The stock market and the democracy (A Response)

Jivha’s blog The stock market and the democracy raised some points, which I couldn’t just let go unchallenged. So here is my reponse to it, that I posted on the blog as comment too.

Now ask yourself, slowly, exactly why is a government which seeks to retain profitable state-owned companies and continue to provide employment to its citizens such a perverted thought that 3,00,000 crores of market capitalization needed to be wiped out?

To ask such a question in a isolated manner is to ignore the prevalent market realities. But since you want us to ask it to ourselves, I did. And here are my2cents.

The basic question is should state own companies at all. If it does, should it create coercive monopolies either through permit raj/legislation or through subsidies and bailouts, thus harming the market in the long run? That, should government give pentions and other benefit from public coffers to a choosen few, from taxes that it collects from others who’re denied these benefits?

If a company wants to do something bold by disregarding established stock-market norms then we laud it for being “bold”. But when a government wants to reverse an earlier government’s policy of selling off profitable state-owned companies, the same becomes “backward” and “anachronistic” because the “market” doesn’t like it? WTF?!?

Well, this is so because when a company screws up, it pays from the wealth it created. When Government screws up, it pays from the others’ money, that it neither created nor has a moral right to hold. So when a company challenges markets, it’s indeed bold, when government does that, it’s rarely bold, just arrogant. (and in this case the arrogance comes from a economic position that is inherited from policies that they’re trying to reverse).

The government in power is a Congress-led one, not a BSE/NSE-led one in case you forgot.

Right. But that doesn’t mean that those whose money is wiped out due to their stupid statements (and hints at stupid policies) cannot question those statement/policies?

enuff said..

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s