Many people think and talk about the failure of marketforces as something new. But it is due to the inherent failure to think theproper application of the laisseiz-faire policy, where to apply and where notto apply. It is not the market forces as conceived by Adam Smith is a failure.The so called followers of Adam Smith introduced privatization even in areassuch as providing infrastructure and civic amenities. The world economy isevolving one and it will around with a renewed strength like the pent-updemand. As it is evolving the regulatory authorities must show the direction,caution and curtail any unwanted euphoria and speculation.
When a child is totally let free, he may groom himself ormore probably ruin his life for the want of care. But this doesnt call for astringent control which will very much affect the growth of the child. We needto follow the balanced strategy of letting the child (economy) free and controlit wherever necessary. Here the banks, financial institutions and the guardiansof monetary and fiscal policies to uplift the ailing economy. The non-followingof the sound economic and banking principles have led to the present crisis.And it is to be admitted that economic policies need a revamp to give a clearcut solution for the present problem. The present one is not the exact replicaof what Keynes himself witnessed. At that time, the integration of economiesand the development of money and capital markets were not at its top. Theconcept of derivatives was also missing at that time. Probably Keynes was rightat that time.
The economists and the policy makers must admit thateconomics is not something about rolling a ball. It is a mixture of variousinternal and external forces that may or may not be brought under the controlof the Government or the regulatory forces. But well planned policies havingflexibility may prevent the recurrent of such economic cycles in future.
The distressing feature of the present crisis is that itfollows the principles of downturn than the recovery or rebuilding of economy.The world over millions of jobs has been lost due to the financial tsunami thathas been largely man made and the man has become the victim to his own folly.The failure of Lehman Brothers set the ball of down turn, but the symptomsmanifested earlier in US went unnoticed. The reduction in real income, thesagging morale to spend more and tumbling down of the Stock Market are theoverall features of the present crisis.
Unlike the IT bubble that shook during 1999-2002, this timethe evil effects of it is touching the heart of every industry. Automobile sector, Tourism, aviation, financial services, Gem cutting, Textilesand Garments and the manufacturing industries in general have been in a way orother hit by the present economic malaise. We have failed to diversify ourexports to the next layer of fast developing and other countries. This has ledto the lop-sided growth of exports to the industrial manors, mostly to US andthe other European countries which accounted for more than 80% of our exports.
About the Author:
The authoris the Asst. Prof. at HKBK Business Academy, Bangalore
Comments