Stealing from the unborn

That's what budget deficits often are, in my opinion. Often, but not always. I was delighted to see this graph in this week's "The Economist".

(Source: Stimulating, The Economist, Feb 19th 2009)

How refreshing to see vertical bars rising above the zero level in a fiscal deficit graph! The article quotes the Chilean finance minister Mr Velasco as saying, "being a Keynesian means being one in both parts of the cycle." Since Chile has prudently saved money in the boom years of 2003-08, reducing public debt to an incredible 4% of GDP by Dec 2008 (India's stood well above 60% in March 2008, even before this year's massive deficit), it can now responsibly run deficits for a number of years without excessively burdening future generations.

Contrast the prudency of Chile to the profligacy of India. India's leaders seem to have forgotten that in addition to being representatives of current citizens, they are also guardians of the nation-state and are trustees for future generations. For the past 15 years (and probably longer than that), not a single year has gone by when the Indian government spent less than it earned. This borrowed money will have to be repaid by future citizens in the form of higher taxes (or a bout of significant inflation, hurting the poorest most). I understand that for a underdeveloped country like ours, governments may borrow to invest in socially and economically productive projects whose returns to future generations will offset the costs of debt servicing (Building a school or a road, say). But we have been borrowing money to spend on current consumption, subsidising fuel and fertiliser prices, to take the most egrerious examples.

Consider a scenario. A man begets a child. He immediately rushes out and buys a Mercedes, pledging to pay the carmaker the first five years of his daughter's future earnings. Would you consider this man as responsible? India has been doing exactly this, writing out IOUs on behalf of her future generations and using the cash to buy cheaper fuel and fertilisers.

India's GDP grew by 8-9% from FY04 through FY08. Yet the budget deficits never disappeared. This year (FY09), growth of 6.5-7% is expected. The deficit is expected to balloon to as much as 11% (centre + states). In 2007, Chile grew by less than 6%. Yet it managed a surplus of almost 9% (Copper-boom related revenues played a part obviously, but the restraint in spending is still commendable). How very frugal is India being, probably because we have simply borrowed this money from our children :(

The reads of 2008

Felt like listing down the books I read last year. I think it is an exhaustive list, since these are all books I have now and I don't recall borrowing any books from acquaintances and am not a member of any library. The list is in roughly chronological order, with the dates in parenthesis being the dates of purchase. However, there probably were books that stayed on the reading shelf longer than others.

1. The Unending Frontier, J. Richards (Jan 1, 2007): Clearing this book from my to-do list took some doing. Altough very informative, it is a somewhat tedious read. Using 14 case studies from across the world, it presents an account of the impact of human economic activities on the environment from the 15th to the 19th centuries.
   
2. Dr Tatiana's Sex Advice to all Creation, O. Judson (c. Feb 1): This is a wickedly witty and highly readable, yet scientifically robust, account of some of the intriguing sexual behaviours of creatures big and small. Judson is a first rate writer. She looks rather pretty too :)
   
3. The Black Swan, N. Taleb (Mar 2): I like this work by Taleb much more than "Fooled by Randomnes" for some reason, probably because the wealth of historical examples he states has gone up substantially, while his annoying arrogance is not so much on display.
   
4. Fooled by Randomness, N. Taleb (Mar 8): [I read this book before I bought it. Might have even read it in late 2007] I did not think that the book contains too much that is groundbreaking, perhaps because I was already familiar with most of the ideas presented. I doubt if I would like Taleb's personality either. Nevertheless, the book is worth reading.Overall, Taleb's ideas about randonmess being a much greater part of our lives than we like to think it is, make for reflective reading.
5. How the Mind Works, S. Pinker (March 8): Pinker is one of my favourite science writers. This book did not disappoint. This exquisite survey of the human mind is definitely a must-read.
6. Barbarians at the Gate, B. Burrough and J. Heylar (Mar 8): This seat-of-the-pants account of the buyout of RJR Nabisco is a must-read for everyone, whether one is interested in finance/business or not. The story is brilliantly told, the characters are superb - it could not have been written better had it been fiction, I venture.
7. Oliver Twist, C. Dickens (May 11): The first classic novel from Victorian times that I have read. I liked it and am resolved to read more of its kind.
8. The Third Chimpanzee, J. Diamond (May 11): I had read Diamond's "Guns, Germs, and Steel" a couple of years ago and enjoyed it thoroughly. Here, the author brings together biology, anthropology and history brilliantly to survey and explain many aspects of our behaviour and culture.
   
9. Breaking the Spell, D. Dennett (May 11): In a very long, but quite readable argument, the author spells out the case for scientific study of organised religion, sketches out a plausible course of the historical evolution of faith, and its implications for the treatment of religion in modern society.
   
10. The Character of Physical Law, R. Feynman (May 11): The great physicist is as articulate as ever in describing the fundamental laws that govern our world. The book is a compilation of a series of lectures he delivered at Cornell University in the 1960s. I wouldn't recommend it to people who have not studied physics beyond 10th standard, however.
11. Ancient Rome, S. Baker (May 11): This is a dramatically told tale of important moments in Rome's journey from being a rising republic, then mighty empire to ultimate decay and fall.
12. Liar's Poker, M. Lewis (June 21): A gift from a friend. This famous account of life as a sales trader in Wall Street makes for great reading and is very insightful. Present circumstances have only heightened the sense of disgust/disillusionment about how the incentive structure of investment banks has served to benefit only employees of those firms at the expense of customers, shareholders and, ultimately, taxpayers.
13. The Vikings, J. Clements (July 8): I bought this in Oslo from the Viking Ship Museum. While it has some interesting information about the Vikings, it was largely a disappointing read - too many names, not enough lucidity. The account about the Viking settlement in North America is interesting though.
14. Timon of Athens, W. Shakespeare (July 13): A play that I bought during my London trip. This is one of the Bard's less famous plays, but the story about money and its fleetingness was certainly appropriate for 2008.
15. A History of Warfare, J. Keegan (July 26): Another author whom I have read before. This book, a rich account of the methods of warfare over the last 3000 years, is very informative.
    
16. When Genius Failed, R. Lowenstein (Sep 21): I bought and read this account of the hedge fund LTCM (including Nobel Prize winning partners) in the days after Lehman's bankruptcy. This book is very well-written, capturing the saga of hubris that ultimately devastated the fund and its partners.
17. Nehru, J. Brown (Oct 5): I read Nehru's autobiography in 1998, along with his "Glimpses of World History" and "Discovery of India". I think very highly of Nehru's writing skills and of his towering intellect, I think his commitment to the cause of democracy was an important facotr in stabilising our country after independence, but always wonder why he got the economic policy wrong. This biography is an adequately sympathetic record of India's first prime minister, without glossing over his many failures.
18. City of Djinns, W. Dalrymple (Nov 16): Had this book recommended by a friend in mind for a while; finally read it now (as it happened, in Delhi). A splendid account of Delhi and the many faces of its history by a gifted writer. I will surely read more by him.
19. The Argumentative Indian, A. Sen (Dec 12): A scholarly collection of essays about Indian "culture, history and identity", as the cover puts it. Sen demonstrates his vast knowledge and deep understanding of social and economic questions he addresses, maintaining a humanist vision without giving in to blind socialism/nationalism.
    

The list does not include "Eccentric Seattle", a collection of sketches of historical events/people of the city, which is still on my shelf, and another that I shall rather not discuss here. It also does not include the handful of volumes of manga I bought in London and read during the ensuing months.

18-19 books in a year is not satisfactory, though it is a big improvement over the pace of 2005-07, I think. I want to recreate my last year of engineering, when I read around 40 books, I suspect. Have read 3 books in Jan already, so that's a good start. I have also noticed while writing this entry that my recollection of the content of the books I have read is very poor. I should start a habit of taking short notes the minute I complete a book, so that my ability to recall its content is improved.