Theory of insulation
Preface
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When globalization was a hot matter & everybody was gunning for it, mainly from developed countries & there were discussions all over on how important were GATT, WTO,
Later it was found globalization more adversely had hit the developed nations. And for the time being developing nations are benefiting (as from making & exporting cheap goods & outsourcing) as they (poor & developing nations) have enormous and endless supply of cheap labour, owing to their huge population, huge percentage of the poor and ample availability of child labourers.
One can’t curb it (i.e. the child labour), whatever law or regulations one can prescribe or try to enforce.
For a sideshow (window dressing) in some factories you will not find them, but where cheap goods & mass productions are going on in smaller, scattered factories and at subsidiaries of big companies at far away places (a smart little technique to obviate the law, but very effective one, can call stealth outsourcing) and in vast unorganized sectors: industry to agriculture to sundry odd jobs, child labour is very handy & the main stay.
Add with that huge young labour force, skilled & unskilled both, but mainly unskilled but very hardy workers, mostly illiterates or half literates, but very fit for blue colour jobs, they throng in very large numbers from countryside to cities ( if you want a proof or want to see by your own eyes? visit to UP, Jharkhand, Bihar, MP provinces of India & western & northern provinces of China).
Poor & developing nations have ample quantity of both skilled & unskilled labourers, but mostly unskilled YOUNG labourers and an “unending supply” of them.
But ultimately with the fall of economies of developed nations they also will reel down and with a more catastrophic effect, as, if these labour force undergo job losses & are driven out of work, with no assets & means to fall back upon, one should not dwell in dreams, that they will happily migrate back to the countryside, where they originally belonged and get back the sordid & low income occupations (mostly agriculture) they had left for good.
But now China’s strategy is (also of some east Asian nations) supply cheap items (I am consciously “not” using the term cheap goods) to the poorer nations, exploit the markets of poor & developing nations, as these poor now have enough raw cash to buy cheap items & developed nations are in crisis & cheap items hardly have a good market there & exporting there is also hazardous (of late China is taking measures to by investing for building bases in vantage & frontline countries to obviate this problem), so better to cash on these poor nations & their people.
This is a vast matter, it demands separate analysis, so I am leaving it now.
Now, I begin on the theory.
Law of nature
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“Theory of insulation” says every region, estate, geographical area; nation should have an insulated, (not isolated) existence of its own, a separate identity, a separate social culture, a separate lifestyle, a separate work culture, above all a separate financial system. It is a law of nature.
Advocates of globalization were for openness, open doors, for free unhindered trade & flow of money.
Not only that, they wanted the world to bring into one financial system(globalization) by breaking of all financial barriers, so that open & unrestricted trade could be done, and also wanted free flow of money in & out, with or without a base (an office, or an installation or a collaboration). The bases too are now shifting from developed countries.
The idea was advanced by rich & developed nations, their economists & their corporates.
Here, I want to remind people of GATT, WTO, Uruguay rounds (search in internet, you will find what not they cried for, even to the extent of “principle of most favoured nation status for all” & also see, all circulations of that times “1994 to 2006”, all carried news, views regarding the above & how dislodging of trade barriers will ensure a provertyless, prosperous world.
Now, I break into my thesis.
I wrote this in 2004 & sent copies to Cambridge & Illinois economics depts. by Regd posts, but they gave no heed to it, as all economists & professors at that time were too engrossed in globalization, so could not perceive its implication & overlooked the fact. Also at that time saying anything against globalization or proposing even a little contradictory view or suggesting some precautions by discerning persons (the economists) carried risks of degrading oneself (the economist who expressed a contradictory view).
INSULATION is a nature’s law & system.
Everything survives because there is a natural insulation, insulation due to geography, distance, customs, habit, habitat, & immunity.
For example, animals, plants survive because there is insulation between groups, colonies, species, races, but NOT isolation, as isolation is being alone, being cut off, but insulation is being part of the system with protected identities.
Anything, for example, take the sun, it is the origin of life on earth and life survives as the sun is there, but we are insulated from the sun (not isolated) by distance & earth’s atmosphere, so we can live.
Globalize the sun & we evaporate.
So with animal or plant habitats, put them together they will hardly survive. But animal & plant groups are not isolated from each other, but there is insulation between the groups. All are dependent on one another for survival, all affect each other but the effect is beneficial & shapes them to be better, a healthy & protected competition, and a competition to evolve for the better.
Human beings
So are human beings, be it national or cultural or any type of colonies of human beings, they are there, because there is insulation, not isolation, as isolation will cause elimination.
Example: small colonies of Andaman’s, east pacific islands are dwindling as they are isolated.
But, other human races are surviving & flourishing, as they are not isolated but insulated, there is an exchange of everything (not only trade) between them but there is a distinction, but in remote isolated islands, there is hardly any exchange so elimination is looming.
Put all human races together, mix them, sure they will degenerate.
From my observation of nature “theory of insulation” has come and as I applied it to “financial system” I got astonishing result.
Financial systems
Financial systems are also unique to every nation, every culture, every colony, every group, even every individual and a product of nature. They (the financial systems) have evolved over thousands of years. They prospered & existed as they had their own resilience. There was exchange of trade between them from primitive to modern ways but always with insulation, so they survived and are still surviving.
Take any human civilization from mankind’s history, they survived as they had their own resilience, an insulation, a protected identity, also they had trade, exchanges, interactions, may be very primitive, may be very limited.
For example take Maya, Indus valley, Byzantine, Mesopotamian, Egyptian, Roman or Inca civilizations, all these great civilizations survived as long as they had insulation, protected identities, but also trade, exchanges & interactions, as soon as the balance went off (got too confined or invaded & exposed), they fell down.
So with our modern financial system, we are not an exception to the rule. We are very much part of this nature’s governing law. Try to flout it, try to break it, we face the devastating consequences.
It is a mathematical fact, that without insulation nothing can exist, also in “isolation” nothing can survive. I have named this “theory of insulation”.
Advocates of globalization had no idea of this theory or natural concept.
Even Joseph’s. Stiglitz who has written & analyzed so much about this subject of globalization, capitalism & finance could not comprehend it, so ended up without a conclusion or solution.
Then
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if this theory is true, then all financial systems must have some insulation for their survival, as global financial system is dependent upon one another (all financial systems, may be located at different geographical areas within a national boundary or outside), so if insulation is done away with, then one fin.sys. After the other will collapse, as that happens in “domino effect”.
And now we know how to remedy the “domino effect”.
Those who say, free the markets, bring down all the barriers,
so that all will prosper & a great global fin.sys. will evolve and that will take care of all, are unaware of this “theory”.
They are not to be blamed for this as they could not envisage this “nature’s law”.
Therefore, it is imperative every market (financial system) should have its own identity, an insulation, even being a part of the global financial system. Let all survive for the sake of own survival. If we break this law, the nature will teach us a lesson for this violation in a very brutal way.
A small example, though lots have been written about this and many books also have been written on this, I actually mean “the U.S.
It is due to the breaking of institutional financial barriers, in short: sub prime home loans- securitizing them- issue of CDO against them- sell them (buyers hoped high returns as home price will boom, even if not, CDO cant lose value)- issue credit default swaps the CDS), sell the CDS- then trade futures against these instruments, a dangerous amalgamation, a dangerous mix up.
So “theory of insulation” is very vital, so far unrevealed and demands a lot of research & debate as it may explain many financial riddle of modern financial system. I welcome & invite any further debate, research and additions.
(This is a paper, so I would not stretch it further as in a book, but I believe I have explained my idea.)
Subhro Das
Araria (
05/05/10
Notes:
1. Theory of insulation covers all gamut of economic activities, is all pervasive, everything on earth, even beyond earth.
2. To come to this “theory” it took 6 years of research & a long observation of nature.
(My theories & concepts
I write my theories & concepts in short as I am a banker & have little time to write in a book like or research file like form, but I do feel these theories & concepts must be circulated for the good of the world & people, anyone is free to elaborate or write on them or point out if any flaw or deficiency in the same)
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