Neo-Liberalism: Investing in Nations

I received an often-circulated article over e-mail on savings as sin, spending as virtue, and that set me thinking as to whether the argument presented by the author Mr. S. Gurumurthy that the Americans spend and save little, while importing more than it exports.   It says that the US has taken over $5 trillion from the rest of the world, which saves wastefully.  Is the US really spending all, and dependent on third world countries?

In my opinion, The United States cannot be the biggest “spend-thrift”.  It is the pioneer in “saving smart”.  It is the largest investor, and also a smart one at that.  I would say, countries like Japan fail to invest and is committing the cardinal sin of “putting all its eggs in the same basket”.

When I say invest, it is not money or securities.  Investments are not in financial markets, but in securing and procuring Nations. The answer to why the world is after US? The US is committing a series of sins to gain the assets of the world.  This is the age of Neo-liberalism (Noam-Chomsky in his book “Profit Over People: Neoliberalism and Global Order”, Seven Stories Press, New York. 1999) or what is termed as “Washington consensus”, which is an array of market-driven policies designed by the government of United States and financial institutions like IMF, World Bank, and implemented by these global institutions on vulnerable societies.  The rule of this global order of polarization is to “liberalize” (Parallels to Bush speak on “we are liberating the people of Iraq”) trade regimes (when Donald Rumsfield says “ We are there for regime change”, the regime meant the “oil trade regime”), control market forces by ending inflation, and encouraging disinvestments of public sector through privatization (Mr. Arun Shourie’s economics is borrowed from the Neo-liberal Americans).  Henry Kissinger's "Viruses" (Chile in 1973) to George .W. Bush's "Axis of Evil" have ignited fires in the "radical" belly of third world nations.  This message has fawned across continents and is today the seed for an army of religious feudalist, be it the Hindu extremists in India, The Chechen Rebels in Russia, Impoverished Extremists in Nigeria, and Sudan, or the South East Asian radicals.  So, the question is does this not create a sense of “Insecurity” in the American community?
The answer lies in the American investment in “Securing the world” thus securing the American economy (a misnomer as the reality is in “procuring the wealth of nations”).  A look at the American Defence spending is the worthwhile. US spent $300 billion for National Defense in Fiscal Year 2001, Military related expenditures now account for over half (50.5%) of all discretionary spending.  The New strategy is for increasing “savings in security” by increasing defence spending gradually to a minimum level of 3.5 to 3.8 percent of gross domestic product, adding $15 billion to $20 billion to total defense spending annually. A brand new strategy is envisioned in the document Rebuilding Americas defenses (http://www.newamericancentury.org/RebuildingAmericasDefenses.pdf ). A country like India spends just $12,000.7 million and today spends at 25-30% increase from that figure.  While India wastefully spends on deploying the Army at the Indo-Pak border and then retreating, US does what is required to maximize returns on the huge investment (Iraq has 112billion barrels of crude oil, 110 trillion cubic feet of natural gas). In 2002, America imported 1.2 billion barrels per day, when Iraq’s oil production levels were 2.0 billion barrels per day.  Experts say, at full production capacity 2.8-2.9 million barrels per day is achievable.  America has thus saved by procuring the “largest energy stock”. 
Will the “spend-thrift” model collapse with the onslaught of other economic powers?  No
The European Union tried to stem the US monopoly but failed to muster the command over nations.  European Nations never invested in Nations, like the Americans.  The Russians had it in them during the pre-Gorbachev days, but they over did it and ended up paying a heavy price for their own economy.  The Russians never really invested in “High valued stocks”(Old stocks like India still remain, but Indians always tilt where the “money” is!).
So the best way to save is by taking calculated risks. The Japanese are risk averse, and so are Indians.  The Americans take risks, and the returns are high.  They save judiciously. 
What are the Lessons here for India Inc?
Invest smartly
Money under the pillow is not savings. Don’t be like the Chinese who invest without thought.  China needs to invest in other countries to gain strategic strongholds like the US. China is not exploring options.
Invest before you spend
The Americans invest in Middle -East (oil), Black Hawks and MOA Bombs. They secure their assets before going for the kill (They don’t take too many casualties, because they prepare for the inevitable). There is no room for speculation.  The Americans can now spend as they have got their money’s worth in Iraq. 
Invest in High Value Stocks
The Americans invested in the worlds second largest oil reserve. The largest is already a “banana republic”.  India is investing in strife torn countries without doing anything to control the nations.  India has invested heavily in Syria for Oil exploration.  US has already issued threats to Syria saying they are becoming a rogue nation, which means they are the next on the US radar. In effect Syria will be under US regime in a few years. Indias investments are for US.

Post script: Countries like India need to be fast, but “slow men and fast horses never win the race” or “fast men with slow horses never won the race”. Today, The US has fast horses, but if other countries have to win the race, there is hope because “Dubya” Bush’s idiosyncrasies suggest that the US riders are fast but without brains.

The Indian Union Budget 2004-05

The Manmohan Singh Government finally rewarded those who voted them to power. It was expected to reverse the pro-rich trend and give dollops to the aspirational lower middle class.
Educational cess of 2 percentage will prove beneficial only when it is disbursed judicially towards improving primary education facilities. In India, over 30 percentage of educational expenditure is towards teacher and government staff salaries. Fiscal Management in education sector has to be established before taxing the salaried people. The service sector taxes had to be raised considering their miniscule contribution to the revenue, though they form over 50 percent of the GDP. My post of social engineering Vs software engineering proved the point.

The additional Rs.10,000 crore budgetary support for popular Mid-day scheme have to be supported with better vigilance. It is known that the Mid-day meals scheme in the schools of Tamil Nadu were a huge hit with the poor not because of the lure of education but because of the meal. Proper monitoring mechanisms should be in place to ensure that schools donot turn into mid-day meal centres and mass kitchens. Fiscal Responsibility and Budget Management Act (FRBM) should be first be practised by the ministers in parliament who waste public resources. The growth target of 7-8 % is not impressive, the government should have found means to improve it to 8-9%. Overall the budget has been without any flamboyancy, and on expected lines. The Finance Minister, Mr. Chidambaram has prepared a south Indian meal. He has added more spice with less salt to the main course and more salt with less spice to the side dishes. The taste is the same.