On the other hand, Finance is a very broad term that describes the idea of management of large amounts of money through activities associated with banking, debit, credit, money and investments.

With the continuous advancements in the field of science and technology, there has been the involvement of technology in almost every branch of knowledge that exists in this world be it security, food, currency, architecture, medicine, art, astronomy and so on. Simultaneously, technology has also proved to be fortuitous in the field of finance and that too on a very high scale. Thus, the branch which deals with the symbiosis between finance and technology and consists of software, applications and other digital services that are used by the consumers for activities like mobile banking, investments and loans, is referred to as ‘FinTech,’ a portmanteau of Financial Technology. 

‘Tech’ in ‘Fin’- Applications

Customer Service is one of the major sectors that has exploited Financial Technology in the last few years. A decade ago, an efficient customer service team was essential in order to carry out the financial tasks involved within a company. But, with the advancements in FinTech, AI chatbots have made consumers’ life way too easier and act as an avenue for customers to interact with. The chance of error is significantly reduced and the workload on humans is also minimised. Earlier we needed a separate team to carry out the bank work but now with the evolution of FinTech, we don’t even need to go to the bank personally to open a bank account, transfer cash or update the details. Everything can be done conveniently by using banking apps and other such software on smartphones.

In finance, computer programming has been proved to be extremely useful in a wide range of situations which include setting up and managing electronic trading systems, pricing derivatives, risk management, trade management platforms and so on. Python, in particular, is important for the latter three. Python can also help in creating analytical tools and models and can even modify Excel Spreadsheets to provide greater efficiency. Another advantage of using this language is that it provides a large array of libraries that can be effectively used in finance to build financial models and perform other mathematical operations. 

Some useful Python libraries and packages include –

• numpy: This package is used for performing scientific and computational tasks on python. Besides that, it is also used in numerical programming, finance, industry, academia and so on. With its roots in all these fields, this library specializes in basic array operations.
• pyfin: If the user wants to perform basic options pricing in python, they can simply use the pyfin library.
• ffn: This is a financial function library for python. It is basically used to quickly carry out analysis of trading strategies and financial asset price series and contains many useful functions for those who work in quantitative finance.
• QuantPy: This is a framework created primarily for quantitative finance in python. It has a Portfolio Class that can import daily returns from search engines like Yahoo.
• zipline: This is a Python based algorithmic trading library. Besides being an event-driven system, it also reinforces backtesting and live trading.
• TA-Lib: This is a software that is widely used by software developers involved in trading and required to perform the analysis of financial market data technically. Another advantage is that it has an open-source Application Program Interface (API) for Python.
• trade: This Python framework is used for the development of financial applications. Once the user informs the items he has in stock and a series of subsequent occurrences with those or other items, trade calculates the effects of those purchases, sales and so on and by and by gives back the new amounts and cost of items in stock.
• QuantSoftware Toolkit: This is an open-source software framework on Python, designed to support portfolio construction and management. This QS Toolkit is primarily for finance students, computing students as well as quantitative analysts with programming experience.
• finmarketpy- This is a python-based library that enables us to analyse market data and simultaneously backtest trading strategies using a convenient Application Program Interface, which already has the templates to define backtest.
• pyfolio:  This is a Python library used primarily for risk analysis and performance of financial portfolios. It works efficiently with the Zipline open-source backtesting library.
• finance: This is also mainly used for Financial Risk Calculations. It has been so optimized such that it is easy to use because of features like Class Construction and Operator Overload.
• qfrm: It is abbreviated form of Quantitative Financial Risk Management. It constitutes amazing Object Oriented Programming tools for measuring, managing and visualizing risk of financial instruments and portfolios.
• visualize-wealth: If the user wants to backtest, construct, analyse or evaluate portfolios and their benchmarks then he can easily use this library in Python to perform all the tasks mentioned above.
• empirical: This is used by both zipline and pyfolio and is used for common financial risk analysis and also in performance metrics.
• statsmodels: If the users want to explore data, estimate statistical models or perform other statistical tests then they can use this Python module.
• ARCH: This is used to perform financial econometrics in Python.

Java is another popular language that is used in the banking industry. This is primarily due to its secure and stable design. Java is a platform-independent and portable language and thus it can easily run on the newer versions as well even when a change was made. It is necessary to install a security system since banks handle a lot of sensitive and confidential information. Java acts as a stimulus and helps banks perform all the tasks while maintaining an appropriate level of confidentiality.

Data Visualization in FinTech

Most of the people in this world are visual learners i.e., they prefer to visualize a certain concept to understand it more thoroughly. Charts and graphs allow the users to understand the growth or depreciation of a certain thing by comparing it with the previously stored data. Histograms are the best means to represent such data statistically. A manager can take large quantities of data, can see the bigger picture more clearly and can provide a concise report.

Data visualization is the creation of visual representations of data that clearly communicate insights through charts and graphs. These charts and graphs help leaders and decision-makers make better, data-based decisions more quickly than the traditional data table. And it keeps them from getting lost in a Where’s Waldo-style puzzle maze of stats and data points. (Sisence, 2020)

Data visualization allows us for quick interpretation of results. We can easily create a chart of the data and see the trends of that particular data over a period of time or over any other variable. For example-

This visual data representation is split into a percentage gauge in addition to a detailed bar chart and will help you to accurately calculate your Earnings Before Interest and Tax (EBIT).

Data Visualization can be easily done using the Financial Toolbox in MATLAB. It provides numerous easy-to-digest functions for mathematical modelling and statistical analysis of financial data. We can analyse, backtest and optimise investment portfolios taking into account the turnover, transaction costs, semi-continuous constraints and minimum or maximum number of assets. This toolbox also enables us to estimate risk, analyse yield curves, price fixed-income instruments and European options, and measure investment performance. (MathWorks, 2021)

Stochastic Differential Equation(SDE) tools let us model and stimulate a variety of stochastic processes. Time series analysis functions can also help us perform various productive tasks. They let us perform transformations and regressions with missing data and convert between different trading calendars and day-count conventions. (MathWorks, 2021)

There are various other libraries in our hand which are used for data visualization in finance-

Matplotlib- This has established itself as the benchmark for data visualization and is a robust, reliable and efficient tool modelled after MATLAB’s plotting capabilities. It can be used to create static image files of almost any plot type. (Foy,2021)

Seaborn- This is another common data visualization library that is based on Matplotlib and provides a high-level interface for drawing attractive and informative statistical graphs. (Foy,2021)

Plotly & Dash- Since all the previous graphs were static and could not be altered and interacted with in any way. Plotly library solves this problem using which python creates interactive plots as .html files. Users can zoom in, select, hover and perform several such tasks with these plots but in order to regenerate a plot to see updates you need to re-run the .py script. Dash helps to resolve this problem. Instead of creating a .html file, Dash produces a dashboard web application at your localhost which you can then conveniently visit and interact with. (Foy,2021)

Some other prominent libraries include Pandas and Time Series Visualization which are extremely useful as well.

Business Intelligence (BI)

Business Intelligence has been defined as “a set of methodologies, processes, architectures, and technologies that transform raw data into meaningful and useful information used to enable more effective strategic, tactical, and operational insights and decision-making.” (Forrester, 2021) Thus, Forrester refers to data preparation and data usage as two separate but closely linked segments of the business-intelligence architectural stack.

Business intelligence can help companies make better and appropriate decisions by showing them the present data as well as the historical data within their desired context. BI can be used by analysts to provide performance and competitor benchmarks to make the organization run smoother and more efficiently. Market trends can also be easily spotted to increase sales or revenue.

The best way to present BI is through Data Visualization.

Listed below are few ways in which business intelligence(BI) can help companies make smarter, data-driven decisions:

• Identify ways to increase profit
• Analyse customer behaviour
• Compare data with competitors
• Track performance
• Optimize operations
• Predict success
• Spot market trends
• Discover issues or problems

Conclusion

BI is rapidly evolving according to the needs of the business foundations and technologies. Companies are striving to be more data-driven and efforts to share and collaborate data are continuously increasing. In the future, we can definitely say that data visualization will be even more essential to work together across teams and departments.

And with the continuous advancements in technology and science, we can definitely hope to see a new phase, a new era of modernization where FinTech would rule the world of finance.

References

Evelson, B., & Nicolson, N.(2008). Topic overview: Business intelligence.  https://www.forrester.com/report/Topic+Overview+Business+Intelligence/-/E-RES39218#

Foy, P. (2021). Python for Finance: Data Visualization. https://www.mlq.ai/python-for-finance-data-visualization/#:~:text=%20Python%20for%20Finance%3A%20Data%20Visualization%20%201,Python%20data%20visualization%20library%20based%20on…%20More%20

MathWorks. (2021). Financial Toolbox. https://in.mathworks.com/products/finance.html

Finance Train. (2019). Best Python Libraries/Packages for Finance and Financial Data Scientists. https://financetrain.com/best-python-librariespackages-finance-financial-data-scientists/

8020 Consulting. (2020). The Growing Power of Data Visualization in Finance. https://8020consulting.com/data-visualization-in-finance/

CFI. (n.d.). Programming. https://corporatefinanceinstitute.com/resources/knowledge/other/programming/

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It can be clearly seen that the preceding economic condition was nothing to boast about and already a national concern, but with the current pandemic scenario, not only did we lose all hopes of recovery, the country is now expected to go into an even deeper state of recession.

The financial stoppage in India, quickened by the COVID-19 pandemic, is compromising the occupations of millions, and will as per moderate evaluations drive a million others into miserable neediness. However, there is an improbable partner in India’s fight against neediness and loss of riches – religious freedom and social harmony

“The social side cannot be viewed as different from the economy side. Not only is social harmony desirable in itself, but it is also necessary for investment to flourish and generate growth. In an autocratic system, dissent is more easily suppressed, but in a democratic environment it cannot be suppressed and this means it is important for the political leadership to work hard to create harmony.”- Montek Singh Ahluwalia

However, the scenario is not the same with India since religion has been a matter of conflict since ages. The government needs to ensure that social harmony is being kept and this topic is just too important to be ignored.

Freedom of Religion and Resulting Consequences

Freedom of religion in India is a fundamental right that is guaranteed to every citizen by Article 25-28 of the Constitution of India. It includes the freedom of conscience, the right to practice, propagate and profess any religion of their own will. As many as 172 countries have signed the International Covenant on Civil and Political Rights that protects the right to freedom.

However, since the faulty implementation is one of the basic root causes of any failed scheme, act or campaign in India, so is the application of the above law. Several incidents have been reported where this basic right has been violated in the past and even in the present.

There have been uncountable conflicts happening in India just because of religious disparities whether it entails the destruction or disrespect of someone’s place of worship or their religion itself.  This has resulted in violent attacks and led to a huge toll on the country’s economy with shops being put on fire and resting curfews that slow down economic activity. Social and religious instabilities and conflicts hamper the economic growth, be it the conflict over Ram Mandir or Attack on Indira Gandhi in the late 70s. Communal violence has been one of the weaknesses that result in the loss of millions of lives.

Deviation from the Crucial Problems

There are a variety of issues such as inadequate healthcare, unemployment rates that are soaring high, illiteracy, protection and empowerment of marginalized communities, systematic corruption, eccentric climatic patterns, poverty and sanitation problems for the urban slum dwellers which require resources and hold vital significance in any country’s agendas. However, with the rising violent conflicts in the country, resources get spent to bring the situation under control and are further utilized in the redevelopment of affected areas. This results in increased government spending and hence the focus shifts from the critical areas of concern to such social disputes.

Violence cost the Indian economy $1.19 trillion (over Rs 80 lakh crore) in the year 2018, in constant purchasing power parity terms, which amounts to roughly $595.4 per person, according to a report prepared by the Institute for Economics and Peace based on an analysis of 163 countries and territories. Also, in 2017, violence impacted $1,190.51 billion to the Indian economy, 9 percent of the country’s gross domestic product or $595.4 (over Rs 40,000) per person. On the other hand, government allocation on the education sector has been only a small portion, nearly 3 percent or even less some years, which is an essential need for the county to progress and develop.

The given data pretty much concludes the fact of how resources reduce for rather crucial issues when social harmony isn’t maintained. It is rumoured that many times such conflicts are the fruits of political disputes and conspiracies. Even the focus of the policymakers and thanks tanks gets diverted to such issues and the crucial issues go rather ignored. It has been suggested in many research works that social and religious conflicts hamper the economy as well as the overall development of the country gravely.

Impact on Investment and Foreign Relation

Even trade negotiations, political relations, and allies also get affected because of these disturbances in the social harmony as the various conflicts sometimes lead to a portrayal of poor image for the country.

It has been observed in various studies that countries that have low levels of religious malice and restrictions put up by the government are ranked higher in terms of education, technological readiness, financial markets and many more important parameters that define a country’s growth and development. China even boasts of not having democratic reforms as it believes that just hampers the nation’s economy and leads to dissent and chaos in the country. Investors tend to be happy with countries where social and religious harmony prevails.

“There is disappointment with India and increasing caution among investors since the last election,” said John Lau, Hong-Kong based head of Asian Equities at SEI, which has $352 billion under management. “The recent political moves and laws have distracted the government from economic reforms,” Lau said the disruptions had led SEI to cut exposure to the South Asian nation to below benchmark levels.

In February, as protesters blocked streets for the third straight month, WisdomTree Investments Inc., the US-based fund with $64 billion under management — said it is concerned rising political and social tensions will delay the country’s economic recovery. Western Asset Management Co., the $453-billion investor and affiliate of Legg Mason Inc., said in January — less than a month after protests intensified — that it was reducing its Indian government bond holdings after tensions around a new citizenship law and the Kashmir region.

These incidents show how investment suffers as a result of social and political issues and thus hampers development. When any protest or conflict takes place, a situation of uncertainties tends to dominate and becomes unappealing to the foreign investors especially. Foreign Direct Investment thus suffers greatly.

Environmental Issues

Moreover, social issues such as the environment have been completely ignored by many companies and industries. A possible reason for the same is that environmental degradation is not subtracted from the country’s GDP and the amount of pollution and toxic waste generated does not have any impact on the GDP. This portrays that although the industry might be severely polluting the nearby water bodies, as long as it is generating goods and services, and adding to the GDP it isn’t a matter of concern. But in the long run, environmental degradation would bring town the economy as a whole as many industries are consumers of natural products such as agricultural products, water bodies for all cleaning and production purposes in industries and other raw materials which are necessary for the manufacturing industry. If the supply of these materials is disrupted because of environmental problems then the economy would eventually slow down.

Imports in the country already supersede the exports and the country thus runs a huge trade deficit which is yet another challenge for the Indian economy. If the supply chain gets disturbed, we would have to again increase the imports followed by a decrease in exports which would further increase our dependency on other nations.

Conclusion

Thus social harmony needs to be given special consideration by the government along with environmental aspects if we wish to develop our economy and achieve the target of getting to a five trillion dollar economy by 2024-25 as envisioned by the government of India. The current GDP growth is already way lower than required to achieve the goal and hence relevant steps need to be taken by the government.

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Historical Context

Observations have shown that with the onset of the Age of Discovery in Europe, increased interest of Russia and China in Central Asia somewhat led to the breaking away of India’s connections with the region. Even after Independence, India’s foreign policy majorly focused on its immediate neighbours, or solidarity-based relations with the African countries, or even robust economic ties with Russia — but, the partitioning of the Indian subcontinent and the distancing of the region geographically did play a role in the deterioration of the relations with the region from India.

Further, in the post-Cold War era, after the Soviet Union split Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan in the 1990s, India took upon the task of developing its relations with the resource-rich region while also undertaking its own domestic economic reforms of bringing about liberalisation, privatisation, and globalisation. Former Indian Prime Minister P.V. Narasimha Rao visited four out of the five republics – Uzbekistan and Kazakhstan in 1993, followed by Turkmenistan and Kyrgyzstan in 1995. In addition to the collective values that India shared with the countries, collective development and economic growth, as well as formulating approached to combating common threats such as terrorism, religious extremism, and crime that these nations shared with India. A few experts also believe that the stage which was set by these conversations was even reflected in India’s Look North policy of recent times. 

Despite the historical links with the Central Asian Economies and India moving quickly to establish diplomatic ties with Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan after their emergence as independent countries almost three decades ago, trade has not grown beyond $2 billion, with them. In recent years, foreign-affairs analysts have begun observing what they call the “New Great Game” in Central Asia — Russia, the US, European Union (EU), China, Turkey, Iran and India are all trying to assert their power and hegemony in the region. Not only does the region provide for a large market, but it also has prospects for developing hydropower, fossil fuel resources, and other lucrative prospects. According to experts, India, for its part, has so far chosen to take the ‘constructivist’ approach. This entails a strategy of, interests are not solely based on economic or strategic benefits but attempt to involve an intersectional and even culture-oriented involvement.

Current Developments

India’s continued interest in Central Asia can be attributed to the geopolitical relevance of the region due to three factors — Chinese presence and influx in the region through its expansionist infrastructure projects like the Belt and Road Initiative (BRI), a continued historical context of Russia’s dominance in the region, and the overall regional security dynamic. Keeping these in mind, India had unveiled its Connect Central Asia Policy in Bishkek in 2012 in order to draw attention to the expansion of the region’s economic interests in congruence with India’s plans of integrating its external neighbourhood.

The lack of connectivity of India with the region of Central Asia has been a long withstanding issue in this context. For instance, the long-delayed Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, backed by the Asian Development Bank (ADB), was first proposed in the mid-1990s and all four actors officially signed an intergovernmental agreement in 2010. But, since then, the project has been stalled due to the status of Afghanistan and mistrust between India and Pakistan.

To combat this connectivity gap, India has undertaken positive action in the past as well quite recently. India, Iran and Russia signed the International North-South Transport Corridor (INSTC) agreement which aimed to offer connectivity between India and Central Asia through Iran. As is noted by this resource, while the INSTC is routed via Iran’s Bandar Abbas port, India has also explored the possibility of connecting with Central Asia via Iran’s Chabahar port and thereafter overland corridors passing through Afghanistan. The importance bestowed by India to the Chabahar port, despite the uncertainties which the US-Iran tensions bring to the conversation, can be accorded by the budgetary allocation to the project, which is amounting to INR 1 Billion in 2020-21 announcement.

Way Forward

Since China has been able to leverage its geography, finances and population to ensure that its projects can contribute toward making its dream of a new and improved Silk Road a reality, India is also committed to expanding the scope of its economic relations with the region. India has immense potential in developing small and medium scale industries in the region which is presently being provided through India’s program of ITEC (Indian Technical and Economic Cooperation). The ITEC programme covers information technology, management, journalism, diplomacy, entrepreneurship, and banking. New Delhi also signed the Strategic Partnership Agreements (SPA) with three of the five nations of the Central Asian Economies — Kazakhstan, Tajikistan and Uzbekistan — in order to stimulate defence cooperation and deepen trade relations.

As a report in a Russian newspaper observed, “Indian presence in the region should balance the growing Chinese influence and prevent it from becoming the region of Beijing’s undivided dominance.” This idea can be brought to effect by India by leveraging its membership at the Shanghai Cooperation Organisation.

India and the Central Asian Economies can prioritize energy, pharmaceuticals, automotive, agro-processing, education, urban infrastructure and transport, civil aviation, IT and tourism sectors to strengthen economic links. The Central Asian economies and India have had a long history of association which can be efficiently revived to mutual benefit by the means of strategic and economic cooperation and connectivity, both notions that can be leveraged by the stakeholders in a post-pandemic world.

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Talking of political culture, people in Eastern Europe are still characterized as having less personal autonomy, less responsibility as citizens and members of a global community. In some cases, people also struggle with seriously disturbing national and social identities.

Source: PEW FORUM

As far as economic efficiency is concerned, east European countries have made remarkable progress in the past years, but this progress isn’t enough. The differences in per capita income, productivity and efficiency, output, capitalization, savings, investment, integration into global networks are still huge.

Trading and Colonisation

One historical factor in the development of west European nations is the influx of wealth associated with its sea trade and exploration. Their favourable locations on the Atlantic and Mediterranean gave them advantages in trade and exploration through the sea route with minimal cost. The colonization of lands in America, Africa, Asia and Oceania by several Western European countries brought a huge influx of wealth and resources, which stimulated the economies of these countries. These resources made them global superpowers as early as the 16th century. The effects of colonisation are still being felt in these countries.

Division of Germany

In the aftermath of World War II, defeated Germany was divided into four zones by the allied powers. The Soviet Union occupied the east, while the rest of Germany was divided amongst the United States, Britain and France. With hundreds of thousands of wealthy American soldiers posted in West Germany and spending their American currency, the area flourished. The Deutsche Mark was introduced in 1948 which added to the region’s growth. In the 1950s and 1960s, West Germany experienced industrial growth and low inflation contributing to their prosperity. The security of private property rights and reliance on the price mechanism also contributed to the success of these economies.

Much of the European side of the Second World War happened in Eastern Europe, in today’s Poland, Ukraine, Belarus, the Baltic countries, the Balkans and Russia. These countries were utterly ravaged. Russia and Germany stole many assets. The Soviets literally dismantled many factories and took many industrial machines East. In addition to this, East Germany inherited highly specialised industrial districts, which were cut off from their major suppliers of inputs as well as their market which was in western Germany. This caused a departure of skilled labour and a number of small and medium-sized firms.

Communism

East Germany, under the authoritarian rule of the Soviets, saw much worse conditions than its Western counterpart. When the rest of the world experienced strong economic growth after World War II, the nations of eastern Europe suffered due to socialism which caused shortage of resources, a highly politicised system and a regressive attitude to progress. Soviets neglected the economy and focused on military power causing an economic crisis. Western Europe, not being the vassal state of the USSR for 40 years probably made a difference.

To start with, Eastern European nations weren’t that developed as they have mostly been the borderlands between various empires. Apart from some exceptions like Hungary, they were Russian hinterlands, not real centres of development, industrial or otherwise.

Communism was ultimately very inefficient. There was no incentive for work as individuals knew that the reward will be the same. Accumulating wealth was not really possible. It led to stagnation in economy, technology and culture. It was the mix of the intense poverty, injustice and the presence of absolute anarchy that crippled these economies.

Marshall Plan

America supported western European countries with aid to stop communism from spreading during the years of the cold war. Dollar aid enabled recipient nations to eliminate raw material shortages in exchange for trade liberalisation. The resource funds allowed governments to finance public projects without the need to cut back on welfare spending.

The U.S. provided $13.3 billion in assistance between 1948 and 1951 to 16 Western European countries through the Economic Cooperation Authority. The Marshall Plan helped in reviving the western economies by controlling inflation, reviving trade, restoring production and rebuilding infrastructure. The Soviet Union rejected the aid on behalf of eastern Germany.

When the Marshall Plan ended in 1951, industrial production, trade and exports had increased far above pre-war level. Employment and standard of living were rising. Politically, communist parties lost influence everywhere.

It encouraged the economic integration that led to the creation of the European Coal and Steel Community among six nations in 1950. It took a leap into a more integrated European Economic Community (EEC) after eight years. It finally became what is called the European Union today. This integration helped the nations to revive their economies through trade.

Demographic Dynamic

The population density in the 19th century was much more in Western Europe more than Eastern. In addition to that, across Western Europe, the casualties of war were offset by natural population growth and post-war mass migration. The impacts of the war and the post-war settlement were different for the eastern and western regions. The population growth was scanty in Eastern Europe which deprived it of flexible labour supply that has been recognised as an imperative factor in western reconstruction and development.

In the Eastern Front, millions fled west, running from the advancing Soviet troops. The effect of war casualties combined with the post-war settlement was devastating. The populations of Hungary, Romania, and Yugoslavia stagnated in the 1940s. Czechoslovakia, Poland, and the Soviet Union faced a population decline over the same period. The shortage of skilled labour proved to be detrimental. The province of Prussia was temporarily depopulated resulting in its industrial districts losing their pre-war labour force level.

The war left a distorted demographic structure with a shortage of able-bodied young men. Conventionally, they were the one who constituted the backbone of the industrial workforce. It all brought the region an excess of industrial and commercial enterprises without their original owners, the necessary skills and managerial know-how required to operate them.

The Fall of the Berlin Wall

The Berlin Wall was a concrete barrier that cut across and divided the city of Berlin from 1961 to 1989 and was constructed in the aftermath of World War 2. The fall of the Berlin Wall symbolised the fall of the ‘Iron Curtain’ that divided the Eastern countries from Western Europe during the Cold War.

East Germany was provided with aid of around €1.6 trillion by the government and private German businesses to bring it at par with the West. The dismantling of the wall had a profound impact on the neighbouring economies as well. Hungry and Czechoslovakia opened up their borders and allowed East Germans to take refuge in Austria. The influx of people meant the economies of neighbouring countries took a hit.

Shortly after the collapse of the Wall, the German Democratic Republic (GDR), the party which was in power in the East also came to an end. Unemployment escalated to extremely high level and the economy was thrown into uncertainty. Those who had government jobs found themselves suddenly out of work. The GDR economy also faced bankruptcy due to the change of currency. Before the reunification of the two regions, 1 Deutsche Mark was the equivalent of 4.5 GDR Marks.

When eastern countries joined the EU, it made it easier for the Western companies to buy up assets in the east. Some also took advantage of the cheap labour market and started companies. Eastern European companies found it challenging to compete with gigantic Western corporations who could afford to undercut prices. In certain industries, prices were set for a certain amount of time so that Eastern European companies could not undercut Western companies which took away their advantage and eventually many Eastern European companies went bankrupt.

Agrarian Economy and Raw Material Exporter

When Western Europe started on the path of capitalist development, the Eastern part of the continent was transformed into an exporter of raw material for the West and an importer of finished goods. The result was a never-ending loop that strengthened Western industries and system that promoted capitalism. Specifically, as the West became more urban, there was a growing demand for agricultural goods, animals and other raw goods. East European people satisfied this need by transforming their domains into farms that exported for the Western market. With the exception of what became the Czech Republic, most of Eastern Europe became more agrarian and therefore poorer than much of Western Europe.

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Current Situation

Over time, the process was expected to create a robust global economic powered by the mutual economic and social cooperation. However, this expectation soon became a distant concept as the world’s economy struggled to overcome disturbances caused by a number of political and economic setbacks that permanently disturbed the socio-economic fabric of society. Most recent of these events being the novel Coronavirus. The crises we face today is unlike any other we have experienced earlier, forcing us to question the existing international systems, and with that the concept of globalisation. On the other hand, there are those that have come to coin the present situation as, ‘Globalisation’, signalling a return to globalised world post the pandemic. There exists no doubt about the fact that the Globalisation has connected not only industries and business, but it has done away with social, economic and political borders, that has allowed for the free flow of intellect, capital and resources. While this has acted to the benefit of many nations, a number of people have been extremely vocal about the fact that the process has enhanced the vulnerabilities of nations by making them over-dependent on the global supply chain. Loopholes and drawback of this nature have been further highlighted by the COVID 19 pandemic, as underdeveloped and developing nations have been left struggling to meet the demand of essential items such as masks, sanitisers and medicines. In the past few months itself, we have recorded a 13-32% decline in merchandise trade, a 30-40% reduction in FDI and 44-80% reduction in International air travel. 

Future of Globalisation

Seeing the present situation, that has resulted in a major role back on the gains made by globalisation in the previous two decades and a fundamental collapse of the international market integration, many have come to envision the world in the post-pandemic days. The most obvious answer to these questions seems to be that, leader shave to plan for and shape a world where both globalisation and anti-globalisation pressures remain enduring features of the business environment. 

It is too early to say, if whether the world is done and dusted with the concept of Globalisation. However, recent statistics and forecasts, predict that the concept should be in currency following the end of the pandemic. However, the nature of the same might be different from what we have experienced previously. The pandemic that had a universal impact, left all national economies in shackles, then whether it be the United States or some of the richest European nations. The economic recovery has been the top priority for all countries. However, such robust economic growth can only be pursued once the pandemic has been brought under control. Viewing the economic trends prior to the pandemic, it is clear that globalisation is an important agent in the growth and health of nations. Countries higher up in the DHL Global Connectedness Index tend to record faster economic growth. There is well-founded evidence to the fact that well-connected countries have a more advanced medical system, making them less susceptible to infectious diseases and put them in a better place to deal with the same. This goes to show that the negatives of globalisation, can just as easily be turned into positive contributions, by investing in health, growth and international cooperation. 

Global Growth

The COVID 19 pandemic has added fuel to the fire, by further destabilising an already fractured world. The pandemic introduced new levels of complexity, an example of which is the national restrictions and differing government response policies, which have further highlighted the differing ideological grounds. However, it is but natural to assume from here on forth that the global socio-economic environment will be driven more by factors based on regional competition, domestic self-sufficiency and when it comes to transnational companies and organisations, the country of their origin will decide the nature of policies they will adopt. Even as the lockdown restrictions have begun to ease we have seen that short distance and domestic trade have recorded a stronger comeback than international trade, hence the importance of regions should not be underplayed and the possibility of stronger domestic and regional trade flows should not be completely forgone while envisaging a new world order.

Technological Advancements

As the pandemic disrupted the status quo, forcing us to adapt to and adopt new ways, it invariably led to the creation of new technology and adoption of e-commerce, videoconferencing and robotics. Before we were faced with the challenge of dealing with a world pandemic, it was a commonly held belief that strides in technological development may not lead to an increase in global flows. However, recent times are a complete antithesis to that belief, as the cross border, e-commerce has come to expand export opportunities for smaller companies, and forced experimentation with remote work could spur more service offshoring. In planning ahead, for the post-COVID 19 scenario, business leaders have to think creatively by taking a structured approach to consider both internal and external implication. For most companies, technological trends should lead to more globalisation in some areas and less in others, rather than a uniform shift in one direction or the other.

Public Perception

Public Opinion towards globalisation has taken a hit, calling back the strong support trends as international trade and immigration had received in the last two decades in particular. The fact that international travel has led to the spread of the virus and the increasing economic stress has resulted in trade protectionism, politicians have used this in their favour to consolidate support against globalisation and the evils that it has introduced into our polities. In these uncertain times, citizens and more important customers and employees have turned to corporate leaders to make a statement regarding globalisation. The rise of anti-globalisation and anti-capitalist movements, as the virus spreads globally has further complicated the role of businesses in the public debate about globalisation. The need of hour requires us to focus on the real economic contributions and how they can help support a healthier form of globalisation. 

Conclusion

A tremendous challenge lies ahead of us, to transform the current world order by regulating and weakening the burdens of globalisation. As the days have passed it has become clearer to us that we have to create a mechanism to respond to diseases through effective international cooperation, without retreating back to the evil of ethnocentrism. Covid-19 effect on the globalisation can be seen more as a bend, rather than a permanent break. Attention to the drivers of globalisation, can lead and navigate companies through and even profit from the turbulence. It is now that the value of globalisation in the form of international cooperation can be portrayed to ensure a suitable and stable future.

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With that framework, the minority population established segregation among housing, education, and all spheres of life, creating three nations: one of the whites [comprising of people groups essentially of British and Dutch [Boer] family line, who battled for ages to increase political supremacy, a battle that arrived at its violent peak with the South African War of 1899–1902); one of the blacks (comprising of such people groups as the San hunter and gatherers of the north-western desert, the Zulu herders of the eastern levels, and the Khoekhoe ranchers of the southern Cape districts); and one of “Coloureds” (blended race individuals) and ethnic Asians (Indians, Malays, Filipinos, and Chinese).

The politically-sanctioned racial segregation system was despised and even fervently opposed by much of the world, and by the mid-1980s South Africa ended up among the world’s pariah states, the subject of financial and social blacklists that influenced pretty much every part of life. In the need compelled to stand up to the unsound idea of ethnic separatism in a multicultural land, the South African government of F.W.de Klerk (1989-94) started to rescind politically-sanctioned racial segregation laws. That procedure thusly set moving a change towards universal suffrage and true electoral democracy, which finished in the 1994 election which the appointed the long-imprisoned leader Nelson Mandela. This change witnessed the nation gaining social equality in a brief timeframe. South Africa has three cities that serve as its capital: Pretoria (executive), Cape Town (legislative), and Bloemfontein (judicial). 

ECONOMY

The economy of South Africa took a drastic turn in the late 19^th century when jewels and gold were found there, followed by large investments from foreign capitals. In the years after World War II, the nation formed a much-developed manufacturing base and encountered exceptional development rates, and at that time its development rated were most noteworthy in the world.

However, South Africa has encountered economic problems since the late 1970s because of the apartheid policies which led may countries to holdback investments and to impose international restrictions against it. South Africa’s economy didn’t quickly bounce back in the mid-1990s while apartheid was being disassembled, as capitalists held on to perceive what might occur. After the 1994 democratic elections, the investments poured in. Post-apartheid South Africa was then confronted with the issue of incorporating the recently disappointed and mistreated greater part into the economy.

In 1996 the legislature made a five-year plan—Growth, Employment, and Redistribution (GEAR)— that concentrated on privatization and the evacuation of trade controls. GEAR was successful in accomplishing a portion of its objectives yet was hailed by some as establishing a significant framework for future financial advancement. The government additionally executed new laws and projects intended to improve the monetary circumstance of the underestimated larger part. The Black Economic Empowerment (BEE) was introduced, it aimed to increase employment opportunities for those who were characterized under apartheid as black, coloured, and Indians, enhancing their working skills and incomes. This strategy was further extended through the Broad-Based Black Economic Empowerment (BBBEE) Act of 2003, which attended to gender, social and racial inequality.

RESOURCES AND POWER 

South Africa is plentiful in an assortment of minerals. Other than diamonds and gold it also has a reserve for iron ore, platinum, manganese, chromium, copper, uranium, silver, beryllium, and titanium. Despite the fact that manufacturing has provided employment for decades, contributing towards the Gross Development Product (GDP) than mining, the mining segment keeps on shaping the centre of the South African economy as it holds companies to invest in other economic activities. Gold remains the most significant mineral—South Africa is the world’s largest producers—and stores are enormous; in any case, creation is gradually declining, and costs have never risen to their stupendous highs of the mid-1970s.

EDUCATION 

Since 1994, South Africa has made incredible walks in understanding the right to education, quickly fabricating an effective, available and quality education system for youngsters and youths. This outstanding advancement has been recorded over the three parts of fundamental training in youth improvement, primary and secondary education. However, notwithstanding these accomplishments, the possibilities and openings stood to kids in South Africa are still generally dependent upon which side of the inequality they were born. Poverty and Inequality stay cruel determinants, forestalling such huge numbers of kids from getting to the fundamental education that they deserve.

From birth to the last year of high school, kids born in poor family face a lot of challenges, which their co-students coming from a wealthy background may not. While access to ECD centres has expanded, the nature of learning and development programmes remain at test. An underqualified workforce paired with the poor implementation of the learning programmes sways ECD results. While giving quality learning and basic education has its difficulties, keeping youngsters in school to finish their education is another. A little more than a fourth of South Africa’s total children drop out of school before the finish of Matric – most of whom are from helpless territories and defenceless against various boundaries to education. This disparity of access is compounded by a sexual orientation imbalance that impacts little youngsters particularly.

SOUTH AFRICA AND ITS DIPLOMATIC RELATIONS

The Ministry of Foreign Affairs is answerable for South African foreign policy strategies. The Department of Foreign Affairs (DFA) inside the Ministry of Foreign Affairs conducts contact with foreign governments and international associations on all issues influencing official relations. These relations are led through foreign government authorities, through representatives licensed to South Africa, and through South Africa’s authorized embassies, departments, and different missions abroad. Until the mid-1990s, the DFA and the conciliatory corps went up against various counter-establishment “strategic administrations” run by antiapartheid associations in a state of banishment, particularly the ANC. The point of these equal correspondence channels was to disconnect the South African government inside the global network as a method for forcing Pretoria to abrogate apartheid. 

After the abrogation of apartheid and the initiation of the democratically chosen Government of National Unity, South Africa’s foreign relations significantly transformed. The nation’s discretionary segregation finished, and existing relations with different nations and with international associations improved. South Africa restored discretionary and trade relations with numerous nations, especially in Africa, and set up new relations with some previous approvals “hardliners”, for example, India, Pakistan, Bahrain, Malaysia, Jordan, Libya, and Cuba. A few provincial and international associations welcomed South Africa to join or to renew its membership, including the Organization of African Unity (OAU), the Southern African Development Community (SADC), and the United Nations (UN).

In addition, South Africa participated in international and bilateral sport, academic, and scientific activities, often for the first time in decades. Relations with the nations of the previous Soviet Union, Eastern Europe, and Central Europe improved. South Africa had full political binds with thirty-nine nations in 1990; that number expanded to sixty-nine out of 1993, and to a maximum of 147 in 1995. Various foreign policies were brought into action before Nelson Mandela was appointed as President in 1994, for example, in mid-1994 de Klerk and Mandela, alongside the leaders of Botswana and Zimbabwe, interceded a conclusion to a military revolt in neighbouring Lesotho. In mid-1994, South Africa gave its first help to a UN peacekeeping activity when it provided medical clinic hardware for Rwanda. Likewise, in 1994, President Mandela consented to help settle the unmanageable common war in Angola, although he advised against unrealistically high expectations in this and other profound established political and ethnic clashes.

INDIA- SOUTH AFRICA RELATIONS

India’s relationship with South Africa is both fundamental and remarkable, going back a few centuries and is tied down in common ideals, ideas, interests, and icons – like Mahatma Gandhi and Nelson Mandela. In any case, their respective relationship stayed stressed for quite a while because of South Africa’s apartheid government. After its independence, India began its struggle for the position at international associations like United Nations (UN), Commonwealth, and Non-Aligned Movement (NAM), and was the main nation to have trade relations 1946, and in this way forced political and financial assets. Following a hole of four decades, India restored exchange and business ties in 1993, after South Africa finished its standardized racial isolation. In May 1993, a Cultural Centre was opened in Johannesburg. In November 1993, strategic and consular relations were re-established during the visit of then South African Foreign Minister Pik Botha to India. The Indian High Commission in Pretoria was opened in May 1994. In 1996, India opened its permanent Office of High Commission in Cape Town, which was re-assigned as Consulate General of India in 2011.

India and South Africa’s shared basic encounters and aggregate quality have formed how the two of them see the world together. As two countries who have shared their battle to independence, the obligation to improve the lives of others is inserted inside India and South Africa’s consciousness. After South Africa established democracy in 1994, it was the Red Fort Declaration on Strategic Partnership among India and South Africa, marked in March 1997 by then PM Shri Deve Gowda and Nelson Mandela, which set the boundaries for a revived relationship. The twentieth commemoration of marking of the revelation was honoured by an India-South African social spectacle involving music and dance performances, and an occasion composed by High Commission of India, Pretoria on April 9, 2017. This Strategic Partnership between the two nations was again re-certified in the Tshwane Declaration (October 2006). Both these announcements have been instrumental components that have contributed in the past to both South Africa and India for accomplishing their national objectives.

List of MoUs signed during the 10^th BRICS Summit, signed between India and South Africa were;

• Memorandum of Understanding between the Indian Council of Agricultural Research, New Delhi, India and the Agricultural Research Council, Pretoria, South Africa on Agricultural Research and Education.
• Memorandum of Understanding between Government of the Republic of South Africa and Government of India regarding the setting up of the “Gandhi Mandela Centre of Specialisation in Artisan Skills” in South Africa.
• Memorandum of Understanding between Indian Space Research Organisation and the South African National Space Agency on Cooperation in the Exploration and Uses of Outer Space for Peaceful Purposes.

South Africa can use its diplomacy not only at governmental but also as a non-governmental level. Utilizing scholastics and specialists outside of government to “include” information and ability to South African discretion, have gotten progressively normal. It is to be trusted that this training will proceed to help give what is expected to compelling interest in an inexorably intricate world. Thorough training of professional diplomats is, however, not unimportant either, and such persons should be retained for the foreign service to establish an ever-growing pool of experience in the DFA. These are on the whole parts of the “small scale level” of strategy and fundamental if the nation is to prevail at the global level. 

Moreover, thought should be given to the decision of various types of diplomacy and their blend; an inappropriate decision can have genuine results, as the Nigerian debacle would delineate. The topic of what balance ought to be kept up among respective and multilateral discretion has been raised; summitry should be utilized wisely; a fitting job for innovation in diplomacy should be discovered; the degree to which the nine areas or locales in South Africa can be permitted to lead their foreign relations should be considered; and, troublesome decisions should be made in regards to accentuation on various regions. Prioritising in diplomacy appears to be unavoidable as the conceivable outcomes are practically unfathomable, though the assets are quite restricted. This isn’t a difficult extraordinary to South Africa. 

The South African government is no world-exhausted system which has seen everything previously, but a youthful, excited organization anxious to show its gifts and beliefs. The government believes in the excellencies of relationship, co-activity and human qualities. It has understood that the present chiefs should be acceptable ambassadors who can adjust domestic and international pressure, who can make arrangements, and resolve debates, characterizing the interests of their states in harmonious manners.

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Past Challenges

The economic and social exploitation of the continent’s resources for decades along with horrendous violence and poor administration by corrupt leaders leading to widespread poverty and untimely deaths, which could have been prevented, has greatly contributed to its present economic scenario of Africa. Africa has witnessed one of the biggest cruelties of humanity, slavery. African slaves were supplied to American plantations which not only led to the loss of welfare due to denial of basic Human Rights but also hindered progress due to scarcity of labour in Africa. The anti-slave legislation solved the problem of scarcity and brought about a major change in the continent that led to the expansion of tropical agriculture in the economy.

However, that did not guarantee good days for Africa because, soon, they came under Colonial Control. The colonizers plundered their resources, worked them to death, impeded growth and development, and projected Africa as an economically weak continent in the global economy. They employed Africa’s necessary resources in the production and export of cheap primary commodities and raw materials only, which forced them to import the expensive manufactured goods which caused unequal trade transactions and greatly increased the trade deficits. The colonial rule has had serious long-term consequences on the economy of Africa and has greatly contributed to the underdevelopment of the continent.

Africa’s commendable growth potential is evident from the way it has bounced back from decades of torture and exploitation and maintained a somewhat average growth rate of 5% since 2000 in the Sub-Saharan region. This shows that Africa has the capability to increase and sustain its growth despite facing adverse conditions.

Present Scenario Due to the Pandemic

Despite not achieving the desired growth in 2019, forecasters were hopeful about the acceleration of growth at a stable rate, with an increase to 3.9% in 2020. However, due to the sudden onset of the pandemic, all prior forecasts have been rendered futile. New predictions state a sharp contraction in the Real GDP by 1.7% in 2020, indicating a 5.6% fall from the previous forecasts. These predictions are valid only for the short-term impact of the virus. If it were to last beyond the first quarter of 2020, then GDP would contract by 3.4%, i.e., a 7.3% fall from the previous predictions. This fall in GDP is accompanied by a 5% sharp rise in headline inflation due to supply-chain disruptions, thus, putting the economy in a state of stagflation. However, there is scope for the internal stability of the inflation rate due to immense fall in aggregate demand.  

Challenges Being Faced

Effect on Fiscal Deficits

The pandemic will lead to a great cyclical increase in fiscal deficits in Africa. It will happen in a two-fold process of decreasing government revenues and increasing fiscal expenditures to boost demand in the economy. In 2020, the deficits have been predicted to rise to 8% – 9% of the GDP, depending on the severity of the situation.

From the pandemics and other crises of the past, it has been noted that government revenues fall more rapidly than economic activity. Situations are more likely to worsen and be volatile to COVID-19 shocks due to the ineptitude of the administration in successfully implementing proper policy reforms to ensure smooth flow of government revenue.

Effect on Poverty

If there is a continuation of the prevailing trends, Africa will not be able to do away with extreme poverty by 2030, as planned before.  Taking into account the current scenario, there have been estimations that poverty will only fall to 24.7% in 2030 from 33.4% in 2018, which is still way above the 3% Sustainable Development Goal Target. Figures in the Economic Outlook of Africa (2020) indicate that the number of poor people will merely fall by 8 million, from 429.1 million in 2018 to 421.2 million in 2030. Only North Africa is expected to somewhat meet the 3% target by 2030.

However, the process of eradication can be sped-up by accelerating growth and development in the continent and taking measures to increase the social well-being of the people. Aggregate personal consumption needs a massive boost, of about 10% per annum, to help achieve the target by 2030. If these measures are not implemented properly then poverty eradication will remain a distant unachievable dream for the continent.

Other Challenges

There are other challenges being faced by Africa at the moment like increases in the debt burdens and fall in remittances and Foreign Direct Investment (FDI). Several countries in Africa have high debt-to-GDP ratios which are projected to drastically increase in the onset of COVID-19 and possess the risk of transforming to a sovereign debt crisis if not dealt with properly. In addition to it, remittances and FDI which constitute a dominant financial flow to Africa have been falling during the pandemic. This poses serious threats to the African economy and makes it vulnerable to economic instability.   

Policies to Ensure Stability

The African Economic Outlook (2020) suggests a few actionable policies to not only improve the quality of growth in Africa but also combat the impact of the pandemic. They are as follows:

• The government should ease the main constraints to productivity like poor infrastructure, uneducated and unskilled labour, poor administration, and others. Relaxing these constraints through adequate policy will guarantee growth revival.
• Governments across the continent should take adequate measures to not only stop the spread of the coronavirus but also economic stability by formulating and implementing a variety of combined fiscal and monetary policies.
• The fiscal and monetary policies should work hand-in-hand to collectively help in the revival of the economy. The fiscal policy should keep the debt buildup in check and provide a massive boost to aggregate demand and the monetary policy should work towards maintaining a stable inflation rate and minimizing exchange rate fluctuations. 
• There must be a shift from low-productivity informal sectors to high-productivity formal sectors which would help utilize the untapped resources of the economy.
• Despite the moderate growth of Africa over the past few decades, the quality of growth has been far from inclusive. Only a combination of rigid structural reforms by policymakers can accelerate Africa’s growth and improve its quality and inclusiveness. 
• Even if there is reduced scope for increased gains, policymakers should implement measures to sustain the gains already achieved in the past few years including macroeconomic stability, minimum fluctuations in exchange rates, and others.
• The government should increase the welfare of the people amidst the pandemic by providing proper healthcare benefits to labourers in the form of paid sick leaves and ensure income safety to those sick or quarantined and ensure job security to all who are suffering to check the increase of unemployment.
• The government should also facilitate Universal access to financed health services for everyone irrespective of their sector or employment status.

Conclusion

The Global Health Security (GHS) Index shows that 33 African countries are inadequately equipped to deal with the threats of the pandemic from a clinical perspective. However, Africa might stand a chance to stay strong in this adversity if proper arrangements can be made for rampant testing across the continent at affordable costs.

The future conditions of the economy depend on the competency of the governments to deal with the issue at hand. If the economies can uphold their resilience at this time, there is hope for a speedy revival and acceleration of the growth of Africa. This resilience can be maintained via effective structural reforms, to keep high debts and deficits in check, and minimal vulnerability, in the form of external reserves, to be able to finance imported advanced medical consumables and to make them available to the public. Thus, there has emerged an urgent need for policymakers to implement drastic reforms to strengthen resilience to be able to withstand shocks at all levels, be it macroeconomic, microeconomic or household levels.

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Who hasn’t heard of the Hiroshima and Nagasaki incidents? Atomic bombs were detonated in these Japanese cities by the Allies during World War II in the year 1945. This led to mass destruction in the country. Over a million people were killed and these two bombings remain the only use of nuclear weapons in an armed conflict. 

Japan is renowned for its extraordinarily rapid economic growth in the 20th century, especially in the first several decades after WWII. Currently, the economy of Japan is the third-largest in the world in terms of nominal GDP. Although Japan is deficient in natural resources, it makes up for it by exporting technologically advanced goods and services since it has highly developed manufacturing and service sectors. Significant contributions have been made in the field of science and technology making it a global leader in the automotive and electronic industries. 

What’s most surprising about the economy of Japan is that even after being destroyed, Japan saw a GDP growth of 10% in the initial period after the war. Too good to be true, right?!  Let us dive deeper into the history of Japan’s economy to look at the factors that led to such a miraculous growth.

PRE WAR

Japan was considered a country that was rich in precious metals like gold, silver, and copper. But, by the time it became possible for Japan to extract such minerals, exports for those were banned. Japan enjoyed good trade relations with the Europeans because they were head over heels for Japanese craftsmanship and metalsmithing. It was also during the time trade flourished that Japan set its foot in the sea and prepared its warships. However, Japan went into a period of isolation in the 1600s and put significant regulations on foreign trade in order to eradicate the spread of Christianization. The economic growth was mild and stable during this period. Porcelain exports rose tremendously in the later period as the Chinese porcelain exporters were out of action. By the 19th century, the country began to open up. 

Major economic development included urbanization along with the diffusion of trade and handicraft industries. The shipping of commodities increased. Sectors like banking and agricultural production witnessed expansion.  Moreover, Japan actively studied western sciences and techniques during this period with the main focus on geography, medical and physical sciences, art, etc. Economic developments of the prewar period began with the “Rich State and Strong Army“. The government also built railroads, improved roads, and inaugurated a land reform program to prepare the country for further development along with adopting a Western education system and focusing on teaching the students with modern science, mathematics, and technology by hiring Westerners.

In a bid to promote industrialization, the government constructed several factories and shipyards that were sold to entrepreneurs at half their price. Such was the success of these businesses that the government emerged as a chief promoter of private enterprise, sanctioning a series of pro-business policies. 

POST WAR

After World War II, most of the industries in Japan had suffered greatly. However, the massive economic growth they achieved astonished the entire world. Industrial growth went up from 27.6% in 1946 to 350 % in 1960, with 1951 being the point that initiated recovery.

This happened primarily because of two major factors.

• The economic reforms brought in by the “Ministry of Industry”. The focus was shifted to the production of raw materials such as steel, coal, and cotton. Additionally, in an attempt to strengthen the workforce, Japan enhanced the inclusion and recruitment of female workers along with some other labor regulations.

• The outbreak of the Korean War in 1950. With the advent of the war, there was a huge demand for Japanese equipment owing to the logistical problems faced by the Korean military in getting supplies from the US. This was accompanied by an investment drive that laid the foundations for a long period of remarkable economic growth.

Since most of the industries were destroyed in the war, on rebuilding they were able to produce more efficiently. Along with these land reforms and mechanization were introduced that boomed agricultural productivity.

As can be seen from Fig. 1, the average real GDP growth in the 1960s remained to be 10%. This was achieved by focusing on the consumer and structural economy that focused on high quality technologically advanced products for domestic as well as foreign consumption along with improvement in transportation. The growth declined to 5% in the 1970s and continued to decrease significantly in the consecutive decades. After the collapse of the Japanese asset price bubble, the economy came to a standstill in the 1990s, which came to be known as the Lost Decade. Real estate and stock markets were greatly inflated which led to stagnation and the country ran into massive budget deficits.

Quantitative easing was used by the Bank of Japan to expand the country’s money supply. However, it failed to induce any growth initially. Later, it began affecting inflationary expectations. In late 2005, the economy finally began its journey on a path of recovery. GDP growth rate that year averaged 2.8%. Unlike previous recovery trends, domestic consumption was credited to be the dominant factor of growth in this scenario.

Despite having interest rates touching zero, the quantitative easing strategy did not succeed in stopping price deflation. Thus, in July 2006, the zero-rate policy was ended but deflation had still not been eliminated. Nevertheless, the economy was able to turn over a new leaf in 2013 because of a smart strategy adopted by the Bank of Japan. In recent years, Japan has been the top export market for almost 15 trading nations worldwide.

Current Scenario

Japan has been facing a major problem of ageing and declining population. The current population of 126.5 million is predicted to decline to 100 million by 2050. This has severe repercussions for the country. Moreover, being an island country it has suffered significant losses due to tsunamis in terms of life as well as property. In addition to this, the tourism industry has not been able to attract many tourists and hence doesn’t earn as much foreign exchange as it should. Besides, since the country’s terrain is not fit for agriculture, it has to import most agricultural products. Moreover, with the current COVID situation and factories being shut down, the country has crashed into another economic crisis after World War II.

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Academics have been seeing this region as a role model for making policies and providing social security. These countries are unique in the sense that they have adopted a socioeconomic model which combines the features of capitalism like free markets and efficiency with social benefits like free education, healthcare and pension payment for retirees. These social welfare schemes are financed through the taxpayers’ money and are administered by the government keeping in mind the interest of all the citizens. This system essentially minimises the gulf between the rich and poor through redistributive taxes. The model is popularly known in the world as the Scandinavian Model or the Nordic Model.

Social Democracy or Democratic Socialism?

The prevailing sentiment in the world is that the Scandinavian nations achieved what they did by adopting socialism. The truth is far from that.

• The only element of socialism which seems to exist in the Scandinavian model is the rampant presence of welfare schemes provided by the state. Apart from that, the means of production are owned by private individuals and the resource allocation takes place through the forces of demand and supply, not through central planning.
• It is important to point out that the Scandinavian nations developed their current economic system after years of free economy and trade. They were economic successes even before they built their welfare states. It was not the government benefits that created wealth, but it was the wealth of people that allowed the luxury of such generous programs by imposing high tax rates.
• In contrast to the general perception about the Scandinavian economies, there is actually an absence of government interference. None of these Scandinavian countries have minimum wage laws. Instead, wages are decided by collective-bargaining between unions and employers, and not through government-imposed floors. In fact, the Nordic nations have some of the highest unionization rates in the world.
• Sweden has complete school choice as the government provides its citizens with education vouchers. The vouchers provide funding to a student at any school whether public or private. This choice benefits the citizens and the future of the nations. If these nations were to be socialist, they wouldn’t have promoted free choice.

In addition to these facts, the Scandinavian countries rank quite high on the index of economic freedom given by the Fraser Institute. All the countries are in the top quartile in the rankings. In fact, all the three Scandinavian nations are among the top ten countries to start a business according to the Ease of Doing Business Ranking, 2020 given by the World Bank. The best proof of the free-trade background of Scandinavian countries might be Volvo’s buyout by Geely of Hong Kong in 2010 and the bankruptcy of Saab in 2012, in which the Swedish government did not interfere in any way even though they were two of its most iconic companies.

The Nordic countries offer government-paid healthcare, tuition-free education, and generous social safety nets for all. It is allowing businesses to be productive without interfering which in turn produces the high incomes that support the tax collections. The system prevalent in these nations is actually social democracy in which the government aims to promote the public welfare through heavy taxation and spending, within the framework of a capitalist economy. This is what the Scandinavians practice.

Is it Sustainable?

Though it is working wonderfully for the time, it is losing ground due to many reasons. There is two fundamental phenomena which come into play namely the “Wagner’s Law” and the “Baumol’s Law”. Wagner’s Law says that the demand for welfare services tends to increase faster than income. According to Baumol’s Law, productivity in the production of welfare services tends to increase at a lower rate than that in the production of goods and services. If we assume equal wage growth across all sectors, costs must increase faster in the production of welfare services than in the economy as a whole. These two taken together imply that the total spending on welfare services rise faster than GDP over time. As these services are tax-financed, the tax burden must also rise continuously with GDP. Starting from an already high tax burden, further increases in tax wedges will eventually cause serious harm to employment and growth. This is particularly imperative in view of the consequences of globalization and demographic change.

Globalisation is in general beneficial to economic growth as it provides an opportunity to increase the returns to factors of production through the international exchange of goods and services and factor mobility. Nonetheless, increasing international mobility of labour can jeopardise the welfare state and the Scandinavian model. As social welfare schemes belong to all citizens, it becomes increasingly possible for them to benefit from the services without paying the taxes (bearing the cost) due to international factor mobility. For example, citizens who have spent most of their working lives abroad may return to their home country after retirement to collect the benefits of free hospital care and care for the elderly.

The most serious challenge to the Nordic model is caused by the changing demographics given the extensive role of the public sector in providing age-dependent social services and benefits. The age composition of the population in most European countries have changed dramatically in recent years. The shift is driven by two factors: a “baby boom effect” as the generation has reached retirement age, and a continued increase in life expectancy. As a consequence, dependency ratios have been increasing since 2010 in all the Scandinavian nations and now stands at 57% in Denmark, 53% in Norway and 61% in Sweden. The balance between those contributing to and those benefiting from the welfare state is shifting to such an extent that the financial sustainability of the system is in danger.

How it evolved?

Till the 1950s, Nordic countries were the top free-market, competition-based nations in the world. In the ‘70s, however, intense social government and regulatory systems were put in place with high tax rates. All of the economic growth came to an end in the early ‘90s with the burst of the housing bubble and the advent of a recession. Sweden’s economic growth fell to 1% lower than the rest of Europe and 2% lower than in the United States of America.

By the ‘90s, government spending was up to 70% of GDP, and the debt to GDP ratio was 72%. Even the unemployment rate rose by 5%. The Scandinavian states were strained and were forced to increase taxes drastically to keep their model alive. As soon as policymakers saw the socialist approach failing, things changed. In 1991, parts of health care were privatized, schooling vouchers were first introduced, and some welfare programs were cut back. In 1993, the collapse of the housing bubble forced the Swedish State to scale down their generous welfare system in a context of lower growth, growing unemployment, and to manage public accounts. Between 1995 and 2000, the debt-to-GDP ratio was dropped down to 50%, and citizens earned more income owing to the new 28% tax rate. As of today, Sweden’s public spending has decreased to 49.3% of their GDP, and their corporate tax rate is 22%, below the OECD’s average of 23.9%. Denmark and Norway allow private firms to run public hospitals and Sweden has privatized part of its retirement system.

Conclusion

Are the Scandinavian countries a model for the rest of developed countries? We may answer in affirmation by looking at the top rankings achieved by them for most of the elements that make a country successful: education outcomes, health and life expectancy, happiness index and economic development. But a large part of the Scandinavian system is unique and reflects the Scandinavians’ long tradition of governance which emphasizes on consensus, compromise and trust. Also, the Scandinavian nations raised the taxation rate only after their economy grew and the citizens had high incomes. A government should never begin with enormously high rates and expect its citizens to keep pace. The population of the region is merely 21 million which is fundamentally homogeneous and thus any big and multi-ethnic state might not be able to adopt the Nordic model. Instead of adopting the model, nations should view it as an inspiration and customise their policies according to their needs and demographics.

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Within a short period of time, the country rose to be one of the high-income countries in the world. Currently, it comprises 0.42% of the World’s GDP (PPP). There was an exceptional shift from the export of labor-intensive goods like textiles, garments and basic electronics to high-value products like telecommunication, equipment, pharmaceuticals, refined petroleum, electronics, chemicals, etc. Singapore received 14 loans over the period of 1963-1975 from the World Bank and the majority of them was taken for infrastructural development like port expansions, sewage system, power and telecommunications etc. Now having one of the best infrastructures in the world, it has progressed in such way that it contributed US$10 million for the ‘Global Infrastructural Facility’ of World Bank. A loan taker to fund contributors for the same sector is a commendable evolution. Over 80% of Singapore’s residents live in public housing. Manufacturing and service sectors stand as a support system for Singapore’s evolution. 

Now Singapore is ranked NO.1 among 42 countries in the Asia- Pacific region, having the status as the world’s freest economy in 2020 index with an economic freedom score of 89.4. According to the Global Competitiveness Report (GCI 4.0), Singapore is the most competitive economy with the first rank in road quality infrastructure, the efficiency of seaport and airport services, sea transport connectivity, macroeconomic stability, public sector performance, trade openness, labour market and no terrorism incidence. Singapore’s economic policies and strategies mostly focus on long-term investment and growth. One such strategy of Singapore which is futuristic in nature is discussed below.

Smart Nation

The third industrial revolution which is also known as digital revolution came into force with rapid increase in and adoption of computerization. From then, growth of technology is associated with accelerated innovations and inventions. Technology plays a significant role in economic development. While many countries are focusing on their digital future, Singapore is yet another country with its rapid digital transformation. The success of National Computerisation and Growth of the info-communications industry of Singapore stands as a certification for its national digitalization efforts. Taking a step ahead while keeping in mind the future challenges with respect to resource constraints, rising ageing and urban population and to attain the comparative advantage for Singapore, it launched the ‘SMART NATION’ initiative on November 2014 with a vision to provide a fulfilling and meaningful life for their people.

The initiative aims to ‘TRANSFORM SINGAPORE THROUGH TECHNOLOGY’ by providing a convenient and sustainable living for its people with enhanced access to information and opportunities, space for businesses to improve productivity, innovation and growth and finally to have a government that can use the technology to serve its people better. Smart Nation would be a combined effort by people, governments and industries for their prosperous future.

The three pillars of the Singapore’s Smart Nation are:

  The Digital Economy focuses on attracting foreign investment, improving business efficiency and competitiveness along with providing wide opportunities for Singaporeans to stay ahead in the future.

• Digital Government:  The central aim of the future digital government is to create” a government that is digital to the core and serves with the heart.”

By using the technology it focuses to serve its people and business with better opportunities to get a good service experience.

• Digital Society: A complete digital society, in general, should make sure that all the people in that society have access to technology and they are in a position to adopt them with relevant knowledge and The Digital Society of Singapore also aims at digital inclusion.

Smart Nation and Digital Government Group (SNGG) which involves Smart Nation and Digital Government Office (SNGO) along with implementing agency, Government Technology Agency (Gov Tech) is responsible for building a Smart Nation.

According to the Smart Nation and Digital Government Office, the initiative’s ”priority is to harness technology to address national challenges and drive transformation in key domains: health, education, transport, urban solutions and finance.”

• myENV app which provides the current environmental information and updates
• OneService app through which people can report all municipal issues in a common platform
• Smart Towns includes providing intelligent homes that make life easier, comfortable and enjoyable for the people. Example of this is the development of Punggoll town
• Autonomous vehicles which is helpful for the elderly and specially able persons
• On-demand shuttle where operations of transport services would be demand-driven so that resource management can be monitored
• HealthHub which is an online health information and service  portal
• Contactless fare payment for public transport, TeleHealth, Digital Government Services, Data Innovation Program Office, CorpPass for businesses are some of the initiatives which are paving way for the Smart Nation.  

 The Strategic National Projects are notable ones which stand as an enabler for building the Smart Nation. They are,

1. CODEX
2. E-Payments
3. Moments Of Life Initiative
4. National Digital Identity
5. Smart Nation Sensor Platform
6. Smart Urban Mobility

Smart Nation Scholarship: The best resource available in a country would be its young talent pool and a nation which utilises it in a better way will have a greater advantage. Singapore is taking a big step towards future of technologies, in order to achieve this, the country has to appreciate and develop the young brains and this scholarship is one such way to help the pillars of the nation who are going to play an active role in the transformation with technology.

In order to bring the expertise in the area of technology and engineering, they also provide Smart Fellowship so that there would be birth of innovative ideas from different individuals.

Challenges

 According to IMD Smart City Index 2019, the smartest city in the world is Singapore. In 2018 it also won the Smart City Award in the Smart City Expo World Congress. Though the nation travels towards its goal, there are also many challenges ahead on the road. According to the Institute of Policy Studies, in 2017, 55.9% of Singaporeans polled, were optimistic about Smart Nation initiatives and in 2018 it was 53.4% so there is a big responsibility in the hands of the state to retain the people’s confidence on the initiatives and to remove the fear of technological disruption. While many nations are piloting with the smart city initiative, Singapore with its brave efforts has planned it for the whole nation and the main challenge lies in reducing the gap between vision and reality. It must also increase technological accessibilities. Another big tension is about digital security.  Having openness in data availability, the state must be very cautious about cybersecurity problems. We could see the government of Singapore taking various steps to overcome these difficulties. Apart from these, there are some of the problems which are external in nature. The growing economic nationalisation, rise in anti-globalisation and protectionism among the other countries, problems like deforestation in Singapore ( It lost nearly 90% of its forest, since 1980 due to increased land usage)and other technology-related environmental problems, rising concerns on the migrant workers who contributes more to that economy may also have an impact on the result of its initiative. Technology when used in the right manner for the right purpose will be fruitful, if not then may lead to negative repercussions.

Conclusion

Despite these challenges, it is undeniable that the country utilized its best resource- the people. At the initial stage of development itself Singapore made sure to educate and upskill its unskilled labour force with knowledge on information technology, electronics etc. In the last three decades their development expenditure accounted for an average of 1/3^rd of the government expenditure. Singapore ranked 1^st out of 157 countries in the Human Capital Index , According to  that, “ A child born in Singapore today will be 88% as productive when she grows up as she could be if she enjoyed complete education and full health.” Also HCI for girls were greater than boys. Be it past, present or future, Singapore’s focus is on its people- it invests in and for people.  Overcoming the challenges and a complete focus on the goal of Smart Nation without any disruption on the road will lead to success.  

Final note– Technology can be one of the means to a better life and not an end.

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