Who won the Cold War

I sometimes wonder, who the real winner of the Cold War was. Traditional wisdom is that capitalism won over communism, right ? The Western world over the Soviet bloc. Freedom and liberty over authoritarianism and government control. Etc Etc. But I wonder if this is really true ?

Take the capitalism versus state enterprise debate. Today capitalism is a four letter word to much of the world. The fastest growing economy in the world and the second largest, China,  is significantly  state enterprise driven. Government expenditure as a % of GDP is 53% in France (surprise surprise), 47% in the UK, 43% in Germany and in supposedly the bastion of free market capitalism, the United states, 39%. Government spending has propped up the global economy for five years now and bailed out financial institutions when they were mired in the quicksand.

What about freedom and liberty. After the revelations over the last couple of days from a certain Edward Snowden, we may have to redefine the word liberty. If I told you that the government listened to your every word, read every e mail and tracked every movement of yours, you would naturally think that the government in question would be Russia or North Korea. Instead we now know that it is the US of A and that their snooping is not not just restricted to US nationals, but literally everybody in the world (the fact that there are howls of protest in the US about snooping on US citizens , but perfect acceptability of snooping on an Indian citizen like me is an interesting definition of the word liberty in America). That this revelation is met with a big yawn in China, where this is just routine practice further annotates my point.

Force feeding prisoners in Guantanamo, keeping them in detention forever without a trial is not very different from what the gulags did in the Soviet Union.  Even at the height of its powers the Soviet Union did not kill citizens of another country from the air with impunity as the US does today with drones. If the Soviet Union brutalised Afghanistan invading it needlessly and tyrannically, you could perhaps make the same point with the US and Iraq.

The citizens of the Soviet Union could never get out and go elsewhere. Those in the  West were blissfully free to go where they pleased. Is that really true now ? Anybody from any country who has to get a visa to go to another country , just to visit (forget emigrating), might have a different point of view with regard to freedom of movement.

What about the West over the Communist bloc ? Well, if you define the communist bloc widely enough to include China, the verdict might be closer to a draw than a clear cut victory. 

Of course, this post stretches the facts, but only to make a point. The scale of what happened in the Communist Bloc during the Cold War may have been beyond anything you see today. But then, although the Soviet Union collapsed, aspects of its ideology are thriving in many places around the world.Perhaps they lost the battle, but haven't yet been defeated in the war. 

Yes, they may never be a winner in the capitalism versus communism debate.  As indeed in the democracy versus totalitarian debate. Alas, what a pity, at least in the case of the former.

Everybody bashes the Taxman

If you have been following the news in the US, you might have noticed an almighty hullabaloo over the the IRS (their tax man) having targeted Tea Party and Conservative groups. Much hot air and righteous indignation is being spouted and Obama has fired the IRS chief yesterday. Almost everybody on earth loves to bash the taxman (rightfully so !) and this is all good fun.

Except that I believe that in this case the bashing is wrong. Or at least much exaggerated.

What happened is this. The IRS admits that it subjected groups which bore the name tea party, or patriot to extra scrutiny. The fact that such groups are exclusively Republican and that the President is a Democrat seems to indicate political targeting. That is, of course, against the law. Hence all this noise.

But why did the IRS do this - after all, they are not fools. If you try and answer this question, a different picture emerges.

The problem all started with, in my view,  the appalling judgement by the US Supreme Court in the Citizens United case in 2010. In layman terms the Supreme Court decided that organisations were people and had the same right of free speech as you and me. Therefore there could be no curbs on their political activities and donations.

Overnight, all sorts of action groups sprung up and the money started being being poured into US elections of all kinds.  Many of these outfits do not want to disclose who really gives them money. The way to achieve this is to register as a social welfare organisation under the tax code which then grants you tax exempt status - something called Sec 501(c)(4) exemption !! You are not prohibited then from indulging in political activity - its just that the primary activity has to be social welfare in nature. The main purpose of these groups is not to avoid tax (for they do not really seek to make a profit). The primary purpose is to avoid disclosing who is giving all the money.

It is probably a safe bet to say that the majority of these groups (Republican or Democrat) have zero interest in social welfare and are primarily there for  political activity.

From 2010 to 2012, the number of such organisations doubled to some 3400. A large number of them were "tea party" or "patriots". Do you really expect the IRS to sit tight and watch all this. After all, it is their job to check whether these outfits really were primarily involved in social welfare. 

The IRS did not prosecute them or withdraw their status. All they did , in true Ramamrtiham style, is to harass them with lengthy requests for information, do audit reviews, delay decisions on their applications and commence painstaking procedures. In this my sympathies are entirely with the said groups as we all know what the incredible capabilities of Ramamritham are.

The real culprit is the political donations sloshing around consequent to that awful Supreme Court verdict.  In true US politics style, this will not be addressed - instead the IRS will be hauled over coals. Yuk !

I never thought I would ever write a post in defence of Ramamritham, but there you go ... !

Oh ! What a mess

Come on Argentina. How often do you ask everybody to cry for you ?  On Wednesday, a US District Court Judge detonated an atom bomb (metaphorically, thankfully), in the world of financial markets. As usual, Argentina was at the centre of it. Here is the story, with a little bit of history.

In 2001, Argentina defaulted on its sovereign debt - one of the rare instances of a major country doing so. A default essentially means that a country has no money on the due date to repay a loan it had taken and tells the creditors to fly a kite. The consequences of such an action are drastic - the country immediately becomes an international pariah in financial markets and nobody would lend to it anymore. That has been Argentina's lot for the last decade, and the situation Greece is desperately trying to avoid today.

When Argentina defaulted, most of its creditors got together and negotiated a "restructuring package" which meant that they would get something back at least - spread over a long period of time. It was a crappy deal for the creditors, but at least they would get something. They did this settlement twice- once in 2005 and again in 2010.

Two hedge funds Elliott Associates and Aurelius Capital, however chose not to negotiate and filed a case in the US courts asking for payment in full. The court gave its sentence last Wednesday, which is the metaphorical atom bomb I referred to. The judge ruled that Argentina will have to pay in full to these two hedge funds who sued, even in priority to the vast majority of creditors who settled ! The amount is some $1.3 bn.

This action is like poking a stick in a hornet's nest. All sorts of ramifications abound. First is the predictable response from Argentina, telling the US judge to go stuff himself, saying he cannot order a sovereign nation to do anything. But since the original debt was issued in the US and in dollars, there is some jurisdiction for US courts. However, short of sending in the army, how would the US enforce this decision ? It is hardly likely to start a war to satisfy two hedge funds.  It can resort to freezing Argentinian assets and the like, creating a messy situation.

The creditors who negotiated and settled are crying foul. They will have to wait for some 30 years and get a percentage of the amount, whereas these two funds are supposed to get their money in full immediately. They are suing to stay the decision giving these two funds priority. So anybody who negotiates in future is an idiot. Greece, which is trying to negotiate a restructuring package currently is quivering in the boots.

Then there is the question of a nation "starving" to raise money to pay "evil hedge funds". An angle that is sure to stoke the fires against wicked capitalists. Cristina Fernandez, the Argentinian President, who can effectively rabble rouse, is already singing this tune.

Argentina is appealing (interestingly while saying that the US courts should f@&* off at the same time !) . This will go all the way to the US Supreme Court. 

All this raises the issue of countries borrowing too much and not being in a position to pay the debt back. Very often the money borrowed is wasted away - in subsidies, doles, etc etc. Every country is guilty of this; just witness what the US is up to with debt at completely unsustainable levels - where are they spending the money they are borrowing ? - in fighting wars in Iraq and Afghanistan, in providing free health care to the elderly and the poor and doling out money to the unemployed. How will any of this yield a return so that the debt can be paid back ? Every country is simply borrowing more to pay back the original debt and keep doing exactly what it has been doing.

 Oh ! What a mess.

A political addenda to the economic blueprint

Politicians will do anything to win elections; even good things ! You can't blame them , for after all that is the objective in politics. As I observed in the previous post, an economic blueprint is of no use unless a political way can be shown as well. So the task is to show that an economic plan will win an election. Or at least not lose one.

I believe the time is ripe for that in India. The Congress government is almost certain to lose in the next general elections due in 2014. They have no plan to win it. No amount of cash doled out to the voter is going to help them win. Therefore they have nothing to lose. Ideal conditions to try something drastic.

Make a fresh beginning. Manmohan Singh should retire and a grateful nation should say thanks for a lifetime of public service. Pranab Mukherjee can be kicked upstairs. Chidambaram, Anthony , Pawar etc are to exit with a 21st century Kamaraj Plan. For the lack of any other leader, Rahul Gandhi should take over as Prime Minister. He should form a new cabinet - 50% from the political class and 50% from technocrats and experts who are complete strangers to politics (imagine Sreedharan as Railway Minister). Form a government of national unity, giving a couple of Ministerships to the BJP and the Left as well - this may not happen, but no harm trying. This government has a two year mandate to do things .

Bribe the states to fall in line. No state is opposing any of the measures on grounds of ideology or conviction - every opposition is simply politics. The best way to overcome them is to bribe the states. Every state that wholeheartedly supports the entire agenda of the government will get say Rs 2000 crores as a dole. Fund this by running a one time deficit. States that still do not want to toe the line are welcome to stand alone, but the rest of the nation will go ahead.  If and when they join, they won't get the Rs 2000 crores.

Form a "conclave of experts". From all walks of life - social workers, businessmen, government officials, environmentalists, politicians, etc etc. Say about 50-100 eminent Indians. Appointed; not elected. The government should "sell" the plan to them. Debate and incorporate the sensible changes they recommend. Make them inclusive in the plan. Appeal to their nationalism that single point agendas (like say an environmentalist opposing any dam whatsoever and not  taking any responsibility for economic development) cannot work. There are no easy solutions. Some tradeoffs must be made. The governing principle is 75% agreement (since all cannot agree), but 100% commitment once the plan is finalised. The plan then goes through Parliament for adoption.

For two years banish any strike or agitation against any aspect of the plan. The conclave of experts have to commit that they will not agitate outside the conclave (that's what 100% commitment means). Opposition or ruling coalition parties who wish to strike are welcome to do so; the government simply ignores them and goes on ahead, daring anybody to bring down such a young, new, active government. It is unlikely that Mamata Banerjee or Mayawati or any of the usual trouble makers will increase their seats in a new election; so what's the joy in bringing down the government. The one likely gainer can be Jayalalithaa who will probably have to be "bought" by more dole to the Tamil Nadu government.

The government fully backs the bureaucracy and the judiciary to take quick decisions and implement like crazy( a bit of Sarkozy style hyperactivity would help). No bureaucrat would be punished for taking risks or taking a wrong decision - he would only be in trouble if he was corrupt. Sack the current grandstanding Comptroller and Auditor General who sees a scam in going to the loo and replace him with an eminent person from industry. Equally judiciary is "bribed" with doles to take a fast track for economic issues. The principle would be that its OK to get it 20% wrong , but quick, rather than hoping for the mythical 100% right and getting nothing done. Create a frenzy of activity - it tends to be self fulfilling and gathers a momentum of its own.

What about corruption ? It will never go away anywhere in the world. In India, contrary to public opinion, personal enrichment is a small part of corruption. Much of corruption is to create the war chest to fight elections. And the bulk of the spend is not in campaigning like in the Western world. Most of the spend is doling out cash and liquor to voters. But that has never won anybody an election. Everybody does this; so you can only lose by not doing this, but will never win only because of this. This can be lessened by moving towards proportional representation, instead of the first part the post system. Something to do immediately after winning the next election. This is an idea I wholly borrowed from Dr  Jayaprakash Narayan, an extremely impressive politician from Andhra Pradesh, where he is a MLA. For those interested, you can watch to him eloquently arguing the case here - incidentally it will also be an eye opener that such politicians also exist.

Meanwhile the current government just says no to building a war chest for elections. The Congress breaks ranks and refuses to bribe the voter with cash and liquor (remember it cannot win by doing this). Instead it tries to stand on the planks of freshness, action and two years of solid work.

Will this win Rahul Gandhi the next election. Maybe, maybe not. But he's not going to win it currently and he has nothing to lose. And maybe, just maybe, it might win him the election . The Indian voter is not an idiot. In the absence of any other compelling reason, he votes on caste lines, or whoever bribed him or sheer anger at the incumbent or fractures his vote. But give him a compelling reason and he votes in a wave irrespective of any other considerations. Remember 1977 after the emergency. Remember 1984 and the Rajiv Gandhi wave. Even the last elections in West Bengal is an evidence of the wave.

A fresh competent government may create a wave. Somebody trying this may lose, but will still go in a blaze of glory. Really worth a try.

Yes, we can

To many, the year gone by was a bad year. Natural disasters took their toll - the earthquakes in Japan & New Zealand, the floods in Thailand, Brazil and the Philippines,  Irene slapped the US earlier in the year, and just as the year was slipping by, Thane kicked Tamil Nadu. Unemployment remained rampant in the developed world ; there is nothing more demoralising than losing your job and not having a hope of getting another one. Large parts of Europe are in crisis. Austerity measures are hurting badly, especially in Greece, and now Italy. Inflation has hurt people in China and India and growth slowing down in both countries is ominous. The Arab world had a new spring, but winter seems to have set in somewhat prematurely.  You could be forgiven for ushering in the new year in a somewhat sombre mood.

But there is every reason to look forward with hope. Adversity often brings the best in man. We can find strength that we did not even know we possessed. The Euro zone will hold together and the crisis will pass. Belt tightening will be required, but with courage and fortitude, there will be less suffering. Joblessness in the developed world will start to reduce as a slow recovery happens . There is no better a mood lifter than getting and holding a job. Inflation will ease in India and China - signs are there already and more and more people can lift themselves out of poverty. An encouraging part of the world is Africa. Long abandoned as a basket case, many countries are showing good growth and the Asian achievement of lifting people out of poverty is slowly, but surely, being replicated in Africa.


The year ahead is going to see significant elections in France and the US and a generation change in leadership in China. Each one of these is going to be momentous - none more so than the change looming in China where for the first time, such a change is going to happen without a strongman like Mao or Deng lording over it. Perhaps a leadership change might happen in India too.

We can look forward to 2012 with hope. I am surmising that the worst is over economically. The upturn might be slow, but upturn it is going to be. We can do much better this year and when the time comes to ring out the year, we can be in a much more cherful mood than we are today. Yes , we can.

Pip pip, toodle-oo; its just not cricket

If ever there was a misleading title to a post, this must be it. This is not about cricket at all. Neither is it about Bertie Wooster. Instead it’s a most ungentlemanly rant.

Readers may recall that I had railed about the behaviour of US Congressmen towards Akio Toyoda here. Something similar has now happened with British MPs and Kraft. This growing trend of activism by politicians towards business is dangerous.

What happened yesterday was this. Kraft was “summoned” to appear before the House of Commons’ business, innovation and skills committee (let us lightly pass over the delicious irony of the words skills and innovation being featured in the same sentence as MPs !) Unlike the brave Toyoda-san, Irene Rosenfeld, Chairman of Kraft ducked this one and sent Marc Firestone Kraft’s head of corporate and legal affairs. Marc Firestone, as far as I know, is a US national. He is not a subject of Her Majesty and British MPs have absolutely no right to behave as they did with him. You can read an account of the select committee hearing here. I happened to listen to snippets of the hearing on BBC Radio yesterday. Marc Firestone was virtually in tears and the bullying by the MPs was downright scandalous.

The problem relates to Cadbury’s Somerdale plant near Bristol. Well before the affair with Kraft, Cadbury had planned to close this factory. During the very public wooing of Cadbury, Kraft unwisely announced that it would not close the factory in a dumb move to get public support. After the deal had been done, Kraft announced that it would close the factory after all, saying that it had not known previously how far advanced the Cadbury closure plans were. Kraft clearly did a mistake, and was blatantly at fault. But the crux of the matter is this – it has done nothing wrong legally.

It is irrelevant to this argument whether Kraft was right or wrong. The British Parliament has no right to demand anything of Kraft US. Sure – it can proceed against Kraft UK. It can certainly action against British nationals, if they have done anything illegal. But other than that, it has no business calling foreign nationals and bullying them.

Unlike Toyoda san, Irene Rosenfeld chose to duck this, but for the wrong reasons. If she had upfront stated that British MPs had no right to demand anything of her, I would have applauded. Of course, saying such a thing would be a PR suicide. Instead she chickened out quietly. That would equally haunt her as a PR disaster worse than if she had come. Some readers of this blog know of an alternate person she could have sent, who I believe would have acquitted himself a little more credibly. On second thoughts, he would never have come; knowing which battles he could win and which he couldn’t. Would love to see some comments on this from those who know him.

This growing political interference with businesses needs to be condemned. I could mouth some obscenities. But then , although the sun has set on the British empire (maybe the MPs haven’t noticed it as yet), some of the glories of British culture are alive and well in the Commonwealth. The British MPs behaved like boors with Marc Firestone. I will express disapproval in a more British way. Pip pip, toodle-oo ; its just not cricket old chap.