Candid expression of thoughts
Saturday, 14 May 2011
Syed Ashraf Ali
Swimming against the current requires skill and strength, but one requires still greater skill, clarity of ideas, deep insight, analytical ability and courage of conviction, to wade against the conventional thoughts, especially on complex economic phenomena. AKN Ahmed, who is gifted with those sterling qualities in ample measure, stands out conspicuously from his peer when it comes to expressing his thoughts candidly. His frank opinions often earned inevitable wraths of his detractors in the past after traumatic events of 1975; they wasted no time to see him off from his favourite milieu of banking and finance in Bangladesh. AKN Ahmed's latest publication, aptly titled 'Against the Current', is studded with 16 articles on such diverse subjects of topical interest as Financial Crisis and Regulatory Deficiency, New International Financial Architecture, Global Subprime Mortgage Loan Crisis, Dr Yunus and Grameen Bank, dot com, e-Trade etc. As the Governor of Bangladesh Bank in the turbulent and crisis-ridden seventies, Ahmed earned admiration of the government and the donors for demonstrating his acumen and untiring zeal for rebuilding the country's fragile financial structure literally from the scratch. He particularly proved his mettle by initiating crucial measures for revamping the payment and banking system, printing of new currency notes, massive devaluation of the national currency and demonetisation of higher denomination notes. These measures reined in the runaway inflation that had been seriously afflicting the nation's fledgling economy. His later stints with the World Bank, a multinational commercial bank and assignment as Bangladesh Ambassador to Japan provided him an opportunity to witness, from a vantage point, the changing panorama in the international financial landscape on a bigger canvas. Recent global financial meltdown and financial crises occupy a great deal of attention in the veteran banker's latest book 'Against the Current'. The author cites specific instances of financial crises that afflict the nations across the world at one time or the other with almost unerring regularity. The crisis, he says, is triggered by 'massive shocks to banks' liquidity, payment system and solvency'. The crisis is exacerbated by what he calls 'panic and dramatic loss of depositors' and investors' confidence. These twin menaces of financial shocks and panic have had debilitating impacts on the economy and society of many countries. The author cited the instance of Indonesia whose cost of financial crisis in 1997-98 amounted to a staggering 34.5% of GDP. The crisis of 1997-98 that engulfed other South East Asian nations too made Malaysia poorer by 19.5%, South Korea by 24.5% and Thailand by 34.5% in terms of their respective GDPs. Bangladesh also had its share of crises but nobody bothered to fathom their impacts on productivity or welfare of people in different strata of the society. Financial crisis has been a regular visitor to the advanced economies too. What distinguishes these crises from those of less developed countries is that the crises quickly spread their wing to affect the economies of the nations -poor as well as rich. The classic instance of financial crisis, dubbed as financial meltdown, in 2008 that reverberated across the globe is specially put under the scanner in 'Against the Current'. While the fallouts of that crisis nearly crippled the world economy, the factors that triggered the financial maelstrom remain a mystery to many people. The author tried to look for an answer by tracing the world's financial history since World War II. The breakdown of the strictly regulated financial system of the IMF-led Bretton Wood system in the early seventies provided an unprecedented opportunity to the financial market players to lead a procession of fortune seekers by creating pyramidal structure with artificial assets mainly through financial derivatives. This made room for financial bubbles to inflate beyond their sustainable limits. The author compares this phenomenon with the 'gold rush' that drove millions from the American east coast to the Wild West in the nineteenth century. According to the author, the 2008 recession was triggered in the US by crash of the mortgage market that ballooned under the weight of much-talked-about subprime loans. The impacts of the crash ricocheted from the financial market to capital markets across America and the countries far beyond its shores. The author's realistic diagnosis of the affliction is followed by a prescription of what the regulators and players in the financial system should do to avert catastrophe of this nature in future. Dr Yunus and Grameen Bank that have now literally become the 'talk of the town' did not escape the focus of the author. While realistically assessing the positive impacts of the Grameen Bank in empowering poor people, particularly hitherto neglected women, 'to get out of their poverty trap and stand erect and get their confidence in themselves in order to survive as human beings', the author attributed the success to strict supervision and monitoring of loans and the inspiration it provided its borrowers to cultivate frugality, savings habit and timely repayment of loans. He, however, does not join the bandwagon of avid admirers or die hard detractors of the GB system and points out that the Grameen Bank 'system of micro-credit is not unique'. He cited instances of countries that have long been experimenting with one or other form of micro-credit systems on scales bigger than even Grameen Bank's. Ahmed also raises a question whether 'the efforts of a few individuals are enough to make permanent change in the poverty landscape without changing the political and economic structure of a society and without bringing about profound changes in the manner the economies are administered now'. He reminded the readers of Yunus's own admission of the limitation of GB system when he said in his acceptance speech of Nobel Prize - 'Rules of strongest take it all must be replaced by rules that ensure that the poorest have a place and a piece of the action without being elbowed out by the strong'. Banking and finance are exactly not the only things that occupy the thoughts of AKN Ahmed whose towering presence in the country's financial horizon has made him a legend in his lifetime. He does not hesitate to delve deep into issues that transcend the domain of money and credit. In this book under review he points out the supreme importance of technology for survival in this tech-savvy age but warns against too much reliance on developing software without erecting a strong platform for developing hardware. Growth, he says, is not the sine-qua-non of development and well-being of the ordinary masses and advises against placing too much faith on the existing form of capitalism as a vehicle of our progress and prosperity. The country has suffered immeasurable loss by denying this talented soul an opportunity to contribute his talent when it was needed most. Belated though, as it is, one only expects that the authorities could draw a lesson or two from this book to fashion its financial and monetary policies for translating the government avowed objective of freeing the people from the abyss of poverty in which they have long been mired. (The reviewer is a former Executive Director of Bangladesh Bank).
Swimming against the current requires skill and strength, but one requires still greater skill, clarity of ideas, deep insight, analytical ability and courage of conviction, to wade against the conventional thoughts, especially on complex economic phenomena. AKN Ahmed, who is gifted with those sterling qualities in ample measure, stands out conspicuously from his peer when it comes to expressing his thoughts candidly. His frank opinions often earned inevitable wraths of his detractors in the past after traumatic events of 1975; they wasted no time to see him off from his favourite milieu of banking and finance in Bangladesh. AKN Ahmed's latest publication, aptly titled 'Against the Current', is studded with 16 articles on such diverse subjects of topical interest as Financial Crisis and Regulatory Deficiency, New International Financial Architecture, Global Subprime Mortgage Loan Crisis, Dr Yunus and Grameen Bank, dot com, e-Trade etc. As the Governor of Bangladesh Bank in the turbulent and crisis-ridden seventies, Ahmed earned admiration of the government and the donors for demonstrating his acumen and untiring zeal for rebuilding the country's fragile financial structure literally from the scratch. He particularly proved his mettle by initiating crucial measures for revamping the payment and banking system, printing of new currency notes, massive devaluation of the national currency and demonetisation of higher denomination notes. These measures reined in the runaway inflation that had been seriously afflicting the nation's fledgling economy. His later stints with the World Bank, a multinational commercial bank and assignment as Bangladesh Ambassador to Japan provided him an opportunity to witness, from a vantage point, the changing panorama in the international financial landscape on a bigger canvas. Recent global financial meltdown and financial crises occupy a great deal of attention in the veteran banker's latest book 'Against the Current'. The author cites specific instances of financial crises that afflict the nations across the world at one time or the other with almost unerring regularity. The crisis, he says, is triggered by 'massive shocks to banks' liquidity, payment system and solvency'. The crisis is exacerbated by what he calls 'panic and dramatic loss of depositors' and investors' confidence. These twin menaces of financial shocks and panic have had debilitating impacts on the economy and society of many countries. The author cited the instance of Indonesia whose cost of financial crisis in 1997-98 amounted to a staggering 34.5% of GDP. The crisis of 1997-98 that engulfed other South East Asian nations too made Malaysia poorer by 19.5%, South Korea by 24.5% and Thailand by 34.5% in terms of their respective GDPs. Bangladesh also had its share of crises but nobody bothered to fathom their impacts on productivity or welfare of people in different strata of the society. Financial crisis has been a regular visitor to the advanced economies too. What distinguishes these crises from those of less developed countries is that the crises quickly spread their wing to affect the economies of the nations -poor as well as rich. The classic instance of financial crisis, dubbed as financial meltdown, in 2008 that reverberated across the globe is specially put under the scanner in 'Against the Current'. While the fallouts of that crisis nearly crippled the world economy, the factors that triggered the financial maelstrom remain a mystery to many people. The author tried to look for an answer by tracing the world's financial history since World War II. The breakdown of the strictly regulated financial system of the IMF-led Bretton Wood system in the early seventies provided an unprecedented opportunity to the financial market players to lead a procession of fortune seekers by creating pyramidal structure with artificial assets mainly through financial derivatives. This made room for financial bubbles to inflate beyond their sustainable limits. The author compares this phenomenon with the 'gold rush' that drove millions from the American east coast to the Wild West in the nineteenth century. According to the author, the 2008 recession was triggered in the US by crash of the mortgage market that ballooned under the weight of much-talked-about subprime loans. The impacts of the crash ricocheted from the financial market to capital markets across America and the countries far beyond its shores. The author's realistic diagnosis of the affliction is followed by a prescription of what the regulators and players in the financial system should do to avert catastrophe of this nature in future. Dr Yunus and Grameen Bank that have now literally become the 'talk of the town' did not escape the focus of the author. While realistically assessing the positive impacts of the Grameen Bank in empowering poor people, particularly hitherto neglected women, 'to get out of their poverty trap and stand erect and get their confidence in themselves in order to survive as human beings', the author attributed the success to strict supervision and monitoring of loans and the inspiration it provided its borrowers to cultivate frugality, savings habit and timely repayment of loans. He, however, does not join the bandwagon of avid admirers or die hard detractors of the GB system and points out that the Grameen Bank 'system of micro-credit is not unique'. He cited instances of countries that have long been experimenting with one or other form of micro-credit systems on scales bigger than even Grameen Bank's. Ahmed also raises a question whether 'the efforts of a few individuals are enough to make permanent change in the poverty landscape without changing the political and economic structure of a society and without bringing about profound changes in the manner the economies are administered now'. He reminded the readers of Yunus's own admission of the limitation of GB system when he said in his acceptance speech of Nobel Prize - 'Rules of strongest take it all must be replaced by rules that ensure that the poorest have a place and a piece of the action without being elbowed out by the strong'. Banking and finance are exactly not the only things that occupy the thoughts of AKN Ahmed whose towering presence in the country's financial horizon has made him a legend in his lifetime. He does not hesitate to delve deep into issues that transcend the domain of money and credit. In this book under review he points out the supreme importance of technology for survival in this tech-savvy age but warns against too much reliance on developing software without erecting a strong platform for developing hardware. Growth, he says, is not the sine-qua-non of development and well-being of the ordinary masses and advises against placing too much faith on the existing form of capitalism as a vehicle of our progress and prosperity. The country has suffered immeasurable loss by denying this talented soul an opportunity to contribute his talent when it was needed most. Belated though, as it is, one only expects that the authorities could draw a lesson or two from this book to fashion its financial and monetary policies for translating the government avowed objective of freeing the people from the abyss of poverty in which they have long been mired. (The reviewer is a former Executive Director of Bangladesh Bank).