Fly me to the moon

With the successful launch of Chandrayaan, India becomes the fourth nation to set out to explore the moon. It will land on the dark side of the moon, which appears to have evidence of life sustaining water resources. The mission also demonstrates India’s ability to launch (at a fraction of the global cost) satellites, and thus to, if the need arises, shoot down hostile ones. This project also enables ISRO to develop a cryogenic engine.

The world is changing hugely, because of new technologies, and the future, in a decade, would be unrecognisable. The website gadgetsnow.com lists 16 industries which face job threats due to AI, robotics, virtually all the important ones of today, including agriculture and pharma, auto, BFSI (banking, financial services and insurance), real estate, and others.

Is the global architecture suited to meet the challenges of the coming technological changes? Is the banking industry doing its job, of being the aggregator of public savings, and directing these savings to businesses most likely to succeed.

It is not. The banking industry has learnt nothing from the 2008 global financial crisis and has reverted to its bad old ways, laying open the credible possibility of yet another, and similar, collapse. This could be led by Deutsche Bank (DB), the post-cursor to Lehman Brothers. DB has plans to lay off 18,000 employees and has suffered a $3.5-billion in the June quarter. In 2017, it was fined $7.2 billion for its role in the mortgage crisis, which led to loss of customer confidence.

Worse still, DB today has a $49-trillion (with a ‘t’ not a ‘b’) derivatives exposure! This is the unexploded bombshell! Remember Lehman’s problems started with its huge derivatives exposure, which led to a freezing of banking transactions, because no bank could evaluate the counter-party risk of doing business with another. A similar loss of confidence in DB, with a $49-trillion exposure in derivatives, would be the start of another, worse, global financial crisis.

So, we have job losses in the BFSI space (Deutsche Bank and others), and in the auto space (Nissan cutting 10,000 jobs worldwide). And this is before the full effects of AI and robotics set in.

The situation today is that all countries are hugely over indebted and desparately trying to salvage the situation. For one, Governments arm twist central bankers to lower interest rates, and keep pumping in money ostensibly for banks to lend to consumers (for propelling consumption) and to companies (for funding investment). However, the money goes, instead, to create asset bubbles, buy back shares to enrich the top management option holders and into speculative activities in the derivatives markets.

Meanwhile, lawmakers are working to pass legislation to de-criminalise industries; last week Democratic lawmakers Jerrold Nadler and Senator Kamala Harris teamed up to pass legislation decriminalising marijuana, and to expunge past cannabis-related convictions.! Now, marijuana, if consumed by people under the age of 21, impacts their mental ability; so, in effect, these lawmakers are myopically harming the next generation!

The banking industry will direct funds towards quick-return marijuana industry and ignore the slower-return industries which would usher in a future, such as genomics to develop, say, a drug to eliminate cancer, or Alzhiemer’s. So, is the current architecture the proper one to meet the needs of a vastly changing world, led by technology?

How about India? The biggest plus for India is its demographic dividend (young population). If the energy of this youth can be harnessed into productive jobs/ businesses, which the government is trying to do through various initiatives, India’s economy can grow, as desired, to hit $5 trillion.

But we must come out of things that slow us down. We need to speed up dispute resolution. Cases in the IBC take far longer than the set deadline, and those outside IBC take even longer. The judicial system needs to focus on the needs of victims seeking justice from it, not on the highly paid lawyers who seek to prolong cases. The education system needs to change from one that treasures learning by rote (memorising things) to one that makes children think for themselves.

If we can prepare for the future, and tweak the financial, judicial and scientific systems for it, the sky is the limit!

Fly me to the moon, and let me play amongst the stars!

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

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