2ndlook

Rise of the British Empire – A 2ndlook

Posted in Business, European History, Gold Reserves, History, India, Media, politics by Anuraag Sanghi on July 6, 2010
Leo Tolstoy in Yasnaya Polyana, May 23, 1908. An early colour photography example in Russia Photo - By Yevgeny Kassin. Courtesy - www.guardian.co.uk

Leo Tolstoy in Yasnaya Polyana, May 23, 1908. An early colour photography example in Russia Photo - By Yevgeny Kassin. Courtesy - http://www.guardian.co.uk

Indian history fails

Indian history’s biggest failing is in understanding and explaining the rise of English imperial power in the Indian subcontinent.

Facing foreign conquest for the first time in 12th century AD, Indians have difficulties in understanding invasion, conquests, territorial expansion and the motive power behind such imperial actions.

Equally for the British, the ‘gain’ and ‘loss’ of India happened so quickly, that they cannot accept the loss and they still cannot believe their luck.

The central question of how India could ever have fallen under British rule continues to engage almost obsessive attention. How so few Britons, as servants of a private business enterprise, could have conquered so huge an area and so many people, so far away, has never ceased to amaze or embarrass. Neither British nor national historiography has proven satisfactory. (From The Oxford history of the British Empire: Historiography By Robin W. Winks, Alaine M. Low).

Modern Indian historians have not been of much help.

The perplexed Indian

The question of Indian subjugation by Islamic and English invasions has rarely been answered with any balance.

For instance, with reluctant admiration, some Indians ‘acknowledge’ that the British must have had something special. After all, how could Robert Clive with 400 English soldiers, defeat Siraj-ud-Dowla’s armies of 60,000? This left the ordinary, disbelieving Indian with the second assumption. Indians must have been fighting with bows and arrows, while the English had guns and cannons.

Now both these answers are wrong – because in 1857, Indian had equally good ship-building docks (if not better) and gun smiths. The best steel in the world came from India – as did the raw material for gun-powder, saltpetre.

A hundred years ago, a perplexed Indian, Taraknath Das, sought to understand the cause of Indian subjugation. He wrote to Tolstoy, the 19th Russian writer. Tolstoy’s very ‘insightful’ answer on Indian independence was

What does it mean that 30,000 people, not athletes, but rather weak and ill-looking, have enslaved 200 millions of vigourous, clever, strong, freedom loving people? Do not the figures alone make it clear that not the English, but the Hindus themselves are the cause of their slavery?’ For the Hindus to complain that the English had enslaved them was like villagers addicted to drink complaining that that the winesellers who had settled in their midst were the cause of their drinking habit. ‘Is that not the case with all the people, the millions of people, who submit to thousands or even hundreds of individuals of their own nation or those of foreign nations?’ If the Hindus had been enslaved by violence, it was ‘because they themselves have lived, and continue to live by violence, and fail to recognize the eternal law of love inherent in humanity.

Gandhiji, made 20,000 copies of this waffling and rambling narrative – and distributed it among the Indian population in South Africa. Tolstoy’s ‘explanation’ is today repeated in Indian schools as a defeatist question, ‘How could a few thousand people conquer a nation of crores?’

Tinged with ‘admiration’ for the English ‘character’!

Modern parallels

What was behind the rise of English power – especially, in the Indian sub-continent? After 60 years and a few hundred-crores (or a few billions) of tax-payer funds, Indian academia and historians have failed to answer this question – satisfactorily.

The usual answers trotted out are:-

  • Military superiority (better trained and motivated English soldiers)
  • Technological superiority (Indians had bows and arrows versus English guns and cannons)
  • Political unity (united English vs a divided India)

Historical evidence completely contradicts these three constructs during the 1600-1850 period, the phase of English ascent. For real answers we will need to look somewhere else.

Later in the post, we will use two widely syndicated posts, that appeared on the same day, originating in the USA. These two reports are an excellent parallel of what happened some 300 years ago.

But before that let us look at the key events and developments.

The coup at Plassey - became a 'military' victory for the British!

The coup at Plassey - became a 'military' victory for the English!

Cut to India in 1757

Robert Clive’s ‘genius’ lay in cobbling exactly one such cabal. This cabal consisted of Armenian, Indian and English merchants.

The Armenians were represented by Khojah Petrus Nicholas, and Indians were represented by the Jagat Seths, Seth Mahtab Chand,and Seth Swarup Chand, and other seths like Raja Janki Ram, Rai Durlabh, Raja Ramnarain and Raja Manik Chand. The Armenians, and the ill-fated Omichund, a “notorious Calcutta merchant who was later to engineer the Plassey Revolution” played an important part in the Bengal/Bihar saltpetre trade. They were all significant players in the export of saltpetre (potassium nitrate). Also known as niter, saltpetre was a necessary ingredient for gunpowder.

Increasing demand for Indian saltpetre from Europe increased prices in India. Indian traders benefited. Was this Plassey-nexus between Armenian, English and Indian traders, a result of restrictions on saltpetre trade itself by the Nawab of Oudh.

As a battle, observes Panikkar, “Plassey was ridiculous. Mir Jafar, who vacillated during the engagement, came timidly round with congratulations and he was told he was now Nawab.” Plassey thus, was “a transaction, not a battle.

The ‘importance’ of Plassey is a colonial invention. It is the Battle of Buxar which started off the East India Company. It is conveniently ignored that the East India Company recruited some 18000 sepoys in the next 6 years (1757-1763). It is these 18000 sepoys which clinched the Battle of Buxar for the East India Company.

The coup of Plassey was not a military success, but industrial and economic. Industrially, the English gained global control over saltpetre, an essential component in gunpowder. With Bihar and Bengal being production centres of saltpetre, control over the global gunpowder production system, passed into English hands. Rest of India and the world were cut-off from saltpetre supplies.

Economically, till the grant of Bengal diwani to the East India Company in 1765, after the battle of Buxar (1764) England used to export bullion to make investments in purchase of Indians goods. After the 1765, diwani, the excess revenue was used to make the purchases – and the English bullion was used to fund expansion, grow armies, et al. It was the battle of Buxar (1764) which created the roots of the English Empire in India via the East India Company.

Such exclusive companies, therefore, are nuisances in every respect ; always more or less inconvenient to the countries in which they are established, and. destructive to those which have the misfortune to fall under their government. (An inquiry into the nature and causes of the wealth of nations By Adam Smith).

Such was Clive’s legacy. A troubled Robert Clive committed suicide in 1774.

The colonial Indian army was used against the civilian population - e.g. Jallianwala bagh.

The colonial Indian army was used against the civilian population - e.g. Jallianwala bagh.

The oppressive army of the colonial Raj

The growth in the Colonial Raj’s army to maintain its authority is the simple reason why the Raj was able to maintain its rule for nearly 200 years.

The 18000 sepoys enrolled in 1763 grew in the early years of the nineteenth century to 150,000 and to nearly 350,000 by about 1820. (from Neighbors & strangers: the fundamentals of foreign affairs By William Roe Polk).

In 1820, Britain ruled less than half of modern India. The population of India at that time has been estimated at 25 crore- and the possible population under the Colonial Raj was less than 12 crore.

To sustain an army of 350,000 on a population of 12 crores is an oppressive burden beyond imagination. In a population of 12 crores, the number of able-bodied men would be around Rs.3.0 crore – and army of 350,000 would have meant 1 in every hundred was a soldier. Another writer on the British Empire confirms

the East India Company’s own army, especially its sepoy regiments, grew rapidly. This created a new demand for officers. By 1772 the Company’s officer corps in India was about 1560 strong, more than half the number of regular British army officers at that time. Regular officers were encouraged to transfer to the Company, but most of the increase was accounted for by the recruitment of very young men straight into the Company’s army as cadets. (from The making and unmaking of empires – Britain, India, and America c.1750-1783 By Peter James Marshall).

A proportionate army in India today would be close to 35 lakhs – twice the size the 16 lakhs that India, defence forces (army, air-force and navy) have today. Not only did the East India Company pay better, they also made timely payments.

The East India Company had a justified reputation for not only paying better but for being a more reliable paymaster for its Indian sepoys than any Indian ruler was likely to be.

Many Indians soldiering communities joined the armies of the British Raj as the

Company sepoys’ pay was high; infantry received about Rs.80 per annum, several times the pay of a specialist field worker. The regularity of pay … distinguished British from indigenous Indian armies.

The other reason why the British Raj military size was greater was that instead of police,

many civil duties, which in this country (England) are performed by the police, are in India discharged by the military force.

The small size of Indian police force was a historical trend, predating the English and continues till date. The small police force was derived from the economic habits of the Indian population which did not depend on crime for a livelihood (unlike say, piracy or slave trade in Europe). The constant warfare against Indian polity in India was essential for imperial English objectives. It was the large size of the Colonial Indian Army, consisting of Indian sepoys that was behind the might of the British Empire.

But during WW2, the situation changed. As Indian armies were sent to various theatres of war, and the Quit India movement exploded – as did various other movements across India, the British hold on India seemed to be hanging by a thread. The British response was interesting.

In 1932 there were 215,004 policemen in India (for a population in excess of 300 million) of whom 32,596 (15.16 per cent) were armed. By the end of 1938, the figure had fallen slightly to 193,118 with 28,703 men (14.86 per cent) under arms. But in December 1943, as political and administrative responsibilities of the police grew, the total reached 300,656 (an increase of over 60 per cent since the outbreak of the war) with 137, 222 (45.64 per cent of the total) under arms. (from Policing and decolonisation: politics, nationalism, and the police, 1917-65 By David Anderson, David Killingray.).

The Royal Indian Navy decided to raise to flag of Independence in Bombay in 1946, after which the Indian Army saw a mutiny in Jabalpur. (Photo courtesy - www.outloook.com).

The Royal Indian Navy decided to raise to flag of Independence in Bombay in 1946, after which the Indian Army saw a mutiny in Jabalpur. (Photo courtesy - http://www.outloook.com).

The day the worm turned, the British Raj ended. On February 18th 1946, the Indian Naval force, then the Royal Indian Navy raised the flag of independence. Colonial history calls it the Naval Ratings Mutiny – on February 18th 1946. Within 1 week, Britain decided to evacuate from India.

On February 18th, the ‘lowly’ Naval Ratings from the Royal Indian Navy rained on the British parade – by raising the flag of Indian Independence. Britain did not have the stomach to take on the Indian Colonial Army, battle hardened and exposed to warfare in all the global theatres of WW2. Penderel Moon, a much quoted British Civil servant, felt that the Raj was on “the edge of a volcano.” As did Nehru and Pethick Lawrence. The INA trials had created serious ruptures in British control over India.

On February 19th, 1946, PM Clement Attlee announced that a British Cabinet delegation of three ministers would visit India. He followed this up, on 20th February, 1946, with a statement in the British House of Commons,

His Majesty’s Government desires to hand over their responsibility to authorities established by a constitution approved by all parties in India … His Majesty’s Government wish to make it clear that it is their definite intention to take necessary steps to effect the transference of power to responsible Indian hands by a date not later than June 1948 … His Majesty’s Government will have to consider to whom the powers of the Central Government in British India should be handed over on the due date

On 15th March, 1946, Attlee announced in the British House of Commons that Britain was leaving India. 23rd March, 1946, Lord Pethick-Lawrence, Secretary of State for India, A. V. Alexander, First Lord of the Admiralty, and Sir Stafford Cripps, President of the Board of Trade came to India for consultations on modalities for power transfer. The British acquiesced and 18 months later the British were out.

It took nearly 200 years for the The Indian sepoy to decide that he was no longer willing to be a loyal soldier of the Company Bahadur. And the British Raj crumbled.

Noiselessly.

The seed capital of the British Raj

In all this, the important thing was funding!

The recruitment and expansion of the standing army, the purchase and stockpiling of gunpowder, needed exceptional financial resources that only the English seemed to have. Where did this ‘liquidity’ come from?And that is where the English secret lies.

Apart from the Indian loot, it was the loot from the rest of the world that enabled the English to fund the acquisition of these power sources. The surge in English financial capital can be explained by a succession of English ‘adventures’ which created the seed capital for Indian subjugation.

Of which, the most celebrated is the piracy.

A captive bows before Welsh pirate Sir Henry Morgan as Morgan and his men sack the city of Panama in the 1670s. (Hulton Archive/Getty Images)  Read more: http://www.cbc.ca/world/story/2008/11/21/f-pirates-whoswho.html#ixzz0stPqRYn3

A captive bows before Welsh pirate Sir Henry Morgan as Morgan and his men sack the city of Panama in the 1670s. (Hulton Archive/Getty Images) Read more: http://www.cbc.ca/world/story/2008/11/21/f-pirates-whoswho.html#ixzz0stPqRYn3

Britain – a pirate power

The explicit use of pirates in the Caribbean brought great riches to the Britain. Keynes famously linked all British foreign investment to the single act of looting of the Spanish Armada.

For a good part of 300 years (1550-1850), the English crown gave permits for pirates to operate on high seas – through, what were known as, letters of marque. With the sanction of the English State, high seas piracy became a national pastime in Britain.

Pirates like Sir John Hawkins made money on slave trade and piracy – targeting Spanish ships. Queen Elizabeth, apart from knighting him, also participated in these criminal enterprises. In a modern context, imagine the Italian government giving legal sanction to the Mafia, or Colombians to the Cali cartel.

The Spanish Armada was assembled by Spain to end British piracy. Further on, British propaganda made these pirates and privateers into heroes – and the Spanish Armada into an instrument of Catholic repression.

John Maynard Keynes, famously and honestly, tracked the source of British capital – and computed the compounded value of this loot. Keynes wrote: –

I trace the beginnings of British foreign investment to the treasure which Drake stole from Spain in 1580. In that year he returned to England bringing with him the prodigious spoils of the Golden Hind. Queen Elizabeth was a considerable shareholder in the syndicate which had financed the expedition. Out of her share she paid off the whole of England’s foreign debt, balanced her Budget, and found herself with about £40,000 in hand. This she invested in the Levant Company –which prospered. Out of the profits of the Levant Company, the East India Company was founded; and the profits of this great enterprise were the foundation of England’s subsequent foreign investment. Now it happens that £40,ooo accumulating at 3f per cent compound interest approximately corresponds to the actual volume of England’s foreign investments at various dates, and would actually amount to-day to the total of £4,000,000,000 which I have already quoted as being what our foreign investments now are. Thus, every £1 which Drake brought home in 1580 has now become £100,000. Such is the power of compound interest!

Now we all know where the Spaniards got their gold from!

English Chartered Companies – monopoly public-sector trading houses

The next major source for English capital were English corporations, in which the British ruling classes were the prime promoters and beneficiaries. English use of corporations was ‘pioneering’. It allowed the State to hide behind the veil of an artificial person. The EEIC could be blamed as the tyrant – and Queen Victoria could be displayed as a saviour.

The earliest English experiences with corporations started with the Muscovy Company (formed during 1550-155), the Spanish Company (1577), giving rise, in turn to the Levant Company (1581). Precursors to the East India Company, the Levant Company for instance was a mostly successful English monopoly of trade with the Turkey, Venice, Genoa and Middle East. English royalty became shareholders in these English corporations like the Muscovy Company or the Russia Merchants Companies in the 1550s, Levant Company, The Royal African Company – and later also the East India Company.

James Lancaster, John Eldred (Treasurer of the Levant Company) and Alderman Thomas Smythe and his assistant Richard Wright were common to both the Levant company and the East India Company. The English Queen contributed to the slave trading enterprise of Jack Hawkins the pirate, with her own ships, the Jesus of Lubeck and the Minion.

These trading houses, set up with royal patronage, controlled wealth, power and trade. Controlled by a few people, these corporations were extensions of the State.

British Slave Trade (Data source - Table from 'The Oxford history of the British Empire: The eighteenth century By P. J. Marshall, Alaine M. Low'; page 446)

English Slave Trade (Data source - Table from 'The Oxford history of the British Empire: The eighteenth century By P. J. Marshall, Alaine M. Low'; page 446)

Britain – prime slave trader

Britain and US were the largest users of African slaves – which gave these economies a 20% labour cost advantage. It also ‘freed’ its unemployed youth to go to the colonies and join the military.

The Royal African Company, a slaving trading ‘enterprise’, branded slaves with the letters ‘DY’, after its benefactor and promoter, the Duke of York, (better known as King James-II) and later the company’s initials, RAC. The Royal African Company, formed as the Company of Royal Adventurers Trading to Africa, was created to exploit the ‘opportunity’ for slavery in general – and the trans-Atlantic slave trade specifically.

Between 1699-1807 alone, there were more than 12100 slave voyages from the English ports of London, Bristol, Liverpool, Newport and others. Britain was the prime slave-trading European power. More than 20 million slaves were captured from West Africa and sold into slavery. The overall number of slaves from Africa to Europe and Americas are much higher than 20 million. Wealthy slave traders built grand edifices across Britain, donated to universities, museums, charities.

Britain – sugar and spice

Based on slavery, was Britain’s chain of sugar production colonies across the Caribbean. With the collapse of slavery in Haiti, sugar prices zoomed. Places in the West Indies, like Barbados, Jamaica competed to become the ‘richest spote of ground in the worlde.’ Between 1793-1798, sugar prices trebled. For a few years, English territories imported more slaves than Cuba.

As slavery became impossible due to revolts and mutinies, Britain turned to India again. This time for indentured labour. Slavery diluted and called by another name, India became a source to fall back on for indentured labour. How could the British afford to buy indentured labour? Bought with new gold discoveries in Canada and Australia. Nearly 1 crore (10 million) indentured labourers were shipped out from India alone to various parts of the world – and continued till about 1917. As is to be expected, the UK Government grossly underestimates these figures.

By the time the indentured labour scheme was finally brought to an end in 1917, it is estimated that 2.5 million East Indians had been shipped to British colonies around the world. (From Empire’ Children – Channel 4).

After the finally abolishing slavery in 1833, indentured labour replaced slavery with indentured labour. Upfront, indentured labour was only slightly more expensive, but was cheaper in the long run. Indentured labour also came fewer issues related to capture, transport, trade and maintenance of slaves – with a veneer of respectability that was needed for propaganda purposes.

Indentured labour – Slavery by another name

In the late and middle 19th century, capture of Indians by British agents indentured labour, (slave traders and slavery by another name) was also the reason, that possibly, the myth of ‘kaal-paani’ became prevalent and Indian traders preferred buyers to come to them. Intrepid Indians, suddenly discovered kaala paani – a defensive response to indentured labour, which was a close parallel to slavery.

The West re-invented slavery (in the 20th century again) and renamed it as apartheid which made native populations into slaves. They could, of course, truthfully claim that great Anglo-Saxon frontiersmen discovered gold and settled empty continents – in ‘hostile conditions.’

As sugar prices climbed, Cuban plantation owners expanded plantations – and increased slave labour. From 1840, rumblings among Cubans slaves increased – which would continue for many decades.

Cuban sugar industry was itself kick-started, with English import of 5000 slaves in 1762, during their brief occupation of Cuba. In 1844 Cuban slaves revolted unsuccessfully. 10th, October 1868, Carlos Manuel de Céspesdes released his slaves and El Grito de Yara War, (a 10 year campaign) against Spain started. General Valeriano Weyler, “The Butcher,” was sent to stamp out the independence movement. He created modern history’s first concentration camps. Hundreds of thousands of men women and children were put into concentration camps.

And English sugar colonies gained another second wind.

But what do the Portuguese call their ocean-going ships? Nau. Yes, nau as in Hindi, for boat. Vasco da Gama’s ship, was illustrated in the Libro das Armadas in 1497. (ACADEMIA DAS CIENCIAS DE LISBOA / GIRAUDON / BRIDGEMAN ART LIBRARY). Picture saudiaramcoworld.com

But what do the Portuguese call their ocean-going ships? Nau. Yes, nau as in Hindi, for boat. Vasco da Gama’s ship, was illustrated in the Libro das Armadas in 1497. (ACADEMIA DAS CIENCIAS DE LISBOA / GIRAUDON / BRIDGEMAN ART LIBRARY). Picture saudiaramcoworld.com

Indian shipping

50 years before Independence, a 100 years ago, India was one of the largest ship building countries in the world. The “modern era” began with the building of a dry dock at Bombay about 1750; a second was erected in Calcutta about 1780.

During Shivaji’s reign, as per estimates, more than 300 ships of 300 tons capacity were launched. The Wadias alone built more than 350 ships – during 1735-1863 170 war vessels for the East India Company, 34 man-of-war defence vessels for the British Navy, 87 merchant vessels for private firms, and three vessels for the Queen of Muscat at Bombay docks.

In 1872, Jamshedji Wadia, from a Parsi ship-building family, constructed the “Cornwallis”, a frigate with 50 guns, bought by the East India Company. This led to several orders from the English Navy.

Bengal was the other major port where ship building was for global markets. Chittagong was the center for shipbuilding (now in Bangladesh). The Turkish Navy (a major world power till WWI) was a major customer.

Ma Huan, the famous chronicler and interpreter of Zheng He (also called Cheng Ho) voyages, during the Ming dynasty, studied boat building in Bengal during the early 15th century (1400-1410).

The third major center for ship building was Narsapurpeta (near Masulipatnam) port – which was a major center of exports of steel, diamonds, saltpetre (potassium nitrate, for gunpowder, to kill Indians, Negroes, Aborigines and Red Indians with) from the Deccan plateau.

Sixteenth century painting of the Calicut port - showing shipbuilding yards. (Courtesy - www.saudiaramcoworld.com; BRAUN AND HOGENBERG, CIVITATES ORBIS TERRARUM, 1572 (2)) Click for larger image.

Sixteenth century painting of the Calicut port - showing shipbuilding yards. (Courtesy - http://www.saudiaramcoworld.com; BRAUN AND HOGENBERG, CIVITATES ORBIS TERRARUM, 1572 (2)) Click for larger image.

These buyers preferred Indian ships, because of better jointing technology and elimination of metal sheeting. Indian shipbuilders had a special system where wood was seasoned in partial vacuum, with oils for timber improvement. British shipbuilders, colonialists ensured through tariff and other barriers, that Indian shipbuilding “was prevented from continuing to develop, even though it had a proven ability to adapt to changing technological needs” – and thus finally killing it. English naval superiority rested on Indian ships – and paid for by exploitation of Indian resources.

In 1498, Vasco da Gama’s ocean-going ship, the Sao Gabriel came to India. The Portuguese caravel are well-known. But what do the Portuguese call their ocean-going ships? Nau. Yes, nau as in Hindi, for boat. Few of these Indian built ships have been recovered in various parts of the world. Indian shipbuilding expertise ruled the world – till colonialism killed it.

History repeats itself

On June 6th, two posts appeared in the Indian newspapers. These two posts were remarkable, as these mirrored events and behaviour some 200-400 years ago.

One report dealt with the American War in Afghanistan. To smoothen logistics in Afghanistan, the US ‘recruited’ an Afghan warlord, Matiullah Khan. Much like the English recruited many Indian kings, chieftains to fight their wars.

His main effort — and his biggest money maker — is securing the chaotic highway linking Kandahar to Tirin Kot for NATO convoys. One day each week, Matiullah declares the 100-mile highway open and deploys his gunmen up and down it. The highway cuts through an area thick with Taliban insurgents.

Matiullah keep the highway safe, and he is paid well to do it. His company charges each NATO cargo truck $1,200 for safe passage, or $800 for smaller ones, his aides say. His income, according to one of his aides, is $2.5 million a month, an astronomical sum in a country as impoverished as this one. (via With U.S. Aid, Warlord Builds Afghan Empire).

Matiullah Khan, yet another report reveals, is one of the

… eight trucking contractors who share the US military’s $2.16bn (€1.68bn, £1.45bn) two-year host nation trucking contract. The companies include NCL Holdings, run by Hamed Wardak, the US-educated son of Afghanistan’s defence minister, and others founded by investors in the US and the Gulf.

The system relies on an opaque network of sub-contractors who pay Afghan security companies to escort their trucks. Investigators suspect these companies in turn pay tolls to militia leaders with groups of hundreds of gunmen.

Prominent militia commanders in southern Afghanistan include Matiullah Khan and Ruhullah. Although some hold ranks in the Afghan security forces, such commanders exercise considerable autonomy and often field better forces than the army or police. Industry insiders say militias run what amount to protection rackets on convoys passing through their territory.

Two aspects of this stand out. One is the figure US$2.16 billion over two years – i.e. US$1.08  billion per annum. Now that is a lot of money for the 1500 Matiullah Khan’s militia – and the other 10,000-15,000 members of the other militias.

Are these private militias a problem for the local Afghans? Yes, say the local people. But, like this reports says, “But as long as the Americans are behind him, there is nothing I can do. They are the ones with the money.”

And that pretty much was what happened in India from 1757 to 1947.

The day we decided to invest in 'Desert Bloc' is the day that evil started becoming so awesome!

The day we decided to invest in 'Desert Bloc' is the day that evil started becoming so awesome!

Indian history according to Dilbert

All this still does not explain how the English could become ascendant in Indian – without Indian collaboration. For understanding this collaboration, let us turn to another column by Scott Adams – the creator of Dilbert.

When I heard that BP was destroying a big portion of Earth, with no serious discussion of cutting their dividend, I had two thoughts: 1) I hate them, and 2) This would be an excellent time to buy their stock. And so I did. Although I should have waited a week.

People ask me how it feels to take the side of moral bankruptcy. Answer: Pretty good! Thanks for asking. How’s it feel to be a disgruntled victim?

I have a theory that you should invest in the companies that you hate the most.

If there’s oil on the moon, BP will be the first to send a hose into space and suck on the moon until it’s the size of a grapefruit. As an investor, that’s the side I want to be on, with BP, not the loser moon.

Perhaps you think it’s absurd to invest in companies just because you hate them. But let’s compare my method to all of the other ways you could decide where to invest.

Perhaps you can safely invest in companies that have a long track record of being profitable. That sounds safe and reasonable, right? The problem is that every investment expert knows two truths about investing: 1) Past performance is no indication of future performance. 2) You need to consider a company’s track record.

Right, yes, those are opposites. An investment professional can argue for any sort of investment decision by selectively ignoring either point 1 or 2. And for that you will pay the investment professional 1% to 2% of your portfolio value annually, no matter the performance.

I’m not saying that the companies you love are automatically bad investments. I’m saying that investing in companies you love is riskier than investing in companies you hate.

If you buy stock in a despicable company, it means some of the previous owners of that company sold it to you. If the stock then rises more than the market average, you successfully screwed the previous owners of the hated company. That’s exactly like justice, only better because you made a profit. Then you can sell your stocks for a gain and donate all of your earnings to good causes, such as education for your own kids.

My point is that I hate Apple. I hate that I irrationally crave their products, I hate their emotional control over my entire family, I hate the time I waste trying to make iTunes work, I hate how they manipulate my desires, I hate their closed systems, I hate Steve Jobs’s black turtlenecks, and I hate that they call their store employees Geniuses which, as far as I can tell, is actually true. My point is that I wish I had bought stock in Apple five years ago when I first started hating them. But I hate them more every day, which is a positive sign for investing, so I’ll probably buy some shares.

Looking back at how the Rajputs, like General Mansingh et al, collaborated with the Mughals (Mughals were better than the Khiljis, right?) Indians also justified alliances with the colonial Raj. It took some time for the reality of English rule to sink into Indian minds.

Reluctant admirers

Thus, at historical crossroads, in the 18th century, Indian industrial technology (shipping and gunpowder), wealth (Indian gold reserves) and Indian manpower (Indian sepoys and indentured labour) powered the rise of Britain.

The Indian military market was completely dominated by the private sector. Elements of the Indian military mix – soldiers, elephants, horse traders and trainers, saltpetre production, shipping, wootz steel production, was supplied to the various kingdoms. Operating on a commercial basis, across borders, these production and recruitment systems were technology leaders with high production capacity. In such a military system, standing armies were rare. Production capacities catered to the entire Indic area – and limited export markets.

As the linkage between Indian intellectual and industrial centres (Takshashila against Alexander; Nalanda and saltpetre) broke, after Indian polity fell under the spell of ‘Desert Bloc’ ideology, from 1200 (Qutubuddin Aibak onwards) till date, Indian military production also  lost discretion and propriety. From being market-oriented, and end-use sensitive, India’s military production became mercenary.

Using their ill-gotten gains, from slavery, piracy, crime, loot, et al Islamic rulers and the English outbid Indian rulers. For military elements like saltpetre, elephants, sepoys, horses, armies et al. The first time in Indian history, defence production became public sector monopoly, under Nehru’s ‘commanding heights’ and ‘temples of modern India’ socialistic policy.

To marginally ethical people, without recourse to loot, piracy and slavery under the Indic values system of shubh labh, ‘Desert Bloc’ ethics were an ‘attractive’ alternative. Economically affected by shrinkage in Indian exports due to slave raids and piracy, land grab by the colonial Indian State, some took the easy way of embracing English practices and values – giving the British Empire a leg up in India.

Pirates and slave traders as vectors of the insidious Desert Bloc ethic are usually not factored, analysed or discussed. Indian ship manufacturing centres were world leaders. Hence, ‘traders’ (especially slave traders) from the world over came to India shipyards – centred around Kerala, Gujarat and Chittagong. But slavery and loot are the two elephants in the Desert Bloc room which needs to be recognized, examined – and understood.

Sandwiched between buying Indian collaborators (like Americans are today buying Matiullah Khan) or obtaining cooperation (like Scott Adams is suggesting) from ‘reluctant’ Indian admirers lies the story of the rise of Britain and the British Raj in India.

Not a great mystery this. If you can cut out all the ‘White’ noise.

Linguistics of the Jewish diaspora

Our knowledge of Jewish life in the second century B.C.E. comes mainly from Flavius Josephus (37/38-95/100 C.E.), the great Jewish-Roman historian who wrote in Greek, the scholarly language of his time. The hellenization of the Jews had been thorough.The King of Judea and the High Priest of Yahweh had Greek names. (page 240).

During the third century B.C.E., the Tobiads were the principal advocates of hellenization among the Jews (Grayzel 1969:49). The Jewish family called the Tobiads (the sons of Tobias) traced their ancestry to Tobias the Ammonite, governor of the Persian province of Ammon (now Jordan), east of Jordan River, during the tenure of  Nehemiah in Judea in the fifth century B.C.E. One of them, Joseph ben Tobias, became very prominent during the second half of that century. (page 219).

By the beginning of the third century B.C.E. the Jews were being hellenized rapidly. They no longer spoke Hebrew or Aramaic, but Greek. Their religious services were conducted in Greek. Their personal Hebrew names were hellenized: Honio became Onias, Ezra became Esdras, Yeshua became Iesous (Jesus), and Joshua became Jason. Some Jews had Greek names only, such as Antigonus, Hyrkanos, Aristobolus, or Philon (Philo).The choice of such names by Jews for their children indicated the degree of their hellenization. (page 219).

During the reign of Ptolemaios Philadelphos (Ptolemy II, 308-246 B.C.E.), the Torah and other Jewish holy scriptures were translated into Greek by a synod of scholars. (page 215).

During the years that he was the High Priest and ethnarch (175-171 B.C.E.) Jason promoted Greek sports at the expense of Temple worship. Jason did not last long in the office of High Priest. He was unseated in 171 B.C.E. by Menelaos, a member of the noble Jewish Tobiads and a more extreme Hellenizer than Jason himself.(page 224-225).

By the first century, Greek had become the language of the Jews in the”diaspora”. The Jews of the Hellenic world spoke Greek the way present-day American Jews speak English. During the Greco-Roman and the Byzantine periods, from the late fourth century B.C.E., to the early seventh century C.E. most Jews were thoroughly Hellenized.(page 454).

By the third century B.C.E the Jews of Syria, Palestine, and Egypt had become thoroughly hellenized. They worshipped Zeus, Hera, and the rest of the Greek pantheon. There were images of Greek sun god Helios, the wine god Dionysos, and the demigod Heracles on Jewish synagogue floor mosaics at Sepphori an other Gallilean cities as late as the sixth century C.E. But the Orthodox Jews violently resisted Hellenism. The conflict between Helenism and Judaism, or rather between hellenized and Orthodox Jews, was to lead to major trouble in the second century BCE, after Palestine was captured from Egypt by the Seleucid Greeks of Syria. (page 215).

Just as in modern America most Jews use English rather than Hebrew in their religious services and rituals, so Greek was used by the Jews of Egypt, including Judea, in their religion (page 215).

Hellenic culture was much more attractive to the young Jews of Judea than the rigid strictures of their own religion. The Greek myths and deities, projections of the deepest infantile conflicts and family relations, etched into the unconscious mind of every person, deeply appealed to the people, just as the Canaanites myths had to their ancestors. The Tobiads led the wave of hellenization among the Jews. (page 220)

Jews always spoke the language of the land which was their home. When expulsions and persecutions eventually brought about a wider separation between the Jews and the non-Jews, the result was a growing dissimilarity between the intimate languages spoken by each group.(Grayzel quoted on page 458).

in the early fourth century, the Jews were divided into three main groupings. Those living in the Western Roman Empire of Italy, which comprised much of Western Europe, spoke mainly Latin, the lingua franca of the West, and the native European languages of the ethnic groups amongst whom they lived. The Jews of the Eastern Roman Empire of Byzantium, with its capital at Constantinople spoke mainly Greek, the language of the East. The Jews living in Sassanian Neo-Persian empire east of the Euphrates spoke mainly Aramaic. Hebrew continued to be spoken by Jewish scholars and by the people in their prayers. (page 337).

During the seventh and eighth centuries the lands inhabited by Jew in the Middle East and North Africa were conquered by the Muslim Arabs. Arabic became the language of the these Jews. (page 454).

Text extracts from A psychoanalytic history of the Jews By Avner Falk.

Judaism – an existential challenge

Jews - the eternal victims

Jews - the eternal victims

The Jewish population, followers of one of the oldest religions in the world, across countries and in Israel, today faces an existential challenge. With 0.25% of world population, i.e. less than 1.5 crore Jews left, in a world of more than 600 crore people, they have made enemies of their neighbours around their country.

The Jewish state, dependent on US largesse, hangs by a thin thread. Without Hitler, the world population of Jews would possibly have been not much better. Maybe 2.5 crores instead of 1.5 crores (at the risk of sounding insensitive). Maybe 0.5% of world population, instead of 0.25%. Also, must be remembered that Jewish studies in the modern context are affected by the ‘Jews as the eternal victims’ syndrome.

Genetic analysis of the Jewish populations

So, what is the reason for this fragile position of the Jewish population? One recent study states that

Admixture analysis based on binary and Y-STR haplotypes indicates a high mean proportion of ancestry from North African (10.6%) and Sephardic Jewish (19.8%) sources. Despite alternative possible sources for lineages ascribed a Sephardic Jewish origin, these proportions attest to a high level of religious conversion (whether voluntary or enforced), driven by historical episodes of social and religious intolerance, that ultimately led to the integration of descendants.

(from The Genetic Legacy of Religious Diversity and Intolerance: Paternal Lineages of Christians, Jews, and Muslims in the Iberian Peninsula by Susan M. Adams, et al; Copyright 2008 The American Society of Human Genetics, The American Journal of Human Genetics, Volume 83, Issue 6, 725-736, 04 December 2008).

Another study concludes that the Jewish population shares a high level of common paternal similarities.

Several lines of evidence support the hypothesis that Diaspora Jews from Europe, Northwest Africa, and the Near East resemble each other more closely than they resemble their non-Jewish neighbors. The only exception was the Ethiopian Jews, who were affiliated more closely with non-Jewish Ethiopians and other North Africans.

Second, despite their high degree of geographic dispersion, Jewish populations from Europe, North Africa, and the Near East were less diverged genetically from each other than any other group of populations in this study. At the most basic level, the genetic distances observed among Jewish and non-Jewish populations can be interpreted as reflecting common ancestry, genetic drift, and gene flow. The latter two processes will tend to increase genetic distances among Jewish populations, whereas admixture will also have the effect of decreasing genetic distances between Jewish and non-Jewish populations.

Our results suggest that common ancestry is the major determinant of the genetic distances observed among Jewish communities, with admixture playing a secondary role. (from Jewish and Middle Eastern non-Jewish populations share a common pool of Y-chromosome biallelic haplotypes By M. F. Hammer, et al )

Of course, it begs the question, was the Jewish population ever a significant part of global population? One writer who has addressed this question is James Carroll, in his book, Constantine’s sword. He estimates,

Jews accounted for 10 percent of the total population of the Roman Empire. By that ratio, if other factors had not intervened, there would be 200 million Jews in the world today, instead of something like 13 million. (He goes onto recount that the) potential demographic crisis facing the Jewish people is defined by the loss of the murdered millions, not only in the twentieth century, but in all others. (from Constantine’s sword By James Carroll, page 26-27, texts in brackets, mine).

Population growth and changes (of not just the Jews) are subject to interplay of complex demographic factors – like assimilation, disease, migration, reproduction rates and proselytization. Since these factors affect all human populations, further analysis of these factors may just reinforce current red herring theories.

The Israel and USA tango - who is using whom!

The Israel and USA tango - who is using whom!

Jews – the eternal victims?

Of course, Jews have not been the only population group in the world who have had to face the problems of epidemics, migration, assimilation, and conversion. What could have been a significant reason for the decline in the Jewish population over the centuries?

A 2ndlook at history points out (extracts above) that the Jewish populations gave up their language and culture ab initio. Within a few centuries of its foundation, they were giving up on their culture.

Interestingly, and apparently, language plays an important and crucial role in the expansion and growth of populations – as the Jewish case seems to suggest.

Those who don’t learn from history …

The Jewish history has invaluable lessons for Indians. For one, all those who think that English is God’s special gift to India (and mankind), should look at the eclipse of the Greek language. I am yet to discover the logic which shows that English will fare better than Greek, Spanish, Persian or Urdu.

Reducing the role of the Indian State

The massive subsidy given by the Indian state towards English language education needs to be phased out. Indian languages (all of them) should start getting back on their feet. The people of India, each individual will choose their language. No bureaucrat, politician, ‘intellectual’ will decide that. Finito. Completo. Terminato. Endlich. Eindig. ändlig.

The Indian language basket also calls for diversification. India needs to learn more foreign languages. The great ‘software success story’ is actually two countries – US and UK who give between 70%-80% of Indian software business? This is coolie labour! We are missing out on the massive Japanese, French and the Spanish markets because we have not invested in those foreign languages. And we have missed out on computing in Indian languages, because we have not invested there either.

The Israel and USA tango - who is using whom!

The Israel and USA tango - who is using whom!

Metrics Of Corruption

Posted in Business, Current Affairs, History, Media by Anuraag Sanghi on April 3, 2009

What you measure is what you manage.

Nixon and Tanaka

Nixon and Tanaka

Measurement of scandals and corruption is a particularly thorny issue. Due to the lack of a common measure, transnational comparison  of scandals is currently impossible. Was the Lockheed Scandal more egregious than the Harshad Mehta Scam?

Was Watergate more dangerous than The Lewinsky Affair? How does one compare corruption across nations and time periods?

Some scandals captured, much more than others, national and international attention. To understand the nature of scandals, we will examine three such scandals. These scandals were seen as particularly flagrant – and damaged the careers of the concerned politicians.

America’s Watergate scandal

President Nixon was forced to resign over this scandal. Two Washington Post journalists were tipped off by “Deep Throat”, William Mark Felt, Sr., an FBI official.  Disturbed by the sidelining of FBI insiders by President Nixon, Felt kept the two journalists updated. The scandal erupted when burglars, supposedly at President Nixon’s behest, were caught trying to bug the site of the Democratic Party Convention. Watergate was projected as a major ‘threat to democracy’ – and the resultant outrage was captured by films and books.

The two journalists were lionized by the American media – as well as international media. The media took care of their own, even though the role of media was only minimal. Under media pressure (and the threat of impeachment), ‘Tricky Dick’ Nixon resigned. Vice President Gerald Ford succeeded and granted Nixon a full pardon. Compared to the shenanigans in the Kennedy regime, Watergate was tame. Yet the media circus made Watergate appear as Armageddon.

Japan’s Lockheed scandal

1974. The Japanese Prime Minister, Kakui Tanaka, resigned, when it was found that he (and some politicians) had allegedly taken bribes to buy fighter jets from  Lockheed Corporation, USA – an incident that the ‘Japanese poetically refer to as kuroi kiri (black mist).’ Though, Tanaka resigned from Government, he remained a powerful politician in the LDP and remained king maker till his death.

After the revelation of the scandal, “Bungei-Shunju’s circulation has jumped 10%, and collectors are now paying up to $60 for a copy of the historic November issue.” The interesting part was the ease with which Bungei Shunju was able to cover this story – and the complete lack of opposition.

The team encountered no political interference. Says Tachibana: “We went to tax offices and census registration bureaus, bowed to the officials, paid a modest fee for copying and came back with a treasure-house of information.”

Was it the amakaduri, or was the faceless MITI, who gave a unspoken go ahead for this bit of muck raking journalism? In a usually compliant Japan, such adventurism raised questions!

India’s Bofors scandal

After Indira Gandhi’s assassination, her son, Rajiv Gandhi won a stunning 400 seat majority in India’s Parliamentary election (1984) – giving him unprecedented power. India had high hopes from him – which he partly fulfilled. India’s telecom revolution, software success owe their success, partly to initiatives during that period.

India’s rising crude oil output from Bombay High gave Rajiv Gandhi elbow room, which he utilized for increased imports. India’s historic rupee overvaluation, corrected during and after his regime. From roughly Rs.18 to a dollar, by 1995, Indian rupee depreciated to over Rs.35 to a dollar. But what finally did him in was the Bofors scandal. It was alleged that Bofors AB, paid off various people involved in the finalization of the howitzers for Indian armed forces.

Post Bofors, the resignations of Arun Nehru, Arun Singh and VP Singh, complicated by the strained relations between the Bachchan-Gandhi families, coupled with Rajiv Gandhi’s weak defense, ensured that he was guilty in public opinion – and he lived and died under the shadow of Bofors. Added, was the aggressive and strident press campaign by Chitra Subramaniam and N. Ram of the normally quiet Chennai-based The Hindu newspaper.

Other scandals

Of course, there were many other scandals – bigger or less famous. Emperor Bokassa’s diamonds to Valery Giscard d’Estaing or the Mark Thatcher shenanigans. Hardly anyone remembers Valery Giscard d’Estaing and Bokassa’s diamonds. But none captured the public bandwidth the way these three scandals did. Hence, it would be a appropriate to examine the elements of these three scandals to understand create metrics for such scandals.

Some other sample cases

To measure the magnitude of the scandal incident itself, it is proposed that the unit of measure can be named as a cBofors (constant Bofors). And the measure of individual corruption can be a cTanaka (a constant Tanaka).

Morarji On Rushmore

Morarji On Rushmore

This metrics also makes clear why I have devoted so much space to Morarji Desai in the past. Morarji Desai’s gold policy has been examined in previous other posts – especially its contribution to: – One, the greatest crime wave ever in human history.; Two – the survival of Bretton Woods for 25 years;

St.PT Barnum, my guru, mentor, friend, philosopher, guide et al, in matters of propaganda, also believes that Morarji Desai must be elevated to Mount Rushmore.

Of course, there was the old case where Seymour Hersh alleged that Morarji Desai was paid of by the CIA. So, I will not repeat myself here.

The four elements that are common in these three scandals were:-

  1. Country Risk – These incidents became scandalous as the future of the nation in all the three cases was seen as jeopardized. The Bofors guns were seen as more critical and hence the outrage. The Coffingate during NDA-George Fernandes was seen as ‘almost benign corruption.’
  2. Cost & expense implication to the tax payer – In all these cases, it was seen that the tax payer was footing the bill – for something illegitimate.
  3. Social Impact – In some cases, the effect is a perceived corollary – and in others, the incidental change is direct and visible. After the Harshad Mehta Scam, a lot of people lost money. After the collapse of Lehman Brothers, the financial crisis in the US was exacerbated.
  4. Beneficiary toxicity – Who gains from these scandals also changes the perception. If a harmless broker like Harshad Mehta benefits, it does not create the outrage that would result if the beneficiary is say, Dawood Ibrahim.

Based on these four elements, we can rate each rate each scandal. As an index, I would propose two measures.

For instance, a scandal like the collapse of Lehman Brothers measures at an impressive 15 kiloBofors – but Watergate weighs in at small 2.21 cBofors. Similarly, AR Antulay, is possibly (say) 7 deciTanakas, but Kennedy is clearly about 5 kiloTanakas.

This is, of course, a dynamic metrics system, which will allow new elements with weights to also come in. It will allow political ‘decision makers’ and ‘business leaders’ to choose between ‘lesser evil’ based on data, instead of gut feel.

One immediate benefit. Such a measurement system immediately makes one thing very clear. Media clearly distorts the gravity of the issue. A Watergate which was a minor political storm in an American tea-cup, which affected  few politicians was blown up (and out) of proportion. But the media ignores, (and understands much less how) Morarji Desai’s support to Bretton Woods with his gold policy condemned billions to lives of poverty.

Blindsided Indians

Possibly more people in India (at least the English press) know about Bob Woodward and Carl Bernstein (who wrote the) Watergate, than about Chitra Subramaniam and N Ram – who ensured that all details of the Bofors Scam came out. Sucheta Dalal, who broke the Harshad Mehta story has become a female Don Quixote – I some times fear.

And of course, nothing happened to the Lockheed and the Bofors.

Incident Beneficiary toxicity Cost & Expense Country risk Social impact
Morarji Desai Gold Policy
Watergate scandal
Lockheed-Tanaka
Bofors (index incident).

c(B)

c(B)

c(B)

c(B)

Harshad Mehta
Ketan Mehta scam
Lehman Bros. collapse
CommonwealthGames

New Global Reserve Currency – Connecting the dots – Part 2

Posted in Business, Current Affairs, European History, Gold Reserves, History, Media, Uncategorized by Anuraag Sanghi on October 23, 2008

ECB’s Nowotny Sees Global `Tri-Polar’ Currency System Evolving Bloomberg.com: Worldwide

European Central Bank council member Ewald Nowotny said a “tri-polar” global currency system is developing between Asia, Europe and the U.S … leaders of the U.S., France and the European Commission will ask other world leaders to join in a series of summits on the global financial crisis beginning in the U.S. soon after the Nov. 4 presidential election, President George W. Bush, French President Nicolas Sarkozy and European Commission President Jose Barroso said in a joint statement yesterday.

European leaders have pressed to convene an emergency meeting of the world’s richest nations, known as the Group of Eight, joined by others such as India and China, to overhaul the world’s financial regulatory systems. … Sarkozy wants the G8 to consider re-anchoring their currencies, the hallmark of the 1944 Bretton Woods agreement that also gave birth to the International Monetary Fund and World Bank.

Europe’s Been Onto Something … While the US gently weeps

The EU region calling for a ‘G8 + India & China’ conference to thrash out this global monetary issue – and has been twisting the knife in the reluctant US side. The US has been dragging its feet. While the EU has been going gung-ho on this, the US has been floating many trial balloons. Warren Buffet, Paul Volcker and Lawrence Summers have been co-opted by the likely President of the US – Barack Obama. There has been talk of a manipulation in bullion prices – which may be required for re-anchoring currencies. Interesting deals – considered impossible till a few years, are being done in a tearing hurry.

Imagine! The EU in the middle of a global crisis goes out and restores diplomatic ties with Cuba.

The US Gameplan

US analysts, led by Paul Krugman, have been calling for Barack Obama (or maybe McCain) to emulate Roosevelt – who waded into WW2, with 25,000 tons of nationalized gold. If gold is nationalized, it may depress demand in the short term – giving rise to huge volatility in gold prices. But Warren Buffett has been on the silver bandwagon for a while – and that is making the gold-silver equation hazy. What if Warren Buffet becomes the new US Treasury Chief? There is the real risk of another fraud like the gold standard happening all over again.

The US has been making its moves – differently. Paul Krugman’s Nobel Prize is an indication of this. Will the US use Paul Krugman as the Keynes of the Bretton Woods. The background of Bretton Woods itself, is of course something that the US and Europe do not want the world at large to know. The other ploy that is being bandied about is the re-launch of the fraud called the Gold Standard – now in a better packing.

The Oil-Dollar Tango

The Oil-Dollar Tango

What Has Been India Upto?

While the US has been resisting calls for action, busy doing post-mortem, Asia and Europe have been moving. Interestingly, Manmohan Singh has done some huge work in the last 60 days – the nuclear deal with the USA and NSG, the IBSA Summit, the ASEAN free trade agreement – and now his three Asian nation visits. India’s Trade and Commerce Minister, Kamal Nath, has been talking about a multi-lateral set up. The UN was made to issue a statement on this. Am I reading too much into this? At times, India has seemed clueless.

After the ministerial meeting, both Prime Minister Manmohan Singh and Finance Minister PC Chidambaram talked about how the ‘developed’ world’ was now ‘listening’ to the developing world – and was willing to ‘give more representation.’

This language itself indicates the distance that the Third World needs to travel.

China and Russia

The big issue is of course, China and Russia. China has 2 trillion of US dollars – and what does China do with this? Russia has come out from a default about a decade ago – with a nearly US$400 billion reserves – flexing its muscles in Georgia and dependent on a high oil prices. What happens to Russia if a new Pacific Republic (Cuba, Haiti, West Indies, etc) were to start drilling for oil? In 5 years, the world would be awash with oil – and Russia’s mineral earnings could evaporate. This crisis seems to have made the Chinese Premier shaky. So, the world may not trust China and Russia too much. Russia and China can be the party poopers – but they cannot be the life of the party.

For financial and military reasons, the inclusion of Russia and China is useful – though not essential to the emergence of a tri-polar currency system. The cost of Russian and Chinese inclusion is high degree of influence that these ‘super powers’ will want – which the developing world will not approve.

Why supplant one form of exploitation with another?

Contours Of The Deal

The EU-USA-Asia may agree on a broad a global regulatory and oversight body to monitor and maintain oversight over a multiple currency regime – an improved, better IMF.

The new 3rd currency may take some time to figure out. Not that it is difficult, expensive, or impossible. Some of Asia may want to cling to the dollar skirt. The new currency may be an Asian-Developing world currency. This may see the emergence of a tri-polar currency regime – which the US and Europe duopoly is desperate to avoid.

The 2ndlook proposal for the Third Global Reserve Currency has been in circulation for some time now.

Bretton Woods – What they wont teach or tell you …

Posted in Business, Current Affairs, Environment, European History, Gold Reserves, History, Media, Uncategorized by Anuraag Sanghi on October 8, 2008

Prequel to Bretton

Keynes’ first book that gained him some following in the world of economics was the ‘Indian Currency And Finance‘. This work examined in significant detail the workings of the Indian currency system. The Indian colonial currency system was anchored to the British pound – and various other local Indian currencies were in use – and even legal tender in large parts of India.

G5 will take on G8

G5 will take on G8

Thus there was always great pressure on Britain to keep the British pound on gold standard – as there was always the option for the common citizen to use coinage from other kingdoms and princely states. In 1900, the British colonial Government tried to enforce circulation of British sovereigns in India – which failed.

Of course, gold importation into India was severely restricted. The gold blockade against India was effective as the major gold production centres were under Anglo Saxon occupation (Australia, Canada, USA, South Africa, Rhodesia, Ghana, etc.).

The Birth Of Bretton Woods

As WW2 was winding down, the Anglo Saxon Bloc went ahead and devised the Bretton Woods system. This system was a copy of the Indian currency system – where instead of the British pound, the American dollar became the Index currency.

Instead of milking only India, the Anglo Saxon Bloc could now milk the whole world. Keynes noted how America when dealing ‘her dependencies, she has herself imitated almost slavishly, India.’ So, when the time came, it took very little time for the US to scale the Indian currency model on the rest of the world.

The success of Bretton Woods-I depended on blockading India from buying gold – which was effectively done by Morarji Desai. (I wonder why the ungrateful Anglo Saxon Bloc has not made a statue of Morarji Desai at Mount Rushmore). He has after all been the single biggest contributor to their prosperity for the last 50 years.

What was Bretton Woods

The world stamped their approval on Bretton Woods.

As per the agreement, all countries of the world would use the dollar as the index currency – for international trade and foreign exchange reserves and for nominal exchange rate fixation. This system allowed the USA to print ‘excess’ dollars. These ‘excess’ initially in limited quantities, but soon at an accelerating pace. Today the USA has flooded the world (and the USA markets with more than US$50 trillion) of excess currency. The housing bubble, the M&A frenzy, the credit crisis are by products of this printing of dollars. With these excess dollars, the US consumers and others bought what they wanted – and US went ahead and printed some more dollars.

Bearing the dollars cross

Bearing the dollar's cross

Behind Bretton Woods – Gold

If the Bretton Woods system was defective, unfair, weighted et al, why was it accepted? Why did the world believe that only the Anglo-Saxon Bloc could deliver.

Why?

In 1944, the Anglo Saxon Bloc (countries, colonies and companies) controlled more than 90% of gold production and reserves. The largest private gold reserve in the world, India was still a British colony. Hence, it was fait accompli.

The Cornering Of Gold Supplies

For the last 150 years, the ABC countries (America, Australia, Britain, Canada) comprising the Anglo Saxon bloc (countries, colonies and companies) have controlled 90% of the world’s gold production. Till (a large part of) India was a British Colony, they also controlled more than 50% of the above-the-ground gold reserves. This gave them absolute liberty to print depreciating currency and flood the world pieces of paper(called dollars and pounds), manipulate the world financial system and keep other populations poor and backward.

Who paid for the dollar hegemony

Who paid for the dollar hegemony

Bretton Woods – Broken Promises

The promise of the Bretton Woods system was stability. USA promised the world that they will redeem the US dollar for gold – at a rate of US$35. Anyone could (except Indians and Americans) buy an ounce of gold from the USA for US$35 – managed by the the London Pool system. Within 20 years, the first promise was broken. Redemptions of dollar for gold to individuals was stopped in 1968 (March15th).

The Bretton Woods system worked for 20 years because Indians were not allowed to buy gold. India’s finance minster during that crucial period, Morarji Desai, (allegedly on CIA payroll during Lyndon Johnson’s Presidency 1963-1968), presented a record 10 budgets, between February 1958, up to 1967.

His break with Indira Gandhi began when the Finance portfolio was taken away from him. Morarji Desai’s ban on gold imports allowed the sham of Bretton Woods to continue for 20 years. His adamant attitude on gold cost the government popularity and electoral losses – and the Indian economy and Indians much more. Was it a co-incidence that many of the RBI functionaries later got (and even now) plum postings at LSE (IG Patel) and BN Aadarkar (IMF)?

The Bretton Woods Twins

Bretton Woods also gave rise to the the Bretton Woods twins (the IMF and the World Bank) which are run and managed by the Anglo Saxon countries. The ABC countries, their client states like Japan, OECD, etc. have 65% of the voting rights. With this huge voting majority, less than 5% of the world’s population (of the ABC countries) decide how 95% of the world lives.

The Bretton Woods twins (the IMF and the World Bank) been significant failures. Aid (spelt, ironically, very similarly to AIDS) projects are approved – which are tied to imports from these Anglo Saxon countries.

Bretton Woods Fraud

The Bretton Woods system was technically created by more than 700 delegates from the 44 allied nations. But the match was fixed.

It was designed by the Anglo-Saxon countries (America, Australia, Britain, Canada), for the benefit of the Anglo Saxon countries. Notice how much Britain resisted and finally did not join the European Currency Union. This system has swamped the world with accelerating inflow of dollars (American, Australian, Canadian) and British pounds. Producers and exporters are left with vast reserves of a depreciating currencies.

Nixon Chop And Bush Whack

From the Nixon Chop to the Bush Whack final months of Dubya’s Presidency, the Bush Family has been in the Presidency for 12 years of the 37 years. And in positions of lesser power for the entire period. George Bush Sr. was the US representative to the UN during the Nixon era – when Nixon made his infamous remarks to Kissinger about the ‘sanctimonious Indians’ who had pissed on us (the US) on the Vietnam War’. George Bush Sr. was also the US Vice President during the 8 years of Reagan Presidency.

The bend in the flow

The bend in the flow

During these 37 years – between the Nixon Chop (1971) and the Bush Whack (2008), the world has changed significantly.

The Nixon Chop

On August 15th, 1971, President Nixon after a two day huddle with 15 advisers at Camp David, delivered the Nixon Chop to the world. The Nixon chop (my name for this event), one month after his China breakthrough, cut the convertibility peg of US$35 to gold as US gold reserves were severely depleted.

The French had been regularly redeeming gold for their dollar earnings – and for this ‘perfidy’ the US had not forgiven France. This was much like the pre-WW2 French methodology of devaluation, new peg, old debt for new gold routine which got the US hackles up. Many decades have passed since these redemption by France, and the new French President, Sarkozy believes it is now possible to renew US-French relations again.

On the opposite side of the world, a beleaguered Indian Prime Minister was celebrating 24 years of Independence with a “ship-to-mouth” economy, dependent on PL-480 grain. Private gold reserves in the Indian economy after nearly 25 years of post-colonial rule, were steadily rising. Over the next 10 years, the western world (and most of the rest) blamed OPEC for post-1971 inflation, gold scaled US$800 an ounce; the Hunt Brothers launched their bid to corner the silver market; stagflation made an entry and Soviet power grew. Nixon Chop , itself the result of many years of gold reserves erosion, was one in many steps that brought the US$ to its knees.

Can the dollar be fixed?
Can the dollar be fixed?

On August 15th, 1971, the world got the Nixon Chop – where even Governments could not redeem dollar holdings. The dollar was put on float. In little time, dollar value depreciated from US$35 per ounce of gold to US$800 in 1980. Over the next 20 years, through various clandestine methods (check out the Edmond Safra and the Yamashita stories links), gold prices were managed and brought down to US$225 per ounce – but still 80% reduction in value of dollar value. Foreign reserves of poor countries got eroded. It was a gigantic fraud on the world – especially the poor, developing countries. And the fraud continues.

Every Few Years

Every 10-25 years, the world seems to go from one financial crisis to another. Trucks full of economic analysis follow each crisis – and everyone agrees after each meltdown, that there will not be another catastrophe. What the poor (and not so poor) economists don’t see is that the Anglo Saxon bloc with 80% of the world’s gold production in a choke-hold does what it wants.

On December 31st, 1974, nearly forty years after Roosevelt nationalized private American gold stocks, Americans were allowed to invest in gold again. Again Indian liberalization (1991) of gold imports happened a good 17 years after the US laws (1974) were liberalized. I wonder, how that was tied.

And that is what has happened for the last 60 years. Of course, all good (for the Anglo-Saxon Bloc) things come to an end. And so has Bretton Woods – I & II.

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