Surviving the Recession

Nature in its 19 February 2009; 457 (7232): 935-1046 issue has come up with a special on the current recession. There are seven commentaries and two book reviews. There have been other related items that have been published over the weeks and all are available at Recession Watch. But, I will concentrate on the nine in the concerned issue.

John Geanakoplos in his End the obsession with interest emphasiss on regulating leverage (the collateral a borrower needs to provide). His reference to Shakespeare's Mercahant of Venice where the collateral agreed between Shylock and Antonio was on a pound of flesh (not interest) if the latter reneged. The role of the authorities here is to see to it that it is "a pound of flesh, but not a drop of blood."

In her Cooperation must rule Noreena Hertz states that the crisis has led to a new socio-political environment where cooperation rather than selfish behaviour would be the rule of the game. For longer-term viability, the corporate leader should be the one who exhorts 'Co-op capitalism' as against 'Gucci capitalism'. I would add, talking lessons from Gift societies also implies that one should cultivate norms and conventions to make cooperation a dominant solution in a prisoner's dilemma setting.

The mantra by John Browning is to Cut costs and sell what you can. For this they have to identify and cut 'dark matter' and be 'flexible' in their thinking and be on the look out to cash on their existing products/expertise. My take is that all this is possible if what you are doing adds value in a fundamental (not superficial) way.

Atsushi Sunami and Kiyoshi Kurokawa invoke that this is No time for nationalism. Drawing up from Japan's lost decade of the 1990s where the escalating real estate prices had adverse impacts on the stock market and banking sector. A positive outcome of this was the coming together of policy makers and scientist and enhancing of research funding in subsequent years. The current scenario gives an opportunity for global research collaborations beyond national borders. No wonder, the success of Meiji restoration in 19th century Japan also relied on opening-up.

Work for the greater good says Eric Rauchway while drawing lessons from the Great Depression of the 1930s. In the New Deal policy makers looked up to scientists to come up with practical ideas for social progress. This brought about productivity improvements because of technological innovations. There is a need, lest we forget, to keep in mind that the scientist should be locally grounded in his sensibilities and understanding of the problem as also the meaning of progress. It need not be material alone.

Scientists, however, have to Learn to convince politicians to protect their research budgets says Ian Taylor. This requires research-industry collaboration, this requires recognizing that innovation entails uncertainty as opposed to quantifiable risks. It should fulfil demand and not fund supply. One need not be a Keynesian to say this. This is a challenge for scientists/researchers. If they are worth their salt then they have to come up with practical successes. The catch of course is that the politician also has to learn to distinguish rabble-rouser's babble from matters of substance. They should learn to read (not listen) between the lines.

The final commentary is Jeffrey Sachs' Boost the developing world. The crisis which originated in the United States and Europe has very serious implications for the developing world. Investing in the poorest of poor countries, he says, is a triple win because it would provide a stimulus for richer countries, develop poorer countries and bring about environmental sustainability for all. The world on the verge of a climate change and food crisis with increasing incidence of hunger, if unaddressed, would lead to rising violence, disease, population displacement and most of all shrinking markets. The lesson for countries like India is to extend this poorer regions and vulnerable groups. Increase capabilities of the people, harness on their inherent enterprising nature.

Investing in the environment is Gail Whiteman's review of Sustainable Investing: The Art of Long-Term Performance by Cary Krosinsky and Nick Robins, Earthscan: 2008. I liked the review's opening sentence. "Money can't buy love. But can it buy a more sustainable world?"

Bill Emmott in his Old lessons for a new economics review's The Return of Depression Economics and the Crisis of 2008 by Paul Krugman, W. W. Norton: 2008; also available in Penguin. The reviewer indicates that the book does invoke Keyenesian thinking to be the need of the hour under current circumstances. However, as the book was initially written by keeping the crisis of the 1990s in mind and padded up by adding 11 pages to the current crisis there is scope for further elaboration.

One gets reminded of Gandhi's quote: "There is enough for everyone's need, but not enough for even one person's greed."