Tuesday, May 20, 2008

A Gift from our Fathers

This is a reprint from a message I sent out to Where'sthemath group. There is a lot being said about the rise of China and India as emerging economic superpowers, but most articles I read appear to me as the modern equivalents of "Five Blind Men and an Elephant" story. I think I can relate to at least the US and Indian cultures, having spent roughly half of my life in each. Here are my observations about the cultural differences.
I recently got a copy of the video "Two Million Minutes" and watched it. I have eight nieces and nephews who go to school in India, and I can get a real time comparison of what they do in school as well. It is funny how often when I call my relatives in India, the "hot news" is what the latest report card is of each one of them. Then they quickly switch to how hard their kids are studying to get into the best colleges. They are not well off, and are strictly middle class. All save one are studying to be engineers. The one who is not is in Accounting and Finance. All require top notch math skills.

Having observed two of the three cultures discussed in this video most of my life, I have arrived at some theories as to why this is the case. Both China and India started with a clean slate almost at the same time. Mao Zedong's communist party came to power in the mid 1940's, about the same time as India became independent. As if by coincidence, about the same time, the US became the sole industrial power left standing after 6 years of WWII. This country received its greatest gift almost by a process of elimination.

Then a funny thing happened. Those who were completely wiped out, namely Germany and Japan, overcame hurdles never before considered conquerable to build the most efficient economies of the world. Several others such as Taiwan, Korea, Singapore, Hong Kong, followed suit. The underlying culture was of saving and sacrifice. Families lived on a pittance just so they could make goods that would sell in the rich countries. They saved for everything. Nothing was bought on credit. Even homes. Foreign currency was jealously shielded from consumption oriented goods, and was only used to purchase capital goods. See a pattern here? The same underlying culture prevailed in China and India, but two key elements were lacking - capital creation, and open markets. Finally, when the Berlin wall and the Soviet Union collapsed, the two large economies capitulated and allowed open markets, and the ascent of the Chinese and Indian economies began. The key elements of savings (which leads to internal capital formation) and sacrifice (which allows the next generation to be better than the current one), are both paying off handsomely.

Did the US get to where it is without these values? Look hard enough, and you will find them buried in the economic history of this country. During the great depression, there was so much disenchantment with everything borrowed, that the savings rate soared. The values of thrift, which were forgotten during the roarin' 20's, again came into fashion. However, the real test came when WWII broke out when people were asked to sacrifice a lot more. This time it included human lives. Both men and women joined to build the largest industrial capacity of any nation in the world. I think this great act of sacrifice by this country's elders was a gift that kept on giving. The post war generations have lived better than their forefathers, and the rest of the world, but this gift is now close to being exhausted. If I were to draw an analogy, the depression and the war were like stocking of a pond with so much fish that future generations had to just reel them in. But when the fish are dangerously close to being exhausted, there is hardly anyone left with the perspective and skills needed to restock the pond. It is as if people are wishing it was a bad dream and it would just go away if you waited long enough.

Now my question is (and for which I have not found an answer), how in the heck would this country get notions of savings and sacrifice into peoples psyches again? Will we need another depression? Another global conflict? Or are we collectively smart and wise enough to change without such drastic events? I think there are enough people who can see what is going on, and a need for this change in psyche. When JFK sad "ask not...." he was tapping into this notion. Maybe that is why Obama is so popular, because his message is about "bringing out the best one can give", rather than the current prevailing sentiment of "taking the most one can take".


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