by Raj Belgaumkar
On the twentieth anniversary of a momentous day in my life, I see two historical bookends:
Sep 11, 2001, one that changed everything while I was sitting at my desk on the 46th. floor of the World Financial Center, in downtown New York, separated by the West Side Highway from the World Trade Center. The first plane struck One World Trade Center (North) at 8:46 am and the second one hit the Two World Trade Center (South) at 9:03 am. It was horror. The rest of that day was recounted in Remembering 9/11 | All About Belgaum
August 31, 2021, nearly twenty years later a second one, was the day that the last American soldier left the soil of Afghanistan and the Taliban were back in power. The US had abandoned that region in 1989 once the Russians had been driven out and yet we’re back there since 2003, because of Sep11.
A deep dive into the past can inform one of why things traveled in the directions they did and provide an assessment of where things could (not are) beheaded.
It is now apparent, in hindsight, that the Cold War allowed the world and its reigning two superpowers to keep a lid on certain matters and ignore the ferment that was festering underneath. Various monarchies and autocrats like Sadat, Saddam Hussein, and Gaddafi were allowed to thrive since oil supplies were to be secured continuously and reliably. The first hint that this could backfire was provided by the ouster of the Shah of Iran, and yet, not much changed for the rest of the Middle East. Someday, the dam masking the reality of misrule, bad governance, and autocracy had to break. It did in the form of an attack on the US on Sep11, using religion as the glue to bind the foot soldiers.
The US, thanks to the heady times of the 90s, took its eye off the ball in discerning deeper signs of impending trouble despite a warning it received in 1993 in the form of an attack that took place in the parking lot of the World Trade Center in downtown New York. Terror had visited the shores of the US. An audacious attempt, plotted and masterminded by a determined adversary, was made that day to blow up a great symbol of American Capitalism. The US had earlier dragged the USSR into an arms race and beggared it. Now, this new shadowy non-state ideological adversary of the US had fired the opening salvo in a war that would see the US spending trillions of dollars in a haphazard zig zag strategy with four-year cycles against an enemy that operated in intergenerational time frames at the civilizational level.
It was on Aug 6, 1988, that I landed at JFK in New York City and settled into Normal, Illinois, as an MBA student at Illinois State University a few weeks later with a detour in between at my aunt Padma’s place in Beaver Creek, Ohio.
The US stock market had crashed in October of 1987; the “Greed is Good” era espoused by Michael Douglas’ Gordon Gekko character in the movie Wall Street appeared to be at an end with convictions of folks like Ivan Boesky and Dennis Levine. The leveraged buyout (LBO) era greatly helped by junk bonds pioneered by Michael Milken at Drexel Burnham Lambert was stopped in its tracks by Rudy Giuliani using RICO statutes generally reserved for mob bosses. The Savings and Loan Crisis involving small banks and billions of dollars in non-performing real estate assets was reaching its denouement. Reagan, the formerly B-Grade actor who became the sweet-talking messiah for conservatives had convinced his acolytes at home that it was necessary to starve the beast (the government) to usher in a utopia for all on the bedrock of tax cutting that would magically, thanks to the Laffer Curve, lead to higher tax collections overall. These were heady times for a student of Finance.
Japan was threatening to become what China is today to the US, economically. The Japanese had already acquired Firestone Tire & Rubber, Columbia Pictures and significant real estate. By 1989 Mitsubishi acquired Rockefeller Center in the heart of midtown Manhattan. The Nikkei peaked at approximately 39,000 in that year. A lot of Management literature was about the Japanese way especially since Toyota and Honda had managed to mass-produce technically sound, elegant, and reliable cars that Ford, GM and Chrysler simply could not.
And yet, despite all this turmoil, the world around us seemed staid and operated at a rhythm that appeared manageable with the occasional economic shocks. The Middle East, allowed by superpowers to misrule their people, produced oil reliably for the world’s insatiable demand. The US and the USSR engaged in a low intensity cold war. China was just beginning to show signs of economic progress under the practical and single-minded Deng Xiaoping. In sum, the world was a fine place.
There were a few unconnected events in 1989 that have turned out, in hindsight, to be harbingers of the next major chapter of world history.
George HW Bush, helped by the Reagan aura, and Lee Atwater’s no holds barred tactics that were to be the playbook of the Republican Party that was taken to its logical extreme in 2016 with Trump’s election, took oath of office as the 41st. President of the US on 20/Jan/1989. His role was to manage the peace and prosperity he inherited from Reagan.
The Soviets, defeated by the Mujaheddin (fostered since 1979 by the US and our neighbour), left Afghanistan, that graveyard of empires. The Berlin Wall, a key remnant of the Cold War, was brought down by German citizens on either side. The Soviet Union eventually broke up and countries like Estonia and Lithuania became independent. The former Eastern European Countries, Czechoslovakia, Poland and Hungary were out of the Iron Curtain finally. Freedom was spreading. Perestroika and Glasnost, terms championed by Gorbachev, we’re finally seeing the light of the day.
Yet, in another setting, Chinese students who protested in Tiananmen Square were mercilessly beaten back into submission thereby confirming the inherent undemocratic and totalitarian impulses of the CCP. Hong Kong and its freedoms would eventually turn out to be a mirage. Taiwan, despite being an economic colossus, is now hoping against hope that the CCP does not turn to its worst impulses, and in that case, will have to be helped by allies.
Afghanistan and our neighbor, having served their roles in the play between great powers from 1979 to 1989, were left to their devices, and thanks to the benign neglect of these two, a radicalism festered and came to bite back the US on Sep 11, 2001. The Soviets, looking to reclaim their perch reposed their faith in strongman Putin, a wily former spymaster, by doing away with a bumbling Yeltsin.
As students, we were so naive to believe that the world was naturally going to be a better place. It turns out, history doesn’t work that way. That the timelines and desires of great superpowers do not follow evident linear paths is so clear now. The rhythms of the Cold War were eventually replaced by newfound realities.
A year after arriving in Normal, I transferred out to Baruch College in Manhattan, the city that my friend Mohan and I would dream about often while discussing Engineering Drawing problems on my study desk in Belgaum. E-mail in the university system was something that we were introduced to. It was, in 1989, a world without the world wide web or browsers, let alone an iPhone. Rupert Murdoch’s Fox News and its brand of divisiveness were yet to be born.
It was sometime in August of 1990 that Saddam Hussein, under crushing debt for arms purchases for the war with Iran, decided to invade Kuwait and claim it as part of Iraq. My parents were in Kuwait at that time, and I was watching events unfold on CNN and it was surreal for me to tell my father over the phone of impending danger. That was the last I spoke to them for a few months. They had to drive through Kuwait and Iraq to Amman in Jordan from where they got back into India thanks to Mr. Ibrahim of Goa. The US put together a coalition that extricated Kuwait from the clutches of Saddam. The Middle East has never been the same since.
My first job after the MBA degree was with a wholesale bank located on the 103rd floor of the World Trade Center (WTC) and it was such a thrill each day to take the train from Hoboken, across the Hudson River, into the underbelly of the World Trade Center and ride up the escalators to the WTC and then take the first set of express elevators to the 78th. floor followed by elevators to the 103rd. floor. For a boy from Belagavi, this was bliss.
On February 26, 1993, I was out with my boss in Flushing, Queens, to meet with a bank there. After our meeting, it was lunchtime, and I suggested a Diner to Frank since I had lived in Flushing for some time and knew this one to be a good one. When we got back to the WTC it was all commotion. A blast had taken place in one of the underground parking lots at the WTC. Six people died that day.
The business of America being business, the nineties under President Clinton was all about the business of spawning the next technological revolution to succeed the Computing Revolution of 50s and 60s. The era of connected personal computers via America Online, Netscape, the Internet, the World Wide Web, Cell phones, etc., and related companies defined the market. The dot-com boom was making its presence felt in all aspects of the American being. Amazon was established in 1994, went public in 1997, and was selling books online. Deficits were tackled, neighborhoods were gentrified, and even New York City (under Mayor Giuliani) became safe. As Clinton left office at the end of 2000, it seemed as if America had nothing to worry about and things were back in order. Greed, ostentation, and insouciance were back in vogue. The Dow and the NASDAQ were at all-time highs. Facebook, Google Search, and Social Media were yet to become powerful forces to reckon with. The stock market bubble collapsed in the following year (2001).
Despite the blast in 1993 that failed to blow up the World Trade Center, the US had lured itself into the belief that matters were under its control. The superpower ignored signs that pointed to the determined and shadowy nature of its adversary. Eight years later in 2001, the US would pay the price for this misstep and spend the next twenty years exhausting trillions of its precious dollars on a country that was, unlike Japan or Germany of the post-WWII era, simply not amenable to change.
Therefore, what learnings have I finally matured into, subject to the humility that these learnings will further evolve:
- Europe, of a very egalitarian state of mind for having rebuilt itself after World War II, mostly, via a social welfare model, will most probably see its inherent character irretrievably changed thanks to the waves of migration from troubled parts of the world, and its low fertility rates. It appears, barring a few pockets, to be a tired giant without fire in the belly for the battles ahead. A journey that began in the 1500s appears to be out of gas.
- The US, having come perilously close to disaster after Vietnam and Nixon, had a brush with it once again with Trump, and the insurrection of Jan 6, 2021. Its deficits, in addition to its humungous fiscal one, are many including creaking infrastructure, and lack of access to college level education for its citizenry at an affordable cost. It is likely that the current President (Biden) might be lucky to get bills passed to address some of these problems. However, the biggest problem appears to be the hyper partisanship that is weaponized, manipulated and amplified by Social Media, a problem that needs to be addressed. The idea of America is being corroded by the abuse of technology, with the constitution as a fig leaf. If wearing masks can be weaponized into a political issue, something is really wrong. The 1%, rather than spending money on lobbyists to preserve their tax breaks, will have to work hard to shape the debate in favor of trusting government and American institutions as a means of improving the quality of life for all.
- China, despite the virus from Wuhan, continues to march from strength to strength economically. However, its unfavorable demographics and political unwillingness to let go of its propensity to control an economy of the size of China will prove to be its nemesis. It does appear that the US and China will end up with a stalemated relationship, somewhat reminiscent of the Cold War. Its actions toward Taiwan will be the ultimate barometer of its political designs.
- India, despite the COVID-19 setback, appears to have a decent chance of improving the quality of life of most of its citizens at an unprecedented scale, somewhat like what the Chinese accomplished from 1979 to 2000. Our time on the world stage will come. Right now, with our favorable demographics, it is the time to put our heads down and work relentlessly to improve the economic fortunes of all.
The Freedom Tower in Downtown New York and the two water bodies that cover the footprint of the two towers that came down on Sep 11 are a great testimony to the resilience of the people of the US. It is time now for the political leaders to think differently for the sake of the nation. Else, the long road to its loss of status as the reigning superpower will become more certain. As many historians have said, such transfers of status rarely come peacefully for the rest of the world.
by Raj Belgaumkar, Founder/Principal, Seneca Consulting