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TUESDAY 18 MARCH 2008 NEW DELHI OPINION 11 Business Standard Stay updated through the day. Visit www.business-standard.com BusinessStandard VOLUME XIV NUMBER 287

ures” but with different ends. Social- ists wish to promote equality, classical liberals . Classical liberals es- Denting confidence again chew socialists’ because (as Nozick demonstrated) “equality” conflicts with “liberty”. As he wrote: he rapid developments last week inflationary spiral. While the Fed has cut “The socialist society would have to for- that saw Bear Stearns acquired its benchmark federal funds rate by 125 bid capitalist acts between consenting Tby JP Morgan Chase, with the sub- basis points this year, with expectations adults” (, State and , stantial backing of the US Federal Re- of another 50 basis point cut, the preva- p. 163). Fourth, egalitarianism as a moral serve at a rock-bottom price of $2 per lent inflationary situation makes cuts be- is part of the cosmological beliefs of the monotheistic , and not share, has opened up a new level of un- yond that point less and less likely. The part of those of moral beliefs, in- certainty about the scope and impact of question is whether a federal funds rate cluding Hinduism, which accept what the financial crisis in the US. Notwith- of 2.5 per cent will be enough to stimu- Louis Dumont called Homo Hierar- standing the repeatedly expressed con- late the financial system into getting lend- chicus (see my Unintended Conse- cerns about “moral hazard” emanating ing going again. Remember that the rate quences). Fifth, is a mod- from the -out of teetering financial in- had declined to 1 per cent during the pre- ern instrument of control of the Preda- stitutions, both the Bank of (with vious cycle when, of course, inflation was tory State. This last point needs some elab- Northern Rock Bank) and the US Federal nowhere amongst the perceived threats. oration. It is now well recognised that Reserve (with Bear Stearns) have obvi- If not, the risks of financial institutions of the suppression of political and civil ously decided that discretion is the better various kinds continuing to fail remain, liberty was an essential part of the part of valour and bankrupt institutions and the Fed and other central banks Illustration by BINAY SINHA Communist version of socialism. But pose a more immediate threat than future will have to either let them fail or sur- it is equally true in a different form of moral hazard. Of course, the Fed’s sup- reptitiously stoke the inflationary flames the softer variety of social democra- port mainly provides a temporary flow of by the kind of crisis management seen in Socialism and liberty cy. Fabian socialists have always been in favour of the Nanny State, because liquidity to meet immediate obligations the Bear Stearns rescue. as Douglas Jay memorably stated, while new sources of funds are found. A major problem in this situation is “The gentlemen in Whitehall know While the immediate objective of pre- that nobody knows the extent of vul- The suppression of political and civil liberty is an essential best” what is in the housewife’s in- venting the institution from going un- nerability of the major financial play- terest. This strand of socialism has der has been achieved, markets around ers. While commercial banks are regu- part of socialism of various kinds, says DEEPAK LAL now taken a new lease of life in Eng- the world are now even more worried lated closely and their risks are visible, land, with many socialist thinkers ad- about the vulnerability of other institu- other financial institutions have a great he public interest litigation (PIL) so many of her actions, appearances Revealingly, the Chief in dis- vocating State interference in the pre- tions. As the guessing game about who deal of flexibility in managing their port- filed by an NGO challenging could be deceptive, as the Left soon missing the petition to delete “social- viously protected private sphere on the 1976 insertion of “social- found out with her declaration of the ism” from the Preamble, stated: “Why the grounds of aiding the virtuous half might be next intensifies, the ability folios. This is as it should be, from a busi- ism” in the Preamble of the Con- Emergency in 1975. (Raj Thapar’s do you take socialism in a narrow sense of a postulated divided self. and willingness of central banks to con- ness viewpoint, but it makes a crisis more T stitution, and the 1989 amendment of excellent memoirs provide a vivid ac- defined by the Communists? In a broad- In support, using Mill’s arguments tinue to rescue floundering institutions difficult to manage. Just as the previous the Representation of the People Act count of the raising and dashing of these er sense, socialism means welfare meas- against (in ), they must also be questioned. The dilemma crisis provoked the Global Settlement, making it incumbent for political par- socialist hopes.) The 42nd Amendment, ures for the citizens. It is a facet of claim that he would not have - posed by the between a calibrat- which mandated a separation between ties to pledge allegiance to socialism, passed during the Emergency, was part- . It hasn’t got any definite ed to this form of paternalism in the ed approach to monetary policy and equity research and business activity brought back many mixed memories. ly window dressing, to appease the dis- meaning. It gets different meaning in private sphere as going against his the almost knee-jerk responsiveness to by the investment banks, this one could In 1973, I spent a year at the Plan- illusioned Left and a potential instru- different .” This raises a num- of liberty. This of course is ning Commission helping Lovraj Ku- ment to thwart her political opponents ber of points. a complete travesty of Mill, who ex- financial distress, as demonstrated in the result in stronger disclosure and risk man- mar set up a Project Appraisal Division. — a purpose achieved by her succes- First, words do . If a word has plicitly discussed and dismissed sim- Northern Rock and Bear Stearns episodes, agement norms for the sector. Macro-eco- At the I was a child of my Indi- sors with the 1989 amendment’s re- no definite meaning it has no place ilar paternalistic arguments against is striking. nomic management is a difficult enough an background and education in the quirement for every political party to in a . Second, socialism the use of alcohol and opium (see An unending infusion of liquidity into job in the best of times. It is being made PPE school at Oxford: a social demo- swear allegiance to socialism. does have a meaning. All the various FT.com for Feb-Mar 2007 for an ar- the system, which is what would result even more complicated by the relative- crat, a Keynesian and a believer in plan- The Supreme Court has rightly al- socialist sects share a belief in egali- ticle by , my letter in from large-scale bail-outs, enhances ly opaque regime in which many of the ning (albeit through the price mecha- lowed this 1989 amendment to be chal- tarianism. The major difference be- response and subsequent letters on the inflation risk, which the Fed and key players in the current crisis oper- nism). That year turned out to be a form- lenged by the PIL, which claims it is “a tween the Communist and Fabian ver- the smoking ban in England). ative year: making me question both grave breach of the liberty provision of sions is that, the former seeks to pro- This new social paternalism is a con- other central banks are quite acutely con- ate. To the extent that more transparen- my previous assumptions about the the Constitution”. But, its summary re- mote egalitarianism by socialising tinuing by socialist thinkers to scious of. Oil prices are at around $110 cy brings about greater alignment be- benevolence and public spiritedness of jection of the plea to declare that so- the means of production, the latter amalgamate notions of “negative” and per barrel and other commodities, in- tween macro-economic and financial sec- bureaucrats and politicians, and the cialism is not part of the “basic struc- by seeking to socialise the results of “positive” . As noted in an ear- cluding major food items, are also in an tor stability, it must be pursued. very intellectual basis for planning and ture” of the Constitution has prevent- production. Third, there is an alter- lier column (“Freedom versus Liberty”, government intervention. ed it from discussing the relationship native set of political beliefs, classical August, 2004), this arises from the am- It was also a formative year for between socialism and liberty, which , which promotes liberty but biguity in the word “freedom”, which India. After her “Garibi Hatao” election Dr Ambedkar, the father of the Con- eschews egalitarianism. It, however, as it implies not having obstacles placed Five years later and victory in the Bangladesh war, stitution, saw clearly in opposing the accepts the need for the State to help in the way of individual actions, allows Indira Gandhi turned leftwards, pro- inclusion of “socialism” in the Pre- the deserving poor and to finance mer- confounding being free to do something resident Bush must be one of the the issue, the domestic political bat- moting the policies advocated by many amble. He said: “If you state in the Con- it like health and education for with being able to do it. It is there- few people who might privately tles may become another legacy of one Communists and fellow travellers in stitution that the social organization of those unable to pay for them (see my fore unfortunate that the rejection of Psee a silver lining to the finan- of the biggest international blunders her coterie: nationalising mines, banks the State shall take a particular form, Reviving the ). This is the PIL’s plea to remove “socialism” cial crisis that is engulfing the United ever committed by the United States — and the wholesale grain trade. It seemed you are, in my judgment, taking away close to the Chief Justice’s definition from the Constitution’s Preamble has States, insomuch as it has diverted at- especially if all that it achieves is to bring that the Fabian socialist nirvana her fa- the liberty of the people to decide what of “socialism”. But he seems confused prevented our highest court from the ther unsuccessfully sought to promote should be the social organization in about the two different political philoso- essential debate about socialism and tention from the fifth anniversary of the together a Shia-ruled Iraq and one of was at last to be delivered. But, as with which they wish to live.” phies, which both accept “welfare meas- liberty. Iraq war. When people are worried about the countries listed by Mr Bush as be- jobs, housing mortgage foreclosures longing to the “axis of ”, Iran. and such pressing matters, the issue The question is, what now? It is ev- of a distant war in which the Ameri- ident that the US cannot simply up and can body count has come down seems leave — Iraq would then slip into an less immediate an issue — although even bigger mess. But what would be Don’t Cut Interest Rates 4,000 Americans have already died in the goals to be achieved by staying? Get- or many, it’s the brilliant lights, Till the inflation-weary Reserve cern over low interest rate fuelled the war (more than in the 9/11 attacks) ting the Iraqi economy going again, with billboards and energy of Times Bank of India (RBI) had the pres- asset bubbles. and the bill is expected to climb even- normal oil production, has proved an FSquare that brings them there. ence of mind to start raising interest And the only way the RBI can act tually to a couple of trillion dollars— impossible task for the American of- On this moderately chill New York af- rates, almost nine times since 2004. in such circumstances is to tighten in- many multiples of the initial estimates. ficials at hand. Western-style democ- ternoon, I am focused on the big news So from a bottom of 7%, where every terest rates and hold on to them, the Americans may also be diverted in their racy may prove impossible to achieve tickers flashing past. As I watch, in an senior manager in a knowledge com- rest of the world (Federal Reserve) be attention from the domestic costs of the in a country that has effectively become hour, the fate of Bear Sterns, anoth- pany (mostly) had become a mini re- damned. er Wall Street giant, is sealed. Or pro- al estate mogul, rates now hover in the The RBI is of course fighting tooth “war” against terror, in the form of a less three mutually hostile zones, dominat- tected, depending on how you look at region of 11%, where there is some and nail to hold interest rates while liberal climate and that impinge on ed by the Shias, Sunnis and Kurds. Set- it. sanity. Of course "industry" is com- every constituency, political, business civil that were once taken for ting up an Iraqi government that has Just when you thought the mort- plaining that growth is , but and economic is baying for lowering granted. Only last week, Mr Bush ve- effective control of the country and gage crisis had seen the worst, there’s DOUBLE EDGE let’s stay with . them. So far, the RBI has held on ad- toed legislation that would outlaw tor- broad popular support, is next to im- more. As I watch the milling tourists GOVINDRAJ ETHIRAJ I am not sure what has changed so mirably. Whether it will manage to ture tactics like water-boarding, while possible since the Shias are unlikely to and the dazzling Nasdaq screen, which fundamentally in the of our hold on is a question mark. I strong- legal battles continue over Guantanamo be kindly disposed to the Sunnis who am sure is not such a big attraction lives that a house I would pay Rs 50 ly feel it should, because high interest Bay and external rendition cases. ruled in Saddam Hussein’s time. If now, I also think back of India’s own lakh for in 2005 is worth Rs 1.5 crore rates are the last reason growth will property crisis. And how the only dis- now in 2008. And what perplexes be affected. The costs abroad have been equal- the new arrangement has too many los- tinction being no one seems to realise ed monthly instalments (EMI) for the me even more, as it has in the last few The news is that an economic ly onerous, in that America’s reputation ers, it is certain that the result will be or acknowledge it. loan. years, is why nobody cares. slowdown may exert pressure on as- and standing have taken a severe beat- more violence — without a functioning This is not a crisis of loans going Meanwhile, I put the house on rent. Actually, we must be one of the few set prices, both in the commercial and ing — not least because of the at army for the country’s rulers to draw sour as you might imagine, at least not For that price in most cities in India, countries that stand unruffled in the non-commercial space. For both it’s Abu Ghraib and elsewhere. Meanwhile, on for strength. yet, but property rates rising to stratos- particularly Mumbai, I could get a rent face of an asset price bubble like this. good news. Land costs are making it the success of the “surge” programme, With Afghanistan also proving to be pheric levels and staying there. And of at least Rs 20,000 to Rs 25,000 and Mostly, we feel proud that, along with difficult for existing industries to ex- built as it has been on throwing more an unwinnable war, with Osama bin of course the prospect of what might I am pretty much home. "Did you hear, our billionaires, our property prices pand and new ones to come up such happen if they reversed direction some- Alok is thinking of buying a house rule on top of the world, despite hav- as in retail. For the common man, American troops into Iraq than at any Laden still abroad, and with Pakistan what suddenly. in Kochi?" a colleague asked. Why ing some of the worst housing and it’s about affordable housing, which previous stage of the war, underlines the a less reliable ally than the US might In late 2005, I attended a colleague’s would a Delhi boy buy a house in Kochi, housing infrastructure. I don’t mean is obviously a non-issue in India. bungling and miscalculations that have hoped, it is hard to see what the wedding reception in Mumbai. Once I asked. "Because it’s cheap." inside the apartments of course. The RBI must hold interest rates, marked the initial stages of the military “war on terror” has achieved — ex- the formalities were dispensed with, The colleague herself had one house Surely there are supply-focused so- till asset prices and maybe inflation drift campaign and its aftermath. With cept if it is to make the claim that all the the talk turned to the booming prop- on rent, lived in another and was plan- lutions to look at. Surely, a committee, firmly lower. Dropping interest rates the original justification, Saddam Hus- actions between them have made it im- erty and stockmarkets. ning a third buy then. I am pretty sure, even if it’s just another one, could look could unleash precisely the kind of sein’s “weapons of mass destruction”, possible for terrorists to strike a second Everyone I encountered was doing with the stock option windfall that into short- and long-term solutions to financial frenzy we want to avoid, some amazingly simple math. Can I would have followed, she would have making housing affordable. though from a cause and effect point proving to be a red herring and with De- time in the United States. That is of find Rs 10 lakh and put it as down pay- either rustled up 10-20% down pay- That’s another story. I am convinced of view, it’s too late either way. The Bear mocrats now intent on establishing that course important, but it may also be just ment. Because if I do, I can buy a Rs ment or maybe even bought it outright. that nobody does care, except maybe Sterns and all the mortgage-backed deliberate falsehoods were spread on happenstance. 40 lakh or maybe even Rs 50 lakh house The stock markets were keeping step the RBI, the only institution to my rec- blowout stories surely teach us the fol- and pay less than Rs 40,000 as equat- with the property market boom. ollection that has expressed some con- ly of excess and low interest rates.

efore I begin this column, I as quiet and gentle has a history have to thank Sathnam of violence caused by his BSanghera for making me Getting personal: The untold Indian story disease, to share his renewed aware of my own prejudices as a acceptance of and love for his reader. until my late twenties; and it is memoir. That genre has grown SPEAKING handful — Vikram Seth’s Two commonplace. I was shaken, father and sister as he grasps Sanghera was born in the only now, at thirty, that I feel the so much that it’s developed its Lives, a brave but strangulated however, to discover a hidden what schizophrenia really is. It’s West Midlands and now lives in need to talk about it,” writes own sub-categories. You have VOLUMES attempt to recover his aunt and taboo in my own mind — a sense a powerful book, and what my London. When I started reading Sanghera. “How did this the spirituality memoir (Sarah uncle’s story, Ira Pande’s Diddi, of surprise that an Indian would initial discomfort tells me is his memoir, If You Don’t Know happen? How can someone grow Ban Breathnach), the love-and- Nilanjana S Roy which revealed her mother’s life write with such candour about simply that it is a necessary one. Me By Now, I thought it was yet up with two members of their spirituality memoir (Elizabeth with honesty, Timeri Murari’s the private business of his own By sharing his story, another diaspora story about suffering from a severe Gilbert’s Eat, Pray, Love), the wrenching and under- family. I admit this is racist: if I Sanghera may have made it familiar themes: young man mental illness, the most severe addiction memoir (Augusten This is an odd prejudice to appreciated A Temporary Son, can read Burroughs on the possible for hundreds of Indians struggles in a white world to mental illness around, without Burroughs’ Dry), the anorexia have, given that one of the most about parenthood, adoption and of his alcoholic sweat to emerge from the false shame hide his white girlfriends from realizing it?” memoir (Caroline Knapp’s Why confessional of all loss. There are a handful of and vomiting, surely a deeply and genuine despair that mental his normal, conservative Punjabi The answer forms the meat Women Want), the old-fashioned autobiographies is written by others, and a few writers, from private matter, it should be easy illness causes — perhaps they family, develops an interest in of the book, and it takes family memoir (Frank McCourt’s one of the most famous of all Nirad C Chaudhuri to Harivansh to read Sanghera’s story of how will now share their stories, with his family history and his Sanghera through a deepening Angela’s Ashes), the family Indians — Mahatma Gandhi’s Rai Bachchan, have been open a misfiring synapse, a faulty the same generosity if not the country of origin, yadda, yadda, understanding of mental illness, memoir noir (Miranda Seymour, The Story of My Experiments about their lives in all respects gene, a missing link in the brain same skill as he offers. We may yadda. and of the violence and denial In My Father’s House), and the with . He writes about — political and personal. But has caused such silent see a new age of personal But Chapter 2 of this unusual, that marked his family history. beloved pet memoir (John death, sex, enemas, sex-and- taken together, these works devastation in his family. histories, with the emphasis candid and very touching His honesty carries you through Grogan, Marley And Me). And death in close conjunction and would barely fill one shelf. That discomfort was, for me truly on the “personal” for the memoir is appropriately titled his story, which is often funny, along with its growth, I other deeply taboo (to an Indian Perhaps that’s why as a reader, very revealing. first time. ‘Vertigo’. “So I didn’t realize my often devastatingly sad. assimilated a simple, incorrect mind) subjects with a simple Sanghera’s book struck me so Sanghera’s honesty allows the father and eldest sister suffered It’s not an unfamiliar story to but powerful : confessional eloquence and a devastating powerfully. I was moved by his reader to share in his family [email protected] from schizophrenia until my anyone who has kept pace with writing is done by people who candour. Unfortunately, for years exploration of a mental illness so history, to share his sense of The writer is chief editor, mid-twenties; I didn’t start the growing appetite in the US are not “us”, neither Indian nor very few Indians followed in his rarely discussed, so ill shock when he discovers that Westland/ Tranquebar. The views confronting what this meant and UK for the confessional brown. footsteps. I can think of a understood and so the father he has always known expressed here are personal