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Monday, June 23, 2008

One crucial assumption is that, in a free market milieu, initial conditions are the same for each participant and opportunities are equal

Front Page > Opinion > The Telegraph, Monday , June 23 , 2008
THE TIME BOMB -
When opportunities are not equal in a free market world
Ashok Mitra

It was the second half of 1991. Dizzy, exciting days, the country had just entered the phase of economic liberalization. There Is No Alternative, announced those holding the reins of administration. There Is No Alternative, echoed the media. The duty chart was sans ambiguity; everyone in the nation had to live for TINA — and die for it as well.
Was the point of dying for TINA just rhetoric? One remembers a bright young thing, freshly back home with a sizzling PhD from Tufts or Brown, who had joined at the time the editorial desk of a major newspaper. She was in her proselytising best. Economic neo-liberalism, she was sanguine, is the same as optimizing efficiency; if you want to survive in the harsh world of global competition, you must try, relentlessly, to prove your superiority over others, you must stay ahead of the rest of the crowd; if you fail in that and fall behind, you are inefficient; once you turn out to be inefficient, you deserve to be weeded out; not to mince words, in case you fail to make the grade, you have no right to exist; once the market rejects you, it is sayonara time, you better die.
Say not your struggle not availeth. The bright young thing’s labours have not been in vain; the education she tried so hard to impart has finally sunk into the psyche of the new generation. Take the instance of the girl, in the fifth year of her class at one of the Indian institutes of technology, who hanged herself the other day. She had flunked two subjects and took little time to make up her mind: she had lost in the battle of efficiency, she therefore had no right to live on. The girl wrote a note of apology to her parents, not so much for ending her life, but for her inability to make it in the concourse of global competition.
For some, her self-destruction was in the genre of an ordinary event. The market buffs will not think twice about it: she was a sorry case, that was that. The global market is a Darwinian precinct: only the fittest survive here; those who do not, simply drop out of the picture. In the countries of advanced capitalism, such as in the United States of America or western Europe, firms which cannot stand the heat of competition go out of the kitchen. Their sponsors either merge their enterprise with a relatively successful firm and are satisfied at playing the role of a minor partner; else they take a junior, non-descript job in a flourishing corporate entity and fade away in the anonymity of suburban living; quietly mowing their lawns on weekends.

Nascent capitalism is a different kind of proposition. It is also, more often than not, predatory capitalism, snatching opportunities from unwary neighbours. Much more killing is the tension which is its joint product. It must have been dinned all the while into the ears of that IIT girl that there was no escape, she was in an either/or situation: either she had to be a topper or it was kaput.
The present whereabouts of the bright young journalist who, 17 years ago, wrote that ferocious piece recommending death to the inefficient, are not known. Maybe she has meanwhile discovered, in some modest measure, the quality of mercy, maybe she remains an unreconstructed crusader for the free market. It is pointless to target her though. The young lady was pledged to a dogma, and perhaps still is. Dogma is quintessential faith. Faith in turn has its own rationale — and its own assumptions.
One crucial assumption is that, in a free market milieu, initial conditions are the same for each participant and opportunities are equal. Is not this hypothesis shot full of holes? Consider the recent decision a particular Indian institute of management, sponsored jointly by the Union and state governments, and set up with public funds, to charge an entrance fee of Rs 12.5 lakh from every candidate for admission to its MBA course. To perform extraordinarily well in CAT — national level admission test for IIMs — in the view of the institute’s governing body, was not enough; even those applicants placed at the very top of the list of successful candidates would have to shell out the indicated kind of money before they could join the pristine course. No less than the ministry of human resource development has failed to nudge the institute’s authorities into reconsidering the matter. Their point of view could not be more clear-cut: in a free market economy, they are entitled to charge what the market will bear, there are enough candidates who will not think twice before shelling out twelve-and-a-half lakh of rupees to get admission to the IIM course, for once they complete the course, the prospects of money-making are mind-boggling, twelve-and-a-half lakh of rupees is pifflingly small beer.
An uncomfortable question sticks its head in. What about that important condition governing a free market mechanism: equality of opportunities and of initial endowments? Is the condition being satisfied in the IIM case? It is possible for offspring from a poor household to be as bright and brilliant — and therefore as competent — as children from a very rich family. But the parents of the former would never be able to put together the sum of twelve-and-a-half lakh of rupees to enable their ward to gain entry into the sanctum of the IIM campus; even the friendly neighbourhood bank will be of no help in the absence of adequate collateral. The short-of-funds youngsters, disappointment writ large on their faces, look around for modest jobs, either in the government or elsewhere, fetching perhaps barely fifteen thousand rupees or thereabouts a month. The offspring from the rich household, on the other hand, would, on completion of the management course, be golden cargo; the ‘campus selection’ pageantry would present this youngster with the prize gift of multiple choices. The choice would be duly made. The IIM directors would call a press conference to announce to the public that this student of theirs has been hired by an international investment group for an annual compensation package of a cool one million US dollars. The winner would take all, and entirely because she or he has a background of wealth and affluence.

There are ways and ways of summing up such goings-on. One approach would be to treat the phenomenon as an inevitable concomitant of globalized development and leave it at that. There can however be a qualitatively different point of view. The technology or management student either from poor circumstances or of poor merit, ending his or her life after being checkmated by the vagaries of the free competition game, could be an isolated event. There might be far uglier, more worrying manifestations of the frustrations of the bumped-off-from-the-opportunities crowd. Hundreds and hundreds of embittered young people, whom the wagon-coach of competition has left behind, might refuse to submit meekly to fate; they could be material for a fearsome incendiary device, which, were it to explode, might cause wholesale rack and ruin to the social rubric.
Do the directors of the IIMs ever stop to think whether their press conferences, blaring the vulgar tiding of how much more luscious the future of a small bunch of already luscious specimens of society was going to be, could not actually be the agent provocateur to set off the incendiary device?

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