The miracle of compound interest

A lot of slightly educated people believe technology alone has made the modern world. The truth, as always, is considerably more complex. Four other factors have played a major role: ideology (think, for instance, of democracy and socialism – as society changing powers, they are hardly three centuries old), organization (think factory system and corporate structures, which divided risk, vastly increased and standardized production scales, and put millions into regimented employment), advertizing (hundreds of millions are simultaneously, daily, constantly told what to buy, from soap to processed food to education to healthcare to entertainment, lifelong, until they quite forget what it means to make independent choices) and the miracle of compound interest.

Few middle class people from non-business families really understand the power of sustained saving. Here’s a sample of what it can do for you. At 8% annual rate of interest (that’s roughly what you get at present from the PPF, income-tax free), compounded quarterly, you get Rs. 52,485 on an initial deposit of Rs. 1,000 after 50 years. Check out the figures for yourself here. Imagine, now, you are depositing Rs. 1,000 – yes, just 1,000 – every month for fifty years, and I leave it to you to figure out the kind of money you will have at the end of that time. A serious saver will put aside much more than a mere Rs. 1,000 rupees a month. And other kinds of savings are far more profitable. The BSE Sensex has grown 280 times since its inception in 1980. Which means that someone who invested Rs.100,000 in it at start has Rs. 28 million now.

Of course, interest rates will not always be 8%, and they might be compounded half-yearly, or even yearly, in which case the yields will be considerably less. On the other hand, there are times when yields are much higher – in the 1980s, when I started saving in a very small way, the Indian banks were offering interest as high as 14% on long term fixed deposits. Admittedly, that was a very special period; interest rates have never again been so high anywhere in the last 250-odd years. In fact, during the time when many people got seriously rich by saving and investing – say, the merchants in Europe during the early middle ages, or when the British-Indian government was raising funds to build the railways – the long-term interest rate on ‘safe’ investments ranged between 3 and 5 per cent. But that didn’t stop long-term savers from getting rich.

Why did relatively so few people get rich over time, then? Well, partly because too few of them ever had anything to save – historically, 90%-plus of populations lived from hand to mouth – and partly because of those who did, only a tiny fraction ever bothered to save in a sustained, long-term manner (that is just as true today as it ever was!), and some were unfortunate enough to have their lifetime savings washed away by accidental disasters, such as disease and war and hyperinflation. The key is time and diligence. Very few people with the ability to save do save month after month, year after year, for entire lifetimes, especially knowing that with humble beginnings, that process has to carry on for several generations for families to get seriously rich. But that does not change the fact that, apart from those who strike gold, only long-term savers get rich. These days, for obvious reasons, people are fascinated by the stories of those who became wealthy almost overnight, the sports celebrity- and Rowling and Zuckerberg types, but the fact is most of the richest folks in the world are those who ancestors have been saving assiduously for centuries. What fascinates me is the story of the Medicis, Fuggers and Rothschilds, or the Indian Chettiars in the south who financed Rajendra Chola’s expeditions to Sri Lanka more than a thousand years ago, or the great Jain seth who hedged his bets by lending to both Rana Sanga and Babur before the battle of Khanwa. Their descendants are still among the richest people on the planet, though, unlike the insecure and attention-hungry nouveau riche, they avoid hogging the headlines. Such men can truly paraphrase the poet and say ‘Kings may come and PMs may go, but we go on forever!’ And it’s all due to the miracle of patience harnessed to compound interest. Ask the Marwari community elders. Of course, looking at the way their descendants are burning money now, it’s a safe bet that many of them will be out on the streets pretty soon. There are laws of history that you defy only at your peril. You can do your own research on this.

So it frightens me to think that economic basics are going awry in a historically-unique way all over the world. And as with almost everything else that is bad, it’s America that has shown the way. Interest rates have dived so far that in some countries the banks not only don’t give you any interest at all on savings, they actually charge a negative interest on it, meaning you are penalized for saving. Simultaneously the credit card economy has led millions of not-too-well-off people to live far beyond their means, saddling individuals as well as whole nations with such enormous debt burdens that no one knows how it will ever be repaid. The motto seems to be ‘sacrifice the future for the sake of today’ – carpe diem pushed to a monstrous extreme. It reminds me of a horror story written, if I remember correctly, by Isaac Asimov, about a man who borrows so much that he has exhausted his credit limit, but he is so addicted to living the high life that he cannot stop splurging, and the bank persuades him to carry on, provided he signs off his son’s future too: the son will be born with an inherited debt burden, and spend perhaps his whole life trying to pay it back. That’s the story of bonded labour all over again, and repeating itself in a highly ‘advanced’ society! The long term implications are mind-boggling, and not just at the individual level. With China buying up trillions of dollars of U.S. debt, there may soon come a time when the Chinese own a significant enough portion of the American economy for major political decisions on behalf of Americans to be taken not in Washington D.C. any more but from Beijing. It will then probably be the first bloodless conquest of a major nation in history since Ashoka’s dharmavijaya of Asia began…

Bengaluru and Singur

I remember writing as a student of economics in the 1980s that the way things were going, all the big political problems of the next century (at least in India-) would centre around land availability, and in an earlier post on this blog itself I quoted a UN Secretary-General to the effect that all the wars (and of course, riots-) of the 21st century would be focused on water. Also, alas, these problems have no quick-fix technical solutions visible on the horizon.

So I was reading about the recent street violence in Bengaluru not only with sadness but with a profound sense of déjà vu. I simply cannot get worked up over such things any more, unlike most ‘educated’ people below forty today, who at least profess to be amazed and shocked like little children every time.

Conflict between the two states of Tamil Nadu and Karnataka (erstwhile Madras province and Mysore) has been brewing, with occasional destructive (and broadly speaking futile) public outbursts for nearly a century now. The problem has only been exacerbated by a booming population, growing per-capita water demand (which is a certain accompaniment to the conventional kind of development that has been in vogue worldwide – even the Colorado no longer flows into the sea), and increased climatic vagaries which most scientists now ascribe to global warming. No government directive, no court order can make either party ever and permanently happy, for the simple reason that there is too little water to go around, and at times the shortage becomes critical enough for people to become violently angry. If you haven’t had to stand in line for water with a bucket for hours daily for years on end, or if you are not civilized enough to empathize with those who must, you will never understand them. Certainly the current street violence could have been sharply curbed if the state government concerned had been more vigilant and prompt in taking action: there is much reason to suspect that they deliberately sat tight until things got ugly enough for the central government and the Supreme Court to grow upset, and then it was curbed quickly enough (I saw what difference government alacrity can make during the anti-Sikh riots post Indira Gandhi’s assassination in 1984, the difference between Delhi and Calcutta, when I walked around the latter city reporting on the carnage, which Jyoti Basu shut down overnight simply by calling in the army, as Rajiv Gandhi did not).  

But the anger and discontent will simmer, and boil over again as soon as another severe shortage strikes. Until – God forbid – two states decide to go to war. Don’t imagine that is something impossible: far worse has often happened. That’s the advantage of knowing history. India’s founding fathers were always afraid that centrifugal tendencies could rip the young nation apart, and if such a thing happens, it will most certainly be triggered by crises over essential natural resources, not over mobile apps and fancy startups with which the urban, well-off youth, comfortably cushioned and cocooned for most of the time, keeps itself happily anesthetized. The same anger and discontent are brewing among Punjab, Haryana, UP and Delhi over sharing the waters of the dying, filth-filled Yamuna, and between India and Bangladesh over the Ganga waters released (or not-) through the Farakka Barrage. One only prays that the apocalypse will be delayed a bit more. That it will come is almost sure.

Which brings me to the story of Singur. Following the Supreme Court judgment (the court and the army seem to be the only institutions left in which the people can still justifiably keep faith!) – that the state government took over 1,000 acres and gave it to the Tatas unlawfully – Mamata Banerjee celebrated with a ‘people’s victory party’ at ground zero. Uneasy lies the head that wears the crown is a very old proverb, so it is rare to see the kind of relief and happy smile that was visible on her face yesterday. The internet will be awash with barbs and invectives, of course: they will all try to sound ‘progressive’ and ‘rational’, but they will be primarily motivated by pure dismay and envy. Funny that in a country where we so worship success, we can’t bear to see anybody being successful and happy, even briefly, unless it somehow serves our own petty vested interests (my son the bekaar engineer could have got a job at the Nano plant, maybe, or I could have got a sub-contract supplying nuts and bolts). Let her enjoy it, because her relief and happiness are bound to be ephemeral.

She knows as well as her detractors that her state desperately needs investment in infrastructure and industry. She knows land is terribly scarce in this grossly overpopulated state (90+ million, in an area much smaller than France or Germany). Fighting for the unwillingly dispossessed at Singur brought her spectacularly to power, so she can never admit, even to herself, that she was wrong. She knows that the public euphoria over the current success story will not last long. She knows that Singur might have sent the wrong signals in some quarters at least, and she needs to woo them back. That the work culture in the state is very poor, that bureaucratic red-tapism is bad if not the worst in the country, and that there is a mafia-raaj of sorts that she can rein in only at great peril to her own political existence are three factors that will work strongly against the inflow of new investments, and there are no magic wands to get rid of them (so no point in blaming her personally, at least too much – just ask yourself, could you have done better?) Add to everything else the fact that all kinds of landholders have now tasted blood, and will ask for the earth to give up their lands to future projects, which might easily make them unviable – it is happening more and more frequently with everything from airports to roads to hospitals. A devil’s brew indeed. Unless you are really very petty-minded, won’t you wish her luck?

Murshidabad

I missed out on the planned holidaying and travelling last year owing to the accident. I became mobile again by December, and the New Year resolution was to make up for the lost year. Three quarters of the year has passed, and that is the vow I have been assiduously fulfilling, as any regular reader of this blog should know.

This month all the schools have examinations, so my kids gratefully gave me leave, and I escaped for a couple of days at once. Two days again, Friday and Saturday, the 9th and 10th September. Early morning set-off, and I headed for Murshidabad with Firoz at the wheel. Strange that the town is so rich in history and only 170 or so kilometres away, yet I had not visited it in all these years!

Thanks to our incumbent President, the ride was silk smooth via Shantiniketan and Nannoor till Kirnahar. The whole countryside along the way was lush green, thanks to the season and the recent rains; in some places vast swathes of paddy were under water, and the kaash flowers were growing in wild profusion everywhere. Then from Kandi onwards the road condition deteriorated, and there was a massive traffic jam while entering Berhampore (apparently a daily affair now, what with all the vehicles and too few roads), so it took all of five hours to arrive at the gates of the Hazarduari palace, though I had – foolishly – reckoned on four. I put up at a modest hotel for a change, Manjusha, because it was right in the heart of the tourist circuit, located bang on the bank of the full and fast-flowing Bhagirathi, I took an instant liking to the proprietor, and because he promised to show me round his magic garden. About that more later.

A bath, a quick lunch and a snooze was followed by a round-the-town tour in a reserved ‘Toto’, now the vehicle of choice, the rickshaws having completely vanished and the tongas nearly so. We stopped at so many places I have lost count, but the highlights were the Katra mosque, the 1100-odd graves of Mir Jaffar’s descendants (there are graves for favourite slaves and pet pigeons too), the Nashipur rajbati, the Kathgola garden villa (built by a family of very successful smugglers in the 18th century), the house (actually the kutcherry) of the Jagat Seths – for a brief period one of the richest families in the world, which controlled a large fraction of the entire country’s trade and money supply – capped with a trip to the Motijheel. Kudos to our current CM for visualizing and laying out the new Park-cum-tourism complex there – look it up on the net, it’s still a work in progress. I particularly enjoyed the sound and light show.

So much for the first day. Happily tired out, I went to sleep at an uncharacteristically early hour, no drink or sleeping pill needed. Early next morning, Sanjoy the same Toto driver took us across the river on a boat, and we looked around. This time the big attraction was the Khoshbaag garden, where the nawabs Alivardi Khan and Siraj lie buried. At the Kiriteshwari temple – supposed to be one of the 51 peeths dedicated to the Mother Goddess – the priest insisted that he had seen me before somewhere, and asked for a cigarette. On the way back, we toured the Hazarduari (900 real doors, 100 false). Grand enough, if you consider that all that pomp and pelf was put on display after the nawabs had lost their freedom and power completely. To think that this city once ruled Bengal, Bihar and Odisha together, financed the Mughal throne, and getting their hands on it set the British on the way to a world-girdling empire! All that remains is crumbling buildings, the jute and silk trades, the Toto driving syndicate, the mango orchards, and thousands of young men gone far away to work as masons and builders.  And sighs. Nineveh and Tyre.  sic transit gloria mundi…

I am glad, by the way, that the Archaeological Survey of India has maintained so many monuments and laid out nice, neat gardens around them. I saw some few repair and renovation works in progress, too, but one could wish for more. Perhaps that will happen if Murshidabad is brought back to the centre of the tourism map from the fringes. Funny to learn that for a few days post 15th August 1947 it became part of (East-) Pakistan, only to be returned. But it is quite evident that Hindu and Muslim have been living cheek by jowl here for ages without much friction, leave alone overt and violent conflict. Heartening, that.

So at mid-day we returned to the hotel. As he had promised, the proprietor showed us around his garden. My God, if anyone has a green thumb, this man does, or maybe he has been blessed by the Ganga, but he has built up a botanical miracle in that half acre of his. What didn’t I see? Rare and precious plants from all around the country, indeed the globe, were blooming there, camellia, dolonchampa, rudraksha, triphola, jayitri-jayphol, camphor, white and red sandalwood, apples and mangoes side by side… I forget. He wouldn’t tell me his secret, fobbing me off with ‘shob i mayer ichchhe!’ I begged him to upload a video on YouTube, and promised to publicise his work all I could via tripadvisor, which keeps telling me to write reviews of places I have visited.

It was a smooth and fun drive back home, though the blazing sun kept the airconditioner running almost all the way. I drove for a bit, just to remind myself how much I enjoyed driving once. The old car glided without a hiccup all through, so my plans to buy a new one are indefinitely shelved.

The pujo is coming up, though I never go travelling during that time. It’s when the old boys come visiting. And Diwali I celebrate at home with a lot of enthusiastic teenagers. But where am I going in December, I wonder?

[for photos, click here]

Ode to the baul-s

Teachers’ Day.  Many thanks for all the gifts, cards and messages that have poured in. This post is to pay tribute to a special kind of teacher.

In the days when I was in college (that would be the early 1980s – my daughter is passing through that stage now), I often took the local trains via Bardhaman on my way home to Durgapur from Kolkata. One reason was to save money – I was very poor then, and the difference with express train fares mattered – but there was another, more pleasant one. There would usually be a baul on the Bardhaman Asansol local who would sing his heart out. I remember I used to splurge sometimes, giving him a twenty- or even fifty rupee note (that was a lot of money in those days, certainly to me) to park himself beside me for the whole duration of the journey instead of begging around and sing all he could, interrupted only by little earthen cups of tea, which we both drank with gusto. Many of those songs still play themselves in my mind’s ear, and I can see visuals, even, of the bauls – usually men – breaking into impromptu jigs, strumming on their aktaras and keeping time with their ghungroo-d feet, clad in the traditional white dhoti and saffron or multi-hued kurta, generally also with a turban around the head and a cummerbund. Many of those lyrics have stayed with me forever, too: ami kothay pabo tare/amar moner manush je re, dekhechhi roopsagorey moner manush kancha shona, praner bandhob re/dao dekha doya kore, khanchar bhitor ochin pakhi kemne ashe jaye… there was something in me that vibed very strongly with the kind of music they made, and it has never palled.

Decades later, therefore, it was my privilege to render some little assistance to a certain lady who was doing a doctorate on the theme of Tagore and the bauls. I was dealing with both Tagore and the bauls: few things could make me happier!

A revival of interest among the youth of today seems to be going on. Or so this article in The Statesman says. I, for one, would be delighted. Leaving aside my specific interest in baul music for the moment, it pains me that in India, which has one of the richest and most diverse repertoires of home-grown music in the world, the youth should be so unaware, so forgetful, so apathetic towards it. Mind you, I am no atavistic and chauvinistic propagandist against ‘foreign’ stuff – my own list of favourites from western music is very wide – but that has not prevented me from knowing, cultivating and loving desi stuff, everything from dhrupadi to folk to rabindrasangeet and Hindi movie numbers. What I rue, what fills me with shame and chagrin is that our young should be so ignorant, and ignorantly contemptuous, of our own culture in this matter (and alas, that is most glaringly evident among the urban ‘English-medium’ educated kind, the type I have to deal with all the time for my sins) – except when they hear that some sahibs are interested in it. So it pleases me no end to see a new generation of youth taking active and talented interest in Indian music again, as evidenced not only on TV but on YouTube as well. If there’s a lot of fusion stuff out there, I don’t mind at all, even though much of it is of indifferent quality – let a thousand flowers bloom, for every now and then a gem will emerge (I am still desperately searching for a pop-style rendition of Raghupati Raghav Raja Ram that I saw in a music video on TV at least two decades ago – I think it was done by Raageshwari. If someone can locate it, please send me the link). It is good to remember that Tagore himself was the greatest fusion music maker of them all!

A woman in a man’s world whom I have lately come to admire is Parvathy Baul. You can search for her by name on wikipedia.

Here is a link to something I wrote about music several years ago. As for the reason behind my particular fondness for baul songs, maybe in another post. But I would like you to note that this is not something that has come with advancing age: I was moved by the same when I was barely out of adolescence…

Landline gone

In the early 1970s, telephones were so scarce they were regarded as status symbols. I read at around that time that New York City had more telephones than the whole of India.

I remember that my father, who worked as a junior officer in a local public sector steel plant, was not in the normal (bureaucratic-) course of things eligible for a private telephone connection (yes, you needed official permission for that sort of thing). Because he was the founder general secretary of their Officers’ Association, he needed one, and he got it by personal recommendation of the then Chief Minister, no less. We had four-digit numbers then, and ours was 2788. So it remained for nearly a decade, before my father quit that job, moved to the then newly-developing Bidhan Nagar (still sneered at as a bucolic retreat – gondograam – by many), and got a new number: 6423. The years passed, until the Department of Telecommunications, which still controlled everything, took it into its head to add two numerals, so then it became 53 6423. A few years later, the ‘modernization’ drive still continuing, the numeral 2 was added ahead of that. And then the privatization drive began in right earnest, followed hard on the heels (I am talking of the turn of the century) by the onslaught of privately-sold and serviced mobile phones. Meanwhile the landline connection had been transferred to my name.

Almost a decade ago, we already had several mobile phones in the family. By that time the DOT had morphed into BSNL, and everybody knew that it was rapidly sinking into obscurity and insolvency, kept going only by endless government subsidies, and actively sabotaged, it was alleged, by the private operators. I had a dial-up internet connection, which was unimaginably slow by today’s standards, and I had a growing suspicion that they were overbilling me, so I got a cable connection instead (much cheaper and much faster – yes, even now, in comparison with those silly dongles). I was going to surrender the phone too, but a senior official, whose son was then a pupil, urged me not to, arguing that my number was too well known, and its absence would cause trouble to a lot of people. He told me to get a ‘Sulabh’ connection, which I did – I’d get incoming calls at a low, flat rental, and I could make outgoing calls (which in the event I never did) with a prepaid card. I put in a parallel line too, and got a cordless unit downstairs for convenience. That too must have been at least fifteen years ago.

Eventually I put my public mobile number on the signboard outside, and over the last two years I had been noticing that very few calls came in on the landline any more, either because the phone was out of order (which was frequently) or because people increasingly preferred the mobile instead – understandably, since half the time I, being outdoors or taking classes, didn’t answer the landline. So I was paying that rental for nothing.

With me, old attachments die hard, but I do bow to the inevitable sooner or later, unless it is too unpleasant a prospect to countenance. So this morning I turned in the landline at last. Now, in this matter at least, I am like everybody else. However, I see nothing to be elated about. Just a necessity, as the sanitary water closet once became. And I am not one of those who buy millon-dollar wc-s just to acquire some ‘status’ in the eyes of idiots…as they already wrote in a Bangla newspaper several years ago, real ‘status’ will soon attach to those who are (ostensibly-) too important and busy to carry about their own phones, as PMs and celebrities and busy surgeons and lawyers and suchlike already are.