Sweat, Think, and Philosophize by Navin Doshi (Sept 5, 2008)

On August 21, 2008 I was fortunate to attend a one time movie event titled, I.O.U.S.A. shown in 400 U.S. cities to give a critical message to the public. The movie was followed by a live panel discussion. Panel participants included Warren Buffett, CEO of AARP, Bill Novelli, Cato chairman Niskanen, and David M. Walker, former head of Government Accounting Office (GAO) under both Clinton and Bush presidencies from 1998 to 2008. GAO is nonpartisan and keeps an eye on Government spending and reports to Congress. The message from the movie and panel discussion was simple. America is heading towards a financial Tsunami if we do not act immediately. We are all familiar with recent problems that include the sub-prime mortgage melt down, the housing bubble burst, and accelerating inflation due to the rising cost of energy. However, only a few of us know about the rising debt problem that could accelerate towards the stratosphere. The problem is compounding due to almost zero household savings and uncontrolled consumption, and the rising cost of social security and medical benefits.

The debt could rise to over 50 trillion dollars in a couple of decades if no action is taken. If the projections are accurate, the most menacing culprit will be the rising cost of medical benefits due to the rising population of baby boomer retirees. Some of the proposed solutions were to increase the retirement age, change tax laws to increase the household savings, and better health management.

Here are my thoughts. America has been on the wrong track ever since we let go of the production economy and went increasingly to a consumption economy. A ball park measure of production is the production of steel. The 19th century belonged to England because they were the largest producer of steel in the world. America was on the top in the 20th century because America was the largest producer of steel. The 21st century seems to belong to China since they are at the top in the same.

There has been a perception that we can maintain our standard of living just by innovation. If we use our minds, we do not have to produce steel or any other hardware in a factory. Some American economists would say about Asia and America that, “we think and they sweat.” I would like to counter this by saying, “we must sweat, think, and philosophize” for our well being. There would be more people earning better wages in manufacturing than those employed in service industries if we were to adopt this course. Wealth is created by producing more, not by consuming more. We should never stop being creative and come up with ideas that give us a better life. But, we must go even further and enter the realm of philosophy and learn about austerity.

More recently we have heard about peak oil, peak water, and peak food implying that these commodities will become scarcer in time because the production can not catch up with consumption. Yes, it is likely that it could happen since more people in Asia would like to have the same life style as those in the West. Then there are two peaks that go hand in hand; they are peak consumption and peek stupidity. Over consumption is not good for our health; obesity in the West is the highest. Why don’t we have peak caution, not peak greed? I suppose greed caused the financial companies to be so highly leveraged. Now we are going in to the process of deleveraging. The pendulum is changing the direction from extreme greed and consumption towards caution and hopefully saving for a rainy day.

I hope, some time in the future America will lead the world to climb the mountain of austerity. Austerity here does not mean ascetic, but simpler living, avoid waste, and being environmentally friendly. Climbing a mountain is not an easy endeavour for any one. America may have to descend a little, go around the obstacles as long as the direction is towards the mountain top. The day America is at the austerity mountain top will be a day to celebrate. We will be in harmony with nature around us, harmony of body, mind, spirit.

NOTE: I congratulate India Journal, their editor, and staff for providing excellent service to Indo-American community for last 20 years. Inadvertently I missed to do so on their 20th anniversary, since I was out of the country watching Wimbledon tennis match.

Navin Doshi (Sept 5, 2008)
(Mr. Doshi is a financial market trader, writer, and a philanthropist)

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