Ukraine, Crimea and the War of the Worlds

Now this “Ukraine” has been undergoing crisis for quite some time. It is one of the few East European Soviet breakaway nations that are yet to stabilize, the other being lesser known Romania. Unrest in Kiev and sharp polarization between Ukrainian speaking people and Russian speaking people has been doing the rounds in the newsroom for quite some time. But even so Crimea’s sudden decision to secede seemed like a shot out of the blue. And suddenly the East West war is on again – at first glance it looked like time pass to me – like Men need to war over something sort of a thing. But the more I have been reading about it the more I realize how each side is seeing it as some sort of turning point in global power division.

Now apart from Russian interest and Western interest, looking at the Ukrainian interest, I have put in my 2 bit.

First, imprisoning Yulia Tymoshenko  on corruption charges seemed wrong to me 3 years back when it was done. Whenever I see a party putting its predecessors in jail, it seems like nepotism to me. If you ask me, a ruling party should have immunity for one term after they lose election to another party. Because corruption charges are something so easy to manipulate that you can frame virtually any politician in it. Although, looking at the present time, overthrowing Victor Yanukovich has in no measure been anything but unconstitutional.

Coming to the second part, Ukraine seems like a linguistically divided society with very sharp differences. Yet it is a centralized state which is obviously unable to meet the needs and aspirations of both sides. Either one or the other side is upset based on which side the Prime Minister comes from. Well, federal structure is the right solution for it. It is a time tested formula and why is there any opposition to that? Federalism with center state power sharing is a good way to stabilize divided societies and has worked in most countries. Ukraine should do that immediately.

Coming to Crimea itself, well the comparison with Kosovo is valid but I am not a big fan of this “Right to self determination” UN Charter. Look what it did to Yugoslavia. I think this charter came into force when the colonial rule was ending and in that context it was a very powerful mechanism. However, now I’m not sure what its significance is. Because generally, when one region secedes from a country it sort of triggers a dominoes effect and almost every other region wants to do the same. I’d repeat – look what it did to Yugoslavia. And Indonesia just about escaped a similar fate by the skin of its teeth. But again, the charter needs to be reconsidered at the overall level.

However, my main point is that Ukraine should save itself from becoming a pawn in the East-West game and chart its course for itself. Look where Poland is headed – Ukraine has a lot of catching up to do unless it only benchmarks itself to Romania. I have never seen anything good come out of any nation or region that becomes a boiling point issue for the Cold War style rivalry. But Yulia Tymoskenko has just managed to free herself and with so much dependence on the West to stabilize her, it might be hard for her to take any long term good decision.

I don’t know which global power will have the final say but I think Ukraine is in for a rough ride.  

  

State Powers – Checks and Balances

In a relative equation between state and individual, the power balance is clearly tilted in favor of the individual in the West today. The ‘fundamental inalienable rights of man’ as envisioned by founders like Jefferson have come into being in several of the Western developed countries. Is it all because of democracy? Believing it to be so, democracy was implemented blindly in myriad countries. However, the results were totally different. Some nations like Iraq moved from repressive autocracy to regressive, repressive and anarchic democracy. Well, that is an extreme example but really developing world democracies just haven’t caught on and state versus individual equation is heavily tilted in favor of the state. So what is the difference?

There are several, first being the process to get there. In Charles Kupchan’s words, “it is worth keeping in mind how long it took for Europe to transition from the constitutionalism associated with the rise of its middle class to the liberal democracy that accompanied the rise of its working class”. Now what does this mean? In England for instance, Magna Carta was the first instrument that curtailed the powers of the king and mandated some rule of law way back in 1215 or so. This document was rescinded and revoked several times through the English history.  Then, about the 15^th century came the age of Scientific revolution, Renaissance and protestant reformation in continental Europe which really modernized these societies. One key catalyst for the change was the power of bourgeois to push back against the powers of the state. Typically, the wealthy classes have a lot of power potential which was unlocked during this period. They challenged the status quo as well as “led” the society in a different direction. The results were tremendous. This was also accompanied by market reforms which enabled wealth creation and led to the rise of a prosperous middle class. This class championed the rights of the common man. Only after centuries of reform, liberal democracy was introduced in the 20^th century with voting rights for all. By this time, 70% of the population was urban already. So democracy arrived in a well awakened society and was liberal.

Why does the bourgeois not push back against the powers of the state in developing world democracies? If you don’t call it defensive, one reason is that political power has already been leaked from them and placed in the hands of the poor majority whose daily life is a struggle for existence. Burdened with worries about putting food on the mat, you don’t expect them to lead any sort of reforms or awakening. However, having said that, the bourgeois still hold a lot of power in these states but that remains limited to their personal realm – you know in the sense of pursuing a good life personally. What is worse is that they all align themselves with certain political parties to enjoy further power, personally. But for the societies to modernize, the bourgeois have to get out of this mindset and start pushing back against state powers. The state is a mighty force but to be harnessed for the good of the common man. That happens best when the bourgeois push back against state powers.

Any unchecked power tends to corrupt. Even when there are elections, people elect party A or B who are pretty much a law unto themselves. So an enlightened bourgeois would push back against state powers and champion the rights of the common people. They would not all join political parties to gather and enjoy even more power. They also hold the key to understanding and empowering other institutions such that everybody is not a rubber stamp second fiddle to the elected autocrats.  Their role in social reforms and enlightenment can not be stressed enough. Media is also supposed to play a powerful role but due to heavy dependence on eyeball hunting, they tend to uphold status quo rather than really challenge it. Further it needs to be a partner in progress with an enlightened bourgeois who are yet sleeping. That missing tango between media and a self empowered bourgeois is the reason most developing world countries are not modern and progressive.

There are a lot of institutions in a country – the Judiciary, the police force, the Artists guild, the Bureaucracy, the Activists, Corporate bodies etc. all of them have to gain significant autonomy and counter check powers of the state for ideal governance. Now, to the contrary, there is a mistaken notion that if you want to do some good to the country you have to join politics. That is not true. Politics is one kind of arena meant for the steely hearted and no doubt governance is not an easy task. Politicians also do work hard and manage conflicting ideals. But all the power of a state can not gravitate towards elected (or otherwise) ruling class. This power needs to be checked by strengthening other power centers in a society as mentioned above. They have a lot of latent power - they just don't know it and don't exercise it. And once again the missing powerful tango between an awake bourgeois and an enlightened media is what may be holding these societies / nations back.

Languishing Infrastructure – the Sunset industry?

A McKinsey report estimates a whopping $ 57 trillion is required to be invested in building and maintaining infrastructure around the globe. Currently the amount being spent is $ 2.7 trillion per year less than half of the required $ 6.4 trillion p.a. 

Where will the funds come from? Is there an overall crunch or no one is interested in the infrastructure market?

No one is interested in investing in the infrastructure market; it is a bit of sunset industry.

If we look at the private industry, it is driven by stock markets which are short to medium term oriented. For an average stock market investor, 3 years is long term and 5 years very long term. These markets are actually infested by day traders. If we look at Infrastructure from their point of view – it has long gestation periods and here is the missing silver lining - there is no golden pot at the end! The returns are low to medium – since falling into the public utility areas, they can not be priced at a premium. So now look at this from an investor’s point of view – long gestation periods but low returns. Only a sucker will buy into that. Compare this with the sunrise IT or knowledge industry – it requires negligible investment; people practically start outfits even in a garage or a backyard but the returns are great. The services industry requires even lower level of investment or gestation period – you almost earn as you go. No wonder it is a sunrise industry and a favorite of the markets.

What about public private partnerships? Well, that is how most projects are handled especially in the developing countries. But no one is willing to pay for infrastructure so the already low margins are squeezed even further. For instance, in India, where potholed roads are a common sight, private operators have built a few good quality toll roads. Now when they charge toll, there are huge protests. The toll booths are often vandalized. The logic of these protestors is that the private operator has already recovered his cost, now why we need to pay the toll. It is very hard to explain to these activists that no private investor is interested in “recovering costs and shut shop” kind of operation. Their idea is to earn some returns on it (which are not huge to begin with). So, the private sector soon smartens up to the sucker plot and stops investing in further projects.   

How about the governments invest in infrastructure? Well, that is the only viable way actually. But let us see the troubles there too. First let us start with democratic countries. How does a voter perceive the infrastructure provision especially in the developing countries where the requirement is the most? Last year I was watching a program on BBC where they were covering roads construction in upcountry areas in India. They asked a few poor people about its value to them. These people were just totally dismissive of it seeing it as rich people’s muse and having nothing to do with them. A lady was even livid about how government is doing nothing for them and called this road as utter non sense  - “ what this road is going to give us roti (bread) or what? Instead the government should do something productive”. Repeatedly it is also seen that chief ministers who invest a lot in infrastructure lose elections. For instance Chandrababu Naidu of TDP built great infrastructure in Andhra Pradesh and provided fairly clean governance. Despite Bangalore being an IT hub, iconic organization Microsoft chose to set shop there. But he lost the elections as most people saw it as a pro-rich and anti poor strategy. Not just the migrant labor kind of people but I once a heard an ‘MBA’ colleague in a corporate saying so (while vacationing in a luxury resort himself!!). Such examples abound.  When politicians come with instant freebees, they get the votes. Very few voters really value infrastructure creation which takes eons and also huge investments when those sums could instead have been spent in populist schemes.  

Now coming to the autocratic states? Surprisingly, great infrastructure is their huge strength. Be it UAE, China or even Saudi, autocratic states are able to invest in long term projects merrily because they don’t have to show any short term results to their people. The bosses decide this needs to be done and it gets done. So, long term thinking and management is their strength. Let us look at China which stole the spotlight in the new millennium. While “build and they will come” has been ascribed as their strategy, it is a bit of a retrospective force fit. None of them knew anyone would come so to speak. They modernized their infrastructure for something like three decades – starting about 1978. No one was talking about them then. Suddenly in the 2000s, to their and everyone’s surprise, their economy boomed. Then the story about “build and they’ll come” was invented, possibly by the Economist. Most of Chinese development was trial and error and they built the infrastructure because they thought that needed to be done. It is only later on everyone realized that is their key strength. But the point is that there are no elections to be won in autocracies – so if there is a progressive leadership at the top, infrastructure is the first thing they build. Often even when military rulers take over, they build these huge new cities and capitals. The lack of political will becomes an issue in democratic states because again long term nature of projects ensure its impact is not felt by the voters in a forceful manner akin to a freebee. 

So, there is no dearth of funds worldwide but political as well as private will is lacking for infrastructure creation. The only way around it perhaps educating the public that it is not a pro rich non sense and everything under the sun is “not free”! So they have to pay for public utilities. But the voters are too spoilt to understand that. So alternately, all infrastructure projects have to be marketed as employment generation projects – being done to create jobs for the common man and essential vehicles of employment generation. Then perhaps political mileage can be gained out of it. But it is a long shot.

As of the now the estimated $ 57 trillion requirement in infrastructure investment is but a pipe dream.