Abbott's angst... or is it our angst?

The meaning of "angst" is "always worried about things" as per Macmillan's dictionary. It means "a feeling of anxiety or apprehension often accompanied by depression" according to http://www.thefreedictionary.com. Tony Abbott, the Australian opposition leader, has run into a problem with women reports The Economist. With the general election on August 21, 2010, Julia Gillard, the Australian Prime Minister, is more popular. While sensible people would place their policies before the people, The Economist reports that Mr Abbott’s frustrated colleagues seem to be trying the “gender card”: highlighting Ms Gillard’s status as an unmarried, childless woman (and an atheist, to boot).

I fail to understand why unmarried, childless woman is in any way inferior to anyone else. It might be her personal choice and should not we respect each person's personal choice. As long as the person has the quality/qualification/experience/knowledge etc to discharge her role as Prime Minister, why should her being unmarried / childless be a disqualification? I doubt if the same yardstick would be applied if it is a man.

If a woman comes up in life, somehow other issues are raised. Can a woman never come up or be successful in life due to her intelligence and hard work? Looks like even developed countries have this attitudinal problem. The Economist calls this "Abbott's angst". Somehow I feel it is not his angst, it should be the angst of all right thinking people as to why issues about a woman are raised for the only reason she is a woman and why societies adopt double standards for men and women?

7 times 7 is 48..!

Came across an interesting short article titled "Luck and riches: Life's not fair" (Economist/Buttonwood). Excerpts -

" .... read this story from Michael Mauboussin, the strategist at Legg Mason and contemplate the unfairness of life.

For almost two centuries, Spain has hosted an enomously popular Christmas lottery. Based on payout, it is the biggest lottery in the world and nearly all Spaniards play. In the mid 1970s, a man sought a ticket with the last two digits ending in 48. He found a ticket, bought it, and then won the lottery. When asked why he was so intent on finding that number, he replied "I dreamed of the number seven for seven straight nights. And 7 times 7 is 48."

Mmm... lucky chap!

Greater fools..!

Came across this interesting article - "GREATER FOOLS" by James Surowiecki

Some excerpts from the article -

Halfway through his Presidency, George W. Bush called on the country to build “an ownership society.” He trumpeted the soaring rate of U.S. homeownership, and extolled the virtues of giving individuals more control over their own financial lives. It was a comforting vision, but, as we now know, behind it was a bleak reality—bad subprime loans, mountains of credit-card debt, and shrinking pensions—reflecting a simple fact: when it comes to financial matters, many Americans have been left without a clue.

The depth of our financial ignorance is startling. In recent years, Annamaria Lusardi, an economist at Dartmouth and the head of the Financial Literacy Center, has conducted extensive studies of what Americans know about finance. It’s depressing work. Almost half of those surveyed couldn’t answer two questions about inflation and interest rates correctly, and slightly more sophisticated topics baffle a majority of people. Many people don’t know the terms of their mortgage or the interest rate they’re paying. And, at a time when we’re borrowing more than ever, most Americans can’t explain what compound interest is.

There’s evidence that just improving basic calculation skills and inculcating a few key concepts could make a significant difference. One study of the few states that have mandated financial education in schools found that it had a surprisingly large impact on savings rates. And the Center for American Progress has found that, across the country, education and counselling by nonprofit organizations, like the Massachusetts Affordable Housing Alliance, have helped low-income families buy and hold onto homes, even during the housing bubble. The point isn’t to turn the average American into Warren Buffett but to help people avoid disasters and day-to-day choices that eat away at their bank accounts. The difference between knowing a little about your finances and knowing nothing can amount to hundreds of thousands of dollars over a lifetime. And, as the past ten years have shown us, the cost to society can be far greater than that.

Read more - The dangers of financial illiteracy in America: http://www.newyorker.com/talk/financial/2010/07/05/100705ta_talk_surowiecki#ixzz0uu47TwMv

Wall Street, the White House, and the weak economy: newyorker.com

Came across an interesting article "Blame Games" by James Surowiecki.

Some excerpts from the article -

The U.S. economy is limping along. The job market is in rotten shape, and business investment is hitting historic lows. And, if you’re looking for a culprit for this dismal state of affairs, many businesspeople would be happy to point you to the White House. Companies aren’t hiring or investing, businessmen say, because the combination of Barack Obama’s anti-corporate attitude and a blizzard of new regulations and proposed taxes has created what Ivan Seidenberg, the C.E.O. of Verizon, calls “an increasingly hostile environment for investment and job creation.” In a recent Newsweek column, Fareed Zakaria pointed to the fact that Fortune 500 companies are sitting on a cash hoard of $1.8 trillion, and suggested that a “profound sense of distrust” might be why they weren’t spending it.

The impulse to blame Obama for all this corporate timidity is understandable: aside from the fact that plenty of businesspeople don’t like his policies, it would make things so much easier if a President could jump-start the economy just by making the suits feel better. But the attacks reflect the same blind faith in Obama’s powers that the hero worship of his election campaign did. As the political scientist George Edwards showed in his masterly study “On Deaf Ears,” people vastly overrate the influence of the bully pulpit: in most cases, the capacity of a President to change voters’ opinions is slim, and there’s no reason to think that he has any more influence over corporate executives. A different President isn’t going to get businesses off the mark. Only a different economy will.

Read more http://www.newyorker.com/talk/financial/2010/08/02/100802ta_talk_surowiecki#ixzz0uu0dSAAM

July 2010 ... interesting readings

These are some of the interesting articles which I have enjoyed reading this month.

Buttonwood: Losing confidence | The Economist 

Regulators Are Human, Too - Economix Blog - NYTimes.com

Bond markets, Keynesianism and debt: The meaning of low bond yields | The Economist 

A special report on innovation in emerging markets: Grow, grow, grow

Buttonwood: What goes up | The Economist

Private equity’s egregious tax loophole. : The New Yorker

Health care and the public’s resistance to change : The New Yorker 

Signal and Noise in Economics Writing, Arnold Kling | EconLog | Library of Economics and Liberty

A special report on Egypt: The long wait | The Economist

BBC News - India unveils prototype for $35 touch-screen computer

Magic of mobile phones and Wi-Fi foreseen 100 years ago - The Irish Times - Sat, Jul 24, 2010

The longest flight: A new record for solar-powered aviation | The Economist 

 

Solar-powered flight: Flying with sunlight (even in the dark) | The Economist

Rivers of Ice » Interactive

Rivers of Ice » Comparative Photography

Op-Ed Contributor - Losing the Owl, Saving the Forest

A Small Incident : The Timeless Wisdom of Eknath Easwaran

Easwaran on Stormy Seas : The Timeless Wisdom of Eknath Easwaran

Likes and Dislikes : The Timeless Wisdom of Eknath Easwaran

 

Do Cell Phones Cause Brain Tumors?

I came across a few interesting articles on the health related issues which come up due to use of mobile phones.  I had posted them in my facebook page on July 5th, 2010.

Do Cell Phones Cause Brain Tumors 

Is My Cell Phone Dangerous? | Environmental Working Group

Cell Phone Safety List 

Get a Safer Phone | Environmental Working Group

While the health related issues due to constant use of mobile phones have not been proven (atleast to the scientific community), somehow I am uncomfortable using my mobile for many months now.  Often I get pain in the ears + a burning sensation.   Nowadays I try to use more of landline, which doesn't cause this type of trouble.  I don't know if it is a problem due to my instrument (alone) or it is a general problem faced by many users.  Somehow the old charm of using a mobile is gone.  I find e-mails coming at late nights - thus even sleep is disturbed.  Sometimes, if I happen to read them then the sleep for the night is gone... as I start thinking about how to attend to the mail the next morning.  I think it was much better 10 years back when office work ended within office itself. 

The fight against processed food

I came across an interesting article in Business Line (July 2, 2010) (through The Hindu / Guardian) titled "Why are we eating our way to death?". 

Some excerpts from the article -

The rules spring from two facts. The first is that people who eat what Mr. Pollan defines as a western diet (“lots of everything except vegetables, fruits and whole grains“) tend to suffer from western ailments: obesity, type 2 diabetes, cardiovascular disease and cancer. The second is that people who eat more traditional diets - including those of certain indigenous peoples - that, by the lights of western food science, might be considered way too high-fat, high-carb or high-protein do not tend to suffer from these diseases. In other words, people can thrive on a wide variety of foods and diets, with one major exception: the diet most of us in the west are now eating.

 Some of his rules -

• Don’t eat anything your great-grandmother wouldn’t recognise as food
• Don’t get your fuel from the same place your car does
• Avoid food products with ‘lite’ or ‘low-fat’ or ‘non-fat’ in their names.
• The whiter the bread, the sooner you’re dead.

Challenges for the future...

Some days back, I received a mail from a senior colleague forwarding an article written by Dr Farrukh Saleem (September 2007) under the series "Capital Suggestion".  This blog post is an outcome of our correspondence on that article. To start with, some excerpts from the article written by Dr Farrukh Saleem.

In 2004, India became the 3rd most attractive foreign direct investment destination. Pakistan wasn't even in the top 25 countries. In 2004, the United Nations, the representative body of 192 sovereign member states, had requested the Election Commission of India to assist the UN in the holding elections in Al Jumhuriyah al Iraqiyah and Dowlat-e Eslami-ye Afghanestan. Why the Election Commission of India and not the Election Commission of Pakistan? After all, Islamabad is closer to Kabul than is Delhi.

Imagine, 12 percent of all American scientists are of Indian origin; 38 percent of doctors in America are Indian; 36 percent of NASA scientists are Indians; 34 percent of Microsoft employees are Indians; and 28 percent of IBM employees are Indians.

Our culture, our traditions and our cuisine are all the same. We watch the same movies and sing the same songs. What is it that Indians have and we don't?

INDIANS ELECT THEIR LEADERS!!!!!!!!!!!!!!!!!!

And also to mention: They think of Construction of own nation, unlike other nations who are just concerned with destruction of others...

Simple answer to why the Indians fare better than the Pakistanis - They don't focus on religion all the time and neither do they spend time and money in devising ways to kill their own and everyone else over religion.

To me it appeared to be written by a Pakistani who (probably) feels bad that his country is not growing as much as India.  It broadly highlights some of the positives about India in the recent past. Now, let me state my observations on this article.

India’s leap forward
In my own life time/living memory, we have moved from being a scarcity economy to a surplus economy.  This is a positive development. During the same time, Pakistan has been repeatedly called a failed state.  The failed states index ranks Pakistan as No.10 in their list.  The Economist calls Pakistan the world's most dangerous place.  Thus, from a common (rational) Pakistani perspective, India has galloped ahead - by concentrating on economics instead of religion.  Of course, there are some people who would like to group India too to the list of failed states.

Important challenges

While I agree that India has grown a lot, especially in comparison to Pakistan, I also feel there are some important negatives, which are crying for attention and which if unaddressed can derail the economic growth.  I will list some of them, as I have observed.

Widespread corruption

Widespread corruption is killing the ordinary people who need to interact with government machinery at every level. Every time I handle tax work, my blood boils at the brazenness with which men (and even women) demand money.  There is no shame either.  A few months back, one of the audit firm's articled clerk told about how her friends feel proud that their 'papa' comes home every day with money or things in kind (like new mobile phones etc).  Thus, not only the adults have lost their sense of shame - even children have lost it.  These are the same boys and girls who are going to rule the India of tomorrow.  Such people will not hesitate to even sell the motherland. 

Justice delayed

Winning (somehow) has become important.  End results are everything.  Means can be dumped in the Bay of Bengal.  This is today's India.  The legal system has become rotten.  There is endless wait for justice.  Justice delayed is justice denied.  But with lawyers becoming liars and seeking endless adjournments, the only people who make money out of the litigation are the legal fraternity.  I remember, even during my school days (1970s/80s) the first response of any God loving or God fearing lawyer would be to first find out what is the truth and then advise reconciliation instead of getting into a legal battle.  Today, the first response of a majority of the legal profession is not to find out what the truth is but how to make money – even if it is by cheating the opposite party – never mind if the opposing party is speaking the truth.  This situation has only reinforced my thoughts that even in the worst situation we should never enter courts. 

Cooking books of accounts

We have examples of how Chartered Accountants (CAs) collude with promoters to cook up accounts.  Whether it is the Satyam issue which came out into the open with promoter taking the blame or the innumerable mini Satyams that are all lying dormant (with active collusion of the CA profession), the level to which CAs have fallen has to be seen to be believed.  They have mortgaged their souls, forgotten their commitments and forsaken the principles of morality to make money for themselves (and for the promoters whom they represent).  Today, the dharma for lawyers and CAs is not to stick to truth but to make their clients win (incidentally, lawyers and CAs make their money too in the process).

Will the cream of our society constitute Yama Loka

Mahatma Gandhi said that business without ethics would destroy us.  The so called cream of the society comprising politicians, bureaucrats, engineers, doctors, businessmen, lawyers, judges, chartered accountants, .... you name them - each one of them is proving to be rascals.  Our scriptures talk about hell.  Seeing the things that are happening, I often wonder whether the Yama Loka would comprise only the cream of India.

Damaging environment

I am not sure if the Indian development story is sustainable.   We are busy clogging the roads with more and more private vehicles.   I find it extremely difficult to cross the road.  The footpaths have either vanished or become smaller.  It is impossible to cross the highway.  I have seen road(s) suddenly become one-ways with never ending traffic - it is impossible for ordinary people to cross over to the other side.  Looks like roads are there only for cars and vehicles.  It gives an impression that we have forgotten that there are large numbers of people who don't own vehicles and they also have equal rights over public spaces.  Do we need this type of development which spoils the environment?  I am not too sure. 

Galloping health care costs & doctors as commission agents

Health care costs have galloped beyond measure.  How many people can afford today's costs?  Almost every doctor looks to me like Lord Yama's agent.  Gone are the days when out of sheer faith and trust we used to consume medicine given by family doctor.  Today the trust is gone and we go for 2nd and 3rd opinion. 

You go for any ailment, doctors will prescribe a series of tests to be done – never mind if tests were done very recently.  The relevance of these tests is also not clear.  Costly tests, irrelevant tests, repeated tests…. there is a sense of revulsion and also helplessness today.  I hear again and again from people who feel that doctors get commission for prescribing medicines – giving rise to a strong suspicion that doctors have sold their souls to the drug manufacturers.  .  Strangely, I have noticed that the medicines prescribed by a doctor would be available only in the pharmacy located near his/her clinic. 

I have noticed one more trend and that is doctors becoming members of agencies like Amway and prescribing these product(s) which are not only costly but also to be bought only from them.  There is a clear conflict of interest – but that is not disclosed.  I am not talking about quality of the products of Amway – they may genuinely be good – but the fact that doctors make extra money by selling them is something which they don’t disclose. 

There are instances where doctors act as agents for Hospital chains.  You go for some ailment – they will tell you to undergo some tests and then get you admitted to their preferred hospital and you will end up with some operations (by-pass is most common).  We can make a reasonable presumption that they are getting commission from the Hospital chain.  Commission need not be in money form – it can be in the form of gifts, foreign tours to exotic locations often disguised as international conference(s) etc. 

I remember in my childhood days, we had a family doctor – Dr P. Vadhiraja Rao.  He will charge from rich – but will give free medicines to the poor.  We ourselves were from a poor family and mostly he used to give away medicines free.  Once or twice a year he used to take money from us – whenever we could afford.  We had blind / total faith in him.  If I give you medicine, you simply take it – that’s what he used to tell us and we used to believe him.  Today, where are such doctors? 

If medical college seats are sold for Rs.20 or 30 or 40 lakh, and if students have to take loans to become a doctor, they need to recover / repay the loans.  Then they start charging exorbitant fees, prescribe unwanted medicines and get medical tests done – whether relevant or not… I wonder where the poor would go for treatment.  No wonder, people like Ramdev Baba are becoming increasingly popular – we cannot afford to get treatment in private hospitals – we are afraid of going to government hospitals as it is generally believed to offer a direct route to Yama Loka – so the only alternative is to look for ways and means to avoid getting sick (Yoga is helpful to some extent) and try out home medicines / traditional medicines as the first line of defense.

Unaffordable housing costs

Housing has simply become unaffordable to a vast majority of the people.  Today is it possible for anyone to get a decent 2 BHK flat in Mumbai for anything less than Rs.50 lakh?  Even for this we have to go to the outskirts of the city.  How many can afford to have flats?  The end result is that we end up borrowing to the maximum extent to buy a roof under which we think we can live safely.  But can we build castles on debt?  I am not sure. 

Changing attitudes – right to live… somehow?

Around 2 months back while travelling in an auto rickshaw back to home, looking at a high rise building which we were crossing the auto driver said that when there is an earthquake, this building will fall.  I could see a “glee” in his face – as if he “wants” the high rise building to fall.  This is not an opinion on the quality of the construction – rather there is an expectation that this building should fall.  I could sense from his conversation that he clearly feels “they are rich” and “we are poor”.  While he may be law abiding today, whether he will remain law abiding in future – if he gets an opportunity is something we can’t tell.

Today there is some hope that with some serious hard work, people can make some money.  Whether they are rich or poor, people want to give some decent education to their children.  But the exorbitant price rise is stretching the limits/patience of people.  Around 6-8 months back, I found that one of the regular auto rickshaws used by me was consistently charging higher auto fares than those charged by other autos.  When I asked him, the auto driver said – “Sir, we have families and we also have a right to live”.  He did not dispute the fact that his auto meter is tampered. 

In olden days, people used to restrict their expenses within their incomes.  Today, expenses are taken as fixed, and income is to be increased, if required, by foul means.  This can have serious consequences for the future.  If people, who want to make money legally, feel they are deprived of the same or they don’t get enough opportunities etc., then it is bound to create resentment vis-à-vis those whom they perceive as rich.

Large middle class and conspicuous consumption

In the 1970s/80s we had a very marginal rich class and a huge chunk of the population was part of the scarcity economy.  Thus, almost everyone was alike – we were all struggling together to make a living.  Thus, resentment, if any was only towards the political class.  Today, what we find is that while the liberalization has changed the position a bit better for a decent size of the population (which is now classified as middle class) around 200 to 300 million people are still struggling for their livelihood issues.  The inflation which is raging is killing them.  My worry is that the disparities are much higher now and much more visible today than it was in the past.  This can lead to resentment and anger.

Can we have islands of prosperity in an ocean of misery? 

An entire generation (or two) of people are coming up who have never experienced what is suffering.  Can they sustain a serious economic downturn?  I am not sure. 

From being a country which was frugal, humble and which cared for the poor and downtrodden, we are changing to the other extreme. 

I find serious 'insensitivity' of the ruling class to sufferings of the poor and poor governance issues (incl serious Maoist insurgency across large areas of the country and widespread infiltration by Bangladeshis). 

The huge population can be a blessing and also a curse (if not properly handled).  While India is ahead in the growth curve vis-à-vis Pakistan, we are definitely much behind China and many other countries, in almost all indicators.  And that is a cause of serious worry.

Given all these challenges including linguistic chauvinism, regionalism, unequal economic development leading to migration from rural to urban centres and from centres of low economic growth/opportunity to centres which are doing well economically etc (South and West are doing much better vis-à-vis East and pockets of North like UP/Bihar), I often wonder whether this country will remain united - 50 years down the line?  I am not sure. 

Our rulers (irrespective of parties), unfortunately don't inspire confidence.  It is a mystery, how we are growing, inspite of numerous hurdles.  Sorry for sounding negative.  Sensex @ 18k or 20k doesn't excite me.  Can we have islands of prosperity in an ocean of misery?  When the inequality dramatically goes up, it would lead to riots on the streets. 

Tears of the poor worry me

How long will the meek remain meek?  Tears of the poor worry me.  Today what we see is predominantly tears of the poor and downtrodden who don’t have voice.  But, think for a moment, how much time does it take for resentment to turn into a wave of anger and hatred?  It can wipe out decades of hard work and India can very easily get clubbed with Pakistan as a failed state. 

While this was my broad response to the article forwarded, I got this response back which is quite interesting –

I am not so appalled by the state of the society though all the individual facts may be appalling. Perhaps I may not know or understand the nuances of sociology or building of a just society, but I accept the fact that society will always remain an imperfect one, no matter how much we advance. Good part is we deal not just with society but with individuals too, many of whom bring smile to our face, give meaning to our life and some sense of purpose.

Yes, we can not be at ease given the circumstances, but can we be at peace with ourselves as long as we spare some efforts for making a difference?

I think that's what our Pakistani journalist friend has tried to do.

Conclusion

There are serious challenges to India as a state.  There are serious challenges to families in our society – irrespective of community / region / class.  Joint families are breaking and these are leading to new sets of problems.  The mindset required to adjust to others is vanishing.  Tolerance for differing opinions/views is going down.  People are living longer, living alone but facing the challenges on account of inflation and high health care costs.  Today, apparently there is wealth creation.  Everyone seems to have money - if not everyone atleast a good chunk of the population is having money.  But unfortunately, even as I see glitter outside, I see hollowness inside the core.  The development and growth structure appears brittle and is based on weak foundations of poor governance.

In his article, Dr Farrukh Saleem is giving example about the Ambanis.  Should we emulate the Ambanis or the Tatas?  I for one would believe that following Tatas would be a more appropriate way and would be in line with our Indian value system - atleast the one that got us independence.  One or more or many or most or all things can go wrong or right depending upon our luck.  We all feel getting rich (somehow) is most important.  The ends are important - but the means to the end are also important, if we want to have an equitable and just society.  I agree it is impossible to have full equality.  But atleast the gap between the rich and poor can be bridged to some extent.  

It is difficult to even visualize a situation where the common man and woman of this country are going to actually have a voice where in they can be heard and some course correction is done by the rulers.  Till then, it appears that we have no choice but to be at peace with ourselves and also bring peace to people around us by sparing some efforts for making a difference to their lives.

Men less enthusiastic about work!

Business Line (July 2, 2010) carried a news report titled "Men 'less enthusiastic about work than women' (Asian News International).  

Its about a UK study carried out by University of Portsmouth scientists, Darren Van Laar and Simon Easton, which found that men are less enthusiastic about work than women until retirement time comes, when they are seen bouncing back with renewed interest in their jobs.  

Mmm... ofcourse, our women colleagues wouldn't be surprised at the finding that men are less enthusiastic about work!  They may ask, why conduct a study to prove something which is already well known?  Anyway, looking at how the world economy is moving and the high cost of living in India, we will all have to work till death do us part... so it is a matter of satisfaction that the UK study has pointed out that atleast around retirement time, men do bounce back with renewed interest in their jobs!! Otherwise, life would be even more difficult.

Birla Sun Life, housing projects and transparency...

I read with interest the news that Birla Sun Life is raising a Rs 1,200-crore realty fund focussed on residential real estate projects (Business Line, July 3, 2010).

The paper quotes Sri Shashi Kumar, Head, Real Estate Investment Advisory, Birla Sun Life Asset Management Company as saying that the intention was not to be a “one more realty fund,” but to bring about as much transparency as possible in the projects. That's a great news.  To this end, Birla Sun Life plans to identify two developers in each of the cities of Mumbai, Hyderabad, Chennai and Bangalore and participate in the development process, right from land purchase.

While this is a good news, what is troubling is the answer to the question as to how the fund house would overcome the unaccounted component of the land deal, since land deals, in general, are known to carry a financial consideration that does not reflect in the accounts, he said the developer would have to take care of that.

Starting a fund, announcing that their intention was not to be a “one more realty fund,” but that the intention is to bring about transparency in the projects, keeping that in view and participating in the development process, right from land purchase, etc but ultimately saying that the developer would have to take care of the "unaccounted component" of the land deal... this is disappointing.

Advertisements by PSUs and private sector companies - Part 3

Well.. I am back to my favourite observation.. looking at advertisements issued by PSUs..  Now, see this advertisement by Indian Bank (Business Line, June 28, 2010):

Mmm... I don't have to say anything.. the picture says it all..

Future, tense..?

Sri V Anantha Nageswaran in his article "Can Asians exhale?" (Mint, June 14, 2010) says that a news item in The Times of India on the relentless rise in apartment prices in Mumbai caught his attention. The asking price for a 620 sq. ft apartment was around Rs44 lakh.  While buyers are turning away, the developers do not appear to be deterred. 

 

The price rise is unreasonable.  In a place like Bombay (or Mumbai, to be politically correct), the rise is spectacular.  People who bought flats in the range of Rs.15-20 lakh 4 to 5 years back are getting offers of Rs.80 to 100 lakh.  In an earlier flat where we stayed (on rent), after the owner promised that we can stay for as long as we want, within 6 months, we had real estate agents swarming the place as there was change of heart of the owner.  The offers he was getting was very good though the housing complex (where our flat was located) was considered as part of the forest land and it was anybody's guess about the final decision in the matter.  After months of uncertainty, we finally shifted to another flat, wherein again after 6 months, we ended up with same uncertainty, as the flat came up for sale.  

Today people are getting offers, which have no basis or economic rationale.  After twenty years of working, I ventured into buying a flat and that too with trepidation.  We are taking a huge risk with a long term commitment.  The key assumption is that our jobs would be intact - our companies would grow - our salaries would go up etc.  We are living in an uncertain world and these assumptions, age has taught me, is pretty dangerous.  Today, too many youngsters are in the job market and they have never seen a downturn / recession.  That's why I feel too many young people are out to buy flats... even if its only for investment.  Maybe the growth in the economy in the last few years, has made corporates loosen their purse strings.  Too many young people make money too quickly and they don't know what to do with that money.  As they have seen that the prices of flats have gone up (in the recent past) they believe that it will go up in similar fashion in the coming years and end up buying flats at whatever be the price.  The situation is unsustainable.  Often I hear people say that it is better to buy flat now, as it will be too late tomorrow.  Here again, people make the assumption that the rosy job / salary / income situation would continue in the future for an indefinite period.  Only time will tell, if such an assumption is correct.

Anantha Nageswaran says -  

.. a combination of interest rate increases, currency appreciation, capital controls, anti-speculative measures targeted at specific sectors and moral suasion with the financial sector and with the public have to form part of the policy response in Asia.

... the overheating is also being fanned due to the pursuit of short-term economic growth as an end-goal in itself. Asia is still anxious to catch up fast and to compress the two or more centuries that Western nations took to achieve their current status into a generation. That is neither desirable nor feasible. There is needless insecurity and breathless activity, consequently. The social, environmental and geopolitical costs of such a pursuit are eluding their grasp.

The point is that no one wants to rock a boat when it apparently is sailing smoothly.  Who will bell the cat?  Politicians, media, banks ... everyone seems to have a vested interest in not rocking the boat.  Why fix something that isn't broke?  That seems to be the thinking.  I only wish it doesn't become a tsunami in future and wipe off all the hard work of the past.  The inflation that is raging on every single item of day-to-day use has to be seen to be believed.  But it doesn't pinch the politicians.  It doesn't pinch the government employees, as they have something like Dearness Allowance, to take care of price rise.  What about the employees from the private sector and the unorganised sector who work for fixed salaries (or CTCs)?  Who talks about them, now-a-days?

As China is growing at 10+% for decades, Indian politicians feel it will be below our dignity if the growth rate goes down a bit and so loose money policy will continue.  In the process, we lose our fight against inflation and impose a cruel tax on the poor.  I am increasingly worried about the future.  Sensex may go wherever it wants.  It doesn't matter to me.  For the common man, it is important to know whether he/she would be able to service large loans taken for housing purposes over 15 to 20 year periods?  I think, today no one is thinking about that.  Everyone feels that the prices of flats would only go up and in case of emergency situation, they can always sell the flat and get out.  In the event of a worse case situation emerging, can everyone get out at the same time?  Will not the prices crash in that case?  Who will service the EMI in such an event?  How will banks manage a tsunami of defaults?  Do they have a macro model where such events are taken cognizance of?  I am not sure. 

Anantha Nageswaran quotes George Akerlof and Robert Shiller for their excellent description of overheating (page 65 of their book Animal Spirits) -

The term overheated economy, as we shall use it, refers to a situation in which confidence has gone beyond normal bounds, in which an increasing fraction of people have lost their normal scepticism about the economic outlook and are ready to believe stories about a new economic boom. It is a time when careless spending by consumers is the norm and when bad real investments are made, with the initiators of those investments merely hoping that others will buy them out, not feeling independently confident that the underlying real investment is sound. It is a time when corruption and bad faith run high, since they rely on trusting behaviour on the part of the public and of apathetic government regulators. This corruption, however, is mostly recognized publicly only after the fact, when the euphoria has ended. It is often also a time when people feel social pressure to consumer at a high level because they see everyone else doing so, do not want to be seen as laggards, and do not worry about such high levels of consumption because they feel that others don’t either.

To me, this definition would definitely hold good in the Indian scenerio and that makes the future... tense.  

Sri Ashoak Upadhyay in his biting article "False optimism, empty promises" (Business Line, June 28, 2010) points out the policy makers have been endlessly dishing out a rosy perception of the future to those who want to hear it endlessly. For the rest, the miseries of inflation and poor infrastructure are here to stay. 

Sri Upadhyay says -

SAME OLD CLAPTRAP

But the policy player seems to have advanced a step. The only way to connect India with modern infrastructure is to fill the funds gap — itself an endless incantation — with capital from the advanced markets that have it.

So the critical problem affecting the the Indian economy is both capital and the institutional mechanism to ensure its smooth flow into the sector. That sounds familiar, too.

So do a raft of assurances on everything that is wrong with India. Consumer prices have been riding high since mid-2008 — in their endless round of increases — and policymakers have never tired of assuring the nation, on television, in print, that their reversal is just round the corner.

How, one asks; what is the Ministry of Agriculture going to do? Crack the whip on hoarders? Boost farm productivity? Everyone is betting on rain, it appears. Last year the drought spoilt the kharif crop; then it was said the rabi would do the trick.

In April when prices soared (and even the Wholesale Price Index, or headline inflation defied North Block) policy players, from the advisor to the Finance Ministry to the Prime Minster himself, rushed to assure us that by year's end, December 2009 that is, prices would drop.

The Reserve Bank of India, for its part, magisterially pronounced its own time-table for deliverance —next March.

Even as policy makers repeatedly assured that inflation would go down, it has defied control.  It has not stopped policy makers from making one promise after another, as if to show that they are in control of the situation.  This graphic from Mint (June 22, 2010) throws light on this issue.

Somewhere down the line, we seem to have lost control over inflation.  Policy makers are caught between showing "better growth rates" so that capital markets don't tank and lower prices expected by the masses.  Today, elections are not there.  Thus, policy makers may think, that the masses can wait and may feel that keeping the capital markets happy is of paramount importance. Policy makers keep making announcements about how inflation is getting controlled or when it will be fully under control.  The media is swallowing and vomitting the policy makers' versions.  The inflation tiger has run away carrying the common man (and woman) in its mouth and the policy makers don't know how to get out of their growth tiger without getting hurt.  There is no satisfaction in knowing that other countries too are facing the same situation.  If I am hungry, I should have food to eat.  Knowing that ten others are also without food, is no satisfaction for me.  It is not going to satisfy my hunger.

Aparajita Sinha & Chandni Gupta point out in Mint (June 22, 2010) that there are indications that inflation is recently spilling over into the manufactured products sector. The big question then: Is the worst behind or ahead of us?  If the capabilities and intentions of the policy makers are any indication, our worst is yet to come.  Too many people are going to get hurt when the growth machine comes to an abrupt halt.  To me, future is uncertain and it definitely looks tense.

Bhopal: Lessons in governance

In a previous post "A riddle, wrapped in a mystery, inside an enigma" I had shared two articles on the subject of Bhopal.  Subsequently, I came across another interesting article "Bhopal: Lessons in governance" in Business Line (June 28, 2010) by Sri P.V. Indiresan, former Director of IIT, Madras.

Some interesting points from the article:

Do we prosecute Mr Patel, the Minister for Civil Aviation, for the disaster in Mangalore or Ms Mamata Banerjee, even though she has shown little concern for rail disasters?

If they can escape recrimination why do we single out Mr Anderson, that too after 25 years? Is he the culprit, or is it the government(s) that left matters drift for 25 years?

The solution to problems like Bhopal lies in taking away the control of the prosecution of offenders from the hands of ministers.

We need a different system of governance to deal with prosecution of the guilty. Sensitive departments should be overseen by all-party Parliamentary committees; appointments and transfers should be made professionally.

When matters of criminal prosecution are thrown open in this manner, decisions are more likely to be impartial.

Nobody has pointed out that the scale of the Bhopal disaster was a matter of geography; few, very few people would have died or suffered in case the plant had been in a village. It is possible that when the plant came up, it was at the outskirts of Bhopal.Unfortunately, the way it happens in all our cities, people were allowed, possibly even encouraged, to settle in large numbers around the plant.

Sri Indiresan concludes the article by giving 3 suggestions.

It appears that disasters of the type we had in Bhopal can be prevented only when we take three precautions:

1. We should have a political system in which ministers cannot ride roughshod over bureaucrats;
2. Our cities should not house dangerous industries and
3. Once a risky plant is established no population should be allowed to settle within a close distance.

Unfortunately, I am not sure whether any of them can be implemented in India.  Let us look at the first suggestion that ministers should not ride roughshod over bureaucrats.  First of all, I don't think there is a need for so many ministries.  But we do have ministries because politicians have to be pleased.  Once we have a ministry, then we need to have bureaucrats!  Thus, it satisfies the need for babus to grow.  Once we have a babu, he/she needs people under him/her.  Thus, a governmental machinery is established.  Once it is there, they need to justify their existence and so some rules are regulations are framed.  At the end of the day, they have to live!

Our cities should not house dangerous industries and once a risky plant is established no population should be allowed to settle within a close distance says Sri Indiresan.  Both are very sensible suggestions.  But cities have grown.  What was once a factory located on the outskirts of the city, is now found right in the middle of the city, as the city has grown on all sides.  How do we ask / ensure that the factory is re-located outside?  Unions (and politicians) would jump into the fray as it means people working also have to go out.  Whenever I go the Mumbai Airport, I see so many buildings/slums nearby - it is such a terrible security risk - still we are unable to do anything.  As a country we only "react" to events - however deadly it is and then after making the ritualistic noise, we settle down to our routine (of not doing anything sensible).  Does anyone remember the terrorist attacks in Mumbai today?  We will remember them after the next attack!  That is the unfortunate price of a democracy.

An excellent article, as usual by Sri P.V. Indiresan.  But we can be sure, nothing will come out it.  Politicians and the media are talking about Bhopal only because they are not getting anything sensational at this point in time.  If we wait for a few more days - everyone would forget it.  Something sensational would come up and media would latch on the "new" news and everyone would forget Bhopal.  After all, as a country, did we not forget it for 25 years?