A "different" politician

I received an email from a classmate of mine, who is now the CFO of a large Indian company. It was such a lovely story that I asked for his permission to publish it in my blog. It is contextually, very Indian and the specifics may be unfamiliar to an overseas reader, but the overall story can easily be appreciated.

Here is the message from my classmate.

(On the left is Mr Konnappa, the MLA who is the subject of this post)

PART 1

The person with me is Konnappa, MLA (equivalent to a Congressman in a state in the US) from the north west part of Telangana adjoining Maharashtra.  I happened to meet him while pursuing some factory location.

He was originally elected on a BSP ticket - only one of two MLAs of BSP (Mayawati). But then seeing his good work, the Chief Minister asked him not to waste his time, join the ruling party and continue his work. So they merged. His constituency is in the vicinity of Ramagondam, Sirpur, and Singareni coal mines.

Recently the area has seen some factories shut down and many workers in the streets. He is working hard to bring some industries into the area or revive the shut ones.  

We learnt about some of the good work that he has been doing. This based on my colleagues' personal visit to the area and my interaction with him.

The closure of factories has thrown some 2400 children potentially out of school - due to loss of jobs of parents. He has supported the children attending school by paying their fees - some Rs 34 lacs ($ 50K) per annum. "Children cant afford to lose their precious years of schooling"   is his logic. "Whats the source of funds - Personal?" I quizzed. "No sir I am not that wealthy.  I ask some money from Chief Minister, some other like minded MLAs, I asked some theatre owners, shop keepers and some  industries who support such efforts. I only make up the balance. Its more of a co-ordination exercise" said he.

Konappa is providing one meal a day for some 1500 poor children in his area. "Half my salary and allowances goes in this". He had invited one of my colleagues during an earlier visit to eat with them and said  "your colleagues was very pleased to do that."

Recently some potential investors were visiting a factory closed for last 3-4 years. "To make it presentable, I worked alongside the workers to clean it and make it as good as the ... he showed the table top of our lunch table in Bikanerwala restaurant. If you start any industry here, I will work one day in the factory free to see that everything goes smooth for you. "

"When your colleague had visited my town, I made him talk to the workers of a closed factory to pep up their mood. They were all happy and appreciative."           

"From last 6-7 months back, I have started a scheme for pregnant women. Tribal women suffer  blood deficiency. This causes several deaths of the mother during child birth or poor health of children. I have started giving them 2 kgs Gude (Jaggery) +some other thing he said which he claimed is good for blood generation + 2 Kgs of Ragi which he claimed he ensures that only the pregnant get to eat' (may be thru social policing). The deaths have started coming down. Now the state has witnessed it and wants to roll it statewide' he said with a pride in his voice. 

I did not get the impression that his claims were unjustified. He seemed utterly sincere; guileless for a MLA. Moreover when the Deputy Chief Minister introduced him to us said,  "he is firstly a social worker; incidentally he happens to be a politician. Ask him for whatever help you need "

PART 2

It was supposed to be the final meeting to say Yes or No as to whether we would take over the closed factory and revive it. The MLA had done stupendous work in the last 4-6 weeks which would have taken 6-8 months for us.

It was in relation to takeover and restarting a sick mill. At stake was the livelihood of 2000 odd workers and their families, the children's education, daughters' marriage, etc. And a passionate MLA who felt the weight heavily on his shoulder.

The Secretary to the government informed us of the decisions of his govt on various help, assurances and policy incentives and assured supply of feedstock etc, we had sought.  It fell short of what we wanted. The MLA , Konappa,  and the Government had gone a great distance; yet it was below our threshold. 

My colleague and myself had a quick discussion and said that in the interest of moving forward we will take it. We said so to the Secretary and requested him not to completely shut the door on the others requests. We thanked him and got up to go. The Secretary must have sensed our discomfort.  and said 'If there are some difficulties later, you can always come back. It is also our interest that you keep things going'  

We came out. In the corridor, I congratulated the MLA for his efforts. Even while shaking his hands I found his eyes getting wet. I am yet to learn how to handle such situations. My colleague, senior in age, sympathised, and consoled the now visibly shaken man. He told him he can't be seen by others in that state and that we should get into some room and we moved into one.

Konappa said  "Sir, for the first 61 years of my life, I did not have any BP or sugar. Last 3 -4 years, I have developed both. Loss of livelihood, children's education, the future, no growth in my constituency... have all affected me. Today I see some hope return". 

"This is the first time I have stayed in Hyderabad, the state capital for 9 days continuously. To go from one person to person to plead for a solution in the best interest of the workers and their families "

 

"When the factory closes and there is no one to care, people start looting. I closed the scrap shop nearby 3-4 years ago and warned other dealers  within the vicinity against dealing in any material from the factory or they will close down for ever. I told the workers some day or the other someone will come and  not even a single bolt should be missing. I know the pains and delays such things can cause for I have been a daily labour in the very same factory several years ago"

"Sir, please  don't worry. It is my personal responsibility that you people will face no difficulties. "

He seemed much more in control by now. and we told him it was time for us to leave. He walked us down. "These are the times that give me satisfaction. Far more than seeing Rs 2-3 lacs in my bank account  (I thought their unit of thought will be in crores rather than lakhs, but this man seems stuck in a time warp of his own).  That's when I feel ... this earth (pointing downwards) which has to bear my weight. I feel I am repaying a part of the debt I owe to it, when I see some poor people appreciate it"

He was composed by now,  with some pride and a smile on his face.  But I was shaken. My mouth was quivering. In full public view at the entrance to the car park.

Some politician this. Some human being. Hope I can work with him some day. Imitation is the  best form of flattery they say. I hope I will be able to imitate him ... one day... some day.

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How do you solve a problem like CEO pay

It's very simple really to most people and that's why its such a complex problem. The problem of executive pay (lets just take CEO pay as a proxy to make it easier to analyse).

For the left, CEOs are greedy bastards who make too much money, when lower level staff in the company can barely make ends meet. Income equality is one the biggest issues facing society. Therefore the answer has to be to curb CEO pay.  Preferably by law. Where is the problem ?

For the right, who is anybody to say what somebody else earns. It's a free market and CEOs perform one of the most difficult jobs of all. When a CEO can increase shareholder value by $10 bn, why should he not get $10 m. Where is the problem ?

In the US, this issue has got into prominence because companies are now required to report how much their Chief Executives make in comparison to the median paid worker. This was opposed tooth and nail by industry, but now the law has come into effect. And the first reports are starting to come in - In Marathon Petroleum it was 935 times, in Del Monte produce it was 1465 times, in Manpower, a temp agency, it was 2483 times. In Berkshire Hathaway it was 2 times.

Governments are starting to act. In the great state of Oregon, where a couple of readers of this blog live, the city of Portland has levied a 10% tax on companies where the ratio is more than 100 times. Many other states and cities are planning a similar levy. I don't think that is right.

Remember, just because something is popular does not make it right. If you held a referendum that the state must burn down the house of every billionaire, it's quite likely to pass with a 75% majority. That won't make it right.

This is not as easy a problem to solve as it seems to the extremists. First to take on the left.

If you extend the same principle to every other domain - no film star should get more than 100 times the salary of an extra. Ditto music star. Ditto sportsman. For that matter why should the mutual fund where your pensions come from, make 100 times more than the janitor who cleans the stock market building. If you sell your property and make a fortune, then of course you shouldn't be doing that as its 100 times more than what the majority of us who have no property to sell are making. We can go on and on. Its been proven time and again  that arbitrary wage equations for everybody will only create a Soviet Union. And why should 100 be some golden number simply because it satisfies somebody's sensibilities.

Now to take on the right. 

Is anybody really worth $98 million ? Really ? That's what Thomas Rutledge took in 2016. The median CEO salary is some $ 11m, but there are also wild outliers. But more than the absolute quantum,  the real problem with executive pay is the reward that even poor performers get. Like golden parachutes if you are sacked. Like pay rises when your company results go down. Like bonuses which don't get returned even though the results are later proved to have been fiddled and overstated. Like backdated stock options. Like saying you have to honour bonus contracts even though your company has just been bailed out by the government.

And then there is certainly the reality that CEO pay has risen far more dramatically in the last 20 years than the pay of others working in the company. It is therefore natural that there is a societal backlash. No society can live with wild inequalities, whatever be the justification.

Companies must be seen to behave sensibly, else regulation is inevitable. A formula could be to more tightly link to company performance, something that's happening anyway. No contractual sweetners that would not be in any other employee's contract. In good years, distribute the bonus pool more widely. Take pay rises only when company performs very well - employees won't grudge your pay rise then. Maybe CEO's can think of contributing 1% to a staff welfare fund. Its all optics. If you not only are fair, but seen to be fair, people won't grudge your pay.

As we began the post, its not an easy problem to solve. So sit back an enjoy how a problem like Maria was solved !

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The Indian parliament is a waste of time

In democracies, the will of the people is supposed to be supreme. The forum for expression of the will of the people is the parliament. All laws and policies are enacted by the parliament and you need a majority of the elected representatives to pass any bill. Issues are debated and a majority vote determines the outcome. So goes the theory. Ha Ha .

India's parliament has become a joke. It has descended into a complete farce, where regular business is impossible to conduct because every party disrupts roceedings by protesting and shouting. Witness the current session of the Lok Sabha. The TDP is protesting against non grant of special status for their state. The AIADMK is protesting against the non formation of the Cauvery Board. The Congress, Trinamool, et al are protesting against the PNB scam. The Shiv Sena , which is actually a part of the government is agitating for, of all things,  inclusion of Marathi as a "classical language" . Each one has disrupted the Lok Sabha such that it has been stalled every day with nothing being discussed or transacted. This has been the way for at least 10 years now, but it has worsened over the last two years with not even one day of sane, sensible proceedings. Every party is guilty of this appalling behaviour. The ruling BJP did exactly the same thing when they were in opposition.

The trigger for this post is the Finance Bill. In India, economic policy is often manifested in the form of the annual Finance Bill (Budget, as it is called in common parlance). This is supposed to be debated and then passed in Parliament by a certain date, else the government will be shut down (similar to the position in the US).

But how do you discuss and pass anything when all the worthies are shouting and agitating. In true Ramamritham fashion, we have invented a process called the "guillotine". When the deadline for passing the Finance Bill comes, it is just "passed" with no discussion or debate. Not even a minute of debate and discussion has happened on major fiscal, monetary and economic legislation. Its just considered adopted by parliament !! What a joke.

The passing of the Finance Bill is one of the most important, if not THE most important job of parliament every year.  Yet for many years now, there has been no debate and it just gets guillotined as a matter of routine. Begs the question, why do we need a parliament at all ? Have elections every five years and instead of actual representatives, put a wax dummy coloured with the party colours in a seat in a room. Each party represented in the parliament simply indicates which way it decides to vote . That can be tallied by a computer (actually even an abacus will do).  Much simpler. In any case, every member of parliament votes according to a party whip. Nobody even reads the damned bill. If you are an opposition party, vote against any bill saying it is the greatest blot on humankind. If you are in the government vote for saying that it is the long awaited final avatar of Lord Vishnu. So why bother with a parliament at all ?

Let this be the first instance where "artificial intelligence" replaces human beings entirely. Replacing our esteemed members of parliament is a simple task as they perform no function at all bar shouting . We don't even need artificial intelligence. Wax dummies are enough to be a major improvement - at least they will be silent.  

If that is considered way too extreme, then perhaps taping the mouths, tying the hands and gluing the seat of the pants (dhothi) to the chair can be resorted to.  For abundant caution, you can also shackle their legs. That would be an improvement over the current situation.

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Singapore is a threat to the national security of the US

Prime Minister Lee Hsien Loong should go on TV and broadcast to his countrymen that Singapore has "arrived". The mighty US is scared of little Singapore. Perhaps a national holiday in Singapore will be declared to mark the event !

I am referring to the US government blocking the bid by Broadcom for the takeover of Qualcomm, on the grounds of national security. Broadcom is a Singaporean company (never mind that Broadcom had offered to move its headquarters to San Jose if the deal went through). Qualcomm is an American company. So Singapore is a threat to the national security of the US. Great !

The US government is giving a specious argument to justify national security. According to the government, Broadcom would cut R&D spending after it took Qualcomm over.  This would affect the development of 5G technology. Instead Huawei would become the leader in 5G. Huawei is a Chinese company. Therefore the US would be dependent on China for its mobile networks. That is the threat to national security.

That is an even more laughable argument. Qualcomm is an important player, but not the leader in the development of 5G in the first place. Have you forgotten Cisco ? Intel ? AT&T ? Samsung ? Ericsson ? And innovation is not the monopoly of anybody - even a rudimentary understanding of business should tell you that. Innovation comes from the strangest of places. If Qualcomm slashes R&D, does anybody seriously think other US companies will not succeed in 5G. If the US was solely dependant on Qualcomm, it was screwed long ago.

And why is 5G technology a matter for national security ? If this is truly the case with wireless technology, China's national security has long been compromised  because of US leadership thus far. Why is ownership of 5G technology and standards so  worrying ? Is the argument that Huawei will get a monopoly of technology and therefore all US companies will have to buy telecommunication equipment only from them and therefore China will have a backdoor entry and control over the entire US telecommunications infrastructure ? That stretches incredulity to the limit.

There's an interesting subplot to this. In the midst of the drama with Broadcom, Qualcomm  itself  is currently trying to take over NXP - another semiconductor company. That deal is awaiting clearance from Chinese regulators. Fat chance of that happening now. The people really screwed by these developments are Qualcomm shareholders - they don't get NXP and they don't get to be bought out by Broadcom at a stiff premium. And before you say you don't care about shareholders, let's just note for the record that US institutional investors , including mutual funds and pension funds, hold nearly 80% of Qualcomm stock.

No, this is not about national security at all. These days it appears you can claim national security for anything - even steel and aluminium tariffs. This is pure and simple economic nationalism. We don't want an American company to be taken over by "Chinese looking people". That's it.

The current US administration is supposed to be a Republican one.  Standing for free trade and non interference of government into business. Has ideology, beliefs and policy ceased to matter at all ?

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Send them back

This blogger knows a thing or two about procuring visas , having had to endure this torture hundreds of times for nearly 30 years now. Indians, as is generally well known, are not welcome anywhere. The visa regimes of every country is designed to make it as difficult as possible for an Indian to visit. Note - the word is "visit" and not "stay".

You sign all sorts of declarations and produce all sorts of proofs before you will even be considered for a visa. You have to produce a ton of documents (my favourite is the Australian visa for which I once had to produce 723 pages). You have to make all sorts of declarations (my favourite is a US declaration that says you have not kidnapped somebody below 18 years of age - there is no requirement to declare that you have not kidnapped somebody above 18 years of age). You solemnly swear to everything under the sun in the fine print.  My favourite is the UK requirement in the past (thankfully no longer there)  that if you are a lady going to get married to somebody in the UK, you swear that you are a virgin, which will subsequently be tested by somebody inserting her hand in to test whether your hymen is intact (I am not kidding). After all this you are subjected to the ignominy of a visa interview where you stand in a long and winding queue outside the embassy starting from 4.00 AM in the morning, then wind your way inside a virtual jail till you come into a prison like counter where you face a visa officer. He or she can , and does, reject your visa application simply because he/she/it does not like the look of your face . Period. That's it. No chance of even appealing.

All this is a long and elaborate preamble to illustrate how the very same countries completely flip 180 degrees if you are an economic offender who has fled your country.  You are now welcomed with open arms. Suddenly human rights of the alleged offender take precedence over everything else.  The very same United Kingdom of Great Britain and Northern Ireland (of the virginity test fame) will shield the alleged economic offender until its very last breath and allow him to stay indefinitely in the country. 

There is a long and illustrious list of alleged crooks who have fled India - Lalit Modi, Vijay Mallya, Jatin Mehta, Nirav Modi, Mehul Choksi et al. If you are interested, the exact number of such luminaries is 184. The modus operandi is usually the same. As soon as the heat starts to be felt and you feel that you are likely to get caught, flee the country. And then claim that you are being harassed , fear for your life, etc etc and stay put. Uncle Sam, Old Blighty and all the rest will freely protect you.

Sure, this lot has obtained permanent residency in these countries sometime in the past. So ? You  sign all the honest to god statements that you have to do for a mere visa to visit. Probably you swear to a few more things before you get permanent residency. This is not citizenship; just permanent residency. You still remain an Indian citizen , bound by the laws of India. If you have then violated them, why isn't permanent residency revoked ?

I can understand protecting those undergoing political persecution, those who are fleeing from war, and those who might be killed if returned. But these are economic offenders. If they are returned to India, they will be put through due legal process in a court of law. The Indian justice system may not be perfect, but it isn't arbitrary and without merit. Even with the greatest of ingenuity, the argument cannot be made that India is a lawless country. So what is the logic in not sending them straight back.

The long list of luminaries referred to earlier are Indian citizens. They are subject to the laws of India. The government of India has revoked their passports. Any foreign government, in whose jurisdiction they are staying,  are hypocrites in not returning them to India forthwith. 

I am not welcome to even transit through Heathrow, let alone visit the UK (the same visa process applies even if you are transiting and not entering the country). Mr Vijay Mallya is free to stay for as long as he wishes to and will be protected by Her Majesty. Shame on you, and every other country harbouring these 184 worthies.

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The economics of Classical Music in India

 (carnaticdurbar.com)

This blogger is  a recently turned fan of Indian classical music. Being the weirdo he is, it is only to be expected that he would turn his attention to the economic side of this . Yes, I know it's weird with a capital W that instead of humming a tune, a blog post on economics is what comes out.

Classical music in India is economically a basket case. Every piece in the carnatic music supply chain is in doldrums moneywise.

Take the fan. A listener will only go to a concert if it is free. Will not buy a ticket even if it is just Rs 50. It is perfectly acceptable behaviour to go to a concert, find that there is a ticket and return back without going in ! The fan is a complete hypocrite. Music must be free. Musicians don't deserve money. But their own salaries (pensions) must be doubled.

Artistes, unless they are at the top of the profession earn an absolute pittance. I am  certain that what most upcoming musicians earn will not even be up to the minimum wage levels in India for casual labour. It is not unknown for lesser musicians to pay to perform rather than the other way around.

The musicians at the very top do earn for their concerts and the popular perception amongst the fans is that they demand too much money. This is nonsense. They may earn Rs 100,000 for a concert; something they have to share with the accompanying artistes. They can probably do 4 or 5 concerts a month on an average. That level of earnings is equivalent to what a middle manager in a company doing an irrelevant pedestrian job will make. And these are the top musicians in the land.

The organisations that hold these concerts are called sabhas - they are the equivalent of music clubs. Given the facts above, every one of them makes a loss and are barely solvent. How they survive is a mystery.

With these economics, it is hardly surprising that there are zero facilities for concerts. None of the cities have anything like the equivalent of an opera house. There is just one good concert hall in the cities of Chennai, Mumbai and Bangalore and they were all built at least 25 years ago. Not a single new concert hall of any size or quality has come up in decades - and just witness the number of malls, cinema multiplexes, resturants and the like that have sprung up. Concerts are held in ramshackle places where the word acoustics is foreign and as for facilities, what are they ?

There are two lifelines that has so far kept this genre going.

One is sponsorship from businesses. Sabha organisers harry, beg, plead, grovel for grants for businesses. You can always find a music fan in a company and they sometimes contribute for a concert. This can hardly be justified in any company for business reasons - this must just be written off as a handout with no benefit for the business.

For the artistes themselves, their main source of income is teaching music to Indian Americans on Skype. You see, the Indian parents in the US feel very guilty for disassociating their children from Indian culture. They are partial to therefore teaching them Indian classical music. Skype offers a perfect medium. Its a nice ego boost to be taught by the finest musician in the genre. This is how artistes put food on the table. The dollar goes a long way as you know.

Another option for artistes is to perform in  the US.  The huge Indian American community in the US wants to "keep in touch" with Indian music, even if they are pretty ignorant about it. For some strange reason Cleveland (of the "bum state" fame) is the headquarters of carnatic music.

All this makes for depressing reading. Musicians world over, in most genres, are millionaires. Classical music in  India is however economically gasping for breath. It is in decent health in terms of listener interest. But it can only thrive if a sensible economic model starts to emerge. For a start, listeners should start paying for a concert instead of demanding it for free. I'll buy a ticket for every concert I go to , or if its a free concert, at least drop the notional ticket price into the donation box.

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Learn from history - Steel tariffs don't help

The US has been there before many times. And yet they do it again and again. Granted that logic and thoughtful action is not a feature of the current US administration. But still, you would have thought they would have read up what happened when they tried it last time.

I am referring to the announcement today that the US plans to impose a tariff of 25% on steel imports.

George W Bush tried the same tactics in 2002, with an eye on the same political prize - voters in Pennsylvania and West Virginia.  He imposed 8-30% tariffs on imported steel . At that time the target was European steel. Europe promptly took the US to the WTO and won sanctions of  some $2 billion. More tellingly, the politically astute European Union threatened retaliatory tariffs on oranges (goodbye Florida votes) and cars (ta ta Michigan votes).  Meanwhile steel prices in the US surged, screwing industries that buy steel. A later study concluded that 200,000 jobs were lost in the US as a result.  Bush retreated and called off the tariffs in 2003.

His father George HW Bush , and his predecessor Ronald Reagan tried various forms of it too. Reagan famously tried quotas on cars (at that time the target was Japan). The end result of that was that car prices went up by $1000 between 1982 and 1984 and the auto industry actually lost 60,000 jobs as a result of the quotas.

Obama indulged in steel tariffs too. His target was China. But that administration did it selectively - huge tariffs, selectively on products and against companies from China that were dumping.

It is not clear what the current administration is trying to achieve. Presumably their target is China , the current bogeyman and indisputably the cause of depressed world steel prices because of overcapacity. But China exports not much steel to the US possibly as a result of the Obama era actions. It is the 11th largest exporter to the US occupying a small portion of US imports - even India is above it in the rankings. The biggest exporter of steel to the US is Canada, followed by Brazil. Is the US trying to screw Canada ?

Why pick a trade war with Canada of all the countries. The US has a  deficit of $ 12 bn in goods and a surplus of $24 bn in services on a $ 700 bn two way trade. Overall the US has a surplus with Canada. And you want to provoke a war with them ? Yes, the current administration has launched a war on NAFTA, but even by that perverted logic, the target must be Mexico and not Canada.  Canadians are not fools . Selected tariffs from Canada  on Vehicles (bye Michigan) and Agricultural Produce ( adieu Ohio) and we are back to reliving the George Bush experience.

Albert Einstein is famously quoted to have said " The definition of insanity is doing the same thing over and over again, but expecting different results.” But to avoid that, you have to read history to determine what has been done before. Well, in the current administration, reading history is too much to ask. They would make a "yuuge" improvement if they could just begin with reading !

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