Business Case Studies, Executive Interviews, Bala V Balachandran on Government and Business

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Executive Interviews: Interview with Bala V Balachandran on Government and Business
December 2009 - By Dr. Nagendra V Chowdary

Bala V Balachandran
Founder anf Honorary Dean of Great Lakes Inistitute of Management

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    Government and Business: The New and Defining Moments

  • Governments have responded vigorously with their bailout packages and that meant in one sense private losses being funded by public money. Henrique Abreu cited a lesson of the late Milton Friedman that ďit is a different thing spending your money on someone else (Warren Buffet) or spending someone elseís money on someone else (government intervention). What is the efficacy of government bail outs, especially for the scale of bailouts doled out?
    It is clear no one wants to put good money over bad money. Governments sometimes tend to do that as there may be a political Agenda and the need to be reelected to power is the driving force behind those decisions. From an economic stand point, you donít want to be emotional and be only rational. In the battle between politics and economics finally good economics will win since there is nothing called as good politics!

  • American taxpayers have become shareholders in AIG, GM, and so forth. Whatís the exit strategy?
    American taxpayers have no say and need to follow what the government they elected states and bids them do. The exit strategy comes every four years in the Presidential and Congressional elections. The two parties have different views of right and wrong. Let the taxpayer decide. This is like investing in stocks. There are bad solutions and worse solutions. There is no good solution. Choose.

  • Regulatory reform will mean higher capital requirements for financial institutions. Wonít that limit GDP growth?
    Definitely yes. But what is the alternative? Few unscrupulous individuals make a huge short term gain and other innocents who skimped and saved money for the childrenís education or marriage are taken for a ride. Thus optimization is impossible and thus satisfying is optimal. Where the economy as a whole is in shambles, the government alone is in a position to induce fiscal stimulus and if it is at the cost of the GDP then so be it.

  • Instead of attempting to regulate using a patchwork of agencies, is it time for Bretton Woods II, i.e., should there be a new and powerful overarching body (as suggested by UK Prime Minister, Gordon Brown) controlling, monitoring and regulating the international capital flows? The aim of economic regulation should be the same in all sectors: to facilitate fair competition among players or, where natural monopolies exist, to ensure fair pricing and service levels. Greater competition means stronger productivity growth, which in turn means a faster-growing economy and more wealth to share. Yet governments everywhere struggle to get regulation right. Unfortunately, regulation often has a negative effect. What can governments do to get it right?
    In each country, there are individuals who are brilliant, extremely welleducated, possess a decent amount of wealth and have spearheaded quality initiatives and public service and have a superb reputation. For example, MS Swaminathan on Agricultural and Green Revolution, Kurien on white Revolution and Milk Production, Sam Pitroda on Telecom Revolution and many others with known competence of that country including Dr. Raghuram Rajan of University of Chicago. I am so glad that Dr.Manmohan Singh, Dr. Montek Singh Ahluwalia, Dr. Abdul Kalam, and other leaders have identified such people and invited them as advisors as their competence, vision, passion and devotion are outstanding. India does not need big deal consultants and I am confident that the educated government does indeed know what is right and also how to go about doing it. So also in the US or any country for that matter. The question is execution. Sometimes they donít go through with it for political reasons or sometimes the system has been so messed up over the past like with corruption etc., that we are unable to execute the plans properly. However in the last 10 years at least in India regardless of the party, progress has been made in a significant measure and inclusive growth (even if out of fear of Naxals) is in existence. In next 10 years the growth will be relatively better and one can hope many things can be executed through a substantially less corrupt and maligned system.

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