Friday, January 30, 2009

What is the significance of Responsible Investment in a Culture and Context which is Irresponsible?

In response to correspondence about academic research in relation to "Socially Responsible Investment" (SRI), the following may be of wider interest:

To my mind, "Socially Responsible Investment" (SRI) at present is a bit like trying to build a dam on one stream of a delta of a river, when there is a flash flood coming - even if the dam holds on that delta stream, there will be a flood on all the other delta streams anyway.

So here is my list of questions for SRI-related research (in no particular order):

1. Can one responsibly invest in Hedge Funds, Derivatives, CDSs, CDOs?

2. How can responsible investment help to change the culture from IRresponsibility to Responsibility?

3. If the global context for trade is set by the WTO and that specifically excludes considerations regarding the environment and social justice (attempting to penalise those companies or countries which take such issues seriously), can you responsibly invest in trade? How can SRI operate in such a way as to tend towards the inclusion of such issues in the WTO regime?

4. If a government is bankrupt (as Iceland is in reality and many other countries are in principle), is it responsible to invest in those countries? - starting with the USA and UK!

5. If the current form of globalisation engenders unprecedented booms and busts (which by their very nature hurt the environment as well as the poor), how can SRI help?

6. Is it responsible to invest in any company whose turnover is in excess of 0.5% of the GDP of the country where it is registered?

7. Is it responsible to invest in any country which prints more money than is justified by its GDP? (The USA already had, in Autumn last year, about one trillion more dollars than it should!)

8. How can tax and other positive and negative incentives be used to discourage credit-based growth for individuals, families, companies and countries? Instead, how can investment-based growth be encouraged?

9. As accelerating stock market activity over recent years has speeded-up short-termism, should SRI research examine the case for the creation of two classes of stocks (Long Term and Short Term)? In theory, these could be created for all publicly-quoted companies, and all stock holdings existing at that point could be immediately considered to have been divided equally into these two classes. New stocks could then be purchased only in equal quantities of Short Term stocks and Long Term stocks. Short Term stocks could be traded at any time. Long Term stocks could be traded only after being held for, say, a year. This will slow down "day trading" and so slow down the rate of economic activity, but at the same time enable growth to be much more solidly and healthily based. The exact proportions of Short Term and Long Term stock issuable and purchasable can be varied by global agreement from time to time, say every 3 years.

10. Can there be Responsible Investment as long as there is the possibility of regulatory arbitrage around the globe? How can SRI encourage the creation of global frameworks, global minimum standards and global approaches to health, safety, pensions, minimum income, environmental protection, and tax (for the last, minima and maxima can be established depending on the level of achievement of a country). As a level playing field cannot be established around the world straightaway, there should at least be rational and agreed principles on which different levels of playing fields are recognised and established from time to time - with a plan for moving towards convergence as soon as possible.

ENDS Sphere: Related Content

Monday, January 26, 2009

Zogby's "First Globals"

You may not be aware of the American pollster John Zogby ( but don't go rushing off to his site before you have read the following.

Among his conclusions is: “We are in the midst of a fundamental reorientation of the American character… Away from wanton consumption and toward a new global citizenry in an age of limited resources.” He describes 18 to 29 years as the “First Globals": a “digital generation” that accepts all races, sexual orientations, and national cultures equally, intent on living sustainably in a unified world.

However, in order to assess that properly, you may want to keep in mind that Zogby comes from a Lebanese Roman Catholic family and describes himself as a Democrat. It may be that this is how that generation likes to think of itself. But is that how that generation actually is?

Well, this generation is undoubtedly digital (at least in the educated parts of the world, which are regretfully not the majority).

But it is worth reflecting on WHY this generation "accepts all races, sexual orientations and national cultures equally". What if this sort of "tolerance" is the fallback from it being too much like mental effort to think about the issues raised and much less effort to simply be "nice to all"?

And what if the interest in "living sustainably" is simply a similarly fashionable floating downstream along with all the other dead fish? I see very little evidence that this generation is prepared to spend more in order to choose "green products" or a "green lifestyle".

I do see evidence that this generation has a potential interest in putting itself to a certain minimum degree of exertion in order to help, but that marginal interest has not been tapped.

And I see no evidence at all that this generation is interested in being any less consumerist than its parents.

Zogby, being a political scientist and a pollster, presumably does not keep tabs on simple economic and financial matters.

If he did, he might notice the simple fact that this generation has higher levels of credit card and other debt than any other generation in history. Sphere: Related Content

Friday, January 23, 2009

The election of a non-white President in the USA, and the nature of democracy

As some of you know, I am an admirer of Dr Vishal Mangalwadi's work.

Ten videos of his discussion of different aspects of Obama's election are now uploaded for free viewing at:

I disagree with a lot of what Dr Mangalwadi says. But what matters is neither my agreements, nor my disagreements. What matters is that, in his very winsome way, he makes you think!

The most useful thing he provides in these videos is easily-understood and very valuable correctives to many popular illusions about democracy in the USA.

The videos are important for Americans, no doubt.

But they are particularly important for non-Americans concerned about encouraging genuine democracy in OTHER countries. Sphere: Related Content

Friday, January 16, 2009

Responding to the endorsement of a fascist by India's corporate leaders

I received the following mail from a friend of a friend, and put it here without comment, but in the meanwhile have obtained the kind permission of the author, Mr. Ranjan Kamath:

"Dear Friend

"The collective amnesia of the captains of Indian industry, Messrs.Tata, Mittal and Ambani embracing Narendra Modi and endorsing his candidature as future PM of India , disturbed me immensely.

"This petition is my humble effort to engage the conscience of corporate India and make it known to them that the Indian citizen is not to be trifled with.Just as we can vote for or against the poitician, we can pinch the corporate bottom-line in order to engage their attention to mend their ways.

"It is not an easy task for us to keep our cell phones and Blackberries switched off for an entire day on January 30th,- the 61st anniversary of Mahatma Gandhi's assassination.

"However, it ought to be sufficient to get the message across to corporate India that we will not tolerate the endorsement of fascists as future Prime Ministers.

"May I request you visit the link below to sign and thereafter circulate the petition below, if you feel as strongly about this mattersincerelyRanjan Kamath The petition title is: Cellular Silence Day_30th January 2009. The petition URL is:

"The petition is directed to: India Inc. The start date is: January 15th, 2009 The end date is: January 30th, 2009

"The petition statement says:
Dear Messrs, Ratan Tata, Sunil Mittal and Anil Ambani
I am one of a billion Indian citizens. I am somewhere in the middle of that pyramid that you wish to give voice - from bottom to top - through wealth creation.I am proud of the brands you represent that have made India proud. I am one of the burgeoning Indian middle-class that share your aspirations of mutating India from indolent elephant to thundering tiger.It ends there...I have hitherto been accused of being indifferent and apathetic, simply because I am overawed and felt overwhelmed in a system replete with Goliaths. But when I saw you embrace the fascist mastermind of state sponsored genocide as a future Prime Minister and endorse the Modi-fication of India, it was disappointingly apparent that the brands that aspire to make India rich shall continue to languish in ethical poverty. While I am filled with revulsion at your endorsement of Narendra Modi, I must respect your right to do so as a fellow citizen. In writing this petition I am a mere David amongst the mightiest corporate Goliaths but I feel empowered to address your collective amnesia - through recollection of the Gujarat pogrom of 2002 - by the true Goliath among Gujaratis in particular and Indians in general - Mohandas Gandhi. All those who sign this petition will switch off their Tata Indicomm, Airtel and Reliance cellular phone and broadband connections from midnight on January 30th 2009. It is eminently possible that I might be the one voice in a billion who will observe the 61st death anniversary of Mahatma Gandhi on as Cellular Silence Day. Then again, there might be close to a billion who could join me on January 30th, 2009 expressing their solidarity and silently insisting that the captains of India Inc adopt an ethical, compassionate path to wealth creation rather than the single-minded pursuit of the bottom-line. We shall know that by the end of 30th January, 2009______________________________________________________________________________________________ Sphere: Related Content

Wednesday, January 14, 2009

The apparent state murder of Lasantha Wickrematunge

What led to the murder of one of Sri Lanka's most prominent journalists?

If one wants to understand that, one has to cast one's eye over something like half a century of developments in what was once the "Pearl of the Indian Ocean".

The British left the country with a Constitution that tried to create a reasonable space for the rather large minority of Tamils in what was once not only a beautiful but also a prosperous country.

However, the rise of fundamentalist Buddhism led to the feeling that the privileges of the Tamil minority ought to be reduced, leading to the change in the Constitution which started then systematically disadvantaging Tamils, forcing them eventually to take to violence in their quest for "Eelam".

So, in order to understand what has been happening in Sri Lanka, one has to focus on the rise of fundamentalist Buddhism as one key factor.

The rise of this sort of Buddhism has also led to the systematic disadvantaging of non-Buddhist Sinhalese, and the rise of corruption in the country.

A free press is by its very nature going to rail against anything which violates justice and fair play, whether it is some of the actions against the Eelam forces, or the disadvantaging of non-Buddhists - or corruption.

That is why fundamentalist Buddhism is connected with the loss of civil liberties in Sri Lanka, the continuing violence against the independent media, and the murder of one of the country's leading journalists.

In each case, whether it is the state or non-state actors who are the "face" of the actions, the prime mover is an entire social and cultural movement - that is, fundamentalist Buddhism.

All sorts of false charges were made against Wickrematunge because he insisted on trying to see and tell the truth about what was happening in the country (including the insidiously evil charge that he was being paid by the Tamil Eelam movement).

I hope that, now that the falsity of that charge has been exposed, everyone who made that evil charge, has at least gone and washed out his or her mouth with soap .

The obituary that Wickrematunge wrote for himself, knowing that his life was on the line, is one of the most moving pieces of writing that has come out of Asia in the last half century.

It has been published in various places. I provide here a link to that obituary in his own newspaper The Sunday Leader:

However, it is unclear how long that newspaper will be allowed to exist in Sri Lanka (this morning, I find that I cannot access several of the pages of the online version of the publication).

If The Sunday Leader goes off-line, as it were, then a Search for "Lasanthe Wickrematunge" on the Internet combined with the first sentence of Wickrematunge's self-obituary will locate the text.

That memorable first sentence is: "No other profession calls on its practitioners to lay down their lives for their art save the armed forces and, in Sri Lanka, journalism."

The entire obituary is equally remarkable, but let me quote just the last words, about the commitment of everyone involved with the newspaper: "Its staff will fight on, unbowed and unafraid, with the courage to which you have become accustomed. Do not take that commitment for granted. Let there be no doubt that whatever sacrifices we journalists make, they are not made for our own glory or enrichment: they are made for you. Whether you deserve their sacrificeis another matter. As for me, God knows I tried. Lasantha Wickrematunge".

As long as there is such determination and such commitment, fundamentalist Buddhism will not succeed in destroying civil liberties in Sri Lanka.

No one can bring back Lasantha Wickrematunge. But the least that we can do is to read that obituary and be inspired by it to continue the struggle for human values.

Lasantha Wickrematunge: I never met you on this earth. You have gone to your eternal deserts. Someday, when I have gone to mine, I will look forward to meeting you. Meanwhile, I count myself among the many hundreds of thousands who have been inspired to rededicate themselves to the struggle to investigate and speak the truth.

Sphere: Related Content

Tuesday, January 06, 2009

Why I'm distressed at the collapse of Waterford Wedgwood

No, I'm not a shareholder.

Perhaps I should have been?

But then most of my shares are in the Company called Heaven (or the Kingdom of God) - which I trust I will see one day, thanks not to my shares but to the shares of someone who paid for me by his life.

So why am I distressed that the crystal-, porcelain-, glass- and china-producing company Waterford Wedgwood filed for bankruptcy yesterday?

Not only because it brings to an end a company history of some 250 years, but because it brings to an end a company with a glorious vision of human flourishing- producing, for example, the most famous and enduring image of the 18th century movement for the abolition of slavery - a kneeling African man in chains surrounded by an engraved motto: "Am I Not A Man and A Brother?"

Today we think of slavery merely as passè.

Slavery was, however, the material basis of every civilisation that human history had known till then. Slaves provided the energy needed to create and maintain life in all empires and kingdoms in all parts of the world up to that point.

To wish to abolish slavery at that time, was the same as wishing to abolish electricity now.

But William Wilberforce, Josiah Wedgwood and others dared to dream of a better world - and to work for it - so that succeeding generations have benefited.

We too can dare to dream and to work for a world better than we see around us.

Like our forebears, we can leave a world to our children and grandchildren that is better, or worse, than the world we see around us today.

The collapse of the company reminds us that all our works, however glorious or infamous, pass into history. However, that means that every generation has the opportunity to struggle afresh for ideal and values - however good or bad appears to be the situation in our surroundings. Sphere: Related Content

Monday, January 05, 2009

Global trade damages the global economy without global rules which make possible a global level playing field

Regarding my PBS broadcast a few days ago, a friend writes: "I like most your suggestions for new financial rules, as opposed to state interference (overt nationalisations). Have you parallel bullet points on global trade? As facing down speculation surely also requires looking at how asset classes held by the global south should not be ripped off in the future by the developed north."

My answer: Trade is always a good thing, but has been distorted by subsidies as well as by differences in regulations across the globe in relation to the environment and social justice.

So my three bullet points on trade are:
1. abolish all direct and indirect subsidies for any product or service if that is to be traded across borders (difficult to establish not only in practice but even in principle, given the complete change in the mentality of government interference which is endemic - regarding research, for example)
2. ban countries who want to be part of the WTO from currency manipulation (and that can only happen if there are clear global rules regarding how much money can be printed by governments)
3. put in place a global regime for environmental standards, heath and safety, pensions and work conditions.

At present, trade takes place primarily as a result of the improper benefits obtained by certain countries from human exploitation, environmental degradation and currency manipulation.

What we need to do is to ban human exploitation, environmental degradation and currency manipulation.

Only then will we have trade based on genuine specialisation based on human talent and resource availability - of the sort that Adam Smith theorised about.

Over the last 30 years, ideologues to the right ("market fundamentalists") have used Adam Smith either to justify human exploitation, environmental degradation and currency manipulation - or to ignore such matters. Sphere: Related Content

Dealing with toxic assets - the only three alternatives

A friend kindly writes:

"Dear Prabhu
"It has been great to listen to you speak on PBS online and also to read your letter to Barack Obama. You have provided a wonderful oversight of the economic global crisis in terms of what must be done - I see predominantly lots of comments analysing without proposing. And of course it all comes with a sense of how God's heart is hurting as those at the bottom suffer most.
"Some questions. In London we read a great deal of the problems of inter-bank lending. You deal with this in passing. The dichotomy is that Gordon Brown wants the banks to recapitalise whilst continuing their 2007 lending patterns. So customers - business and individuals - suffer as banks hold onto cash. But acutely, the banks won't help each other out because of fear. Do you have ideas to get them lending to each other? Would forcing them to a confidential acknowledgement of their exposure to toxic debts help clear the air?
"regards as ever

Here is my response:

Dear David
many thanks for your kind response to the PBS interview (BTW did you listen also to the first broadcast that PBS did with me, back in 2004 if I recollect aright, titled "The Gods of Business"? - as far as I know, it was the most popular programme ever broadcast by PBS in that series)

inter-bank lending: "forcing banks to a confidential acknowledgement of their exposure to toxic debts" would indeed clear the air - in the sense that whoever the disclosure was made to (presumably the government) would then know exactly rather than merely generally as at present. However, the issue is not merely disclosure. The issue is what to do on the basis of the detailed information disclosed: some (or possibly many) financial institutions are in fact bankrupt when their toxic debts are taken into account.

There are only three possible solutions:

1. Wait for the market to gradually sort this out (Japan has pursued this path since 1990, and the market still has not been able to sort that out some 28 years later, with the effect that Japan - the world's second-largest economy! - has been stuck for all that time!)

2. Government could take on even more toxic assets (which means in fact you and I as taxpayers) - do "we" really want to do that? How much toxic debt do you and I want to take on? Why?

3. All such toxic activity could simply be declared illegal and the liabilities made irrecoverable except for the amounts originally invested. I favour this option because that hurts the speculators sufficiently without hurting the ordinary citizen. It is important to avoid hurting speculators so much that they all go bankrupt - if they did all become bankrupt, that would also hurt you and I as taxpayers, because all the employees of the affected organisations would be made redundant and at least some of them (perhaps many of them) would become "social cases" dependent on government handouts (i.e. one handouts from taxpayers). Such bankruptcies would, of course, have consequences for pension funds, as well as create the risk of system failure if one or more large players go under from continuing full exposure to their toxic liabilities.

It is not only a matter of *my* "preferring" option 3. It is the only option that makes sense, so far as I can see.

prabhu Sphere: Related Content

Saturday, January 03, 2009

China continues to flout agreements that it has signed

Since China has never renounced the Maoist idea that "power flows from the barrels of guns", and since no power except Russia or the USA can cause it to rethink its actions for military reasons, it is not at all surprising that China continues to break its treaties and agreements with impunity - the latest newspaper report regards China's breaking its agreement with Japan to jointly-develop gas fields in disputed areas such as the East China Sea -

Smaller countries bordering China see the pattern in China's behaviour, are too timid or weak to do anything but treat it with respect. What is a mystery is why Japan continues to treat China as a respectable nation - or indeed why other strong countries continue to do so. Sphere: Related Content

Thursday, January 01, 2009

Why President Ma of Taiwan needs to be taken to see a psychologist

We all suffer from minor delusions from time to time. But when someone starts from a major delusion for too long, he or she needs to be given psychological treatment

President Ma presumably considered carefully each word in his New Year message to the nation: so he obviously really committed to the peculiar idea that entering the sorts of entanglements that he is now busy entering with communist China will not only leave Taiwan's own sovereignty untarnished but will even help democratise China!

The first is a delusion that might not be big enough to justify President Ma being wheeled off, but what is one to think if he really imagines that a nation of some 25 million is going to fundamentally change the political structure of a "mother country" of 1.4 billion people (that is, some 56 times as big)?

Size isn't everything, you say: Rome conquered Greece militarily, but Greece ended up completely dominating Rome culturally!

True. But the Romans looked UP to Greece!

By contrast, China regards Taiwan as a "renegade province" be bent to the will of China - not the other way round! Sphere: Related Content

Get ready for oil at $100, and Chinese stocks to fall another 65% in 2009

You will recollect that when oil was around $120, and some were forecasting oil going up to $250, I forecast oil at $40.

Then, when I was proved right, others started forecasting oil at down to $25. I stuck to my guns and said that while oil prices were volatile, the natural point of gravity for oil then was 40, not 25. Though oil did dip occasionally to around 33 (so that I was even at the bottom price more right than the doomsayers), it has continued to be around 40.

Today, I tell you that we will soon see the oil price go back up to $100.

However, just as oil at $140+ had nothing to do with fundamentals but only with speculation, and just as oil even at $33 had nothing to do with reality but only to do with speculation, so speculation is what will drive the price up to $100. The "natural market price" for oil (including "normal speculation"), in my view, remains around $70.

So why will the oil price soon shoot to $100? Why will speculators push the price to this level? Because of the attacks on Israel, and the crisis around oil production and supply that will soon emerge, created by Iran but aided and abetted by other countries which "need" the price of oil to be as high as possible - or at least around the natural market price.

Why then will it go to 100? Because the current structure of the global economy commits it to pendulum swings. And the swing has gone too far (down) for too long (from the viewpoint of certain countries).

So the next upswing (coming soon) is what will take the price to $100.

Why not higher? Because even speculators need something to speculate with and speculate on. There isn't the same supply of money to speculate with, there isn't the appetite to speculate that much right now, and the "excuse" of a booming economy and "booming demand" (on which the price of 140+ was predicated) is not to be seen anywhere.

WHEN will the oil price START swinging up? Pretty soon. As soon as the conflict in the middle east hots up a little more.

However, because this oil price rise has nothing to do with an increase in productive demand or a productive economy, but only to do with war and fears of war, it will worsen the situation for all oil-importing countries.

That is also why other commodities will benefit marginally because of a sympathetic rise in slow sync with the oil price, but the commodity price rise will soon steady or deflate.

The global problem of a deflating economy will continue. Chinese stocks, for example lost 65% of their value in 2008. Though they may recover by as much as 50% from today's levels at some point in 2009, altogether they will lose at least another 65% from today's levels during the course of the next 12 months - possibly, they will crash much more, depending on how China manages the social unrest that will grip it this year.

And President Ma of Taiwan will be shown to have been an idiot for having driven the country's economy, society and even military to such deep entanglement with China.

As Taiwan then tries to withdraw, while China wants to get even closer hold of all of Taiwan's money and productive talent and capacity, the US and other countries will be called upon to get involved - with consequences that are at present unclear to me, because I don't see right now the relative strength of the US military presence in the area at that time, let alone the shape of the US economy, nor the will of Obama and others around him.

Some of that will become clearer towards the end of January as Obama's soaring rhetoric is tested by the reality of developments to do with the Middle East and Russia. Sphere: Related Content