The number $10.3 trillion denotes the outstanding Public Debt of the United States of America as of 17 October 2008. Just three years ago, at the end of 2005, it was $7.9 trillion, which itself was about nine times its 1980 level. Indeed, the number was lengthening so rapidly that the National Debt Clock at New York’s Times Square recently ran out of spaces. A new and longer clock is now under construction. America’s gross debt has become so huge that it amounts to 70 per cent of the country’s GDP this year.

What this means is that America has simply borrowed its way to prosperity. Paradoxically, nearly four-fifths of the borrowings that have sustained its prosperity are from foreign institutions and governments, including the Government of India, who have been investing in dollar-denominated debt instruments issued by the US Treasury. (This also means, shockingly, that the US has been fighting wars in foreign lands using other people’s money.) Borrowing has become a way of life, both for the government and the people. In an economy where interest rates were kept artificially low for a prolonged period of time, citizens were first addicted to consumerism and then to the culture of ‘living a good life’ by borrowing, as can be seen from the fact that Americans spent $800 billion a year more than they earned. An average American family owns 13 credit cards, and 40 per cent of them have a balance. Household debt grew from $7 trillion in 2001 to $14 trillion in 2008. An entire new industry of financial jugglery came into being to translate greed into profits. And this non-productive industry of ‘financial products’, and not the real industry of making physical products, became America’s primary business. Manufacturing today accounts for only 12 per cent of USA’s GDP.

Some people on Wall Street became obscenely rich by simply indulging in ‘financial engineering’, which is the root cause of the crisis that has now gripped America. In what has come to be known as the ‘Home Loan Bubble’ that has recently burst, millions of subprime borrowers (those without adequate income or assets to back their borrowings) were goaded into taking easy loans to own bigger homes, vacation homes, or homes simply as a profitable investment. Speculators kept property prices rising. Financial institutions like Fannie Mae and Freddie Mac skimmed profits in the process. However, once home prices started to decline, millions of homeowners began to default on loans. Its cascading effect has now caused the collapse of the entire financial system like a house of cards.

What we in India should worry about is why and how we imported this ‘Made-in-America’ crisis. Since the advent of liberalisation and globalisation, the rich and the middle classes in our country have chosen to believe that America is the role model for India to become prosperous. A small segment of our society indeed became prosperous thanks to a model of economic growth that relied on stock market boom, fed largely by FII inflows and speculative impulses. In tandem with the stock market boom, there was also a real estate boom, fed by selling the ‘American Dream’ to India’s wealthy class. The recently built malls and gated five-star housing enclaves even have American-sounding names. But as soon as a crisis impaired the American economy, India began to feel the heat. Sensex fell from the 21st floor to the 10th. Real estate markets have slumped even more.

The wounding effects of the economic downturn in India have not been adequately reported by the media, whose judgment of news is still guided by the ‘glamour factor’—another habit imported from America. For example, it was alright for TV and print media to highlight the retrenchment and reinstatement of 1,900 employees by Jet Airways. But where do we read or see anything about the tens of thousands of people who have lost, or are on the verge of losing, employment in the construction industry and the allied industries of steel, cement, transportation, furniture, etc? The Index of Industrial Production (IIP) shows that India’s industrial growth has plummeted to 1.3 per cent in August from 10.9 per cent in the same month in 2007. In the months to come, it is likely to become negative. Hence, a large number of people in the manufacturing sector will lose their jobs. However, since they are not as smartly dressed as the in-flight crew of Jet Airways, you will not see them on your TV screens.

Shouldn’t somebody be held responsible for this simultaneous onslaught of inflation and recession on the Indian economy? And who should it be, if not the Prime Minister and the Finance Minister? Both of them, especially the Prime Minister, sold the dream that India’s short-term and long-term interests lay in becoming a junior partner of America. Indeed, the sub-text of the Indo-US nuclear deal, on which Dr. Manmohan Singh spent almost all his time and energy, was that America, led by George Bush, was going to help India become a Great Power. This line of thinking influenced many well-meaning intellectuals who warned those opposing the nuclear deal by saying, “Why do you want to lose the support of the middle classes, who are all for India being on the right side of America?” What an irony, therefore, that in a month when the nuclear deal was finally signed, there was not much cheer in the Indian middle-classes for this ‘historic achievement’ and few takers even in the Congress party for Dr. Singh’s unbecoming praise—“People of India deeply love you”—for President Bush.

It is high time we Indians reflected on the negative consequences of being excessively influenced by ‘Made-in-America’ concepts, either in economic development or national security. It is also high time we rediscovered India’s own national wisdom in doing business and statecraft, guided by our own goals, priorities and ideals.

sudheenkulkarni@gmail.com