Thursday, February 26, 2009

Economic Nationalism, raising walls of protectionist poliiicies ..

Being the world's largest economy, the actions the US leaders take,
have got repercussions in other parts of the world. In this globalised
and highly networked environment, no action will go unnoticed or
uncommented. Obama's economic stimulus plan highlights "economic
nationalism" or protectionism in its crudest form.

Obama is insisting that companies who receive federal bailout funds, cannot

1. outsource their work to companies outside US
2. federally funded public works should buy only US made Iron, steel
and manufactured good
3. federally aided banks not to hire foreign workers

Thinking like India did till twenty years back ?

How wisely it is said that "history repeats itself", men never learn
from their mistakes. Economic historians tracing events recollect the
depression of the 1930s when US Pres then, Herbert Hoover raised
duties on about 900 items, leading to the recession getting deeper,
precipitating a worldwide crisis.

Obama is keen repeating the same mistakes his predecessors did.. The
not so great policies of George Bush, partly reasonable for
precipitating the global economic crisis now, does not mean Obama also
follow similar dumb-headed attitude.. I do not recall where I read it
from, constructive destruction is the term coined for this new
process. That is what the world needs to look at now. Destruction is
happening and with it there is construction ..

Kanwal Reikhi, the venture capitalist when he visited IIT Bombay
recently was mentioning the folly of the US government in trying to
salvage US pride by sinking hundreds of billions of dollars in the
crisis ridden companies of GM, Chrysler, Citibank and BankAm, once the
pride of US innovative spirit, now the symbol of reckless greed and
poor corporate governance and ethics. These organisations are at the
declining stage of their life cycles. No amount of financial funding
and salvaging can help these dying corporations and banks, No amount
of good will is going to revive these companies.. They have outlived
their utility and need to be reborn again in a new avatar, be
innovative enough and useful to the world. The new evolutionary
process thus coming from the land of innovation, should be creative
destruction, with the US govt giving full support to it.

Constructive destruction will ensure world resources and natural
strengths and capabilities of countries are used more diligently and
efficiently. Allow each country do those things it is efficient at in
modern day activities, like US in innovation, Japan in high tech
re-engineering and high quality miniaturisation, India in textiles,
value added software development and back office operations, China in
low cost manufacturing, South East Asia in machinery, manufacturing,
Australia in iron ore mining and so on. It also ensures the most
efficient allocation and utilisation of global resources. The
resulting synergy can then be leveraged to revive the sinking world

Ensuring that creative destruction happens with the least of human
inconvenience or discomfort is the main lookout for governments, not
the blocking of the process altogether. It is inevitable and will
happen whatever and however we try to block it. a natural process one
has to go through ..

A dynamically changing world needs developing the right skills and
thought processes to leverage on the collective strengths and
weaknesses of the countries of the world, this is the only sureshot
panacea to its ills.

Mr Pascal Lamy, WTO Chief, is a much troubled man, jetsetting from
country to country trying to reason out the futility of imposing
domestic restrictions on goods and services during these times of
economic crisis.

Aware of the ills of protectionism, let us join hands in this global
endeavour. Fet world leaders stop playing to the gallery .. Let trade
and businesses cross over the barriers or narrow walls of selfish
economic interests to be globally efficient. Let us work together to
resuscitate the world to greater levels of efficiency and productivity
of operations. Only this can ensure global growth, efficient
operations and revitalise global economy in the coming years ..


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