Transcription of Sri. S. Gurumurthy's Interview (Second Half)
There is a fundamental shift in the US economy. I will make four points and then I will come to what our response, the Indian way, is. Four shifts that have happened in the US in the last 50 years is going to dynamite the US economy. I'm giving them one by one.
The supply chain model which were worked out during globalization has made US import dependent almost forever. It could produce money and import goods. It can never reverse it. Even today you can see any media writing that the only way to control inflation is to bring down the duty of imports from China. You can see this in any newspaper in America. Because US federal reserve system has lost the capacity to manage inflation. It has been managing only through printing dollars and exporting it outside and bringing in cheap goods. This has been the model for the last 20 years. Is it possible for this to change? And you can see any number of newspapers in America saying the same thing. And they say, "No, no, no, you bring down the duty from the European Union." There is no use in bringing down the duty from European Union because the European Union inflation is higher than that of America. So Europe cannot export deflation to America. This is the situation in which the US is.
Second is, state dependent population has peaked in America. 51% of the American population is taking some handout or the other. And even more important, because two things I'll tell you which will shock you, and I will compare India. In 1960, in America, in their household there was 3.3 persons. Today it is 2.5 persons. The reduction of 0.8 persons per household meant a construction of 32 million more houses at the cost of 8 trillion dollars and this added to the GDP. In India, we have almost 30 crore households. And our average persons per household was 5.1 in 1950. It is 4.5 now. If 1 person per household is reduced in India, we will need 6 crore more houses. And we are promoting individual rights. We are promoting human rights, son against the father, father against the son, daughter against ..., this is what happened in America. We should work on civilizational policies to sustain our economy. Your law, your courts, your media. Destroying the civilizational foundation of India which makes India maintain 4.5 persons per household. Does anybody discuss this? The Indian way is, that we will bear with difficulties but we will be together and that means even 1 person employed is the whole house employed. There is savings. Why India is one of the highest saving nations in the world is because we have family responsibility. We have to safeguard our children, we have to take care of the parents, we have to take care of elders. All these responsibilities are removed and universal social security has been mandated in America against which people like Milton Friedman said, "Don't do it." Their advice was not heeded. In 1980 when the American economy was in transition several economists came together to discuss this. This book has been published by the National Bureau of Economic Research of America. This is one of the finest books which captures how America degenerated as an economy in which Milton Friedman said please don't interfere between two generations. Let the sons take care of their parents. Don't ask them to pay the tax and you take care of the parents and you take care of the children. Forget about it. You have already taken over the kitchen through multinationals. If you take over family responsibilities also, a functionless family will cease to exist (claps from the audience). This was the conclusion of the economists. America did it. You look at the American social security report today. You know, they were collecting money and paying out to people. They were collecting money from all the people who were working and they were paying out to people who could not work. The receipt was more than the payouts till 2009. Now it has reversed. Payout is more than the receipts because more people are retiring. They have found out that the present value of the future social security obligations which they have undertaken is so high. Today they need an enormous amount of money to discharge that obligation. It is as much as 63 trillion dollars. America doesn't have even 1 dollar. Let us assume it is some other country. That very currency will cease to exist. All this is now putting pressure on America. If commodity becomes dominant, the dollar will not be able to dominate the world. That is the message of Ukraine.
Now, if you look at the direction in which the world is going and what we should be doing, I will conclude with these two points.
The European Union has published a paper. It is a very important paper. It says that by 2040 there will be diffusion of global power. The power that is concentrated now will get diffused among the nations. It is not our document. It is their document. And it will shift from West to Asia.
The second point they make is that by 2030 there will be no hegemonic power in the world. And I told you about the Harvard economist who said that American dollar is not sustained by rules of economics. It is not controlled by fiscal rules, it is not controlled by trade rules, it is not controlled by monetary rules. It is backed by what is known as the laws of Physics. The universe is sustained by a dark matter. Dollar is also sustained by the dark matter called the power of the United States. Because, from 1976, 14 trillion dollars is the current account deficit you have incurred. Dollar value must have gone down to the depths. But dollar value has gone up by 3 times in this period. To which the explanation by the Harvard economists is, "No, no, no, no, no, no, for us the economic laws don't apply. It is the laws of Physics." This was the extent to which the American establishment discredited itself. China had 2 trillion dollars in US government securities. They have withdrawn the money and come down to as low as 900 billion dollars. They said, "We will put the money in some project which may not even fetch returns but we're not going to put it in American securities because it is a suspect currency today." We must understand how the world is moving. It is not going to be led by the West. Certainly not by the US. And unless we really understand where things are moving, and in 2040, E7 - China, India, Indonesia, Brazil, Russia, Mexico (and Turkey form the Emerging 7) is called E7 - the output and GDP of E7 will be twice the output and GDP of G7. This is the documentation. We are moving from a very West centric world into a diffused world. The world order which we talked about is not going to be the same. In world economic forum, in May 2022, two great men spoke about the shift that is taking place in the world order. One was Henry Kissinger. Very wise man. He told the Americans not to start this war. He told the Americans not to expand NATO. He told the Americans to give up Ukraine. He said, the war must end immediately, in one or two months, otherwise the world order will be restructured forever and permanently. And then George Soros. He said the Western civilization is in danger. These are all not normal people. They are very influencial people.
Nobody cares about WTO. Does anybody talk about globalization these days? No. It's over. So we are moving into a totally uncharted course and I'll tell you what India should be doing. We have to maintain our civilizational basis. Even our democracy is civilizational in nature. In fact Yogendra Yadav had done a research. How, in India, the voting pattern is. He says more unemployed people, more illiterate people, more poor people, more scheduled caste, more minorities vote in India than educated people, than higher class people, than wealthy people. India's bottom is pretty strong. You look at the liberal democracies. Only 40% of the youths vote. Only educated people vote. Only wealthy people vote. And in fact there is backsliding of democracy in East European countries. The entire Western liberal democracy is under great stress. From 80% voting they've come to an average of 45% voting. The youngsters are making use of the liberty that you have given to them only to enjoy their lives and not even to contribute to the sustenance of the democracy. So our civilizational democracy is growing. India is one of the strongest democracies in the world. Despite the fact that they don't accept it as a liberal democracy. Indian democracy is strong because of the Indian civilizational base.
Indian economy is strong because we have a strong civilizational base. As I said, if all earning Indians decide to disown their responsibilities towards people who are elder to them, 50-60 crore people will be standing before Narendra Modi for two square meals a day. Can they afford it? Indian economy is sustained by Indian civilization, Indian culture, Indian value systems. Does this appear in economics textbooks and economics discourses? What is the effect of 4.5 persons per household in India as compared to 2.6 persons per household in America? If this situation becomes like America, where will India be? And you are not sustaining it through education. You are actually promoting the destruction of the civilizational values, culture, value system, respect for parents, elders, teachers, etc. This is part of the economic wisdom of India.
The third thing is, we are a non-aggressive hard power. Fortunately we acquired hard power. No world power can ignore us. And we are an attractive soft power. And with family as the social security foundation of India. And nation first approach. Which has shaken the world. We had only 24 hours to decide what position we will take on Ukraine. The position we took changed the complexion not only of India but also the global situation. All this has contributed to the rise of an Indian model. A confidence as a nation. Today the foreign minister goes and tells, "You are saying we are buying oil. The oil that you are buying in one afternoon, we are buying in one month!" They have no answer. This is the Indian way. We have been subjugating ourselves. We never thought we could be self reliant. We have now come to a position where we can think for ourselves, work for ourselves, lead ourselves, mediate and take positions. There was a cartoon published in a Japanese newspaper with which I learned, whether it is in G7 or in BRICS or in Quad, everybody on both sides is holding Narendra Modi's hand. This is the cartoon published in Japan. So the time has come. We need to build up the spirit. Thank you very much.
Q: My first question to you is... Because what I find very refreshing and very different in your approach is that you link society, our civilizational ethos, our history, global events, geostrategy, and then link it back to pure economics. So my question to you, sir, is, in a broad level, has the West undermined the impact of geopolitics on economics or, post WW2, have they taken the geopolitical order in the world for granted? And is it for the first time that in 2021-22, post Ukraine, post COVID, there has been a rude awakening for them for the first time? Have they been taken by surprise? And just to elaborate, there's been this view that America understands geopolitics and there's been a certain intrinsic arrogance about the way they've dealt with their own place in the world and their rights on global assets. Did they overstep? Did they forget their own limits? Or have they been outsmarted?
A: See, I believe that the Western thinkers have lost their sense of civilization. The West has been living on the civilizational assets created by their forefathers without fertilizing it to grow. For example, 55% of the first marriages end in divorce in 10 years. 67% of the second marriages end in divorce. 73% of the third marriages end in divorce. The Americans living as a couple is only 28 million households out of 130 million households. Because they felt civilization will sustain itself. Civilization requires an ecosystem to survive. Ultra individualism has destroyed the family, culture, civilization, and has promoted only rule of law. Rule of law cannot be the main basis on which a society functions. Rule of law has to be very largely supplemented by non-formal systems controlling and regulating human behavior. This was gone. Church was doing it and they destroyed the Church. In America, when I went to address a meeting of some Hindu organization in Boston, I was taken to a huge building. It was a Church. I asked, "Why are we meeting in a Church?" They said, "Sir, it is no more a Church, it is a Vishnu temple." Churches are being sold. So when they think that 5 years is the limit for human existence, their short-termism, 5 year politics, 1 year economics, quarterly results, overnight interest, has destroyed them. So it requires a very big thought movement. I don't think that kind of thought movement can get generated in an ultra liberal America with wokeism on the rise. I think whether they will be able to sustain the kind of liberal democratic institutions and approach itself is a big question mark for me. And as a result, when they felt globalization has given them an institutional lead, institutional command, they thought this is an undiluted advantage forever, with the main enemy finished, and one enemy is at their feet. But that enemy had a longer plan. We will buy our time. And they were able to do it. One point I forgot to mention is that they allowed the Chinese into the WTO. But in 2016, American trade representatives and EU trade representatives filed an application in the WTO saying China is not a market economy. China said, "The very fact that you've allowed me into the WTO means I'm a market economy." America had to threaten, "If you don't declare China as not a market economy, we will withdraw from WTO." So in 2019, WTO declared China as not a market economy. Everyone knew China was not a market economy. For your geopolitical interests, you allowed China. China has trampled you today. According to me.. in fact I've written a whole thesis on this and put it in the Vivekananda International Foundation website as part of my random thoughts last year.. that America raised a Frankenstein monster in China only because the American institution was invaded by China itself.
Q: Sir, in your entire introduction today when you were speaking, you repeated the phrase dynamite and America two or three times and I had this whole visualization of this in my mind. You said, "This will dynamite the American economy. That will dynamite the American economy." And I was thinking, "What an opportunity for India?" for two reasons. We are a true democracy. And I believe that they have been lecturing us about the phrase you used, backsliding of democracy. And I hate it. I don't want to be lectured by a country where there are the Capitol Hill riots. I feel that if there is a democracy that is backsliding today, it is those democracies which lecture us. You saw what happened with the truckers' protest in Canada. You saw the regressive verdicts by the courts in America on the Capitol Hill riots. That is a clear backsliding of democracy. And I would like your thoughts on what impact that would have on the world. Whether the backsliding of the western form of democracy is a systemic risk to the markets. Does it give an opportunity to India? I feel America is an unstable country today socially. And my simple question to you is, when the world's largest economy, whose currency dominates everything, everything, becomes socially unstable, what is its impact on the global economic order in your view?
A: See, what America has done in the last two decades is to co-opt the world economy into the American financial system. It has coopted the world monetary order into the American monetary order. It was its strength and that is becoming the weakness also today. So with so much of dollars outside America and America printing more dollars or America exporting more dollars to import and with no other mechanism to control inflation, they have to do it even more. They are now caught in a situation which is difficult to get out of. I am talking economically. To get out of this, America has to hugely reduce its standard of living. Otherwise it is not possible. This is one. Second, look the kind of standard of living they have. For example, a country with 120-130 million households has 260 million cars. And for that roads and for that petrol. You know, these kinds of things are not sustainable by any standard. And for that the only answer you have is not that you are raising revenue but printing dollars. This was possible because you were the super power to which everybody looked up to. Today you are being challenged. You are being challenged not by another country. You are being challenged by commodities.
Q: The Chinese economy is not as attractive as it used to be. Systemic fault lines are now becoming more visible. Hugely. The American economy is hinged on an overextension. It is fragile. It is overstretched. I believe that it has made a huge mistake in Ukraine. It has got into a war that it cannot afford. And therefore I am saying with our shared philosophy of nation first that there is a tremendous opportunity for Bharath in all of this. But if India is to emerge as an alternative, I hate to sound cruel about it but America has to fall. I'm being a little mercenary in my thought here, sir. But can America course correct? Because you said two things which struck me. One is America is this huge import driven economy. Their supply chains are incongruous. They are unsustainable. You also said that it's a country which is spoilt on dole. It is a state dole dependent population. These are not things that you can course correct in a day. Can such a challenged America course correct? Are they capable of doing that? And if so, then what kind of course correction is needed for them?
A: See, I'll make three points. Whatever happens to America, the worst affected country will be China. They'll fall together. Serious problems. Because the kind of problems that China will face, if the export driven economy receives a setback, I don't think the Chinese system will be able to manage. For e.g., simple, they have invested about 5.4 trillion dollars outside China. If the world economy is slowing down, that will become an NPA. So world economy to be sustained, the same kind of printing of money, the same kind of perception that things are okay, everything is hunky dory, business as usual, this cannot continue. There will be a huge restructuring of the world economy if there is scaling down of the American or European Union's standard of living which according to me is inevitable even on the grounds of environment which is becoming a very important issue. In which India will sustain itself. For e.g., if there is scaling down of standard of living, the first thing that will fall is the oil prices. And that's precisely what you want. And India's technological rise and India's capacity to have self restraint. Most important thing is, our people have huge self restraint. Our capacity to save. And you are also making safe savings. You know we are not going in for these risky savings. We are a bank led economy which is very good. I think government must understand this. Our economists should understand this. Our media should understand this. Take Germany for instance. If Germany will survive, it is because it's a bank led economy. In Germany many companies are delisting from stock market. They are losing faith in stock market. And stock market has now become such an important thing in US, pension system, insurance system, nearly 20-25% of the assets being in stock markets has become 70-75%. What happens to the stock market will happen to the insurance companies and the pension funds. So they have put all the eggs in one basket. Fortunately, India is free from all this. There is a disengagement on all these points. Our point is, how are you going to make the external position, how to handle this, on which I think we have to undertake a serious review of our imports. Second thing, we have to go for huge bilateralization of trade. And we have got to combine capital and current account together in dealing with the country. For e.g., we have a running current account deficit of 25 billion dollars with Saudi Arabia. Saudi Arabia is going to invest in India 50 billion dollars. So we will combine the current account and capital account and say that we will give you our Rupee to invest. Why do you want us to pay in dollars? You know, this kind of restructuring will take place in the world. Part by part, bit by bit, we have to do it. Because, once globalization fails, bilateralization is the only alternative and India must quickly step into bilateralization of trade.
Q: What do we learn from the fact that the Russian economy did not collapse as the entire Western media predicted? In fact, people hate it. Those whose entire thinking is Western economy centric hate the fact that the Russian economy has been quite resilient in its own way. What does that tell us? What is the learning for us of, you know, which is exactly the opposite of what the Western media had predicted?
A: Actually the unique advantage that Russia had was its energy and it was able to make Europe dependent on itself for its energy by using the very slogan of globalization. That I am giving you pipeline, I am giving you everything, you come to me, and they knew that by making European Union dependent on Russia for energy is the only way Russia will be able to face the challenges of America on NATO. So they slowly in 20 years co-opted the European Union into the energy economy. For e.g., if the European Union had not been co-opted to that extent, Russian response in terms of commodity trade would not have been as successful as it was. So it's a very peculiar position they had. China has the opposite thing. China will not be able to give up its exports to America. And it will not be able to sustain itself without the financial link that exists between America and China. And China has a huge housing problem. In fact I have been studying it. Its problem is unmanageable because they are destroying the houses which they have built to create more houses. Because those houses are not occupied. European Union, America, and China followed the house property inflation rate, house property asset appreciation to create money to fund. And China's shadow banking is as large as the American shadow banking. Actually it is the Marxist version of American capitalism. So all these nations have the same risk, the financial risk. We don't have that financial risk because our entire asset base according to the Credit Suisse is 4.5 trillion dollars. Period. Whereas it is 10 times more for China. So we are safer. Because our households are least indebted. Our government is less indebted than most Western governments, particularly America and England. All these countries are very high. Their corporates are indebted. The tech which the Western economies carry today is unbelievably high. China has more debt than America itself. So these people have gone all for financialization which we have been very careful about.
Q: But don't you think America is in a worse situation? Because it is in a form of drugs which it cannot get out of. See, George Soros is a person to follow a little bit because he tells you about this kind of thinking. He knows about money. BTW, he's incredibly interested in investing in Indian media organizations by stealth. Speaking about the Ukraine war he said in Davos, "Even when the fighting stops as it eventually must, the situation in the world will never revert to what it was before." Is the insinuation that if the war ends the Western economy as we know it is certain to collapse? And let me just explain it to you in the way I've been looking at it. If you do a heatmap of the stocks of American companies, which show companies in technology in the red, semiconductor technology in America in the red, credit services in America in the red, financials in America in the red, software sector in the red. The only companies doing well are the defence manufacturers, Raytheon Technologies Corporation is the top performer. That is why, this September the National Security Coordinator for Arms Control there called the war, "The greatest opportunity for us." It is like a person who is terribly sick asking for a last strong dose of chemical drugs to feel better. Am I over pessimistic about the American situation or is it moving in that direction? Because there is no parameter which is telling me that the American economy will soon not be on the ventilator.
A: Actually in the last 20 years America has lost policy control over both finance and their economy and they allowed market to take charge. That has been the fall of America. Alan Greenspan's declaration in 2007 was precisely this. We will not be able to regulate the finance. Let the market regulate it. That's how the banks themselves became shadow banks. They became investment banks. So the power to control money which is the seigniorage power which enables stability in the economy, the American system has lost. That's why I said 22.5 trillion dollars being outside domesticated dollars, which are beyond the control of the US government and US central bank, can do so much harm to America. It can buy the whole of America. When American asset prices collapse, it is the sovereign funds which will buy them. So America is in a serious problem. And no policy formulation I see can work. Because it is the genie out of the bottle now moving around.
Q: India as a country, as a society, our government must start thinking geopolitically and geostrategically that we must now marry our economics with an understanding of our geopolitics. Because eventually geopolitics matters. If you have said commodities matter, Putin has the commodities and that's why he's survived, which means eventually geopolitics matters. So should our youth, our next generation, perhaps be more equipped to deal with the global geopolitical challenges? Should we be less insular in our approach, even in our foreign policy and otherwise?
A: We have already done it. For e.g., if we are getting 20% or 25% discount from Russia on oil, Iraq is offering more discount. So we are also using geopolitical weapon to handle the situation in which we are oil dependent, we are energy dependent. So India has begun playing the global game undoubtedly. And I'll tell you, I don't know how many people noticed, in April 2022 when the Ukraine war was picking up and India had taken a position against America, every country's leader, finance minister, prime minister, foreign minister worth the name came to India. In just one month everybody came, as if it is a planned affair. I don't think the media ever covered this. I have not seen this in the print media. I feel India has acquired a stable and central position in the world because of three things. One, it's a democracy. However much you may say it is not a liberal democracy, it is not this, it is not that, nobody can deny the fact that India is a functioning democracy. Second, after 1989 we did not have a stable government. The governments were wobbling. 25 parties. 30 parties. Each pulling in one direction. In 2014 a government came, produced results, repeated itself, and a leader of global eminence emerged. These are all factors. This has given India a central position to deal with the world. The third point is, the Indian economy is, I am not going by the GDP, I am not going by any of these things, the centrality of the Indian economy, is that it is not purely market dependent, it is not government dependent, it is a self dependent people's participative economy. This has not been properly understood by the Indian economists and the Indian policy makers as I just gave that one example. If the Indian family gets split, there is no economic solution for it. If the Indian family sticks together, that is the way India grows. And I would give the whole credit for this only to Indian women. They have held the Indian family system together. We should praise them like that. Instead we are transforming them into feminists of the Western type. So we have no civilizational approach. We have no silo free approach to say, these are the four points of the strength of the Indian economy. The Indian economic textbooks are rotten. The sooner they are replaced, the better it is for India. So we need a total revamping of our economic thinking, our economic discourse. Then we will align Indian economy to the Indian people, Indian way, Indian civilization. Then we will understand the cultural foundations of India. India is not a market economy. It is a market economy working with the society. This distinction is coming, those of you familiar with economics may know, there is a difference between market economics and market society. Market society transforms even human beings into a commodity. In fact you can lend your forehead for putting somebody's brand on it for one month and take 500 dollars. Or you can permanently have something fixed on your forehead, some phone brand or something for 25,000 dollars. This is what is happening in the world. We are not a market society. Please understand. Market society has been a success because it has produced more money. By producing more money you don't become wealthy. That wrong thought that producing more money makes a country more powerful has been the wrong message that America gave to itself and to the world. You require the capacity to digest that money. That is what Y. V. Reddy said. "Don't bring this money, it is poison." And it proved to be poison. You must also know how much money you can handle, how much you can digest, how much you can invest, how much you can spend.
Q: I would like your views, sir, on the media and what it can do in nation building, and what it can do towards this mission that we are all on for our country.
A: See, having been part of the media in the most challenging and the most purposeful times in Indian history, between 1975 when emergency came, very actively, till 1991, there was a purpose, there was a sense of idealism, there was a sense of commitment, there was a sense of sacrifice in being a journalist and in running a media. Once the journalists were paid like MBAs, once they began acquiring properties, once the type of cars they were moving in decided their status, they became the Lutyens gang. I know Ramnath Goenka with whom I have moved. He is one of the most powerful persons who dismissed as many as a dozen chief ministers and two prime ministers. He will feel shy to get into a car larger than Maruti 800. He said, "Guru, I feel shy." He ran the most powerful newspaper. Media is a mission. We have to bring back that spirit of mission in the media. A media cannot pay like Coca Cola. It is very clear. Like IT companies. In fact, A. M. Naik, a good friend of mine in L&T used to say, to the civil engineers whom I need for this nation building construction work I can pay them just 25 thousand rupees. But my IT company pays them 100 thousand rupees. Civil engineers whom I need for doing this work are going there. You know, this misdirection in the economy is also one of the reasons why we are suffering in different fields. But about all this there is no discussion. Specifically coming to the media, unless the missionary spirit is restored into the media, it is very difficult. For e.g, what I feel proud about you is that after the days when we were fighting and having 2 hours and 3 hours of sleep and going to jail and a strike brought down Indian Express, the entire system, 300 cases were filed against us, and all kinds of things, I saw only one battle of the media against the government and that is by you. So that is why I admired you. Unless a media is willing to fight, it is no media. We are lacking that media. We need examples. And I suppose many of these medias are just piffles. People are already losing faith in them. It is only the number of pages. I think all this will get sorted out because people will get bored with these things. I'm sure some correction will take place. And there is already a civilizational moral movement in this country which will be the answer to this. Without a moral and civilizational movement which has been set off since 1980s in India which has brought about all these changes nothing is possible. This movement has to be taken forward and deepened and intellectually supported. Then you will see the kind of results that we want to see. It cannot be merely by giving speeches or anything. It has to awaken the soul of India. Thank you very much.
Transcription by Sri. Shyam Sundar
Reviewed by Smt. Nivedita
Video of the interview added below for easy reference.
Video Courtesy - Republic World