thenewconstructs’s blog

“3M earnings helped by swine flu mask sales”

“Bottled water global sales to cross $85 billion by 2011”

The entire family had been looking forward to the Disney World experience, and we were all excited on the plane trip from India to Florida. My daughter Samvitha, who was 8 at that time, was especially eager. But almost as soon as we landed, she took ill. This was a few years ago, at the height of the SARS epidemic, and my wife and I were very concerned.

Our daughter was bedridden our entire week in Orlando. She suffered no lasting problems – beyond the disappointment of not getting to meet Mickey and Goofy and go on the many rides – but I often think about her illness today when I exit a plane with breathing difficulties or read about the threat of the H1N1 swine flu epidemic.

From the beginning of time, we humans have taken clean air and water for granted. No more, especially in densely populated areas such as the cities in India where movie theatres, shopping malls and schools have been closed to stop the spread of the flu. Whether in the enclosed space of an airplane or in a crowded market, we are right to worry about air quality. And water quality, too: just look at the increase in demand for bottled water all over the world in recent years.

These concerns over air and water – the most basic necessities of life – are leading us to think in new ways about what is valuable in our lives. Adam Smith talked about the paradox of value, also called the diamond-water paradox. He made a distinction between “value in use” and “value in exchange.”  The things that have the highest value in everyday use, such as water, often have relatively little value in the commercial marketplace. Conversely, things that have the highest value in exchange - such as diamonds - have little practical value in terms of use.

Over the last two centuries, the Industrial Age, with its focus on scale and efficiency, has centralized agriculture and farming, bringing prices of food down quite significantly. But this is not without its costs. According to Bill McKibben in “Deep Economy,” concentrated agriculture makes us sick on a fairly regular basis.

Seventy-six million Americans fall ill annually from food-borne illnesses, 300,000 are hospitalized and 5,000 die. For instance, the cheapest way to raise hogs is all in the same place; one worker can take care of tens of thousands of animals. But this concentrates their waste in one place. Instead of being useful fertilizer to spread on crop fields, that concentrated waste becomes a toxic threat – and increases the chances of swine flu.

While it is fortunate that countries like India do not have this level of concentrated farming, globalization makes up for it. We are affected by the H1N1 threat in the same way we have been affected by the sub-prime crisis and the financial meltdown.

It is time to step back and take stock. As we look at reinventing our fundamental constructs, our idea of economic value needs close inspection. Should we start valuing what’s really valuable to our lives on this planet rather than what just makes us feel good or look good?

Should our decisions on centralization and decentralization be driven by considerations of what drives true value, rather than just efficiency? How global is too global – what global governance mechanisms do we need when we deal with systemic and globally interrelated issues like pandemics, recession etc.? These are but a few questions that we will dialog on this site.

The New Constructs is an initiative to examine our beliefs and assumptions - about life and living - that we need to reinvent in order to create a more inclusive and sustainable world. It is an opportunity for each one of us to connect, collaborate and co-create the world that we will rebuild for posterity. Please feel free to comment. We look forward to your active participation. Join the discussion on Facebook. Follow us on Twitter.

Imagine that the official length of a meter changed day to day – 80 centimeters today, for example, and 115 centimeters tomorrow. And that every country had its own measure of length – say the meter in India and the yard in the US – and the conversion rate between the yard and the meter again varied from day to day. This confusing jumble is what we have been living with for the past 38 years with one of the most important facets of our lives – money.

Being in a global business where more than 90% of our revenues come from outside India, the company that I run bore the brunt of these vagaries last year. We were suddenly poorer by more than $25 million dollars (almost 10% of our revenues), just because the pound sterling eroded in value against the US dollar. While our revenue in the UK grew in pound sterling (something our UK teams were proud of), it declined significantly in dollar terms (which made our CFO quite unhappy).

Our modern currency and exchange rate system was agreed upon by 44 countries in 1944. All currencies pegged their values against the US dollar, and the US government agreed to exchange dollars for gold at a standard rate of US $35 per ounce. In 1971, President Nixon took the US off the gold standard, leaving every currency literally floating – with no inherent value.

Money, our measure of value, was left with neither constancy nor consistency. Instead of being worth something real – a certain amount of gold – the world’s dollars, pounds, pesos, rupees and other national currencies were worth only was someone was willing to pay for them in another currency.  

That all happens today on the international foreign currency exchange, a vast market that operates around the clock around the world and produces trillions in profits for banks and their traders. Under the guise of providing liquidity and price discovery, banks and other financial institutions set arbitrary values on the different currencies – and then profit by buying and selling currencies as the prices shift up or down.  

Why should a loaf of bread or a textbook cost more in one country that another? The International Monetary Fund uses an index indicating Purchasing Power Parity, which compares the value of world currencies in the real world. The PPP shows how some currencies are undervalued against others – not because they are really worth less, but because bankers and traders say they are.  

A key premise we want to debate is whether we, as humanity, are valuing the truly valuable. The question now is whether the way we measure value has any basis? What would the world be like if currencies were actually valued according to their Purchasing Power Parity?  
Will the world be a better place if we had a single global currency – similar to the gold standard of the past or the Euro of recent times? These are but a few questions that we will dialog on this site.

The New Constructs is an initiative to leverage Connected Intelligence in realizing the Connected Age. Please feel free to comment. We look forward to your active participation. Join the discussion on Facebook. Follow us on Twitter.