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Facts, please: Re: Forwarded: Re: PRE-DEBATE: Public sector (fwd)




> Date: Mon, 22 Jun 1998 11:04:19 -0400
> From: Ram Narayanan <loraln@worldnet.att.net>
> Reply-To: janaky@indiaintl.com
> To: Sanjeev Sabhlok <sabhlok@almaak.usc.edu>
> Subject: Re: PRE-DEBATE: Public sector

> I think it was wrong to have nationalized several branches of economic
> activity that the government was ill-prepared to run efficiently, but
> compensation was paid whenever the government acquired private property.
> There was no question of expropriation without payment of monetary
> compensation. I am not therefore sure if the use of  words like "stealing"
> and  "stolen" are appropriate in this context, unless Sabhlok is talking
> about what happened after nationalization. 

I am talking about both things. But first, I'd be grateful if anyone
(Ram?) could provide me facts about Banks, say.

As far as I know (unfortunately I have learnt some corporate finance and
even taught it), the only way to value a company is to deflate the cash
flows from that firm till eternity. The only known mechanism for that is
the stock market. I was very little boy when I read first in the
newspapers about nationalization of banks (headlines, these were!), and I
don't remember reading about the govt. goint to the stock market one fine
day and buying out all shares of a particular bank which was to be
nationalized. That means that the formula used was essentially an
arbitrary one. Except for the case of land where acquisition laws - in
force from a century - try their best to work out as close to market value
as possible - and leave a scope for judicial appeal, and hence are fair,
in terms of compensation offered, I don't think there was any law in force
even today which tells us (as bureaucrats we are trained in these laws)
how to value firms at market value.

If I hold 100 shares in a firm and a buyer comes tomorrow and fixes a
price at gunpoint instead of buying my shares from the stock market, that
would be clearly called stealing. 

I want to know why the nationalization of firms should not be considered
as stealing by the government, in my terminology.

> Did  some of the government
> officers who were put in charge of nationalized enterprises, actually steal
> from those enterprises?  Was there no accounting ? Didn't the workers or
> the auditors discover such deliberate acts of wrong-doing, as distinguished
> from losses created by inefficiently managing them?   

Stealing has always been very cleverly disguised by corrupt CEOs in league
with ministers, particularly at the state level. Further, stealing has
taken place at many levels, including the purchase of equipment, building
plant and machinery, etc. If the existence of audit was enough, there
would be no Indian who would claim that India is corrupt. If we are going
to fool ourselves like this then we cannot move forward very far. I know
personally of many "techniques" which have been used to steal at pretty
high levels, but will not list them here. There is no transparency in most
government sector. Therefore it is actually quite easy to steal, including
by the act of bribing "auditors" at times. 

Essentially, however, I am looking for facts on the way the Banks and
other firms were valud at the time of natinalization. Just for my
knowledge, so that I can call that act by the correct name more boldly. 

SS