Since it’s Halloween, and I have not yet overdosed on Starburst and Snickers, I started to wonder how what role fear has in 2007. We seem to want to be scared, which is why horror movies are so popular, although I am not a fan of torture-porn flicks like Saw and Hostel. Catwoman was scary enough.

But what about using fear for non-entertainment purposes? It can often be used in situations where it may not be the best approach. Like a parent who warns, “Study hard, or you won’t get into the Ivy League and you’ll have no future.” Well, I studied hard, didn’t get into the Ivy League, and am doing OK.

It may sound naïve, but hope really is a better sales pitch than fear. And if all you have to offer is fear, or it’s close relations such as cynicism, paranoia, etc. – you start to become unpleasant company after awhile.

Fear seems to be ascendant these days, and from all corners. Neocons are trying to scare us that Iran is bent on world domination, despite the fact that it cannot even dominate their own neighborhood or refine its own oil. Fareed Zakaria does a thorough job of taking down that argument here.

Some environmentalists are insisting that doomsday is right around the corner – a message I’ve been hearing since Happy Days was still on the air. And if a guy such as Bjorn Lomborg argues that the challenges, while real, can be dealt with by abandoning hysteria, he is branded a heretic with a level of ferocity that he could be a modern day Galileo up against the Catholic Church.

From a poli-sci POV, are certain kinds of democracies more prone to fear-mongering than others? Indian political and economic reforms are often ham-strung by fear of consequences. Some Indian politicians fear loosening labor restrictions because it will lead to abuses by MNCs. Or they fear allowing modern supermarkets to open up, because of the fear it will drive small shopkeepers out of business. In the U.S., we fear tainted meat and lead-laden toys, but not fatty foods or excessive drinking. France is afraid of the 40 hour workweek.

So, why is it that at a time when living standards and education levels are generally rising that fear is too often the first tool that someone uses to make their point? It might be easy to simply say “politicians” but they often first gauge the public mood, and then plan out a strategy. Are there steps we can take to lower the market value of fear as an instrument of persuasion? Now excuse me, I have to fininsh my work early enough so I can get home before some kids egg the house.

Prime Minister Manmohan Singh of India, even though he has forcefully staked his legacy on a landmark nuclear agreement with the United States, made it plain on Friday that his government would not invite early elections by confronting its Communist allies in Parliament over their opposition to the deal. “What we have done with the United States — it is an honorable deal, it is good for India, it is good for the world,” he said at a conference here. “I do attach importance in seeing this deal come through, but if it doesn’t come through that is not the end of life.”

Not ready for the world stage may seem a harsh assessment. After all, many critics of the deal pointed out that even if it did go through, the actual electricity generated would not meet India’s needs. Indian security experts (that were not reflexively anti-American) pointed out that they were uneasy about how involved America would be in setting Indian nuclear policy.

I do not dismiss those concerns out of hand, but the deal was something more – it was an acknowledgement of changing global realities. The. U.S. invested a lot into the deal, being criticized by the non-proliferation community as being reckless, by some paleo-cons as being too indulgent with India, etc. But it was, in a sense, a bet by the U.S. that India was going to take a bigger role on the world stage. America bet on the wrong horse.

By failing to get the Communists in line, PM Manmohan Singh has shown he is an incompetent who cannot get things done. Under his watch, there have been no major arrests in high profile terrorist attacks, such as the Bombay train blasts of 2006 or the recent blasts in Hyderabad. Naxalites have free reign over parts of rural India. In the immediate neighborhood – the Maoists are close to seizing control in Nepal, Bangladesh is under military rule, and Sri Lanka is looking to Pakistan for weapons to deal with the Tamil Tigers. Pakistan has been a better neighbor lately, but that may have to do with its preoccupation with internal matters than any new thinking on their part.

On the economic front, reforms have stalled. With millions of young workers entering the labor force every year, Singh has failed to enact labor market reforms that can make those jobs available. Instead, all Singh managed to do was threaten the private sector with caste quotas. All that will do is ensure that the private sector will be as wasteful and unproductive as India’s public sector.

On the education front, primary and secondary education are still woefully underfunded, with absentee teachers collecting money for classes that are not taught. Rather than deal with this, Singh offers to expand quotas at university level, and increase the acceptance rate – which is likely to lower standards.

By being adamant in their opposition to the deal, India’s Communists have blocked India from having access to Western technology that their paymasters in China already enjoy. Someone is popping champagne in Beijing, seeing their Indian puppets carry out their bidding with such effectiveness.

When Singh first became PM, it was thought that since he was not a career politician, he would not be as beholden to special interests. He’d handle the policy, and Sonia Gandhi would handle the politics. By not having any experience on how to keep parties in line, Singh was a poor choice for prime minister. Nitin Pai at The Acorn is calling for his resignation.

Am I over-reacting? I’d like some feedback from the India-based readers.

What I’ve always wondered though, is how prominent should finance be in a nation’s economic profile? You can even go down to the city level – how much role should Wall Street play in New York’s local economy? What role do the futures exchanges play in Chicago today, and what role will they play 20 years from now? For a developing nation like India, how prominent a role can financial firms play? Should the rules governing their behavior be different than in a developed country? This October 1 issue of Time has an article, Banking on India which reports how Goldman Sachs entered India in 2005, starting out by renting a Hilton hotel suite in Bombay, and two years later, had a hand in two of corporate India’s biggest deals – Vodaphone buying Hutchinson Essar, an Indian cellphone company, for $11 billion and helping ICICI bank do another IPO for $4 billion. The head of the office, L. Brooks Entwistle, exhibits an infectious enthusiasm about the opportunities in India. He has good reason to be. According to the article,

With an economy growing at about 8% a year and corporate earnings a robust 25%, India has become a must-see for multinational investment banks looking for big, bold corporate mergers, acquisitions and financing deals outside the U.S. The country’s total market cap reached $1 trillion earlier this year, up from just $280 billion five years ago. Companies in India’s technology and financial sector are booming, and the world’s investment bankers are paying court. Banks used to “come to India about once a decade, get spooked and pull out,” says industry analyst Janmejaya Sinha of Boston Consulting Group. This time around, “it’s going to take more than parachuting in.”

While there will be beneficial effects on other areas of Bombay’s economy, I can’t help wonder if there wouldn’t be a bigger bang for the buck if there was more attention given to more basic sectors – manufacturing and transport, for starters.

The September 15 issue of The Economist has a special report on financial centers. In developed cities like New York and London, there are already complaints that housing costs are increasingly out of reach, as wealthy finance types price teachers, cops, drivers out of the market. One of the articles notes

Growing prosperity, a bigger tax haul and the cosmopolitan lifestyle of young financial professionals have injected new vitality into places like London, New York and Hong Kong. Yet there is also growing inequality, a steep rise in the cost of living and increasing pressure on middle-class families who are having to live ever farther away from city centres. The income discrepancy between haves and have-nots in the world’s financial capitals has not been this great since America’s “gilded age” in the late 19th century, says Susan Fainstein, an expert on urban issues at Harvard. The trend began in the 1980s and has become stronger, despite temporary blips such as the dotcom bust in 2001. A report on wealth inequality in Britain in July found that the gap between rich and poor is now bigger than it has been for 40 years, with the proportion of middle-class households shrinking.

India already has a substantial disparity of wealth, and while there is always some in a market economy, shouldn’t public policy be geared towards lessening inequality? It would certainly make other reforms more palatable if voters can see that the benefits of reform are not going to a select few.

Of course, India’s politicians often do more harm than good, by not repealing counter-productive restrictions on how much land can be bought by one person or entity, and keeping in place labor restrictions that discourage companies from hiring. Like information technology, India’s financial sector seems to benefit from the fact that most Indian politicians don’t know how it works, so they’ve ignored it. But as India’s financial sector continues to grow, and profits increase, it is bound to attract attention. Hopefully, that attention will be to build on existing strengths, rather than simply redistributing the existing wealth – which wins elections, but does not create profits.

Religion and politics in India make for a combustible combination, but a recent article in The Wall Street Journal on Azim Premi entitled Secular Engineer: How a Muslim Billionaire Thrives in Hindu India raises the matter of religion and economic advancement. The article profiles Premji, and gives a brief history of Wipro – transforming it from a seller of vegetable oil to the IT powerhouse of today.

A couple of things about the article rubbed me the wrong way. Part of it was the mention of religion in the title. Does anyone know of the religious background of billionaires from China, Japan, or Western nations? Only recently did I find out the owner of the Marriott hotel chain is a Mormon.

The article repeats one of the standard explanations of why Indian Muslims are under-performing their neighbors – that after partition, the best and brightest Muslims left for Pakistan. If that is the case, then Pakistan should be further along the development path than India, and there should be a number of world-beating Pakistani (or Bangladeshi) companies. Such is not the case – while both nations certainly have wealthy families, they are more likely to have garnered that wealth through methods usually seen in many developing nations – graft, monopolized markets, government favors, feudal relationships, etc.On the matter of prejudice – while there is prejudice towards Muslims in India, is that the main reason that they have not advanced? After all, there is no Hindu majority holding back Muslims in Pakistan or Bangladesh, yet these two nations have not produced a Premji or Yusuf Hamied?

Premji’s success is dismissed by Munir Ahmed, an imam who runs a madrassa about 30 minutes from Wipro’s Bangalore offices.

The madrassa’s imam, Munir Ahmed, says that for his students, a future as self-employed shopkeepers or peddlers is preferable to seeking formal work at a large company. “A job is like being a slave,” Mr. Ahmed chuckles, adding that his graduates are in great demand as teachers in other madrassas.

That’s self-serving nonsense – would he be so quick to dismiss Indian Muslims who have succeeded in high profile areas like film and sports? Secondly, plenty of the Indians that go to do back-breaking work in the Persian Gulf are Muslim. Is the imam suggesting that given the choice between being a construction worker in Dubai and answering phone calls in an air-conditioned office in Bangalore, that a Muslim will choose the former?

The article makes a statement that I find a bit hard to believe:

In southern India, where most of the country’s technology industry is based, Hindus speak a number of regional languages and are more likely to study English.

Had he gone to Calcutta, the reporter would have come across plenty of Bengali Muslims who speak English. Even though IT is primarily in the South, it attracts workers from throughout the country. He must not have come across Tamil Muslims or Malayalam-speaking Muslims. And considering that Hindi and Urdu are largely the same spoken language, how would language prevent a Muslim from becoming, say, a receptionist at an IT firm?

The article does end on a hopeful note:

Bangalore’s Al-Ameen college is run by a movement that seeks to modernize the Muslim community. About 360 graduate and undergraduate students, both men and women, are currently studying for computer-science degrees. Most are Muslims, including pious young men with long beards and women with an Islamic hejab that covers their hair, though not their faces. Many graduates have already gotten jobs at companies like Wipro and Infosys, says the college’s principal, Mr. Javeed, and have started to earn salaries well above those offered outside the booming technology industry. “This has brought awareness to the Muslim community about the need to pursue higher education,” he says. “People are beginning to realize that education is power, that education is money, that education is an opportunity.”

Indeed, Premji is a far better role model, for any Indian, than someone who tells you the best you can hope for is what your father did before you, and what his father did before him.

How does this relate to South Asia? Well, many ethnic groups use the Jewish model as something to structure their own lobbying efforts. But becoming too dominant in a region where America has different, sometimes conflicting interests, would harm both the U.S. and India. Secondly, in order to wield influence effectively, it is sometimes necessary to cut off internal debate, so as to present a more united front to Congress. In the case of the Israel Lobby, M&W argue the viewpoint it presents does not accurately reflect the varied opinion of Jewish voters in the U.S. So, an Indian lobby wishing to emulate groups like AIPAC or the ADL may wind up silencing dissenting voices that should be heard.

For example, after the attack on India’s parliament in December 2001, there was plenty of domestic pressure on the government in New Delhi to strike back, if not at Pakistan directly, then at a minimum some terrorist training camps in the Pakistani portion of Kashmir. If there existed an Indian lobby that focused solely on Pakistani-sponsored terrorism, which was as dominant as the Israeli lobby, you had the risk that the U.S. would not have tried to restrain India, thereby making a bad situation even worse. Instead, the U.S. managed to pull India and Pakistan back from the brink. Arguably, Pakistan’s nuclear deterrent was a more immediate reason that India did not strike, as discussed in Sumit Ganguly’s and Devin Hagerty’s Fearful Symmetry, but lack of domestic pressure politics allowed the Bush Administration to approach the crisis with a greater leeway than it has in the Mideast. The Bush Administration was able to offer enough incentives to both Islamabad and New Delhi to cool down the rhetoric. In Pakistan’s case, it was being designated a major non-NATO ally, a status enjoyed by South Korea and Australia. In India’s case, it was the nuclear deal. Another calming factor was now that India is “back-office to the world”, it had more to lose by going to war.

In contrast, when the Democratic-controlled Congress drafted spending bills for the Iraq war, it withdrew a section that would have required the President to seek Congressional authority before it undertook any military action against Iran’s nuclear facilities. AIPAC put tremendous pressure on House Speaker Nancy Pelosi, and that portion of the bill was dropped. For an administration that is stuck in Iraq, allowing it the freedom to bomb Iran does not promote stability in the region or Israeli security.

While Indian American lobbying efforts will probably increase in the coming years, it seems that Indo-American relations will proceed along two tracks. In matters of regional security, lobbying efforts will take a back seat to old fashioned self-interest, by both India and the U.S. The increased military cooperation between India and the U.S. seems more focused on regional stability and not against any one country. For American hawks that worry about a rising China and see India as a counterweight, keep in mind that the level of trade between India and China is increasing rapidly. Indians are not likely to be foot soldiers for American adventurism in the region, but having been beaten by China once on the battlefield in 1962, and knowing that Pakistan’s nukes came with a Made in China sticker on it – India is not going to let China dictate terms. A partnership with America helps in that effort.

The second track – the economic one – is probably where lobbying by Indian Americans will be more prominent. Whether it is giving campaign contributions, or sending strongly worded complaints when candidates put their foot in their mouths, such as Obama’s camp did a couple of weeks ago – it is in the economic arena that Indian American efforts will yield results more quickly.

This is fine by me – a nation’s security policy should put its own interests first, and not worry about immigrant lobbies or, in India’s case, diasporic communities which advocate taking an extreme position, but not risking anything themselves.