“War is never economically beneficial except for those in position to profit from war expenditures.”
“Setting a good example is a far better way to spread ideals than through force of arms.”
both from Ron Paul, who is running for the Republican nomination for president in 2008.
Confessions of an Economic Hit Man was a great, light read. It is described as an insider’s account of exploitation or neo-colonialization of Third World countries by a cabal of corporations, banks, and the United States government. It was on the New York Times bestseller lists for over a year.
According to his book, Perkins’ function was to convince the political and financial leadership of underdeveloped countries to accept enormous development loans from institutions like the World Bank and USAID. Saddled with huge debts they could not hope to pay, these countries were forced to acquiesce to political pressure from the United States on a variety of issues. Perkins argues in his book that developing nations were effectively neutralised politically, had their wealth gaps driven wider and economies crippled in the long run. In this capacity Perkins recounts his meetings with some prominent individuals, including Graham Greene and Omar Torrijos. Perkins describes the role of an EHM as follows:
Economic hit men (EHMs) are highly paid professionals who cheat countries around the globe out of trillions of dollars. They funnel money from the World Bank, the U.S. Agency for International Development (USAID), and other foreign “aid” organizations into the coffers of huge corporations and the pockets of a few wealthy families who control the planet’s natural resources. Their tools included fraudulent financial reports, rigged elections, payoffs, extortion, sex, and murder. They play a game as old as empire, but one that has taken on new and terrifying dimensions during this time of globalization.
Definitely interesting. I don’t have time to write a new review, so I’ll copy what I wrote to a friend who I’ve been dueling with over the benefits of market capitalism (my friend Sushil, who is pretty radical, actually recommended this book to me, and here’s what I wrote back to him) .
It was entertaining in a spy-thrillerish way, though I think Perkins sacrificed some truths for entertainment value, and the book is worse off for it. The basic thesis appeals to me quite a bit - the corporatocracy is bad. Corporatocracy as Perkins describes it is the teaming of the feds and select private sector firms to advance political hegemony and economic rent. Corporatocracy is terrible. However, extrapolating this to “globalization and capitalism is bad” is QUITE a stretch.
In fact what is bad is the creation of wealth that depends on coercion in the hands of the government. THAT IS NOT MARKET CAPITALISM! Halliburton and Bechtel, among others are funded indirectly by the US govt and our dollars to force people off their lands in South America. That is obviously terrible, and isn’t how market capitalism works, so this book doesn’t provide a cogent argument against libertarianism at all. Halliburton and Bechtel are violating our rights as taxpayers by funding the politically connected firms. The South American Govt’s are violating the rights of the people and cultures displaced when they remove them from their indigenous land.
He uses the real examples of Halliburton, Chas T. Main (engineering companies acting in hand with the US government to cheat 3rd world countries - though I think he exaggerates this and makes some leaps in logic), and then pretends that Wal-Mart and McDonalds going into the 3rd world are doing the same things. They aren’t toppling economies and they aren’t with I don’t find fault with Nike opening a factory in Malaysia, allowing workers who live in the area to voluntarily sell their labor for wages that would exceed their next-best opportunity for work. Noone dies, no cultures are killed off, and (hopefully) no subsides are given by the governments, so taxpayers aren’t footing the bill. Again, I don’t know the answers here… I’m open to discussing this and open to being swayed one way or another by someone. Shoot me an email or drop a comment if you have anything interesting to add.
Oh, in this vein, here’s an article against microfinance that I find to be pretty interesting. It echoes some thoughts I’ve had for a while.
Microfinance misses the mark
However, I still think there is a huge need for microfinance, and also that the industry has a long way to go. I think where the author is right is that Microfinance isn’t a silver bullet for poverty and that we need to support industry. However, there are many non-economic benefits of microfinance that can’t be overlooked. Additionally, one thing that I think the article is good about addressing is that microfinance is more than microcredit - finance includes the ability to borrow, but also much more than that, particularly savings and insurance. A lot of the problems are around governmental regulation, for example in India Non-Banking Financial Companies (NBFC’s) can’t accept savings, yet that is what most of the MFI’s in India are registered as or moving towards. Anyway, no time to write more, but its certainly an interesting discussion to have.
——-
Here are some Billboards from Bombay that I meant to post a long time ago but forgot… More than 10 years after deregulation, there are “Airline wars” going on in India, which are mostly good for the consumer. The Indian aviation market is pretty hot, and a bunch of low-cost carriers have come in the marketplace in the past few years. Here’s a great example of advertising one-upmanship:
First, Jet airways puts up a billboard saying “We’ve changed”. Kingfisher responded within 36 hours by putting up another billboard on top of it, saying, “We made them change”. A few days later, GoAir put one up on top, saying, “We’ve not changed. We’re still the smartest way to fly.” Pretty clever advertising.
What’s wrong with America is the way in which we are being forced more and more to equate criticism as something counter to democracy, when, in fact, it’s the core of it.
~Sean Penn
Another book review…
Games Indians Play is a short but intellectually heavy book in which Raghunathan tries to decipher why Indians are the way they are. In Raghunathan’s words,
“Why are we a nation that is individually so smart and collectively so naive? Why do we mistake talk for action? Why is our self-worth massaged only if we have the ‘authority’ to break rules? Why are we among the world’s most corrupt? Why do we jump red lights? Why do we dump our garbage at the neighbour’s doorstep? . . . Can it be our climate, population density, poverty, colonial past or even genetic encoding?”
Raghunathan uses game theory and behavioral economics to analyze the behavior which has prevented India from being a developed nation 60 years after its independence. I’m pretty new to game theory… the primary scenario Raghunathan uses is Prisoners Dilemma - The classical prisoner’s dilemma (PD) is as follows:
Two suspects, A and B, are arrested by the police. The police have insufficient evidence for a conviction, and, having separated both prisoners, visit each of them to offer the same deal: if one testifies for the prosecution against the other and the other remains silent, the betrayer goes free and the silent accomplice receives the full 10-year sentence. If both stay silent, both prisoners are sentenced to only six months in jail for a minor charge. If each betrays the other, each receives a two-year sentence. Each prisoner must make the choice of whether to betray the other or to remain silent. However, neither prisoner knows for sure what choice the other prisoner will make. So this dilemma poses the question: How should the prisoners act?
Raghunathan also describes iterations of this dilemma, and goes into different strategies for how to deal with it, and explains that ultimately the strategy that wins is Tit for Tat, which maximizes the gains of the individual as well as that of the population. So when you repeat the experiment, continue to cooperate until the other guy defects, then also defect. Selfishness maximizes short term gains, but in the long run co-operation leads to the greatest rewards.
Raghunathan also discusses several things about India that don’t make any sense, and they are the sort of things that many of us outsiders understand immediately… unneccessary paperwork (I had to submit 5 passport photos for my drivers license), the requirement that you fill out a customs form for a domestic flight that has an international connection, even if you’re just on the domestic leg, getting insurance for ticketless travel on the Bombay local trains (there are people who will offer to sell you a monthly pass for less than it costs to buy a pass from the railway - you pay them in advance and you don’t actually get a pass… you just travel with out a ticket and pay the fine if you get caught. They reimburse you after you present them with a receipt of getting caught. The chances of getting caught aren’t very high).
The book itself is very interesting, and I learned a lot about game theory, but I’m not sure I agree with the author on several points. One that he mentions several times is that he feels that Indians are perhaps the most intelligent race in the world… He uses examples like the vegetable seller who keeps track of the amount that everything costs and can compute how much you buy faster than a computer. I’d argue that he can do that because he grew up doing so, and may not be better at something else, and wouldn’t be as fast if he grew up with a calculator. Also, simple math isn’t a good way to measure intelligence. Also, I find this same skill lacking in a lot of Indians. Case in Point: I went to Subhiksha the other day to buy my groceries. I love the place - it’s kind of like my favorite store back home, Aldi. Their stores have a small footprint, but you can get everything you need, and it’s cheaper than you can get it elsewhere. The cashier rings up my order of goods that I’d mentally guessed would be approx 100rupees. Instead the cashier gives me a bill for about 300 rupees. He’d put in the wrong number for the daal that I bought, and ended up charging me for 2.5kg instead of 250grams. I pointed it out to him immediately, but he protested that that is what the number is, so that is what the price must be. I protested that it was impossible for such a small amount of daal to cost so much, and asked him to use some common sense. After a lot of convincing, he relented but said that only one of the registers was equipped to do returns, and that the manager had to do them, so I had to wait about 10 minutes to get my price adjusted. It’s a frustrating experience, and one that I often find in Indian supermarkets. Anyway, my point was that not all Indians are smart and can do math in their head. Don’t think that Indians are more intelligent than other races based off that assumption. Raghunathan makes some other assumptions that I’m not too crazy about, doesn’t cite his experiments very well (most of them seem to be run among his IIM students- you can’t represent an entire race based off of somewhat greedy students at their best business school) I also don’t think Raghunathan is a very good writer, but it is definitely interesting just to learn about game theory and how it can be applied practically, so I’d recommend reading book just for that and the insight into India. One thing that I really enjoyed reading about because I’ve found it to be so true is how Indians as a people mistake talk for action and boast about the glorious past when living in a filthy present!
And - I saw this shirt in a store in Delhi, but was short on cash so couldn’t buy it (wanted to buy it for Shaila, who’s working on a project with camel cart drivers), so I took a picture… It’s so true of India… New Century, Same day. It would’ve been better if they had the camel cart driver talking on his cell-phone, which I’ve seen.
Rather than the usual quote, I’ll start with a cartoon, because it fits in well with the book review:
I’ve been on a bit of a book-reading kick… I haven’t read nearly as much this year as I thought I would, but it seems like I’ve been catching up in the past month. The 3 books I read recently are:
For the Lova of India: The Life and Times of Jamshetji Tata, by RM Lala,
Games Indians Play, by V. Raghunathan,
and Confessions of an Economic Hit Man, by John Perkins.
I’ve been criticized for my posts being too long so I’ll split this one up into 3, starting with a review of For the Lova of India: The Life and Times of Jamshetji Tata. It’s probably still too long as a review.
For the Love of India is a pretty good account of one of India’s first and most successful Industrialists, Jamshetji Tata. Jamsetji Tata not only built an unparalleled personal wealth but was also one of the builders of modern India. His conviction that India must change from a predominantly agricultural nation into an industrialized one put the country on the road to modernization, a road that encountered many bumps and hurdles during the socialist period of rule, but one that I think is on a better path now. Its simply amazing to me how many amazing things Jamshetji accomplished in his lifetime, and even more so including things that happened after his death but based on his plans.
Jamshetji brought to the country iron, steel and hydroelectric power, but also made fine cotton when everyone else was making coarse yarn and revived the silk industry in the South. In 1877, he set up Empress Mills in Nagpur to make cotton cloth. It was the first major industrial enterprise in the Central Provinces, and the book argues that he did a lot of world-wide innovation, both in technical prowess and in human resource management. As early as 1873, he was toying with the idea of using hydroelectric power for his mill, something that was unheard of even in the West.
The book primarily focuses not on how Jamshetji built his wealth, but rather on 4 projects he undertook “for the love of India,” in his dream to see an industrialized nation of educated people. Looking back from now, his 4 projects were amazingly ambitious for the time… they are The Taj Hotel in Bombay, Steel, Hydroelectric Power, and the Indian Institute of Science.
The Taj Mahal hotel in Bombay, which I’d argue is still the best hotel in Bombay, at a majestic location near the Gateway of India (though the gateway wasn’t there when it was built).
Here’s a picture of all of the kids from the Bombay Marathon in front of the Taj, still magnificent 100+ years after it was built.
The Taj is still owned by the Tata Group, and they now also own 77 other properties around the world. Taj Hotels have been acquiring beautiful old hotels recently, and have 3 properties in the US as well (Boston, NYC, San Fran).
Making Steel in India wasn’t seen as sort of a crazy dream at the time, but Jamshetji hired the right people from America and elsewhere to make his dream a reality. Again, Tata Steel is still in the hands of the Tata’s, chaired by Ratan Tata. Tata Steel is historically known for establishing an 8 hour workday when 12 hours was the norm, introducing leave with pay, and starting a provident fund for employees. It seems to me that the Tata’s mastered the art of being rich and successful, and also doing a lot for their employees and country. The Bizarro above is so indicative of the traditional stance towards wealth accumulation, but you can be wealthy and kind, and the Tatas have proven it.
The author doesn’t go into a lot of detail about the hydroelectric plant, and I can’t add any value there anyway, so I’ll skip over it, but I will mention that when Tata Hydro-Electric Power Supply Company was set up the only other place using hydro-electric power was Niagara Falls.
The most interesting of Jamsetji’s dreams for India was the idea of establishing an institute of higher learning that eventually took shape, after his death, as the Indian Institute of Science, Bangalore. Tata realized that Indias educational system was severely lacking, and he wanted to make a huge impact on it. He felt that the best way to uplift his nation was not to uplift the downtrodden, but rather to create an institution for the very best to prosper and advance the nation. There are debates everyday on both sides of the issue - should x person have spent $100 million by donating it to a business school or should they have cured X African people of malaria. I don’t know the answer to that, but I think its a value judgement and I wouldn’t criticize the person for their philanthropy. Anyway, Jamshetji wanted to create a Research University, of which none existed in India at the time (and very few do today). Personally, I think one of the best things about America, and what has kept it so prosperous is the American educational system. We have the best research universities in the world, which bring the brightest students from around the world to the US, many of them for life. In the US, we teach problem-solving and value creative thinkers probably moreso than anywhere else in the world. This is true to some extent at the secondary level, but much more so at the university level, and even more so at the grad school level. This is still a huge problem in India. Jamshetji foresaw this, and decided that he would endow a large amount of money to the place. In fact almost 1/3rd of his estate went to the University, after giving 1/3rd to each of his sons. He had to fight Lord Curzon, the British Viceroy to India at the time to make his dream a reality, but finally did so (although it didn’t formally launch until after his death)
Still, many say the greatest thing about Jamshetji was his ability to make leaders. He wasn’t personally able to fulfill many of his own goals, but he showed the way to others inspired them to hold on to his dreams after his death. Interesting read if you’re interested in business biographies and have an interest in India.
Looking for a book suggestion… any good book recommendations? I’m planning to read “The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits”, by CK Prahalad, a professor at the University of Michigan Business School. It’s a book I really should’ve read a long time ago, given my interest in the subject. I’m also planning to read Maximum City in the near future.
Since I started with a Bizarro, I might as well end with one. I realllly love Bizarro. I think it’s the most clever cartoon out there. Here’s one of my favorites:
I haven’t seen it in syndication here in India, probably because the jokes wouldn’t make sense here. Every month or so I get caught up with my laughs here. I have to admit though, I’m finding the recent ones less and less funny… maybe its a sign that I’m becoming more and more Indian.
