I am taken back to the year 2000, when, during the then American President’s historic visit to India, I had started my seminar series called “The Great Indian Dream — India can beat America”, with a front page advertisement in leading dailies welcoming Clinton on the day of his arrival to India. The header of the ad said: “LAST DAYS OF AMERICAN SUPREMACY.”
It has been eight years since. The time for the great power shift has come — the time for power to shift from US hands to the Chinese, Indian and, dare I say, West Asian hands.
Many US biggies have been incessantly bailed out by West Asian petrodollars. So, while the investment of Kuwait Investment Authority is $2 billion in Merrill Lynch, in addition to a $3 billion for Citigroup, there are monoliths like Abu Dhabi Investment Authority, whose assets globally are above $800 billion. This company is now the largest Citibank shareholder with a $7.5 billion investment, has a stake in Carlyle Group and holds 28 per cent share in the London Stock Exchange.
The current US financial crash is not an incident in isolation, it would invariably have far-reaching repercussions.
Economic disasters are not new. The most recent was the South East Asian crisis in the last decade. Before the collapse, they were called the Asian tigers who could take on Japan. Most like Indonesia, Malaysia, Thailand and South Korea were lured by illusions created by US-backed financial institutions. Most foreign institutional investors overestimated the growth and extent to which these countries could export to the US. This led to a major foreign exchange crisis.
The same holds true for Mexico and Argentina. These economies blindly indoctrinated US lessons. US companies, in their quest to keep up growth, used all means necessary to increase sales, even if it meant setting aside credit unworthiness of customers. This went on for long, aided by dubious tales woven by investment bankers, which lured banks and financial institutions to lend as much as possible. For long, everything was fine and the system of borrowing from one to pay the other made sure the skeletons stayed hidden.
For the uninitiated, the near $1-trillion-loss due to subprime lending is just one of the many issues plaguing the US. If one takes into account its massive current account deficit, the situation is grimmer. Many don’t realise there is recession in the offing in the US.
For long, many in the West criticised China for their conservative policy and the central bank’s control on financial systems. These banks were also criticised for the NPAs they held. But, it’s also true that now, while the US is reeling under the crisis, the Chinese are achieving super growth despite the NPAs.
Thank God for India’s allegiance to the planned model of development and Opposition parties not allowing sweeping reforms.
While I might believe socialism is the ideal economic system, nothing appeals more to humans than capitalism. So capitalism is the way ahead. This is where the question of saving capitalism from the capitalists comes in.
If you want to save capitalism, you have to change its rules completely and, dare I say, turn them upside down. Beginning with the term itself; and rename it “Happy Capitalism”.
The prosperity of a society is not the sum total of prosperity of its companies and the top 20 per cent people. Prosperity of a society is about the prosperity of the bottom 80 per cent of the population. It’s only when they have real purchasing power — not falsely induced credit-based purchasing power — that society will prosper and be happy.
Thus, instead of the basic tenets of capitalism like “Survival of the Fittest” and the “Trickle Down” theory, we need to start believing in “Survival of the Weakest” and the “Trickle Up” theory — both of which speak of the humane face of capitalism through systems of national economic planning, about growth with equity and control mechanisms to control the greed of capitalists.
I end with a confident assurance that we would have a much better and humane system devoid of such humongous upheavals. And that it is Happy Capitalism that will save Capitalism!
The author is an economist, management expert and the honorary dean of IIPM