All about Business and management

November 24, 2008

Is Mr. Paulson too late?

Filed under: My Opinion — Jagdish Hiray @ 9:40 pm
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            Yesterday first time I noticed US treasury secretary Mr. Paulson started talking about helping consumers and trouble homeowners. Do former CEO of Golman Sachs and supporter of so-called ‘free market’ economy know consumer is important element of economy? Consumer is building block of this economy. This is the consumer who promptly wakes up in the morning, works hard and feeds family. This consumer if ‘atom’ of this economy; this economy is built on millions of atoms ‘consumers’. Not all of these consumers have investment in stock market nor majority of them have 401K accounts. But this ‘consumer’ was ignored, focus was given to stock market and efforts were seen to secure foreign investment in stock market.

 

            Today ‘consumer’ is dead. Money stops flowing in ecosystem of this economy. You do not have to wait for report to come showing banks tighten lending policies, banks stopped lending to consumers… You need to be in mall, in wal-mart, in offices, in restaurants, at gas stations to see how consumer is suffering what is its pain. You need to pass by through towns to see forecloses happening in communities, you need to feel what you feel when you vacant your home with heavy heart …

 

            Too late to rescues … regulators were waited too long to watch economy get recovered, expecting consumer to suffer and stand again to keep life going. Yes, this time consumer will stand up again but with different vision and mission. New born consumer will stop using credit cards and unnecessary spending, will refuse to borrow money from financial institutes, will not invest in stock market to pay for huge CEOs compensation and fund manager’s expensive mortgages, will try to increase savings and refuse to gamble in stock market. Will be happy to get small amount of 401K returns with peace of mind.

 

            There is enough of free market and capitalism. Henceforth consumes will drive market not bankers and traders.

 

November 22, 2008

City of Toledo and $700 billion bailout plan

Filed under: My Opinion — Jagdish Hiray @ 9:02 am
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This is story about the city of Toledo in state of Ohio. In around 1980s, city of Toledo started offering incentives and concessions to attract new businesses as well as to existing business to stay around area. These incentives were ranging from funding these businesses to exceptional tax breaks. In couple of years city has attracted many known industries such as General Motors and Chrysler. When state of Ohio authorized an Enterprise Zone program to create industrial base, city of Toledo was ahead to take advantage. The main goal was to create more new jobs and prosper.

However, in next couple of decades, study found out that new jobs were not created as expected, new jobs were moved to different locations, jobs were outsourced and companies failed to keep their promises. Companies took advantage of tax breaks but failed to create new employment. The government spent over $280 million dollars to bring and keep new Chrysler plant in Toledo; in reality it caused more job losses than creating new jobs.

Study found out that there was no monitoring mechanism setup to monitor how these companies were using incentives and whether they are being appropriately utilized. Companies were not accounted for their promises. Tax breaks were gone to hundreds of companies that closed or reduced their facilities. There was no accounting for how public money was spent.

 

Today we have similar situation. In today’s economical crisis, we as people of this democratic country represent the city of Toledo. We have public bail out money $700 billion dollars approved by congress on behave of tax payers. Auto makers and various other well know companies of this so called ‘Capitalist’ system are coming forward to ask for help to keep their businesses running and hence to keep jobs for thousands of workers. Toledo (here we people) has second and probably last chance. If we want to help these industries to keep our jobs and keeps economy flowing, we have to get answer for some basics questions.  Are we going to have monitoring mechanism this time? Who is going to monitor this mechanism? Who is going to review their business plan (may be industry experts)? What if they do not use people’s money as promised, what will be penalty? Who is going to take personally responsibility? …

 

Toledo has money to fund but still fighting for survival … dark side of ‘Capitalism’.

 

 

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