B. Ramalingam Raju has been much on the minds of the citizens of our Republic, whose birthday we celebrate tomorrow. It is thus a good time to reflect on Satyam’s moral significance for our post-liberalization era. Although the story is still unfolding, there are intimations of sadness and tragedy about a man who has committed the greatest fraud in Indian corporate history. The swindle was worth Rs. 7136 crores, and the deceit went on for seven years. As a result, the public—both Indian and foreign investors—have lost around Rs 23,000 crores in the value of their shares, and over 40,000 employees face an uncertain future.
Raju built through skill, talent and dedication a great company. Ten years ago, I looked him in the eye and I saw sincerity, competence, and great purpose. I saw ambition, not greed. Soon after that I ran into one of his customers in the U.S. and she spoke glowingly about Satyam’s dedication to quality, reliability, and integrity. There is no tribute greater than a satisfied, passionate customer, and it explained to my foggy mind, at least in part, why India had become the world’s second fastest growing economy.
Why should a person of such palpable achievement turn to crime? Was it just greed or was it because his stake in Satyam had dwindled to 8.6 %, and the company was in danger of slipping out of the family’s control? Raju had two sons and possibly a sense of filial duty drove him to create companies in real estate and infrastructure, two sectors of our economy that are only half liberalized, where politicians insist on bribes up-front for favours delivered. Since revenues from the new companies were far away, Raju dipped into Satyam to pay the politicians. It might have worked but no one counted on a downturn and a liquidity crisis. Desperately, he tried to restore the stolen assets back to Satyam by merging it with his son’s companies but that didn’t work.
When Raju crossed the line from his cheerful and familiar world of open and competitive capitalism into the dark nether regions of crony capitalism, he was no longer in control. He had walked from the transparent world of reformed India into the shadowy underworld of unreformed India, whose rules are set by crooked politicians. Why did he do it? Greed is too easy an answer. It might have been hubris, like Duryodhana’s in the Mahabharata, who thought he was master of the universe and could get away with anything. It is easy to believe your infallibility when everyone in Hyderabad tells you so.
The better comparison, I believe, is with the father. Raju was ruined by his Dhritarashtra-like weakness for his sons. We should nurture our children, but we don’t need to leave them a company each, certainly not by crossing the line of dharma. It takes moral courage to resist the sentiment of partiality to one’s family. This is why the Mahabharata challenges the old sva-dharma of family and caste, preferring instead the newer, universal sadharana-dharma, which teaches us to with behave impartially with everyone.
Satyam is a case of fraud and criminality. So, let us also stop wringing our hands, looking for regulatory answers. It is not a governance failure. Internal and external auditors, and independent directors are guilty only of negligence. This was such an ingenious crime that that no still understands it. Remember, there are crooks in every society, and they will get around the most fool-proof systems. So, don’t try to reform the system—it will only create more red tape and kill the animal spirits of capitalism. The important thing is to quickly get to the truth, and put the guilty behind bars. Ideally, make the crooks sing and book their political protectors as well. Don’t blame liberalization either--the answer is more reform, not less, in order to break the nexus between politicians and business in the unreformed sectors of our economy.
Raju’s story causes us discomfort because it challenges our unexamined conception of success. Surely, there is a better way to live, we ask. Yudhishthira also challenged the kshatriya concept of success in the Mahabharata. When he insisted on taking a stray dog into heaven, he performed an act of dharma, showing that goodness is one of the few things of genuine worth in this world that might take away some of the familiar pain of being alive and being human in these post-liberalization times.
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Sunday, January 25, 2009
Friday, January 02, 2009
The Next World Order, New York Times
CHINA and India are in a struggle for a top rung on the ladder of world power, but their approaches to the state and to power could not be more different.
Two days after last month’s terrorist attack on Mumbai, I met with a Chinese friend who was visiting India on business. He was shocked as much by the transparent and competitive minute-by-minute reporting of the attack by India’s dozens of news channels as by the ineffectual response of the government. He had seen a middle-class housewife on national television tell a reporter that the Indian commandos delayed in engaging the terrorists because they were too busy guarding political big shots. He asked how the woman could get away with such a statement.
I explained sarcasm resonates in a nation that is angry and disappointed with its politicians. My friend switched the subject to the poor condition of India’s roads, its dilapidated cities and the constant blackouts. Suddenly, he stopped and asked: “With all this, how did you become the second-fastest growing economy in the world? China’s leaders fear the day when India’s government will get its act together.”
The answer to his question may lie in a common saying among Indians that “our economy grows at night when the government is asleep.” As if to illustrate this, the Mumbai stock market rose in the period after the terrorist attacks. Two weeks later, in several state elections, incumbents were ousted over economic issues, not security.
All this baffled my Chinese friend, and undoubtedly many of his countrymen, whose own success story has been scripted by an efficient state. They are uneasy because their chief ally, Pakistan, is consistently linked to terrorism while across the border India’s economy keeps rising disdainfully. It puzzles them that the anger in India over the Mumbai attacks is directed against Indian politicians rather than Muslims or Pakistan.
The global financial crisis has definitely affected India’s growth, and it will be down to perhaps 7 percent this year from 8.7 percent in 2007. According to my friend, China is hurting even more. What really perplexes the Chinese, he said, is that scores of nations have engaged in the same sorts of economic reforms as India, so why is it that it’s the Indian economy that has become the developing world’s second best? The speed with which India is creating world-class companies is also a shock to the Chinese, whose corporate structure is based on state-owned and foreign companies.
I have no satisfactory explanation for all this, but I think it may have something to do with India’s much-reviled caste system. Vaishyas, members of the merchant caste, who have learned over generations how to accumulate capital, give the nation a competitive advantage. Classical liberals may be right in thinking that commerce is a natural trait, but it helps if there is a devoted group of risk-taking entrepreneurs around to take advantage of the opportunity. Not surprisingly, Vaishyas still dominate the Forbes list of Indian billionaires.
In a much-discussed magazine article last year, Lee Kwan Yew, the former prime minister of Singapore, raised an important question: Why does the rest of the world view China’s rise as a threat but India’s as a wonderful success story? The answer is that India is a vast, unwieldy, open democracy ruled by a coalition of 20 parties. It is evolving through a daily flow of ideas among the conservative forces of caste and religion, the liberals who dominate intellectual life, and the new forces of global capitalism.
The idea of becoming a military power in the 21st century embarrasses many Indians. This ambivalence goes beyond Mahatma Gandhi’s nonviolent struggle for India’s freedom, or even the Buddha’s message of peace. The skeptical Indian temper goes back to the 3,500-year-old “Nasadiya” verse of the Rig Veda, which meditates on the creation of the universe: “Who knows and who can say, whence it was born and whence came this creation? The gods are later than this world’s creation. Who knows then whence it first came into being?” When you have millions of gods, you cannot afford to be theologically narcissistic. It also makes you suspect power.
Both the Chinese and the Indians are convinced that their prosperity will only increase in the 21st century. In China it will be induced by the state; in India’s case, it may well happen despite the state. Indians expect to continue their relentless march toward a modern, democratic, market-based future. In this, terrorist attacks are a noisy, tragic, but ultimately futile sideshow.
However, Indians are painfully aware that they must reform their government bureaucracy, police and judiciary — institutions, paradoxically, they were so proud of a generation ago. When that happens, India may become formidable, a thought that undoubtedly worries China’s leaders.
---Gurcharan Das is the author of “India Unbound.”
Two days after last month’s terrorist attack on Mumbai, I met with a Chinese friend who was visiting India on business. He was shocked as much by the transparent and competitive minute-by-minute reporting of the attack by India’s dozens of news channels as by the ineffectual response of the government. He had seen a middle-class housewife on national television tell a reporter that the Indian commandos delayed in engaging the terrorists because they were too busy guarding political big shots. He asked how the woman could get away with such a statement.
I explained sarcasm resonates in a nation that is angry and disappointed with its politicians. My friend switched the subject to the poor condition of India’s roads, its dilapidated cities and the constant blackouts. Suddenly, he stopped and asked: “With all this, how did you become the second-fastest growing economy in the world? China’s leaders fear the day when India’s government will get its act together.”
The answer to his question may lie in a common saying among Indians that “our economy grows at night when the government is asleep.” As if to illustrate this, the Mumbai stock market rose in the period after the terrorist attacks. Two weeks later, in several state elections, incumbents were ousted over economic issues, not security.
All this baffled my Chinese friend, and undoubtedly many of his countrymen, whose own success story has been scripted by an efficient state. They are uneasy because their chief ally, Pakistan, is consistently linked to terrorism while across the border India’s economy keeps rising disdainfully. It puzzles them that the anger in India over the Mumbai attacks is directed against Indian politicians rather than Muslims or Pakistan.
The global financial crisis has definitely affected India’s growth, and it will be down to perhaps 7 percent this year from 8.7 percent in 2007. According to my friend, China is hurting even more. What really perplexes the Chinese, he said, is that scores of nations have engaged in the same sorts of economic reforms as India, so why is it that it’s the Indian economy that has become the developing world’s second best? The speed with which India is creating world-class companies is also a shock to the Chinese, whose corporate structure is based on state-owned and foreign companies.
I have no satisfactory explanation for all this, but I think it may have something to do with India’s much-reviled caste system. Vaishyas, members of the merchant caste, who have learned over generations how to accumulate capital, give the nation a competitive advantage. Classical liberals may be right in thinking that commerce is a natural trait, but it helps if there is a devoted group of risk-taking entrepreneurs around to take advantage of the opportunity. Not surprisingly, Vaishyas still dominate the Forbes list of Indian billionaires.
In a much-discussed magazine article last year, Lee Kwan Yew, the former prime minister of Singapore, raised an important question: Why does the rest of the world view China’s rise as a threat but India’s as a wonderful success story? The answer is that India is a vast, unwieldy, open democracy ruled by a coalition of 20 parties. It is evolving through a daily flow of ideas among the conservative forces of caste and religion, the liberals who dominate intellectual life, and the new forces of global capitalism.
The idea of becoming a military power in the 21st century embarrasses many Indians. This ambivalence goes beyond Mahatma Gandhi’s nonviolent struggle for India’s freedom, or even the Buddha’s message of peace. The skeptical Indian temper goes back to the 3,500-year-old “Nasadiya” verse of the Rig Veda, which meditates on the creation of the universe: “Who knows and who can say, whence it was born and whence came this creation? The gods are later than this world’s creation. Who knows then whence it first came into being?” When you have millions of gods, you cannot afford to be theologically narcissistic. It also makes you suspect power.
Both the Chinese and the Indians are convinced that their prosperity will only increase in the 21st century. In China it will be induced by the state; in India’s case, it may well happen despite the state. Indians expect to continue their relentless march toward a modern, democratic, market-based future. In this, terrorist attacks are a noisy, tragic, but ultimately futile sideshow.
However, Indians are painfully aware that they must reform their government bureaucracy, police and judiciary — institutions, paradoxically, they were so proud of a generation ago. When that happens, India may become formidable, a thought that undoubtedly worries China’s leaders.
---Gurcharan Das is the author of “India Unbound.”
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