Friday, May 25, 2007

Has our Prime Minister Lost it?

PM Manmohan Singh has asked businesses not to fuel a rich-poor divide with excessive salaries and greedy behavior:
Resist excessive remuneration to promoters and senior executives and discourage conspicuous consumption," he said. "Rising income and wealth inequalities, if not matched by a corresponding rise of incomes across the nation, can lead to social unrest.
He also added:
We cannot afford the wasteful lifestyles of the Western world. Conspicuous consumption must be reduced.
Seriously, is this guy an economist? As far as my limited knowledge of economics goes, spending and consuming is one good way (the best way) to ensure that the benefits of wealth are distributed to all involved in the manufacture of what (whether goods or services) was consumed.

Manmohan Singh's primary theme in his speech to the Confederation of Indian Industry (CII) seems to be the idea of equitable distribution of wealth. Hence all that beef in the PM's speech about "wasteful lifestyles" and "conspicuous consumption." The way to spread wealth is that someone spends it whatever be that person's lifestyle. The wealth will eventually trickle down to all in the manufacturing and supply chain.

The way to ensure that the a rich-poor divide doesn't grow wider is not by recommending that the salaries of senior executives in any industry be limited but by making sure that businesses and industries have enough incentives to grow and create more and more jobs. If the government can do that, then perhaps it won't have to keep up the pretence of being humane and compassionate and the PM can stop being stupid and directing the industry about how it should be doing its business and paying its employees.

2 comments:

niti bhan said...

Mandar,

What an excellent question you pose! For once in my life I'm tempted to not add the phrase "but I might be wrong" to this potential answer,
http://www.nitibhan.com/perspective/2007/05/an_argumentativ.html

then again, I could be wrong. ;p

Priyanka Sarkar said...

im glad i came across ur blog!!!
my knowledge of economics is meagre...and so is my interest in the issue.....but ur post got me thinking.....
doesnt tht say a lot abt u r post???very very well-put thoughts...