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Self-Reliance of Working Class and Per Capita GDP of a Country Bellamkonda K. Kishore, M.D., Ph.D., MBA It seems there is a relation between self-reliance of the working class people and per capita GDP (gross domestic product) of a country. My contention is based on the following observations and facts. Merriam-Webster dictionary defines self-reliance as reliance on one's own efforts and abilities. Here I am using self-reliance in the context of the ability of people to do their own personal and family chores without depending on domestic helpers. As you are aware, depending on the domestic helpers for personal and family chores is a common practice among working class people in countries such as India, because of relatively low cost of hiring domestic helpers. However, it is not common in advanced countries such as the United States, where only the rich can afford to hire domestic helpers due to high cost of hiring. So, the working class in countries such as the United States is self-reliant, whereas the working class in countries such as India is not. With this background, I would like to develop my logical derivation of the relationship between self-reliance of working class people and per capita GDP of a country. GDP is the total value of all goods produced and services rendered in a year for each country. According to the Investopedia, per capita GDP is a measure of the total output of a country that takes the gross domestic product (GDP) and divides it by the number of people in the country. The per capita GDP is especially useful when comparing one country to another because it shows the relative performance of the countries. The per capita GDP is also an index of how prosperous a country is in relation to the perception of its people. Since the population of countries can vary to a great extent, countries with comparable GDP can have very different per capita GDP. For example, in 2013 the GDP of the United States (population 310 million) was $16.72 trillion. During the same year, China (population 1.34 billion) and India (population 1.21 billion) recorded GDPs of $9.31 and $1.84 trillion, respectively. According to the World Bank, the per capita GDPs of these countries during the same period were $51,749 (US), $9,083 (China) and $3,813 (India). As we can see, while China and India have comparable populations, yet China has 5-fold higher GDP and 2.4-fold higher per capita GDP as compared to India. Now, if we adjust the per capita GDP of the United States assuming that it is also as populous as China and India, then it will be about $12,591, which is still higher than that of China and India. The above numbers can be interpreted in different ways. But one should take into account that both China and India have a huge advantage over the United States in terms of the number of highly skilled working class, engineers and technocrats. Then why these two countries are not able to come closer to the per capita GDP of the United States? In fact, India is lagging far behind China in per capita GDP. Why? The answer is not a simple one. But, if we consider that every working class person in a country contributes his/her share to the GDP, and the extent of that contribution depends on how productive that person is, and how self-reliant a person is, then we may find some sensible answer for this disparity. Of course, per capita productivity among these three countries is not the same. The per capita productivity in the United States is much higher than in China or India. Again, India lags behind China in per capita productivity (see below for more details). But leaving aside the per capita productivity, let us consider the self-reliance of the working class in these three countries using the definition given at the beginning of this article. If we use self-reliance of the working class as the benchmark, then again United States is on the top, followed by China with India far behind. Due to the high cost of hiring domestic help and for other reasons, the working class in the United States and China is self-reliant. In these two countries, only the rich can afford to hire domestic helpers. The situation is very different in India, where domestic helper (at least one per family) is a must among the working class, while white collar and high earning employees hire 2 to 4 domestic helpers per family. This raises two issues to ponder. First, being self-reliant enhances per capita productivity in general, as seen in the United States and to some extent in China. Second, lack of self-reliance in the working class creates a huge market for low-paid and unregulated domestic helpers. The latter reduces the per capita productivity of the poorer section of the population, which would otherwise be working in more productive sectors, such as industry, agriculture, construction. In other words, lack of self-reliance on the part of the working class people, however smart they may be in their professions, indirectly contributes to low per capita GDP of the country. So, there appears to be a relation between self-reliance of working class people and per capita GDP of a country. This observation is further exemplified by the fact that the top 20 countries listed by per capita GDP, except oil rich Qatar, Kuwait and UAE, all have highly self-reliant working class. These are in the Western Europe and Scandinavia, Canada, Australia, Singapore and Japan. Notably the populations of these countries are between 5 to 127 million, but their per capita GDPs range between $43,000 to $100,000. Based on the above, it is logical to consider that a person, who is not self-reliant and depends on domestic help, is negatively contributing to the per capita GDP of the country by creating a sub-optimal productive environment for a large section of the population. Domestic helpers who spend their lives doing the chores of the working class people represent an untapped potential of a country. Their contribution to the national economy is wasted. No one knows the exact number of such domestic helpers in India. Estimates vary from as low as 2.5 to as high as 90 million. But considering the fact that India has about 225 million middle class and about 50 million rich “households”, and most of them employ more than one domestic helper, one can predict that the actual number of domestic helpers in India will be more than 300 million, almost equivalent to the population of the United States. This represents a huge wastage of human capital just because the working class and the rich are not prepared to do their own personal or family chores. Under these circumstances, how can India expect to become a major economic power? Mere brains, higher education, and a vast array of natural resources alone cannot help to build a nation. Besides, a large number of low paid, unregulated and unprotected domestic helpers pushes a country to the so called third world status, despite its rising economy. Rising economy alone will not raise the status of a country in the eyes of the world, unless it is paralleled by a matching rise in the social status of its workers guaranteeing them dignity of labor. Mahatma Gandhi, who professed dignity of labor, did all his personal chores by himself, without any domestic help. Mahatma cleaned his plates, washed his clothes, spun yarn to make his clothes, swept the floor and cleaned even the toilets with dignity, and at the same time he had enough time to fight against the British Raj for the freedom of the nation. If the working class of India follows the life of Mahatma Gandhi or at least copies the best practices from the working class people of the United States, such as being self-reliant, it helps India a lot more than any economy reforms. China versus India: Finally, coming to the comparison of per capita productivity of China versus India, which I alluded to above, there is a general belief among the Indian economists that Indian economy will surpass that of China by 2050 when China’s population will be older than that of India. However, according to an article published in a recent issue of the Harvard Business Review (January – February 2014, page 34), this is nothing but a myth for the following reasons. China’s population is more literate and therefore much more productive. Most Chinese will not retire at age 65 (majority have no pension entitlements). To these I would like to add the following facts. Chinese are self-reliant and do not depend on domestic helpers, thus freeing a vast number of their fellow citizens to work in more productive jobs, such as manufacture sector, thus directly contributing to the nation building. They are not supporting working class people and thus remaining at the bottom of the society. This is clearly reflected in the fact that over a decade of economic boom, about 10% of the Chinese people could move above the poverty line, whereas a decade of economic boom in India could help less than 1% of people to rise above the poverty line. Furthermore, China is aggressively investing in higher education by developing and equipping Universities to meet the world standards, thus strengthening its science and technology sector. This will eventually boost its growth rate in the future when more and more highly qualified scientists and technocrats are available. Furthermore, as a percentage of GDP, United States and China spend 2.77% and 1.97%, respectively on research and development (R&D), whereas India spends only 0.9%. This is clearly reflected in the recent surge of number of patent applications filed by Chinese scientists and technocrats (an increase of 4,629% between 1996 and 2010; source Scientific American, October 2013, page 62). In parallel China is investing heavily in infrastructure building. It is time that India should emulate the Chinese model for development and for sustained increase in the per capita GDP. The author is a medical scientist and freelance writer, and
lives in Sandy, Utah. |
| April 13 2014 |
