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Nationalization



Folks:

I believe that nationalization of private enterprises should be used
very very sparingly and reluctantly.  When investors (domestic and
foreign) have this "nationalization" albatross hanging around their
neck, they are reluctant to take the plunge.  However, even the United
States has used temporary nationalization for urgent national needs.
For example, world war production of weapons was mandated by the
government to the private sector.  Chrysler, Ford, GM, US Steel etc.
put their production entirely for war needs.  President Truman
temporarily took over the the steel companies for a short while during a
strike to prevent economic problems.  When Prime Minister Mrs. Gandhi
nationalized the banks in 1969, the public did welcome it.  The
reasoning by the government was flawed then and is flawed now.  They
reasoned that the banks were profiting enormously and leading to a tight
credit.   They also reasoned that a socialist economy has no use for
large banks.  I want to point out that the capital limits at which
nationalization is automatic has been rasied many times since 1969.   In
fact, both Prime Minister Rajiv Gandhi and Prime Minister Narasimha Rao
had avoided any bank nationalization during their tenure.   My solution
would be the opposite way.  I would encourage actively,  formation of
primary and secondary capital markets.   Capital is the fuel for an
economy and a system capable of providing and acquiring capital without
regard to emotional, political or social reasons is essential.  Also, I
would go forward and make the Reserve Bank of India, a quasi government
organization in the mold of the US Federal Reserve.  The Federal Reserve
makes all the monetary policy without government intervention and is
solely concerned with the economy.  The RBI has been a tool of GOI
(usually the Congress government) to pump liquidity during election
years and subsidize individual State deficits.    Well that is my 2
cents or 84 paise worth.

--
Thank You.

Regards

Dave Mahadevan.. mailto:mahadevan@fuse.net