When Free Markets Are a Bad Thing

A year back, we were visiting my wife’s relatives. The head of the family, my wife’s uncle, used to be in the police force before he drank himself to death. 

As is the norm in these cases, his eldest son was given a job in the police department.  Of course, he had to pay a bribe for the job.  He got a discount because of his late father, but he wasn’t exempted. If the son had been a graduate, the amount would have been lower, but he would still have had to pay. 

And oh – he did not get an actual policing job. That would have cost him much more. He was given a clerical job in the department, dealing with personnel matters.  That cost lower. 

“I don’t suppose you have any opportunities to make extra money in this section?” I asked him.

It turned out that he did. It is not just citizens who have to bribe India’s government officials. Even government officials bribe each other. For routine matters like leave applications. A policeman’s leave would not get sanctioned unless he paid for it.  The money was channeled to superior officers through my wife’s relative. His superiors, when they gave him a job, had warned him against showing ”leniency” to his colleagues just because they used to be his dad’s friends.

I was more fascinated than shocked.  If you are a salaried middle class person in India, it is easy to forget just how deep-rooted corruption is in India.  Corruption is just an annoyance that stops you when you jump a red light and extracts bribes from you. It is easy to forget that there is a large section of the population – in fact, for an overwhelming majority – corruption is an inseparable part of their lives.

There are three points that flow from this, which I will cover in three separate posts, which I will introduce below.   

There are some incurable optimists who still do not believe in rolling back government, insisting that it can still be reformed. I wonder what accounts for those people. One explanation is that they imbibe the same narcotic that Ratan Tata consumed  when he decided to set up his Nano plant in West Bengal. The other is that they belong to the aforementioned salaried middle class, or some other group that does not have the overwhelming presence of government in its life. They simply do not appreciate just how rotten the government is from the inside. This explanation is not very convincing, because there are many who do not fit this classification. 

I believe that there is a third answer which has much more explanatory power.  I will cover this answer in the next post. 

Second, many people bemoan the fact that government spending on public services like health has worsened over the past couple of decades. They blame this on “liberalization”. I believe that this incident explains much better why this has happened. That will be in a separate post. 

Finally, people talk of the the choice between government action and free markets. But the incident tells us that internally, the Indian government itself is a market. I will explain this too in a separate post. 

Actually, a lot of points follow from the last post, which I may expand into separate posts

21 thoughts on “When Free Markets Are a Bad Thing

  1. I don’t know about your explanation but what I have understood so far is

    a. We live in denial.
    b. Our political mobilization is powered by belief that it is just if government robs Shyam to pay Ram, as long as we are Ram. In this socialism is the biggest ponzi scheme.
    c. We are Republic in name, not spirit.

    PS. Again apology for link solicitation.

  2. Isn’t it about five years too late to try and answer things? Anyway, I guess your target audience is Gaurav — in which case, it never is.

  3. this comment thread is very nice. it is very relevant to topic of post. I am waiting for next comment by gaurav, maybe “you are a butthead”, followed by comment by nillu, maybe “yes, but shut up.”

  4. “But the incident tells us that internally, the Indian government itself is a market”

    Do you mean to imply that market (of GOI) is free?

    Just be because there is a market, it doesn’t make it a “free” market. If the market is truly free (including information) it’s never bad compared any other market one can think of.

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