Sunday, January 06, 2019

Market based central planning

Under a "new" economic system, it is possible to assure every young person that he or she can get a job that pays enough to meet the cost of living and to raise a family.

What is this "new" system?

It is not really "new". It is "central planning".

I am not talking about bureaucratic central planning that failed in the past in many countries.

I am referring to a market based central planning that works, somewhat along the lines adopted in China.

How can this "new" central planning achieve this laudable goal?

We are now in a different era from the past. With the internet and social media, we can achieve transparency, fairness and efficiency.

The "new" central planning takes into account the projected population in 5 and 10 years ahead, and the age profile of the population.

It will determine the appropriate number of people needed for each occupation.

It allows the young people to opt ahead, with guidance from their parents and teachers, for their preferred types of occupation.

If there is lower demand for certain kinds of jobs, the salary and working condition will be improved to attract more people.

Conversely, if there are more demand for other jobs, the salary will be reduced.

In this way, we will get enough people to take up the different kinds of jobs needed in the economy.

The young people can then take up the education and training needed for their preferred jobs. Indeed, they are given a "licence" for that job. The number of licences will be controlled to ensure that each holder is assured of a job.

However, the holder will have to pass the qualification to get that licence. If they failed to qualify, they should continue to try.

The number of licences can be changed to reflect economic situations, i.e. growth or slowdown. This will affect the new applicants for the licences, so that the old licence holders are given security.

If there is a protracted economic slowdown and the demand is less than the supply, based on the number of licence holders, the working hours can be reduced, so that everyone has work, rather than be unemployed. It is a fair system.

If they work less, they will earn proportionately lower. The lower earnings is likely to be compensated by a lower cost of living in an economic slowdown. They have more time for leisure, hobby, self improvement and social activities.

There is room in this system for entrepreneurs. These are people who come from more wealthy families and can afford to take the risk. They can start their businesses and employ the workers, i.e. the licence holders.

This is a more efficient system as it will train people for the jobs that they wish to do in the future. They can become more productive.

We will not bear the wastefulness of "educating" people for several years on knowledge that they cannot use in their jobs or their lives.

Most people will be able to opt for jobs that meet their personal passion. But this may not be possible for all cases. In some cases, they may have to opt for other jobs, but they will learn to like them.

I will refer to this system as "market based central planning" or to coin an acronym MBCP.

There is scope for some people to work outside of the system. They may not wish to be trained for a "licensed job". Or they might be trained for a certain job and wish to do something else.

This option is possible, but it cannot be made at the expense of the other licensed holders. If these people wish to take the risk of being an entrepreneur or doing a job that is not licensed, they have the choice.

Under MBCP, the salaries for certain licensed jobs may be adjusted yearly to reflect the supply and demand. Eventually, the difference in salary should reflect the level of skills and the effort needed to get the required skills.

Under this new system, there will be greater equality. Most people can earn an income that is adequate to meet the cost of living and to set aside savings for their future needs, and for retirement.

Most people have the choice of earning more through overtime or a second job. They can do it out of personal choice or passion. They do not need a second job because their first job does not pay enough.

Many countries face the big problem of youth unemployment. Many young people cannot find jobs. They have to take up jobs that pay poor wages.

We need to find a solution for youth unemployment. Central planning can provide this solution. It will give a better future for young people.

The free market has its good and bad points. The market based central planning promotes the positive aspects of the free market. The current capitalist free market reflects the negative aspect.

When you hear about "central planning", do not think about the bad experiences of the past. The needs of the future require a new form of central planning to give everybody the assurance of a job that pays adequately.

Tan Kin Lian

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