Just a couple of months back, the entire global media fraternity was talking about the next probable war between China and Japan over the issue of a small group of islands in the East China Sea. Just when people thought that the issue was cooling down, last month, a delegation of former US officials submitted a report to Hillary Clinton that the dispute could spin out of control and result into a military confrontation; add to that China’s recently declared intentions to deploy marine surveillance drones to track maritime activity around the cluster of islands from where the conflict originated. The entire issue is certainly far from over, with both the nations in no mood to step back.

There is, of course, nothing new in the conflict between Japan and China. Through centuries, these two Asian neighbours have been brutal to each other – politically, economically and militarily. The Japanese monarchy before World War II was notable for their imperialistic intentions – they invaded China in 1931 to mark the beginning of a violent, 14-year occupation of the land, finally retreating only after the World War II reversals in 1945. However, in the post-World War geopolitics, the foreign policy trajectory between the two nations has swapped its direction. Since the past few decades, Japan has sought to maintain a nice-guy image, while on the other hand, China has wanted to treat Japan slightingly. Japan’s cooperative and accommodative foreign policy acted as a silver bullet for its economy, which saw an unprecedented growth from 1950s till 1980s. That period saw Japan barging into the elite club of developed nations (the only Asian country to accomplish the feat then) and becoming a part of G-7, or the seven most industrialized states in the world. That’s a remarkable accomplishment, considering the fact that this was the same country that had literally been reduced to ruins in the Second World War and also the fact that none of its Asian counterparts could mirror Japan’s subsequent economic achievements. China, like Japan, started a new journey from 1949, when the Mao Tse Tung-led Communist Party of China overran the country and gained control on its governance. But unlike Japan, China, in the first three decades, emphasized largely on a military buildup. Amidst this journey of these two Asian giants, one thing represented permanency – that these two nations won’t walk hand in hand.

Interestingly, Japan’s ruling Liberal Democratic Party had promised before the 2009 election that Japan would be more muscular in its foreign policy and had hinted then on a shift from being a US-backed nation to being one with a more Far East integration, including with China. However, that didn’t happen. The recent happenings have in fact worsened the situation. The first, significant barrage came from the Japanese government in early September 2012, when they revealed their intentions to purchase three disputed islands in East China Sea – a move that led to their fragile relationship with China nose-diving in no time. China pledged to thwart Japan’s intentions, and in response, sent three fishery surveillance ships to the territorial waters near Senkaku, the group of islands in contention. In return, Japan adopted an aggressive foreign policy stance and announced that they would take the Chinese bull by the horn – by mid September, Japan had officially bought the islands.  Read more....

An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).

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Ever since the American economy went bust and the European economy has been going down, it’s sad to see my favorite magazine, The Economist, frantically trying to defend the wrong and go wrong by criticising the right. Time and again. Just a handful of weeks ago, in their frantic effort to criticize everything Chinese and everything non-market oriented, The Economist did a cover story called The Rise of State Capitalism (January 21-27, 2012). Basically, the story talked about how economies like China and even India are becoming more dependent on large public sector units and how this is bad blah blah. The obvious supposed scare is that public sector corporations are inefficient, have time overruns, invariably have cost overruns, have ingrained corruption and so on! The real scare is the growing might of China, of course!

Our group is into almost all kinds of consulting activities and we rarely come across a private sector company where an executive doesn’t ask for a bribe before awarding a big contract. Sometimes we’ve even found out that a competing firm has used sleaze to satisfy the client being prospected and thus has obtained the deal. From Enron to Olympus to Accenture, there is no dearth of large corporations which have made the most corrupt of choices. Large companies – whether public or private – always have within them certain ingrained issues. And what differentiates them from one another are systems and leadership. Under a different leader, the same GE could be the world’s best benchmark example while under another, in just a matter of a few years, it could be a struggling joke! The same it is with the public sector. If systems are put in place like the private sector, there is no innate reason why public sector corporations should be inefficient. And if systems go wrong, then you could even have a Reliance being rated worse than a public sector company to deal with.

As a management teacher, at least that’s what I have believed. That the former USSR failed or that China is nondemocratic doesn’t mean that the public sector idea is wrong. The only truth is that governments must know what to plan and what not to. A government, for example, has no business being in the luxury hotels sector; at the same time, in countries like India, the government not being in health or education is a crime. There are wonderful examples of public sector successes and one of them is the Delhi Metro Rail Corporation (DMRC)! It’s a case study of our times.

In the midst of times where corruption was the high point and scams were unearthed left, right and centre, in the midst of the massive CWG scam, here was a corporation in the same government sector, under the control of similar ministers and bureaucracy and in the same country, with a key role during the same Commonwealth Games. And yet, the legacy of DMRC has been diametrically opposite and mind blowing! For records, the Delhi Metro has almost always completed projects before time. In fact, the first phase of the DMRC project was completed in seven years instead of the planned ten years. DMRC has had absolutely no cost overruns. Its efficiency is beyond any kind of international comparison with the trains being on time 99.97% of time! That too with a very strict guideline of one minute deviation as the standard of excellence – while internationally, in most countries, they term a 3 min deviation from scheduled time as on time! By all international standards, the Delhi Metro is world class and it was competed in the second shortest time in the history of the world as far as metro constructions go! And finally, to top it all, it has had no instance of corruption and it is as massive a corporation as it gets!
 
So what made the difference? Meet the man who was at the helm of it all Mr. E. Sreedharan and you will know! I have a theory – the corruption index of a man is always on his facial muscles. It’s not about being traditionally good looking or bad. It’s about the reflection of your thoughts on your face. The man who spends his life asking for bribes has a dirty bribe-seeker look on his face along with the look of someone who has an inner fear of doing wrong and getting caught. A reason why all the professors in our institute look distinctly different from the majority of the politicians in our country! Yes, E. Sreedharan looks like the former ones, my professors who taught me! Clean, honest and sincere! And when he speaks, he exudes integrity – growingly the rarest virtue!
 
“Four simple principles,” is how he explains his success story! The key to DMRCs success has been integrity! Yes, that’s what Sreedharan looked for first in his people! He wanted a free hand in selecting people and consequently got his old work acquaintances and others who were known to be totally clean to work with him; yet, he fired them at the first instance of an attempt to be corrupt! Integrity was his absolute top priority. It was followed by something that is interestingly massively linked to integrity! Professional excellence! The rule is simple. If you are talented, you are in a better position to not just deliver high quality results on time but also be more ethical. Those are the non-talented guys who retain their place mostly through corrupt practices! So within DMRC, Sreedharan had no place for the less talented! The focus on efficiency was so much that he did away with clerical staff! Today’s offices required no clerks; in fact, that’s from where the delays and corruption start! With these two key principles in place, the job was more or less done!     Read More....

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Growing up in a Bengali neighborhood, in Delhi's C.R.Park, meant even at an early age of ten, there were friends who knew the basic difference between capitalism and communism, and had clear-cut preferences! Of course, these preferences would be heavily influenced by their parents! And my father is perhaps the only Indian who did a full fledged Master’s Degree in National Economic Planning from an erstwhile communist nation, the erstwhile East Germany. Needless to say, my first story books were on Lenin's life and I had been totally charmed by him into believing in the positive aspects of communism, and till date remain so. And on the giant world map that hung in front of his study table, the country that I heard and studied most about till I passed out of my school in 1989 was a country many of my readers today aren't even aware of! A country called the Union of Soviet Socialist Republics! Ruled by leaders who followed and most importantly understood to a large extent the ideology of Karl Marx – voted by the BBC as the world’s greatest intellectual of the last millennium – USSR on the world map looked like half of the world; and for Indians then, they were the nation which was there to protect us finally in the eventuality of any real war.

They had given us steel plants, military aircraft and were our biggest friends. And for those of us who used to hate the Americans for their military aid to Pakistan, celebrating every success of USSR was a must! Actually, India still was a distant ally, if one were to take a look at the East European countries that USSR protected and developed like their own nation. Those who have visited the East European regions in those days, would swear that the benevolence of USSR was such that they gave those countries invariably a better standard of living than that enjoyed by the Soviet people. To understand what USSR was in all its glory and magnanimity, one really needed to compare its development with that of USA till 1989! From CIA to topmost economists and historians of that time, all used to agree then that USSR had become 40% of the Americans in terms of standards of living. What it meant in essence was that despite bearing the biggest brunt of the second world war, thereafter investing about 33% of their GDP on defense, taking care of the entire Eastern Europe – from East Germany to Poland – USSR, in a short span of 45 years, had reached the enviable position of being 40% of the American per capita income; but more importantly, absolutely equal, if not superior, as far as military might and space war were concerned. It also meant that it was technologically extremely advanced, just that it had not yet started using that ability to make the consumer’s life more luxurious. But on the streets of USSR you could never spot a malnutritioned child, someone without full access to education or healthcare! That was USSR, the saviour of the world from greedy capitalist aggression, humane in terms of its development priorities and a country that was reason why the world spent 45 years in complete peace; compare that with the next 20 years that we have seen of unbridled capitalist greed driven aggression.

This difference between the far, far more peaceful time post the second world war and now, is a direct result of what happened exactly twenty years back! History was literally rewritten on December 25, 1991, at 7:20 pm when Mikhail Gorbachev – doubted by many as an ideological spy of CIA, if not an actual one – aired his speech announcing his resignation as President of the Soviet Union. A couple of minutes later, the flag of the Soviet Union from Kremlin was replaced with a new tricoloured flag of Russia. And thus, the whole world map was reconstructed with a demise of not only a union, but the demise of a political ideology in itself. The massive Soviet Union that had stood tall for seventy four years acting as a bulwark to the hegemony of United States and its allies, was broken to pieces as Mikhail Gorbachev (the General Secretary or the first secretary of the Communist Party of Soviet Union) could not handle a pro-democratic wave in the streets of Moscow and elsewhere led by Boris Yeltsin – later clearly branded as a fun-loving drunkard devoid of any ideology. Boris Yeltsin aspired to become the President of independent Russia, a country which till then was ruled by a spate of extremely ideologically driven leaders, who, albeit authoritarianism, were committed to not just their country but the globe on the whole.

During Gorbachev’s rule, the iron curtain and strict state control of political, economic and administrative machinery that was beyond all pedestal of criticism was liberalized under the set of reforms Gorbachev named “Perestroika" (restructuring) and "Glasnost" (openness); these were brought into the Soviet system in 1985. Concurrently, the oil prices dropped sharply in 1985 and 1986, thus lowering the country’s revenue and foreign exchange reserves that led to the import crisis of grains, attracting widespread public ire. The dried up revenue stream eventually portended the country’s bankruptcy and the end of the regime! In a nutshell, the bumbling rush to enjoy the glitters of prosperity that the US-led West enjoyed, along with the influence of Yeltsin who was a diehard crusader of democracy, brought the Soviet era to an unfortunate end.

Contrary to the popular belief, and despite him being a key factor in the disintegration of USSR, Gorbachev did try to keep Soviet Union united and bring in a transition through economic, social and cultural reforms – but was thwarted by Yeltsin’s intent who wanted a drastic change to democratization – the pro-West groups keep on hammering the point that it was an inevitable trajectory; yet, one should take lessons from China on how they managed the transition that the Soviet Union couldn’t. Gorbachev concurred with this point as he emphasized again and again on August 21, 1991 (the day the coup was orchestrated) that the Union could be preserved! Even though the coup didn’t last more than two days, it brought in the death knell for the Communist Party and demise of Soviet Union. Gorbachev couldn’t prevent the Soviet Union from being splintered, and history was made.     Read More....

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The cracks are already visible all across Europe. It was first Greece, then Portugal and Italy, with Spain waiting in the queue. The current situation of Europe reminds me of the situation post World War II – wherein most European economies and societies were in complete anarchy! Since the last five years, European nations have been facing major economic setbacks, which have been triggered by political mismanagement and have impacted their entire social structure to a large extent. Today, fallouts of erstwhile strong economies are leading to a cascading effect and sending tremors across the continent!

Amongst all of them, Italy makes an interesting case because as a nation, it has been ranked among the top 25 most developed nations, has one of the best quality-of-life (features among the top ten in the quality-of-life index) and has a per capita GDP at par with other developed nations of the world. This fourth largest European economy is today struggling with a $2.2 trillion debt which is more than 120 per cent of its GDP. In spite of being one of the major manufacturing hubs of the region and boasting of big labels in the fashion and automobile industry, it has miserably failed to keep a balance between expenditure and income. UniCredit SpA (UCG) and Intesa Sanpaolo SpA (ISP) – two of Italy’s biggest banks – recently collapsed while five other large Italian banks have lost around 30 per cent of their share value since the beginning of 2011. Today, 20 per cent of their GDP is made up by the parallel economy and corruption ails the system. So much so that investors too are now shying away, which is evident from the fact that today Italy ranks lowest among OECD countries in the ‘Ease of Doing Business’ index; for that matter, Italy has seen a fall in all attributes since the last year’s ranking, with a drop of 10 points. The overpaid bureaucracy and corrupt political system have been instrumental in systematically destroying the nation, bit by bit!

The situation in Italy has been worsening with every passing day. More than 500,000 youths (aged less than 30 years) lost jobs between 2009 and 2010, in a nation that once had the lowest unemployment rate (around 8.5 per cent) in the entire Europe. Among this, the worst hit were pregnant women (around 800,000 pregnant women left the job as they were denied medical leaves) and low-cost skilled labourers. This not only led to a drop in family incomes, but also prevented hundreds of parents from sending their children to school. As a result, in the last year, the average school drop-out rate was around 20 per cent! And mind you, in Italy, the first six years of primary education are free.

Italy also fears that in the next few months to come, around one-fourth of the entire population may get trapped in the clutches of poverty. As per official figures released in July 2011, the poverty rate increased by 5 per cent and touched a figure of 29.9 per cent among households of 5 and more members. This is evident from the fact that in order to meet their daily consumption, the household savings rate in Italy has been experiencing a steep decline.

The savings rate that once oscillated between 25 to 34 per cent is now around 8-9 per cent! Needless to state that given the state of the socio-economic condition, societal crime too has increased in the nation. More and more unemployed youth attempted suicide in 2009 and 2011. On an average, 250 additional cases of suicides were reported in Italy every year starting 2009 – and 75 per cent of all cases were attributed to youth who were unemployed or lost their jobs. This is not all; kidnapping, assaults and sexual crime too saw a huge surge – around 25 per cent – since 2009. The cases of drugs abuse, teen pregnancy, drug addiction, alcohol abuse and depression have also seen an unprecedented rise in the last couple of years.

Add to this the problem of demographic replacement. According to a report published by the ISTAT (The Italian National Institute of Statistics) this January, the population growth is into a deep mess. Previously, due to migration, the population growth and the natural dynamic (the gap between birth and death rate) were positive. But then, after a huge protest against immigrants (due to the indigenous population losing jobs) the population growth started to decline. ISTAT reports that since the last four years, the natural dynamic is negative with the death rate surpassing the birth rate by 30,000 units; the average birth rate of women fell down to 1.40 by the end of last year. More and more parents are opting to not produce babies as they fear the high cost of medical and child-care. The government is also incapable of giving incentives for reproduction, as it did earlier, and had to discontinue their “fund for the newly born” scheme.     Read More....

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The strength of the Chinese population can be gauged by the very fact that today around 19.3 per cent of world population is Chinese.

But then, such a figure based on the law of averages hides more than what it reveals. The figure that talks volumes about the Chinese sphere of influence, at least with respect to human capital, is that of 50 million plus overseas Chinese who are settled in various parts of the world and playing their bit in accelerating the fast-paced Chinese economy. Today, overseas Chinese not only pump money into the Chinese economy but also facilitate Chinese ambitions of global cultural and political colonisation. Overseas Chinese have made themselves inimitable in almost all spheres of influences – from heading many hard power areas by chairing vital positions in global forums, military and political institutions of many nations to being the face of various soft power areas of influence. One may not be well versed with the Chinese powers-that-be, but at the same time, very few would be not well versed with the likes of Jackie Chan!

The emigration of Chinese dates back to the Ming dynasty, but the real wave of Chinese diaspora started in 1840s when thousands of Chinese left China and made their way to the United States, especially after the discovery of gold in California. Initially, uneducated and unemployed Chinese labourers left their homes and moved to the US (for mining and railroad jobs); but then, during the late nineteenth century, the scenario changed. Instead of labourers, those were skilled and educated Chinese who moved out to avoid the ill effects of poverty and famine – which were haunting China in the late nineteenth century. However, this time the destination was not confined to the US or the West; many Asian nations suddenly made it to the destination list of Chinese. Among all the nations, Southeast Asia and Australia (apart from US) attracted the most Chinese. With more and more Chinese moving out of China, most of the big cities across the world saw a huge inflow of Chinese.

Gradually, these people moved and settled down in a more organised manner and formed strong communities across the globe. So much so that most of the renowned cities (in almost all nations) have a China located somewhere – which today we call ‘Chinatown.’     Read More....

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