Today I encountered the
Free Market Leviathan (FML) - a paradoxical beast that Sanjay believes will
leave everyone better off. He makes one critical assumption to validate
this paradox – the Free Market is the Commons, the Leviathan spawns from it and the Leviathan actually maintains this Commons. What on Earth
does that mean? Let’s start at the beginning.
It’s 1845 on a Tuesday, we’re
stuck at these ridiculously improbable traffic lights for an incredibly long
time (by their standards, Sanjay says). And he says it’s going to get better
soon – given an indefinite traders’ strike within the City over a proposed LBT
(Local Body Tax. Not LGBT excluding the gay brethren) in the State. He waits
for a couple of minutes, and springs that uneasy question – do I think that’s
right? It being the Tax, not the strike. Throw in the sentiment behind the
strike as well. I claim rudimentary knowledge, trying to shrug it off (being my
usual conversational self). But he’s steadfast. Here is a summary of his
understanding of the sentiments of the various stakeholders. Unorganized trade
rips off consumers playing the information asymmetry card. Government
imposition of mandatory declaration of goods (and services) flow will
automatically remove this, thereby making the market more competitive and hence
more efficient. Smells like (good) protective governance and merely an
opportunity cost so far. But wait, the declaration naturally paves the way for
taxation. Bingo. Vested government interest. Laying the cards out – the government
gets revenue, a semblance of fair free markets that the consumer might buy, and
a double whammy of lost revenues and increased expenses (that increase with
revenues) for the producers. Looks like a bipolar conflict so far. But Sanjay
thinks otherwise. In a way, he argues that this market will improve consumer
participation and will be a net profitable gainer. He strays here from the ‘free’
part of his free markets by assuming that the government will also be a
forceful price setter (not true with something like the LBT). But that’s
forgiven. He then proceeds to digress briefly (for precisely 15 minutes) into
his recently changed shopping habits (the toddler marketer in me starts
sniffing for insights, involuntarily). He buys Dal from D Mart these days. Oh
firstly, he thinks the government runs D Mart (it’s operated by a private LLC).
But that’s forgiven too. He says he’d rather go with a fluctuating free market
price that always promises quality (you win some, you lose some) than a black
box custom pricing mechanism that always keeps you guessing if you got ripped
off. Scratch that. He says he’s sure the shop next door has always ripped him
off. He’s more pissed off that the other guy got it cheaper at the same shop. He
goes on to update me about prices of nuts and bolts and the mark-up involved in
their flow (a good 300% according to him). And 50g of paint (that’s what it
sounded like – unless pants weigh that much and can be made at INR 8). And
jeans. He buys them at malls these days. Here he’s thinking of value and not
price – a slightly costlier pair that lasts longer than the wash-outs his
neighborhood store offers. But it’s the fair common price that clinches it, he
says. And he believes the government deserves credit for this. Declaring price
up front makes the market competitive. Backing the price with records of sale
keeps it competitive. Taxation on the basis of these records becomes an
external stimulus that can potentially control this price. And he says this is
fundamentally acceptable.
At this point I’m forced
to make some human sounds. So I point out recent leakages in the flow of
government revenues. He admits everyone’s got to eat. But his system assumes
efficient governance. That’s what makes it a Free Market Leviathan – price is
not controlled privately (to a large extent – he fails to factor in rare
resources, hoarding etc that the OPEC and DeBeers have so proficiently used)
which makes a price competitive market a Commons. But there is no control on
the price either beyond demand and supply – which makes it a free market. That’s
one side of the coin – Free Markets as a Commons. But all this is enabled by a
big government – imposing mandatory declaration of goods flow. There’s your
Leviathan. Traditionally, it would snuff out the free market. But it cannot
exist without the Commons – in the extreme case of efficiency where consumable goods
and services are privately produced, the Commons funds the Leviathan. The
Leviathan is OK with self preservation, so the Commons can live. But what’s in
it for the Commons? The Leviathan spends to maintain it – infrastructure and
investment, mainly. There you have it – the Free Market Leviathan.
At this point (around 1930), we’ve crossed Powai, and the traffic has
eased. I slip into my own thoughts – I’d estimate the penetration of water
purifiers at about 35% within certain subsets of the universe which puts it in
Phase 3 of the Market Development Model – which basically means Modern Trade
should increasingly take a back seat in driving growth through penetration. So
I’m screwed! Wait, there’s trade-up to consider… I’m distracted again. This
time by surprise at the realization that the familiar whine on Sanjay’s music system
is Enrique Iglesias. He ends my misery swiftly. Oh wait, that’s Atif Aslam.
Meh. I suddenly find the road very interesting. I finally arrive at my
destination at 2000. I give one last consideration to the FML. I decide it won’t
work, and decide not to dwell on the reasons. I pay him the fare (which, he
points out, is self declared, government controlled and fair), thank him and
head for home. At this point I decide to undertake a quest of actively probing
for and documenting the economics of taxi drivers. Because anyone can.
Economics. Jaywalkers are better off in Mumbai than Delhi and Bangalore. And I
will now have hit a milestone in writing – one thousand words.
