Monday, October 31, 2011

Democracy or something like it…


             It seems like the ‘Anna Wave’ has lost its mojo. Corruption wins in India, again.
             Let’s put some things in perspective.
           
            We have a Prime Minister who is very well educated and has an impeccable personal reputation. He is trusted on the international platforms and demands high regards from across the political spectrum. As far as his political skills are concerned, there is no doubt that he is not wired for it. He has, and is been played along. I wonder how he would be feeling; knowing that he most certainly can fix the issues, if only he had the ‘power’ that comes with his post.

            I really think that if it was some one else holding the premiership of the nation, he/she would have certainly been booted out by the opposition and public, because of the recent corruption scandals. It’s funny how things work in the so-called Democracy. Majority of the People are against corruption and hence oppose the ruling party, but the same majority also like the Prime minister of the corrupt ruling party. Given the major political parties we have, and there leaders, it’s like picking your poison, either way common man is going to suffer!!

            If this is democracy do we really need one? Should we look for an alternative political system?

            India has tremendous potential and the world knows it, but democratic politics is hindering her progress. Both, economic and social lives are affected because of political leaderships. Should we go for constitutional change?

            This might sound foolish, crazy and stupid but desperate times need desperate measures! I propose to appoint Mr. ManMohan Singh as PM for a two year period and demolish the current constitution for that period. Mr. Vajpayee (another person with an impeccable reputation) should be the President. Criminal proceeding against the political leaders and government officials should be put on fast track. Bureaucrats should be given final authority on any public project and should be personally liable. I understand there will definitely be a major international backlash, but it will be manageable as we will have the time table to get back to democratic values. Domestically it will not be easy, as our great corrupt political souls will get-together to defeat this motion.

            This might be just a ‘dream’ but when present is so troubled there is no harm in closing your eyes for a moment and live in world that ‘could have been’…

Thursday, October 20, 2011

US – China: The Big Fat Global Wedding


           With the recent debacles in Congress it’s no surprise that the US Congress has an approval rating of 14%. Even lower then the IRS, which historically has been a darling of American hatred.

            Recently a bill was proposed in the House that threatens punitive duties on Chinese imports in the absence of more rapid appreciation of China's currency, the Yuan (Reminbi). Policy makers have shaped this bill as a ‘Jobs Bill’. The argument is that imposing duties on Chinese imports will reduce US trade deficit and hence lead to job creation in US.

            There is some similarity between now and 1980’s. Back then Japanese goods were killing the US jobs and industry. So to decrease the influx of Japanese goods, US ‘pressured’ Japan to appreciate its currency, to increase US exports. The Plaza Accord of 1985 worked in favor of US but not for Japan. Everyone knows that, including China. Besides, I think US policy makers have there math wrong.

            First and foremost, simply enacting legislation is not going to make China accelerate its currency at a faster pace. Instead, the threat from US is more likely to prompt China to do the opposite, to project its sovereignty and strength.
           
             Secondly, recent history doesn’t support the inverse relationship between the value of Yuan and the bilateral trade deficit. Globalization and the advancement in the transnational supply chain means that far more ‘Intermediate’ goods are traded than in the past. This has softened the impact of currency values on the ‘Finished’ goods that are exported. Only about half of the value of Chinese exports to the United States is actually Chinese value. The other half comes from components produced in other countries that are processed or assembled in China. Yuan appreciation reduces the price of intermediate goods to Chinese producers and assemblers, who can then reduce their prices for export to preserve their market shares abroad. Between July 2005 and July 2008, the value of the Yuan increased by 21% against the dollar. But the bilateral deficit increased by 33%, from $202 billion to $268 billion.
           
           Now consider the scenario where China would impose retaliatory duties on U.S. exports. Chinese government has already stated on several occasions that the currency legislation would incite a trade war. In 2009, in response to U.S. duties on Chinese tires the Chinese government imposed duties on U.S. chicken and auto parts, which reduced sales and employment in those U.S. industries.
           
            I don’t think either of the two can live without one another. If US need cheap Chinese goods to keep its inflation in control, China also needs US consumers to sell its products to. For the last thing that Chinese communist party wants is a revolution because of economic depression. 


 

Tuesday, October 18, 2011

Is India complicated?

           
                     Recently I spoke with a friend of mine, Hiruta Hiromichi from Tokyo, Japan. I had met him when I was volunteering in a kibbutz in Israel in 1996. Then, I had asked him how will he like to visit India? I vividly remember his answer, “India is so crowded, I am afraid I will get lost” he said. He did visit me in India while going back to Tokyo. Since that time, India has changed…a lot, for better. I repeated my question to him, “will you visit India with your family?” His answer was “Yes”. A very enthusiastic ‘yes’, I must say. But then after a pause he added, “But things are still complicated in India”.
That made me think, is India complicated?
  
First of all what is India?
            We have over 1.2 billion people or 17.5% of the world’s population, living in the seventh largest country or 2.4% of the world’s land area. We have more arable land area than any country except the United States, and more water area than any country except Russia, Canada and the United States.

Now, let’s focus on India’s languages-
            How many languages are spoken in India? Chances are that no one has the accurate answer- the country’s authority’s account for 234 languages spoken by 10,000 speakers, and a total of 1,600 languages and dialects. In other words, every 50 miles you drive, you will encounter a different culture with a different dialect or a language.

            On the Economic front, India’s macro economy is doing fabulous but you start focusing on the micro structure and you encounter all the things that are wrong with India’s present. Except for some western pockets, roads and rails are the story of misery. Electricity is still an issue. 24 hour water supply is still considered a luxury.

            On the Social front, Law and order is for the selected few. There are some improvements in the social fabric of the nation but then again they are in few and selected places. Elections are still manipulated and are won by short-sightedness. Literacy rate of 71%, I think, is the only bright spot in social India. Most of the judicial cases are still settled outside the courtrooms. Justice is still delayed and denied.

Does all this makes India complicated or this is what India is? The jury is still out.

My professor of economics once told me “One is optimistic on India till the time they arrive in India