Thursday, November 27, 2008

Mumbai Terror Attacks: A Colossal Intelligence Failure

The present Cong led UPA government in India is an embarrassment of massive proportions. They have been more interested in playing politics with India's security than staying alert to protecting the nation against real terror threats. In past month, they have been too busy coining and establishing a new term, "hindu terror" for narrow political ends. For this, they have dedicated a lot of attention and resources to fabricating false cases against some innocent so called "hindu terrorists". With attention of intelligence agencies, media and entire nation thus diverted to cheap games, of course, India was caught unawares of planning and execution of "real terror attacks". This is a colossal intelligence failure, probably one of the worst in history of independent India. Just imagine, how blatant and shocking these attacks have been! Foreign terrorists arriving by boats to India's western shore, landing near the financial capital of the nation. For all practical purposes, this is nothing but an invasion by a small militia! And, none of this made even a blip on radars of India's security agencies?

This present UPA government is focused on appeasing minorities and playing politics with national security ever since they came to power. One of Prime Minister Manmohan Singh's first decisions was to repeal the POTA (Prevention of Terrorist Act) law passed by the BJP-led NDA government. This was an anti-terror law, not an anti-hindu or anti-muslim law. Only the pseduo-secularists with their eyes on minority vote bank could label this as an anti-muslim law. The need of the hour is to stop playing communal politics with national security. That will go a long way in helping India do a much better job fighting terrorism and preventing future terror attacks.

The Wall Street Journal (WSJ) has reported in an article titled, "Murder in Mumbai" that "A lack of political leadership is to blame":

"A lack of political leadership is to blame. Yesterday Prime Minister Manmohan Singh promised that "every perpetrator would pay the price." Yet his Congress Party has done little more than bicker with its coalition allies over the past five years on how best to fight terrorism, as Sadanand Dhume writes here. Or it has tried to deflect responsibility by blaming Pakistan. It may pay a price for its incompetence at the national polls next year."

In another article published by WSJ, author Sadanand Dhume blames Cong-led UPA governement's scrapping of POTA:

On taking office in 2004, one of the first acts of the ruling Congress Party was to scrap a federal antiterrorism law that strengthened witness protection and enhanced police powers.

Recommended Reading:

Newsweek: Flunking the Intelligence Test
Newsweek: Right Tilt
IBNLive: Govt knew about the threat, did nothing: Arun Shourie

Wednesday, November 26, 2008

CNN Video: India Vs China

A very interesting comparative analysis of the world's two most populous and fastest growing economies, their strengths, weaknesses as well as the challenges the face as they grow:

Tuesday, November 25, 2008

Henry Paulson's Approach is Bass Ackwards

Lets get it straight. The key underlying cause of the financial crisis is income stagnation and fall in real wages of the consumers. There has been a lack of growth in well paying jobs for past several years. The debt levels, including credit card debt and mortgage debt, have risen to alarming levels. What makes the rising debt levels really alarming is that they are not supported by a concomitant rise in incomes.

Henry Paulson's approach to deal with the crisis is to re-capitalize the banks so they can start lending again. This is exactly the "bass ackwards" approach that is not going to do anything to solve the financial crisis of the century. Let me explain. The real problem is not lending, in fact, it is reckless lending to credit unworthy masses which led to the problem in the first place. We will not solve the problem by simply lending more at a time, when income levels are stagnating, number of well-paying jobs are dwindling (outsourced by globalization) and consumers are neck deep in debt (mortgage & credit cards). Getting the banks to start the lending cycle all over again would be akin to treating an alcoholic by giving him more alcohol for medicine.

It would seem that Henry Paulson and his rescue team are either in denial of the underlying cause of this crisis or they are merely pretending to be ignorant. Unless a proper diagnosis is done to determine the root cause, only treating the symptoms would be pointless. The current freeze in the credit & lending markets is the symptom of the problem, and not the underlying cause. If a doctor treats only the external symptoms of a disease, it is only a matter of time before the disease symptoms would resurface. At best, it would only push the problem out a few years but the next relapse could be even more severe.

The long term solution has to be stimulating income growth by creating more well paying jobs. This can be done by investing in infrastructure projects, innovative technologies for the future and making investments in hi-tech R&D. To focus on short term results while ignoring investments in R&D for the long term is like eating seed corn. This economic stimulus has to be accompanied by common sense regulations on lending practices and complex financial instruments to ensure proper functioning of the financial markets in the future. Executive/CEO compensation should be linked to long term performance and not to short term stock movement.

These steps would be like nourishing the tree at the root, which would help restore the health of the entire tree including trunk, branches and leaves, as opposed to Henry Paulson's approach that merely waters the leaves at the top. It is common sense that a tree must be watered at root for proper nourishment, washing the leaves is cosmetic at best.

That said, in the short term, it is alright to take measures to ensure proper functioning of our financial system but over the long term these measures must be complemented with radical steps to support the economy at its roots: income growth for consumers who support the real economy. Eventually the economic growth will be restored only by re-emphasis on innovation leading to real products and services of real value and ultimately real income growth.

Sunday, November 23, 2008

Big Three Auto Bailout is Wrong Solution

Hardly anyone would disagree that a vibrant domestic auto industry is vital to our future energy independence as well as leadership in fuel-efficient technologies such as electric/hybrid vehicles and batteries.

That said, a taxpayer-funded bailout for the Big Auto is not a practical solution as it will only delay the inevitable demise of the Big Auto. It will not fix their flawed business models, bloated cost structures, inferior products and an out of touch management, which have contributed to the problem at the Big Three. The goal should be to solve the problem and not push out the problem until later.

Both the management at the Big Three and the UAW are disconnected with the existing realities in increasingly globalized automotive markets of 21st century and as such should be allowed to go the way of the dinosaurs. Simply throwing $25b of taxpayer money without any path to viability would not accomplish anything, especially when these people cannot seem to get anything right.

The Big Three management and UAW have displayed an utter lack of vision on how to solve the problems their compaines face. The fact that CEOs of the GM, Ford and Chrysler flew in private corporate jets to Washington to beg for taxpayer money, shows how disconnected they are with any sense of time, place and circumstances.

They need to be forced to make the painful and tough choices they have been unwilling to contemplate to date. Bankruptcy is not such a bad solution as it is made out to be. Only a complete restructuring will allow a modern auto industry to emerge with new vision and business model that can compete in the global automotive marketplace. The restructuring must focus on the following:
  • Fix the cost structure including new labor agreements
  • Bring in new management with fresh vision for a new start
  • Commitment to invest in innovative technologies such as fuel-efficient design and electric car batteries.
Last but not the least, taxpayer paid bailouts set the wrong example and would encourage more bad behavior in the future. How does one make sure that bailouts remain what they are supposed to be: "one time exception".