Musings of a Spectator
- Name: agastyabhrata
- Location: Hyderabad, Andhra Pradesh, India
Thursday, July 24, 2014
Sunday, March 22, 2009
Responding to the Economic Meltdown - Arun Shourie
(The Asian Development Bank recently organised a meeting in Manila of central bank governors, ministers and senior finance officials from South Asia to consider the impact of the economic meltdown, and possible responses. Michel Camdesus, former managing director of the IMF delivered the opening address, former Union minister Arun Shourie the closing address. This is the text published in The Indian Express (Click here to see the web version. In the text given below, emphasis added is mine).
Several features about the current economic crisis stand out. The first, of course, is the sheer scale of what preceded it, and the magnitude of what has happened in its wake: to recall a typical fact, in a recent lecture, Andrew Sheng mentions that, on the eve of the breakdown, the nominal value of financial derivatives and exchange traded derivatives had soared to fourteen times the world’s GDP.
The second feature is the pace of wealth destruction in this round: as has been observed, there has scarcely been another period of four to five months in which almost fifty trillion dollars worth of wealth has been wiped out.
Third, as several observers have pointed out, the breakdown differs from the Southeast Asian crisis in other respects also: that crisis was on the periphery of the world economic system; this one has originated in, and has thus far most severely struck the very heart of the system. The result makes demands of its own: as the Southeast Asian economies went into a tailspin, the OECD economies held up; this helped the recovery of the former as they were able to resume exports to the latter. This buoy is not available this time round: while some of our economies may be able to resume growth only when the US, European and Japanese economies come out of the recession, we will have to depend on our own efforts. This is all the more so as governments, pressed by job losses at home, will, overtly or covertly, adopt protectionist measures. As a lemma, the same proposition holds for China: it is idle to expect, as commentators kept saying in the last quarter of 2008, that China would shore up other economies. China is focusing its efforts on reorienting its economy towards domestic demand, domestic requirements, domestic employment: the “stimulus” this effort may provide for other economies will only be a residual.
Fourth, the world has turned out to have become much more intertwined than experts had pronounced it to be. Economies are much more inter-linked, sectors within an economy like India are much more interdependent than had been presumed. How contrived the declarations of October/November last year look just four/five months later – that our economies will not be affected as the “fundamentals” of our economies are strong, as our economies are, in effect, “decoupled” from western economies. Our economies are linked to others through exports of goods as well as services, through remittances, through foreign inflows – through monies that have come in for arbitrage even more so than as direct investment. But more than any of these, our economies are linked with those of US, Japan and Europe through that all-pervasive intangible – confidence. Yes, particular banks and firms have been thrown into difficulties. Yes, there is shortage of liquidity. But the real blow has been to confidence – that is the tsunami that has traveled all the way to our shores. Till confidence is restored, things will not begin to turn around. And notice that as yet, the 4 trillion dollars notwithstanding, nothing that the governments of the US, Europe or Japan have done has shored up confidence.
That is one reason why the periodic declarations, “We expect recovery from the third quarter of 2009/ from the first quarter of 2010…,” are just that much whistling in the dark. In spite of the scale of the breakdown; in spite of the pace at which wealth has been destroyed; in spite of the fact that nothing that has been done thus far – and what has been done this time round is far greater in magnitude than in any other crisis in decades – has shored confidence, in spite of these features, Government after government has underestimated the impact that the crisis is certain to have on its economy. Indeed, several governments – and the Government of India is a prime example – have been in denial. The tsunami has hit countries successively. But, till the penultimate moment, each has convinced itself that the tsunami has passed at a safe distance.
The first lesson is not to remain in denial. Governments must anticipate. They must react at lightning speed. They must overwhelm. The old adage is indeed apt: hope for the best but prepare for the worst. A lemma is: do not be lulled into relaxing your effort by blips: that in Pakistan’s case remittances have, in fact, increased a bit in the last two months may well be due to the fact that workers who are being laid off in the Middle East are repatriating their savings in one go; that automobile sales in India have gone up in January may well be due to some transient factors… Hence, instead of clutching at these straws, prudence dictates that we assume that developed countries will take five to seven years to return to the status quo ante, and devise our responses accordingly.
Nature of the stimulus
The view has been urged, “Our deficit is our stimulus.” Such claims are a symptom: the current crisis is being used by many governments, the Government of India is again a prime example, to cover up the results of mismanagement during the period preceding the crisis. Financial profligacy is what caused the deficits in India, for instance, not some prescience about the impending breakdown. Unchecked, poorly targeted subsidies on food and fertilizers; on petroleum products; a massive waiver of agricultural debts; pay rises for government staff – these three items are what pushed the combined deficit of central and state governments in India to over 11 per cent of the country’s GDP. Not only were these outlays way beyond what prudence would have allowed, they were grossly under-budgeted: the provision for food and fertilizer subsidies was at least a third less than what would manifestly be required; the POL subsidies were kept out of the Budget calculations all together; as were the outlays on the massive increases in governmental salaries.
The assertion, “The deficit is our stimulus,” presumes that our economies are today suffering from the classic Keynesian deficiency of demand. That is far from being the case. Not a generalized deficiency of demand but a breakdown of confidence – this is what is causing industry to hold back on investment, it is what is causing even consumers to hold back on purchases. And that is precisely why cuts in rates of interest, cuts even in taxes are not triggering the surge in investments and purchases that policy makers have assumed would follow: how can the fact that a person will have to pay 2 per cent less as interest lead him to go in for a house when he is not sure whether he will have his job two months from now?
Prior profligacy limits a country’s ability to deal with the crisis. And profligacy today limits its ability to deal with the crisis as it continues into next year. Today the countries that have reserves, that have fiscal headroom, that have the ability to execute massive infrastructure projects – these are the countries that are in a better position to navigate the crisis. When investors and others see that their government is unable to bring its expenditures to heel, their confidence in the future is further damaged. And there is the real effect too: in India, with governmental borrowing of Rs. 3600 billion having become inescapable in 2009/2010, the State will be pre-empting the private sector from the market, it will be pre-empting the very sector on which it is coming to rely not just for executing infrastructure projects but even for financing them. A return to fiscal discipline, therefore, is necessary precisely for meeting the crisis.
There is another reason for this. The crisis is no longer a generalized one. By now it is sector-specific. It is location-specific. It is firm-specific. Units in Tirupur in Tamil Nadu producing garments for exports have been hit hard. By the time the stimulating effects of a general deficit will reach Tirupur, an age would have passed.
Moreover, jobs are not malleable. Establishments in the gems and jewelry business have had to cut down operations drastically in Gujarat. Assume that, through deficits, the Government finances public works in Bihar or even in Surat. How many diamond cutters will be inclined to or even be able to avail of them?
To be of help the relief must be in the locality and in the industry that has been hit. Faced with a sudden fall in purchases of trucks, the commercial vehicles sector will be
helped not when the Government goes in for an even larger general-purpose deficit but when it decides to expedite procurement of trucks for the country’s defence forces.
The same goes for individual firms. To pluck an example from India, the very firms that were the pride of the country yesterday as they acquired firms abroad are in danger today: several of them acquired the foreign firms with substantial borrowings. Today, with the collapse of markets, the fall in commodity prices, the evaporation even of working capital, they are finding it difficult to service their obligations. That constitutes a twofold problem for the country. First, at the very time that foreign funds have been withdrawn – close to 70 billion dollars in the last six months – about $ 53 billion short term debt has to be serviced – either through repayment or through renewal – in the coming year. Second, a failure of even one of these firms will not just be a problem for that firm, it will be yet another blow to confidence in general. In a word, governments should be planning not just general packages but location-specific, industry-specific and firm-specific relief.
While doing so, governments must keep the inarticulate in mind also. With sources of
external commercial borrowing having dried up, Indian corporates, for instance, will be turning to Indian banks and the Indian market. The small and medium establishments, already hit by the sudden and extreme risk-aversion that has seized our banks like banks elsewhere, will now be squeezed out completely. Yet, as a recent McKinsey study reminds us, this is a massive sector. It accounts for 40 per cent of manufacturing output, that is about 17 per cent of the country’s GDP. It accounts for close to 44 per cent of exports. Most important, it employs close to 30 million people. Closures and lay-offs in this sector will be diffused. But they will be of an order that, if unattended, can trigger social unrest.
For the same set of reasons, governments should be alert to early signs of stress even in sectors that are conventionally regarded as strong. In India, for instance, it is generally assumed, and quite rightly so, that our banking sector is safe as it has been conservative. It has made substantial progress in bringing down non-performing loans to just about 2 per cent of its outstandings. But recent studies – by Chetan Ahya and Ridham Desai of Morgan Stanley, by Joydeep Sengupta and Anu Madgavkar of McKinsey – remind us other that there are facets also: about 40 per cent of corporate India’s asset base has a return on incremental capital that is lower than the cost of capital; and Indian banks have lent $ 100 billion to these vulnerable firms – loans that account for a fifth of total bank loans. In a word, take no sector for granted. Identify the vulnerable units in each sector, and prepare contingency plans for them – remembering always that a collapse of any constituent of any sector will impair the most important variable that is needed for revival, the very variable that is most fragile today – namely, confidence in general.
In such environment general deficits will be as much of a stimulus as throwing money out of the window. The stimuli which will really help are ones that strengthen the viability, sustainability, and competitiveness of the economy for the long run -- that is, for the time when this particular crisis would have passed and the economy would be back to its normal course. A good example of this kind, for instance, is the announcement in the US that it will be deploying a good bit of its stimulus plan towards creating a green infrastructure. Outlays to create alternate energy which liberate economies like those of South Asia from their current dependence on imported Oil supplies; expenditures to multiply and enlarge manifold the current facilities available for higher and technical education, facilities which would overcome the extreme shortage of technical personnel in these countries would be examples of the same kind. An excellent initiative, one that we should emulate, is available from Singapore. The Government has launched a plan under which a person losing his job can enroll in an institution for acquiring higher skills than the ones that are required for his existing job. He is paid a stipend for every day that he attends a class for five hours of class. When the current downturn is behind us, the person will be able to seek a job which is better paying and which demands more of him than the job that he has just lost.
The crucial variable here is the ability of the country to execute these projects expeditiously. This is why China is way ahead of, say, the typical South Asian country. To begin with, it has $ 2 trillion of reserves. With these it can finance massive infrastructure projects – an option that is not available to a country like India which, through the Government’s profligacy of the past three years, has robbed itself of fiscal headroom. Equally important, China has large supplies of engineers and skilled personnel – because of the extensive programmes which it had implemented earlier for both, training engineers as well as for upgrading vocational skills. With those two trillion dollars it can also, as it is doing, acquire mineral and other resources in other parts of the world, the resources that it will need for its long-term growth. Most important, China has a shelf of projects which it can start implementing forthwith: many of these projects had been prepared to the last detail as long ago as 2005. Several of them were kept in abeyance, in a sense, as it was felt that the economy was overheating. Now they can be implemented without any delay. And that is possible because China has overcome the customary obstacles which hold up the execution of projects in countries such as ours. It has acquired an unmatched capacity to implement projects expeditiously. In our case, apart from implementing such projects as can be implemented now, the current crisis is yet another occasion to make every effort to acquire the ability and resources to improve the capacity to implement projects more expeditiously in the future.
Why not start straightaway? Institute massive rewards for firms and local and provincial governments that expedite the implementation of projects? Institute tax rebates for companies which, instead of laying off workers, retain them and have them acquire better skills?
A role for the ADB
And this points to a vital role which an institution like the Asian Development Bank can discharge at this moment. Andrew Sheng and others justifiably remind us of the curious charge that has been put out – namely, that countries of Asia have exacerbated the current crisis by their excessive savings, that the current crisis has been made possible, indeed that it has been intensified by what have been called “global imbalances”. This is one of those predictable surprises. Our countries were being hectored incessantly that we should increase our savings rate. And now we are being told that, because we have done so, we have contributed to intensifying the existing crisis! But, for a moment, take this charge at face value. The cure is obvious. The cure to “global imbalances,” it has been rightly said, is to develop the capacity within Asia to use our savings here.
In addition to improving our capacity to implement projects within our countries, we should enhance our capacity to implement cross-country, regional projects. There are a large number of such projects which can be implemented, but which have been languishing for reasons that are as remediable as they are well-known. Setting up power projects in Nepal from which power is sold mostly to India; setting up projects to exploit the natural gas resources of Bangladesh from which a large proportion of gas would be sold to India – these projects have not got off the ground for decades because undertaking them has become a political issue within Nepal and Bangladesh. This is where the Asian Development Bank, with the trust which countries in the region repose in its fairness, and in its objectivity and expertise, can play a vital role. It should, for instance, draw up the terms and conditions which would be best for Nepal and would be fair to India for implementing power projects in that country.
This is the role which would be more appropriate than to expend time and effort in setting up yet another institution. As is customary in the wake of every crisis, today also proposals are being advanced for setting up new institutions. Shouldn’t we set up an institution for regional monitoring? Shouldn’t we set up an arrangement, a regional fund for helping our countries tide over such crises? Our experience with new institutions in response to crises has been, that, ten years after they have been set up to deal with the problem, the problem remains as it was, and the institution has become a new problem. Therefore, instead of going in for more institutions, an organisation like the ADB should use its influence and expertise and acceptability to persuade governments to at last start implementing cross-country projects.
The current crisis has triggered a sort of triumphalism among those who have traditionally opposed reforms in our countries. “See,” they say, “capitalism has failed;
liberalization and opening up of the economy, integration with the world has brought all these problems upon us.” Therefore, they are pressing, not just a halt to further reforms, but for a reversal of many of them. With this logic in hand, we should just have remained at the hunting and gathering stage. Had we only done so, none of the crises that afflict countries periodically would have touched us at all! The lesson is the opposite one. Every circumstance, every arrangement, every new setup opens up new opportunities just as it also occasions new problems. We should not, for that reason, shy away from reforms and progress. The lesson is to institute such correctives and reforms as the new circumstances demand. One of President Obama’s advisers has a good maxim: “No crisis should be allowed to go waste”. In the current circumstances also, the people, as well as governments will be prepared to take measures today which they would not have taken in normal times. The new circumstance should, therefore, be used to affect improvements that are necessary in the light of the crisis as it has unfolded, and at the same time to institute those reforms which will enable our countries to adopt policies and implement projects more expeditiously – policies and projects which, as we noted above, will strengthen
the viability, competitiveness and sustainability of our societies for the future.
But all this is contingent on our having clear-headed, competent, purposeful, strong governments. This is the real deficit, the real crisis in our societies – apart from the advance that has been registered in Sri Lanka of overcoming the terrorist threat, and apart from the steady hands that guide Bhutan, governments in South Asia are losing grip as well as legitimacy. No stimulus package, no slew of economic reforms can survive the wreckage of governance.
Considerations that go beyond countries
One of the important features about the current crisis is that the breakdown has not come about because of one rogue, not even because of a handful of rogues. This is not the work of a Harshad Mehta or a Madoff. Entire industries have been involved in bringing about this collapse. Mortgage salesmen, banks, financial analysts, chartered accountants, auditors, rating agencies, regulators, central bankers and the governments – what has happened is the joint product of one and all of them. I’m reminded of a phrase which Joseph Berliner had used to describe the inability over decades of Soviet planners to get at the facts about individual enterprises. The reason, he said, was that from the bottom – the shop-floor of the factory – to the top – the provincial and central planning bodies – everyone had a vested interest in exaggerating the production figures and minimizing the quantities of raw material that had been used to produce the particular item. The reason, he wrote, was that functionaries all along the line were knit in “interlocking webs of mutual complicity.” These “interlocking webs” of the complicit are precisely what account for the current breakdown. For that reason, merely adding one more twist to a regulation or even to the law; merely setting up another institution which in the end comes to work in the same way as the existing institutions – such steps will not do.
For we must examine how this mountain of sand swelled to such proportions and “no one noticed.” We must reflect on the ease with which what was good for a few got dressed up as being good for all. We must reflect how warnings, even protests, some of them from leading statesmen of Asia itself, were disregarded. In fact, they were drowned in the general applause and acclamation of “financial innovation” which was said to be taking place. We must reflect how, in fact, regulations were enacted in countries like the U.S. but were not enforced. We must recall how, at crucial turns, regulations were, in fact, relaxed.
There were several reasons why all this happened. For the present purpose recalling just two of them will suffice. First, the beneficiaries, for instance the investment bankers, had acquired the position and “the intellectual stature” of referees. They were interlinked with advisers, analysts, rating agencies, and ultimately with the regulators. That is how what was good for them came to be dressed up as being good for all. Similarly, several governments and central bankers, as is now acknowledged even by some of the prime actors themselves, blew into the bubble and made it swell even more. The reason was that they took the resulting rise in asset values as certificates for their performance, they took them to be evidence of the correctness of their policies and as proof of the confidence which markets all over the world reposed in them personally.
After all, it is not that warnings were lacking. It is not the case that everyone was convinced that the innovations were all for the good. All of us today recall the statement of Warren Buffet – about an entire category of these innovative instruments being “Weapons of Mass Destruction”. We recall the warnings of Naseem Talib, of Roubini, of Jeremy Grantham. The point to reflect is, “How is it that these warnings went unheeded? How did they get drowned?”
The second point to reflect upon is more fundamental: are there features that are inherent in this kind of a financial universe and which make such breakdowns inevitable? Take, for instance, the simple matter of Asset-based Lending. Marry it to the perverse incentive system which became the characteristic of the financial world in the West. Loans would be given on the basis of the value of a category of assets, say houses. As the volume of loans against that category of assets for further investment in that category of assets increased, the value of those assets went up. Accordingly, in the second round, those who could offer those assets as collateral were able to borrow even more against those assets. That in turn raised the value of those assets even higher… And the larger the volume of loans that got made against those assets, the higher the rewards that accrued to those stoking the fire. And notice, the extent to which “innovation” was taken to further this fire: so much so that today the banks themselves, and the companies that ostensibly insured the transactions of those banks do not know the extent, even by a broad order of magnitude, to which they have become exposed to those toxic instruments.
To continue with the current example, so as to safeguard ourselves against future collapses of this kind, we must devise and hone gauges of our own to identify bubbles. And it should be the duty of our governments and central banks to alert our citizens, in particular small, uninformed, retail investors about bubbles that are emerging. Even this recent episode shows that when asset prices rise at the astronomical rate at which they did in the last five years, a bubble is getting formed. Similarly, when transactions come to have little to do with reality, that too is an indication that we should heed. In this last round, for instance, far-fetched and unimaginably esoteric formulae became the basis for millions of dollars to move into and out of “packages”, and countries. The ratio of one currency to another; the ratio of those two currencies to that of another pair of currencies; correlations of absolutely distant variables over whatever stretch of time fit that string of observations… Such determinants became the automatic triggers for transactions. They had nothing to do with what was happening in the underlying sectors, in the firms. When things reach such a pass, we should know that transactions and instruments have departed so far from reality that they are bound to come down in a crash.
Thus, the spiral and the eventual collapse were inherent in the design itself. But there is an even more basic question that we must ponder. Are the spiral and the subsequent collapse inherent only in a particular sector? Or is it that the economies themselves have got addicted to bubbles? The real estate bubble in one round. The dotcom bubble in the next. The sub-prime and yen-trade bubble in the third…
Therefore, while much has been made of the fact that this breakdown was triggered by a policy failure, the failure to save Lehman Brothers, the fact is that the failure to save Lehman Brothers was just the occasion for what happened subsequently. That failure, to recall an expression used in a very different context, was just “the spark that lit the prairie fire.” The fact that entire sectors collapsed, that entire economies went into a tailspin so swiftly upon the decision not to save a single institution shows that the whole structure had become just a wall of sand. That is what we should reflect on for our future.
Several operational conclusions follow.
A few things to do
First, there is much talk of a new international economic architecture. Unfortunately, once again almost all work on what shape that architecture should take is being done in the very countries, sometimes by the very institutions and personnel whose excesses and misjudgments, to put it no higher, have led to the present pass. But they are, and quite naturally, loath to part with power. They may well let time pass. They may once again busy us in futile debates. And ensure that processes and institutions remain in their control. That would only ensure that the next bubble, and with it the next jolt will not be long in coming. That is all the more likely because, in those societies, the ones whose excesses and greed have led the world into this pit have got away scot-free. Others – tax payers who must pick up the bill for the bailouts, workers who must suffer joblessness – are the ones who are defraying the cost.
Second, we must keep our ears open to the Cassandras. We must not get swept away by intellectual fashions. Certainly, we should not succumb to the urgings of financial wizards and advisers who chastise our countries and governments for not keeping up with innovations that have been adopted “all over the world.”
Third, these events remind us once again that we must think for ourselves. We must be centres of countervailing intellectual, institutional and real economic power. Unless we build up these capacities, we will remain vulnerable to being misled by persons and institutions that have ideas that suit them rather than us, to say nothing of agendas they might have.
It is equally important to nail the culpable. First, we must document and nail the double standards of the West and of international institutions and international advisers. Policymakers in Southeast Asia recall vividly the advice which was thrust down their throats in the late 1990s. “No, no,” they were told, “you must let those who had made mistakes collapse. That is the way the market ensures that the mistakes will not be repeated in the future.” Governments in Southeast Asia, the government even of Japan, the country with the second largest conomy of the world, let banks and other firms fail. These were then bought up at throw-away prices by western companies and consortia. And what is the position today? We are told that all rulebooks have to be thrown overboard. We are told that governments must intervene to save the companies and institutions which have done such gross wrongs, which have made such enormous mistakes, which have been propelled by little else than personal greed – we are told that governments just have to intervene and save these institutions at the cost of the taxpayer because, otherwise, the system as a whole will come down. When that was to be the consequence for our countries, no one was prepared to listen. Not just advisers, but institutions on which countries across the world, including our countries are represented insisted that failure was the only instrument for improvement. These double standards continue to this day. How many have spoken out against the protectionist measures which have already been announced by President Obama? Has he not announced that tax reliefs will not be available to firms that outsource their work? Has he not announced that foreign nurses will not be an employed or welcomed? What if the leaders of one of our countries had announced such measures?
For the same reason it is very necessary to document and nail the red-cards and yellow-cards which rating agencies and other monitors keep handing out. How come they were giving triple ‘A’ ratings to institutions and to instruments and to packages which we now see were entirely hollow? Are these not the very rating agencies and monitors that hand out ratings of one kind or another to our firms, indeed even to our countries, ratings that then influence the decisions of investors and thereby move billions of dollars into or out of our countries? We must document their record so that, in future, they command only as much authority as the intrinsic worth of their
In a word,
We must grab the crisis by the forelocks, as we would grab time.
Second, by now the remedies have to be sector-specific, location-specific, firm-specific. General-purpose deficits are no answer to the downturn into which we have been pushed.
Third, we must think for ourselves. In particular, we must document the advice that was thrust down our throats over the years.
Fourth, we must focus on working and reforming existing institutions and processes rather than on setting up yet another slew of institutions. For this purpose institutions like the Asian Development Bank, countries like India and others in South Asia should coordinate and sustain intellectual effort.
 Andrew Sheng, “From Asian to global financial crisis,” Third K.B. Lall Memorial Lecture, Indian Council for Research on International Economic Relations, New Delhi, 7 February 2009.
A friend of mine who works in a financial information services company was kind to pass on to me a link which talks of a 'formula' that killed Wall Street. To put it in short, the mathematics in financial world is too complex for people in general to make sense of it. Not understanding the conditions under which a formula can be applied, say, for risk evaluation, can result in a disaster. This makes it all the more important for technology students to focus on their fundamentals and have a greater clarity over things so that if they were asked to give an advice about the use of "decision support systems" involving technology, they are sure of their ground. You may read the article here.
Thursday, January 24, 2008
What Can India Contribute to the World of Today and Tomorrow?
What can India offer to the world of today and tomorrow? I will not tackle this problem directly but instead take up one of its sub-questions: to whom is this problem important and why? I believe it is important to both Indians and Europeans but for different reasons. In this talk, let me spell out and reflect upon some of these reasons.
For the first time in the last four to five hundred years, non-white and non-Christian cultures will have a significant impact on the affairs of the humankind. Here, India will be a global player of considerable political and economic impact. As a result, the need to explicate what it means to be an Indian (and what the ‘Indianness’ of the Indian culture consists of) will soon become the task of the entire intelligentsia in India. In this process, they will confront the challenge of responding to what Europe has so far thought and written about India. A response is required because the theoretical and textual study of the Indian culture has been undertaken mostly by Europe in the last three hundred years. What is more, it will also be a challenge because the study of India has largely occurred within the cultural framework of Europe.
In fulfilling this task, the Indian intelligentsia of tomorrow will have to solve a puzzle: what were the earlier generations of Indian thinkers busy with, in the course of the last two to three thousand years? Let me use a contrast with the European culture to exhibit the nature of this puzzle and its importance to the theme of this evening.
What were the European intellectuals busy with, during the last two thousand years? It is almost impossible to answer this question without describing the history of Europe; still, we can say they produced theologies, philosophies, fine arts, natural and social sciences … The list is so varied, so diverse and so huge that one does not know where to begin or how to end. Despite this, the fact remains: all interesting theories about human beings, their cultures and societies, which we use today, are products of the European intellectuals. So too are the institutions and practices that most of us find desirable: democratic institutions and courts of law, for instance. The sheer size, variety and the quality of the European contributions to humanity is overwhelming.
What were the Indian thinkers doing during the same period? The standard text-book story, which has schooled multiple generations including mine, goes as follows: caste system dominates India, women are discriminated against, the practice of widow-burning exists, corruption is rampant, most people believe in astrology, karma and reincarnation … If these properties characterize India of today and yesterday, the puzzle about what the earlier generation of Indian thinkers were doing turns into a very painful realization: the thinkers from yesteryears were busy either instituting or defending atrocious practices. Of course there is our Buddha and our Gandhi but that is apparently all we have: exactly one Buddha and exactly one Gandhi. When the intellectuals of one culture, the European culture, were busy challenging and changing the world, most thinkers from another culture, the Indian in our case, were apparently busy sustaining and defending undesirable and immoral practices. If this portrayal is true, the Indians have but one task, to modernize India, and the Indian culture but one goal: to become like the West as quickly as possible.
However, what if this portrayal is false? What if these basically European descriptions of India are wrong? In that case, the questions about what India has to offer the world and what the Indian thinkers were doing become important to the Europeans. For the first time, their knowledge of India will be subject to a kind of test that has never occurred before. Why ‘for the first time’? The answer is obvious: the knowledge of India was generated primarily when India was colonized. Subsequent to the Indian independence, India suffered from poverty and backwardness. In tomorrow’s world, the Indian intellectuals will be able to speak back with a newly found confidence and they will challenge the European descriptions of India. That is, for the first time, they will test the European knowledge of India and not just accept it as God’s own truth. This has not happened before; it will happen for the first time.
Moreover, the results of this test are not of mere scientific interest; they will also have serious social, political and economic repercussions on the European societies. If true, the question now becomes: what kind of European ‘knowledge’ about India will be tested?
As an example, consider one of the things that Europe ‘knows’ about India: the Indian caste system.
Almost everyone I know has very firm moral opinions on the subject. Many see in it the origin of all kinds of evils in India: from the denial of human rights to oppression; some see in it obstacles to progress and modernization and so on. I suppose we all agree that we need to understand a phenomenon before making moral judgments. With this in mind, if you try and find out what this famous caste system is, and why people either attack or defend it, you discover the following: no ancient book exists that tells us what the principles of the caste system are; no Indian can tell you about its structure or its organization; no scientific theory has been developed that explains how or why it continues to exist. Simply put, nobody understands what it is or how it functions. In that case, how can anyone be pro or contra the caste system? If we focus on how people normally describe this system and understand how easy it is to turn such a description upside down, the absurdity of the situation becomes obvious. While emphasizing that I do not attack and much less defend the caste system in what follows, let us look at the existing descriptions and their consequences.
(a) Caste is an antiquated social system that arose in the dim past of India. If this is true, it has survived many challenges: the onslaught of Buddhism and the Bhakti movements; the Islamic and British colonization, Indian independence, world capitalism, and might even survive ‘globalization’. It follows, then, that the caste system is a very stable social organization.
(b) There exists no centralized authority to enforce the caste system across the length and breadth of India. In that case, it is an autonomous and de-centralized organization.
(c) All social and political regulations, whether by the British or by the Indians, have not been able to eradicate this system. If true, it means that the caste system is a self-reproducing social structure.
(d) Caste system exists among the Hindus, the Sikhs, the Jains, the Christians, the Muslims… It has also existed under different environments. This means that this system adapts itself to the environments it finds itself in.
(e) Because new castes have come and gone over the centuries, this system must also be dynamic.
(f) Because caste system is present in different political organizations and survives under different political regimes, it is also neutral with respect to political ideologies.
Even though more can be said, this is enough for us. A simple re-description of what we think we know about the caste system tells us that it is an autonomous, decentralized, stable, adaptive, dynamic, self-reproducing social organization. It is also neutral with respect to political, religious and economic doctrines and environments. If indeed such a system ever existed, would it also not have been the most ideal form of social organization one could ever think of?
The question of the immorality of the caste system became immensely important after the British came to India. In that case, there are two interesting possibilities to choose from: one, Indians did not criticize the caste system (before the British came to India) because Indians are immoral; two, the Europeans ‘discovered’ something that simply does not exist in India, viz. the social organization that the caste system is supposed to be.
There is a reason why I have spent time on this issue. And that is to signal in the direction of a problem, which has very far-reaching consequences. If what Europe knows about India resembles what it claims it knows about the caste system, what exactly does Europe know about India or her culture?
Not very much, I am afraid. Precisely at a time when, to survive in a ‘globalizing’ world, knowledge of other cultures and peoples is a necessity, it appears as though Europe knows very little about either of the two.
Perhaps, the absence of knowledge is felt most acutely by the Europeans who invest in India. Today, they rediscover what people knew: they are not well-equipped to do business in India. They understand neither the culture nor the role of cultural differences in management structures and organizations. The books and articles on “culture and management” are full only of platitudes; on top of it, the newest trend in anthropology tells us that the notions of “culture” and “cultural differences” are almost of no use in understanding people.
In other words, I am suggesting the following. What the Europeans think they know of India tells us more about Europe than it does about India. This ‘knowledge’ will be tested during this century. In that case, quite obviously, the earlier generations of Indian thinkers were not merely busy instituting and defending immoral practices. What else were they doing then? Now, the puzzle becomes very intriguing: what were the Indian thinkers doing in the course of the last two to three thousand years?
What did they think and write about? Did they make contributions to human knowledge? If yes, what are they? Answering these and allied questions will become one of the primary preoccupations of the Indian intelligentsia in the course of the twenty-first century. This puzzle is important to the Europeans too.
Let me say why by setting the context first.
Let me sketch the context by raising a question: what has the world to learn from Europe? Here are the familiar answers: science and technology; democracy and the legal system; respect for human rights and ecological awareness; becoming modern and cosmopolitan… When such answers are given, one does not mean that the rest of the world has to learn this or that scientific theory, or a solution to this or that mathematical problem from Europe. One means something like this: Indians have to learn a particular way of going-about with the world from the European culture. That is, one believes that this way of going-about is the unique contribution of the European culture, something that is absent in other cultures.
Let us now reverse the question: what has Europe to learn from India? In all the thirty years I have spent in Europe and in all the thousands of books I have probably read, I have not come across a satisfactory answer. Most do not even raise the issue; those who do, mumble about ‘learning’ things that Europe once knew but has forgotten since. How to understand this situation?
The first possibility is that there is nothing to learn from India. Possible, but implausible. It ispossible that, much like the ‘chosen people’ that the Jews believe they are, Europe is the ‘chosen’ culture from all the cultures that populate the planet. However, it is implausible because I have not come across any explanation for this ‘European miracle’. Nevertheless, if there is nothing to learn from India, we can all sleep peacefully: the world, as we know it, will not be disturbed. This is the first possibility.
Consider the second possibility now. Europe has ‘something’ to learn from India but many Europeans do not yet know what. Some give the following answers: meditation, yoga, notions of Karma, Vedic astrology… These will not do: not only are there native meditative and astrological traditions in Europe, but such answers are also inadequate. It is like saying that one has to learn partial differential equations from Europe. So, let me push the question: what is this ‘something’ Europe has to learn from India?
At this stage, I normally encounter silence because there does not appear to be any answer to give. Surely, this is strange: Europe has been studying India for centuries; it has colonized her territories and people; it tells Indians what is wrong with their society and culture… And yet, no answer is forthcoming. The Indians know what they have to learn from Europe and they have been learning it for centuries on end. Europe, by contrast, apparently has no proper answer to the question.
By virtue of this, the second possibility, viz. Europe has something to learn from India but does not know what, is very disturbing. One culture, the Indian, has been learning for generations and centuries; the other culture, the European, does not know what to learn or even whether there is anything to learn. And these two cultures, for the first time in so many hundred years, will meet each other on the world arena as equals and as competitors. What will the outcome be?
Whatever the outcome, the meeting between these two cultures sets the context for the puzzle I spoke of. Let me remind you what that puzzle is: what were the Indian thinkers doing in the course of the last two to three thousand years? What did they think and write about? Did they make contributions to human knowledge? If yes, what are they?
To these questions, we have one set of indirect answers. In course of the last three hundred years or so, the mainstream theories in social sciences and humanities carry on as though Indian thinkers have made no substantial contributions to human knowledge. However, almost without exception, this splendid corpus of writings about human beings embodies assumptions of the western culture. Not only have the western intellectuals created these theories in humanities and social sciences; they also express how this culture has looked at the world so far. Generations of Indian
intellectuals have accepted these answers as more or less true as well. The future generations will not be so accommodating though: they will test these answers for their truth. I say this with confidence because I find that more and more people in India are gravitating towards this kind of research. These are not of mere academic interest to such people, whose numbers steadily increase. More than most, they realize that answers to these and allied questions have the potential to ignite an intellectual revolution on a world scale.
My own research, and that of many more in India and Asia, is focused on answering the puzzle. In the time that is left to me, I cannot even hope to tell you what the research results are.
Therefore, I am forced to take a rain-check. Nevertheless, let me indicate the far-reaching nature of these results.
Even a limited acquaintance with the Indian or Asian culture tells us that their thinkers have also produced multiple ‘theories’ about human beings. These also express the way the Indian or even Asian culture looks at the world. Yet, these theories are contributions to human knowledge. This knowledge is about many things: the nature of human beings, the nature of ethics and morality, how human beings learn, what happiness is and how to reach it, what we could know about human beings…
In short, this is knowledge about us; it is also about what we can know, what we might hope for and what we should be doing. As the Indian and the European cultures differ from each other, so do their views about human beings.
The European intellectuals have elaborated their stories so far. The Indians and the Asians will do the same in the course of this century. These two sets of theories will meet on the world arena too, as equals and as competitors. Today, we think that the European story about human beings constitutes knowledge; that is because there are no competitors to this story as yet. How about tomorrow, when there will be competition in the marketplace of ideas, and Indians and Asians come up with other and different theories?
So, by the end of this century, there will at least be two different sets of stories about human beings, their societies and cultures. One that the West has produced and the other that India and Asia will.
Only one of these can be true or both will be false. However, these are issues for tomorrow. Today, let us merely appreciate why the theme of this evening is so important to all of us.
I thank you.
In a message referring to the above presentation, Prof. Ashok Jhunjhunwala writes:
"...Many of you may not know, but my early years in Chennai (about seven to eight years), my primary work was with an organsiation called PPST (Patriotic and People Oriented Science and technology (PPST). We looked at rejuvenating India by looking at Indian civilization WITH Indian eyes. I think many of us got significant confidence out of that, which we carried forward as we started working on indigenous technology. PPST looked at Indian society and challenged many a notion taught to us by British. But I think we were largely talking to ourselves.
India is in different position today. It is finding its mooring and getting back its confidence. In fact the world has started looking at us differently – some times with awe, and sometimes with fear. May be some of the work that we did in eighties, need to be relooked at. May be it will help us better understand our own civilization and may be it will help us play more meaningful role in the world.
Sometime it puzzles me that a country with growing confidence is still caught up in dividing the country, beating the weak and at other times pulling down India’s past. Is it just relics of the past? Some how it does not fit in. Looks like as a country we believe less in ourselves than the rest of the world. But then there are large number of individuals who have started thinking differently. We would certainly not turn back."
Tuesday, January 08, 2008
me: hi, what's up?
PG: was reading about cricket till now :)me: what do you think would be an honorable way of moving forward from this stalemate?PG: From whatever i can see, Since they have no proof against Harbhajan, his ban should be revoked. Secondly, let ICC make a statement tht umpiring will improve
that's the least :)me: Aussies will protest in case ban is revoked. And they will not keep quiet. It'll only mess up things!PG: If was possible, would delete that TEST :)
what's the best in your opinion :)me: Look at the case carefully. You will find that the biggest trouble in the case of any "racism" comment these days is the frivolity with which charges are being framed. Racism is a highly loaded term. And the current Indian protest is precisely on these grounds.
me: Terming someone a racist is not something which can be shrugged off by banning for 3 tests or something of the kind. The historicity of the term and the complicity in making a charge without actually knowing what it entails is the first mistake that came out
me: and ICC should realize that if someone is being taught words which shall be considered racist remarks and there is an attempt to catch hold of these people who make those remarks it is only a matter of low intellect to look at "objective" parameters of what goes off as racist. This is precisely the mistake that Mike Procter makes. He follows the rule-book "religiously". There are cases where "objective" parameters are not the ones that shall give you the complete picture. Racism is not about use of some "abusive" references. It is about the deeply inherent hatred towards an entire race on account of their color,creed or whatever background.
PG: umm ... I see your point.me: So, if you ask me how this thing can progress further what is required is an intellectual understanding of what it means to be racist. Trivializing loaded terms like racism, or terrorism - by using certain terms of not to be used words is nothing but asking for trouble. And this is what you are seeing. An intelligent lawyer should have known. I am surprised as to what role the ICC's lawyer played!
PG: ohome: I am surprised how the lawyer employed by ICC was not able to do this. It is required to make Aussie cricketers understand the gravity of what they are charging Harbhajan with. And the ICC to realize that things like racism are not matters where you just write down a list of not to be used references - and keep track whether they are used or not, and go ahead and punish those who use them! Australians are players who know their rules extremely well.So, they know what comes within the scope of a rule, and what does not come in that. So when they are involved in sledging or whatever, they go by the rule. That is to say, they may end up doing those things which in spirit of the rules is not allowed..
PG: ummmme: ..but in letter, there is nothing in the rules that prevents them from doing what they do. This is where what Anil Kumble implied: They have not played by the spirit of the game - is a perfectly valid statement. Anil Kumble and Indians, by far, with their background as Indians have a better way of understanding what things entail.
It is time that - I consider you as a racist if you call me a monkey kind of trivialization be stopped.
PG: very informative :)me: See, this is why this controversy is of such importance. It just shows how we forget the "meanings" of what these loaded terms mean.
PG: solution (?) you propse ..
me: I thought I told you!
PG: i mean theory is fineme: It is time that one sits back and considers how silly it is to say who is a racist and how you look at it.
PG: If i have understood ... you are suggesting to make them withdrawme: I am suggesting that the charge be nullified. It is nullified on the grounds of bad policies adopted. The Australians be praised for having stuck to the rules.
PG: Wht about complaint against Hogg :Pme: The complaint against Hogg was more conventional. It is talking of abusing the other player. You could have probably considered Harbhajan's case also as a case of abusing another player. That is probably the right way of judging the situation.
PG: hmm..but will this happen ?
me: Well, at this stage I do not see it happening.
PG: hmm... what do you forecast?me: This is for the simple reason that there seems to be a lot of gap of thought between the Australians and Indian thinking. When Adam Gilchrist - We're not sorry - he means it. And for all the right reasons. He does not have any malicious intentions, and he feels, so does Ponting feel - what's this fuss all about? We're playing by the rules. The rule says: Racist comments are clearly listed. If you ever use them, you are subjected to the punishment as cited.
me: Also remember that Australians have not borne the brunt of racism.
PG: yes.me: They do not know how seriously painful it is. They do not have the experience. For Ponting, racism is just another issue. Look at what Ponting says after the match:
"I have absolutely no doubt about this match being played in the right spirit," he said. "There's been one little issue that's come out of the game, otherwise the spirit between both teams in both Tests has been excellent."
What was the minor issue?
A strong case against a player on the severe charges of "racism"!
PG: yep.me: This is the trouble. I am disgusted to see the media unable to explain the predicament of two opposing cultures both of which think they are right on their part. At least some thinkers in the media should have probably sat down to do this task. I'd expect Harsha Bhogle to be someone who would be best suited to do this.
PG: hmm... forecast? Will tour continue ?me: The tour might as well continue. But, there may not be good relations between the two teams. There may be some compromise made.
PG: hmmme: Though I think what is to be done now, is not the compromise, but for greater clarity on things. Clarity on dealing with the troubles of bringing troubled pasts into the modern contexts - in this case - the case of racism.
Wednesday, July 25, 2007
Spreading the good word
In the midst of all this, after his stint at the Raj Bhavan, comes the news that he has decided to get back to the Academia and shall be joining Anna University. What's more?
He has accepted our Institutes's offer to be one of its Distinguished Faculty!
Though the news might as well be stale by now, but I thought there are some points which are of greater interest. One of my friends asked me - what does his presence mean to us, the students, the Institute? His question was more pointed. He wanted to know what is the objective gain?
The gain is expected to be perceptual. Perceptual - at the level of individuals, at the level of society. One may not call this objective, but nevertheless it is as good as what we gained from having a man like Dr. Kalam as the President.
I do not wish to say more,but wish to sum up all that I can say with this: President Kalam has given a quintessential evidence for the importance of the very act of spreading goodness.
Thursday, May 17, 2007
Fraternal Affinity: Agastya and Agastyabhrata
- The Princes of Ayodhya - Rama, Lakshmana, Bharata, and Satrughna - form an ideal brotherhood and present a model to humans to admire and emulate.
- Anchorites and ascetics, pursuing rigorous penance for spiritual progress, get knit together into a fraternal fold. Sarabhanga and Sutikshna may not be brothers by birth; but they are closely akin in aspiration and attainment. Agastya and Agastyabhrata form another pair and come under this category.
[Rama along with Sita and Lakshmana, during their fourteen year exile, were travelling through the forests. They go to Sage Sarabhanga's hermitage and he directs them to go to Sage Sutikshna's hermitage. Sutikshna plays host to them and as they wish to leave for Saga Agastya's hermitage, he asks them to go, first to Agastyabhrata's hermitage, make a halt there before moving on to Sage Agastya's hermitage]
Agastya and Agastyabhrata
In common parlance, Agastyabhrata conveys the impression that the person, so referred to, has no individuality of his own, has accomplished nothing worthwhile in life, has no distinction or merit to his credit - in fact a nonentity. And so he takes shelter under his kinship with an illustrious person to get identified. Agastya, of course is a renowned Rishi of great stature, with miraculous powers, with magnificent accomplishments, and outstanding victories to his credit. His brother may not have reached similar heights to stand comparison with him. But is he to be regarded as a worthless nonentity, simply because he is not known by a name of his own but identified only as the brother of Agastya? If this is how we are to understand the nature and stature of Agastyabhrata, we have to question the propriety of Sutikshna in sending Rama to him. Sages know the value of time; they will have a definite purpose in their directions to people. Evidently, Agastyabhrata is a seasoned sage with ripe wisdom, an illumined soul with deep insight and spiritual experience, worthy to be honoured with a visit by Rama, the Lord incarnate. He is one of those sages, who love to remain in cognito, to revel in anonymity, whose time is spent wholly in discharging self-imposed spiritual tasks, whose lives are consecrated to the Lord's service, within the confines of their hermitages. This brother of Agastya has a hermitage of his own. And a name is needed only for identification of a person. But he has reached a stage of sublime self-effacement. He must have felt that no other name, however sweet and pleasant for personal identification, can equal the descriptive appellation of sanguinary kinship with Agastya. Agastyabhrata extends welcome to Rama, Sita and Lakshmana, and offers them all the courtesies of asram hospitality; but what has transpired between him and his guests is a sealed book. After a night's rest, the guests feel refreshed; they seek his blessings and leave for Agastya's hermitage. The very fact that his sage takes pride in being called Agastyabhrata, in being known only by his kinship with his more illustrious brother, proves how fondly he loves Agastya and how highly he esteems him.
And now about Sage Agastya - seer and sage with a magnificent record of glorious accomplishments and heroic exploits - be it arresting the growth of Vindhya or be it the slaying of Vataapi by digesting him in his stomach or the task of drinking all the water of the oceans. He is instrumental in Ramayana for he is the one who suggests Rama to go to Panchavati for his stay in the forests. He also helps Rama by teaching him Aditya Hridaya Stotra during the war with Ravana and thereby enabling the blessings of Sun with Rama in his bid to slay Ravana.
Agastya and Agastyabhrata are bound by a fraternal affinity which has a special flavour of its own. Both abide in the Lord; the elder one is an active participant in the workings of the Incarnation; the younger one is content to providing sustenance for the cause by his spiritual exercises. The brothers keep close in spirit and work in unison. In such a scenario, there is little scope for outward manifestation of mutual affinity.
Thursday, March 15, 2007
A Case for Consideration
"Internet is provided from taxpayers’ money, from government’s money. My challenge is that the student should reach the classroom at 8:30 in the morning and I have been teaching for almost 30 years now. I have seen sleepy eyed students in the class. I don’t want that to happen. I want them to learn in the classroom"IIT Bombay Director Prof. Ashok Misra
The recent decision of the IIT Bombay Administration to curb the Internet access to students between 2300 hours - 0800 hours IST is a very interesting development. In relation to that, CNN-IBN show India 360 raised the question where Prof. Ashok Misra is quoted as saying above, which I feel requires serious consideration.
Forget the internet access part for a while, which I shall certainly comment about at a later stage, there is something much more fundamental to that quote.
The reference to taxpayers' money, Government's money!
Prof. Misra's worry about the failing standards of discipline in the IIT is going much beyond the case of Internet alone. By raising the point of taxpayers' money - he has reflected on a collective duty of the institutions such as the IITs - whose essential role is to impart education to the so-called brightest minds of the country , towards an end that results in positive empowerment of the country - as they are funded by the taxpayers' money to do good to the country. This scenario expects the students to be aware of what and who is funding their education, and at the same time puts an onus on the Professors at such Institutes, to ensure that they make the students realize the responsibility that they ought to take for the education they receive. The desperation that seems to sound in what Prof. Ashok Misra says is: Inculcating the responsibility talked above can happen only if they could impart some education - but the student is not ready to accept the education itself! In turn, the Professor is sad at not being able to fulfill his duty towards the country, towards the taxpayer's money, which even he is getting to enjoy. Such strong sense of repaying one's gratitude towards the taxpayers' money speaks of the highest sense of public morality that the IIT Director is upholding. If I were to think more, speaking the language of CNN-IBN, I would think that the IIT Director would be doing "whatever-it-takes" to enforce what he thinks is disciplined student behavior. That would mean, it should be very interesting to see the developments at the IIT Bombay from now on. From my own experience at a college of similar kind but for the Government funding, it would require a great deal of structural changes required in the IIT if Prof. Ashok Misra has to inculcate the standard of public morality that he talks of to his students. Whether Prof. Ashok Misra goes the distance or not - he certainly has a made a beginning. Or so I hope, hoping that I read Prof. Misra correctly.
A reflective account of Atanu Dey, who is an IIT Kanpur alumnus, on Who Actually Paid for my Education is a must read, in this context. A brief gist of the article would be: Education at the IITs is highly subsidized, thanks to the Government support and it is subsidized by the Government, in order to educate the best of the best so as to help create human resources for the future. Henceforth, one who studies at such institutes where Government supports them has to have a sense of gratitude towards the country which unfortunately seems missing.
Next two posts - curbing Internet access, on attending classes, and more. Stay tuned.