Prasanna Kumar Choudhary

(Extracts from articles and notes written between July 1991 and February 1992)

 

1.

Market is the current catchword. And in the present topsy-turvy world, it has valid reasons to be so. Yet, despite innumerable attempts to unravel its mysterious powers, it remains an enigma.

The history of human civilization is, in one sense, a history of its marketization. Market which emerged spontaneously with the growing productive faculties and intercourse among various communities of humankind, engulfed over the centuries not only the planet Earth, but ever increasing spheres of human life as well. Market bred market: simple commodity market, bullion market, money market, credit market, land market, capital market …. and, of course, the intellectual property market.

Market, this unconscious creation of the conscious humankind, has always bedeviled the human mind. Adam Smith saw some mysterious hidden hand behind it. The Marxists claimed to resolve this mystery by discovering the theory of surplus  value. Walras and the subsequent mathematical school tried to unmask this hidden force with the aid of algebraic formulae, curves and coefficients. The Keynesians strived hard to tame it by using the mighty arm of the state, and the communists sought to eliminate it through their planned economies. In many cases, market went underground only to re-emerge with vengeance at later date. Market has so far eluded any precise definition: it can be approximately understood, positively or negatively, through its attributes only. Yet, its understanding, of course a relative one, is indispensable at this crucial hour of transition worldwide.

However, market is far from being an economic category only. Since its beginning, it has entered the domain of politics, playing a key role in the rise and fall of mighty empires, be it Mauryan or Roman. In the present-day world, some link it with democracy, others charge it with promoting autocratic interests of the rich. In developing countries, market’s political behavior – from Chile to South Korea  - has been very complex and diverse. At this point of our development, what sort of a mix of market and state, of freedom and protection can lead to a vibrant economy ? Is state becoming market-friendly the only way out?

Market goes beyond the realm of politics. It is given credit  for fostering entrepreneurship, efficiency, accountability, individuality, ever-increasing improvement  and sophistication in civic life, etc. At the same time, it is cursed for dehumanizing humankind by promoting all sorts of immoral activities, by giving  precedence to appearance over essence, by reserving  ideals  for idiots, by replacing  poetic expressions of love and romance by ‘ erotic electronic encounters ‘, by making instant satisfaction (‘ use and throw ‘) the guiding spirit in all our activities, etc. Market, in one sense, stands in sharp contrast to morality, an ideal self-image of humankind which too evolved over the centuries, parallel to the former.  Moreover, market is, to some extent, held responsible for ecological imbalances, pollution, organized crime and corruption, dangerous misuse of scientific and technological researches, broken families, new diseases and increasing number of psycho-therapeutic centres  - i.e. for the problems that now preoccupy  the western mind. Are market and morality two mutually exclusive categories? Is humankind destined to wear a look of the sphinx with the head of a pretty women and the body of a lion or the vice versa?

 

2.

Since the beginning of modern economic thought in our country, market and state intervention in economic activities have not been considered as dichotomous categories; rather they have been accorded complementary roles in the making of modern India. Long before the advent of Keynesian economics in the west, our great forerunners Ranade, Naoroji and R C Dutt campaigned for active state intervention in economic affairs for the promotion of private entrepreneurship. Ranade questioned the validity of classical political economy in a backward, stagnant agricultural country where the champions of that economy themselves did not adhere to the percepts of classical economics. The necessity of state intervention in our country emanated from altogether different background, and it cannot be equated with Keynesian state intervention in the west or with the socialist state economy. While the Keynesian state intervention was meant for meeting the challenges ( or recession ) of the developed capitalist societies, and there was no space for the development of private entrepreneurship in socialist command economies, state intervention in our case was sought to develop and foster the entrepreneurial culture from below in a condition where status, tradition and custom ruled, where due to colonial drain of wealth, country faced shortage of capital, and where weak capital was unenterprising and unwilling to take risks. A clear understanding of difference among these three types of state interventions is vital since on it hinges our correct response to the contemporary challenges.

It is bad economics to make state sector synonymous with self-reliance and liberalisation measures with imperialist domination. The development of independent national economy is a complex process involving a number of variables in which both state sector and liberalisation measures, both planning and market forces play varying roles in varying circumstances.

Moreover, the question of market-state interface now cannot be tackled in the stereotyped classical, Keynesian or neo-classical frameworks. A comprehensive and consistent theory concerning the knowledge market or the intellectual property market is yet to take shape. Theories dealing with commodity or capital markets, it seems, will prove insufficient to explain the phenomenon of this knowledge market, and the inclusion of knowledge as an economic category will surely demand revision of our existing understanding of commodity, capital and labour as well.

 

3.

Freedom is not always a felicific category; it often exposes us to death and destruction. But only when we are exposed to death and destruction, we come to know how to live. Talent consists in accepting the circumstances in which we find ourselves and turning them to our own ends. Protection over the years creates its own vested interests and acts as an anathema to innovation and entrepreneurship. It covers up inefficiency, bad management, wrong allocation of national resources, and unaccountability. Eating into the vitals of our economy these protectionist worms gradually become a social force fearing free competitive environment. (Even the protagonists of protectionism like Fredrick List in the nineteenth century Germany, regarded it as a mere transitory system, while free trade was considered to be the norm. The rise of Germany as an industrial power owes very little to List's protectionism; its causes primarily lay elsewhere. The progress made by science and technology cannot be attributed to protectionism, rather a liberalised regime acts as a stimulant to such progresses. At about the same time, the strictly protectionist Spanish economy hardly made any progress worth mentioning.) Protectionism betrays lack of self-confidence and will to face the new challenges, and dampens self-development, creativity and the spirit of always finding out better ways of doing things. The question of sovereignty is invariably linked with this self-confidence and this will and spirit.

This move towards freedom needs to be combined with, what Jefferson called, struggle for science. In this regard, there is no need to lament our own backwardness. Explaining the industrial revolution in imperial Germany, Veblen talked of the ' merits of borrowing ' - how England paid the penalty for taking the lead by falling behind in the later industrial race, and the borrowing countries - America, Germany, Japan, Russia forged ahead starting on a higher technological level without the cluttering bric-a-brac of customs and vested interests which Britain had developed. We miserably lack the culture of science and a favourable climate in which the insights demanded by modern scientific revolution can flower. We had the whole body of Europe's and America's science to use as an unlimited drawing account and to grasp the crucial role of knowledge in economic growth, we need not summon Paul Rommer or Maurice Scott. Knowledge and mechanism for transferring it to productive use constitute the key to progress in free market conditions. In other words, we can well add a new chapter in our Puranic literature narrating the marriage of Saraswati with Vishwakarma.

 

4.

Freedom is a fantastic idea, but an abominable reality. It is always conditioned by direct slavery, bondage or some kind of dependence. The history of free trade is simultaneously a history of slave trade, of annexations and colonization, of protective tariffs and trade wars, and of subsidies and (state) supportive measures. Therefore, any discourse on free market will be incomplete if it does not address itself to the diabolical realities of the market place.

Moreover, the humankind has entered the age of global trade policy coordination whose key words are interdependence and mutuality. This coordination question, according to western experts, arises only in ' strategic environments ', and not in perfectly competitive environment. Strategic environments are those in which the number of economic agents making interdependent decisions is relatively small. India obviously does not find place in this strategic environment and it has yet to enter the relatively small club of economic agents. So in the age of ' coordination compacts ' also, we have no choice of an agreed or implicitly chosen coordination. We are left with an imposed coordination which consists in harmonizing our policies with those of a strong, large or skilled agent. This imposed coordination today manifests itself aggressively in the sphere of trade in services, trade-related intellectual property rights and trade-related investment measures.

So far nations at different levels of economic development exist, the question of free market cannot be put in a general form. The manner in which Pareto put the question remains valid till date, ' Given all the economic and social conditions of a country at a given moment, is free trade or protection the better policy for that country at that time? ' The right to decide these things is the essence of sovereignty of the nations. This question will remain a highly inflammable material. Are developing countries accorded their due place in the strategic environment of global trade policy coordination? Is the mechanism of multilateralism, minilateralism and bilateralism skillfully utilized to the satisfaction of all contracting parties? Is coordination is pursued on substance and in sectors where mutuality is feasible, isolating substance and sectors where hostility reigns.

Freedom of choice extends to the realm of science and technology as well. The Americans maintain that the science type in any civilization exists long before the science and the sciences are a key to the crucial civilisational traits. They take pride in the characteristic sciences of American technology - chemistry and physics, electronics and radiation. Are we conscious of our own science types and have the freedom of choice to develop our own characteristic sciences? This too is a vital question and cannot be left at the discretion of market forces alone.

Hence both free market and autarky represent two extremes inadmissible under conditions of a developing economy. Explaining his theory of markets, J B Say once said, 'The theory of heat and of weight and the study of the inclined plane have placed the whole of nature at the disposal of mankind. In the same way the theory of exchange and of markets will change the whole policy of the world.' One can humbly retort, ' Even the study of high energy particles and the theory of relativity have not placed the whole of nature at the disposal of humankind. Similarly, the theory of markets has changed the policy of the world, but there are still a lot of things to ponder over under the heaven apart from the markets. '

 

Photos: themumbaiguide.com; malls-multiplexes-design.blogspot.com; downtoearth.org

 

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