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Any large element of individual freedom and some beauty in the ordinary life of the ordinary man, some measure of real progress in the material comforts at one’s disposal, and a life hope of further progress in the future – it is found that the private market was the main device being used to organize economic activity
Raju G. Mendez
It’s impossible for people help laughing and once they begin to laugh it is almost impossible to stop their laugh at the cheap gimmicks played by the so-called politicians. People are not creepy stalkers but rather they are intelligible.
Let those represent people politically be fully convinced of the reality that they are what they represent by way of their conduct, manners, policies, and right attitude towards the public. Let them not amuse people with political gimmicks for their own gains. The plain truth is that the people are really fed up with all these cheap games of theirs.
The combat between the people and the elected ones is fierce and unfortunately, as a sign of contrast, the people are repulsed with great loss during this contest.
Whatever it be, before the people set fire, let the politicians be acquainted with the real facts! As long as the ‘True Lords’ (people) remain captive of the rulers, the lesson that is to be taught to the rulers is, that there will be a day when every citizen worth lakhs of them, will be inclined to break the fetters, for only they are also made of is iron. A stronger armour of iron can easily break another tiny piece of metal effortlessly.
There are many reasons lying at the bottom of their mindset, close in with Democracy, Freedom, and Economy. The position of power achieved, merely under the Constitution of India they enjoy, shouldn’t be contrived as the final right to secure a succession of political supremacy bequeathed to them by the people. The impenetrable eyes and inscrutable countenance of the people give little away. Rulers can never join the people unless they are convinced that “we can only win collectively” A democratic thought from News Politics.
Economic freedom can only be obtained under a well-regulated form of society and consists of an equal administration of justice and of laws, to which the citizens agree to submit for the benefit of the whole- the equal right to live, and not be permitted to starve, which has not yet been obtained in this country.
But how does it work?
A study by Bibek Debroy and Laveesh Bhandari found that the five most economically free states in India have higher incomes than the national average.
If we fix our eyes on political freedom it signifies the right to vote and choose a government that the majority of us prefer and the tale of social freedom is the right to be treated equally regardless of caste, race, or gender.
Economic Freedom?
How many of us have trained ourselves to be adept at economic freedom? What still remains idle in ourselves is economic freedom, without which political and social freedom are at best inadequate and at worst a farce. What we have callously cast away is political freedom while the rich could buy votes and the government.
The key determinants of economic freedom are small Government, the safety of property rights, easier availability of credit, and a plentiful labour force. When people are tempted to change religion for money or marry their girl child off to the highest bidder social freedom loses its relevance. Ironically, India is a country with a high level of political freedom and a low level of economic freedom. In fact, higher prosperity is achieved only through policies that foster economic freedom.
Scottish philosopher and father of modern economics Adam Smith said: “Nations will experience opulence and peace once they create the institutions that encourage entrepreneurship and savings.”
Evidently, a country evolves to help its people remain prosperous is through the kind of policies (e.g. tax, expenditure, and savings) and the type of institutions (e.g. police, judiciary, and banking)
The hard part that still haunts us is, on every ranking, several research institutions around the world have placed India on economic freedom, closer to the bottom than to the top. Hong Kong, Taiwan, Malaysia, and Singapore are among the most economically free countries in the world ahead of India.
Ironically, none of these countries offer the level of political freedom that Indians enjoy. But that doesn’t mean countries with a high level of political freedom can’t have high economic freedom. The US, UK, Germany, France and Australia are ranked much higher than India on economic freedom and people in these countries are as politically free as Indians are.
India needs to increase its level of economic freedom while preserving its already high political freedom. That is because political freedom can be enjoyed most only when combined with economic freedom.
To be fair, the Central government has done quite a bit since 1991-both on the policy and on institutional fronts-to enhance India’s economic freedom. But economic freedom is as much a consequence of the policies of the Central government as it is a result of the acts of state governments. In a pioneering study, Bibek Debroy and Laveesh Bhandari- the duo behind INDIA TODAY’s annual ranking of states developed an index of economic freedom for Indian states.
Being the first effort of its kind, the index faced some limitations. Not all factors that reflect economic freedom were available in India. Data on many factors were not available for all states. Yet measuring the level of economic freedom in Indian states was worth an attempt.
The results are instructive and validate the hypothesis that higher economic freedom results in higher prosperity. The five most economically free states in India generate about 40 percent of India’s GDP. The income of people living in these five states, barring Chhattisgarh, is higher than the Indian average (see table: Freedom = Prosperity). So economic freedom pays and pays very well.
Aggressive disinvestment in state-owned companies and a smaller proportion of government employees push Chhattisgarh’s score as freedom facilitator. Of course, within this broader conclusion, there are exceptions. For instance, Chhattisgarh, the fourth most economically free state in India, has income levels much lower than the national average and its contribution to the country’s GDP is abysmal. On the other hand, Punjab, which is one of the richest states of India, ranks very low on the economic freedom index.
One way to interpret the apparent contradiction is as a performance potential gap. Chhattisgarh’s high level of economic freedom points to the immense potential the state has for economic growth and it is up to the state Government to realize that potential (through better policies and institutions). The high level of prosperity in Punjab indicates that the state has scope to increase the degree of economic freedom for its people (again by improving policies and institutions).
A caveat is in order. Most of the data used in the study are up to the year 2001. State governments that came to power after that year can’t be credited or discredited for their high or low ranks. Gujarat should particularly take note of this since the state Government claims the high rank on economic freedom as its achievement.
What are these policies and institutions that can help states increase freedom and prosperity? The study identifies three categories of factors: facilitation, protection, and regulation.
Facilitation is about the size and type of government in a state. Tax rates and expenditure levels give an idea of the government’s size and intervention in the economy. Generally, low tax means higher freedom. Chhattisgarh has one of the lowest taxes on commodities and services.
Stamp duty is low in Andhra Pradesh, Madhya Pradesh and Punjab. Disinvestment in state-owned companies also enhances economic freedom. Andhra Pradesh, Chhattisgarh, Uttar Pradesh, and Uttaranchal outperform other states on this parameter. Economically freer states also spend the least on subsidies. Power subsidy to domestic users is among the lowest in Gujarat, Jharkhand, Bihar, and West Bengal.
In Tamil Nadu, Orissa, Gujarat, and Kerala, government services and revenue expenditure of the government constitute a smaller part of the state GDP positive factor for economic freedom. What is measured here is the revenue expenditure and not investment (or capital expenditure) by the government. When it comes to capital spending, higher spending may be good for freedom. Chhattisgarh is the surprise topper on the facilitation index.
Higher recovery of stolen property, high rate of completion of trials, and moderate vacancies of judicial posts make Tamil Nadu the best protector of economic freedom
Protecting freedom is as important as granting it. The protection index measures how good a state’s legal system is in protecting property and other rights. In Andhra Pradesh, Rajasthan, Haryana, and Jammu and Kashmir a larger share of property that gets stolen is recovered (a high percentage of stolen property is recovered). Bihar, Assam, Kerala, and Maharashtra don’t do well on this parameter. Safety of life is highest in Gujarat, Tamil Nadu, and Andhra Pradesh. However, Jammu & Kashmir, Bihar, and Uttar Pradesh don’t do well on this count.
Economic freedom is higher if justice is served effectively and without delay. In Gujarat, Chhattisgarh, Rajasthan, and Madhya Pradesh most of the cases taken up by the police are ensured complete investigation. The completion rate of trials by courts is high in Andhra Pradesh, Tamil Nadu, Karnataka, and Orissa.
An easy and regular supply of credit (loans) and labor are critical ingredients of economic freedom. States that regulate credit and labor will have a higher level of economic freedom. Wages for workers are higher than the minimum wage rates in Andhra Pradesh, Maharashtra, Himachal Pradesh, and Jammu & Kashmir.
That means higher economic freedom for workers. Industrial disputes constrain business. Gujarat, Madhya Pradesh, Uttar Pradesh, and Orissa report the least number of days lost due to strikes and lockouts, whereas Kerala, West Bengal, and Tamil Nadu show a higher level of industrial disruption.
The ratio of unorganized to organized labour force is very high in Bihar, Uttar Pradesh, and West Bengal and is among the lowest in Gujarat and Tamil Nadu. The presence of a large number of unorganized labour means more workers, a positive factor for businesses. Bihar, Uttar Pradesh, and West Bengal are better performers.
Special economic zones (SEZs) were created to grant industries higher freedom. Gujarat, Andhra Pradesh and Maharashtra have a large number of SEZs. An indicator of economic freedom is the implementation rate of investment proposals.
Rajasthan and Haryana show a very high rate of proposals translating into actual investments. The implementation rate is the slowest in Chhattisgarh and Orissa. When it comes to corruption, Gujarat, Andhra Pradesh, and Maharashtra are the cleanest states while Jharkhand, Jammu & Kashmir, and Bihar are among the most corrupt. Overall regulation is best in Maharashtra topper on the Regulation Index.
Highest minimum wages for unskilled workers and one of the lowest rates of industrial strikes make Maharashtra the best regulator of economic freedom
The three indices of facilitation, protection, and regulation present a blueprint of sorts for states willing to enhance economic freedom. The 26 factors that the three indices cover are by no means exhaustive. But they clearly prove that a state can only be as prosperous and free as its policies and institutions allow it to be. The Economic Freedom Index also tells us why some states prosper while others don’t. Ten years ago, an average person in Goa, India’s richest state, earned six times more than an average Bihari. Now he earns 7.7 times more.
As states compete with each other for investment, their track record on economic freedom is one achievement investors can consider, especially now that states are becoming determinants of their destiny by breaking free from the controls of the Central government. The lesson for Bihar and all other states ranked low on economic freedom, is to break the shackles imposed on the economic lives of its people. And what about the states with a high level of freedom? They must keep raising the bar of economic freedom- for themselves and for the laggards.
FREE MARKET?
In a free market, the government does not have any room to regulate the economy.
A free market is a self-regulated economy where the laws of supply and demand determine the economic system. In a free market, the government does not regulate any aspect of the economy. However, some critics argue that even the freest markets require some state intervention but for what?
Private market investment offers flexibility and customization. Investors can participate in decision-making, tailor terms and structures, and align their portfolios with long-term goals. This level of involvement and customization enhances the potential to achieve specific investment goals.
However, the politicians intervening to establish Democratic capitalism, referred to as market democracy, is a political and economic system that integrates resource allocation by marginal productivity, masquerading as being synonymous with free-market capitalism, adopting deceptive means of resource allocation in terms of social entitlement. But the truth is, it is a political gain over a democratic approach.
The concept of Democracy is not to be perceived as merely being free while It can be said that dictatorship has been defeated and freedom has been won. Yet, the victory of freedom does never signify that it is the triumph over democracy. Though we claim that we have freedom, we still have not achieved the democratic order of Freedom which is so fragile.
We are not born equal from the evidence of our own senses. To suppose that every man was born equal is to to suppose that they are equally endowed with the same strength, and with the same capacity of mind, which we know is not the case. We are all meant to fill various situations in society according to what we have, what we are, and what we can. It is clear evidence that the earth was not intended to be equally distributed because the strong oppress the weak, tyrants rise up and conquer – men combine to do wrong. This is what happens in the present monstrous society, in which we have kings and lords, and people rolling in wealth, while others are in a state of pauperism and obliged to steal for their daily bread.
Legal freedom is the idea that individuals have the right to be independent and act on their own will. The legal system protects individuals from external interference, allowing them to explore and experiment within a sphere of action.
The Great Depression was caused not by a failure of the free-market economy but rather by flawed government policies. (The Monetary History of the United States 1867-1960. Friedman and Anna Schwartz presented compelling empirical evidence.)
The Great Depression had a major impact on the Indian economy. Between 1928 and 1934 it reduced Indian imports and exports by nearly half. Wheat prices too fell by 50% during this time. More than the urban areas the agricultural sector which dominated livelihoods in rural lands was badly hit by the Great Depression.
Friedman’s “Free to Choose”(1980) became one of PBS’ (stands for Public Broadcasting Service,a non-commercial, free-to-air television network in the United States that broadcasts educational and cultural programs) most viewed video series. It also attracted large audiences abroad, including communist countries where it reportedly was being smuggled. The book that accompanied the video series was a bestseller and was translated into 17 languages. According to him “Wherever the private market was largely suppressed, and the state undertook to control in detail the economic activity of its citizens … there the ordinary man was in political fetters, had a low standard of living, and was largely bereft of any conception of controlling his own destiny.”
‘The Wealth of Nations’ by Scotsman Adam Smith as the father of modern economics, analyzed the way in which a market system could combine the freedom of individuals to pursue their own objectives with the extensive cooperation and collaboration needed in the economic field to produce our food, our clothing, our housing. Adam Smith’s key insight was that both
parties to an exchange can benefit and, so long as cooperation is strictly voluntary, no exchange will take place unless both parties do benefit.
No external force, no coercion, and no violation of freedom is necessary to produce cooperation among individuals all of whom can benefit. That is why, as Adam Smith put it, an individual who “intends only his own gain” is “led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.”
Democratic capitalism was implemented widely in the 20th century, particularly in Europe and the Western world after the Second World War. The coexistence of capitalism and democracy, particularly in Europe, was supported by the creation of the modern welfare state in the post-war period. The implementation of democratic capitalism typically involves the enactment of policies expanding the welfare state, strengthening the collective bargaining rights of employees, or strengthening competition laws. These policies are enacted in a capitalist economy characterized by the right to private ownership of property. Even Catholic social teaching offers support for a communitarian form of democratic capitalism with an emphasis on the preservation of human dignity
Thomas Jefferson had set the second set of ideas embodied in the ‘Declaration of Independence’, drafted to express the general sense of his fellow countrymen. It proclaimed a new nation, the first in history established on the principle that every person is entitled to pursue his own values: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights; that among these are Life, Liberty, and the pursuit of Happiness.”
The central theme is that the market economy is much more effective in promoting freedom, prosperity, and equality than centrally controlled mechanisms that rely on bureaucratic decision-making.
The legal definition of freedom includes the state of being free, Liberty, self-determination, absence of restraint, the opposite of slavery, the power to act without hindrance, other than what is imposed by just and necessary laws, the presence of a system of laws and institutions in a country’s government and constitution that secure civil liberty to the individual citizen.
Freedom is often associated with liberty and autonomy, which can be understood as “giving oneself one’s own laws”.
( Raju G. Mendez is a language and life skills trainer, writer, and Journalist based in Thiruvananthapuram )
