There is a thrill of living in a fast-growing economy. Opportunities are aplenty. Factories are always humming. Jobs chase employees instead of the other way around. Prices of most things move up, but so does the income of individuals and companies. Every other company manages to mop up funds from a public eager to multiply its money. Double digit economic growth seems within reach. The buzz in all the activity says anything is possible. That buzz had started evaporating as the sub-prime crisis manifested itself and intensified but the September shock has pretty much eroded it. The lingo of everyday life has now changed completely. The new buzzwords are liquidity crunch, salary cuts, recession, four-day work weeks, job losses, black-days on the stock markets, stalled projects, collapsed currencies (think Iceland) and so on. As we get ready to enter 2009, at a time when zero is an aspirational number for many companies and economies suffering in sub-zero zones, here are a few themes which should keep the spirits high until we are fully ready to “Come out and Play”. That, incidentally, is the catchline for the Commonwealth Games slated to be held in Delhi in 2010.
Jan 20 = Obama = Hope
On January 20, a new President will be anointed in the world’s most powerful nation who is unlike any of his 43 predecessors. This is a young African-American who has been elected at a time when the world is passing through its worst economic crisis since the 1930s. He is not only a beacon of hope for America but for the whole world and he can single-handedly give us the confidence that anything is possible. He is said to be readying a stimulus package for the American economy which could be as high as $1 trillion — about the size of Indian economy. If India can be hit by the ripple effects of the global crisis, get ready to be benefitted by the ripple effect of such packages. Add to that the list of the other interesting possibilities during the year — a car for Rs 1 lakh (Nano), oil below $30 per barrel (after a high of $147), third generation telephone networks, return of foreign institutional investors and other such things — and it may seem that the worst of the economic pain is behind us.
Magic of People Power
If there was any doubt that the power in a democratic state vests with the people, one just need to look at the number of heads that rolled after the debacle of the Mumbai attacks last month — one central minister (Shivraj Patil), one chief minister (Vilas Rao Deshmukh) and one deputy chief minister (RR Patil) for reasons ranging from sleeping on the job to arranging unofficial tours of terror sites. Expect to see a more vociferous exercise of this power as the country elects a new government in the next few months. Whether we end up with a new team or bring back the existing one, a new government brings new plans, new activities, new spending and renewed hope and energy.
Joy of Back-to-Basics
The financial thriller Barbarians at the Gate by two award-winning journalists, Bryan Burrough and John Helyar, talks about the three rules which Wall Street lived by during the late 1980s when the $25 billion battle for control over RJR Nabisco was fought. They were:
It seems the same mottos came into play to germinate the sub-prime crisis. They are now set to be reversed. The trend is back towards time-tested virtues like living within your means and being thrifty. Cash is now king as we all know, and ranks much higher than any of its fancy derivatives that fall under the assets head. Truth is not an option but a necessity if you want to survive (think Richard Fuld of Lehman), and there are serious consequences for breaking the rules. Sanity is in. Cautious optimism is in. Irrational exuberance is out. That should make the world a better place to live in!
Year of revival?
Whatever goes down must come up and vice versa. The key question is when does the upswing begin. The trillions of dollars worth of stimulus packages that have been announced around the world from the US to Europe to China to India should have an impact on the most stubborn growth inhibitors sooner rather than later. The economic crisis has also brought the world closer to enable coordinated fiscal action. The US and Europe were already doing it and now the wind has swept Asia too. Over the weekend, China, Japan and South Korea agreed to work together to tackle the global financial crisis. There are those who expect the impact to be visible in the second half of 2009 while there are some who expect no serious revival winds to blow until the second half of 2010.
My advice: Stick with the optimists. Smile more often and enjoy 2009. Happy holidays!
