Cacoethes Scribendi

Changing Social Equations : Witnessed through the prism of movies

I've always felt that motion pictures are much more representative of a society's collective impulses than any other art form. It is possible for a novelist or a painter to construct an alternative universe of his own and create works of art that can exist in isolation in any era independent of the social milieu that surrounds them. The art of cinema is fundamentally different. Being a mass medium, movies must be able to relate to the impulses of the audience if they have to succeed. Most movies are products of the times in which they are made, unlike a lot of great books. Frank Capra's films are products of the thirties Depression Era. Woody Allen's pictures on the other hand are influenced by the counterculture of the sixties and seventies. Either of them couldn't have succeeded in the other person's era.

Literature is quite different in this respect. It is a lot easier to associate the attribute of 'timelessness' with books than it is with movies. Take for instance the fictional world of the incomparable PG Wodehouse. He created a universe inhabited by absentminded earls, erudite butlers and wealthy nincompoops which hardly had any basis in reality. The books of Wodehouse found a niche market which exists even today, though the 'Edwardian' utopia found in his books is not to be found anywhere on earth.

Which is why I feel that studying the history of motion pictures can provide a great deal of insight into how the society has evolved over the decades. Having watched countless Hollywood classics over the past year or so, I was drawn towards how the treatment of coloured people on the big screen has changed so dramatically in the course of movie history.

The earlist movie I've seen is DW Griffith's Birth of a Nation released in 1915, a three hour period saga of how two white families cope with the consequences of the American Civil War. The movie was notorious even then for its blatant depiction of blacks in a negative light and its glorification of the Ku Klux Klan. What's more interesting to me is that Griffith employed white actors with faces painted black to play Negroes in the film! And yes. This movie was a major worldwide blockbuster the year it was released. It couldn't have been made in 2009!

Things got a little better in the 30s and 40s, with black character actors like Rex Ingram and Hattie McDaniel getting meaty roles in A-films. Yet, their characters were invariably maids or butlers. It was still quite unthinkable for a mainstream Hollywood film to accept a black leading man or a leading woman. I find Alexander Korda's delightful 1940 Arabian fantasy - The Thief of Bagdad most significant in this respect. It is one of the earlist films that I know of to feature a coloured boy in the leading role. The actor was a teenage son of a mahout in Mysore who was transported to England to play in several British adventure films, the best of which is The Thief of Bagdad.

However, it was still anathema to both movie-goers and movie makers to have a coloured actor as the romantic male lead. The emergence of Sidney Poitier in the sixties was to change that. Remember, we are in the sixties now. The decade of Martin Luther King & Malcolm X, the Beatles & The Vietnam War. The audiences could finally digest the prospect of Poitier, a Bahaman negro, dating and *gasp* marrying a white girl in the family drama Guess Who's Coming to Dinner. The movie may seem too cutesy and sentimental to modern audiences. But it must have made powerful viewing in 1967, amidst all the cultural upheavals of that decade. The success of Poitier in the sixties seems so timely and inevitable. Poitier couldn't have become a star in the thirties. He may have ended up specializing in butler roles instead. He wouldn't have been such a big deal in the nineties either. His stardom had a lot to do with being in the right place at the right time with the right complexion.

Which brings me to a movie that I happened to see recently. The Taking of Pelham123 starring Denzel Washington and John Travolta, two ageing actors lending some star power to an otherwise forgettable movie. Having been weaned on movies from Hollywood's Golden Age (1930-1960), I was extremely surprised that none of the characters drew attention to the fact that Washington is black in the course of the film. Not even a single oblique reference! It was almost as though the colour of his skin was totally immaterial to everyone around him. This would have been unthinkable in a Poitier movie! No wonder America is ready for a black President.

The critic David Thomson wrote that the "history of American movies is the history of America in the time of the movies". Very true. I couldn't agree more.

On Ganguly's Legacy and the "Great Man" theory of Leadership

Saurav Ganguly's retirement from international cricket spawned many finely written tributes, most of which emphasized his role as a Lutheran figure who transformed Indian cricketers from a bunch of designer track bullies to the world's second best team. Apparently it was he more than anybody else who made the Indian team believe that it could win abroad on a regular basis.

These claims are backed by facts that are very impressive on the surface. 15 of India's 31 overseas test triumphs have been in this decade. Writers who subscribe to the "Great Man" theory of Leadership believe that great leaders arise when there is a great need. The emergence of the leader in Ganguly happened at a time when Indian cricket was at its lowest ebb what with the 3-0 loss to Steve Waugh's Australia and the implication of certain players in the match fixing controversy. Since Ganguly's appointment as captain coincided with the reversal of India's abysmal cricketing fortunes, the "Great Man" theory dictates that he be hailed as a "great" captain. Post hoc ergo propter hoc.

A closer examination of Indian cricket history reveals that the "Great Man" theory exaggerates Ganguly's legacy a great deal. It was just over two decades ago that the Indian cricket team was a fairly formidable force both at home and abroad. In a span of 10 months in 1985-86, India won three overseas test series against SriLanka, Australia and England rather comfortably. At that point India was probably the second best team in the world after West Indies. The key to their success was balance. A great opener in Sunil Gavaskar, a strong middle order with Vengsarkar, Amarnath and Azharuddin, a hard hitting allrounder in Kapil Dev and a very well balanced bowling attack led by Kapil again. Things began to fall apart in the late eighties with the retirements of most of the stalwarts in this team. By the early nineties, only Azhar remained and the batting replacements for the rest simply weren't good enough, with the sole glorious exception of Tendulkar.

So, between 1989 and 1996, the Indian side was a very indifferent one, heavily reliant on one man Sachin Tendulkar to put the runs on the board everytime it toured abroad. No wonder we won zilch outside the subcontinent during that period. 1996 was a transformational year. Three very good batsmen debuted for India that year - Dravid, Ganguly and Laxman. They filled a gap that had remained ever since the retirements of the batting bulwarks in the eighties. Indian performances outside the subcontinent improved remarkably from that year onwards.

Now, the natural question would be - why did the Indian team win so little abroad between 1996 and 1999 despite the much improved batting order? Why didn't we start winning until Ganguly took over captaincy? I attribute that mainly to chance more than anything else. We should have won in England in 1996 when we were clearly the better side after the first test loss (Dravid and Ganguly did not play in the first test). We were up against a very strong SA side in 1996 (possibly the best eleven South Africa ever assembled since its return post apartheid) and yet we nearly managed to win the third test at Johannesburg. We were very unlucky with the umpiring decisions in Australia in 1999. The series was nowhere near as one-sided as the 3-0 scorecard suggests.

Now, let's examine Indian overseas results after Ganguly took over captaincy. 7 of the 15 wins overseas since 2000 have been against Zimbabwe and Bangladesh. The Indian team of the mid/late nineties didn't get to play that many games against these teams. 2 more wins have been versus Pakistan, a country we didn't visit during the nineties. The series draw in Australia in 2003-04 was against an Australian team in transition, with McGrath and Warne injured. And we lost series in West Indies, Srilanka and South Africa with Ganguly at the helm.

So, it's quite clear that the "Great Man" theorists have got it wrong here. Yes, we are performing better overseas than we used to. But the seed of this improvement was planted in 1996 and not in 2000.

Moving away from cricket, we find "Great Man" theorists at work everywhere. Alan Greenspan is often hailed as the greatest of all central bankers on the basis of the remarkable performance of the American economy during the eighties and nineties. What's often overlooked is that Greenspan's period at the helm was also marked by the personal computer revolution and the internet which drastically improved the productivity of the American economy and helped rein in inflation. Funnily, Greenspan gets the credit for what was largely the handiwork of the impersonal force of technology.

Labels: cricket, history

Thoughts on banking

Prof. Jayanth Varma seems to hold a view similar to what I wrote in the previous post. Securitization has little to do with the current crisis. Here's the link. Ofcourse, a fiasco like AIG probably wouldn't have happened but for the misuse of Credit Default swaps. However, it isn't wise to pin the blame on CDS product per-se, especially when the infrastructure to support it is inadequate. The CDS market is mostly OTC. In the absence of an exchange that bears counterparty risk and ensures liquidity, credit derivatives were unlikely to be successful.

The professor's remarks on the basic unsoundness of a bank driven financial system were quite provocative. Ideally, a credit intermediary would want to borrow long and lend short (who wouldn't!). However, no saver wants to lend long and no investor wants to borrow short. As a result, the banking system is forced to resort to very high leverage levels to make its business model viable.

Now, the most facile solution is to do away with credit intermediaries (banks) and move towards a world where credit allocation happens entirely through financial markets. Securitization is a step in that direction. In an idealized version of that world, every credit-seeker, be it an individual or a business, will issue a bond. The prospective lenders will make the investment decision based on the borrower's creditworthiness (say his FICO score). Sounds very good.

However, there is a hitch. For such a system to function, it is important that we have borrowers and lenders who are willing to borrow and lend respectively over an identical timeframe. That's seldom the case since most reasonable people want to borrow long and lend short. Which is why we have highly risky institutions called banks with humongous leverage levels :(

To do away with banks would imply a considerable shrinkage in the economy's capacity to supply credit to those who need it. To persist with them would mean many more financial crises similar to what we're witnessing.

Labels: economics

On Financial Meltdowns

Frederick Bastiat, the nineteenth century French economist, once authored a memorable essay aptly titled 'What is Seen and What is not Seen' in which he said that the unintended, often invisible consequences of an event tend to be overshadowed by the more obvious effects. We are so preoccupied with the visible problems resulting from an event that we completely overlook the much more darker possibilities that might have unfolded had the event not happened.

The current financial meltdown is a classic example. Large, hitherto formidable, investment banks have succumbed, marking what's clearly the worst financial crisis in atleast a generation. Pundits of all hues have been quick to demonise financial innovation (read CDOs and derivatives) as the prime culprit. However such an inference is incorrect since it is based on the faulty assumption that there would have been no crisis in the absence of the much maligned financial products.

The seeds of the current crisis were sown by the discretionary monetary policy of the Federal Reserve which kept interest rates too low for too long by overreacting to the economic slowdown in 2001. The fact that Asian central banks were propping up the dollar and suppressing long-term interest rates by investing in American bonds did not help matters. The abundance of liquidity and the availability of easy money triggered a huge demand for credit among those who had hitherto not entertained notions of taking on debt and successfully servicing it. When the rates eventually started increasing circa 2005, defaults started piling up and the banks had to face the music.

Now, all of this would have happened regardless of the sophistication of the financial products in place. Securitization is essentially a tool for managing risk. No...it doesn't help us get rid of risk. But it ensures that the risk is borne by those who are most capable of bearing it. Imagine a world without securitization and derivatives. A more traditional world where banks borrow short from depositors and lend long to individuals and businesses. In the event of widespread defaults, the risk would be borne by those who are least capable of bearing it - the small time depositor, the average Joe on the street who has placed all his lifetime savings in the neighbourhood bank. Bank runs would have ensued thus contracting the money supply in the economy. What's worse, many depositors would've lost savings of a lifetime. This is precisely what happened in the early thirties during the Great Depression. The amount of money in the economy declined remarkably and the size of the economy shrunk by almost a third in a couple of years!

Thanks to securitization and the widespread use of derivatives, bank runs are now a thing of the past. The real economy continues to grow at a reasonable rate despite the carnage in the financial sector. Yes, there will be job losses resulting from bankruptcies. But the ones affected belong to the highly skilled, educated and affluent section of the workforce who are extremely employable and can afford to make ends meet without a job for a few months atleast.

Commentators who cannot look beyond the obvious claim that the current crisis is an indictment of free markets and financial innovation. They cannot be more wrong. The crisis is infact reason enough for us to celebrate the virtues of financial innovation, which have helped insulate the real economy and also ensured that the risk is NOT borne by the more vulnerable sections of society.

Postscript :
Bank runs are now a part of our economic mythology - a curiosity from a bygone era that can only be recreated in movies. Here's a clip from the classic Frank Capra film, It's a Wonderful Life that illustrates a bank run :)

Labels: economics

Blurbing an epic

It is often said that Indians don't have a flair for marketing. A line in the first parva of the great Indian epic - The Mahabharata, suggests that our forbears had a genius for advertising that would be envied by many a book publisher today. Here it is -

"What is found here, may be found elsewhere. What is not found here, will not be found elsewhere."

What a way to blurb a book! You just have to pick up the book after reading this most extraordinary advertisement :)

Labels: books, mythology

On Plays , Movies and Hitchcock

Alfred Hitchcock once said that the silent movie is the purest form of cinema. The first time I read this quote, I dismissed it as a nostalgic remark of one who yearns for old fashion to return. It seemed ridiculous to claim that the addition of dialogue could detract anything from a film.
In retrospect, I think the reaction betrayed my lack of appreciation of the differences between theatre and moving pictures.

A play is a form of literature, notwithstanding the fact that it is primarily meant for performance rather than reading. Its success hinges almost entirely on the script penned by the playwright. The art of the Cinema on the other hand is not tied to language. It is essentially a montage of moving pictures that aims to provoke emotions among the audience. Silent pictures fulfil this criterion admirably. Unlike a play, a silent picture is universal in its appeal. Unlike a play, it influences the audience not by means of dialogue but by enabling the viewer to draw connections between a sequence of moving frames. It is no wonder that Charles Chaplin was the most recognizable face in the world in the twenties and thirties as his brand of pantomime transcended the barriers of language and culture.

However, the distinction between cinema and theatre became blurred with the introduction of sound in the late twenties. The cinematic style pioneered by silent film went out of fashion. Films became increasingly talky with a greater emphasis on dialogue and the performance of actors than on music and cinematography. Hitchcock, a director who came of age in silent films during the twenties decried this -

In many of the films now being made, there is very little cinema: they are mostly what I call "photographs of people talking" . . . One result of this is the loss of cinematic style, and another is the loss of fantasy.'

The difference between a play and a movie became very apparent when I rewatched a couple of old favourites last week - Maltese Falcon, a fast paced film noir starring Humphrey Bogart, and Rear Window, one of Hitch's evergreen favourites. The former, though a fine yarn with superb performances, is not cinema. It is essentially a play that heavily relies on dialogue to convey the plot. Rear Window, in contrast, is a film driven almost wholly by visuals. Though it contains a lot of dialogue, it is possible to comprehend the movie in mute. Dialogue is used mainly to impart humour and develop characters and not for explaining the plot.

The coming of talkies also prompted filmmakers to focus more on content than on style, a development that was diametrically opposed to Hitch's 'content doesn't matter' dictum. Dialogue was used as a medium to explore themes that would've been beyond the reach of silent doyens like Murnau. Hitch nevertheless stayed away from dramatic material and stuck to the suspense/mystery genre as it enabled him to give full scope to his cinematic style. Ofcourse, he paid a heavy price for it as the Oscar Academy preferred substance over style and assiduously avoided his films every year.

The tendency to celebrate substance over style still very much persists among critics and moviegoers. This is especially noticeable in India where off-beat serious movies like Taare zameen par are glibly hailed as masterpieces with little regard to their actual cinematic merit. Whereas exceptionally well made light comedies and thrillers such as Bheja Fry and Johnny Gaddar seldom enjoy similar critical adulation or comparable box office success.

The first question audiences invariably pose while deciding to watch a movie is - "What is it about?". I wish they'd rather ask "How well made is it?"

Labels: movies

More on the Rupee

There still isn't a consensus on the ideal future course for Indian currency policy. Today, Surjit Bhalla in the Business Standard laments the adverse impact of the rupee appreciation on the economy-wide growth figures in general and the Indian exports in particular. Though this might be true to some extent, we can actually do something about it only if the following conditions hold

• The RBI is in fact pursuing a strong-rupee policy
• If it makes up its mind, the RBI can actually keep the rupee at a much lower level

However, both these statements are untrue. The central bank has actually been struggling hard to keep the rupee down over the last year with limited success. Thus, the rise in the rupee has been despite the RBI policy and not because of it.

In the wake of huge capital inflows, the RBI typically undertakes large-scale purchases of US Dollars in the currency market to keep the rupee down. However, currency market intervention inevitably leads to increases in liquidity and acceleration in prices. To suck the excess liquidity out of the system, the RBI sterilizes its intervention by issuing government bonds. But sterilization is no magic wand. Large scale sale of government securities increases interest rates and tightens credit conditions. Moreover, the interest payable on these bonds constitutes an enormous burden on the exchequer.

The RBI's experience in Dec 2006-Mar 2007 clearly illustrated the problems created by the weak-rupee policy. Call rates shot up to astronomic levels. To bring them down, the RBI resorted to partial sterilization which resulted in an inflation scare. Eventually, the RBI had to ease its dollar purchases and let the rupee appreciate in order to retain some semblance of control on inflation and the credit conditions.

As Milton Friedman once quipped, there is no such thing as a free lunch. The cost of pursuing a weak rupee policy, amidst strong global pressures, is enormous. Successful pegging of the exchange rate will either entail the loss of monetary policy independence or the imposition of draconian capital controls. Neither of the outcomes is desirable or viable.

Instead of trying to have a currency policy, the RBI should be focusing on setting up a vibrant currency derivatives market that will mitigate some of the distress caused by a free-float exchange rate regime.

Labels: economics