Going Deeper
Parameters of governance
In the euphoric global rush to embrace open and competitive market economy, to the untrained mind the difference between laissez-faire and capitalism may sometimes become blurred. Laissez-faire doctrine advocates economic activities to follow their natural course with the least degree of governmental control, if any. Capitalism, on the other hand, describes an economic system where private actors are allowed to own and use property as they wish in furtherance of their interest but subject to the laws of supply and demand, where the government has a role to play in order to maximise the interest of the society and not to maximise the interest of the few.
If in developed economies the government sees fit to regulate the market in cases it deems necessary, then it is not readily understood as to why the donors and Bretton Woods Institutions become panicky if governments in developing countries intervene in the price mechanism so that the great majority of the consumers do not have to remain at the mercy of few dishonest businessmen bent upon making abnormal profit by creating syndicates that in turn create artificial shortages of goods in the market.
Though governmental intervention in a capitalist system is generally indirect, occasions may arise, as has been happening in Bangladesh in recent months, where skyrocketing of price of essentials has become the preeminent politico-economic problem, and the authorities may have to take direct measures to bring the price of essentials within the purchasing capacity of the ordinary people.
Both Alfred Marshall and Karl Marx, despite having disparate beliefs, agreed that capitalists, if not regulated by governmental agencies, would inevitably rush towards making as much profit as possible, and, hence, bring distortion in optimal market conditions that form the core of a capitalistic society.
French philosopher Michael Foucault stresses that governance should contain active and positive conduct of the government throughout the whole fabric of society and should penetrate the deepest recess of a nation's being. In that sense, any government worth its salt should be acutely aware of, and redress, the difficulties of the governed.
Almost all developed economies that boast victory over communist ideology do have governmental control over the economy, which is used indirectly so that private actors in the market are bound by rules. In the US, anti-trust laws prevent monopolistic practices in interstate commerce, with strict criminal sanctions imposed on the violators.
Prof. Steven Rosefielde describes the American system as based on "a culturally regulated, imperfectly competitive market model, founded on individual utility-seeking under the rule of law, modified by a constituent form of state economic governance. It features private ownership of the means of production, and negotiating price-setting, including wages, interest and foreign exchange rates … The government intervenes in the economy through legislated programs, micro-regulations, tax incentives and disincentives, subsidies, controls and transfers, administered by federal and state bureaucracies."
In short, Professor Rosefielde describes the US as having a "managed free enterprise." It is, therefore, axiomatic that the regulation of market forces cannot be left only to the whims of the sellers and the need of the buyers, and the role of the government has to be accepted.
Even if the roles of the buyer and the seller are reversed, the result of a distorted market cannot be ruled out because human beings, by nature, are acquisitive, often beyond their immediate and future needs, and uncaring to the needs of those less fortunate. To bring about equity in the distribution of national wealth to ensure welfare of all the people, the role of the government is undeniable.
One should, however, be aware that the greater the regulatory role that is given to the government, the risk of corruption in the form of collusive relations between the business community and the political and administrative power holders also becomes greater. And if corruption is unchecked then disparity in income between the haves and the have-nots becomes greater, leading to breakage in social cohesion.
One could, perhaps, find corruption as a smoldering factor in the anti-Tsarist and the Chinese revolutions, and more recently in the Iranian Islamic revolution. It is regrettable that in all three cases the popular aspiration for economic emancipation might have been met to a certain degree, but political freedom as understood in any definition of democracy was denied. But then, communism and theocratic systems rarely allowed dissent and, consequently, optimal management of resources became a casualty of command economies.
Yet, like a politician of a Third World country, the present British Prime Minister Gordon Brown told the 1994 annual conference of the Welsh Labour Party: "When I see children trapped in the grinding humiliation of family poverty, frail pensioners having to decide whether to go hungry or to be cold, people young, fit, and willing to work reduced to homelessness and begging in the streets … I know for the Labour Party the hour has come."
Lack of respect for values to serve the people among some politicians in both developed (albeit in lesser number) and developing countries is common, as we have seen in Bangladesh and most recently in the conviction of former Philippines President Estrada on charges of corruption. This short discourse on corruption was needed because international financial institutions have assessed that, but for corruption, Bangladesh's GDP could have grown by another three percent per annum.
But if capitalism is designed to satisfy consumers' needs in the short term and productivity in the long term to ensure a higher standard of living of the people, then the efficient and technologically advanced entrepreneurs will have the advantage over relatively inefficient ones, thereby resulting in disparity in income between the two groups. This would also be true globally, as seen by the insistence of the US and EU that the developing countries lower their tariff and thus increase the penetration of the developed countries' goods into the developing world, while, at the same time, the developed countries are reluctant to lower the subsidy given to farmers and tariff on agricultural imports. Reduction in farm subsidy and support to farm products exporters would have a huge effect on more than one billion poverty-stricken people who largely inhabit least developing countries like Bangladesh. Therefore there is an in-built inequity in the WTO negotiations as in the national economies of the developing world.
There is no reason to believe in the altruism of the donors and lending agencies who have their own agendas to follow. In such a scenario, governments in countries like Bangladesh would be well advised to continue reducing import tariff on essential commodities, provide interest-free loans to farmers, particularly to those who have lost their homes and hearths during the floods, reduce interest for export-oriented industries (and allied small import industries that supply intermediate goods to the export industries), and, above all, try to instill a sense of fairness among the rich and powerful who, in any case, will also suffer if things do not improve for the common man.
Kazi Anwarul Masud is a former Secretary and Ambassador.
For all latest news, follow The Daily Star's Google News channel.
Comments