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Re: [Re: Pvt and Public -no point]



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<<
"The free-market thesis would account for the Old couple's
predicament and solution, IF it is allowed to play perfectly."
How exactly do you do that? That is the main issue.
And where do you have free markets in this real world?
You can see, for example,  from Human Development Report of UNDP that
top 10 pesticide companies in the world control 85% of the global
market, which is worth 31 Billion dollar worth. Similar is the case with
top 10 telecom companies in the world, which control 86 % of the 262
Billion dollar global market.The way inequalities in the world are
growing is unprecedented in history. The assets of top 3 Billionaires in
the world are more than combined GNP of ALL least developed countries in
the world consisting of 600 Million people.All this shows simply that
level playing field doesn't exist, desireable though it is. Can we
honestly expect free markets to play their text book role with so much
of gap?
>> 

Free markets does not imply simple privatization. Historically the concept of
"free market" began from the idea of everyone having the freedom to trade with
anyone they choose. In the absence of large outside influences, such a system
settles down to a configuration where there is "equality of opportunity." 

Equality of opportunity does not imply equality of wealth. It only implies
that regardless of who it is, everyone has the same levels of opportunity to
register their demands. For example, having a standard entrance examination
for entering professional studies is an example of equality of opportunity.
Someone whose father is rich does not automatically get a better opportunity
than someone who isn't for getting into professional studies. 

As the above example demonstrates, huge levels of inequality of wealth and
lack of structures that verify equality-of-opportunity transactions, can
undermine free markets. For example, you might argue that many bright people
are so poor they can never afford to study for these examinations, etc., and
hence not be able to register their demands (for professional studies) onto
the system. Exactly. And that is *not* a free market scenario. 

In a free market, the dynamics are what are called "demand driven". Wealth in
a free market comes from meeting demands in the market. And that is how
equality of opportunity results. However, if wealth coming to a market from
outside is many times greater than wealth that can be generated by meeting
local demands, the system is no longer a free market. It is just an oligarchy
of the rich and the powerful, whose richness has nothing to do with what they
have contributed to the system. 

A system with no safety nets for its citizens -- no means of arbitration, no
"institutional infrastructure", etc. is still a privatized system, but not a
free market system. Not every actor is free (has equal opportunity) to trade
with anyone else; they need to have "money" which they cannot earn to suitable
levels (so as to have comparable levels of opportunity) by trading with others
in the system. 

In India actually, socialism wasn't that big of a problem than the different
oligarchies in its soceity. Government corruption is more often than not a
reflection of the corruption inherent in India's soceital oligarchies; and is
very different from the government corruption that was claimed to have existed
in the real socialist economies. 

IMO, implementing a free system in India is bound to fail if it is tried to be
done "top down" with governmental policies alone. What we need (IMO) are the
"networks." Economic strength, after all is supposed to be a measure of how
easy it is to make demand and supply meet. Terms like foreign exchange, GDP,
per capita income etc., assume the existence of networks of a particular kind
that seeks to meet demand and supply. However, in India it is not the case.
Such networks do not exist or are not comprehensive enough. 

-srinath 


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