The fallacy of elections


Just this week we saw how democratic election results can be hijacked by instruments of democracy – I am referring here to the State Elections in the Southern Indian State of Karnataka. As most people know, Bangalore is the famed capital city of the Karnataka State which is responsible for the IT revolution which propelled India as the world’s leading software services power.

This is not the first time, and it will not be the last time that such hijacks take place in the democratic process. By and large, India has proved that democracy does work as a system of government over the past seven decades, except for a brief two-year period when it was itself hijacked with the imposition of “emergency” in 1975 -77. Well, there are many lacunae in any system of government, and democracy is no exception. It has its own share of problems in implementation, but that is for another blog post!

The federally appointed Governor of Karnataka State invited the Opposition BJP Party to form the government, instead of inviting the ruling Congress Party which had formed an alliance with another party, the JDS. The number of legislators in this alliance was 117, as against the 104 in BJP. In the normal procedure, the Governor would have invited the biggest alliance which can then win a trust vote in the State Assembly.

However, the Governor invited the single largest party (the BJP) and gave it 15 days to prove its majority in the State Assembly, which is only possible if BJP is able to snare at least 8 legislators from Congress/JDS alliance. And, how will that happen? Just think about it. India has already passed the Anti-Defection Law, which means it would be hard for legislators or parliamentarians to cross the aisle and join the other party. It is also not moral to do so, having been elected under the auspices of the party under whose symbol the legislator(s) won the election.

In other State Elections in India, the respective Governors had invited the biggest alliance to form the government, not the single largest party. That suited BJP (the party which rules India at the federal level) in couple of States. However, in the case of Karnataka, they tried to change that rule which a Governor should follow once he or she receives the letters of commitment from the legislators.

So, what happened?

In a tense 3 days of drama, played out in the Supreme Court of India and in Bangalore, the BJP lost out against the alliance of Congress/JDS. I am not in favour of either party, but I am concerned when the powers that be plays out the political game with utter disregard towards established precedents under their own rule. The Supreme Court played a central and decisive role in the whole episode and determined what way things should go in Karnataka State Assembly – it gave just 24 hours to the BJP Chief Minister (who had been invited by the State Governor to form the government) to face a trust vote in the Assembly. So, left with no time to indulge in horse-trading both sides brought their safely guarded legislators to the Assembly for the trust vote. Facing the loss of the trust vote, the BJP Chief Minister resigned.

The whole drama could have been avoided if the Prime Minister had intervened and ensured that proper procedures are followed. The fight should be at the hustings, not at the assembly after the elections were completed. Exposing the respective parties’ machinations to the common man and to the world at large, and going to the Supreme Court which was forced to intervene are not good examples of running the world’s largest democracy.

This proves that at the end of the day, all politicians are the same in India. Some are articulate, polished, well-behaved, and most are corrupt and bend rules in their favour. However, when it comes to winning elections, they let lose anarchy and throw principles to the wind. Similar things happen in other nations as well in varying degrees. However, India cannot risk its strong democratic institutions and the three well delineated arms of governance – the Executive, the Parliament/Legislature, and the Judiciary. These are self-balancing to a large extent, and each one is expected to check on the abuse of power by any other arm, and eventually balance the overall system of governance.

What the Karnataka Elections proved is simple – the will of the people have to be respected and cannot be manipulated in the way that one party wants. The alternative would be to call for re-elections at a great cost, annoying the voters; or, to bring down the government once it has been formed by legislative techniques and defections. However, it has been proven time and again that the voters exercise their power at the hustings to elect their representatives and have the ultimate power to dislodge parties which do not perform to their expectations.

Viva La Democracy, or to put it precisely “vive la démocratie!”.

Cheers,

Vijay Srinivasan

20th May 2018

 

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Great Truths


Courtesy: My Classmate

  1. In my many years I have come to a conclusion that one useless man is a shame, two is a law firm and three or more is a Congress.

— John Adams

2. If you don’t read the newspaper you are uninformed, if you do read the newspaper you are misinformed.

— Mark Twain 

3. Suppose you were an idiot. And suppose you were a member of Congress. But then I repeat myself.

— Mark Twain

4. I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.

— Winston Churchill 

5. A government which robs Peter to pay Paul can always depend on the support of Paul.

— George Bernard Shaw
6. A liberal is someone who feels a great debt to his fellow man, which debt he proposes to payoff with your money.

— G. Gordon Liddy 

7. Democracy must be something more than two wolves and a sheep voting on what to have for dinner.

— James Bovard, Civil Libertarian (1994)

8. Foreign aid might be defined as a transfer of money from poor people in rich countries to rich people in poor countries.

— Douglas Casey, Classmate of Bill Clinton at Georgetown University 

9. Giving money and power to government is like giving whiskey and car keys to teenage boys.

— P.J. O’Rourke, Civil Libertarian

10. Government is the great fiction, through which everybody endeavors to live at the expense of everybody else.

— Frederic Bastiat, French economist(1801-1850)

11. Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.

— Ronald Reagan(1986) 

12. I don’t make jokes. I just watch the government and report the facts.

— Will Rogers

13. If you think health care is expensive now, wait until you see what it costs when it’s free!

— P.J. O’Rourke 

14. In general, the art of government consists of taking as much money as possible from one party of the citizens to give to the other.

— Voltaire(1764)

15. Just because you do not take an interest in politics doesn’t mean politics won’t take an interest in you!

— Pericles (430B.C.) 

16. No man’s life, liberty, or property is safe while the legislature is in session.

— Mark Twain(1866)

17. Talk is cheap………….except when Congress does it.

–Anonymous 

18. The government is like a baby’s alimentary canal, with a happy appetite at one end and no responsibility at the other.

— Ronald Reagan

19. The inherent vice of capitalism is the unequal sharing of the blessings. The inherent blessing of socialism is the equal sharing of misery.

— Winston Churchill 

20. The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin.

— Mark Twain

21. The ultimate result of shielding men from the effects of folly is to fill the world with fools.

— Herbert Spencer, English Philosopher (1820-1903) 

22. There is no distinctly Native American criminal class…………save Congress.

— Mark Twain

23. What this country needs are more unemployed politicians.

— Edward Langley, Artist (1928-1995) 

24. A government big enough to give you everything you want, is strong enough to take everything you have.

— Thomas Jefferson

25. We hang the petty thieves and appoint the great ones to public office.

–Aesop 

FIVE BEST SENTENCES

1. You cannot legislate the poor into prosperity, by legislating the wealth out of prosperity.

2.What one person receives without working for…another person must work for without receiving.

3. The government cannot give to anybody anything that the government does not first take from somebody else.

4. You cannot multiply wealth by dividing it.

5. When half of the people get the idea that they do not have to work, because the other half is going to take care of them, and when the other half gets the idea that it does no good to work, because somebody else is going to get what they work for, that is the beginning of the end of any nation!

Courtesy: My Classmate

Cheers,

Vijay Srinivasan

5th May 2018

 

Salt Mango Tree


I felt only shame after viewing this Malayalam movie “Salt Mango Tree” on NetFlix along with my wife.

While there are many positive things I can say about my birth country India, there are equally many bad things that exist even today in modern India. I feel very proud when I see global corporate CEOs from India (far outnumbering many other countries), over 100 satellites being placed successfully in orbit by one single rocket launch by the Indian Space Research Organization, the very optimistic young generation in the entire world which India has in abundance, and so on and so forth – it is a rather long list of achievements by India and Indians in a short span of just six decades.

However, the things which went wrong over these same six decades, and which continue to hamper the potential and growth of India still bother me a lot. These should bother all well-wishers of India. What I am referring to here are things like corruption, lack of guaranteed, affordable and accessible education for all, lack of universal healthcare for all citizens, lack of safety and security for women and even for very young girl children, and lack of world-class infrastructure and facilities all across the country including uninterrupted access to electrical power, potable water, proper roads, high speed internet, etc., etc., Though there have been some improvements in the past few years, what India needs cannot be met with incremental enhancements of existing infrastructure. India needs to do what a China has done in the past 30 years of relentless public investment in a non-bureaucratic manner with the sole intention of enhancing the livelihood of its people. Communist China has done a far better job than a democratic India, and I am not going to listen to the democratic nonsense that many armchair philosophers expound on the superiority of democracy. Everything in the corporate world is measured on budgeted outcomes, why not in government and governance?

The movie “Salt Mango Tree” describes one facet of India’s systemic failure in providing quality education for all children. Parents have to run around for getting admissions to prestigeous schools, and are totally stressed out in the process. They have to perform better than their children in school admission interviews. What about children of hawker stalls and poor people? How will they get admission in such schools if the criteria is based on how well the parents perform in interviews? How will they speak in English, let alone come well dressed and well groomed for such nonsensical interviews?

I was seriously embarrassed to see how the movie portrays the anguish of both the parents, who struggle to make a living and save money for their only boy. The movie strongly hints about the so-called “donation” which is nothing but a bribe which parents have to offer to schools. When parents give up on the due process in getting school admissions, they turn towards short cuts such as bribe, and this practice continues throughout the life cycle of their children, embedding and validating the need for systemic corruption. Why would anybody outside the Indian system believe that our quality of education is good and impeccable, on par with the developed countries? Making an incorrect comparison with the IITs and IIMs is wrong, as the folks who get into such schools do so entirely on merit, and they go on to change the greater world in many ways. They are focused on making wealth and very few dedicate their lives to fixing the systemic issues of governance in India (I personally know of only one such classmate).

I am not going to describe the movie here, but the message from the movie cannot be more impactful – to get quality education in India even at the primary level (starting at Kindergarten) today, parents have to prepare well, get trained, perform very well in school admission interviews, and be ready to offer donations. This is not the case in any one of the developed nations of the world. If India wishes to achieve the status of the top 5 countries of the world (not just based on GDP), it has to pay serious attention to education, healthcare, quality of living, public infrastructure, etc., and follow the model of either the Nordic countries or countries like Singapore, where public systems by government trump even the best quality of private systems (which are also available but at a tremendous cost). If India cannot invest at least 5% of its national budget on improving public Education and another 5% on public Healthcare, then the future generations will continue to suffer.

The focus outside India today has turned positive about India after a long dry spell of negative media coverage about the bad things happening in India. I have seen that over the past quarter century (most of which I have spent outside India), and it sometimes used to pain me. I am out of it now and immune to the negative coverage on India. I look for some positive news on India every day. The political news is not encouraging. As I wrote in a recent blog post, my experience in Bangalore traffic in the midst of visiting foreigners was not positive. The “East Asians” detest infrastructure problems as they have long been used to good infrastructure and environment. I make it a point not to bad-mouth India in any manner to them, and I try to keep my views to myself. I tend to talk about the positives and push the envelope for their next visit.

However, as I write here this evening, it pains me again to see that India has not changed in fundamental public services.

Looks like this will be the situation in our life time.

Cheers,

Vijay Srinivasan

29th April 2018

The worsening traffic nightmare


India has always faced ever mounting infrastructure issues as its economy has expanded year after year over the past decade and a half. The country has consistently under-invested in infrastructure (roads, railways, airports, seaports, logistics), exactly opposite of how China’s infrastructure has been built ahead of its economic growth demands. Well, as they say the elephant takes time to get its house in order, while the dragon whizzes past at a tremendous, almost unbelievable speed even compared to Western standards.

So we have an India which is bursting at its seams, unable to cater to ever increasing domestic demands for all kinds of services. More than 115M Indians took a flight in March 2018, which is almost 10% of India’s population. This is a fantastic growth of nearly 24% Year-on-Year. But it exerts enormous pressure on airport infrastructure and capacity management. This has always been the issue in India. Almost everything is under planned, with the result being overcrowding and inability to manage demand with limited supply.

The only positive thing is that there is a sprinkling of brand new airport buildings and roads all over the country, and seaports are being upgraded. My guess is that it will take not less than another two decades before India catches up with China in terms of the country’s infrastructure – it could be faster as people would demand the same – there is after all a breaking point when things are likely to go haywire.

I experienced the road traffic jams in two Indian cities earlier this week – Bangalore (Bengaluru is the new name) and Chennai. I have not been to Bangalore for quite a while, so I was surprised with the traffic situation. Traffic in arterial roads was moving at snail’s pace, and it took more than two hours to reach Electronic City from the Airport. I should say that the Bangalore Airport was good (though not comparable to Mumbai or Delhi Airports) but it has been located some 50 to 60 KMs away from the city. I was also quite taken aback when the taxi swerved into several side roads (away from the highway) in order to cut the time of travel, but that ruse did not work out. Why can’t the city planners work out a straight toll-based expressway like in most global cities? Why should all visitors suffer just to get to the city, taking a good two hours and sometimes more? Why should the route to Electronic City cut across the key roads of the city instead of being connected to the Airport via an entry to the expressway, and so on and so forth………..there are no answers from our Bangalore colleagues however. Everyone is wondering, I guess, like we were! I later discovered that there is a helicopter service from the airport to Electronic City, but it was too late. Not only that, I found that the cost of the chopper was not very much higher than that of the taxi service, but it would cut the time taken to just 15 minutes.

I believe the charm of a city is robbed by traffic chaos and mismanagement. Bangalore was a beautiful garden city admired by many but inhabited by ex-army folks, retirees, and public sector employees. The IT revolution has of course benefited the city’s economy greatly, no doubt about it. It has however damaged the ecosystem of the city and its surroundings. People from all over India (and many international people) have made Bangalore their home.

Coming to Chennai, I should say it fares better than Bangalore in terms of traffic management. I was however, not happy with the deterioration that I witnessed just over the past six months – there has been a strongly felt absence of road works and enhanced traffic routing all across the city. While it takes only 30 to 40 minutes to reach the centre of the city from the Chennai Airport, one has to navigate it like a city road, as there is no expressway to the city. The road is jammed with auto-rickshaws, cars, heavy vehicles and the like, making the vehicular movement rather slow. Traffic light violations are rampant, and the notion of “might is right” is slowly encroaching on road traffic in Chennai (I think it is an export from Delhi road culture).

I also found that it took longer to get a call taxi this time in Chennai. I was using the popular OLA app for getting auto-rickshaws for shorter rides (less than 5 KMs) and cars for longer rides. I had to plan in an additional 15 – 20 minutes to get an auto-rickshaw and at least 30 minutes for a car due to the bad traffic conditions on heavily congested roads. It took me 40 minutes to get a taxi at 6:30 PM on a Saturday to go to the airport.

Overall, I find that India’s development comes at a heavy cost of lost productivity, with traffic situation being only one of the factors. People are irritated on the roads, and small accidents are not uncommon in city roads, often leading to fights and stoppage of smooth traffic flow. Traffic violations are on the rise. Wi-Fi is becoming a much sought after service on taxis to kill time. Transportation is a most basic requirement of people and it is the responsibility of the government to provide ease and flexibility in transportation. It is going to cost India more than a trillion dollars to get its infrastructure in place, and that will take not less than twenty years in my opinion.

Cheers, and enjoy India’s traffic in a pleasant manner, and without getting into road rage,

Vijay Srinivasan
21st April 2018
Chennai International Airport

The Mechanism


Institutionalized corruption has been the bane of good governance in most developing countries. Even in developed countries corruption masquerades as expensive lobbying, with quid pro quo for almost all favours done by the powers that be. Unfortunately, corruption is instinctively embedded in human psyche – the premise is that almost everyone has a price, like everything has a price, and provided that price is paid, that everyone is available to provide a service. It sounds obnoxious and bothersome to say the least, but it is a practical reality most of us have encountered in our lives. There is no denying it, it is very rare for a person not to have experienced or seen it.

When corruption is institutionalized in the system, like it is feeding upon itself in embedded circles, then we have a very serious and dangerous problem to handle and fix. When public money (basically taxpayers’ money) is siphoned off by government-owned companies through the well-oiled system of awarding contracts at inflated prices to chosen contractors, who then reward the politicians and ministers who appoint directors on the board of these companies via a money laundering scheme, then corruption is well entrenched. It is not possible to eradicate the scourge of corruption irrespective of change in governments or officials. The law enforcement becomes part of the system as it comes under the Justice Ministry, which is just another government machinery to ensure that the above-described system stays in place.

“The Mechanism” is a Netflix serial which just started running – it is about the systemic corruption in Brazil, which is still playing out in real life. You might have seen that the ex-President Lula da Silva has been arrested and sentenced to years in jail, and his successor Dilma Rousseff is also facing corruption charges. I have been seeing the serial for the past couple of weeks, and it has got my full attention. I can visualize how the same system would work out in other countries that I know of.

What surprised me in the serial is the passionate commitment of the law enforcement officers and their loyalty to each other as they fight the corrupt villains together sometimes, and on a disjointed basis on other times. It is funny to see how the lead officer fights off the prosecutor during a press conference. At the end of the day, it is all about human emotion, and how that plays out while the almost real story spins out of control. The Mechanism also shows how important it is to have an impartial judge who carefully evaluates the evidence before signing off the search and seizure or arrest warrants. When someone cannot be bought, then the story turns in favour of ultimate justice.

Many of us have experienced the most simple variety of corruption – like the official at the property registration office demanding a cut before registering the sale or purchase of property, or the driving license official asking for a price, etc., Many of us have only “read” about institutional corruption – how public funds that otherwise could be usefully deployed to pay for much needed infrastructure or citizen services, are tapped by unscrupulous public companies and politicians which keep developing nations poor for ever. This is a sad story playing out in most countries. There are only a very few lucky countries which do not have this plague afflicting their system of governance.

I was never that much interested in Brazil, but The Mechanism brought Brazil right front and centre – a fascinating country indeed. It is the 8th largest economy in the world with more than 207M population, and a GDP per capita of over USD 10K. It is the largest economy in South America and prior to 2012, it was one of the fastest growing economies in the world, meriting its inclusion in the McKinsey BRIC group of countries.

Large countries do have large problems, and Brazil has not been an exception.

Corruption has roiled the country out of shape over the past several years, damaging the presidencies of multiple presidents. It is always surprising to find that the pressure to maintain the status quo is just phenomenal – as we see in The Mechanism, the previous Attorney General (called the “wizard” in the serial) tries to negotiate a deal with the incumbent Attorney General on behalf of the 13 corrupt contractors who, he maintains, are crucial for the survival of the Brazilian economy! And, when that pressure builds up all the way to the President of the country (as is shown in the serial as well), then one can imagine the enormous stress that can be applied on honest law enforcement officials and judges.

The serial is not over, and I have not seen all the episodes. But is easy to figure out the impact of corruption in the Brazilian society, as the water utility company which comes to fix a broken pipe in the serial demonstrates the corrosive influence of systemic corruption by passing off the work to a small time contractor who will then feed back the bribe to the company officials.

I have not seen serials on corruption – this is probably the first one. The creator of the series has done an amazing job (his name is Jose Padilha), and the key actors have performed exceedingly well, though personal animosities do take an overarching role disturbing the main theme of the serial. But let me forgive that distraction and focus on the positives of the serial!

Cheers,

Vijay Srinivasan

08 April 2018

 

The terrible loss of privacy


Privacy is a funny aspect of life.

Most institutions and corporations we deal with in our lives demand that we sign off on dotted lines when it comes to providing them access to our very personal data. Most consumer companies do the same thing. Governments have always asked for our data. However, the phenomenon of giving away our total freedom and personal data to social media giants did not bother us for a long time. Until last week.

I am referring to the data breach on 50M Americans who have accounts with Facebook. Well, this is not the first instance, but in terms of scale it is the biggest ever. There have been hacks on Apple’s iCloud, releasing personal data of celebrities. There have been other hacks such as the bad one on Yahoo mail.

But, people forget and forgive, the reason being that they still need the services of the social media companies, cloud service providers and email operators. There is just no alternative to leading one’s life today – if an individual is not on Facebook, he does not exist – not just virtually, but physically as well! He or she is ignored for lack of digital savviness, or inability to be in sync with the rest of the world which seems to be rushing into Twitter, Instagram, Snap, WeChat, WhatsApp, Line, Google’s variety of offerings including of course Search, and so many such digital tools.

So, things will be back to normal after a few months for Facebook. They will undergo detailed investigation that is reserved for Russian hackers, questioned on Capitol Hill, excoriated in the “adult” networking circuit, and punished in some way, like being forced to implement tougher security measures. Facebook’s reputation currently is in the dumps, and they should not be trusted as they have traded their users’ data. But apart from all this, do you think that anything substantive will happen to them? There are more than 2B users who depend on Facebook for communication. Not me however – I never seriously used the consumer version of Facebook, though I have an account with very sparse data on myself (I however use a corporate version of Facebook behind my company’s firewall for internal teamwork and collaboration, along with other tools such as Microsoft Teams and Yammer).

So here I am – not a regular user of the consumer version of Facebook, Instagram, Twitter, et al, but a serious blogger on this WordPress platform and LinkedIn user. I select what I wish to do, and cannot be led to use some tool that I do not wish to use. Further, I am careful not to accept terms and conditions of these tool makers and platform owners, and do not click to give access to all my data voluntarily. Neither do I agree for unsolicited marketing communications from these folks or their marketing collaborators, though sometimes it is made difficult not to agree.

The question is – what is more important: maintain privacy or lose it due to either the lack of security of the provider or his desire to sell off my data for money? In my case, the answer is crystal clear – I would rather forego the convenience of “checking into” Facebook and detailing what I am up to, or posting my photographs enjoying a vacation with my family, but safeguard whatever little privacy that I still have. It is not necessary for the entire world or my friends and relatives, or for any government, to know what I am doing at this moment (I am blogging now!). It is irrelevant to them, but it is critical for maintaining my sanity. It is not that I am anti-social – I am in multiple WhatsApp groups – but I wish to remain private. I do not respond to LinkedIn invites from people who I have not yet met. I should know the person through a referral or I should have met that person before I would even consider accepting the invite.

Nothing wrong with wanting to be a private individual. However, we know that most teenagers willingly give away their most personal data on the Facebook platform. The issue is that Facebook cannot be trusted to keep that data totally private and secure.  We do not know for sure that the data is safe and secure. We also do not know if they had traded our data for money. We never knew that Facebook gave away the data on 50M Americans to a U.K. Professor for some vague research, who in turn handed that out to the now infamous Cambridge Analytica.

It is more important to spend F2F (“Face to Face”) time with friends, relatives and family, like in the old times. It is more important not to be influenced by hate speech and lectures that are posted on all social media platforms. Did we live without a mobile phone or social media platforms in the past? Did we live a life without networking? We did live well, but I believe we did not learn to adopt technology well in the 21st Century. We just blindly jumped into all that is new without much analysis.

I am not against any of these innovative tools and platforms which have created enormous value to equity investors and users. I think we need to be extra careful in how and why we use these in our lives. Do we give our date of birth or place of birth to our neighbours or strangers? We don’t. We do not share any personal data in public. The same caution applies when we venture into digital space. We cannot ignore the fact that digital platforms are fast proliferating across our lives, and will come to dominate all facets of our existence. We may not be able to order ice cream without a social media account in future, or something as ridiculous as that.

Welcome to a world less private, more intrusive, less secure, and more dangerous as a result.

Hope you enjoyed your weekend.

I am happy to share the fact that I am now allowed one glass of wine, and I will soon be posting on the wine I had and the experience of de-addiction to wine.

Cheers,

Vijay Srinivasan

25th March 2018

Falling Markets


We saw that the major equity markets around the world suffered steep losses during the week which just ended.

There are always multiple reasons why the equity investors fret at times and start a major selling operation of their holdings. Mostly it is sentiment, sometimes emotions, but almost always there is a reason or many reasons why the market sell-off happens.

In the current scenario, the negative sentiment is driven by multiple factors afflicting the U.S. economy, aggravated by bad government policies which appear to keep shifting all the time under the wise administration of President Trump. To start with, there has been a series of exits of experienced people from the administration – the latest being General McMaster who was the National Seecurity Advisor to the President. He has been replaced by the rather hawkish hothead – John Bolton, who is likely to plunge the U.S. into another back-breaking war, either with Iran or North Korea.

So, you have a combination of the following factors:

  • a huge deficit budget of USD 1.3T which has just been signed off by the President, necessary to keep the government running till end of September 2018, which has a massive allocation for the military (not all of that is necessary);
  • a possible credit squeeze, with the Federal Reserve planning to raise the interest rates at least twice if not more times during this calendar year;
  • a high dependency on China which buys most of the U.S. Treasury Bills;
  • a looming trade war primarily with China, with the President planning to impose tariffs worth USD 50/60B on imports from China, and the already planned retaliation by China;
  • a strong noose tightening around the President’s neck – the Russia investigation of Special Counsel Robert Mueller – Trump cannot fire Mueller as that would lead to unforeseen consequences, but he might still do it, plunging the U.S. into uncertainty;
  • more potential exits from the Trump administration – Jeff Sessions is one clear possibility;
  • sex scandals threatening Trump from a series of women – the courts are admitting the cases against the wishes of Trump and his lawyers;
  • the clear possibility that Kim Jong Un might refuse to enter into talks with the U.S. if John Bolton is involved; North Korea termed Bolton as a “scum” and a “blood sucker” in 2003/04 and is unlikely to talk to him if Trump deputes him or brings him along to threaten Kim Jong Un, which will very likely happen;
  • the Iran nuclear deal imbroglio; Trump might refuse to certify the continuance of the deal when it comes for his quarterly certification signature as required by the U.S. Congress, in which case Iran will be free to walk away from the deal, and that might lead to Bolton arguing his case to bomb all of Iran’s nuclear facilities;
  • the continuing loss of elections to the Democratic Party as just happened in Pennsylvania – the potential loss of both the House and the Senate majority, which is not likely, but appears possible now;
  • and, so on and so forth…………there are many such factors

So, the equity markets falling was expected by all and sundry. If I recollect, the U.S. market ran up by more than 6,500 points (DOW) in about 14 months from the time Trump took office, allowing him to tout the market gain as one of his signature achievements. Now out of this increase, 3,000 points are gone, and it is likely that the sell off will continue into next week.

A government that is so critical for world peace and stability cannot be tottering every day. One has to just see CNN News and the U.S. Talk Shows by major news organizations, to get the full import of what is going on in Washington D.C. The Trump administration has become a laughing stock, even within the U.S.

The only silver lining is that Trump is the first U.S. President who has succeeded in pushing North Korea to the negotiating table (mostly by harsh tweets from Trump!), though both Koreas claim that they decided to play the Olympic game together and cool off the rhetoric. The other achievement of Trump is that he is the first U.S. President to stand up to China without any fear of repercussions and challenge them to a trade war.

While these are great to see and hear about, we have to recognize that Trump has still not won any battle with either one of these countries. He could not even win the Border Wall case against Mexico, which refused to foot the bill. It is going to be very tough for the U.S. to negotiate when Trump has surrounded himself with foreign policy and military hawks such as Mike Pompeo (the new Secretary of State, yet to be confirmed by the Congress), John Bolton (the new National Security Advisor who does not need Congress confirmation), Gina Haspel (the new CIA Director nominee who needs to be confirmed by the Congress), and the perennial lady hawk Nikki Haley who is the U.S. Ambassador to the U.N. A war is surely looming with such hot heads around the President, who himself is a strong hot head who will not take a slight from anyone, or advice from anyone. All the major departures have happened apparently due to the fact that the concerned person begged to differ from the views of the President.

So, here we are, with markets having fallen all around the world, including India’s SENSEX. We are entering an uncertain phase in world history and diplomatic relationships. Everything can come off unhinged. No relationship is going to remain sacred. Continuous drama at the White House is going to rock the markets on a daily basis. The markets can no longer afford to do their own business disconnected from political and economic realities.

So, we are all in for a rocky ride, folks.

Enjoy the ride however.

Cheers,

Vijay Srinivasan

24th March 2018

The Digital World


The “Digital World” is happening rather fast in our lives today.

In countries like Singapore (wherein I reside), the government actively and constantly encourages adoption of digital mechanisms in daily lives of citizens. Singapore probably is the most advanced digital economy in the world today. Almost all transactions are going cashless, and the transportation system just announced that they would not accept cash in stations, people would have to use electronic payment cards to use the bus and train systems. Very few people go to bank branches. I keep some 50 dollars in the wallet, and mostly there is no need to use it. I pay for lunches with a pre-paid card, and if there is no balance in the card, I can pay for lunch by tapping my Visa or Master card on the credit card terminal – there is nothing to sign (the danger is if someone gets hold of your credit card, they can not only eat all your lunches, but can also spend a lot of your money using the “pay by wave” mechanism, which does not need your signature or entry of your PIN into the terminal, like it is required in India). All corporate and even personal applications are moving to the cloud, which is more cost-efficient and available any time on demand – there is no need to start up any hardware. All cars on the road are going to be monitored via satellite sometime starting in 2019. Citizens have to make a compromise between safety/security/convenience and lack of some privacy.

Other countries are way behind, but it is only a question of rather short time when every one catches up as the digital movement is inevitable. I was (and still am) amazed at the rapid advances that India has made in several areas in the digital world – the one which personally impacted me was the Income Tax System, which has recently introduced an e-vault mechanism for added security. I submitted an online complaint using their grievance portal, and got a message that any documents to be uploaded have to be in PDF format, and multiple documents have to be Zipped together in one Zip file!

I wondered how many citizens would know how to use digital systems, especially in India. As the tax net widens to capture many people who have not paid income taxes in India till now, there should also be an education system which delivers the modus operandi of filing taxes electronically. How will a farmer who has never used a laptop going to understand and file taxes? Even folks in cities have trouble with various things such as digital signature needed to file taxes or rectification of tax data. So, the need for chartered accountants still continues to remain strong (in India).

In Singapore, I am not filing any taxes as there is a special “no tax filing” mechanism – the Income Tax Department gets the income details of each and every employee electronically, and computes the tax automatically. Only if you disagree with the computation, you have to log in and file a complaint. It is that simple. No need for digital signature or uploading documents – they have all documentation and my identity.

As we move aggressively into the digital world, it is critical to take the older generation along with us – no one should be left behind. This means investment in a support system which guides these folks as they are gently migrated to the digital world. For the folks who are already employed in the information technology industry, it should be rather easy. How about other industries, and how about people employed at the lower rungs of the corporate ladder? Here is where India needs to learn from Singapore – constant communication is the key.

In large countries like China and India, there is also the worry about workforce displacement due to the influx of digital technologies. Again, this is inevitable in all industries, not just in information technology industry. People have to constantly keep themselves updated with new technologies, and enhance their skill levels to compete with technology even while adopting it. There is always a place for skilled people in any industry, and so it is absolutely essential for each one of us to keep ourselves moving in sync with technology. We cannot be complacent, we cannot be slow, that is the reality of today’s life. In fact, we have to be ahead of robots – how? I don’t know, but we have to see how robots are entering our digital lives and identify areas wherein we can collaborate or leverage robots to achieve our corporate or personal goals.

Looks daunting? Yes, it is.

But human mind is innovative, it is complex, it can constantly come up with solutions to new problems and challenges.

I am sure in the digital world as well we will see the ingenuity of the human mind. The key thing is to identify opportunities in our own lives to leverage and benefit from the incessant adoption of new technologies – I am not talking just about apps on our iPhone or Android phone – there is much more going on around us. Look out, read up, skill up…………and enjoy the digital ride of our lives.

Cheers,

Vijay Srinivasan

24th February 2018

 

The Culture of Materialism


The premise of this post has been to establish the link between materialistic greed of (certain) people and corruption and overall destruction of value for citizens who lead normal lives. I went for an event today, and this topic was discussed among a set of trusted friends who had very different views. As an author, I am supposed to state my views in a non-diluted manner, while accepting criticism or praise in equal measure, which is exactly what I am going to do now – I have not changed any of my views in this final version which is getting published this evening (Saturday evening in Singapore), though I did think about some of the alternate views expressed by friends today on this topic.

Here is my view in a few bullets (this is not the normal way I write, but I thought it would be good to highlight):

  • Countries which unabashedly focused on the material well-being of their citizens in the 1970s and 80s, paved the way for economic growth to be the dominant factor in their countries’ vision – examples would be South Korea, Taiwan, Hong Kong, and Singapore – the four “Tiger Economies” of Asia. This meant that citizens were led to believe on the economic vision of their leaders, in turn, leading to rapid growth over the past 3 to 4 decades, rapidly enhancing the GDP per capita of these nations, and focusing on generating material wealth for the citizens. This has already happened – Singapore now is the 4th richest country in the world in just one generation! There are pros and cons, but one cannot argue with the fact that economic progress has been clearly accomplished.
  • Countries which focused on political philosophies and social development in an Utopian manner did not progress fast due to the debilitating bureaucracies that these countries established, leading to slow progress and corruption as the main driver for faster movement of business. There are many examples of such nations, mostly democracies and some dictatorships, but I am not going to name them. Established mechanisms of corruption and nepotism led to stealing of wealth from ordinary citizens to line the pockets of politicians and bureaucrats, and the wealth generation was isolated in few family run businesses. Not surprising, however.
  • Over the past decade or so, these large countries have seen what the smaller countries have accomplished, and are trying to adopt some of the policies though in a much belated and haphazard manner. However, the institutionalized corruption continues irrespective of change in governments as the essence of bureaucracy has stayed the same. This implied focus on materialistic economic growth will take a very long time to trickle down to ordinary citizens, and will again benefit few individuals and families, as we are seeing. Tax payers’ money is being stolen brazenly to benefit these folks.
  • So, the derivation is that the focus on materialistic wealth generation is not going to work for larger countries since institutional changes and policy frameworks have not changed for the better. This would mean that corruption would accelerate and lead to larger financial scandals, while ordinary citizens would see probably a lower impact of routine corruption due to e-governance initiatives (the only major benefit, yet to be realized however).

In a nutshell, the culture of materialism will lead to skewed economic growth for larger countries, benefiting the same businessmen who benefited in the past. Lifting millions of people out of poverty towards a USD 5,000 income per capita is not a simple challenge – it cannot be compared with the easier task that the Tiger economies had with their singular focus on trade. So, there is going to be very hard time befalling on millions of honest working folks and farmers, who would be held subservient to the governments by paying more taxes and more fees to obtain banking, insurance, and other services.

This is indeed a sad situation. Expecting millions of ordinary folks to understand economic and digital principles is foolhardy, as the base of education and healthcare has not been laid out over the past many decades. When ordinary people see how the rich people fleece money in an illegal manner from the same banks and governmental institutions, what ideas would they get? When these powerfully connected and rich people escape without so much as an indictment, what message does that send to others? While a French revolution is not in the offing, ordinary people would have to take some kind of action within their control, right?

Fascinating, but also saddening. Think about the whole complex situation developing, and you will see that WhatsApp messages and Fake News do not tell the entire story. The deeply maligned people are going to scot free, and no one can do anything. This is the result of all our democracies and institutions in action. Even the U.S. is not spared, as you see in daily news, day in and day out.

The culture of materialism is destructive. It will lead to serious social divisions in society which cannot be fixed in one generation.

Think, probably with a drink like what I am doing now!

Cheers,

Vijay Srinivasan

17th February 2018

Gini Coefficient


I am not going to explain what exactly is the Gini Coefficient or how it is computed for a country or society.

Suffice it to state that the Gini Coefficient is a good measure of income inequality – how wealth is distributed in a country. A perfectly income-equal country (where everyone earn the same amount of income) has a Gini Coefficient of 0, and a completely unequal wealth distribution leads to a Gini Coefficient of 1 (wherein one person has all the income, and the rest have none at all).

There is, of course, no country in the world with a Gini Coefficient of 0 or 1. The dispersion lies somewhere between these two figures, but the best “equal income” countries have a Gini Coefficient below 0.5. It is not practical to expect a figure better than that (like a 0.2 or 0.3) in a largely capitalistic world that we live in. Examples of such countries include South Korea, Canada, and many Western European countires. The Gini Coefficient has been deteriorating over the decades, as concentration of wealth in the hands of few people increases, as we have seen in many countries.

Governments are severely handicapped when it comes to tackling income inequality in their respective countries. Economic and taxation policies do not curtail the increase in the concentration of wealth. Many governments allow fixed capital formation in their countries with little tax impact, in order to attract investments and wealthy folks to their countries. As societies become prosperous in developed nations (in Asia that would include Hong Kong, South Korea, Singapore), the desire for further wealth accumulation increases in an unfettered manner based on past successes. Real estate prices go up in an uncontrolled manner, leading to a societal segmentation which segregates society into multiple fragments, and engender a more unequal income to be the cause of undesirable thinking in the disadvantaged populace. An “entry” price is eventually established for each such segment of the society, and the wealthier sections of the society become distanced from the so-called proletariat, even in advanced countries. This kind of “pricing” manifests itself in multiple ways – more BMWs, Jaguars, Bentleys, Ferraris, Lamborghinis on the roads is a good example; the other example is the inherent price fixation in real estate for exclusive high-end zones which precludes consideration by even the “above-average” dual-income couples who aspire to move into a better accommodation in such zones. General cost of living increases, and economic fundamentals adjust to serve the needs of the well-heeled. Gradually, the segmentation sets in firmly, and several enclaves form to cater to the respective segments, leading to even more dispersion.

While many of us have heard about the Gini Coefficient not so frequently, it is a commonly used economic term which concerns global multilateral economic and financial institutions. The global concern about unequal wealth distribution and concentration of wealth in the hands of few oligarchs is well placed and requires urgent tackling. Socially progressive governments in countries such as Switzerland are actively and very seriously considering various policy actions in this regard.

The problem with the fast developing countries such as China and India is more acute as the embedded inefficiencies in these countries allow for faster wealth accumulation in fewer individuals due to nepotism and favouritism, and other factors. Wealth created by family-run conglomerates far exceeds that by public sector corporations (or largely state-owned enterprises, which are publicly listed in the bourses). While it is commendable that the private sector wealth creation and capital formation is driving the business in India, it is also responsible for increased income inequality in a country with 1.25B people.

There are no easy answers for solving this rather intractable problem, I will let you think about potential solutions. In the meanwhile, I am returning to my usual weekend glass or red wine, while thinking about the solutions. What can we all do to reduce such inequality? Such thinking is even more important and relevant in wealthier countries such as Singapore, wherein the folks who earn far below the per capita income are very disadvantaged to sustain themselves in a fast-moving, economically-driven society.

Have a good weekend folks, and please think.

Cheers,

Vijay Srinivasan

10th February 2018