Friday, January 02, 2009
Thursday, January 01, 2009
The global economic slowdown is revealing itself in India in many ways. News reports here are not that different from those in America. For instance, Honda not only has postponed an expansion of its manufacturing operations in India, but also is trimming production in its existing plant.
I met a businessman who owns a factory where about 60 are employed. A little more than a year ago, he made additional investments in his factory, importing newer machines from Japan. After all, it was a time when talk was about economic growth and not about a meltdown.
Now, this businessman is worried about the high levels of uncertainty and fear: “For the first time in my life, I don’t know what to do.”
Airline traffic is down significantly. Passengers frustrated with airline companies engaging in last-minute cancellations under the umbrella of “technical difficulties” suspect that perhaps the real reason is that they don’t want to operate money-losing flights with very few passengers. The financial liquidity crisis has left everyone scrambling for hard cash, which has led banks and investment firms to pay high interest rates of more than 11 percent for deposits for two or more years. Naturally, interest rates on loans have shot up as well.
Senior-year students in engineering and computer science who were looking forward to flashy employment contracts only a few months ago are now wondering whether they will be able to find any job.
The state of the economy is reflected even in “arranged marriages,” which are quite the norm in this part of India. (No, mine was not arranged!) Apparently, parents of girls are shying away from potential grooms who are in the information technology field because of concerns over economic security.
In all these situations, there seems to be an underlying frustration — sometimes explicitly articulated in conversations and news reports — that America has let the world down. In her column, spiced with humor and sarcasm, the editor of a leading weekly financial magazine notes that the pizza parlors her daughter loves are quite empty these days. She goes on to explain how it is connected to, you guessed it, the mortgage mess in America.
Against such a background, it did not help that television news stations seemed to have on endless loop footage of an Iraqi journalist hurling his shoes at President Bush. While the journalist who flung his shoes was making a statement strictly about U.S. involvement in Iraq, here, those same shoes flying toward Bush also are seen as a statement about everything that has gone wrong under U.S. leadership, both on Pennsylvania Avenue and on Wall Street.
I am now worried way more than before that it might take the rest of the world quite a few years to once again have trust and confidence in anything American, given how much America is viewed as the source of this financial pandemic.
There is not much of a hope that the new president would be able to turn things around any time soon. One person compared it to the typical joke about the common cold: it lasts a week if untreated, and for a full seven days if treated with medicines. I should note that this pessimism about the capability of an American president to overcome an economic crisis of such a magnitude is separate from the overwhelming support for Barack Obama himself.
One of the toughest questions about the economic meltdown — and a very simple one at the same time — came from my mother: “If this problem is so severe, then how come nobody saw it coming?” I simply shrugged my shoulders because I had no answer. So, I chose to focus on something easier — the delicious breakfast she had cooked.
Published in the Register Guard Dec 16, 2008
This is not an abstract public policy issue for me by any means. After all, the vehicles that our family currently owns are from one of these manufacturers — a Ford Focus, a Saturn Vue and a Jeep Cherokee. We also have owned a Ford Taurus and a Saturn station-wagon. The only “un-American” vehicle we ever had was a Nissan Sentra.
It is not that we were implementing a “Buy American” policy at home. It just so happens that the vehicles we bought met our preferences and budget constraints.
Earlier today, when I took my Saturn Vue to the dealership for the regular oil change, I began to wonder whether the brand will even exist in the future. News reports suggest that General Motors is planning to sell the division, or merge it with another. It’s possible Saturn could be shuttered completely.
On the one hand, the public policy person in me prefers inefficient economic enterprises to fade away without government intervention. I think about Pan Am, which symbolized air travel when I was a kid. It has been almost two decades since Pan Am closed down when it could not survive in a highly competitive global travel industry. It is the law of the jungle that inefficient businesses lose out to efficient ones. In order to pre-empt a Pan Am-like story, the auto manufacturers should have avoided the strategic errors they made, especially during the cash-flush decade from the mid-1990s when sport utility vehicles and minivans delivered billions of profits.
On the other hand, I recognize that government actively intervenes in practically every aspect of our economy. Heck, even my home is partly underwritten by the government, which permits us to write off the interest paid on the mortgage loan. Thus, if many other industries can be subsidized or bailed out, well, why not help out Saturn and its loyal and committed employees?
Even as policymakers try to figure out the current crisis, we might want to understand a few longer-term trends as well. “Planes, Trains and Automobiles” was a holiday season movie two decades ago; these same American manufacturing industries listed in the title also have been in decline. Trains, for all purposes, have been nearly relegated to history. The automobile industry is in a pickle — some might argue that it has been in denial since the energy crisis in the 1970s.
And all is not well in the aviation industry either — both in the manufacturing of planes and in passenger transportation. Boeing was the undisputed champ in its field, perhaps even more powerfully so than the American “Big Three” ever were. Slowly but steadily, Boeing has been losing its market share to other manufacturers. Twenty years ago, Airbus had barely 16 percent of the market; now it is nearly on par with Boeing in terms of the value of aircraft delivered.
Meanwhile, Brazil and Canada have become active in the manufacture of short-haul jets. China is the latest entry into this field; last month, the Commercial Aircraft Corporation of China announced the sale of five of its ARJ21s to General Electric’s aircraft leasing division, with an option for 20 more. The ARJ21 and other larger CACC-manufactured jets are essentially China’s effort to crack the market dominated by Boeing and Airbus.
Over the last few years, we have come to realize that anything we do can be done cheaper in China. This means that, if we don’t watch out, here in the Pacific Northwest we could be worrying about Boeing 20 years from now, just as Americans are worrying about General Motors today.
Therefore, even as we try to mitigate the woes of the auto industry, and even as the manufacturers begin to articulate a long-term survival strategy, I hope we will learn one important lesson.
Global economic competition is real, and it will only get more intense in the future. If we don’t learn that lesson, another bottom line awaits us: History does repeat.
Published in the Register Guard Dec 16, 2008
When terrorists struck in Mumbai, India was in the middle of a cricket tournament with the visiting English squad — though in a different city. The first of the engagements was a series of one-day matches in which India was on quite a roll, completely overwhelming the visitors. The country was preparing for the lengthier, traditional five-day test matches when the English team opted to return home as a result of the massacre.
Given how systematically the terrorists had targeted Britons and Americans, it is impressive that in practically no time at all the authorities in England decided the players would head back to India in order to participate in the test matches. But with one change: Instead of playing the first test in Mumbai as had been originally scheduled, the venue was shifted to Chennai, where I am visiting my family.
Dec. 15 was the final day of this first test match, and England had set up quite a challenging victory target for India. The Indian team rose to the challenge, and the winning runs were scored by one of India’s star cricketers, Sachin Tendulkar, who was born and raised in Mumbai.
It was a poetic and cinematic response that a “Bombaywalla” guided the team to victory. At the end of the match, when awards were presented, both Tendulkar and the team dedicated the victory and the test itself to the victims of terror.
It was almost as if the entire country was practicing an old preaching that the best form of revenge is a life well lived. In this case, the professional approach to winning a test match seemed to be a statement that Indians, and the British as well, would not let terrorists decide how life should be lived.
Getting back to “normal life” this rapidly also has lowered the decibel levels of belligerent calls for military action against terrorist bases in Pakistan. In their meetings with the prime minister and other leaders in India, American and British political leaders also have urged restraint. While not because of the cricket results, the defense minister also has stated categorically that India is not mounting any war effort. I hope that cooler heads will prevail.
Of course, a cricket series amidst extremely tense geopolitical worries is only the latest installment in human history when it comes to the intersection of sports, politics and war. The “ping-pong diplomacy” to help thaw the Sino-American relationships is an example of sports intermingling with international relations. Even the marathon, now held in cities across the world and in the Olympics, owes its origins to the Greek-Persian war 2,500 years ago.
I suppose sometimes sports is not always just about sports. As a new foreign student at the University of Southern California, I remember being impressed with the war-like preparation that I observed for football games. The first game USC played that season, and my introduction to college football, was a sort of re-enactment of history: the Trojans against the Spartans. To my disappointment, the Trojans lost!
Ironically enough, the teams met again at the Rose Bowl after winning their respective league titles. And the Trojans lost again! Such a maniacal approach to sports is, however, far better than the loss of lives and property, which was the case in the real Trojan War.
Along those lines, maybe the Obama administration should designate a “sports czar” who will work alongside the secretaries of State and Defense. Within a short time, this “sports czar” could facilitate soccer tournaments where teams with names such as the Baghdad Bombers and the Saudi Skyjackers can compete, where a soccer ball and the players’ feet and heads will be the only “weapons” for the youth to work with.
Then, comparable to India’s response to terrorism, the rest of the world can deliver a blow to the likes of Osama bin Laden without resorting to violent retaliation and merely through sports.
Hey, I have an inalienable right to dream, right?
Published in the Register Guard Dec 22, 2008
Wednesday, December 31, 2008
As world financial markets collapse like fraternity pledges at a keg party and banks fail around the world, the International Monetary Fund implements an emergency program under which anybody who opens a checking account anywhere on earth gets a free developing nation. But it is not enough; the financial system is in utter chaos. At one point a teenage girl in Worcester, Mass., attempts to withdraw $25 from an ATM and winds up acquiring Wells Fargo. ....
The stock market plummets farther as investors realize that the only thing that had been keeping the economy afloat was the millions of dollars spent daily on TV commercials for presidential candidates explaining how they would fix the economy. As it becomes increasingly clear that the federal government's plan of giving hundreds of billions of dollars to dysfunctional companies has not fixed the problem, the government comes up with a bold new plan: give more hundreds of billions of dollars to dysfunctional companies. Soon the government is in a bailout frenzy, handing out money left and right, at one point accidentally giving $14 billion to a man delivering a Domino's pizza to the Treasury building.