An economic slave's economic dilemma

Being a student of science, the simplest intricacies of economics, money matters and related things have always eluded me. An unhealthy disregard for news viewing or reading hasn't helped either. And so as I grew up, the everyday events and the working of the real practical everyday world, which is so closely related to economics in general and money in particular, has always managed to leave me clueless and feeling like a stranger in a strange land (thank you for that superb phrase Mr Heinlein)... The major question that kept nagging me was somehow related to the fact that I work hard (hard being a relative term) and I am fairly intellectual (at least I like to believe so). And yet, here I am hardly making ends meet (technically that's an exaggeration, but lets not get into technicalities shall we?). Well, I am okay with my meager earnings and a frugal existence. What really gets to me is the fact that so many other less qualified, less gifted, certainly less intelligent (does anyone smell hubris here?) people earn so much by apparently doing so little... They wear good clothes. Roam in big cars. Own big houses in high end areas. Can afford to buy all that over rated and expensive stuff at the malls... While I have to manage my spending, all the while struggling, working my ass off, day in day out, to earn my daily bread... Does that not sound unfair? It certainly does to me...

So, I set out on a noble quest to dispel my ignorance and figure out how the real practical world worked, especially the monetary part of it... Now let me refrain from getting too over-dramatic here. Laziness aside, suffice it to say that I did try to show a marginal interest (which is certainly more than I used to do before) in every book I could lay my hands on regarding money matters. And a few documentaries helped me out too - from the eye opening Inside Job, to the scary Collapse... Of course, the specifics of my quest were less related to economics in general. It was more related to the how and why some people earn better and apparently with so little effort... And the answers were quite easy to come by...

I first tried to find them right around me and my workplace... A worker earns less. A manager earns more. For the longest time, I resented this fact (which employee doesn't?). But after long deliberation and getting to know some of my supervisors better (and realizing that they too were human after all), I arrived at the conclusion that their higher pay scale may be justified. Because the manager has more responsibilities on his shoulders than a worker does. The manager is paid higher to get work done, to take decisions, and to be responsible for the success or failure of the tasks entrusted to him and his subordinates. So, while it may appear that me and my fellow workers (here I consider the peers in my field as skilled labour) did all the work and our supervisors got away by merely tinkering around with excel sheets and attending endless meetings, the gravity of their work and the responsibilities and the pressure they face cannot be denied. So I grudgingly conceded that my supervisors earning more than me could be considered fair. So we have established that the higher a person is on the corporate hierarchical ladder, the more he earns. So far so good.

But then who was it in our firm, that earned more while hardly doing anything worthwhile? I kept looking up and up the corporate ladder, realizing that everyone had some role to perform in this scheme of things, I finally reached the investors and stake holders... And that's where I found my enlightenment... The damned investors. They made no contribution to the work of the company whatsoever. They weren't even a part of the corporate ladder... All they did was invest their money in the company. So the employees worked. And a part of the profit that was a result of their sweat and blood went to the investors... In economics, the most fundamental rule is High risk, high gain. Accepted, the investors took a pretty high risk by investing their wealth in the company. But apart from that little fact they had nothing else to show as their contributions to the running of the company... And its not just the investors who invest in a company. There are those who trade in stocks. All they really do is sit around all day following the stock market and playing around with the money they already have. The more money you have to invest, the more gains you can expect on investing in the right stocks. Then again, there are those too, who deal in property. They invest once and enjoy the fruits in terms of rent for years and years to come...

Not everybody can be an investor... Making money when you have money is easier than making money starting from scratch. No wonder there are more riches-to-super-riches stories than rags-to-riches ones. Money pulls money. So the rich become richer. Usually by acquiring resources with the help of their money. And by exploiting the have-nots, employing them to earn hefty profits. Only a margin of that profit reaches those who toiled to make it all work... And while the rich grow richer, the poor grow poorer. May be that's an exaggeration... Maybe when there is employment, the poor earn too. But the ratio of the efforts that they have to put in against the income they earn, is much higher than that of an investor...

The human race has grown exponentially in the past couple of centuries. And the resources that our planet offers keep getting scarce. No wonder our economic system evolved into what it had become today. For with limited supply of resources, be it land, oil, food, water, power, etc, it is but natural that people with the means will try to acquire and own these. People with the means are of course the ones who already possess money and power. And it goes without saying that they will charge the rest for perusing the resources they own... So again the rich become richer and the poor grow poorer...

And this is how I arrived at my conclusion about what was really wrong with the current economic system of the world... It was apparent that money pulling in more money (i.e. Using money as a resource to earn money, whether by interest on the capital or by investing that money in other devices...) and acquiring and hogging up resources like land, fuel, food, etc were the root cause of all evil in the current economic system... The current system is entirely based on the universal human trait - greed - a human trait more prevalent than even love and hate...

Armed with this half baked theory, I decided to pitch in - get into the rat race so to speak... So I went ahead and bought a little flat. I had to, before the exploding real estate prices went beyond my affordability. While I despise this greedy tendency, I had no choice. "Stay hungry, stay foolish", as Ms Rashmi Bansal would put it. I did not want to be either. So I pitched in all my meager savings (funny how heavy you feel when your purse is suddenly light after you have decimated your savings to zip), and got a hefty loan from the bank... And finally I had an asset of my own... I too was in the race to get rich, richer, richest asap...

Then one day I was with a friend. We were having a nice little chat about life, the universe and everything... And our topics meandered from what a beautiful time we had in childhood to what a bitch life had become... The prices that soared, the earnings that did not soar proportionately, the difficult times we anticipated in the years to come... Necessities like fuel, water and food are getting scarce day by day. And the population is exploding at an ever higher rate... With short supply and higher demand, the prices for all these necessary things are soaring everyday... And will continue to do so in the future. I already have a loan on my head. So I will end up paying almost double the price for my flat, than it actually cost me... Soon I will be married. Have kids. My expenses will grow tenfold. With the average inflation rate going in double digit figures and the average rate of monetary raise still lingering in single digits, how was a decent working man to earn his daily bread?

Cynically, I suggested we start a vada-pav business. For those who aren't acquainted with this term - it's sort of an Indian burger... We laughed at the idea. Then we considered it seriously. It was true, the average vada-pav-wala, did earn good, it seemed, considering how we were fast turning into a gluttonous fast food nation... But then, there would be social pressure. I mean imagine an engineer or a business administrator running a vada pav ka thela. A hundred people would say a hundred things. Not to mention the fact that our expensive education would have been a complete waste... Weird, how the income and the scope of work of a well-educated person gets restricted while a seemingly not so well-educated guy living in the slums earns better selling vada pav...

It seemed as if my fate was carved in stone. I was destined to work in engineering firms laying digital brickwork for a living, earning a fixed income and helping the company investors quadruple their wealth... All that while, my salary would increase at a fixed rate each year, irrespective of the inflation rate... I would watch with horror and dismay as new young recruits, fresh out of college, would bag more CTC than myself - a well-experienced skilled labourer (I am already experiencing this nowadays). It would be a regular monetary jugglery - trying to make ends meet, paying for a good lifestyle for the family, and a good education for my kids. Added to that the extra burden of the home loan, the EMI carving out a major portion of my monthly salary. And added to that the burden of taxes, not only on my income, but also on the goods and services I buy... I was of the opinion that the services or goods provider should pay service tax, not the poor consumer like me who was already paying tax on his income. But a friend pointed out that if such a rule was enforced by the government, then the service provider will simply raise the rates to include the service tax within his charges. This way or that, we, the consumers, were bound to end up paying the service tax...

It was at this point, that my friend came up with the term "economic slave"... Its certainly not a new term. I might have certainly heard of it before. But it was the first time I was hearing it in my own context. I was relating it to my own situation... It was a horrific idea. And yet, so true... The term would keep nagging at me for years to come... My friend is in business. And he is no better off than I am. For he may earn really good one month, but might not earn much the next... In fact, the banks - the same ones who are sure to earn double the amount they loan out - flatly refuse him a home loan. To them, he is a high level risk individual - for he does not have a fixed salary... 

The unhappy realization dawned upon me - we were all Economic Slaves...

And who was responsible for this? It was my firm belief that the economic system was - a system based on greed and ambition and exploiting the dreams of the people. A system created by the rich to benefit the rich... Common man is a dreamer. Sell him his dreams. Create new dreams for him. And earn from him... For example: Create a mobile phone. Sell it for cheap. Advertise it. Make the people get used to it. Add a camera to it. Make it cool. Make it smart. Let the common man dream about owning one. Get him addicted to it. Make it a necessity. So he will go for one even if he does not have enough money for food, medicine or other basic necessities.

That was my conviction until recently, when a colleague of mine opened my eyes, showing me how my interpretation might be flawed. We were again talking about my favourite topic - how life was a bitch and we were all economic slaves. I told him how I felt it was wrong that we should work so hard and the investors should earn from our efforts solely based on their current wealth - by investing in the company, and doing nothing more... I had told him earlier how I had bought a secondhand book for 100 rs and had sold it online for rs 150 - a straight 50 rs profit. He pointed out that fact to me... "See. You had this book. It was a resource you owned. You sold it for a profit. What was the effort in that? You owned something. You sold it. Earned from the transaction... The same is true with the investors. They own the money. That's their asset. Their resource. When they are investing in the company, they are just selling their resource, and profiting from it, albeit in the long term..."

I had never thought of it this way before. Never thought of money as a resource. When he explained this to me, suddenly the apparently convoluted unethical system of money looked simple and ethical enough to me... It seemed to make sense.

So I was back to square one. I was still an economic slave. And I had no idea how or why...