Saturday, April 12, 2008

If it aint broken, you can't fix it

At this time, on 12th April 2008, I am sitting in a Sheraton property in Kuwait City. On the 14th floor overlooking the sea, I can see the dust and blazing sun, and decided to shift my meeting to evening, when, I know, the weather will be more pleasant. Being a Saturday, it almost worked out to be a lazy afternoon, with all my contacts deciding to come tomorrow. So, funnily, I get my first true weekend in a month, having nothing to do except writing this blog.

Of late, I noticed that I have become philosophical, at least when I write the blog. This is possibly because I am having a mid-life crisis of sorts, wondering what I am doing in the first place. Oh yes, I am terribly busy, hardly having time to sort out work and life [I did not have opportunity to change the ceiling bulbs in my study and working with table lamps for last one month, whenever I was home] - but this also meant I almost disconnected myself from the world around me.

So, this afternoon, is a special chance. Yesterday evening was special too, when our flight to Kuwait had go into a thunderstorm, and could not land after successive attempts. This is possibly routine, but these days, when you can see the runway on the front camera, and can feel the plane approaching the runway and then lifting off, it is a scary experience. Nothing happened, I must add - we went to Dammam, and then returned - 4 hours behind schedule. But, on top of bleary eye, such experiences also add a bit of perspective to life, of its shortness/longness etc, and also its meaning, perhaps.

But, today, I shall resist being philosophical and rather stay on ground. It is not just the first idle afternoon in a while, but also a chance to watch BBC and read things on the Net, and a bit of space to think. And, as I see right now, few things happened in the world in the last few months, which needs to be watched seriously.

First, the money market system is broken and the Central Banks don't even know the answer. The recession is here, but unlike in the past, the Governments are no longer in charge and they won't admit anything is wrong. Central banks only know one method - cutting the interest rates to make money cheaper - and it isn't working anymore. This is because the real rate of interest is already negative, or close to negative, and they can't go any further. The funny situation is that it is very cheap to borrow money today, just that there is no one who is willing to lend money. So, yes, exactly - interest, the price of borrowing money which should be fixed by supply and demand, is fixed by a variety of structural factor, and the supply and demand model of modern capitalism isn't working.

There is another place where this mechanism is not working too, for a different reason. I was watching BBC, where FAO, an UN body, was warning against the growing food prices and food scarcity across the world. There were scores of food riots in various countries over last few months and the food prices are continuing to go up despite Governments trying their best to control it. We are suddenly hearing a politically incorrect, almost Malthusian, language - world demand is outstripping supply. So, this is one area where the economic rule is working, but just that it does not appear acceptable that a vast majority of people will not be able to feed themselves soon. Of course, one will add the dimension that while half of world's population will not have enough to eat, a certain percentage of people in rich countries will become obese [Disclaimer: including myself]. This is a trend which, if not reversed soon, will challenge the moral superiority of capitalist economics and hurt its claim of being 'the final solution'.

One parting thought: The world view according to demand-supply is going through a series of difficulties. It may come good, yet again. But every crisis like this is always worse than the previous one, and points to basic instability of such a model. Add on top the fact we are wrecking the environment and buring out our energy resources following the demand/supply economics, one would run out of the moral smugness that came in fashion since Reagan. Time to look seriously into an alternative model: Every person according to ability, every person according to need? May be. More on this thought later.

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