Going by conventional 'wisdom' (an oxymoron if I ever saw one!), there is an easy solution to the world's current ills. 'Stimulus' and 'Bailout'. To me, this looks analogous to an easy cure for alcoholism: whisky and vodka.
Real estate 'developers' in India have been very busy developing their (undeclared) bank accounts at the public's cost. Having dealt with a number of them myself, they seem to me to be cheats to the last guy - exorbitant pricing, late construction, totally unethical behavior are not just rampant, they are even expected by the consumer. They live by the maxim - what's mine is mine and what's yours is also mine. Their demand, therefore, that the government break laws and allow them to build more crappy and super expensive stuff (as a 'stimulus' you see), strikes me as the pinnacle of venality. Or look at the media industry. When the times were good, they were raking in the advertising dollars. Now that the economy is slowing down, they run to the government asking for 'stimulus'. Or infrastructure players (a certain airport developer comes to mind) who have asked for (and got!) higher consumer cesses in a manner which is illegal (according to the original contracts), unethical, and against business principles (oh, people not flying? simple way to get them to fly more - charge them heavily to use the airport!! Duh???)
This is a happy marriage of capitalism and socialism: capitalise all profits and socialise all risks. The fact that there is a huge moral hazard at play seems to escape everyone. Hello? I thought that risk was an essential cost for getting return. Business cycles were an undeniable part of life. But suddenly I find a slew of 'expert economists', abetted in no small measure by the media, sprouting out of the woodwork, expounding on their interpretations of Lord Keynes' theories.
To me, this is nothing but avarice, pure and simple. It is not my case that genuine government intervention is not required in industries which are suffering for factors outside their control. Export oriented industries for example (textile, gems and jewellery, fisheries) are having to lay off thousands and thousands due to events in other geographies. Help in the form of temporary loans, tax relief etc. is very much in order. But please, let us not allow all kinds of fly by night operators to pile on and grab taxpayers' monies in the name of 'stimulus'.
What we need is more accountability, and an ability to take the rough with the smooth. Not 'Bailout'.
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2 comments:
By far the best perspective I have read so far.
Agree.. same things holds in the US too.. US auto industry really shouldn't be bailed out.. They aren't competitive, even in great times lagging far behind and are too big for anyone's good... However, there is huge political pressure to "save" them because the voting pulic don't understand the real issue in the banking system, media has hyped bankers are the rich villians and everybody wants to buy that and these people elect the legislators..
Much the same I suppose everywhere.. Fiscal indiscretion and populism go hand in hand in such times.. What to do!
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