Success and Excess II

Somehow success and excess always seem to go hand in hand. A while ago when the China - Arunachal Pradesh conflict was at its peak, the visa issue, the rock painting fiasco and so on, elicited 'Power, Politics, Success and Excess'. A talk about ethics and transgressions and how you always have a choice came out in 'How much is too much'. And today, again, on the topic of where to draw a line, here are some thoughts.One of my professors mentioned a very interesting trend in hedge funds . He said, "Some firms are engineered to blow up." He spoke of LTCM and Bear Stearns' 2 funds that were forced to fold. LTCM failed in a macro sense because of a black swan that no one expected. No one dreamt that Russia, America's cold war nemesis and erstwhile feared superpower would default! But one can always argue against such exigencies and ask why risk management practices weren't more robust to prevent even the rarest of rare events from causing damage. Then when we speak of Bear Stearns that broke because of massive exposure to subprime lending and the subsequent drying up of credit markets, one asks again, isn't it a manifestation of excesses? Why didn't people stem the exposure long before the situation went beyond salvage? Take GM. Why do entities need to blow up to 'bailout size' and then justify bailouts saying that they are too big to fail?

Take hedge funds again. We came to know that John Merriweather of LTCM, recently floated his third or fourth fund after busting subsequent funds! Who would have lent him money, you ask? Well, every fund makes some money for some (to the tune of several millions) and loses money for some others. Those who make money, do so thanks to discerningly or luckily removing their money from the fund at the right time and they will lend to these fund managers in their new escapedes, despite the previous fund's having folded! They get the guts to lend again, thanks to the confidence built by having several million dollars of disposable income! The poor, loyal, unsuspecting bunch end up on the left tail of the bell curve, and these are the scapegoats who bear the brunt of irrational exuberance displayed in excesses by successful managers, or they are unfortunate souls who think that their pot of gold just needs an ounce more ! And these people, well, many-a-time, aren't able to reach even 50% of their starting baseline level of affluence! And the story goes on and on.

So more often than not, success leads to excess and this excess can catapult some to untouched heights, while thrusting some others into the chasms of lonely failures. So is regulation the key? Now apparently there are thoughts of regulating some hedge funds by a central authority. Being a strong proponent of efficient markets and classical economic theory, all I can say is - entities that have thrived through self regulation are better off being left alone. Humans never interfere in the laws of the jungle, but somehow, a justice system exists and functions (more efficiently) in the wilderness. So we are better off observing the beauty of self-regulation, Darwinian theory of selection, machinations of the wheels of fortune and the extremes of successes and excesses playing out in front of our eyes, rather than pillage the same with concrete barriers that can destroy this beauty.

Such are the ways of the world. Every black has a white, every God has a satan, every right has a wrong and every winner has a loser.

Manic Monday - Are we Indians truly worth it?

Andie McDowell, Aishwarya Rai and Eva Longoria look us in the face and say - 'Because you're worth it'. But are we really worth it??? India is reeling under swine flu. That said, I just saw some reports of Chikungunya cases being reported in AP. Even a bustling metropolis like Mumbai was not spared. Pune and Mumbai became swine flu spots. And the administration received well deserved flak for not having a proper process in place to check the pandemic! We are supposed to be the sunshine country of the future. Linked with China, poised for growth, harbingers of the world economic order! And here we are faced with drought, (which climatologists claim is a natural occurrence once every 5-6 years, scientifically), a pandemic, the world economy is hit and all hell has broken loose!

Dr. Amartya Sen in his book Development as Freedom has compared the India-China story and described how the Communist, populist regime of China pre-reform focused on 'people development'. One can attribute some level of the people-centric policies to the Chinese culture, where education and all-inclusive health care are principles ingrained into their psyche. Chinese and Japanese were supposed to be the lodestars of human civilization and culture in the ancient times, after all. So, an offshoot of this deep culture, stood them in good stead, whereby by the time China got ready for reforms in 1979, they had a prepared, educated population all set to exploit the reformed economy to the fullest and steam roll their way into the future.

Could we perhaps even attribute this process to communism? Communism, as a philosophy speaks of 'down with the owner-worker relationship' 'everything belongs to everyone'. So could it be that these deep populist, equitable distribution seekers could allow this philosophy to creep into the realm of governance and ensure all inclusive provision of basic facilities? Take Cuba, for instance - it is supposed to have the best education and health care system in that part of the world. The statistics speak for themselves. 4th highest in literacy rate, with literacy rate almost reaching 80%. Before the Cuban Revolution, Cuba had the third-highest number of doctors per capita in Latin America, the mortality rate was the third lowest in the world, infant mortality rate was the lowest in Latin America and the 13th lowest in the world, and life expectancy was some ten years higher than the Latin American average. Kerala - the Indian state with the highest literacy rate, and maximum institutional births in India. Although industrial growth has been dismal, quality of life for the people is rather high in comparison to the rest of India. The key again was inclusion in provision of health care and education, that resulted in overall upliftment.

So, while China was prepared for the liberalization movement, India in contrast, when she liberalized her economy, opened up the economy to grossly under prepared people, who were still majorly illiterate and perhaps never understood the modalities of a liberal economy. As a result, to a very great extent, it appears as if the whole liberalization regime was either too premature, given India's gross lack of preparedness to rise up to the challenge, or the developmental part has a lot of catching up to do, to make up for the lost ground.

That said, it is perhaps not enough to just develop pockets. It doesn't make sense to have the most opulent sea facing mansion on one end, and Asia's largest slum on the other end of a city's spectrum. Unfortunately, this spectrum is indicative of the pattern existing in India as a whole as well, with interior India still struggling for electricity and water, while some other regions grapple with issues of floods. It is all a bit murky, and a lot of sorting out needs to be done. But at least the administration seems to have its heart in the right place. There has not been a famine in India since 1947, and Dr. Sen attributes this to the fact that we have a democracy, that ensures that vote bank politics prevents governments in office from not taking adequate steps to arrest famine in the wake of food shortages. One just hopes for words to get translated into actions and we hope that a sunshine nation like ours may not still, after 62 years of independence, grapple with issues like drought, policy initiated 'food crises' or curable diseases turning into pandemics!

Boxing Week 2008

It's Boxing Week. Well, all along, I thought that Boxing Day (day after Christmas) held some historical significance in terms of the sport called Boxing, and hence is celebrated as such! Only later did I learn that Boxing day is when Christmas presents are to be unopened and kept / exchanged / returned. The 'boxes' represent the 'Boxing day'. Simple? Oh yeah! This whole week is Boxing week. All malls, shopping places run deals, good deals. Loads of discounts, since this week traditionally invites shoppers in hordes! There have been stories about stampedes outside malls on Boxing day, that apparently even killed a store employee! Now, people spend a lot before Christmas. They spend to buy presents for everyone. And Boxing week is like a bonanza, more like a ritualistic shopping expedition, as a means to add cheer to the white holidays. Basically, Boxing week is like shopping week, in a greater part of the Western World.

This year though, the story has been slightly different. Given the economic slowdown, analysts, economists, retailers have all been speculating on how the mood would be this year. Given the fact that people need to spend in order to boost the economy, the economy watchdogs were actually 'watching'. They wanted to see where the consumer would go, whether he would head to the shop or whether he would hide money under the mattresses. To lure customers almost all major shops advertised 50 - 70% discounts. They advertised freebies, and what not! Just to make the consumer come out and spend.

This time, with loads of people being laid off, mounting debt, lack of free funds to spend coupled with a general sense of uncertainty over where the economy is heading and when the bear would hibernate giving way to the bull, people were not really in a mood to splurge. No stampedes at Wal-Mart, only marginal queues. To make the crowds look bigger, some cash registers were closed off. Many people said that they had exhausted their budgets buying Christmas presents and so, did not wish to spend more in Boxing week. Some were prudent to keep aside buying a much wanted item like a pair of shoes or a bag for Boxing week, just because of the favorable deals. But that's it. No splurge shopping. Some were restrained because they did not feel right shopping when so many people were being laid off or were facing the brunt of the economic slowdown. The only contrasting report however was about Amazon reporting 73 deals per second on day 2 of Boxing week. Heartening to know. But a conspiracy theorist inside me asks whether this was a media byte to boost consumer confidence.

While some actually took pains to go and buy something, some others chose to window shop, for sake of the ritual. So Boxing Day actually took on the significance I first thought it to hold - Boxing... Only this time, fighting the urge to splurge in favor of a bit of prudence......

Global economic meltdown - a new dimension

There have been loads of reports in the newspapers these days on how the global economic meltdown is affecting shoppers. There have been reports on how people are cutting down on spending, on account of the terrific uncertainty in the markets. In just a matter of 8 months the Bombay Stock Exchange - BSE Sensex (for sensitive index... Man! it seems more sensitive than a Cancerian woman!!!) has tanked almost 13000 points! 20,000 to 7000, and still nose-diving! So most urban Indians whose wealth is locked up in the markets are a little wary about spending. To the extent that on Dhanteras, when people generally buy gold or some other valuable - considered auspicious to do so, many refrained from purchasing anything other than essentials! So sellers want to lure people somehow or another.

Now, as we face a bust everywhere, with real estate prices going for a correction, the stock markets diving deeper and deeper, people do not want to invest any more, at least not to the extent that can hold up the exaggerated property prices. So builders who embraced the whole 'redevelopment of old properties' concept face either unfinished projects, with huge outflows or finished buildings with no takers! The result - they have had to slash prices and also offer freebies!!!! Buy a house, get a car free. Buy one house, get one free. Bizarre how things have shaped up in just a matter of months.

But the most bizarre thing is, that this dire attempt to lure customers has hit other markets as well. Just this evening, while I was at a food mall, there was an announcement - "Buy half a kilo brinjal, and get another half kilo absolutely free."

Tata says tata

Tata leaves Singur for greener pastures – literally. As a rather strong proponent of capitalism, like most of the younger generation these days, I feel vindicated again. For enterprise to grow and thus foster growth of a nation, the answer does not lie in Communism! Look where Left Bengal has gone!

Politics is a media circus. The whole US Presidential election 2008 replete with moose, pigs, makeup, racial sentiments, feminism, and blockhead politics is testimony to that fact. But that a political party would ditch potential growth for those measly 15 seconds of fame, leaves me wondering whether India has been hit by another syndrome post the global economic meltdown. A syndrome called ‘idiocy in politics’!

The scene in West Bengal - A friend of mine who has lived his life in Calcutta says that the sleepy city is in no way comparable to a metropolis. He’d been to Cal for around 10 days on an assignment, and when he came back, he said that he was happy to be back, since had he continued there, he would have become lazy and lethargic. His case you can argue, is an exception, but who can argue against the number of stirs and strikes that are commonplace in WB? Every other day, shutters are down for some reason or the other. But with a growing population, and more number of graduates the dearth of jobs is a reality. Where do they go? Move to other cities. Brain drain on a smaller scale. But what does that do to the state and its infrastructure? Every state, no matter how small or inconsequential, has state machinery that needs to run. And for that the state needs investment. An investment to the scale of the kind that Tata envisioned, would have opened up the floodgates of investment. Maybe Reliance, Vodafone? Daimler Benz for all you know??!!!?? Ironically ,the Communist government in WB noticed that fact, which Ms Banerjee chose to ignore. She went on and on hammering into the heads of anyone who would listen and also those who wouldn’t, that she wanted to protect the farmers, whose rights had been cruelly snatched by the alligators of corporate capitalism! Whoa, and this poor alligator could have given jobs, much needed tax revenues to the desirous millions in West Bengal. India is an agrarian economy, no doubt, but somewhere one needs to move on. Agriculture alone cannot feed, clothe, house and develop the zillions of people. Khmer Rouge and Polpot had such nefarious intentions – a complete regression to farming and the ways of the olden times man. The result – a wipe out of a whole generation in Cambodia. Which again brings me back to wonder how one woman could have been so foolish???

Two instances make me believe that perhaps West Bengal is opposed to anything new. They abhor change of any sort! Traditionally the Left with roots in West Bengal, have been very good ‘opposition’. No, I don’t mean it as a compliment to their political methods, but they operate in the true sense of the word – oppose anything that comes your way. The government said – ‘Without nuclear energy we would literally be left groping in the dark. So support the nuclear deal’ The Politburo said – ‘we hate America and all things American. So shoo the nuclear deal.’ I wish someone had then told them that nuclear energy does not belong to one country! It is property of the world community, scientific community, rather. Second, an Indian company made bold and decided to set up shop in WB. Two years ago. Why did the agitation begin to reach feverish levels only just now? Where were the protests before this? Save for a few breaks of the gate and screams here and there all this while, why protest now when the plant is at a stage where relocation costs are exorbitantly high? Where were these disgruntled farmers for so long? Spending the money they received as compensation? And when the moneybag ran dry, they found a reason to ask more? Has greed reached such abysmal levels? Ms Banerjee perhaps never imagined that the man of steel – Ratan Tata would move lock stock and barrel. She thought she could formulate a truce plan that would benefit her so called oppressed farmers and also bolster her long lost plans of becoming the CM next year. Unfortunately, the whole plan backfired. Now the youth are aghast, since much needed employment is gone. The state as a whole is disgruntled with her, and the glacier between her and the ruling government has received 10 more layers of ice! And irrespective of what Mr Tata may say to anyone, any future investor would think a billion times before embarking on a project in hinterlands of Mamtaland.

The biggest loser, however is West Bengal. They were legendary for being thought leaders. Rabindranath Tagore, Shantiniketan, Bengal Chemicals, a majority of the freedom fighters, all have their roots in West Bengal. With the advent of the Left government, the state started sinking into the oblivion. Blame it on policies, or the lack of it, reticence towards development, a cushy comfort in the status quo or whatever. But now, such cruel selfish politics has managed to sound the way downward for one of India’s once most illustrious states.