Suppose

Let me put this hypothetical question to you. Suppose you live in Myanmar, which is quite a conjectural statement to start with. On a regular Tuesday morning, your cleaning lady asks you for a small loan, to pay the hospital bills for her child. She offers to repay you in ten instalments, by deducting a third of her wages every week. You readily agree (is there really another option?), fish out the money from your wallet, and leave for work.

The question that keeps you occupied on the way to work is whether to gift the money to your cleaning lady or to accept the instalments. It is an amount you can easily miss, and ideally you would gift her the money as it’s doing so much good to her compared to you spending it on whatever. Yet you are worried about creating the wrong incentives. If the money was gifted, your cleaning lady might ask for more in the future, perhaps without having an urgent cause. She might make up reasons, or invent stories.

The world is incredibly unequal and incredibly unfair. Does it matter that your cleaning lady might make up stories to get money off you when she is so much poorer? In a way it does. By virtue of allowing her into your apartment, and giving her a key, you need to fully trust her. Without that trust, you would have to cancel the contract. Moreover, Myanmar is full of people poorer than your cleaning lady. If you gave her free money, why wouldn’t you hand it out in the street to anyone who might need it?

Still, the world is incredibly unequal and incredibly unfair. This inequality is a by-product of growth in our capitalist system; some sort of an externality of having reached our current level of welfare. People work hard, innovate, and take risks when they know their efforts will pay a reward. Communism failed for a reason. Many people who can afford a cleaning lady are adding more to society than they are receiving from it, thanks to a progressive tax system and the impact they have through their job. Yet, this textbook example doesn’t hold true at all times, partially because of the twin vices of nepotism and corruption that are still all too prevalent. There is only so much you can justify by referring to economic theory.

All reasoning aside, the world is incredibly unequal and incredibly unfair. In this highly hypothetical situation, what would you do? What should you do?

Farmers and garments

Dear all,

a while ago Marleen and I got the idea to 'respond' to one another's blog posts by writing a corresponding story. Like many nice ideas, it remained just a nice idea, until I found myself writing a lengthy response to one of Marleen's Facebook posts this morning. Hopefully this is the beginning of a string of stories in which we compare our experiences and visions of living and working in the world's youngest democracy. Please find below the link to Marleen's blog post and my subsequent response. Feel free to contribute to the discussion by leaving a comment in the designated space below the article. Happy reading!

https://rsr.akvo.org/en/project/3717/update/17355/

Well let’s first establish that I don’t disagree with the spirit of your article (I mean how could you disagree with a better world for everyone) but rather with the reasoning behind it. Let’s first start with the rural-urban migration that you point out for its negative impact on food security because of the scarcity of labour it implies in the countryside. In my view and experience, the exact opposite holds. Smallholder farmer might seem romantic or idyllic from an outsider’s perspective, but those people eking out a living farming three acres of paddy land are dirt poor, and continuing to do so won’t make them any better off in the near nor the distant future. Myanmar was once the rice basket of SEA, and for them to reclaim this position we need better farming practices, the consolidation of small farm plots, and mechanisation. W.r.t. the latter, in our observations of the tractor market, we have seen evidence of farmers investing in machinery because the price of casual labour has gone up – precisely because of the reasons you point out. In my view this is a good thing. Any market force that stimulates a farmer to ditch the wooden plough and substitute it with a much more powerful tractor ought to be celebrated. Of course, when I am travelling through rural Myanmar, I find the sight of two big draft animals pulling a plough in a paddy field much more attractive that a noisy, smelly tractor. But isn’t that very selfish? Those farmers who have invested in machinery increase their labour productivity manifold, i.e. they produce more food in less time. They are much better off than when they were still trailing their oxen. Let me be even bolder in my statements; in addition to casual labour migrating to the cities, we need the smaller farmers to be bought out by the larger, more efficient ones. This will allow those farmers to grow larger, invest more in their farms, and increase their labour productivity and thus food production. A country cannot prosper as long as the majority of its labour force is locked up in smallholder farming. In the Netherlands only a small fraction of our GDP is derived from agriculture, yet we have plenty to eat. Myanmar is in parts an extremely fertile country, and it has the potential not only to feed itself but also supply its two giant neighbours, neither of which produce enough food to feed their own population. Myanmar’s current account deficit was a yawning 8.9% of its GDP in 2015, and increased agricultural productivity (and the garment industry, but I’ll get to that) can help to bridge that gap.

Now that we have established that rural-urban migration is stimulating productivity in the countryside rather than harming it, we get to your second point about the garment industry. While I fully agree with your critique of the consumerism in parts of the rich world, I think that this is a problem that lies with consumer attitudes and regulation in the West, not with producer countries in Myanmar or Bangladesh. Buying clothes for next to nothing only to dispose of them after wearing them once or twice is ghastly, and showcases much of what is wrong with today’s consumer mentality in the rich world. Yet prohibiting Myanmar people to work in the garment industry is not the solution to this problem. In my view, as long as the garment industry (or any industry for that matter), provides people who used to live in the countryside with a better income than what they had before, we shouldn’t discourage the invisible hand of the free market. As Myanmar develops, invests in schooling and infrastructure, and grows richer, so will the type of work improve that the majority of its working age population are engaged in. Looking at our own experiences in Western Europe, this transitory phase seems to be a regrettable but unavoidable phase of industrialisation. After all, the state of many a working class neighbourhood in late 19th century London wasn’t that glamorous either. In my view, if well-directed and regulated, FDI can speed up this development process, while stalling it will delay such progress.

Myanmar currently imports much more than it exports, which is unsustainable and harmful. It needs to make use of its competitive advantage to produce things at a price and quality that nobody else can beat, which would allow them to export it. Currently, looking at its fertile land and cheap labour, agricultural products and cheap garments fit the bill. Let’s hope the former will further develop so that the country may become an agri export powerhouse, while the latter will transition towards something more skilful.

So, hopefully, in a decade’s time, people will answer to your questions that they are on their way to a value-added job, which came about on the back of FDI, while answering that, thanks to a thriving agricultural sector, not only they have eaten, but also their Indian and Chinese neighbours have.