Home > Business-Economy > The “tug-of-war” strategy: Answer to our economic woes

The “tug-of-war” strategy: Answer to our economic woes

Having read myriad articles on the federal investigations into the financial crisis… I thought that this was it! The virus was in the financial system and now that it is being cleaned, we could expect a sound and reliable foundation for the globalized economy.

However, the recent gulf oil spill has spoiled my party… no longer it is just any other virus that was creeping the economy, it seems to be a multi-headed medussa… throwing up skeletons from every damn part of the business world. Today, it is BP… and who knows, maybe, there’s another economic (in combination with a mix of environmental, social, political) disaster waiting to happen.

That made me question on what could be a more fool-proof approach to preempt such mishaps. Something that Warren Buffett once said a few months ago… crossed my mind. He’d said that if he is to go for some acquisition, he’d rather hire two i-banks instead of one… with one pitching for the acquisition while the other being hired to pitch against the acquisition. That ways, the business’ best interests worth billions can be safeguarded at a cost of a few millions.

And if we draw a parallel in context of the BP mess, the same issue seems to have reared its ugly head in a different dimension altogether. There is this MMS (Minerals Management Service) that was hired to promote oil exploration and at the same time, regulate the same companies that it provided incentives to for doing oil business. What a paradox!!!!!

This is where I think, my “tug-of-war” strategy could work… all that any government needs to do is… if oil exploration is on top of its ecomomic agenda, then it should have two bodies instituted to manage the whole oil exploration business…
– one to regulate the market/business by putting in the policies, guidelines and then enforcing it with no advantage in the success of companies they regulate
– second to promote and support the companies to do business in the economic eco-system and achieve the economic expectations that the government has from this field

Obviously, more incentive has to be offered to the first arm – the regulator – to ensure that they don’t buckle under the pressure of politics, money or business might. The second arm is definitely (you gotta be joking if you disagree with me on this) going to be taken care of by the businesses.

Eventually, the government would be able to see the net impact… to assess on the fair value each initiative provides to the overall ecomomic objectives of the country.

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