The last few weeks saw two significant developments. The first concerns the acquisition of significant amounts of shares in Bombay Dyeing by a certain Arun Bajoria. The second is a proposed bill by the government to bring down its holdings in the public sector banks to 33 per cent. The first resulted in the two premier industry associations of the country, the Confederation of Indian Industry and the Federation of Indian Chambers of Commerce and Industry, finding themselves in opposite camps. The second created the usual clamour by bank unions about the ill-effects of privatization and how it helps everyone else at the expense of labour. The fallout of these events is very interesting. Bajoria has been accused of attempting a hostile takeover that will harm the minority shareholders. The bank unions have criticized the government for playing into the hands of defaulting borrowers who will buy up the banks and write off their outstanding loans from these banks. At an individual level, labour and industry seldom agree on anything. For instance, industry blames labour for opposing market reforms, and labour blames industry for pushing market reforms. However, both now seem to be crying out in the interest of the cartoonist R.K. Laxman's common man. Industry is worried about the small shareholder whose wealth will be eroded by Bajoria's machinations. Labour is concerned about the wastage of resources, collected from the general taxpayer, which will be used to recapitalize the banks for the non-repayment of loans. One cannot help being impressed by the altruism being voiced by both industry and labour. However, the cynics are yet to be convinced. The unions' protest against the reduction of government holdings in banks was expected. What came as a surprise was their inference about why the government is doing what it is doing. According to them, big industrialists who have not paid back their bank dues, will buy up the shares in these banks, sit on the management boards and decide to write off each other's outstanding loans. One is reminded of a certain South American country where manufacturing corporations owned banks, took loans from them in the name of their corporations and never paid them back. Clearly, according to labour, India is a banana republic. It is difficult to see how with an independent authority regulating banks, such a thing will happen, but most conspiracy theories are seldom realistic. However, to be fair, one cannot emphasise enough the point that the regulatory system in India is not exactly independent, or entirely efficient. But, this is precisely because we believe that the government is fairer than the market. An independent body, by definition, cannot be subject to governmental interference. Professional politicians, with or without criminal records, are not professional regulators and, hence, cannot be allowed to regulate market activities. Otherwise, we have inefficient regulators, being controlled by non-specialized political appointees. I am reminded of an instance when a government appointee, on a judicial board dealing in company matters, admonished a counsel for confusing issues. The latter had referred to a working capital term loan. The learned judge maintained that a term loan and working capital are two different things and the counsel must make up his mind which one he is talking about! The only way out of such stupid incidents is to get the government out of our hair. In this, privatization is the first and necessary step. But this is something most people already know, excepting labour - or should I say incumbent labour. In particular, industry has been crying itself hoarse about labour's resistance to such market-oriented reforms. Yet, and this is most intriguing, they are so stridently opposed to 'hostile' takeovers of public corporations. Recall that CII and FICCI have publicly taken opposing stands regarding Bajoria. CII believes that the Securities and Exchange Board of India should reign in 'fly by night' corporate raiders like Bajoria. FICCI is of the view that Bajoria has done nothing wrong (provided his claims about informing the Bombay Dyeing management about his acquisition of more than 5 per cent of the shares are vindicated). Given the recent events that have generated a lot of friction between these two associations, some feel that Bajoria is just a catalyst around whom they are organizing a showdown. Such a reading may not be entirely baseless. This is because, both the organizations, while voicing their respective views about the Bajoria incident, have strongly opposed the culture of hostile takeovers that seem to be developing in Indian markets. They are afraid that well-managed firms will be taken over by bad people with lots of money and no managerial experience. This will destroy the national economy as these prized assets will be mismanaged and, therefore, lose value in the market. There are a number of implicit assumptions in this line of reasoning. First, the 'outside' shareholders, owners not involved in managing the firms, will allow this to happen. This assumption is acceptable if the potential acquirer of the company lures the outside shareholders with high takeover premiums on their shares. But, if the acquirer of the firm pays high values, it is not clear why he, or she, will do so unless these assets are perceived to be more valuable than what the stock market currently reflects. This brings me to the second implicit assumption - the incumbent management knows best and the market is stupid. Of course, being a representative of an industry association that believes in the market, you do not want to be seen to harbour such feelings about the market. So, if you are sophisticated, you find faults with the takeover code implemented by SEBI. And the chances are high that you will be right. For instance, you will probably be right in pointing out that while an outsider can 'creep' up from a five per cent to a 15 per cent stake, a promoter is not allowed to creep by more than five per cent in any given year. If a promoter crosses the (addi- tional) five per cent acquisition in any given year, this has to be publicly announced. You are willing to take a chance that no one will question why, even though the takeover code has been in force for more than two years, promoters did not increase their holdings by this additional 10 per cent that they were capable of. But then that is a matter of detail which most of your audience will miss. And, like labour, they are not worried about themselves. Their only concern is for the small shareholders who will see their assets plummet in value after they have been taken over by the Bajoria-type big bad wolf. So one needs a big brother to look after the small guys. And who best to do that job than the untried sons of erstwhile lobbying fathers who often own less than 10 per cent of assets, the rest being owned directly, or through nationalized financial institutions, by the so-called small shareholders? India's current problem, as always, is the inability of the general population to identify those who die on their behalf - be it the socialist, criminally inclined political leader; inefficient and organized incumbent labour or the unprofessional, family-controlled big business. Especially when they all believe in markets that must allow them to continue in their respective roles. And if the public wants globalization, they can always bring in their NRI wards. The author is an economist at the Indian Statistical Institute, New Delhi