Compromise is Good for Politics (November 22, 2011)

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Business & Economy, November 22, 2011

Dr. Frank-Jürgen Richter has been monitoring the changing dynamics of business, economics and politics for long now. Here he shares his views on the issue that have engulfed our world in these contemporary times

It´s not an easy task to act as an interface between developed and emerging economies, but Dr. Frank-Jürgen Richter, Chairman, Horasis: The Global Visions Community is cutting no corners to ensure that the world sits up and realises what nations like India, China & Brazil have to offer. His stint at the World Economic Forum has put him in a unique position to understand and decipher the state of global economy, business & politics. In an exclusive conversation with B&E´s Amir Moin, Dr. Richter speaks at length about responsible political leadership, the ongoing economic crisis and how world leaders can fix things up.

B&E: How important is responsible political leadership for sustaining growth? How will you define it?

Frank-Jürgen Richter (FJR): It is extremely important. If a country does not have the right leaders, it can get in to a lot of trouble. Look at your neighbour Pakistan. Not just this government, but many before this did not have the wherewithal to come up with a leader who could take the country forward. Another example is Spain. We have an unemployment rate of more than 20%. Among young people, every second person is unemployed. Something was wrong and the leaders didn´t see it. As a result, it has ended up rendering a lot of people unemployed in the country.

B&E: We live in one of the most uncertain times. Crises have become a part of day to day life. So where did all this start and where are we headed? How much is the ruling class responsible for this situation?

FJR: I think all this started not with the fall of Lehman Brothers but long before. We managed to live beyond our wealth and means. We just spent money and financed everything. We started thinking that anything is possible. We started believing that there is no risk any more and the western way of capitalism is taking over. In fact, I think this crisis might have happened much earlier. May be a decade back, but then 9/11 happened. And that, I think, is one event which overpowered the imbalances in the economic world. But then, with the Lehman crisis, the loopholes came out in the open. Now, as we started thinking that we are coming out of it, the second crisis started. To be honest, the Eurozone crisis is much more severe than the US financial meltdown and 2012 could well be an apocalypse. Countries like Greece, Spain and even Italy for that matter are having a hard time repaying their debt. This means that Europe is in very bad shape, meaning that it will also impact the rest of the world. On the other hand, US is also not going thorough the best of times. This is having a direct impact of economies which are somehow connected. For instance, China´s GDP has shrunk because it is dependent heavily on exports. India, on the other hand, is doing much better. Since the Indian economy is largely driven by domestic consumption, not being dependent on exports has come as a blessing in disguise. However, you might see India´s GDP shrinking by around 1% in the aftermath of what happens in Europe.

B&E: The European crisis cannot be attributed to miscalculations. There were intelligent people out there making decisions and implementing policies. What went wrong and who do you think is responsible?

FJR: I think one issue which really contributed to this mess is leadership. In Europe - and I´m very blunt on that - we don´t have the best leaders. People who get into politics in Europe are usually the ones who have failed at business. And I am not pointing at someone in particular, I believe that there is no consensus among the leaders. Say for example, in Brussels and the commission, you´ll notice that there are a lot of compromised candidates. It´s not the strongest person who is the commissioner but someone who was appointed because some influential countries in Europe agreed to it. When the Prime Minister of India goes to Europe, who does he meet? Is he meeting the head of the commission, head of the council or is he going directly to the leaders in London, Paris and Berlin? Maybe he has to see all of them. So at the end of the day, he gets 10 different opinions, but not one single European opinion. Therefore the issue of malaise in Europe is the failure of leadership. And we don´t show an urgency for change. There is a lot of complacency in Europe.

B&E: What are you views on democracy as a political system?

FJR: The beauty, and in a way, the failure of democracy, is that we are always debating and there is not enough action. But then, there is no choice. The alternative to democracy is an authoritarian system like that in Russia and China. In India, things take a lot of time to happen. It´s sometimes very tedious. But at the end of the day, I think India can only win by improving upon this decision making process because you have open dialogue and intellectual exchange, even sometimes too much of exchange. India produces great entrepreneurs. They are not the ones who come out with huge IPOs but the ones who actually contribute to the over all economy. The politicians are also great. But the problem lies two to three layers down. Bureaucracy is the bottleneck. In my personal opinion, you have too many people. The government should do something to streamline the governing machinery.

B&E: As you just said, India is at one extreme of the spectrum - a lot of bureaucracy. But don´t you believe that power is very much centralised in the US and that is not acting in their favour?

FJR: You know in US, it´s a different system indeed. It is a two party system. The Europeans and Americans usually blame others for corruption. But if you look at how party financing happens in the US, it´s not so much different from India. When you want to run for President, you have to first put together a lot of dollars to finance your campaign. And in Washington, there are a lot of lobbyists. So I think the American system is not maybe the best system. I think the fact that there is no concept of coalition in the US is really bad. Compromise is always good for the political system. Further, the US system works on the foundations of a strong President. He is in charge of the army, foreign policy, the economy. Basically everything. That´s too much of a burden on one single person I must say.

B&E: Do you think the fact that lobbying is legal in the US has been a deterrent?

FJR: Yes. Absolutely. In US today, we don´t talk about lobbying anymore. We call it corporate advocacy (which is a little better). But at the end of the day, it´s about pushing through your corporate interests in Washington DC. I think it´s a bad practice and if the corporate world can be so decisive on regulation, then it undermines the entire concept of democracy. Wall Street might hate me for this comment but I think we need more regulation.

B&E: What do you think is the way out of this imbalance?

FJR: What we really need to do is rethink the current form of capitalism. The Anglo Saxon form of capitalism should be done away with because it is always based on arms length, short term spot to spot transactions and has no substantive link to the economy. It´s all very temporary. One way is to bring an Asian element in our approach to capitalism. While capitalism in US is all about boosting the share price, in countries like India, Malaysia and Singapore, it is about long term sustainability and giving back to society.

Horasis is a global visions community committed to enact visions for a sustainable future. (http://www.horasis.org)

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