INSUBCONTINENT EXCLUSIVE:
By R Gurumurthy Indranil ChakrabortyMcDonaldisation is a term popularised by American sociologist George Ritzer to extend and
As financial markets have undergone significant transformation and almost all these changes have been brought about in name of improving
all of which are meant to deliver rational and efficient outcomes.
As we understand, efficiency and standardisation are at core of
Over years, significant strides made by information technology industry helped financial markets grow rapidly in size and swiftness adding
being unreasonable to others
The derived efficiency also might have a temporal dimension as entire efficiency gains of good times might be wiped out when same factors
(for instance swiftness and volume of financial transactions) that contributed to liquidity in markets could make them totally illiquid and
Passive management by replication of benchmarks is generally found to be efficient from an individual perspective.Yet, any market full of
passive investors who take no active role (especially in governance of firms) are clearly informationally inefficient, a point also made by
a behaviour induces pro-cyclicality in a market with homogeneous investors
The point is that such risk limits may be optimal from an individual risk management perspective but clearly have adverse market stability
implications.
Calculability, there has been an increasing emphasis on quantity over quality in economic as well as sociological research
The issue is not to undermine importance of quantification that adds immensely to objectivity, but quality of numbers and their relevance to
markets have taken their own course with debate over transparency of central bank communication
Standardised regulations and risk management systems (whether encouraged by regulations or through market influences) are part of paradigm
price declines do not help to bring them back.
Control is last element of McDonaldisation
Standardisation helps control but despite obvious benefits, it runs risk of encouraging mono culture institutions and often it becomes a
Furthermore, a standardised control framework takes away behavioural diversity of participant response thereby inducing pro-cyclicality; in
In addition, control is also country/institution specific
The US, Germany and Scandinavian countries are all free market capitalist societies but with very different institutional frameworks for
Hence, a standardised corporate governance framework say in company board constitution may not be equally effective in all these disparate
A uniform control framework, divorced from institutional moorings, is possibly not optimal.
The problem, however, is not with
rationalisation or even with improving efficiency, but with their partial evaluations
As Ritzer reiterates point in a sociological context that a retreat from McDonaldisation is neither desirable nor possible and solution to
problem of various irrationalities of rationality is greater control over process of rationalisation involving, among other things, efforts
to ameliorate its irrational consequences
This makes sense as we grapple with operational risk losses, including frauds in Indian banking industry.
(The authors are working in area
Views expressed here are personal)
