The onset of a new year is an occasion for reflection. Herewith the random thoughts that coursed through my brain as I contemplated 2018.
*The surge of nationalistic fervour that has swept the globe and upended the post World War 2 liberal, multilateral and rules-based world order is in reaction to the forces of liberalism, globalism and technology that promised a win for all, but, in fact, left standing still the majority that did not have the skills or the opportunity to jump onto the train of the internet world. The minority that had these qualities and were able to board benefited disproportionately. The left behind majority expressed their frustrations at the polling booths and voted into positions of leadership innately autocratic populists with an inward, isolationist bent. This has rendered the world a riskier place. Its leaders are stepping off the international stage at a time it faces major transnational problems like climate change, pandemics, migration, nuclear proliferation, water stress and fundamentalism.
*The science of global warming is incontrovertible. The planet is headed for a climate-induced catastrophe. The criticality of containing greenhouse gas (GHG) emissions is universally acknowledged. That said, the measures agreed at the climate summits, first in Paris in 2015 and recently in Katowice, are not enough to avert the crisis. The following questions, therefore, have to be asked: Are such top-down, multilateral summits with each participant sovereign government constrained by domestic pressures the appropriate fora for tackling this potentially existential and planetary threat? Would this problem not be better addressed through subnational fora (for example cities, NGOs, industry, professionals) with each locality, sector or association looking to address the issue via a decentralised collective? Can the public afford to leave the fate of the planet in the hands of leaders who, because of the nature of the electoral process, represent only a minority of their electorate?
*A few years ago, the Pulitzer Prize winning author Liaquat Ahamed wrote a fascinating book called the Lords of Finance: The Bankers Who Broke the World, about the four heads of the central banks of the US, France, the UK and Germany in the 1920s. The book tells us that the economic catastrophe, the Great Depression of 1929, was not foreordained, but was the cumulative impact of a series of misjudgements by these four individuals, each lacking in intellectual will but with strong, inflated egos. I am reminded of this book as I contemplate the escalation of the tariff war between China and the US; the stupidity of Brexit; the humanitarian crisis in Yemen; the gruesome murder of journalist Jamal Khashoggi and more all decisions made by leaders with an exaggerated sense of self and/or a limited understanding of economics and geopolitics. In 1929, the world went over the edge because the series of crises fed on each other to create the economic whirlwind that engulfed the globe. Today, the problems may be substantively and geographically disparate, but in our connected world they bear on each other. The consequences of unfettered power in the hands of narcissists is frightening.
*Why is it that reputed business leaders fail so often to deliver on the promises made to their boards? There are many explanations, but the ones that, I believe, need debate are whether an investment evaluation model that focuses only on measurable ratios like return on investment, earnings before tax and depreciation, market share, etc, can capture fully the risks inherent in today s non-linear and disruptive business environment? Whether the governance model that emphasises growth and maximisation of shareholder profits is compatible with current and emergent political, cultural, social and environmental trends? And whether the model needs to be redesigned to integrate non-measurables so as to enable the evaluation of business risks within the broader context of societal change?
*Jugaad entrepreneurs have an unshackled mindset. They respect in letter but seldom in spirit the established norms of corporate governance. They can remain below the radar as long as they are small. But once they are mainstream and big, they need to adjust their corporate governance models. Most, however, fail to do so. They continue to think small and end up bending, if not breaking, regulatory norms and facing societal scrutiny. The travails facing Facebook offer a high-profile case in point. Its early motto was Move Fast and Break Things. They did so and they have been phenomenally successful. They did not, however, adapt their corporate culture correspondingly and, today, they are in the crosshairs of regulators across the globe.
*Sooner than later, clean energy will be competitive against fossil fuels. The mid- to long-term constraint on building a non-fossil-fuel-based energy system is not economics, but scale. To remove this constraint, the government must adopt a multipronged (holistic), multilayered (Centre, states, cities) and non-linear policy approach focused on the transformation of organisations, institutions, infrastructure and customers of the energy sector.
* Lord, grant me chastity and continence, but not yet. So did our brilliant, former chief economic advisor Arvind Subramanian invoke St Augustine to forewarn against pushing renewables. His argument was that this would impact adversely the livelihood of the millions employed by the coal and power industries; it would strand thermal power assets; it would deepen the NPA stress facing the banks; and it would lead to higher energy prices. I cannot refute the economics of his argument. His logic is solid. But I am not persuaded. For me, it brings to the fore the conundrum: How to overcome vested, incumbent, sunk interests to bring about essential long-term change?
*Something has to be done to improve the operational autonomy of the public sector. Privatisation is for the present, not an option. The government lacks the political will and it will not cede control. So what might be that something? First, strengthen the boards; second, unshackle the management from political and bureaucratic interference; third, allow them to recruit top talent; and fourth, remove the constraints imposed by investigative agencies (CBI, CVC, CAG). In all events, create the blueprint for staunching inefficiencies.
The author is chairman and senior fellow, Brookings India