Monthly Archive for December, 2011

From The Economist

INDIA’S technology firms are no longer spring chickens. Infosys had its 30th birthday this year and its lead founder retired, hailed as a visionary by his colleagues and celebrated as the man who kick-started the country’s first world-class industry. Yet judged by their share prices of late, the three big firms, TCS, Infosys and Wipro, are still giddy, uncertain things. Last month TCS’s shares, which had swaggered earlier in the year, slumped as it posted disappointing quarterly figures. Wipro’s shares are well down on the year and this week’s news of quarterly profits little changed from a year ago sent them a bit lower still.

The volatility partly reflects investors’ fears of a depression in the rich world, where the three make the bulk of their money. But it is also a symptom of mild paranoia about whether these firms can in their dotage still deliver perky growth. The worry is that they might go the way of Nokia: for years the Finnish handset firm maintained high margins, in defiance of its many doubters. Then, suddenly, the naysayers were proved right.

Regarding the slump in rich economies, the recent past does offer a chilly precedent. During the Wall Street crisis in mid-2009 the IT firms’ revenue growth slowed almost to zero as customers, especially financial ones, slashed spending. But activity bounced back smartly (see chart) as clients recovered their nerve and redoubled efforts to cut costs through outsourcing and reorganising their back offices.

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Photo via The Economist

John Lanchester, The New York Review of Books

Boomerang: Travels in the New Third World
by Michael Lewis
Norton, 213 pp., $25.95

Most people with a special interest in the events of the credit crunch and the Great Recession that followed it have a private benchmark for the excesses that led up to the crash. These benchmarks are a rule of thumb, a rough measure of how far out of control things got; they are phenomena that at the time seemed normal but that in retrospect were a brightly flashing warning light. I came across mine in Iceland, talking to a waitress in a café in the summer of 2009, about eight months after the króna collapsed and the whole country effectively went bankrupt under the debts incurred by its overextended banks. I asked her what had changed about her life since the crash.

“Well,” she said, “if I’m going to spend some time with friends at the weekend we go camping in the countryside.”

“How is that different from what you did before?” I asked.

“We used to take a plane to Milan and go shopping on the via Linate.”

Since that conversation, I’ve privately graded transparently absurd pre-crunch phenomena on a scale from 0 to 10, with 0 being complete financial prudence, and 10 being a Reykjavik waitress thinking it normal to be able to afford weekend shopping trips to Milan.

Many people all over the world went nuts on cheap credit in the years of the boom—a boom that was in large part built on an unsustainable spike in personal and governmental debt. Michael Lewis has already written a very good book, The Big Short, about the mechanics of the crash, by casting around for people who didn’t just foresee it, but who made huge bets that it would happen, and profited vastly when it did.¹

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Matthias Matthijs and Mark Blyth, Foreign Affairs

“Never did a ship founder with a captain and a crew more ignorant of the reasons for its misfortune or more impotent to do anything about it.” This was Eric Hobsbawm’s damning judgment of the policy elite’s response to the Great Depression. As these leaders reached for the old truisms of balancing budgets, lowering tariffs, and restoring the gold standard, they merely worsened the crisis. The same judgment may soon be passed on Germany for its role in the ongoing European sovereign debt saga.

After watching the economies of Greece, Ireland, and Portugal founder, the world has now turned its attention to Italy, home to the world’s eighth-largest national economy and third-largest sovereign bond market. The diagnosis is sadly redolent: Europe should deflate its way to growth by sticking with a gold standard of sorts: the hard-money German-dominated euro. Meanwhile, under enormous international pressure, the Greeks replaced socialist Prime Minister George Papandreou with Lucas Papademos, a former official of the European Central Bank, and the Italians placed economist and former European Commissioner Mario Monti, hailed “super Mario,” in the stead of Silvio Berlusconi. Yet despite the EU’s coup d’état, the yield on ten year Italian debt went back above seven percent within twenty-four hours of Monti showing up for work.

It is more than ironic that those two foundational Western civilizations — the Greeks and the Romans — who were among the very first to experiment with democracy, now have to let unelected Eurocrats run their economic affairs. There is even a whiff of the 1930s here, too, as weak democrats are pushed aside in favor of strong leaders at the behest of international creditors. As Hobsbawm noted, this did not end well last time.

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Image via ForeignAffairs.com

Eric Alterman, The Nation

We live in a media world simultaneously obsessed with technology and personality, and so it was hardly surprising that when Steve Jobs succumbed to cancer, the coverage of his life would focus, alternately, on his incredible accomplishments in the former category together with his apparent shortcomings in the latter. Yes, Jobs was a genius and also an SOB. This is hardly unusual when it comes to geniuses. In Jobs’s case, his boorish behavior makes for an interesting biography, courtesy of Walter Isaacson, but it’s not really an issue for the rest of us.

Far more significant are the societal roles Jobs played. And here, despite the myriad ways his companies improved our lives, Jobs was a hero only in the Ayn Randian sense. A living, breathing character out of Atlas Shrugged, he treated the people who actually manufacture Apple products like serfs and hoarded his $8.3 billion fortune to no apparent purpose.

Apple is a wonderful company for its customers and investors. So, too, Pixar. (NeXT, not so much…) But Apple is also an engine of misery for its subcontracted Chinese workers. That this story went largely unreported during Jobs’s life is a testament to how enthralled our media are by the myth of the man’s talismanic qualities, and how easily manipulated most reporters are by wealthy, successful entrepreneurs. But it is also a testament to how little the lives of laborers appear to count anymore. It fell to the monologist Mike Daisey, who created and stars in the brilliant one-man show The Agony and the Ecstasy of Steve Jobs, now at the Public Theater in New York City, to force this issue into public consciousness. Daisey traveled to the Foxconn plant in Shenzhen, China, which employs 420,000 people to manufacture products for Apple and other electronics and computer companies, to talk with the workers (unlike the Wired magazine reporter who, Daisey scathingly notes, penned a 3,300-word cover story on the plant without speaking to a single worker). Daisey’s mission was risky—a photographer was recently beaten up by the company’s guards—but he was determined, having heard about abuses at Foxconn. There, thirty-four-hour shifts, beatings, child labor, an epidemic of suicides and a general prison-camp atmosphere prevailed, and even yawning could get your (meager) pay docked. He met one worker whose hand had been “permanently curled into a claw from being smashed in a metal press at Foxconn, where he worked assembling Apple laptops and iPads.” When Daisey showed the man his iPad, it was the first time he had ever seen one turned on. He thought it was “magic.”

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