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Thursday, May 31, 2007

PMs bold advice to the Corporate - why will the genie listen to the master?

Our Prime Minister is often (mistakenly according to his colleague Mani Shankar Iyer) given the credit for what is popularly called the LPG (liberalization, globalization and privatization). Letting the free market situation to emerge in India through the consistent economic policy change (called economic reforms by some) whereby the top of the deck corporates reap all the benefits and the bottom of the pyramid is just about sustained through dole outs. Now the fundamental of the current market paradigm according to economists is that each one to their own, the free market believes that the more selfish the person is the better she would compete and the more healthy it is for the overall health of the market. Period.

Individuals and companies play in the market to maximise their returns of investment, whether it be financial investments, it be career advancement or expansion and acquisition, the fundamental rule is aggrandizements. The methods and tools of the market paradigm are designed towards this purpose, it cannot behave differently. Having let the genie of the market paradigm out through his personal initiatives and initiatives for which he is credited, it was surprise to find the PM make the following statement. Perhaps, the realization that, 'there is enough for every man's need and not everyone's greed' has suddenly hit the PM or there are signs of imminent break out sooner than later that lead to this rather introspective muse. The place where he chose to do it, just like my earlier posting of Iyer's talk was amidst the industrial captains! He must have looked really stranger there.

It is a first in many ways, I don't know when was the last time in the post cold war era an Indian leader openly said that we cannot afford the wasteful western lifestyle. Is this a statement on the much celebrated and proclaimed 'American way of life' that the Super power would want us all to adopt? I think this is perhaps the most striking part of the speech for me, then asking the corporate captains to take a pay cut requires a lot of courage, I do hope he follows it up with a similar request to his own brethren Members of Parliament whose income and perks put together is a major drain on the exchequer though negligible compared to the corporate standards. He also talks of decency and greed being the boundaries of corporate profit maximization, tough luck, neither of these are regulated by the government or anyone else. We have celebrated and venerated Dhirubhai Ambani as a corporate legend, we have even made movies on his life, increasingly our corporates tell their employees and share holders that 'greed accha hai'! The consumer is wooed forever with the promise of any number of choice of products in all categories, and the advertisers go over board to emphasize that it is fine to over consume and all this is the outcome of the LPG.

Anyway, the following are the excerpts from his speech, use the link to read the larger transcript (though rediff repeats itself in reporting)

The Indian industry's success in wealth creation is worth celebrating, but showing off the riches through ostentatious parties is as good as insulting the less privileged and stoking social unrest, Prime Minister Manmohan Singh said on Thursday. Apparently turned off by extravagant weddings and other parties thrown by the "rich and the famous," he cautioned that "rising income and wealth inequalities, if not matched by a corresponding rise of incomes across the nation, can lead to social unrest."

Inviting the industry to be the government's partner in creating a humane and just society at CII's annual general meeting here, the prime minister wanted corporate India to first resist excessive remuneration to promoters and senior executives and reduce conspicuous consumption -- as it was "socially undesirable" and "environmentally unsustainable."

"We cannot afford the wasteful lifestyles of the Western world," he said, reminding the industry that India, with over one billion people, ... faces the problem of scarce natural resources on per capita basis.

...He also said that corporate social responsibility must ... be based on the idea that the wealthy have an obligation to society and to nature.... "The time has come for the better off sections of our society to understand the need to make our growth process more inclusive."

Singh said unless workers feel they are cared for at work "we can never evolve a national consensus in favour of more flexible labour laws aimed at ensuring that our firms remain globally competitive."

The prime minister also made it clear that operation of cartels by groups of companies to keep prices high must end."It is unacceptable to obstruct the forces of competition from having fair play. It is even more distressing in a country where the poor are severely affected by rising commodity prices," Singh said.Terming cauterisations as a "crime" that goes against the grain of an open economy, the prime minister said: "Even profit maximisation should be within the bounds of decency and greed."

May be the PM might have felt like a stranger to them, soon there may be news paper columns questioning his sanity, I won't be surprised if someone suggests his name for the next President, a way of saying let us shoe him up, there might be mild reminders that the market cannot accept this by twenty minute political pundits in popular news channels.

The genie would refuse the master is sure by the response from the corporate houses, not one leader actually used the opportunity to make any dramatics and say that he would personally adhere the PM and lead by taking a 5% cut even. Shows the kind of stuff our corporate leaders are made up of.

In Tamil there is a proverb that once you have lost your eyesight it really doesn't matter if you learn suryanamaskaram (a traditional set of yoga postures normally practiced facing the sun at dawn) or not. Mr. Manmohan Singh seems to be doing just that.

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