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OPINION 13
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Volume XXII Number 209

ILLUSTRATION BY BINAY SINHA
MUMBAI | MONDAY, 4 JUNE 2018 rates, inflation rates, and growth rates rise and fall
together.

Resume AI sale process The second type of risk reflects the cycle experi-
enced in underdeveloped, non-market-based
economies as they make the transition to a market-
The govt must ease some onerous conditions for bidders oriented economy. In this fast-moving cycle, housing
and fixed-asset prices (as well as the currency’s value)

T
he Air India disinvestment fiasco is yet another example of how the will increase faster than productivity growth in the
government is out of touch with ground realities. That the process tradable sector, owing to supply constraints. As
would be a failure was a foregone conclusion; it’s only the government households and investors borrow cheaply to invest in
rapidly appreciating housing and fixed assets, bub-
officials who were in a state of denial. Even a day before the end of
bles form and then burst, spurring crises. Yet, because
the deadline for the expression of interest from bidders, officials told the world the usual response — socialisation of bank losses,
at large that offers will “pour in” at the last hour. That bravado is still under- with a privileged few keeping the profits and bonus-
standable, as no seller would like to be seen as throwing in the towel before the es they accrued while the bubble was growing — cre-
process was over, but the blame game that has followed is baffling. Government ates moral hazard, the cycle is likely to be repeated.
officials have faulted everybody — the transaction advisors for their ineffective Abandoning the distorted and imbalanced incen-
tive structure, and ensuring that both creditors and
communication, and industry in general for a lack of risk appetite. But the only
debtors share and manage risks, would help break the
thing they have refused to do so far is to look at the mirror. It was clear to every- cycle. China could create a system in which broad

Managing China’s
body that some of the conditions mentioned in the preliminary information equity stakes — held by pension, social security, or
memorandum (PIM) were a big put-off for any serious bidder. sovereign wealth funds — are professionally man-
Consider the guidelines for dealing with the airline’s 11,214 permanent aged, thereby guaranteeing not only that the long-
employees. The PIM said workers could be given voluntary retirement after a term risk-adjusted ROE is higher than the real (infla-
tion-adjusted) GDP growth rate and the nominal
year of the completion of the sale; what no one cared to clarify was the legal

global risks
interest rate, but also that the gains are shared wide-
requirement of getting the government’s permission before any such exercise ly among the population.
could be undertaken. This was important because there was no guarantee that A widely shared positive real ROE would mean
the government of the day would give such permission. Equally onerous was less financial repression and a fairer income and
the condition that the airline had to run at arm’s length from the other busi- wealth distribution. Meanwhile, with more skin in the
nesses of the buyer. Also, with the government having a board presence by game, venture capital would be more accountable
virtue of its 24 per cent stake in AI, a potential investor could not have had a free If China is to build a balanced, resilient, and anti-fragile real economy and to investors and savers.
In addition to structural and cyclical risks, China
hand to deal with the airline. Unless, of course, he is willing to be a bakra, or sac- financial system, it will need to develop a set of risk-sharing mechanisms must address the “gray rhino” (highly likely, but often
rificial goat, as evocatively described by former aviation minister A Gajapathi ignored) strategic risks arising from the intensifying

T
Raju. One big put-off for potential buyers was the amount of debt that they will he world economy and international sys- income inequality. Sino-American geopolitical rivalry. Here, the emerg-
have to subsume — almost ~334 billion. That is not good news for prospective tem are now characterised not only by deep These structural risks are largely a result of ing trade war is just the tip of the iceberg. The US and
bidders for an airline that has seen its share of domestic traffic slide to 12.3 per interconnectedness, but also by intensifying China’s transformation from an agriculture-led econ- China are set to become immersed in a long-term
geopolitical rivalries. For China, the situation omy to one driven by manufacturing exports. As competition for technological and strategic suprema-
cent and global traffic to 16.9 per cent. is complicated further by US President Donald technology continues to progress, with robotisation cy. To stay ahead, they will use every kind of leverage
It would, however, be unwise to scrap the AI disinvestment process because Trump’s evident view of the country as a strategic becoming more accessible, companies that once and instrument at their disposal. If this competition
the cost to the taxpayer will be massive with continued government ownership. competitor, rather than a strategic partner, not to relied on cheap labour and manufacturing exports is left unchecked, it will surely have far-reaching
The government must quickly address some of the structural issues and mention massive domestic social change and rapid increasingly need to produce goods and services spillover effects.
resume the disinvestment process. For example, it could decide to sell its technological disruption. The only way to mitigate closer to domestic consumers in open and globally Risks are normally mitigated through avoidance,
entire stake in AI, and on much simpler terms, because nobody would want a the risks that China faces is with a tough, continuous, competitive markets. hedging, insurance, and diversification. But the Chinese
and comprehensive reform strategy. In this context, China’s only option is to abandon and US economies are both too big and too intercon-
government nominee on the board who could be under political compulsion A key risk is financial. At its low-cost manufacturing nected to fail, making avoidance and hedging far too
to act against the airline’s commercial interests. The other option could be to least four “mismatches” lay at export model and move up glob- dangerous and costly. Insurance would also be impos-
go in for a reverse auction: Write off AI’s entire debt and invite financial bids the root of past global financial al supply chains. To that end, sible, owing to the lack of markets. Diversification may
based on the potential that interested parties see in the airline. Deeper engage- crises, and three of them plague the government has already work, if both countries pursue a variety of low-cost,
ment is also required with potential bidders to hammer out ways to make the China today. First, with its bank- introduced industrial strategies high-return, cooperative win-win options. These
dominated financial system, — “Made in China 2025” and include technological innovation that addresses social
airline a more attractive acquisition target. AI has been a textbook case of yet
China (along with Europe and “Internet Plus” — to support problems and promotes inclusive growth; further mar-
another state-owned firm in India running aground after the opening up of the many emerging economies) suf- technological development, ket opening; tough measures against rent-seeking spec-
economy and the failure of the state to retreat from non-strategic and com- fers from a maturity mismatch, adoption, and innovation. The ulators and interest groups; and tax reforms to improve
petitive sectors. Any further delay in the sale process will mean shifting the bur- owing to short-term borrowing US, however, has taken these income and wealth distribution.
den further on to taxpayers. and long-term lending. Yet, industrial policies as evidence The fact that trade negotiations are being pur-
unlike many emerging of mercantilist state interven- sued in tandem with talks over North Korea’s nuclear
economies, China does not
ANDREW SHENG & XIAO GENG tion that justifies punitive trade programme suggests that China and the US under-
struggle with a currency mis- tariffs and other sanctions. stand that, in today’s interconnected global system,

The deadly virus match, thanks to its large for- Complicating matters further
eign-exchange reserves and persistent current- for China, the rush to create an open, market-orient-
account surpluses, which make it a net lender to the ed economy has fuelled corruption and rent-seeking.
cooperation is necessary for managing multiple glob-
al risks. But if China is truly to build a balanced,
resilient, and anti-fragile real economy and finan-
Laxity in countering Nipah can be disastrous rest of the world. And, as recent European post-crisis experience has cial system, it will need to go further, developing a
But China has not avoided the third mismatch, shown, it is politically very difficult to carry out struc- comprehensive set of risk-sharing mechanisms. It is

B
y declaring that the Nipah viral disease in Kerala is “not a major out-
break and is only a local occurrence”, the health ministry seems to
underrate the potential perils of this scourge. Nipah is one of most
lethal viruses with a mortality rate as high as more than 70 per cent.
Till now, 16 out of the 18 people who had tested positive for the virus in Kerala
have died. It has been listed by the World Health Organization (WHO) among
the eight highly hazardous diseases, along with Ebola and Zika, which could
trigger global pandemics. Worse still, there is no vaccine, nor any cure, for this
virus. The government’s bid to trivialise it has, expectedly, cut no ice with peo-
ple. Many of them have fled from Kozhikode and Malappuram districts, the epi-
between debt and equity: The credit-to-GDP ratio tural reforms when vested interests have captured a task that can no longer be ignored or postponed.
doubled over the last decade, from about 110 per cent the regulatory system. That is why Chinese President
in 2008 to 220 per cent in 2017, highlighting China’s Xi Jinping has been engaged in a comprehensive anti- Andrew Sheng is Distinguished Fellow at the Asia Global
under-developed long-term capital and equity mar- corruption campaign — often misrepresented as a Institute at the University of Hong Kong and a member of the
kets. Nor can policymakers afford to ignore the fourth power grab — since assuming office in 2012. UNEP Advisory Council on Sustainable Finance. Xiao Geng,
mismatch — between ultra-low nominal interest Yet China’s problems extend beyond structural President of the Hong Kong Institution for International
rates and the relatively high risk-adjusted return on imbalances to two types of cyclical macroeconomic Finance, is a professor at the University of Hong Kong.
equity (ROE) for investors — which has contributed risks. The first risk stems from the business cycles in ©Project Syndicate, 2018
to speculative investment and widening wealth and advanced, market-based economies, where interest www.project-syndicate.org

Plastic fixits won’t work

centre of the malady, abandoning their homes and livestock. Its economic fall-
out, too, has begun to emerge with the countries like Bahrain and the United
Arab Emirates banning, even if temporarily, the import of fruit and vegetables
from Kerala and advising their citizens to avoid visiting this region.

P
According to the WHO, Nipah is a zoonotic virus transmittable to humans lastic is back on the agenda, with the 2018 World
Environment Day on June 5. And, I am not talk-
from animals like bats and pigs. It causes brain-damaging sickness, which
ing about garbage problems of countries like
begins with flu-like respiratory symptoms and advances towards fatal India. For us, plastic has never left the agenda — it is
encephalitis. The name comes from Kampung Sungai Nipah, a district in in our face literally. Our governments lack the mon-
Malaysia, where it was discovered in 1998. Since then, its outbreaks have been ey or the manpower to take back the increasing
reported in countries such as Cambodia, Thailand, Indonesia, Madagascar, amount of waste we generate and to get rid of it.
Ghana, the Philippines, Bangladesh and India. Bangladesh has, in fact, wit- Growing mountains of non-biodegradable garbage —
mainly plastic — is our nightmare. It is choking our
nessed several episodes of this ailment since 2001. In India, it was recorded in
drains, our rivers and our streets.
Siliguri, West Bengal, in 2001 when it killed 45 people. No, this time plastic is back on the
No doubt, the state and Central health authorities have done well to contain global agenda — perhaps after some
the infection in its hotspot in Kerala till now, but the chances of its escaping to oth- 30 years or so. It was in the 1970s that
er tracts, even distant ones, are not ruled out. Worryingly, the source of this the now developed world struggled
infection in Kerala is still not confirmed, making it hard to find an enduring solu- with its massive waste problem. But
then cities cleaned up litter. There is
tion. The general belief is that bats, besides pigs, are the main carriers of this infec-
no plastic waste on the streets or in the
tion. However, the bats collected from the house of the family in Kozhikode which rivers. The problem of garbage has
suffered the maximum casualties were found free of the Nipah virus. More tests been managed.
on bats are underway to ascertain the real source. The WHO maintains that the This is not to say that plastic has
infection normally spreads through the consumption of fruit and fruit products gone away. In fact, plastic has
remained. Its use has increased. It is
contaminated with the urine or saliva of virus-carrying fruit-eating bats. If this
is true, it makes the task of restraining this virus all the more arduous.
today perhaps the most ubiquitous DOWN TO EARTH
and necessary material that
Contaminated fruit might have already reached other areas and consumed “mankind” has created. The biggest SUNITA NARAIN
there. Their further spread can, however, be stemmed by destroying them after increase in the use of plastic has come
paying suitable compensation to the growers. But this infection can also be dis- in the packaging industry — from water bottles to
seminated through infected, but not yet sick, humans during the long incubation plastic layers in tea bags to plastic straws, glasses,
period of the virus, spanning four to 14 days and, at times, even up to 40 days. plates and just about all that we package for our con-
sumption. But we also wear it; we sleep on it; we build
Restricting the movement of such human carriers of virus may not be easy. our homes with it and we pipe our water and oil in it.
Nonetheless, the monetary cost of any strategy to control this virus is Use was not an issue, because plastic waste was a
bound to be high. Besides hitting lucrative fruit exports, it would adversely affect problem that had been handled. As long as people did
the vibrant tourism industry in Kerala. But this cost has to be borne to stop the not use carry-bags to do shopping; and as long as they
killer virus from dispersing to other areas. Any laxity on this count, on the pre- segregated waste, it was ok. We could use and some-
body would recycle. Or it would be taken to an incin-
sumption of its being a one-off local event, would prove calamitous.
erator and burnt. Or taken away to be put in a landfill.
All in all, it was handled.
But now the balloon has burst. The first shock has
come from studies that show that plastic generated on
land is filling up and polluting our oceans. And that
fish is eating this plastic and we are then eating the
same fish. So, the cycle has closed. The plastic which
we used and segregated, and which then somebody
took away for recycling has come back into our bod-
ies. It is almost as if it never went away.
Then came the other shocker — micro-plastic or
tiny fragments have been found in tap water or even
the air we breathe. This is because
plastic is a wonder substance — it
does not get destroyed. But with
exposure to sunlight or water it does
break up. Or it can be crushed. When
this happens, tiny particles — frag-
ments of plastic — contaminate our
environment and bodies.
A fascinating study by academics
from the University of California and
Santa Barbara and others has put
together the world’s first material bal-
ance of plastics. It should really wor-
ry us. They estimate that the world
has produced some 8.3 billion tonnes
(bt) of plastic from 1950 — when
large-scale production began — to 2015. Of this, some
6.3 bt or 76 per cent is plastic waste.
Of the 6.3 bt of plastic waste generated in the world,
as little as 9 per cent has been recycled. Of the 9 per
cent that is recycled, only 10 per cent has been recy-
cled more than once. Then 12 per cent of the waste has
been incinerated. The rest, as much as 79 per cent of
the plastic manufactured in the world between 1950s
and 2015, is in landfills or in the environment —
oceans and waterbodies.
The question we need to ask each time we use
something of plastic is that what will happen to it.
There are currently three options. It can be recycled
or reprocessed into secondary material. In most cas-
es, this “secondary” material is of lower quality or
value. So, it does not displace the primary product.
Recycling delays the final disposal, say authors of the
plastic balance study.
Then plastic can be destroyed using thermal heat
— incinerate it. But burning plastic in incinerators
also produces emissions. So, unless there is expen-
sive pollution control equipment installed and func-
tioning, this option is not so benign. The third option
is to dump it somewhere.
So, then what are our options? Will the world’s
anti-plastic movement succeed? Or will it once again
succumb to a new set of technology “fixits”. For
instance, there is the much-needed and much-wel-
come deposit scheme that has started in some coun-
tries. People can return plastic goods like water bot-
tles and get back the deposit. Or there is the extended
producer responsibility scheme in which produc-
ers have to take back a proportion of the materials
they generate. But again, this begs the question:
What will happen when the waste is collected? What
do we really mean by recycling?
Surely, we need more drastic solutions. The future
has to be plastic-free. But how will we do this when our
lives are so enjoined with plastic?
In Hinduism, the God of destruction — Shiva —
is more important than the God of creation —
Brahma. Maybe the next time we celebrate an inven-
tion that is so convenient because it is so indestruc-
tible, we should remember this.
But for now, plastic is a sign of the anthropocene.
How sad!
The writer is at the Centre for Science and Environment
sunita@cseindia.org
Twitter: @sunitanar

Intoxication down the ages
BOOK REVIEW
TONY PERROTTET
The pleasure of the micro-history is the
chance to view the complex chaos of the
past through a narrow lens. In A Short
History of Drunkenness, Mark Forsyth
takes the tendency to endearing
extremes: The very origin of the species,
he reports, comes down to our love for
hooch. The first primates that swung
down from the forest canopy may have
been in search of fermented fruit, kick-
starting evolution. Ten million years lat-
er, humans turned to agriculture
“because we wanted booze” and needed
to grow barley. Writing? The ancient
Mesopotamians came up with it after
using a symbol for kash, or beer, on trad-
ing IOUs pressed in clay. Fast-forward a
few millenniums and we find that
Christianity was such a hit because it used
communal wine in its rites. In modern
times, George Washington launched his
political career by handing out free booze
to voters and succeeded on the field after
he doubled his men’s rations of the hard
stuff. The Russian Revolution occurred
because the czar banned vodka in 1914:
Since the beloved spirit was a state-run
business, the treasury went broke in
World War I. Why stop there? Perhaps a
sequel might suggest that Adolf Hitler’s
teetotalism put him in a tetchy mood; a
relaxing glass of schnapps might have
kept him out of Poland.
But a little hyperbole is all part of the
fun on this entertaining bar-hop through
the past 10,000 years. The tone evokes a
cheeky Oxford professor regaling us over
a pint of stout in the pub, and Mr Forsyth
revels in his Britishisms as much as any
P G Wodehouse character.
As it happens, far from a crusty don, Mr
Forsyth isn’t much over 40, according to
his bio, and is best known in Britain as a
witty etymologist. Another pertinent detail
we learn on Page 1 is that the author is —
unsurprisingly — not averse to a tipple.
This cheerful acceptance of the bottle
may strike more abstemious American
readers as another very “British” element.
Unlike the hand-wringing that has shad-
owed the drinking life in the United States,
the Brits still tend to have an indulgent
attitude to bingeing. This, Mr Forsyth
explains, makes them one of history’s “wet
cultures,” in such good company as the
Vikings, as opposed to the “dry cultures,”
whose mildly buzzed denizens drink in
“Continental” style, sipping for hour after
hour, but in moderation. (Full disclosure:
I was raised in Australia, a land so wet it’s
practically drowning. Down Under gets
its very own chapter on its liquor-addled
origins as a penal colony, when rum was
currency and even inspired a military
coup, the Rum Rebellion. It gives one a
patriotic glow!)
In the best pop-history tradition, Mr
Forsyth also guides us on step-by-step
tours of the legendary drinking joints of
the past. We learn how to behave in the
rowdy taverns of ancient Ur (“the perfect
place for the craft-ale snob”) and at a
Greek Symposium, where the wine
poured from the krater bowl was closely
regulated by the host, although with
mixed success. (The guests might end up
running deliriously through the streets,
shouting and causing mayhem, in a
komos.) We visit a medieval English ale-
house and discover that our image is
largely culled from romantic novels and
cheesy Robin Hood films. Fans of
Westworld will be distressed to learn,
however, that Old West saloons had no
swinging batwing doors, while the work-
ing girls usually provided nothing sauci-
er than conversation.
The pub crawl can get a little exhaust-
ing, and the reader can get bloated on the
relentless whimsy. Some will prefer to dip
into chapters at random, jumping from the
Old Testament Bible to Ivan the Terrible.
But there is always some serious history
slipped in with the joking. Almost every
human society, Mr Forsyth shows, has cre-
ated an elaborate web of rules around
drinking and drunkenness. Even Attila the
Hun had strict protocol at his feasts, with
guests toasting one another in order of rank.
And those taboos and rituals reveal a great
deal about the broader culture.
One appealing side effect is to suggest
how odd our own drinking rules might
look to visitors from other eras. The Aztecs
encouraged pregnant women to drink a
vitamin-rich brew called pulque, and for
most of history, a liquid breakfast was con-
sidered healthy. In the Middle Ages, it was
downright dangerous not to drink beer all
day, since the water supply was contami-
nated. Every possible attitude to inebria-
tion has been tested over the ages. The
only constant, perhaps, is that alcohol is a
disruptive force that by its very nature
defeats efforts to control it, from ancient
Roman bans on the debauched Bacchic
rites in the first century B.C. to the great
American experiment, Prohibition.
The bottom line, Mr Forsyth con-
cludes, is that boozy revelries are here to
stay, and we might as well embrace them.
As the philosopher William James (an
American, no less) put it: “Sobriety dimin-
ishes, discriminates, and says no; drunk-
enness expands, unites, and says yes.”
©2018The New York Times News Service
A SHORT HISTORY OF DRUNKENNESS
How, Why, Where, and When
Humankind Has Gotten Merry From
the Stone Age to the Present
Mark Forsyth
Three Rivers Press
243 pages; $18