Development as Freedom (20 page)

“It is the customary fate of new truths,” says T. H. Huxley in
Science and Culture
, “to begin as heresies and to end as superstitions.” Something very like this seems to have happened about the truth of the importance of markets in economic life. There was a time—not very long ago—when every young economist “knew” in what respect the market systems had serious limitations: all the textbooks repeated the same list of “defects.” The intellectual rejection of the market mechanism often led to radical proposals for altogether different methods of organizing the world (sometimes involving a powerful bureaucracy and unimagined fiscal burdens), without serious examination of the possibility that the proposed alternatives might involve even bigger failures than the markets were expected to produce. There was, often enough, rather little interest in the new and additional problems that the alternative arrangements may create.

The intellectual climate has changed quite dramatically over the last few decades, and the tables are now turned. The virtues of the market mechanism are now standardly assumed to be so pervasive that qualifications seem unimportant. Any pointer to the defects of the market mechanism appears to be, in the present mood, strangely old-fashioned and contrary to contemporary culture (like playing an old 78 rpm record with music from the 1920s). One set of prejudices has given way to another—opposite—set of preconceptions. Yesterday’s unexamined faith has become today’s heresy, and yesterday’s heresy is now the new superstition.

The need for critical scrutiny of standard preconceptions and political-economic attitudes has never been stronger.
¹
Today’s prejudices (in favor of the pure market mechanism) certainly need to be carefully investigated and, I would argue, partly rejected. But we have to avoid resurrecting yesterday’s follies that refused to see the merits of—indeed even the inescapable need for—markets. We have to scrutinize and decide what parts make sense in the respective perspectives. My illustrious countryman Gautama Buddha may have been too predisposed to see the universal need for “the middle path” (though he did not get around to discussing the market mechanism in particular), but there is something to be learned from his speeches on nonextremism delivered 2,500 years ago.

Even though the merits of the market mechanism are now very widely acknowledged, the
reasons
for wanting markets are often not fully appreciated. This issue was discussed in the introduction and in the first chapter of this book, but I must return to it briefly in examining the institutional aspects of development. In recent discussions, the focus in assessing the market mechanism has tended to be on the
results
it ultimately generates, such as the incomes or the utilities yielded by the markets. This is not a negligible issue, and I shall come to it presently. But the more immediate case for the freedom of market transaction lies in the basic importance of that freedom itself. We have good reasons to buy and sell, to exchange, and to seek lives that can flourish on the basis of transactions. To deny that freedom in general would be in itself a major failing of a society. This fundamental recognition is
prior
to any theorem we may or may not be able to prove (on which more presently) in showing what the culmination outcomes of markets are in terms of incomes, utilities and so on.
²

The ubiquitous role of transactions in modern living is often overlooked precisely because we take them for granted. There is an analogy here with the rather underrecognized—and often unnoticed—role of certain behavioral rules (such as basic business ethics) in developed capitalist economies (with attention being focused only on aberrations when they occur). But when these values are not yet
developed, their general presence or absence can make a crucial difference. In the analysis of development, the role of elementary business ethics thus has to be moved out of its obscure presence to a manifest recognition. Similarly, the absence of the freedom to transact can be a major issue in itself in many contexts.
³

This is, of course, particularly so when the freedom of labor markets is denied by laws, regulations or convention. Even though African American slaves in the pre-Civil War South may have had pecuniary incomes as large as (or even larger than) those of wage laborers elsewhere and may even have lived longer than the urban workers in the North,
⁴
there was still a fundamental deprivation in the fact of slavery itself (no matter what incomes or utilities it might or might not have generated). The loss of freedom in the absence of employment choice and in the tyrannical form of work can itself be a major deprivation.

The development of free markets in general and of free seeking of employment in particular is a much appreciated fact in historical studies. Even that great critic of capitalism Karl Marx saw the emergence of freedom of employment as momentous progress (as was discussed in
chapter 1
). But this issue concerns not just history but the present as well, since this freedom is critically important right now in many parts of the world. Let me illustrate this point with four quite different examples.

First, various forms of labor bondage can be found in many countries in Asia and Africa, and there are persistent denials of basic freedom to seek wage employment away from one’s traditional bosses. When the Indian newspapers report that the upper-caste landowners in one of the most backward parts of India (viz., Bihar) are terrorizing—through selective murder and rape—the families of laborers “tied” to their lands, there is, of course, an issue of criminality involved, which is why such incidents receive media attention (and which may be ultimately the reason why things may have to change even in these terrible communities). But underlying the criminal activities, the basic economic situation involves a battle for the freedom of employment as well as the ownership of land on which the “tied” laborers are forced to work; these arrangements continue despite their illegality (as a result of postindependence legislation that has been only partly implemented). The situation has been more studied in India than
elsewhere (as discussed in
chapter 1
), but there is enough evidence that similar problems are present in several other countries as well.

Second (to turn now to a very different illustration), the failure of bureaucratic socialism in Eastern Europe and the Soviet Union cannot be fully grasped merely in terms of the economic problems in generating incomes or other results, such as life expectancies. Indeed, in terms of life expectancies, the communist countries often did quite well, relatively speaking (as is readily checked from the demographic statistics of the Soviet Union, pre-reform China, Vietnam and Cuba, among others). In fact, several of the ex-communist countries now are in a significantly
worse
position than they were under communist rule—perhaps nowhere more so than in Russia itself (where the life expectancy at birth of Russian men has dropped now to about fifty-eight years—considerably below those in India or Pakistan).
⁵
And yet the population is unwilling to vote to return to the previous arrangements, as election results indicate, and even the new successor parties drawing from that old political quarter do not propose such a return (and only demand rather less radical restitutions).

In assessing what happened, the economic inefficiency of the communist system must, of course, be recognized. But there is also the more immediate issue of the denial of freedom in a system where markets were simply ruled out in many fields. Also, people could be disallowed from using the markets even when they existed. For example, they could be barred from seeking employment in an ongoing recruitment process (including some unfavored persons being sent to work where the bosses wanted them to work). In this sense, Friedrich Hayek’s chastising description of the communist economies as “the road to serfdom” was indeed a fitting, if severe, rhetoric.
⁶
In a different—but not unrelated—context, Michal Kalecki (the great Polish economist who returned to Poland with great enthusiasm as the communist rule got established there) noted, in answer to a journalist’s question on Poland’s progress from capitalism to socialism: “Yes, we have successfully abolished capitalism; all we have to do now is to abolish feudalism.”

Third, as was noted in
chapter 1
, in the distressing subject of child labor (as prevalent, for example, in Pakistan, or India, or Bangladesh), there is an embedded issue of slavery and bondage, since many of the children working in exacting tasks are forced to perform them. The
roots of such servitude may go back to the economic deprivation of the families from which they come—sometimes the parents are themselves under some kind of bondage vis-à-vis the employers—and on top of the nasty issue of laboring children, there is also the barbarity of children being
forced
to do things. The freedom to go to school, in particular, is hampered not only by the weakness of primary educational programs in these regions, but in some cases also by the lack of any choice that the children (and often their parents) have in deciding what they want to do.

The issue of child labor tends to divide South Asian economists. Some have argued that merely abolishing child labor without doing anything to enhance the economic circumstances of the families involved may not serve the interest of the children themselves. There is certainly a debatable issue here, but the frequent congruence of child labor with what effectively is slavery does make it, in those cases, a simpler choice. The starkness of slavery yields a forceful case for more vigorous enforcement of antislavery as well as anti-child-labor legislation. The system of child labor—bad enough on its own—is made much beastlier still through its congruence with bondage and effective slavery.

Fourth, the freedom of women to seek employment outside the family is a major issue in many third world countries. This freedom is systematically denied in many cultures, and this in itself is a serious violation of women’s liberty and gender equity. The absence of this freedom militates against the economic empowerment of women, and also has many other consequences. Aside from the direct effects of market employment in adding to the economic independence of women, outside work is also causally important in making women have a better “deal” in intrahousehold distributions.
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Needless to say, women’s work at home can be backbreaking, but it is rarely honored or even recognized (and certainly not remunerated), and the denial of the right to work outside the home is a rather momentous violation of women’s liberty.
⁸

The prohibition of outside employment for women can sometimes be brutally executed in an explicit and fierce way (as, for example, in contemporary Afghanistan). In other cases, the prohibition may work more implicitly through the power of convention and conformity. Sometimes there may not even be, in any clear sense, a
ban on women’s seeking employment, and yet women reared with traditional values may be quite afraid to break with the tradition and to shock others. The prevailing perceptions of “normality” and “appropriateness” are quite central to this question.

This issue relates to other important concerns of this work, in particular, the need for open discussion of social issues and the advantage of group activities in bringing about substantial social changes. Women’s organizations have begun to play a very important part in this transformation in many countries in the world. For example, Self-employed Women’s Association (SEWA) has been most effective in bringing about a changed climate of thought, not just more employment for women, in one part of India. So have participatory credit and cooperative organizations, such as the Grameen Bank and Bangladesh Rural Advancement Committee (BRAC) in Bangladesh. While emphasizing the significance of transaction and the right of economic participation (including the right to seek employment freely), and the direct importance of market-related liberties, we must not lose sight of the complementarity of these liberties with the freedoms that come from the operation of other (nonmarket) institutions.
⁹
This complementarity between different institutions—in particular between nonmarket organizations and the market—is also a central theme of this book.

The labor market can be a liberator in many different contexts, and the basic freedom of transaction can be of central importance, quite aside from whatever the market mechanism may or may not achieve in terms of incomes or utilities or other results. But it is important also to examine those consequential results, and I turn now to that—rather different—issue.

In assessing the market mechanism, it is important to take note of the forms of the markets: whether they are competitive or monopolistic (or otherwise uncompetitive), whether some markets may be missing (in ways that are not easily remediable) and so on. Also, the nature of factual circumstances (such as the availability or absence of particular kinds of information, the presence or absence of economies of large scale) may influence the actual possibilities and impose
real limitations on what can be achieved through various institutional forms of the market mechanism.
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