Should Ratan Tata advise Mukesh Ambani about how to use his wealth?

Should Ratan Tata advise Mukesh Ambani about how to use his wealth?

A couple of days ago famous industrialist Ratan Tata commented about the lavish life style of another billionaire business tycoon Mukesh Ambani quoting his 27 storied Mumbai house viz., Antilla. Tata said that Mukesh Ambani's house Antilla represents the rich Indian's lack of empathy for the poor. His remarks: "The person who lives in there should be concerned about what he sees around him and [asking] can he make a difference. If he is not, then it's sad because this country needs people to allocate some of their enormous wealth to finding ways of mitigating the hardship that people have." 

Is Ratan Tata right in his remarks or is he misguided in his judgements? Is he aware about the role of an entrepreneur in an economy or is he ignorant of this basic economic fact? Or is his remarks has some underlying assumptions which make those remarks perfectly apt for Mukesh's lifestyle? Let me deal with these questions one by one. I take two scenarios to carry out my analysis. In first scenario we assume that Mukesh Ambani is an honest entrepreneur and his profit comes from the market competition. In second scenario we assume that, Mukesh is not an honest entrepreneur and his profit comes from his business ties with government officials and his manipulation of the system of State. We see the implications of Ratan Tata's remarks under both these scenarios.

Scene 1: Mukesh is an honest entrepreneur

I first make an assertion and then go onto prove it. If Mukesh is an honest entrepreneur then his profit - which he earned in the market competition - is absolutely legitimate, and if he don't desire to do a philanthropist work then that is his voluntary choice. Ratan Tata has no right whatsoever to advise Mukesh about allocating his honestly hard earned wealth amongst the poor people or to comment on his lavish lifestyle.

As Ludwig von Mises explained, the only way in which an entrepreneur can make profit in the market competition is by serving and fulfilling the most urgent wants of his customers in the best possible way, and that best possible way is of providing top quality goods at the lowest possible price. Only those entrepreneurs succeed and make profit in the market process who can ascertain and fulfill the subjective wants of customers in the best way compared to his counterparts. 

By producing and selling top quality goods at a lowest possible price successful entrepreneurs allow even the very poor people to buy his products. By allowing them to buy his products he lifts their standard of living; he lifts them out of their poverty even without raising their nominal meager income. That happens because with the falling prices in the market with the same amount of nominal income people can now buy more goods and services i.e., their real income rises. And no sane person will deny that this is the real way of increasing prosperity in the society; this is the true way of eliminating poverty and lifting the standard of living of millions of poor people. 

Philanthropy, about which Ratan Tata is advising Mukesh, will only help poor people in a very short run i.e., for the urgent immediate consumption purposes. Such help to poor people will actually harm them in the long run by making them dependent on such easy free money. It will not cultivate any habit of hard work and independent living in those people. Redistributing the income will only exacerbate the problem of poverty because human nature is such that most people will always prefer the free goods. Such allocation of rich peoples' income will make everyone of us poor too because rich people play an important role of providing essential savings for the economy. And without savings it is impossible to sustain a labor population in present time which is involved in production of intermediate capital goods. And without capital goods it is impossible to increase the future production of final consumption goods, and without that progress (so-called growth) is not possible. Capitalist class - which includes people coming from all strata of society, and not just rich - plays a pivotal role of supplying this saving. If they are forced to allocate their saving to poor people, who will mostly use it for immediate consumption, then society and economy cannot progress and without progress everyone of us will be poor one day for sure.

And people should not forget another vital economic truth that, honest entrepreneur do not become rich by exploiting the public, but they are made rich by their consumers i.e., the same public. Consumers voluntarily buy the products sold by such sellers because they prefer their products over other sellers. And in this process they give their portion of income to these entrepreneurs making them rich in turn. Profit is a signal that the businessman is fulfilling the most urgent wants of his consumers in a best possible way, and that's why he is rich. On the other hand those entrepreneurs who make losses are not fulfilling consumers' wants properly and so they remain poor in turn by going broke! (to deeply understand the beautiful system of profit & loss I will advise my readers to read Mises' wonderful book, Profit and Loss).     

 

So, if Mukesh is an honest entrepreneur then he has all the rights to keep and use his profit in whatever way he wants to. 

Scene 2: Mukesh is a dishonest entrepreneur

But, if Mukesh Ambani is a dishonest entrepreneur and his profit comes solely from his friendships with the government bureaucrats and politicians then he has no right whatsoever on his wealth. Profit generated by such dishonest political maneuvering is immoral. In a system of government such businessmen are working not to serve their consumers but only to serve the politicians and bureaucrats who help them in restricting the market competition. They actively lobby government so to establish their monopolies in the market. Through these monopolies then they fleece the consumers. And because their profit depends on exploiting the political system they don't care about their consumers. In fact they go to any length to harm their consumers for making such illegitimate and immoral profits. 

This type of system is historically known as 'fascism' and sadly in today's world most of the businessmen, especially the big business houses are making their fat profits by this way only.

If Mukesh Ambani (also Ratan Tata and all others) is doing his business in cahoot with the government officials then his profit is illegitimate. If one day India becomes truly a free country then he should be stripped of his illegal profits (property) and should be convicted and punished for his crimes against the people. He and all such dishonest business tycoons should be incarcerated, may be hanged.       

Conclusion

Looking at these economic facts, if Tata and Mukesh both are honest businessmen and they really want to help people of this country then instead of  allocating their profit to the poor people they should use that capital in producing top quality goods at the lowest possible price. They should try to provide as many economic goods as possible to people of India through market competition. Tata and Mukesh both can profit by serving the needs of poor people. There exists a thriving market even in remotest rural poor areas of the world as C. K. Prahalad has shown. All capable entrepreneurs (existing and new ones) should provide top quality private schools, hospitals, private roads, electricity, water works, sanitation, home etc. goods in these areas at the lowest possible price. That will be the best possible moral way of making a difference in poor peoples' lives; that is the only way in which these entrepreneurs can help the poor in mitigating their hardships. Allocation/redistribution of wealth will only result in misery for all of us.   

DEEDS

Speaking of art and art galleries, Anupam Kher hosted curator Vickram Sethi's art exhibition `Have a Heart', organised by the NGO Deeds at Out of the Blue in Khar. Kher must have been trying to be clever and make people smile when he said he was going to personally borrow some money from his driver to make the first contribution, but certainly he had his heart in the right place. What made this event special was a dance performance by 12 hearing impaired children from Vikas Vidyalaya based on popular film songs, followed by a bhajan rendered by the children.
The idea was to disprove the myth that the hearing impaired cannot dance or sing in rhythm. Deeds plans to build a hostel at Dehradun for at least 100 hearing impaired students. The NGO also plans to set up 40 vocational centres, upgrade teaching methods in schools for the hearing impaired and work with Impact India Foundation to reach out to one million children in Maharashtra.

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HAP

the HAP 2007 Certification Scheme


HAP 2007 Standard

More than two years after initiating its development, on 30 January 2007, the HAP Board adopted the HAP 2007 Standard in Humanitarian Accountability and Quality Management
HAP wishes to thank all of those who have helped.
Download HAP 2007 by clicking one of the links below
> HAP 2007 Standard in Humanitarian Accountability and Quality Management (pdf lite version)

> HAP 2007 Standard in Humanitarian Accountability and Quality Management (printable pdf version)

http://www.hapinternational.org/en/complement.php?IDcomplement=79&IDcat=4&IDpage=74
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the UN and ISO 9000

How can these standards be applied to the UN, its programmes or its procedures ?
Between 1947 and the present day, ISO has published more than 14 300 International Standards. ISO’s work programme ranges from standards for traditional activities, such as agriculture and construction, through mechanical engineering, to medical devices, to the newest information technology developments. The UN and the staff who work in its agencies no doubt use or benefit from many ISO standards in both their professional and private lives. However, I presume your question concerns the ISO 9000 standards for quality management.
These can certainly be applied to the UN, as they are «generic management systems standards». This means that the same standards can be applied to any organization, large or small, whatever its product or service, in any sector of activity, and whether it is a business enterprise, a public administration, a government department, an NGO – or a UN agency.
«Management system» refers to what the organization does to manage its processes, or activities, in order that the products or services that it produces meet the objectives it has set itself, such as satisfying the quality requirements of its customers, and complying to regulations.
Implementing a management system is a way to ensure that nothing important is left out and that everyone is clear about who is responsible for doing what, when, how, why and where.
The ISO 9000 standards provide the organization with a model to follow in setting up and operating the quality management system. This model incorporates the features on which experts in the field have reached a consensus as representing the international state of the art.
The requirements for a quality system have been standardized – but most of us like to think our organization is unique. So how does the ISO 9000 approach allow for the diversity of say, on the one hand, a « Mr. and Mrs. » enterprise, and on the other, to a multinational manufacturing company with service components, or a public utility, or a government administration – or to the UN system?
The answer is that the ISO 9000 approach lays down what requirements your quality system must meet, but does not dictate how they should be met in your organization – which leaves great scope and flexibility for implementation in different business sectors and organizational cultures.

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NGO's and charitable institutions

To facilitate discussion about this proposal, it is necessary to provide definitions of key terms used.
Our definitions are drawn from the International Standards Organisation (ISO), and are specifically
related to the ISO 9000 series of “quality management” standards. As the ISO website explains, ‘In
the everyday context, like "beauty", everyone may have his or her idea of what "quality" is. But, in
the ISO 9000 context, the standardized definition of quality refers to all those features of a product
(or service) that are required by the customer. "Quality management" means what the organization
does to ensure that its products or services satisfy the customer's quality requirements and comply
with any regulations applicable to those products or services’

1
. While it may be argued that
humanitarian action is not simply a “product” or “service”, and that the intended beneficiaries are
not just “customers”, the core ISO objective of promoting quality management is exactly analogous
with HAP’s transformative agenda for the humanitarian system, and in this respect the ISO 9000
quality assurance process is of direct relevance and has much accumulated experience and
wisdom to offer us.

Accreditation ‘refers to the formal recognition by a specialized body - an accreditation
body - that a certification body is competent to carry out… certification in specified business
sectors. Accreditation is like certification of the certification body. An Accrediting Body,
Agency, or Association is a non-governmental entity that sets standards for accreditation,
administers the process of accreditation, and provides assistance, as it is able to
institutions, programs, and the general public. Accreditation is a process by which an
institution periodically evaluates its work and seeks an independent judgment by peers that
it achieves substantially its own objectives and meets the established standards of the body
from which it seeks accreditation.’

2
.
Certification ‘refers to the issuing of written assurance (the certificate) by an independent,
external body that has audited an organization's management system and verified that it
conforms to the requirements specified in the standard. Certificates issued by accredited
certification bodies - and known as "accredited certificates" - may be perceived on the
market as having increased credibility.
3
Registration ‘means that the auditing body has recorded the certification in its client
register’. The organization's management system has therefore been both certified and
registered.’
4
.
Typically, the accreditation and certification processes both include a self-evaluative description of
the candidate institution, examining goals, activities, problems and achievements. The resulting
report is the basis for an on-site review by a team of professional peers. Finally the accrediting or
certification body reviews the self-study and the peer reports as the basis for decisions and follow-
up action on granting accredited or certificated status.

4) Why accredit and certify?
Although HAP’s Statutes place an obligation upon the Secretariat to develop a system of
accreditation, it is worth reminding ourselves why this process is attractive, and why it has been
given a central role in HAP’s organisational design. A reliable, robust and accessible accreditation
system will:
Create incentives for improving the quality, effectiveness and accountability to beneficiaries
of the humanitarian work of certified agencies
Confirm that a reasonable level of compliance with the HAP Accountability Principles is
being achieved by certified agencies
Provide a framework for recognising and rewarding agency staff that implement the HAP
Accountability Principles
Ensure learning and continuous improvement within certified agencies
Enhance the credibility of certified agencies
Protect certified members against harmful internal and external pressures
Enable donors to make more informed choices

If HAP is to become more than a small mutual admiration club, it must develop and promote
incentives that encourage greater accountability to beneficiaries. An accessible and robust
accreditation system is probably the most powerful tool that could be deployed for this purpose.

5) The HAP Accreditation Strategy
Given our particular need to build a decentralised and accreditation system with an “outsourced”
certification function, the strategy for creating a HAP accreditation system will have to accomplish
three crucial development tasks:
a) Define indicators and benchmarks of “quality management” for the Accountability Principles
b) Adopt standards for the process of accreditation
c) Grant “accredited status” to suitable certification/registration bodies
Each of these stages in developing a system of accreditation will have important implications for
HAP, specifically with regard to its constitution, its membership and the functions of the Secretariat.
a) Define indicators and benchmarks of “quality management”. The 2003 General
Assembly and Board meetings tasked the Secretariat to develop a process to identify
appropriate indicators and benchmarks for the application of the HAP Accountability
Principles. The Secretariat has integrated this and several other General Assembly and
Board mandated activities into a process for the production of the HAP “Manual for
Accountability to Humanitarian Beneficiaries” (see Appendix 1). The detailed planning of
this project, approved in principle by the Board in June 2004, should have been completed
by September 2004, but unfortunately the consultant was unable to complete the
assignment
5
. However, initial feedback indicates widespread support within the HAP
membership for the production of the Manual, as well as amongst potential new members.
The Secretariat now intends to appoint a temporary member of staff to manage the project,
with guidance provided by an Editorial Steering Committee, and in consultation with a wider
reference group of humanitarian practitioners and accountability experts. Given the
problems with this consultancy, it is now more realistic to anticipate that the first meeting of
the Editorial Steering Committee will take place in March 2005. The Secretariat still expects
to present a draft Manual, including indicators and benchmarks for the application of the
HAP Accountability Principles, to the December 2005 General Assembly and Board
meetings.

b) Adopt standards for the accreditation process. In order to protect the “brand” integrity of
a HAP system of accreditation and certification, it is necessary to adopt robust standards
and benchmarks for the processes of accreditation and certification. A sound accreditation
process usually involves a collegial exercise of self-review and peer review that provides a
reliable guide to the quality and accountability of institutions and programs. As the exercise
involved in developing accreditation and certification process standards and benchmarks
needs to be closely linked to the process of seeking consensus on appropriate actionable
and verifiable indicators for HAP’s Accountability Principles, the Secretariat proposes to .. more

Charitable Institutions

http://www.zyen.com/Knowledge/Articles/quality_mangement_in_charities.htm


How to run a charity trust
http://www.www-fundraisinginfo.com/charity-trust.html






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