Having expressed my thoughts on few of the causes and repercussions of the economic downturn currently prevalent and having discussed the need for organisations to shift focus from rapid to sustainable growth, the need for better risk management processes and tighter corporate governance frameworks, I move onto discuss what I had put down in my blog on this topic as the most noteworthy ill-effect of rapid economic growth and industrialisation – inequality and unfair distribution of wealth leading to poverty & related social vices. One might wonder how this is related to the recession and how taking measures to tackle this evil will help prevent similar downturns in the years to come….
It may be noted that any economy inevitably goes through a cycle of booms i.e. periods of high economic activity and recessions i.e. periods of low economic activity. These periods of low economic activity are in usual course a result of shortage of credit, increase in interest rates leading to non availability of funds for investment or at times conscious decisions by organisations to cut down on investments and expenditure. The most critical bit in re-igniting the economy and restoring economic activity to normal levels from these abnormally low levels is to encourage spending and provide an incentive for investment, which is in usual course done by subsidising interest rates and through financial support/backing.
However in such circumstances, in my personal opinion, it is possible to reduce the impact of the periods of low economic activity and possibly eliminate them, rather than having to find an artificial and readymade cure to such situations.
To reduce the impact of recessions, it would require long-term planning and cooperation between organisations and world economies and an attempt to fight poverty and unequal & unfair allocation of wealth. Organisations should take up the mighty responsibility of not just acting and transacting in an ethical and socially responsible way but also to actively participate in and allocate a share of its funds to the cause of provision of basic facilities for individuals and families below the poverty line. This could be in the form of providing a means of livelihood or employment for those in need of employment, adoption of under-developed rural areas by corporations with a view to electrifications or provision of proper and hygienic sanitation or through micro-financing arrangements for sectors like agriculture & small-scale cottage industries where finance is in short supply. It was earlier believed that the government was solely responsible for the above. But I personally believe that organisations/corporates have a huge role to play in this process and will in the long run benefit from this. The rationale behind such an argument lies in the fact that by raising the standard of living of those below the poverty line and those unable to satisfy their basic needs, organisations are in the long run creating a new market to cater to and this new clientele/market ensures sufficient economic activity at all times. On the same lines, by allocating & spending a share of company funds for such social causes, a re-distribution of funds transpires. As a result of this re-distribution funds are no longer holed up & held as idle funds in a few hands, but is readily in use in the economy. Thereby there would be no requirement to artificially encourage investments through the techniques discussed above.
The views expressed in the blog above on corporations spending in a socially responsible manner and for social causes, thereby helping fight social evils might be seen as an idealistic solution to fight downturn. But it is my strong belief and conviction that such a move will reap rewards for the global economy in the long run! I invite your comments/suggestions on the above blog!
Recent Comments