By Tensing Rodrigues*
Couple of month’s back we had reminisced about the financial crisis of 2008. And we had spent quite some time in discussing some of its aspects. We had then noticed a particularly disturbing trend in India, viz. the hyper-spending on the part of households. Today let us look at a macro picture of that trend or rather the macro-consequences of that trend and how it can impact the households in return.
Our lessons are drawn from the experience of the US and European economies. A note of caution before proceeding: Do not be misled by the rising Dollar. It is no sign of the strength of the US economy but simply a hangover of the good times when US was a strong economy. What is more important is to realize what made US a strong economy? It was, what has come to be called ‘the protestant ethic’. Though Max Weber first used the term to draw the connection between the Calvinism and Capitalism, today it has no connection with any religious concept. In contemporary economics it simply refers to a culture of ‘hard work, discipline and frugality’. Over three centuries between 1776 and 1929 hard work, discipline and frugality became the driving forces behind building a powerful nation and a prosperous economy. The Great Depression marks the end of that dream and Roosevelt’s New Deal the beginning of the struggle to keep it alive. New Deal was simply the early version of quantitative easing; the only difference is that while the New Deal was based on the Keynesian economics, quantitative easing is more monetarist. From then on US has been on a binge– spend to survive. Though not on the same curve but sharing in the US spending spree, Europe too joined the party.
And now it is our turn. Good. Very good! But we need to see US and Europe at the next turn. US and some of Europe began partying after they had grown up. We have begun even before we have learnt to tie our shoelaces. USA and Europe will take a long time to crumble. But we? That is the reason it is urgent to get back to hard work, discipline and frugality before we pour our next glass of lager.
Remember, all this begins at home; I mean at the micro-level, not at the macro level; that is, at the level of the households, not the economy. It pays to remember the religious roots of the protestant ethic – that is, to remember the fact that the roots of economic behavior lie in the individual attitudes : working hard to create value, being disciplined in the use of the value created and using the bare necessary of it for personal gratification; the rest going for building the future; of the individual, and through it, of the nation. In simple words : saving and investing !
Even in this age of overspending, one does come across stories of individuals who follow the US model – the old US model, not the new one ! They work hard, save and invest – and then enjoy the rest of their life; enjoy doing what they love to do, not at the mall, disco or pub. Take for instance the story of John Eric Gomes. Substitute that John with Projoy or Dhundappa; makes little difference. John worked for a multinational bank for 20 years – from 25 to 45. Moved up the ladder, raked in good moolah. And then decided to call it quits. He lives in a modest but well provided flat in Caranzalem, with his wife and the two kids. No worry to rush to thumb the biometric machine, no pressure to perform. Not that John is idle, lounging on volter with a glass of urrac. He does that too, along with the work he has taken up. He is busy as any bee; that keeps him fit and on his feet. And most important of all, he feels fulfilled. He does earn; but he does not have to slog to earn. He slogs to get to his dream goal – to put his knowledge and experience to use for a better community. His logic is : for twenty years I have received abundantly from the system, now let me use it to keep the system running, and running on the right track; when one is a part of it, one has to be a slave of it. But all this becomes possible only with hard work, discipline and frugality.
* The author is an investment consultant. Readers can send their comments and queries to email@example.com