15/12/06

do free markets mean free individuals?

does it mean that there won't be any gujarati/marwari cartels in the bombay stock exchange? does it mean that a dailt entrepreneur, say, would have as much access to all information as upper caste businessmen? does it mean that people from the lower castes in india would miraculously be able to shrug off the burden of disprivileges that they've long had to contend with and upper caste rivals, in turn, would somehow, more miraculously, kick away their privilege-powered special racing shoes ...and both would compete on equal terms?

would the markets play the fair arbiter and ensure that the laws of 'nature' cease to play a decisive role in the distribution of outcomes? would the inexorable logic of the markets bring in efficiencies that'd guarantee the lower castes improved access to resources? in plain words, would the markets render caste irrelevant? in practical terms, would there be no two-glasses system in the teashops of the free markets?

these questions do not seem to engage those who support free markets (perhaps, they're not the right questions). to be fair, they weren't of great interest to those who supported the socialism project when the country started out, either. i support freedom..because i've seen that the aforementioned project was the smartest ruse ever designed to protect, and promote further, the most protected class of homo sapiens in the world - upper caste hindus. what crumbs were thrown at the lower castes, by way of 'reserved' resources/ jobs/entitlements/whatever...a freer, less state-directed economy would have delivered more. because, whatever the aims of the socialism project, in practice it had protected the business and middle classes of the country from outside competition, while at the same time directing most of the resources of the country towards building a mammoth ..mock-modern economy that had no use for 'pre-modern' lower castes. my view is that if the economy had followed a less 'commanded' and more natural path, meaning less government intervention (or intercession on behalf of the upper castes)...the lower castes would have found a steadier foothold than the one they teeter on now.

as i said, i support freedom..but its proponents make me suspicious. it has a different meaning for the lower castes of the country. but i don't think the free marketers have any time to spare for their concerns. in fact, the 'inefficiencies' engendered by periodic bursts of pandering to so-called identity politics seems to make the need for liberation more pressing for them. why? perhaps the indian state, as originally crafted, has become useless for those who profited the most from it. perhaps, the lower castes too have grasped the concept of rent-seeking and seem to expect that it should work for them too ...isn't that idea preposterous? the question of caste didn't fit in the socialist scheme of things, either. there are, among the intellectual class of india, several liberals who'd explain in a language, uniquely their own, how disastrous the markets have been for chile, mexico, peru, chile..mexico but would never bother to tell you why socialism has been so very disastrous for the lower castes of india. look at this recent article by ramachandra guha - he criticizes those indian intellectuals who oppose markets, almost unthinkingly. he is not an extreme free marketer..he thinks the state can play a useful role in the delivery of public goods like health and education (and these public goods are important for the lower castes). but look closely - he is the only active, maybe popular is the more appropriate word, intellectual i've read until now who mentions the word caste in this ongoing debate. but he doesn't get support from either side. strictly speaking, he isn't a participant in this debate - to be regarded as one, it seems, one needs to unequivocally oppose or support the idea of free markets.

so what does it all mean- this debate? ask sainath or swaminathan iyer..or karat or narayan murthy..or.. whoever. it's their game - of those who had participated in the socialism debate earlier ..and talked around the lower castes.

17 comments:

Gaurav said...

in plain words, would the markets render caste irrelevant?

No. And I don't think any right-thinking free-market supporter will claim that markets can make caste irrelevant.

And a question which seeks to link the two reminds me of a joke. A patient with a broken hand is being wheeled in for surgery. He asks he doctor "Will I be able to play the piano properly if the operation is successful?". The doctor says, "Of course you will.". The patient is overjoyed and says "That's great. I couldn't play piano for nuts before my hand broke."

Free markets are a solution to our economic problems, not social. There are several ways in which a less-socialist policy will give the oppressed castes greater opportunities and greater access to resources. But they can not, by themselves make caste irrelevant. That needs a change in the social mindset. But yes, if there is a change in the social mindset, then free markets can be enablers of change.

Take the blacks in America. While they still have a lot of problems, I hope you will agree that their situation and standing in society is far better than, say, the 50s. Taking the specific example of Michael Richards, he was banned from the LA comedy club because of his racist outburst. The club banned use of the n-word. Voluntarily. I am sure that the market played a huge role in the proactive steps taken by the comedy club. If their image suffered, they would lose business since people who care about the issue of racism would not visit the club.

But this effect of the market was possible only because the civil rights movement has caused a social change in America big enough to make people feel outraged by someone using a racial insult.

Now here's what I am interested in knowing. Forget, for a while, the macro-concept of laissez-faire free markets. It is not a realistic idea in India for a few decades at least. I am thinking about some of the specific policy changes being proposed by free marketers - labour reforms, a change in the law which gives government a monopoly over buying agricultural land for non-agricultural purposes, simplifying the entry of private players into primary education, dismantling the monopoly of APMCs everywhere, reforms which will stop harassment of street vendors by the police, denationalisation of the power sector.....

Which of these policy changes do you think will worsen the caste problem? In general, can you think of an economic reform which will actually make the life of an SC/ST/OBC worse than it already is? Do you not see some, if not all of the above policy measures actually helping everyone, including the oppressed castes?

Gaurav said...

And here is my criticism of the left-liberal commentators in India who write about caste. Their focus is too scattered, and a lot of the points they raise seem to have their origin more in a guilty-conscience and an intention-driven thinking, rather than a closer examination of the root of the problem.

One of my pet peeves is the logic of "representation". I have read people argue - reservations are not about oppression or skewed resource access. reservations are about representation. Focusing on representation is what has made the caste problem stagnate. Because everyone, from thinkers to politicians, is just working to make sure that they can say "the proportion of the oppressed castes in colleges and offices is the same as their proportion in the population".

They ignore that a place in colleges and offices comes much later in life. What is more important is representation in more basic things which enable a person to get on equal footing.

What is the proportion of dalit and obc houses in rural India that have electricity, running water, as compared to the national average? What is the proportion of dalit children who complete primary education?

How about talking about representation in those things? Why is that never talked about or promised? It seems to me that the facts - "Only 31% dalit households have electricity as compared to 61% non-dalit households" or "Only 16% dalit children are enrolled in primary school as compared to 84% non-dalit children" are much more damning, worrying, unjust, and problem-causing than the fact that dalits are under-represented in industry.

But those issues are not raised or talked about. Instead there is reams and reams of polemic on more peripheral and secondary outcomes like dalit percentage in the IT industry and post-grad courses.

Gautam said...

I maynot be "right-thinking" in the way that Gaurav means :-). I find it difficult to distinguish cleanly between economics, social and political organisation of a society, since they are so interlinked.

I think that free markets will considerably reduce the perverse incentives of a low growth economy, that allow caste to persist. Once while looking around on this issue, I spotted a book by Gary Becker called the Economics of Discrimination.

The books had a detailed economic model describing how in a free market it would be costly for the discriminator to discriminate. If as a producer you have to think about anything except getting the best profits for the lowest costs you would have to impose a cost on yourself. Admittedly this is a long term outcome, and I think this is possible in high growth economies, like the one we are cultivating in India.

Growth tends to be higher in urban agglomerations because of dense networks of exchange and interaction. This changes the dynamics of interaction with others. You are less bothered about the next guy, including what the colour of his skin is or what his caste.

All we need to get rid of caste over the next 50 years is to forget about it. Focus on economic growth driven by free markets and urbanisation driven by free movement of people, caste will disappear on its own.

kuffir said...

gaurav,

i'm glad that you didn't try to talk around the subject of caste.

a leninist friend recently remarked that there is politics even in a glass of water. free markets advocate the superiority of individual choice over state control, crudely put, in economic decision making. now isn't that about power and how it is distributed in a society?

i agree with gautam that it is difficult to draw lines between economic, political and social organization of a society. but i also agree with you that the idea of free markets primarily focuses on economic decision-making. as did the socialist ideas india adopted after independence.

i think i've made it implicitly clear in my post that i believe the free markets are possibly an answer to many of our economic problems...having said that, let me point out how primarily economic ideologies like free markets may prove inadequate in providing greater access to public goods such as education and health and a few other such services, if you consider them public goods, to socially disadvantaged groups..and may in fact actually reduce access to these goods. some may feel otherwise but the jury's still out on that one.

why i feel access to these goods may actually decline for the socially disadvantaged is because we've such a long history of excluding the lower castes from exactly these kind of resources.

secondly, caste has survived the most determined onslaught of reformers within hinduism, other religions, egaliltarian philosophies such as marxism-socialism and of economic growth. even now, less than 5% of our population marries outside caste (and those people are again absorbed into one caste or the other). as a system of social/economic organisation, i guess, it makes greater sense to many indians over other systems - because legislation and the power of the state have not been able to curb many negative practices prescribed by the caste system. it may not directly influence state policy but..it does influence the implementation of policy.

so viewed against that background..reservations would make greater sense to you (as a natural consequence of caste overriding state policy, in more than one ways). i'm not entirely in agreement with the left view that reservations are about representation. given full rein in india, i don't think the left would have implemented reservations for the dalits after independence..or even constituted the mandal commission in 1978, leave alone implementing reservations for obcs. the left doesn't understand the need for reservations..just as those who those swear by other largely economic philosophies don't either.
but i should thank you for expressing your views on this post - they've clarified certain issues for me and i'm sure they'll also further definitely help me in my own efforts to grapple with the idea of free markets.

Gaurav said...

Was a pleasure, k

gaddeswarup said...

Kuffir,
I read a couple of interesting books on caste last year which you may like to look at if you have not aleady seen them ( I myself did not think too deeply about the matter since I kept hoping that it would disappear). The first is a very comprehensive one by Nicholas Dirks called "Castesof Mind", Princeton University Press 2001( Permanent black 2002). His contention is"... I will argue that caste (again, as we know today) is a modern phenomenon, that is, specifically, the product of an historical encounter between India and the Western colonial rule. By this I do not mean that it is invented by the too clever British... But I am suggesting that it was under the British that "caste" became a single term capable of expressing, organizing, and above all "systematizing" India's diverse formsof social identity, community, and organization". He also says
"Caste defines the core of Indian tradition, and it is seen today as the major threat to India's modernity".
The secondbook is by Michael Katten called "Colonial Lists/Indian Power: Identity politics in Nineteenth Century Telugu-speaking India". I dowmloaded from Gutenberg e-books and it might have come out as a book lasy year. Colonial lists of Mackenzie play an important role in both the books. Katten's wife is from coastal Andhra and he spent some months there. His contention: " It has been the intention of this work in general to suggest that the systems of social and political control we see in nineteenth-century India were produced as much by Indians as they were imposed by the British". This does not completely contradict what Dirks says and I feel Dirks is the more comprehensive work which also contains the discussion of Ambedkar-Gandhi debates and Periyar's work. Katten quotes from Sumati Satakam to emphasize that the Indian had already had their stratification lists. I am not sure how old Sumati Satakam is and Dirks discussion starts from earlier periods. And of course there are Kosambi's books which discuss these things from marxist (? sources of production) point of view. These are already a bit dim in my memory and I am sorry that I cannot be more helpful.

kuffir said...

gautam,

i'd been writing a post on a related subject when i stumbled upon your critique of guha's article. that was a smart refutation... but your across the board defense of free markets, though well argued, seemed a little too optimistic to me. for instance, education: you linked to a paper i had read a few months ago - i don't know whether i would draw the same sweeping conclusions from that paper as you do.

but that said, you suggest - 'All we need to get rid of caste over the next 50 years is to forget about it.' i agree with you. and not even all castes need to do that. the idea would percolate down if only the upper castes in india decided to do it. the way caste was originally constructed, according to some theorists, it was groups at the top which decided to 'close the borders'...and turned exclusive: to foster an image of elitist specialness. the idea was mimicked by those below... just as fashions and other such ideas are picked up by the elite first and then by other classes. the lower castes can't get rid of caste on their own. too many reformers have tried that and failed.

the upper castes in india have lived in a high growth economy of their own, so to speak, for a long time since independence and greater interaction (among themselves) hasn't exactly broken down any barriers. and i have seen attitudes among the caste based groups in different businesses which seemed to suggest that caste made good economic sense to them.

but, as you imply, we can only hope and pray that this would happen. perhaps, greater pace and quantum of exchanges and interactions, across a larger number of groups, would reduce the perverse incentives. but we all live and die in the short and medium term.

thanks for your insights and the info about the book.

Krish said...

Gaurav, it is not true that the situation of African Americans in US has improved. See the recent data released.

http://newstandardnews.net/content/?action=show_item&itemid=116

Lemme highlight the data below

1) Unemployment among blacks is more than double that for whites, 10.8 percent versus 5.2 percent in 2003 -- a wider gap than in 1972.

2) Black infant mortality is also greater today than in 1970. In 2001, the black infant mortality rate was 14 deaths per 1,000 live births, 146 percent higher than the white rate. The gap in infant mortality rates was 37 percent less in 1970.

3) African Americans had 55 cents in 1968. Thirty-three years later, in 2001, the gap had only closed by two cents. The report notes that, at this pace, it would take 581 years to achieve income parity.

4) Median income for black families went from 60 percent of white family income in 1968, to 58 percent in 2002

5) The average black college graduate will earn $500,000 less in his or her lifetime than an average white college graduate. Black high school graduates working full-time from age 25 to 64, will earn $300,000 less on average.

6) The average black family in 2001 had a net worth of just $19,000, including home equity, compared with $121,000 for whites. Blacks also had just 16 percent of the median wealth of whites, up from five percent in 1989. At this rate, it would take until 2099 to reach median wealth parity.

7) Blacks have a nearly six-year gap in average life expectancy, having narrowed the gap only 1.81 years in the past three decades

Anonymous said...
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Rishi said...

Kuffir,
I would like to address whether free markets reduce discrimination. Let us take two examples
1. The chai shop that you mentioned, that would have 2 sets of cups - This has almost been eliminated from restaurants, because of the inexorable force of market economics. It is basically cheaper to have only one set of cups and to serve all customers.

2. Whether SC's, ST's and OBC's would get jobs - Let us for argument sake, take 2 software companies. The first decides not to hire any people of lower caste, however talented they may be. The second hires talented people without looking at their caste. Now over time, the first company would be restricted in their labour pool and would loose out in the race. The company with a caste- agnostic approach wins in the end.

I took the example of the IT industry as it is the best example of free market in the country. Other industries are less free in varying degrees. But the example would still be valid, however the time-frame for a wrong approach to fail would extend depending on the freeness of the markets. What would take 3-4 years in IT would take probably 20-30 years elsewhere.

Jay Kalawar said...

there are other practical and down to earth aspects of the role that markets play in indian economic development, other than the category of caste that is continually brought up (without integrating it into a theoretcial labor - capital framework) seem to be missed out by Indian intellectuals. If there is an indepth objective analysis of the underlying casuses of what is going on in Singur (other than superficial symptomatic polemics that Indian intellectuals posture as objective analysis) please point it out. I have presented my analysis at this blog (also see the two comments on the blog post):
http://talkingbusinessamericaindia.blogspot.com/2007/01/common-threads-singur-west-bengal-and.html

kuffir said...

jay,

'Is that because of an unspoken consensus among the India’s top down decision-making elite of the need for a certain kind of large-scale development?'

i completely endorse that view expressed in your singur post.. i'd commented elsewhere, a number of times, the refusal of the elite to give back, to put it crudely, some basic rights, at least, to the villages/communities.. make the panchayats more meaningful - not mere 'recipients' of wisdom and conduits for 'development'.

if the issue of caste had been 'continually' brought up earlier... i wouldn't be bringing it up now, would i?

integrating caste into a capital-labor framework is a task most indian wise economists/sociologists and their clients, the planners, have mostly shied away from. and the few who have done so.. their 'objectivity' is moot. could you please elaborate on your views on the subject?

kuffir said...

rishi,

'But the example would still be valid, however the time-frame for a wrong approach to fail would extend depending on the freeness of the markets.'

agree with you- but i've reservations on how free the markets would be in an 'unfree' society. wouldn't they hinder the process of freeing of the markets itself?

Jay Kalawar said...

kuffir,
i see the reason caste is not brought into the labor-capital framework of economic analysis is because it is a false category (does not provide material economic information) created by british colonisalists in an attempt to understand their subjects. the category of caste was created as part of census taking in early 19th century and then subsequently abandoned. i see that in india there have been and continue to be jatis as communities with ties and internal supporting mechanisms which allowed functioning of communities in the absence of a state (which was a european development coming out of schism within organized religion - specifically catholic and protestant). if, on the other hand, if false categories, such as caste (or race in the US), are used for resource re-allocation / re-distrubution it results in mis-allocation of resources and therefore productivity and growth - if we are to go by theoretical economic framework of labor and capital. how and why has caste come to be an integral part of the lexicon of the new indian state as it struggles to establish itself? does it help or hinder in efficient allocation of resources and equitable distribution of incomes? would you say these are relevant / interesting questions?

kuffir said...

jay,

the enumeration of castes was abandoned in the 20th century, in 1932 to be precise.. as the nationalist movement was building up. i thought you'd come up with a more substantive explanation for disregarding caste, than attributing its creation to a british conspiracy.

'i see that in india there have been and continue to be jatis as communities with ties and internal supporting mechanisms which allowed functioning of communities in the absence of a state (which was a european development coming out of schism within organized religion - specifically catholic and protestant)..'

jatis have existed in both situations - in the presence and absence of a state. too many studies indicate that allocations made by the indian state, following strictly objective socialistic norms, have primarily resulted in outcomes being cornered along caste/jati lines... and hence the need for various commissions to look into the 'backwardness' of various castes/communities. my primary question in this post would the markets, which basically is a aggregate individuals making choices, allocate resources/outcomes more 'objectively', efficiently than the state, which has proved to be grossly inefficient?

'how and why has caste come to be an integral part of the lexicon of the new indian state as it struggles to establish itself?'

caste was abandoned with much posturing by nehru in 1955 when he rejected the report of the first commission on backward classes.. it didn't play much of a role in any planning, except when some token acknowledgement was paid in the case of the dalits,... so, you could say the state allocated resources very 'objectively'- so, what do you think went wrong... that caste is surfacing again?

kuffir said...

jay,

'my primary question in this post would the markets, which basically is a aggregate individuals making choices, allocate resources/outcomes more 'objectively'...'

pl. read that as :' my primary question in this post was : would the markets, which are basically aggregates of individuals making choices, allocate resources/outcomes more efficiently...'?

Jay Kalawar said...

Kuffir,

I did not offer the argument that caste came into the Indian lexicon as a result of a British conspiracy. The British used it as a category to measure attributes of their subject population, not as a conspiracy. So what I am saying is the following: If the British had used language and dialects as a way of measurement of attributes of their subject population, then we would have today found that certain language and dialects have cornered resources etc. The category chosen for measurement begins to describe an object, becomes human knowledge, which is then used by humans to attempt to control and change that object. This is true even in natural sciences as practiced on non-social objects. Social sciences have the same handicap (in addition to the subjectivity that the social scientist brings to the environment as an observer): the categories of measurement of social systems constrain the configuration of knowledge produced.

About Jatis:
1.In the case of Jatis – my hypothesis is as follows: Jatis are dynamic in regional space and over time. The Jati configurations are different in different parts of India at any given point in time. Jati configurations change in any given region over a period of time. The British approach to measurement of castes have led to an assumption that castes can a) be narrowly defined and b) are static – resulting in our having minimal or incorrect knowledge of Jati dynamics and therefore our ability to change it.

2.Jatis are still in play in India since the state is very weak – it does not provide for the basics of human requirements and therefore Jati systems are still required.

3.To the extent the new emerging state system competes with Jatis, the Jati systems resists its being supplanted. The electoral process plays into this interaction between the Jati system and the state system – with the state system becoming a projection of the Jati system.

About state attempts to develop Indian economy

To the extent the state is a reflection of the Jati system, state control of the economy will amplify Jati ways of allocating resources and distributing incomes.

About role of markets in allocating resources and incomes equitably:

Markets favor those who a) own capital and b) control financial and regulatory institutions (since there is no such thing as a pure market economy). Those Jatis who have owned capital in the past will benefit from markets. Those Jatis who through the electoral process come to have control over financial and regulatory processes will compete with owners of capital for allocation benefit.

So, at least in my mind, the question comes back to: if a) state control over economy and b) market economy will not help take India to a more efficient resource allocation and more equitable income distribution, what will? My thinking at the moment is we need to understand the dynamics of the Jati system much more to be able to change it. We are so into polemics that applying scientific method to the Jati system as an object of study has not been possible. I would say that if we have a set of capable social scientists working on this, free of noise from the Jati leaders, it will take up around 3 to 5 years of research and analysis to come up with ways of introducing change dynamics into the Jati system so that it morphs into something that produces happiness for most of the people most of the time.

Look forward to your thoughts on this.

 
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