The economics of bottomless pits
The economics of bottomless pits: We don't know how government ownership affect the behaviour of privately owned firms
December 3, 2017
This refers to TCA Srinivasa-Raghavan’s brilliant analysis “The economics of bottomless pits” (Business Standard, Marginal Utility, December 2/3). Quite possible, because of the lavish sprinkling of economic theory and sophisticated jargon, lay readers like me may miss the real issues raised. Still, all the concerns shared deserve attention and informed debate.
The concept of ‘mixed economy’ was a joke during the Nehru days. I still remember E X Joseph who worked in Bombay AG’s Office during those days (1963), comparing mixed economy to adulteration of chicken meat with meat from dead horses during war days in Britain. The proportion was 1: 1, one horse for one chicken! He said in mixed economy capitalism and socialism were having that kind of ‘mixing’ (Joseph is now a Senior Advocate in Supreme Court). The role of public sector in India continues to be viewed with derisive criticism.
The public sector in India is being criticized for no fault of the sector. The ownership of PSUs including Public Sector Banks (PSBs) is with government which is owned and operated by back-seat driving by the rich and the powerful in the private sector. The private sector leadership, by manipulating government policy, ensures that the management of PSUs remains inferior to that of private sector organizations. The fall of Unit Trust of India and the present stress faced by PSBs with a banking business share of over 70 percent are examples. Organizations like ISRO, Railways and LIC have survived such manipulations because of less HR interference from GOI. That can be attributed to the awareness of the inefficiency of the private sector to manage organizations with social commitment preceding in priority over commercial considerations.
A word about resources. Let us be clear about the fact that both public and private sector organizations source funds from public and government has the moral responsibility to protect both types of organizations in public interest. Whether it be taxpayers’ money or funds mobilized from public by corporates, resources need to get the same respect and treatment from the government.
M G Warrier, Thiruvananthapuram