Greed drove the globalization of Financial markets – Part 2

Greed for higher profits & a demand for brown collar workforce are discussed

Greed drove the financial globalization of the nineties
Greed drove the financial globalization of the nineties

The nineties saw the globalization of Financial Markets

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]Y[/dropcap]ou want to set up a facility in Chennai then you can think of raising funds from New York Stock Exchange or European Banks if the project is found to be attractive. Funds were looking for markets and “geographical diversification” became the buzzword. The pension funds were one of the largest investors running into nearly 15 trillion USD and at least 15 to 20% of this was in non-domestic markets. The Funds started searching for markets instead of markets trying to attract funds. The life expectancy in the Europe and US increased significantly and the pension funds were to earn for longer period since old people have to be provided for. Then came the idea of consumption led growth and greed as the norm. On May 18, 1986 Ivan Boesky gave the commencement address at the University of California at Berkeley’s business school. “I think greed is healthy,” he told his wildly enthusiastic audience. “You can be greedy and still feel good about yourself.” A few months later Boesky was indicted on the charges that would land him in Southern California’s Lompoc Federal Prison, also known as Club Fed West.

But greed continued to be the norm rather than the exception. The inter-temporal expectations became very large and waiting time became shorter and the so called “get rich quick” attitude took over. To achieve those aims domestic markets were not found to be adequate. Hence the search for “geographical allocation” wherein it was felt that risk should be reduced by spreading it across territories and across product lines. The more financial markets integrated the less they became attractive for diversification since the correlations were becoming more positive. But the meltdown has impacted on the idea of globalization. Suddenly countries which are supposed to be de-coupled from the global markets are considered smart. Indian Central Bank is praised for keeping India “de-coupled” from integrators. Not only that –The US congress included a “Buy American” clause in the $787 billion stimulus package particularly mandating the use of U.S made iron and steel in stimulus funded projects , it was clear that protectionism had trumped globalization.

As a response China has a “buy Chinese” clause in its stimulus package of $586 billion. So the whole game is unravelling on the G front. But the third and most important dimension of globalization, is in the context of the Labor Markets,to allow free flow of human beings to carry out brown collar work in the west. There is a spectre haunting the West.

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]I[/dropcap]t is the spectre of uncleared garbage, clogged drains and overflowing sewerages. West is facing an acute crisis in the area of brown collar labor. Labor to clear the garbage, remove plates in restaurants, clean the sewerages and treat the municipal and industrial waste. It cannot be outsourced so easily as that of white collar work since the latter has significant content of software portion while as brown collar work still has requirements for human beings at locations. In the fifties and the sixties, millions of the Turks and Kurds and Iraqis went to Germany when that economy was booming and they were/ are called guest workers. Even today most are not given rights of Citizens and continue to be guest workers. The Algerians and Moroccans went to France and continue to be a significant minority in France and also active in their Soccer teams. Still, many of them are guest workers since France have this interesting idea of blood being important for becoming citizens– of course the “original” French blood! Hence French are rather frugal in accepting them! More than a million Mexicans in USA are called “undocumented”– euphemism for “illegal”. These workers in France / Germany / USA etc. were mainly in the blue and brown collar jobs more so in the lower skill categories like cleaning restrooms and restaurants / meat cutting / grape picking/ domestic help/ road laying/ garbage processing/ plumbing/ handyman jobs; babysitting etc. There was a mass of literature on “Social Cost” of having these migrants [in simple language the pain on the civilized west due to the brown and black people]. Then came the economic slump in the late nineties and these European countries have erected fences and reject visas etc. for third world labor. Between England and France there is a huge camp [Sangatte camp] near the starting of the tunnel tube train on the French side and the main job of thousands of migrants held there, is to attempt to get into England and sometimes they get killed in the tube rails.

Even as the brown collar workforce is being kept out, the requirements are soaring for this workforce. We find that the municipal waste alone has significantly increased and the per capita waste or generation intensity for OECD countries is more than 600 kg per annum, which has increased many fold compared to their population. This coupled with industrial waste provide a very large challenge to the west since the brown collar work is not being preferred by the white Caucasians.

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Prof R. Vaidyanathan

Cho S Ramaswamy Visiting Chair Professor of Public policy[CRVCPPP]

Sastra University

An expert in Finance and a two times Fulbright Scholar, Prof. R Vaidyanathan is a much sought after author, speaker and TV commentator on all items related to Money and Finance.
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  1. Crisp and Precise, the Professor has explained it all. If one were to be seeing his lectures, including the couple of Videos in this site itself, he has very clearly mentioned the EU situation.

    It is pertinent to note that todays(15/07/16) Newpapers have carried a column of Japans Shrinking population which he has been saying for long .


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