Opinion | Decisions by top few can change fates of many

Even as the IL&FS saga continues to unfold, many fingers are being pointed towards the mismanagement of a few at the top. If the company is unable to revive revenues and reputation, one certain outcome is that many employees will lose their jobs. 

Shift focus to the infamous trade war that’s ensuing with the US raising tariffs on imports from all across the globe especially China; once again the muscle flexing among those at the top has the potential to drive significant job losses across export industries in many countries. As this spectacle of power show and negotiation continues, for the steel industry worker sitting somewhere in a north east Chinese rural province, shutting of a factory, thanks to lower export demand, is less about power and more about being able to feed his family. Of course, even before the trade wars began, the Chinese steel industry suffered from job losses, thanks to oversupply, partly a result of capacity expansion sanctioned in the last decade, (again) by a few leaders at the top. 

Think about this; if an entire industry is on course to reducing jobs, what is the alternative for that worker, his supervisor and their manager? They have no way of influencing  decisions made by a few at the helm on broad economic policy. But these decisions directly impact their future earnings. Without a job, alternate skill sets and prospects, how can they continue to manage expenses, children’s education and medical costs? 

Let’s rewind to the global financial crisis of 2008-2009, thousands of financial services employees lost their jobs—in most part, thanks to unwarranted risks taken (again) by a few steering the wheel. It was assumed that the US government would not let large banks and financial institutions go under. But it didn’t help Lehman Brothers out of bankruptcy. History attributes this outcome to decision-makers including Ben Bernanke (then US Federal Reserve chairman), Henry Paulson (then US Treasury secretary) and Timothy Geithner (then president of New York Federal Reserve). Once Lehman went under, bailouts were arranged for other large financial organisations in a similar position. Why was Lehman allowed to fail and many of its employees rendered jobless almost overnight? Possibly because those in power decided so. Subsequently, the US economy was rattled into a crisis that played havoc in the livelihoods and savings of several Americans and others who held jobs in large global financial companies worldwide.

Decisions that go right get applauded. But every so often, decisions—even by those at the helm—go wrong. In the 1920s, for example, after World War I, Winston Churchill—then Chancellor of Exchequer—infamously announced the return to the gold standard and retained British pound’s value against gold at pre-World War I level. The result—high prices of British goods, a fall in demand leading to manufacturers reducing costs. Trade, exports, foreign exchange reserves all fell, jobs were lost, and the economy was in a bad state. People suffered because Churchill, although in power, was not a competent authority on the subject and, in retrospect, experts say he perhaps made the wrong choice. 

This often-repeated faux pas in decision making at the top should make you question the proficiency of the one leading your country or even your company. But this column is not about that; the recounting of the instances simply establish the lessons not learnt. What matters more is how a bad decision by one can impact you. You can end up losing your job or face severe inflation or have to deal with falling asset prices tearing down your wealth. NextMAds

In today’s turbulent times, let’s be clear that the salaried individual has little control over what world political, economic, industrial and corporate leaders decide. What you do have control over are your own finances. It’s only prudent to reiterate personal finance lessons that can come handy if such risks play out.  

Firstly, save regularly; spend less than what you earn. Thanks to a cultural shift globally towards consumerism, increasing reliance on credit cards and consumer loans, the temptation to buy more stuff is always high. Set aside emergency money for situations like job loss, then start indulging your spends. Secondly, invest in long-term assets—use savings to create wealth. Thirdly, don’t chase returns if it means taking on an unknown, uncalculated risk; stick to what is transparent, understandable and comes with a track record. Lastly, try to start all the three steps above as early in your earning life as possible; it’s never too early to save. 

This world is not equal or fair, if you are not one of those at the top, making impactful decisions, you are vulnerable and so is your income. Save. Invest. Create wealth for the long term. Rely more on your common sense instead of assuming that those in power will always use theirs.thirdMAds

Lisa Pallavi Barbora is a consultant with Mint