05. Observing the different nodes and layers of the economy

Often times I use to think about the good design of a sound economy. I observe the large-scale impacts of offshoring/outsourcing/mergers/acquisitions and the related layoffs and shocks to public life.

How can we build a resilient economy that is built with inbuilt safety mechanisms and sound structural design?

The answer to me, seems to be around building it with all around inclusivity  (please refer to my article on this topic at -An Alternate View on Economics (mayoan.com)) and careful central planning. The planning may focus on the integrated trade-block level and/or at the country level with the later given higer priority.

The economic think tanks may consider some simple models (interconnected matrix) as a starting point for visualizing the economic structure and then modify/enrich as more data/inference is obtained. The different layers and nodes should be derived from the underlying knowledge about the below aspects:

·       How are the count of jobs of the population mapping to different sectors of economy?

·      How are the count of jobs mapping to different sizes of organizations (Global, Large, Medium, Small scale and niche shops)?

·       How is the educational scope of the population mapping to the above segments?

·       What are the noticeable salary bands of the population and their distribution in the population?

·       How are the salary bands mapping to the above segments? (Notice the location of medium income and its related trend over years)

·       How are the noticeable age group bands of the population mapping to the above segments?

·       What are the Cost-of-living aspects impacting, specifically the local economy and generally the national economy? (studying/researching housing costs, heating costs, food costs, education related costs etc., mapped to median income and studying the trend of the related indexes to unemployment data and/or tracking related indexes by GDP/GNP or to some measure of poverty trend)

·      What are the scenarios surrounding outsourcing/offshoring? Please notice the effect of employment outsourced/off shored for purely the reasons surrounding profits of a given organization, but which may be harmful for the greater economy if practised in large scale by several organizations among several sectors.

·       How is the deployment of the local economic resources in the same block/country faring in generating employment/GDP?

·       How is the import of major resources helping the different economic segments and hence providing direct employments to local population? What are the opportunistic gains (such as products focussing on physical/mental health of the population) of such imports? If the import is not adding to GDP or providing any support to generation of jobs, we should take precautions on those imports.

·       How is the export of major local resources helping the different economic segments and hence providing direct employments to local population? What is the cost of not using it locally? Is the opportunity cost of not using it locally exceeding the revenue obtained from exporting? While doing these analyses, we should always keep in mind not only the direct costs/revenues but also other aspects like physical and mental health of the population and the related derived expenses and should not be excessively focussed on a single micro entity like an organization.

·       Tracking of any other relevant metrics aiding in the central planning

When the above data points in the highest state of quality is obtained, we can observe/infer the below aspects post careful analysis:

·       The segment which is generating the most employments

·       The segments which are generating the most employments for people below or at medium income

·    The interconnectedness of the economic activities possibly crossing one or more boundaries and the cascading effect of any negative impact for sectors having tight and numerous integrations. Here we must be open to avoid any global/regional domino effects and hence should take meaningful measures for isolating and barricading the segments and blocks of economy, especially for those areas that provide maximum employment to the population or is based out of any local economic resources.

·      Ideas around how sustainability be obtained for the economic activities while focussing on the growing population and depleting resources.

·     The economic usefulness of any sectors or organizations vis-à-vis its impact on sustainability and any potential long-term issues.

·       The risk and reward potentials.

·       A reflection on the health of economy on the long, medium and short term horizons.

In the last step of the analysis, we should create an economic model that is resilient, self-healing and is sustainable.  A sample reference model can be a matrix/node model where the below aspects may manifest:

1.       Strong nodes Layer: A bedrock of organizations that is providing for maximum job employments/stability. Efforts should be made to increase the quality of life at this layer by increasing the efficient and effective involvement of government in social schemes such as free healthcare, free education and the implementation of the universal basic income scheme etc., These steps should have a drag effect on the economy and should pull more and more population out of poverty and into acceptable living standards.

This bedrock of organizations should be identified as systemic institutions and hence should be protected with adequate measures from any global/regional negative domino effects.

The above organizations’/sectors’ impact on the state of physical and mental health on the jobseekers should be studied with carefully curated metrics on a continual basis. Possibly the calculation of the median income of the country should be weighted more in this layer. Outsourcing/offshoring/mergers & acquisitions should be carefully controlled in this layer.

2.       Medium nodes Layer: The organizations are possibly not as resilient as the above nodes and can consist of organizations of any size. Probably we may expect the business leadership to steer it appropriately than being influenced by any focussed central policies.

3.       Layer with niche nodes : If the nodes are practising something niche, then the IPR related concerns should be addressed. If some of these nodes are dependent on local resources, then special care should be taken to keep these organizations/sectors alive. Sectors like defence, telecom, finance, infrastructure etc., are to be treated carefully so that national interests are kept intact all the times above and beyond profitability concerns.

The economic principles should be created based on the model designed and should cover the below points:

1.     The different layers are efficiently integrated.

2.     The different layers/segments are adequately designed for resilience.  

3.     The failure of any part of the model is largely/quickly insulated and contained and should not be producing any domino effects.

4.    The failure risks of the different aspects of this model should be adequately distributed and sharp risk handling mechanisms should be put in place.

5.       The use of economic resources and the related logistics are very efficiently planned across the layers.

6.       Different steering mechanisms to navigate the economy in choppy weather should be in-built by design. It may not be just the fiscal and monetary measures taken by the central banks. We can be innovative and thus provide the sector wise number of jobs (new and old) generated and sustained in each locality and nation wide and publish this metrics in publicly viewable dashboards energizing the public and to influence its spending habits. For example, suggesting them about spending in local shops more and less in online shops till a certain targeted recovery is made.