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MARCH 2021 Download this Article
All countries have a single point agenda. They want to make their citizens richer. What does that mean? Does it mean that the country will not have poor anymore?
What does it mean for a country to have everyone rich? Is it possible for a country to function with everyone rich?
Well, we all want economic equality of some sort or the other, but too much equality will destroy the very friction in the economic system that runs it.
The country will slip into economic uncertainty if all are rich. The economy is like the tyres on-road, too much friction and vehicle stalls and too less, the economy slips out of control.
Definition of Poor
Poor and rich is relative. Someone rich in a country could be poor in another by comparison. It is essential to understand here is the distinction between poor and poverty.
While poor is a relative term compared to rich, poverty is a lack of resources and opportunity to the extent of inability to sustain basic life. Here we are discussing poor and not poverty and why all countries need poor.
Poor makes people strive to do more to get more. An element of aspiration is attached to the poor, which fuels entrepreneurship and drive to achieve gains. The inequality between rich and poor gives those opportunities to earn more.
There is another condition attached to being a useful poor. Must be qualified with a skill set that is useful to the rich. Failure to attain that skill set will disable the opportunity to service the requirements of the rich.
How exploiting Poor runs Global Economy?
Suppose a country has all rich, then who would cook, drive their cars, clean those mansions, manicure the gardens, sit behind the cash register to sell daily needs and courier goods.
Though not a comprehensive list, but these are essential services required by the rich to run their daily lives.
In economic terms, these are low-end jobs which rich wouldn't do. Since they don't do, there is an opportunity for someone to undertake.
How much will the poor be paid to do these services is a matter of demand and supply for a given quality. For a nanny, the wages are higher than a usual babysitter. But for sure, the nanny cannot be as rich as the employer.
In a mass market of skill sets, where the supply is high, the poor get opportunities but paid low. In terms of social science, it could mean exploitation.
It is unavoidable as profit maximisation drives the rich to outsource these kinds of jobs in most cases.
To a great extent, this is the current model on which the world is thriving today. China is the manufacturing hub that is doing the hard work.
From manufacturing sovereign flags to hi-tech telecommunication electronics, the Chinese utilise its natural resources and its impoverished population.
Though over a period, those poor have gotten money and moved up the economic ladder.
A similar outsourcing model of the rich countries applies for Mexico, Guatemala mainly for the US and Canada. India, Bangladesh, Egypt, and Sri Lanka are the poor men serving the rich countries worldwide.
Whether it is smelly leather tanneries, overcrowded garment factories, exhausting tea leaves plucking labour or cotton weaving, rich countries are the employers and buyers of the services. The rich see the cost-benefit in utilising these services.
Ironically same work was done by the citizens of their own country but at a higher cost, which has now gotten outsourced. Manchester of the United Kingdom was the centre for cloth manufacturing, and so was Sheffield for steelworks.
Pittsburgh in the United States was the nation's foundry, now outsourced to China. Currently, fellow citizens are out of work, making them poor in their own country.
This cycle of finding the poorest to do the cheapest is playing out in the US, Europe and primarily by developed economies. Globalisation works with the search for cheaper opportunities to maximise profit, irrespective of the location of work.
A suitable example that simplifies the globalisation model involving developing countries is the story of garments.
All major brands sold in the developed countries are made in China, India, Bangladesh, Cambodia, the Philippines and Sri Lanka.
The markup that wealthy employers get on their products can be up to a hundred times if it is a luxury item like women handbags or shoes, the markup skyrockets to few thousand times.
On the bright side, if those rich didn't exploit, then the poor wouldn't have the opportunity to get even that smaller bit of the large pie.
The trickle-down effect of the riches did have a positive impact on China. It has removed nearly 800 million from the clutches of poverty.
As natural partners, both the rich and poor have to coexist, as seen in the holistic picture.
When the rich (relatively) countries realise that their own is expensive and elsewhere it is cheaper, they shift bases. For the services that cannot be moved, the rich countries import the poor from outside.
They run programs like the Windrush, H1B to get the poor with the best skill set. The European Union opened the doors to Romania and Bulgaria in 2010.
These were the two most poor countries of the European Union. Earlier, it was Poland who was allowed into the Union.
This move saw a mass migration of poor coming to the UK and doing jobs for cheap. Also, those were the jobs that the British were too complacent to undertake.
The Mexican and Latin American migrant workers are the backbone of the US odd job market. The scale of job definition is so large that these migrants are infamously stereotyped with jobs.
Along with the poor – rich symbiosis comes the stories of rags to riches too. We have mostly seen in the Americas and China once the poor have made it well into the rich club. Beijing has outpaced New York for having more billionaires.
London is a city of economically poor migrants flocking to encash highly inflated prices for the services.
There are migrants from the rest of Europe and Asia. The same applies to New York and Los Angeles. The entire middle east is built by poor labourers, mainly from India, Pakistan, Bangladesh, Malaysia, Indonesia etc.
Indian brain drain is a typical example of the poor walking into a rich club. The Indian education system had produced excellent technocrats for the last 70 odd years.
So without hesitation, opportunities were taken. The US was the destination where an aspiring kid of a low-income family found wings to his dream.
American technocratic layer is filled with Indians running the country like their own. Once poor, they are now the rich of the US. The cycle goes on.
So what makes the poor so crucial for a country?
Domestic Migration
within the country, inequality fuels economic activity. Population moves from places of least earning to more opportune locations.
Migrant labourers are working in the fields in different seasons. This phenomenon is prevalent in all countries. People move to bigger cities for odd jobs, It is paid more for the same work.
But that does not mean this phenomenon does not apply to the cities of developing countries. Beijing, New Delhi, Istanbul, Mumbai, Jakarta etc., are the destination for domestic migration.
These cities flood with short and long term migrants who support the (so-called) low-end job profile of the prosperous cities. In Mumbai, more than half of the city's population is migrant.
Many have made Mumbai their home as multiple generations have found livelihood in its dynamic and flexible business climate. Stories of rags to riches line the streets, and this journey of crossing the inequality is inspirational to many more elsewhere.
As with these examples, one common thread is putting in hard work without complaining about working conditions.
It is the pursuit of a better life that makes them toil, inspired mainly by the very those they work for(employers). For every minute spent working hard, there is a joy of earning more and feeding many back homes.
So, how much poor population needed in a healthy economy?
A healthy economy requires a lot of the poor. For every work outsourced, there should be many to take it up. It will circulate the money and move the economy faster.
It is a no-brainer that inexpensive services make the poor more employable. There are far many more personal drivers in India than they are in the US and Europe.
There are far more housemaids in middle-east than they are in the Americas and Europe. The skill is readily available and cheap to hire.
The rich can afford and save effort on this odd job, only to focus on a value-added task. The scope of DYI (do it yourself) kills the economy and productivity of the nation. The rich countries are suffering, though taking pride in their DYI skills.
It is up to the social welfare governance to limit the exploitation of the poor. In colonial times, there were slaves and bonded labour. It is something that no one wants today.
But on the other hand, no one wants to pay fortunes for a routine and unskilled job.
If the society and the country, in general, can respect human rights and provide for good working conditions, having poor in the country works for the economy. Conclusively, all of us are poor when compared to the richest in the world.
Successful Poor
As the examples have demonstrated, the rich were willing to pay the poor, which have changed the fortunes of many countries.
China and India are two icons of using their skills to service the rich countries and move the vast majority of their population out of poverty.
The inequality between the developed and developing countries has moved China and India into an emerging economy. There are more billionaires in China than in Europe combined.
India has the world's third-largest population of billionaires after China and the US. All this is a result of the hard work of the last 70 years.
While these so-called poor countries have earned by exporting their services, they have used it for their good. They have built their country into a modern nation.
They have furthered their motives to be world leaders in many areas. China has the largest network of high-speed railways and is now exporting that expertise to the rest of the world.
It has developed its expertise in nuclear power generation and electronics as a world leader.
India's space programme, pharmaceutical manufacturing and information technology skills are the envy of developed countries.
All these are attained in the last 70 years solely by efficiently and effectively utilising the earnings received from rich countries.
Poland is another case in point where it has effectively utilised the earning from wealthier European countries to establish its robust manufacturing and service destination.
The same does not hold good for Mexico, though. Subsequent governments have failed, and the country has sunken deep into problems of drug and poverty.
Success lies with the vision and leadership of the poor countries and how they convert the opportunity to improve their own countrymen's lives.
Like said earlier, poor and rich is relative. The circle of economics turns fast, and within one's lifetime, can we see the transformation.
Indeed, the world essentially needs good quality poor to run the progressive rich successfully. Without one, the other cannot survive.
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