America An Empire of Wealth

Life has been crazy in the last three weeks. I heard the stories about the consulting jobs being hard on personal life and being very stressful. I can validate these horror stories with my experience at my new job. Life is always on “emergency” mode. Any mistakes in the project can crucify the firm. Negligence is not an option.

I think two skills are the most important for success in Business Consulting:

• Attention to detail

• Stamina (to work 14-16 hours a day without losing concentration)

America and its history of wealth

Not to mention, my new job has tremendously slowed my reading and has adversely affected my contributions to the blog. In the last ten days, I finished a rather detailed economic history of America. The book is titled “An Empire of Wealth” written by Mr John Steele Gordon. Mr Gordon, who reminds me of a cheap Vodka Brand sold in the US, is a very well respected American Historian. He has an uncanny ability to write in a simple language and to tell a story in an appealing manner.

American history of wealth is a detailed tale that starts with the colonialisation of the North American continent by the Englishmen and other Europeans. The initial attempts to settle were quite unsuccessful due to unpleasant weather, lack of resources to sustain life, and disease. Slowly, the settlers adapted and the real boom in the agriculture started with the introduction of a cash crop called Tobacco in Virginia. America for its initial 125 years of history was a net importer, most of the exports were agricultural commodities and the imports consisted of processed metals, machinery etc.

American industrialization developed on the foundation of stolen intellectual property from Europe. Most of the machinery for the industrialization such as clothing mills, weapon designs, smelting and steel furnaces etc. were copied from the European designs without paying any royalties towards these inventions.

US and other western countries never flinch to criticize corruption or inefficiencies in ruling associated with democracies. The book accounts the widespread corruption and crony democracy that infested in the US in the second half of the nineteenth century. Slowly but steadily, the system of governance improved and led to the current powerful (though not without corruption) institution of democracy and freedom. This book provides some hope and optimism to the sustainability of the democracy, especially for countries like India.

Another key aspect of the US’s development into a strong nation was its trade policy. For a significant duration of the US history, the trade policy was extremely protectionist, guarding the US’s domestic industries from the European industries that enjoyed large economies of scale. The distinction between the North and the South of the US becomes very clear in the discussion of the trade related policies. The North, which was highly industrialized, demanded tariffs and barriers on the foreign goods. The South, an agrarian economy, relied on the export of the commodities to other countries. Therefore, the Southern states were opposed to any tariffs on the trade. These dichotomynexits till date, the South being more conservative (read Republican) that the North (Liberal).

The story of the US economy is far from perfect. It was a system that took several iterations and painful series of failures to come to the current form. The main theme of the story always was pursuing self interest. The success of the US sometimes overlooks the high volatility of its economy and its vulnerability to producing bubbles and busts.

A good lesson from this book is regarding the role any Government should play in running the economic affairs of a nation. Trusting the direction of the economy on the “invisible hand” is not the best way to drive. The US history attests this theory with its endless cycles of continuous booms and busts that came to existence only because of the US’s policy of supporting Wild West style of capitalism.

America became an industrial and economic power first. The innovation and ingenuity that we associate with the US is a new phenomenon (post WWII). The achievement of large scale industrialization sows the seeds of invention and creativity. I think the next wave of large scale innovation and invention will come from Chine, which has been reaching industrialization scales once reached by the US in the nineteenth century.

India Unbound

I just finished reading the book India Unbound by Mr Gurucharan Das.

I began the book on a skeptical note after reading numerous books and articles projecting an overly optimistic future of India and its citizens. I must say the book did complete justice to the time and energy that I invested in reading over 350 pages in it. The author came across as a knowledgeable person equipped with keen observation skills. Now, some observations can lead to theories. Mr Das is very liberal to put forward his own theories. I believe that’s where the problems can arise. But, as far as the book in terms of original ideas and analysis is concerned, it is an inspiring work. The author utilizes various references to judge the state of Indian politics, economics, and society. For example, he compares India with China, Japan, the US, and sometimes India of the past. He nails the issues related to the lack of development of the capital markets in India and the way the Government and bureaucracy sabotaged the entrepreneurial spirit of Indians. I found his analysis related to the lack of progress and development in India quite intriguing and accurate.

My criticism is the sense of entitlement that he affords to claim through the access to politicians, his educated class upbringing, and knowledge through his business experience that the author claims in various parts of the book. It starts to rub on the readers face after a few references to his Harvahd education and exploits at P&G. To be fair, he does provide a good amount of original analysis to walk the talk.

The tone of the book can be described as politically neutral, socially liberal, capitalist by economic inclinations. The book has a lot of in depth analysis of the social order, politics and the economics in India. The author narrates with great faith and conviction the benefits associated with capitalism, liberalization, and equality. He has laced the book with rhetoric of the inefficiencies associated with the Government bureaucracy and the legacy of Indira Gandhi and Nehru. He has rejected the Nehruvian model of mixed economy as disastrous at best. His acerbity towards Indira Gandhi is very entertaining and enlightening.

Contradictions are inherent in the book and the author has failed to address several other models such as US, UK, Japan that grew and became industrial under the Government umbrella. These economies were protectionist and the Government bureaucrats played a significant role in the initial stages of the economic development in these countries. He ignores these facts and does not detail on why some models do so well and some did not. He also ignores the extreme capitalist versions implemented in Argentina that led to the bankruptcy of a nation and abject poverty of its innocent citizens.

He recommends that Venture Capitalists and entrepreneurs will revive India. He also glorifies the role of MNCs’s participation in the Indian economy. But, he again does not acknowledge the power of big corporations to wipe out the small entrepreneurs. The monopolies and inefficiencies associated with the capital markets do not make even the slightest mention in the book. I feel that just describing the benefits of capitalism is not sufficient to develop a strong economy in India. We need active participation of Government to bring out half of our population still stuck in the mud of dearth, poverty, and ignorance.

I think this is one of the better books written about India from a very broad perspective. This book has not only influenced mere mortals like myself, but powerful CEOs such as Mr Narayana Murthy of Infosys to write a whole book by developing some of the ideas mentioned in the book. On the whole, a very good book and a must read for young Indians.