Britain's economy is expanding at an annualized rate of 3.1 per cent. Fears of global deflation have receded and forecasts for economic growth around the world are extremely bullish. Dow Jones industrials rose 25.3% in 2003, the Nasdaq surged 50% and the Standard & Poor's 500 gained 26.4% US markets have witnessed a significant shift from fixed income funds to equities in 2003 with investors pouring funds into equity funds in US. According to various estimates, global funds, including US and emerging markets category funds witnessed fresh inflows of $146 b in 2003.

Taiwan, Korea, China, India, Brazil remain the biggest investment destinations for global funds. India is extremely europhic with a great wave of feel-good factor that its government promises to turn into a feel-great factor even though, compared to the performance of other emerging economies, India's performance is only moderate.

While the MSCI World index rose 31% during the year, the MSCI Emerging Markets Funds index rose 52%. Among the major countries that are tracked by the Morgan Stanley Capital International (MSCI) indices, shares in MSCI Thailand have clocked returns of 134% while those in Turkey have gained 122% in 2003. The HanSeng Chinese Enterprises Index which tracks shares that foreigners are allowed to invest in China vaulted 6.8% to touch a new all-time high. The index has gained 170% in 2003. Brazilian equities rose 103%. India is ninth best performing market in the global emerging markets category with MSCI India index clocking a return of 74% in 2003. According to Boston-based Emerging Markets Portfolio Research, global emerging markets witnessed fresh inflows of close to $12 b in 2003. India was the third biggest recipient of FII inflows in Asia after Taiwan and Korea. The total inflow was $6.7b in equities.

Juxtaposed against this corporate glory is a recently published FAO's annual hunger report that says starvation, man's oldest enemy, still lurks in large parts of the world. Hunger stalks 842 million people even today. 10 million hungry live in industrialized countries including US & UK. The report laments that, well after a decade of globalisation, hunger is actually on the increase. The number of undernourished people in 26 developing countries has increased by 60 million during the second half of the decade. 30 million more people have slipped into hunger in just two countries, India and the Democratic Republic of Congo. 33 million have been added to the ranks of hungry in India in 2001-2002 alone. According to the results of 5th round of the National Sample Survey, the number of people below the poverty line in India has arisen to 27.6% in 2001-2002 compared to 24.4% in 2000-2001. With 276 million people living below the poverty line, India, recognised as a software giant, has the dubious distinction of being a country with the largest number of hungry people in the world. FAO's report also shows that countries with a high prevalence of chronically hungry people are also afflicted by high rates of HIV/AIDS. World's AIDS graph shows a steady increase of the number of deaths on account of AIDS. The figure last year went upto 3 million. After infecting 28 million people in Sub Saharan Africa, AIDS is advancing steadily towards Asia and East Europe. 1.8 million people are living with AIDS in the countries of Eastern Europe and Central Europe. Total number of people living with AIDS has increased to 40 million.

The situation on the employment growth is pretty alarming despite the economic growth in major economies. Despite annualized growth of 8.4%, US economy generated just 1000 jobs against the expectation of 150,000 this December. This is despite an injection of $1.7 trillion worth of tax cuts that George W Bush granted to 5% rich Americans. The paradox of jobless growth is gripping both US and India. Employment over the past several years in India has virtually come to a standstill pushing millions of young each year in the jobless list.

All this shows that the maxim of capitalism on which the globalisation was based such as that the free markets would lead to universal opulence through free competition spurring greater productivity has not worked. In fact the inequalities in developing countries have increased by 2% since the Uruguay Round, which founded the WTO, 10 years ago. The world is witnessing a new phenomenon called "jobless growth". In 2001-2002 the monthly per capita consumption expenditure in rural areas of India rose a mere 0.7% over that in 2000-2001, while consumer price index for agricultural labourers, a measure of their cost of living, went up 2.23% pushing more people below the poverty line.

While poverty is increasingly depriving large populations the very basic needs, the greed is pushing the envelope of corporate agenda. There has been no remission from corporate scandals despite Sarbanes-Oxley and Sir Derek. According to Sherrin Watkins, the Enron whistleblower, the directors have still got their hands in the till. Last year has witnessed value destruction in a whole lot of iconic enterprises such as Skandia, Boeing, Hollinger and Parmalat. World's oldest stock exchange NYSE has also not been spared. After defending for months the obscene remunerations of £140 million that it paid to its former chairman Richard Grasso, NYSE has decided to join SEC in ordering investigation into Grasso's earnings. The pay package will be investigated by famed New York Attorney General Eliot Spitzer.

Skandia provides a classic example of what can happen when strong management is left unsupervised by a weak board and flawed auditing process. As usual the management represented by former chief executive Lars Eric Peterson and his deputy helped themselves to huge bonuses and company perks while Skanllia share price plunged by 90%. Latest to face SEC charges is another American icon IBM. Widening of Parmalat probe has shown the involvement of even Bank of America and Deutsche Bank, Germany's biggest bank. Here is a lesson that investigations, unless carried out with full commitment and persistence, do not unravel the magnitude of skullduggery.

American mutual funds, a $ 7 trillion industry, known to be the saviours of small investors were also caught by SEC while trying to make a fast buck at the expense of small investors. Even UK's Invesco was involved, raising the question once again as to why corporate misdoings by the same institutions escape scrutiny in the UK. SEC said it found 14 brokerage firms taking cash from mutual fund advisers and 10 funds accepting payments in the form of brokerage commission.

Michael Eisner of Disney, managed to use corporate governance to get rid of all his sharp critics from Disney board including the nephew of the founder and filled it with his cronies. He has continued his autocratic reign in what is called one of US's ten worst companies in corporate governance.

Corporate mis-doing can do the greatest damage to this bullish market. Markets have only begun to bring in the small investor after a long absence. Not long ago 45% of those polled in a survey of potential investors had said that stock markets are a sure way to ruin. Our most important challenge, therefore, is to restore the credibility of the stock market. Experience has indicated that mere box-ticking of corporate governance codes does not help. Indeed it can be counter productive because it gives you the illusion of things being in control. Besides, this is an area which is already over legislated. Further tightening of the rules as has been done by OECD improves the form and not the substance. More focus needs to be given on monitoring implementation. As Warren Buffett recently wrote to shareholders: "The answer is not in inadequate laws ….but in what I would call 'boardroom atmosphere'. When the compensation committee, helped by a high-paid consultant, reports on a mega grant of options to the CEO, it would be like belching at the dinner table for a director to suggest that the committee reconsider." What we really need is training of directors in boardroom skills as to how to intervene without raising a storm.

Maximising the shareholder's returns in a world of such disparities can be most challenging. It is dangerous to focus on profits alone in a world characterised by grueling poverty and squalor and build islands of opulence and extravagance. Such disparities in an interconnected economy pose the greatest threat to corporations and are time bombs waiting to explode. Corporations can ignore them only at their own peril. Their most important agenda, therefore, is to bridge these disparities through a triple bottom line approach focusing on people, profit and planet. The need for transparency, equity, integrity, accountability and social responsibility in such a situation is far more pronounced. It is certain that people are not going to accept a second class status in the internet world. People can stand poverty but not injustice. It is the corporates who will suffer a backlash if disparities persist and are not made good through market interventions. In this context the widening differentials between the wages of an average worker and the CEO are cause of deep concern warranting immediate corrective actions.

The failure of Cancun is a shame on the industrialized nations. Their insistence on continuance of farm subsidies to the tune of $900 per cow per year are grotesque when viewed in the context of average earnings in a developing country such as India which are less than half this figure. Subsidy for each cow is twice the average earning of an Indian.

One of the greatest dangers of our economy is that the truth itself has become a casualty. Even the media does not report truthfully. Different channels during the Iraq war had different interpretations of the truth. Who says there are no WMD's in Iraq? Weapons of Mass Disinformation could be seen everywhere. Now we have it even from horse's mouth - Paul O'Niel, former treasury secretary of US, Scott Ritter, the UN Weapon Inspector and David Kelly the British Scientist who made a supreme sacrifice to save embarrassment to his government.
We are living in an age of escalation and exponentials. Everything has to be magnified in the battle for eye balls. While media competing for our attention is multiplying astronomically, our reducing attention span has become a major constraint. Despite living in a knowledge economy, our short attention span has made us helpless victims of media manipulation. Our minds are trapped in by craftily engineered stories fired at us through audio visual missiles. We have little time to digest, let alone analyse the avalanche of new information. Instead of making us wiser this information is often confounding and disorienting us making our perception far removed from reality.
In the fiercely competitive economy of today, markets work on the basis of "winner takes all". Small successes can result in a network effect that leads other players to fall in line. This coupled with escalation of the immediate, shorn of its full context by media, creates a distorted perception of reality giving an impression of feel-good in the same way as an Ostrich burying his head in the sand in face of danger.
This "feel-good" factor prevents us from facing the reality and then coming to grip with it. The world today is beset with many serious problems. Some of them are catastrophic. One such problem is the environmental damage and global warming due to emissions of green house gases. It is a pity that the President of world's biggest economy, US, is spending enormous sums to prove otherwise. This is how Robert F. Kennedy Jr. of Natural Resource Defence Council describes the US President's response to environmental challenge:
"There is no scientific debate in which the White House has cooked the books more that of global warming. The Bush administration has altered, suppressed or attempted to discredit close to a dozen major reports on the subject. These include a 10 year study by the International Panel on Climate Change (IPCC), commissioned by the President's father in 1993 in his own efforts to dodge what was already a virtual scientific consensus blaming industrial emissions for global warming. After disavowing the Kyoto Protocol, the Bush administration commissioned the federal government's National Academy of Sciences to find holes in the IPCC's analysis. This ploy backfired. The NAS not only confirmed the existence of global warming and its connection to industrial greenhouse gases; it also predicted that the effects of climate change would be worse than previously believed, estimating the global temperature will rise by between 2.5F and 10.4F by 2100. Bush reacted by launching a $100m-10 years effort to prove that global temperature changes have, infact, occurred naturally - another delay tactic for the fossil fuel barons."
It is now well known that the Iraq war was initiated primarily to secure future supplies of oil. It was a highly short-sighted approach aimed to defeat its very objective. Oil is not going to last for more than 50 years. Huge oil imports of 11 million barrels a day with forecast of 20 million barrels a day by 2005 are ripping US economy and adding to its enormous deficit $1.5 billion a day. It would have been so much better to spend these £57 billion allocated for Iraq war in subsidizing the non-conventional energy sources. This way US would have helped the world in finding a lasting solution to the global warming problem and also balanced its budget.
A sweeping new computer-modeled study conducted by scientists from 14 laboratories covering six regions rich in bio-diversity such a Mexico, Australia, Brazil, South America and Europe came to the startling conclusion that more than one-third of 1103 nature species like mammals, birds, reptiles, insects & plants could become extinct in 50 years time. The reason is because greenhouse gas emission from cars and factories could make earth hotter than it has been 10 million years. Applying the same yardstick in other regions means loss of one million species by 2050. Now if such research is made fully public, i.e. if media publicises the fact that cars are causing emissions that are destroying the Australian lizard called Boyd's Forest Dragon, Europe's azure-winged magpie and Mexico's Jico deer, most of the young purchasers would replace their cars with bikes.
2003 was the third warmest year during the last 150 years. The other two warmest years also were during the last 5 years. Antarctic Ozone hole has expanded to an all time high. Arctic Sea ice has touched a record low. This bad news on environment has its good side. People will finally rally to the defence of environment. Coming years are going to witness much greater respect for environment. Lot of value will be created through corporate strategies based on the theme of "return to nature". People will be willing to pay taxes to protect bio-diversity. Company's market capitalisation would depend on how they protect environment. An important trend would be migration of economy from acquisition to an experience based mode. Greater value will be created by intangibles that would appeal to emotions than products.
Thanks to the attack on Iraq, the world today is turning into a state of siege. What good is all this economic prosperity if people cannot even move around the world at will and are going to be fingerprinted at the borders? If US wants visitors to be fingerprinted it is only natural that other nations will follow suit as has already been done by Brazil. What would then happen to the dream of globalisation? We cannot afford to become paranoid about security. According to George Soros "the war on terrorism has been used to curtail liberties at home and to exert our might abroad. Yet, attempting to impose our values on others endangers our security by engendering a vicious circle of escalating violence."
History shows that it is impossible to have total security protection against ruthless and suicidal tactics. It is time to look deeper into the problem and assess the psyche of the suicide bombers. Why are thousands of young men and women cutting their lives in prime while others of their age are still discovering the pleasures of puberty? All talk of a war against terrorism is misleading. Britain a former colonial empire knows that terrorism cannot be defeated by force. Terrorism is a political weapon and has been used by many who are in power today to bring them to the position where they are. Numerous heroes of today are terrorists of yesteryears. A siege mentality, therefore, is not the answer. Dialogue is the only way forward.
2003 has been a great setback in this direction. Think of the damage that has been wrought because of Iraq war. It's gravity will come home only as the time passes. A Bush administration's task force on America's image abroad has admitted "hostility towards America has reached shocking level." US companies have assets of $2.5 trillion abroad. Some 30% of the profits earned by companies on S&P's 500 stock index derive from foreign operations.

Iraq tragedy has caused a civilisational divide right across the world making Americans persona non grata in most parts of the world, due to no fault of theirs. Why should whole nations suffer due to the acts of a few powerful individuals? The war itself was a governance issue. Majorities even in countries that attacked Iraq were against the war until they were bombed with WMD's, Weapons of Mass Disinformation all of which have now been discovered to be wrongly based. Saddam was nothing more than a tinpot dictator like so many others of his ilk and would have been ousted far more easily had the track followed by U.N. been allowed to continue. He simply was not worth sacrificing precious lives of US, British, Spanish or Japanese soldiers.

In any event nations cannot be kept under occupation for long periods. Iraqi nationalism cannot be regarded less fervent than Irish nationalism. Even democracy cannot be shoved down people's throats through tanks and missiles. The whole experience of 20th century testifies that force, at best, is only a short-term solution. In the end people find their own solution. No hegemony can last indefinitely. Looming US budget deficit will sooner or later limit America's international power and the arrogant unilateralism. Recent study by Goldman Sach - Dreaming with BRICS: Path to 2050, tracks the performance of Brazil, Russia, India and China during the next 47 years. The fact that in another 35 years US and Chinese economies will be running neck to neck with Chinese overtaking US by 2050 should be a sobering thought for the policy makers of Anglo American alliance.

What intrigues most is not so much what has happened to Iraq but how two nations that symbolised liberalism and freedom and became the cradles of modern democracies could behave the way they have done. An armed intervention just when the dialogue was beginning to pay. Instead of playing a fanatical vision of national security of securing supplies by force, US should have developed energy alternatives that are more cost effective and environmentally sound.

The war has made the US CEOs particularly vulnerable. As Jeffrey E Garten, dean of Yale School of Management argues " the upheaval in the Middle East, not to mention the wave of anger among Muslim populations from France to Indonesia, may have just begun. Anti-Americanism could be further inflamed by growing disillusionment about Washington's strident push for US-style free-market policies. US credibility already has been undermined abroad by its move to protect its steel and agricultural sectors as well as by corporate and financial scandals, from Enron Corp. to the New York Stock Exchange."

Global corporations today have to face new geopolitical realities. Their's has to be a global vision transcending parochial boundaries. As their businesses expand and operations extend beyond their borders, they have to expand their mindsets as well. Having cried hoarse all along for minimising the government role in corporate agenda they cannot bank on governments alone to solve the problem of disparities. Businesses are the engines of today's progress and have to become the drivers of change. They have to become aware of the new challenges of managing diverse operations across continents spanning different cultures and geographical locations, they have to face resurgent geopolitics, and heightened business volatility all of which would require greater transparency and accountability. Corporations have to realise that their biggest challenge today lies in managing diversity and bridging disparities. National governments driven by local and parochial agendas have been unable to cope. It is now for the business to drive the government agenda and engage with all stakeholders to make them intervalise the benefits, of proper implementation of globalisation can bestow. They have to invest in local communities and seek their trust. Capitalism has to channel self-interest to achieve collective good for its own survival. A deep commitment to corporate social responsibility is our only hope. We must not allow it to be used simply as a brand building exercise.

Earlier this year, Francis Fukuyama of John Hopkins University wrote that opposition to US politics could become the chief passion in global politics. Greatest challenge, therefore, before the US companies is to undo the damage caused by their President. This requires a collective effort on the part of USA Inc. CSR gives them an opportunity to do that. They can now start a campaign for hearts and minds in the true spirit by beefing up stakeholders dialogue by collaborating with local NGOs and the civil society with a view to improving the quality of life of the local communities where they operate. The alternative means capitulation to the forces of anti Americanism, antiglobalisation and anarchy.