Sunday, 24 November 2013

With apologies to Rabindranath Tagore



Where the mind is maybe with a little fear but the head is held high

Where there is no Blogger to corrupt the thoughts

Where there is no Facebook to waste time

Where there is no Twitter to inform the world that you are brushing your teeth

Where there is no YouTube so that you don’t watch Justin Bieber

Where there is no Google for you to check what sesquipedalian means

Where you can’t get to Dropbox  for the trillions of useless stuff you have stored

Where there is no Picasa , you narcissist, for admiring your selfies

Where there is no TV, to watch mindless soaps (or football if you prefer)

Where there is no bourgeois newspapers to corrupt the mind

Into that pure , unpolluted, NSA free heaven, my father, I shall awake tomorrow, and be there for a week !

Monday, 18 November 2013

No Tim, No

Caesar's wife must be above suspicion , as the saying goes. It is not just important to be right, you must also appear to be right. This is even more important for very public figures. That is why this post is titled No Tim, No .

Timothy Geithner, the former Treasury Secretary (in Indian parlance, Finance Minister) is going to become the President of Warburg Pincus, an investment banking firm. There is nothing legally wrong in what Geithner is doing. He was the Treasury Secretary during Obama's first term.  He left office in January 2013 and has been writing  a book since. Now comes the news that he is to become the head of Warburg. He is perfectly entitled to do whatever he wants once he steps out of pubic office.

The problem is the old one of Caesar's wife being above suspicion.The cosy nexus between businessmen and politicians is a significant problem today - especially in the US after Citizens United. The financial sector is in the eye of the storm of government attention and regulation , much of which Geithner himself started when he was Treasury Secretary. In his new role, he will have a considerable amount of interaction with the US government. While he may want to , and maybe even will, be prim and proper, it is inconceivable that he will apeear to be so in the eyes of the public. While we will be charitable to Warburg, it is not inconceivable that they hired him precisely for his political talents and connection.

This is the age old problem of government servants and regulators leaving their jobs, or retiring, and then joining the very corporates they regulated or oversaw.  In some countries there are statutory cooling off periods before they can do so. My belief is that it should never be done. It is impossible to ignore the conflicts of interest. Even if the individual concerned is meticulously honest, he will have to recuse himself from virtually any issue that has a bearing on his old job. That will make him completely ineffective. In effect, the very reason corporates hire them is to take advantage of their past connections. That is why it is wrong.

The reverse flow also happens. Corporate honchos join the government too - in the US many past Treasury Secretaries have been CEOs of Goldman Sachs. I would not go so far as to ban corporate types from joining the government - the flow of talent from the private sector to the government is one to be encouraged. But I believe, they should not take up a position that is in the same field as where they came from. I have no problem with say Henk Paulson becoming the Secretary of Education , but as Treasury Secretary, where his job would be to supervise his former employer Goldman Sachs , ...... that fails the test of Caesar's wife. I know this would not utilise his talent in his field of expertise, but if public trust in government is to be maintained, fairness must be above board. Do you really think Paulson's decision not to rescue Lehman Brothers, a hated rival of Goldman Sachs, can ever be whiter than white, even though it may have actually been so ?

I am well aware that such a view will be met with derision in today's circles as old fashioned, romantic rubbish. Yes, old fashioned values have little support in today's environment. But that does not detract from the merits of them. Pompeia, Ceasar's wife held a festival for women only in which Cloudius gatecrashed dressed as a woman, ostensibly for seducing her.  He was caught, but in the trial that followed, he was acquitted. And yet, Caesar divorced Pompeia, leading to that famous expression. Can you imagine in today's world, such standards being set by those in power. Alas, that is why governance today is at such a low point.  When values come to the fore again, we shall be governed by honourable people.

Sunday, 10 November 2013

Wonga Wonga

If you are a Brit, you know Wonga very well. If you aren't, you probably have not heard of them. Ed Miliband, Britain's opposition leader even called the ruling government's philosophy, the "Wonga economy". This post is a continuation of my struggle with moral dilemmas -  its been that sort of a time these days. What was black and white  long ago,  now, appears to be impossible shares of grey - far more than fifty, if you must know !

Who or what is Wonga ?  Wonga is a provider of  something called payday lending - a concept very familiar to those of us who came from humble beginnings. Wonga gives small amounts of credit for extremely short periods - until the next pay day. It helps poor families tide over until the next salary comes. The maximum amount you can borrow is £ 1000 and the maximum period you can borrow upto is 30 days. Loan evaluation and grant is extremely quick (has to be , isn't it) . Sounds very good. So what's the catch ?

The catch is that the interest rate works out to  some 5000% per annum. Yes, the number of zeroes is correct and there is no mistake in the decimal point. Five or six thousand percent per annum. Except that when you charge it, say for 18 days, it doesn't seem to amount to much in absolute money.
On the face of it, you can't fault Wonga. They are extremely efficient in processing and disbursing loans ; often on the same day. They don't hide the interest rate or the charges you have to pay. Their website couldn't have been more clearer on this - they say 5853% clearly  (credit card companies might wish to learn a thing or two from them). So , they are not cheating anybody. They are upfront with the costs, deliver exactly what they say and as a consumer, you have every right to take them or not go anywhere near them.
On the other hand, you can argue that if ever there was a better example of usury, you would be hard pressed to find it. 5000 % ?? Does anybody need to buy anything at all borrowing moneys at 5000% interest. ? This is what is getting Ed Miliband's goat - the culture of borrowing at ridiculous costs to buy things you don't really need. Or at least you wouldn't die if you didn't have them. Yes there may be emergencies , for which such financing is a boon, but outside of that, do you really need it. Remember, this is the UK, where the NHS makes sure you get free medical care; so can there really be an emergency outside of the medical arena ?
This is , of course, not unique to the UK. In India, the local pawn broker performs exactly the same function. Judging by the numbers of people who make use of pawn brokers, Wonga and the like, there is a big consumer need for such service - interest rates be damned.
Herein is my dilemma. There is a consumer need and this is being filled transparently, legally and efficiently , at least by Wonga. If this were banned, it would only drive the providers of such a service underground and result in probably far worse terms. (Indian governments who banned micro finance might want to think about it).  At the same time, don't consumers need protection from usury. And should we not be discouraging a culture that  wants immediate luxuries and pays for it by borrowing -  the same culture that sees each nation saddled with huge debt.   But who am I to say what is a luxury and what is a necessity ? A poor man who cannot afford it, but  borrows to go on a holiday may be called an idiot. But then, he has to have some happiness in life. So, by what and whose standards should we judge. Should we allow the free market to operate and whoever wants to do whatever can happily do so, even if he is digging his own grave ?  But aren't there undesirable social trends that we should be actively fighting against - isn't that why we don't allow free drugs .... I am in a whirl.  HHEELLPP !!

Friday, 8 November 2013

Are all jobs OK ?

Are there "good" jobs and "bad" jobs ? Are some jobs inherently demeaning in nature and therefore to be banned ?  Or is the economic imperative an acceptable argument for any job where there is demand and where people do of their own free will ? Unforced prostitution is one such example. Manual scavenging is another. I find it a difficult moral dilemma, as this post on the "mule women" of Melilla will show. I came to know of this from one of the greatest of radio shows - BBC's From Our Own Correspondent. (starts from 12.25). If you prefer simply the written version rather than hearing it on the radio, it is here.

An accident of history has made two small enclaves of Spain (and therefore of the European Union) exist on the north coast of Africa. Melilla and Ceuta are located in what should be Morocco, but they are part of Spain and hence border-less with the European Union and all its goodies. The whole story arises because

a) Moroccan residents of Nador, the neighbouring province in Morocco are allowed to freely travel (but not stay) in Melilla
b) Morocco allows goods to be brought in from Melilla, duty free, as long as it is physically carried by a person - not pulled in a trolley or cart, but physically carried across the border.

Enter the "mule women" of Melilla. They are hired by Moroccan importers to cross into Melilla and then physically carry the goods across the border, thereby earning the right to be duty free. Each bale is some 60 to 80 kgs and the women can make 3 or 4 trips in a day. They are paid some 3 or 4 Euros per trip. The photo below,  courtesy of the BBC, tells its own story.



This is exploitative and tantamount to slavery - right ? Can you imagine carrying 80 kilos on your back and trudging across the border all day, and in the hot sun, like this . There is little doubt that the women are prone to injuries . If ever there was an example of back breaking work, this is it; literally. Wages are a pittance. That the workforce is almost entirely women and not men is evidence that there is exploitation, at least on wages, going on. All this due to a quirk of customs law which imposes a duty on something that is mechanically moved, but gives a duty free status if it is carried personally. The whole matter can easily be solved by a stroke of the pen - a change in the customs laws. Hey presto; exploitation of the women will stop.

But as Linda Pressly, the BBC reporter who publicised the story says, when she asked one of the women why she was putting up with exploitation, she was met with an incredulous look from her - "I have a family who must eat. I have four children and nobody to help", was the answer. If you take away their work, they will have nowhere else to go and will become destitute. Governments can give a dole or a pension, but is that better than being allowed to work ?

In my younger days, this was not a debate and the solution was clear. Nothing justifies exploitation. Any trade that exploited any vulnerable group physically or emotionally, must simply be banned. Demeaning work must be wiped off the face of the earth. Period.

Now, as I am older, and perhaps a tad wiser, it's not so clear. What do you think ?

Sunday, 3 November 2013

The US Treasury should be ashamed of itself

There is nothing more irritating than somebody who pontificates. Even more irritating is if the guy has absolutely no credentials to pontificate on the subject in question. Imagine the Pontiff (if you'll pardon the pun)  lecturing on the merits of Viagra. Or Sarah Palin extolling the merits of Shakespeare. Or even this blogger blogging about Kollywood !!

That is how I can best describe the American Treasury's criticism of Germany's economic policy. The criticism is that Germany's current account surplus as a danger to the eurozone and the world economy. Germany runs a current account surplus - that is, it exports far more than it imports. This is , according to the American Treasury, a big danger to the world economy. This blog is not meant to be a technical paper - so I will desist from explaining this , which will make it too technical. Suffice to say some "leading economists" also share this view.

First let us play the man rather than the ball - after all this blog is refreshingly free of any responsibility and therefore can attack any which way ! Of all the people, America should not be lecturing on fiscal responsibility. If there is a prize for the most fiscally irresponsible nation on earth, surely the US of A would be a prime candidate. The land of the free has many redeeming virtues, but fiscal responsibility is not one of them. The US Congress hasn't even passed a budget for the last 3 years. The last time they balanced their budget was 1998-2001 and before that  1969. They have had a President who cut taxes massively and then started two wars. They are now flirting with a sovereign default every 6 months. They have promised Medicare and Social Security to their citizens, then inadequately funded it and have no plan to defuse the time bomb.  Because the dollar is the world's reserve currency, they take on levels of debt that most other nations would shrink in horror at the very thought. And collectively as a nation, they foisted the global economic crisis of the last few years. Even India, another prime candidate for the ultimate fiscal irresponsibility award would be hard pressed to match that.

And the country they are taunting is Germany. Post reunification, they were termed the "basket case of Europe". They lifted themselves out of that by their bootstraps. Their prudence is legendary - they are so scared of inflation that they follow the most conservative  monetary policies of all. They struck a deal with the unions when they were in a mess, to hold wages and little by little built up German competitiveness back again.  When the Eurozone crisis hit, they have been the chief (only ?) lenders bailing out every nation that is in trouble.  They don't manipulate currencies (unlike another country we know which also runs a big current account surplus). Can you imagine America bailing out other nations in today's world (to their eternal credit they did that after the Second World War, but that is 70 years ago - the America of today is a pale shadow of the America of those years).

What is the prescription. The Germans must stimulate their economy. They should take more debt. They should consume more and save less. Great.

The Germans have been more peeved at the newsy bugging of Angela Merkel's phone. They haven't reacted with fury  at the American Treasury. They should tell them to piss off and take their pontification elsewhere.  Perhaps the best way to do it is for "Mutti" to whisper on the phone that the US Treasury is a greater danger to the world than Al Qaeda (probably true) and leave it to the NSA spooks to relay that upwards.




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