It has been ten years since a small film called Lagaan wowed the Hollywood studio establishment. Its supporters , quite befuddlingly to most Indians turned cartwheels in delight when they saw it. Indian people wanted to say “Oh come on! Ahutosh gowriker ain’t THAT good!”. While the ‘colored by numbers’ effort was an average campy imitation of a swank bollywood musical (Dil se/ Dilwale dulhaniya le jayenge) it reeked too much of the artifice of stage musicals and the National school of Drama (delhi). The film was hardly a cinematic masterpiece. What was it about Country bumpkins teaching the British army cricket that hit an ogasiastic nerve among your common Studio Hollywood Executive?
Here is a tutorial, ten years after, for the completely clueless bollywood person that still thinks slumdog millionaire was an homage to Indian cinema (not!).
Film financing :
Part 1 : The Indian Mafia : Films have always existed in an alternate world of financing. Hollywood or Bollywood. Traditionally, the Cash intensive nature of the Box Office have attracted people that do cash business to film financing ..In India that has meant the grey economy (and Indian royals, who hoarded Gold were part of this grey economy). They have also included people from Abroad who have had hard currency to invest in films (dollars, dhirams, gold, drugs) , who were interested in the many charms of the glamorous and high risk-return indian film industry. This is not because Indian films are particularly more or less unsavory than any other, (Hollywood is the home of unsavory when it comes to all things film) , but because of the low entry barriers for money launderers that get into India in general and the Indian film industry in particular.
The Arab based South Asian Mafia that got its tentacles into Bollywood had no way of differentiating between “clean” crime and religious war. Many of them were also financed by Pakistan’s shady intelligence and counter terror agencies that also had a hand in Afganistan and Kashmir. However, Independant of extremist sources of financing from the Gulf, these crime “dons” were really petty criminals without Glory or honour in the ruling societies of the persian gulf who pursued dreams of Integrating their semetic asses into western societies and buying up property in switzerland and Northern Italy. They saw any involvement in muslim crime as a distraction and an embarrassment(as an aside, they ALSO saw Osama Bin Laden as a distraction and embarrasment).
This was the place Bollywood found itself in, in 2001 was where the Industry’s biggest players were crime syndicate financed(they still , partially, are but the biggest source of financing is more the Hollywood Mafia (big studios) and Big Pictures™.
This was the era when Ram Gopal Verma was producing Paen after Paen to the anti hero Gangster, remember, and a bunch of very nice actors , who had a captive audience the size of europe, to whom it made no difference how big the hits were because, like in a casino, the mob takes it all.
Part II Austrian Economics and Hollywood : So what is this grey market and what the heck does Austrian economics have to do with it? The Austrian School of economics is, briefly put an Anti central banker school of economics.
Central banking, the world over is based on the assumption that money supply needs to follow economic activity. So if Vinay ki amma makes one roti and sells it for 3 rupees, classic central banking holds that the central bank in vinay’s amma’s country should produce enough liquidity to support someone buying her roti for three rupees. too much coin, and there will be Inflation, and vinay’s amma’s rotis will start to cost more, too little coin and Vinay’s amma will go out of business. Central banking tries to make liquidity a neutral(or non profit) enterprise in regulating the economies it controls.
EXCEPT liquidity is often NOT a non profit enterprise, it’s a LOSS making game. When a government is unable to raise enough money from taxation, the central bank is often asked to print more money. if the government doesn’t repay it’s debt, why! there’s the central bank , of course!. balance of payments problems? depreciate your currency ,central bank! So While a central bank professes the intention to stay neutral in an economy when it prints money, it ALSO tries to take into account a host of factors it has very little control over. including the NON profit neutrality of the political powers that control it. A central bank , in other words is as untrustworthy as a corrupt cop in matters of money supply.And these are central banks that do what they’re SUPPOSED to do. Let’s not even talk Weimar central banking.
One can say that the power of the Austrian school of economics has been enhanced over time by the waning power of central banks in particular and governments in general. In an interconnected world, the irresistible force has at least as much power as the immovable object. The Austrian school tries to give motive power to the liquidity in the world outside the direct control of central banks.
The Austrian School of thought works on an extreme capitalist mindset. It holds that in an economy the top (say) 80% productive assets (and not financial assets) are what gives it value. At the top of the pyramid of value is Gold, the store of value. Gold price is, thus a barometer of how much value people want to put in the store, and how much they want to give to Vijay’s amma’s chappati. if they think it’s valuable, why! they’s pay Gold for the chappati! Thus, a central bank’s role is a passive one. money should be a profit or loss making tool, held as a constant. if there are more goods demanded, they will then become as valuable as Gold, and the owners of the gold would spend it for the value.
The Austrians thus try to “speak for” “the private enterprise system” to a “government owned/operated” central bank, trying to delegitimize it of its non “free market” roles.
Whether this band of pirate economists should have the power to represent Capitalism is a debate worth having, but where there are no grownups minding the store, like in the times of a Mortgage crisis or a European debt crisis, the voice of the Austrians grows and sounds ominously like self fulfilling prophecies, which they sometimes are, being that the major players CAUSING the crisies are adherents of and missionaries for the Austrian school.
Austrian Economics is to the private sector what the grey economy is to films. In a regulated and overcontrolled world where a paper could not move from place to place without the SEC the FED and a whole bunch of national and trans national regulators getting wind in two seconds and pretty much destroying the money machine, the liquidity provided by the grey market, often from the adherents of Austrian schools(because of their mistrust, they stayed liquid in international hot money) was like a shot of doping serum that drove industry to higher levels of performance. This was the world Big studio Hollywood got its liquidity from, and counted as its idealogical voice. In a post Soviet unipolar world Hollywood was not only tributing its paymasters, it was also talking their language, and that sounded like music to Lehman Brothers and Goldman Sachs.
Initially big losses were made when such free floating liquidity entered the “organized” sector ( terrible films , massive losses) but soon the Investment Banker and the Film financier learnt his trade better. Thus , now , as there was Goldman sachs betting soverign debt(and making everybody in it billions) so Studio financing behemoths were making billion and two billion dollar grosses on basis of the grey market money, which now, effectively was recycled into the kosher market in another country.
Then there was Lagaan.
Aamir Khan’s band of boys getting a break in taxes and bringing down the public infrastructure of middle class britain Sounded like History according to Carl Menger, to the cabal financing hollywood films. That they did this with the power of free enterprise felt like the Gospel, and the timing of the whole thing felt like that girl in the little black dress who comes in the door and blows me a kiss.
Hollywood money thought Bollywood was inviting Austrian economics in. After all, everything that they had heard about Bollywood told the right story. these were a bunch of (wierd if) talented professionals who learnt the craft the way Soviet black marketers learnt capitalism – by hard knocks and survival of the fittest on the streets of St Petersburgh – and who had no qualms working for the mob- I mean we can’t be as bad as the MOB!
Sounded like Lagaan was inviting them in, saying that , like in many crumbling post Soviet countries, there were no grown ups minding the store, and people could just come and help themselves to the 400 million person strong entertainment market in India and the traditional markets of Bollywood.
So THAT’s why there was so much glee after Lagaan in Big studio Hollywood.
This was also a period of a large ramp up in volumes. The Lord of the rings trilogy heralded the entry of Invesment financing into billion dollar revenue projects. When films were earlier being made for one to ten million dollars and marketed for about thirty, now the budgets were in the hundred million dollar range, the marketing in three times that much, Revenues of the biggest grossers touched a billion dollars worldwide grosses. Hollywood, in other words was ramping up it’s game. With every one going CGI and Video game , there was real danger that one or two bad projects later Hollywood would be a wasteland of dead spaceships and they would have to rebuild , like after a particularly wild party.
So Shall we start prostituting our sisters already?
Oh no, not quite. Because while the initial confusion about who the players were, in Bollywood ended, Hollywood has started realizing that even though a billion people see it, Bollywood films are small fry being run by the “one Indian store in town valued at less than $ 50,000”. It’s a culturally unique (and sometimes odd ) commercial film industry, but it can not pull off the major scams necessary to produce even ONE > 100 mill (revenue) film. Speilberg’s Ambani adventure has shown that even Indian Billionaires think small. No one is going to give you leadership in grabbing and monetizing the three billion person Audience for Bollywood films. (there’s me but I ain’t playin’.) Now it’s time for the beast to lose interest and go away….and leave India with a built up infrastructure for producing better films and TV. So you see even this story of greed rape and pillage has a happy ending.