Two Indias @ Harvard India Conference 2011

I had the opportunity to attend the Harvard India Conference organized by the Harvard Business School every year this last weekend and got to hear views of a cross section of people on India. Speakers included Politicians, Economists, Businessmen, Harvard Professors, Social Entrepreneurs and Writers. Title of the conference was titled 'India - march of a Billion Aspirations'

Key themes that emerged out of the conference were mostly the same that we hear and read every day : a land of opportunity with an emerging middle class, young, educated and English speaking population, and traditions of democracy and independent judiciary. On the flip side, corruption was highlighted as being prevalent in every aspect of life and holding India back. Every one had a view that India of today is a divided India - the urban India with an educated, confident and wealthy middle class and numerous Billionaires and the India that is terribly poor, illiterate, hungry and do not have access to even the most basic of healthcare, nutrition, education and infrastructure. Which India would eventually prevail remains to be seen. A renowned Harvard economist summed up his response to the question beautifully that got me thinking - he said if India is a land with the march of a few million aspirations, then this rally would soon collapse. If this march is that of a few hundred million aspirations, then the rally would survive a decade or so. But for the rally to survive in the long term for India to truly become a superpower and a civilized society, it has to become the land of billion aspiration in a true sense.

Now this is one question which flips me out. As I noted in my earlier post, India is home to more than 60% of worlds total malnourished children population. At the same time, we are home to 52 billionaires (4th highest in the world), 100,000 dollar millionaires and have the distinction of being host to the most expensive $ 2 billion home in the world. I have been looking for research into whether Indian growth has been more or less inequitable than countries who have gone through this development process - views welcome. I also want to understand which country has had the distinction of least inequitable growth throughout the cycle and what are the lessons to be learnt.

While the conference was overall well organized and well received, one thing left me a little amused - why did Harvard call Subrata Roy Sahara to deliver the closing key note address - first page on Google search reveals he had a bailable warrant issued against him in January this year and he is commonly known as the most corrupt businessmen in India? Guess sensationalism works everywhere. I reckon Baba Ramdev would have been a better bet than him.

No Indian university in Times top 200 universities of 2011

I am not surprised at the latest 'Times Higher Education' ranking where no Indian University features among worlds top 200. I am also not surprised by China's rise with 6 universities featuring in top. Despite all the talk about state of education in the US, 7 out of top 10 are American universities and I doubt if that's going to change anytime in near future. Fact remains that the best and the brightest of the world come to the US for higher studies and this again is not changing anytime soon.

In this post, I want to express my thoughts on why Indian education system is gradually deteriorating at a time when we as a country seem to defying the age old process of economic development - skipping the industrial revolution and becoming a services driven knowledge economy. Needless to say education plays the most vital role in this knowledge economy.

Government's decision to increase the number of IIT's has eroded the IIT brand value. Established IITs (6 of them) seem to be satisfied to have become a factory of producing IT engineers and analysts - very little research seem to be coming out of the IITs. Poor pay and infrastructure drives the best academic professionals away. I suggest we privatize the IITs, let them enter into faculty and student exchange programs with top engineering universities and allow them to pay top dollars to deserving faculty. This would lead to a much higher tuition but given that future of IIT grads is typically bright, there should be no problems in students availing loans for a quality education - government can start subsidizing student loans and offering need based scholarship grants rather than directly subsidizing tuition. I just don't understand the rationale of a Modern School or Delhi Public School student spending less than 10% of what he / she spent in school for a world class engineering degree.

Same holds true for the IIMs as well. I doubt if government needs to even subsidize student loans in IIMs given that most of the graduates end up with great job offers.  

For undergrad universities like Delhi University - first step is to increase tuition. Paying less than a thousand dollars a year for an undergraduate degree is not going to get us the best education and infrastructure. Government needs to again walk away from directly subsidizing cost but rather move to a need based scholarship grants and interest free loans. Management of universities need to be put into professional's hands rather than bureaucrats. Why cant the Dean of Delhi University be chosen through a CEO search firm? Curriculum of most of the undergrad colleges is outdated and students get little or no practical exposure during 3 years. I believe its time to make undergrad degrees 4 years in tenor with internships and projects forming a substantial part of evaluation. More money needs to be put in to improve infrastructure and creating conditions for best minds to join academics.

It is time we allow foreign universities to come and set up campuses in India - to safeguard the interests of student from fraudulent universities, we can start with those featuring in the top 200 to come and invest or define a criteria.

We need to be open minded when we talk about institutions like IIPMs. We laugh at them and consider them to be fraudulent but lets not forget they do play a role in the overall system - they basically play on the skill gap formed in our undergrad colleges and try fill that. Their purpose is to make money and lets not bastardize them for that - lets try and put in place regulations that ensure student get their moneys worth rather than say IIPMs should not exist. Harvard and Stanford are not public universities - they are private universities and we need to embrace this aspect rather than revel in our socialistic past.
In the end, I still believe that quality of students coming out of our top colleges is comparable to the best in world. It is therefore not hard to imagine how much further better it can be with better infrastructure and faculty.

Primary education would be the subject of my next post.

Saving Capitalism!

Michael Porter recently co-authored an article in Harvard Business Review on "How to Save Capitalism". He elaborates on the fall of capitalism and how people's trust of capitalism has progressively receded even as businesses have increased their spending on CSR. After setting the context, he advocates the concept of 'Shared Value' as the panacea for Capitalism's current ills. He asks businesses to create economic value in a way that also creates value for society by addressing its needs and challenges. He urges businesses to take up the task of reconnecting business success with social progress. Some of the examples cited as known to most of us - Unilever's network of poor women in rural India to sell its products, Tata's focus on the bottom of the Pyramid, GE's strategy of selling environmental friendly solutions etc.

When Mr. Porter writes, the world reads and pundits come out agreeing or criticizing. The Economist has taken the concept of Shared Value and shred it to pieces. It has criticized the concept as undercooked and nothing new. Some of the industry leaders say it is interesting while some say it has to be a joke.

I am no authority on management or economics to offer a critique on what Mr Porter proposes or what other say of it. But on this topic, I do have a strong point of view. I strongly believe that a capitalist system within a democratic political system is the best of all systems tried so far. Communism, which is both a political and economic philosophy, failed miserably with the fall of Berlin wall and disintegration of the USSR. India's experiment with a mixed economy also failed in 1991. China's experiment with capitalism within a communist political system seems to be working so far but calling it a success would be premature. Saving capitalism therefore has an existential criticality attached to it. So here are my two cents on how to save capitalism:

Believers in Adam Smith's 'Wealth of Nations' never really read or chose to ignore his follow on work 'Theory of Moral Sentiments'. That is where the first and foremost problem of todays capitalism lies. To me, purpose of a business is to create a product or service that fulfills a customer need in the most efficient and compliant way to create economic value. Compliance is the key word here - businesses often focus on the efficient part and ignore compliance as policy making can always be influenced or businesses can just comply with the letter of the law while defeating its spirit. Businesses achieve this by employing an army of lobbyists, by financing political campaigns and by adopting highly skilled accountants and lawyers to circumvent regulations. First two deal with influencing policy making and the last one, on defeating the spirit of regulations.

Fixing the lobbyists and policy-makers nexus is the first step in fixing capitalism. It is unthinkable but for the influence of lobbying that derivatives market is still unregulated and run by a group of banks. Stated objective of derivatives as instruments for wider distribution of risk and efficient price discovery has proved to be empty rhetoric. AIG collapsed and needed a bailout due to derivative losses. But there has been no progress on regulating the derivatives market as yet. Even efforts for strengthening financial regulations have proved futile so far. In such an atmosphere, how could the people trust businesses. This nexus has to be broken to ensure sensible policy making prevails over influenced policy making. It starts from disallowing corporations and businesses from donating to political campaigns. Then lobbyists need to be reined in - a start would be to legislate no one holding a political position and their direct relatives would not be allowed to engage in any form of speaking engagement or any other activity that results in a monetary or quantifiable non monetary benefit.

Second step would be to align the incentives of management with that of owners and other stakeholders. The great management invention of separating ownership and professional management has turned out to a grave misalignment of incentive between managers and other stakeholders. Long term sustainability of businesses has given way to short term financial returns that are often built on excessive risk taking. These incentives need to be aligned to restore people's faith in management as they run corporations forming the very core of capitalism.

I am hopeful the world would not have to see a struggle for saving capitalism that creation and preservation of democracy has often seen and continues to witness.

Failure of the American Foreign Policy and Multilateral Setup

When it comes to foreign policy ideologues, there are as many as there are experts. Widely quoted experts tend to identify themselves as neo-conservatives, nationalists, realists, liberals and rationalists. Ironically, US despite being home to the best of foreign policy schools such as Georgetown, John Hopkins, Harvard and Columbia, foreign policy experts seem to have lost sense of a coherent foreign policy.

Not that this incoherence is a recent phenomenon - American foreign policy started loosing the consensus it enjoyed in the post second world war era starting late 1960s. US emerged as the undisputed superpower in the world after the second world war. It took on a leadership role in the post war reconstruction efforts and was able to gain acceptance as a leader by advocating protection of human rights, promotion of free trade, adoption of democracy and creation of a multilateral set up.

In the late 1960s however these principles which formed the backbone of US foreign policy started to take a backseat and the Nation became obsessed with the ideal of winning the Cold War and defeating communism globally. It eventually won the cold war but ended up creating a distrust in the mind of other nations in the process. US was now seen as a superpower which was not afraid to use its hard and soft power unilaterally for promoting its hegemonic interests.

The incoherence in the US foreign policy accelerated further after it won the cold war. American policy makers saw winning the cold war as a mandate to bully others into accepting a bundled package of democracy and economic liberalization regardless of their readiness. It also instilled a sense of supremacy which led the policy makers to assume they had the right to abide or overrule the very multilateral system US helped create in pursuit of its own interests.

US turned a blind eye to the genocide in Rwanda that cost more than 800,000 lives but pushed for intervention in Kosovo. Classified documents released to the public reveal how the Clinton administration knew of the Rwanda genocide and the plan to eliminate Tutsis and modest Hutus. Some say the non intervention was due to the earlier fiasco in Somalia while some say Rwanda didn't matter as it possessed no noteworthy energy reserves and had no strategic geopolitical value. Some also contend Rwanda was alien land with which Americans shared no identity. On the other hand even though the US intervened in the Balkans with force and cooperation of the NATO, the result was only a qualified and partial success. This brings me to the middle east policy.

Middle east has vast energy reserves and is geopolitically strategic. The fact however is that Foreign policy with regards to the middle east is now a clearly visible failure as well. Israel and Palestine are not even remotely close to resolving the conflicts and most of the middle east is rising up in protest for freedom. Mobarak who was eventually disowned by Obama was once the favorite ally of the US and Israel in the middle east. Mobarak was showered with American arms and greenbacks to remain friendly to Israel and keep Islamic militancy in check. His autocratic means and oppression of Egyptian didn't bother.

It is pertinent however to ask ourselves; in a global world where everyone is competing for the finite amount of resources, should America be expected to promote democracy and human rights or should it be allowed to choose its allies and policies pragmatically on the basis of their strategic value. Why should the American taxpayers be made to pay for keeping Israel safe at the cost of annoying countries with enormous energy reserves and keep spending money and earn hatred of locals while intervening in civil wars? I am afraid, there is no easy answer to this question.

Truth is it is not just the US that wants to intervene out of strategic interests or many a times out of compulsion, but also that the world has come to rely upon the US for solving any and every conflict. That says a great deal about the ineffectiveness and failure of the entire multilateral set up created after the second world war. UN is turning out to be a disaster after all those years of hard work. It has not been able to fulfill even the most basic of its reactionary duties. Expecting it to react pro-actively would be like expecting Microsoft to outsmart Apple and Google.

It is also a telling example of how ineffective the EU has been in rising up as a genuine superpower. Secondly, US by being so hegemonic and vocal about its role in the world has bred the impression among countries and the people that its ready to defend the basic principles of Human Rights, Democracy and Free Trade. My feeling therefore is that if you carefully breed a sense of dependency into the mind of others, you are also supposed to live up to those carefully bred expectations and this is where the US has lost ground.

The financial crisis where many see the American financial system as responsible for pushing the world into recession has further dented American credibility in the global establishment. Given all this, America need to reorient itself and try to be persuasive and respectful and give up bullying. We have seen how one solution doesn't fit all in the failure of democracy in Iraq and Afghanistan imposed by the US. We have also seen how we cant come to rely upon the Americans to bail out each and every problem in the world.

Therefore what we need is an urgent and fundamental reform of the UN and the Security Council. We cannot trust 5 veto wielding nations to protect the sovereignty and security of other 187 member nations, especially when they are competing among themselves to capture more and more energy resources and geopolitical leverage. This reform process need to start with the expansion of Security Council and elimination of veto power. The General Assembly need to come out of its dysfunctional state and exert its influence. It needs to have a strong and equipped reserve military that can be rapidly deployed to control situations such as Libya and prevent events such as the Rwanda genocide from occurring again. Unless the UN emerges out of its hibernation or a strong replacement multilateral organization is set up, we would continue to have whats happening in the Middle East and Africa.