Opportunities in Meltdown Crisis

It is the yearning of most middle class Indians to send their sons and daughters to go to Harvard Business School. That’s not surprising, given the Indian obsession for job-oriented training rather than a liberal arts education. When your children get into elite business schools, you feel you’ve fulfilled your dharma. After that, they get lucrative jobs in Goldman Sachs, Morgan Stanley, Lehman Brothers and what have you. There they work with men and women from around the world whose Arjun-like focus is to make piles of money: an apartment on the Upper East Side of Manhattan, a spectacular beach house in the Hamptons, a skiing holiday in the Alps, a summer place in the south of France, a villa in Tuscany, an apartment in Paris or a great hotel in London.

Well, just as American assumptions about finance have been upturned by the dismal reality of economics, your idea of dharma is about to take a beating. The chickens have come home to roost. Twenty-eight years after the fall of the Berlin Wall and the unlamented demise of Soviet communism, we are witnessing a massive assault on the skewed capitalism unleashed by global finance. When a bunch of ambitious yuppies is given the run of the markets, you should expect immature behavior. A thousand points up, a few thousand points down: the masters of the universe thought they were invincible.

We’ve seen this in India in the first four decades of Independence. Young people with means and connections attended elite schools like Oxford and Cambridge and returned to high positions from where they pushed the intellectual ideas of the day. The result was Fabian socialism that created and favored the elite. The Leftish intellectuals who ran the country advanced distorted notions about egalitarian growth from positions of privilege. They pushed weird ideas: a ‘commanding heights’ public sector; restrictions on private enterprise; outright nationalization of ‘core’ sectors deemed vital to the country; ‘development’ banking, subsidy populism.

The entire edifice came crashing down in 1991 when the government went bankrupt. Slowly and painfully, a new structure arose in its place: a tentative reform regime frequently held hostage to mindless moffusil politics practiced by con men and goons, bigots and activists who fill party offices. One thing is obvious; the old elite have had to make way for ambitious interlopers, whether in politics or business. Their next generation largely opted out of public service and made their homes largely in the global financial community: in New York, London, Hong Kong and Singapore.

This is where the story becomes intriguing: at the intersection of the next generations of the Indian elite and the world of global finance. Once a secure and lucrative place, it is now the center of the meltdown. If the recovery is long in coming, these young men and women will most likely head home. As they pour in looking for elite perches, they will encounter the crass interlopers who now occupy such positions. It could make for an interesting political turn. In alliance with modern-minded politicians found in the Congress and in some regional parties, they could power a new equation in the country’s politics.

The global financial bust could actually re-invigorate politics. The moffusil mafia that now holds the Indian state to ransom could face a challenge. Chances of overcoming the current anarchy could improve dramatically. As things stand today, civil society (not the jholewallahs but the real thing: a middle class with civic values) is under assault. All manner of low life, including criminals, assembles under a ‘leader’ and wreaks chaos and mayhem in cities, towns and villages, without let or hindrance. You have Hindu bigots killing tribal Christians in Orissa and Karnataka; street hoods enforcing a chauvinist agenda in Bombay; Mamata Banerjee forcing the Tata Nano venture from Bengal; a regional party playing to its ethnic base by seeking to influence Indian policy in Sri Lanka; the Left playing ideological games to strap a government they were in alliance with; a BJP that is desperate for power and will go to absurd lengths as it did with displaying wads of cash during the vote of confidence in Parliament; a Congress that cannot shake off its nostalgia for Indira Gandhi and therefore remains unconvinced about economic reforms.

These distressful events are taking place at a time when the economy is notching up record growth. The minuscule middle class has grown to a critical mass and can irreversibly transform the country into a stable, modern democracy. Sadly, no political party speaks for this emergent group. Virtually all political parties are preoccupied with caste, religion and populism. It is a measure of the narrow worldview of the political leadership that no one has been able to grasp the significance of this demographic event. The closest any leader came to recognizing the growing middle class is Prime Minister Manmohan Singh. This much was clear from his relentless advocacy of the Indo-US civilian nuclear agreement. He fought the odds and emerged triumphant and the middle class applauded. Can he persuade his reluctant party to solicit the support of this vital new constituency?

Meanwhile, at ground zero in the global financial markets, Gordon Brown and Nicolas Sarkozy have demonstrated their leadership by pursuing an intelligent response to the crisis. The much maligned British premier, in particular, has won plaudits in his own country and around the world. In the US, a fading George W Bush failed to rally his own party around a flawed bailout package put forward by his lightweight Treasury secretary, Henry Paulson.

Interesting possibilities lie ahead. For instance, the crisis has steered the debate in the presidential campaign to focus on crisis management capabilities of the candidates. As such, this has favored the unflappable and analytical Barack Obama, with his cool temperament and level head, over the more mercurial John McCain. In the next few weeks, US voters will have the chance to send a powerful signal by selecting their President. A President Obama has a better chance of restoring sanity in fearful and avaricious global financial system.

an edited version of this column appeared in education world, november 2008

Corporate Social Responsibility?

The Nano Goes to Modi’s Gujarat

The decision by the Tata group to re-locate the Nano plant in Sanand is of concern to liberal Gujaratis. The logic of business is to be competitive and profitable; as such, Tata’s move makes sense. The company was right to choose the business-friendly state and get down to the task of making the revolutionary Nano car, which promises to put India on the global map of the auto industry.

Nevertheless, it just does not sit comfortably with liberal sensibilities in the communally-polarized state. What’s more, the triumphal note that Gujarat chief minister Narendra Modi sounded at the media event to announce the pact appeared to be a new form of propaganda. He followed it up with a series of television interviews, resplendent in new sartorial style. In these interviews, Modi positioned himself as a spokesman for the new India.

Modi is a politician and, some might even argue, a cynical one. It doesn’t take rocket science to see through his new effort to buy respectability. Like Lady Macbeth, he is seeking desperately to wash the communal bloodstains off hands in order win national acceptability. He is positioning himself to emerge as a national leader in the BJP once L K Advani is gone.

We can explain away Modi’s posturing as the way of an ambitious and ruthless politician. What is more difficult to accept is Tata’s decision-making process. The Nano is Tata’s prestige project. It is plausible that the decision was made on the rebound after the embarrassment and the financial costs of the shenanigans at Singur in Bengal. Given the formidable reputation of Tata, did no one consider the possibility that the decision could sully that standing?

Tata has sizable commitments to corporate responsibility programs. They stem from the conviction of senior management that their methods of conducting business should be ethical; as such, they must take into account the interests of society. These laudable programs have won prestigious awards and wide recognition. The Nano project is also driven by the same larger vision: to provide affordable personal transport to the emergent middle class.

While some companies like The Body Shop and others are recognized for their socially conscious practices, others are disparaged and their efforts often dismissed as hollow public relations ploys to whitewash the ethical questions raised by their operations. For example, the tobacco and oil industries simply have been unable to deal with the core ethical questions.

For all the years that such companies have fretted about corporate social responsibility, their notion is largely a putative expense to divert attention from real and serious ethical issues surrounding their business. Milton Friedman made sense when he famously argued in an article written 38 years ago that “the social responsibility of business is to increase its profits.”

Friedman’s piece stirred a major controversy at the time. Not just his idea of corporate responsibility but all his work on monetary theory was dismissed as a handmaiden of powerful multinationals. It was the time of Woodstock and Viet Nam; big business in the West was viewed with glaring hostility in the media, in the academy and in the liberal mainstream. In India, given the socialist mindsets in politics and the bureaucracy of the time, business was seen a milk cow: favors and cash in exchange for licenses and permits.

With the dawn of the Reagan-Thatcher era, governments ceded space to the private sector. That was when views about corporate social responsibility began to change. If the private sector has unfettered access to markets, land, labor and capital, many scholars and analysts argued, companies must consider the larger social entity in their decision making.

In a recent example, a major infrastructure firm with far-flung projects served by casual labor included AIDS awareness and disaster management as part of its social responsibility initiative. It serves both the larger community and the company interests. Companies need to seek out areas where their operations intersect with the larger good.

Seen in that light, the Tata decision to re-locate the Nano plant in Gujarat raises many questions. Modi is like a chameleon in his relentless pursuit of power. Starting out as a fiery Muslim basher, he went on to pose as the champion of Gujarati pride; now he pushes himself as a business friendly leader. How does Tata reconcile its pact with Modi whose seven years as chief minister have been marked by overt targeting of minority groups? How can a company that has been honored by the US India Business Council sign on with a controversial politician who has been and continues to be denied a visa to the United States.

Modi’s culpability in the communal mayhem that followed the Godhra incident was clearly established; his effort to gain absolution by setting up the kangaroo Nanavati commission was clumsy. It’s in the past; he has turned a new leaf: the cheerleaders say. But who can forget that Modi built his political career by fanning the flames of religious bigotry with references to the conquest of India by the Mughals in medieval times and more recently, the Partition of British India into India and Pakistan

In the end, there is a growing belief that Tata’s move, though legitimate, helped Modi in his whitewash campaign to emerge as a national leader. As a result, this highly respected company’s commitment to social responsibility appears somewhat weaker.

an edited version of this piece appeared in the times of india, october 21, 2008