Guest Column — Regulate capitalism

As economists would tell us, the market behaviour depends upon the well known laws of demand and supply, for services and goods. Very often...

As economists would tell us, the market behaviour depends upon the well known laws of demand and supply, for services and goods. Very often it operates against the interests of some or the other sections of the society. On account of the complex nature of the market forces and somewhat unpredictable behaviour of the market, the rulers and Governments, from time to time, have had to regulate and intervene in the market. The regulation and intervention could be anywhere along the line on the supply or demand side.

The fact that free market mechanism is not perfect and requires regulation based on historical experience is accepted by most. In a free market, nature’s law of `survival of the fittest’ operates. The weaker get marginalised and elbowed out. With the passage of time such regulations and interventions have taken various forms.

In extreme cases the Governments have totally rejected the free play of market forces and taken over all the functions and responsibilities of producing and supplying the goods and services to the people. In this century we have seen the rise and fall of such systems. It is difficult to say that any system of governance in the recent human history has ever allowed total freedom to the market forces without regulatory, promotional and developmental intervention in some measure.

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Human development, equitable distribution of wealth and resources, and human happiness should be the ultimate objective of any economic activity. Most of the countries in this century threw their lot with one or the other bandwagon of dominant doctrines i.e. capitalism or communism. Now with the collapse of communist ideology capitalism has a field day, with what can well be said as globalisation of capitalism.

In the midst of these extreme positions, some countries adopted a middle and cautious course. They allowed the private sector to operate, however they exercised numerous controls at every level. Countries which have followed the path of such a mixed economy may not have achieved spectacular progress but have succeeded in creating democratic and business institutions unlike the totally communist regimes.

The failures and inadequacies of the mixed economies were not really on account of ideology but largely due to the political and bureaucratic mismanagement. In the Indian context public sector involvement was well conceived and for valid reasons. Lack lustre performance of public sector can also be attributed to lack of autonomy, interference and inflexibility.

It is necessary for the Governments to realise that the conditions that necessitated the public sector involvement and intervention still exist in considerable measure. However, changes and corrections in terms of downsizing, restructuring and freedom of operation are required.

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A total shift to capitalism and market driven economic order would adversely affect the lower strata of the societies, including those in the developed countries. It is already evident from the falling incomes of those at the lower end, and increase in incomes of those at the upper end.These developments, coupled with technological shifts, increasing population and stubborn unemployment and under-employment could exacerbate the problems.

The author is the Secretary General of Standing Conference of Public Enterprises