Saturday, November 12, 2011

About Government Crony Capitalism, Vijay Mallaya and his Kingfisher Airlines

Recent economic troubles of Kingfisher Airlines has brought in focus many important issues re how the centrally planned Indian economy is faltering, how these so-called business tycoons like Vijay Mallaya are a disgrace, and how government is always helping their cronies in the business world and elsewhere.

As I have noted many times in the past, the whole story of emerging Indian economy is bunkum. Sure some people are doing extra ordinary hard work and producing the economic goods which every other lazy bums like politicians, bureaucrats, government workers, and other such parasite class of society are enjoying shamelessly. But, notwithstanding that, whatever phony growth figures Indian officials are reporting are just figures on the paper; mostly a result of Keynesian money printing programs of Indian central bank RBI. Indian economy is a classic example of an artificially (paper) inflated boom, which is now busting e.g., growth figures are now revised downward, industrial production is at 2 years low, banks are downgraded etc.

While this bubble is busting, business tycoons like Vijay Mallaya are getting exposed. His Kingfisher Airlines is facing huge amount of debt due to which he has to cancel many flight routes recently. Rising borrowing cost in the form of increased interest rates and high fuel prices has broken the back of his company. This was very much expected because when the artificial boom is going on everything looks very rosy and upbeat; businessmen are fooled by the government and central bank low interest rate policies. Vijay Mallaya was also fooled. He is now making senseless statements which is putting a question mark on his abilities to run a business profitably e.g., he is saying whether it is his duty to fly the loss making routes!? Duty of an entrepreneur is to take care of his company's share holders and his consumers. And if he fails in his duty then he should shut down his business. The problem with him is, after going bust, he went to government requesting a bailout or some sort of other help. Basically he is trying to stick his company's bill on the back of poor tax payers! He enjoyed privately the profit of his company, but now he is trying to socialize the losses. This is a disgrace. This is crony capitalism (crony capitalism has nothing to do with true free market Capitalism). I am not sure how Mallaya got so rich in the first place, but I suspect that he earned his wealth surely by being in bed with the government, in stead of truly satisfying the most urgent wants of his consumers. He squandered precious resources of his investors and thus should be allowed to be stripped off of his wealth. He must take the losses; he must foot the bill of his financial blunders. His company should be allowed to go bust or restructure and being taken over by some other healthy firm.

But, what we see in stead? We see that the wonderful [sic] Indian government and its prime minister Mr. Manmohan Singh - who, I have to finally say,  is increasingly showing signs of economic illiteracy - is promising to draw a Kingfisher airline rescue plan! I don't know from where he learned this 'bailout economics', but Mr. PM needed to be reminded of a wonderful system of  'profit and loss'. India is supposedly implementing 'market reforms', and in a market when a company fails to satisfy its consumers' most urgent wants, it goes belly up. No one rescues such loss making firms. It is for everyone's good that such firms go out of business because only then the owner entrepreneur of that firm can be stopped from wasting precious resources of investors and consumers. Not bailing out (or rescuing) such firms is socially beneficial because when such firms go out of business they are taken over by more efficient firms.

Instead of bailing out such loss making failed entrepreneurs, they should be condemned by everyone. The mass public - under the influence of lefties and commies - always blame profit making businessmen. But that is wrong. Those businessmen who are earning their profits honestly by serving consumers are true heroes of society; they are lifting everyone's standard of living. contrarily, those businessmen who are making losses are not serving their consumers and  wasting investors' resources. People should be condemning such loss making entrepreneurs and not someone who is improving their living standards.           

By rescusing loss making Kingfisher Airlines and a failed businessman Vijay Mallya, the government and Mr. Manmohan Singh are only promoting an inefficient system. They are promoting losses. They are promoting failure. They are helping their cronies who fund their elections. As I always say, governments are never here to serve people; they are here to serve their cronies. This Kingfisher episode is just another stark evidence of this centuries old known fact.

1 comment:

  1. Sir, UB Group is having many subsidiaries under which are quite financially healthy. Why cant be a inside bailout when conglomerate group such as TATA did for helping TATA STEEL after the steel company had huge debt since acquiring the Anglo - Dutch Steel company CORUS STEEL?


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