Thursday, January 31, 2008

The greatest plus point about market falls is that the accumulated hidden information tends to come out

Rediff Home » India » Business » Columnists » Guest Column » The Yin and Yang of markets
T C A Srinivasa-Raghavan January 25, 2008
Chance, necessity, luck, panic -- all very human things -- play a dominant role.
A 1999 paper* by Harrison Hong of the Stanford Business School and Jeremy C Stein of the Harvard Business School brought this out very clearly. They developed the theory which says that basically it is the existence of two views -- optimistic and pessimistic or bulls and bears -- that causes all the problems.
"Because of short-sales constraints, bearish investors do not initially participate in the market and their information is not revealed in prices. However, if other, previously bullish investors have a change of heart and bail out, the originally-more-bearish group may become the marginal 'support buyers' and hence more will be learned about their signals."
If you think about it, this is what we are being told to do now, namely, buy when the prices are down. And, indeed, this is what has been happening since Wednesday. (But, if I may add, no one has ever said "sell when the prices are up!")
Be that as it may, Hong and Stein said that the greatest plus point about market falls is that the "accumulated hidden information tends to come out." They are absolutely right. In the next few days we will learn of a lot of firms and industries that have been "performing" so well under the delicate manipulations of speculators.
It is worth reading their paper because it helps us understand "large movements in prices unaccompanied by significant news about fundamentals." In other words, they tell us why things change when there is no reason for them to.
Their paper also explains "negative skewness in the distribution of market returns and the increased correlation among stocks in a falling market."
Finally, it makes a prediction that "negative skewness will be most pronounced conditional on high trading volume."
In another paper**, in 2000, the same two authors, along with Joseph Chen, also of the Stanford Business School, had analysed the effects of skewed returns. They concluded that you can get negative skewness if there has been "an increase in trading volume relative to trend over the prior six months; and positive returns over the prior thirty-six months." Just look at the BSE's penny stocks and mid-caps and you get the picture.

Reciprocity, empathy, emotional attunement, and co-operation

Title of the new book by Michael Shermer. Here he is at the Cato Institute speaking on the book. Nice talk. It is an overview of the new fields of behavioral economics, neuro-economics, and evolutionary economics. (I’m reading a very good book on evolutionary morality right now).
Shermer says that one of the deficits (sorry bad pun intended) of the classical theory of economics was its assumption that the individual is a rational self-motivated, quasi-omniscient (at least in terms of what is self-beneficial) figure. These new theories have looked into ways of how people actually respond to markets rather than how they should in a rational thought-experiment driven situation.
What follows then is grounding market principles less in notions of “competition” or “greed” per se (i.e. a misreading of the selfish gene, Gordon Gecko style), but rather highlighting the intrinsic elements of reciprocity, empathy, emotional attunement, and co-operation built from the bottom up. Not the markets treated like a god descended “naturally” from the skies. But more in the style of communication, exchange, and historical development.
It would be very interesting to compare this book with say Howard Bloom’s group selection meets economics tract: Reinventing Capitalism.

Capitalism is about values, not about steel and cement

LEADER ARTICLE: Enjoy The Ride Meghnad Desai TOI 31 Jan 2008
So people can't accept the simple explanation. There has to be a conspiracy.
Something similar happens when we encounter theories of who runs the world, who controls global capitalism. People are convinced that it is the Americans or the multinational banks which are also American. Others blame the Jewish conspiracy, the Elders of Zion, Saudi oil money and the Masonic movement. It is hard for people to believe, as Karl Marx did, that societies and even modes of production are self-organising systems which no one 'runs' but which are run by a sum total of infinitely many decisions we all take. Some of the actors are big and others small but no one is big enough to buck the system or small enough not to make an impact. This is an insight which came from the Enlightenment, once people stopped believing that God directs the world or signs in the Zodiac do it. They sought an explanation in human action and behaviour. From Adam Smith until the start of the World War I, this was the dominant philosophy.
Last fortnight has proved the truth of that insight. On the one hand, American multinationals admitted that they goofed up big time. Merrill Lynch, Citibank, Bear Stearns and others lost billions of dollars in a market which they thought they knew and dominated. They have gone cap in hand to various sovereign wealth funds, which are by and large Asian. So the Kuwait, Qatar, Abu Dhabi and Chinese funds will own large slices of American multinational banks. Then last Monday, the French bank, Societe Generale, began to unwind contracts of more than $50 billion, larger than its net worth. A single trader had taken unhedged positions (i.e. gambled) on the equity derivatives market. That unwinding led to a sharp fall in the stock markets, enough to panic the US Federal Reserve to cut its rate of interest by three quarters of a percentage point. So the Europeans cannot be smug about the foolish American banks.
For much of the century after World War I, politicians and intellectuals thought that the world could be regulated, that it could be 'driven' like a machine. They planned elaborate schemes and created institutions to repress the market. The USSR impressed everyone by its seeming success in achieving high growth and full employment. Nikita Khruschev even said as late as 1960 that communism will bury capitalism in an avalanche of commodities. That experiment bit the dust in a spectacular fashion. All that accumulation, all those steel and cement factories produced junk that had no value. After the integration of East and West Germany, they could find no one to buy the capital stock that the East Germans had built up. Capitalism is about values, not about steel and cement.
So now even Jyoti Basu has seen the light that socialism is no longer on the cards. He said in effect that capitalism was for now the only game in town. India may call itself a socialist republic but it is luckily no such thing. It is a robustly capitalist country. Only for a brief period of 10 years between 1967 and 1977, Indira Gandhi with a little help from her Left comrades dragooned it into a low income and low employment growth regime called socialism.
Finally common sense, or shall we say, Sensex prevailed. But capitalism is not a free lunch either. Large or small countries, big or small corporations can all experience upheavals in their incomes, share values or growth rates. It is not that capitalism is in a terminal condition with each successive crisis getting ever bigger as the Leninists say. It is that capitalism is always a disequilibrium system which has periods of prosperity and then recessions. Such swings do not destroy the system; they cure it. Marx understood that. Those peddling political parties in his name don't, but then one never expects much wisdom from the Indian Left.
So enjoy the roller-coaster ride of the Sensex and the Footsie. Through 300 years of capitalism, such gyrations have shaped the system and delivered more prosperity than its rival could ever manage. India is on the way up as never before. The writer is a member of the British House of Lords.
"Stay in the game" is the only mantra that's worth repeating. It keeps you from picking stocks that can wipe you out. It keeps you from speculating on situations that are worthless. It keeps you from borrowing a lot of money, known as margining, and hoping that stocks will make a magical move upward. It keeps you from wallowing in worthless penny stocks. It keeps you from trying to make a killing in tech. And it stops you from averaging down on bad stocks, because stocks aren't like parents when you get lost at the mall; they don't always come back. Staying in the game is the ultimate lesson.
How do I know this? Because it is what I have done. I have been able to make big money when big money could be made because I didn't get discouraged or fed up or desperate when times got tough. I didn't do anything illegal or silly or unethical to stay in the game because I knew that when the game eventually turned, I would be there to pounce on what was to be gained.
Staying in the game makes sense rationally and empirically because, over the long term, we know stocks outperform all asset classes. The reason more people don't get rich with stocks, though, is that people can't seem to stay in long enough to win. They get bored, tired, frustrated, defeated, or reckless. They get discouraged. They get beaten by the unnerving and jarring and humbling process not of investing but investing successfully. My methods are designed to keep you from getting discouraged and quitting. Staying in the game is key, it is everything, and if you can't stay in the game then you have failed. And I have failed. I can't let that happen. [ET 30 Jan 2008]
Bill Gates Was Creative at Microsoft from Cafe Hayek by Don Boudreaux
Bill Gates's call, in Davos, for "creative capitalism" is getting much press. Here's a letter on this matter that I sent yesterday to the Wall Street Journal:
To the Editor:
I'm delighted that Bill Gates is reading the important work of the late Julian Simon ("Gates Calls for Kinder Capitalism," January 24). When he digests Mr. Simon's central idea - that human beings in market economies are "the ultimate resource" - Mr. Gates might then recognize that there is no need to change capitalism so that it becomes "creative." Capitalism has always been creative. It is inherently creative.
Everything from apparently mundane pencils and stocked supermarket shelves to obviously complex skyscrapers and personal computers are astonishingly complex artifacts created by human ingenuity unleashed, as only capitalism can unleash it, to experiment, cooperate, and compete. No philanthropist, no government body or commission, no Great Leader - no matter how "creative" or "kind" - has done one-trillionth as much to give dignity and comfort to ordinary people as has capitalism. It doesn't need re-inventing or to be made kinder; it just needs to be spread more widely around the world.
Sincerely, Donald J. Boudreaux January 25, 2008

Wednesday, January 30, 2008

Wake-up call: Of the rest of the world, we remember next to nothing

The first striking impression I must comment upon as someone brought up solely in the Western intellectual tradition is that Power and Plenty is what we describe nowadays as a ‘wake-up call’. There is and always has been a much wider world out there than the nearer, though highly significant, horizons we normally contain ourselves within.
I do not mean to imply that educated people in the West are unaware of the rest of the world – how could we be in the electronic times we live in? I am thinking more of our historical vision than today’s global reality. If our knowledge of history is lit up today, as we go back in time the darkness of ignorance about what was happening outside of Europe gradually closes in the further back in time we go. And even then, with our focus on a narrowing segment of the earth, mere islands of puny light settles on isolated places, themselves surrounded by darkness.
Our memories knew something about the near east from the Bible; we sung about names like Bethlehem as little children; we ran with Moses out of Egypt; and sat in awe of Nebuchadnezzar of Babylon too, and all the rest that remains in a distant locket of memory to name but three places a long way from Britain, on the fringes of The darkness.
I remember our schoolboy’s irreverent chant of ‘Shadrach, Meshach, and Abednego; Shake the bed, make the bed, and into Bed we go’. (Apologies to the unsmiling, who were never children…)
Of the rest of the world, we remember next to nothing. Alexander the Great marched through somewhere called Persia; Greeks and Persians fought regularly and with each other; then the Romans fought all round Europe with everybody, including England (but not much of Scotland). Our vision was inward bound; the rest of the history of the world was in darkness. There were some rumblings about a man called Genghis Khan, but not much else. Even Mohammed and Islam did not impinge too much as something we must know about.
Thus, to break the reverie about a too narrow upbringing, I should say that the first three chapters of Power and Plenty came as a bit of a shock. Of course, as an economist, I know more about the rest of the world than I knew as a boy. But what I did not know much about, even after close study of Wealth Of Nations, Lectures On Jurisprudence, and various 18th century books, including Cook’s voyages and the accounts of various other circumnavigators, is the history of the rest of the world long before the Enlightenment got into its stride.
Ronald Findlay and Kevin O'Rourke on Power and Plenty
from Adam Smith's Lost Legacy by Gavin Kennedy
Ronald Findlay and Kevin H. O’Rourke, 2007, Power and Plenty: trade, war, and the World Economy in the Second Millennium, Princeton University Press, Princeton and Oxford
The first chapter organises the thematic structure of book by dividing the world into seven regions, which re-appear regularly in the chapters that follow: Western Europe; Eastern Europe; North Africa and Southwest Asia: the Islamic world; South Asia; South East Asia; Asia (China, Korea, and Japan).
To be blunt: chapter 1 (Introduction) is heavy going, not because it is not written well, but because the reader is led into it without much preparation and is easily ‘lost’ by thestrange names of places and people because of this.
Things get going from Chapter 2 (The World economy at the Turn of the First Millennium) covering the golden age of Islam; China: the Sung economic miracle; The Indian Ocean and South east Asian trade; the Pirenne thesis; Eastern Europe: the Viking connection; the economy of Western Europe.
The thesis of Henry Pirenne (Mohammed and Charlemagne, 1939) will be of immense interest to Adam Smith scholars. Smith advanced the thesis in Lectures On Jurisprudence and Wealth Of Nations that the fall of Rome under the assault of the barbarians (5th century) resulted in a retrograde step from the age of commerce to a fairly basic agriculture (‘a few wretched cattle…’), sometimes known as the Dark Ages (‘banditry and rapine’ ruled the land).
Pirenne puts it differently. The Frankish kings didn’t change much in post-Roman society; but to the south in the Mediterranean the ‘Arab caliphate’ conquered the sea routes between Byzantine and Old Rome in the 7th century, which closed trade between the empires that caused ‘Western Europe to revert to a more primitive self-sufficient economic dynasty’, concluding ‘no Mohammed no Charlemagne’.
Adam Smith was right about the decay of the former Roman western empire, but Pirenne located its cause differently, and opens up a new route of enquiry. To understand his thesis we have to find out more about the rise of Islam, which doesn’t take long to draw us towards the east with which region the Islamic empire did much trade and political business. Before long we are in central Asia, India, back to the Vikings in eastern Europe, ending with a trawl through more familiar ground in Western Europe.
By now I was drawn into Power and Plenty and could not help noting how strong dynasties all across the seven regions reigned, fractured, leaving usurpers, would-be usurpers and failed usurpers to flit across the generations. From the sheer numbers involved, Findlay and O’Rourke could have called their book, Plunder and Trade without misleading readers, a thought confirmed by Chapter 3, ‘World Trade 1000-1500: the economic consequences of Genghis Khan’, the first section of which, ‘trade and war in the Mediterranean and the Black Sea’ is a fascinating read. The two sections on the Black Death (‘the unification of the globe by disease’) (Roy Ladurie, 1981) remind me of the thesis advanced by Gregory Clark, whom Findlay and O’Rourke cite appropriately.
But throughout this chapter, I couldn’t help thinking of the underlying economic structure. A predominantly agriculture society – foodstuffs, and manufactured artefacts from the land, in Physiocratic fashion – but with a population of the land, another engaged in trade, and a third manning the armies and fleets of the ruling order. I wanted some consideration of the implications that in the midst of the pretty low levels of subsistence and the general poor state of the economic basis of their societies, some of them 'worked'.
To sustain the different populations in each such society, land productivity must have been something of a wonder: soldiers have to eat, people have to produce their weapons, and somebody has to fill the traders’ camel trains with trade goods, ships and modes of transport. No wonder plunder and trade were closely associated. The farming population were kept on subsistence; soldiers could supplement subsistence with private plunder; and some of the surplus had to be diverted to building castles, churches, monasteries, mosques, fortifications, ships, and war weapons, not forgetting the miniscule amounts that went to a few scholars, and the larger amount that build cities.
The combined capital used for these ventures across the ‘civilised’ world through the seven regions had to be formidable by any count. The amount of capital destroyed, or used to no good effect, must also have been formidable. Countries opting out of foreign trade (China, Japan), and regions adopting non-growth inducing policies and activities, plus all the plunder that even the wide prevalence of trade within and between countries that did continue trading relations could not do other than mitigate the imposed preferences of those who ruled them.

Gautier quotes Sri Aurobindo, and pays an inspired homage to the great visionary’s writings

I, like the millions of others of my generation, grew up basically ignorant of Indian history as I had only been taught the Nehruvian pseudo-secular socialist government-sanctioned propaganda “history.” Now it is time that we free ourselves from the government brainwashing by reading alternative viewpoints critically. I bow deep in gratitude to the internet gods for allowing some light to shine through the darkness that Nehru imposed.
Rewriting Indian History: Book review by CJS Wallia January 29th, 2008 · 5 Comments
The following is a review of Francois Gautier’s Rewriting Indian History. (New Delhi: Vikas Publishing 1996). The reviewer is C J S Wallia who writes:
Worse yet, Gandhi’s anointed disciple, Nehru, propagated false readings of Indian history in his books and speeches. Gautier quotes Nehru’s “amazing eulogy” of the tyrant Mahmud Ghazni, the destroyer of Mathura’s great Hindu temples, Gujarat’s Somnath, and numerous other Hindu and Buddhist temples. When Nehru, the arrant appeaser of Muslims, became India’s first prime minister, he appointed a fundamentalist Muslim, Maulana Abul Kalam Azad, as the first education minister. Under Nehru’s pseudo-secular rule, “Hindu-bashing became a popular pastime.” Moreover, Nehru “had a great sympathy for communism….
He encouraged Marxist think-tanks such as the Jawaharlal Nehru University [JNU] in New Delhi, which has bred a lot of ‘Hindu-hating scholars’ who are adept at negating Muslim atrocities and running to the ground the greatness of Hinduism and its institutions.” These Marxist “historians,” well-ensconced at JNU, have long been masterminding the politically correct textbooks of India’s history used in Indian schools. No wonder, JNU is also known as “the Kremlin by the Jumna.” For a long time, the Indian Marxists had been so brainwashed that whenever it rained in Moscow — the capital of their “only true fatherland”– they opened their umbrellas in Delhi.
To be sure, dissenting voices were raised against Gandhi’s whitewash of Muslims. Before the partition of India, Aurobindo Ghosh, the great Hindu poet-philosopher, posed the question about Islam...
Throughout the book, Gautier quotes Sri Aurobindo, and in the concluding chapter, “The Final Dream,” pays an inspired homage to the great visionary’s writings.
Like Konraad Elst’s Negationism in India: Concealing the Record of Islam, Francois Gautier’s Rewriting Indian History contributes to the growing literature of dissent against the “standard” textbooks of India’s history. [Please note: The above text is not written by me. I did not put it within blockquotes for formatting reasons. The source of the review is here.]

The theology of market self-organization is the postmodern version of Adam Smith’s capitalist/Calvinist notion of the Invisible Hand

Whitehead’s God from The Pinocchio Theory by Steven Shaviro
God, or the Body without Organs Steven Shaviro
How to imagine a form of self-organization that is not exploitative
This is the point at which Deleuze and Guattari encounter Marx. There are two ways in which the logic of the Body without Organs can be identified with the logic of Capital that Marx describes. In the first place, when the Body without Organs interrupts and deadens production, it also captures the fruits of production (the products), attributes these products to itself, and distributes them all across its surfaces. This is what Marx calls exploitation, or the extraction of surplus value. And in the second place, just as, for Marx, the surplus value extracted in the process of production cannot be realized without a concomitant movement of circulation, so, for Deleuze and Guattari, the productions of the connective synthesis cannot be actualized without the concomitant circulations and inscriptions of the disjunctive synthesis, as recorded on the surface of the Body without Organs.
This is how the Body without Organs is a "machine" of both repulsion and attraction. It takes the form both of a "recording surface," and of what Deleuze and Guattari call the socius: "a full body" of social production (10). Under the capitalist mode of production, this socius is the body of Capital itself, "the body that Marx is referring to when he says that it is not the product of labor, but rather appears as its natural or divine presupposition" (10). Human labor is the actual, material cause of social reproduction today; but Capital is the quasi-cause, sterile and seemingly unengendered or self-engendered, upon whose surfaces this reproduction is recorded, through whose mediations it is organized, and to whose depths we cannot avoid attributing it. "Human labor" must here be taken to include the productivity of what Virno (2004), and Hardt and Negri (2001), call "immaterial labor," "affective labor," and "general intellect." Though certain theorists (e.g. Lazzarato 2004) seem to think that such phenomena invalidate Marx’s insights about the exploitation of "living labor," they actually conform all too fully to the ways in which productive causal processes are appropriated by, and assimilated to, the quasi-causality of Capital.
Marx describes how Capital arrogates the products of living labor to itself, so that it appears as if the surplus value extracted from that labor were a "natural" result of Capital’s own autonomous process of "self-valorization." But this "appears as if" is not a mere falsification; part of Marx’s point is that the self-valorization of Capital is, in its own right, a sort of objective illusion, or what Deleuze and Guattari call an "apparent objective movement" (1983, 10-11). In capitalism’s image of itself, labor is placed alongside raw materials, machinery, rent, and so on as a mere input of production; profit is calculated as a function, and indeed a product, of the total capital advanced. The creative role of living labor is thereby occluded. But this image is not just a mystification (though it is also that). For it is less a false representation of the capitalist system, than it is an actual aspect of Capital’s self-representation. And this "ideological" self-representation is itself necessary to Capital’s own internal functioning. Entrepreneurs and enterprises must themselves adopt this image, this method of calculation, in order for the capitalist mode of production to work at all. This is what it means to say that Capital per se is the quasi-cause of social production – in contrast to living labor as its material cause. Marx says that "the movement of capital is. . . limitless," because "the circulation of money as capital is an end in itself. . . the valorization of value takes place only within this constantly renewed movement" (1992, 253).
In Deleuze and Guattari’s terms, Capital as the Body without Organs incessantly "falls back on (se rabat sur) all production, constituting a surface over which the forces and agents of production are distributed, thereby appropriating for itself all surplus production and arrogating to itself both the whole and the parts of the process, which now seem to emanate from it as a quasi cause. . . the socius as a full body forms a surface where all production is recorded, whereupon the entire process appears to emanate from this recording surface" (1983, 10).
Capital is not the material cause of what it produces; but, as that which organizes and conceptualizes the system of production, it emerges retrospectively as the quasi-cause. This is perhaps why we should be suspicious of the current mania for self-organization and emergence. There is nothing inherently liberating about such concepts. For every Deleuzian account of selforganization, like the brilliant one worked out by Brian Massumi (2002), there is also an account, by the likes of Friedrich Hayek (1991) or Kevin Kelly (1994), of the capitalist market as a wondrously self-organizing system. The theology of market self-organization is the postmodern version of Adam Smith’s capitalist/Calvinist notion of the Invisible Hand; like its predecessor, this theology simply ignores all questions of exploitation. For Deleuze and Guattari, the problem is how to imagine a form of self-organization that is not exploitative, and that does not just reproduce and expand itself, pushing itself to its limit and then recomposing itself anew at every limit. This is also the problem of how genuine novelty, as imagined by Whitehead and by Deleuze, might be something other than incessant capitalist innovation, "capitalistic fashion-novelty." 8:40 AM 8:13 AM 8:02 AM

It will happen one day, just may be by the end of this year

Emerging markets: Future safe havens Swaminathan S Anklesaria Aiyar, ET 30 Jan, 2008
Stock markets across the globe are more closely linked than economies. Over the last two decades, stock-market dependency has increased even as real-economy dependency has decreased. However, do not assume that stock-market dependency means that Indian markets will always plunge along with US bourses in a US recession. The growing muscle of China and India, and their ability to grow reasonably fast even in a global recession, means that they will one day be viewed as the safe havens of the future. That is, we could see a switch of funds from the US to India in a recession. It may be premature to expect this to happen in 2008. But do not rule it out.
For a long time, the US has dominated the world economy, accounting for a quarter of world GDP and almost 40% of annual GDP growth some years ago. So a standard analogy to describe the world economy was that of a railway train, with the US locomotive pulling other wagons along. When the locomotive slowed, so did the wagons. They were coupled. This was never a good analogy. That is demonstrated by the simple fact that a US recession is generally defined as a decline in GDP growth for two successive quarters, whereas a global recession is generally defined as global GDP growth of less than 2.5%. Clearly, a stalled US economy does not bring the world to a complete halt.
In recent times, many theorists and stock market practitioners have talked of the decoupling of the wagons from the locomotive. That’s a terrible analogy — decoupled wagons do not move forward at all! What the theorists actually want to say is that developing countries are capable of fast growth even if the US slows down.
A better analogy would be that of a series of speedboats (countries) tied to each other (globalisation). Each speedboat has its own engine and velocity, but can be slowed down or pulled along faster by the action of others. So, the net outcome depends both on internal and external factors. What matters is not just the velocity of each speedboat (that is, its rate of growth) but its size (its share of world GDP). Thus the US may be moving more slowly than small Asian countries but has a greater influence on the overall line of ships than some small, fast-growing countries. In the past four years, the contribution of countries other than the US to the world economy has risen significantly. Developing countries have accelerated phenomenally. China and India have done exceptionally well, but so have Russia and many others in Asia, Latin America, Africa, Eastern Europe. In 2007, the contribution of China to annual world growth overtook that of the US in dollar terms, and was several times as high in PPP terms.
Once, developing countries were highly dependent on exports to the US. But they have now diversified their trade. India’s merchandise exports are 14% of GDP, but the US accounts for only 2% of this. Similarly China’s exports are almost 40% of GDP, but the US accounts for only 8% of this, So, a US slowdown will have adverse effects on China and India, but will not make a huge dent in their exports or GDP. The share of the US in world GDP has come down to perhaps 21%. The IMF projects that US growth will decelerate to 1.9% in 2008, yet projects world growth at a buoyant 4.8%. This suggests that the world has multiple centres of growth — several speedboats now have strong engines, and depend less on the US engine. Why then have all emerging stock markets crashed in January, along with US markets? The simple answer is that the US may not dominate the world economy, but global investors dominate emerging-market bourses. A billion dollars is peanuts for global investors, but is a huge sum for emerging stock markets. The inflow of billions from foreign institutional investors (FIIs) has ramped up prices across emerging markets in the last decade. And the withdrawal of a tiny fraction of this sum in January was enough to ramp down prices.
Emerging-market economies may be less dependent on the US economy for real growth. But emerging bourses are more exposed to and dependent on global funds than ever. Domestic investors cannot move the markets as FIIs can. Now, the strength of domestic mutual funds has improved in India. Indeed, on a few exceptional days the Indian market has advanced even when foreign institutional investors have been selling. Yet whenever FIIs are seen selling on a serious scale, no domestic investor dares buck the trend. Twenty years ago, FII investments in emerging markets were negligible. These markets were considered too risky by global investors. Besides, many countries — including India and China — had severe restrictions or outright bans on foreign entry into local stock markets. In that era, links between the Dow and emerging markets were very limited. Not any more.
However, dependence on FIIs is not the same thing as dependence on US bourses. Till now, FIIs in emerging markets have bought and sold in line with US markets. But, given the new strength of emerging markets, the day will come when it no longer makes sense to treat the US as a safe haven—or emerging markets as unsafe—in the event of a global recession. Indeed, it may be both profitable and safe to take money out of the United States and put it in emerging markets. This would constitute a revolution in the thinking of global investors about safe havens. It will happen one day, just may be by the end of this year. If that happens, global markets will indeed be coupled, but emerging markets will be the new locomotive.

Gandhi remained the high ideal, but he was now the ideal that stood in our way

Home > Edits & Columns > Why Bapu matters Pratap Bhanu Mehta Indian Express: Wednesday, January 30, 2008
Is he revered more because of his absence than his presence?
Gandhi's gloriously original and inventive life continues to be extraordinarily fascinating. But his assassination remains shrouded in embarrassed silence...Gandhi had already become marginal to the new forms Indian politics was taking in the late forties. He was out of sync with the political tendencies of the time: communalism, Partition, new constitutionalism, and development. He also had the sense of being marginalised in his personal relationships with leaders of the time. He had to plead to be consulted on major decisions, including Partition. But to see what his death achieved, just think of the counterfactual. One of the matters he attended to before his death was the rift between Nehru and Patel. His death, as Ram Guha has argued, ensured that the two would continue to work together. Imagine the strain it would have been on the fledgling republic if the Congress had openly split around these two personalities.
It has to be admitted that his continual presence and riposte to the government that was coming into being would have been an extraordinary liability for Nehru. On almost every issue of the time there were serious tensions between the emerging state and what Gandhi stood for; and his stance would have continually cast a shadow of doubt over Congress’s legitimacy. To put it bluntly, it was beginning to be felt that with Gandhi around, normal politics would have been near-impossible. But perhaps most importantly, had it not been for Gandhi’s assassination, the new state would not have been able to delegitimise Hindu nationalism to the extent it did.
It has become all too easy to forget the fact that by the late forties Hindu nationalism was in the position of being a potent political force, and the assassination made it difficult for more people to openly avow it. In a way, the surprise is not that Hindu nationalism reappeared in the eighties, legitimised by the excesses of the Congress; the surprise is that the guilt of being killers of Gandhi remained a damper on its aspirations for so long. It is a pity that we still don’t fully come to terms with Godse’s claims at his trial...But the essence of his case has three prongs:
  • Gandhi was a failure, the charkha could not even clothe 1 per cent of the nation and non-violence was an ideal honoured only in the breach.
  • Second, Gandhi was impractical.
  • But most importantly, Gandhi’s virtue had become his vice: “Gandhiji should have either changed his policy or could have admitted his defeat and given way to others of different political views to deal with Mr Jinnah and the Muslim League.”

The problem with Gandhi, on this view, was that his own path was too impractical to succeed, but his presence was powerful enough to ensure that no other path could gain equal legitimacy. Gandhi remained the high ideal, but he was now the ideal that stood in our way. In a way Gandhi’s resolute individuality, Ekla Chalo had become, not a signifier of leadership, but an ability to block. Again to quote, “Indian politics in the absence of Gandhiji would surely be practical, able to retaliate, and would be powerful with armed forces.” In a sense this captured the schizophrenia over Gandhi: his undoubted power over us, but also an experience that this power was a fetter to our conception of practicality.

One of the judges presiding over the trial had little doubt that had the audience on the day of trial been constituted into a jury, they would have returned a verdict of ‘not guilty’ on Godse. To say that we were all complicit in Gandhi’s death would be to obscure several important moral distinctions. But it is not too far-fetched a claim to say that by the late forties no one had any idea about what to do with him. Even Patel and Nehru were at their wit’s ends. The moral force of his ideals could not be denied, even if living up to them was impossible; his personality remained a powerful force that could move people to peace. But it was peace sustained by the aura of his personality, not an acceptance of his ideals.

In some contexts, Gandhi still remains supremely relevant. There is little doubt, for instance, that the Palestinian cause would have succeeded far more if it had taken a Gandhian turn. His manner of constructing a fearless and inventive self remains supremely instructive. As the first genius to master mass politics, he remains, to use the defining aspiration of our times, cool. But on the sixtieth anniversary of his assassination, it is difficult to shake off the feeling that he is revered more because of his absence than his presence. As with Munnabhai, his ghost occasionally haunts us, but the important thing is that it is only a ghost. His assassination allowed us to cope with him. The writer is president, Centre for Policy Research

The middle-class antipathy to Gandhi cuts across ideologies

LEADER ARTICLE: Death Of The Mahatma Ashis Nandy TOI 30 Jan 2008
The middle-class antipathy to Gandhi cuts across ideologies. During one of her earlier tenures, Mayawati precipitated a first-class public controversy by attacking Gandhi. But she was only joining a long line of distinguished critics of Gandhi, stretching from Mohammad Ali Jinnah, the classical liberal turned Muslim nationalist, to Bal Thackeray of the Shiv Sena. New, aggressive critics of Gandhi are now being thrown up by the knights of globalisation in India...Godse thought he was executing Gandhi on behalf of a majority. Exactly as Mayawati and, before her, E M S Namboodiripad felt that they were speaking on behalf of a majority - the bahujan samaj, the proletariat, the Shudras and the Dalits - when they attacked Gandhi...
The liberals have never found Gandhi digestible either. Shankaran Nair, an early Congress leader, said that Gandhi was against everything that the great sons of 19th century India stood for. Gopal Krishna Gokhale was even more forthright. He declared Gandhi's Hind Swaraj to be "the work of a fool" and prophesied that "Gandhi would destroy it after he spent a year in India". Such honest estimates are now rare, because the liberals in the meanwhile have produced their own house-broken Gandhi - modern, nationalistic, progressive, statist and secular. There is nothing left of the politically incorrect, intellectual maverick who took on the imperious Enlightenment vision and refused to accept that its dominance was proof of its finality.

Tuesday, January 29, 2008

I have actually never seen us celebrate our Constitution

Kalachakra Saturday, January 26, 2008 Happy Republic Day Shruti Rajagopalan
Happy Republic Day. This is a rather emotional holiday for me, so I shall meander on with some of the thoughts I feel virtually every year on this day. A couple of years ago I heard a lecture by Randy Barnett, who was talking about his book The Lost Constitution, a most wonderful read. Barnett asked us to imagine a psychopath who breaks into the National Archives Building and starts destroying the original US Constitution by tearing the document apart. This would be unacceptable. Patriots may even ask for the highest possible punishment for this man. And yet this is what the honorable judges of SCOTUS do each day, and get away with. He went on to explain how the judges have misinterpreted the US Constitution and virtually forgotten some of the original document.
On Republic Day, I feel much of the same sentiment. We have an Executive, which takes such tremendous trouble to organize a parade, put on the best show to showcase emerging India, show off the latest in its military strength and everything that is supposedly patriotic. The same people who also uphold the flag and other such symbols and create a racket when someone wears a tri-colored underwear. But the original intent of the Republic Day was to celebrate the fact that we are a Republic. That we have a Constitution. That it is the sacred law of the land. That it must be preserved. Because this document preserves and guarantees the very rights and freedoms that we enjoy, even those actions which we use to destroy the Constitution.
I have actually never seen us celebrate our Constitution. Instead of understanding the text and meaning behind it, we elect governments who appoint committees to check if the Constitution is compatible with the current bureaucracy. Instead of seeing whether the current system is in conformity with what the Constitution lays down. We have a legislature which has made every attempt possible to change the Constitution when it was inconvenient. The deletion of Right to Property under Article 19 and Article 31 are excellent examples. An even better example of subverting the Constitution is the Ninth Schedule. Anything that was feared to be declared unconstitutional by the judiciary could be included in the Ninth Schedule; which was part of the Constitution. This is perhaps the biggest legal absurdity!
An excellent example of imputing new values which never existed in the Constitution is by including the word Socialism in the preamble and justifying every rent seeking and partisan legislation under that ideological label. The Preamble to the Indian Constitution was inspired by the American Constitution and begins with “We the People of India….” The purpose of the Preamble is to clarify the source of the Constitution, the sanction behind the Constitution and the goals of the people who wrote and sanctioned it. Most importantly the Preamble lays out the basic type of government and polity which is established in the country through the Constitution. So it seems logical that the Preamble is sacred and should not be touched as it changes the nature of the nation the founding fathers hoped to build. Just as the Constitution is sacred.
In India, the Supreme Court declared the Preamble as part of the Basic Structure of the Constitution in 1973, which means it is outside the Parliaments power to amend the Constitution. But amend we did, and as early as 1976. The odd thing is that every person filing an application to stand for election must agree to uphold the values of the Constitution. This is thanks to Section 29A of the RPA Act which requires all political parties to include Socialism in their party mandate to align with the values in the Preamble and Constitution. This seems a bit odd, given that in the past every time the Constitution didn’t align with the Congress Party mandate, it was the Constitution that was amended. So under this absurd law, which by the way should be unconstitutional, we have every member elected to the legislature under an oath that he would uphold the Constitution. The very same legislature sometimes under super majority amends the Constitution, destroys its spirit, and justifies its own agenda by calling the Constitution outdated and irrelevant. I wonder what kind of society we choose to have when the basic rights and freedoms become “outdated”.
I would give most of the credit for this travesty to the Nehru Gandhi Family. Every member has systematically destroyed the Constitution, and is showing signs of producing more generations who shall carry on that tradition. They were all present today at the parade. Posted by Shruti Rajagopalan at 11:08 PM Labels: , , 2 comments:
Guruprasad said... hi shruti (whichever one this is! :) ) 'happy republic day to you too!' and thanks for a wonderful post. but i think any man-made document cannot stand the test of time and would have to undergo change to reflect the ethos of the current times. else the document becomes nothing but a set of dogmas that people are supposed to adhere to irrespective of relevance or meaning!i agree with you that some of the values embedded in our constitution (like our scriptures) are timeless and for them core of what defines humanity eg. love, freedom, and the choices change we must, if we have to evolve. but this change has to be brought about by the people. and the representatives of the people who do not have their warped personal or philosophical agendas that they want to thrust down the collective throat of the populace! 12:26 PM

A correct balance in exploring the potential of spirit and matter

Sri Aurobindo, one of 20th century’s greatest spiritual masters and seers, had accurately diagnosed the current crisis in human society as the result of the imbalance in man’s treatment of matter and spirit. He argued through his incisive writings and speeches that mankind will not be at peace with itself unless it achieved a correct balance in exploring the potential of spirit and matter and linking them together.
Unlike most philosophers and proponents of spiritual development, Sri Aurobindo’s thoughts on the subject were not the result of his mere ‘armchair’ intellectual exercise. Refusing to accept at face value various interpretations of Vedic texts made by scholars, Sri Aurobindo conducted his own independent research into Vedic scriptures to understand and experience the cosmic consciousness and its impact on the physical world. After nearly 40 years of practicing what he called Integral Yoga as part of his practical research, he made a startling discovery — man is not at the pinnacle of life’s evolutionary cycle on earth. Man, he found, is only a ‘transitional being’. He found that the Homo sapiens have yet to evolve further in the realm of spirit. It is only when man evolves higher into the remaining stages of consciousness that he will have reached the zenith of life’s evolution on our planet... Posted by Admin at 5:33 PM

Judges are appointed with the intent of serving the political ends of the people appointing them

Trying to put a dress on a pig & fresh cat vomit
72. January 28th,2008 4:44 pm
How… disingenuous.
Judges are appointed with the intent of serving the political ends of the people appointing them. No more, no less. Trying to assign these complex motivations to judicial selection is like trying to put a dress on a pig.
Judicial politics are those things which have taken the commerce clause, which specifically lays out that the federal government has authority over what commerce transpires between the states, and turned it into legislation that magically pretends that said clause “means” that the fed has authority for *anything* that transpires intra-state. Black is white; up is down. Alice would be right at home, albeit just as confused as usual.
Judicial politics are those things that have taken the explicit constitutional prohibition against ex-post-facto law and instructed the judges to nod like bobble-headed idiots when retroactive offender registration came before them. Which they then proceeded to do. One is tempted to ask, quite seriously, “What part of “no ex post facto law shall be passed” did these fine legal scholars not understand?”, but of course that is superfluous; they knew precisely what they were doing. The pretense that adding horrifyingly dangerous, invasive and onerous requirements to a sentence after the fact is “not adding to punishment” caters to the politically correct fear of the day while serving as the most transparent of outright lies.
Judicial politics are those things that, using no higher metric than sophism, claim that “interpreting” the constitution is legitimate, when the framers took the time and care to specify a way to change the constitution, that process called amendment; “interpretation” is specifically and *only* an end-run around the requirement and opportunity to amend. Philosophically speaking, “interpretation” has the approximate intellectual heritage of fresh cat vomit.
Please don’t try and tell us that supreme court judge appointments are anything but political exercises, with the intent and effect of installing political tools. The court’s actions tell the explicit, vicious truth - even while you dissemble with your fine words, they fail us all as they erode the honorable structure from which the federal government derived its only legitimate authority.
In the end, we have a government with immense and growing power, and almost no remaining authority at all. The congress makes any laws it wants to make, and the supreme court rubber stamps them, roundly ignoring (or completely re-imagining) the constitution more often than not.
High crimes, indeed.
— Posted by Ben Williams

The map of the true India

I am going to write about a book by Kosha Shah, who is a resident of Auroville ( She deals with India and her neighbours in South Asia. The book is published by Auroville Arts and is priced at Rs. 80. It has 84 pages and is divided into 7 chapters. There is both an introduction and a conclusion. There is a message in the beginning and an annexure at the end. The author provides us with a bibliography at the end.
The author has been for the last several years researching and working with the large body of thought of Sri Aurobindo with particular reference to his Social and Political writings. In this book she deals with issues concerning South Asia and India treating them in the light of Sri Aurobindo and Mother’s vision, thoughts, messages, recommendations on the subject...
In the introduction, the author discusses the first dream of Sri Aurobindo outlined in his Independance Day Message and speaks of the first positive step taken by the regional confederation: South Asian Association of Regional Co-operation (SAARC).
The first chapter deals with South Asia, the Indian Sub-Continent and beyond. In this chapter, the diversity in the racial origins and religious inclinations of the people of South Asia has been discussed. The author points out to a certain homogeneity amongst the people of the sub-continent irrespective of their racial past. Describing the true map of India which is what Mother envisaged as the real and undivided India, one can see it till today in the Playground of Sri Aurobindo Ashram. The Mother is quoted here:
“The map was made after the partition.
It is the map of the true India in spite of all passing appearances, and it will always remain the map of the true India, whatever people may think about it.”
Fatima Bhutto, the granddaughter of the late Zulfikar Ali Bhutto talked about the South Asian region last week during her visit to Jaipur, India and said the greater India comprised India, Pakistan, Afghanistan and Myanmar. “It’s her vision”, she said, “to see that these sister nations build bridges and end their differences”.
To be continued . . . Posted in South Asia, Sri Aurobindo, The Mother No Comments »

Monday, January 28, 2008

The main battlefield is what I call “the second world”

Waving Goodbye to Hegemony By PARAG KHANNA NYT: January 27, 2008
And Europe’s influence grows at America’s expense. While America fumbles at nation-building, Europe spends its money and political capital on locking peripheral countries into its orbit. Many poor regions of the world have realized that they want the European dream, not the American dream. Africa wants a real African Union like the E.U.; we offer no equivalent. Activists in the Middle East want parliamentary democracy like Europe’s, not American-style presidential strongman rule. Many of the foreign students we shunned after 9/11 are now in London and Berlin: twice as many Chinese study in Europe as in the U.S. We didn’t educate them, so we have no claims on their brains or loyalties as we have in decades past. More broadly, America controls legacy institutions few seem to want — like the International Monetary Fund — while Europe excels at building new and sophisticated ones modeled on itself. The U.S. has a hard time getting its way even when it dominates summit meetings — consider the ill-fated Free Trade Area of the Americas — let alone when it’s not even invited, as with the new East Asian Community, the region’s answer to America’s Apec...
The Big Three are the ultimate “Frenemies.” Twenty-first-century geopolitics will resemble nothing more than Orwell’s 1984, but instead of three world powers (Oceania, Eurasia and Eastasia), we have three hemispheric pan-regions, longitudinal zones dominated by America, Europe and China. As the early 20th-century European scholars of geopolitics realized, because a vertically organized region contains all climatic zones year-round, each pan-region can be self-sufficient and build a power base from which to intrude in others’ terrain. But in a globalized and shrinking world, no geography is sacrosanct. So in various ways, both overtly and under the radar, China and Europe will meddle in America’s backyard, America and China will compete for African resources in Europe’s southern periphery and America and Europe will seek to profit from the rapid economic growth of countries within China’s growing sphere of influence. Globalization is the weapon of choice. The main battlefield is what I call “the second world.” ...
When Tata of India is vying to buy Jaguar, you know the landscape of power has changed. Second-world countries are also fast becoming hubs for oil and timber, manufacturing and services, airlines and infrastructure — all this in a geopolitical marketplace that puts their loyalty up for grabs to any of the Big Three, and increasingly to all of them at the same time. Second-world states won’t be subdued: in the age of network power, they won’t settle for being mere export markets. Rather, they are the places where the Big Three must invest heavily and to which they must relocate productive assets to maintain influence.
While traveling through the second world, I learned to see countries not as unified wholes but rather as having multiple, often disconnected, parts, some of which were on a path to rise into the first world while other, often larger, parts might remain in the third. I wondered whether globalization would accelerate these nations’ becoming ever more fragmented, or if governments would step up to establish central control. Each second-world country appeared to have a fissured personality under pressures from both internal forces and neighbors. I realized that to make sense of the second world, it was necessary to assess each country from the inside out.
Second-world countries are distinguished from the third world by their potential: the likelihood that they will capitalize on a valuable commodity, a charismatic leader or a generous patron. Each and every second-world country matters in its own right, for its economic, strategic or diplomatic weight, and its decision to tilt toward the United States, the E.U. or China has a strong influence on what others in its region decide to do. Will an American nuclear deal with India push Pakistan even deeper into military dependence on China? Will the next set of Arab monarchs lean East or West? The second world will shape the world’s balance of power as much as the superpowers themselves will...
Mubarak, Musharraf, Malaysia’s Mahathir and a host of other second-world leaders have set a new standard for manipulative prowess: all tell the U.S. they are its friend while busily courting all sides. What is more, many second-world countries are confident enough to form anti-imperial belts of their own, building trade, technology and diplomatic axes across the (second) world from Brazil to Libya to Iran to Russia. Indeed, Russia has stealthily moved into position to construct Iran’s Bushehr nuclear reactor, putting it firmly in the Chinese camp on the Iran issue, while also offering nuclear reactors to Libya and arms to Venezuela and Indonesia. Second-world countries also increasingly use sovereign-wealth funds (often financed by oil) worth trillions of dollars to throw their weight around, even bullying first-world corporations and markets.
The United Arab Emirates (particularly as represented by their capital, Abu Dhabi), Saudi Arabia and Russia are rapidly climbing the ranks of foreign-exchange holders and are hardly holding back in trying to buy up large shares of Western banks (which have suddenly become bargains) and oil companies. Singapore’s sovereign-wealth fund has taken a similar path. Meanwhile, Saudi Arabia plans an international investment fund that will dwarf Abu Dhabi’s. From Switzerland to Citigroup, a reaction is forming to limit the shares such nontransparent sovereign-wealth funds can control, showing just how quickly the second world is rising in the global power game.
To understand the second world, you have to start to think like a second-world country. What I have seen in these and dozens of other countries is that globalization is not synonymous with Americanization; in fact, nothing has brought about the erosion of American primacy faster than globalization. While European nations redistribute wealth to secure or maintain first-world living standards, on the battlefield of globalization second-world countries’ state-backed firms either outhustle or snap up American companies, leaving their workers to fend for themselves. The second world’s first priority is not to become America but to succeed by any means necessary.
Karl Marx and Max Weber both chastised Far Eastern cultures for being despotic, agrarian and feudal, lacking the ingredients for organizational success. Oswald Spengler saw it differently, arguing that mankind both lives and thinks in unique cultural systems, with Western ideals neither transferable nor relevant. Today the Asian landscape still features ancient civilizations but also by far the most people and, by certain measures, the most money of any region in the world. With or without America, Asia is shaping the world’s destiny — and exposing the flaws of the grand narrative of Western civilization in the process.
The rise of China in the East and of the European Union within the West has fundamentally altered a globe that recently appeared to have only an American gravity — pro or anti. As Europe’s and China’s spirits rise with every move into new domains of influence, America’s spirit is weakened. The E.U. may uphold the principles of the United Nations that America once dominated, but how much longer will it do so as its own social standards rise far above this lowest common denominator? And why should China or other Asian countries become “responsible stakeholders,” in former Deputy Secretary of State Robert Zoellick’s words, in an American-led international order when they had no seat at the table when the rules were drafted? Even as America stumbles back toward multilateralism, others are walking away from the American game and playing by their own rules.
The self-deluding universalism of the American imperium — that the world inherently needs a single leader and that American liberal ideology must be accepted as the basis of global order — has paradoxically resulted in America quickly becoming an ever-lonelier superpower. Just as there is a geopolitical marketplace, there is a marketplace of models of success for the second world to emulate, not least the Chinese model of economic growth without political liberalization (itself an affront to Western modernization theory). As the historian Arnold Toynbee observed half a century ago, Western imperialism united the globe, but it did not assure that the West would dominate forever — materially or morally. Despite the “mirage of immortality” that afflicts global empires, the only reliable rule of history is its cycles of imperial rise and decline, and as Toynbee also pithily noted, the only direction to go from the apogee of power is down.
Parag Khanna is a senior research fellow in the American Strategy Program of the New America Foundation. This essay is adapted from his book, “The Second World: Empires and Influence in the New Global Order,” to be published by Random House in March.

Sunday, January 27, 2008

Bill Gates Calls for a kinder and more creative capitalism

Last night I watched the three-hour documentary, The Corporation. I was again reminded that the current state of capitalism is not only unsustainable but also wreaks ethical havoc wherever it sets its profit-centric tentacles. If a corporation is a sentient being then its psychological make-up is that of a psychopath. And yet, we're all dependent on it. We're all profiting from it, directly or indirectly. We're all co-creators of a fast-growing global capitalistic society. We're all drinking from its intoxicating cup of madness.
But all hope is not lost. There's a growing number of conscientious CEOs, like Ray Anderson of Interface and Yvon Chouinard of Patagonia, to name a few. Serendipitously, during the World Economic Forum 2008 at Davos, the richest man in the world issues a call for a kinder and more creative capitalism. Here is a video of Bill Gates's speech at Davos.
Bill Gates may not have the cool image of Steve Jobs, but he's still one of my heroes. I think Richard Mahoney is right when he said that, "'Bill Gates is going to be remembered more for what he did for international public health than what he did for the world of computers.'' I'm hoping that Bill Gates would also be remembered for his vision of a kinder, more creative, and conscious capitalism. January 26, 2008 at 02:49 AM in Business Permalink Comments (0) TrackBack (0)

We need to set up small communities locally, where we are of service to each other

Microcredit Lending January 26, 2008 • 2 Comments
I’ve started lending out some small loans at Kiva. This is an excellent site that is getting a lot of good reviews. Most of the people seeking loans are women from the Third World wanting to set up small businesses. I highly recommend this site — it’s reliable and the return rate on the loans is nearly 100% (similar to the experience at Grameen Bank in Bangladesh). Go ahead and sign up! If you don’t have much money, you can even give loans as small as $25.
You know, I’ve been thinking about how the catchphrase for the 21st century is: think globally, live locally. In other words, we need to set up small communities locally, where we are of service to each other, while also making contributions on the global scale and being mindful of how our actions are affecting others on this planet. The difficulty is not really about learning how to do this, so much as it is about unlearning all the old, egoistic ways.
What a marvelous time we are living in, though!
“Remember that you are at an exceptional hour in a unique epoch, that you have this great happiness, this invaluable privilege, of being present at the birth of a new world.”— The Mother
Posted by ned. Filed under Worthy Initiatives, Human Unity.

If the finger points them to prison, to the prison they go

You will have no complaints to make against others, because then you will not need any leader. The leader is within yourselves.
A lecture delivered under the auspices of the Bombay National Union by Sri Aurobindo to a large gathering at Mahajan Wadi, Bombay, on Sunday, the 19th January, 1908. Location: Home > E-Library > Works Of Sri Aurobindo > Bande Mataram Volume-01 > The Present Situation
I have written about many things, about Swadeshi, Boycott, National Education, Arbitration and other subjects. But there was one truth that I have always tried, and those who have worked with me have also tried, to lay down as the foundation stone of all that we preached. It is not by any mere political programme, not by National Education alone, not by Swadeshi alone, not by Boycott alone, that this country can be saved.
Swadeshi by itself may merely lead to a little more material prosperity, and when it does, you might lose sight of the real thing you sought to do in the glamour of wealth, in the attraction of wealth and in the desire to keep it safe. In other subject countries also, there was material development; under the Roman Empire there was material development, there was industrial progress, but industrial progress and material development did not bring life to the Nation. When the hour of trial came, it was found that these nations which had been developing industrially, which had been developing materially, were not alive. No, they were dead and at a touch from outside they crumbled to pieces. So, do not think that it is any particular programme or any particular method which is the need of the situation. These are merely ways of working; they are merely particular concrete lines upon which - the spirit of God is working in a Nation, but they are not in themselves the one thing needful.
  • What is the one thing needful?
  • What is it that has helped the older men who have gone to prison?
  • What is it that has been their strength, that has enabled them to stand against all temptations and against all dangers and obstacles?

They have had one and all of them consciously or unconsciously one over-mastering idea, one idea which nothing can shake, and this was the idea that there is a great Power at work to help India, and that we are doing what it bids us. Often they do not understand what they are doing. They do not always realise who guides or where he will guide them; but they have this conviction within, not in the intellect but in the heart, that the Power that is guiding them is invincible, that it is Almighty, that it is immortal and irresistible and that it will do its work. They have nothing to do. They have simply to obey that Power. They have simply to go where it leads them. They have only to speak the words that it tells them to speak, and to do the thing that it tells them to do.

If the finger points them to prison, to the prison they go. Whatever it bids them to endure, they gladly endure. They do not know how that enduring will help, and the worldy-wise people may tell them that it is impolitic, that by doing this they will be wasting the strength of the country, they will be throwing the best workers away, they are not saving up the forces of the country. But we know that the forces of the country are other than outside forces. There is only one force, and for that force, I am not necessary, you are not necessary, he is not necessary. Neither myself nor another, nor Bepin Chandra Pal, nor all these workers who have gone to prison. None of them is necessary. Let them be thrown as so much waste substance, the country will not suffer.

God is doing everything. We are not doing anything. When he bids us suffer, we suffer because the suffering is necessary to give others strength. When he throws us away, he does so because we are no longer required. If things become worse, we shall have not only to go to jail, but give up our lives, and if those who seem to stand in front or to be absolutely indispensable are called upon to throw their bodies away, we shall then know that that also is wanted, that this is a work God has asked us to do, and that in the place of those who are thrown away, God will bring many more. He himself is behind us. He himself is the worker and the work. He is immortal in the hearts of his people.

Faith then is what we have in Bengal. Some of us may not have it consciously; some may not call it by that particular name. As I said, we have developed intellectuality, we have developed it notably and we are still much dominated by it. Many have come to this greater belief through the longing to live for their countrymen, to suffer for their countrymen, because God is not only here in me, he is within all of you, it is God whom I love" it is God for whom I wish to suffer. In that way many have come to do what God bade them do and he knows which way to lead a man. When it is his will he will lead him aright.

Another thing which is only another name for faith is self-lessness. This movement in Bengal, this movement of Nationalism is not guided by any self-interest, not at the heart of it. Whatever there may be in 'some minds, it is not, at the heart of it, a political self-interest that we are pursuing. It is a religion which we are trying to live. It is a religion by which we are trying to realise God in the nation, in our fellow-countrymen. We are trying to realise him in the three hundred millions of our people. We are trying, some of us consciously, some of us unconsciously, we are trying to live not for our own interests, but to work and to die for others. When a young worker in Bengal has to go to jail, when he is asked to suffer, he does not feel any pang in that suffering, he does not fear suffering. He goes forward with joy. He says,

"The hour of my consecration has come, and I have to thank God now that the time for laying myself on his altar has arrived and that I have been chosen to suffer for the good of my countrymen. This is the hour of my greatest joy and the fulfilment of my life."

This is the second aspect of our religion, and is the absolute denial of the idea of one's separate self, and the finding of one's higher eternal Self in the three hundred millions of people in whom God himself lives.
The third thing which is again another name for faith and selflessness is courage. When you believe in God, when you believe that God is guiding you, believe that God is doing all and that you are doing nothing, —
  • what is there to fear?
  • How can you fear when it is your creed, when it is your religion to, throw yourself away, to throw your money, your body, your life and all that you have, away for others?
  • What is it that you have to fear?

There is nothing to fear. Even when you are called before the tribunals of this world, you can face them with courage. Because your very religion means that you have courage. Because it is not you, it is something within you.

  • What can all these tribunals, what can all the powers of the world do to that which is within you, that Immortal, that Unborn, and Undying One, whom the sword cannot pierce, whom the fire cannot burn, and whom the water cannot drown?

Him the jail cannot confine and the gallows cannot end.

  • What is there that you can fear when you are conscious of him who is within you?

Courage is then a necessity, courage is natural and courage is inevitable. If you rely upon other forces, supposing that you are a Nationalist in the European sense, meaning in a purely materialistic sense, that is to say, if you want to replace the dominion of the foreigner by the dominion of somebody else, it is a purely material change; it is not a religion, it is not that you feel for the three hundred millions of your country-men, that you want to raise them up, that you want to make them all free and happy. It is not that, but you have got some idea that your nation is different from another nation and that these people are outsiders and that you ought to be ruling in their place. What you want is not freedom for your countrymen, but you want to replace the rule of others by yours. If you go in that spirit,

  • what will happen when a time of trial comes?
  • Will you have courage?
  • Will you face it?

You see that is merely an intellectual conviction that you have, that is merely a reason which your outer mind suggests to you. Well, when it comes to be put to the test,

  • what will your mind say to you?
  • What will your intellect say to you?

It will tell you,

"It is all very well to work for the country, but, in the meanwhile, I am going to die, or at least to be given a great deal of trouble, and when the fruit is reaped, I shall not be there to enjoy it. How can I bear all this suffering for a dream?"

You have this house of yours, you have this property, you have so many things which will be attacked, and so you say, "That is not the way for me." If you have not the divine strength of faith and unselfishness, you will not be able to escape from other attachments, you will not like to bear affliction simply for the sake of a change by which you will not profit.

  • How can courage come from such a source?

But when you have a higher idea, when you have realised that you have nothing, that you are nothing and that the three hundred millions of people of this country are God in the Nation, something which cannot be measured by so much land, or by so much money or by so many lives, you will then realise that it is something immortal, that the idea for which you are working is something immortal and that it is an immortal Power which is working in you. All other attachments are nothing. Every other consideration disappears from your mind, and, as I said, there is no need to cultivate courage. You are led on by that Power. You are protected through life and death by One who survives in the very hour of death, you feel your immortality in the hour of your worst sufferings, you feel you are invincible...

  • Have you realised what Nationalism is?
  • Have you realised that it is a religion that you are embracing?

If you have, then call yourselves Nationalists; and when you have called yourselves Nationalists, then try to live your Nationalism. Try to realise the strength within you, try to bring it forward, so that everything you do may be not your own doing, but the doing of that Truth within you. Try so that every hour that you live shall be enlightened by that presence, that every thought of yours shall be inspired from that one fountain of inspiration, that every faculty and quality in you may be placed at the service of that immortal Power within you. Then you will not say, as I have heard so many of you say, that people are so slow to take up this idea, that people are so slow to work, that you have no fit leaders and that all your great men tell you a different thing and that none of them is ready to come forward to guide you in the path that is pointed out.

You will have no complaints to make against others, because then you will not need any leader. The leader is within yourselves. If you can only find him and listen to his voice, then you will not find that people will not listen to you, because there will be a voice within the people which will make itself heard. That voice and that strength is within you. If you feel it within yourselves, if you live in its presence, if it has become yourselves, then you will find that one word from you will awake an answering voice in others, that the creed which you preach will spread and will be received by all and that it will not be very long — in Bengal it has not been very long, it has not taken a century or fifty years, it has only taken three years to change the whole nation, to give it a new spirit and heart and to put it in front of all the Indian races..

Saturday, January 26, 2008

Markets adapt: Complex new instruments diversify risk and serve the public good

Op-Ed Columnist Two Cheers for Wall St. By DAVID BROOKS NYT: January 25, 2008
The only question is which narrative is going to prevail, the Greed Narrative or the Ecology Narrative.
The Greed Narrative goes something like this: The financial markets are dominated by absurdly overpaid zillionaires. They invent complex financial instruments, like globally securitized subprime mortgages that few really understand. They dump these things onto the unsuspecting, sending destabilizing waves of money sloshing around the globe. Economies melt down. Regular people lose jobs and savings. Meanwhile, the financial insiders still get their obscene bonuses, rain or shine.
The morality of the Greed Narrative is straightforward. A small number of predators destabilize the economy and reap big bonuses. The financial system is fundamentally broken. Government should step in and control the malefactors of great wealth.
The Ecology Narrative is different. It starts with the premise that investors and borrowers cooperate and compete in a complex ecosystem. Everyone seeks wealth while minimizing risk. As Jim Manzi, a software entrepreneur who specializes in applied artificial intelligence, has noted, the chief tension in this ecosystem is between innovation and uncertainty. We could live in a safer world, but we’d have to forswear creativity.
The United States has generally opted for financial innovation. This has worked out pretty well. The U.S. has enjoyed 25 years of strong economic growth, in part because capital has been efficiently allocated to companies that can use it well.
Financial instruments like adjustable-rate and subprime mortgages have allowed millions of people to get homes they could not otherwise purchase, and research shows that most of these tools have been used intelligently.
Hedge funds have proliferated to help investors manage risk. These things exist precisely because investors want to smooth out volatility. In the old days, a blow to, say, the Texas economy could have dried up lending in Texas, but now funds flow globally, and money from one part of the world can shore up weakness in another.
As Sebastian Mallaby of the Council on Foreign Relations has pointed out, time and again hedge funds have dampened market instability. If a currency, a company or a stock market starts to spiral downward, deep-pocketed funds, smelling bargains, will come in and stabilize its assets. If a company’s price is rising to unsustainable levels, contrarian funds bet against the hype.
Most of the time, the complex new instruments diversify risk and serve the public good. But life requires trade-offs, and, as we’re being reminded this week, the innovation process involves a painful adolescence.
When a new instrument enters the market, it takes a while before people understand and institutionalize it. Whether the product is high-yield bonds or mortgage-backed securities, there’s a tendency to get carried away.
In the first stage of this adolescence, investors look around and see everybody else making money off some new instrument. As Nicholas Bloom of Stanford notes: “They assume they are fine because they see everyone else buying it.” Individual bankers have a special incentive to get in on the ride because their yearly bonus is determined by how they do in the short term.
Then there’s a moment when people realize how stupid they have been. They’ve bought a pile of subprime mortgages without really knowing what they’ve purchased. The ratings agencies suddenly don’t look so reliable. The cycle of overconfidence becomes a cycle of underconfidence because nobody knows who is holding worthless paper.
Then, finally, maturity sets in. Those who have lost great gobs of money get fired. People still find the new product useful, but within parameters and with greater safeguards.
The lesson of the Ecology Narrative is that, in most cases, the market corrects itself. Maybe this year banks will change their pay structure so there’s not so much emphasis on short-term results. Maybe companies will change their boards to improve scrutiny over complex new instruments. In short, markets adapt.
People who embrace the Ecology Narrative don’t like the offensive bonuses that get handed out on Wall Street. They just don’t see any way the government can curtail them without rending the fabric of the ecosystem. They don’t like the periodic crises, but don’t see how government can prevent them without clamping down on innovation. The challenge is to give people the means to withstand the perturbations.
The Ecology Narrative is not morally satisfying. I wouldn’t bet on its popularity as a backlash against Wall Street and finance sweeps across a recession-haunted country. But the Ecology Narrative has one thing going for it. It happens to be true.