Between April 6 and 9, independent think tank organisation Horasis held a global meeting in Cascais, Portugal, to discuss how countries and private companies can trigger equitable growth. Specifically, it discussed ?Catalysing the Benefits of Globalization?.
Horasis chairman Frank J?rgen Richter is a German entrepreneur who founded the organisation over a decade ago. He has since dedicated himself to finding fair and sustainable solutions to socio-political and economic issues faced around the world.
Under the theme of the 2019 global meeting, Richter spoke to Qrius about the recent spike in anti-globalisation all over the world, including in India. He explains that people become swayed with economically protectionist policies especially because they are still reeling from the 2008 Wall Street crash.
He says that resisting any kind of foreign presence since became an attractive idea. Populists then capitalised on this and created anti-immigration agendas that people resonated with because the politicians claimed that a restriction on immigrants will translate to job security.
However, it is at odds with the way the immensely interconnected way the world currently functions, creating increasing tensions between communities. Richter even discusses the impact of India?s GST policy and the need to absorb labourers into the workforce. He also says that all business- public and private- have a responsibility to include minorities in their success? a persistent issue in the Indian landscape.
Please briefly explain why the recent trend of de-globalisation has sprung up. What is attracting people to a protectionist mindset?
This is an interesting question that may be answered in part by noting globalisation increased naturally over many decades as local firms expanded their sales to regional, national then international. This was not an overnight phenomenon but the subsequent realisation that economic growth also took place and the generalised prosperity gave cash to the middle classes which further boosted the economies. Then external events impinged on all economies ? there have been several massive hits on economies over the last century ? the Wall Street Crash, or the Asian financial crisis of the late 1990s. But it was the 2008 financial crisis that still mires the global scene affecting all nations ? their governments had to adopt strong austerity measures to stay afloat. Their people did not enjoy this and generally voted to change governments, blaming the older as being too complacent thus they set ideas to retrench, localise, and attempt to remake goods at home that had been ceded to foreign soils.
Being self-contained to repulse foreign forces is enticing, but such ideas are contradictory to effective resource use wherein we ought to buy goods from places that can make them better than ourselves, while we can then concentrate of doing what we do best. That sentiment has allowed most developed nations to move their manufacturing and assembly and let others do it ? notably Asian nations which had low wages and a labor surplus.
China in particular, as it developed economically, moved millions of people from low-skilled, low wage rural poverty to a wealthier situation in its manufacturing belts. I am not saying this was a time of happiness as the ?sweat factories? of Asia were often exploitative. Since 2008 global growth resumed slowly, but nationalist tendencies accelerated including the realisation that global growth had taken place to some extent disadvantaging the poor. These inequalities were viewed in a bad light and populists addressed this and other issues glibly and we, feeling the pinch of austerity, agreed with their arguments.
The inequality across the world and the increased appetite for news on radio and television highlighted the migration of people away from regions in which mini-wars or economic hardships were experienced. Entrepreneurs took advantage of these vulnerable people, setting up so-called safe routes that often pressed them into boats to cross seas ? in South East Asia, or across the Mediterranean into Europe. In Europe the richer nations had experienced an immigrant flow from within Europe, the Eastern nations, looking for better wages to remit home to their families. In fact, the UN Population Studies notes that migration is steady at about four percent of total population but as the total increases and with intensive media cover the situation looks dire. And there was a feeling in populist-inclined nations that immigrants were ?stealing our jobs? so local people were further incentivised to more strongly restrict all immigration.
The latter effect runs counter to national development as incoming people are often young, healthy and willing to work and thus contribute taxes to the local economy. They bring a strengthening to the local culture as well as needed skills. The US is astounded to find that ?their? start-ups are most often created and later run by outsiders, often of Indian stock who took up US education, undertaking post-doc research and then becoming entrepreneurs.
Many facts indicating the benefits of globalisation are suppressed by individual?s being adamant that their country is being taken over, or bought, by foreign entities. Their bias is profound and unshakable ? and is supported by the xenophobic rants of the populist leaders. Sadly, populist leaders do not often have deep knowledge of political leadership ? some are even comedians (well liked on TV) who might hope to attract votes. But that is not a guarantee in this fickle world where media pressure, fake and false news are exchanged freely as though true. Unfortunately, we get the government we voted for and the rest of the world has to accommodate the change.
The Horasis Global Meeting in Portugal is focused on refuting the recent trend of resenting globalisation, particularly in China, India, and South East Asia. What are the unique challenges in the region?
To an extent and over-simplifying, we have the rich and contented attempting to suppress the newly arising Asian nations: wealth sharing is not appreciated. But as I said above, there are many threads to the arguments. First there is the normalisation of the old idea to make goods where they best can be made ? and the poor nations of Asia clamored to use their own labor until recently as they wish to move from a low-wage society to a middle-class service inclined model. Second, population dynamics shows that while global birth-rate has stabilised since 2004 it is uneven globally – the growth regions are Africa and Asia. Some of these nations struggle to accommodate jobs for their people, failing to grow their economies and become world-class traders of quality goods. There is intense competition across Asia, perhaps more widespread now than in the early growth stages of the 19th Century.
The challenges are about equality, diversity and caring for the planet ? not only in terms of combating climate change, but in changing to a more frugal and resilient use of scarce resources). Such ideals often come from authors in the developed nations and are resented by the emerging market (EM) nations ? a glib term in financial circles that perhaps needs to be changed. We are back to conversations between the perceptions of the ?haves and have-nots?.
To develop more quickly and evenly Asia needs to boost all its infrastructures ? not only the physical such as transport, energy, food and water distribution which have immediate benefits, but also education, health and social support that have longer-term effects (educating an infant only come to fruition in 20 or more years).
The Horasis Global Meeting talks about creating an egalitarian society. Could you elaborate on the “actionable plans” private businesses in India can use to be more inclusive towards marginalised communities? Do you believe that international MNCs operating in India have a similar responsibility?
All enterprises have this responsibility but might argue they cannot afford the softer aspects, instead concentrating on robotisation and throughput. Some plans are easily actionable, and business schools are very good at training their students to create good, plausible business plans that will attract financial backing. There is considerable cash waiting to be invested so firms can quickly set-up.
You ask – what of marginalised communities? The business manager ought to consider both his business viability as well as his social duties. At one stage financial reporting had no place to record ?social duty? as a cost or benefit. However, more subtle account measures are finding ways to accommodate the benefits accruing from aiding marginalised communities ? giving them hope for a more viable existence, or greater self-esteem. In turn the softer attitudes of the aided communities can spill over to the better well-being of the firms in several ways ? local produce might be offered to the canteens, local people might be happier to tend to the firm?s gardens as an instance of passing cash from firms to community, not as a gift, but for work done in an inclusive way.
Being egalitarian is a complex issue and has never been solved since the days of serfdom in medieval times. There will always be master and servant however one dresses the situation. The essence is to create a healthy, happy working environment that cares for all its staff and the local community and which is also profitable ? for without profit the firm will fail.
What is the South Asian business climate doing right in terms of increasing its global reach? What can it improve on?
Essentially firms must produce goods that the community wants ? with good quality, price and timeliness. To do this all staff must be motivated by the seniors to use the best equipment and techniques possible which implies good planning for equipment purchase and training for its use. And this demands the managers have confidence in the nation?s economic future as their internal plans are not an instant event but may span months or years. We see in the data illustrating Purchase Manager?s intentions or the general business sentiment that for long nations have hovered at about the 50 mark ? a level indicating neither growth or recession. Such weakness in both forecasting and reality undermines the business manager?s decision to invest for the firm?s future, and without new machines the aggregate the economy of the nation falters.
The easy fixes of absorbing low-skilled rural workers into semi-skilled jobs has been accomplished across Asia, in some nations more than others. But the decisions of government years ago have determined todays opportunities and to rearrange the future demands further years of attention to detail. Governments and their regulations determine the ease of doing business, often a factor noted by inward investors who may wish to bring new skills to the region. Regulations also determine the ease of inter-region transfers ? we should note the benefit of India?s GST. But the global reach you mention is determined by the availability and quality of the goods and services offered. Without early aspirations or accommodative regulations firms may have been unwilling to look far for sales ? to alter this mind-set takes time.
Many in the emerging markets have found it easy to leap-frog pinch-points by purchasing modern machinery for instance. New kits work well and outputs can be guaranteed. But staff attitudes are slow to change and these determine the forces to generate global reach as it is a chicken and egg aspect: customers must have needs and suppliers must have the goods ready to sell, and regulations must be supportive of each side.
South Asian farmers have been dealing with a massive financial crisis the past few years because of artificial price hikes and middlemen. Do you have recommendations for how a public-private partnership can help tackle the issue in a sustainable manner?
Farmers globally are reliant on weather and on technology. Weather is a random event on a daily basis, but technology can aid with the provision of the best growing conditions for the plants and the best methods of getting produce from field to fork without wastage. Technology is costly and also may require enabling government regulations that shift farmers from labor intensive methods into supportive peripheral activities – like cleaning and packaging that was not done for a local market, but is beneficial to reach to a national or international market.
It is a truism everywhere that the total system needs to be evaluated to remove inefficiencies. Business process re-engineering was pressed upon low-performing production firms years ago, there is no reason not to employ its rigor on the farming system. Indeed, a public/private venture ought to do this via its due diligence studies. The studies would unearth both good and poor practices and lead to a far better, slicker and more sustainable process.
There are two aspects to be born in mind. First at the producer level with problems ranging from improper use of inputs to lack of proper post-harvest storage, processing or transportation facilities. These losses can be as high as 40-50 percent for root crops, fruits and vegetables, 30 percent for cereals and fish, and 20 percent for oilseeds. And second at buyer level with consumers who have ?throw-away mindsets?, and buy more food or clothes than their families can possibly use. Waste also includes overproduction, which often stems from availability of crop subsidies and leads to more supply than demand, and the removal of safe food from the market or from the supermarket shelves due to stringent regulations.
Thus, as I suggested, strong research and a willingness by government to action the findings will alleviate many problems that will pave the way for public/private enterprise to thrive freely.
India’s IT sector is booming. How can the government and private businesses use this digital revolution to create equity in society?
It was said long ago in the days of the ?License Raj? that the IT industry was not noted because no one could visualise the product! Perhaps this was so, but it is true that we must be diligent to create industries that have staff willing to help the customer: a service mentality is important.
In health care often there is a clear outcome ? visitors are attracted to world-class Indian hospitals, and having accepted the interventions, emerge as cured patients. This business sector did not arise overnight but as a long-term plan to train staff and invest in cutting-edge equipment. But even so, India?s poor cannot avail themselves of these good hospitals without new government interventions, especially the fees demanded.
In the IT sector it is not good enough to educate to fill call centers or accounting back-offices. The leading edge of IT demands deep training and education across all aspects of society. For without a doctor, for instance, understanding how IT can help, the IT professional might not understand how he or she can aid the doctor. This is a deep problem in designing learning systems for Artificial Intelligence intervention. Great strides have been made where AI facilitates diagnosis and also aids the operational skills of doctors ? but education is the key.
As education takes time to blossom and it is incumbent on Government to shoulder the long-term costs. Many governments globally have mandated young school children learn computer coding ? not only to be able to add 1+2 within a computer, but illustrate creativity in their skills acquisition. Private firms on the other hand look for rapid returns on their investments and look, in the IT case, for the available well-educated person. One Silicon Valley study estimated there were only 10,000 people globally who understood the intricacies of AI. India might demand all these and more, but would never attract more than a small fraction, even though many are staff in Indian-led US firms.
It is said the IT and AI in particular will aid society. It is true that robotics will remove people from dangerous or hazardous jobs, and robots can be incorporated into exoskeletons to give strength to frail humans undertaking heavy repetitive tasks. But these are only a few of the millions of tasks needing support in society. The future aid offered by IT is yet to be determined ? and to do this we need transparent discussions of the costs and benefits and for governments and businesses to agree on supporting everyone in an equitable way. This is an evolving, never-ending story.
Rhea Arora is a Staff Writer for Qrius
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