Change is coming to America

Change is coming to America

On the day Barack Obama won the Oregon Primary, he didn’t stick around for the traditional victory lap. He chose instead to be in Des Moines, Iowa, back in the first big, largely “White” state he won, early in the primary season. That was the win that converted him into a serious presidential candidate and contender for the Democratic Party nomination. So, it was fitting that Obama returned to Iowa to launch his presidential campaign with his presumptive nomination all but sewn up.

In Des Moines, on Tuesday 20th of May, Obama made the second of his trade-mark “vision” speeches during the long primary campaign; moving, lump in the throat inducing, like those of JFK’s from 48 years before, ringing with calls for change. The first was, of course, his exquisitely balanced “race” speech made at the National Constitution Center in Philadelphia already being compared by academics to Abraham Lincoln’s, given at Cooper Union in New York on February 27, 1860.

May 20th was also the day, poignantly, that the world found out that the 76 years old Senator Ted Kennedy, was gravely ill with a malignant brain tumour. JFK’s last surviving brother, the venerable senator from Massachusetts for 46 years, a “liberal lion” and democratic party royalty, endorsed Obama, along with JFK’s daughter Caroline, just a few months ago. They too were inspired, they said, by his youth and idealism and call for change that reminded them of JFK.

Obama’s recent Iowa speech was cadenced, alliterative, soaring, concerning matters home and abroad; on the unfinished business in Afghanistan and the unnecessary goings on in Iraq; on health care, employment and bringing American jobs home; and elegantly, on opportunity for his daughters, thanks to the path opened up by rival Senator Hillary Clinton.

Obama’s new war cry had something of Reverend Martin Luther King’s “I have a dream” intensity about it. It also had echoes of the Gettysburg Address, those stirring written words of Abraham Lincoln, resonating still, because the American Civil War was indeed the first blow struck for civil rights in America. It also incorporated a fleeting touch of his turbulent Pastor of twenty years, Jeremiah Wright, for its passion if not its tonality. And, in this one Ohio speech, Barack Obama used the word “change” no less than 17 times.

Of course, in the most visual of telegenic ways, the 46 years old Obama, both Black and White, a product of an American and Indonesian upbringing, and a Kenyan blood-line too; embodies change. But Obama embodies change in much more substantial ways too. His previous “race” speech, had made it clear that Obama was a new kind of 21st century Black, unwilling to be bitter about the burden of racial differences, determined not to exploit race for political gain and its polarising consequence.

The older Reverend Wright, like others of his generation, couldn’t make this crossing, despite his three-decade long Ministry as a man of God. Nor could the earlier era presidential pretender Reverend Jesse Jackson. But Obama, the pragmatic African-American of today, determined to play his part in the political mainstream, could, and can. Obama is neither Black “enough” for the bitter men of colour, nor White “enough” for the bigoted and fearful. His ancestry is however a sorely needed bridge, that can not only heal dangerous rifts in America’s soul but change the resentments many around the world feel towards the predominant power. And exasperating as this hinging on racial cheeseparing may seem, this talk of “enoughness” or its absence, may be the very key to Barack Obama’s inclusiveness.

Change is the metaphor Obama has brought to the public imagination, and he wants to sweep clean, changing Washington in the process. The time has come for Change to become the theme for this Democratic Party presidential race, the two rivals only debating what it means to each, and may well prove to be that of America’s going forward.

It is implicit change that has made possible the presidential candidacy of Barack Obama and his feisty Democratic Party rival Hillary Clinton. Despite a tantalisingly close race, Clinton’s delegate tally remains stubbornly short of the necessary. With just three states yet to be polled, Clinton knows she cannot catch up, not even if the delegations from two early-polling and curiously excluded primary states, Florida and Michigan, are seated. She is nevertheless determined to battle on, waiting for a miracle, a main chance, fate or the closing bell.

This bruising primary has so polarised the democratic voter, between the young, the highly educated and the Black – largely Obama supporters all; and the older, White, working class men and women who are staunch Clinton supporters; that the future script is under pressure. The traditional democratic party constituency has been cleaved in half because there are two winning candidates when there is place for just one winner.

It seems obvious therefore that Obama has little choice but to invite, and persuade, Hillary Clinton to become his Vice Presidential running mate. The Democratic Party on its part, and its remaining uncommitted super-delegates, may have to weigh in to force this outcome, unless they are prepared to watch the prize slip away to the Republicans by default.

We shall all soon see what we shall see, but if this “dream ticket” forged in the imperatives of voter logic, does emerge, it will, most probably, result in the pair going on to win the White House in November. It will be a revolutionary development for America, simultaneously creating a great leap forward in both race and gender equality after months of damaging pot shots at both conditions.

But, even if Clinton isn’t on the Obama ticket, either because he won’t ask her because of the considerable Clinton-era baggage she carries; or because of the primary season acrimony between the candidates; or because she refuses to play second fiddle, even if Obama offers to beef up the content in a largely ceremonial veep’s post; all may not be lost. Obama is, after all, a hugely inspirational figure, and there are many experienced and electorally attractive Democratic senators to choose his running mate from. The challenge then will pass on to reveal the maturity of the Democratic Party voter to put the primary behind them and vote Obama to office.

(1,050 words)
Gautam Mukherjee
Thursday 22nd May 2008

Here comes the Cavalry!

Here comes the Cavalry!


In the formulaic but once popular “Western” genre, produced by the Hollywood Studio System, the last reel of the film often had heroic “Cowboys” beleaguered into a last stand. There they were, too few by far, confronted by cohorts of face-painted and whooping Red Indian Braves, riding horses bareback, and licking the living daylights out of them. But, just as all seemed lost, along came the blue-uniformed United States Cavalry. The Cavalry looked marvellous; galloping to the rescue, tooting whistles and blowing bugles, with their not-a minute-too-soon timing, and their highly effective aggression. The unerring moral of the classic Cowboys and Indians story is-- the Cavalry always turns up to save the day.

But here, in a country with Indians of a decidedly different sort, what do we do about the disgust we feel as witness to yet another horrific terrorist attack? We watch innocents being routinely slaughtered, and wonder at the inept attempts of the government and security agencies. They cannot seem to either anticipate terror or be able to catch very many of the perpetrators!

We have no Permanent Account Number (PAN) system to map terrorists. We seem more intent on finding out “sources of funds” than we do about threats to human life, notwithstanding our almost parallel “black” economy. We have only the haziest notions about who our citizens are, where they live, what they do, where they go, whom they meet. We know even less about our “guests”, both welcome and unwelcome. So how is a blind-folded Cavalry meant to save us? They are, our men in khaki, just as vulnerable as the rest of us!

But, fortunately, in matters economic, not everything that we do is so inept. And a great deal happens globally that influences and shapes our macro outcomes, and over which, thankfully, we have little or no control. A careful reading of the tea leaves seems to suggest that things are about to get decidedly better. This is most welcome, of course, after months of unrelenting pressure that was drawing us closer and closer to the negative tipping point.

The energy consuming world’s No. 1 economic threat, and ours, since we have a 70 per cent oil import scenario, is that of spiralling crude prices. This one threat has overtaken the global credit crisis, temporary food shortages, insurrections, pestilence, natural disasters, political instability and climate change. Crude prices have risen 30 per cent in 2008 alone, and nearly 100 per cent since 2007. Expert estimates suggest that a fair “value” price for crude, inflation-adjusted, is about USD 75 per barrel, and a further USD 10 to USD 15 can be tolerated for demand and supply imbalances. Anything above that is being driven by sheer speculation.

Nevertheless, the situation has grown so acute, that the maximum estimates of a trillion dollar global credit crisis and the five year-old, three trillion dollar Iraq War, pale in comparison. The war can be brought to an end, and may well be, soon after the US general election. And the credit crisis is a mess of sins past. It is the outcome of a bill being presented for a ten-year-long party. But the excess of lending to undeserving candidates, once discovered, can, and is, on its way to being remedied.

But crude oil prices, that crested at USD 127 last week before edging reluctantly downwards to a low of USD 120 plus in intra-day trading on the 16th of May, are another matter altogether. Recent nightmarish projections of even USD 150 and USD 200 per barrel by certain “mad pride” analysts, albeit over the next couple of years, have the potential to derail the world economy, and bring about tectonic shifts in the way it runs itself.

But fortunately, the “Cavalry” of self-correcting market forces is galloping to the rescue. Oil prices are headed downwards at last. In the near future, by the end of 2008, or sooner, they may be nesting at an acceptable figure of under USD 100 a barrel. More and more commentators are now inclined to think, like Peter Morgan of HSBC and Sandeep Sabharwal of JM Mutual Fund, that crude oil prices have peaked. Moreover, says Peter Morgan, the US economy will see revival, not recession, in the second half of 2008.

Others say, it won’t just be oil that is headed downwards but the whole raft of cyclical commodities that have had an excellent bull run after decades of depressed prices. They have seen unprecedented price levels, much above fair value and the demand supply axis, pursued by very large sums of speculative money. This money, from Hedge funds and Private Equity alike has been engorged by the series of interest rate cuts forced on the US and other nations by the threat of recession after the sub-prime crisis.

But now, the speculators are sniffing a change in the wind direction. There is a consolidated resistance from all the real economies of the world, unable to digest such high prices. It is too much and too soon. So the speculators are taking their profits off the table. This process will gain momentum in the coming weeks and bring much needed relief to the world economy. It will stabilise the fast depreciating rupee and the now strengthening but deeply beaten down US dollar alike. This benign development will also arrest most of the remaining recessionary trends in the United States.

The net effect on India, as well as in all the other fast growing economies of the world, will be a revival of GDP projections, a much needed reduction in inflation, a modest appreciation of the rupee, and perhaps a growth inducing cut in the interest rates as well. India can contemplate 8 per cent plus growth rates for fiscal 2008 once again. This reversal of an unhappy trend will also raise all boats including the equity and realty markets in India, with both likely to go up in anticipation.

Sandeep Sabharwal, well known for his often contrarian but spectacularly accurate forecasts, expects a hearty 30 per cent decline in most commodity prices including oil, going forward. He also expects a 10 per cent rise in the equity markets over the next six weeks. Thank God then for the Cavalry because we couldn’t have held out much longer.

(1,050 words)

Gautam Mukherjee
Friday 16th May 2008

Published on Edit Page of The Pioneer and online at www.dailypioneer.com as "The Cavalry's here, so relax" on Wednesday, May 21st, 2008

Why cooperate when we can have it all?

BOOK REVIEW

COMMON WEALTH Economics for a Crowded Planet
By Jeffrey D. Sachs
Published by ALLEN LANE, UK, an imprint of PENGUIN BOOKS, 2008
386 pages, Price: GPB 22, Rs. 695/-


Why cooperate when we can have it all?

The “neoconservative mistake”, says Jeffrey Sachs, is the proposition: “Why cooperate when we can have it all?” It is this kind of predatory thinking that has been at the root of imperialism from the days of the Roman Empire and the conquests of Genghis Khan. But today, when the very air we breathe and the water we drink is threatened because of what Sachs calls “the anthropocene” effect --that of humans, “clearing the ecological playing field to satisfy human desires,” albeit in an unequal way; we had better think again.

This is the central message of Jeffrey Sachs’ second book, in which, this distinguished Professor of Sustainable Development at Columbia University, makes a lucid and passionately argued case for global cooperation. At stake, as he disturbingly makes clear, is the very survival of our planet, the human race, and all creatures great and small we share it with. Sachs is convincing when he makes the case that we cannot go on as we are and expect to have an unfettered future much beyond 2050. We must make urgent changes, says Jeffrey Sachs, unless we are determined to court certain and irrevocable disaster.

While it is not difficult to agree with this prognosis, the sticking point, as always with the “greens”, is in agreeing on what will be the lever to force the changes necessary. Traditionally, the environmental Left presents its case in lofty moral tones, probably expecting to prick the conscience of the world into righteous action. But this has never worked. No voluntary good sense has ever prevailed. America won’t, as yet, sign the Kyoto Protocol for example. And the Protocol only calls for a modest, some would say miniscule, reduction of 5 per cent in “green house gases”! And none amongst the entrepreneurial classes worried at all about environmental degradation during the substantial growth century or more of the “billowing smokestack” Industrial Revolution.

What became the “game changer” over the ages was always technology. In energy terms, mankind went from wind to steam to coal to petrol--and now, as petrol becomes increasingly scarce and expensive, technology must come to the rescue once again. The imperative, as always, is economic necessity, and profit, not idealism. But thanks to the awareness generated by advocates such as Professor Sachs, the by-product of “progress” might well slow, halt and even reverse the rapid environmental degradation wrought thus far.

The entire set of issues may also have achieved mainstream status at last. In 2006, the Hollywood establishment recognised An Inconvenient Truth, the largest grossing documentary film of all time, starring Al Gore, with an Oscar. Former Vice President Al Gore, cruelly and controversially deprived of the Presidency of the United States, has taken up the gauntlet of a much greater mission. In 2007, the august Swedish Academy awarded a Nobel Prize to Mr. Gore for his activism, jointly with India’s own Rajendra Pachauri, representing the Intergovernmental Panel on Climate Change (IPCC).

The fact is, depleting oil and gas reserves won’t last beyond the 21st century. “Clean” energy development, therefore, may result as a most welcome side-effect of the search for alternate energy sources, including, perhaps, self-replenishing electrical energy. Similarly, water scarcity from the demands of a population of some 7.5 billion people, or more, by 2050, may eventually be solved by efficient reverse osmosis based desalination of sea water. But the desalination needs to be carried out using vast quantities of renewable energy. It will also have to pumped, and piped large distances, just like gas might be, at present, and in the near future.

While the technological leap of faith looks the most promising solution, most of Sachs’ book concentrates on a Utopian idealism involving cleaner manufacturing, eco-friendly agricultural practices, less rapacious fishery, scrubbed energy generation and a clear cut commitment to alleviate poverty, ignorance, hunger, disease, under development and ignorance in the poorest parts of the world. Sachs wants a sustained commitment of intent. And he wants a small proportion of managerial and financial resources available to the richer nations of the world. He presents all this in terms of good economics because problem areas in a globalised, and interdependent world, affect the affluent too and restrict their topside growth potential too. But mostly, Sachs presents his views in the ethical context--laying out the responsibilities of the rich towards the poor.

But will altruism ever become the animating spirit of the rescue? The poorest parts of Africa, such as Darfur, pose the greatest challenges. But help and succour has and will certainly come. Some of it will come from China and India, both busy courting the “dark continent”. But they are doing so with a definite eye on Africa’s plentiful natural resources; its oil and uranium, its minerals and diamonds, the vast potential for enhanced agricultural production to feed a hungry world, and its lucrative 5 per cent plus a year growing markets. Human nature will certainly prevail. But Jeffrey Sachs may not be happy to acknowledge the notion that saving the planet will be its happy by-product.

(850 words)
Wednesday 7th May, 2008
Gautam Mukherjee

Published in print and online on May 25th, 2008 as "A case for global cooperation" in The Sunday Pioneer, Agenda Section under BOOKS and under BOOKS online at www.dailypioneer.com

Reprieve for the confidence sensitive

Reprieve for the confidence sensitive



Tim Condon from ING Barings, recently revealed great insight about the Indian Stock Market, calling it, smack-dab, a “confidence sensitive market”. It sounds innocuous enough, like a type-written label - to a bottle of TNT; because there’s a hair trigger concealed in the cotton wool of the insight. Condon has put his finger, willy-nilly, on a profundity. But let’s see, Bhajji and Sreesanth will agree, certainly if they’re put under hypnosis. It’s self-evident after all, we Indians do tend to over react. And so, by implication, the FIIs trading in India should factor in this local characteristic, this natural excitability of temperament that makes us lurch around somewhat more than is necessary.

I suppose a touch of melodrama in Dalal Street is inevitable. We are what we watch. And Bollywood and its Southern equivalent couldn’t be themselves, if we didn’t like our emotions exaggerated. So overreacting to global cues is natural to us. We can be depended on to do this, and no amount of near double digit growth at home can assuage matters. But, it is also true that once we’ve wailed, wept, beat our breasts, separated, reunited, and lost trillions in market value; we will suddenly calm down and reinstate our natural optimism. A storm followed by the abrupt all clear is characteristic. Naturally, it catches out most market analysts. They flounder about, atop the contents of their laptops, desperately trying to apply international analytical models to this phenomenon. But what can they do: it’s science versus “confidence”, not to mention “sensitivity”.

The bipolarity is between “confidence” and “sensitivity”. So, no bad news goes down without vigorous lamentation. Conversely, no amount of CRR hikes, 42 month high levels of inflation; darkest pessimism from TV and print borne experts displaying impressive logic, can put a kink in our optimism. Of course, this time, for once, the Indian Government has played its part by showing policy sagacity by plumping for growth even as they set about fighting the inflation by monetary, supply-side and fiscal methods, working, one hopes, in concert.

But it is undeniable that RBI Governor Reddy definitely turned Indian Stock Market sentiment for the better. He provided a much needed domestic “trigger” by choosing not to raise the Repo and Reverse Repo rates on April 29th. This well received action was followed by the US Federal Reserve cutting interest rates by another 25 bps on April 30th taking it to a very attractive 2 per cent compared to our high by comparison 7.75 per cent! But, at least the RBI didn’t hike it to the widely expected level of 8.25 per cent.

Indian business and industry has been coping admirably with 7.75 per cent so far, refusing to go slow on its investment plans; but another 50 bps in the midst of high raw-material, input and energy costs, would probably have been the proverbial last straw.

US Fed Chairman Bernanke not only cut 25bps as expected, but pointedly left out his cautionary line, used every time he cut interest rates, this being the seventh time, about expecting continued challenges to US growth. This is a happy departure, because it has been taken to mean, in the arcane way central bankers indicate things, that the Fed thinks the tipping point for the revival of the US economy may have come.

There is evidence in America and elsewhere to support this idea. The commodity and oil prices are heading downwards. The US dollar is getting stronger. Job losses are moderating. Foreclosures are down. The Dow 30 Index has closed once again above the 13,000 mark.

Across the water, the United Kingdom is thinking of recommencing its lending programmes to revive the UK Housing Market. Down under, the Australian Stock Market is at its highest number for the year so far. Japan is doing very much better and announcing profits in some of its major corporations. China has retraced some 15 per cent of its 50 per cent fall after a 200 per cent rise. Brazil is having a distinctly good year. Let us wait and see how things go over the next few weeks in Germany and France

And in India, we are within sight of the 18,000 level on the Sensex, and above 5,200 on the Nifty once again. The majority of stock market commentators, both Indian and foreign are still reluctant to call this move up from 14,500 to near 18,000 on the Sensex, a resumption of the five year Bull Market. Even the renowned Bulls like Rakesh Jhunjhunwala and Ramesh Damani are Bearish as yet. They call the revival so far all sorts of things yet- a “relief rally”, a “bear market rally”- an adjustment to the “oversold” state of affairs and talk of a “cap” about to resist all attempts at a “breakout”.

But another school of thought thinks the local and global turn in the Wheel of Fortune happened that weekend, just a few weekends ago, when the much maligned US Government under G. Dubya Bush put together a USD 30 billion guarantee package, in less than 48 hours, to save Bear Stearns from collapse. US Treasury Secretary Paulson, ( previously CEO of a highly profitable Goldman Sachs), working in tandem with the Federal Reserve Bank Governor Bernanke, pulled it off. Like well-rehearsed precision dancers they underpinned the audacious J.P.Morgan Chase takeover of Bear Stearns. By this one impressive action, one of the five main pillars of Wall Steet was saved, and with it, so was the rest of the financial world globally.

So, maybe it is time we developed confidence amongst all our sensitivity. We might also do worse than recognise that what Condon said about the Indian Stock Market may well apply to the nation as well. The Economist, of April 12th, reviewed the report on Indian Financial Sector Reform submitted recently to the Planning Commission by Mr. Raghuram Rajan, an ethnic Indian, former Head of the IMF, and praised much about it. But the magazine didn’t expect very much to come of it, because in India: “regulators get blamed only for mishaps, not for lost growth and wasted opportunities.” Ours is a system that “prizes stability over vigour”. But maybe it’s beginning to dawn on us that without vigour what we achieve is a crisis of “confidence”. And that we can’t afford to condone.

(1,050 words)

Friday 2nd May, 2008
Gautam Mukherjee

Appeared in print and online as "No doubt we overreact" on the OP-ED Page of The Pioneer www.dailypioneer.com on May 7th, 2008