Socialists@XL

Some of the SAXI tenets

2005-08-08T11:42:00.000-07:00

1. Government should not be in businesses that are not core. Therefore, disinvestment is correct
2. Disinvestment because of above reason is good. Disinvestment just for the sake of raising money is bad because it is not sustainable.
3. Regarding raising money: By ignoring the problem of NPAs the government is behaving like an Ostrich with head in the sand. It is like a stranger forcibly occupies my shop and instead of trying to evict him I begin to sell my family jewellery to make ends meet.
4. The underlying theme of the article is prioritisation. Out of eight hours in a working day, a government servant(IAS)/public servant(MInister) should spend six hours on rural development and raising revenue through sustainable sources of income like taxes. The other two hours on disinvestment. But the opposite seems to be happening.
5. Lastly, the government is corrupt and inefficient. But the solution isn't in taking responsibility away from it by selling PSUs or forming NGOs. The solution is in trying to make the government responsive and efficient.

Regards
Akshay Gupta
BM-2006

Government's misplaced priorities: BHEL Disinvestment case

2005-08-02T10:05:00.000-07:00

BHEL: The turtle and the hare-brained
Going back on its promise made in the Common Minimum Programme, the UPA government has put Bharat Heavy Electricals Ltd. on the carving table, allegedly to fund health and education. But the proceeds from the proposed sale of equity in BHEL are a fraction of what could be raised by different, less repulsive means, says P Sainath.

21 June 2005 - There is a roaring sale on at the United Progressive Alliance turtle market. Asia's live animal bazaars daily see healthy turtles cut up and sold by the piece - while they are still alive. That way the buyer gets them fresh.

One thing, though. The seller doesn't pretend to be doing it for noble causes. It's for the money. The UPA is more selfless. It is doing it to fund health and education. The Bharat Heavy Electricals Limited is a living, breathing (and profit-making) body. Going back on its own Common Minimum Programme, the Government has BHEL on the carving table. Chopping off a limb from this public sector giant might yield Rs. 2,000 crore. This, it insists, will be used to fund vital social sector programmes. It will even be used to ready more turtles for sale and live slaughter. Part of the funds raised, we are told, could help to revive other public sector units.

Aside from a dozen other reasons why it is wrong, the proceeds from this proposed sale are a fraction of what could be raised by different, less repulsive means. By not running the country as a welfare state for the wealthy, for instance. The amount written off as bad loans by banks is roughly 22 times what the Government would get from the sale of equity in BHEL.

The studied silence over the banks writing off some Rs. 45,000 crore "stuck in" non-performing assets (NPAs) persists. This was achieved in just five years. And the plunder of public money continued in 2004. But it's hard to find those scathing editorials on `inefficiency' that crowd newspapers each week. Perhaps because we all know it was a neat job. The banks were looted in a highly efficient manner by some of the richest people and corporates. With much help from the Government. The loans are deemed `not recoverable.'

Consider what you could do with that money if it wasn't gifted to the rich and famous. The Government could fund its entire employment guarantee scheme from that sum. A universal EGS, as Professor Prabhat Patnaik has pointed out, would not at present cost more than Rs. 25,000 crore. That's about half of what's been written off. With Rs. 45,000 crore, you'd have an EGS and a lot of money left over. More than what the Government will spend this year on rural development. More than what it would spend by way of Plan expenditure on agriculture and allied services. Maybe more than all these sectors put together.

Or let us say the Government sells rice to the poor at Rs. 2 a kg through the public distribution system. To do this, it would have to subsidise each kg it buys to the extent of around Rs. 5. Or Rs. 2.50 for 500 gm per poor person each day. We would be able to give rice at Rs. 2 a kg to 400 million hungry people every day.

Instead, we gave a free lunch to a mob of corporate hucksters. Even after giving rice at Rs. 2 a kg to the 400 million for a whole year, there would be about Rs. 9,000 crore left over. Besides, such an action would bring great benefits in productivity worth thousands of crores. Not to mention what it would tot up in savings on health spending. In a country that is home to the largest number of hungry people in the planet, this would be a huge step forward. The Rs. 45,000 crore written off by banks also comes to more than this year's subsidies for food, fertilizers and other items put together.

Or take that quest for the governmental Golden Fleece. The 6 per cent of GDP everyone wants set aside for education. The gap between the 4 per cent now spent and the desired 6 per cent is about Rs. 50,000 crore. A gap almost bridged by what the banks have handed out to a gang of corporate crooks. And fully bridged if we add the two per cent cess the Government was supposed to set up - but did not - for the `Prathmik Shikhsa Kosh.' Or suppose instead of writing off those huge sums per company, we just wrote off the lowest levels of farm loans. Maybe thousands of poor farmers who took their lives - crushed by debt - would still be alive.

But there are other sources, too. The UPA's employment scheme could be fully funded from the outstandings of just two worthies. Harshad Mehta and Ketan Parikh. According to the Central Board of Direct Taxes, the dues of these two stand at around Rs. 30,000 crore. Tax arrears totalled nearly Rs. 90,000 crore last year. Imagine how many health projects the UPA could launch with half that sum. If only the Government forced evaders to pay up. India has one of the worst tax realisation rates in the world.

Remember too that this Government once toyed with the idea of a 0.15 per cent tax on stock market transactions. But scurried for cover when stockbrokers expressed dissent. Had it stood firm, the Government would have in time got a lot more than it will by flogging bits of BHEL. As Professor Patnaik points out: "The country's tax-GDP ratio, already among the lowest in the world," sank with the coming of the "reforms." What if the Central tax-GDP ratio had stayed the same as it was in 1990-91? "Then the Centre," he points out, "would be raising an additional revenue of Rs. 30,000 crore annually at today's GDP."

That's money each year. A sum that could buy a lot of health and education. There are still more ways. The Government hopes to raise Rs. 2,000 crore by tearing a limb out of BHEL. That figure seems to be matched by what just one Government department says it has been robbed of. Late last year, the Central Board of Excise and Customs issued notices demanding Rs. 1,234 crore in excise and Rs. 646 crore in customs. Most of these were to manufacturers ducking excise duty.

If we get into free gifts to the builder and corporate lobbies - in just Mumbai - there is no social sector project the Government cannot complete. Land worth crores can be leased out for one rupee for 99 years. All that's required is that you are already very rich. And while on Mumbai, consider the thousands of crores that Enron cost Maharashtra. A project all set to be revived so it can make more kickbacks.

Maharashtra, ruled by two UPA partners, is unique. What this State has doled out to corporate hucksters over the years would likely bridge the country's fiscal deficit. What it has sunk - quite knowingly - in cooperatives and co-op banks that are the fiefs of corrupt politicians would fund the best nutrition programme in the country. It is also the State where thousands of children, especially Adivasis, die of hunger-linked causes.

Ravi Duggal, researcher from CEHAT (Centre for Enquiry into Health and Allied Themes), sees the write-off in another way. "The current health budgets of [the] Centre and States put together come to about Rs. 25,000 crore. This is almost twice that amount - and about 2 per cent of GDP. That is the target for health spending in the National Common Minimum Programme! At present, India spends less than 1 per cent of GDP on health."

One of the lowest in the world

Our per capita health expenditure is one of the lowest in the world. India ranks 189 out of 192 countries in terms of how much the Government spends on health as a share of total health spending. But we don't scrounge off when it comes to keeping our millionaires healthy. Even when they run their companies to ground. A top official put it famously years ago: The sicker the industries get, the healthier their owners get.

Power sector expert Prabir Purkayastha has his own take on it. "With Rs. 45,000 crore we could generate close to 15,000 megawatts. That would wipe out the country's power shortage. It would also leave us with a surplus of some 3,000 megawatts. Or, better still, we could really upgrade all our transmission and distribution networks. This would sharply bring down technical losses which are a big part of our power problems. That way, you may not even have to generate more power."

If we chose the first method, we would save money worth 3,000 megawatts. This could be used to boost other sources of energy such as solar power.

But why do all those things when it is so much more fun carving up the turtles? One problem is that you run out of them. K. Nagaraj of the Madras Institute for Development Studies is clear on this.

"Disinvestment," he says, "is a self-defeating exercise. For both [the] Government and the national economy. What the Government `gains' today will be more than lost tomorrow since the returns will be ever lower. Secondly, the economy as a whole - even the private sector - gains from public `investment,' not from disinvestment." ⊕

P Sainath
21 Jun 2005
(Courtesy: The Hindu)

P Sainath is one of the two recipients of the A.H. Boerma Award, 2001, granted for his contributions in changing the nature of the development debate on food, hunger and rural development in the Indian media.

URL for this article:
http://www.indiatogether.org/2005/jun/psa-bhel.htm

Left's take on Budget 2005

2005-03-21T11:58:00.000-08:00

Budget could have been worse: Prakash Karat

Prakash Karat | March 01, 2005

Prakash Karat, Politburo member of the Communist Party of India (Marxist),says that Finance Minister P Chidambaram's Budget 2005-06 has not enthusedthe Left parties at all.

On behalf of the Left parties we had submitted a twelve-point memorandum to Finance Minister P Chidambaram. We also had a two-hour discussion with him and it was followed up by another discussion of the Left-United Progressive Alliance Coordination Committee.

In that exercise, we expressed our opinion on what direction the Budget should take. I think the discussions and debate that the UPA and Left entered into had some impact on the Budget.

Not total, but some impact is there.

We did not put any pressure on the Budget process, itself but we are seriously concerned about the economic policies of the government and Budget is just a small part of that.

Our stand has been that the government should reorient the policy keeping in mind the verdict of the last Lok Sabha election. We wanted change in the government's economic policy too.

In fact, Chidambaram started his Budget speech by saying that the verdict of Lok Sabha 2004 was for the new government and new economic policy. But so far we have seen few new policies. Our point is that the previous government, led by the Bharatiya Janata Party, had neglected agriculture, rural development, health, social sector, education and employment generation.

We want more attention and more allocation for these sectors. We want a National Rural Employment Guarantee Act, a mid-day meal scheme and for education and health; we wanted a provision of Rs 50,000 crore as additional Plan outlay. They haven't provided that. Our first reaction to this Budget is that to an extent it addresses these needs and therefore it is in the right direction. That is a positive feature. But the allocation falls far short of our expectations because it is less than Rs 25,000 crore. We are not satisfied with allocation of Rs 11,000 crore for the national rural employment guarantee scheme. We wanted at least Rs 20,000 crore. We are against FDI (foreign direct investment) in mining, pension funds and retail trade.

We believe that mineral resources should be under national control. The savings of poor and old people should not be given to foreign control. No way are we going to like that as ordinary Indian citizens can never fight against these foreign majors if something goes wrong. Remember, we are still fighting against Union Carbide in the Bhopal gas tragedy case.

Retail trade should be protected from foreigners because their money will bring in large-scale unemployment. Small traders will be wiped out. The BJP government considered it but could not implement it for the same reasons. Retail trade is one area where self-employment opportunity is there. Why trouble small traders?

In the mining sector, it is the duty of the government to find the resources to obtain the latest mining technology. We are very much against the direct foreign capital in mining industries.

We are also not sure how is black money menace is going to be curbed by the taxing of withdrawal of amount above Rs 10,000. The tax revenue shortfall is about Rs 11,000 crore. The FM has reduced the corporate tax which was not necessary. The FM says that there will be more realisation of taxes. We are skeptical of that claim of his.

On the one hand, they are promising to increase the expenditure on a whole lot of sectors. Where will they get the money from? They say they will widen the tax net. I feel even then, certain service sectors could have been taxed more.

We believe that there was no need in a big jump in defence expenditure. Last year they had a big jump but then they said that they had some contractual obligations of the previous government to meet.There is Rs 6,000 crore of net increase in defence budget. We were not in favour of any further increase. Defence budgets have become a sacred cow. Nobody is able to touch it. We have to rationalise our defence spending which is not debated enough. Even when the (aircraft carrier) Admiral Gorshkov was ordered we didn't debate enough. The transparency is missing in our defence spending. We are not saying 'don't spend', but its usefulness and rationale are not debated enough. This is not due to jingoism but because of lack of transparency.

I will agree that Congress is also for liberalisation like the BJP was but because of that fact we are here to check them. That's why we are not sharing power. Our support is from outside. In this Budget certain issues are avoided to avoid the conflict, like divestment of public sector units.The subject is taken out of the Budget. Whenever it comes up, we will oppose it.

On the subject of subsidies, we say that there are subsidies for the rich also. We want a full scale debate on this subject.

>From the Left's point of view, the most satisfying aspect of this Budget is that there were certain aspects of the National Common Minimum Programme which needed to be implemented.

This Budget is trying half-heartedly at least to meet those expectations. A National Employment Generation Guarantee Act and the allocation of funds for health and education are such examples.
On the issue of taxing the rich, the Budget falls short. On issue of foreign institutional investors, the Reserve Bank Governor is voicing his concerns that this investment is coming for speculative purposes, but the FM has obviously not taken it as a matter of serious concern.

Lastly, if you think we look happy with the Budget, it is because we believed that it could have been worse!

- As told to Sheela Bhatt

Development: Swadesh style

2005-03-21T11:49:00.000-08:00

This is what I call patriotism. Not empty emotional jingoism but the drive to take your country to great heights.

Go light a bulb

Dilip D'Souza | March 11, 2005 | 13:23 IST

In November 2003, the two engineers were awarded a 'Technovators' prize by the Massachusetts Institute of Techonology in the USA. The astonishing thing was, neither I nor anyone else who knew the pair was able to reach them to tell them about this. They did not respond to phone calls, e-mail, nothing. For all we knew, they were off in another remote corner of India, doing another project, quietly putting their training to use, as we had seen them do twice over, for the benefit of those who need it most. It wasn't until months later that someone confirmed to me that they had indeed found out about the MIT award.

Anil and Madhu are two young engineers from Kerala. What they accomplished, I found simply remarkable. And after recognition at MIT, they apparently touched a chord somewhere in Bollywood. In Ashutosh Gowariker's Swades, as you no doubt know by now, Shah Rukh Khan plays an engineer who does just what I watched Anil and Madhu do.

Now I think it is a good film, though it also has its inevitable moments of Bollywood-style drama and could do with being an hour shorter. But for me, the best thing about Swades was the understated message about what I found so inspiring about those two young men in the first place. Their quiet patriotism. A patriotism they didn't even think about.

Anil and Madhu build 'micro-hydel' projects: small dams across small rivers, enough to supply small villages with drinking water and electricity. I saw them do this at two different spots in the Narmada valley in northern Maharashtra. First, Domkhedi, where they lit six huts with 30-watt compact fluorescent lamps. That's six huts, an entire hamlet, that had never ever had electricity. One of those belonged to an old woman with a gently-etched face called Khatri Vasave. She was so moved by the Kerala pair -- so moved by this demonstration that some fellow Indians, at any rate, cared about her life -- that she wept, as I watched one afternoon, to see Anil leave for home on a hard-earned vacation.

Yet Domkhedi was just the warm-up act. Spurs earned there, Anil and Madhu moved upriver and branched right -- along a Narmada tributary called the Udai, to a place watched over by the lush hills of Nandurbar district. If Domkhedi was impressive, what they produced in Bilgaon takes your breath away. Their dam and water-channel and tank and pipes and generator, together, send electricity arcing into 300 -- three hundred, yes -- homes that never had it. And a tribal school that never had it either.

What do you say about these men who, unlike so many of us engineers, get down and apply their learning, and apply it to visibly better the lives of people around them? People they don't even know? There's little to say. Take your hat off to them, is all. Find inspiration in them, is all.

This seems to be what fired Swades: it's been written about, but it bears repeating. Shah Rukh Khan is Mohan Bhargava, NASA engineer from the States who comes to an Indian village that's without electricity and many other things as well. After learning a deal about the dynamics of Charanpur, he slowly comes to understand that he must build a dam here and light bulbs. In the huts in the village, of course; but also, allegorically, in himself.
Nods to standard film formulae notwithstanding, he does just that.

When the dam is done, the first bulb comes to life in, brings light to, a hut belonging to Charanpur's own Khatri Vasave, an old woman with a face just as magically lined as hers. Everyone cheers. You feel a tug at the cynical old heartstrings.

But you've felt that tug earlier in the film as well. Swades sends out a number of messages: about self-reliance, and the hollow brutality of caste, and finding your purpose, and the meaning of culture and tradition, and giving of yourself, and patriotism. To me, the film works because of these ideas. Because it says that patriotism is about caring for your fellow human beings, about living for your country, about finding your purpose and acting on it.

After all, those are the things I learned from Anil and Madhu.

And for me, the high water mark of Swades is the exchange about culture and tradition. After a Dussehra celebration, the village elders sit Mohan down and ask him about life in the USA. One -- whose gentle but firm hostility for the US-returned engineer is an undercurrent through the film -- listens for a while and then pronounces: 'Yes, but India has something they'll never have there, something that makes our country great: our sanskriti and parampara.'

The short pause that follows this is the fulcrum of the film. One way it might swing from here is to agree with this and move on: after all, wouldn't all of us in Swades's audience love to believe in the seductive warmth of Mera Bharat Mahan?

But to Gowariker's credit, he chooses another way. Also gentle but firm, Mohan takes issue with the elder. Without needing it spelled out, we know what he is talking about -- all that he's encountered in Charanpur -- when he says: 'We have everything it takes to be great, but we are not a great country today. We let too many things happen that only pull us down.'

We are not great merely because we say we are. Or think we are. There's too much that's wrong around us.

The scene works because it ends soon, and these themes are not explored ad nauseum. But it also works because deep down, we all know the truth in what Mohan says. What might we achieve if we got beyond the things that hamstring us: caste and religion, corruption and apathy, choose your own?

Swades answers such questions on screen just as Anil and Madhu did in real life. When you get down to it, just forget the obstacles and simply get to work, you can do a lot. For example, you can build a dam. Turn night into
day. Bring hope. Squeeze tears from an old woman's eyes. Build a nation. Inspire.

I saw all that happen in two small villages in the Narmada Valley. And then a NASA boss understands what drives Mohan Bhargava and tells him: 'Go light your bulb!' Yes, it is just a film. But you know that understanding might just be a greater award than even MIT has on offer.

Special: All about Swades
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You can send me comments at ddd@rediff.co.in
Death Ends Fun: http://dcubed.blogspot.com

The Scorecard on Globalization 1980-2000: Twenty Years of Diminished Progress

2005-03-21T11:47:00.000-08:00

By Mark Weisbrot, Dean Baker, Egor Kraev and Judy Chen July 11, 2001

It is commonly accepted that the increased opening to international trade and financial flows that has occurred in the vast majority of countries in the world has been an overall success. Even critics of globalization have generally accepted that the reforms of the last two decades, in low to middle-income countries, have boosted economic growth rates. They have argued that this growth has left many people behind, and has often been at the expense of the natural environment.

This paper looks at the major economic and social indicators for all countries for which data are available, and compares the last 20 years of globalization (1980-2000) with the previous 20 years (1960-1980). These indicators include: the growth of income per person, life expectancy, mortality among infants, children, and adults, literacy, and education.

For economic growth and almost all of the other indicators, the last 20 years have shown a very clear decline in progress as compared with the previous two decades. For each indicator, countries were divided into five roughly equal groups, according to what level the countries had achieved by the start of the period (1960 or 1980).Among the findings:

Growth: The fall in economic growth rates was most pronounced and across the board for all groups or countries. The poorest group went from a per capita GDP growth rate of 1.9 percent annually in 1960-80, to a decline of 0.5 percent per year (1980-2000). For the middle group (which includes mostly poor countries), there was a sharp decline from an annual per capita growth rate of 3.6 percent to just less than 1 percent. Over a 20-year period, this represents the difference between doubling income per person, versus increasing it by just 21 percent. The other groups also showed substantial declines in growth rates.

Life Expectancy: Progress in life expectancy was also reduced for 4 out of the 5 groups of countries, with the exception of the highest group (life expectancy 69-76 years). The sharpest slowdown was in the second to worst group (life expectancy between 44-53 years). Reduced progress in life expectancy and other health outcomes cannot be explained by the AIDS pandemic.

Infant and Child Mortality: Progress in reducing infant mortality was also considerably slower during the period of globalization (1980-1998) than over the previous two decades. The biggest declines in progress were for the middle to worst performing groups. Progress in reducing child mortality (under 5) was also slower for the middle to worst performing groups of countries.

Education and literacy: Progress in education also slowed during the period of globalization. The rate of growth of primary, secondary, and tertiary (post-secondary) school enrollment was slower for most groups of countries. There are some exceptions, but these tend to be concentrated among the better performing groups of countries. By almost every measure of education, including literacy rates, the middle and poorer performing groups saw less rapid progress in the period of globalization than in the prior two decades. The rate of growth of public spending on education, as a share of GDP, also slowed across all groups of countries.

Thanks to Prof. Madhukar Shukla for forwarding this link to us

Akshay

This was posted by Akshay gupta

SAXI vision of Socialism

2005-03-21T11:36:00.000-08:00

The Cambridge Dictionary defines socialism as "The set of beliefs which states that all people are equal and should share equally in the wealth of the country, or the political systems based on these beliefs."

But is this the belief that SAXI should stand for. The world psychology towards capitalism and socialism seems to be see-sawing. Supporters of Socialism seem to have all the ideas and thoughts but the supporters of capitalism seem to have the power or money to buy power. Even implementation of socialism in countries has been successful only partially. They have not advanced beyond the stage of communism. (I believe that Communism is a beta version of socialism and communist countries ultimate goal should be to mature into socialist country and the communist countries did not do that. That is the reason I believe resulted in the dismantaling of the Communist countries). Both the system of beliefs capitalism and socialism have their defects
and advantages and neither of them can be said to be a panacea for reforms and development of human race.

So as SAXI members I think we should follow something which Akshay (rather Narayan Murthy) had once defined "compassionate Capitalism". Compassionate Capitalism is being aware of the social ramifications of any capitalist moves, take action to mitigate it and realise at the end of the day that you owe something back to the stakeholders. It is similar to Shah Rukh's role in Swades.

He realised the banality in sending rockets up when his mother like amma lives in a village with no electricity. Every person and committee in campus must have some agenda to address these issues and spread awareness among people about issues related to these issues.

Definitions from other people about how SAXI should define "Socialism" are invited.

Posted by Karl_che

Prof. Madhukar Shukla's take on Socialism

2005-03-21T09:32:00.000-08:00

1. yes, socialism/capitalism is a pretty obsolete - and far too simplstic binary - classification... somehow 'socialism' get equated with only the erstwhile Soviet Russia... and the fact that it fell sort of vindicates that socialism is bad for economy. Also economics and politics being intertwined in out own heads (not just 'out there'), the left/socialism gets equated with dictatorship and opression, and right/capitalism with freedom and democracy (such is the power of media!!;0)... worth having a look (and do take the test!!) at:

http://www.politicalcompass.org/

2. in the process, one tend to overlook other self-proclaimed socialist countries (my favourites are the scandinavian ones) which have been performing pretty well... in one of my blog postings I had mentioned this link - am enclosing the document describing there 'socialistic" framework

3. agree too, that each country has to design its own macroeconomic policy framework depending on its specific requirements - there is no single medicine/tonic to perk up all economies. Joseph Stiglitz, who used to be the Chief Economist for IMF (was fired/ resigned for his views) had once written an interesting article on this (am enclosing that too)

4. the terms like "reforms" "liberalisation", "Globalisation" etc. have sort of acquired a brand equity, which influences us subliminally, and stops us from looking underneath for the ground-level reality (the kind which the hindu article describes) - I mean, when you say that this is 'reform' (or democracy, freedom etc. for that matter) who can dispute you... in politics, it is called "setting terms of debate" - whoever is able to do that, wins.... the only empirical study, to my knowledge, which has comprehensively looked at the impact of these (reforms, globalisation, privatisation, etc.) on countries world-wide was done by Center for Economic and Policy Research. The verdict is far from positive:

http://www.cepr.net/globalization/scorecard_on_globalization.htm

(and noone talks about countries like Ghana, Bolivia, etc., who liberalised their economies and then went bankrupt)

5. "economic progress" is a function of what one measures - the current benchmark is GDP... calculating GDP is actually an art (like the CTC in CRP;0), and different countires calculate their GDP in different ways... in any case, how much people consume on average (that is what roughly GDP measures) does nothing to reflect the income disparities, unemployment, environmental damage, divorce/suicide rates, etc... we need to look at more comprehensive measures to assess the well-being of a society... one can call it socialism or capitalism or whatever, but no point having a high GDP growth, high FDIs, if crime rates or suicide rates are going up, or more and more people are unemployed/ starving...

my two paise worth

ciao

madhukar

=====================

Dr Madhukar Shukla

Professor (OB & Strategic Management)

XLRI

Jamshedpur (India) 831001

ph: 91-657-2225506 x 300(O) / 603(R)

mail: madhukar@xlri.ac.in; madhukar.shukla@gmail.com

webpage: http://www.madhukarshukla.com

weblogs: http://madhukarshukla.blogspot.com/; http://alternativeperspective.blogspot.com/

ryze: http://www.ryze.com/go/madhukar

Compassionate Capitalism

2005-03-21T08:49:00.000-08:00

How to build a great company

January 31, 2005 | 07:57 IST

N R Narayana Murthy, Chairman of the Board and Chief Mentor, Infosys Technologies, outlines the key ingredients to building a great company and the role of 'compassionate capitalism' in society.
Narayana Murthy is a co-chair of the Annual Meeting of the World Economic Forum at Davos, Switzerland. Excerpts from an interview with the Infosys Chairman:

You are fond of using the term 'compassionate capitalism.' What does this mean in the context of India?

As I look back on the idealism of my youth, I realise that a socialist system will not succeed as a system, because people need opportunities, incentives and competition in order to better themselves. This is the essence of capitalism. Embellish the spirit of capitalism with fairness, decency, transparency and honesty, and the result is compassionate capitalism. Compassionate capitalism is extremely important for every society, in general, and for developing countries, in particular. In India, where the divide between the haves and have-nots is very large, the only way we can reduce this divide is by embracing compassionate capitalism.

To what do you attribute the success of Asia's multinationals?

The first factor is the work ethic. By and large, there is tremendous focus on hard work, pride in the company, and loyalty to the company in Asia. This focus exists in the West too, and that's how they have built great companies. However, I see less emphasis in the West on such a work ethic these days. Second, there is a spirit of family in Asian companies. This means working as a team, showing concern for your fellow employees, making sacrifices for each other's benefit, and identifying with the common cause of the company.

How has Infosys responded to the tsunami that struck South-East Asia?

Infosys has contributed Rs 50 million to the Prime Minister's Fund. In addition, we requested employees to contribute a day's salary on a voluntary basis. We did something similar after 9/11. We were the first Indian company and one of the few in the world outside the United States to contribute to the Firemen's Fund. The Infosys Foundation has donated clothing, medicine and food items to the victims of the tsunami. Some of our people have gone to affected areas and helped people to improve processes for better management of aid distribution.
Some companies sell to the bottom of the economic pyramid, to customers with relatively little spending power.

What is the business case for multinational companies to target this market?

About 80 per cent of the global population lives in the developing world. These people have low disposable income. Thus, taken as individuals, their buying strength is small but, as a group, they have an enormous potential as a market. On the other hand, the markets in the developed world are getting saturated and growth is coming down. Hence, if multinational companies were to design products that are inexpensive and cater to this vast segment of low-disposable income consumers, then there is tremendous growth opportunity both in revenues and profits for MNCs.

Business can address social challenges through public-private partnerships. Again, what is the incentive for companies to partner with the public sector?

Public-private partnerships in developing countries like India are very important because a company cannot prosper on a sustainable basis, unless it makes a difference to the context in which it operates. By making a difference to the society in which they operate, companies create goodwill in the society, and become friends of the society. This responsibility is even greater in the case of multinationals, since there is a mistaken belief that multinationals do not care for the context, and are there only to plunder the society where they operate. When the vast majority of the poor believe that there is a positive impact on them because of a public-private partnership involving multinationals, it is likely to create tremendous goodwill towards these companies.

What is the key to building a great company?

First of all, we need good leadership. I don't know of a single great company that has not had good leaders. Great leaders raise the aspirations of their followers; they make people more confident, energetic and enthusiastic. Such leaders make people embrace the adage: a plausible impossibility is better than a convincing possibility. People, who are motivated by great leaders, dream big, make sacrifices and achieve miracles. It is not sufficient just to have great leaders. We need a mechanism to identify, train, empower and mentor successive generations of leaders. Such leadership training and mentoring has to become the responsibility of the current generation of leaders. Second, we have to create a grand, noble vision which elevates the energy, enthusiasm and self-esteem of everyone in the company while ensuring that everybody sees a benefit in following the vision. Third, a company has to benchmark itself on a global scale in every area including sales, production, human resources, R&D and finance. It creates an open and confident environment where first-raters recruit first-raters. Fourth, a great company continuously measures and improves the following attributes: meritocracy, fairness, justice, openness, speed, imagination and excellence in execution. Finally, a great company practices an enduring value system, and follows the finest system of corporate governance.

Reproduced with permission from the World Economic Forum. Rediff.com
is the WEF's online media partner.

The Essence of Leadership

2005-03-21T08:35:00.000-08:00

N R Narayana Murthy | January 04, 2005 | 07:12 IST

A leader is an agent of change, and progress is about change. In the words of Robert F Kennedy, 'Progress is a nice word; but change is its motivator.'

Leadership is about raising the aspirations of followers and enthusing people with a desire to reach for the stars. For instance, Mahatma Gandhi created a vision for independence in India and raised the aspirations of our people.

Leadership is about making people say, 'I will walk on water for you.' It is about creating a worthy dream and helping people achieve it.

Robert Kennedy, summed up leadership best when he said, 'Others see things as they are and wonder why; I see them as they are not and say why not?'

Adversity

A leader has to raise the confidence of followers. He should make them understand that tough times are part of life and that they will come out better at the end of it. He has to sustain their hope, and their energy levels to handle the difficult days.

There is no better example of this than Winston Churchill. His courageous leadership as prime minister for Great Britain successfully led the British people from the brink of defeat during World War II. He raised his people's hopes with the words, 'These are not dark days; these are great days -- the greatest days our country has ever lived.'

Never is strong leadership more needed than in a crisis. In the words of Seneca, the Greek philosopher, 'Fire is the test of gold; adversity, of strong men.'

Values

The leader has to create hope. He has to create a plausible story about a better future for the organisation: everyone should be able to see the rainbow and catch a part of it.

This requires creating trust in people. And to create trust, the leader has to subscribe to a value system: a protocol for behavior that enhances the confidence, commitment and enthusiasm of the people.

Compliance to a value system creates the environment for people to have high aspirations, self esteem, belief in fundamental values, confidence in the future and the enthusiasm necessary to take up apparently difficult tasks. Leaders have to walk the talk and demonstrate their commitment to a value system.

As Mahatma Gandhi said, 'We must become the change we want to see in the world.' Leaders have to prove their belief in sacrifice and hard work. Such behavior will enthuse the employees to make bigger sacrifices. It will help win the team's confidence, help leaders become credible, and help create trust in their ideas.

Enhancing trust

Trust and confidence can only exist where there is a premium on transparency. The leader has to create an environment where each person feels secure enough to be able to disclose his or her mistakes, and resolves to improve.

Investors respect such organisations. Investors understand that the business will have good times and bad times. What they want you to do is to level with them at all times. They want you to disclose bad news on a proactive basis. At Infosys, our philosophy has always been, 'When in doubt, disclose.'

Governance

Good corporate governance is about maximising shareholder value on a sustainable basis while ensuring fairness to all stakeholders: customers, vendor-partners, investors, employees, government and society.

A successful organisation tides over many downturns. The best index of success is its longevity. This is predicated on adhering to the finest levels of corporate governance.

At Infosys, we have consistently adopted transparency and disclosure standards even before law mandated it. In 1995, Infosys suffered losses in the secondary market. Under Indian GAAP (generally accepted accounting principles), we were not required to make this information public. Nevertheless, we published this information in our annual report.

Fearless environment

Transparency about the organisation's operations should be accompanied by an open environment inside the organisation. You have to create an environment where any employee can disagree with you without fear of reprisal.

In such a case, everyone makes suggestions for the common good. In the end everyone will be better off.

On the other hand, at Enron, the CFO was running an empire where people were afraid to speak. In some other cases, the whistle blowers have been harassed and thrown out of the company.

Managerial remuneration

We have gone towards excessive salaries and options for senior management staff. At one company, the CEO's employment contract not only set out the model of the Mercedes the company would buy him, but also promised a monthly first-class air ticket for his mother, along with a cash bonus of $10 million and other benefits.

Not surprisingly, this company has already filed for bankruptcy.

Managerial remuneration should be based on three principles:

Fairness with respect to the compensation of other employees;
Transparency with respect to shareholders and employees;
Accountability with respect to linking compensation with corporate performance.

Thus, the compensation should have a fixed component and a variable component. The variable component should be linked to achieving long-term objectives of the firm. Senior management should swim or sink with the fortunes of the company.

Senior management compensation should be reviewed by the compensation committee of the board, which should consist only of independent directors. Further, this should be approved by the shareholders.

I've been asked, 'How can I ask for limits on senior management compensation when I have made millions myself?' A fair question with a straightforward answer: two systems are at play here. One is that of the promoter, the risk taker and the capital markets; and the other is that of professional management and compensation structures.

One cannot mix these two distinct systems, otherwise entrepreneurship will be stifled, and no new companies will come up, no progress can take place. At the same time, there has to be fairness in compensation: there cannot be huge differences between the top most and the bottom rung of the ladder within an organisation.

PSPD model

A well run organisation embraces and practices a sound Predictability-Sustainability-Profitability-Derisking (we call this the PSPD model at Infosys) model. Indeed, the long-term success of an organisation depends on having a model that scales up profitably.

Further, every organisation must have a good derisking approach that recognises, measures and mitigates risk along every dimension.

Integrity

Strong leadership in adverse times helps win the trust of the stakeholders, making it more likely that they will stand by you in your hour of need. As leaders who dream of growth and progress, integrity is your most wanted attribute.

Lead your teams to fight for the truth and never compromise on your values. I am confident that our corporate leaders, through honest and desirable behaviour, will reap long-term benefits for their stakeholders.

Two mottos

In conclusion, keep in mind two Sanskrit sentences: Sathyannasti Paro Dharma (there is no dharma greater than adherence to truth); and Satyameva jayate (truth alone triumphs). Let these be your motto for good corporate leadership.

The author is Chairman and Chief Mentor, Infosys Technologies.