Back to the Wall Street

Publisher: Little,Brown / Hachette India

Pages: 304

Price: Rs 699

Every half-decade or so,Financial Times journalist Edward Luce delivers an easy-reading but insightful country profile. In Spite of the Gods Little,Brown,2006 had chronicled the strange rise of modern India without benefit of an industrial revolution and with the baggage of Gandhian and socialist priorities which sit uneasily with contemporary economic wisdom. That was the fruit of five years that Luce spent in Delhi as bureau chief of the FT. From 2006,he has been bureau chief at Washington,barring a stint as Larry Summers speechwriter. Time to Start Thinking is the outcome. The title is a crashing bore but between the covers,theres a very lively account.

Luces books profile nations at the tipping point. About 2006,the Indian success story had found wide acceptance. In the Western imagination,India was an outsourcing behemoth that could reach out and snatch away jobs from halfway across the world. Culturally,Bollywood and Indian literature were as hip as sushi. And geopolitically India,along with China,was developing into an important node in a multipolar world. As Luce wrote,India is not on an autopilot to greatness,but it would take an incompetent pilot to crash the plane.

After half a decade and a financial meltdown,the world is very different. Indias pilot suffers from policy paralysis,one of several political and economic illnesses trying to flatline the growth story. The Obama administration freely admits that maybe it could have,but it actually cant. India and China are engaging with the US in completely different ways,the former by alignment and the latter by expressing its frustration as leading shareholder in the US economy,with poor returns.

Time to Start Thinking is a reporters account of America in decline. The country is in a flat spin,the autopilot has cut out and the pilots cant or wont hear the shrieking altimeter alarm. Drawing on interviews with a varied cast of actors and interested spectators,from military commanders,lobbyists on the Hill,inventors and industrial leaders to students and taxpayers,Luce takes the pulse of the worlds most influential nation.

His diagnosis recalls the unofficial slogan of Bill Clintons 1992 presidential campaign: Its the economy,stupid! Luce writes of his former boss Larry Summers brushing off appeals for industrial policy,the lack of which has given the US a rust belt while Guangdong booms and Shanghai glitters,and urged GE,the biggest manufacturer,to station most of its technical staff overseas. He also recalls Summers disparaging a now-famous 2005 paper by former IMF chief economist Raghuram Govind Rajan currently an economic advisor to the Indian PM on the dangers of complex derivatives,the very monster which brought down Wall Street.

Luce attributes Americas failure to arrest the slide to a faltering tradition of innovation. Its multiple organ failure,actually. Vinton Cerf,former defence scientist and prophet-in-chief of Google,who invented the Internet decades before Al Gore,complains that a toxic brew is killing non-military innovation a combination of Luddite politicians,indifferent economists,falling research allocations,austerity and hyper-regulation. Meanwhile,venture capital has been infiltrated by investment bankers and has turned conservative,rewarding management teams rather than innovators of destructive technologies. And elsewhere Paul Volcker,former chairman of the Federal Reserve,has rued that the only innovation Wall Street has delivered in three decades is the ATM machine.

Innovation is incubated by policy but is birthed by skilled people. During World War II,the US took pole position in technology by providing a safe haven for the European sciences,particularly physics and mathematics. The Eisenhower administration threw its weight behind the military-industrial-space complex,which spat out a slew of growth-enabling spinoffs,from Velcro to the Internet. Now,the air is stifling in what used to be an enabling environment. Middle-class incomes are falling and safety nets pension and health benefits are being cut away. Americas post -/11 fortress mentality discourages foreign students from lingering. Luce draws attention to the reversal of the brain drain which had fuelled the American dream for half a century. The reflux is enriching India and China,from which the US used to recruit its highly skilled workforce.

Luce reveals that the effects of the slide are being felt well outside the economy proper. At a workshop at the National Defence University,he watched Iraq veterans and intelligence officials simulate a national security plan to help America regain its hegemony before time runs out. Their focus? Not strategic concerns in the military sense. Its the economy,stupid! In fact,they vetoed war with a nuclear-armed Iraq for fear of excessive costs.

Just before President Obama hiked the national debt limit by 2 trillion to fund reconstruction after the meltdown,Admiral Mike Mullen told Luce: We are borrowing money from China to build weapons to face down China. I mean,thats a broken strategy. However,if the US military is so alive to the cost of warmaking and security,one wonders why it has generally come quietly when called upon to invade and not protested much when asked to tarry pointlessly.

Luce suggests that America no longer knows whether it wants to be hegemon or beacon and therefore can become neither. His first book was about the paradox of modernity in an India whose mind urged it to evolve rapidly while its heart clung to tradition like it was a security blanket. Time to Start Thinking psychoanalyses an architect of modernity which no longer knows its mind and does not have the stomach to face the problem. Edward Luce is carrying forward the great tradition of foreign correspondents from the Anglo-Saxon world,going back at least to Edgar Snow,who have produced penetrating outsider accounts of nations in the throes of change.