Greed: Productive & Destructive
Looking at the bloated spending programs of the US authorities, the rest of the world is filled with
worries. . Even Americans are worried that the programs will eventually bankrupt the US economy. The Europeans are, as Reuters commentator Paul Taylor puts it, are worried about the possible flood of inflation from the water that Obama administration is pouring to control the fire.
Warren Buffet, the legendary investor, said in his letter to the shareholders of his company Berkshire Hathaway that the medicines that were known to be administered by cups are now being administered by barrels. Anyone can guess about the side effects.
In his second prime time press conference after taking the office, President Obama said that the programs were designed to make sure that the USA would not follow the economic cycle of boom and bust for the next 20 years. That is unbelievable. Anyone with the basic knowledge of economics realizes that such business cycles are natural and cannot be avoided for such a long time unless all the countries of the world adopt the state-controlled system that Cuba had adopted till recently under Fidel Castro.
Nepali economists and authorities can be heard arguing for greater role of the state to control the economy and avoid the cycle of booms and busts. US government’s recent steps have provided further strength to their arguments. But they are missing the fundamentals of the market economy.
The fundamentals of the free market economic system are based on the universal truth that humans are greedy by nature. While this greed is the reason why people work and innovate better, but they fail to realize that excess greed can be catastrophic. Free market economic system means one is free to satisfy his greed by earning the resources for his purposes. But if greed becomes unrealistic and results turn negative, nobody else is compelled to share the losses that he suffers. While many American individuals, banks and hedge funds were becoming excessively greedy by investing in such queer derivatives that were sure to collapse, seasoned American investors like Warren Buffet had already warned of the dangers. Buffet had termed the derivatives as weapons of mass destruction several months before the US banks started reporting the financial crisis.
What the US government has been doing is protecting those who were in the soup due to too much greed and, in the process, it is penalizing those who had not committed anything. And this is being criticized by sensible Americans. Though their voices are not loud enough to be heard as the number of such people is naturally small in every society, the US society and the government don't take long to realise the wrongs and take corrective measures. The decision to stop bonuses to bank executives that received the bail-out money is an example.
But that sort of resilience is not there in Nepal and we cannot afford to make the same mistakes.
