Market structure and corporate power
have been inextricably intertwined in the globalized world. Both gain
considerably from the opportunities offered as a result of the rapid changes in
the area of communication and technology. Thus businesses and economy of
particular countries get exposed to international laws, procedures and
conventions. Such an exposure should ideally contribute in strengthening the
economic ties between businesses and countries. Corporates that had the
resources opened their wings worldwide in search of markets. Even those firms
which didn’t have enough resources also strived to be global players for their
survival.
As the field was wide open for the
players –small, medium and big, world witnessed different ball games within the
same space. Balls were kicked, thrown, pushed and tossed as the referees were
asked to be liberal onlookers. Those who tried to bring in rules to end the
chaos were accused as advocates of red-tapism.
Meanwhile, teams competed to buy, sell, borrow, and lease players and
balls. That required large cash
resources within a short span of time. Major financial players extended liberal
support to many in need. The climax was faster than expected. In games, some
clear winners emerge at the end. But in this ‘free for all’ game without
referees, the giants stumbled upon the biggies and both of them smashed the
dwarfs. The result was a none-win situation. Chaos and confusion originated in the field spread beyond not only to real lives of onlookers but
also to the masses who were toiling for their daily bread quite unaware of mega
market free game.
John Lie has rightly said that the
study of markets is too important to be left to economics. But economic
rationalism rules the financial and corporate world with little understanding
of the way markets actually function. The economy is perceived to breathe through
the stock exchanges. Analysts predict the glooms and booms in the economy based
on the random numbers smoked out of the stock exchanges. Little they realize
that the stock markets are nothing but institutions that survive on the fears,
apprehensions, hopes, rumours, and gossips generated (deliberately and
otherwise) on the greedy middle class dreamers and also on the smart moves of
the loyal insiders. Meaningless numbers from these unscientific institutions
are transmitted across the globe as if those are the readings from an Electro
Cardio Gram that monitors the cardiovascular system of the economy. The reports
are never analyzed to examine the causative factors, but prescriptions are
given. Often the patients themselves suggest the treatment that governments
need to prescribe. The pills are forced on the government rather than on the
patient. And the panacea for all diseases that affected the economy and the
businesses are suggested to be the policy and process of de-regulation and
unlimited freedom for everyone to do what they want. The logic is that market
will effectively control and balance itself in a globalized world amidst
contrasting legal frameworks of particular countries. That is what is called
economic rationalism.
The failure was quite predictable.
Neither higher professional acumen nor unique prophetic skills required to
understand the trajectory of games in an absolutely free market world. The
moral of the true story is not ‘no laws means no loss’. The message that
emerges out of the painful historic experience termed as ‘recession’ is the
need to have an effective cross country regulation rather than the sermon for
de-regulation. Corporate governance and business policies need to be governed
by global norms that are sensitive to local needs. Problems cannot be solved by
just replicating Sarbanes-Oxley Act of US, or any country specific regulatory
institution.
What required are global
regulatory institutions that govern inter-country transactions in a most fair,
equitable manner giving ample scope for healthy competition and balanced
growth. Therefore, what is important is not economic rationalism but
sociological realism. It is for the governments to think of sitting across the
table for formulating regulatory institutions of global character and
representation. That can happen not through tripartite talks, regional
alliances or specific groups of countries. Though existing country networks can
have their own working groups, decisions need to be taken at a very large level
so that views and interests of all countries are considered fairly. It is to be
debated whether UN which is the organization with large membership-base has the
necessary power, will, and acceptance across the nations to initiate the action
to have an independent regulatory body for global corporate and business
governance.
(Views are personal. Comments are welcome)
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