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Location: Hyderabad, Andhra Pradesh, India

The permanent temptation of life is to confuse dreams with reality. The permanent defeat of life is when dreams are surrendered to reality.

Wednesday, November 26, 2008

Bailouts in a free-market economy

It’s ironical...suddenly the proponents of free market and capitalism want State intervention and support. Till yesterday they were shouting hoarse about governmental regulations hampering growth and development and today we have them lined up asking for bailouts.

When you see Banks and Investment firms across the world falling like proverbial nine pins…the solidity of the nationalized Banks in India bears a testimony to the banking regulations in our country. Of course cash flow has been affected by the global recession, but the Reserve bank of India who prescribes guidelines for banking operations within which the country's banking and financial system functions has ensured that the fundamentals of our banking norms as established in its objectives are strong enough to weather the global economic gloom. The Reserve Bank of India who formulates, implements and monitors the country’s Monetary Policy ensures that liquidity is maintained in the economy and banks in the country do not have to go the Citigroup way.

One of the primary reasons why banking systems across the globe failed was…greed. ‘Greed is good’, a buzz phrase in Oliver Stone’s Wall Street, was seized upon as the mantra upon which the Investment Banks were operating and their haste to make a quick buck from an economy that was already showing signs of having reached boiling point short circuited global economy. The effect of their rash decisions did not rest within the financial sector but percolated down to other sectors…primarily the auto and textile industry and sent the world spiraling into recession.

One of the sector that was crying out the loudest in India for deregulation was the airline industry and they are the one’s who are screaming for handouts to sustain themselves. But wasn’t one of the primary principle of free-market capitalism competition and profit maximization, where creating a sustainable entrepreneurial enterprise is determined solely by the operation of a market economy that is beyond the ambit of a central economic planning. The King of Good Times is certainly not flying high right now…

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