Tuesday, October 28, 2008

The Fiscal Rope Trick

It is Diwali time but there is a general pall of gloom sweeping the surroundings. The world economy has slowed down and consequently our economy has braked- so many of our investments have come to a nought, just become some smart alecs sitting in plush offices in US have put their dough in the wrong places. But why do we need to pay the price for someone else’s blunders of avarice?

We were told that an integrated economy is the way ahead. As the world trades more, we will all progress but did somebody forget to tell us that when there is a slowdown we all have to suffer? The stock market, irrational as usual, has come down from the Manhattan towers to the slums of Dharavi and is plunging further still.

So, all that requires the entire world economy to stumble is a few bad loans in US, is it? I mean is this the stable growing economy that we are talking about? Economists have told us for years that Markets are intelligent enough and will correct themselves and that regulations adversely affect the market. Free trade and free movement reflect positive growth but then free falling recessions, bad debts and wages also come hurtling back in bad times.

The news has been full of banks queuing up to collapse in a pile, companies cutting down expenses, B-Schools getting candidates placed wherever they can and TV channels making merry with stories on various fiscal ruins. The Indian Aviation Industry is crying for help and we are all concerned that flight trips have got more expensive but in the midst of all this, our son of the soil remains silent. He wonders what the fuss is all about; many of his colleagues have been committing suicide every year and all that happens is that magazines like Frontline feature articles on them and Sainath rants about government (in) action. Is our pain of greater concern to the Government than that of the farmer who suffers in silence?

Gordon Gekko in his famous “Wall Street” speech remarks Greed is Good and we all believed in it. It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made; it's simply transferred from one perception to another. Yes, we realised that he was the villain in the film but once the movie was done, we went back to the rational exuberance of the markets.

The Market is God, it decides fates and it is fun as long as the destiny follows a path of flowers; the moment, the road starts crumbling, we look for scapegoats- the government, the brokers and all the innumerable people who have put money in places where it has just been sucked in through and through. Everyone is to blame except us the poor investors- we just wanted to make some extra money, don’t blame us...

Maybe, just maybe, it is time to decelerate and ask ourselves whether we are moving in the right direction. Introspection comes only during crisis and the world needs earthquakes to question some of its holy cows who have long eaten it hollow. Socialism is a bad word now but as a concept it still has relevance. When Jet Airways decided to fire many of its employees, many felt the pinch because it was much closer home and we reacted strongly to the high handedness of the management but for years, farmers in Vidarbha and Andhra have been suffering a worse fate but they are confined to the occasional blips of our conscience.

Aravind Adiga exposes the dirty side of social and economic disparity in The White Tiger but many have been critical about the fact that it dares to talk about the dark underbelly. As the country marches ahead relentlessly, inspite of the Gods, do we need to talk about them – the ants that are crushed when the Elephant Dances are of little consequence to us. Shining India cannot talk about dirty India, can it? Think of the big picture we are told – somebody has to suffer in the larger interests of the nation and we agree as long as it is not any of us in the firing line.

The current India is akin to the US of the 60s; there is an entrepreneurial instinct which pushes continuously cutting through yards of red tapism. So, the focus is on growth and profits and these alone – people and environment are not of much importance. So, you have more and more construction work happening, cars multiplying and spends increasing. This is an India dazzled by the glow of its own success that turns a blind eye to its areas of discomfort.

Why does a country that is home to advanced high-tech and manufacturing companies still have about 400 million illiterate people and high unemployment? Only 65% of the population can read, and in the villages that number falls as low as 33%. There an almost complete disconnect between the 300 million, high-flying Indians, living in lavish luxury and intoxicated by their own verbosity over globalisation and the remaining 750 million of their countrymen, many of whom seldom get two square meals a day. The "trickle down" theory remains a theory for all practical purposes.

But would this slowdown act as a pill which would awaken to the disasters that are in store when pure economics rules over emotions and compassion? Some lessons to be learnt and some philosophies to be shed and a directional change is required and this crisis will probably cause nations to do that. Capitalism or no other -ism is a final solution; a middle path needs to be evolved and hopefully some things will change now.

Probably things are not that bad despite what Rajdeep and Co may say. We have gone through greater disasters but then in this era of shock and awe reporting, we see all the effects of this slowdown magnified in front of our eyes. Yes, we need to do a bit of pruning down (For the first time in 3 years, I am going home by train instead of flight) but then, it does not hurt to lie low for some time, doesn’t it? Let the market takes it own course............

1 comment:

  1. Well crisis or no crisis i still live by the invisible hand ...:)