happen if value addition were to be replaced by true value? What would happen if the purchasing power of a dollar or of a rupee were to become rock steady?

Have you thought about it this year-before you start (or at least finish) spending that bonus?

What will this Christmas/Pongal bring I wonder? Is it perhaps even possible to have fun and fellowship with friends and without money? Will anyone believe that you love them anyway even though you didn’t push your plastic a few thousand more over its already strained limit?

GOLD > Coins > Bills of exchange > CREDIT Þ Transactions

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The Value of Adding Value

November 11, 2007 at 6:44 pm | Posted in developing economy, goods and services, medical transcription, per capita, poverty, real value, starvation, tempigrant, trickle down, value addition, wealth distribution, world GDP | 8 Comments

As mechanisation has been a staple reality world over for the last couple of centuries, it has shaped our societies and cultures.

In honour of the industrial revolution, engineering became one of the most sought after professions that only the most brilliant could aspire to. Courses in civil and mechanical engineering initially held pride of place, but then gave way to electronics and electrical engineering, and now even these have become less popular than communications and software ‘engineering’ – courses that are now even found in the ubiquitous ‘Arts College’. The professions have tried to keep pace with cultural developments.

The agricultural revolution and rapid advances in medicine have also combined to make the world’s huge population explosion just barely manageable. Of course, out of 6.6 billion people only 1 billion live well. Of the rest, around 25% are in abject poverty and in danger of starving (that’s about 1.65 billion people). In absolute terms compared to a century ago, the percentage of poor has declined by half but the absolute number of the very very poor has gone up by about 40 million!

It is argued quite successfully (on paper) that the way to deal with poverty is not to give handouts but to give a hand-up. In other words, bring the poor of the world into the mainstream of production, and poverty will be licked. Is this realistic? Is it even possible? What jobs can we envision creating for the billions of poor?

In 2006, it was calculated that if a real U.S. dollar value were to be placed on the per person share of the entire world’s economy (per capita on the world’s GDP), it would work out to about $6,600 each. Such figures are heavily disputed by economists, mostly depending on where the economist hails from and what turf they are seeking to protect, so I take this as merely illustrative. The plain fact is that this is well below what an American or a European would consider the barest minimum subsistence level. In other words, if one were to pay an American $6,600 a year, they would starve to death. The poverty level cutoff in the U.S. last year was over $13,000 per annum. On the other hand, in India or China or in Africa six and a half thousand dollars would support a whole family of four at a ‘middle class’ level for a whole year.

Another little illustration that might illustrate the difference is that a good Medical Transcriptionist (MT) in the U.S. would earn about 65 cents a line. An average MT may pull in about 45 cents a line. The same work, when outsourced to the Philippines or India will earn the MT there, anywhere from 2 cents to 3 cents a line. In both types of economies this would constitute a middle class occupation.

The difference lies in the ways in which “value” has been added to products and services in these developed economies. People eat, they wear clothes, pay rent, they go to and from work, their kids get educated… all over the world. But in the ‘developed economies’, it costs a heck of a lot more to live even in this basic-needs sort of way.

Marketing and management have become the most honoured professions. The highest paid of all professionals in the world are the managers of large corporations. Now knowledge is the key to money and power. The knowledge that is most valued is the alchemical secret of value addition. It has to be done insidiously and so effectively that the consumer will consume both the product and the mythical value and feel pleased. Now, that’s MAGIC !

Is it all worth it? The corporations think so and to tell the truth the answer is that without the layers upon layers of value addition, these developed economies would collapse.

Big business absolutely relies on the inflationary effects of exploitable, value addition, in order to pump profit margins up to a level where there remains little connection between what a goods or service costs to perform/produce and what the end user ends up paying for it. The value addition is self justifying also because it is the primary means of distributing “wealth” or more accurately earnings in the strictly trickle down economy.

Now, these economies want the developing world also to faithfully follow the same route. Everyone should buy-in to the concept of breaking the connection between the real value and what we collectively end up paying for anything after value addition.

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