The looming crisis of world unemployment - A Response
Shashi Tharoor's recent article raises an important warning.
Over the coming decade, around 1.2 billion young people in the Global South are expected to reach working age, while current projections suggest that only about 400 million viable jobs will be created. The World Bank itself describes this as a defining economic and strategic challenge.
Lack of viable jobs is given as the reason for the resulting gap of nearly 800 million jobs.
Viable Jobs - Is that the Criterion?
Viability is applicable to commercial ventures, not to nations building their productive capacity.
This is the difference between the magical growth of the Chinese economy and much of the rest of the world.
China did not build its extraordinary productive capacity by first asking whether every factory, railway, port, energy system or industrial ecosystem was commercially viable.
It built them as part of a national productive-capacity project.
China accumulated factories, machine tools, shipyards, ports, energy systems, industrial clusters, transport infrastructure and manufacturing ecosystems.
It accumulated real productive power.
The conventional economy asks whether an investment can generate an adequate financial return.
A nation building its productive capacity must ask a different question:
What real resources are available, and what can those resources produce?
Labour.
Land.
Materials.
Energy.
Technology.
Infrastructure.
Knowledge.
Organisational capability.
If the resources are available, they can be deployed.
That is the fundamental difference.
The question is therefore not whether the global economy can create 1.2 billion commercially viable jobs.
The question is whether the 1.2 billion people entering working age can be productively deployed.
A road need not be commercially viable to be necessary.
A healthcare system need not be commercially viable to be necessary.
A water system, school, care service or manufacturing facility need not be commercially viable to increase the productive capacity of society.
Commercial viability is a condition for a commercial venture. It is not a condition for building national productive capacity.
The 800 million "jobs gap" may therefore not be an 800 million shortage of jobs.
It may be an 800 million failure of productive deployment.
The 800 million jobs gap need not become a catalyst for instability. It could happen only because governments, conditioned by past monetary practices, failed to recognise a fundamental fact:
work produces goods and services - the real wealth of a nation - and the monetary constraint that once restricted productive activity no longer exists.
As discussed in Why Are World Leaders Not Asking the Most Important Economic Question of Our Time?, China offers an important lesson.
While much of the world focused on quarterly profits, financial markets, speculative asset expansion, consumption-driven growth and accounting orthodoxy, China distributed large portions of its developmental costs across state banking systems, public infrastructure, local government financing, long-duration credit structures, energy systems, land frameworks and coordinated national planning.
This enabled Chinese industry to expand scale, penetrate global markets, strengthen supply chains and accumulate technological capability.
China did not eliminate debt burdens, excess capacity or financial risks. But it prioritised the accumulation of physical productive capability over short-term financial neatness.
A nation becomes powerful not merely by balancing financial accounts, but by continuously expanding productive capacity.
If China’s experience demonstrates that productive expansion can be financed through coordinated national systems beyond conventional fiscal orthodoxy, many developmental limits accepted by governments begin to appear less inevitable and more ideological.
The Demographic Dividend Is Still Available
The market always functions within the institutional structure created and regulated by the government, including its laws, regulations, budgetary practices and implementing institutions.
Since work produces real wealth, the demographic dividend remains a strength. People can be put to work if the government chooses to deploy available resources.
There is little point in blaming the market when governments regulate the economy through their laws and exercise currency power that is no longer constrained by gold or foreign-exchange reserves.
The question is not whether the market can absorb the available manpower. It is whether the government will deploy it.
There is a simple economic reality behind the demographic debate.
A worker who is not productively deployed represents production that is lost forever.
The Misplaced Priority Given to Global Trade
Global trade has become the most glorified element in economic governance.
During the gold standard and the Bretton Woods System - the fixed exchange-rate currency regimes - countries had to accumulate gold or foreign-exchange reserves to protect their convertibility commitments. As the global trade was settled in gold during the gold standard era, exports became the focus of the economy.
When the United States terminated the dollar’s convertibility to gold in 1971, the fixed exchange rate system came to an abrupt end and with that, the necessity to accumulate gold reserves.
With the compulsion to accumulate gold or foreign-exchange reserves gone, exports should have become secondary to the domestic economy and the focus returned to domestic economy and full employment. But the decades of policy making tied to export oriented economy led Governments to lost sight of their primary economic duty: managing the livelihoods of their people and continuously improving their living standards.
Public Capital Must Lead
The World Bank recommends unlocking private capital, removing regulatory obstacles and improving infrastructure.
But the immense power of public capital remains hidden by conventional thinking. With capital ceasing to be an inherent financial constraint for a currency-issuing government, all the available resources can be deployed.
The public sector has to lead, with the private sector supporting it. The history of successful industrial economies reinforces this point. Japan, South Korea, Taiwan, Singapore and China did not build their productive capacity by embracing free markets from the beginning. The State played a central role in developing infrastructure, nurturing industries, directing investment and building technological capability, as discussed in World’s Successful Economies Did Not Embrace Free Markets from the Beginning.
The Choice Before Governments
The Global South’s young population is not a threat in itself. The real danger lies in leaving its productive capacity unused while human needs remain unmet.
The question is not how many commercially viable jobs the market can create, but how governments can organise available resources to produce the goods and services their people need.
The demographic dividend can become a source of instability only if governments fail to turn it into productive capacity.
Further Reading: A Framework for Continuous Full Deployment, Price Stability, and Rising Living Standards
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