Tale of ant and grasshopper: Lessons for Europe, India

European nations, which have been playing while the world was working, are struggling to come to terms with the grave issues facing them.

The normal way of life - generous state support, fewer working hours, extended summer holidays and assured jobs - is a thing of the past and the ordinary European is having a tough time adjusting to this new environment. Jobs are scarce, the government is bankrupt and people are finding they have to work hard for their money. It is no wonder that the Greeks and the French are rejecting austerity; that rejection is also likely to spread to Spain, Italy and Portugal. However, rejecting austerity will not help the Europeans in any way since it will be a long, hard grind to come back to normalcy.

[caption id=“attachment_306212” align=“alignleft” width=“380” caption=“The Greeks are the grasshoppers, while the Germans are the ants now.”]  [/caption]

It is ironic that the story of the ant and the grasshopper actually originated in Greece. Aesop, an ancient Greek storyteller, told the story of the ant who struggled everyday through summer to store food for the winter, while the grasshopper spent his time playing in the nice weather. Then, in the winter, the grasshopper found it had no food for the winter, while the ant survived because of its hard work in the summer.

More from Economy

Budget 2024: These are the many hopes and aspirations of India's social development sector Is the United States in recession? Signs to watch out for

The Greeks are the grasshoppers, while the Germans are the ants now.

Greeks have to listen to the Germans on how to spend money and they do not like it, hence the call for leaving the eurozone. The question is, will Greece ever come back to normal if it does not embrace austerity?

The answer is no as it will try and embrace a ‘spend and grow’ policy that will take them deeper down the drain. However, it is for the Greeks to do what they believe is the right thing to do and one cannot be judgmental about it.

India is also a part of the ant and the grasshopper story. In India, the ant is represented by the people who work hard and save money for the future. The government, on the other hand, is the grasshopper that lives off the savings of the hard-working Indian.

The government spends money when the sun is shining. The government also spends money in the winter by taking away the savings of the people. The government never learnt to save money and the people are paying the price for it.

The average Indian saver is seeing his hard work go down the drain in the form of inflation and depreciation in the value of financial assets from bonds to equities. The government, by merrily spending its way into and out of trouble, has made sure that the hard-working Indian is suffering for the sins of hard work.

Inflation has touched double-digit levels, while equity values are down even as interest rates remain high. All of this leaves the ordinary saver hugely disillusioned.

The average Indian politician does not like austerity as it makes him or her believe that he or she is vulnerable to voter angst. The reduction of subsidies, distribution of freebies, social spending schemes etc. are all ways to take away hard-earned money from the public and throw it into the economy. The biggest gainer in all this is the politician and the wasting of money helps feed his or her riches.

It is high time that there is an accountability of the use of public money by the government. Public money is after all built through hard work, and it is the right of every Indian saver to reap the benefits of hard work. If accountability for public money does not happen soon, the Indian will either try and take the money out of the country or will hoard physical assets that can only depreciate in value as the economy flounders.

Foreign money that appreciated the hard-working Indian with investments in equities (which currently stands at close to 15 percent of the total market capitalisation of the BSE), is now looking at the Indian government as a Greek voter who is rejecting austerity. The rupee is facing the consequences of a spendthrift government and has lost over 20 percent in value over the last one year. Unless macro-economic policies benefit the rupee, it is unlikely that the currency will regain any of its former luster.

It is high time the government starts behaving like an ant and allow the hard-working Indian to benefit.

Arjun Parthasarathy is the editor of www.investorsareidiots.com, a web site for investors.