America has become a burden on the world

‘It is a US crisis at global cost’

S Gurumurthy is a chartered accountant by profession, but wears several other hats. He is the National Convenor of the Swadeshi Jagaran Manch, a mass-movement committed to the promotion of swadeshi industries and culture. He is also a renowned columnist, writing regularly for The New Indian Express and other publications. Often, he also acts a mediator in large industrial disputes.

In a free wheeling conversation with Claude Arpi in Chennai, Gurumurthy — known for his candid and at times controversial views on various subjects — speaks on the current sub-prime crisis and the civilisation choices which have triggered the present difficulties. He also reflects on the international food crisis, its political repercussions in India, and also on the Finance Minister’s recent decision to waive farmers’ loans.

In the second and final part of the interview, he argues that ‘It is not an economic crisis, it is only the economic effect of a moral, intellectual, social and cultural crisis.’

Part I: ‘The state has taken more responsibility than it should’

Do you think the US economy can recover?

The American economy has survived because it was able to saddle the bad loans on to other countries. The moneys lent on sub-prime basis was not American money. The mortgaged loans of the US banks belong to banks in the Middle East, in Korea, in Taiwan or even in India. It is a US crisis at global cost. That is why it affected the world.

Globalisation helped America to make the local loans, global loans. Out of the $1.5 trillion risk loans, the EU Central Bank issued a cheque for $512 billion in December 2007. The EU money was lent in the US, not in the EU. Today, America has become a burden on the world. They have over $7 trillions debt to the world and they are borrowing at the rate of $2 billion a day.

If the recession sets in, will it change something?

In the US, the recession will not be allowed to set in on the consumers’ front. They will print more dollars, put it in people’s pocket and ask them to buy.

How long can it last?

It can end all of a sudden. But it will not be the melt down of the Anglo-Saxon economic model. It will also be the weakening of the political structure, which is based on atomizing individualism.

Isn’t it getting worse?

Naturally! Is it going to come to a grinding halt? It is the question that everybody is asking today. I feel that it could be the end to this type of economy and reconsideration of the political premises that support this type of economy and, the end of dismembering the family to promote economics. Unless a larger dimension of life is integrated into politico-economic philosophy and policy-making, there is no answer within the present Anglo-Saxon Model. How to organise life, what is the place of men and women, of parents, of children, or, of elders? Unless there is an intellectual effort and social movement to reverse the degeneration, which has occurred mostly in the last 20-30 years, I see no possibility for this crisis to be averted. It is not an economic crisis, it is only the economic effect of a moral, intellectual, social and cultural crisis.

Does India have a role to play?

All family-oriented societies, where atomizing individualism is less dominant, have a role to play, not only India which is of course a significant country. How has Japan, which is a technologically-advanced country, been able to avoid the consequence of the crisis that the US has got into? Because of the family and community structure.

A balance is maintained between individuals on the one hand and family and community on the other. The market has been kept confined to business, and not allowed to penetrate families and communities. Look at the two economies. In family-oriented economies, women have an important role - it is a feminine economy, while the Anglo-Saxon is masculine, based on consumption and power. In Japan or India, it is based on carefulness, savings, safety - all characteristic of women.

Do you see the Nobel Peace Prize being awarded to Mohammed Yunnus for micro-lending, often to women, as the recognition of a new trend?
But they also awarded the Nobel Prize to (Fischer) Black and (Myron S) Scholes. The model for which they got the Nobel Prize in 1997 has greatly leveraged and risked the American and global economies. It legitimised and celebrated the Leveraging Model.

Bear Stearns, which collapsed, was leveraged 7 times in 1994. It was considered as safe. But it started leveraging some 30 times its own equity. This is what caused its collapse. This leveraging is based on the Black and Scholes model which received the Nobel Prize (for Economics).

The Nobel to Yunnus was not given as instituting feminine structure of micro-saving and micro-lending, it was just given to an individual, without understanding the philosophy of his model. The world has to take a conscious shift towards a sober, feminine approach.