Free Market: Redesigning Development Agenda


By

Parag Pateria
Reader
Disha Institute of Management & Technology
Raipur
 


The success of many developed countries may not show it, albeit free markets and democracy are a dangerous combination.  Especially when an economically dominant ethnic minority is combined with widespread poverty and rapid democratization, populations may respond by repudiating either markets or democracy.  We attempt to identify tools that have been successfully used to mediate this market-democracy tension in developed nations, and shows why they might not work so well in developing free market democracies.

This appraisal focuses on the instability inherent in free-market democracy.  We argue that the current peaceful coexistence of free markets and democracy in many developed countries is the result of a somewhat fortuitous confluence of circumstances not found in many of the world's developing free-market democracies.  In particular, many such developing countries are economically dominated by ethnic minorities; combined with rapid implementation of democracy, such situations can be explosive.  Therefore, it is not only unrealistic, but also improper to promote markets and democracy in the developing world in absence of institutions capable of mediating them.

We attempt to identify the main tools that governments use to de-escalate the conflict between market-generated wealth disparities and popular politics.  First, we argue, governments use material tools; redistribute institutions aimed at the less prosperous, combined with the general rise in prosperity brought about by markets, helps alleviate some of the discontentment of the economically disadvantaged.  Second, through illustrations drawn from the United States, we identify political tools governments use to mediate the tension between free markets and democracy, such as restraints on suffrage and restraints on political participation.  These tools can be used to ensure the economic status quo also remains the political status quo.  Alternatively, these restraints can check the "confiscatory impulses" of the majority.  Third, we cite prevailing national ideologies used to justify economic inequality in democratic countries.

After identifying the main tools used to help free markets and democracies coexist in developed countries, we propose that these tools are more likely to fail if similarly deployed in developing free-market democracies.  Though critics attack each device in turn.  Material constraints are less likely to succeed not only because of the paucity of resources and surfeit of population in developing countries, but because those resources which could be used to pacify the truly disadvantaged are often directed instead at lower-level apparatchiks.  Political restraints are not efficacious because, although they exist, they have not been internalized by those with the power to enforce; the only real restraint on governments in developing countries is those governments' own corruption and thus incompetence.  Meanwhile, market-compatible ideologies are less likely to take root because citizens' own survival is too imperiled for citizens in developing countries to internalize such myths. 

The chief problem identified is that of ethno nationalism, described as "that form of nationalism in which the nation is 'defined in terms of assumed blood ties and ethnicity.'"  Unlike already-developed free market democracies whose dominant ethnic groups also dominate the economy, many (although certainly not all) still-developing free-market democracies are often economically dominated by ethnic minorities.  In any given nation-state this tension alone threatens to foster widespread majority resentment, leading either to internecine conflict, a retreat from the market, or a retreat from democracy.  When combined with widespread poverty and rapid democratization, the results can be disastrous. 

The hypothesis stresses that prophylactic measures must be taken to quell potential ethno nationalist tensions by giving the poor a feeling of involvement and investment in free-market democracy, but that if not properly designed they may do more harm than good.  While admitting that tracing the origins of certain ethnic groups' economic success is a difficult task, The concept of material, political and ideological tools to search for solutions.  The material remedies of interethnic middle classes and interethnic corporate ownership becomes a core driving thought.  The political restraints, while so far successful in developing free-market democracies like India, can be used to inflame as well as quell ethno nationalism—universal suffrage is necessary to check this danger.  Finally, a tertiary set of measures that would not advance a particular thought ideology but rather turn public opinion away from ethno nationalism.  First, economically disadvantaged minority groups must see some of their "own kind" prospering.  Second, dominant minorities must prove stereotypes about their group wrong through savvy public relations and community involvement.
 


Parag Pateria
Reader
Disha Institute of Management & Technology
Raipur
 

Source: E-mail September 23, 2006

     

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