Corporations: The Necessary Evil

Watched the movie "Battle in Seattle" yesterday and the mind immediately got flooded with a plethora of thoughts.The movie is based on real events depicted through fictional characters and is the story of mass protests at the WTO(World Trade Organization) meeting in Seattle,Washington which ultimately led to collapse of the talks.For a full synopsis(at the risk of encountering spoilers) go to

http://www.imdb.com/title/tt0850253/synopsis

However, what I want to talk about is not the movie itself but issues- both core and peripheral- related to it.The protesters are opposed to the WTO because they feel that it's being used by the developed and powerful nations of the world to flood the third world and poor nations with their goods thus destroying any attempts at self-sustenance.All this is done under the garb of sugar-coated slogans of "Globalization" and "Free Trade".The carrot held out is the seemingly easier and cheaper access to goods for the people of all countries.The WTO envisages a single unified global economy but fails to make any provisions for the local farmers and entrepreneurs who would lose their livelihoods in face of stiff competition.Hey wait!How can imported goods come at so cheap a price so as to elbow out these guys?? The answer lies in- subsidies.

European nations and America give billions of dollars in subsidies to their own farmers who are then able to produce at a lower cost and sell cheap. Even so, they make handsome profits.Now, these countries are not agrarian in nature- meaning that only a very miniscule percentage of the population is involved in farming.This makes it easier for the governments to give heavy subsidies per farmer.On the other hand,developing and third world countries have majority of their populations involved in agricultural activities.For these countries whose economies are much smaller than those of the developed countries,it becomes all the more difficult to subsidize farming.This results in lack of usage of modern equipment and techniques in farming which has a direct impact on the quality and quantity of produce.If at all the farmer chooses to use modern machinery, the cost of production also goes up considerably because the farmer now has to pay back the loan taken from the bank to purchase the machinery. This limits his ability to sell below a minimum price.With cheap and better quality goods coming from elsewhere he is unable to withstand the competition. It's true that consumers which form a smaller portion of the population will now have access to cheaper goods but face the risk of becoming overdependent on imports owning to the dying out of local industry. There may arise a situation where owing to poor produce some year the developed country doesn't export its produce.The impact can be imagined. This effect continues up the production chain because the local industry won't be able to produce cheap after procuring the more expensive raw material from local sources whereas industry in developed countries will.The irony is- developed countries in WTO want developing countries like India to stop giving subsidies to their farmers but are not willing to do the same in their own.Clearly, all this is being done at the behest of and in the interest of large corporations which are driven by the profit motive.Infact(atleast as far as the US is concerned) a corporation is mandated by law to maximize profit for its stakeholders and thus can absolve itself of guilt,if any,in the pursuit of its objectives.

Now this is where it all gets damn confusing for me! All right, the corporates world over are driven by selfish motives and are willing to exploit or be involved in the exploit of others in pursuance of their goals.Also,many of us would automatically sympathize with the plight of those suffering as a result.But does that mean we should stop using the products of these companies? Not eat that burger at your favourite multinational joint, not purchase that pair of sports shoes from Nike(in India they are imported from China where its workers are paid a pittance and Nike pockets all the money),not consume products made from imported food-grains(not that ur gonna be able to tell anyway!),not use a laptop or an iPod(the lithium ion batteries use a substance found in abundance mostly in very poor African nations which use child labor to mine it-of course it's the corporations who supervise the mining),not wear diamond jewellery(try finding out something about DeBeers if u can not to mention blood diamonds)? This list can go on for ever,including things you cannot imagine life without-foremost being oil.Probably nothing in the world has caused as much exploitation as oil has. This exploitation has been carried out by both- corporations as well as governments- and continues to this day.Ever since reserves of oil were found in the Middle East at the turn of the century, the world has never been the same.A number of countries have been condemned to eternal hell for their oil,the most recent being Iraq and Afghanistan.Afghanistan itself doesn't have any significant oil but its control is vital for the US to enable it to bring oil through pipeline from oilfields in Turkmenistan and Kazakhstan which will have to pass through Afghanistan and Pakistan before entering the ocean.A Taliban controlled Afghanistan wouldn't allow that although US tried its best to negotiate with this barbaric regime.More on oil politics in later posts.

Even if everyone decided to boycott these goods or decide not to be employed by them what will happen to the workers who might go jobless as a result? The collapse of corporations will resonate throughout the economic chain because everything is interlinked(the current recession is proof).The world economy shall collapse and it will be utter chaos everywhere.And what shall we have achieved? Absolutely nothing.So clearly an outright boycott is not an option. Then what IS?I don't know and I don't think there IS an effective one.At most you can try your best to persuade these people to bring about a change of heart and hope for the best but clearly that doesn't smack like a practical solution.Human greed is too strong to let go of opportunities for the sake of others.Most of us want to be rich and powerful and I personally am no exception.

That leaves taking recourse to legal route as the only option.Tough laws may discourage exploitative,immoral,unethical and criminal practices and force corporations to behave.But again laws are made by governments-which may be democratically elected or dictatorial regimes.In case of the latter dictators aren't accountable to anyone and can therefore rule as they see fit.Naturally corporations would be willing to pay arm and leg to the dictators to bend laws their way in such an atmosphere.In case of a democracy,no one ever heard of politicians winning elections without money to run their electoral campaigns.Who pays the chunk of this money and what do they want in return? Be it either India or the US,time and again we have seen laws being heavily tilted in favour of corporations and the judiciary overlooking violation of laws by them.Organizations like the WTO are brainchilds of not governments but corporations who are eager to expand their reach at whatever price.With the weight of the government behind these guys what choice does that leave you with?

So where do I see myself after college?What do I want to achieve?Like many others I want a high-paying,satisfying,glamorous job and a stellar corporate career.Would I be hypocritical enough to join a multinational?Yes,I would.I've worked hard all my life to the best of my ability to realise my goals.I know there are things which I cannot change and are beyond my control.Besides,there is no corporation which doesn't perpetrate exploitation in one form or the other and given all the arguments in this post do I have a choice if I want to fulfill my dreams?(Assuming that I'm not planning on being an entrepreneur!)

Polyester Prince :The Rise Of Dhirubhai Ambani

This is the name of a book by Hamish McDonald I finished reading a couple of days back. It details the life of the man right from his childhood days till about the time he died and exposes him and Reliance to the world in full. It is only after reading this book that I realised the scale and magnitude of the frauds perpetrated by him and his coterie of friends.

On the other hand, one cannot but help marvel at the sheer genius of the man who took on the whole government and bureaucracy headlong and twisted and manipulated them to suit his will and desire. The state-controlled economic set-up of India(which it was till 1991) had been designed by some of the best minds in the world and yet Dhirubhai outwitted and hoodwinked it at each and every step.That he managed to shine the most when license-raj in India was at its worst speaks volumes about his abilities.At the peak of his powers he could make or break Prime Ministers not to mention other Cabinet ministers and Chief Ministers. His battles with Bombay Dyeing chief Nusli Wadia and Indian Express owner and editor Ramnath Goenka have become the stuff of legend.It is in the most intense phase of this battle that 'years of living on adrenalin' as the author puts it, finally took its toll on him and he suffered a paralytic stroke from which he never fully recovered.

In the course of reading this book a lot of characters and events in the movie 'Guru' began falling in place.Apart from the obvious Abhishek Bachchan as Dhirubhai and Aishwarya Rai as his wife Kokilaben, the character of Abhishek's father as schoolmaster is based on Dhirubhai's father who was also a school teacher, Mithun Chakravarty's character is inspired by Ramnath Goenka who initially saw great promise in Dhirubhai but later fell out with him owing to latter's business practices and Madhavan's character as a journalist in Mithun's paper is inspired by S.Gurumurthy who exposed Reliance and Dhirubhai in Indian Express to the full.Aishwarya's brother as Abhishek's business partner in his initial days is also based on a real life character whose share Dhirubhai bought out after they disagreed on certain points. Abhishek's stint in Turkey is symbolic of the years Dhirubhai spent in Aden(in Yemen) when it was a busy business place. The allegation levelled against him regarding smuggling of machines without paying custom duties is very much true;Dhirubhai is said to have smuggled in a whole factory worth $1 billion by dismantling machines and then reassembling them after their arrival taking advantage of loopholes in customs regulations.It was considered as a punch in the face for the bureaucracy at that time.In another instance he paid duty for 8 machines and installed 12 in his plant by showing the latter as spare parts to the authorities(the figures of 8 and 12 appear in the movie too).The annual shareholders meeting used to be a grand affair with Dhirubhai as shown in the movie and there was an instance when the public turned against him in the meeting and he had to flee. The paralytic stroke shown in the movie(after the disastrous shareholders meet) came much later in real life though.The movie leaves out his most scandalous affairs(Harshad Mehta scam and issuing of duplicate shares)and doesn't even make a mention of his tussle with Nusli Wadia.Guess the producers didn't want to take chances with the Ambani clout.On that note, even this book is not available in India for the Ambanis have threatened legal action against anything they preceive as defamatory in the book!No wonder I never across it before in the press or anywhere else.It's only by accident that I chanced upon a downloadable free ebook version on the net while searching for something else.

The book candidly details all of Reliance's misdoings while acknowledging the genius of the man.In the words of Sucheta Dalal, a well-known business reporter:

The Polyester Prince is an accurate portrait of one of the most colourful, controversial and brilliant of Indian businessmen, who converted into an art; the bending and twisting of the stifling license-permit system to his advantage. It traces his humble beginnings at Chorwad in Gujarat to being in the Forbes list of the world's richest men.

As McDonald says in the book, 'Everything about the Ambanis, in fact, was a good magazine story.' If Anil Ambani's stormy courtship of Tina Munim, whom Hamish describes as 'a girl with a past' has all the ingredients of a Bollywood potboiler, then the saga of Dhirubhai's rise to being among the most powerful men in India is significantly more dramatic and awesome. There is the fight-to-the-finish battle with Ramnath Goenka -- the fiery and fearless proprietor of the Indian Express; then the war with industrialist Nusli Wadia of Bombay Dyeing; the much publicised allegations against some Ambani staffers over a plot to murder Wadia; Reliance's travails during the V P Singh government, which almost brought the business house to its knees, and sundry other controversies over licensed capacities, export manipulation and share switching. It also narrates how Reliance created the equity cult which got the general public investing in equity and investors' reciprocal adulation for the man for over a decade.

McDonald uses his skill as a journalist to paint an accurate picture and to bring in the unsavory aspects of Reliance's dealing with business rivals without attracting charges of defamation. The book candidly traces Dhirubhai's uncanny knack of tweaking and capturing political and bureaucratic power -- Ambani's equation with Indira Gandhi and her family and their powerful minions, as well as the suitcases of cash which Indian business houses used to engineer changes in tariffs and duties for specific products. At the same time, McDonald finally portrays Dhirubhai as a visionary with unconventional ways of fulfilling his mega plans.

Read the full article here: http://www.rediff.com/money/2000/jul/26dalal.htm

He manipulated not only the system but his company's account books as well.By putting up front companies and spinning a complex web of financial transactions here and there he made it extremely difficult for anyone to make any sense of it. As the author says-Probably only Dhirubhai, his two sons and a couple of selected near ones were the only people who had the whole equation in their heads.

Everything else apart, the book makes you realise the readiness with which our politicians do the beckoning of businessmen, the impunity with which they demand cash(for instance,Sanjay Gandhi asked Nusli Wadia for donations to Congress to get a license clearance) and abuse their positions in power.Apart from Indira Gandhi,Murli Deora,the present Minister of Petroleum and Natural Gas and Pranab Mukherjee, the External Affairs minister, used their clout in the administration to benefit Reliance and Dhirubhai heavily-both financially and legally. CBI has been shown to be a mere puppet in the hands of politicians and by extension Reliance(the CBI chief's son was the owner of a Reliance factory)- something that stays true to this day.The heads of public sector banks, bureaucrats in the finance ministry,law ministry and officers in the law enforcemnt agencies have been shown as having business interests in Reliance either directly through ownership of shares and debentures(allotted by Reliance for free out of special prerogative quotas in return for their 'services') or indirectly by having franchisee rights of a Reliance company through their family members. A number of bureaucrats accused of favouring Reliance have been shown as taking up jobs with it after retirement.Even the media hasn't been spared.Reliance had a number of journalists in major newspapers and magazines on its payroll to paint a favourable image of the company.It even started a newspaper of its own-the 'Observer of Business and Politics' when the Indian Express campaign started hurting it real bad but it failed to click. But the author does acknowledge that given the opportunity any other businessman does and would've done the same things Dhirubhai did.The only difference with him was the courage factor and the scale on which he did whatever he did. By his own admission he took advantage and worked hard to exploit the opportunity while others remained complacent and therefore had no right to complain. He attributed complaints to the jealously factor he says is so inherent in Indians.

To say that he played a big role in changing the face of Indian politics forever (inadvertantly though) won't be an exaggeration. He got V.P Singh (who was the Finance Minister in the then Rajiv gandhi Government and was bearing down upon Dhirubhai's empire) sidelined upon which the latter resigned and then led to Rajiv's downfall in the next elections.Fearing a Congress comeback he then took the reservation genie out of the bottle which has completely changed the contours of Indian politics forever. The man who had a reputation for honesty and efficiency (as Chief Minister of UP he rid the state of notorious bandits to a great extent) became a villain(or a hero depending on which side of the fence you are) overnight.

Perhaps the most shocking side of his personality was the willingness to take recourse to violence as the last means. At various times he got beaten up his own workers agitating for higher wages and overtime pay, his business rivals(son of Kapal Mehra, his rival in the polyester business)-the latter couldn't be proved in court and got threats issued to a number of people as well(none of which have been proved). A manager of his company Kirti Ambani was arrested for hatching a murder conspiracy against Nusli Wadia and Reliance immediately dissociated itself from his actions.

The author also gives details of the Ambanis association with Harshad Mehta in order to jack up Reliance share prices by manipulation of markets but says that the joint Parliamentary probe was stopped by Murli Deora before it could throw the noose around Dhirubhai.

Dhirubhai's contention was simple-Everyone has a price, whether low or high.His personality is best summed-up in the author's own words-

Dhirubhai Ambani built his company through outstanding abilities and drive on many fronts: as an innovative financier, an inspiring manager of talent, an astute marketeer of his products, and as a forward-looking industrialist. The energy and daring that showed itself in his early pranks, practical jokes and trading experiments developed into a boldness and willingness to live with risk that few if any other Indian corporate chiefs would dare to emulate. His extraordinary talent for sustaining relationships, and sometimes impressing men of standing, won him vital support from both governments and institutions.

The dark side of his abilities was an eye for human weakness and a willingness to exploit it. This gained him preferential treatment or at least a blind eye from the whole gamut of Indian institutions at various times. Over decades in India, some of the world’s best minds had applied themselves to building a system of government controls on capital ism. Dhirubhai Ambani made a complete mockery of it-admittedly at a stage when the system was decaying and corrupted already. The Ministry of Finance and its enforce ment agencies, the Reserve Bank of India, the Central Bureau of Investigation, the Securities and Exchange Board of India and the Company Law Board proved timid and sometimes complicit in their handling of questionable episodes concerning Reliance. The public financial institutions that held large blocks of shares in Reliance and had seats on its board were passive and acquiescent spectators, rather than responsible trustees for public savings.