Interesting, Changing Times

The times they are a changing… We certainly live in interesting, changing times – stagnant economic output in the developed world coupled with high levels of debt not seen since 1970s in the UK; high unemployment; rising inflation; fall in real incomes and living standards; largest gap between rich and poor in decades; negative real interest rates; banks failing to lend; Greece on the verge of default; Italy looking to China for a handout; the US already at its maximum indebtedness to China; China poised to overtake the US as the world’s largest manufacturer; the US government’s credit rating lowered; riots and the promise of strikes and social unrest in UK/Europe; high volatility in stock markets nervous of continuing uncertainty making matters significantly worse… Is this the legacy of western capitalism?

The anguish of trading floor

‘The Great Moderation’: an illusion

So how did we get here? Not long ago we were basking in the Goldilocks economy with booming stock markets, rising corporate profitability, low inflation, low unemployment, and a budget surplus. Mervyn King, Governor of the Bank of England, described it in 2003 as the ‘NICE’ decade – the non-inflationary, consistently expansionary decade! Ben Bernanke, member of the US Board of Governors in 2004, referred to ‘the substantial decline in macroeconomic stability’ as being ‘one of the most striking features of the economic landscape over the past twenty years or so’. ‘The Great Moderation’ we know now was an illusion – based on debt, cheap money and cheaper imports. Gordon Brown assured us that Britain had achieved economic nirvana; boom and bust were things of the past! Now we are told living standards may not ever recover.

Yet money is still cheap, real interest rates are negative in many countries. But overall trade and growth remain weak, individuals and businesses are finding it difficult to borrow. What precipitated the financial crisis in 2008 was the banks’ unwillingness to lend to each other. It may not be as bad today, but the banking sectors’ problems are far from over, particularly if their reserves need to be strengthened. Negative real rates are inflationary; but in recessionary times lack of demand, pay freezes, fall in household affordability and the lack of credit has restrained inflation to some extent.

The devaluations forced upon ailing economies makes imports costly, inflationary. The Eurozone, UK and the US have been experiencing low or no growth and consistently rising inflation. How long will this state of affairs last? Much depends on central bankers and governments of these countries. Luckily the emerging countries’ economies are growing at reasonable rates. But will it be enough to sustain global growth? One of the positive developments of the past decade, 2000-10, for example, was that Britain became the destination of $129 billion of emerging market acquisitions. America received more ($193 billion), but in proportion to the size of its economy Britain got four times as much. Its open economy, plentiful supply of expertise and global brands attracted investments. The creation of the European Union was definitely a strong contributory factor. As Europe faces financial difficulties, will the cycle of investment be maintained?

In heavily indebted economies where one would expect savings to be at a premium, we have a curious state of affairs where savers are punished with negative real rates of interest. The government is caught Janus-faced – looking on the one hand to stimulate investment in the economy and growth, and on the other to reduce debt and interest payments. An efficient financial system is essential for economic stability. It is a well established fact that poorly invested savings pose a problem for individuals as much as the economy. Bank lending to small businesses remains at best anemic. Companies find it harder to borrow, or to raise equity capital. This lack of investment is dampening economic growth. Well functioning financial markets are essential for all kinds of reasons – from enabling investors to price risk adequately to securing a stable society. When investors/ savers are faced with extreme market volatility, negative real interest rates, and an uncertain economic outlook, their cautious response makes matters worse.

Absence of robust bank bailouts

The primary reason why governments bailed out the banks was the fear of a global banking collapse leading to a 1930s type recession. The prospect of such a thing happening was not a risk worth taking. But, the bailout could and should have been managed more robustly. The billions spent on bailing out the banks did not flow back into the economy; that is not what John Maynard Keynes had in mind when he advocated public spending in crisis.

Imagine if those billions had indeed been invested directly in the economy – improving our infrastructure, providing jobs, improving education and health, growing the economy, bringing in revenues via taxes and spending! Unfortunately, governments and bankers were unable or unwilling to do so. It may be encouraging to hear now of monetary activism, of ‘credit easing’ to help small businesses. One cannot help asking why the government, as owners of several banks, could not achieve this earlier.

Why the reluctance on part of leaders and governments to lead? Bankers were allowed to reward themselves with unearned and undeserved bonuses. We were told they would leave the country – though nobody ever informed us where they would actually go to – if they did not receive ridiculous amounts of money in compensation for their multiple failures. The stock market collapse was the market’s way of disciplining profligate, irresponsible bankers. In bailing out the banks we interfered with the market’s ‘creative destruction’ mechanism. No senior banker was tried or put in jail; those who resigned left with multi-million pensions and bonuses.

The financial crisis did not happen overnight. It had been brewing for some time. The entry of the Asian giants into the world economy provided a huge pool of savings. These savings were absorbed by industrialized economies, and helped in ensuring a sufficient level of demand in stabilizing inflation and maintaining desired levels of output and employment. Low real interest rates fuelled economic growth but did not help savers/ investors. The search for yield was intensified. Investment bankers who make a living by passing on risk to savers/ investors sought new means of doing so.

The scale of global imbalances and mismanagement is worth examining simply because we have a way of forgetting. Prevention is better than a cure. The tragedy of our times is short-sightedness; a long-term investment these days is less than three months. Europe is considering a transaction tax to kill two birds with one stone – curb the high level of trading and raise money in the process. Such a tax though is likely to have unintended consequences unless it is applied globally. Investors complain high market volatility forces them to trade. How do we create an environment where investments will prefer to invest long term? Surely addressing the compensation arrangements for investors and traders is the right way forward rather than introducing another tax?

Lack of regulatory oversight, incredible

Let’s go back to 1999, on the verge of a new century, markets were bullish, the technology bubble was building. Two major acts were passed in the US altering the financial services industry – not only in the US but its ramifications were felt in Europe, thanks to globalization. Europe too was getting its act together. Not for an integrated economic entity like the United States of Europe. Considering the European Union was a marriage of convenience, the due diligence process appears to have been flawed. Will expanding the powers of the European Financial Stability Facility, the main bail out fund, now be enough? Europe is like a play in the Theatre of the Absurd – seventeen characters in search of an author! The author of greater economic integration is still to be found.

Greece’s problems did not happen overnight, nor did Italy’s or Ireland’s – the mismanagement with the deficits have been around for years. Why were the inherent weaknesses of these economies not addressed earlier – after all, Europe has had at least a decade to put things right? Why was economic union – the issuance of European bonds, for example, not on the agenda? Bringing so many countries together at different stages of their economic cycles is not easy. Even in the UK with just four entities – England, Scotland, Wales and Northern Ireland – a single interest rate does not work for all the regions. As long as the crisis is used to usher in deregulation where it is needed and regulation where it is necessary, the outcome could yet be positive in the long term.

In the US, the two acts that changed the landscape of financial services were – first the repeal of the Glass-Steagall Act of 1933 which had required banks, investment banks, securities firms, and insurance companies to operate separately. The Glass-Steagall Act had also prohibited banks from trading on their own account. The other was the Gramm-Leach-Bliley Act of 1999, known as the Financial Services Modernization Act, which exempted investment banks from direct federal regulation. These acts were passed in the name of innovation, liberalization, creativity, greater operational efficiency etc. The lack of regulatory oversight ushered in by such legislation is incredible. It can be argued that the current financialcrisis that originated in America was state sponsored as the banking deregulation was implemented by successive governments, and as a result long-standing regulatory checks and balances were removed.

In 2000, the Commodity Futures Modernization Act barred federal regulation of swaps, which enabled financial institutions to develop, market and trade unregulated financial products, such as credit default swaps, foreign currency swaps, interest rate swaps etc. In 2002, the Treasury allowed banks to hold less capital in reserve if they held securitized mortgages with investment grade credit ratings. In 2004, the Securities and Exchange Commission relaxed capital requirements for larger broker dealers who traded in such products. By September 2008, an unregulated credit default swaps market stood at $60 trillion. The financial meltdown was a direct result of the failure of regulation, undisclosed conflicts of interest, flawed compensation structures, under-pricing of risk etc. The US authorities passed legislation after legislation sponsoring legal weapons of mass destruction! Warren Buffet pointed that out soon after the invasion of Iraq.

There were regulatory failures in the UK too. The UK government under the leadership of Gordon Brown made the Bank of England independent, and that was a positive development. But regulatory oversight was split between three different institutions – the Financial Services Authority, Bank of England and the Treasury. The three institutions were not the Three Graces or the ‘three eyes of wisdom’ in Eastern traditions; no they were more like three eyes in a cubist painting imitative of Picasso – lacking a coherent overarching vision. None of these entities, individually or collectively, appreciated the extent of the problems in the banking sector.

The scale of deregulation in the US was mind-boggling to say the least, leading to irresponsible risk taking and overleveraging. Inadequate oversight, undisclosed conflicts of interest, creation of complex financial products, easy credit, the lack of independence of credit rating agencies, globalization, and flawed compensation structures generated an environment of incorrect pricing of risk. Normally risk is associated with reward. If compensation structures reward true skill, that is healthy. Unfortunately, the compensation culture in the industry has been such that senior managers rewarded themselves without taking any real risk; risk was passed on to the investor. When banks were bailed out, the risk was passed on to the population at large like a deadly virus. Greater distribution of risk does not mean the elimination of risk. In times of crises it becomes a highly leveraged risk.

Responsible investors get crucified too

Investors too are to blame – nobody forced them to buy financial instruments they did not understand. The problem however lies in the fact that the market does not discriminate between good and bad investors. There is no safety for investors who behave responsibly; they too suffer severe losses as markets collapse. So, where do long term investors turn to if they wish to preserve the real value of their savings – particularly in a world where governments expect individuals to provide for their own retirements?

If Lehman Brothers or Northern Rock had collapsed without causing widespread damage to the economy that would have been manageable. Individuals like central bankers need not be concerned if a collapsing financial asset bubble does not threaten to impair the real economy – its production, jobs and price stability. The problem arises when irresponsible risk-taking threatens to bring down the entire edifice – the too big to fail syndrome is really not worthy of capitalism. This fictitious capitalism lies at the heart of the matter. Such a threat has been allowed to grow because risk takers have been encouraged to pass the buck to others – perfect example of having your cake and eating it! That is where the inequity and injustice lies; those who bear the risk must also be rewarded. But, where are the rewards for the citizens of the USA, UK and Europe?

On the other hand, the financial sector has usurped a disproportionately large portion of resources that could have been better utilized in other sectors of the economy. It is true we all depend more and more on markets and financial innovation in most areas of our life. A change in our collective attitude to risk/ compensation is critical in a world where individuals are increasingly expected to fund their retirements, when parents need to invest in their children’s education or farmers depend on derivatives to secure a better price for their produce.

Governments have an obligation to provide economic stability, an infrastructure where enterprise is rewarded and the market is accessible to the largest number of participants. Unfortunately, we are left with a shrinking economy with high unemployment and skewed compensation arrangements. In a global world such matters need to be addressed globally. Also, markets are not good at addressing complex social issues; that is where governments play a key role. The world we have inherited today is not a fit tribute to democracy or capitalism.

It is worth pointing out that unlike doctors who take the Hippocratic Oath to practice medicine ethically, bankers and other professionals in the financial services sector are not obliged to take any oath to practice theirs ethically or to serve their clients’ interests first. The CFA (Chartered Financial Analyst) Institute traces its lineage back to 1947, yet its members today are confined largely to professionals in the ‘Buy’ side – i.e. analysts, fund managers etc. The ‘Sell’ side professionals – i.e. commercial and investment bankers, traders, corporate financiers etc. – do not have an equivalent regulatory requirement.

Members of the CFA Institute are required to disclose any conflicts of interest and adhere to clearly defined codes of ethical conduct. The institute’s vision is built on a clear mission – that financial markets should be equitable, free, and efficient so that every investor has a chance to earn a fair return; the interests of the ultimate investor takes precedence over the interests of all other market participants; and that high individual ethical principles and self-regulatory standards are as important to market efficiency and fairness as rules and regulations.

The financial services sector faces changes on many fronts as regulation aimed at stemming systemic risk and augmenting investor protection is implemented. As long as misaligned incentives remain, no amount of regulation will be enough. Recent unauthorized trading, involving fraud and false accounting, at the Swiss Bank, UBS, is just another example of how regulation has its limits, particularly in an environment where money and power attract the greedy and corruptible.

The Guardian— Poem of the Week: Beware

Beware from 'Dreams that Spell the Light', featured as 'Poem of the Week' in the Guardian newspaper

Carol Rumens features ‘Beware’ as her ‘Poem of the Week’.

Perception & the Self

In Oxford I attended a poetry reading by Allen Ginsberg where he spoke at length about India. His India was quite different from my India. By then I had learnt there were several ‘Indias’ just as there were several versions of ‘England’, ‘the West’ or ‘Vilayat’ that had been depicted to me, unsolicited, by various well-wishers and friends before I left India in 1979. Most of these individuals had never left India. In Oxford, I discovered my ‘West’ along with other people’s ‘East’ and their ‘Indias’ as they attempted to establish a means of communication with me, though they too had never been to India! Ginsberg had at least spent some time in India.

There are several ways in which such encounters can be interpreted; understanding the limits of our perception is one. What I am referring to of course is a variation of the fable of the blind men and the elephant. Each of us is privy to a part of the whole; our perception of reality mostly defines us. What seems like the whole truth is a fallacy due to the partial, fragmentary if not deceptive nature of individual perception. The story of the blind men and the elephant originated in India; Advaita Vedanta, non-duality of the universe and the concept of Brahman, was appreciated by Hindus centuries ago.

The concept of ‘Know Thyself’ evolved in response to the dilemma posed by Life itself – how to lead a life that is good, harmonious, self-aware? It was no mean achievement that Hindus grasped this fundamental need and appreciated the sheer diversity of human nature. This is best illustrated in their definition of God, Divinity, Reality – ‘neti, neti’. Such an idea is liberating; the infinite variety of Reality enables us to posit as many gods to suit our individual preferences because in the final analysis God is without attributes. To live and let live is ‘to see as God sees.’ (John Keats, The Fall of Hyperion).

Following this line of reasoning in many late-night discussions on the nature of God, as a doctoral student in Oxford, I had argued it was possible to believe in Christ, Mohammad, Krishna or Shiva and be a Hindu. Equally, it was possible to not believe in any of these incarnations of the Divine and still be a Hindu. However, it was not possible to not believe in Christ or Mohammad and be a Christian or a Muslim. To set the record straight, I added that despite the openness of Hinduism, non-Hindus are not allowed inside temples while I a Hindu can freely attend church services and be blessed by the priest if I wished. Any idea is only as good as the person/s interpreting it.

Looking back on my India, I feel immensely privileged growing up in a world where one read the St James’ version of The Bible, The Bhagvad Gita, The Koran or any other sacred text in the normal course of life. It was a gift as not only did it help me in my understanding of other cultures but also of their literatures, histories, beliefs and practices. We were multicultural, multi-faith, international etc before these words became fashionable and acquired connotations that today seem limiting. Being multicultural in the UK today could deny me the possibility of blending in; one is condemned to live within identities defined by others – for example, being referred to as an Indian or Black British poet or published in anthologies dedicated to writers classified similarly.

I see no reason to think it to be a UK phenomenon; it’s a human predilection. The cultural imperialism, for example, of the Bengalis is well known. The Oriya language was at one point threatened with oblivion. Brahmins have been responsible for many injustices over the centuries. The dogmatism of multiculturalism can be as alienating as imperialism or any other ‘ism.’ One of India’s greatest assets used to be its broad-church mentality, its open, pluralistic, my-father’s-house-has-many-rooms approach to life, its acceptance of diversity and its intrinsic tolerance of different viewpoints. Jews and gypsies, persecuted in Europe, took refuge in India. This is not to imply India did not have its limitations, its own set of practices that denied human rights.

In acknowledging the multiple simultaneity of existence along with the limits of human perception, we prepare ourselves for the unexpected – the sort of evolutionary surprise that Charles Darwin discovered when he landed on the Galapagos Islands. Scientists today are still struggling with the mystery of how such a large diversity of species could develop in a remote location like these islands. What nature achieved would not have survived without conservation; in 1959, the Ecuadorian government declared the islands a national park. We need to create a similarly benign environment for human diversity to flourish across the globe – a bill of rights for all nations.

As our understanding of the world changes, so must we. We must remain open to change. In his essay, Nature, Ralph Waldo Emerson wrote: “What we are, that only can we see. . . Build, therefore, your own world.” Such realization can be enormously liberating. It could also lead to existential angst when the burden of building your own world falls on you. Sometimes, it is easier to be someone else than one self. In The American Scholar, an oration delivered before the Phi Beta Kappa Society, in Cambridge, Massachusetts in 1837, while urging young Americans to “Know thyself,” Emerson referred to an old fable “that there is One Man – present to all particular men only partially, or through one faculty; and that you must take the whole society to find the whole man.” He was not referring to a monolithic Self, but one that is kaleidoscopic, inclusive. No one person and of no one age can be expected to represent that Self. Like nations that carry an inventory of their past, individuals are also repositories of their ancestral experiences.

The idea that our perception of reality reflects us more than Reality per se confirms the extent to which we create our own reality. This by no means implies that two plus two does not equal four; only that there may be times when individuals fail to think so. If we perceive a rope to be a snake in the dark or vice versa, it affects the way we might respond to the perceived reality of the situation. The ‘weapons of mass destruction’ argument advocated in the 2003 war with Iraq is one example. One can argue that George Bush and Tony Blair knew what they were doing, though that is not a given. It would certainly be naïve to suggest that all politicians in the US and UK were similarly inclined. There were many who simply did not know what to think, and some genuinely believed the threat was real.

The recent financial crisis is another example of human failure. Driven by greed, bankers struck a blow to the very foundations of capitalism; regulators, lawyers, accountants, politicians all failed or chose not to see the emperor had no clothes. As Warren Buffet pointed out, it was credit derivatives that became the real weapons of mass destruction and not the perceived threat from Saddam Hussein. If bankers’ bonuses were linked to the eradication of poverty, clean environment, universal education, global peace, democratic institutions and the greater common good would it have worked? Well, the communist experiment failed, and it would be short-sighted to think democracy and capitalism is the same thing. The fault lies in us. It is up to each individual to define who we are, the kind of society we want to live in and act in ways to make that happen. Our identity is determined the way we relate to the world; each thought, action has an effect.

The self is multiple, diverse, infinitely changing, it is not a fixed identity; our looking at something changes it including ourselves. Trying to negotiate one’s way through this hall of mirrors is one way of finding oneself. The way we perceive reality so we shape it. Far too often our reality is usurped if not invaded by others’ whose views are utterly alien to ours. That is the challenge we face – to be able to see the world through the eyes of others, particularly others whose views we fail to understand or disagree with, and to what extent we are prepared to defend their rights. Not long ago, a British judge ruled that two Pakistani students posed a serious threat to national security; yet they could not be deported because of the risk they would be tortured or killed in their own country. How such a judgment is received by us can provide clues to our selves. One can only wish such legal and humane principles were applied evenly in all cases.

In the final analysis, a high degree of open-mindedness is vital to our own survival. Our closed-mindedness has created havoc in many aspects of our lives from biodiversity to climate change, from the death of languages, cultures, tribes and whole eco-systems. We really have no idea of the extent of our loss. The more we learn about the universe, the more we realize how little we know. With greater awareness of our limitations, hopefully there is greater willingness to share and learn from each other. This involves mutual respect, humility, a willingness to learn from others.

Even this wide-eyed consciousness may not always protect us from falling into the heffalump trap where we could meet our critics/ enemies. The strength of a human being’s achievement lies in the fact that s/he remains open to the limits of human possibilities. This is particularly revealed in the radical readjustments and revaluations we are willing to make in our conception of the Other, which is always with reference to the self, usually oneself. Walt Whitman’s “Song of Myself” not only celebrated himself, but the ‘I’ of his poem “contains multitudes.” The majesty of such a point of view is its open-endedness, the willingness to embrace contradictions.

The key to knowing oneself is the willingness to see ourselves as others perceive us while acknowledging that our own self-perception and that of others are both incomplete. To that extent every representation is limited – merely a point of view. And who is to decide which view-point is more valid than another? Self-preservation is a strong impulse, but like most human instincts it can be a force for good or ill. The question we all face is – how do we live diverse, fulfilling lives in a world where resources are finite yet human demands infinite? And to achieve this within the context of human nature; not forgetting the issue of intergenerational equity – i.e. the future of our children and grandchildren.

Despite the enormous developments in science, technology, medicine, trade etc, our record in securing a basic common humanity, let alone an ideal one, globally remains seriously flawed. The answer has to be in recognizing that ‘no man is an island’ and how each man’s suffering, injustice diminishes me for ‘I am involved in mankind.’ Such knowledge is neither new nor original. I of course quote John Donne from his Meditations written in 1624. The great religions have advocated such a world view. However, the record of wars, executions, fatwahs, riots and honour killings conducted in the name of religion belies that fact. The awareness of our interconnectedness and mutual dependence is being increasingly recognized; yet individuals and nations persist in ‘holier-than-thou attitudes’ that do not assist in establishing equilibrium among individuals or nations.

The interconnectedness of the human race has never been appreciated more – from scientific discoveries, climate issues, trade and economic development to terrorism we learn every day a little bit more about it. It is undeniably true each generation needs to define that universal consciousness individually, see the world afresh. Every human being must have “an original relation to the universe,” as Emerson put it. This transcendence from the individual to the universal arises not just from a selfish instinct to survive but also a generous one in fulfilling oneself.

Reflections on the Riots

How does one reconcile a peaceful vigil in a north London suburb turning into the worst riots in England for decades? Mark Duggan, 29, was killed on Thursday, 4 August 2011, in Tottenham, after police officers stopped the minicab in which he was travelling to arrest him. At the time of his death he was under investigation by officers from Trident, the Metropolitan police unit responsible for gun crime within the black community. It was reported that Duggan pulled a gun on the police; the Independent Police Complaints Commission confirmed he did not fire first. The sequence of events that resulted in riotous burning and looting in Tottenham on Saturday night, 6 August, remains unclear.

As the riots escalated, it was also not clear what the demands amounted to? Disobedience is the true foundation of liberty. But this was no act of civil disobedience driven by a clearly defined ideology. There was no protest; they were not shouting slogans against police brutality, carrying banners demanding justice for Duggan. Instead the rioters were carrying off whatever loot they could lay their hands on – mobile phones, shoes, clothes, TVs, etc – from shops they had broken into. They say God helps those who help themselves, but this is not the kind of self-help that pays off in the long term.

The burnt-out shops and flats in Tottenham became a key image of the riots

The profile of the looters as it slowly emerges is varied – ranging from students and teaching assistants to a mother, a chef and an aspiring song writer. This is not to impune students, chefs, mothers etc; some mothers and parents reported their children to the police on spotting their criminal acts on TV. While many of the rioters were from deprived backgrounds, not all were poverty-stricken youths. They came from different racial groups, and their rampages were not confined to their local boroughs; the age of participants ranged from early teens to individuals in their forties. Clearly, there was an element of opportunistic criminality. Unlike the Arab spring, the late summer flowering of discontented youth in our streets does not offer much hope.

Not long ago we saw thousands of students taking to the streets of London in protest of increased university tuition fees. While the student protest also escalated into violence, it did not descend into the kind of looting, and thuggery seen recently. The student protest divided opinion across the country, but the recent riots have caused widespread consternation, shame, disgust, anger and fear. Even those who sympathize are horrified by the way in which otherwise tranquil suburbs were transformed into no-go zones, cordoned off by fear and apprehension instilled by hooligans.

It is also not clear why this madness was not curbed sooner? The police lost control of the streets to hooded gangs of youths, who were undoubtedly the main participants in the trouble. The rioters with their Blackberrys organized themselves via Twitter, Facebook and other electronic media. The police and the fire brigade on the other hand were unable or unwilling to respond to the crisis. They seemed unprepared for the ferocity of the attacks; that they were inadequately resourced was a contributing factor. The House of Reeves, a furniture shop in Croydon, for example, which has been with one family for five generations and survived two world wars, was razed to the ground overnight. The owner’s son phoned the fire brigade, located in the neighborhood, within minutes of the fire starting. By the time help arrived, 15 minutes later, there was not a lot the fire-fighters could do. The fire kept blazing through the night. London had not experienced such scenes since the blitz.

What was worrying was the initial response of the police. In some affected areas, there was virtually no police presence; in others, the few policemen present stood by doing little. Their mandate is to uphold law and order. Criminal acts were taking place in their presence; why did the police not intervene, why were reinforcements not sent? The riotous youths went rampaging for hours moving from one suburb to another without being arrested. They were not protesting peacefully, why did the police then not apply reasonable force in establishing law and order? Is it not ironical that it was a police shooting that triggered the riots in Tottenham in the first place!

There exists a history of protests against the police in the UK, much of it racial. However, these riots were not, despite the killing of three Asian youths in Birmingham, not by the police but by rioters who ran them over in a car, as they were trying to protect their property. This civil violence was class based, driven by young people (over half of those arrested being 18 years or less); older people with low-paid jobs joined in. When questioned about their motives, the issue of police brutality, justice etc was not foremost on their minds. If we examine the history of riots over past centuries most involved mob violence. Individual morality descends into mob rule – angry mobs are not upholders of law, justice, morality etc. On the contrary, violence becomes a means to an end.

What were the youth so angry about? One is not sure what exactly they were protesting against, or if protest is even the right word? The ‘have-nots’ decided to help themselves to whatever they could in whichever manner they saw fit. Even such a statement is simplistic as such irresponsible behaviour was not manifested by all poverty-stricken youths. In one incident, a woman in south London – by no means rich or privileged – was asleep in her home. Some youths broke into her house and left with her handbag and whatever else they could. They felt entitled to break into someone else’s home and simply help themselves! It is this basic lack of respect for any kind of rule, authority, let alone a sense of duty, decency and honour that is puzzling.

It can safely be said that the looters do not know what true poverty really is. Is it correct to conclude these angry youths resent government cuts and the closure of youth clubs, they were protesting because unemployment among youths is highest in the country? Is it because teenagers today have nothing better to do? Is their malaise born out of a culture of consumerism and a misguided sense of entitlement? Has years of unemployment finally killed the work ethic? Or it is that the young simply feel they are worth it?

London has been witnessing fatal youth crimes for years now, the gang culture being widely prevalent. The killings were as sinister as this outburst of violence, directed at others, where the gangs worked together. Astonishingly, there are over 200 youth gangs in London alone. Many of the rioters come from families with a single mother who at best struggles to make ends meet. She is either not at home (if she has the good fortune of having a job; sometimes, she is doing more than one low-paid, part-time job); or, if she is at home, she is possibly depressed, dependant on alcohol/ drugs. There is typically no father figure who goes to work and provides for the family. Nor are the children used to any parental guidance or discipline. Not only have they been let down by their families, but also by the schools they attend. They are illiterate, have no interest in education or in improving themselves, their future prospects bleak. Brought up on a diet of violent video games and other forms of violent electronic entertainment, many of them are immune to violence. Many belong to a gang, disenfranchised from their family and community.

At the same time, we live in a culture dominated by electronic media that worships celebrities. We hear of success stories often driven by greed, dishonesty and/or stupidity. Think of all the scandals we have had recently – the banking crisis with major banks having to be bailed out by governments while bankers continue to receive massive bonuses as ordinary people lose jobs, livelihoods; the MPs expenses scandal, the phone hacking scandal with journalists bribing the police – the list goes on and on. If the rich and so-called educated people behave in such a depraved manner, where are the role models for the young, especially those who have never had the advantages of a stable family, good education, and well-paid jobs etc?

This is not to condone the violence of the rioters, far from it! There are decent people living in the same deprived areas who are deeply disturbed with the criminal behaviour they have had to put up with. It is a small minority responsible for such vandalism. Most people lead lives of quiet purpose and hope, if not desperation. All our lives are small acts of protest; it need not turn into desperate acts of terror. However, it is true that societies that are deeply divided, where the gap between rich and poor keeps growing, where the young receive no guidance or discipline from parents, nor do they get any real education at school, where individuals foster little hope for their future; nor do they possess the intelligence or the means to chose a path that could save them from a life of crime, drugs, disease etc, then sooner or later such societies disintegrate into chaos.

It is the poverty of aspiration that is shocking among the rioters – the lack of determination to build a better life for oneself through education, hard work, honesty, integrity etc. One can understand young people feeling alienated, disenfranchised etc. It is unfortunate they cannot discover positive ways of channelling their anger. The purpose of alienation, which by the way even rich and well educated kids experience, is to explore oneself, to discover something beyond one self – be it through science, music, literature, art, sports, nature, etc. I wonder how many of the rioters are capable of enjoying reading a book, painting, listening to music or doing something creative. It is a pity they have not learnt to think. As far as that feeling of loneliness is concerned – well, some of the greatest men and women were also driven to achieve great things by their alienation. Feeling lonely, scared, confused, an outsider, is fairly common. What distinguishes one individual from another is how s/he deals with it.

The current crisis of course did not happen overnight, it is the unintended consequence of past government policies. Give a woman preferential social housing if she has a child, and top it up with other benefits, and you end up with single mothers. What was intended by William Beveridge as a safety net for a few has become a lifestyle choice for many! The Welfare system has not diminished the five “Giant Evils” in society – squalor, ignorance, want, idleness and disease. Most adolescents rebel against authority. Offering benefits to the young if they opted for education, or better still for work apprenticeships, would have been a superior investment of public funds. Governments influence the behaviour of its citizens; policy-makers need to examine carefully the consequences of their decisions. Human nature, being what it is, is prone to misjudgements.

For example, it can be argued that the current financial crisis that began in America was state sponsored. I am referring to the banking deregulation implemented by successive governments in the US. In the name of liberalisation, innovation etc, several long standing regulatory checks and balances were removed. The financial meltdown of 2008 was a direct result of the failure of regulation, undisclosed conflicts of interest, flawed compensation structures etc. Such behaviour was not confined to the US; UK and Europe were not exempt.

Burning buildings in Croydon, South London

The cost of the recent riots pales into insignificance compared to the wealth wiped out by the banking crisis; it affects the world and its prospects. It has and will alter the life paths of many who had nothing to do with it. As a nation we will be guilty of moral hazard if we treat the destruction of assets differentially. How many bankers, regulators etc have been arrested, questioned for plunging the world into a financial crisis? Coming down heavy on the young rioters is not going to help much unless the causes associated with their lawlessness are also addressed. Young people learn to be responsible when they see others taking responsibility. As long as governments and those in power behave irresponsibly, what moral authority can they really exert?

Talking of a broken society will not automatically heal the divisions. In the final analysis it is what individuals in authority – including parents, teachers, politicians among others – do that matters, not what they say. It is regrettable when parents and teachers feel they have no control over their charge. Do they have the courage and the wisdom to do the right thing, guide young minds to a better life? It is clear a concerted social effort is needed. Bees have no law, no religion, no moral training etc. They act on instinct, seem to know their survival depends on working together. Despite all our achievements, we humans are so much poorer for lacking such a developed sense of social responsibility.

My message to young people today is – it may not be a fair world but you can always try to make it better. Do not think of yourself as non-productive members of society, and do not feel marginalised because others marginalise you. Each one of you has a role to play – each one of you is good at something. So, go discover your real strength. Rioting is not a career. It will lead, sooner or later, to imprisonment of some kind. When you can be free and be someone, why settle for anything less? If you believe and expect great things of your self, and work towards it, you will find your place in the world.