Tuesday, November 11, 2014

Blog Post #103 -WIIFM(What is in it for me?) - Why Government is important? - Boiling Frog and Elephant in the room

Let's start first off with saying No one likes the government!.

That might a good starting point for most of us. What do you think about government?

The role of government is not well understood by most of us. I thought I will revisit this since my son had a project in second grade to learn about government.

Understanding Communist government, Islamic governments with Sharia Law and Monarchy with Kings ruling subjects are out of scope for this discussion (want to be politically correct! - why mess with something that are best left alone)

Let's look at the frog in the pot

The premise is that if a frog is placed in boiling water, it will jump out, but if it is placed in cold water that is slowly heated, it will not perceive the danger and will be cooked to death. The story is often used as a metaphor for the inability or unwillingness of people to react to significant changes that occur gradually.(Wikipedia)


Our governments are the boiling water and we are so deep in it . The fact is you cannot jump and run to Mars(no scheduled flights yet!). So let's face it and learn what the government can do !



Democracy! - Let's start with that and stay with that for some time.

I asked my son "Who drank tea in Boston tea party?" and Arnav promptly replied "The Fish"!

American democracy and French democracy may be best examples for democracy but what still echoes in my ears in a set a lectures in iTunesU (iTunes University) from UC Berkley where the professor said "I wonder how India with all its divisions still functions as a democracy and is not in a civil war state for 70+ years).

In a traditional democracy we have Legislative, Executive and Judiciary.

The Law maker, the Law enforcer and the Law classifier!

My 7 year old didn't miss a beat when I asked what does the government do? My 74 year old Dad would also said the same reply - "Collect taxes!" . Is that the role of government?





I am reading this book now - "Naked Economics" and the author argues why Countries rich with resources like Angola and Nigeria are non functional because they don't have a functioning government.

Nigeria and Angola are countries with lots of resources and corruption and existence of no government oversight(or no government) makes these countries poor compared to all countries without any great resources like Egypt and Morocco.




Compare this same idea to what is happening in middle east. Israel which has no natural resource is a wealthy state and competes with all the oil rich states.

What can the government do? Create magic! Create the platform to encourage people and resource to work together to benefit its people.

BYOI - Bring Your Own Infrastructure - In most countries where companies are ready to invest are asked to bring their own Infrastructure including Nigeria.

Read the ted talk transcript here from Mariana Mazzucato

Have you ever asked yourselves why it is that companies, the really cool companies, the innovative ones, the creative, new economy-type companies -- Apple, Google, Facebook -- are coming out of one particular country, the United States of America? 


In other words - why is America more innovative than Europe in this new century (21st or 22nd depending on your mindset!)

The short answer - US Government invests in platforms.  DARPA invested in Internet. NIH- National Institute of Health invested $2.7 billion in FY 1991 dollars in Human Genome Sequencing Project. No wonder US will lead all innovations in not just sequencing the genome but build on top of that. DARPA is challenging all to create drive less car which Google and Standford are competing hard.

All these are ways by which US government is investing in what is important to its people and to the world. Create internet give us away for free to the world. The companies which worked on these are all US and no wonder US companies will benefit mostly Silicon Valley.  Same is true for Genome sequencing!

Government is the Elephant in the room . We can ignore them but it doesn't hide or vanish!

Belgium has no formal government for 535 days .Read about it  here.

So ,don't think it is only the African governments. 535 days is more than after Iraq with no government than Saddam .

Without understanding the word - externality we cannot understand why we need a government !

In economics, an externality is the cost or benefit that affects a party who did not choose to incur that cost or benefit.[1]
For example, manufacturing activities that cause air pollution impose health and clean-up costs on the whole society, whereas the neighbors of an individual who chooses to fire-proof his home may benefit from a reduced risk of a fire spreading to their own houses 
(from Wikipedia)

If your neighbor installs  an antimissle system you benefit too! So, you don't want to invest and you neighbor doesn't and you get killed!



Enter the Savior the government.

If you make music or software and some one takes it and gives it free to everyone who can help you - Enter the Savior the government.

If you have a fight with your uncle who can settle that? Enter the Savior the government.

If your cat gets killed who will punish the 'bad' guy and how will you know they are bad - Enter the Savior the government.



Think about this cycle. British East India Company entered India through Chennai and Kolkatta.
and finally gave this territory to the Queen.

Companies can conquer territory for a government and government can help its people to be better! (How did he British people benefit - go back to wikipedia and Google please)

On the other hand governments can help foster and create new companies the Dutch/Netherlands has setup the environment for  Philips .Switzerland helps cheese factories, Nestle company and secret and transparent banking,Nokia was started in Finland.

On the contrary I heard the CEO (through the press) of Glaxo in World Economics Forum in "China is growing because of its government and India is growing despite every effort by its government"

What does your government do?


Keep getting government (and govern)
Sivakumar Manikanteswaran




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