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Jakarta Post

What would Gandhi have done amid financial meltdown?

In these stock market obsessed times there is a troubling tendency to confer "Godly wisdom and attributes" to well meaning, intelligent but ultimately flawed individuals

Amol Titus (The Jakarta Post)
Wed, October 8, 2008

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What would Gandhi have done amid financial meltdown?

In these stock market obsessed times there is a troubling tendency to confer "Godly wisdom and attributes" to well meaning, intelligent but ultimately flawed individuals. First, Alan Greenspan was called the "oracle" but now his policies of stubbornly keeping interest rates low are being blamed for feeding the bubble of easy money coated "irrational exuberance".

Then there is Warren Buffet, referred to as the "sage of Omaha" -- someone whose investments almost always turned into gold. That was true until he rather unwisely invested in some tottering Wall Street investment banks. And now the U.S. Treasury secretary, Henry Paulson, is being held up as some kind of savior who can cleanse the system of its "serious toxicity" armed with a US$700 billion bailout package.

In the words of one clear-sighted demonstrator outside the failed institution, Lehman Brothers, we are living in times of "casino capitalism" or an elaborate game of rigged roulette in which many of the participants joined in a greed-driven frenzy, throwing caution, ethics, principles and rule books (whether internal or external) to the wind. Leveraging up to 40 times what they could actually afford they literally bet the house with their leaders and cohorts in accounting firms, ratings agencies and the media, continuing to deny the problem that was masked under off balance sheet structures, tax dodges, regulatory loopholes, opaque hedge funds and spin and bluster passed off as quarterly disclosure.

Built on intrinsically faulty foundations -- excessive mortgage linked lending to borrowers incapable of meeting obligations -- the speculative house of cards has come crashing down in the U.S. More troubling for emerging economies like Indonesia is that the reality of contemporary globalization will also usher greater vulnerability in terms of slowing growth, sluggish exports, weaker currency, restricted lending appetite especially for SMEs, reducing stock and property values and anemic foreign direct investment. Casino capitalism is unleashing its own form of materialistic violence and bloodshed not just on Wall Street and Main Street in America but also painfully across the Third World.

In such troubling times it is worth turning to the wisdom of Mahatma Gandhi, whose 139th birth anniversary on Oct. 2 passed relatively unnoticed amid the current collapse. Gandhi presciently noted that there was sufficiency in this world for "every man's need but not for one man's greed". He warned about the dangers of "life corroding competition" and it is quite clear that any lasting recovery from the current mess requires financial sector participants to drastically rein in corporate greed. Many have directly or indirectly abetted speculative activities linked to "asset classes" -- stocks, bonds, treasuries, oil, natural gas, commodities, food staples even water. Sub-prime mortgages with high fees and interest rates (due to the inherent risk of financially unsound borrowers) was one such attractive asset class that was addictively played up snaring even otherwise cautious commercial banks, insurance companies and pension funds.

Gandhi assessed the roots of violence to be "wealth without work, pleasure without conscience, knowledge without character, commerce without morality, science without humanity". Though he was referring to physical violence his insights apply equally to the materialistic mayhem. There is an unsustainable tendency to seek out super normal returns in the shortest periods of time. So managements, compromised with numbers linked incentives, have resorted to a "hook-or-by-crook-end-justifies-means" work ethic. A willful suspension or suppression of conscience is clearly rampant and this is what is fueling anger among many customers -- mortgage holders facing foreclosures, retail investors facing substantial downside risks that were not properly explained during "predatory" sales processes and developmental economists who are concerned at how the financial sector is increasingly becoming a serious oft repeated cyclical liability.

Remember how the costly bailout of over $65 billion in the recapitalization of Indonesian banks after the Asian financial crisis adversely impacted social spending on education, health care, sanitation, agriculture and infrastructure due to budgetary constraints. The financial sector must get back to contributing more meaningfully toward microfinance, rural development, large scale civic and trade infrastructure and sustainability-linked funding. Its vast sector insights, financial muscle, technology, networks and talent pool must be tempered with other key attributes Gandhi referred to -- character, morality and humanity. That would also constitute genuine CSR as opposed to publicity driven tokenism.

"We must become the change we want to see in the world" counseled the Mahatma and this will ultimately become the test of leaders of battered financial institutions. "Becoming the change" will require an unstinting commitment to transparency and openness, to integrity in operations, to genuine long-term customer value. The vision and mission statements of all financial institutions make noble claims but there is sharp disconnect between words and deeds, claims and operations, action and accountability.

"Herd mentality" is a frequent accusation against banks and in the current chain of falling institutional dominoes, this is evident. Many participants jumped in because "others were doing it" or due to inducement of "market practice". Gandhi cautioned "an error does not become truth by reason of multiplied propagation nor does truth become error because nobody sees it". Internal governance and external supervision must be drastically improved to contain the costly missteps arising from this herd mentality.

Some management experts, media pundits, even business school professors caught up in the headiness of casino capitalism have had little time during the past few decades for genuine value-based seers like Gandhi, Mandela or Martin Luther King. Gandhi said of similarly dismissive British colonialists "first they ignore you, then they laugh at you, then they fight you, then you win". Some pin striped suited buffoons would do well to finally grasp the reality that in the end truth, honesty, self restraint and personal accountability wins out over spin, corruption, greed and the blame game.

(The columnist is a writer and management professional based in Jakarta. His book Gandhi and Contemporary Management Values will be released in December.

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