The "Call-Centre Economy" of Girangaon

Normally, a book review does not have a place in AlternativePerspective, but this one describes some interesting parallels, and the "unintended consequences".

The following are the excerpts from the book review - published in the June 27th issue of Business World - of One Hundred Years, One Hundred Voices: The Millworkers of Girangaon (by Meena Menon & Neera Adarkar)

"This book is compulsory reading for the white-collar class. It may have lessons for them. They work long hours, as did the despairing workers of Mumbai's textile mills. When released late in the night by dictatorial bosses, they rush to bars, as the millworkers did. Over drinks, they abuse their bosses, as the millworkers did. In Mumbai, this daily 'happening event' is called Corporate Happy Hour.

The millworkers were an important social group of Mumbai. The city's economy depended on them. They were Mumbai's first globalised class, other than opium traders. They produced goods for a global market. The textile mills of Mumbai can be described as India's first call centres. Of the blue-collar class, of course. The world was mainly a blue-collar environment then.

The workers were recruited from Mumbai's impoverished hinterland. They pioneered hinterland dual-income survival...

The mill hours were long and the work environment harsh, especially for women. The cotton fibres they inhaled were a greater health hazard than sitting for ten hours in front of a computer screen. There was no maternity leave, and they had to be back at work the day after delivery. If the workers made a mistake, the cost of the mistake was deducted from their wages...

The millworkers lived in one-room tenements (chawls) which had common corridors... Out of this sharing emerged a working class with class. The people of Girangaon were patrons of music, drama and dance, cinema, literature and circulating libraries, painting and rangoli, wit and humour. They were keen readers of newspaper editorials. Religious festivals and the arts helped them to occasionally forget their hardships and convert Girangaon into a fun place. Many artistes emerged from this milieu.

The hardships produced aspirations of a better lifestyle. Savings became important, and gold was the most secure investment and insurance against calamity. Jewellery shops and moneylender Pathans mushroomed. The millworkers provoked the immigration of the merchant class. The mass migration to Mumbai resulted in many khichdi languages. Communication was more important than correctness. The linguistic orgy and aspirations found expression in Hindi cinema, which carried Mumbainess to the rest of the country with missionary zeal. Mumbai deserves special etymological dictionaries that would attract world attention.

Mumbai's aspirations nourished the real estate business and provoked innovations in architecture, engineering, transport and communications...

...The book is about the millworkers' economic and political struggles. Angry masses attract liberators. The first liberators to promise dictatorship of the proletariat to the millworkers were communists. They failed, and were replaced by others, including the Shiv Sena and the final executioner Datta Samant. The millworkers became vote banks who were manipulated by politicians with the help of ganglords.

The millworkers lost. Mill lands became real estate assets. The closure of mills defeated men, but women became entrepreneurs. Bank loans given to Girangaon women and their savings accounts would tell a very interesting story.

One Hundred Years tells the story of the struggle objectively, interspersing it with interviews of Girangaon people who relive those times. The interviews are timeless. The exploited across the globe in the past and the future cannot say anything that is very different from what those in Girangaon have said."

Subsidized Global "Free Trade" - II (Industry)

In the contemporary worldview, a belief and endorsement of "free trade/ market" - competition, level-playing field, removal of trade-barriers/ subsidies, etc. - has become a fashion statement of a liberal and modern mindset. It is also taken as a fact of life, since it is perpetuated by the popular mainstream media (which now also often includes management education and reports by investment analysts).

A couple of months back, this blog/newsletter had carried a posting about how the the rich and developed nations heavily subsidize their Farm and Agriculture (while at the same time, they put pressure on the less-developed countries to dismantle the subsidies on their agriculture and industry - through the "conditionalities" of loans given by the nations and multilateral agencies)

Even for the industry, the fact of subsidy holds. All global trade is subsidized (one may like to call it "incentivized") by developed countries

All developed countries have what are broadly called the ECAs (Export Credit Agencies), who provide lower-than-the-market loans to companies, loan guarantees for bad investments, low-risk financing for high-risk projects. These credits/loans allow the companies to export and market their products in other countries at a price lower than their manufacturing costs.

In US, for instance, (and am quoting this primarily, since US is a champion of "free-trade" cause), there are these various agencies/programs which serve this purpose:

Exim Bank of USA

Overseas Private Investment Corporation

Export Enhancement Program

Martime Subsidies

Advanced Technologies Program

Accelerated Depreciation Deduction

Corporation Tax Credits

Deferral of Taxes on US Corporations
etc.
This link lists 55 Corporate Welfare programs, inder different names, and their outlay in 1997:
http://www-hoover.stanford.edu/publications/epp/88/88d.html#table1

These program and agencies provide various kinds of subsidies and grants to businesses, e.g.,

below market loans and loan guarantees to businesses

below-cost or free provision of government goods and services to businesses;

above-market price purchases of goods and services by governments from businesses;

tax breaks and loopholes for businessesto escape taxes

loans for projects which cannot be funded due to international law; and,

business-protection laws or changes in laws that help business bottom lines.

One of the reports from Cato Institute estimates that during 1996-2002 these subsidies/incentives/ corporate welfare programs (have your pick for the term) amounted to $3.7tn - yes, $3.7 TRILLION!!! - that was doled out to american corporations... [essentially, meaning that a US company can market its produce at a price lower than its manufacturing cost!!!]

The "economic stimulus packages" which give tax breaks to large corporates, provide for further cushion. Interestingly, the benefits of this "stimulus" mostly go to large, successful and profitable corporations. A study found that between 1996-2000, just ten large profitable companies enjoyed a total of $50 billion in corporate tax breaks. That brought their combined tax bills down to only 8.9 percent of their profits over the five years (please note that in US for companies with taxable income of $10mn or above, the corpoate tax rate is 35% of taxable income). These were:

Microsoft enjoyed more than $12 billion in total tax breaks over 1996-2000. In fact, Microsoft actually paid no tax at all in 1999, despite $12.3 billion in reported U.S. profits.

General Electric, America’s most profitable corporation, reported $50.8 billion in U.S. profits over this 5 year period, but paid only 11.5 percent of that in federal income taxes. That low tax rate reflected almost $12 billion in corporate tax welfare for GE.

Ford enjoyed $9.1 billion in corporate tax welfare over 1996-2000.

Worldcom paid no taxes at all in two of the last three years during 1996-2000, despite reported U.S. profits of $15.2 billion. Worldcom’s total tax rate over the three years was only 1.6%.

IBM reported $5.7 billion in U.S. profits in 2000, but paid only 3.4 percent of that in federal income taxes. In 1997, IBM reported $3.1 billion in U.S. profits, and instead of paying taxes, got an outright tax rebate.

General Motors paid no taxes at all in three of this five years period, despite $12.5 billion in reported U.S. profits. GM’s tax rate for the past three years was negative 1.3 percent.

Enron paid no income taxes at all in four of these five years, despite $1.8 billion in reported U.S. profits. Enron’s total taxes over the five years were a negative $381 million.

El Paso Energy reported $1.6 billion in U.S. profits over the five years, but paid less than nothing in federal income taxes, getting tax rebates of $254 million.

Colgate-Palmolive paid no taxes at all in three of the five years, despite $1.6 billion in reported U.S. profits. Colgate’s total tax rate over the five years was negative 1.3 percent.

Navistar, on $1.4 billion in U.S. profits over the five years, paid only $28 million in federal income taxes, a tax rate of only 2 percent.

In addition, corporations - specially, the large ones - receive numerous subsidies from the states and local governments. Donald L. Barlett and James B. Steele in an article (Corporate Welfare,The Time, Nov 9,1998) report:

"State and local governments now give corporations money to move from one city to another--even from one building to another--and tax credits for hiring new employees. They supply funds to train workers or pay part of their wages while they are in training, and provide scientific and engineering assistance to solve workplace technical problems. They repave existing roads and build new ones. They lend money at bargain-basement interest rates to erect plants or buy equipment. They excuse corporations from paying sales and property taxes and relieve them from taxes on investment income."

They go on to give some specific examples:

In 1989 Illinois gave $240 million in economic incentives to Sears, Roebuck & Co. to keep its corporate headquarters and 5,400 workers in the state by moving from Chicago to suburban Hoffman Estates. That amounted to a subsidy of $44,000 for each job.

In 1991 Indiana gave $451 million in economic incentives to United Airlines to build an aircraft-maintenance facility that would employ as many as 6,300 people. Subsidy: $72,000 for each job.

In 1993 Alabama gave $253 million in economic incentives to Mercedes-Benz to build an automobile-assembly plant near Tuscaloosa and employ 1,500 workers. Subsidy: $169,000 for each job.

In 1997 Pennsylvania gave $307 million in economic incentives to Kvaerner ASA, a Norwegian global engineering and construction company, to open a shipyard at the former Philadelphia Naval Shipyard and employ 950 people. Subsidy: $323,000 for each job.

... and so on.

Needless to say, all this at the expense of the tax-payers' money...

I am sure what is true of US would also be true, in different degrees, for other developed economies... In fact, may even be true for the fast developing economies like China and India...

Yes, one may feel that all is not "fair" in the "free market economy"... But at least, now we do know how and why some "globally competitive companies" become gloablly competitive...

Sources:
http://www.cato.org/testimony/ct-sm060397.html
http://www.endgame.org/subsidies1.html
http://www.corporations.org/welfare/
http://www.ctj.org/html/corp0402.htm
http://www.socialconscience.com/articles/welfare/
http://www-hoover.stanford.edu/publications/epp/88/88a.html
http://www.time.com/time/archive/preview/0,10987,989508,00.html

13 Reasons To Believe Why We Live In A Crazy World

I am sure that there must be sound economic reasons - and purpose - for these snapshots of the world we live in. The list is longer than just these dozen (+1)facts, and I am still trying to figure out a rationale why these happen.

According to the FAO, every year governments world-wide spend $116 billion to catch just $70 billion worth of fish.

The production of one gram of microchips consumes 630 grams of fossil fuels. According to the American Chemical Society, the construction of single 32 megabyte DRAM chip requires 3.5 pounds of fossil fuels in addition to 70.5 pounds of water.

The cows of the North earn twice as much as the peasants of the South. The subsidies received by each cow in Europe and the United States double the average salary earned by peasants in the poor countries for a whole year of work.

in 1996, Food and animal feed imports to UK involved transportation by sea, air and road amounting to over 83 billion tonne-kilometres. This required 1.6 billion litres of fuel and, based on a conservative figure of 50 grams of carbon dioxide per tonne-kilometre resulted in 4.1 million tonnes of carbon dioxide emissions

The World Bank praised the privatization of public health in Zambia: "It is a model for the rest of Africa. There are no more waiting lines at hospitals." The Zambian Post daily completes the idea: "There are no more waiting lines at hospitals because now people die at home."

In 1998, journalist Richard Swift arrived in the fields of western Ghana, were cheap cocoa is harvested to be shipped to Switzerland for making chocolates. The journalist carried some chocolate bars in his backpack. The native harvesters had never tasted chocolate before. They loved it.

In 1998 Britain imported 240,000 tonnes of pork and 125,000 tonnes of lamb from overseas - and in the same year exported 195,000 tonnes of pork and 102,000 tonnes of lamb to other countries.

In the US, the average piece of food is transported almost 1,500 miles before it gets to a plate. In Canada, the average piece of food is transported 5,000 miles from where it is produced to where it is consumed.

Ever since China opened up to the so called "market economy," its traditional menu of rice and vegetables has been speedily overtaken by hamburgers. The Chinese Government had no choice but to declare war on obesity, which is now a national epidemic. The advertising campaign publicizes the example of Liang Shun, a young man who lost 115 kg (253 lbs) last year.

in 1997, Britain imported 61,400 tonnes of poultry meat a year from the Netherlands and exported 33,100 tonnes to the Netherlands. It also imported 240,000 tonnes of pork and 125,000 tonnes of lamb while exporting 195,000 tonnes of pork and 102,000 tonnes of lamb.

According to a UN study, the 20% Northern minority of humankind has: 82.7% of world gross national product, 81.2% of world trade, 94.6% of all commercial lending, 80.5% of all domestic investment, 80.6% of all domestic savings, 94.0% of all research and development.

In UK, among all products, food items travel the farthest before being consumed. On average, a food item travels 129 km compared to the average product travel of 94 km. Nearly 30% of household waste is food waste.

The annual market value of the world's water supplies is estimated at about US 1 trillion dollars. In the year 2000, for example, 12 countries received IMF loans - negotiated under the new Poverty Reduction and Growth Facility - on the condition that they privatize their water services. Eight of these were in sub-Saharan Africa.

I hope that one day I - and you - will be able to understand these, and make sense out of these kind of things happening around us. Till then, we will continue to live in this topsy-turvy world.

Sources:
http://www.sunsonline.org/trade/process/followup/1999/08310299.htm
http://www.zmag.org/content/print_article.cfm?itemID=2604§ionID=13
http://www.lifeaftertheoilcrash.net/Index.html
http://www.fromthewilderness.com/free/ww3/040605_world_stories.shtml
http://www.ratical.org/co-globalize/waterGrab.html

Victims of Development / Globalization (1): Ghana

This is an extension of the previous posting on Scorecard of Globalisation: 20 Years of Diminished Progress.

... bourne out of the realization that numbers and graphs, do not tell the whole story...
----------

Ghana used to be a favourite story in 1980s, to highlight the benefits of globalization. This small West African country - known as Gold Coast during its British occupation till 1956 - is (or used to be) a rich land of gold, cocoa, rice and timber.

For various historical/political reasons it "liberalized" its economy in 1983 when it took a loan from IMF - and became the favourite example of the wonders that GPL - globalization/ privatization/liberlization - can do for a country. Its success was compared with the growth of the South-Asian economies... etc. etc.

Ghana is now a HIPC (Highly Indebted Poor Country), and has received "structered loan relief" 26 times!!!

In 2001, John Kampfner, a BBC correspondent visited Ghana, and filed this report, which are snapshots of life in Ghana:

Ghana - prisoner of the IMF

Betty Krampa is a prisoner, thanks to the World Bank and the IMF. She has just given birth. She is sitting on her rickety metal bed in the corridor of Tarkwa general hospital. She's not being allowed to leave until she comes up with the money.

The policy is called cash and carry. Patients pay for everything - for surgery, drugs, blood, scalpel, even the cotton wool. Betty's parents are dead. Her husband is out of work. Her jailers are as ashamed as she is. But user fees have to be collected to keep the hospital going.

Ghana used to be called the model pupil. Now after 20 years of economic fundamentalism, what does it have to show for it? It's now about to join the ignominious club of highly indebted poor countries.

So, if the economic experiment has failed in a place like Ghana, what chances for anywhere else?

The poor have to pay for all the essentials of life, for education; for clean drinking water - even to go to the toilet.

A mile or so down the road from the hospital, I come across Mary Agyekum. She breaks stones for a living. Small flint hammer in hand, she sits on the parched ground under the sun, 12 hours a day, chipping away at boulders.

Her children help her out. If she's lucky, she receives £2 a week.

She tells me of her shame, of the pains she feels carrying her heavy loads of stones. She can only send two of her children to school now, but they are chased home by the teachers if she hasn't paid the fees on time.

Mary begins each day with a trip to the public toilet. If she's run out of money, she begs the woman at the booth to let her children in for free. Then she walks to the nearest borehole where she pays for a bucket of water.

This is what the World Bank calls full cost recovery.

The Agyekum family used to live well. They owned a farm. Then one day a mining company forced them off their farming land and took away their livelihood.

It's a familiar story here. Two thirds of the land in this region has been sold off to multinationals. Compensation is minimal.

Tarkwa is at heart of Ghana's gold mining industry. Gold may be the country's biggest export earner, but the people get nothing out of it. Urged on by the international institutions, the government allows mining firms to operate virtually tax-free for up to 10 years. Environmental and other regulations are kept to a minimum.

My journey across Ghana took me from the capital, to the mining region of the west to the rice growing area of the north. I was joined by Yao Graham, a Ghanaian activist who travels across the developing world, listening to communities' specific grievances and taking them onto the global stage - to institutions like the IMF and World Bank.

Yao's reaction to the events of 11 September was typical of many here. He was shocked and horrified. And yet, what struck me was the speed with which so many Ghanaians - as pro-British and pro-American as they are - made a link between terrorism and poverty.

"We're living in a world where so many people are feeling taken for granted," he tells me, "that unless the big powers become more sensitive to the demands of weaker countries, all of us are endangered."

The international institutions don't try too hard any more to defend their record. Peter Harrold, the World Bank's man in Ghana, admitted that global inequality was posing a much more immediate danger now.

And what about the IMF? "You learn that economic growth doesn't necessarily mean you're tackling social problems", its representative, Girma Begashaw, told me. Why, I asked, had it taken so long for this to dawn on him? All of us, he said, have to learn from experience.

And yet, in spite of the rhetoric, the attempts at contrition, in the villages the same economic fundamentalism is still being applied with the same vigour.

Why American rice?

In the village of Kpembe, I came across Azara Issah. She was filling her bucket with water from a dam she knew was infested with guinea worm. She didn't have the money to pay for clean water at the local pump.

The village chief invited us for lunch. We ate chicken feet, soup and rice - American rice. A mile away is the Katanga valley, once Ghana's rice bowl. It now lies fallow.

Ghana used to be self sufficient in rice. But then the World Bank and IMF decreed that markets had to open and subsidies had to stop.

Wherever I looked, I saw double standards. People here have to pay for the essentials of life, like water. In America, the government pours millions of dollars each year into propping up its water system.

And why is American rice the staple now for Ghanaians? Yes, you've guessed it. American rice is subsidised.
!!!

Source:
http://news.bbc.co.uk/1/hi/programmes/from_our_own_correspondent/1634514.stm

Scorecard of Globalisation: 20 Years of Diminished Progress

Most of the accounts of benefits of "economic reforms" and globalization (or whatever is practiced as "globalization" nowadays - a term gaining currency to make this distinction, is "new-liberal globalisation") are of two kinds:

They are based on anecdotal accounts, citing the example of a particular country (which often, as the case is, is the current poster-child for the media... E.g., at one time in 1990s, it used to be the "success story" of Argentina... that is, before the country went bankrupt). Similarly, currently, India and China, are the hot favourites, even though, among the transitional economies, both these countries have the most protective regulations and systems, have refused to open their economies in many sectors, and have developed at their own pace. Also, as we saw earlier in a posting on China's Rich-Poor Divide on this blog, even in these fast developing economies, the rich-poor divide is also growing just as fast.

Many "feel-good", "globalization-shining" books and articles, which blur the boundary between travelogue and serious social study - ranging from Gurucharan Das' India Unbound to the recent bestseller, The World is Flat by Thomas Milton - also fall into this category of euologies to globalization.

They cite growth on specific measurable economic parameters (GDP, exports, FX reserves, %age of global trade, specific sectors - e.g. IT exports in India or manufacturing exports from China, etc.) as the evidence of benefits of globalization. However, since societies and countries are not just numerically judged "economies", these aggregates and averages often fail to reveal the total impact of globalisation on the society/ country, and its people.

To my knowledge, there is at least one substantive study The Scorecard on Globalization 1980-2000: Twenty Years of Diminished Progress, conducted by Centre for Economic and Policy Research, which shows that the social - in fact, even economic - impact of globalisation and economic reforms is harmful to society.

The complete study is available at:
http://www.cepr.net/globalization/scorecard_on_globalization.htm

In the general, the findings show that

overall, the impact of globalisation and economic reforms was negative, and

in comparison to rich and developed nations, the less developed societies/ nations were more adversely affected.

The following are excerpts from the report, and some accompanying graphs:

"This paper looks at the major economic and social indicators for all countries for which data are available, and compares the last 20 years of globalization (1980-2000) with the previous 20 years (1960-1980). These indicators include: the growth of income per person, life expectancy, mortality among infants, children, and adults, literacy, and education.

For economic growth and almost all of the other indicators, the last 20 years have shown a very clear decline in progress as compared with the previous two decades. For each indicator, countries were divided into five roughly equal groups, according to what level the countries had achieved by the start of the period (1960 or 1980). Among the findings:

Growth: The fall in economic growth rates was most pronounced and across the board for all groups or countries. The poorest group went from a per capita GDP growth rate of 1.9 percent annually in 1960-80, to a decline of 0.5 percent per year (1980-2000). For the middle group (which includes mostly poor countries), there was a sharp decline from an annual per capita growth rate of 3.6 percent to just less than 1 percent. Over a 20-year period, this represents the difference between doubling income per person, versus increasing it by just 21 percent. The other groups also showed substantial declines in growth rates.

Life Expectancy: Progress in life expectancy was also reduced for 4 out of the 5 groups of countries, with the exception of the highest group (life expectancy 69-76 years). The sharpest slowdown was in the second to worst group (life expectancy between 44-53 years). Reduced progress in life expectancy and other health outcomes cannot be explained by the AIDS pandemic.

Infant and Child Mortality: Progress in reducing infant mortality was also considerably slower during the period of globalization (1980-1998) than over the previous two decades. The biggest declines in progress were for the middle to worst performing groups. Progress in reducing child mortality (under 5) was also slower for the middle to worst performing groups of countries.

Education and Literacy: Progress in education also slowed during the period of globalization. The rate of growth of primary, secondary, and tertiary (post-secondary) school enrollment was slower for most groups of countries. There are some exceptions, but these tend to be concentrated among the better performing groups of countries. By almost every measure of education, including literacy rates, the middle and poorer performing groups saw less rapid progress in the period of globalization than in the prior two decades. The rate of growth of public spending on education, as a share of GDP, also slowed across all groups of countries.

Historical Coincidences!!??

Disclaimer: This posting merely reports some historical events and statements. All characters mentioned below are now dead. Any resemblence to any living person or current events is just a historical coincidence.

"This so-called ill treatment and torture in detention centers, stories of which were spread everywhere among the people, and later by the prisoners who were freed... were not, as some assumed, inflicted methodically, but were excesses committed by individual prison guards, their deputies, and men who laid violent hands on the detainees."

Er... Lest one confuses this with some similar statements made about "few rotten apples" during last couple of years, this was a actually said by one Rudolf Hoess. Hoess used to be the SS commandant at Auschwitz, and made this statement during the Nuremberg trial for war crimes (Hoess was hung to death in Auschwitz)

During the same trials, Hermann Goering, who used to be the Commander-in-Chief of the Luftwaffe & President of the Reichstag in the Nazi Germany, was asked why he denied access to legal process and public trials for people imprisoned on suspicion. His response was:

"You must differentiate between the two categories; those who had committed some act of treason against the new state or those who might be proved to have committed such an act, were naturally turned over to the courts. The others, however, of whom one might expect such acts, but who had not yet committed them, were taken into protective custody, and these were the people who were taken to concentration camps... if for political reasons... someone was taken into protective custody, that is, purely for reasons of state, this could not be reviewed or stopped by any court.... People were arrested and taken into protective custody who had not yet committed any crime, but who could be expected to do so if they remained free, just as extensive protective measures are being taken in Germany today on a tremendous scale."

The Nuremberg Trials, as we know were, conducted after the World War-II for war crimes in 1945... That is, seven years after the year when Adolf Hitler was judged the Time magazine's Man of the Year.

Hitler was the Time's Man of the Year for 1938 (to be fair, Time magazine also judged Joseph Stalin the Man of the Year twice - in 1939 and 1942 - and has been clear that the recognition goes to people who impacted the world history "for better or worse" in that year). The description in Time read:

"Greatest single news event of 1938 took place on September 29, when four statesmen met at the Fuhrerhaus, in Munich, to redraw the map of Europe. The three visiting statesmen at that historic conference were Prime Minister Neville Chamberlain of Great Britain, Premier Edouard Daladier of France, and Dictator Benito Mussolini of Italy. But by all odds the dominating figure at Munich was the German host, Adolf Hitler.... Fuhrer of the German people, Commander-in-Chief of the German Army, Navy & Air Force, Chancellor of the Third Reich, Herr Hitler reaped on that day at Munich the harvest of an audacious, defiant, ruthless foreign policy he had pursued for five and a half years. He had torn the Treaty of Versailles to shreds. He had rearmed Germany to the teeth - or as close to the tooth as he was able. He had stolen Austria before the eyes of a horrified and apparently impotent world."

Earlier that year in March, Hitler had annexed Austria, reneged on Munich Treaty, and was in the process of taking over parts of Czechoslovakia. In 1939, Hitler invaded Poland... and led Germany into War...

Leading a country to war, apparently, was easy. As Goering stated in his trial:

"Of course the people don't want war. But after all, it's the leaders of the country who determine the policy, and it's always a simple matter to drag the people along whether it's a democracy, a fascist dictatorship, or a parliament, or a communist dictatorship. Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked, and denounce the pacifists for lack of patriotism, and exposing the country to greater danger."

...Luckily, however, we live in more enlightened times (!?), when freedom and liberty are upheld, and democratic values embraced by nation after nation. If any of the above seems to give one a sense of deja-vu, well... as the disclaimer says, it is just a historical coincidence.

Sources:
http://www.law.umkc.edu/faculty/projects/ftrials/nuremberg/hoesstest.html
http://www.law.umkc.edu/faculty/projects/ftrials/nuremberg/Goering1.html
http://www.kdhs.org.uk/history/v2/a/as_unit6/time_mag.htm

The Maya of B-School Salary

Yesterday, I received this interesting mail from a student, who will be joining the XLRI course this June:

"I will be joining XLRI for 2005-07 batch in PM&IR . I wants to know if is there a basic difference between the salaries for BM students and PM&IR students and if you can kindly tell me the average salaries for PM&IR and the prominent companies coming to the campus for PM&IR."

While such a curiosity can be considered natural, there were two things about the mail which struck me:

One, the subject of the mail was "urgent"... I wondered if he needed this information to take an immediate decision - and how would this statistical information really help in taking a personal decision, and

Two, this was the only query in the mail... no other questions, e.g., about the nature of jobs one can expect, what skills would be required, or what one can expect in the 2 years of coursework... It was almost as if after getting the offer for admission, the only worthwhile issue to consider is the salary one can expect after two years.

...this stimulated some thoughts about this obsession with salary, and salary statistics being being considered the primary criteria for ranking of education in B-Schools. The summary of those reflections:

Mostly the salaries quoted by the companies are not the ones which the B-School grad gets in hand. Since late 90s, companies started packaging their salary offers under a mysterious heading of CTC (Cost-to-Company). I consider it "mysterious", because calculation of CTC is actually more an art than a science. Anything can become a part of CTC...

Many companies add the induction training cost to their CTC (e.g., if part of your training includes a one month "foreign" assignment, it is bumper addition to CTC - besides of course adding the "foreign" glamour to the job offer); some others also add the cost of subsidised lunch in the canteen in the salary package (e.g., you pay Rs 10, while it costs company Rs 150/-, and so, Rs 140/day get added to CTC). Similarly, stock options, market value of chamari accommodation, medical insurance entitlement (e.g., if one is insured for Rs 2lac by the company, that also goes into calculating the entitlements), etc. - or even the market value of infrastructure provided to you (office space, PC, etc.) can be - and sometimes are - part of CTC... A few years back, one MNC bank had given an offer of Rs. 9.0 lacs/annum to one of the students; of which Rs 6.0 lacs was for the rental value of a flat in Malabar Hills, which the bank was providing for her accommodation!!!
(to be fair, now many companies do share both the CTC and take-home salary, but somehow the CTC occupies a larger mindshare)

Why do companies do this? Why not be just straightforward and realistic in quoting the salaries? One reason, of course, must be the economics of recruiting, i.e., apparently the person does "cost" them that much. But a more likely reason is the implicit knowledge that salary is the only (or at least the main) criteria which a young B-school graduate considers in deciding on a job... In fact, as the mail above indicates, it is often the main criteria for even joining the B-School in the first place.

Moreover, it is very rare that a student has actually studied the company s/he is applying for, for the job - information about the company is normally gathered through pre-placement talks (which most B-school students abhor to attend, and which often also present a pretty white-washed picture of the company), through feedback from their seniors who may have joined those companies, or through their own, or their batchmates', summer training experience in that company. Sometimes, the media reports (including the Best Employer Surveys, Best Place to Work, etc.) - specially, those published during last one years - also play a role.

But ultimately, the choice is determined by the salary package, since, under the peer-pressure during the "Placement Season", the salary also becomes a - one may say, the only - measure of one's self-worth.

The myth of CTC-masquarading-as-high-salary, however, does not end here. It gets further perpetuated by the B-Schools themselves, when they quote salaries for the subsequent B-Schools Ranking Surveys done by different magazines and newspapers. Ostensibly, it is done to create awareness about the institute, and to maintain/build the institute's "brand" so that it can attract better recruiter (who quote higher CTC/salary), and better prospective students (who aspire for higher CTC/salary)... I am not sure if rankings also attract better faculty to join the institute...

All B-Schools regularly highlight the highest salary offered to students, the average salary, number of "foreign placements", average number of job offers per student, etc. (I am always intrigued about the speed with which the calculations of "average salary" are made, within hours of the finishing of the placement - and weeks before the actual job-offer letters, which give the real break-up of salary, reach the students). In recent years, other statistics have got added to this list - e.g., how quickly the placement got over. Earlier it used to be calculated in number of days, nowadays it is quoted in "hours" - mostly indicating a change in method of calculating these figures!!.

Needless to mention, no B-School shares information about the "lowest" salary, or the "average salary of the bottom 30%", or about the number of students who did not get placed (even in cases when this happens: a few years back, one of the premier B-Schools, which had a large batch-size - about 300 - and was left with about 25-30 students without a job offer. It gave temporary jobs of "research associates" to all of them, so that it could declare 100% placements in record time!!!)...

Lastly, we have the magazines and newspapers, who play a crucial role in sustaining, and feeding, the illusions.

Why do these publications neglect other data - e.g., lowest salary - in their survey?

One simple reason is that they are entirely dependent on the B-Schools themselves for any information - and no B-school will share this kind of information (or, at least, will share it accurately). Secondly, to do an accurate survey of hundreds of B-schools requires resources - reporters who can travel to the business schools, talk to recruiter, alumni etc. - which will make the cost of the "story" prohibitive. In fact, often the survey is outsourced to some other agency.

This often makes the validity of information on which the survey is based, somewhat questionable (a year or two back, in one of the surveys, the publication also wanted to include "alumni rating" as a dimension. Naturally, it asked the B-schools to get survey forms filled up by a sample of their alumni... Well, the rest can be guessed!!!)

One must also mention that conducting B-School ranking survey, by itself, has emerged as an effective business-model for increasing circulation of any publication (and the huge ad-revenue it generates - virtually, all B-Schools issue ads for these special issues).

Correspondingly, there are some 6-7 B-School Surveys, conducted each year by different magazines and newspapers - each uses different methodologies, evaluates the B-Schools on different set of criteria, and each claims to be the "most comprehensive and accurate"!!!... Not many people notice this, but even for the same publication, the survey methodology and ranking criteria keep on changing from year to year!!!... it is almost like being ranked on your height one year, and on your weight the next year, making it impossible to compare rankings of a B-school across years, even on the surveys conducted by the same publication.

... An indicative example of the 'objectivity' of survey was the one done by a well-known global marketing agency for a certain well-known business magazine in 2003. On page 46 of that magazine was the description of the methodology. It read:

"It is based on (the agency's) trademarked xyz-Model, and it involves a perceptual survey of (list of dimensions)etc. By not depending on questionable factual information, and focusing exclusively on subjective information, the (magazine's) survey ends up being most objective of them all."!!!! [no, I am not joking or making it up - this is a verbatim quote!]

Not surprisingly, the ranking of the same B-School on different surveys can vary from being among top 10 to being relegated to something like No. 47...

[These lacuna would perhaps also explain why this year, the IIMs announced that they will not participate in any survey... Or why Harvard and Wharton had withdrawn from the Business Week survey last year]

In any case, by and large this "model" works: the implicit collusion among the recruiters, B-Schools and the media helps "manufacturing" a reality which suits all the three players....

...and who loses in the process?

...the naive prosective B-school aspirant - the kind, who wrote me that mail yesterday...

...till s/he joins the system, and becomes a party to creating/ perpetuating the Maya of B-School Salary....

Other Related Readings:

The Real Salaries in B-Schools (archived discussion board)
http://www.pagalguy.com/cat/archive/index.php/t-2195.html

There's many a pay slip... (EcoTimes)
http://economictimes.indiatimes.com/articleshow/46792795.cms

What ails Indian B-school education
http://us.rediff.com/money/2005/mar/16guest1.htm

The $150,000 googly
http://youthcurry.blogspot.com/2005/03/150000-googly.html

Get the best salary for yourself
http://in.rediff.com/getahead/2005/mar/03gd.htm

Disclosure!!! (coolavenue)
http://www.coolavenues.com/placements/2004/disclosure.php3

IIMs shun business school surveys
http://in.rediff.com/money/2005/mar/31iim.htm

IIMs should not shun surveys
http://in.rediff.com/money/2005/apr/13iim.htm

Community- & Eco-Money: Alternative Currency Systems

Mostly we take money and the currency system as a "given"... almost as if there is only one way in which money can circulate, be used... and affect the lives of people.

However, as one of the earlier posting (The Eleventh Round - A Fable) pointed out, the current monetary system, by its very nature, tends to promote inequality and social disharmony. Moreover, the global currency speculations of the FX markets tend to make local economies dependent on FX operators, and promote instability.

There are, however, many alternative currency systems in the world (e.g., Times Dollars, LETS (Local Exchange Trading System), Calgary Dollar, etc.), which are localised, promote stability and cooperation, and provide a more sustainable alternative. According to Bernard Lietaer there are more than 4,000 of such complementary currencies in operation around the globe.

Here is one example (given the facts: that 66% of human beings who ever reached the the age of 65 are alive today, and $trilions of unfunded pension liabilities and rising healthcare costs, such alternatives make immense sense):

Japanese "Relationship Tickets" and "Eco-Money"
Thursday, February 5, 2004

Two types of local currencies have been created in Japan to promote community, environmental conservation and health care. Hureai Kippu, or "Caring Relationship Tickets", were created in 1995 by the Japanese Welfare Institute so that people could earn credits helping seniors in their community. Sometimes seniors help each other and earn the credits, other times family members in other communities earn credits and transfer them to their parents who live elsewhere. A surprising part of the project has been that the elderly tend to prefer the services provided by people paid in Hureai Kippu over those paid in yen.

This may be due to the personal connection developed between users of the currency.

The second form of Japanese currency, called "Eco-Money", is a community currency much like Calgary Dollars, used to connect neighbours in obtaining the goods and services they need.

In the town of Kuriyama, Hokkaido, for instance, second grader Ami Hasegawa paid 1,000 kurins to get her favorite toy fixed. The kurin is the local currency that was named after the township. Ami's father earned 3,000 kurins for fixing the handrail of a staircase in a neighbor's house. And her mother paid 1,000 kurins to an elderly man who wrote addresses for her on postcards in beautiful handwriting.

In spring 1999 Kusatsu in Shiga Prefecture became the first city in Japan to use eco-money, calling it the Ohmi, which is what the prefecture was called in the old days. Several other cities followed suit with currencies of their own, with Matsue, Shimane Prefecture, calling it the dagger (borrowed from the local dialect) and Takaoka in Toyama Prefecture.

Some 30 more communities across Japan are introducing such currencies. Some municipalities plan to use the money to plant trees and reduce garbage. Eco-Money Network Secretary General Masanari Nakayama stated, "Eco-money is a way of getting neighbors to help each other out and to deepen their ties to the community."

references:
http://www.calgarydollars.ca/article/2004/02/japan.html
http://alternativeperspective.blogspot.com/2005/04/eleventh-round-fable.html
http://www.timekeeper.org/whatis.html
http://www.transaction.net/money/lets/
http://www.calgarydollars.ca/

SAP ("Structural Adjustment Program") - the Un(?)intended Consequences

One of the comments on the last posting on Argentina's Museum of Debt was: "The policy makers, economists all the big shots who decide on the behalf of their country must have been taking all this into account. If yes, then how do they accept to bind themselves to these "pseudo" chains of slavery?"

While, often the economic decisions do get influenced by the political "flavour of the day" ideology, there are also often the un(?)intended consequences of debt which are neglected by the policy-makers of the country...

This post is about these un(?)intended consequences of the IMF/WB loan/debt (one may even call it the Faustian Contract with Mephistopheles)...

Since there are no free lunches in the world - and so, the debt/loan from IMF/World Bank comes with certain strings attached to it - normally called "Structural Adjustment Program" (SAP) or "Country Assistance Program". These conditions call for "reforms", requires "austerity measures", suggests that the country should "open" the economy, allow "free trade", and become part of the "global economy".(now, who can argue against something which is dubbed as a "reform", "opening up", "free", "becoming part of gloabal economy", etc. - such is the power of words!!!).

The world, however, being more non-linear than what economists suggest/know, there are also the Un(?)intended Consequences of these conditions for getting the loan - leading to devastation of countries and economies.

Some examples of the conditions, their intentions, and their consequences:

PRIVATISE, REDUCE TARRIFS & OPEN THE ECONOMY/ MARKETS FOR FOREIGN OWNERSHIP OF RESOURCES AND BUSINESSES:
This is aimed to bring much needed capital into the country by making the business environment conducive for MNCs (many of which have a turnover larger than the countries GDP). Once the economy opens up, MNCs can easily purchase or start enterprises. To attract MNCs - and FDIs - countries also compete by offering tax breaks, low wages, free trade zones, etc. Often governments also offer implicit pledges not to enforce labor and environmental laws. Relaxation of tarrifs allows free-flow of foreign - often better quality - goods to domestic markets, and makes the luxury items within the reach of larger proportion of populace
Un(?)intended Consequences:

Control of entire sectors of economy shifts to foreign MNCs, whose sole reason for investing in a country is to make more profits

Makes it harder for domestic producers to compete against better-equipped and richer foreign suppliers

Leads to closure of businesses and layoffs, increasing the unemployment
---

CUT SOCIAL SPENDING & SUBSIDIES ON BASIC GOODS/SERVICES:
Reducing expenditures on health, education, water, farm subsidies, etc., will free up money for debt-repayment
Un(?)intended Consequences:

Increased school fees force parents to pull children - usually girls - from school. Literacy rates go down.

Poorly-educated generation not equipped for skilled jobs

Higher fees for medical service mean less treatment, more suffering, needless deaths.

Increased cost of basic items which are needed for subsistance.
---

REDUCE THE SIZE OF GOVERNMENT:
Reducing budget expense by trimming payroll and programs will free-up capital for debt servicing and for more productive purposes
Un(?)intended Consequences:

Fewer government employees means less capacity to monitor businesses' adherence to labor, environmental, and financial regulations

Massive layoffs in countries where government is often the largest employer, leading to rising unemployment

Makes people desperate to work at any wage, and under any conditions
---

RE-ORIENT ECONOMIES FROM SUBSISTENCE TO EXPORTS:
This is based on the Comparative Advantage hypothesis - i.e., do what you can do best, and access better quality of goods/services from those countries who have a natural advantage in those. For instance, if the country has that natural advantage, it should give incentives for farmers to produce cash crops (coffee, cotton, etc.) for more lucrative foreign markets; encourage manufacturing to focus on simple assembly (often clothing) for exports; encourage extraction of valuable mineral resources, etc. This will help the country to earn foreign currency, and ease in repaying the debt.
Un(?)intended Consequences:

Law of supply and demand pushes down price of commodities as more countries produce more of the same thing (as happened with Coffee, Sugar, etc.), resulting in driving down the earnings of local producers - often below their cost of production.

Local competition gets eliminated for foreign MNCs

Country becomes more and more dependent on imported food, goods and services.
etc.

....To be fair, the conditions of IMF/WB are not all that bad for everyone. They do help the educated middle-income groups in the developing countries to live a better - consumerist, insulated - life-style, and they - the bankers, business men, MBAs... - become the local champions for these policies...

Argentina's "Museum of Foreign Debt"

Every nation that has been invaded, occupied and devastated, has created some sort of monument/museum to preserve the memory of that invasion and occupation, for the posterity.

In the present days, the rules of war have changed, and the invasions and genocide come in the form of economic recovery packages (or as IMF/WB would put it: "Structural Adjustment Programmes") and foreign debt. And therefore, it was appropriate that Argentina should inaugurate the Museum on Foreign Debt.

This news item reports

Foreign Debt Museum Opens Its Doors
By Mary Milliken
Fri Apr 29, 5:40 AM ET

"Three years after staging the largest debt default in modern history, Argentina on Thursday opened what may be the first Museum of Foreign Debt to teach people the perils of borrowing abroad...

.... In one corner, a pink, doll-size play kitchen represents the recipes of the International Monetary Fund, which Argentines blame for encouraging the heavy borrowing in the 1990s that led to the catastrophic economic collapse in late 2001.

"We chose a play kitchen because we are always so innocent and believe in magic recipes from abroad," said museum designer Eduardo Lopez. "Look, we open the freezer and the oven and there is no food."

But the museum in the University of Buenos Aires economics department doesn't dwell only on this latest debt crisis: It goes back to Argentina's first default in the early 1800s and gives a detailed account of the last 30 years when the country's foreign debt woes snowballed.

Visitors can delve into a spongy "black hole" -- the place where all that borrowed money ended up.

"I liked best the black hole with everything the debt swallowed -- education, families, jobs," said Fabian Jader, 34, an opening night visitor. "I feel anger and pity for the people, but above all helplessness."

Argentina's economy has recovered at a healthy clip in the last two years and the country is on the cusp of ending its default of some $100 billion (52.3 billion pounds) in foreign debt.

But 40 percent of the population in the once-wealthy nation still lives below the poverty line, many of them in the crime-ridden industrial rust belt around Buenos Aires.

"People know absolutely nothing about how we accumulated all this debt, they only know about the misery they have seen lately," said museum director Simon Pristupin, who dreamed up the idea in 2001 and struggled to convince sceptics...."