why the world economy stagnated

only two events are responsible for where we stand today, agrarian advancement that allowed non-agri populace become manufacturers and traders, and industrial revolution that increased availability of goods for which people worked to satisfy their wants. these two had a long-lasting impact on world economy, the rest, of which digital revolution is a part are only flashy successes.

other factors included competition which kept prices in check, allowed employment growth and fortified the supply side, thus keeping the demand side in continuous motion; innovation that was real such as invention of motorized vehicles, telephones and consumer electronics, which tempted buyers who could only make purchases by lending their labour.

in the past few decades, the world economy grew on the strength of services sector including banking, communication and information technology. and this is where we made mistake. consider each of this and you will notice that these aspects only compliment manufacturing, banks enable credit for business growth, communication and information technology increase efficiency, nothing more beyond this.

tv commercial of one of leading webhosting providers mirrors the errors we are committing. the advert asks businesses, small or medium, to shift to building websites to promote their products and services and denounces conventional promotional activities. now do you believe that millions of businesses showcasing themselves online will actually be able to garner the public interest they intend to?

same is the case with other information technology services. how many mobile apps can we sustain, how many e-commerce portals does the public need, is online video streaming adding to the economy, does the society need so many software?

the irony of today’s world economy is that businesses like google, facebook and netflix have outshined those that are truly the driving force. as simple as this, people would not want to give their labour to earn for accessing google maps, websites, facebook pages or netflix videos; but they will do so to own a refrigerator, television, computer, car and other tangible goods.

it is time we realise that technology and other businesses in the services sector aren’t the main driving forces of economy, they only compliment the manufacturing sector.

another problem is the education flaw that has enabled a person with acquired knowledge on business administration to run companies. a few among these may hold qualities of a capable leader, the rest are mere degree holders, unable to gauge the real mood of market. what we need is a redefined criteria for appointment of managers and leaders, a beeline outside b-schools will only further deteriorate the already ailing economy.

the simple solution is – treat services sector as inferior to manufacturing, and alter the hiring criteria for managers.