Business Government Society

BUSINESS, GOVERNMENT & STUDIES HANDOUT SUMMARIES
On 1 August 2009
Contributors: Saurabh Verma Amartya Singh Sadanand Subray Kamat Ashis Nayak Jagadeesh R Om Prakash H Mayank Rohit Jaiswal
Bhawna Jain Alok Jain Humbad Abhishek Nirmal D Dineshkumar Shikha Rawat Rangineni Srikanth Hemant Agarwal Ravi M V
R Umesh Ram Sevak Sandeep S Nair A V Naga Chaitanya Chayan Mukhopadhyay Anuprakash Kapil Makhija Rajeev Kumar
Handout Summary
Business, Government and Society
Contents
Introduction................................................................................................................................. 4 Overview ..................................................................................................................................... 4 A New Era for Business.............................................................................................................. 4 How to Manage government and Influence Politics .................................................................... 5 The Corporation ........................................................................................................................... 6 The Social Responsibility of Business is to Increase its Profits....................................................... 6 The Corporations Rise to Dominance ........................................................................................ 7 The Biggest Contract ............................................................................................................... 10 Merck Case A.......................................................................................................................... 12 Role of Government ................................................................................................................... 12 The Public Sector in a Mixed Economy ..................................................................................... 12 Excerpts from Capitalism and Freedom .................................................................................... 14 Parkinsons Law ...................................................................................................................... 15 Regulation.................................................................................................................................. 16 The End.................................................................................................................................. 16 The Looting of Americas Coffers.............................................................................................. 18 Unintended Consequences ...................................................................................................... 18 CUTS ...................................................................................................................................... 19 Interest Groups .......................................................................................................................... 21 The Logic................................................................................................................................ 21 Sharing the Spoils; group equity, development and democracy ................................................. 22 Social Movements in Crisis ...................................................................................................... 24 Social Capital .............................................................................................................................. 27 The Prosperous Community .................................................................................................... 27 The Market and the Polis......................................................................................................... 29 Introduction in ethnic conflicts and civic life ............................................................................. 31 Media ........................................................................................................................................ 32 News Media & Nonmarket Issues ............................................................................................ 32 A Propaganda Model............................................................................................................... 38 Media and Governance ........................................................................................................... 41 Caste matters in the Indian media............................................................................................ 43 Sense Making by the Public ......................................................................................................... 44 Equity, Symbols, Numbers, Rights ............................................................................................ 44
PGP 2009-2011 Section E
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Environment .............................................................................................................................. 47 Environmentalism: Ideology, Action, and Movements ............................................................... 47 The Truth about the Environment............................................................................................ 47 A Global Marshall Plan ............................................................................................................ 47 Green and Competitive: Ending the Stalemate.......................................................................... 48 Business Strategies for Climate Change .................................................................................... 48
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Introduction
This document is a compilation of the BGS Summaries painstakingly put together by a handful of students of the PGP 2009-2011 Section E. Hope this is enlightening to one and all.
Overview
A New Era for Business
Scott C. Beardsley, S heila Bonini, Lenny Mendonca and Jerry Oppenheim A New Era for Business Stanford Social Innovation Review, Summer 2007 Saurabh Verma (0911343) The article is consultants from McKinsey who talk about how the future of companies is intricately tied to the socio-political issues of the times. These days, the issues are far more in number - and social lobbyists far too strong for companies to ignore them. The solution is to adopt a strategic long-term approach, and engage with NGOs, Govt. etc. for two reas ons: These issues can affect their reputations if the companies are seen as culpable Companies may capitalize on the issues as business opportunities
Companies have a social contract (Hobbes, Locke, and Rousseau) as a set of laws, regulations and obligations that guide corporate behaviour. These vary from industry to industry, region to region. It can be formal, like regulations/ laws (what Enron faced), Or informal, like labour standards, healthy food (related to obesity etc.), environment
These are complex eg. A bank is expected not to lend to companies that are harmful to nation, but also grant equal access to all. The 5 Rs: Risk: Predict and handle new risks that result from changing societal expectations. (If you react late to an issue, it might hurt your reputation. Eg: green, climate change etc.) Renewal: Approach societal expectations as opportunities for growth (new products, processes, markets). (Eg: Hybrid cars) Regulation: Shape policy agendas to reflect societys and companys interests. Relationship: Identify stakeholders to build relationships. (NGO, Govt.) Reputation: Foster public trust, not just with PR, but with action. (One wrong step can cause great harm. Promote consumer concerns, and demonstrate your progress on them) How to tackle these issues:
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Prioritize Issues: (Public concern and effect on company) Collaborate: with NGOs, Govt., or other companies. (May also choose to capture early bird advantage and not collaborate with competitors, in some situations) Communicate clearly: Show people youre making a trade -off between profit and common good Lead from the top: CEO should set example Become an agent for change: Indulge in debates, speak to diverse people
How to Manage government and Influence Politics

Rishikesha T. Krishnan How to Manage Government and Influence Politics Sensex, April -June 2009 Amartya Singh(0911291)
The article basically talks about the association between the government and the corporate India. The article starts with the liberalisation in 1991. Initially the Industry has raised its opposition to the deregulation process. Later, they realised the benefits of exploiting new opportunities, which clearly outweighed the benefits of a previously protectionist regime. The author gives several example as to how various policies by government have helped the business enterprises:1. Indias power projects, post 1991, benefitted companies more than public. 2. During Deregulation in telecom sector, licensing conditions had to be completely changed to rescue the telecom conditions who had given over-optimistic bids 3. Land acquisition for companies in India still requires political support(Eg Sterlite over POSCO in Orissa) 4. Lack of clear regulatory authority by TRAI, CERC, IRDA. 5. Legal system not as fast as China. Late resolving of cases. In some cases, Indian firms have had vested interests in delaying court decisions 6. Lack of competition regulation in India Importance of Politics The only constraint before the politician-business-bureaucrat nexus is the democratic electoral compulsions. The closures of Dabhol power project, pulling back SEZ formation in
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West Bengal in face of oppositions and maintenance of power tariffs for small domestic consumers are some examples. Another issue of interest for politics and business people is the availability of skilled manpower. Industry bodies have been involved in development of skilled manpower. E.g Infosys. CII has setup a center of excellence for development. While many business people have entered politics of late, there have not been many business men taking up stands to fight on contentious issues. The exceptions include Ratan Tata against violence in Nandigram and Anu Aga against Gujarat riots Politicians owning institutes of higher education has also been controversial. In Perfect Balance Indian government has lobbied hard abroad for the rights of the Indian businessmen. E.g in acquisition of Arcelor Mittal by LNM and lobbying against protectionism by Obama government for the betterment of the outsourcing companies. The government has not taken proper care of labour rights vis-a-vis companies The article concludes by saying that an understanding has been reached between the current UPA government and the business industry. Equilibrium has been reached which will perhaps be disturbed if say BSP comes to power at the center.
The Corporation
The Social Responsibility of Business is to Increase its Profits
Milton Friedman The Social Responsibility of Business is to Increase its Profits, New York Times Magazine, September 13, 1970. Ashis Nayak(0911296)
Writer Friedman doesnt buy to the concept of businessmen speaking eloquently about businesses have social responsibility According to him (a) Business or corporation having social responsibility is a vague statement with corporation being an artificial person/entity; but its the corporate executives who have the social responsibilities. (b) Again the corporate executives are the persons who are appointed by the owners or the stockholders of the firm to run their business; His first responsibility is to adhere to the stockholders interest;
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(c) When these corporate executives exhibit social responsibilities, they do with their own money, let it be to the community or to the church they go to; but again, it is their personal social responsibility not the corporations. (d) The executives perform social responsibilities when they use the companys profit or the money for some social acts like using costlier techniques (which is consuming companys profit) to reduce the pollution generated by the firm and likewise; in these cases he is using someone else money for the social cause. But in this case there is every chance of him being fired. So, it is a very improbable case. (e) In certain cases the companies act on Social corporate responsibilities (CSR) but they are stunts performed to reduce their tax. They use the money they would have given to government as tax for SCR. All in all the only CSR for corporations is to use its resources and engage in activities designed to gain profit so long it remains within the rules and regulations of the game without deception or fraud.
The Corporations Rise to Dominance

Joel Bakan The Corporations Rise to Dominance [Chapter 1 from Joel Bakan The Corporation: The Pathological Pursuit of Profit and Power, Free Press, 2004] Jagadeesh R (0911313)
Note: This article is not the authors opinion, but merely a roster of events tracking the history of emergence of corporations through major events arranged in their chronological orde r. The corporations have managed to rise from relative obscurity to become the worlds largest economic institutions, their remarkable growth is analysed below: From late 16th Century to the Bubble Act: The corporation first emerged in the late sixteenth century with the basic idea of separating ownership from management. This was a departure from the prevalent form of business then, Partnerships, where the owners ran the business. Sceptics argued that this was a recipe for corruption and scandal, stemming from the fact that other peoples money was being poured into the company run by managers. This was indeed what happened between 1690 and 1720, when many bogus companies were floated in Londons Exchange Alley which flourished on speculation, only to coll apse soon after.
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After the collapse of South Sea Company, taking down many people with it, the Bubble Act (1720) was passed by the British Parliament, which outlawed the creation of corporate bodies. From 1712 to the repeal of Bubble Act: In 1712, the steam-driven machine unwittingly started the Industrial revolution , leading to the development of large-scale industries such as textiles, mining, breweries and distilleries. These industries required more capital investment, thus leading to an explosion in the number of corporations in the US. England, not to be left behind, repealed its Bubble Act in 1825. From early 19th century to the Limited Liability Act: With the invention of the steam locomotive, railways became the engines of growth of the corporation. Since railways were mammoth undertakings requiring huge capital investments, they soon became heavily reliant on the corporate form of financing. This led to a national market for company securities, with numerous people investing in it. Despite its popularity, the stock market still had one major barrier, which kept the middle class out of the process. Unlimited liability which meant, irrespective of the amount invested, every shareholder was personally liable to pay the debts incurred by the compan y without a limit. Supporters for limited liability mushroomed, selling the idea to be an antidote to class conflict by co-opting workers into the capitalist system. They predicted that once the limited liability was brought into force, the common man would become a shareholder. There were some detractors of the idea too who believed it would undermine personal moral responsibility. Nevertheless, limited liability was incorporated into the law in 1856 in England, followed by the US. By the early years of the 20th century, numerous publicly traded corporations dotted the economic landscape. Early 20th century to the Great Depression: The era of corporate capitalism began with many provinces relaxing restrictions on corporations, especially regarding mergers and acquisitions, this lead to the consolidation of many individually owned enterprises into a few huge corporations. Corporations assumed the role of a person, complete with rights to due process of law and equal protection of the law. The voices of the stockholders died out in large corporations. With their size, their powers grew, making them unpopular among the general public who viewed them as soulless leviathans.
PGP 2009-2011 Section E Page 8 of 50
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Sensing their vulnerability to public discontent and organised dissent from growing labour movements, huge corporations like AT&T and GM launched advertising campaigns aimed at humanising and softening their image. Especially after the great depression, to reverse the adverse public opinion, the corporations initiated Corporate Social Responsibility. From the New Deal to Neoliberalism: Post depression, Franklin D. Roosevelt created the New Deal, which among other things curbed the powers and freedom of the corporations. This stifled the unbridled growth of the corporations. Then, the advent of technology and convergence of ideology and law in the 1970s led to economic globalisation . This together with the crisis created by the surging oil prices led the governments to embrace neoliberalism. Thatcher and Reagan who came to power in late 70s were active proponents of neoliberalism, whose core policies were deregulation and privatisation. The era of WTO: Technology grew rapidly and aided in the rapid advent of globalisation. Corporations were no longer limited to a particular country and now scoured the earth for cheap labour and rich markets. Thus corporations now leveraged their independence to dictate terms to governments. States started deregulating and slashing taxes with little regard to social welfare, to attract investments. With the creation of WTO (1993), all regulatory measures weakened. It became a powerful, corporate-influenced overseer of governments mandate. The states who became members came under pressure from WTO to change or repeal laws designed to protect public interest, which hindered trade. Governments lost their abilities to protect their citizens from corporate exploitations. The curse of power: In the present day, though the corporations have arguably become more powerful than governments, it is their very power, which makes them vulnerable. Corporations today attract mistrust, fear and demands of accountability as in the past. And they, like their predecessors, are trying to humanise their image through branding exercises.
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Corporate social and environmental responsibility is offered today as an answer to the growing public concerns. Beyond just being a marketing strategy, CSR lends legitimacy and presents corporations as responsible and accountable rulers of the society.
The Biggest Contract

Ian Davis The Biggest Contract The Economist May 26, 2005 Om Prakash H (0911322)
This article tries to shed light on the long-running debate about the role of the business in society. Ppl on one side argue that the business of business is business. Social issues are not of prime concern to the corporate management. Their sole purpose is to create shareholder value. On the other side, we have the corporate social responsibility(CSR). But both fail to notice the significance of social issues to businesss success, a nd the contribution of business to society. Now we talk about the problem with the business of business is business attitude. This attitude blinds the corporate management to 2 important realities: Social issues are not so much tangential to the business as fundamental to it. Companies that ignore public sentiment make themselves targets for public attack. But these social pressures can also act as indicators for company's profitability: by adhering to the regulations and public-policy environment, for example. If companies treat social issues as distractions or unjustified vehicles of attack on business, they are making a big mistake, because, these public sentiments can have a major impact on the companys strategic future. Most stock market value in A merican and European markets depend on expectations of companys cash flow beyond the next 3 years. In food & restaurant industry, the general concern on obesity has led to a stronger control on the marketing of unhealthy foods; public and planning resistance to establishment of new stores of big retailers, etc.
As can be seen, these social issues can eat away billions of dollars of shareholder value, if unnoticed. Usually, managers focus excessively on short term performance of the business, and tend to forget the long term opportunities and issues, of which, society is vital, and so is the customer trust and growth prospects. So, large companies need to articulate the businesss social contribution and define its ultimate purpose in a way that has more s ubtlety than the business of business is business.
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Another interesting aspect is that, business can profit by spotting and supplying unmet social needs and consumer preferences. Ex: in the era of fast foods, providing healthier meals, in the polluting energy industry, the creation of cleaner fuels.
But CSR is not the best answer to ensuring that the companies are bound to the social welfare. CSR is very defensively perceived and disconnected from the corporate strategy. The main reasons could be the anti-corporate campaigns and anti-globalization protests during the 1990s. This prompted the companies to draw CSR as a means to avoid the NGO and damages on reputation. Big companies bring with them, productivity gains, innovation & research, large scale inv estments, and above all, global economic welfare. Companies which undertake stakeholder dialogues with the NGOs will be much aware of the potential social issues and would have already incorporated in the corporate strategy. Even then, the company usually takes up CSR initiatives by adding a new policy here and there, just for the sake of it. They tend to operate at a distance from the strategic decision making within the company, and exist for rebutting criticism. In view of these, a new approach for business needs to be created. Three main points stand out in this regard: 1. Business needs to make sure that social issues and forces are discussed at the highest level as a part of overall strategic planning, by the way of introducing explicit processes. 2. The need for realization of the fact that business and society have an implicit contract. Even though it has been successfully portrayed as a bargain thru which only business benefits, the need to highlight the fact that the society has very much benefited from the business is high. At the same time, business should acknowledge that it is subject to rules and constraints.Company should also actively manage this contract by the means of transparent reporting, developing and deploying voluntary standards of behavi or. Ex: GEs announcement of extending its spending on eco-friendly technologies. 3. The need to shape debates on social issues much more consciously. This means that the companies should more actively be involved in external debates and in media about the social issues that shape the business context; to describe businesss ultimate purpose as the efficient provision of goods and services that society wants. The point is that, profits should be seen as a signal from society that the company is succeeding in its mission of providing something ppl want, and in a very efficient manner.
Rousseaus social contract helped to seed the idea among political leaders that they must serve the public good; in similar lines, the CEOs should take the opportunity to restate and reinforce their own social contracts in order to help secure the invested billions of their shareholders, in the long term.
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Merck Case A
Mayank (0911319) Merck case is classical situation of Friedmans B 3 Vs Social responsibility. In the coastal region of some African countries, people used to suffer with a incurable disease known as River blindness. Merck has invested initial money in the research for drug formulation for the disease. They have come up with a version which is effective on animals. However, Merck is facing couple of issues before going ahead with the drug: The cost of drug is really high for the poor. There is still no guarantee that the drug will be successful for Human beings without side effects and research investment will pay off. There is threat of drug sales in black market. There is no proper distribution channel. There is no organization which has come forward to deal with Merck in addressing of this issue.
The dilemma lies with Merck is that its main objective is to serve patients, so in this case, should Merck with go for further investment in drug formulation despite knowing of less profitability???
Role of Government
The Public Sector in a Mixed Economy
Joseph Stiglitz The Public Sector in a Mixed Economy [Chapter 1 in Jo seph E. Stiglitz The Economics of the Public Sector (3rd edition), W.W. Norton, 1999 Rohit Jaiswal (0911339) There is a role of govt In lots of things from hospital to roads to travel. Economists always differ on the role of govt. To what extent and in which areas should govt. play an imp role? Key concepts: 1. Mercantilists believe that govt. should promote trade and industry. Some countries had benefited from the active role of the government. On the other hand there were others where active government had caused a negative impact by squandering on wars or unsuccessful ventures
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2. Adam Smith asked for very limited role of govt. Invisible hand: put forth by Adam smithsuggested that competition among individuals for pursuing their personal interest (profits), will indirectly serve public interest too. Adam smith was of the opinion that there was no need to rely on the govt. People in the process of doing their own good will do the benefit for the society. Competition will lead to the prod of all goods at minimum cost Competition leads to efficiency and provides spur to innovation 3. Laissez Faire Govt should leave the private sector on its own and should not attempt to regulate the private sector. 4. Keynes - He felt that govt should try to create employment and remove economic disparity. 5. Four major reasons for systematic failure of Govt a) Limited Information Govt has limited information required to do what it would like to do. For eg. Govt. might like to give some privilege to those who are disabled but with the limited info Govt. has it fails to differentiate b/w those who are really disabled and those who are pretending to do so. b) Limited control over private market responses Govt has limited control over the consequences of its decision. c) Limited control over bureaucracy Govt has limited control over those people who will be executing/implementing its policies. d) Limitation imposed by political process Political interests come in picture when govt make decision. This raises additional difficulties. Public sector economists are concerned with 4 fundamental questions of choice concerning the use of limited resources 1) What is to be produced? What kind of public goods to be produced 2) How should it be produced? Whether to produce privately or publicly? Whether to u se more labor or capital intensive technique. 3) For whom is to be produced? Who is the target consumer of public goods/services? 4) How are decisions made? How to make collective decisions? What policies to adopt to reach to a decision affecting whole group?
Four general stages of analysis to the above fundamental questions 1. Knowing what activities the public sector engages in and how are they organized? Describing what the govt does. 2. Understanding and anticipating the consequences of the Govt activities 3. Evaluating alternate policies 4. Interpreting the political process.
5.
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Positive Economics It looks at the scope of govt activity and the consequences of it. Normal Economics It tries to evaluate the alternative policies that might be pursued. Richard Musgrave thought of govt as having three economic branches 1. Stabilization To ensure that economy remained at full employment with stable prices 2. Allocation How to allocate money to diff resources education, military, how to impose tax. 3. Distribution How the goods that were produced by the society were distributed among the members.
Excerpts from Capitalism and Freedom

Milton Friedman Excerpts from Capitalism and Freedom (2d Ed.) University of Chicago Press, 1982. Bhawna Jain (0911301) The article talks about competitive capitalism the organization of the bulk of economic activity through private enterprise operating in a free market as a system of economic and political freedom. As opposed to President Kennedys views Ask not what your country can do for you ask what you can do for your country, Friedman says that to the free man will ask what I and my compatriots can do through government to help us discharge our individual responsibilities, achieve our goals and purposes and above all to protect our freedom? To a free man, the country is the collection of individuals who compose it, not something over and above them. One of the greatest threats to freedom is the concentration of power in political hands. He asks how can we benefit from the promise of government while avoiding the threat to freedom? The solution : 1. The scope of the government must be limited . Its major function must be only to protect our freedom, to preserve law and order, to en force private contracts and to foster competitive markets. In both economic and other activities, we must ensure that private sector is a check on the powers of government sector. 2. The government power must be dispersed and decentralized. By centralization and standardization, government actually replaces progress by stagnation, creativity by mediocre performance The role of the government cannot be spelled out once and for all since each day brings new problems and new circumstances. Its also why we need to reexamine the role of government from time to time. He goes on to criticize how the meaning of the term liberalism has changed from the late eighteenth century to the twentieth century. In the 18th century liberalism supported laissez faire and
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emphasized freedom as the ultimate goal and the individual as the ultimate entity in society. However in the 20th century, in the name of welfare and equality, liberalism has started favoring centralized government and the revival of the very policies of state intervention against which classical liberalism fought!
Parkinsons Law
Northcote Parkinson C Parkinsons Law This article first appeared in The Economist, November 1955.
Parkinsons Law is based on observations and can be stated as work expands so as to fill the time available for its completion e.g. An elderly lady of leisure can spend an entire day in writing and dispatching a postcard while it requires a mere 3 minutes effort from a busy man. Law is mainly concerned about public administration work or paper work. According to Parkinson the number of the officials and the quantity of work to be done is not related to each other at all. The rise/growth in the total no. of employees is governed by Parkinsons Law and this law is based upon an analysis of factors by which the growth is controlled.
Before statistical proofs, the two motive forces that underlie the Parkinsons Law are
Factor I. The Law of Multiplication of Subordinates : An official wants to multiply rivals.
subordinates, not
To explain this, author gives an example of a civil servant A who finds himself overworked. For this real or imaginary overwork, there may be three possible remedies: (i) He may resign or (ii) He may ask to share the work with a colleague B or (iii) He may demand the assistance of two subordinates C and D. By resignation he would lose his pension rights. By having B at the same level, he will feel more competition for promotion. So A would prefer to have two junior C and D below him. Here he has not chosen C alone because in that case C would be sharing the work with him and assume almost the equal status which has been refused in the first instance to B. So to facilitate As own promotion he would like to have two subordinated rather than one. So this chain grows further in the same way. C and D will have the two juniors each namely E, F, G and H and hence the situation will facilitate Xs promotion.
Factor II. The Law of Multiplication of Work : Officials make work for each other. Continuing with the previous example, now seven people are doing what one did before. For these seven make so much work for each other that all are fully occupied and A is also working harder than ever. Now an incoming document comes to all of them in turn before giving it to A. But A is busier now because he is also handling seven people below him. He is the one to decide for their
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promotion, vacation, transfer and sickness leave related issues. But A is conscientious man; so besides these many problems created by his colleagues for themselves and for him, he is not going to shirk his duty. He reads each document coming before him for approval, undoes unnecessary changes done by other officials and finally produces the same reply he would have written if officials C to H had never been born. So here far more people have taken far longer to produce the same result.
Statistical Proofs: To prove statistically author has taken two examples, one is British Navy and other is of Colonial office estimates. In both the example, statistically finds that the in normal scenario rate of increase in staff is around 5.5 to 6.5 percent per year irrespective of increase in the work load. Parkinsons Law in Mathematical form : In any public administrative department not actually at war a staff increase may be expected to follow this formula:
X = (2km + p) / n
Where k is the number of staff seeking promotion through the appointment of subordinates; p is the difference between the ages of appointment and retirement; m is the number of man hours devoted to answering minutes within the department; and n is the number of effective units being administered then X will be the number of new staff required every year.
Regulation
The End
Michael Lewis, The End, Conde Nast: Portfolio, December 2008. Available at: http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-WallStreets-Boom D DineshKumar (0911305)
This article does not have any concept being conveyed. I ts more of an narration about the events which had let to this sub-prime crisis of last year. Its just talks about the subprime lending, creation of complex securities like CDOs, negligence of the rating agencies, etc., as events leading to this financial crisis. Article published in Dec 2008 Author Michael Lewis ( and ex- Wall street Investment Bank employee who had written the famous book Liar Poker in which he has criticized the practices been followed in the finance companies)
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The author through the characters (Eisman, Daniel & Mossels) of certain financial analyst, tries to analyze what went wrong during the past decade which had resulted in this financial crisis. The following events were cited and criticized by the author
Prediction of housing bubble early in 2004: Theres a simple measure of sanity in housing prices: the ratio of median home price to income. Historically, it runs around 3 to 1; by late 2004, it had risen nationally to 4 to 1. But the problem wasnt just that it was 4 to 1. In L os Angeles, it was 10 to 1, and in Miami, 8.5 to 1. And then you coupled that with the buyers. They werent real buyers. They were speculators In 2000, there had been $130 billion in subprime mortgage lending, with $55 billion of that repackaged as mortgage bonds. But in 2005, there was $625 billion in subprime mortgage loans, $507 billion of which found its way into mortgage bonds
By the spring of 2005, FrontPoint was fairly convinced that something was very screwed up not merely in a handful of companies but in the financial underpinnings of the entire U.S. mortgage market. Subprime Lending: Lots of firms were lending money to people who shouldnt have been borrowing it. Lenders were making loans to people who, based on their credit ratings, were less creditworthy than 71 percent of the population Original & Ideal structure of Mortgage bond : . The loans went into a trust that was designed to pay off its investors not all at once but according to their rankings. The investors in the top tranche, rated AAA, received the first payment from the trust and, because their investment was the least risky, received the lowest interest rate on their money. The investors who held the trusts BBB tranche got the last payments and bore the brunt of the first defaults. Because they were taking the most risk, they received the highest return Modified structure of these bonds resulting in crisis The big Wall Street firms had just made it possible to short even the tiniest and most obscure subprime-mortgage-backed bond by creating, in effect, a market of side bets.
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Instead of shorting the actual BBB bond, you could now enter into an agreement for a credit-default swap with Deutsche Bank or Goldman Sachs. Conversion of BBB rated loans to AAA: Wall Street investment banks took huge piles of loans that in and of themselves might be rated BBB, threw them into a trust, carved the trust into tranches, and wound up with 60 percent of the new total being rated AAA. Formation of CDOs & the rationale : The first tower is made of the original subprime loans that had been piled together. At the top of this tower is the AAA tranche, just below it the AA tranche, and so on down to the riskiest, the BBB tranchethe bonds Eisman had shorted. But Wall Street had used these BBB tranches the worst of the worstto build yet another tower of bonds: a particularly egregious C.D.O. The reason they did this was that the rating agencies, presented with the pile of bonds backed by dubious loans, would pronounce most of them AAA. These bonds could then be sold to investors pension funds, insurance companies who were allowed to invest only in highly rated securities.
The Looting of Americas Coffers

David Leonhardt, The Looting of Americas Coffers, New York Times, March 11, 2009 Shikha Rawat (0911344) The looting of Americas Coffers The article talks about the financial crises and gives a specific term to the actions of the financial giants looting. The government has to bail out the banks and financial institutions to prevent large scale crises (spiralling out of control). This creates a moral hazard. The financial institutions play with the money and take risks, if the risk works out, they earn huge profits but if it doesnt they dont have to bear the loss. Hence they have an incentive to lo ot which was what happened in the Texas crises of 1980s and the more recent subprime loan crises. Stricter government regulation including steps to clearly define the path towards nationalization of financial institutions, regulation of payment of bonuses and other high salaries (they should not be paid out of profits which are actually taxpayer money siphoned off in advance through looting), etc.
Unintended Consequences
Rob Norton, Unintended Consequences. Available at: http://www.econlib.org/library/Enc/UnintendedConsequences.html Rangineni Srikanth (0911336) The law of unintended consequences states that actions of people and of government always have effects that are unanticipated or unintended.
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One example is the case of the Exxon Valdez oil spill in 1989. Afterward, many coastal states enacted laws placing unlimited LIABILITY on tanker operators. As a result, the Royal Dutch/Shell group, one of the worlds biggest oil companies, began hiring independent ships to deliver oil to the United States instead of using its own forty-six-tanker fleet. Oil specialists fretted that other reputable shippers would flee as well rather than face such unquantifiable risk, leaving the field to fly-by-night tanker operators with leaky ships and iffy INSURANCE. Thus, the probability of spills probably increased and the likelihood of collecting damages probably decreased as a consequence of the new laws. Economists and other social scientists have heeded its power for centuries and it is considered one of the building blocks of economics. American sociologist Robert K. Merton identified five sources of unanticipated consequences. They are 1. Ignorance 2. Error
3. Imperious immediacy of interest : If someone wants the intended consequence of an action so much that he purposefully chooses to ignore any unintended ef fects. For example, The Food and Drug Administration creates enormously destructive unintended consequences with its regulation of pharmaceutical drugs. By requiring that drugs be not only safe but efficacious for a particular use, as it has done since 1962, the FDA has slowed down by years the introduction of each drug. An unintended consequence is that many people die or suffer who would have been able to live or thrive. 4. Basic values As per Merton, ethic of hard work and asceticism paradoxically leads to its own decline through the accumulation of wealth and possessions. 5. Self-defeating prediction This happens when the public prediction of a social development proves false precisely because the prediction changes the course of history. For example, the warnings earlier in this century that population growth would lead to mass starvation helped spur scientific breakthroughs in agricultural productivity that have since made it unlikely that the gloomy prophecy will come true.
CUTS
CUTS Centre for Competition, Investment and Economic Regulation, Status of Competition and Regulation in India, 2007. Hemant Agarwal (0911311)
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A competition policy and a regulatory regime have become very important in India since the reformed in 1991. Post 1991, Competition laws didnt achieve the fairness and efficiency they were aimed at. In most sectors, protection of public interest objectives rests with the law Regulatory regimes have been set up for natural monopolies (telecom, electricity) and network industries (where production patterns of one producer are linked to that of others, e.g. cement, steel)
CCI: Competition Commission of India Government wants to play the role of a facilitator and allow for more competition. But many govt policies are not in line with market principles: a) b) c) d) e) Operation of anti-dumping measures, inverted duty structure, etc Discrimination in favour of the public sector Intervention in pricing of several commodities like coal Rules and regulation like the Essential Commodities Act States making laws to favour local players
1. Competition Act, 2002 (amended in 2007) a) CA 07 handles cartels better b) Protects IPR (intellectual property rights) better 2. Sectoral Dimensions: a) Local Regulation Required: Problems need to be handled in a more distributed scale b) Telecommunication: need to be delinked from changing governments, has been partial towards particular business houses c) Electricity: politicians need to accept electricity can go to private hands, regulator has been grossly ineffective d) Healthcare : fee structure need to be monitored to prevent exploitation of patients, very little competition on local level 3. Way Forward: a) Political elite has to realize importance of competition b) A broad-based national competition policy is required rather sector based policies c) Predictability is needed in regulatory framework to attract investment d) Competition rules should be enforced e) Better pays and a restructuring in the regulatory bodies , presently made up of retired judges and bureaucrats, needed f) There is very little expertise in the country, capacity building needed to implement the changes.
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Interest Groups
The Logic
Mancur Olson The Logic [Chapter 3 in The Rise & Decline of Nations: Economic Growth, Stagflation, Social Rigidities, Yale University Press, 1982] pages 17-29.
Olson, Mancur (1965) The Logic of Collective Action. Cambridge: Harvard University Press. chapters 1-4, and 6. Author DV IV Mancur Olson The Logic of Collective Action Collective action (group organization to gain collective goods) Size of group Use of selective incentives Asymmetry of incentives/benefits (privileged groups) Summary : Olson gives a logic of collective action that describes how organization/collective action comes about in relation to the size and type of groups. Unlike individuals or small groups, large, latent groups will face collective action problems because freeriding is easy and collective goods are non-excludable. Thus, organization will not occur without individual, selective incentives. Using the labor union as an example for his logic, Olson shows how compulsory membership and/or coercion is necessary for large groups to overcome the collective action problem. He also applies his logic to explain the failure of Marxist theories of class conflict and illustrates how large press ure groups are capable of collective action because they provide other functions. Main Points The purpose of organization is to achieve common interest Collective good is public good non-excludable in a large group Exclusive and inclusive groups: market vs non-market situations. According to this division, the exclusivity of a group depends on its goals, not its makeup. Less bargaining or strategic interaction in inclusive groups because one persons holdout does not affect others much. A Taxonomy of Groups 1. Two types of non-market groups that correspond to oligopoly in market sit uations A. Privileged Group: small group in which benefits are unequally distributed, so privileged members have an incentive to bear the costs of organization. B. Intermediate Group: group in which no member has incentive large enough to insure organization, but the size of the group is large enough so that one persons default is unnoticeable. Interest is shared. 2. Non-market group that corresponds to atomistic competition A. Latent Groups: refers to groups which are so large that one members de fault is unnoticeable has no effect on group. Because free-riding is easy and collective goods non-
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excludable, these groups require separate and selective incentives to stimulate individuals to act in a group-oriented way. Barely even shared interest. large groups are different from small groups in terms of collective action The Labor Union and Economic Freedom 1. Large, latent union groups succeeded in action because of compulsory membership/support and coercive picket lines (as a form of coercion against economic incentives to defect) 2. The union is analogous to the state, public goods can only be provided through compulsion 3. Economic freedom: government provision of public, collective goods limits individuals economic freedom, while government-owned socialistic enterprises producing noncollective goods do not (paradox: socialism actually limits an individuals economic freedom less!) Marxist Theory of Class Conflict: Failure is explained through Olsons logic. If individuals are rational then class conflict should be less prominent because of organization/collective action problem. By-product and Special Interest Theories 1. By-product theory of large pressure groups: large pressure group lobbying is by-product of organizations that are organized for some other purpose. 2. Business/Special interests: privileged groups hence high levels of organization Questions A. What is common interest? Is it interest for the whole but can exclude interest of some indvls, or is it interest of all indvls and hence aggregated interest of whole? B. How does Olson explain existence of group leaders? Are these solely those whose private incentives are larger than the rest? Can these private incentives be intangible? (psychological)
Sharing the Spoils; group equity, development and democracy

Pranab Bardhan Sharing the Spoils; group equity, development and democracy [From Atul Kohli (ed.) The Success of Indias Democracy, Cambridge University Press, 2001] Kapil Makhija (0911314) Part I India is a hierarchical society and heterogeneous in composition. This results in greater drive for equity. As a result there is a frenzy for job reservations and caste quotas in India. But, since the structure is multi-layered, they may be crying about indignities from upper strata, but forget their behaviour towards the lower strata. For example, Jats in UP would worry about equity with upper castes, but forget their oppression of Chamars.
Part II The pluralistic culture of society has resulted in each group asking for greater share of the pie (sharing the spoils). Large part of public resources spent on implicit and explicit subsidies. All these subsidies, together with upwards revision of salary scale, and other factor results in huge fiscal deficit.
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According to a document submitted to Ministry of Finance in May 1997, budget-based subsidies of the central and state governments taken together amounted to Rs. 1.4 tril lion, which is 14.4 percent of GDP. States are unable to pay back the financial assistance provided by centre. Farmers get benefits in terms of fertiliser subsidies, small industries get protection against competition, all increasing the fiscal deficit. Interest groups ensure that reforms cannot take place in the Indian system. Little has been achieved in breaking the grip of the network of subsidies catering to dominant interest groups.
Part III Political parties favour quotas and reservations, resulting i n more protectionism and less efficiency, all in the name of intergroup equity. They dont realize that reservations once adopted are difficult to reverse. More stress should be on equality of opportunity instead of equality of outcome i.e. provide more training programs and preferential loans and scholarships. Public investment allocation in favour of uneconomical plants and unsustainable projects in backward areas has been supported in the name of regional equity.
Part IV Bureaucrats are transferred very regularly owing to their caste, especially on appointment of a lower caste chief minister, people of his/her caste are promoted, and those belonging to upper caste transferred. Politicians for many years used to direct managers of public financial institutions to relax their strict criteria in giving out loans to their favoured clients. o Inefficiency in public jobs is because politically powerful lowest grade employees have complete job security. Criminals join politics to ensure that they can neutralize the police. Any enquiry against the leaders is publicized as discrimination against their particular caste.
Part V No accountability in government institutions. Serious problem of absenteeism of salaried teachers in village public schools and doctors in rural public health clinics. The doctors and teachers are not answerable to the villagers, since the system is not sufficiently decentralized. Overhead costs of organizing resistance groups, hence poor are less organized at local level than at national level, where they can pool their organizing capacities.
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Decentralization can give rise to greater voice for poor, and hence greater accountability at local level.
Social Movements in Crisis

Rajeshwari Deshpande Social Movements in Crisis? [From Rajendra Vora an d Suhas Palshikar (eds.) Indian Democracy: Meanings and Practices, Sage Publications, 2004]
The reading tries to develop a sympathetic critique of the role of social movements in India. It offers tentative analyses of the contemporary crisis and discusses how the situational constraints and internal dynamics contributed to the present crisis. The major points in the reading are: Post Independence, social movements have been on a decline and have played a peripheral role in Indian politics. Review of social movements post independence: o Trade Union movement Working class politics dates back to colonial period industrial workers agitating against unjest woring conditions First Indian factories Act implemented by british in 1881 Communist led Kisan Sabhas in rural areas Communist mobilised urban insutrial working class Remained engulfed in economism. Unable to stand up to the expectations of leading a revolution on behalf of the poor. Remained a movement of a small section of the society. o State as a mediator Just after independence, the economic model that India accepted helped in stabilization of labour market in organized sector and Facilitated the growth of the trade union. Economic development heavily relied on growth of industrial sector. Policies resulted in increased jobs and bigger working class The state was interested in regulating industrial relations in order to patronize the emerging capitalist relations, benefitting the bourgeois Government implemented welfarist labour laws to protect working class Trade unions fought over economic issues Unable to develop independent agenda for workers Officially remained committed to labour welfare, however sided with employers in all major industrial disputes. All the political parties established their own unions. Industrial development in India happened at an uneven pace First 2 five year plans emphasised on industrial growth Organised sector workers pushed for aspirational demands which were unheard by state and employer 1974 railway workers strike, 1982 Mumbai strike, Emergency marked the period of industrial recession and decline of trade union movement. Agitation against the MNCs by white collar service secotr in 1980s As a result of changing economic plans, role of state as a mediator changed and i t no more favoured the working class. o Challenges of Informalization
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Liberalization geared up the process of informalization and casualization of the Indian workforce. Major of workers in informal sector. Most of the urban informal sector workers forced to be unemployed Resulted in scattered workplaces and temporary employment. Left could not associate itself with informal sector workers. Unable to expand the dimension of class politics to issues like caste, gender and communal questions. Reasons for failure. Agrarian Movements Struggle led by left were on a decline. Only naxalites are working among poor peasants and tribals. Agrarian sections highly stratified. Most of the struggles led by rich and middle sections. Land reforms programmes legitimised role of state as intermediary in reforming the existing land relationships. Lot of reforms, but partial implementation did not benefited the marginal and the small farmers much. Green revolution, further helped in consolidation of this group. Left couldnt focus on poor peasants and landless labourers The Naxalite movement Expresses unrest that emerged in the county during 1970. Political programme includes abortion of landlordism, redistribution of land through peasant committee, wage increase, distribution of governmental land, and control of forest resources and political mobilization of the peasants, dalits and tribals. Common problems Choice of politics of violence (alienated them from large section of society and made them an easy target of state) Could not deal with caste questions. Success among tribals based on assumption of homogeneity of tribal society which is not true in many situations and hence limited success. Could not wade through the more complicated relations of exploitation in mainstream civil society Farmers movement: A new phase Rich and well to do farmers dominated the agrarian politics. Main demands Higher subsidies for agricultural sector, remunerative prices, lowering of taxes and debt relief to the farmers. Due to populist appeal, the movement could attract poor peasants Upper agricultural strata major beneficiary. Never emphasized on redistribution of land, increase in wages. Only consistent demand - remunerative prices Initially neutral in political stance but gradual became more political. Possibility of increased participation of the lower social sections in democratic practices Anti caste politics Dalit Movements Initially led by RPI (Republican party of India) which faced continuous splits at organizational level since its inception. Engaged in politics over symbolic issues Dalit organization mainly active over issues of effective implementation of reservations and related educational matters. Reservation centered politics of the movement limited its potential and reach.
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In 1988, formation of dalit federation main demands: effective implementation of reservation policy and prevention of atrocities against dalits. Unable to go to the root of the problem. Emergence of OBCs Legal category developed by state, recognized later as a political and ideological category. Increased the participation of lower castes in politics Inadequate for anti-caste movements Permits the state to mould it for political purposes. Ex: recent inclusion of Jats Electoral politics mainly benefited the upper caste amongst OBCs. Womens movement Three Currents Very limited in scope inspite of its strong ideological intervention. 2nd most important movement post independence Taken shape in 3 levels post 1975 Environmental issues (chipko movement), agrarian struggles in Maharashtra, Bihar, etc. Work of women organizations affiliated to political parties, notably left political party. Autonomous organizations working on womens issues. Emerged as mainstream womens issue. Limited in scope due to: Initial concentration on issues of sexual harassment and violence, but was limited to urban centres. Ignored rural women, lower caste, manual labourers, and self employed. To relate to rural India, started working in areas like health and education. 2 consequences: o State had a possibility of influencing and co-opting by pumping resources o NGOs Non political character Inadequate understanding of womens situation. Misses the caste and class dimension of gender inequality No women constituency and hence apolitical. No political party has the political will to support womens cause Womens Bill Reservation as a tokenist gesture. Voluntary Sector Owed origin to Jayaprakash Narains call for total revolution and students movement. Flexible and open in nature Loose organizational network of the people. Middle class activism Worked among agricultural labourers, tribals, women and small villages over issues of wages, health, education, etc. at local level. Beginning of process of disjunction between political parties and social movement. Failure of state to intervene on behalf of dispossessed. State was condemned and delegitimized. Grassroot Movements Micro struggles. Became inevitable because of failure of macro level institutes. Led to the glorification of grass root movement as the only solution. Work failed to pose a challenge at the political level. Could not develop links with mainstream politics.
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Handout Summary
Could not intervene effectively with civil society as they operated at local level. Most of them transformed into NGOs. Could not further the radical agenda of the social movement. o National Alliance of peoples movement (NAPM) Alliance of many voluntary organizations. Share their opposition to the process of globalization. A network of such responses will help change the overall political system. Crisis of Social movement o Micro struggle has occupied the mobilization politics arena in last 2 decades. o Other social movements are on a decline. o Who are the people? Resorted to the category people to buildup dissent against estab lished political system Fail to address caste class injustices in their bid to address subtle experiences of injustice Shifting Support Bases o Issues Lack of cooperation and coordination among movements Overlapping characteristics of movements State and political parties co-opting without representing Problems o Construction of people problematic at many levels. Imagines local communities as autonomous, homogenized entities, which they are not. o Shifting support base o Disjunction from politics. o State and civil society relation Movement might side with the global capitalist forces. Movements have to take help from state in dealing with civil society injustices.
Social Capital
The Prosperous Community
Robert Putnam The Prosperous Community, The American Prosp ect, Vol. 4, No. 13, March 21, 1993. Ravi M V (0911337) General summary of the passage is Everyone would benefit if everyone cooperate with each other, In the absence of coordination and mutual commitment but everyone defects apologetically but rationall y confirming each others depressed expectations Analogous with the human capital that enhances individual productivity, social capital refers to social networks that facilitate coordination and cooperation. These social networks could be newspaper readership, soccer clubs, literary circles etc. These networks value solidarity, civic participation and integrity. These groups allow the democracy to flourish. Italian experiment verify the above statement, in regions where the social bodies were active the government proves remarkably successful, where as in areas where the engagement is social an d cultural associations is meagre, the government failed miserably.
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Also the active social groups seem to be a precondition for economic development. How does the social capital support good government and economic progress? The social groups foster the feeling of reciprocity, i.e. You do for me, I will do for u. A society that relies on reciprocity is better than distrustful society. In addition these bodies facilitate coordinate and communications among the members. Social capital is a resource whose supply increases rather than decreases through use and becomes depleted if not used. Social networks foster trust, lower transaction costs and speed information and in novation. Chinas extraordinary growth depends on the personnel connections to channelize savings and investment. Job searching is more efficient when they are embedded in social networks. Networks among the workers and entrepreneurs fuel ultra modern industries. Social capital approach can help us formulate new strategies for development. In the modern society lack of connections among its members can also have negative effects. Most poor Americans experience social and economic isolation which leads to j oblessness, inadequate education and poor health. That is two identical youths, the one unfortunate enough to live in a neighbourhood whose social capital has eroded is more likely to end up hooked booked or dead. Thus the social capital you can draw on helps to define who you are and thus to determine your fate. Research suggests that life chances of todays generation depend on the social capital resources of their ethnic group. Investments in physical capital, financial capital, human capital and social capital are complementary and not substitutes. Investments in jobs and education will be more effective if they are coupled with the reinvention of community associations. Social capital is a prerequisite and as well as a consequence of effective public policy. The importance of social capital is not limited to minority groups. Take public education, the private schools success depends on the involvement of parents and other communities in the process. Our political parties once connected to the community have not alienated from the grassroots. If we have to reform our democracy we should promote the social capital i.e. allowing space for religious organizations, choral societies. . Negative effects of social capital: Networks that serve some groups may obstruct others. Even with active social networks we need to worry about how community distributes the benefits. Before promoting the social capital, we need to weigh the costs as well as benefits. The social capital approach uncovers the new ways of combining private social infrastructure with public policies that work and in turn revitalize the stocks of social capital.
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The Market and the Polis

Deborah Stone. The Market and the Polis from Policy Paradox WW Norton, NY, 1997. R Umesh(0911324)
Definitions Polis, a Greek word for city- state conjures up an entity small enough to have very simple forms of organization, yet large enough to embody the elements of politics- hence a fitting name for the essential political society. A Market can be defined as a social system in which individuals pursue their own welfare by exchanging things with others whenever trades are mutually beneficial. Participants in the market are in competition with each other for scarce resources; each person tries to acquire things at th e least possible cost, and to convert raw materials into more valuable things that can be sold at the highest possible price. Basic features of the market model In the market model, individuals act only to maximize their own self - interest. Self- interest is not the same as selfish- they might include, for example, the well-being of family and friends. The competitive drive to maximize ones own welfare stimulates people to be very resourceful, creative, clever and productive, and ultimately raises the level of economic well-being of the society as a whole. Comparison between the Market and Polis Systems 1. Community- Markets start with individuals and assume no goals, preferences or intentions other than those held by the individuals. A model of the polis assumes both collective will and collective effort. A model of the polis must include a distinction between political community( a group of people who live under the same political rules and structure of governance and share status as citizens) and cultural community( group of people who share a culture and draw their identities from a common language, history and traditions) Membership in the community defines social, economic as well as political rights. Example of insurance. In polis money is pooled by the members but in market insurance is just a financial product one buys from another seller. 2. Public Interest- In a polis, there is public interest. Public interest could be individual interests held in common, things everyone wants for themselves or indivi dual goals for the community. They could also mean goals on which there is a consensus. Public interest is usually perceived as things which are good for the community as a community. The concept of public interest is to the Polis what self- interest is to the market. Public interest in a market society is the net result of all individuals pursuing their self-interest. While public interest in markets are filled in as an afterthought with side effects of other activities, it is well planned, forethought and made with conscious effort in a Polis Model.
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3. Commons Problem- Situations where self-interest and public interest work against each other are known as Commons Problems. There are 2 types of commons problems a. Actions with private benefits entail social cost- discharging industrial wastes into a lake b. Social benefits necessitate private sacrifices-maintaining a school system requires individual tax payments. In markets common problems are exceptions, in polis common problems are everything. 4. Influence- The gap between self-interest and public interest is bridged in the Polis by influence, cooperation and loyalty. Influence is inherent in communities. People are neither freewheeling nor freethinking. Our ideas about what we want and what choices we make are shaped by our education, persuasion and general processes of socialization. Influence sometimes becomes coercive. Bandwagon effect. Central elements of politics. 5. Cooperation- In the Polis, cooperation is as important as competition. This is true be cause politics involves seeking allies and organizing cooperation in order to compete with opponents. Cooperation is also essential to power. It is often a more effective form of subordination than coercion. In the ideal market, there is nothing but pure competition, which means no cooperation among either buyers or sellers. 6. Loyalty- In the ideal market, a buyer will switch suppliers in response to a price or quality change rather than stick with the previous supplier. In politics relationships involve gif ts, favors, support and future obligations. Political alliances bind people over time. In the market, people are buyers or sellers. In politics, they are friends or enemies. 7. Groups- In the polis model, groups are important in 3 waysa. People belong to institutions and organizations even when they are not formal members. Their opinions are shaped by organizations, and they depend on them to represent their interests b. Policy making is not only about solving public problems, but about how groups are formed, split and re-formed to achieve public purposes c. Groups are important because decisions of the polis are collective. When officials have sole authority they are influenced by opinion and pressure. 8. Information- In an ideal market, information is accurate, complete and available to everyone at no cost. In the polis, information is interpretive, incomplete and strategically withheld. Because politics is driven by how people interpret information, much political activity is an effort to control interpretations. Information is never fully and equally available to all participants in politics. Crucial information is very often deliberately kept secret. 9. Passion- In the market, economic resources are governed by the laws of matter. Resources are finite, scarce and consumed upon use. In a polis, passion feeds on itself. Like passion, political resources are often enlarged or enhanced through use, rather than diminished. Political skills and authority grow with use. In the polis, the whole is greater than the sum of
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its parts. Another law of passion is that things can mean (and therefore be) more than one thing at once. 10. Power- Power is a phenomenon of communities. Its purpose is always to subordinate individual self-interest to other interests. It operates through influence, cooperation and loyalty. It is based on the strategic control of information. It obeys the laws of passion rather than the laws of matter. Any model of society must specify its sources of energy, the force that drives the change. In the market model, change is driven by exchange, which in turn is motivated by the individual quest to improve ones own welfare. In the polis, change occurs through the interaction of mutually defining ideas and alliances. Ideas are the stuff of politics. People fight about ide as, fight for them and fight against them. Interaction between ideas and alliances is ever-changing and never-ending.
Go through page 33 of the reading. There is a table which summarizes all the basic difference between market and polis.
Introduction in ethnic conflicts and civic life

Ashutosh Varshney Introduction [In Ethnic Conflict & Civic Life] Ram Sevak (0911335)
In this section, the author talks about the link between the structure of civil society and ethnic/communal violence. Inter-communal networks can be of two types: associational forms such as reading clubs, sports clubs etc and quotidian (everyday) form . Civil society is a non-political but non-state forms of organization. As Horowitz argues, all conflicts based on ascriptive group identities such as race religion, tribe etc can be grouped under ethnic conflict. Contrast this with the narrowly used sense of race when discussing ethnic conflict. Ethnic conflict can have an economic base but it is not its defining feature . Ranked ethnic systems (ethic systems with a hierarchy such as caste) can merge ethnicity and economic class but unranked ethnic systems cannot (e.g. inter-racial relation in the US). So it is imperative to study ethnic peace to understand ethnic conflict. If we analyze Hindu-Muslim violence in India from 1950-1995, it is largely an urban phenomena and that too concentrated within specific region in a city. The preexisting local networks of civic engagement between the two communities act as the single most proximate cause for conflict. Thats why associational forms of engagement act as a bulwark of peace than everyday engagement. As regards the absence of riots in Indian villages although they dont have an associational form of engagement, the author argues that size reduces the effectiveness of everyday interaction and associations are only critical when village like intimacy in public life is not possible within conflicting groups. Thus a multiethnic society with few interconnections across ethnic boundaries is very vulnerable to ethnic violence. Politicians behavior depends on the settings of the institutions i.e. constitution of the country, power sharing agreements and structure of civic life in a conflict zone . Such institutional linkages
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Handout Summary
between politicians and the public were formed in India during Gandhian struggle for uniting Indians in 1920s. So genesis of some of these conflicts can be traced back to Independence struggle underlying historicity of ethnic strife in India.
Media
News Media & Nonmarket Issues
David Baron News Media & Nonmarket Issues, Business and its Environment, 3rd edition, Prentice Hall, 2000. Sandeep Nair(0911341) Introduction The news media plays an important role in society by providing information to the public about matters affecting peo ples lives and the society they live in. It also plays an important part by identifying non market issues and stimulating actions which affects their progress. Many companies dread media coverage of their non market issues. The essential role the news med ia plays in a democracy is accompanied by responsibility to provide the information in an accurate and an unbiased manner so that individuals can formulate their own conclusions. The role of the News Media in Non market Issues Media coverage can Alert the public, activists, interest groups and government officeholders to the non market issues. Raise concerns about the policies and practices of firms Provide information about the likely effects Reduce costs of non market action Facilitate a non market strategy by conveying information generated by an interest group. Represent certain interests and principles consistent with the news medias perception of its role in society
Message and their interpretation Because of the importance of the news media, firms and their managers must anticipate which issues will attract media coverage and how the media will treat them.
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Coverage and treatment provide inputs to which the reader and the viewers are exposed and on which the interest groups, politicians, firms and others condition their perceptions and actions. Those actions can themselves be newsworthy, attracting further coverage and giving the issue a life of its own. The messages provided by the news media are interpreted in a variety of ways depending the individuals prior information, beliefs and preferences. Their impact can be systematic and important. The message received by those in the non market environment can give rise to market and non market actions that shape the environment of business and affect the progress of issues through their life cycles. A Theory of News Media Coverage and Treatment Treatment can take several forms A straightforward presentation An interpretation of facts and events An exploration of potential significance Advocacy of a course of action
Intrinsic Audience Interest Predicting which issues the media will cover requires determining which issues are of intrinsic interest to the readers and viewers. Similarly, to predict the treatment of an issue requires determining what holds the attention of the audience. The principal predictions of the audience theory are 1. Coverage increases with the increase in audience interest 2. treatment will be chosen to appeal to and retain an audience
Societal Significance This reflects the news medias perception of the significance of an issue to society as a whole. It reflects the medias role in protecting democracy by providing the information the citizens need. It emphasizes issues which are important to the social fabric and the tension in that fabric. The news media has a special role in a democracy and is assigned or has assumed the duty of serving the
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peoples right to know. The greater the perceived societal significance, the more likely the treatment will be characterized by advocacy. Refer to Figure 3-2 in the book. Extending the theory The newsworthiness of issues extends the intrinsic audience interest and perceived societal significance dimensions. The more people to whom the issue matters and the more it matters to them, the more newsworthy is the story. It is also more newsworthy if it has a degree of immediacy or urgency it has a human interest dimension which the audience can identify with it involves a celebrity it contains controversy or conflict
In contrast, stories about ideas are often difficult to write about, especially in the visual media. The audience The issues audience also affects its treatment. Many non market issues, such as the opening of a foreign market are primarily of interest to those who want business information. When an audience is the broader public, news organizations beyond the business media will be attracted and journalists may be less knowledgeable about the issue. The cost of coverage News coverage is also a function of the costs of obtaining information and producing a story. Media is more likely to use stories from journalists already onsite as the marginal cost is lesser. Both the costs of obtaining information and budget pressures on most media organizations have forced them to rely increasingly on low cost sources of information such as interest groups, government etc. rather than developing the information first hand. Nature of the news media
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In the United States, news organizations are owned by for profit companies, so profit is a primary objective. News organizations are in a highly competitive industry. They compete not only against other companies in the same medium, but also across media. Competition has increased with the rise of the internet. The profession Media decisions are shaped in part by the people who chose careers in journalism. Journalists are often perceived to be more liberal and activist than the public in general. A widely shared perspective among journalists is that they are serving the public. As a profession, journalism is governed by standards enforced by the news media organizations and professional organizations. These require that a story be Accurate verify facts and ensure that the situation is portrayed correctly. Balance both sides are represented Fairness participants have an opportunity to present their views.
Journalists seek professional attainment and reward. A necessary condition is that a journalists work should be published or should have an impact. Does the news media treat issues selectively? The media may not cover all issues under the same criteria. Most issues are treated under controls and editorial standards. On some issues like pollution etc, the media adopts an advocacy approach. Bias and Accuracy Business criticism is due to a variety of reasons. 1. Few companies like their activities scrutinized 2. Critics of the company get an opportunity in the interests of balance 3. Media caters to anti business sentiments 4. Interviews edited to make the best, but not complete. 5. Always results in oversimplification, which may not be correct. Business interactions with the news media The need for information
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Many business issues are newsworthy, and frequently only the business has the information that can serve as the basis for a story. This provides firms with an opportunity to bui ld a relationship with the news organizations in which they provide the information needed in exchange for stories which will be fair and balanced. Media Strategies Six elements of effective media strategy The unusual is usual Emphasize the consistency of business and public interest Remember your audience Communicate through the press The medium is the message Establish credibility not friendship
Response and Vacuums On many issues, business prefers that no story appear. One strategy is not to comment to the media. But this can be risky when the story is going to appear anyway. Relationships with the Media Many firms develop relationships with the news media based on mutual respect and honest and forthright exchange. This is easier in the business press than in the general media. Media Interviews Because of the importance of the media in the development of non market issues, managers are frequently interviewed by the media and called on to speak to the public. Media training is customary in many firms, and a communications consulting industry has developed. Many firms provide guidelines for dealing with journalists. Anticipating issues When a non market issue can be anticipated, the theory of the news media can be used to assess whether the issue is likely to be covered, and if so, the type of treatment it is likely to receive. Normal interactions are with the business media and these can be predicted. However when the general media comes into the picture on issues of societal significance, the issue becomes m ore complex.
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When it can be anticipated, the firm has the opportunity to prepare. Preparation includes gathering relevant information about the issue and its context. Preparation also includes assessing the messages and the likely responses to them. Unanticipated events Because events such as environmental accidents can occur, firms should have a routine to follow in case of the breaking story. For serious matters the firms should have a crisis management plan. If the issue is to be confidential, be prepared for leaks later. Gather information as much as possible. Develop a strategy Implement it and speak in a single voice
Recourse in disputes with the media Private recourse The subjects of news coverage at times perceive stories to be incomplete, inaccurate or unfair. Actions taken can range from Writing to the editor to correct inaccuracies Initiating legal action Economic measures
Media organizations take actions to discipline their correspondents, editors and managers who violate ethics. They can be suspended, reassigned or fired. Recourse to the Law Libel Statements which are either written or broadcast Slander statements which are spoken A degree of privilege is provided to the media by the first amendment, which extends protection, but does not provide an absolute defense. For E.g. New York Times V/s Sullivan (1964) The rationale for the standard enunciated in Sullivan is that although individuals retain rights to privacy, they lose a degree of privateness when they participate in public activities . A relatively untested aspect of the law pertains to information on the internet. Such postings can be widely disseminated and could form the basis of a defamation lawsuit.
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Political Recourse New bills have been passed which are called the veggie -libel laws. They do not allow disparaging comments against certain vegetables. Other Laws Certain companies have adopted a new approach. They filed lawsuits challenging the means by which the news media obtained a story.
A Propaganda Model
Edward S. Herman & Noa m Chomsky A Propaganda Model [from Edward Herman & Noam Chomsky Manufacturing Consent: The Political Economy of the Mass Media] AV Naga Chaitanya (0911286) Introduction The authors claim that a systematic propaganda is at work in the United States. Busi ness, media and the government are the main players in their proposed propaganda model. It is difficult to spot this propaganda system at work since it is operated by private media houses in an environment where formal censorship is absent. Also, the media purportedly disguises the propaganda by periodically attacking and exposing business and government malfeasance and by portraying themselves as spokesmen for free speech and general community interest. The authors identify five essential ingredients in the propaganda model. They call these ingredients as filters that regulate the flow of information to the public. They claim that medias claim to objectivity is only valid within the constraints placed by these filters. Filter 1: Size, Ownership and Profit Orientation of the Mass Media Radical and working class press that emerged in Great Britain in the early 19 th century has been gradually snuffed out by 1. Libel laws and prosecutions enacted by the legislature of the time 2. Rise in investment required to operate the newspaper business (due to improvements in technology) Hence the first filter is size. You need to big money to enter the media business. The huge monetary interests of ownership act as a filter on the information disseminated by the media. There are 24 big media houses in the United States which act as the top tier of the media. Smaller media houses depend on this upper tier for content and news. These 24 companies are owned by quiet wealthy people. There are also patterns of cross ownership (Banks, institutional investors and corporations ex. GE have huge stakes in media houses). Cross ownership has been fuelled by rules limiting media concentration and control by non-media companies. Another structural relationship of importance is the media companies dependence on and ties with government. The radio TV companies all require government licenses and franchises and are thus
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potentially subject to government control or harassment. This technical dependency has been used as a club to discipline media. Media houses are also dependent on Government for general policy support (favourable tax laws etc.). Filter 2: The Advertising License to do Business The main source of funds for the print media is not sales. In fact the selling price of newspapers are more often than not less than their manufacturing and distribution costs. Media houses manage to under price their news papers through advertising. The television and radio media are completely funded by advertisers. Hence for media houses sell their audience/readers to advertisers. Hence media houses are interested in attracting audience; not just any audience but audience with buying power. Also, advertisers are in a position to influence television programming. In fact television networks have special departments to solicit potential advertisers and to explain how their programs serve the advertisers needs. Large corporate advertisers on television will rarely sponsor programs that engage in serious criticisms of corporate activities, such as environmental degradation, working of the military-industrial complex etc. Hence we see a dearth of serious programming and television and an increase in trivial and lightly entertaining programs.
Filter 3: Sourcing Mass-Media News The media need a steady, reliable flow of the raw material of news. They cannot to have reporters and cameras at all places at all times. Economics dictates that they concentrate on sources of information. The white house, the Pentagon, and the State Dept. are some of these sources. He nce media is implicitly dependent upon the govt. bodies for its news. Corporations and trade groups are also regular and credible purveyors of stories deemed to be credible by their status and prestige. Observe that news that does not emanate from credib le sources will require extra work in to establish its veracity. To consolidate their preeminent position as sources, government and business-news promoters go to great pains to make things easy for news organizations (think advance copies of speeches, p hotoop sessions etc.). In effect the large bureaucracies of the powerful subsidize the mass media, and gain special access by their contribution to reducing the medias costs of acquiring the raw materials of producing news. The media may feel obligated to carry extremely dubious stories and mute criticism in order not to offend their sources and disturb a close relationship. It is very difficult to call the authorities on which they depend as liars. Filter 4: Flak and the enforcers Flak refers to negative responses to a media statement or program. It may take the form of letters, telegrams, phone calls, petitions, lawsuits etc. Positions have to be defended within the organization and without, sometimes before legislatures and possibly even in courts. Adve rtisers may withdraw patronage. Television advertising is mainly of consumer goods that are readily subject to organized boycott.
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The ability to produce flak and especially flak that is costly and threatening is related to power. The Media Institute, the Center for Media and Public Affairs and Accuracy in Media may be regarded as institutions organized for the specific purpose of producing flak. These institutions more often than not are funded by corporate-wealthy patrons. Although the flak machines steadily attack the mass media, the media treat them well. They receive respectful attention, and their propagandistic role and links to a larger corporate program are rarely mentioned or analyzed. The producers of flak on the other hand add to one anothers str ength and reinforce the command of political authority in its news-management activities. Filter 5: Anticommunism as a control mechanism Communism as the ultimate evil has always been the specter haunting property owners, as it threatens the very root of their class position and superior status. The Soviet, Chinese and Cuban revolutions were traumas to Western elites. Anticommunism helps mobilize the populace against an enemy, and because the concept is fuzzy it can be used against anybody advocating polici es that threaten property interests or support accommodation with Communist states and radicalism. It serves as a political control mechanism. The anti-Communist control mechanism reaches through the system to exercise a profound influence on the mass media. In normal times as well as in periods of Red scares, issues tend to be framed in terms of a dichotomized world of Communist and anti -Communist power, with gains and losses allocated to contesting sides, and rooting for our side considered an entirely legitimate news practice. The ideology and religion of anticommunism is a potent filter. Conclusion The five filters narrow the range of news that passes throught the gates, and even more sharply limit what can become big news, subject to sustained news campaigns. By definition, news from primary establishment sources meets one major filter requirement and is readily accommodated by the mass media. Conversely, propaganda campaigns will not be mobilized where victimization, even though massive, sustained, and dramatic, fails to meet the test of utility to elite interests. Thus, while the focus on Cambodia in the Pol Pot era (and thereafter) was exceedingly serviceable, as Cambodia had fallen to the Communists and useful lessons could be drawn by attention to their victims, the numerous victims of the U.S. bombing before the Communist takeover were scrupulously ignored by the U.S. elite press. In sum, a propaganda approach to media coverage suggests a systematic and highly political dichotomization in news coverage based on serviceability to important domestic power interests. This should be observable in dichotomized choices of story and in the volume and quality of coverage... such dichotomization in the mass media is massive and systematic: not only are cho ices for publicity and suppression comprehensible in terms of system advantage, but the modes of handling favored and inconvenient materials (placement, tone, context, fullness of treatment) differ in ways that serve political ends.
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Media and Governance

Mukul Sharma Media and Governance Seminar [From www.india-seminar.com] Rajeev Kumar (0911333)
Role of Media in Governance: Democracy implies participative governance, and it is the media that informs people about various problems of society, which makes those wielding power on their behalf answerable to them. The actions of the government and the state, and the efforts of competing parties and interests to exercise political power should be underpinned and legitimized by critical scrutiny and informed debate facilitated by the institutions of the media. Media can shape power and participation in society in negative ways, by obscuring the motives and interests behind political decisions, or in positive ways, by promoting the involvement of people in those decisions. In this respect the media and governance equation becomes important. Indian Media: There are at least three major media traditions in modern India that of a diverse, pluralistic and relatively independent press; of the manipulated-misused, statecontrolled radio and television; and that of many autonomous, small media outfits of various subaltern groups and their organizations. With television expanding its base among the masses and aided by economic liberalization, particularly from the 1990s, the onslaught from the skies, in the form of international satellite-distributed television, radically transformed the countrys broadcasting environment. Globalization has further had a profound effect on Indias media, particularly the growth of Internet and on-line media. While e-mail still accounts for the majority of Internet usage in India, Internet is fast becoming a means for political communication as well. Many Indian newspapers have gone on-line. The Indian Army web-site gives its version of events in Jammu and Kashmir. The Bharatiya Janata Party (BJP) set up Indias first party website during the 1998 elections. Current State of affairs: State control over television and radio, the role of multinationals and big corporate houses and bourgeois monopoly over print media has meant that media has often remained inaccessible to the vast majority of the poor and the marginalized. Overwhelming commercial interests and monopolies of a few affluent individuals and business houses are not good for democracy. The media, under monopoly conditions, does not provide a wide range of interpretive frameworks that are important for the well being of democracies. It cannot be denied that both media and governance in India suffer from serious problems, which at times even feed into each other. Suspension of civil liberties, excessive
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militarization, communal assertions, and homogenizing tendencies has too often spelled doom for Indian democracy. In this context it is imperative that media becomes more sensitive on issues of democratic governance, peoples struggles against social injustice and inequality and so on. Its commitment towards democratic norms and values in its own governance system, structure and function is a must. Role of the society: The role of peoples organizations, social movements, voluntary organizations and other civil society formations in monitoring the functioning of media and making it more people centred is important especially in light of the fact that autonomous organizations within media like those of journalists and workers, have not only become weak but they also severely lack in their ability to raise critical issues pertaining to media governance and its functioning. Positive Role of the Media: The news media plays a decisive role in establishing a discursive space, one framed by the state and economic domains on either side, for public deliberations over social issues. The formative influence of the news on popular attitudes is accentuated by conceiving of the news audience as citizens engaged in public dialogue. If we want to define various developments in the particular context of governance, and governance that means something for a majority of the poor, the struggling people, then we must first realize that the media, in all its varied forms, has opened up the potential for new forms of participation. People are discovering ways to think about themselves and to participate in governance that would have perhaps been unthinkable a generation before. Their access to information and accessibility of information has both increased. Thus the dalits, women and other marginalized sections of the society are also using the media to make their voices heard, to make democracy somewhat more real. It is also amazing that in spite of variations and complexities of opinions, by and large the overall thrust of news-gathering and dissemination is to propagate and promote democracy. Media in India depends on the central impulses and aspirations of democratic governance. Relatively Independent: India has not had an unreported famine since independence, and the media, especially newspapers, and opposition political parties have played an important role in this. China on the other hand, went through a more-or-less unreported famine during the Great Leap Forward of 1959-61. This experience highlights the truth that in the Indian context, there exists a relatively independent and plural space I n the media that can perform valuable democratic functions and take on progressive roles. Need of the Hour: Over the years the corporate sector has developed its own press and channels. The political parties have their own newspapers. The governments in this country have also promoted their own medium of mass communication. But the voluntary organizations, groups engaged in movements, associations of the oppressed castes and the
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citizens engaged in promoting alternative politics which have grown manifold in the postindependence era in terms of its sheer number and the area of operation, have not been able to develop their own press or television channels with a mass reach and sound credentials. It may be noted that different civil society formations have developed and are running their own medium of communications, like small magazines or newsletters. But these do not have an impact on a macro level and have not been able to develop a professional form. The challenge to develop a reliable TV channel, a TV programme, a radio programme or at least a magazine is before all those who are engaged in various ways to promote and support alternative movements, alternative social groups and alternative models of development. While it is true that a truly public media is essential for a live democracy, media is only one of many institutions and practices of democratic life. No single institution can by itself bear the burden of furnishing democracy. Indeed, such centralization would be profoundly anti democratic. For a peoples democracy, peoples participation, panchayats, local gover nance, schools, civil liberties, forms of work life, freedom of faith and worship may be placed above the media. Civil society needs a variegated array of institutions and necessities sanitation, electricity, water, neighbourhoods, libraries, rule of law and above all a basic level of security and welfare. An informative and critical media is a necessary condition for democracy but not a sufficient one. Democracy can exist only when interwoven with the human and material condition of life.
Caste matters in the Indian media

Siddharth Varadarajan Caste matters in the Indian media, The Hindu, 3 June 2006. Available at: http://www.thehindu.com/2006/06/03/stories/2006060301841000.htm Kapil Makhija (0911314) Politics about caste plagues media as much, if not more, as it does the society. The article elaborates this with inhumanly treatment meted out to SC students in UCMS (University College of Medical Sciences). The media gave a lot of coverage to anti-reservation protests, but hardly any voice to proreservation protests. Whatever coverage has been about reservations, it has always been projected in the negative light, as a compromise of meritocracy. One instance of this bias is when a section of doctors sought to protest against higher fees imposed on poor patients, they were warned of dire consequences. Under a High court order, AIIMS premises cannot be used for protests, but anti -reservation protests were supported by one and all openly on the same premises. Not a single accredited Dalit journalist in Delhi. Number of accredited OBC journalists in Delhi less than 10. No tribal journalists in Chhatisgarh.
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Better caste representation in media would ensure equal coverage of different sections of society, instead of having a bias towards pro-forward caste news coverage. It would help broad-base the journalism and make it more authentic and professional. Media houses should think about starting internships and training programs for Dalit, Tribal, Muslims, and OBC students.
Sense Making by the Public

Equity, Symbols, Numbers, Rights
Deborah Stone. Equity, Symbols, Numbers, Rights from Policy Paradox WW Norton, NY, 1997. Introduction: The author analyses the importance of Symbolic Representation in the definition of Policy Problems. She is of the view that all Policy Problems are defined with words; therefore the manner in which these words are used symbolically to represent an idea can determine how the policy problem is conveyed to the public. This strategy does not necessarily imply conspiracy or manipulation; by conveying right and wrong, good and bad it becomes a fundamental instrument in the struggle over pubic policy. Symbols: Anything that stands for something else; Meaning depends on how people interpret, use or respond to it: hence collectively created
How are Symbols political devices? A good symbolic device works to capture the imagination, shapes our perceptions and suspends scepticism (at least temporarily) Therefore, they are means of influence and control. Four Aspects of Symbolic Representation: Narrative Stories Synecdoche Metaphors Ambiguity
I .Narrative Stories Narratives use many literary and rhetorical devices to lead the public to a course of action Have heroes and villains, problems and solutions, tensions and resolutions. Provide explanations of how the world works
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They are of two types: Stories of Decline :There is dramatic tension drawn from the assumption (stated or implicit) that in the beginning things were good, then it got bad, now its a intolerable; usually ends with a prediction of crisis and a proposal on how to avert it. Foster anxiety and despair Eg.Poverty rates are rising, environmental quality is worse etc. Stories of decline have two variations: Story of stymied progress: in the beginning things were terrible, then got better thanks to someone, but now someone else is interfering therefore, terrible again. eg.In 1970s & 1980s the American Medical Association, while fighting Govt.cost containment efforts reminded the public of days of plague, tuberculosis etc and warned that govt interference would undo all the progress. Story of progress-is only an- illusion: Eg.Child abuse is not on the rise, it only appears to have increased because there is more public awareness, legislation etc. Hence Progress/Improvement is only an illusion.
Story of Control : Moves the public from the realm of fate to the realm of control ,alleges that what was believed to have been random or natural can be changed through a human agency, that there is a choice, thus invoking the support of the public; Offer Hope Has two variations: Conspiracy Story: Shows that things were in our control, only few knew it and concealed it from the rest.eg.Ralph Naders crusade against auto makers to improve the safety of the cars, proved that accidents could be controllable Blame the victim story: Locates control in the people who suffer the problem. Eg. Workers suffer from occupational injuries because they refuse to wear protective gear
II Synecdoche A synecdoche is a figure of speech where a part is used to represent the whole. A small part of the policy problem is used to represent the whole ;politicians or interest groups choose one outlandish incident to represent the universe of cases.
For Eg.Wisconsin,Divorce reform law : Presumed there should be equal division of property upon divorce because the woman had spent years as a housewife and mother and would therefore not receive any economic assets in settlement .This diplaced homemaker perspective that dominated public thinking did not account for a)women who were home makers and income earners , and b)women who had brought home substantial assets to the marri age, and would therefore be entitled to more than the equal share of the assets.
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III Metaphor A likeness is asserted between one kind of policy problem and another, pervasive in policy language. eg. We live on spaceship earth- subtly implies a fragile co-existence. Common metaphors in politics include : Living Organisms: E.g. Communities/Neighbourhoods have a life of their own. Often used in the context of resisting change, upsetting a natural balance etc Natural laws: Laws that govern the social world, divide society into rulers and the ruled etc Robert Michaels : Iron Law of Oligarchy : All organisations inevitably evolve towards the concentration of power among a few leaders. George Stigler :Law of Public Income Redistribution : Any attempt to redistribute toward the poor ultimately takes the money away from them and redistributes it in the middle classes Albert Hirschman:Futility Thesis : Impossibility of human control Charles Murray : Law of Unintended Rewards: Helping people who have problems(illness,poverty)actually rewards them for being in that condition and creates an incentive to stay that way.
Other metaphors used: machines, tools, containers, disease and war. IV.Ambiguity The ability of statements, events and experiences to have more than one meaning. Ambiguity is the glue of politics, enables coalition and compromise. It allows people to agree on laws and policies because they can read different meanings into the words, allows policy makers to placate both sides in a conflict Eg.The phrase Defending the countrys interests has different connotation for the countrys judiciary, legislature and the citizens. However invoking this phrase is a good way of getting everyone to agree on a policy.
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Environment
Environmentalism: Ideology, Action, and Movements
Harper Environmentalism: Ideology, Action, and Movements
The Truth about the Environment

Bjorn Lomborg The Truth about the Environment The Economist, August 2, 2001. Chayan Mukhopadhyay (0911302) The truth about the environment-the economist Environmentalists say:1. 2. 3. 4. Natural resources running out Population ever growing and less to eat Species becoming extinct; forests disappearing Air and water getting more polluted
Facts: 1. Only 0.7% of species expected to disappear in the next 50 yrs 2. Acc to UN, agricultural production in the developing world has increased by 52% per person since 1961 3. Malthus said population growth will be exponential and many it will bring more land into cultivation. He was wrong. As people grow healthier and richer, they have smaller families; growth rate now less than in 1960s 4. Threat of biodiversity loss exaggerated; species are more resilient than expected. E.g 99% forests destroyed in Puerto Rico, but only 7 of 60 species of birds became extinct 5. Air pollution diminishes as society becomes rich enough to concentrate on the environment. e.g London:- air pollution today-cleaner than it has ever been since 1585 reasons for people thinking the problems to be more serious than they are: 1. Environmentalists have the nature of lobbying just like other groups 2. Media 3. Poor individual perception What it means for us:- not to get distracted by the fear of largely imaginary environmental problems which may lead to diverting energy from dealing with more serious ones.
A Global Marshall Plan

Al Gore A Global Marshall Plan Earth in the Balance Abhishek Humbad (0911312)
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Environmental crisis is a global problem Need to collectively fight Participation required across all countries, In order to counter this threat we need collaboration never before seen in history Something similar but smaller which happened in history is the Marshall Plan or the European Recovery Program post World War-2 We need a Global Marshall plan to counter this environmental crisis based on Concepts of democracy, free markets and global civilization are globally accepted and followed, same must be applied to the environmental crisis Global Marshall plan must be an inclusive system with equal weightage and involvement of Africa and Latin America New plan will require the wealthy nations to allocate money for transferring environmentally helpful technologies to Third World Need for international agreements amongst countries to take up action All countries must share the burden Crisis can be solved by attaining 5 strategic goals o Stabilizing world population o Development of environmentally appropriate technologies in energy, transportation etc. o Accounting mechanisms for environmental and ecological impact o International agreements for cap on emissions o Educating world citizens on the scale and urgency of the environmental crisis
Green and Competitive: Ending the Stalemate

M.E. Porter and Claas van der Linde Green and Competitive: Ending the Stalemate Harvard Business Review, September-October 1995.
Business Strategies for Climate Change

Enkvist, Naucler and Oppenheim Business Strategies for Climate Change McKinsey Quarterly, 2008, No. 2. Sunil Kumar (0911348) The shift to a low-carbon economy is already under way and that business must get ready for it, especially in the energy, transport and heavy industry. To meet the goal of reducing global greenhouse gas emissions, economic growth must be decoupled from emission growth. Three related developments provide the starting point for the analysis of a low -carbon landscape and for any strategic response: 1) Optimizing current assets and products There will be efforts to optimize the carbon efficiency of existing assets and products: infrastructure (buildings, power stations), supply chains and finished good (automobiles, TVs, PCs). This optimization will involve measures to improve energy efficiency, as well as a
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shift to less carbon-intensive sources of power such as solar, wind, nuclear and geothermal. Corporate leaders should consider the following ways to benefit from the shift: a) Reduce costs through carbon-efficient operations Many companies in most sectors have profitable opportunities to save money by cutting energy consumption and greenhouse emissions. Reducing emissions will be particularly profitable when companies can receive carbon credits, which can be sold in the EUs Emission Trading Scheme, for the reduction. A simple starting point for any company is to improve its internal energy efficiency and to use less carbon-intensive fuels. Reconfiguring production can be an effective lever in heavy industry. One example is to reuse heat from manufacturing processes to generate electricity or to heat later stages of production. Similarly, financial companies can save energy and cut costs by reconfiguring data centers-removing redundant applications and installing new servers to improve heating efficiency. Switching of lights and machines when not in use could also help. Another way is to design products like computers and cars that are made from more carbon-efficient raw materials and consume less energy and emit lower levels of greenhouse gases in operation. b) Reposition the portfolio Companies in energy and heavy industry can also reap strategic advantages by repositioning their asset portfolios. They could sell plants likely to be less competitive if carbon regulation is introduced or reinforced. And they could buy assets that will benefit from public-policy actions. And they could shift the mix of their investments toward less carbon-intensive plants and technologies. c) Capture profit in carbon-trading markets The EU Emission Trading Scheme and similar regulatory mechanisms that could be established elsewhere are ideal for banks and other capital traders that understand what drives carbon prices and how these markets could de velop. Though the total value of the emission rights is about $40 billion a year, only a fraction of that is traded now but it is a growing fraction. 2) Building new low-carbon businesses There will be major moves to develop radically more effective low-carbon solutions for new infrastructure. Emissions can usually be reduced at lower cost by building new houses, factories or cars than by retrofitting existing assets. The need to decouple emissions from economic growth will reinvent industries. In forestry and bioenergy, for example, a major new value chain seems likely to appear around the large-scale supply of biomass to power plants. Power plants and property owners could form new alliances to generate distributed power. 3) Shaping the regulatory landscape For many industries, huge value is at stake in the regulatory arena. The precise design of emission-trading schemes can have a great bearing on profits. Mandates and subsidies will be decisive for the commercial viability of solar power and many other emergin g green technologies. Companies need to work closely with regulators to ensure, for instance, that the rules dont unintentionally shift production away from relatively carbon efficient plants in regions with high carbon costs to higher-emitting plants in geographies with lighter regulation. There are several ways companies can influence the regulatory environment: a) Assess the value at stake and develop a stance to regulation
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The regulatory interests of companies within an industry vary considerably, depending on issues such as the carbon intensity of their assets and products, their technological capabilities, their market shares indifferent segments and they geographies where they operate. Figuring out what position to take in each area of regulation-and integrating these different stances into a coherent and credible argument- are prerequisites for successful regulatory management. b) Leverage the advantages of incumbent or attacker position Incumbents have an opportunity to build strong positions by amassing emission permits as carbon markets develop. Attackers, by contrast, typically have the benefit of a newer, lower-carbon asset base. c) Engage regulator at many levels Businesses have a lot to gain from participating in a sophisticated process of engagement, using partnerships and alliances to support their arguments, and influencing policy makers both through direct dialogue and through efforts to shape public opinion. To succeed, most companies will need to strengthen the regulatory organization and raise the discussion to the level of senior management.
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BUSINESS, GOVERNMENT & STUDIES HANDOUT SUMMARIES

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