Economics and ecologies

This is something that other people, far cleverer than your truly have thought of - however, it is always worthwhile to put some random thoughts down. Consider an economy as an ecology. Most economies will begin as primitive ecosystems - where meagre resources (basic chemicals) will be traded amongst almost lifeless entities. And economies, just like ecosystems, given the right mixture of resources (nutrients) and conditions (an energy surplus, moderate stability in the environment) will evolve. As they do, more complex traits will emerge. At some point, the barter system of trade will become something more sophisticated. A common currency of trade might emerge. In the living world, this is, mostly chlorophyll derived carbohydrates. There will, of course be primary producers, like farmers - or in the biological case, plants. Almost everyone else will use the primary product (crops/carbohydrates) and act as middlemen. At the same time, there will be continue to be niche markets and niche ecologists, such as the lovely anaerobic bacteria which help in fermenting any number of things we love to eat and drink. Think also of the tenacious little buggers (like my old friend Thermus thermophilus) surviving absolutely extreme conditions in volcanic springs like any Glen Beck viewing survivalist who wants nothing to do with trade treaties.

And as every economy grows, it creates a surplus. With a sufficient surplus, there comes the opportunity to do more than merely eke out a living. There will be people who do other things - which, in turn can accelerate the rate of development. The first person to make a wheel was perhaps greeted with the same derision that the first sea-dweller who liked hanging out on beaches was subjected to. There might even be a critical mass, a tipping point for every economy and every ecology after which the rate of growth increases and increases.

And inevitably, in both systems, there will be predators. And there will be predators of predators, superspecialized creatures which usually represent the current peak of development in that system. But such apex predators can only survive when their footprint, their constituency, or simply put, their garden isn't wiped clean. If these predators kill everything that sustains them, then the whole system collapses. Probably examples are many current deserts. (side note- does the goat count as an apex predator, when protected by the benign hands of humans?)

I leave it to your active imagination to think of hedge fund managers as apex predators in today's economy and why their untrammeled greed can lead to the undoing of a functional economy which has taken a long time to build up.

But, before leaving, two links which are the reason I started thinking about such things: the first concerns the use of cellphones as a barter system in Africa - which is a new economic development - and should merit close study. The second is a podcast by Kaspersky's people on frauds in the cellphone economic system. The predators have arrived.

Guest article: Ghosts of Bretton Woods

From today's Statesman, Calcutta edition - no copyright violation intended, its just that you guys do not maintain archives - and this article deserves to be read and re-read.

Ghosts of Bretton Woods
In A Global Collective Action Trap
andrew sheng
LAST week I attended the second annual meeting of the Institute for New Economic Thinking (INET) in Washington Hotel, nestled in a beautiful snow-capped valley, in Bretton Woods, New Hampshire. In 1944, the historic meeting on the international monetary system was held there. The British delegation was led by Lord Keynes, the foremost economic thinker of his day. The US delegation was effectively led by US Treasury adviser, Harry Dexter White. Even though all the Allies attended the meeting, including China and India, it was essentially a debate between the declining superpower, Britain, and the rising superpower, the United States.
Keynes understood full well the problem that Britain faced as the issuer of sterling. Since Britain was running large current account deficits because of the two world wars, she was having a tough time maintaining sterling as the main reserve currency. By the end of the Second World War, the US emerged as the dominant global power, since she ran large current account surpluses by supplying food and raw materials to Europe in exchange for gold. To avoid the Triffin dilemma, Keynes argued for the creation of a new international currency, called Bancor that would not be related to the issue of a national reserve currency.
The Triffin dilemma is the problem that the issuer of the global reserve country had to continually run large current account deficits to meet the liquidity needs of the world. In the short-run, the reserve currency role benefits from an “exorbitant privilege”, since the issuer country could pay for its imports by printing more currency, whereas non-reserve currency countries could only import by paying in foreign currency.
However, Harry Dexter White rejected the idea of the Bancor because he did not like the idea of the issuance of global currency by a global central bank. Instead, the idea of the Special Drawing Rights (SDRs) was adopted, where the SDR was a reserve unit of account, which could only be created through the exchange of national currencies with the issuer, the International Monetary Fund. As the dominant IMF shareholder, the US could reject the issuance of SDRs, thus ensuring the US dollar remains the dominant reserve currency.
There is common confusion that the SDR can eventually become a reserve currency to replace the US dollar. It is a unit of account between the IMF and the member-countries, but it cannot be used for international payments. Currently, it is issued to member-countries to increase their foreign exchange reserves. However, when the member-country needs foreign exchange, it must exchange its holdings of SDR with the IMF in four component reserve currencies, namely, the US dollar, the euro, sterling and yen.
Thus, the components of the SDR can change, but the reserve currency role remains national, not global.
Keynes was right. Sixty-seven years later, the US had become the leading global borrower, whereas the net lenders are Japan, China, Germany and the oil producers, creating what is now called the Global Imbalance.
Last year, the Italian central banker, Tomaso Padio-Schioppa gave a speech about the international monetary system, called the ‘The Ghost of Bancor’, because the idea of Bancor was killed in Bretton Woods 67 years ago. Mr Padio-Schioppa, who had a major role in the creation of the euro and became a member of the Board of the European Central Bank, unfortunately died early this year. Interestingly, he equated Bancor with Banquo, the Scottish king who was murdered by Macbeth, in the famous Shakespeare play Macbeth. As is well known, Macbeth met three witches in the forest. They predicted that he would murder his king, Banquo, and become king, but he would be succeeded by Banquo’s successors.
Keynes conceived the idea of Bancor as the steward of the king (gold). But the replacement SDR has yet to emerge as an effective replacement for neither gold nor the US dollar. At the heart of any global currency (issued by one country, a number of countries or the IMF) remains the Triffin dilemma: what is the hard budget constraint to prevent the global currency issuers from printing too much money and, therefore, creating global inflation?
The ghost of Bancor basically says that no national central bank or a global central bank, can resist the temptation of printing too much money.
Currently, the deficit countries blame the surplus countries for saving too much and the surplus countries blame the deficit countries for printing too much money. The reality is that it is the current international monetary system that is flawed. We cannot return to the gold standard, but a fully flexible system of fiat money is also not desirable.
We are in a global collective action trap, where everyone must share a burden of being part of the global game. The difficulty lies in how to allocate that burden in a fair manner.
My humble opinion is that the crisis of fiat money is due to excess consumption financed by excess leverage. That excess consumption is also the fundamental cause of global warming, as natural resources are depleted, while fiat money keeps on increasing. No one likes to use gold because there would be price deflation which would automatically cut down excess consumption. That is too painful, so everyone still keeps on printing money by passing the pain to savers and future generations.
If there is more and more quantitative easing (money printing) and less and less natural resources in a shrinking world, should we be surprised that gold and oil prices keep going up?
Who speaks the truth, the ghost of Bancor or his successors, the current reserve currency issuers? Perhaps it is the witches in the misty forest, the shadow banking system. That story will be revealed in the next article.

Tax cuts and how the media talks about them

I am not an economist. Neither am I a journalist. However, I understand that the perceptions of people are moulded by media. This much, I imagine you will agree with. So when you read an article like this one, you wonder why the coverage appears to be so biased.

Consider this section: "While about three-fourths of Democrats favor raising taxes on the rich, about half of independents and nearly two-thirds of Republicans oppose the idea. Support for cutting everyone's taxes exceeds four in 10 people in every region of the U.S. except the Midwest, where one-third back the proposal. Even among people earning under $50,000 a year — mainstays of the Democratic Party — 43 percent want to continue the tax cuts for all."

Would that not have been better written as
"While about three-fourths of Democrats favor raising taxes on the rich, about half of independents and nearly two-thirds of Republicans oppose the idea. 6 in 10 people in every region of the U.S. favour ending the Bush tax breaks. In the Midwest; 7 in 10 people favour ending them. Among people earning under $50,000 a year — mainstays of the Democratic Party — a majority of 57 percent want to end the Bush tax breaks."

Just a thought.

The world's most pointless city

Is Dubai. This city, not Manhattan or London is the cruel face of unfettered modern greed. But first, a bit of history. Several hundreds of millions of years ago, gigatonnes of zooplankton and algae were buried under a settling sea and underwent endothermic reactions to create what we know as petroleum in that region of the world we call the Middle East. In the last couple of millenia, a band of feckless nomads wandered into that desert and claimed it for their own. Said nomads then spent the next few centuries plundering each other's tents. Early in the twentieth century, that most intrepid and rapacious of all the European colonialists, the British found a use for them. They decided to turn these camel riders into a weapon against what was probably the longest lived Muslim nation ever: the Ottomans. The war ended, and the British left.. well sort of. They came back when they found oil. And that began the greatest historical example of an entire people becoming parasites. It is merely the value of oil, and the epic coincidence of those nomads wandering on this particular piece of soil that makes the Mid East the battleground and the promised land that is is. But for the machinery of extracting oil (not even refining it), there is scarcely an ounce of industry there. By industry, I mean both the noun and the verb...

What passes for society there is a collection of xenophobic and misogynistic laws that some apologists call 'culture'. And wealth. Wealth beyond measure, wealth beyond imagination, but only for a select few. And the former nomads love to show off their wealth. They have constructed the world's most luxurious hotels, indoor skiing ranges in the middle of the desert and countless other temples to greed. Sadly, Universities, research centres, schools of engineering and other such trivialities have been somewhat ignored. Who needs PhDs and patent offices when you can have indoor skiing ranges, right? Just as long as suburban soccer moms keep insisting on driving their Escalades and Explorers to malls, petrodollars will keep flowing, and with it, this bubble of prosperity that Dubai stands on will keep expanding.

The dirty underbelly of this colossal construction business is what happens to the migrant workers who actually build skyscrapers. These people are poor workers from India, China and many other parts of South/South East Asia. They are the subhuman detritus left by the expanding bubble Arab hubris. What keeps them there? Certainly, China and India are not 'forgiving' economies. Making a living in modern India is not easy if you are not a software engineer. But for all our considerable demerits, we have just voted a passably decent government into power and we have the most egalitarian Constitution ever written. In a brief conversation with a Kuwaiti kid who goes to school in the town I live in, certain matters of perception become apparent. He thought I had studied at some posh 'English school', as he put it. When I told him that I went to a government school which charged my folks a pittance (and does not charge girl students anything at all), he was taken aback. My point is that India and Indians, for all that we have going against us, try! Emiratis are perfectly happy to sit on their bloated arses and have essentially slave labour working their streets and Caucasian engineers keeping their power plants running. That is not a sustainable economy, neither is it a sustainable country. And when the bubble collapses, as it inevitably will, this arrogance will be remembered.

Article: Sordid reality behind Dubai's gilded facade

When the rich become too rich...

If I remember correctly, there was a line from 'The Good Earth' which went.. 'There is a way. When the rich become too rich, and the poor become too poor, there is a way.' These words, authored by Nobel Laureate Pearl Buck might be applicable in the current world. Read on.

GM crops and India's suicide belt

The region of Madhya Pradesh in India called Vidarbha is one of the hottest regions of the country. It is located almost in the centre of the subdontinent. It is also now called India's suicide belt. The reason is genetically modified, or GM crops. Monsanto, the US based supercorp which trades in seeds and agricultural products is using India as a a test ground for GM crops. These seeds are sold at much higher rates than traditional seeds. To make room for them, government seed banks and other sources of traditional seeds arebeing displaced. GM seeds require much more water than traditional varieties. In India, where electricity and water is not always guaranteed, GM crops fail. Leaving the farmers in terrible debt. At which point they commit suicide. As simple as that. Of course, if the crops succeed, then the farmers reap rich harvests. But it increasingly appears that our government has sold the poorest of the poor down the drain. Yet again. The truth of the matter is that Western corporations can afford to treat the rest of the world with such awful callousness only because they are always able to find brown/black people who will happily sell their own families away for a few dollars or pound sterling. It is these people whom we end up electing to positions of power who are, in truth responsible for ruining lives.

Read this article on the GM crop related suicides.

What is a PhD worth today?

This is a question I ask myself every so often. Good answers are not forthcoming. Let us take a short look at the context of this problem. In the India of today, certain jobs are highly paid: the software industry, banking/finance. One might say that the Indian economy has finally come of age. But the other side to this 'success' is that all other professions are being sidelined. To the extent that it is now increasingly difficult to the point to being impossible for, say a high school teacher to buy a flat in any major city. Forget houses, only the rich live in houses in urban India. Small businesses are being run into the ground by large conglomerates. In effect, much of our nation is being Walmart-ised. The other side of easy, but well paying jobs straight out of college is that the more 'staid' professions, such as 'proper' engineering; just does not have any takers. As a result, our industrial production is dropping in overall quality. And the diversion of trained minds to relatively well paying, but not intellectually demanding jobs (call centres, anyone) is in my opinion the equivalent of the nation shooting itself in the head. The price we will pay for adopting the worst of Western values without thought is that we risk becoming a client state for the powers that be. But coming to the initial topic, what is a PhD worth? State salaries are not too high for research staff. Industrial research is a new beast in India. But in the larger context discussed above, these two articles talk about miscalculations by policymakers and the larger malaise gripping the entire university system, although from the US perspective. Good reading.

1. Don't Become a Scientist!
2. Doc'd - economic disadvantages of graduate education

"It's not coincidental that 1928 was the last time that the top 1 percent took home more than 20 percent of the nation's income."

This essay from the Post talks about much of what is wrong with allowing wealth to flow upwards.

The end is nigh for H1B visa holders (maybe)

A certain senator wants Microsoft to first cut H1B workers' jobs. This could be the beginning of a nasty trend that will hit us Indians where it will hurt the most. We have spent the better part of three decades training the world's largest white collar work-force, and done so largely at the expense of developing better industrial research. As a result we have pen pushers and coders, but no genuine 'products' in the sense that a Dell desktop is a product. These workers depend, and with them the Indian economy depends on the US economy, and the H1B visas are the umbilical cord. Times are bad indeed.

Oh this is funny! Hedge funds being dosed with their own medicine.

Let me summarize the matter: short selling is when you sell shares of a company that you don't own AT THIS POINT. Wait, what? Yeah, that can be done. As long as you buy the shares you sold later. Its complicated. Read here. So why do it? Because if you have some information about the company that indicates that the share prices are going to tumble tomorrow, then short sell today at high prices, and buy back tomorrow after the prices have dropped. That gives one a big profit. Hedge funds like to do this. That is why insider information is important. Also shady. Well, hedge funds and pirates frequently like to get together to drive prices down on a company. In that case, short selling will also garner massive profits. Also in the process devaluing the company and perhaps putting it through the wringer, but what do brokers care?

This week, hedge funds in NY and London tried pulling this on VW. Making it, for a short while, the largest capitalized company in the world. Except that it did not work. Thanks to VW, and also thanks to Porsche, a major shareholder. Read on here.

Urban Planning, Money and some totally insane shite going on in Dubai.

Read this article, which is really mostly pictures, and tells how Dubai is transforming itself from a quite Emirate into a fookin' crazy place where (presumably) urban planner and bankers smoke random shite together and decide to build nutty things and actually finance them!

The last line of the article is quoted herein:

• "There are more construction workers in Dubai than there are actual citizens."

WHAT THE HELL IS GOING ON OVER THERE?

Yeah, my question exactly! The people involved in the actual construction of these magnificent monuments to Mammon ( I love alliteration) are an unfortunate lot. They work under harsh conditions. This article and this Human Rights Watch essay details what these migrant workers go through.

Just to put some things in perspective

Source: http://www.phdcomics.com/
All credits to Dr. Jorge Cham. The man rules.

Monuments are built on the backs of slaves...

Empire building usually happens when there is a large surplus of humanity willing to work for horribly low wages. As this article tells you, the wave of prosperity in Dubai, culminating in the most beautiful hotels in the world, is built on the backs of Indian/Pakistani/Afghan migrant workers who are made to work obscene hours for a pittance. Why do they keep coming in such large numbers? Simply because it is even more difficult to get any kind of job back home. In some cases, like those of Afghans, their homes, indeed their whole nation has been ravaged by war. What do people go back to?

One has to think about this: it has long been understood that all economic systems thrive on inequality: there is no way that the rich of the world, or even the not so rich, who shop at Saks cannot possibly maintain their own extravagant lifestyles if we were to provide free immunization against MMR to every child in the world. Or clean drinking water.

One of the fringe benefits of maintaining low intensity conflicts around the world is the constant availability of displaced people (refugees, we called them in a distant past) who will serve as willing (or coerced) warm bodies for labour when we erect our monuments to our own undisputed glory. There is the slight problem of some of tehse displaced people whose lives have been ravaged by conflicts set up and sustained by the great powers that they will turn so angry that some of them will insist on passing on their grief to as many people as possible. But hey, thats what the police state is for!

Prezidunks, wuhs, economies, elekshuns and bailouts.

There it is again. Elekshun time! When all will be forgiven, and we can start anew, clean slate and all. Or not. Take your pick, the US Prez is the de facto leader of much of the world, sits on top of a good 20% of the world's 64 trillion $ economy and wields control over almost 6000 strategic and tactical thermonuclear weapons. The war in Iraq has killed over 4000 Americans. It is interesting the way we say it.. "the war has killed". As if the responsibility for all those lost lives can be placed on the shoulders of some malign, but ot manifest entity. Oh, and speaking of war deaths, that would be about a hundred thousand Iraqis. Indeed, we live in interesting times. There is, of course the subprime lending crisis, which has blown up in our faces. So what is the crisis about anyway? This comic illustrates. No math, no complicated five syllable words. So I happened to see 'Slacker Uprising', Mike Moore's film about the 2004 election. Watch it free here, on the official site. And then go and read the open letter from Moore to all citizens. There is a lot at stake here. Much of these are catchphrases to be used at dinner table conversations: freedom, equality, health, blah-di-blah. But let us not forget that they do mean something real.

Financial Intervention and the Government of the day

Warning... I am not trained in finance.. these are merely the opinions of a layman. Let us begin with India. Back in the early 60's, the Government of India (GOI) decided to start a mutual fund company. This was called the Unit Trust of India (UTI), and their major vehicle was a fund called US64. Our economy has always been a troublesome one. By constitutionally describing it as a 'mixed' economy, we have brought upon us the corruption and inefficiency of the worst socialist models, while on the other end we have the unlimited wealth (greed?) of a few lucky individuals and companies who have toadied up to the Sarkar. Anyway, so the sublime ridiculousness of starting a mutual fund in an economy where almost everything was PSU owned was actually subsumed by the fact that 'national wealth', as one might term it was being drawn from the coffers of savings accounts and pumped into industry. Well, it did make sense. From a traditional Indian standpoint(still very much extant): the only true wealth one might have is property and gold. Shares and stocks come later to the aam aadmi. So, the best way to kick start a nascent economy would be to divert money from property/gold and put it into stocks. Or so we thought. Except that in the late 1990s', UTI was in deep shite. They needed a GOI bailout to the tune of perhaps 3,300 crores of Rupees. That would be almost a billion $ at today's exchange rate. UTI staggered along for a while longer and then had to fold US64. This required a much bigger restructuring package from the GOI.

Today we are seeing the same things happen on Wall Street. Bear Stearns, one of the largest finance corporations was taken over by JPM Chase for a song. On the 8th of Sept, two of the largest Mortgage financers, the Federal National Mortgage Association (Fannie Mae) and Freddie Mac were taken over by the US government. Hardly a week passed before Merrill Lynch was bought up by Bank of America. Then Lehman Brothers went under. And now, AIG which underwrites some of the biggest and potentially most hazardous investments has been given an 88 billion $ bailout by the Fed.

The question is always the same: most of these huge companies are going under because of their incompetence/greed. Remember Enron? The company whose watchword was 'innovation'? They traded in dreams too: and for a while they made it big. But then people started calling their bluffs and they went under. Except of course, when giant corporations go under; the CEO's rarely, if ever suffer. They have awesome golden parachute deals written into their contracts.. so even if they f**k up, they come out of it smelling like roses. Or a couple of hundred million bucks. Take your pick.

Why should the people of India pay through their taxes for the mismanagement of UTI? And why should US citizens pay.. what was it 29 billion $ for the Merrill Lynch deal and a colossal 88 billion $ for the AIG bailout? The point has been reached at which these companies know that they are now TBTF. That stands for Too Big To Fail. These people cannot be allowed to play fast and loose with other people's money and then yell for Fed help when they get their noses bloodied. If Government intervention is asked for, then the whole industry should submit to Government oversight, if not actual regulation. That is the bottom line.

Why spend money on science?

Apart from the obvious answer (fund me, I am a good person and deserving of taxpayer support)..... society can only tolerate activities which do not contribute to economic survival beyond a certain critical mass of population and overall economy size. In today's multinetworked world, where we can support Paris Hilton (understand me here, dear reader: every second that you have ever spent reading an article about her, or seen her on TV in some lame reality show has directly or indirectly contributed to her income: hence I do not mean 'support Paris Hilton' in any metaphorical sense.. this is real), we can certainly support some science.

Ok, but shouldn't we support only the science which helps us? Hmmm.. define science which 'helps us'. Most of the great revolutions of recent times have come out of unfettered 'ocean foam' thought. Quantum mechanics has lead to every solid state electronic device that enriches and makes your daily existence possible. It is not possible to classify science as useful and useless, although one might argue that the grant system of research does just that. But one thinks that the world is in very real danger of throttling intellect and exterminating creativity by demanding a clearly measurable outcome from any and every scientific project undertaken. There are no more cases of 'lets see what happens'. Every decent grant proposal is hypothesis driven, and must have a clearly defined and achievable objective. But this fetters thought, and those truly outstanding 'where no one has gone before' experiments may be a thing of the past. That would be a sad day for science indeed. That would be a sad day for humanity.

But do people care? For the most part, no. Hence, of course we are faced with such outrageous nonsense as people saying that the Mars project should be abandoned, because clearly, life originated on Earth, and hence any other planet is boring. So, what is the price we place on space exploration? Here are some answers.

The rejoinder to my arguments: that the economy cannot support such activity is rather untrue. I have no numbers to make my case, but a strong belief that if we (as in the whole world) stopped making guns and paying our CEOs/Presidents/Dictators so much, we would have money for clean water, food, housing, antibiotics for everyone on Earth. And maybe some money left over for stargazers, poets and cultural anthropologists.

Let me finish by mentioning that the dedication in 'Gravitation', by Wheeler, Misner and Thorne, if I remember is to 'the taxpayer who funds research'. Thank you, dear taxpayer.

How to leave your husband...?

The joys of a litigious society.. this is from a financial advice page... tells women how to leave their husbands and when.

yeah, amongst other things

I was going to blog about our Pittsburgh trip over the weekend, but this caught my attenshun and I don't have too much time. Let me summarise this: Islamic law (Sharia) reportedly frowns upon interest gained from money in a bank account. So, Lloyds TSB provides 'Islamic banking' services which include zero interest savings accounts. The BBC reports here. For comparison, here is the webpage of the Islamic Bank of Britain. I just want Terry Pratchett to incorporate this into his next work. Something is fundamentally skewed with this turn of events. If I may make a suggestion, there are many people in the world who can use some largesse: why not directly send the income derived from capital belonging to our Muslim brethren who would wish to abide strictly by the 'no interest rule' to Muhammad Yunis' Gramin Bank?

What do you mean, I can't have it?

The US is probably slipping into a recession as I write this, and one of the main reasons for this appears to be the sub prime lending crisis. In layman's terms, this means that banks and other moneylenders have been lending money to people who can probably not afford to pay them back. This has lead to widespread that the moneylenders have overstretched themselves and they way to recover is to withdraw funding from the worldwide investments that they have made. Which would spread the pain all over the world instead of just the US.

Now what did things come to this? The credit history of an individual is a fairly important barometer of his personal future. This is the only country in the world where the following conversation would make sense:
A: I want to buy a car.
B: So you need a loan.
A: No, I have the money. I have saved up for five years.
B: So, now you should take a loan and return it in a year.
A: Why?
B: To improve your credit history, obviously!
A: Why do I need to do that?
B: So that you can get a loan easier!
A: But I don't need a loan.
B: But you may, later.


Right, something is seriously wrong here. Let me try to put my finger on it. I don't think people in this country have ever heard of the word 'austerity'. Simply put, the culture of the US appears to be one of immediate gratification and continuous consumption. The old idea of 'saving up for something special' seems to simply not exist. Hence lending agencies. Hence, people overspending and transferring debt from one credit card to another. And speaking of which, what is the deal with so many different credit card products anyway? I personally think this whole crowded market full of different lending products is just a minefield waiting for the unsuspecting and naive consumer.

Anway, I want to finish with this story about a lady who lives on a 2500$ a month disability payment, and went ahead and leased a 100 000$ BMW with a fake credit application.

The sky is falling!! Privatisation woes.

Our national carrier is suffering from the blues. There is competition at all levels: the premium segment of the market has been captured by Mallya's Kingfisher Air and the discount ticket business is dominated by Air Deccan. Amidst this looming crisis, Air India, already losing money each day indulges VIPs and other fluff. This is part of the reason why they are bleeding so much money. I include here, two Statesman reports:

http://www.thestatesman.net/page.news.php?clid=1&theme=&usrsess=1&id=176956

and

http://www.thestatesman.net/page.news.php?clid=1&theme=&usrsess=1&id=176957

I have the following suggestions:
1. Make VIPs pay. Stop giving perks to MPs, MLAs, their cousins, mistresses and Board Members of the airline.
2. Start a rationalised fare structure with complete internet booking facilities. Cut out the middlemen.
3. Reduce turnaround time at airports. This reduces terminal fees. If people cannot turn up in time to catch their flights, screw them.
4. If you want to run a premium segment, then do so. But brand that differently, make sure that if people are paying four times what the discount fares cost, they should get their money's worth.
5. Stop treating company Directors like gods. They can pay for their own rented cars: stop proving limo services.

Lastly, this is the most radical solution: allow all longterm employees to buy into Air India stock via pension funds/provident funds. If one is literally invested in where one works, one will work a little better. And steal less.

And if Air India cannot make a difference in, say a year... let Laloo Prasad Yadav take over. He did it for the Railways, he can do it for Air India as well.