The Sydney Morning Herald by Ian Varrender - Essay Example

The article by Ian Varrender published on January 31, 2009 in the online version of ‘The Sydney Morning Herald’ contained the message demanding a stricter check over the capitalistic luxury and the risky outlook of the modern corporate world. The title of the article which reads, ‘High-risk gamblers should be bailed up, not bailed out’, within itself reflects the strength of the message the writer intends to extend. The economic context of the article becomes of high relevance as most of the corners of the world are presently struck with the credit crunch and its resultants. The writer explains the urge for a control over the economic outbursts that corporate giants bring in. The most interesting factor is the mode of expression of this urgency, as the author narrates it through a series of examples on the corporate luxury. The economic risks and the lack of transparency involved in the firms that were struck by the recession and which ended up getting ruined have been explained in the article. The lavishness that the CEOs of these firms wrongly utilised during the boom period has been strongly criticised by the author. Jack Welch- the CEO of General Electric, John Thain- the boss of Merrill Lynch and many others are included in the list of people who in their reign saw the downfall of their companies but didn’t relinquish the opulence that they managed to have. The article in a broader meaning explains the reason for the economic recession that hit the global economy. It is the uncontrolled liberalization of financial institutions that prompted them to make huge investments in the risky derivative market. The local government’s monetary policy had least control over the finance flow. This scenario has been proved by the fact that the funds were even transferred four hundred folds internationally from the original source. Another important risk involved in the global scenario was the sub prime lending. It referred to the giving away process of finance which involved very low security and high risk. The market aggression of the entities encouraged them to allot loans with no regulations maintained. The risky measures of the corporate giants as mentioned in the article indirectly refer to this as well. The macroeconomics involved in the background of these incidents is necessary to understand the message of the writer to the fullest. The bilateral ties and increased international links amongst the nations developed after the Second World War encouraged more global trade. This caused a spurt in finance resulting in an abrupt increase in the number of financial institutions all around the world. It increased the amount of money in business resulting in an increase in the spending capacity of the public. But in reality this capacity was an induced one, with the ease in availability of loans. Lending became the backbone of most of the global economies. Further, the trial for market advancement, led the financial institutions to the idea of multilevel lending process which later evolved as derivative markets. The market started to depend much on Real estate industry, Share market and other future marketing ventures. The increased flow of money in the market created a feeling of boom in the economy. The luxury of this boom was enjoyed to the fullest by the corporate firms. The employee count and benefits increased to newer heights. The top guns in corporate giants bargained for their benefits. This trend has been explained in the articles with examples and appropriate figures on the benefits. Jack Welch, John Thain and some other CEOs of leadings firms are explained by the writer as ideal examples for these. The commission demanded by John Thain for arranging the purchase of his busted firm has found a special mention in the article. By this, the author clearly makes the point that the corporate giants have no intention to change even after the big economic lesson. Ian Varrender is demanding more transparency in the deals of corporate giants. Further in the article the measures taken by the Australian government to make sure that its economy does not get hugely hit by the recession has been appreciated. The move by the government to raise a fund of $4 billion as a rescue fund for real estate property companies has been highlighted in the article. This is a precautionary measure to save its property industry in case the private financiers abruptly pull out of the project. This should be read together with the fact that real estate was the first and worst struck industry all across the globe in the event of recession. This move of government indicates that it intents to reduce the dependency over privatization and international finance. In other words the Australian government is aiming to recheck its liberalisation policies. The tile of the article also criticizes the bailing out policy of different governments especially the American government. It is true that governmental intervention to substantiate and regulate this situation is inevitable. Governments are trying to stabilise the market by pumping in money and giving security to the institutions in crisis. But a more sustainable approach should be taken because a trial to masquerade the crisis by forced money flow may prolong the essential tragedy, but won’t solve the problem for ever. This statement could be read together by the fact that similar efforts by the American government during the Dotcom bubble burst in 2000, 9/11 attack and the Iraq war couldn’t stop this crisis from happening. An empowerment of the public sector entities should happen by the deliberate efforts of the governments across the globe. The government may take lessons from the sustainability of the national economies which were not affected by the crisis, still have Public financial Institutions on the rule. The neo-liberalistic approaches will have to be rethought. Resources like treasury regulations and policies are for obvious going to affect the global economic scenario. The crisis will lead to regulations in the leasing industry. This will substantially decrease the money flow in the economy. As a result industries and service sector would tend to implement stronger cost control methodologies even resulting in low production and unemployment. References Varrender, Ian. 2009. High-risk gamblers should be bailed up, not bailed out. The Sydney Morning Herald, January 31, Business day, Online edition, http://business.smh.com.au/business/highrisk-gamblers-should-be-bailed-up-not- bailed-out-20090130-7tz3.html?page=1 Read More