Change Is Our Only Hope In The Next Decade

IN THE SEASON OF SCAMS AND PARLIAMENTARY paralysis, it is easy to take a glum view of the future. Ratan Tata proclaims India a banana republic; institutions of the state lack integrity; a community is on warpath demanding lower social status; a region wants to separate from a state; workers of the world unite only in killing one another in eastern India; insurgency and counter-insurgency shed innocent blood; and even vegetables make you cry.

Yet, there is much to be hopeful about, if only you lift your head out of the continuous present in which contemporary culture dunks you and keeps you submerged. This Limping out of the Asian crisis at the turn of the century, few would have thought that India would accomplish what it has over the last 10 years. If we could achieve so much these last 10 years, why should the next 10 be bereft of hope?

Change must come to a number of different areas. The potential exists, resources are aplenty, only the will to act is missing. Political funding must become transparent and accountable. Every rupee that a party or its functionary spends must be traceable to its source. The current non-institutional form of mobilising resources for politics is the root of corruption. Politicians make money for themselves and for their parties through loot of the exchequer, sale of patronage and extortion, all with the collusion of civil servants. Other democracies fund their politics, but without such comprehensive depravity. This can and must change.

The legal system cannot continue to be dysfunctional. What prevents us from appointing 100,000 new judges over the next 10 years, to clear up the backlog of cases that creates a perversion of justice called undertrial prisoners, and shrink the life expectancy at birth of any piece of legislation to 18 months till disposal of the final appeal? Our police forces are sadly undermanned, poorly trained and politicised. Overhaul them, we must.

India faces a desperate shortage of talent. We need a revamped, expanded education system, a parallel stream of clearly defined, certifiable skill modules that offer young people the possibility of continuous skill upgradation all the way to a professional degree. We need a political culture that stops patronising power theft, and instead, encourages payment of realistic user charges to transform all infrastructure deficit into a huge growth opportunity. And we need to shed our current fear of technology, to realise its full potential whether in inclusive banking or education or tele-medicine. Regulatory wisdom in India comes twinned with geriatric suspicion of technology, scuppering a universe of possibilities.

If there is one thing that we need to carry over from the decade that is coming to a close, besides the philosophy of inclusive growth, it is the slogan, Yes, we can!

Till next time, wish you the very best in the year ahead 2011.

- Prasad

Small economies, big headaches

Another financial storm, another bailout. In May, it was Greece. Now, it’s Ireland, an economy that accounts for just.0.3% of world GDP. Over the past few weeks, Ireland has been the central figure in an unfolding tragi-comedy . The EU was pressing Ireland to accept a rescue package. Ireland insisted it didn’t need one. It has finally settled for a bailout estimated to cost €80-90 billion.

The drama has not impressed the financial markets. There have been huge sell-offs in several markets, including India. You have to wonder how a country , which registers as a place where men sport skirts, can give the jitters to the world economy.

Ireland is being mentioned in the same breath as Greece. But the two situations are different. In Greece, the EU bailout was necessitated by the refusal of private investors to provide funds to the Greek government. Ireland contended that its government finances were fully funded until the middle of 2011. And yet the EU has pushed funds down Ireland’s throat. Why?

The immediate problem in Ireland is with banks, not with government finances . In 2008, at the height of the subprime crisis, the government assumed full or partial ownership of three large banks and guaranteed the liabilities of the entire banking sector until the end of 2010. The guarantee was recently extended up to June 2011.

But these measures have not stabilised the Irish banking system. Bank losses from real estate have mounted. Corporate deposits have been fleeing Irish banks. Ireland’s banks are on ventilator support — they now survive on liquidity provided by the European Central Bank.

The markets rightly believe this can’t go on. Today’s banking problem will become tomorrow’s sovereign debt problem . The banks will require massive infusion of funds. The funds will have to come from the government. With public debt at 100% of GDP, the government will find it difficult to borrow. Yields on Irish government bonds have gone up by over 200-basis points in recent weeks. That raised the spectre of a default on Irish government guarantees of bank debt.
Should this happen, two consequences will follow that could prove lethal to the world economy. One, there will be a run on banks in other troubled economies such as Portugal and Spain. Two, banks in UK, France and Germany will incur huge losses on the substantial exposures they have to banks in Ireland.

As with Greece earlier, saving Ireland is all about saving banks elsewhere in the EU. A more accurate analogy would be with the Iceland crisis in 2008. In Iceland too, banks went bust leaving other EU banks heavily exposed. The operative word is ‘contagion’

Any more bailouts anyone ?

Emerging economies as saviours ?

OVER the past two years, industrial countries have experienced bouts of severe financial instability. Currently, they are wrestling with widening sovereign-debt problems and high unemployment. Yet emerging economies (EEs), once considered more vulnerable, have been remarkably resilient. With growth returning to pre-2008 breakout levels, the performance of China, India, and Brazil is an important engine of expansion for today's global economy.

High growth and financial stability in EEs are helping to facilitate the massive adjustment facing industrial countries. But that growth has significant longer-term implications. If the current pattern is sustained, the global economy will be permanently transformed. Specifically, not much more than a decade is needed for the share of global GDP generated by developing economies to pass the 50% mark when measured in market prices.

So it is important to know whether this breakout growth phase is sustainable. The answer comes in two parts. One depends on EEs' ability to manage their own success; the other relates to the extent to which the global economy can accommodate this success. The answer to the first question is reassuring; the answer to the second is not. While still able to exploit the scope for catch-up growth, EEs must undertake continuous, rapid, and at times difficult structural change, along with a parallel process of reform and institution building. With government policy remaining on course, we should expect a gradual strengthening of endogenous domestic growth drivers in EEs, anchored by an expanding middle class. Combined with higher trade among them, their future is one of reduced dependence on industrial-country demand, though not a complete decoupling.

Distribution as well as growth matter. EEs still need to manage better their growing domestic tensions, which reflect rising income inequality and uneven access to basic services. A failure on this front would derail their strengthening domestic and regional growth dynamics. This's better understood today, with distributional aspects of growth strategy being firmly placed on EEs' policy agendas.

While EEs can deal with the slowdown in industrial countries, the financial-sector transmission mechanism is more challenging. Today's low interest-rate environment is causing a flood of financial flows to EEs, raising the risk of inflation and asset bubbles. The hiccups in western banks have served to disrupt the availability of trade credits, and, if amplified, could destabilise local banks.

These risks are real. Fortunately, several EEs continue to have cushions and shock absorbers. Having entered the 2008-09 crisis with sound initial conditions, they are nowhere near exhausting their fiscal and financial flexibility — and hence their capacity to respond to future shocks. Overall, EEs are well placed to continue to navigate successfully a world rendered unstable by crises in industrial countries. Yet, again, the decoupling is not complete. A favourable outcome requires industrial countries' ability and willingness to accommodate the growing prominence of EEs. The risks here are significant.

The flow of knowledge, finance, and technology that underpins sustained high growth rates in EEs is closely linked to an open, rule-based, and globalised economy. Yet this global construct comes under pressure in an environment in which advanced countries have stubbornly high unemployment and bouts of financial volatility. Hence, such continued openness cannot be taken for granted. Political and policy narratives are becoming more domestic and narrow, while the global agenda and the pursuit of collective common interests are having greater difficulty being heard. These challenges will grow.

Managing an increasingly complex set of transnational connections is an even bigger challenge in a multi-speed world that is being turned upside down. Such a world needs better global governance, as well as overdue institutional reforms that give EEs proper voice in global institutions. In the absence of such changes, the global economy may bounce from one crisis to another without a firm hand on the rudder to establish an overall sense of direction. The result is what economists call Nash equilibria, or a series of suboptimal and only quasi-cooperative outcomes. Where does all this leave us? EEs will be called on to play an even larger role in a multi-speed global economy characterised by protracted rehabilitation of over-extended balance sheets in industrial countries. Left to their own devices, they are up to the task. But they do not operate in a vacuum. EEs' ability to provide the growth lubrication that facilitates adjustment in industrial countries is also a function of the latter countries' willingness to accommodate tectonic shifts in the operation and governance of the global economy.

Let us hope that these global issues receive the attention they require.

A Pill For Bad Memories - Pop it, forget it

Its been a long time no action from my side...well work has kept its toll on me lately...but yes that doesn't mean I stop my thoughts to flow on the web. This thought is a killer which wont kill you but yes will surely get you outta of the mess.

Our mutual interaction tends, given that we are a species as complex and complicated as nothing else, to produce both feelings of euphoria and acute depression. The latter, however, may have a cure at hand: an antidote for bad memories. An international team of scientists, led by the University of Puerto Rico, has reportedly discovered a drug that can lessen the painful impact of bad memories. The protein called Brain-Derived Neurotrophic Factor (BDNF) works by ‘flooding the mind with feelings of security and safety'. A dose of the substance is supposed to reduce fear and anxiety making us all happy and contented human beings, dispensing with the services of spiritual gurus.

There are other benefits. The heartbroken, by way of amorous matters or otherwise, could find prompt relief. Then, it could help us, in India, get over several issues. The Partition, for example. All we need to do is get an Indian pharma company to make a generic version of the substance and produce it on a massive scale. The resultant pill or syrup could then be supplied, through all available private and public sector means, to the whole population. And, of course, we supply it in requisite doses to neighbouring countries.

Once it is consumed, we will be so full of the milk of human kindness, all mutual hostility so utterly forgotten, that we will be trampling over each other to shower kisses and hugs on our previously-hated ones. The fringe benefit will be that the fundos on either side, both the well-bearded and the saffron sort, will, in the Marxian sense of things, wither away and die. That, as some of us might aver, is a consummation devoutly to be wished for. Irritating sceptics, however, might try to point out that this whole culture of having a pill for everything is somewhat odd, or perhaps even undesirable.

They could be force-fed the pill on a priority basis. And then we can take another pill so that all of us can forget anything nasty happened.

Hahaha....

Till next time...let me pop the pill and tell you its feedback !

Finding true love

THE notion that finding a perfect match is a science, has been known to Indians for millennia.

Complex calculations of the relative positions of stars in the candidates’ horoscopes, even more convoluted research into their familial prospects and assets, besides of course, close scrutiny to assess personal attributes, have always been de rigeuer pre-nuptial activity. The cumulative information and practical wisdom that reposes in the heads of people traditionally charged with finding alliances in India, have proved to be convenient and speedy shortcuts for marriageable offspring and anxious parents alike, with classified matrimonial advertising adding a 20th century dimension. Now, after years of seeking true love via pop quizzes in lifestyle magazines, the west has finally caught on that the perfect mate can be obtained less by mastering the art of love than by analysing empirical evidence. It stands to reason. If Netflix can recommend appropriate movies for customers based on an algorithm that analyses previous choices, why can’t singletons find their possible mates using scientific markers? Online, that too.

While the idea of romantic chemistry via novel formulae devised by websites offering ‘focussed’ choices seems more dependable than singles bars, they do not come cheap. One service, for instance, that has based its USP on the ‘fact’ that women are attracted to the smell of men who have immune systems very different from their own, charges nearly $2,000 to bolster their subscribers’ chances, by taking deep background checks to a new level: not only credit and criminal records but also DNA profiles! Some sites delve into matching characteristics and traits, others compare and match family, social and educational backgrounds, interests and aspirations. The underlying principle is obvious — finding a mate has to be more exacting than finding a date.

Could this be the next lucrative outsourcing idea?