Creating business opportunity; What obstructs the "Pursuit of Happiness?"

But out-sourcing too many personal and familial responsibilities to government officials and bureaucrats defies basic common sense.

BANGALORE, INDIA, April 16, 2012 – Writing from one of India’s most vibrant cities, I confess that inspiration for this column came from Barney and not from the Bhagavad Gita.

We are steps from Bangalore’s busiest commercial streets (think really, truly busy), yet it is largely peaceful here, even outside on the sprawling veranda and in the cool, manicured gardens that surround us.

Perhaps that is why the Maharaja of Travancore bought this plantation-style manor home for one of his many family members, before our landlord’s father chose to make his urban base here.

Tucked into a corner of this stunning 19th century compound, there is a small school that caters to the very young.

Recently, giggling 3 and 4 year old voices broke my concentration as they chanted these words made famous by our purple friend:

“If you’re happy and you know it clap your hands.

If you’re happy and you know it and you really want to show it clap your hands”.

In America, we are obsessed with finding happiness—but incapable, so far of recognizing economic truths that make our standard of living feasible.

Our nation, taken as a whole, defines the 1%—America was born blessed with abundant and essential natural resources.

Until recently, our leaders were prudent men and women who did not spend or borrow excessively and so preserved our hard-won liberty.

Compared to most nations, America was the port of first call for investment capital.

And we retain, amazingly enough, the immensely valuable right to manage the world’s primary reserve currency.

Yes, Americans do clap frequently—at sporting events, inside concert venues and on campaign stops. However, there are fewer smiles inside our homes as so many actually struggle to make ends meet.

Are we who live in the most “advanced”, materialist society truly happy?

If we are not happy, do we actually know the reasons why?

And how is it we expect government to dispense happiness to us rather than seeking happiness first within ourselves?

Some answers to these questions are found in examining the surprising contrast between experiences here in India and elsewhere.

For example, as I waited in front of the hotel last Saturday, a man with lifeless, right-angled legs propelled himself along the rain-washed Bangalore sidewalk using just the palms of his hands.

With steadfast determination he moved towards his destination, not pausing to ask for help of any kind. In the seconds that passed, I saw neither grimace nor pain on his serene face. He simply made his kind of progress.

The sight of this physically challenged man peaceably advancing along a bustling Indian streetscape was jarring enough on its own.

However, my mind absorbed this vision only days after reading an article in the Daily Mail whose headline leaves out an important part of the story:

“Unemployed man cuts off foot to continue claiming jobless benefits only to discover he is still eligible for work”.

It seems an Austrian malcontent (whose head was certainly not screwed on right) tossed the foot he severed using his buzz-saw into the stove—to make sure the doctors would not re-attach it and thus to preserve his unemployment benefits.

In this stark contrast between stoic acceptance of affliction and self-induced personal destruction, I saw some light that helps me understand why “advanced” nations seem to be committing economic suicide collectively while nations such as India are re-awakening.

In October 2010, I first suggested that the American political climate seemed similar to that described as occurring in the tragic run-up to our brutal Civil War.

Deep down, Americans across the political spectrum are certainly not happy.

The “Occupy” crowd is sure the rich are busy hoarding their treasure, while resolutely exploiting the bottom 99 %. Changing this equation seems an obvious solution and many voices are already clamoring for  rough “economic justice” as eyes await a pivotal election in November.

At the other end of the spectrum, economic conservatives are certain that the business of America has unwisely become “government”. Too many Americans depend upon government for jobs, pensions and patronage. Deficits cannot be controlled, the U.S. dollar is losing its value, and our stated best intentions seem to confirm the worst fears of our Founders.

Economic truth does not lie in between these opposing views.

Writing in 1776, Thomas Paine noted:

“For all men being originally equals, no one by birth could have a right to set up his own family in perpetual preference to all others forever”.

Paine’s thoughts doubtless extended just to his compatriots—he likely ignored the vast hordes of humanity outside England and her sphere of interest.

Reality in the 18th century was also starkly different than today—economic activity was hooked more neatly into natural, agrarian rhythm and not tethered to global markets for manufactured goods and services. Furthermore, credit markets were not as deep or as intertwined.

Until about 1991, some governments could insulate citizens from the stark reality that the number of people who are eager to work is many times greater than the number who provide goods and services in the fiercely competitive and price sensitive world marketplace.

Starting after 1991, a sudden and vast increase in the supply of accessible labor has subjected all private sector workers in high cost nations such as America, Japan and many in Western Europe to crushing downward pressure on their compensation and on their number.

The open, global labor market we heralded in 1991 is proving to be our economic undoing.

But the present state of affairs should be no surprise. As far back as 1844, Karl Marx (of all people) explained the root cause of the problem:

“If the supply greatly exceeds the demand, then one section of the workers sinks into beggary or starvation. The existence of the workers is, therefore, reduced to the same condition of every other commodity. The worker has become a commodity, and he is lucky if he can find a buyer. And the demand on which the worker’s life depends is regulated by the whims of the wealthy and the capitalists”.

I suspect that Marx never imagined how big governments would eventually become or that his “War on Capitalism” would go mainstream in America and in Western Europe.

In fact, labor incomes earned in the private sector are the essential support for modern livelihood and the ultimate foundation for all asset values.

In contrast, public sector incomes and transfer payments are necessarily dependent upon the vitality of the private sector and on the credit capacity of each nation.

I acknowledge that monopolists have abused power to exact profit. However, all known and conjured abuses combined pale into insignificance when compared with the profitless misery orchestrated in the name of Marx by his comrades in the former Soviet Union and in China, to pick two obvious counter-examples.

Since 1965, America has followed our misguided socialist and communist brethren along a trail of tears that has empowered a detached and arrogant swarm of bureaucrats to insulate themselves from the rigors of global competition and the reality that they are enormously over-compensated for their “contributions” in comparison to world scale.

Out-sourcing private sector jobs to places like Bangalore is a wholly natural consequence when labor is in excess supply and when labor costs remain as competitive as they are here in India compared to Western Europe, America and Japan.

But out-sourcing too many personal and familial responsibilities to government officials and bureaucrats defies basic common sense.

We have already created a Byzantine government monster in America that only exists today on present scale because our fiat currency is still accepted and because investors still buy and hold American dollar-denominated debt.

To give you a sense of the scale of the problem, America spent some $5.6 trillion in 2010 to fund the activities of federal, state, local and regional Maharajas. This expenditure amounted to $17,977 for each American.

In India, the size of all “legitimate” economic activity (Gross Domestic Product using purchasing power parity) was $ 4.5 trillion or just $3,704 for each Indian citizen.

If India could borrow to finance government spending at the same per capita level we “enjoy” in America, India’s government expenditure would total $ 21.7 trillion.

Across the whole economy, if India could borrow the way households, corporations, financial institutions and governments borrow in the United States, her legitimate economy might theoretically explode to $ 57.6 trillion in size.

Neither scenario is either likely or desirable.

Past basic levels to protect national security and alleviate suffering among the truly needy, government spending certainly does not buy happiness.

In contrast, piling debt obligations on a country surely results in financial ruin—private sector jobs disappear, population growth rates plummet and the most economically productive citizens emigrate.

Put simply: “a little cash may rent happiness but too much debt assures misery”.

Since 1991, companies can serve the global market from many attractive national platforms.

Today, India has vexing challenges—however, entrepreneurs have found this country to be an excellent launching pad for certain industries.

For example, a business school classmate named Krishna Chivukula formed his company  just 15 years ago.  Today, this manufacturer exports more than ninety percent of its annual sales volume and is a solid global leader in its field. All told, Indo-Mim has some 1,800 full-time workers and also fuels productive economic activity at numerous suppliers and in many communities.

During the first 17 years of his life, Krishna who is now well on the road to material prosperity slept outside on a cot, protected from vipers just by kerosene. He did not even wear shoes until he matriculated at University having been home-schooled.

But boy did he study and everywhere he looks he sees and seeks out opportunities both for profit and to help those less fortunate.

In every sense of the word, my friend is happy as he has been whatever his economic circumstances.

Krishna is quite fond of pithy sayings. Pasted on a wall and prominently displayed in one of his manufacturing plants is this simple adage:

“The best pair of helping hands is located at the end of your arms”.

Perhaps this saying should be emblazoned on all fiat currencies!

Charles Ortel became a lapsed member of the silent majority in August 2007 when he began alerting the public to dangers posed by structural changes in the global economy. Since then, Charles has appeared in the print, radio and television media with increasing frequency. Graduated from Horace Mann School, Yale College and Harvard Business School, Charles tries to learn each day. 

Follow Charles on Twitter at @CharlesOrtel

 


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Charles Ortel

Charles Ortel became a lapsed member of the silent majority in August 2007 when he began alerting the public to dangers posed by structural changes in the global economy. Since then, Charles has appeared in the print, radio and television media with increasing frequency. Brass Tacks will attempt to offer non-partisan perspective on factors contributing to the unresolved, burgeoning crisis and discuss potential solutions. Graduated from Horace Mann School, Yale College and Harvard Business School, Charles tries to learn each day.  

Contact Charles Ortel

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