Margaret and Peter are in their mid-forties and have two children in secondary school. Margaret as works teacher earning about $400 per week while Peter runs a transport business. They pay off about $350 per month on the house and have an old car. However Peter’s business has run at a loss since the onset of the recession. He has repayments of $4000 per month for business loans and is unable to make the payments. The family is hounded by debt collectors and Peter works long hours and interstate in his attempt to keep going. Needed repairs to the house go unattended. The situation is depressing and demoralising and causes stress and disharmony in the family. His work has a bad effect on his relationship with his wife and children and upon his own self esteem.
This is the story of just one family. There are millions who have even more terrible experiences to share. There are countless number of people who despite their experience and loyalty to their work have been left stranded on the streets and still many more under constant fear and threat of having to lose their jobs. What began as a crisis in the housing market in the USA has transcended borders and sectors, gripping and hammering economies of all types. The much celebrated concept of a global village has made economies, no matter developing or least developed, dependent on each other, which basically means that nations cannot be decoupled from each other even during bad times. What has caused all this? What made it so grave suddenly and how come so many nations are feeling the pinch so suddenly? There are many haunting questions which need to be answered and policy makers, economists, analysts will have to face sleepless nights to find solutions to them.
What is important to understand is that people normally brush off the magnitude of the impact of the crisis on the common man by believing that the collapse of large investment banks and financial institutions cannot hurt the poor, as they have no stake in them. However, they do get hurt, and get hurt the most. Studies estimate that a 1% fall in the growth rate of countries like India or China pushes almost 20 million people back into the folds of poverty. And the common man is not just the one living below the poverty line but includes anyone who works hard to make a living. We all have read and witnessed some of the worst layoffs which have happened in the country recently. Headlines in the newspapers like: ‘IT firms put off campus recruitments’, `Techies get pink slips’, `Indian students in US left in the lurch’, `US firms put a freeze on recruitments’ is spreading panic in the air. The global meltdown is putting a severe strain on India’s booming back office industry and eating into the earnings of software exporters. Though USA accounts for only 3% of India’s GDP, the IT industry gets its main thrust from investments and purchases made by MNC’s belonging to the USA. Most of the employees engaged in the BPO sector are students. CEO’s of top companies who have served for many years have had to do away with their job. So nobody’s place is secure. Either you perform or perish. This is putting tremendous pressure on those working and is indirectly causing tremendous stress on other family members. The students who are to sit for their placements in colleges are uncertain of their future. The intake has sharply gone down. Because of lesser intake competition among job seekers has increased manifolds. The stress is tremendous.
The middle class can adjust their lifestyle and still make do for sometime. However, the ones who get hit the hardest are the working class and in times of crisis, they have nothing to offer but their labour. Yet, when companies contract their businesses, it is this very labour that they are not allowed to offer. They have no choice but to fall into the traps of extreme poverty.
So what can be done to help the poor in these times? There is no magic wand at our disposal. The Government must realize that in an ever changing world, it must play the role of an enabler, if not a commander. It must continue to invest heavily in education, health and infrastructure, which will fulfill the poor’s basic needs, and will give the economy a boost at the same time. Governments in the US and UK over the past few decades which had completely done away with most social security programmes, must rethink over it as statistics show that over the past one year, the number of people using food stamps, the subsidized food scheme for the poor, has increased by almost 10%. Queues in front of food banks are getting longer, while resources are shrinking. In India, what is required is that we be more realistic and creative in our approach. The need for social-security measures is being felt severely. But would countries like India with population of a billion and unemployment in millions, expected to increase in this time of recession, be able to provide social security measures? We would be wrong to quote statistical data’s to manipulate the issue for political gains when a more realistic and creative approach is to be looked into. Yet, India must give a serious thought and it’s that the welfare state must return, though in a new avatar.
A number of bail-out packages have been announced by the USA, UK and few other nations, including India. Tax cuts and slashing of interest rates have been announced to ensure credit liquidity in the market so that the economy does not stagnate. This would encourage investors to invest. But I wonder where the money being pumped into major banks and MNCs to bail them out is coming from? The answer is simple – from the pockets of the common man. A US senator famously said: those masters of the universe, who thought they could turn anything into gold, are now expecting us to pick up the pieces of glass that they broke. True, but it’s a necessary evil, or else the whole system will collapse. However, this basically means that economists and bankers must now become humbler and more participative in their approach. Here is a satire, I quote: ‘Stock market and economists have predicted 14 out of the last 5 recessions’, unquote. Thus our so called God’s on earth in the guise of economists must shed their arrogance and learn from their mistakes.
At the end I would also like to state that apart from what the policy makers and correctors who are engaged and already facing sleepless nights in correcting the situation, a bit of contribution from our side could probably help us meet the challenges and scrape through it without much hurt. At a personal capacity we could cut down on useless expenditures in all possible ways. Efficient and innovative use of available resources would also certainly be of much needed help. And we must continue working hard, for that is our biggest strength. As citizens we not only have our fundamental rights, but also have fundamental duties to perform.