THE GREAT SURRENDER-3

 

 

 

ONCE upon a time there was an ant working hard in bright sunshine, storing food in her house. A grasshopper was sitting under a tree, playing music, and ‘enjoying’. Season changed, rainy days came. The grasshopper could not find good food to eat, but the ant was enjoying food and resting in her house, without any worries of survival. For, she had saved for the rainy days! This simple bedtime story for children has become a thing of the past. The wisdom of saving for the rainy days appears to be fading in the glitter of the growing economy. There are still many who are wise but most others are basking in the glory of a big bubble, without proper realisation of what is happening. For, they have surrendered willingly to the lure. The lure of fast bucks is the basic driving force behind the economic surrender. In the process, a lot of values get demolished, systems get subverted, rules get tweaked, risks are presented in attractive packaging, loans are glorified, and savings are disincentivised. Risky trading, hefty profits, little caution make a recipe for disaster. In contrast, Indian wisdom advocated a blend of savings and thoughtful spending so that everyone including the State exchequer had enough in store for rainy days. But, somewhere something went wrong.

 

It is difficult to mark the exact wrong turn in the long and complex history, but there are certain aspects to be flagged. India always took pride in being a ‘consumer market’. A few decades ago, India prided herself in being a consumer market of $800 million. Now, it has grown. But, the socio-cultural surrender dominated and the thought of India shedding the tag of ‘consumer market’ and building the identity as ‘maker’s paradise’ did not strongly cross the collective consciousness. This was surrender of economic thought. Akio Morita, the founder of Sony corporation, in his book ‘Made in Japan’ explains how the impression about Japanese made goods changed from being easily dispensable to the goods appreciated for quality. In a way, he refused to make an economic surrender. But, Indian psyche is different from that of Morita’s. A lot of Indian firms think in terms of ‘Dollars’ or ‘Pounds’ or ‘Yuans’ or ‘Yens’ or ‘Roubles’ instead of ‘Rupees’ even in domestic business documentations and presentations. They want to benefit from ‘aligning’ with global trends -- an indication of economic surrender. India made economic surrender through disincentivisation of small savings since the advent of the economic ‘reforms’. Monetisation of assets gained focus in the past few decades.

 

This gradually created a collective mindset that has led to monetisation of savings, which is risky for small and middle income groups. Savings are driven towards growing-but-volatile ‘markets’ ridden with uncertainties. Conventional savings instruments are treated as unattractive because of very low rates of interest. While chasing the dream of making it big in the ‘market’ without ample preparation and precaution, a big chunk of uninformed investors are forgetting the age-old wise advice of not putting all eggs in one basket. Today, this means achieving a fine blend of savings and market investments. Further, the Loan Economy has evolved, fuelled by rising aspirations of youngsters to own a house, car, or jewellery, frequent air travels, destination weddings, foreign vacations, credit cards etc. Even the high-end cellphones and laptops are lapped up on EMIs. Finance companies and even banks are distributing loans with a banana grin, but are building up a debt pool probably overlooking the possibility of defaults. The younger generation, while availing loans, does not treat the USorigin global economic meltdown of 2008 as warning. Then, the liabilities of major companies had surpassed the equity manifold. As the crisis unfolded, people lost retirement funds and savings, many were rendered jobless, companies and banks doomed, and the Government bailout packages helped the big fish in the ‘market’.

 

That time, India was saved by small or household savings. India benefited as the women had followed the age-old wisdom of putting money in piggy-banks, rice or wheat jars, collecting gold bit by bit on various festive occasions. Today, the age-old wisdom is treated as contemptuously outdated, forgetting that shortterm gains may have long-term consequences. Many lured by the gains land in ‘holding trap’, while compromising on meeting instant needs. Not many investors have enough holding capacity to gain from the effect of compounding. Many borrow money or take loans to meet instant needs, by mortgaging market investments or assets. This increases notional money in the market, and adds to the risk factors associated with ‘market economy’. Another disturbing trend is erosion of willingness of youngsters to save for the rainy days.

 

This has come from the socalled liberal economies, where people earn on weekdays and spend on weekends to ‘enjoy’, like the grasshopper. They buy what may not be necessary, they treat needless shopping as therapeutic, do not believe in building a chest with savings and conventional investments with a portion kept aside for insurance and market investments. The chain of fast bucks-losses-cheating to make good the losses, carries risk of moral compromise with farreaching evil consequences for social morality. But, most are unable to escape from this trap The best and the simplest solution to all the problems arising out of economic surrender is to inculcate good financial habits by asking the children to build savings in their piggy-banks. The elders disturbed with the spending pattern of youngsters should start gifting piggy-banks to the latter. This may not entirely reverse the surrender on the economic front, but may help change the mindset and gradually change the course in a positive direction.