Governments in Business
This post is inspired by the TamilNadu government's recent move to take over the operations of MSO's like SCV and Hathway. The government's contention is that it would be able to provide better service and reduce the rates to the consumers. Good intentions, no doubt. But history reveals that as a rule - state owned firms are never efficient and competition is the only thing which increases efficiency, drives the prices down and improves Service.
I have often wondered whether i am a Socialist or Capitalist. It's a very difficult choice. There's no bigger example to explain this difference than the banking system in India. India allows foriegn banks and FDI in banking. So with the de-regulation of the economy we had new banks like ICICI Bank which became popular overnight. In any big city, u can observe all these big players - ICICI, StanChart, CitiBank etc comepeting aginst each other, offering newer and easier options(Sometimes unsolicited ones !!) and great service. But if u have a look at the rural scenario, where credit is most important, these banks don't even care a damn(except ICICI, which is making a foray into rural through Self Help Groups). Even the bigger State owned banks think twice or thrice before lending to a poor farmer. Now these farmers are left to the mercy of money lenders who charge sky high interest rates !! The trouble with capitalism and market oriented companies are that, they enter only where it is profitable for them. What about the other oft-neglected areas ?? The telephone industry is another example. There's a stipulation that private operators are to provide service to villages also, faling which they are to deposit money to compensate the losses of BSNL. Is there a solution to this problem - maybe a middle path - Capitalism with a Human Face ??
I have often wondered whether i am a Socialist or Capitalist. It's a very difficult choice. There's no bigger example to explain this difference than the banking system in India. India allows foriegn banks and FDI in banking. So with the de-regulation of the economy we had new banks like ICICI Bank which became popular overnight. In any big city, u can observe all these big players - ICICI, StanChart, CitiBank etc comepeting aginst each other, offering newer and easier options(Sometimes unsolicited ones !!) and great service. But if u have a look at the rural scenario, where credit is most important, these banks don't even care a damn(except ICICI, which is making a foray into rural through Self Help Groups). Even the bigger State owned banks think twice or thrice before lending to a poor farmer. Now these farmers are left to the mercy of money lenders who charge sky high interest rates !! The trouble with capitalism and market oriented companies are that, they enter only where it is profitable for them. What about the other oft-neglected areas ?? The telephone industry is another example. There's a stipulation that private operators are to provide service to villages also, faling which they are to deposit money to compensate the losses of BSNL. Is there a solution to this problem - maybe a middle path - Capitalism with a Human Face ??
posted by Karthik at 4:20 PM
2 Comments:
Great post. This is exactly my argument too. We need an all inclusive economic liberalization rather than a blind one. I agree that socialism has hindered the economic progress but what is the guarantee that capitalism is the correct solution. What is the guarantee that the "Kathrina effects" that we saw in US will not happen in India. In fact, I am expecting 100 x Kathrina in India. What we need is a mixed economy which keeps us competitive in the global arena while making sure that every segment of the society benefitting from the economy.
Government taking over is acceptable in cases. Think about Tasmac. With all the corruption and politicking that went with Bars' tender processes tasmac has now become a better profitable trade. In case of cable Tv. Sumangali enjoys monoploly. Leave out Hathway it is peanuts. If sumangali had been able to flex its muscles then the STBs would have not made the foray. We can argue either way in STB. but lets leave it. Nyways this has thrown open a discussion. Could this be an election gimmick ???
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