Executive Interviews: Interview with Bala V Balachandran on Government and Business
December 2009 - By Dr. Nagendra V Chowdary

Bala V Balachandran
Founder anf Honorary Dean of Great Lakes Inistitute of Management

• While the Wall Street thought its firms to be “too big to fail”, for the main street “too big to fail” meant a financial institution cannot be allowed to fail. Do you agree with those who say that Lehman had to fail in order for Congress to have the political will to pass any kind of rescue package?
  Well, the Titanic was considered unsinkable. So also, Lehman Bros. Lehman Bros were allowed to fail since the policy maker was in the other camp called ‘competition’. A select few relish the thought of watching your competitor drown without giving him a helping hand. The truth is ugly, and life is not fair!

• What did the US Financial Crisis mean to global economy and the business? How do you think the governments and the businesses have responded?
  If you compare China and India, China believed that they don’t know advanced finance and financial investments and trusted their advisors who are from the US firms. Thus, the thinking here is that if the US is doing something, it has to be right and let us also follow suit and invest. This is something like the Venture Capitalist in the Dot Com Word before it became a Dot, invested since the super Venture Capitalist is putting the money. He must be right and now let us go like a sheep. India, had its handful fighting fires at home and hence the inaction helped them and that is why our economy was not very affected.

• What can be the lessons learnt from this crisis – for governments and businesses – especially from the point of view of public policy, globalization, financial coordination and information sharing? And also from the viewpoint of developing countries – especially for the emerging and BRIC economies – and developed countries?
  Let us look at the history. A 200 plus million people of the US over 70 years after agricultural revolution, industrial revolution created so many great educational institutions and systems, including World Bank, IMF and even United Nations where there was dominance compared to many others in the total world and the British Domination was taken over by the US capitalism. Three things happened in the last 50 years:
  First Deng Xiaoping went to Lee Kuan Yew and created Shujow park, Shanghai, Shendgen etc., creating a huge economic prosperity lasting about 17 years before 1991.
  Second, the economic freedom of India created by the then PM Shri P V Narasimha Rao, the current PM Dr. ManMohan Singh and the present Home Minsiter PChidambaram.
  Then came Gorbachev, who felt the need for prosperity and eliminated the Berlin Wall and made possible the German Unification and Demise of the Soviet Union and with little help from Brazil etc.
  Together these four countries form the BRIC economy and have made about 50% and more of the world economy co-creating wealth for themselves. Thus the model in the next decade will be in these people and the US will still be a formidable market on all dimensions but not a dominating market. Thus whoever takes this opportunity in these four with some cooperation within the Block of 4 will create a new capitalism challenging the US capitalism. I believe it might be a welcome respite to the world economy – in that it need be forced to periodic upheavals mirroring one large country’s economy alone – i.e., the US.

• Do you think the crisis is behind us or are we to witness even worse?
  The crisis is almost behind us; excepting for the Credit Card Crisis or the 3 C’s. If a high school or higher secondary school student of 12 years can have 4 credit cards each with a cap of $800 without any collateral, in the US alone, and if all the risks are compounded, you do the math – it’s another catastrophe waiting to happen, if the regulatory framework doesn’t open itself up to this possibility and proactively counter it. But, it is yet to be and I am quite hopeful that it can be thwarted.

• How has Wall Street changed during the past year, and what will these changes mean for the stock markets and the investors?
  There are certain circuit breakers which have been put in and it is hoped that the stock-markets will not reflect a complete depression state. It is also hoped that these measures will introduce a level of stability and prevent drastic highs and lows in the indices. But the stock market being what it is, is largely affected by sentiments and perceptions of people and stock values of companies can plummet or sky rocket based on the market sentiments and reactions to news about the company, economy or even politics. All this considered, I must also add that these circuit breakers are for known or anticipatory problems. There are very imaginative culprits who can outsmart any system. The only way to prevent these is through moral leadership and honesty, integrity and transparency.