Sunday Posts

'Self-reliance' has come to India. However, in its current avatar, it looks less like a confident country aspiring for a great future but rather like this staged street-corner bonfire of foreign (chinese) products.   In a volte face par excellence, many Indian commentators, who snigger at 'Nehruvian Socialism' and the strategy of 'import substitution' followed by post-Independence India, are suddenly champions of 'Atmanirvar' Bharat. This, of course, doesn't mean that they have belatedly realised Nehru as a genius. They, and various Trump-loving American commentators after them, believe that this time, self-reliance is different. It is not about North Korea style autarky; instead, some kind of magical open closedness (or closed openness as it may be) that would let India have its cake and eat it too. "We can import anything as long as it's made in India", the Prime Minister is reported to have told a group of businessmen recently. This ...

In the middle of the ongoing economic chaos, many in India find solace in the hope that many manufacturing companies would now leave China and shift their factories to India. They enthusiastically share many stories about companies deciding to move out. While the COVID19 pandemic, still in its early stages in India, is stress-testing the Indian economy, India as the next global manufacturing hub is indeed the dream worth dreaming about. This is an old dream, however. This - 'Make in India' - was a campaign slogan in 2014 General Election. In fact, this has been the key economic strategy of the government of India, to elevate India into its next stage of economic development and reach the benefits of economic growth more widely than the service-led economy has achieved so far. It was presumed - then - that China had become too expensive for manufacturers and they would now move to cheaper locations, such as India. And, it was not wishful thinking: Manufacturers were indeed gradu...

It is always poor people's fault. The world seems precarious at this moment. The neo-liberal activism since the 80s have destroyed the foundations of the Liberal system, its system of nations sustained by the welfare state: The neat structures of the world order seem to be withering away.  A Russian president openly talks about the possibilities of nuclear war; the leaders of Britain and Germany precariously hang on to power in the face of right-wing revolutions while the prospect of a left revolution looks real in France; in the United States, private interests of the President trump his public duties. At the turn of 2018, chaos reigns. If the newspapers have to be believed, it is all due to immigrants or poor people. In fact, it is immigrants AND poor people: Globalization unleashed people movements - from South and Central America to North America, from North Africa and the Middle East to Europe and from East to West Europe - and this has made the poor people i...

The Middle Class is all about paradoxes.  Those who embrace Middle Class claim not to believe in classes at all, or at least in class as a determinant of human behaviour. For Middle Classes then, it's about in the middle in terms of income and not about being a class at all. In that sense, Middle Class is only a temporary, transitional, identity. Also, this 'Middle' is neither the average, nor the exact middle point and nor the most common level of earning, but rather, about being in transition - not being defined by what one is, but what one wants to be. So, the most plausible definition of the Middle Class is not about class, or a point in income distribution, but a mindset. Now what that mindset is, there is no clear agreement on that. One view holds that middle class is about striving, trying to get better, doing better than their parents did. The other is that the middle class is about an endless struggle not to be poor, by mimicking the techniques of t...

Automation is Capitalism's great new prize and its most potent challenge. At once, it breaks the back of organised labour but puts into disarray the carefully constructed social system that we call Capitalism. It is Capital - that's what machines, robots and know-how are - becoming supremely productive and utterly meaningless at the same time. It is the realisation of an utopia, but also a moment of reality. It would potentially expand supply infinitely, as finite Human time will no longer be required, at the same time as perversely limiting demand, as nothing that is produced could be bought. The last bit is indeed the classic Marxist argument, but from the vantage point of 21st century, we see something that Marx did not. First, though Marx made some very insightful predictions, the empire was still only taking shape and at the time of Marx's death, the integration of global economy was still in its infancy. Also, for Marx, the nineteenth century capitalism was a ...

It is common to hear - Globalization is not working for everyone! The Right says it, and believes that closed societies with open economies is the answer; the Left says it too, though they believe that the solution lies in closed economies with an open society. The Left says that the Right is xenophobic, and the Right says that the Left is living in cuckooland! And, the Right-of-the-Right and the Left-of-the-Left steal the wind from the sails of their clueless moderates, claiming, in consensus, that globalization is the problem, erasing the right-left divide into a new politics of For and Against Globalization. At least in theory, global trade is good: It should keep the wars away. Stopping trade is the first rumbling of the war, the moment when the possible booty of extraction seems bigger than benefits of exchange. And, this is not just about flows of goods and money: Flow of people too, since when people started to matter in politics, is important in reducing conflicts. Once y...

There are people who would proclaim 'End of Capitalism' as each new crisis breaks, only to be proved wrong. Just as Marx did in his time, they see this end coming in every war or revolution, and indeed, in big and small financial crisis - from great depressions to currency crisis to stock market crashes. They see germination of an alternative from the triumph of socialist agenda in Vietnam or Venezuela, or a general apocalypse in climate change or a Russian face-off. In short, they seem to expect a definitive, episodic end of capitalism. But nothing yet has come of it. 'Capitalism', the beast these thinkers aspired of killing, has only come back stronger, proving its resilience through defying the odds. Stock markets that went down went up eventually, financial crisis dissolved into stability, revolutionary regimes decayed into business as usual and the apocalypse failed to arrive. Ironically, as it defied misplaced expectations of its demise, it seemed Capitalism...

All our politics is Politics of Welfare. For, all our difference, between Liberals and Conservatives, the Left and the Right, can be summarised as this: 1. The Liberals want the State to tax those who earn and provide Welfare to those who do not, so that those who earn can keep themselves forever on the treadmill and those who do not can be happy with the handouts, and this should keep everyone off politics. 2. The Conservatives do not want to tax those who earn and do not want to give Welfare to those who do not, so that the former is happy and the latter is on the treadmill, and this should keep everyone off politics. These conversations are so common that one may think this was always the case. However, as we know, politics of welfare is not primordial, but rather an industrial age phenomena. At its core, it assumes that everyone can, and should, be able to find work, and it is either Unfortunate (Liberal) or Criminal (Conservative) not to be able to find work...

Of the life's two great certainties - death and taxes - we have not been doing very well with the latter. For an increasingly squeezed Middle Classes, facing declining real income, uncertain job prospects, costlier health-care and education and the very real possibility of never being able to retire, the fact that the rich does not pay much taxes may occasionally shock, but not paying taxes has indeed become one of the key signals of being rich. The newest metaphor of business - the cloud - is not just about technology, but of de-materialisation of taxes too. Obscure as it may be, the fate of taxes, and its consequence, may be one of the best ways to understand the global economy. Consider the two seemingly opposite conversations trending in the news in the last few weeks. One is that the Indian cabinet is considering imposition of a 'Google Tax', or, more correctly, an 'Equalisation Levy', an uniform charge on revenues made in India for all corporations not h...

I pledged to myself to read a book a week and write a short review here. The first book that I read under this pledge is Martin Wolf's 'The Shift and The Shocks : What We Have Learned - And Have Still To Learn - From The Financial Crisis' . A summary judgement, in the tradition of Amazon, is that this is a 5-star, absolutely brilliant book to read on the Financial Crisis and its causes. Martin Wolf, who I saw as an apologist of Globalisation and principally writes in the Financial Times, would not usually be an author I would start my reading pledge with, and it needed some persuasion from a friend whose I advise I value greatly and who suggested, accurately as I understand now, that if one has to read just one book about the financial crisis, this should be it. It is, as is clear from the title, about the financial crisis that started in 2007 and shaped our lives in many ways. The boom years before 2007 is now a distant memory for many of us, and though some countries...

Rajiv Sethi, Professor of Economics at Columbia University, calls Albert Hirschman's book, Exit, Voice and Loyalty Responses to Decline in Firms, Organizations and States , one of the finest books ever written by an economist. However, while by that description this short treatise stands alongside Keynes General Theory or Adam Smiths The Wealth of Nations, it has none of the glamour and recognition of these peers. Yet, in some ways, Hirschman's work has a timeless quality about it - its topic and its exposition appears strangely contemporary despite the frantic transformation of our world and our thinking since the book was published in 1970.  Hirschman was dealing with an unconventional subject in Economics - decline in firms, when they do not do things well - and therefore, his work stood outside the mainstream economics. Mainstream economics, as Hirschman himself pointed out, operates on the basis of 'Consistent Rationality', which means decline of operating pe...

I am in India (again) and have the opportunity to follow a conversation about teaser loans, which, in my mind, goes on to show the madness of middle class economics. ( Read the news here ) Teaser Loans are loans offered below the base rate (which is 9.70% for State Bank of India, for example) and which banks to want to give out. The idea is not to change the eligibility criteria in anyway (anyone remember subprime?) but offer loans at an attractive rate for the first few years. The reason why this is back in conversation is because the Indian Real Estate market is close to breaking point. The transactions are at all time low and the inventories are at all time high. However, despite the lack of transactions, realtors refused to reduce the prices - so prices are at all time high - hoping for the Central Bank to bail them out with a rate cut. The Central Bank (Reserve Bank of India, as it is called in India), under the very able leadership of Raghuram Rajan, has so far resisted th...

Nicholas Carr is counter-intuitive, and therefore, must-read for anyone interested in talking technology. I followed his big ideas since his path-breaking 'Does IT Matter?' which was about Information Technology stop being a strategic tool and more like an utility, like Electricity. One could argue that this prediction did not materialise, as we put our hopes on Big Data etc to change the way business is done. However, the follow-up on this thesis, that IT would be available through a pipe rather than the strong-room like infrastructures in the past, certainly did, and today one could look at the Cloud Computing infrastructure as an utility, rather than a strategic asset. His later work, 'Is Google Making Us Stupid' (and the book that followed, The Shallows), created a whole genre of work exploring the effects of technology on our brain and our capacity to think, which bore out some of his early warnings about changing behaviour. In summary, he excels in making the Te...

What's the relationship between Education Technology and Teachers?  The most common sense answer is that education technology is the new mode and the teachers are the old mode, linked somewhat in an asymmetric relationship like the one between the weavers and textile factories. The former is just an inefficient form of doing things which technology can do much better, or at least, be able to do much better when it becomes smarter eventually. Others take a kinder view of teachers and teaching. They actually contend ed-tech will be good for teachers. The advent of ed-tech, in this view, is the panacea for the 'cost disease' of education, because, as the economist William Baumol has affirmed, education is one of those trades where the 'productivity' of the Professor does not go up much, though their salaries keep going up. This problem is at the heart of the runaway costs of education in the developed world, particularly in the US, where college fees beat inf...

Why does one care for new ideas? Because new ideas are central to economic growth. And, without growth, we will have no modern economy. Because one essential part of the modern economy is credit, which rests on the assumption that we will have more than we have today. If the economies stop growing indefinitely, credit will disappear and there will be no 'modern' economy. The mere hint of no-growth will be the economic equivalent of an armageddon. Ideas, in a way, are the protean agents that mine the future for the present. Think of ideas as a tool that is curving out bits of the future for the present day, doing in the real economy which the financial mechanics of credit creation is doing in the money economy. One can call them therefore the lifeblood of the economy, because without these new ideas, we won't have a view of the future, no optimism and therefore, no economy. And, yet, idea is a painful thing. To be really successful in what an idea does, one nee...

We live in an exceptional time. Though this isn't a quote from the excellent Foreign Affairs essay written by Erik Brynjolfsson, Andrew McAfee and Michael Spence ( read it here ) but somewhat its central message: That automation is now reaching a certain tipping point in capability, and with it, it is changing the dynamic of globalisation, ending the party for low cost labour and instead creating a Power Law economy, where a creative elite reap most of the rewards and most other lose out even more completely. Indeed, the authors argue that this is already happening: They report that China may have lost over 30 million manufacturing jobs, 25% of the total, since 1996 (though, the authors note, the data is unreliable because of a change in the way it was gathered) , though at the same time, manufacturing output has expanded at an exponential rate. Foxconn's (and of others) automation projects appear to be the obvious reason. This also bears out on anecdotal observation: Joshua ...