FOCUS : Employment, Entrepreneurship and Economic Independence

A year after the human resource manager at Maruti-Suzuki, India’s largest car manufacturer, was killed by striking workers demanding a wage increase, trouble is brewing at HeroCorp a maker of motorcycles, located not far from the site of that ghastly accident.
Meanwhile, trade unions across India engineered a successful national strike to press for higher wages, lower inflation and better working conditions.
The ideological decline of the left, has led to a corresponding decline in trade union membership and their ability to influence the dynamics of employer-employee relationship also known as industrial relations. The smarter of the trade union leaders have switched over to more remunerative political careers or become public relations managers- for the same employers. The less influential are turning into hardliners and becoming violent.
What is the future of trade unions – their members and their leaders, in a new economic environment that is shedding jobs rather than creating them ? More significantly what is the future of employment itself in a world where there will be fewer, uncertain and short-lived jobs – anyway ?
Employment is an invention of the industrial age. In preindustrial societies, there were occupations and professions – artisans, farmers, soldiers, traders and slave etc. Workers did not exist simply because there were no factories.
Industrialization of Britain, and subsequently of Western Europe and America began circa 1760. Over the next two centuries other parts of the world also gradually industrialized. Human productivity, it is estimated grew over a thousand fold in the same period, enabling an unprecedented economic expansion.
Industrialization
Considered to be the single most important event in the history of mankind since the domestication of animals, industrialization brought an epochal change in the life of ordinary people. The mixing of capital with human labor supported by mechanization made mass production and consumption possible. In the process, a market for wage labor was created – something that was closed to humans under a feudal system. Industrial production based on specialization of work famously documented by Adam Smith, allowed enterprises to achieve exceptional levels of productivity and corresponding demand for workers’ employment.
Karl Marx thought industrialization was dehumanizing because it alienated the worker from his own creation by commoditizing his work. In preindustrial societies the artisan was the owner of his work – industrialism separated him from his work – his dignity and his creativity and his intellect. Welfare states, run by social democrats, evolved to mitigate some of the excesses of industrialization and bring balance between the aspirations of workers and the capitalist turned industrialists. There is little doubt that industrialization helped create the massive middle class bulge and the accompanying prosperity that the world enjoys today – the criticism that it also created deplorable inequality and helped enrich few at the cost of many, notwithstanding.
Some economic observers contend that the age of industrialization is over. This is evidenced in the growing joblessness and the inability of industries not only to hire but also to keep away from retrenching people in existing employment. If the preindustrial age was characterized by a master-slave relationship and the industrial age by that of employer-employee, the postindustrial age has no such character.
When the slaves were first freed, it is said that many of them went back to their masters and gave themselves voluntarily into their service simply because they had never experienced anything other than the life of slavery and were so conditioned to it that they felt fearful and were unable to cope with their freedom and the personal responsibility their new position entailed.
Industrialism ushered in a new form of relationship where the workers (who would have remained slaves if industrial age had not arrived) voluntarily sold their labor for a wage payment. That was a period of great uncertainty but also a period of an earth-shattering change in human relationship. While it was a duty of the master to look after the slave and keep him alive and well, the industrial capitalist entertained no such moral or social obligations towards his worker. The industrialist was as free to hire any worker, as the worker was free to seek employment with any industrialist. The state acted as an arbiter to this arrangement and ensured that labor markets were free and fair and that no economic exploitation took place – at least in principle if not in practice.
The Knowledge Age
Industrialization propelled some nations and societies into yet another phase that came to be known as the knowledge age (and correspondingly the age of information societies). In this age, human beings discovered a new market for their knowledge and intellect and creativity and their general ability to think and organize knowledge – against a market for body labor. Hyper-specialization and innovation allowed more productivity to be squeezed per capita effort than specialization hitherto made possible. Internet, financial services, information and communication technologies, data processing and software development enterprises that characterize this phase of industrialization also helped accelerate the movement of goods and capital across borders, in their stride.
Unfortunately we are at the end of the productivity boom that started with industrialization and brought human society into the knowledge age. It continues to produce some economic value but not enough to keep people employed. Even developing countries have become victims of a new economic reality that can deliver growth… but no jobs.
Companies that are less than five year old created almost all new jobs in America, averaging about three million per year, over the last three decades. Startups as these companies are described in the US and now around the world have stepped in to make up for jobs lost to large industrial enterprises – it would seem. In India, a country that has seen exceptional growth in the same last three decades less than five percent jobs have been created in the organized sector – (read) large corporate, the almost entire employment took place in micro enterprises, startups and self-employed activities. Elsewhere most national governments are encouraging their citizens to create their own earning sources – and becoming entrepreneurs.
Entrepreneurship was the occupation of society’s problem child. Such was the lure of employment and the certainty it provided that only those who were misfit or found themselves rejected by the organized labor market took up being self employed. The outcastes, outliers and the oddballs risked being entrepreneurs – the good boys secured employment or became professional doctors, engineers, accountants and lawyers.
An Entrepreneurial Commonwealth
The making (some say accidental) of an entrepreneurial Silicon Valley ecosystem and its successful mixing of venture capital, innovation and education have been so inspiring that several clones have emerged around the world – eager to replicate similar successes by building their own entrepreneurial ecosystems. As oil and mineral wealth in the Middle East, Africa and the South American countries diminish and the cheap labor in India and China becomes expensive – the only source of further economic progress is an entrepreneurial commonwealth.
That makes America’s entrepreneurial tradition the biggest hope for its people and… its only choice. The choice for other nations – both large and small irrespective of where they are located is equally the same – entrepreneurship.
The more the politicians and policy makers see jobless growth staring on their face, the more they are scrambling to understand the nature of entrepreneurship and ways to promote it to their citizen constituents.
Across the world business incubators are proliferating – many of them with the support of the governments. In India private incubators far outnumber those that are government supported and so is the case in the USA. Elsewhere, governments are providing tax incentives to angel investors, co-investing in incubators, funding startups and promoting entrepreneurship as a career choice.
Unfortunately, despite of all this focus on entrepreneurship development, it is unlikely that a large majority of population will find themselves in meaningful occupations – partly because entrepreneurship is often confused with high tech. The need for encouraging entrepreneurship is far greater at the bottom of the socioeconomic pyramid than at the top where a lot of private effort is already being put.
The Age of Karl Marx
In a small market in a small town in India, I once came across this young boy, with a body crippled down his waist, unable to walk since birth and abandoned by his family when small- he ran a small business on the pavement – a weighing service. Passersby paid a small sum for getting to know their weight. On most days the small coins added to a make enough for a small meal and a night shelter – he told me in a casual conversation. He had all the traits of a Silicon Valley entrepreneur except that he did not have the privilege to drop out of Stanford or Harvard- in fact he had never been to school. A few years later I saw him again sitting on the same pavement but happier and eager to tell me something more. In a narrative that should form compulsory reading for all would-be-entrepreneurs he explained to me how he had saved some money after a year of brisk business and bought an additional weighing machine and put another cripple to work in another nearby locality and after some time another cripple some distance away and yet another one and that he now had ten cripples working with him. His journey that began on the pavement and will probably end there will remain untold to the world while Mark Zuckerberg’s journey towards creating a 100 billion dollar plus Facebook from Harvard dorm is already a folklore.
The Bangladeshi micro-financier and Nobel Prize winner founder of Grameen Bank, Muhammad Yunus once claimed ‘that we are all entrepreneurs – only few of us get to practice it’.
More than three fourth of people in the world are self-employed. These include farm workers, artisans, daily wage earners, hawkers, shopkeepers and menial workers etc. The society rarely gives the respect that it gives to Silicon Valley entrepreneurs although the risks they take and the efforts they make are no less in nature. On the contrary and often, these people are looked upon as social pests – ignored at best. Field studies by the late Prof Prahlad (Fortune at the Bottom of the Pyramid) and more recently by Prof Tarun Khanna (Billions of Entrepreneurs – Harvard Business School) have revealed how the entrepreneurial traits of those at the bottom of the pyramid could be harnessed to increase the cumulative wealth of the society.
The lesson they provide is that prosperity of those at the bottom need not come at the expense of those at the top – that people across the entire economic spectrum benefit.
Continuing job losses could therefore be a force of positive change provided the society accepts this transition to the reality of self-employment and entrepreneurship. It would be counterproductive for trade unions to fight this change – strike work, kills human resource managers and shut down countries. They would rather be sitting down with social scientists, economists, policy makers, bureaucrats and politicians to evolve a productive approach to entrepreneurship and benefit from it.
Teaching entrepreneurship at high schools and universities and creating incubators are welcome first steps but they are by no measure enough to deal with the enormity of challenge that involves transitioning a whole society that seeks employment for itself to a society that will create jobs for others.
The age of entrepreneurship is ultimately the age of Karl Marx – of economic independence of human beings, of freedom. An age in which workers will own and enjoy the fruits of their labor and redeem their creative self rather than see it sold for a small change under a mind-wasting, wage-paying industrialism.