Why do you want to become an ‘insider’?

I had long wanted to write a detailed review of Yanis Varoufakis’ book, ‘Adults in the Room’ which I finished reading some six months ago. But, never got around to doing it. I shall post separately a long review of ‘Adults in the Room’ – a simplified and shorter version of which appeared as a MINT column. It appeared in MINT in April 2018.

As my good friend Gulzar Natarajan remarked recently, the drawback of YV seems to be that he does not seem to admit to any mistakes or frailties or failures on his part.  In fact, some in Europe have claimed that he failed not so much because the ‘Troika’ (European Commission, the European Central Bank and the International Monetary Fund) did not agree with him but that his personality was abrasive and somewhat insufferable. We will not know which version is true.

But, one of the first things that strikes you from the book is the question that Larry Summers poses to YV:

There are two kinds of politicians: insiders and outsiders. The outsiders prioritise their freedom to speak their version of the truth. The price of their freedom is that they are ignored by the insiders, who make the important decisions. The insiders, for their part, follow a sacrosanct rule: never turn against other insiders and never talk to outsiders about what insiders say or do. Their reward? Access to inside information and a chance, though no guarantee, of influencing powerful people and outcomes. So Yanis, which of the two are you?

This is a very profound statement. In the context of Greece, both Alex Tsipras and Varoufakis were outsiders who became insiders. But, Alex internalised his ‘insider’ role too much while YV retained his ‘outsider’ spirit and could not continue and came out to become an outsider, again. That Alex Tsipras chose to agree to the demands of the Troika after the referendum he called gave him the mandate to reject the EU conditions was a dramatic about-face. Notwithstanding everything that must have gone on before, including possibly YV’s personality playing a role in the debacle of negotiations with Europe,  this must be a sad moment for all those who harbour romantic notions of challenging power and coming out the better for it.

Actually, Larry Summers’ quote above might sound utterly cynical but is very close to the truth. All change agents succeed only when insiders permit them to. Otherwise, most end up as rebellions without success. Even if they succeed in overthrowing a particular regime and come to office and then turn into ‘insiders’ themselves, did their cause or the ordinary citizens who trusted them succeed?

‘Insiders’ are those who control the discourse, the narrative, wield power, influence and usually benefit smaller power centres and narrow interests than serve large interests. ‘Outsiders’ are like Don Quixote tilting at the windmills.

If you become an ‘insider’ by accident as YV did and if the ‘insiders’ already inside permit you – assuming that you retain the spirit of the ‘outsider’ in you, you may be able to achieve a few things that are consistent with your ideals. That is the bitter reality of the balance of power. All democracy in that sense is a fig leaf for the balance of power that rests firmly with the powerful. The power of power is powerful!

A rising tide might turn some boats into giant steamers andin the process may lift some boats. But, we mistake it for the power of our ideas, power of our persuasion and the triumph of the underdog, etc. It might simply be the case that you were allowed to succeed for various reasons.

The question, at a personal level, is whether one wishes to remain an outsider or an insider. IF one wanted to become an insider for the sake of ‘doing good’, then it is important to remember Summers’ advice. IT is sound, practical and true. The risk is that one might become a quintessential ‘insider’ oneself. The system digests you completely.

Or, one retains the spirit or remains loyal to it, remains untouched by the trappings of becoming an insider and achieves whatever possible. At the margin, he or she would have made the world a better place. It is possible theoretically but happens relatively rarely or to a few. It is possible for policy advisors and some technocrats but less so for politicians and for those who hold political office.

Or, one comes out; becomes an outsider again and remains true and loyal to one’s beliefs and values and sleeps soundly. If one were lucky, a crisis occurs and one’s ideas are sought and one pushes them through in a crisis. Otherwise, insiders would never permit them. One’s ideas see the light of the day and make a positive impact and one remains an outsider. That is the ultimate success story. But, it needs a lot of luck or divine will.

In India, many political parties started out as outsiders. The DMK in the South, the All Assam Students’ Union come to mind. Laloo Prasad Yadav started out as a Lohia-ite socialist. Tamil movie, ‘Achamillai, Achamillai’, is the story of how the insiders turned an outsider into one of them – a school teacher who joined politics to do good; becomes a politician, engineers a caste conflict and killings. His wife does not ‘recognise’ him any more and kills him in the end.

Tamil Novel, ‘Mayaman Vettai’ by Indira Parthasarathy is another tragic tale of a returning non-resident Indian becoming an insider – part of the system that he sets out to change.

Just right now, notice how in the tragic turn of events in Sri Lanka, Arjuna Ranatunga, the hero of their World Cup victory in 1996, has been arrested as his bodyguards fired at demonstrators or opposition supporters. He was the leader of the underdog team – an outsider – that challenged  ‘status quo’ powers.

One of the most brilliant articles I had read this year was about the current Pakistan Prime Minister and the brilliant cricketer cum captain, Imran Khan, who led his team to victory in 1992 World Cup. The story is that of an outsider for whom becoming the insider became an end in itself.

Very few remember why they became insiders in the first place. IF they do not truly become insiders – at least, they forget their original ideals and settle for their personal career advancement. That is, becoming part of the system becomes an end in itself. They may not be as harmful as true insiders usually are but they drift far away from their ‘outsider’ spirit. Very little of it stays with them. There is little public welfare gain from them becoming insiders. There are many in this category.

Personally, I feel very comfortable imagining myself as an outsider. I must consider myself lucky that, in my corporate career, I was allowed free reign of my ‘outsider’ spirit. That was partly a matter of luck for my role never really threatened the insiders and my research calls, predictions and views – out of consensu as they were – did not turn out to be systematically and persistently wrong. In fact, they were right, for the most part. It was a lucky confluence of many things that helped me remain an ‘outsider’ for most of my corporate innings.

Things became difficult in more ways than one, after 2009, with the engineered economic recovery. I never could come to terms with it, until today. No wonder I quit in 2011, feeling confused about many things! I still am.

[Cross-posted in http://www.jeevatma.wordpress.com]

Coconut oil

Came across this article in ‘The Guardian’ on Coconut oil. A professor at Harvard calls it ‘pure poison’.

A friend of mine who is a Cardiac specialist and surgeon wrote back:

“We have been using coconut oil for many centuries without any mishap. Whole of Kerala is using it and so many Pacific islanders do use coconut. Think the west is trying to undermine us! Our forefathers were clever indeed!”

Another friend sent me a link to this effective speech by Dr. B.M. Hegde on coconut oil. Dr. Hegde, in that six-minute speech, mentions an Institute that he has co-founded. You can find it through this link.

Another friend wrote in to say that he would trust B. M. Hedge over anyone else anyday.

One more friend – who always gives me a complex whenever I talk to him – shared the following information and insight with me:

I have read a lot of stuff on food and the only 2 things I have concluded are 1) a Mediterranean type diet is good, and 2) concurring with Michael Pollan’s pithy advice ‘Eat food. Not too much. Mostly plants’

I think Pollan is the Atul Gawande of food writing. I love his description of edible food like substances (high fructose corn syrup and other products of food science) which he contrasts with real food.

He added:

‘In defense of food: an eater’s manifesto’ is the one with the pithy advice; his preceding book ‘The Omnivore’s dilemma’ was good and his most prescriptive book is ‘Food rules’ which followed ‘In defense of food’.

I think coconut oil has already benefited me a lot, as you can see from the information I was able to gather from friends.

Das Activist Manifesto

I cannot fathom why I did not blog on Frank Partnoy (with Rupert Younger)’s article on ‘The Activist Manifesto’ (‘What would Karl Marx write today’ was the title of their article in FT in March 2018). By chance, I stumbled upon it again, today.

I was writing to my friend Gulzar about some of the books written by Wall Street insiders. ‘F.I.A.S.C.O’ came to mind. Frank Partnoy was the author. He wrote it after he worked for Morgan Stanley. I had read the book long ago. I liked it. He practised law after that and joined University of San Diego in 1997. I understand that he is now shifting to University of Berkeley as tenured law professor. I had used his article in ‘The Atlantic’ on Wells Fargo (‘What’s inside American banks?’) in the courses that I teach.

I decided to check and see if he had a Twitter handle. Thankfully, he had one and even more thankfully, he was not an inveterate Tweeter! In the process, I chanced upon the FT article again on the rewriting of ‘Das Manifesto’. They had a website for the manifesto.

I spent time reading Professor Alan Morrison’s great introduction to the manifesto of Partnoy and Younger. Worth reading. I am yet to download their new manifesto and the original. Intend to do so.

In the process, from Partnoy’s Twitter handle, I read the wonderful review of Adam Winkler’s book, ‘We, the Corporations’ by Zephyr Teachout. Sample this comment:

Beginning in the 1970s, a group of activist lawyers associated with the University of Chicago persuaded courts to gut well-established principles designed to protect open markets and decentralized power, and to replace them with an ideology of efficiency that has contributed to our current crisis of monopoly capitalism and inequality. Winkler mentions the Chicago school in passing, but he doesn’t address the post-1980 antitrust cases, a striking oversight because they fit neatly into his theory: Corporate monopolies gained rights by asserting that they benefited the rights of others (in this case, consumers). [Link]

Teachout says that Winkler missed out on this but writes a nice tribute to his work.

Also, read the review of ‘The Chain of Title’ by David Dayen, reviewed by Frank Partnoy himself. It is the kind of stuff that one sees in developing economies. Nobody knew who had the titles to the properties that were foreclosed. Yet, they foreclosed! This happened in America. Heart-rending, actually:

Lisa Epstein, a nurse, learns that the bank foreclosing on her, the one at the end of
the securitization daisy chain, could not prove that it had legally obtained her loan. When she challenges the bank in court, its lawyers present a document dated three months after she was served with foreclosure papers — a “poorly drafted cover-up,” Dayen writes. She meets Michael Redman, a car salesman who had a similar experience, and persuades him to publish an online guide to uncovering mortgage fraud. The two of them connect with Lynn Szymoniak, a lawyer, who investigates the signatures in her own foreclosure action and finds one with a date when the signer was actually in state prison.

Exposing those lies becomes a moral crusade. The homeowners’ stories are emotional roller coasters, which Dayen meticulously reports. He and his characters find the banks’ behavior not just indefensible but criminal. Prepare to be surprised, and angry.

Partnoy also reviewed Anita Raghavan’s Billionaire’s Apprentice.

So, an evening in ‘partnership’ with Partnoy!

 

On Adam Smith

There is a nice article in ‘Aeon’ magazine on Adam Smith. The article is better than the review prof. John Kay wrote of a new book on Adam Smith which, I think, is similar to the article above.

But, the book itself might be richer in content than the review suggests. So, my comment on the review is not a comment on the book. Perhaps, the article in Aeon and the book might be convergent.

The important message from the article above is that Smith was not so much against state intervention as he was about ‘State capture’.

Further, there is the unnecessary obligatory reference to Donald Trump in Prof. John Kay’s article. Not needed at all, in the context of the article. John Kay too does not need to conform. If so, he would not have written ‘Other people’s money’ and authored the report on UK Equity Market Reforms. Just shows how powerful the tendency to conform to conventional wisdom is.

That is the word

Tucker stopped short of advocating the BoE be brought back under Treasury control. But beneath the bonhomie with governor Mark Carney and his old BoE colleagues, was there a hint of critique? Late on, Tucker pointed to the front row, where Carney and three deputies (Ben Broadbent, Sir Jon Cunliffe and Sir Dave Ramsden) sat next to chief cashier Victoria Cleland, and joked: “I’ve just noticed: this is the politburo.” The front row, Soviet-style, did not smile. [Link]

I am reading ‘Unelected Power’.

Pre-announcement of our new book

I have some good news to convey:

Our (Yours truly and Gulzar Natarajan) co-authored book, ‘The Rise of Finance: Causes, Consequences and Cures‘ has been accepted for publication by the Cambridge University Press. It is now ‘syndicated’ for publication. Have to deliver the manuscript before I go on a holiday end of this month. Will provide further updates on the timing of the launch of the book.

Italy, Europe, Pakistan and the rest

Been six days since I blogged. Was travelling again on May 30-31. Backlog of blogging builds up. So, this one is a potpourry.

Almost done with reading ‘Final hour’ Sir Martin Rees. Recommend it.

Of course, ‘Adults in the Room’ by Yanis Varoufakis remains the highlight of the year in terms of readings completed. He has a fairly sober piece on Germany (Merkel, in particular) being at the heart of the problems confronting Europe. In his attempt to be politically correct, I think, he has finessed his lines.

Paul Krugman has three tweets on the Italian President denying the Italian election winners the right to form the government by denying them their Finance Minister nominee.

But, Yanis makes this interesting point:

Trump understands one thing well: Germany and the eurozone are at his mercy, owing to their increasing dependence on large net exports to the US and the rest of the world. And this dependence has grown inexorably as a result of the austerity policies that were first tried out in Greece and then implemented in Italy and elsewhere.

Today, I heard Raghuram Rajan in Singapore saying that, one of the reasons behind the austerity policies in the UK was (or, could be) that their banks were too big relative to their economies and that the austerity was an accommodation of the demands of such a big banking sector on the government’s fiscal resources. Same goes for Europe. He was not defending this, however. Rajan was delivering the 9th MAS lecture today in Singapore.

Nonetheless, I am not advancing this either as an explanation or justification for the ‘Troika’ to impose austerity – and that too with utter hypocrisy (I am yet to write a full review of ‘Adults in the Room’) – on Greece. Simply recording something I heard today related to the word, ‘austerity’.

Inter alia, UK Government sold some of its stake in the Royal Bank of Scotland at a hefty loss today.

The UK Chancellor of the Exchequer George Osborne has such a massive conflict of interest with what he is doing at the ‘Evening Standard’ that I do not know where to begin. Read this to figure it out yourself. Equally, I am not surprised that Google took up his offer. They should be embarrassed but will they be?

The implications of this story are staggering and overwhelm me. How is India, for example, going to find employment for its youth with or without formal education? Is technology such a holy grail that it should be pursued, no matter what? That is where I find Sir Martin Rees thoughtful and humane. See the beginning of the post.

Prof. Atif Mian at Princeton has a series of fourteen tweets on development, the vicious poverty trap and how public policy and prejudices make it more vicious. First tweet here.

Australia charges Citi and Deutsche Bank for cartel-like behaviour in their underwriting of ANZ shares a decade ago. The authorities have made a criminal charge and that is serious stuff. Banks will be banks, I suppose.

A damning verdict on American universities by Rana Foroohar. They are now hedge funds, she says. Ed Luce wishes she were not right. He concurs.

A powerful way to understand what we (humans) have wrought to the climate. Found it via the twitter handle of Atif Mian.

Gulzar shared this pithy and perceptive blog post by Tyler Cowen on how Trump’s foreign policy might outlast him in America.

This should tell us why Europe has not earned Trump’s respect.

A good summary of Pakistan’s acute ‘Balance of Payments’ situation.

More later.