Comment

We need perspective rather than empty dogma to understand crises

In a conversation recently, a good friend of mine who describes himself as an investor, referred to newspaper columnist talking about the 1908 US stock market crash and the apparent fact that the market bounced back in six months.

The columnist concerned works for a prominent US bank which has had to undergo severe restructuring by reason of its over-expansion and risky investments in the mortgage-backed securities market.

He would be a role model for students being churned out by our IIMs and IITs, someone who will talk in a slight twang, speak the language of Wall Street, and be a Mr Know-it-all. No one can really quarrel with such stupendous monetary success and Indians least of all.This particular banker and his brethren like to identify themselves with the creation of wealth which they see as a complete panacea to the ills of mankind, and, in most cases, have a crass disregard for traditional learning.

The disturbing feature is that this particular friend of mine, the investor, is that he is someone of huge learning and with a respect for books and history. His difficulty is that people who share the same value systems which the liberal arts inculcate often do not share the same fascination for people who make lots of money which he evidently does.

The real danger is when you end up confusing street cleverness and opportunism with real learning and historical perspective.This, unfortunately, seems to be the predicament we are in.

India will someday pay a price for an excessive obsession with the skill sets of an investment banker, when subjects like history and literature are considered irrelevant to contemporary needs.

My view is these MBAs may soon become extinct and their knowledge is today increasingly worthless, almost as worthless as some of the works of the great Marxist economists of the 1940s or the Jesuit thinkers of the 16th century, except perhaps in India where we still regard such people with awe.

This particular columnist was blissfully unaware of the impending financial meltdown, continues to have faith in the wisdom of the market and sees the current dismal scenario is a sort of blip on the screen, a footnote in the progress of capitalism.There is something admirable about his can-do attitude, but also very frightening.

What I find interesting is that we see a reference to history to justify the current predicament.This shows a rare sense of perspective.Whether such a parallel with the 1908 stock market crash is warranted by the facts is doubtful. What was the size of the stock market in 1908 and what is it today?

Were derivatives and highly complex instruments of securitisation in existence?What was the extent of global interdependence in 1908 and can you sensibly make any comparison with the financial world a century later?These questions come from a historical perspective, one founded on examining facts as opposed to peddling dogma and theory.

The fact remains that the kind of liquidity unleashed by irresponsible securitisation of dubious assets, packaged and graded often by agencies paid by the person involved in the securitisation is without parallel in human history. It allowed the investment banks huge leverage opportunities and a wave of finance which in turn generated huge avenues for cupidity and corruption.

I think the current meltdown is not just a financial meltdown: it is the discrediting of an ideology of the market fundamentalists — the belief that public good and private greed are interchangeable, the taxes need to be minimal to spur enterprise and innovation, and there is no such thing as society.If only India were run like a business goes the refrain — a business like Lehman Brothers perhaps?

This crisis comes at a time when the other pillar of this ideology, that of spreading democracy through militarism and a tough approach to recalcitrant countries has hit a road block with the unsuccessful wars in Iraq and Afghanistan. Afghanistan is out of control and so will Pakistan go the same way.

I cite this example not just because of the Indian middleclass infatuation with American muscle and financial success, but the complete bankruptcy of the neo-con ideology — a simplistic and unhistorical dogma based on faith rather than facts.

My perspective is not leftist but conservative and historical, which I share with someone like Chris Patten who has many pointed observations in his new book What Next?I quote, “I don’t think Mr Blair knew any history at all.

I don’t think he knew the history of the Middle East, where he came such a humiliating cropper, and I don’t think he knew much about the history of Britain”.Today we need history more than ever, and perhaps need to put great historians on a pedestal at the cost of jejune ideologues who find facts inconvenient and knowledge unnecessary in the conduct of public policy.
The writer is a senior lawyer