Kingfisher Airlines chairman Vijay Mallya is in trouble. His airline awaits an emergency rescue. Kingfisher Airline suffered a loss of Rs 1,027 crore in 2010-11 and has a mounting debt of Rs 7,057.08 crores. With banks reluctant to give more cash to Kingfisher Airlines, Vijay Mallya has turned to the government.
Civil Aviation minister Vayalar Ravi has been quick to make a public pitch to bailout the debt-ridden company. "I will meet the Prime Minister on his return to the country," he told the Indian Express. "I will also talk to the Finance Minister so that some assistance from the lead banks is granted. Closing down the flights affects the travelling public".
Ironically, in the past one month more than a hundred farmers have committed suicide in Andhra Pradesh, Vidharba and Kerala. All these farmers took the fatal route to escape the humiliation that comes along with mounting indebtedness. According to the National Crime Records Bureau 15,964 farmers committed suicide in 2010 alone. Put together, more than 250,000 farmers have taken their own lives during the past 15 years. Growing indebtedness had pushed them to the brink.
I haven't seen any urgency on the part of the successive governments or the policy planners and mainline economists to provide a bailout package to the beleaguered farmers. I don't understand why the serial death dance in the countryside does not evoke any reaction while all hell breaks loose when a big company goes bankrupt. Aren't the poor farmers human beings? Why is that they don't need even a word of sympathy whereas all aviation experts/planners and economists are making a strong pitch for bailing out a debt-ridden airline?
Well, George Orwell was dead right. All animals are equal, but some are more equal than others.
This brings me to the fundamental question. Economic reforms have been built on the need to privatise the industry. The economic justification for privatisation is that it ushers in efficiency. The underlying principle is that while efficiency has to be appreciated, the inefficient ones are left behind and need to be dumped. The rules of the game are clearly laid out. In a competitive environment, inefficient firms bow out. Agreed, than why do we want to change the rules of the game? Why do we want to bailout a bankrupt company? Why shouldn't it be allowed to die?
I see a number of experts on the TV channels making a strong plea to bailout the company. These experts of course are all beneficiary of a system that keeps inefficient industries floating with the help of public money. This is what happened when the world witnessed economic collapse in 2009. The inefficient and corrupt banks were rewarded with bailout packages, and the top executives who should have gone to the jail instead received bountiful bonuses. Market economy was made to survive with public money.
More than US $ 20 trillion of public money was pumped in to keep economic liberalisation alive. And this tells us that market reforms or market economy cannot sustain without public money. All it does, and that too very cleverly, is to hoodwink us to believe that capitalism is the sure path to economic growth. In reality, all it does is to allow for 'privatisation of profits, and socialisation of costs'. The rich become richer, and the poor are left to pick up the socio-economic as well as the environmental costs.
Aren't mainline economists therefore liars? They go on singing virtues of a failed and flawed economic model? Why don't they muster courage to accept the underlying principles of economic reforms? Well, the answer is obvious. They too are beneficiaries of the same flawed economic model.
Kingfisher Airline should be allowed to die a natural death. Unless we do so we will never be able to clean the rot in the system. We will go on supporting inefficiency with bailouts. What we need, and need desperately, is to send a strong message that inefficiency can NEVER be appreciated. Otherwise, we will continue to ensure that the big companies never collapse. The bigger the company the bigger would be the tax-payers support in the form of a bailout package.
The government cannot be allowed to run a charitable hospital for the ailing private companies. Let them strictly follow the rules of the game. Only the fittest survives, and the rest need to be dumped in the dustbin.