IS CAPITALISM INHERENTLY UNSTABLE?

There are at least two beneficial fallouts of the economic recession. The first one is the generation of ample fodder to the newspapers, magazines and TV channels for debate, discussion and opinion on the demonized topic. Suddenly, we are awash with opinions from anyone to everyone whether worthy of their salt or not, on the demerits of unfettered capitalism and the virtues of socialism, opinions which were hitherto considered blasphemous at least in the developed world. There were a few who had the bravado or the machismo to talk about it in the past(irrational exuberance etc) but their voices were faint, occasional and got lost in the melee or else were ignored as the going was too good for most people in the business to be distracted by discordant voices. Soothsayers continue to talk of such recessions as parts of normal boom-bust cycles to be taken in one’s stride quoting economic history.

The second beneficial fallout is the rise in the number of devotees (the recession affected ones) thronging the self-styled gurujis, swamijis and wellness counselors seeking solace, thereby adding to their business. Politicians and the economists now wiser on hindsight and the spiritual gurus exhort that ‘greed’ is at the root of all the mess. Greed (or call it the freedom to create and market goods and services) was supposed to be good for innovation and development as long as it was channeled properly for the benefit of humanity or at least so said Ayn Rand. Then came the concept of greed being good but excessive greed being bad.

But I think we need to answer a more fundamental question than be insouciant with the sayings and the opinions of those who are more interested in perpetuating their businesses and fads. The questions are how does one differentiate between ‘greed’ and ‘excessive greed’? Good to whom? To the self or to the humanity? Isn’t it naïve to think that human beings would somehow understand the differences and would draw for themselves their internal ‘laxman rekhas’, namely taking a pledge thus far and no more where greed,corruption, nepotism, favouritism, and devising ponzi schemes etc are concerned? All human beings are born with three gunas namely Rajas,Tamas and Sattwa in varying proportions with Rajas(materialistic desires) dominating in the present day world. There is also the fact that human beings are endowed with varying levels of intelligence. Capitalism feeds on Rajas where more is claimed to be better and merrier. A society based on such a premise is bound to be fundamentally flawed and unstable for the more intelligent ones of the world with dominant Rajas are bound to dominate and liquidate the less intelligent ones, notwithstanding the deceptive claims made by the apologists of capitalism.

MBA Finance-The End of Glory?

Conversations with cult followers, religious adherents, or swamiji buffs can invariably turn into personality clashes that shut out possibility of any rational scientific debate. Such is the deep rooted allegiance of the acolytes to their faiths and beliefs. A similar leap of faith existed at least until now about a MBA in Finance from an Ivy League school. The three magic letters paved the way to get rich in the shortest time possible. Join an investment bank on Wall Street and lo and behold and you were on the path to paradise. Aided and abetted by an irresponsible media which kept lionizing their achievements by flaunting their placement offers year after year, the names of even the best of scientists were pushed to obscurity. Parents ran that extra mile to see their wards somehow join the sacred portals offering the magic degree. The financial pundits told us  that a vibrant financial sector is the backbone of any economy and that allocative efficiency of resources can be better achieved by a well developed  derivatives market which allows different market participants to offload and spread risks through  exotic financial instruments. While it was and is true, greed overtook sanity and the spin doctoring continued unabashedly to the point of collapse. Those who felt that it looked too good to be true were touted as doubting thomases and cases of sour grapes. It was the natural career choice for most engineers from premier institutes to tread this path. Who would like to wait for donkey’s years undergoing the drudgery of learning and applying engineering to earn a decent living? After all there was great demand for the new breed MBAs and it was for the market to decide the hiring price be it eye-popping or gravity defying. Like all ‘good’ things come to an end, the system started buckling under its own weight of inconsistency. The flannelled suited were suddenly left in the lurch. Once used to the uber-rich lifestyles and suffering from delusions of grandeur, they unfortunately continue to put up brave faces hoping for a recovery of the sector to its ‘past glory’ which in the first place was only a mirage.

A sanitized version of the financial services sector with a strong regulatory mechanism will exist but without the magic of get rich quick careers. The Indian government plans to add at least 10 million jobs every year to sustain its proclaimed GDP growth of 9% and bulk of it must come from the manufacturing sector. The sector needs highly talented techno-commercial professionals and career growth can happen only slowly with years of effort. I suppose the Ivy League institutes would concentrate their efforts in churning out more of these and stop selling dreams of dizzy careers in the financial services to their students. Selling dreams should best be left to the entertainment industry.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Is Astrology superstition?

To the extent that it lacks scientific rigour and the ability of being validated by scientific observation and experiment,it will continue to be in the domain of superstition.However,purely on a statistical basis I have seen it working.Good astrologers have used predictive analytic tools in their own ways(akin to regression models) to mine large amount of horoscopic data to come out with trends and patterns which do work many times in predicting events.Astrologers can be likened to the technical analysts of the stock market who generally have a better success rate than fundamental analysts.Eventhough predictive success can be coincidental in many cases,it can certainly help people broadly know the shape of things to come to prevent impending disasters if any.

Is shareholder wealth maximization a good norm to follow?

“Maximising shareholder value unfortunately continues to remain the 'Holy Grail' of running businesses.The self styled financial pundits of yore in all their wisdom thought this was the best way to minimise agency risks and costs.To me while it made financial sense,it made little socio-economic sense.Enron,Worldcom,Northern Rock,the subprime messes were all creation of indulgent managements who purportedly acted in financially appropriate manner but ended up being socially irresponsible(Who cares.They were not expected to be altruistic!),for sake of pleasing thier shareholders.

That's the downside of a laissez faire market economy but with each of such fiascos,the innocent small time investor or the mortgage owner down the street lost his lifetime earnings. We need a complete rejig of the concept itself followed by norms for social governance in running businesses.”

Reservations/Quotas

To all those who are crying hoarse against reservation ,let them not forget that the IITs and the IIMs were conceived as part of Central Government initiatives. They were painstakingly and assiduously nurtured by funds from the Central Government (and of course also aid from various foreign governments in the initial years),massively subsidizing student education while aiming to provide quality education in technology and management. Government of India has every right to tweak the admission policies of these institutions to suit the larger social objectives of the nation. Moreover, why bother about the institutions like IITs and IIMs if their only purpose is to train their incumbents for grand placement or US visa melas? Why deprive the slightly less endowed(gutter snipes if the pseudo elitists like to call them) to partake in the melas? Is there a single piece of trailblazing research work undertaken at any of these institutes which is comparable to the Ivy league institutes of the West? Can we dub them truly premier?

Ask any of the bright alumni if they are interested in making a career in these institutes for research and you can almost pre-empt the answer. I am sure the alumni of Stanford or MIT would be proud to join their institutions for the research opportunities they provide.That speaks volumes. I think the whole debate is irrelevant. The protagonists of anti reservation instead of protesting could do better by working towards setting up a number of quality educational and research institutions in private domain, to meet the needs of truly deserving students.

Corporate Social Responsibility(CSR)

Corporate social responsibility defined in terms of philanthropy, charity, espousal of social causes, labour relations, going green, etc, is to trivialise its very purpose as it allows errant firms to go off the hook by robbing one section of the poor and donating a part of the loot to another section of the poor.
Looking good to society is different from being good. CSR is more fundamental in nature and should dwell on the ways in which firms must ideally operate in a business environment by not indulging in practices like cartelisation, stock price manipulation, unfair trade practices and balance sheet manipulation. The idea is to prevent firms from enriching themselves at the cost of other sections of the society. The buck of social responsibility must start with democratically elected politicians who must not succumb to policy directives of influential firms.

Romantic careers

Monetary consideration has been and will be the sole motivator for most people in selecting careers with increasing all round and inclusive economic growth.Increasingly,business and shareholder activism are bound to demand absolute subservience of the employees to the goals of the employers,do their biding,or to put euphemistically 'share their vision',to prevent conflicts of interests.In such a set up,I would see decreasing bandwidth of freedom for employees to pursue their personal interests or to do what they love to.

Employees may claim unremitted love for their chosen careers as long as such careers are well paying.Romanticism borders on adventurism and very few would dare to forsake economics for sake of their first love.