The perils of inclusive loans

on Sunday, September 28, 2008


Inclusive finance — giving loans to everybody, including the poor — is desired by politicians in India, and in all democracies. Yet, the current US financial crisis shows the perils of taking this goal too far.
The crisis arose from the bursting of a housing bubble. That bubble was created, fundamentally, by government policies and institutions seeking home ownership for all Americans, including low-income ones. Politicians rooted for such inclusive finance. But this ‘inclusion’ extended finance to ever more borrowers with fragile and low incomes, causing disaster. This holds lessons for India.
Wall Street investment banks like Lehman Brothers and Merrill Lynch have been pilloried, rightly, for magnifying the bubble. Yet, they did not create it — that job was done by politicians and government-backed institutions.
The biggest Wall Street firms were pygmies compared with two quasi-government entities, Fannie Mae and Freddie Mac. These two held mortgages and other assets totaling $5 trillion, five times India’s GDP. Fannie Mae was created by Roosevelt to shore up the housing market in the Great Depression. Freddie Mac was created later to compete with Fannie Mae.
Although they had private shareholders, these firms carried an implicit government guarantee. So, they could borrow much more and more cheaply than rivals. This implicit subsidy was justified as reducing the cost of home loans for all. These institutions bought and underwrote mortgages originated by the whole banking system. This reduced risks for banks, enabling them to spread home loans far and wide.
Now, as mortgagers of last resort, Fannie and Freddie should have kept a watchful eye on the housing market. If a bubble grew and burst, they would be left with many worthless mortgages. But instead of being watchdogs, the mortgage twins became active participants in inflating the bubble. Many experts warned that the bubble would burst. These warnings were ignored by politicians, who refused to rein in the bubblemakers. Legislators cheered the housing finance boom for making housing available to all.
Politicians had long created special incentives for home-owning, starting with the creation of Fannie and Freddie. They mandated tax-free interest on all first mortgages, and on the first $100,000 of second mortgages. This encouraged Americans to own houses (and get tax breaks for monthly interest payments) rather than rent accommodation (rent payments were not tax deductible). Capital gains tax was waived for the first $500,000 of profits from home sales. If a buyer provided 20% of the cost of a house, the balance of 80% from banks was insured by a federal agency, lowering the interest rate.
Next came a financial innovation — securitisation. Instead of keeping mortgages on their books, banks sold these to Wall Street firms that chopped them into bits, bundled top-grade mortgages with dubious ones, and sold the bundles as mortgage-backed securities to investors. These securities gave relatively high returns, yet appeared safe because they were backed (and bought) by Fannie and Freddie.
As securitisation grew explosively, banks lowered lending standards to shovel out ever more subprime loans to poor borrowers, without verifying their income, assets or ability to repay. By 2006 they were giving NINJA (No Income, No Job or Assets) loans. Many banks offered teaser loans with low interest for a short period followed by soaring rates, attracting poor borrowers who didn’t realise what they were getting into.
Why did banks take such risks? Because the risk was transferred to investors who bought the loans and mortgage-backed securities, including Fannie and Freddie. The buying spree of the supposed watchdogs yielded them high profits when home prices rose, but made them bankrupt when home prices started falling. The government had to take them over.
Experts like Alan Greenspan had warned over the years of the risks of concentrating such huge financial power with such light regulation on Fannie and Freddie. Breaking them into smaller entities, subject to stricter regulation, was urged by many reformers. But Fannie and Freddie hired lobbyists to resist reform. Major recipients of campaign finance from employees and political action committees of Fannie and Freddie included Barak Obama ($125,000), Hilary Clinton ($75,000) and Senate Banking Committee chairman Dodd (over $165,000).
The strategy worked: the mortgage twins remained unfettered even when, in full public view, they bought subprime mortgages and inflated the bubble. Many politicians supported subprime mortgages as worthy loans to the needy, not realising the consequences. Subprime mortgages are only 6.8% of all mortgages, yet add up to a massive $1.3 trillion.
In sum, financial inclusiveness is fine in small doses, but leads to disaster on a really large scale. India is just at the start of financial inclusion. But as it prospers, political pressures for cheap loans to the poor will grow. The lesson from the US is that inclusive loans on a sufficiently large scale can sink the whole financial system.
So, the poor and needy should be given grants, not loans that they cannot repay, or may be encouraged by politicians not to repay. We have already received warning of this from the fiasco of IRDP, India’s first inclusive loan programme in the 1980s. The US crisis drives home a similar lesson.

A Farewell to Blood, Race, and Everything Else

on Friday, September 26, 2008

Speech: A Farewell to Blood, Race, and Everything Else
Before I say anything else, first let me say, I am (partly) Chinese. Not that I'm proud of it. In
fact, I'm ashamed to admit it. Although the Chinese are an ancient race with an interesting history, what
was the purpose? You can't call it the "Chinese History," because the wars fought by the Chinese were
mostly against each other. Take the Romance of Three Kingdoms. Three kingdoms fighting amongst
each other. And they are Chinese. One Chinese kingdom wages war on his brethren, and for the
purpose of expansion of territory. It's more acceptable and understandable to wage war on another
country for the purpose of expansion.
Take modern China and compare it to the state of the United States during the Civil War.
If the Tibetans throw a fit and want to become their own country, China drops in and says "Hell
no, you belong to us you damned idiots. We won't abide your disregard for our rule. Time to teach you
a lesson." Then the protesters and their fellow Tibetans are rounded up and slammed into detention
centers and the like. Most of these people were then used in the "BODIES... The Exhibition" exhibit at
museums. And you, my fellow Chinese, you call yourselves a great race? You're sickening. You're
almost as bad as Nazi Germany. The only difference is you're doing this to your own countrymen. Can
you remember Tianamen Square? The blood, the gunfire, the screams. Civilians, cut down in swaths,
and they were there demonstrating a basic right, one that is guaranteed by nature, for if nature did not
provide the tongue, mouth, and throat, and you had not a voice, then you would not be able to speak.
But since nature has provided it, it is guaranteed, no, intended that you should have freedom of
During the American Civil War, the South first chose to secede. They formed the Confederate
States of America. Yes, the Union (North) chose to attack in order to maintain a united America, but the
reason was later determined to be to end slavery. I do not think my fellow Chinese would approve of
slavery unless it was of all races but the Chinese. Therein lies their fault, for I have seen it in China.
They enslave their own people. And so they do in Myanmar. Vietnam. North Korea. But not so, not in
Japan or South Korea, and I have not seen it in Taiwan either. (Please refrain from calling Taiwan a part
of China, for it is its own nation, the Republic of China.)
And there is another blow that the Chinese government strikes to its own people. Communist
China calls itself the "People's Republic of China." Taiwan is called the "Republic of China." If
Communist China were truly the People's Republic of China, the people would be guaranteed their
rights, the elections would not be rigged. Also, the people would not be oppressed.
Take a look at this now. This is a political/social joke, done in Adobe Photoshop.
Among the dictators are listed George W. Bush (Yes, we hate our president for the Iraq mess), Osama
bin Laden (Well, he did bomb the U.S.), Apple (Everyone has to have an iPod), Hu Jintao (Current
"President" of China), and Mao Zedong (The "Chairman" that started it all).
So who really is civilized? What is the meaning of race? Is any one government better than the
rest? Is your own race really something to be proud of? I speak not as a Chinese, Russian, Japanese,
German, Italian, nor any other of my blood. I speak as a human being.
And now the answers to those questions.
The civilized peoples would be all as equal as possible. No one person would be better than the
other, and they would hold each other in the same view as they would themselves.
Worst Dictators In History
Race is a complicated thing. But there really should be no racial division, not even for reasons
of pride. All people should regard themselves as humans, not Chinese, not African, not British, not
Japanese, not any race. We are all human beings, and all of us are made equal. Even if there was no
God, we can still say that all people are created equal. No, not "All men are created equal," for there are
also women in this world. Remember, you are a human, regardless of race, and you should treat all
others as humans as well.
There is no one government that is ultimately best. Communism, if it had not been corrupted,
would have had its benefits. However, the Soviet Union and the Chinese Communist Party twisted it so
much that it had become incapable of any significantly good changes. Democratic governments, such
as the one in the United States are usually more capable than others, but sometimes corrupted officials
must be impeached and on some occasions, the people make the wrong choices. It would be best if
there was a government that evenly balanced power, wealth, and everything else.
Race... It's not really something to be proud of or ashamed of. It's just a term. Race means
nothing. Humanity is the most important.
In conclusion, I must say that China, should be invaded by the rest of the world, and control of
the country handed over to the Western Powers. The United Nations should maintain an internationally
controlled government in Manchuria, and habitation of Western China should be initiated.
Thank you for listening.

What China did at NSG

on Wednesday, September 24, 2008

Disputing official Chinese accounts of Beijing [Images] having played a "constructive" role in last week's Nuclear Suppliers Group meeting on India, diplomats from several NSG States say China stood by the handful of countries resisting approval of the India waiver and only backed off when it saw the opposition melt away on the morning of September 6.

At the same time, some diplomats questioned the suggestion that China was out to block the deal, with one European envoy who took part in the three day meeting describing the Chinese interventions in the plenary as "careful and moderate".

In multiple interviews conducted by this reporter with a number of diplomats who took part in the NSG's deliberations, the picture which emerges is one of a cautious Chinese strategy of remaining in the shadows going awry and eventually running aground on the second day of the three-day plenary meeting of the nuclear cartel. If China overestimated the capacity of the six-likeminded countries and Japan [Images] -- described pejoratively by one European country as the 'seven dwarfs' -- to resist the juggernaut of US pressure in the eleventh hour, Beijing, say the diplomats, also erred in underestimating India's ability to hold firm to its demand for an unconditional waiver.

The accounts given by the participants provide a fascinating, if sometimes contradictory, ringside view of Chinese attitudes and actions at the NSG that the diplomats said were driven as much by a desire to condition or even block the India waiver as by resentment at Washington's attempt to change the rules of the international system without due consultation with Beijing.

In the early hours of September 6, India issued a demarche -- diplomatese for a formal representation -- asking China to back the consensus. The message was delivered by telephone to the Chinese ambassador to India. And after the waiver came through, the Indian government made its displeasure at Beijing's role publicly known as well.

In remarks at a public function in New Delhi [Images] on Tuesday, China's foreign minister, Yang Jiechi, said he was "shocked" at reports that his country had stood in the way of the NSG's decision. "Our policy was set from a long time," he said. "I can tell you that we conveyed to India in a certain way our support for the decision, period, before consensus was reached within the NSG."

Yang's statement was factually correct, in that consensus was established at 11:56 am, Central European Time, and China had already informed India that it was going to approve the waiver as finally tabled at the NSG plenary. But the Chinese decision only came at 1 pm China Standard Time, barely four hours before the final bell was sounded on the 45-nation supplier group's extraordinary proceedings.

Earlier on Friday, the unity of the Group of Six spearheading the opposition to the American proposal to allow nuclear commerce with India crumbled when Netherlands and Norway backed off following the incorporation of a reference to the Indian foreign minister's statement on nonproliferation in the waiver text. Switzerland [Images], too, conveyed its assent to the US by 1 am on Saturday.

But when the NSG adjourned for the night soon after, Austria, China, Ireland, Japan and New Zealand [Images] were still holding out. Tokyo was the first to come on board, followed by Beijing, and then the last three. The fact that the Chinese decision was so late coming is at variance with the idea that its policy had been set "from a long time". Unless, say diplomats, its policy itself was to play for time in the hope that the seven countries would do the heavy lifting. And face the maximum flak, in case the waiver was successfully blocked.

"It is my view that China was hoping the exemption would be delayed to such an extent that India might walk away," a diplomat from one of the G-6 countries told me in an email message. "They did not wish China to be blamed for doing this but hoped the group of six would do it for them. Ultimately, when it became clear that [we] would not block consensus on the exemption, they also made sure that they would not be blamed in any way for holding up progress." The diplomat, who represented his country in last week's NSG meeting, added: "Our group was always wary of China's role, knowing that their interests were very different to ours."

But if the G-6 was "wary" of China, diplomats from other countries say the group actively sought Beijing's help when it became clear on September 4 that the mood within the NSG was largely in favour of granting India the waiver. "The six approached a number of bigger countries," said one diplomat. And though Australia [Images], Canada [Images] and Germany [Images] refused to be dragged in, China did step forward.

According to the diplomats, China acted in two distinct ways, though at least one of this reporter's sources admitted it was "hard to say what exactly China's strategy was". "The Chinese did manoeuvres in a procedural way in order to support the six. But they didn't want to come out in the open. They wanted to remain in the bushes rather than come on to the battlefield," said one diplomat from a European country that backed the waiver with reservations.

A G-6 diplomat described this phase as one where the Chinese "offered quiet but clear support for a number of proposals put forward by the like-minded group of six." This support, he said, continued "right up to the last moment." But when it seemed to China that the G-6 was standing resolute, the Chinese delegates also began putting forward amendments and sentences of their own. "They suggested a lot of minor changes to the text during last Friday, seemingly with the intention of delaying progress," the diplomat said.

Though these changes were more often than not unacceptable to India, the diplomats said the Chinese suggestion to include language which might open a door for "other States" (ie, Pakistan) to seek a similar waiver met with stiff resistance by virtually all NSG members, including the G-6. This idea was a complete non-starter, said one diplomat. Another described it as part of a tactic of "procedural procrastination".

As the evening wore on Friday, the Chinese, by all accounts, grew increasingly impatient. The US was running multiple consultations in parallel steering groups, which were yielding incremental changes in the draft language. After going through an Indian filter, these changes were then taken to the plenary and incorporated into the main text. Either irritated by the slow pace or by the fact that the redrafting process was making serious headway, the Chinese delegation began calling for an adjournment. "During the day, everyone's assessment was that we were going to be deadlocked," said an East European diplomat. "By the time it was apparent that there would be no deadlock, the Chinese started saying they had to wait for instructions from Beijing."

It was at this point, said many diplomats, that the US started paying attention to the Chinese stand. The two countries went into consultation and remained closeted for a long time. One European diplomat recalled a conversation he had with another colleague that night when he was wondering whether he had time to slip outside for dinner. "Oh yes, he said, you have plenty of time. The Chinese are meeting with the Americans, mad that they were not consulted by them earlier and determined to let the US pay the price -- it will take at least two hours. We went down to eat, and he was right that several hours passed." It was this diplomat's assessment that the reason China held out for so long was because the US had not bothered consulting with it earlier in the day. And that the reason the US delayed doing so was precisely because the Chinese had struck a more moderate tone throughout the day compared to the G-6.

Though the Chinese eventually yielded on the drafting language, they continued to hold out for more time. Most delegates did not find the Chinese plea for an adjournment to be credible. "When we broke at 2 am, it was already 8 in the morning in Beijing. There would have been no problem getting the requisite authorization," said a diplomat. Matters were further complicated by a semi-'walk-out' by the Chinese at midnight on September 5. Though some Chinese officials remained in the small consultations run by the US till 1:30 am, its two senior diplomats in the plenary left the main room leaving behind only "a rather junior" official "presumably to pick up the final draft".

"Many delegates felt there was a certain gesture," a west European diplomat said. "It was not clear that it was a walkout, for that would have meant the NSG might have adopted the waiver without their presence. But it was more of a signal that we can't take this for much longer."

Days later, participants remain divided about what exactly China was trying to achieve. If the G-6 diplomats were clear the Chinese were firing from their shoulders, others without a dog in the fight tended not to see China as a country that was blocking consensus. "My sense is that they were balanced, and not in the limelight," said a diplomat from the former Soviet bloc.

"We believe China did not try to block the deal and never wanted to block it alone, although the opposition from the six and others may have suited them well� Certainly it would have been very late in the day for them to block the deal at the last minute given their earlier moderate posture," said a European diplomat who undertook to discuss this reporter's questions with his colleagues in order to get a more accurate assessment. "But that is speculation. We are pretty certain, though, that the Chinese were dissatisfied with the way the issue was handled at the meeting and made it clear in their own way to the US� Perhaps they just cooked the US a little to teach them not to neglect China."

Asked whether he agreed with this assessment, one of the G-6 diplomats said no. "It is hard to decipher China's attitude at times, but I would be very certain that their behaviour was based on more than simply a desire to teach the US a lesson not to neglect them," he said.

Either way, Indian officials feel it is significant that when China eventually came on board, it communicated its decision not to the United States but directly to India. The Manmohan Singh [Images] government's handling of an awkward situation was correct but firm. But having issued a demarche and secured the NSG waiver, it is important for the country to move on. Beijing -- and New Delhi -- are sure to have come away from this entire episode the wiser, and in diplomacy that is ultimately what counts.

(The author is Associate Editor of The Hindu and was in Vienna [Images] to cover the NSG meetings of August 21-22 and September 4-6)

Meditate, And Act

on Sunday, September 21, 2008

Yes, we need to draw firm lines. But India is a complex country, and we must do so with due thought
Mr. Tarun J Tejpal, Editor-in-Chief

BOMBS KILL individuals. Bigotry kills societies. Of course the equation is not so simple. Bombs are also the effect of bigotry, and often its cause. As India enters a new cycle of terrorism, it would do well to draw out some waters of wisdom from the forgotten wells of Punjab of the 1980s. As a state, as a people, we did so many things wrong in the first few years of that watershed decade that preliminary testings of separatist violence soon ratcheted up into a maelstrom of anger that consumed thousands of lives including those of a prime minister, a chief minister, a general, and scores of police officers, officials, artists and other luminaries. Briefly, the very unity of India came into question.

This time the test is more severe. Failing it can bring into question the very idea of India. The challenge — if we cut through niceties and political postures — is rather straightforward. How do you with ruthless efficiency combat those who practice terror, without bringing into play a widespread prejudice against a single community? On this count, in Punjab, the state had a very poor report card. For many dangerous years an ugly schism was allowed to take root between Hindus and Sikhs — two communities intimately bound by ties of history, culture, religion and matrimony. The schism gave the cult of terror cyclical lifelines; the schism made the 1984 Sikh carnage possible. It led to the desecration and destruction — by militant and state alike — of the Golden temple. It led some of the most eminent, liberal Sikhs — including Khushwant Singh — to round on the state for its dishonorable intent.

This time in the crosshair is the Muslim. If Sikh militancy was a ten-piece puzzle, then Muslim extremism is a thousand-piece one. Just in terms of scale: 14 million Sikhs then, 160 million Muslims now. But more pertinently, in the last twenty years there has been a growing narrative in India that has been trying to focus the Muslim as the “other”. It has done this using a mix of sentiment, rhetoric, myth, economics and history — both real and false. Its intent has been divisive; its intent has been oppositions. Tragically, in a country quick to cling to tribal identities — caste, community, language, region — the narrative has gained ominous purchase. Helping it along has been a global conversation brimming with apprehensions about Islam.

At such a time in history comes a story of violent young Muslim men planting bombs and creating mindless misery. For the state and the Indian people, the moment seems tailor-made to do everything wrong. To unleash a counter-attack that feeds into the crisis rather than contains it. To buy accusations and nail blame even before the charge-sheets have been filed and the evidence brought in.

We are in the moment of meditation before action. It must be given its full play. What the state must not do is strike out with grand alacrity — no matter the shrill exhortations of critics and media. What the state must do is calmly disentangle the pieces — understand clearly where it must apply force and where fraternity. What we are facing is partly a law and order problem and partly a political one. Neither piece will succeed if the other fails. Good law and order enforcement nabs the killer; good politics cleans up the terror nursery.

It can safely be said that the well-oiled acts of terrorism we are beginning to see arise from a counter-narrative being adopted — and propagated — by the “other”. Of victimisation at the hands of a state run by majority Hindus, of societal prejudice, of unjust security forces. It is played to the theme of the 2002 Gujarat killings, Babri Masjid, false encounters, Mumbai blasts cases, SIMI, all of it counterpoised with the excesses of the Bajrang Dal and VHP — with its chief orchestral instrument being the purity and pre-eminence of one’s own religion.

You would have to be an idiot to imagine that law and order alone can clean up this flaming soup. What law and order can do is to isolate the soup-stirrers, the bomb-makers, the killers. This it must do with determination and evidence. To make this happen the union government must provide men and materials, resources and federal structures. But for it all to work there must be leadership, inspiration, clarity. Anyone who has dealt with Indian intelligence and security agencies knows that the Indian political order has ensured that all these traits are out of supply.

What we don’t need is more draconian laws. This frenzy of demand is coming from India’s secure classes — who seldom have to contend with the excesses of the men in khaki. There is absurd talk of making confessions to police admissible as evidence. Even the white colonial did not go so far. In the twilight zone of a police station a man can be made to confess to anything. As a police friend once said, give me any man for 24 hours and I’ll get him to confess to 9/11 and the killing of JFK. There are enough laws in existence to do the job. Let’s put in place the vision and the will.

Also let’s not buy our own rhetoric about soft state and hard state. The truth is we are pathetically soft when it comes to the necessary virtues: health, education, infrastructure. (For perspective: more than 2 million children under five die every year because of malnutrition.) We have no will to make these happen. And we are hard when it comes to human rights, to dealing with dissidence — Kashmir, northeast, endless delays in courts, the abject condition of under-trials. Those who read upmarket English magazines should fall foul of the police to know how hard the Indian state can be.

Yes, we need to draw firm lines in the sand. But India is the most complex country in the world and we must draw these lines with due thought. Not only the state, even the Indian elite must not succumb to easy formulations. A refined, sophisticated elite questions and calculates the fall-out of all its words and actions. It understands that the framework of social compliance and decency is upheld by a few inviolate principles. In the case of the idea of India, these are liberalism, tolerance, equality, justice, individual liberty. A wise elite understands if the pillars crumble the roof comes down on everyone’s head. It understands when bombs explode they rip through the air indiscriminately.

As never before, India’s elite has a huge stake in pushing for the right thing. All around our shining enclaves a dangerous discontent is bubbling. Where the terror question is concerned, perhaps the right thing is to debate and pass stringent hate laws. To make prosecutable the fomenting of any kind of hatred in spoken or written word, or in actions. These laws must then be enforced without bias against every grouping that practises any form of bigotry, from SIMI to the Bajrang Dal to Christain extremists. In any society there will always be violence and resentment, but its catchment area must be shrunk, not continually expanded. All this requires a national consensus across political hues, a shedding of partisan planks. That may prove a greater challenge than catching a few fanatic bomb-makers.

From Tehelka Magazine, Vol 5, Issue 38, Dated Sept 27, 2008

Let them EAT CAKE

Anirban Bose, a Have, who lives in a gated complex with a pool, wonders if the guillotine blade is being sharpened

Although, as it turns out, Marie Antoinette’s famous saying was actually a rumour perpetuated by the revolutionaries, these four words best epitomise the callous indifference of those in any position of wealth or power (the haves) towards those who cannot afford bread, let alone cake (the have-nots).
And, when people ask me about my impressions of India after returning from the US after 12 years, although generally positive, time and again I am reminded of these four words. Presumably, being able to afford a nice apartment in a gated complex with a gym and a swimming pool, I’m a ‘have’ and a chill runs down my spine imagining if some day my head will roll off the sharp blade of a guillotine.
But India is prospering, they tell me. Double-digit growth. Low-cost tech capital of the world. Largest democracy. Superb banking and financial institutions. Special Economic Zones...The list is endless, they reassure me.
Recently, we bought a washing machine and refrigerator from a swanky store in a beautiful mall. When I had left India, I didn’t know what a mall was. Now, standing in the middle of an architectural marvel of glass and steel, I felt confident. India was on the rise. My wife and I were treated like royalty by a flock of smart men and women serving us tea and coffee and reassuring us that delivery would be free and within 48 hours. And lo and behold, within 48 hours there was a telephone call from the security gate to inform me that the men had come to deliver our washing machine and 260-litre refrigerator.
I opened the front door slightly and waited. And waited. Five minutes rolled into ten and then 20. I peeked outside a couple of times to ensure that the elevators were working. They were. When no one had showed up after 45 minutes, a vein of irritation began to throb in my head.
Then there was a light knock on the door and a man younger and thinner than me stood outside, panting, won dering if he had the right ad dress. On that hot, humid af ternoon, he stood sweating as if he had just stepped out of a
shower. His perspiration made his clothes stick to his body as though they were painted on him. He asked if he could have a glass of water for himself and his friend, still struggling up the stairs, lugging the washing machine on his back.
I was shocked. Why hadn’t he used the elevator, I asked. The security guards downstairs wouldn’t allow it, he replied matter-of-factly, as if the error was in the unreasonable request not in the guard’s denial. I was flabbergasted. Using the elevator to ferry a couple of heavy objects up six floors was a privilege, not a right? What if we had lived on the thirteenth floor or bought a 300-litre refrigerator?
Anger welled up inside me and I felt tears of outrage sting my eyes. I marched down to the security office. The guard informed me that he had simply followed the estate manager’s rules. Rules? There was a rule saying that people couldn’t transport heavy appliances on elevators? Yes, the guard informed me with a serious face, there were rules. He justified his concern saying that appliances tend to have sharp edges that could scratch the paint or dent the elevator walls.
What if the man had twisted his ankle or what if the refrigerator had fallen on him and crushed him, I asked the big, burly estate manager who had shown up. The manager missed my point completely and informed me that the company would surely replace the damaged goods free of cost. This is the new India where customer is king. The delivery man, damn it! Don’t worry, he reassured me, the company would find ten more people like him to do the job.
I didn’t know whether to laugh or cry.
I argued, trying to educate him on the basics of humanity, humility and human rights. After a few moments of dodging my pointed questions he said that other tenants of this upscale complex might not want to share elevators with sweaty delivery boys and smelly milkmen. And that’s when visions of murderous crowds with hatchets and spears baying for bourgeois blood begin to fill my head.
Upstairs, my wife was feeling equally sorry for the delivery men. I found them sitting in a corner of our living room, muching on something. The men were hungry, my wife informed me, and, since we didn’t have any bread, she had given them some leftover cake.

Is America becoming socialist?


Socialists, like Hugo Chavez in Venezuela or Indira Gandhi in India, are famous for nationalising the biggest corporations. But the US government has taken over three of its biggest corporations within two weeks. Has the US turned socialist?
American right-wingers moan that this is indeed the case. Meanwhile, Indian leftists are stunned at nationalisation in a country they view as pitilessly capitalist.
Two of the nationalised corporations, Fannie May and Freddie Mac, are by far the biggest mortgage lenders in the world, with $5 trillion of mortgages and loans on their books. That’s five times India’s GDP, to put their size in perspective. The third corporation, AIG, is the biggest insurance company in the world. No nationalisation in professedly socialist countries were ever so big.
Leftists suspect the US takeovers aim to rescue rich shareholders. Not so. The government will acquire 79.9% of the shares of these companies at virtually zero cost, pushing down the share price close to zero. So, rich shareholders have been wiped out, and the bosses of all three corporations have been sacked.
This is not a rescue of the rich. It is a rescue of ordinary people who need mortgages and a functioning housing market, which would have collapsed had Fannie May and Freddie Mac gone bust. The takeover of AIG will save millions of insurance policy holders from losing their coverage and annuities. The takeovers aim to prevent financial panic from spreading and dragging down the whole economy, as happened in the Great Depression of the 1930s.
The usual procedure in a capitalist welfare state is to let mismanaged companies go bust, penalising the shareholders and managers, and then provide safety nets to those adversely affected. But when corporations are so large that their collapse would endanger the entire financial system, it’s sensible even from a capitalist viewpoint to have a government takeover before they collapse. This is a sort of pre-emptive safety net. Moreover, preventing distress wins votes (or at least doesn’t lose them), and that’s vital in a democracy.
Does this mean the US is becoming socialist? Let’s distinguish between two meanings of the word. For many people, socialism means state ownership of the means of production, as in the Soviet Union and Mao’s China, and the US is not going in that direction. But socialism can also mean an activist state that provides basic needs for all, and creates safety nets for those hit by misfortune, old age and sickness. The US has long been socialist in this second sense, and is getting more so.
Modern capitalist states are all welfare states. Enormous bureaucracies have been created to tax the rich, regulate business, provide subsidies and special schemes to the needy, thwart environmental harm and health hazards, and so on. The list is long and keeps growing.
It could not be otherwise in democracies. Contrary to Marx’s assumptions, legislators get elected by catering to the masses, even while taking money from corporations. Legislators constantly create new rules and regulations to protect consumers, retirees, and other vote banks. Hence, the US has become a land of rising red tape.
Between 1970 and 2006, the number of pages in the Federal Register (which lists all regulations) shot up from 20,036 to 78,000. The number of regulators in the service of the federal government rose from 90,000 to 241,000. In the first six years of the George W Bush era (2000-2006), the number of pages of regulations increased by over 10,000, and regulators by over 65,000.
This is galloping socialism, often criticised as bureaucracy run amok. The US is less welfarist than European countries, but is not too far behind. The US legislators have expanded entitlements for the aged and sick so greatly that state spending on social security, Medicare and Medicaid is projected to rise from 7% of GDP today to almost 20% by 2020. So much for the myth that the US is a heartless capitalist ogre. In fact, it combines capitalism with welfarism, and often tilts toward the latter when the two conflict.
Since US politicians get elected by constantly promising to save citizens from pain, they have now saved citizens from corporate bankruptcies that would threaten the whole economy and throw millions of lives into disarray. This is no more than an extension of the safety net principle.
This is very different from Indira Gandhi socialism. Her nationalisation aimed to give the state a stranglehold on industrial production, and seize the commanding heights of the economy. These measures did not benefit ordinary folk at all, and were soon exposed as ‘‘amiri hatao’’ rather than ‘‘garibi hatao’’ measures.
The US takeovers, by contrast, are temporary affairs, to be followed by re-privatisation once the crisis is resolved. The corporations will be obliged to sell chunks of their assets to pay off debts and attain stability. They will then be re-privatised. They will emerge greatly shrunken, and perhaps broken into smaller units.
Nationalisation is a misleading word for this process. It is better called forced restructuring by the government, as a pre-emptive safety net. It aims to save citizens from pain, but within a market economy framework.

Misawa Air Base/Misawa Air Festival 2008

on Wednesday, September 10, 2008

Disuniting colours of fanaticism

on Monday, September 8, 2008

Many, in India and other parts of the world, would have us believe that religious fundamentalism has only one colour, that of Islamic green. The vicious attacks on Christians and Christian institutions — including orphanages — instigated by VHP activists in Orissa have savagely shown that such fanaticism comes in many colours, including that of Hindu saffron. Not that this needed further proof, after the Gujarat riots of 2002 which VHP leaders had vindicated with the sacrilegious claim that the atrocities committed “had the blessings of Lord Rama”. 
    Fundamentalism — the hijacking of a faith to promote an exclusionist agenda, often through violent means — is a trans-credal phenomenon: it doesn’t begin or end within the confines of one belief system but is common to all. There are Christian, Sikh, Buddhist and atheist fundamentalists (sometimes called communist), not to mention so-called ‘pro-life’ fundamentalists who murder people who work in legal abortion clinics. 
    Though no credo has a monopoly over fundamentalism, after 9/11 the word (often interchanged with ‘terrorism’) has been hyphenated with the word ‘Islamic’. It is often urged that ‘moderate’ Muslims must stand up and be counted as a correc
tive influence on their radical co-religionists. So, in the current context of Orissa (and earlier of Gujarat) should only moderate Hindus denounce the horrors that have been perpetrated in the name of their religion? No. Moderates of all faiths — including that of moderation itself, which surely is the most beleaguered of faiths in an increasingly divisive world — must unite in condemnation of such acts. 
    The goal of fundamentalists, of any stripe, is to disunite and destroy our common humanity. Such subversion can only be countered by a refusal to ghettoise the response by making it the responsibility of one particular faith. Fundamentalism is based on the premise of extreme exclusion, the creation of a demonised Other; the opposing voice of moderation must base itself on the principle of inclusivism, the affirmation of a pluralist identity. 
    That is why the often-repeated call to ban organisations which allegedly are fundamentalist in nature — be it SIMI or the RSS (progenitor of the VHP) — make for a bad politics of moderation, necessary though such proscriptions may seem at times. (The RSS has been banned thrice in India: after the assassination of Mahatma Gandhi; during the Emergency; and after the demolition of the Babri masjid. In each case, the ban was lifted by the Supreme Court.) 
    Bans go against the basic nature of both democracy and moderation, which many might say are one and the same thing. A ban is another way of saying that fundamentalism won, that it achieved its objective of divisive exclusionism; it turned moderation into a mirror image of prohibitory fanaticism. 
    The Vatican has come out strongly against the carnage in Orissa. Let’s hear it now from the leaders and practitioners of other faiths. But most of all, from those who profess belief in that ultimate credo: that no moderate is an island, entire of itself.