Recently Space Bar posted three outstanding articles by Husain (1, 2, 3) that provoked some ferocious comments. The main theme of the criticisms was that you can't blame Wall Street bankers for being selfish and greedy, if that is what works in a capitalist society. (Sample quote: "I'm amused that there are still people out there who see the fact that bankers are selfish and mean-spirited as a revelation... crises like these are not the product of some global conspiracy by evil bankers collaborating together but the logical result of really smart people working competitively in a system designed to incentivise profit that is poorly regulated.")
I didn't really have a good response to that point per se, though it bothered me: didn't companies like the Tatas earn respect from their honesty and fair treatment of employees and customers, and didn't that translate to good business? But here's an article by Will Hutton (from a British perspective, but covering both sides of the pond) that brings out this point much better than I could. Quotes:
This is not the end of capitalism, as some wildly claim; there is no intellectual, social or political challenge to a market system based on respect for private property rights, even by the Chinese Communist party. Rather, it is a crisis of a particular capitalism that has set aside respect for trust, integrity and fairness as fuddy-duddy obstacles to 'wealth generation'. What we are relearning is that without trust and fairness, capitalism risks its own sustainability, even while it unleashes forces that undermine those self-same values.... Even in the dog-eat-dog financial markets, trust and integrity are matters of self-interest. However amoral you may be, it is in your interest to care about your reputation, because if you behave badly you will not do business with me - or others - on favourable terms again.
Worse, now that the system is in trouble, financiers are turning to taxpayers in the US and Britain for help without understanding the other key principal of fairness - that we will consider helping those who for no fault of their own get into trouble, but not those who freely created their own bad circumstances.
He goes on to predict the nationalisation of several banks, as happened in Sweden in 1992. (The NYT, too, refers to the Swedish precedent and lessons for today.)
Trust is key, in business as everywhere else. As Hutton says, even if you are not inherently trustworthy, you had better make others believe you are.
Which brings me back to the Tatas. I wonder whether JRD Tata would have countenanced the state-government-assisted land-grab at Singur, and now that it has apparently backfired on them, I wonder if the Tata's fortunes will suffer -- and not just from the financial loss and the delay in the Nano car project.
(PS: a few seconds after I posted this, I got a mail from Kapil giving me the following quote, taken from here:
Companies which do not audit completed projects in order to see how accurate the original projections were, tend to get exactly the forecasts and projects that they deserve. Companies which have a culture where there are no consequences for making dishonest forecasts, get the projects they deserve. Companies which allocate blank cheques to management teams with a proven record of failure and mendacity, get what they deserve.
Maybe the sentiment will catch on.)