Credit-constraint — the Inability to Borrow

For anyone concerned about the poor and poverty, the first task is to clearly define the words “poor” and “poverty.” Wealth and income are reasonable measures that usually serve in defining a poor person: one who has less than some defined minimum of wealth and/or income.

But that definition is not comprehensive. What if a person could borrow the money needed for an investment with a sufficiently high return such that it would be possible to return the money with interest, and still have some left over? Then the person is not poor. Meaning, anyone able to borrow is not poor. Conversely, anyone who is unable to borrow is “credit-constrained” and is comprehensively poor.

For a person to be considered poor, it is not necessary that the person have zero net worth or wealth. The sufficient condition for being poor is that one is credit constrained. Even if a person has negative net wealth, as long as the person is able to borrow, the person is not poor.

For example, consider a person who does not have money for acquiring a particular skill that would enable him to earn a very good living. Suppose further the person could borrow the money needed and be able to pay back the loan from the higher income from the acquired skill. When he borrows, his net wealth (his assets minus the loan liability) will actually be less than zero. Yet he will not really be poor because it will only be a temporary situation. In this case, he creates assets (acquires the skill) using the loan that later enables him to repay the loan.

We are familiar with many cases of “wealthy” people who at some point in their lives had negative or zero wealth but were able to borrow (sometimes to the tune of hundreds of millions) that allowed them to build up their fortunes and repay the loans. Even with a negative net wealth, they were not poor because they were not credit constrained.

So what is the main implication of this definition of being poor? It is this. An efficient way to help those who are poor is to somehow release the credit-constraint they face. Economic efficiency considerations recommend that.

But what if the poor are being denied access to wealth that they have a legitimate claim to, and which they need? Then it would be a moral imperative to return that wealth to them.

The poor of India have a share of the public wealth of India. It is economically efficient and morally right to give them that wealth. It has to be done now, and not in some indeterminate future. [Previous post in this series: Public Wealth Return.]

Shourie’s Address at Mumbai on 12th September

A number of Rotary Clubs of Mumbai had invited Shri Shourie to address them on the evening of Wednesday 12th Sept, 2018 at the Yacht Club in Colaba. The following is a report of what he said. I lay out the main points. I believe I have faithfully recorded the ideas. 

For the record, I admire Shri Shourie immensely. I respect him for his integrity, knowledge, wisdom, scholarship, work ethic, and his tireless dedication to the nation. A brilliant raconteur, his wit never fails to entertain even as he informs. Also for the record, the following should not be taken as endorsed by him. It’s my recounting and could differ (but not substantially) from what he actually meant. With that disclaimer, here goes. Continue reading

Public wealth return

What is not privately owned is public wealth. It’s everything that exists within the territorial boundaries of a country and the citizens have a legitimate claim to it. The question is this: who has the authority and the right to control it? Furthermore, when and how do the citizens of a country get access to their share of what wealth they collectively own?  Continue reading

The Catholic Church is Force for Good in the World

I love a good debate, and naturally so because I am the argumentative kind. Most of all, I like debates centered around religion.. The line dividing the opposing sides is sharp, and the positions irreconcilable. I delight in the skewering that monotheism takes in them.

A superb example of that is the intelligence2 debate in which the proposition before the house was “The Catholic church is a force for good in the world.” Opposing the motion were Steven Fry and Christopher Hitchens. For sure they are masters of their mother tongue, and more pertinently they are implacably opposed to the Catholic church.  Continue reading

Ask Me Anything – The Important Thing edition

“Doggie, wait here a sec. I have got this important thing to get done. Then we go on with our walk, okay?” 

Doing the important thing is not the difficult part of life. Indeed it’s the fun part. The difficulty lies in figuring out what’s the important thing.

Fortunately, a good many people have thought hard about what’s important and we have access to their writings. The ability to read has to be one of the most rewarding skills we learn.  Continue reading

I Heart the 747 and the A380

If you ever saw me on a flight, you’d be convinced that I was a country bumpkin first time inside a plane. I look out the window (always a window seat, thank you) take pictures,  and always take videos of the landing and takeoff. On ground, I always look up when I hear jet engines. At the airport, I watch planes land and take off. I find airplanes fascinating — especially the big birds. The plane I love the most is the Boeing 747, the “Jumbo jet”, the Queen of the Skies.  Continue reading

Ganesh Chaturthi Greetings

After quite a few years, I find myself in India on Ganesh Chaturthi. At my friend’s place in Mumbai where I am staying, today (Thursday 13th Sept) we had Ganesh puja in the morning. There’s Shri Ganesh and of course his favorite modaks (left foreground). I have some videos too which I will upload to Youtube in a bit.

Here’s the invocation to Ganesh: Continue reading