Contact Your Financial
Adviser Money Making MC
7
October 2016
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| people-worldwide (The Total Investment & Insurance Solutions) |
It would be no exaggeration to say that the
world is passing through tough times. The picture today is vastly different
from what we experienced as recently as a decade ago. Global economic growth is
no longer guaranteed, with several economists talking of what they term as the
“new normal”, referring of course to a reduced potential for growth of the
world economy. Greater inequality has ensured that the benefits of growth over
the last four decades are limited to a few and bypass the vast majority.
Consequently, globalisation, which was considered as the one constant factor
that would drive the global economy, is meeting a stiff challenge, as evidenced
recently by Brexit (Britain withdrawing from the European Union- EU). The Total Investment & Insurance
Solutions
The world is no longer unipolar or even
bipolar, as it was during the cold war, with many strong power centres trying
to assert themselves in global affairs, thereby making geopolitics very
uncertain to understand and deal with. Intolerance, especially religious
intolerance, is flaming passions that are difficult to control. Terrorism,
including state sponsored terrorism, is a scourge that afflicts all nations.
New problems, such as migration, have cropped up for which we do not seem to
have any solution.
The global governance structure that emerged
post World War II is proving incapable of addressing these problems. The
institutions established at that time including the United Nations
Organizations (UNO), the World Bank, the International Monetary Fund (IMF), the
World Trade Organisation (WTO) and the International Court of Justice (ICJ),
amongst others, are being challenged by many countries that want a greater say
in running these institutions, appropriate to their newfound economic clout.
Significant increase in inequality and higher risks of unemployment are leading
people to think more about the impact that various policies have on them as
individuals rather than be satisfied with the perceived benefit to their
country or the world at large. “What is in it for me” is a question being asked
more often now than at any time in the recent past. The Total Investment & Insurance Solutions
The main culprit leading to such a scenario
has been poor governance, be it governance of companies, the government,
international organisations, non-government organisations (NGOs), and,
dare-I-say, even families. Human beings have proven incapable of managing organisations
in a manner that matches what the corporate sector often terms best governance
practices. Governance deficit leads to dissatisfaction amongst people
especially amongst those who are adversely impacted and as is happening lately,
provokes reactions that endanger the wellbeing of the entire community.
The corporate sector is familiar with the
concept of ‘agency cost’. Organisations are established to serve the interest
of its stakeholders. These stakeholders appoint professionals to manage
organisations and achieve their objectives. More often than not, there is a
divergence between the interest of the organisation and that of the managers,
resulting in outcomes that are less than optimal, at times even contrary to the
organisation’s objectives. The
Total Investment & Insurance Solutions
The UN receives maximum financial
contribution from the US, which has a dominant say in its functioning. UN
policies are often determined by what the US wants rather than what the UN’s
own charter demands. Similarly, the heads of World Bank, IMF and Asian Development
Bank (ADB) have traditionally been appointed by the US, Europe and Japan,
respectively. These organisations usually serve the interests of these
respective countries more than those of other stakeholders or the countries
they lend to. The Total Investment
& Insurance Solutions
Religious organisations suffer similarly.
There is no reason for instance, why Tirumala Tirupati temple (and of course,
many other places of worship) should accumulate the kind of wealth they have.
Such wealth can be put to better uses but the hoarding of wealth gives the
trustees and pundits a sense of power they do not want to let go. Even in
families, especially Indian families, nothing can be done to dilute the hold
and power the head of the family exercises over others. Resistance to change is
the norm and individual initiative is nipped in the bud. The Total Investment & Insurance Solutions
Decision making amongst governments across
the world is predicated on its impact first on the head of the state and the
party and only then would the impact on the nation be taken into consideration.
The interests of the nation and the people who have voted them to power and
whose welfare they are entrusted with, is often a mere afterthought. This trend
has got accentuated, in recent times, due to the emergence of powerful leaders
at the top – China’s President Xi Jinping, India’s Prime Minister Narendra Modi,
Germany’s Chancellor Dr Angela Merkel, Russia’s President Vladimir Putin,
Turkey’s President Racep Tayyip Erdogans and many others. The Total Investment & Insurance
Solutions
Eventually, when the impact of agency cost
breaches a certain threshold level, people react, as they seem to be doing lately.
Their anger is manifesting across the globe in ways that was unthinkable
earlier. The ‘Arab Spring’, the worldwide angst against bankers post 2008
financial crisis, the migrants’ crisis, anti-globalisation wave, anger against
poor governance in India and even widespread terrorism; religion-based or
otherwise, are in some ways an outcome of the governance deficit that
characterises most institutions globally. The Total Investment & Insurance Solutions
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people-worldwide1(The Total
Investment & Insurance Solutions)
Various studies have been carried out on the
sub optimality of decision making by legislatures and the executive wing of the
government. According to these studies, while the benefits of the decisions
taken are concentrated and are available to a few, the costs are diffused and
are borne by a vast number of people. While the vast majority of people show
little inclination towards the problem, the small number of beneficiaries
spends significant money, time and effort to ensure decision making in their
favour. The decision to pump funds periodically into loss making public sector
units (PSUs) and banks is of vital interest to the employees who fear a loss of
employment and of other benefits, should the company become a sick entity. In
addition, while the sums involved are large for the nation as a whole,
individually, people do not have a significant stake and therefore accept such
decisions without significant opposition. The Total Investment & Insurance Solutions
The future governance will be determined by
our ability, or inability to design government and organisation structures such
that the interest of the stakeholders and those managing organisations can be
aligned. Can we ensure that the diffused costs for the majority are not
sacrificed at the altar of concentrated benefits to a few? Can we take along
the vast majority who have little say in decision making in organisations and
the government? Can we show enough empathy towards the less privileged and
ensure that we do not give primacy to the interests of the elite over the vast
majority? As Mahatma Gandhi had said, the true test of a decision is in its
impact on the poorest and whether it can help in wiping their tears. The Total Investment & Insurance
Solutions
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people-worldwide2(The Total
Investment & Insurance Solutions)
Given the recent past, it is difficult to be
optimistic of the future and despondency is a natural outcome. We must however
take solace from the significant strides made for more than two hundred years
since the industrial revolution that have vastly improved standards of living
and otherwise made the world a better place to live in. The current period is a
time of flux for all of us. Complex forces are at work, where the old
established order is clashing with the demands of the new order. Such turmoil
is normal during times of significant change. The Total Investment & Insurance Solutions
Society is a complex entity, which is
displaying its dynamism during this period of change. From complicated
interplay of various forces at work will emerge a new dawn that would hopefully
set new standards of governance. Reaching there will involve struggle. During
the period of struggle, things may appear bleak and may tend to compromise our
efforts towards change. Our success in this struggle will depend on our ability
to hang on to our faith in a brighter future despite the gloom and despair.
Changes in society do not happen overnight, especially in a world as diverse as
ours.The Total Investment &
Insurance Solutions
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