Lord Acton was on the dot when he said that ‘power corrupts and absolute power corrupts absolutely’, indicating that the moral sense of a person diminishes as he/she obtains more power.

There are distressing signs of this adage showing up, both nationally and internationally. Let’s start with the latter.

For global economic growth and for stock markets, two international developments are particularly worrying. One is the increasing rhetoric of trade wars between the US and China. Global trade accounts for over 30 per cent of global GDP and it is inanity of the highest order to seek to disrupt it. It is necessary for global growth and is the bedrock of globalisation, which is based on the theory of competitive advantages.

Each country produces goods/services it is best at, and competes on a level playing field. The rhetorical trade war could be merely bluster, which Trump excels at, but if it escalates into increasing protectionism, global GDP will falter, prices will rise and markets fall. American farmers are unsure whether to plant soyabean or corn, unsure of Chinese retaliation. Retail stores importing from China can become uncompetitive.

The other development is the threat (instigated by the US military-industrial complex (MIC)) to take military action, which was vetoed by the UN (US has taken unilateral action against Libya and Iraq earlier) on the fake news that Assad had used chemical weapons against his people. The main reasons are elsewhere.

Syria has been resisting allowing a pipeline (to sell Qatari gas to Europe) to pass through it, thus ensuring Russian stranglehold over supply of gas to Europe. According to an article in www.zerohedge.com the MIC, led by John McCain, would like a war to make money. Witness the wars, without any grounds, launched against Libya and Iraq, both of which wanted to abort the use of petro-dollars for the sale of oil.

Trade or military war is bad

A trade war, or a military one over a fake Syrian gas attack, would be disastrous for stock markets.

Domestically, too, there are instances of severe abuse of authority. Justice in India is an Animal Farm, with some animals more equal than others. In J&K, an eight-year-old girl was gangraped and brutally murdered, and serious action is yet to be taken against politically-connected persons.

A similar incident has occurred in UP and is being investigated. The father of the victim was beaten up for protesting the rape of his daughter, and jailed for the offence of seeking justice. He died there. How depraved has our society become!

Other countries punish criminals with severity, thus deterring future offenders. Dubai recently gave a 500-year sentence to an Indian who perpetrated a Ponzi scheme there. Bernie Madhoff got 150 years for his Ponzi scheme in America. Yet, in India, the courts give adjournments for years to Ponzi conmen.

Add to these, the continuing unwinding of QE and raising interest rates, and it seems unlikely that global stock markets will rally sharply over the next few months. Indian markets may not fall much because domestic money flows, mostly via SIPs, are likely to continue, as the retail investor has found a fondness for stocks and lost his infatuation with gold, bank deposits and real estate.

(The writer is India Head — Finance Asia/Haymarket. The views are personal.)

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