Target 2048 – Part III: Go for creative capital and not for mere human capital

Monday, 31 July 2023 00:15 -     - {{hitsCtrl.values.hits}}

 Hermann Gmeiner School playlet artistes

 

Given the present declining growth and economic catastrophe it is facing, what is needed is a critical mass of creative people who will see beyond what ordinary humans normally see. Thus, creative capital is the use of human brainpower to do the impossible. Human capital simply does what others have already accomplished within the given parameters

 

Goal of 2048

President Ranil Wickremesinghe outlined a few points of the economic policy strategy which he will be adopting to deliver his goal of making Sri Lanka a rich country by 2048 in a nationwide address in June 2023 (available at: https://www.youtube.com/live/-5EkMlJL32g?feature=share). One of the four pillars of his economic strategy is the investment promotion. 

Investments are needed to convert human efforts to tangible goods and services that will serve several purposes: generating new incomes and employment, making available a bigger quantum of goods and services for domestic consumption, helping Sri Lanka to earn foreign exchange to finance its imports by making available some of these products to consumers outside, and increasing economic growth and sustaining it at a level that is sufficient to make Sri Lanka a rich country by 2048. 

Given the present level of wellbeing of Sri Lankans at an average level of income per citizen amounting to about $ 3,400, this requires an average compound economic growth of over 7% over the next 25 years. That growth will require a combination of physical capital, human and entrepreneurial talents, and the use of high technology. The details of how this will be done were not revealed by him in his address to the nation. Probably it will be decided and signed off in the Lab Approach he has suggested by getting private businessmen, bureaucrats, and Cabinet Ministers into a policy making forum for six weeks in the 3rd Quarter of 2023. One important aspect which his Lab participants should reckon is the development of human and entrepreneurial talents in the use of high technology to convert physical and human resources to tangible goods and services. I call this creation of ‘creative capital’ as opposed to the human capital often emphasised in development literature. 

Creative capital sees solutions beyond the frame

How does creative capital differ from human capital? Creative capital looks for solutions beyond the frame that has been set for it by social, political, or cultural constraints, whereas human capital just seeks solutions within them. When the Macedonian army could not cross the Hydaspes River, a tributary of the Indus River, because there was no bridge, Alexander, the Great, ordered his engineers to find a bridge. It is reported that they built floating vessels by using a mass of hay lying in an abandoned field nearby to enable the massive army to cross to the other bank and attack the enemy (see: https://www.youtube.com/live/-5EkMlJL32g?feature=share). That is seeing beyond the frame and being creative in finding solutions to impossible questions. 

 

The erudite university administrator had told them that they should be critical, probing, and questioning the existing order. When humans are deprived of this freedom, it is not creativity that comes out of them. Instead, they will be intellectual slaves, devoid of free-thinking power and ever ready to follow some crafty designers slavishly. Such type of intellectual slaves cannot take Sri Lanka to richness. It is only a critical mass-sufficient number that could change Sri Lanka’s growth path-of creatively thinking people that will usher richness to Sri Lankans

 

 

Given the present declining growth and economic catastrophe it is facing, what is needed is a critical mass of creative people who will see beyond what ordinary humans normally see. Thus, creative capital is the use of human brainpower to do the impossible. Human capital simply does what others have already accomplished within the given parameters. In the 4th century BCE, when the Macedonian army facing the problem of crossing the Hydaspes River, a tributary of the Indus River, for lack of a bridge, Alexander the Great ordered his engineers to create a bridge. They did not have any material to do so, but had used a massive stock of hay that was lying unused in an abandoned field to build a floating bridge (see: https://en.wikipedia.org/wiki/Battle_of_the_Hydaspes#:~:text=Alexander%20quietly%20moved%20his%20part,he%20may%20cross%20the%20river.). That was the nature of using human talents creatively. It is this creativity that is needed by Sri Lanka to come out of the present economic crisis. 

Freedoms of thought and expression

Creativity comes from the unrestrained freedom which people enjoy in questioning the existing order. This was eloquently said by the founding Vice Chancellor of the Vidyodaya University –Rev. Weliwitiye Sri Soratha, the predecessor to the present-day University of Sri Jayewardenepura, when he addressed the first batch of students in 1959. It is reported that the erudite university administrator had told them that they should be critical, probing, and questioning the existing order. When humans are deprived of this freedom, it is not creativity that comes out of them. Instead, they will be intellectual slaves, devoid of free-thinking power and ever ready to follow some crafty designers slavishly. Such type of intellectual slaves cannot take Sri Lanka to richness. It is only a critical mass-sufficient number that could change Sri Lanka’s growth path-of creatively thinking people that will usher richness to Sri Lankans. 

Creative students creating a drama

Recently I had the opportunity to observe a group of such creative students at the Commerce Day Event of the Hermann Gmeiner School located at the SOS Village at Piliyandala. The students, guided by the tutorial staff, staged a short drama depicting the pathetic side of the sale of the State assets to fill the coffers of the Government. In the drama, there was a family –husband and wife – fighting all the time with each other due to economic hardships. Both had been used to a certain middle-class lifestyle and due to the economic hardships, it is now something in the past. No expensive meat or fish at the dinner table, and not even less expensive dried sprats. Wife complains that she cannot live anymore like this, but the husband responds with his usual aloof look. He is unemployed and cannot support the family as he had done in the past. There was suggestion that he should go out and look for work. He puts back his aloof look even to this suggestion. 

 

Creative capital comes from the freedom of thought and the freedom of expression. If Sri Lanka wants to become a rich country by 2048, the Government should ensure that the people do enjoy both these freedoms. Any suppression of these two freedoms will create not independently thinking creative people but those who are simply intellectual slaves. The more intellectual slaves present in society, faster the country will recede to the past. Hence, Sri Lanka should have a critical mass – minimum number that is needed to make a change in the system –of independently thinking creative people. It is the duty of the Ranil Wickremesinghe administration to lay foundation for the creation of such a critical mass

 

 

Selling everything to manage current finances

This is a fine depiction of the present state of the economy in Sri Lanka presented from a microeconomic stand. But that microcosm is valid for macrocosm too. At the national level, many who had been gainfully employed in the past are unemployed and have lost their livelihood. It had driven them to poverty from which they cannot get out on their own now. The drama goes on and the family gets excited by the news that an uncle of the wife living in England is visiting them soon. Husband is looking with suspicion, but the wife is waiting in excitement thinking that he would be their saviour. Finally, the uncle, a fat man dressed in a three-piece European costume, arrives at their doorstep with a large travel bag implying that it is filled with gifts for all. 

He opens it and takes out imported Swiss chocolates for wife and a bottle of Scotch whiskey for the husband. Temporarily, the economic gloom that had been looming over the family disappears and the family is back to the previous merry making. But soon it is over, and they are back to the old economic hardships. The uncle comes very handy as an advisor and asks them to sell those assets they have in the household to wade through the current hardships. The toilet is gone followed by the kitchen and the bedroom. They have temporary cash boosting that helps them to have a jolly good time. 

 

Sri Lanka should invest heavily in coming out as inventions and developing a critical mass of entrepreneurs to innovate the same. A larger portion of national wealth should be allocated for this purpose. Then, it should ensure that the new knowledge is disseminated and copied by successful parties. Without going through these steps, it is unthinkable that Sri Lanka will become a rich country by 2048

 

 

But once the cash is over, they experience personal difficulties once again, no toilet, no kitchen, and no place to sleep because all these assets are now owned by outsiders. The uncle from the wife side disappears to be replaced by another uncle from the husband’s side. He scorns them for selling assets to make a living but when the problems became so unbearable, his suggestion was to sell even the sitting room. Thus, those who plan to live by selling assets which they have acquired from their ancestors will one day reach a level where they no longer have anything to sell. At that stage, they are fully bankrupt and driven to destitution. 

Sell assets but replace them soon

The students had also come up with a good piece of advice to anyone who wants to sell his assets. There is nothing wrong in selling a well-performing asset for a good price. In fact, this is what is happening in the business sector every day. You build a business, make it well performing, and then, sell it to another for a good profit. But you do not stop there and start building another business which you can sell again for a profit in the future. This is a continuous process. When the toilet was sold, the students had suggested that the family should have used a part of the sale proceeds to build another toilet. The same principle applies to the sale of the kitchen and the bedroom too. Do not spend all the sale proceeds for current consumption and use a part for further development. 

This valuable piece of advice should be given to the Sri Lanka Government headed by President Ranil Wickremesinghe too. Sell profit making enterprises for a good price but use a part of the sales proceeds for further capital developments which you can sell one day when you will face a similar economic crisis. How do you decide the good price? Calculate the present value of the net income stream in the future – possibly for another 10 years, add it to the depreciated value of the present stock of assets, and get the new buyer to buy it at that price or at a price close to it. If you do not follow this rule, you are simply disposing your valuable assets for a pittance. In that way, you not only lose proper value, but also make yourself vulnerable for charges of corruption. 

Inventions have no value without innovations

Creative capital brings in new products, systems, and techniques that will help an economy to move forward faster on one side, and be competitive with the rest of the world, on the other. These are known as inventions, the main output of research. But such research should be developed into viable products and services, the process known as research and development or R and D. But R and D alone is not sufficient because those inventions should be commercially produced and supplied in the market to sustain as a product. That part should be accomplished by entrepreneurs through a process known as innovation, according to the Austrian American economist Joseph Schumpeter. Then, for an economy to grow, such knowledge should be made available to other entrepreneurs which Schumpeter called diffusion and all those other entrepreneurs should copy them in production which is called imitation. Hence, it is the creative capital that works at every point: invention by engineers and scientists, innovation by entrepreneurs, diffusion of knowledge by media men, and imitation by other businessmen and entrepreneurs. All these people should see beyond the frame and be ready to challenge the existing orthodoxy as advised by Rev. Weliwitiye Sri Soratha, the founding Vice Chancellor of the old Vidyodaya University. 

 

Do not spend all the sale proceeds for current consumption and use a part for further development. This valuable piece of advice should be given to the Sri Lanka Government headed by President Ranil Wickremesinghe too. Sell profit making enterprises for a good price but use a part of the sales proceeds for further capital developments which you can sell one day when you will face a similar economic crisis. How do you decide the good price? Calculate the present value of the net income stream in the future – possibly for another 10 years, add it to the depreciated value of the present stock of assets, and get the new buyer to buy it at that price or at a price close to it. If you do not follow this rule, you are simply disposing your valuable assets for a pittance. In that way, you not only lose proper value, but also make yourself vulnerable for charges of corruption

 

 

Let many thousands of flowers blossom

Creative capital comes from the freedom of thought and the freedom of expression. If Sri Lanka wants to become a rich country by 2048, the Government should ensure that the people do enjoy both these freedoms. Any suppression of these two freedoms will create not independently thinking creative people but those who are simply intellectual slaves. The more intellectual slaves present in society, faster the country will recede to the past. Hence, Sri Lanka should have a critical mass – minimum number that is needed to make a change in the system –of independently thinking creative people. It is the duty of the Ranil Wickremesinghe administration to lay foundation for the creation of such a critical mass. 

Chairman Mao Tsetung of China too made this need known in a similar tone in 1949. He said ‘Let thousand flowers blossom’ meaning that thousands of creative people should be developed in the new People’s Republic of China to make the country the great nation which it aspires to be. In today’s context, a thousand flowers are not sufficient to play as a game changer in society. It should be ‘many thousands of flowers’ expressed in multiple terms. 

Sri Lanka should invest heavily in coming out as inventions and developing a critical mass of entrepreneurs to innovate the same. A larger portion of national wealth should be allocated for this purpose. Then, it should ensure that the new knowledge is disseminated and copied by successful parties. Without going through these steps, it is unthinkable that Sri Lanka will become a rich country by 2048. 

 

(The writer, a former Deputy Governor of the Central Bank of Sri Lanka, can be reached at [email protected].)

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