PRAGOTI

This case has been compared to the Enron scam in the US, and indeed there are many similarities. These dodgy financial practices can work during a boom, but start to unravel in a slump. As the Indian economy also slows down, as export orders come down, and particularly as auditors and external investors start looking more closely at the books, there may be more unsavoury revelations emerging from the corporate world. If recent experience is any guide, maybe we should start by being especially suspicious of all award-winning companies,writes Jayati Ghosh on the Satyam scam.

In a very pointed indictment of policy prescriptions derived from neo-classical economic theories, the author brings out how they contribute towards eroding the institutional bases that constrain 'control frauds' and make markets more efficient. Drawing on certain basic premises in the study of 'criminology', he lays out the manner in which such prescriptions produce strongly criminogenic environments that far from containing endemic “control frauds”, actually lead to whole waves of such systemic failures. With globalization, these crises can transmit to other nations through "contagion" or by causing key international investments to fail. Though neo-classical economists minimize the incidence and importance of fraud for reasons of self-interest, class and ideology , such control frauds are in nature of financial super-predators, causing greater losses than all other forms of property crimes combined. They have actually led to a series of recurrent disasters (as brought out for instance in the cases of Latin America and Russia) that have discredited neo-classical policy nostrums throughout the world and paved the way for 'anti-US' and ‘anti-free market' formations in different parts of the world.

For most Indians who, since 1991, got used to a steady barrage of opinion, expert economic advice and political re-education on the scourge of the public sector, the minor corruption, inefficiency and incompetence of sarkari babus in state-run enterprises ought to pale into insignificance in the face of everyday stories from the US of what the private sector and free enterprise can do even when the going is not just bad, but critical.

K P Nayar writes in The Telegraph.