For its 2007-2012 Five Year economic plan India incorporated the concept of “Inclusive Growth”, which, in the most basic terms, is defined as pursuing the goal of bringing the benefits of rapid economic growth to the masses through government policy. This includes, but is not limited to, assisting lagging regions catch up, improving agricultural technology and infrastructure and empowering the poor through proactive policies that enable their fair and equitable participation in the market economy. The policy of Inclusive Growth is laudable and necessary, for what is the point of India's economic development if the gains are not shared widely?

The pursuit of Inclusive Growth is insufficient as a policy unto its own and India must decide a second question: what does it want to be when it grows up? On a purchasing power parity basis (ie. adjusted for local prices), India's gross domestic product is about $3,000 per capita and China's is about double this level, compared to thirty or fourty thousand dollars per capita in most developed countries. At their current GDP growth rates per capita incomes in the two Asian giants will approach the current levels of developed countries within two or three decades. But India and China need to overcome the enormous barrier of energy scarcity to achieve this much growth (among other barriers). The Age of Cheap Energy, fossil fuels, critically oil, is over: it is impossible for the world to produce the three or four times current oil supply it would take for these Asian giants to sustain carbon copies of the energy glutton U.S, or even European, economies. India and China have no choice but to grow based on alternative energy.

The character of an economy's energy supply is a significant determinant of its economic structure. But even as India, China and much of the rest of the world launch alternative energy initiatives in deed or in spirit as the case may be, there is little discussion about how the way we live needs to change. For developed countries, Mass Consumption fueled by Cheap Oil has been the defining economic theme for more than fifty years. Developing countries are following in the footsteps. Well, the cost of energy in the foreseeable future is going to be higher, no matter how many solar cells and wind turbines we plant next month. The math is simple: more people chasing fewer resources equals higher prices. And no one selling miracle technological fixes to this problem has yet credibly demonstrated he is more than a captivating huckster. Add in global warming to all this and it should bring a tear to your eye or an exasperated head shake at humanity, depending on your disposition. And yet more, it (Mass Consumption) might all have been for naught...

American President Herbert Hoover's 1930s depression era slogan “a chicken in every pot” has today morphed into the sentiment of a T.V in every room and a car for every biped by Sweet Sixteen. But even as Mass Consumption became a reality in developed countries after World War II, it has had little impact on improving the underlying human need for happy, enriching lives. By many measures developed country workers are no happier today than they were fifty years ago. To make matters worse, during the last three decades median incomes in many developed countries have stagnated (productivity gains have been absorbed by the wealthiest strata), leisure time has been clawed back, dual income families have become the rule, debt has increased significantly as families try to maintain stable living standards and keep up with the Joneses, and constant stress is a defining malady of life. It's been a good time for therapists and shaman.

We in the developed world have become self-obsessed ninnies forever absorbed by multiple mid-life crises, combating our inner depletion through attempts to gain euphoria by maintaining a sense of constant titillation on the bandwagon of limitless escapist Consumerism. Politically docile addicts of ornamental novelty. This era is over, emphatically brought to a close by the collapse of the Cheap Oil Bubble, a side effect of which was to also end the related Cheap Credit Bubble thirty years in the baking. The band is gone; the hangover remains.

But at current developed country GDP levels surely it is possible to do better than to be caught up in a continuous cycle of consumption and accumulation of Stuff. Digestion of said Stuff has not durably lifted the individual human condition. At the dawn in the 1950s of the era of Mass Consumption and its counterpart Mass Production, hopeful futurists envisioned the advent of an increasingly productive society where basic needs and many wants would be met even while workers gained increasing amounts of leisure time that they would devote to nurturing interpersonal relationships and pursuing fulfilling creative endeavors. This was not a foolish prediction – it was based on how historical productivity gains had benefited the average person since fifty years before World War II: improving living standards, shorter work weeks. It didn't work out that way. The futurists were made fools. We did not climb atop Maslow's pyramid. But don't blame capitalism. The errors are all political and public policy; that is, in how vast productivity gains were divvied across the population.

And even while we now seek alternative energy solutions in the face of energy shortages and rising energy prices we are trying to continue the Mass Consumption theme not realizing it must and will change. So while India has established a National Solar Mission and China is a leader in the field of alternative energy, from India's Tata motor vehicle company came the $2,000 Nano, a 21st century version of the Ford Model T designed to bring car culture to India's middle class, and China was recently witness to a 65 mile long traffic jam outside Beijing that in Chinese style pales in comparison to any “rush hour” that has come before. And, continuing the car culture example, the belief that gasoline burning engines can simply be replaced on a mass scale by electric engines, bio-diesel or some other novel yet impractical technology rests on faulty assumptions about what kind of lifestyle currently foreseen technology and resource availability will enable for another 3 billion people.

For Inclusive Growth to be a sustainable long-term policy requires that India acknowledge and pursue proactively through policy an economic theme different from Mass Consumption. The market, through higher energy prices, will encourage much change on its own, but why waste resources clinging to an outdated economic structure as a goal? In practice this means Indian policy makers should not blindly support massive road-building to fuel a car culture, cookie cutter suburbs and ex-urbs and the mindless mass consumption and accumulation of, well, Stuff. Consumption and pollution ought to be taxed appropriately (with value added and GHG taxes), while investment, education, social safety nets, income/productivity, leisure time and public goods such as mass transit and transport are encouraged. With the goal of creating an economic structure that is super energy efficient, highly environmentally sustainable and frugal in resource use and where the gains from economic growth are widely dispersed.

To many an ideologue such economic planning smacks of too much government interference. But such ideological criticisms conveniently ignore the fact that the cheap energy, fossil fuel driven mass consumption economy has received much government support for decades. And the fact of energy scarcity means it is neither wise nor possible to copy the West. So India's choice is rather to either wait and let the market impose the change over time, wasting resources in the meantime, or to proactively encourage change in that direction. And because markets fail, the transition without guidance may be haphazard. Within two decades India's economy will quadruple in size at current growth rates – this represents a wholesale makeover. It seems silly to waste a few of these crucial years going in the wrong direction against the grain. Indian policy makers ought consider how the nation will become self-actualized.

And investors may be wise to consider how coming changes in energy sources and costs will impact their ventures. Aside from getting into the alternative energy or energy efficiency game, every company today needs a continuous plan to operate more energy efficiently and environmentally sustainably, and to develop their products keeping these themes in mind. It may be enlightened thinking. But it's also good business planning.

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