Sriram Balasubramanian is a Journalist, voracious reader, avid Blogger, social enthusiast and a believer in excellence not mediocrity. With an inherent passion towards journalism and writing, he believes in playing the "Straight Drive" all the time. Besides this, he has a MS in Engineering Management and has played Chess for Singapore.
The BBC interview with a trader on the crashing of the Global Economy on YouTube, that is running viral caught my eye. It talked about the impending Greek collapse, the EU government's inability to handle the crisis and how this would mean dooms day. It was not the content, since it's well known, but the impact of the stark reality shrouded in it. At that second, I felt I should write about this.
I am no Paul Krugman nor am I of the caliber of Mr Bernanke; still I have an opinion on it. Amidst this entire economic jargon of bonds, derivatives, ratios and what not, I think a fundamental point is being missed in this entire crisis. The fundamental issue of this entire fiasco, according to me, is more of a social one than an economic one and learning from the Indian middle class can help. Here's why:
Greed, Greed, Greed and more Greed:
The trader on the BBC interview , however skeptical his identity would be, expressed what millions of people actually feel. When you have a feeling that "Goldman Sachs rules the world", then there has to be something wrong. The eternal greed of the financial markets in the western world comes with their obsession to make money at all costs. This greed is also fuelled by the average Joe who wants to milk the most of this even though he can't afford it. In India, on the other hand things are much more measured with respect to the common man (leave the elite aside). Money is a valuable commodity and thus our restraint in taking radical risks. Despite the criticism from the West on this, the Indian middle class stuck to this approach which is reaping dividends now. The West can learn from India on how to be restrained in using money; treating it as an valued asset rather than a tradeable commodity to fulfill more greed.
Inept Social Handling of Collective Failure:
The Western world has produced numerous individuals who are entrepreneurs who have overcome numerous failures to rise as business icons. However, from a broad perspective and taking the median average Joe on the street in the West including Europe, failure and lack of jobs have not hurt them this bad since the Great Depression. As a result, the middle class society as a whole is not ready for such a collective failure. In India, on the other hand, failure for a common man is a given in all walks of life. It is a standard component in our day to day lives, so it's not an issue for us since we are used to it. As such, there is greater immunity to such setbacks in the life. The people in the West are struck by this tsunami and they are being swept away since they are not able to handle it. The governments and the people in the West, I feel should learn from the Indian Middle Class to handle multiple failures with limited resources yet lead a dignified life.
Forget the family, Forget the Savings too:
The fact is if all the gold that is saved by Indian women today is made into cash; we would be probably the richest nation in the world. Indian society as a whole is still family oriented however much youngsters would beg to disagree. The older generation still calls the shots and in some sense rightly so. This brings about two advantages in terms of savings is concerned. 1) Even if one is not willing to save, one has to do so for the family or members of it 2) Saving becomes an economic buffer that is ingrained in our genetic code. My American friends don't have it. For most of them having negative balances in their bank account is a very normal thing. This lies on the assumption that success somehow would come somewhere and till then we can hold on. Now the question has become till how long can one wait? The ultra liberalist would hate me saying this but with due respect, the fact is a family serves as a structural positive nexus to help you take a measured response. In the West, where the family structure is nascent in its evolution, some of my friends don't have these commitments, so a)they are not obliged to save for everyone else b) they are not in a family atmosphere which forces them to save. Since you don't have this structural pressure to push you to be cautious, the arrogance of youth takes over and the spending goes for a shot. In essence, you have an economy which is based on spending forever at all costs, come what may, even if the sky falls apart. This approach, in my opinion, is a social issue that needs to be solved and that's where the Indian Middle Class can teach vital lessons.
The Obama's and the Merkel's might be working overtime to work things out. The EU might be working overtime to give bailout after bailout to prolong the staring disaster. While they sit in their own maya of thinking that the markets would recover and the countries would recover, they need to realize one thing very well. Economics plays an integral part of the reform in this crisis but beyond economics, there lies in a human element that controls this universe. The social element and nature of being less greedy, more measured and holding onto each other's kith and kin by saving is the long term solution to this crisis.
After all, the society as a whole is the heart and soul of the economics governing any nation; in this respect the West needs to learn from the Indian Middle Class to solve its issues.
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