Indian Pollution Crisis & Real Product Cost

We are now living in dire situations.
Humans have done what no other specie could think of - destroying their own habitat to live better.

All of us have gone beyond our natural longing and needs to achieve great heights in our lives - or so we thing.

Mass production has increased consumption levels of all humans to an unprecedented level by providing expensive natural resources at cheap rates.

Cheaper prices are bad because they result in the flaunting of one crucial law of nature – give back as much as you take. 
For example: people do not realize how expensive a laptop or a smartphone can be if the natural resources are accounted for. A few big players are using our urge to make money by using up our resources. Climate change is just the beginning. 

Not far from today, Industrialization shall be considered as one of Humanity's greatest blunders.

Let’s question a few of the goals behind industrialization and mass production of goods.

1. Achieving economies of scale to reduce production costs? Make these products available at cheaper rates to increase sales?

The first and most important point of all.
Henry Ford started it - green revolution thrashed it and we all reaped it's fruits. Industries were built to manufacture a product at a fraction of it's actual cost. This increased sales and multiplied profits.

Seems like a brilliant and simple solution to a costing problem. 

But did we account for all the costs correctly?  Was mass production of a product really reducing it's actual cost? I don't think so.

Lets take an example to understand this: 

• I want to pain my car white, and by using the most economical method of painting, I need 5 liters of paint to do this. 
• Lets assume 5 liters of paint will cost me INR 100/liter (Total - INR 500).
• But if I had to paint 10 cars and bought 50 liters of paint, the supplier would have agreed to give it to me at INR 80/- per liter (Total - INR 4,000)
• Which means I would have painted one car in INR 400! That's nice! 

But here is the catch.

The amount of paint needed to finish up a car will be the same. No matter the cost reduction.

HENCE: 

• The amount of natural resources needed to use the paint shall also be the same! Logical? 
• The actual cost on the environment does not go down – only the monetary costs go down in mass production.

2. Get a useful product in reach of the common man?

This is one of the greatest statements in support of industrialization and mass production. But is it really true?
Why do we need to get this so called useful products in reach of the common man? It's Profits and businesses are needed to build an economy, not philanthropy – and good marketing and PR result in such outlandish statements. 
Creating a need and then fulfilling it with a product is the way of today’s largest business houses.

But what are the repercussions of this?

We now know that mass production may reduce the cost of the product in terms of money, but it does not reduce any stress on the environment, in fact it may damage it further by pollution and tree felling.

So when such a low cost product is launched in the market, it quickly sells out – and not just that, if the product gets’ lost or damaged, the consumers will easily re-buy it without thinking about its cost – since it’s a cheaper option to actually making it. 

So what does this do? 

• It directly increases the consumption of natural resources a lot more than what is actually required
• And no one is held accountable for this. 
• The cost of natural resources is not accounted for and lower prices increase their consumption without any motivation towards recycling.

3. Increasing employment? 

Another blatant lie. We have seldom seen industry workers happy with their jobs. Almost all of the majority blue colored workers have to get employed at cheap wages and worst work conditions to sustain a living. Thats one of the ways to achieve the economies of scale and reduce costs. I would rather say that it’s this little wage they get in these industrial mass production line jobs that stops them from venturing into the world to make a better living.

So what can be done to stop this?

I am thinking of a direct solution. 

• Make it uneconomical to mass produce any product that use elements/resources which are either harmful to produce or damage the environment. 
• This will increase the cost of production and discourage businesses to do it as increased costs will reduce sales and in turn, profitability. 
• We can have our scientists and researchers identify and categorize all the elements/resources whose production damages the environment
• We can levy a fixed extra tax amount on it’s use. 

That is it. 

• The moment this is carried out – private research will be done to find alternative elements/resources that are not in the list.  
• And new innovative product designs shall be launched that do not use such elements and resources.

How Online B2B Marketplaces provide an insight about the Economy

After considering the different ways in which our economy can be improved, we can understand the current state of the economies by analyzing the marketing strategies that are undertaken by business houses in a nation.

Marketing strategies will help the business grow in volume and hence is an essential element for an enterprise to survive. When a certain industry is under tough competition, that is if there are multiple players competing for the same prize there shall be an increasing successful marketing industry providing these services. The profits and growth of the marketing industry - be it online, viral or one to one, reflects on the mood of the economy. 

Today, China has an online market place that has also catered to international business called 'Alibaba.com'. 

The USA has various sites like Alibaba (B2B & B2C site) named Ryze that is similar to alibaba but also includes networking in it's gamut. India has various sites, the most popular (popular not successful) is indiamart.com. Comparing the worthiness of these sites - Alibaba.com takes first position among all. US sites come second and the rest follow. 

Why do you think Alibaba.com, a site born in China that caters to the world needs is so massively successful while their counterparts remain to be content with a smaller share? The reasons lie in the economic development of the respective nations. 

China, a post communist regime turned democrat is the home to alibaba. The world largest population offers a brilliant market for businesses that have been given the opportunity to rise with time and cater to the needs of their nation. This has prompted the business houses to compete which in turn resulted in the growth of Alibaba.com as the world's largest online B2B marketplace. 

USA on the other hand has a comparatively tiny population. Unfortunately this population is far more demanding than any other population on earth! Hence business houses - through good capitalism policies have a chance to cater to these demands and use business networking and B2B marketplace portals to promote themselves. Business networking is a more logical approach for USA, because the small market can only be targeted by a personal touch, in stark contrast with China where bold advertisement can be the only way to capture attention. 

India is in a much more complex situation. Tradeindia.com stared out 16 years ago as a B2B marketplace. Many other players followed and today now one knows anything about Tradeindia.com. Marketing and PR of another site called IndiaMart.com has catapulted the company as India's no. one online B2B marketplace. It's understandable. Indian population, being the second only to China is much more diverse than any other country. This diversity results in 2 main outcomes. 

1) Multiple needs

2) Multiple industries

Due to various needs, the amount of business houses that can cater to these needs are extremely limited when compared with China and the US. There is no need to invest time and money to promote a business online using B2B market places. But I may freely say that this is not entirely the final result. 

Due to the increasing variety in demands of the Indians, business houses have begun to reach stagnancy. There is limited growth on such grounds and hence they have started using marketing companies to help them capture more customers. This tells us that in the present Indian economy, there is a chance where standardized products such as soaps, towels and chairs have a bright future ahead and marketing agencies shall be able to profit if their clients deal with such standard goods that cater to universal needs. 

I would say this is a brilliant signal. With growing needs, the only way companies will spend on marketing is when the anticipated demand is high. There is nothing much like it.

It's evident that there should be growth in the economy in the future. The economic policy to keep the kart wheel moving is proving it's self well. 

Do we need Census Towns to spur growth?

Today there is quite a large hue and cry about how great
Census towns are, and it’s a definite sign of growth in our economy. Most of us
do not know much about census towns.

Census towns are actually small villages that used to depend
on agriculture for survival, have now many more opportunities to make a living
due to industrial development that is taking place.  Farmers have turned away from their farms to
work at factories and earn money.

Let’s understand more about these census towns.

• -         
  Factories and large companies from the
  automobile and consumer durable industries have set up their plants in faraway villages
  for gaining the benefit of cheap land and limited but useful connectivity.
• -         
  In the recent past, these villages have not been
  able to earn a decent living through farming.  With their limited education (Class X) it’s
  difficult to make a living in an urban area where there is severe competition.
  There small time villagers have to depend on farming and small cottage
  industries for a day’s meal. Such a population/location is ideal for the
  placement of assembly units and industries.
• -         
  For such companies, they are the ideal workforce
  that can be used at the cheapest wage possible. It’s a lot more economical than
  employing a full robotic process with no other running expenditure and a full
  time working capacity.
• -         
    In cases where there is limited social
  infrastructure, big companies have the ability to create schools and educate
  mass workforce about the job they need to work on. Hence the villages are
  provided with quality education, new infrastructure and above all, value
  creating jobs.
• -         
  Instead of the workers settling in cities to
  work at large companies, these companies have come to the villager to employ
  him.

Looking at these advantages today, I would like to draw your
attention to a man named Kasturbhai Lalbhai, one of the greatest businessmen of
India. Post-independence he saw the need for a dye making industry, and founded
Atul ltd. (Atul means incomparable).  The
fact is that when Nehru was invited to inaugurate one of India’s first free
mills, he refused.
This incident is narrated in a book called “India Unbound” by
Gurcharan Das. It is said that he did this because he opposed capitalism. Atul
ltd had built a small town as well as an urban environment for the villagers
who were to be employed there. This business/economic model that would have
catapulted India into a much needed industrial revolution dominant with Indian
companies was plagued by the government’s red tape and heavy taxation policies.
The outcome of this was a largely successful urban India and a forgotten rural
India coupled with uneven distribution of income.

I strongly believe that the step taken today by the Indian government
to free FDI is a necessary measure for the moment. Yes, if Nehru’s sadistic
hunger for controlling the Indian’s and their growth would have been overrun by
the need for overall growth on the country, there would have been an industrial
revolution, and Indian companies would have accepted foreign investments on
different terms. But today the need is to grow, and foreign direct investment
shall help the rural India become more successful than the urban India. 

How to rebuild our Economy

Money should not grow on trees

Knowing a fact of life, there is nothing in this world that last for ever. The reason for that is, nothing is perfect. Our modern economic system is not perfect. The proof of that is the current failures that have the potential to recapture the growth of our children.

In our world today, we are captured by the chains of economic growth and monetary well being. Nothing seems worth it, if it's not worth the money. That's the methodology adapted by us to choose. And since we have the power to choose, then lets choose a system that rewards hard work and increases the growth of true value.

The truth about our economic system lies in the fact that it fails to adequately reward value created. Abstract occupations today are more profitable than others. This leads to the increase in price of the output generated and causes inflation.

There should be a system that can reward value created with respect to the need it fulfils. 

As generic economics goes to explain the price of a product to be directly proportional and positivity related to the demand for it in the market, it fails to take into account the amount of money circulated in the market and also fails to account for the uneven distribution of income, and these factors warp the prices and product demand forecasts. Hence the new system must ensure a correct distribution of currency in-line with the economic growth, and also the rightful distribution of revenue generated from value creation.

To implement such an economic system, there must be a simple and effective measure put through the nation or nations.

There mustn't be any artificial sources of income including

• Interest rates
• Future Trading
• Stock Trading
• Option Trading
• Forward Trading ect..

Any form of income that is accrued without creating value is to be eliminated.

Trading physical stocks and assistance in distribution and sales of goods and services produced is equally productive an activity as production itself. 

The moment artificial income is eliminated, we must ensure accurate valuation of the economy size and monitor/control the currency flow into the system. Some may argue that in today's times currency flow controls are implemented to ensure effective international trade, and i agree with them. This should be a strategic move that can succeed only if there revenue distribution is of a higher quality. 

Revenue distribution cannot be equal. This is simply because no man is equal. Revenue distribution should be based on value creation. The price of the value shall be accurate only if there is no man with black money, which is a tall statement. Nevertheless, this situation is commendably possible if there is no artificial income floating in the economy.

Such an economy shall be free from inflation, depression, and stagflation of the economy. Such an economy can only be tow things, it's either stable, or in a growth phase and I feel that both situations are much more desirable than our current inflationary, and in a few other economies - depression like states.          

    

Flaws of interest rates.

Illuminating the flaw in collecting interest on loans and capital had been the motto of this blog. If you have followed the past posts, you shall understand the concept of fake value in money, created via interest rates.
When an individual earns money, it's his share of the aggregate value of the economy in which he lives.

When interest comes into the picture, new currency printing complements it. Today the economy is controlled using interest rates. This is possible due to the floating nature of currency in the economy. The value of money is no longer fixed and fluctuates depending on the amount of dollar reserves present with the national bank. The crux in fixing value of money using gold or even so USDs seems flawed. Why should gold be a security when it cannot complete any of the human needs? Gold wont feed you, it wont protect you. The inflated value of gold has caused trauma and disaster in the economies of the world. Wars have destroyed civilizations in South America and outcome has never been sweet. The Spaniards today face the same fate as their ancestors did all those years ago.
Hence fixing a value using gold or USDs is not the correct methodology to ascertain currency value. And using interest as a bait to control the surges in economic development is also incorrect. Since money made via interest rates is not an exchange for value created, this money spent shall cause inflation of prices.

Understanding normal human nature shall help us gauge the realism of this argument. When a person has more money in his pocket, he will be ready to pay more for a service he desires. Observing an man that has earned his living, you will find that his evaluation of cost for a service or product is a lot more stringent than a man that has made money in stocks or earns interest without a lot of hard work.
The service in question here is being delivered by the utilization of time and effort and the provider expects to be paid for it. If this is bought by money earned with value created - it shall contribute to the growth of the economy. And if this service is bought by money earned via stocks trade or interest - it shall inflate the value of the service and cause inflation in the economy.
The volumes of interest earned in the economy today is huge. Europe is in grave problems because it felt that interest on their capital invested elsewhere shall result in satisfactory earnings and a secure future.

Today Inflation is controlled by increasing interest rates to reduce return on investment. During the period of boom, no cost of investment shall seem expensive. Inflation is caused due to artificial value created by income that is not a reward for value creation.

To protect the economy from the ills we are facing today, we must put a stop on interest rates and build the economy with stronger hands. Value must be rewarded and true value must never be ignored. Each man must perform his chosen duty well as no mans work is greater than the work of another.

Money Measures Wealth

Why do we end up misunderstanding Money for "Wealth"?

exceeding the prescribed limits will be harmful

People and individuals including myself, have grown up seeing people buying goods with money. It's natural for us to identify money as wealth or a means of wealth. The fact being unimportant for us, we all unanimously aim our success on the amount of monetary income we achieve.

As explained earlier, our system has kept money as a means to eliminate exchange issues.
To learn the importance of money, lets see how money gets valued-
Our money today came to form as a representative which could be converted into gold or silver by application at the bank. Since banks issued notes far in excess of the gold and silver they kept on deposit, sudden loss of public confidence in a bank could precipitate mass redemption of banknotes and result in bankruptcy. Other than this, in today's economy our currency is floating in nature and the value is controlled indirectly by their controlling governments to achieve various economic goals that they might have set.

Economic achievements of nations depend on development. Development in-turn depends on value created using a standard supply of raw materials. Hence all currency values are indirectly affected and monitored by the amount of 'hard work' and 'out-come' of the hard work put in by individuals of a nation.

So to sum up the topic, when people make money in Futures, Derivatives, Options ect, they are going to harm the economy. There is no value exchanged for the money these 'businessmen' pocket. Infact it's just money changing hands. Hence when the increase or decrease of these incomes are recorded as revenue - it's a false claim. It's a claim that inflates the value of money.
Now picture the man that has made money in stocks exchanges spending it on his supplies and home. The man has eaten up on the efforts of so many other individuals who have utilized resources to produce value that can be sold on the market,  by waving his wade of cash. This is how a service get's undervalued for a start.
As an how other individuals notice the luxury and time enjoyed by such money lovers, they shall also make the effort to shift occupations. Eventually, as the number of such money lovers rise and value builders fall, the services that are provided by the value builders-the ones you would actually require to 'live by' shall start getting overvalued.
This is how we end up in inflation :) This is why today the European economy managed by massive banks that earn loads of 'Interest' have started falling short. This is the only reason why China is emerging as a Super Power. Chinese governments have always focused on production and value creation as a means of growth, and today most of the goods we use come from China. I am not a supporter of Communism, but i am a supporter of value - true value.

Collecting or giving Interest to gain from Capital is a primitive and flawed concept. 'Interest' is similar to blood cancer, where money acts as a circulation element in the body of an economy.
It's a disguised inflation trigger that has machine gunned our economic satisfactions. To conclude this topic, and give you an idea about the next, think about it - if you borrow capital on a fixed interest rate from me, and incur a loss in you venture and hence have not created any value (as spoken about in Our Current Econ-System), are you still entitled to pay me the fixed amount of money?
Considering the fact that my money is hard earned cash from value exchange, would doing so contribute to economic inflation or depression?

Basic Economic Structures

"Our current economy works on a system based on an upgraded barter system."

      Today, all men work to satisfy their wants and on the other hand no man works to satisfy all his wants. We don't need to grow food to eat it, sew cloth to wear it, or build a home for shelter.  We work on one of the human wants and exchange the surplus for the needful. 

      So in other terms this should be an ideal situation. This system will not overvalue or undervalue any human effort. All outcomes shall be valued based on the need or desire for it. Now, the element put in place to measure this value of human effort is MONEY. Currency is a beautiful system that eliminates the uncertainty of over or undervaluation present in the barter system.

     Money is the value we earn today for our efforts. The greater demand for the outcome of our effort, the higher we get paid. :) This is simple to comprehend. And most shall agree that this is exactly what is going on in the present economic system.

    How did the economic system end up in inflation and depression if the current system did not allow over or undervaluation of human efforts?

    The answer to this question is simple. Any individual or entity that gets paid without them contributing towards any one of the human needs will result in inflation. And any individual or entity whose efforts have been consumed and have not been reimbursed for it, has the potential to cause depression. This is how it works. Its a domino puzzle that triggers large scale problems but at the heart of it all, this is what starts it.

   So ask your-self. Have you been earning any money for doing a task that is not contributing to any materialistic human need? Each human need is fulfilled using a chain of tasks. If you are present in one of these chains then you are a contributing citizen.

   Business that allow you to earn money without having to work for it causes negative vibes through the economy. Money is the value of an effort, and if there is no effort and only money, then the true value of the money is degraded. This causes inflation.

Interest for example is an income that is recorded  officially by the World. I feel that this entire concept is flawed. Providing capital to a business is a good thing. Demanding a fixed return is a bad thing.

This is because there can never be fixed returns in a business. All business will face gains and losses. When a business gains, it means that it has successfully addressed important needs of a business. The efforts of that business has created good value for the economy.  This is a time where the investor can demand a return on his investment, and this is a correct proposition. On the other hand, when a Business faces a loss, it means that it failed to recognise a need and has put in efforts that have no value. If there is no value created, the investor can not demand a share. If a share is given to him is such a case, it shall injure not only the business owner, but the entire chain of individuals involved in the endeavour to create value.

Countries lend money to other economies and earn heavy interest rates. They reduce their in-house efforts to produce goods and services that cater to a particular need or want, and bank on the income on interest, and buy the products from another country. Now if the economy where this investment is done cannot pay the interest because it's value created is not great enough (like Dubai), everything will be screwed! 

Please refrain from collecting interest, no matter how small that amount may be. It's your money that gets played with. In other words it's your efforts that get played with. Stock Markets, Derivatives ect. are similar avenues used widely to make money. Such income is not a value creation but ensures the degradation of the economy. As said earlier, any money acquired without work harms the system, and we are all a part of it.