Goldman Sachs and people backing it make me sick

July 13, 2009

Goldman Sachs is back to the old ways of the financial services sector in the US, making money on high risk, reports The New York Times.

It seems like it is back to the old days of champagne and caviar for the company in its new avatar as a holding bank, as the company plans to dish out large bonuses to its employees, even as most other people in the US are without jobs or tightening their belts.

On Wall Street, where money is the ultimate measure, Goldman is both revered and reviled, says the New York Times. Not unexpectedly the company’s share price is on the upswing.

Meanwhile, there are dark hints that the bank may be using its old-boy network to benefit from the US government, according to Matt Taibbi in the RollingStone

The bail out of AIG benefited Goldman Sachs, as AIG payed back a large loan from Goldman Sachs after receiving the bail out. And Goldman Sachs, now a beneficary of a deposit guarantee scheme of the US government, has had access to cheap funds to invest.

What sickens me, and I am sure a lot of other people around the world is that it seems to be business as usual in the US for the banks.

We could now be heading towards yet another financial crisis that could hit the whole world. Why ? Because the Barack Obama administration in the US has not pushed through quickly enough measures to regulate the financial services sector and all its various offspring like hedge funds.

Obama sermonizes to the world at large, in Ghana, in the Middle East, and even in Europe. But when it comes to delivery he seems to be up against the financial and business elites Robert Kuttner writes about in the Squandering of America.


Pope calls for a new economic order

July 7, 2009

Pope Benedict XVI has called for a new financial order, a new way of understanding business enterprise, that respects the dignity of workers and looks out for the common good by prioritizing ethics and social responsibility over dividend returns, according to a report by the Associated Press.

The text of the enyclical titled “CARITAS IN VERITATE” or “Charity in Truth” can be found here on the Vatican web site.

The Pope in this third encyclical of his pontificate has addressed squarely a myth that has surrounded modern capitalism and economic growth. Most often this mythology has attempted to perpetuate the dominance of the rich classes.

This mythology has as its key theme that for capitalism to thrive, trade unions must be weakened or non-existent, that profits have to be maximized even if it goes hand in hand with worker layoffs and lower wages, sometimes achieved through offshore outsourcing.

The profit motive is worthy, but it need not be exhorbitant profits at the expense of the worker. Both the capitalist and the workers can have a share in the wealth of a company.

On the other hand, the government does not exist for the investor but for the people, understood as workers, investors, and other classes of people on the margin of society.

It is the responsibility of the government to spend on development, on education, on healthcare. The private sector cannot be expected to deliver in these sectors in a manner that delivers services that are affordable to the poor.

There will be those who will argue that competition reduces prices. Competition will not however reduce prices beyond a point where they do not meet the high profitability requirements of the private sector. Don’t expect the private sector to insure the poor sick….those will be on the streets if the government cannot foot the bills.

Competition in private sector education may lower costs, but not as low as a government-run and subsidized schools. The private sector wants a share of the subsidies by offering to deliver services better than the government. The pet line goes: if poor kids can’t afford private schools let the government pay the fees for them. But the government can have far more kids educated at the fees private schools charge.

One of the greatest challenges facing the economy is to achieve the most efficient use, and not abuse of natural resources, based on a realization that the notion of ‘efficiency’ is not value-free, the Pope wrote.

The Pope said that the drive to outsource work to the cheapest bidder had endangered the rights of workers, and demanded that they be allowed to organize in unions to protect their rights and guarantee steady, decent employment for all, according to the AP report.

Pope Benedict is concerned about the inhuman conditions for factory workers in outsourcing hubs in China and south-east Asia. The move to outsource at the lowest cost has led to workers working in sweat shops, under inhuman conditions, as has been documented by Naomi Klein (No Logo) and other writers.

Some writers like nobel laureate Paul Krugman have argued that sweat shops are an improvement over the current lving conditions of people in some Asian countries. But the Pope cannot take the clinical (if cynical) view of an economist. His concern is the pain, the dehumanization of people worldwide.

In India a budget to be proud of

July 6, 2009

The free marketers are crying foul. In his budget speech on Monday, Minister of Finance, Pranab Mukherjee disappointed them by not detailing a plan for allowing foreign investment in the insurance sector, for privatization of public sector companies and of education.

Even as Mukherjee was making his budget speech, the Sensex of the Bombay Stock Exchange dropped.

To a large extent, big business led to its own disappointment by its euphoria after the re-election of the government of Prime Minister Manmohan Singh. Share prices soared on the stock markets as investors believed that the UPA, freed of its dependence on the Left parties, would now pursue a reformist agenda.

The term “Reformist” has usually been defined by business and the pro-business media in terms of free market policies that liberalize cross-border capital flows, open new sectors to private investment, and make labor markets more flexible (read ease out labor unions).

The evening after Mukherjee’s speech, the pro-business The Wall Street Journal is making a spectacle of itself, claiming interestingly that Mukherjee’s budget was ” a pretty dreadful spectacle”. Newspapers are expected to report and analyze, and not espouse causes, but that is a subject for another post, another time.

What industry and media like the WSJ mis-understood is that the Congress party, which is the main partner in the coalition government, has traditionally had a stand of its own on social policy, which is social democrat and far from pure capitalist.

Mukherjee used the budget speech to remind viewers that India was protected from the global financial meltdown because its large banks are government controlled and did not expose themselves to speculative activity, and stocking up on CDOs. He credited his former leader, the late Indira Gandhi, for nationalizing the banks when she was Prime Minister of the country.

By his focus on inclusiveness, on rural development, on expanding the economy through stimulus spending, Mukherjee has sent out a strong signal that social democracy is not dead in India.

By refusing to privatize education, and by in fact making a budgetary allocation for new IITs, Mukherjee is making the point that Pt. Jawaharlal Nehru’s strategy to spend on education and research as core competencies is still relevant.

Mukherjee’s budget in fact creates the opportunity for the emergence of more people from out of the pale of poverty, into becoming beneficiaries (and consumers) of the economic boom. The question is; will foreign investors decided this is a good market opportunity for them ? Or will they continue to demand what seems to be quite impossible in a country that is moving to its social democractic roots ?

There is some concern about the deficit in the budget, but at times of economic crises, deficit financing and government spending is the way out to stimulate the economy and create jobs. The challenge for Mukherjee is to rein in inflation when it happens, by a reduction of the deficit, and other appropriate fiscal measures.

There are also issues such as the implementation of the programs that aim to bring India’s vast rural poor into the mainstream of economic development. There will undoubtedly be leakages, corruption, and some of the money will not reach the target group.

But unbridled capitalism won’t solve that problem. Civil society and good politics can.

MySpace not responsible for assault on minors: US court

July 2, 2009

Internet servers like MySpace cannot be held liable when minors are sexually assaulted by people they first meet on a website, a California appeals court ruled in an opinion filed late on Tuesday, according to this report from Reuters.

The court seems to be saying, to use a metaphor from physical life, that if I rent a house to a person who commits a crime against a minor, or to a person who initiates a crime on those premises, I cannot be held liable.

I think that is reasonable from a purely legalistic standpoint, except in cases where a landlord is found to be actively abetting or aiding or profiting from the crime or its initiation.

But what if the landlord in this case saw the tenant lead an unknown minor girl to the house ? Should he just ignore it, as he is not legally liable, or should he just ask around, or drop in on his tenant just to show he is watching ? How much effort is good enough ?

Please note: this is no longer a point of law, but a matter of conscience.

To be sure, the landlord can try to smoothen out his ethical discomfort by blaming the parents who allowed the minor child out with the stranger in the first place, or by blaming parents who do not keep enough checks on the whereabouts of the children.

Or he may worry about intruding on the privacy of the tenant.

The landlord is within the law, but is his conscience clear ? If a crime does happen in his premises, he is not legally liable, but is his conscience clear, unless he puts in his best efforts to check what is going on ?

Social networks can’t be hauled to court for a crime committed or initiated by someone else on its premises, says the Second District Court of Appeal in Los Angeles.

“The idea is, you hold the speaker responsible not the soapbox,” Electronic Frontier Foundation (EFF) spokeswoman Rebecca Jeschke told Reuters.

The ruling, if adopted by other courts around the world, shifts the onus dramatically to citizens.

The public will have to be far more aggressive to get social networking sites to put in place security measures for minors, or prevent minors altogether.

Social networks are no longer liable for this role in a court of law, but they could be liable in a court of public opinion and action, liable for a failure of conscience.

Social networks can in certain circumstances be hauled before the court of public opinion and citizen action, made all the more easy on the Internet.

People with a conscience may, for example, decide to pull out of a social network because it does not protect minors enough, if its controls for preventing minors on its site are not strong enough.

Or people may decide to boycott products or services that are advertised on social networks that are found not to have a conscience.

To the other denizens of MySpace and other social networks; do we watch out for any signs of criminal activity and report it ? We are equally responsible as the people running the social network.

India needs English education for all

July 1, 2009

Education is the way out of economic backwardness for India’s large number of poor. Needless to say access to capital at reasonable rates, subsidies, health and other services are as important.

In this post my focus is on education. A number of state governments are enforcing state vernacular languages as the medium of education with scant regard to the relevance of this education in the job market.

They forget that India would not have emerged as an outsourcing hub but for a quirk of history, the decision by the British to introduce English as the language of education in the country.

We should be equally concerned about protecting our local culture and language. The McHomogenization of Indian culture is not at all desirable. But the classroom may not be the place for the protection of culture at this stage of India’s economic development.

The Wall Street Journal in this article has argued that the denial of English education to the masses is in a sense a form of domination, to keep the people subjugated.

“In fact, much of the political class remains opposed to English medium education supposedly because they fear the loss of local culture and language,” WSJ writes. It’s more believable that it’s because an ill-equipped population of voters is a malleable population of voters,” it added.

In the state of Goa in western India, a majority of the people backed Konkani as the mother tongue of the state, because it was the language spoken by most people But when it came down to the implementation of the language as a medium of education, parents fought back in favor of English.

They had by then realized that the official language issue had helped Konkani protagonists to perpetutate their roles as culture czars and educationists.

These protagonists re-wrote the language in the name of standardization, and expected children to learn a language that was by now quite different from what they had been used to speak at home. The script was also different.

Clearly there is a need to separate the politics of language from the relevance of a particular language in the new economic scheme of things. The education system, whether we like it or not, is geared to producing people suitable for employment in our factories and offices.

A few of us may have some discomfort about this mechanistic and production oriented metaphor of education. But to India’s poor, this is right now probably the only education that is relevant.

I got myself a Twitter account

June 30, 2009

It is fashionable, and all the folks I knew had it. So I decided I too should have a Twitter account.

I picked up a large number of followers within a day. Most of them folks who are a phone call away, but never bother to call. Very politely, I decided to follow them as well.

And then silence, or a few inane messages. One of the folks I was following twittered that he was sad that Michael Jackson was dead. Another wrote that he was delighted with his new car, another twitted about his new house. Then again silence.

Have people forgotten how to converse, and seek recourse in the crypto-messages they can post on Twitter or social networking sites, from the safety of their computers or mobile phones ?

Does Internet communications provide a comfort zone that normal conversation does not ? Is it that you can release online just that little and self-serving information that you care to have others know about yourself, while all your trials, joys and limitations stay your own and private ?

Has counting the number of followers and followed become a substitute measure of social success ?

Curiously, my usual talkativeness had disappeared on Twitter. I didn’t want to broadcast my real thoughts, information on all my real activities, however banal, to the world at large. Anyways my thoughts can’t be confined to a few words or characters allowed on Twitter.

So I was silent.

The people I followed too were generally silent. There were no wise sayings, intense communications of needs and feeelings of joy, sorrow, and betrayal. Nobody twitted that he had a terrible day at work, got fired by his boss, or his girlfriend ditched him. Only silence.

Some guys twittered quite candidly that they didn’t know what to do once they were on Twitter.

Other folks followed the news channels, and the press releases agencies on Twitter. It turns out it works well as an RSS reader.

Twitter to be sure helped people communicate when in time of crisis, and helped take democracy online when regimes crushed popular movements as in Iran.

Is it that we talk freely online only for a functional purpose as in a crisis ? Is it that for the rest of the time we prefer the telephone, or the corner tea shop for a meeting with friends and a belly-full of conversation and laughter ?

Or is it silence all around, as when people have forgotten how to communicate; when most interactions are an act, a pose, an exhibition, and what we expose is an elaborate persona ?

I am still looking for an answer and to some decent Twits to and fro.

Brands are arbiters of quality on the Internet

June 29, 2009

Knowledge, news, music, opinion shall be free (as unfettered). That was the promise of the Internet, and bloggers were expected to deliver on that promise.

What followed was utter chaos, irresponsible reporting, plagiarizing without batting an eyelid, and an overload of information. The dark underbelly of society was showing on the Internet.

Wikipedia suddenly became less reliable. People very often edited entries on Wikipedia to suit their personal agendas, and the users’ only hope for accuracy is that some other guy got there before him and corrected the inaccuracy.

Folks, even bloggers, now need help to negotiate the labyrinth of the Internet to find information that is quotable and credible. Hence most bloggers now quote what are considered long-established credible sources, such as The New York Times, CNN, and The Wall Street Journal, and a few new online credible sources of information.

A lot has been written about Twitter. Like email when it started, Twitter is a great way to get the message out. But as spammers and frauds started using email, the message was increasingly questionable.

That is happening to Twitter as well……I don’t know who is my source of information on Twitter, whether he is reliable, whether he was at all in Iran while updating me on the youth unrest in that country after the elections.

Most of the time it is not hard core information I get on Twitter, but some vague reports from equally diffuse people on what they are eating now, how they are feeling at the moment, or what car they are driving.

Many times people themselves are filtering information to put them in a good light, or promote themselves. After all this is the age of personal brand building, and any channel is useful.

In 2007, I had written that although the Internet had made expression free, whether the expression was in the form of writing, art or music, there would still be needed gatekeepers to the Internet who would separate the wheat from the chaff.

See article titled ” Finding gold on the Net is a long shot”.

It was expected then that new brands would emerge to play counsellors and guides to Internet users. The “Long Tail” had created opportunities of all sorts of online purveyors of music, news, and other forms of art, by lowering the cost of inventory, distribution, and marketing.

But the gold rush to the Internet left people gasping for some guidance on how to avoid the trash. Already they were suffering from clutter and information overload.

eMusic, for example, focused on the “Long Tail”, and tried to build a music download brand around that. Leading newspapers set up blogs aiming to be arbiters of quality in both formal news reporting, and the more informal world of blogs.

The upshot is that a mix of new and old brands have emerged as gatekeepers to the Internet. That makes navigating the Internet for quality and reliable stuff more reliable.

But to a large extent it has also robbed the Internet of its fierce democracy. Once again the big brands – a few – will decide what goes through its filters. Once again smaller purveyors of content will have to kow-tow to the big brands or go unnoticed, and end up in some corner on YouTube.