Picture of British Empire (http://www.atlasofbritempire.com/ )

deliriousattackInternet and Web Development

Dec 4, 2013 (3 years and 11 months ago)

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Kirpalani
1



Picture of British Empire (http://www.atlasofbritempire.com/ )

"The Sun never sets on the British Empire." This q
uote was used to
described the e
normous geographical landscape that Britain once possessed.
British colonies range from Australia out in
the east, to India, (The world's
wealthiest nation in this time, in terms of GDP, due to its gold, diamond, and
spices) to an array of African and South American nations. The Roman empire
,

equally

just

as dynamic as the British empire, similarly dominated
the world on
an economic scale, controlling the only center of wealth
, of its time,

in what is
currently modern day Europe. Both empires dominated the world in their time,
neither exist today. Ironically both empires posess similarities to a nation today.
The nation whose currency is the standard
-
bearer
for every nation in the world,
t
he nation that is looked on to resolve con
flict in times of disturbance, t
he nation
whose gross domestic product is twice as large as the next country; this nation,
the 2012 d
iamond of the world, The United States of America.




The dynamics of each empire

is far different from one another. Their
road to prosperity have few

fundamental traits in common. T
he Roman empire

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was l
argely developed by it's incredible military, and mi
litary technology that
was far advanced than any civilization during its time
,

or prior to it. The motive
behind the Roman empire in developing itself to its level of enormous strength
was to maintain their dominance amongst potential up
-
and
-
coming empires
.
Their dominance that lasted over 1000 years was motivated based on their
desire to maintain control over "all the lands"
,

and enforce their traditions and
values. Very little of their motive was based on economic sensitive strategy.
Ironically they also
had social caste layers, though this was a key contributor to
it's demise and eventual fall, this disparity amongst wealth status f
rom the Kings
and Lords to the s
ervants and peasants was evident structurally.

Forbes
magazine in a piece that identified sim
ilarities between these United States, and
statures such as the Roman Empire presented striking similarities. “The few
Romans who possessed that wealth and opportunity we
re able to negotiate tax
and le
gal concessions that greatly
weakened the central gover
nment
.

The
concessions that con
gress is granting the super rich

today, such as constantly
reduced taxes and freedom from legal restraint
s, head in the same direction.
Sound horrifyingly similar, the parallel railroad track doesn’t end there.

“The
end came

when the Romans started engaging in wars it couldn’t afford
.


Did
these efforts cost the Romans are large portion of $16 trillion?



Social inequality is a driving force to the development of an e
mpire.
Perhaps the inadvertent t
rigger of developing an em
pire may be economic
ally

driven such as the one exhibited by the Roman, British, and American em
pires.
Needless to say though, e
very empire, whether it be for eco
nomic benefit or
social benefit, that
there ever was exhausted all free labor options.

It was
simply

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just a component of their journeys to prominence. Even before the Roman
Empire, and therefore not nearly as documented,
the

prominent empire was the

Indus and Aryan empires which is present day India. Though i
n its later years it
became
strongly led

by muslim founders such as Shah Jahan (the builder of the
Taj Mahal), these empires particularly the Indus people were led by Hindus.
Many are aware of the severe displacements in Hindusim's social structure going
from Brahmins to the untouchables. Simila
rly, not only did the Roma
n kings
make strong efforts to c
ontrol Christianity, But used all those who were jailed for
practicing Christianity as free labor sources. To summarize, no peasants and
Christians, no Roman empire. Many historians have argued that

many Roman
invasions such as those of the Spaniards were for an increase of labor supply.
Fast
forward to the British Empire, t
he establishment of their South African and
Australian colonies were driven by British prisoners who were forced to move to
thos
e islands, and work in manual labor intensive assignments. Many in our own
countr
y's media would dare say this, b
ut even our empire the United States of
America was built on 100 years of slavery from Africans and Native Americans.
Fast f
orward to the 20th
century, inex
pensive labor alternatives were often fed
by large immigrant groups from the Irish,to the Chinese in the West Coast, to
presently Mexicans. Immigration and Slavery has been unfortunately been the
melting pot for our greatness. The argument tha
t free efficient labor is needed
for the inaugural development of an empire can be proven in each instance. Fast
forward

one last time, now to 2012.

Where in the world are soci
al inequality
gaps most evident?

Walk down the street in Marina Boulevard in Mum
bai, India.
A very common site especially on weekend nights are youngsters approximately
my age, sporting latest Italian automobile models from Lamborghini to Bugattis.

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You take a walk across the bridge not

more than a half a mile walk, a
nd you see
poverty

in its most extreme form. Children with their ribs being exposed due to
malnutrition, or in the best case for many of them the basic right to education
(India has now as of 2011 made it mandatory for all of it's children to attend
school). What has bother
ed me for most of my life and will continue to bother me
the rest of it, is that the 20
-
year
-
old driving a Lamborghini and a child who is
trying to convince his parents to let him go to school both have the same
passport, the blue and gold passport that sa
ys "Republic of India" Where else?
What about the only other country with a 1,000,000,000 plus population in the
world, China? One of the few things that the Chinese have innovated in the last
couple of decades are the invention of a sweatshop. Far too man
y articles are
being suppressed by the
, state run journalist who call themselves the

Chinese
media of workers attempting suicide within the factory grounds. What puzzles
me further is out the Chinese government is structurally designed. Under a
communist s
tate the function

(by definition)

of their economic motives, social
motive, and political motives are all intended to reach equality amongst all its
members or citizens. It is therefore hard to understand why so many of the
Chinese citizens are Into the un
developed western portion of the country, amd
not allowed to secure better opportunity, through better education and
healthcare in cities that are far more developed under these criterias. The
sanctity of human life in China simply does not exist. Further

illustrations of this,
include t
he one child policy which force

families to develop their family plans to
the one baby policy initiated by the government, Reporting of forced abortions
for female babies (also recorded in India), or their takeover of Tibet

creating an
environment where monks across the land are setting fire to themselves to

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exhibit
Chinese

government protest. Ironically enough, both of these countries
are being discussed as the diamonds of the future.

After all they already fit on of
the pr
eliminary requirements to
kick
-
start

their journey to superpower level.



The ability to exploit members of your own society or country for
economic benefit cannot be the only tool to create an empire, it may create short
term
fuelled

domestic success
, but were talking about worldwide success, on a
worldwide stage.

Countries such as Great Britain and the United States became
rich because their citizens overthrew the elites who controlled power and
created a society where political rights were much mor
e broadly distributed,
where the government was accountable and responsive to citizens, and where
the great mass of people could take advantag
e of economic opportunities. “
(Acemoglu,
pg.

45, 2012
)
Many have been abl
e to exploit their own people, j
ust
ask
Ahmadinejad

of Iran, Hussein of Iraq, or Castro of Cuba. There has to be
simply another ingredient to achieve this success. If the Romans went to the
Spaniards and said "give me your la
nd and dissolve Christianity", i
f the British
went to the Indians and s
aid "we will be stripping all of the gold, diamonds, and
spices from your land,(Academic economist believe India would have over $11
trillion in 2012 terms for its current GDP
vs.

$15 trillion the United States has if it
wasn’t stripped of her resources)
and a few of you will have to move 1000 miles
away (to what is now known as the West Indies) to work as slave
labourers
", if
Christopher Columbus went to the native Americans and said "we will be taking
this land, and (eventually) will allocate you to unpr
oductive land far away from
your current land (reference the trail of tear movement)", or even if our
predecessors went to Africa and told everyone in sight "Get on this ship, where
we will lock you into the lower compartment crammed with other rival triba
l

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members, with a decreased rate of survival because of lack of oxygen supply, to
eventually pick cotton as slaves"; I am sure the common response amongst the
Spaniards, Indians, Native Americans, and the Africans would be a resounding
laugh as if they jus
t heard an amazing joke. The common ingredient amongst The
above mentioned was a first
-
class military founded from first class, superior to
2nd

place by far (in their time)
technology .
Particularly

in the modern age the
development

of technology has been
unequivocally been derived from quality
education. Many nations have quality academic programs

namely Switzerland
and Japan, s
o it should be noted that quality education is simply the root of
which strong military technology is created. Quality education,
and access to it
amongst all it's citizens, is the father of innovation. Innovation in a peaceful
world is what develops the competitive economic demand that is driven by the
demand of the innovated good or service.


The world is far different than it was
when the Romans and British ruled
the world. With populations across the globe increasing exponentially, currently
at 7 billion versus well under 1 billion when the Romans ruled, the economics of
resource scarcity play a more integral part in defining your
self as a world leader.
You need energy from oil, you need gold as currency base, and you need minerals
for weapons and other vital technological components. The United States, China
and India's soils are all infertile in terms of producing necessary growt
h
medicines, so it will boil down to who can best innovate and create ways to
capture these resources. History has shown its the nation with the strongest
military, but we now live in a world of nuclear weapons, ensuring that
procurement of these "medicine
s" must be conducted on an intellectual level.


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The purpose of economic dominance, greatness, or any other adjective
you want to use to describe a superpower in the world must be constructed with
the motivation that it will be aggregately beneficial to all

of your country's
citizens.
Forbes noted “
The basic similarity between late Rome and present
-
day
America is that in each case manmade political and social developments
seriously damaged a formerly robust commercial world, leading to enormous
disparities i
n wealth and opportunity.” So
unds like a socialist statement? I
t

isn’t.
There was a common emphasis
we heard both Romney and Obama mention over
and over, “grow the middle class.” It has always been the larger mass
, the middle
class

of a country that will l
ead aggregate spending and consumption. The rich
wont do it on their own. C
hina and India’s middle class are

just starting to
blossom in number, hence the reason why there is such a large euphoria around
their future prospects.

E
conomist forecast that China
would

overtake the United States by 2016
as the
world’s

largest economy. This means nothing, when you consider that
China has a per capita income at only a small fraction of the United States. The
marginal benefits for their ci
tizens the British and Romans achieved throughout
their runs, should be the
models
. So is Switzerland the model for what a world
superpowe
r looks like? I would argue not. E
conomic supremacy is a function of
total economic output, and how well
its people ef
ficiently divides it
. The Swiss
divide their economic output
profoundly;

they just don't have a large enough
economy on a global scale from which the divisions are made. Few economists,
in a noticeable effort to sell more of their publications have made st
atements
indicating that nations like Turkey, Brazil, Indonesia, and even African nations

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are the latest, and future of the emerging markets movement.
As a matter of fact
Jim
O’Neill

of Goldman Sachs, the creator of the term BRICS has been a leader of
this

new “developing markets” fad, bringing them into the spotlight.
These
countries unfortunately don't possess the distinct advantages the original
emerging markets possess from a structural and demographic standpoint. Any
potential transition that will resu
lt in the United States stepping down from its
current superpower platform will be dramatic. Every world currency is based on
the United States
dollar;

the dollar is the underlying base of all foreign trade
transactions. The dollar, as described later stil
l holds of greatest value in the
world. What will a potential change in current world order mean for financial
markets and trade worldwide? It is India and China that have the greatest chance
to carry the baton of economic supremacy from its current holder

in the United
States. The question boils down to will the United States be passing it on anytime
soon?



Keep selling unbased economic journalism, the Red, White, and Blue will
continue to drive this world


(Bullish case for the United States)


We've all

heard the same song before. Originally it was supposed to b
e the
Soviet Union, w
ith their dom
ination in the Middle East and t
heir robust military
strength. It was

then supposed to be in Japan, i
n the 1980s. The electronic
innov
ation from Japan was far ahe
ad of

any competing country i
n the world
during this time. Firms

like Sony, Toshiba, Panasonic, and Sharp led a
technological revolution that developed products for overseas markets that was

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the starlight of the world. Having a Sony TV was a status symbol
amongst so
many communities, driven by its remarkable preci
sion and quality. The Japanese
d
ominance ranged not only in electronics but also in automobiles. The export
market became somewhat

of a
two
-
headed

animal. Manufacturers

like Toyota,
Honda, Nissan,
and their luxury models were considered the most reliable and
effective cars in the market. During this time, it was felt that
Japanese

export
dominance would be here forever
, its underlying fundamentals driving it were
flawless
.

The World kept hearing “Gi
ve it a few years, the Japanese would take
America’s reign as world leader.”

Ironically, this is the same domination that
China currently poses on the world with their cost efficient, low cost
-

low price
products
, effectively creating an export monopoly
.
Today the Soviet Union, now
known as Russia has an array of political issues, Japan is on the verge of
economic collapse
fuelled

faster by its aging demographic. Nearly every product
we pick up in our daily life has the made in China something on its base,

that

doesn't have to be a problem though. For two reasons. First let's take t
he iPhone,
t
his popular product was designed and innovated in the United States of
America, lets call this intellectual capital. However, its components are
manufactured and
asse
mbled t
ogether in factories in China, t
his is the merit for
the made in China stamp on the back of the phone. A b
ase iPhone retails at over
$600.

Apple contracts their Chinese firm responsible for building the iPhone a
maximum of $160 to build the phone.
It is estimated that if building the phone in
the United States using equivalent technology and labor it would cost over $400
to do. Bringing the retail price of the phone to north of $840. Apple in the
meantime, a Unite
d States company, Apple meanwhile po
ckets

the remaining
$440 that is retained in the United States economy. Lobbyist continued to argue

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that all produc
ts should be made at home, and o
utsourcing is destructive for our
economy
, and great “job killers”
.

Americans shouldn’t even want these jobs.

As a
developed economy, we should be aiming for high skill


high paying
employment.

$240, that is the savings that is passed on to the American
consumer because of the low cost labor in China. The American consumer now
has the option of saving that $240
, or buying an
other tangible product with those

excess funds. So China theoretically creates a economic ad
vantage for the United
States, c
onsumers now have access to stronger technology, which would most
certainly be cutback on if American labor had to be
pri
ced in to price if the
iPhone, b
ut
instead increases for the American consumer.



China has failed miserably at every attempt to innovate on their own and
create

products that the world desires. They are simply good

"copycats". Any of
India's distin
ct innovations have failed to create a market niche, or

total
demand
” for them. The poise and wit of the American Entrepreneur, t
heir ability
to innovate and create thinking outside the box is remarkably unmatched in our
world today.

These intellects crea
ted the likes of

Google and Apple, Soo
n to be a
$1 trillion company, l
arger then 98% of the
world’s

economies. Until proven
wrong, there simply aren't any Steve Jobs in India or China. There

certainly

have
been arguments that there are plenty of

Steve Jobs

protégés in India, w
ho are
equally as dynamic t
hinkers and educated, b
ut that country has failed to provide
the platform to allow such creativity. For example it takes over three months to
start a business in India, It might take 30 days in the United Sta
tes.

In Thomas
Friedman’s boon The World Is Flat he explored the creativity that drives
America, and distinguishes its force separate from the rest of the world.

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“America is the greatest engine of innovation that has ever existed, and it can't be
duplicate
d anytime soon, because it is the product of a multitude of factors:
extreme freedom of thought, an emphasis on independent thinking, a steady
immigration of new minds, a risk
-
taking culture with no stigma attached to
trying and failing, a noncorrupt burea
ucracy, and financial markets and a
venture capital system that are unrivaled at taking new ideas and turning them
into global products.”

(Friedman,
pg.

313, 2005)

The
world’s

brightest and most
talented still flock to these shores,
attempting

to trade in
their talent in exchange
for the American dream.

This has simply expanded the force, and thoroughly
developed the nation’s dominance and force that has made it the world’s
hegemony over the past century.

Despite the 2008 financial collapse, Investors
are s
till trading in their local currency exchange for the United States dollar. Any
a Harvard economics professor would not be able to explain this, simply because
it defies economic 101. When you take in the American dollar, you have faith in
the underlying g
overnment which supports the currency. The government has
irresponsibly printed their way to a 16 trillion debt, and by all measures due to
continued constraints on employment growth, and fragility in several sectors has
promised to continue to print, unde
niably weakening the dollar, which by the
way will create losses for these investors. Personally, under these circumstances
I am buying Gold, but perhaps im getting something wrong because
professionals around the world are putting their money where their
mouth is,
and continue to flock to the dollar, and dollar based securities. These guys are
the professionals, I am not.




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The United Stat
es uses 25% of the
world’s

oil, o
ur addiction that has
created a
n

increased risk to our economic interest
, but

more importantly our
national security interests. The purpose of this research isn't from
an

env
ironmentalist perspective, but f
rom an economic perspective. When it was
announced that the United States will be energy independent by 2020, and a net
exporte
r of oil by 2035 Due to an abundance of newly founded resources in the
Midwest and Gulf
Coast this Is u
ndeniably game changing
, it changed economic
forecasts overnight
. Writing IOUs to China
,

to purchase oil from Middle Eastern
countries who then use the f
unding to develop terrorism agencies aimed at
killing Americans, isn't plausible superpower strategy. This newly found fortune
will allow the United States to rapidly
decrease it's debt recordings, p
erhaps
allow us to spend less on a world leading military

budget, but have greater
control of economic and national security interests.




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13


US indicators: Graph 1 US Housing Starts Graph 2 Disposable Income Graph
3 Personal Spending Graph 4 Expenditures

Every month, particularly in 2012, economic indicators
continue to rise.
US corporations as a whole have a record levels of cash in their system, We may
see a lot of that cash enter the economy and our politicians find a robust
conclusion to the imminent fiscal cliff. Consumers which have long been
discussed a
s the underlying supporters of US economy, are as confident as they
were In February 2008 with a consumer confidence index reading showing

in
the month of November of 73.1, r
ecord retail sales are only further proof of this
coming trend. Already improving
business activity is being contained decidedly

by the
on
-
going

crisis in Europe. Europe is a major destination for many
American
products;

the

on
-
going

depression stayed in the euro zone has
contained the American economy in the past two years. Still,
t
he
American
economy is impressively still humming along
, showing tremendous resilience
.
Housing starts and other real estate indicators are finally turning, which will

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create wealth for many Americans. Unemployment rate currently at 7.8% is
ticking down very
slowly,
however

more and more are starting to finally enter
back into the labor force suppressing growth in this number. In the midst of the
emerging markets slow down, a full
-
blown crisis in Europe, the United States is
still the brightest star on the blo
ck. The question still remains though, will this
last?


“Remember the American Empire” (Bearish Case for the United States)



The word $16 trillion would make any accountant go deaf. Any logic that
would dissect the ability to bring that number to a balanc
e is puzzling. Doing so
would require large amounts of innovation and creativity beyond anything
administered before by any government. The country is spending a staggering
87% of its GDP. The left side insists this is simply a function of digging out from

the worst financial crisis this world has seen since the Great Depression. The
right side has their fingers firmly pointed to the country's enormous
expenditures, along with its current account deficit. The United States ranks near
the bottom of the 191 U
nited Nations recognized states in terms of current
account and capital accounts. The latter being a symptom of a large import
surplus with China.

In

Moyo’s book “How the West was Lost” she develops a
fundamental equation that breaks down as follows:







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Y=C+I+G+(X
-
M)



C= Individual Consumption

I = Total Investment in the country (private and foreign)

G = Net position of government (Revenues less expenses)

X
-
M = Exports minus Imports


(Moyo, pg 56, 2012)


Though very fundamental, I found this judgement of a nation’s prosperity
brilliant. You
can’t

hide
behind

anything. If you are artificially pumping your
economy, with
anaemic

interest rates, the results will show in the “G” variable.
We have witness
ed

Ben
Bernanke initiate the same actions promising to hold
down the country’s interest rates till 2014. When you keep interest rates at such
low levels, you make your present debt more expensive.

You are forcing
consumers to push more money into the market, crea
ting inflation, but the
effects that you do to your balance sheet are the worst of the symptoms.

I assure
you even an individual who doesn’t have great math skills, can quickly compute
that the “Y” variable of the United States would be deeply in the negat
ive.

Even
more disturbing, this country politically is more divided than it has ever been in

our history
. The recent election is a perfect snapshot of this prognosis. Obama
and Romney shared a near 50
-
50 split in terms of the popular vote. The people
which

are the backbone of democracy, have two different visions of where they
want this country to go. Our politicians in Congress are simply echoing their
sentiment with the bickering and party partisan
fuelled

agendas displayed by
our leaders. As of November
2012, the prospect of Democrats and Republicans
coming together to reach a solution to the fiscal cliff which will arrive on
December 31, 2012 seems as likely as the Charlotte Bobcats comp
eting in the

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16

NBA finals in June. T
here may be hope in this regard. M
embers of Congress did a
plausible job of "kicking the can down the road" on August 2, 2011 which was
the last date in which we were reaching such a cliff. I am confident that our
politicians only under
pressure

will manage to come with
similar

pressure
i
nduced collaboration. If this is the case, it still does not fix our countries severe
debt responsibilities not seen in the history of mankind. Increasing spending
limits, or raising taxes will not constructively close the account gap. It may only
make a d
ent. It is certainly not an easy Mountain climb. Decreasing spending too
much may throw our
economy back into a recession, w
hilst increasing taxes on
any wealth group will also have severe impacts on consumer spending which
will hurt US businesses. Sure ou
r country has overcome very difficult situations
historically, And sure we elect the best and brightest to run political office. These
guys know what they're
doing;

it is just a matter of putting personal interests at
the door. Unfortunately history is not

in our
favour

in that regard.



Graph 1 indicates Mandatory Spending
vs.

Discretionary spending of the
United

States Graph 2
indicates level of debt by developed countries in blue, and emerging markets in Green.


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For a country to grow, it must have the a
bility to invest. You cannot invest
if you do not have money to invest. Therefore a $16 trillion debt responsibility
should mean contraction, not growth. Our government does not invest in real
estate,
stock market

equities, and fixed income investments. Th
eir investments
are in larger magnitude such as Investing in b
etter education for our youth, a
nd
also better infrastructure from roads, railroads, and ports to enhance commerce.
Any solution to the countries current debt responsibilities will almost
certainly
include having to cut from all of these resources. In terms of education, the
United States is hanging below mediocrity on Global standards.

Were ranked 25
th

in the World in Math

Freidman
joked,

“In China Bill Gates is Britney Spears. In
America,

Britney Spears is Britney Sp
ears, and that is our problem.”


(Freidman,
pg.

472, 2005)
This is our problem. Our children have access to Xbox and an
IPhone, especially under environments where our culture doesn’t involve
parental enforcing educational
pri
nciples
, why in the world would that teenager
pick up his Biology textbook? Obama also commenting on this
persistent trend in
our country’s children joked at a New Orleans High School “Your competing
against kids in Beijing and Bangalore,
there

not getting

over,
they’re

not hanging
out or playing video games.” At least someone is aware of the issue. The forces of
nation’s environments play an integral role in this development. The pressure to
succeed in academics in emerging markets is a matter of life and
death, literally.
Without reaching the top ranks of education in India for example,
you’re

essentially destined for a life of poverty. In the World is Flat Friedman described
a dinner table discussion with his daughters. “When I was growing up, my
parents
told me, finish your dinner, people in China and India are starving, Today

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on top of finishing your dinner, make sure you finish your homework, the youth
in India and China are starving for your job.”

As noted before, without first class
education prospect
s for retaining superpower status

will equivocally be
contained.


Being the superpower of the world has its responsibilities,
responsibilities that cost money, and responsibilities that help push the national
debt. This country has made it unfortunately o
ur culture to police the world.
National security is certainly on top of the list in terms of important
expenditures, however a $6 trillion war in Iraq, and an
on
-
going

war in
Afghanistan costing trillions more would seem excessive considering our
country'
s much smaller revenue.
An article discussing America’s foreign policy
noted the following; “
It is far more important to maintain a robust and
productive economy here at home than it is to squander billions of dollars trying
to determine the political fate

of some remote country thousands of miles away.
External conditions may impinge on U.S. power, but it is internal conditions that
generate it.”

Furthermore, as police officer on in the world we find ourselves gifting
struggling nations like Pakistan with
$80 billion a year gifts, which in that
specific case is actually inadvertently intensifying our national security efforts
due to the funds finding its way to anti
-

United States terrorism. These type of
expenditures would be a great way to start cutting
the fat. If our leaders still feel
these lavish expenditures are too much apart of the American culture, perhaps
they should be presented with the fact that only $1.4 trillion can eliminate
hunger from our world for 365 days. With a check under a quarter t
he size of the

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19

Iraq war we change our image in the world. We go from being the sole
representatives in the fight against global terrorism, to nations across the world
collaborating together following the (newly admired) United States' lead in
eliminating i
t. Imagine the possibilities.



President Obama received my stamp of approval in this year’s election
because of his ideas that enhance our country’s current education standards.
Recall from earlier in this research, education drives innovation, and innova
tion
separates

a nation from the rest creating the total economic advantage.
A
Harvard

University Economist proved in his research “
advanced countries such as
the United
States, human

capital investment had three times the positive effect on
economic grow
th as
did physical

investment. And educational investment is particularly
important in early
childhood development

and learning, according
to growth

economists. The return on investment from interventions such as prenatal care and
early childhood programs
is higher than for virtually any class of financial assets over
time” As the country pours itself further into debt, there goes the prospect of increasing
our educational standards. Of course, as mentioned quality education needs to be
initiated at home, b
ut without the infrastructure any preparation would be all for
naught.


It isn't just politics where the citizens of United States are divided. Post
-
financial crisis there has been a larger attention to the country's growing wealth
divide.
Fundamentally,
a free market based economy is what instrincally creates
success. In Moyo’s book she seemed to be fixed on the prospect that the West
was speeding down the world to socialism. “
The trouble is, it won’t be just any
socialist welfare state... the US is on a
path to creating the worst and most venal

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20

form of welfare state [poorly developed and designed]


one born of desperation
from many years of flawed economic policies and a society that rapaciously feeds
on itself.” In the realm of a world where euros and d
ollars are massively being
printed daily, newly established health care laws that guarantee protection
under any circumstances, and government citizen


based expenditures that are
exponentially increasing yearly, she may have a point. But lets still keep
it in
context.

Those who have worked hard to achieve their "1%" status are now
being persecuted by media sources. Persecuting hard work is never a recipe for
success. What drives a population is hunger to be better, be more educated, work
harder than the n
ext for a better tomorrow. Those in the 1% seem to forget
about their responsibilities as American citizens. Too many Americans have been
thrown into poverty during the course of the aftermath of the 2008 financial
crisis. The "buffet rule " movement start
ed by legendary investor Warren Buffett,
explaining that his secretary pays a 30% effective tax rate versus his 13%.
Underline the word effective. An economy, especially a consumer driven
economy, grows when the middle class is able to spend freely. Decrea
se that tax
rate, by increasing slightly the tax rate of the mega millionaires and billionaires
you may have found yourself a place to start. Visit a city
Greenwich, Connecticut

whose vast majority of its residents will spend at the same pace regardless of
whether their tax rate is 13% or 25%. Now travel to a middle
-
class city where
decreasing a tax rate from 30% to even 19 or 20% and you will automatically see
increased spending

across the board. This is spending that can fuel an economy
in a powerful way. This country has a historically unseen obstacle in its path, It
has however also seen historically unmatched success, it will be the willingness

Kirpalani
21

and creative constructive measu
re that are badly needed that will determine her
future.



“Believe the numbers, China dominates the world for the next Century
“Bullish Case for China”


The term "redtape"hardly exist in the
People’s

Republic of China.
Executive government decisions are m
ade by a select few at the top. If they feel
that a new infrastructure project would benefit the country it is done almost
immediately. If interest rates need to be lowered to help refuel an economy that
is hurting it can also be done almost immediately. T
here is hardly any political
bickering when it comes to increasing taxes, or decreasing spending on a fiscal
level. For good or for bad, there is very little backlash from its citizens. The
people of China have learned to adapt rather than protest decision
s made in
Beijing. The country currently has an abundant account
surplus, which

it is pro
-
actively investing very efficiently. Investment projects range from developing the
largely undeveloped western part of the country, which potential results can be
mou
th watering considering the world leading economic growth is coming
exclusively from the eastern coast of the nation.
A large portion of the country’s
investments is

also going overseas. We are in a resource scarce world,
and

very
few sections of the world

boast Of the abundance of resources such as gold and
diamonds and oil as Africa. Chinese firms both state and privately owned are
aggressively attacking the African markets partnering with locals,
to

extract
these valuable resources from African soil. Chi
na optimist should still perceive

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22

this movement with caution, the backlash from locals who feel that their corrupt
leaders are raping their lands without remuneration back to
the people is a
growing problem” (Moyo, 2012).





Military spending in China
forecasted to outpace the U.S. already lavish military
expenditures

China is developing formidable military strength every day. They have the
most populous military in the world, and at the current pace of efficient
investment in research and technology it

Will undoubtedly make the country the
most technology efficient nation in the world in terms of their military. History
has proven the nation with the strongest military will always call the shots on a
global scale.
More impressively than China’s developm
ent of their military
forces, is
they’re

uniformed and poised governance. Investors in the world have
been rejoicing
every time

China announced a subpar economic reading. Indexes
around the world rallied because they felt that with each negative reading wo
uld

Kirpalani
23

come chance that the government
would announce a new form of stimulus. It
never happened. As China looks to be turning the corner, it looks like they
protected their own interests, instead of conforming to market forces. Extra
liquidity in the market w
ould of simple created further inflationary problems,
and would of negatively impacted growth in the long run.

In his b
ook Breakou†
Nations,

Ruchir Sharma, who made his case against China continuing robust
growth efforts expressed “When you become middle
aged
, you cant sprint
anymore” (Sharma, 2012).

At this point, China has gained so much ground so
fast, it doesn’t have to sprint anymore, and really shouldn’t. China can maintain a
jog, which will allow restructure of balance sheets, and intensive focus on

the
welfare of so many Chinese still struggling. The transition from an emerging
market to “a peaceful change (transition) to a
responsible developed economy”
as Victor Chiarelli stated in our interview, will dictate how far China’s journey
lasts.


China

still remains the largest export market in the
floo
ding foreign
shores with its cheap low
-
cost and low
-
priced products. Ironically however the
country shows too many similarities to

the

export dominance th
e Japanese
exhibited in the 1980
s. Many in the med
ia are over exaggerati
ng a current
China's slowdown, m
ost feel it is
a necessary cooling
-
off period t
hat is needed
after a nation has been growing so fast for so long. Already signs has shown a
turnaround in China's Manufacturing, incrementally rising each

month in the
second half of 2012 to a PMI reading of 50.2, from 3 straight quarters of
contractionary readings

(below 50)
. China is currently going through a once in a
decade

change of leadership process, m
any feel that once this process has

Kirpalani
24

included the
government will then focus on tools such as rate cuts which will
help restart the engine of growth.





China, the great ponzi scheme
:

(Bearish Case for China)


When
China sneezes the world catches a cold.” If this now far too
frequently used cliché has a
ny merit, the world may catch a deadly virus under
any scenario where China is seen to reach the imminent “economic crash”

or
hard landing

that so many economists are forecasting. Under an economic
environment both in our country and China where massive st
imulus has become
the new norm, excess liquidity in the markets pose higher volatility, or increased
risk. That’s why the 2012 version of China sneezing, may present itself in a more
daunting fatal
autoimmune

disease. An

economic bubble is defined by a
mov
ement that is structurally flawed without tangible value behind it. Too much

Kirpalani
25

of China is proving to be an economic bubble. You walk through industrial
neighbourhoods

in
Tianjin

and Dalian and you find empty office buildings and
empty factories built by the

government to boost investment revenue into the
country. Investment into China has not slowed by accident. There is growing
mistrust by investors worldwide to the validity of Chinese reported data in both
the public and private sectors. "China's growing a
t 9
-
10% annually, but are they
really?" asks Ray Dallo of Bridgewater Associates. Most facets of Chinese
journali
sm is controlled by the state, a
ccuracy for reports in that matter needs to
be taken with caution.


China's real estate market is showing sig
ns far too similar signs to the
housing bubble that crashed the United States financial markets in 2008. China
often granted interest
-
free loans to any applicant who applied between 2004
-
2007, in efforts to accelerate growth statistics. The effects of crea
ting such a
bubble are starting to slowly be realized.
According to Ernst and Young, “One


Third of the $700 billion in loans taken out by local govern
ments may face
repayment problems, the People’s bank of China estimates that Chinese banks’
exposure to
local government loans is 14 trillion
Yuan

($2.2 trillion).” What kind
of losses will occur for the positive capital accounts the government boasts of
when these loans start to become due?



The advantage of a communist state are more equality amongst all
members of the society, There is then no explanation why wealth inequality exist
on a comparable level to the United States and other democracies as it does in
China. This undoubtedly will intrinsically create an increased risk to a full blown

Kirpalani
26

revolution o
nce people realize that their sacrifices of individual liberties for a
communist state that promises equality amongst has turned to greater wealth
displacement than at any point in China's lengthy history. Stories such as a
government official's son crashi
ng a Lamborghini whilst receiving pleasantries
from two female escorts only exacerbate any underlying tension. History has
proven time after time, it is the people who dictate the path of a country. Ask the
Romans, ask

the British, and ask the European lea
ders who face anti
-
austerity
protests at their door step daily. Communist state or not, your people must be
pacified to have a shot at superpower status. With China aging demographically,
China must now find ways to take care of its aging. On a side note,
I assure you
it's one child policy will certainly speed up the rate at which China ages.
(Reference India section on importance of age demographics)


China's economy is structurally built on its export induced competitive
advantage. This is not a bad thin
g, as long as you are able to make an efficient
transition to a consumer driven economy.

This doesn’t seem to be the case has
consumers represent a 8% share of GDP, an emerging market high. (next closest
is India at 4.3% and they are actually a consumer d
riven economy). This is a
good thing right? No,
when

you consider that exports are in 16
-
19% range
your
facing a large structural balance sheet issue progressing. Simply put, Chinas
consumers have already reached that maximum potential, whilst the gap that

a
country must close with its export growth number is still stubbornly high.
This is
a challenge that China has yet to accept. It's export advantage was emanated
from its low labor costs, which was fed by its world leading 1.6 billion people
population. C
hina has shown how a labor surplus (large population) is actually

Kirpalani
27

an asset for a country, these are notes India should probably jot down. China well
utilized their "human" capital. The problem however arises when the country
forgets its responsibilities to

its citizens. Creating a platform which will truly
generate maximum spending ability amongst all citizens. In the West, we call
leaders such as President Obama

and Prime Minister Hollande of France
,
socialists for using this rationale. In any form of econ
omic arithmetic,
quantitative computation will prove that when spending power is spilled over to
those who had been working in your factories for $1 day type wages, you will see
maximum aggregate spending in to your country's consumer driven sector.
China
instead through the channels of corruption maintains policies that
disallow movement amongst wealth classes.
Ruchir Sharma examined

Historically, periods

of social turmoil in China have been sparked by mounting
price

pressures. The rising cost of housing

today is a particular concern

for many citizens, and Chinese policymakers are deeply worried

about potential unrest that rising prices might cause. At the same

time, Chinese income inequality has grown
.


So lets say, Chinese factories

demand wages that better correlate the increasing profits that the state owned
corporations are raking in. Any protest according to Mr. Sharma’s proven theory
will result in a spike in inflation. Remember now, high inflation means lower
growth. This wont

do nearly as much damage as the “Roman Empire” effect,
emanating from social unrest caused by increased inequality. In a non


democratic system, where individuals are
suppressed

to begin with, magnitude
of conflicts can be devastating.

China's assertion

that it can simply maintain its current economic model,
with the same level of success is delusional. China now growing at only 7%, is a

Kirpalani
28

direct result of sales globally slowing. Europe is in a depression, and the United
States is growing only marginally.
Even the marginal business that could be
initiated by increasing trade with the United States to get the country's growth
engines revving again is showing signs of increasing conflict.

It isn’t just the
balance of trade where China partakes in excess risk
based maneuvers. China
holds over $2 trillion in United States treasuries, or government debt. If the
United States fails, and cant pay its bills which wouldn’t be terribly surprising
considering its currently weak balance sheet, China now takes in another

$2
tr
illion


plus write down. This decisively

further places a further footprint that
China’s strategy goals are far too export oriented. The idea that it must give
money back to its customer, to purchase more products sounds absurd in every
sense of the

process.

Almost every member nation doing business with China
has alleged the country of a multitude of anti
-
dumping reports. There is a
growing euphoria of anti
-
China amongst western governments and markets.
When a country pegs its currency the way Chin
a does (which accelerates its
export advantage), it will naturally create very dicey foreign relations. The
United States, The Romans, and the British had very little empathy for the rest of
the world during its peak years, however neither of them took the

route of
growth by being a export
fuelled

economic furnace, a furnace that is only lit with
customers, and their approvals.



Kirpalani
29



Illustrations indicate a growing domestic oil industry, which will reduce “fatal” foreign demand.


Chinas 1.6 billion people
require energy, alot of it. Very little has been
spent towards research into other viable energy options namely solar, electric,
or wind farm options. Oil is increasing in scarcity, energy is the underlying
commodity that fuels growth in any shape or form.

China may have the cash to
outbid the United States and India's of the world, but outbidding other nations
for the product will increase the price of oil. Increased energy costs are always
destructive for the economy.










Kirpalani
30

Slow and Steady always wins
the Race (India’s Bullish Case)



(Graph above shows correlation between the Mumbai Sensex in blue, and New York’s Dow
Jones in Green)


Mark Twain once said; "India is, the cradle of the human race, the
birthplace of human speech, the mother of history, t
he grandmother of legend,
and the great grand mother of tradition. our most valuable and most instructive
materials in the history of man are treasured up in India only."
Amongst all the
BRIC
nations, India.

possesses the youngest demographic. 40% of India
is 25 and
under, These individuals are just starting to get ready to contribute to their
economy in productive innovative ways. India proportionately also has a limited
aging population, C
are for the elderly
sociologically

speaking f
alls under the
burden o
f the individuals families rather then the government. Connect India's
youth and the representation of education within the Indian culture and you
generate a scary dynamic.
A New York
Times

article reported “
The O.E.C.D.
report said that more rapid aging
in China “partly explains why India and
Indonesia will overtake China’s growth rate in less than a decade.” It forecast
that China’s G.D.P. would grow at a rate of 2.3 percent a year from 2030 to 2060,

Kirpalani
31

little more than the 2 percent it forecast for the Uni
ted States.”
The profound
success amongst Indians abroad particularly in the studies of medicine, law, and
banking isn't by accident. Indian parents emphasize a large level of importance
to a child's academics, placing everything else a very distant second
. With one of
the major tenets to achieving superpower status including education, you've got
to like India's chances.

The government of India forecasts that “By 2017 India
will graduate 20 million people from high school (or 5 times as many as the
United States), and ambitions total over 26 million people every year receiving
bachelor degrees versus the United States pro
jected 8 million.” India’s
government is putting
their money

where there mouth is, quadrupling their
education in investment from 11 million in the late 1980s, to a level of $44
million in 2008. They also forecast a $75 million budget for this fiscal year.


The
difference in educational patterns in the United States and India is appalling. And
India, children and the youth pursue academics in a manner that is intent on
mastering the material, not just learning it. In the United States, were more
concerned a
bout finding whatever path is necessary to achieve the A on our
report card.
This is India’s demographic dividend.
This creates a complete
intellectual advantage amongst 40% of Indians getting primed to contribute to
the green, white, and orange.


India only gained its independence from Britain in 1947. It remains a text
this stayed until 1991 when current Prime Minister, then finance Minister
Manmohan Singh opened up the doors to India's economy, Unleashing India's
full potential in terms of econom
ic growth. Trade and investment carriers were
lifted;

Competition increased moderately due to foreign forces, India had no

Kirpalani
32

revolutionized its economic strategy. India has only started to realize its
economic potential for a little over 20 years, versus the

40
-
50 year head start
china generated amongst Chairman Mao's forced resignation.


Structurally speaking India's economy is the polar opposite of China's
export oriented model. Whilst most of the world felt the wraths of the fire that
came with the 2008 gl
obal financial crisis, India maintained its robust growth
pattern, with GDP growth only slipping a few percentage points. Why? India's
economy is based on the fundamentals of domestic driven features. It's service
sector (of Which only 2% comes from their
outsourcing business) maintains
double digit growth yearly, a "thermometer" sector, such as India's auto industry
grows 7
-
8% annually. Indians have efficiently insulated their economy from the
rest of the world, whilst still moderately maintaining free mar
ket and free trade
agendas. Some might consider this economic genius.


The government cant keep the cows to the side of the road, and
you say superpower


Many of the prospects that are dampening India's growth miracle are
almost identical to obstacles in t
he United States just on a more sophisticated
and exponentially greater level. Already analysts from Morgan Stanley to
Goldman Sachs on Wall Street are putting an end to the Indian economic run. In
order for an economy to run at full strength from a moneta
ry policy standpoint,
Lending rates initiated by the RBI (federal reserve of India) must maintain low

Kirpalani
33

rates. India's current inflationary environment is the highest amongst all
emerging markets, Quarter after quarter has gone by and inflation rates have
be
en stuck at stubbornly high levels, under this scenario it is impossible for
Finance minister to lower reserve requirement ratios or federal funds rates to
levels that will help accelerate the economy from current 10 year lows. China,
though not a consumer

driven economy does not have this problem therefore
flexibility the economic intangible every finance minister dreams of is in a much
greater place for India's
north
-
eastern

neighbour
.


India’s inflation rate has maintained relatively high levels over th
e past 5 years


Corruption is by far the greatest economy killer. It was forecasted that in
2010 corruption clip GDP growth in India by 1.5%. This 1.5% is the difference in
pulling so many starving out from poverty in India, and creating badly needed
infra
structure to maintain the rate of expansion India needs to keep the "party"
going. There have been plenty of concerted efforts by activist groups, Most
recently the one led by Anna Hazare which received global attention, to bring
India's corruption to spo
tlight. There is no landed on this earth that faces the
same level of corruption that exist in India, and specifically the fundamental

Kirpalani
34

actions in which it is executed. Bribery is a commonality in India. Business
leaders will create advantages for their bus
inesses by giving unsolicited gifts to
parliament members swaying their vote in favor to the business' needs, instead
of the national needs. Corruption does not end there, it comes in an even more
detrimental form. Much like the federal government does in
the United States,
the India allocates funds intended for poverty reduction welfare programs and
education building projects to the various states of India. Another commonality
has become politicians representing the receiving states to take huge digs into

the cookie jar, sometimes as much as 60% of the budget. Changing the course of
this system will involve completely changing the political landscape in India,
however immediate actions, simple in nature can still be resurrected.



I
ndia's slowdown in 2012 is directly correlated to a rapidly increasing
removal of foreign investor money in Indian equity markets. (Though domestic
investors have a polar opposite sentiment with 76% citing imminent
improvements in India’s infrastructure wi
ll increase India’s attractive, and 52%
indicating they see their sector as an
innovation

hub (according to Ernst and
Young Research)) Who would blame them? I am certainly not putting my money
in a country that presentexhorbidant

risk thanks to its corrupt

political
landscape. Whilst in the long
-
term India will likely not be as reliant on foreign
investment, its hard to imagine the nation reaching its potential when you are
pulling out the training wheels to the bicycle before the operator has learned to
e
ven ride the bike. If India is serious about reaching its economic growth
potential, Business leaders must realize what that 1.5% clip does for their
business. An economy that is growing at a 1.5% faster

rate,

will bring in that

Kirpalani
35

much more revenue for the b
usiness. While changing the landscape to the social
political structure may be a formidable task, cutting the hand that feeds that
seems more feasible in the

interim. An excerpt from Why nations fail states
marvelously

"The success and failure of specific

groups notwithstanding, one
lesson is clear; powerful groups often move against economic progress and
against the engines of prosperity. Economic growth is not just a process of more
and better machines, and more and

better educated

people, but also a
tra
nsformative and destabilizing process associated with widespread creative
destruction. Growth thus moves forward only if not blocked by the economic
losers who anticipate that their

economic privileges will be lost and by the
political losers who fear that

their political power will be eroded." Politicians
misactions are felt immediately, this may be a good thing.

The

removal of foreign
funds from equity markets has

excaserbated

the decline of the rupee, further
enhancing the pressures of inflation and the
detrimental effects it has on the
economy quantified by the country's 10 year low 5.3% GDP growth rate as of the
3rd quarter of 2012.

Though this number is still more than double the rate the United States is
set to grow at, and makes many westerners envi
ous, there is too much on the
line. Mr. Joshi a Mumbai based economist announced “
“The poor man's wages
have risen quite swiftly until last year. That cushioned them against inflation,”
Joshi said. “The high growth we saw allowed people to pay more for hou
sehold
services, more for their drivers, more to farm laborers. But can wages keep rising
at the same rate if the economy slows to 6 percent? I don't think so.



Though
lifestyle is continuing an upward trend amongst the wealthy, the middle class

Kirpalani
36

and poor
are getting hit hard. Bharat Singh a middle class
restaurant

owner from
the state of Punjab said “vegetable prices have gone up 25%, and in my personal
life they are also going to increase school fees by 20% in the next term, I have no
money to save.” Thi
s rhetoric is being echoed largely around India. No money to
save? India and China have managed their extraordinary success because of their
exorbitant

savings rates. Just like a country, when citizens have savings they
invest. Investing brings in a bright
er future. In why nations fail
the importance of
savings is examined “Nations fail today because their extractive economic
institutions do not create the incentives needed for people to save, invest,
innovate.” This book allows a reader to show the economy

crashing impacts of
high inflation. It is not just governments and central banks that must react to,
and deal with the effects of inflation. Inflation takes away a huge part in families
lives in every country, democratic or communist. India needs to wake
up to
reality, if politicians cant step outside the doors of their offices failure will
without doubt be waiting for India at her doorstep. Victor Chiarelli my former
supervisor at Merrill Lynch discussed the potential of managing growth in an
inflationary

environment. “In a perfect political climate, it is possible. However
there isn’t a nation in this world that boast of such.” With lawmakers doing their
job, it takes away a lot of pressure from central banks having to act to develop
growth. Politicians w
ith correct legislation can create soil mixed with high
quality fertilizer that allows growth. However, with governments all over the
world displaying behavior to the exact opposite, central banks must keep
printing, bringing in more inflation.
“The Econom
ist” magazine mentioned “
at
least ten million young folk will enter the workforce every year for the next
decade or so. They will be coming to the big cities, looking for jobs that won't be

Kirpalani
37

created if India expands at a rickshaw rate of growth. “ Any Talk
of a
demographic dividend may turn

back into talk of a time bomb
.

What if we
compensated our politicians the same way we compensated board
members of companies. On a performance basis. If the country was
reducing debt and growing from the year previous, th
ey would be
awarded a large bonus, on top of a base $45,000 a year salary. This
would give them an incentive to stop the bickering, and get the country
moving. Unfortunately, this might be the only way democracy could
work these days.


India
possesses

deficits in both their current account (receivables
vs.

expenditures) and capital accounts. Though both deficits
aren’t

at extreme levels,
account surpluses are needed for growth as previously stated, perhaps
tightening its belt on allocation of funds to
ministers may be the most logical way
to correct that, very little India has ever done
politically

has been logical. For
instance, when members of parliament are taking a break from stealing from the
people of India, they practice the same level of bickeri
ng we see all the way in
Washington. Nothing gets done, perhaps this is simply a function of democracy,
that does not mean it is excusable.

All over the world we see the idea of
democracy crumbling apart, from protests in Europe, to American increasing
fru
stration for Washington’s inability to put legislation first, and of course India’s
corruption. Perhaps democracy, an idea that is relatively youthful in the scope of
human history is not meant to work. Sure the British empire was a

Kirpalani
38

parliamentary democracy
, but even then its citizens don’t have voting
privileges
.
Mr. Sharma argued in his book “
“When you look back on the history of the
twentieth century


in fact through human history


you notice periods of very
high economic growth are associated with auto
cratic, not democratic regimes.
Just think of Chile under the dictatorship of Augusto Pinochet or the ‘miracle’
economies of East Asia


Hong Kong, Singapore, South Korea, and Taiwan.
Starting in the 1960s these four economies went from being poor to being

rich in
just over a generation. The first one was a British colony, the second an
oligarchy, and the latter two essentially one
-
party states. It’s true that Chile,
Taiwan and South Korea
democratized



but that was
after
they’d experienced a
generation of

rapid growth, not
before. The

historical data on growth over time
in many different countries that Easterly has
analyzed

show that
if
you’re a fast
growing country then there’s a 90 percent chance that you’re an autocracy.” If
we accept that the squabblin
g and inaction arising from democratic units are
simply just a function of the system, what can we say about the prospects of the
democratic system prospering
economically?

In India, they are desperate for
increased infrastructure. In a system where you ne
ed permits for development
projects, and the common
occurrence

of businesses bribing legislators to
prohibit the approval of certain licensing, how can a country grow? In a “The
Australian” article that
virtually

smashes the structure of the Indian politic
al
system, the article mentioned that “Indian legislatures are no longer forums for
informed debate. Instead, under the guise of "seeking a consensus", they are now
nodal points for crass political horse
-
trading. Or for obstructionist mobocracy.”

Democracy

is
a people friendly way of governing, but perhaps it is the people

Kirpalani
39

who destruct marginal benefit for the entire population. Perhaps the United
States just stroke a bit of luck in the development of her empire.



India also does not possess a welcoming environment for foreign
investment. India continues to dictate its foreign investment strategy from the
old school protectionist days of the past. India creates hurdles such as the "51
-
49" rule stating that any forei
gn company wishing to develop business
operations in the country must partner with a domestic Indian firm giving it a
49% stake in the revenues. Furthermore, and disturbingly Indians are mocking
this. India's greatest Bollywood star created an advertisemen
t shown locally
stating "India used to boycott foreign firms (from the Gandhi days), now we buy
out the firms that make those foreign goods." This level of thinking is not
constructive
. Free market trade environments breed competition, competition
that for
ces domestic firms to struggle to offer their consumers, the Indian
consumer the best product and service available. For example, India's 180% tax
on foreign luxury car brands is absurd and irrational. India attempting to protect
domestic industries throug
h such tactics is the first ingredient of economic
policy failure.


Keep the baton moving



Kirpalani
40




Every investment bank, "supposed" economists, and financial writer has
an opinion on this topic supplemented with forecasts that coincidentally match
their opinion. Goldman Sachs indicates China will surpass the United States in 8
years, an
accolade

India
will accomplish by 2030. "The Economist" magazine
forecasts India will then take total control of "top dog" by 2045. Needless to say,
there was no shortage of sources for this research. However, every article
presented a different variation of a different
forecast. Eventually, someone will
be right, while the rest will be wrong. Forecasts essentially mean very little in the
world of finance and economics. Economists use standard deviations to track
their data which may help them forecast what may be the mos
t likely outcome. R
-

Square readings (the reading showing correlation amongst data sets, a measure
used to prove or disprove standard deviation) help economist feel confident in
the accuracy of their forecasts. What happens to the aforementioned readings
if
China calls in their debt with the United States creating an immediate dramatic
downgrade in the nations credit rating. What happens if India's forever
antagonist Pakistan creates further tension leading to war between 2 nuclear

Kirpalani
41

armed nations? What happ
ens if the world finally turns its back on China due to
its currency manipulation and trade malpractice. These forecasts become
worthless. Therefore a forecast, especially generated on a research paper, should
be merited on
analysing

facts, and forming an
opinion. This is my attempt.


Both on a macro and micro level, economics and finance is very cyclical.
Typically equities or nations that get buried
don’t

stay buried forever. This is
why so many investors quickly sell their stocks when they reach unpred
ictably
high levels, and buy when stocks have been oversold. Those that are on top, will
not maintain dominance forever. There are reasons for this especially from a
geopolitical vantage point. When a nation that has dominated the world and
achieved enormo
us success, the success is felt my the majority of its citizens.
Individual's stomachs get full, to intrinsic hunger and desire to succeed vanishes.
Children don't study as hard in school, adults lose innovative spirit that may
allow them to create a new p
roduct or service leading to a great business idea.
Employees put in only a "9
-
5" type of effort, nothing more, nothing less. You can
thank complacency for this. Keep in mind, it would be absurd to rationale that
every citizen of the nation conducts themse
lves in such a manner. Of course
those on the bottom of the wealth chart (still near the top of wealth charts in
developing economies relatively speaking) will fight harder to reach the ultimate
success of the "American" Dream. But we are assessing entire
nations, so we
must assess the sociological factors of the entire masses. In India and China the
tides are turning for an array of reasons detailed in this paper, but all are a
different derivative of the "hunger" notion. A child in India will naturally st
ruggle
harder knowing the feeling of hunger and poor family living conditions to get out
of his or her current circumstances. An American child may study at a more

Kirpalani
42

relaxed luxurious pace. A man from China may spend 18 hours a day working,
because he desper
ately needs to keep his children from starving. He will do
whatever it takes to protect his already scarce job, knowing that there are
thousands of people behind him literally dying to take it from him. An American
or European worker doesn't see need to wo
rk a little harder or longer, because if
he loses his job he has unemployment checks waiting for him from the
government. This is a function of productivity. Naturally the inner animal that
creates maximum results will more commonly be found in the masses
of an
emerging market, rather than a developed market. It is simply just human
nature. A westerner may only turn up the heat if he's aiming to get his family that
new vacation home. Now don't get me wrong, there is nothing wrong with this.
This is the drea
m, this is enjoying the fruits of the empire you live in.
Sustainability is not in your
favour

however. China and India have populations
approaching 2 billion a piece, however in the absence of a dramatic reversal of
current trends, it will be a greater st
ruggle for western nations to take care of
entire populations, and an easier (eventual) path for these eastern giants to
manage the welfare of their citizens. Throughout my research I initially aimed
my research at proving my preliminary thesis that is was

possible to live in a
zero
-

sum world, where all nations would achieve identical economic success.
Just because someone succeeds, doesn't immediately mean failure for another.
Cyclical forces described above kept disproving this theory. This is what crea
tes
the development and destructions of empires. Roman historians would probably
argue that their fall was due to a rapidly growing wealth gap. I would say this is
just another symptom of cyclical
decline;

upwards mobility became harder for
the entire mas
ses, which made it especially harder for those on the bottom to

Kirpalani
43

persevere.
If things rapidly get worst for our country as an entire nation like so
many economic forecasters seem to point towards, it will happen quickly.
“When
things start to go truly bad,
empires regularly unravel with unholy speed: just a
year for Portugal, two years for the Soviet Union, eight years for France, 11 years
for the Ottomans, 17 years for Great Britain, and, in all likelihood, 22 years for
the United States, counting from the
crucial year 2003.” This writer used the year
2003 to reference the beginning of foreign intervention through military force, a
function (the Romans exhibited) that will lead to the dissolve of world hegemony
power. They say

Nothing in life is permanent

,

the same rhetoric applies to the
sustainability of an empire.



Kirpalani
44



Graphs indicate the historical share of world outputs and GDP


We have now made a full circle, economic forces have moved from east to
west, now evidently back east. The object is now
determining, when

all said and
done, will

the tiger or the dragon roar the loudest. China has dominated just
about every growth met
ric over the past decade. It's unified government versus
India's
dysfunctional

corrupt governance is a vital step ahead. China has grown
very fast, some may argue a little too fast. Both nations have taken so many
poverished into now civilized lifestyles.
Both make valid cases to achieve

Kirpalani
45

superpower statuses. There are simply too many toothpicks holding China's fort
however. The government has built apartments anticipating that "one day" they
will be occupied. It has a currency that doesn't reflect real valu
e. It can control
road bumps like inflation with a simple click of a button adjusting their currency.
If this is the case what does the underlying currency actually worth? India's
problems are very generic for a developing nation, nothing that hasn't been
seen
before. Corruption is bred from lack prior economic misfortune. A combination
of the power of the people, and increased profitability for politicians to do their
job will steer India towards fully functioning governance. In India, you have
control of
your own destiny. The business you create, the extra hours you work
will all be realized directly back to you. In a communist state, your business is
most likely state
-

owned. If your success is your own, wouldn't you be more
likely to fight for your succ
ess?
India’s profound ability to innovate solutions to
the dire problems it has faced in her past has been much noticed. “
If I were asked
under what sky the human mind has most fully developed some of its choicest
gifts, has most deeply pondered on the gre
atest problems of life, and has found
solutions, I should point to India.



Max Muller I
ndia has always bounced back
from adversity, the resilience of her populations has always bounced back (look
no further than the Gandhi movement), foreigners (investor
s) have turned their
back on India, I'm putting my money on India. Turn on the Bhangra music, this
party is just getting started.