Will the continuing integration of India into the world economy diminish or exacerbate graft? Ravi Ramamurti (Northeastern University) looks at the issue. He argues “The paradox is that even though India’s faster growth in recent years is the result of fewer controls, most managers would tell you that corruption has increased… The explanation is that faster growth has created new choke points at which politicians and bureaucrats can extract payments… Faster growth has also raised the economic cost to firms of delays in public approvals, giving officials that much more ‘held-up’ leverage over private investors.”
The bard in the bourse
William Shakespeare taught me how to read financial newspapers. My favourite play, Much Ado About Nothing, is well titled, because it is, in fact, a play about nothing. More precisely, it’s a play about things which might be real, but turn out not to be.
In the end it turns out that none of the problems was real. The prince really did keep his word. The fiancé really was faithful. The bride’s death turned out to be a hoax. All of the problems in the drama came from false rumours and from people’s reactions to them.
One way to keep track of these complicated comedy-of-errors plays is to take a blank sheet of paper and draw a line down the middle of it. In the left column you write facts such as “Hero is faithful.” In the right column, you write feelings such as “Claudio thinks that she is not faithful.”
If Shakespeare is too advanced for you, try it with old reruns of Three’s Company, if even that’s difficult, best stay away from markets.
Next time you read a newspaper, I want you to try the Much Ado about Nothing Analytical Tool. In the left column you put sentences with stats based on an actual count of something real—jobs, dollars, interest rates, prices. Quotes, if they are substantial, go in the left column, too. Actual events like hurricanes, elections, wars and terrorist attacks are for sure left column material.
Your right column is for sentences with words like “worries”, “concerns”, “expectations” or “believes”. Unattributed quotes go on the right, as do short quotes. Opinion polls go on the right. This includes polls masquerading as economic stats such as consumer confidence, or business confidence. Elections and futures markets, however, go on the left as do “Subprime jitters”.
Now step back and compare your two columns. The first column is a glimpse, however incomplete, of the world as it is. The second is a glimpse, no matter how distorted, of the world as people perceive it.
There is almost always a gap between the outlook of the two columns. Eventually the right column catches up with the left, as reality gradually forces itself into people’s minds. In the meantime, there is a gap between fact and feeling—a zone where you can see the world clearly and see just as clearly how public opinion is clouded by emotion. That zone is where leaders are made.
When perception is more gloomy than reality, effective leaders invest. When perception is more cheery than reality, effective leaders walk away. Buying in the midst of a panic (or selling in the midst of a mania) can be a very uncomfortable place to be, and the longer it takes for the crowd to catch up the more painful it is. But don’t worry, as the Bard said in another context, “Truth will out.”