Readers Write In #249: Free Market and democracy

Posted on August 23, 2020


(by G Waugh)

The very idea of a free-market economy is often conflated with the idea of true freedom an individual is supposed to enjoy. And the reason why we guys keep writing the about the ‘free-market’ all the time is because it is one most powerful idea that has wreaked the most havoc among millions of lives and livelihoods cutting across nations and continents during the last five decades or so. When one chooses to comment upon a particular contemporary issue such as rising incidence of cancer in a rather well-to-do society or that of increasing numbers of suicides among the student community, it is indispensable that he knows a thing or two about the influence of the free-market upon the society in question as to make a convincing case for himself.

When you look at the term ‘free-market’ it generally looks more like an economic jargon not necessarily of any importance to the general citizen. But there is nothing really esoteric about it and if you know what it really means, you will understand that it is something as basic or crucial as knowing math or traffic rules that help you lead a proper day-to-day life.

The term ‘free-market’ essentially means non-intervention of the state/government in the affairs of managing the market. So what does the market actually mean? The place for buying and selling of commodities which could be as wide ranging as fish, soap, electricity, education, health, labour and sometimes even justice. The case for a free-market, as you may have observed is often pitched for only by one particular class in the society and not certainly the others. The rich industrialist or his band of financial analysts often leads the campaign for the withdrawal of the government out of the spheres of his influence while adding a moral tinge to it by furthering it as the only panacea for all social and economic ills. He implores the non-interference of the government on the issues of prices he sets for his assiduously-built product in the market, on the terms and conditions of employment he sets for his workforce, on his capacity to expand beyond his current sphere of production as to branch out into other areas, etc.

In a liberal democracy such as ours, a democratically elected government in general, one that enjoys the mandate of the majority of the nation’s masses is naturally expected to provide for at least the basic essentials required for a fairly dignified existence of the individual. The government is thus, entitled to run schools, hospitals, transport and colleges aimed at lessening the costs of these barest essentials for citizens to procure. But the governments all over the world in order to encourage private initiative and entrepreneurship, took a minor retreat from all these areas and stood back to serve primarily as an active observer or arbiter making way for entrepreneurs and the commercial classes to take over the responsibilities of delivering these essentials to its citizens.

In other words, the government majorly funded and run by its poor and middle classes had decided to outsource most of its responsibilities to newer service providers, on the promise of better and efficient delivery of services. However, the role of the government was still supposed to be active in ways such as capping the prices of essential commodities, setting wage laws for the sale and acquisition of labour, enforcing safety laws for labourers at the workplace, implementation of regulated fee structures for students in schools and colleges and even laws guaranteeing protection of jobs from retrenchment. Governments that ran on these lines were installed all over the world post the Second World War across Europe and even in the newly liberated countries of Asia, Africa and Latin America. These governments were called Welfare States that allowed and encouraged private initiative while preserving sufficient wherewithal to rein in on their profiteering tendencies in the very interest of the majority.

The creation of the Welfare State was accepted for a while even by the propertied classes as it managed to create enough purchasing power and infuse necessary demand for their manufactured commodities. The Welfare State also succeeded in creating a proper supply of skilled manpower for employment in the critical processes of commodity production. But as the scale of the businesses expanded and newer avenues of profiteering appeared on the horizon enabled by breakthroughs in technology, the so-called captains of industry were not happy to stay on a tight leash. This meant pushing for greater freedom to do business through removal of regulatory oversight over every aspect of their businesses.

This may seem a legitimate demand akin to those of writers and artists asking for removal of restrictions on the part of an overweening government over their rights to free speech and construction of healthy public opinion. And this analogy was precisely the one that the business classes made use of, accusing the government of inappropriate interventionism through enforcement of licensing regulations, outdated taxation practices that fleece enterprising businessmen, smothering innovation and efficiency all the while.

Before we venture further, let us remind ourselves that housing, health and education are sectors that are crucial for the growth of every individual and consequently that of the whole society and it is the bounden duty of a democratically elected, citizen-funded government to make these accessible to its patrons at the lowest possible costs regardless of who provides it and how. But in a context where these services have already indiscriminately been outsourced by the government, the only role that it could play at the most was that of an impartial arbiter who ensures proper provision of all these social goods by the private sector to the tax-paying citizen. And this role was what that was deeply contested by the business classes who demanded an outright abdication on the part of the government in order to create a ‘business-friendly’ climate that favours private initiative through unrestricted profiteering.

A government that no longer cares even a smidgen about its primal responsibilities towards its patron-citizens, one that demotes itself to the role of a powerless spectator even when millions of its tax-payers suffer from rising prices, shortage of commodities, malnutrition, lack of sanitation and hygiene, unemployment and poor working conditions, unaffordable costs of healthcare and education is the ideal government that a typical captain of industry wishes deeply for. A government that fattens itself at the expense of the taxpayer only to subordinate itself to the role of a facilitator or an agent of business is what is meant by popular slogans such as ‘minimum government and maximum governance’ echoed quite often by free-market evangelists.

A new class of economists and technocrats were conceived by the captains of American industry whose duty was to create new economic theories and standards that celebrated the virtues of economic freedom and unhindered consumerism as early as the 1960s. This new class was called the ‘Chicago Boys’ on account of their training at the Chicago University who were deployed to serve governments situated across the world especially amongst Third World countries. The newly invented theory called ‘neo-liberalism’ or the theory of the Free-Market denounced the regulatory tendencies of the State as ‘interventionist’ or ‘monopolist’ and hence termed them anathema to the basic idea of human freedom calling for an immediate end to this unacceptable tragedy. This theory was popularized across nations as the new gospel of liberation and people in Chile and Bolivia were chosen to be the first set of guinea-pigs for the experiment. The experiment naturally failed to revive the social and economic indices of these poor countries but succeeded in liberating the national resources and public infrastructure of these countries from the clutches of the government for the local and international big businesses to devour abundantly.

Having achieved their first success within less than a decade of implementing neo-liberal reforms by effectively pushing millions and millions of people into poverty, starvation and death, the Chicago School of economists were invited to embark on successive tours that included Ecuador, Thailand and newly liberated countries of the erstwhile Soviet Union. The free-market wherever it landed produced consistently horrible results and stories of poverty, destruction and social upheavals became almost ubiquitous. But the scale of losses of lives and livelihoods due to the neoliberal phenomenon is not the subject of this essay.

The question I want to raise here is purely from a moral standpoint – Is a democratically elected government that functions based on the financial and moral legitimacy bestowed on it by the working classes, morally entitled to shirk away from the responsibilities of providing basic services to its citizens? If the crucial question of how much time a worker must spend at the factory or how much must he be paid on a daily basis is to be decided by an ‘unknown’ market over which one has absolutely no control, how can such a society be even called ‘democratic’? When the government that is run by elected representatives of the people has no say in the exploitation and distribution of a nation’s precious resource such as minerals or even water, what basic purpose does such a government even try to serve? On what moral authority does such a government even instruct its citizens to pay their taxes? Why should a citizen pay for something which gives him nothing in return?

When a particular class of a society calls for de-nationalization of a natural resource, what it actually calls for is the exit of the tax-paying citizen from the privilege of managing or claiming it. When the delivery of social goods such as education, health, water and housing is no longer allowed to be part of the State’s domain, what it naturally means is a surrender of a vast amount of decision-making from the hands of the citizens to a well-to-do coterie of powerful individuals who, according to the rule-book of the free-market, cannot be held accountable for any lapse or pitfall on their part.

So the next time we see an economist or a captain of industry call for the exit of government from a particular sphere of economy, we must have no doubt as to how to interpret it. A call for privatization or de-regulation is nothing but an open call exhorting the citizen to surrender his hard-won right to rule over himself to the caller and pave the way for a modern-day autocracy. Even if such a system of political economy in the most unlikely case manages to lift people out of poverty and bring overall development, it has no right to call itself democratic or even morally legitimate.