Friday, March 26, 2010

Theoretical Debates and Reality



We are all indeed always tempted to look at social reality through the theoretical baggage of hypothetical socio-political literature. Such a temptation generally revolves around pronouncements of world capitalism or socialism which also leads to new coinages like socialistic capitalism especially in the context of Government policies in the US & European Union using stimulus and bailout as economic policy tools to correct the economy.

There is indeed no comprehensive theory that explains what works in all cases and the advent of post-modernism exemplifies how theoretical models only aid in the understanding of disjointed social causality and cannot be generalized in the very strict positivist notion.

One of the greatest advantage of what we call capitalism today has historically been its adaptability and the absence of any rigid theoretical basis. What it relies on is maintenance of contracts that needs to be guaranteed by the legal infrastructure and the basic incentive for progress that is as natural as human instincts themselves. Marx would call this transfomismo or the inherent ability within capitalism to nullify revolution.

Ironically capitalism is again mostly blamed for inequality, the belief being that the rich gets richer at the cost of the poor. This is rooted in the belief that wealth is finite and if the rich takes all of it what could be left for the poor ? The truth cannot be any further from that belief. Failed economies and economies with gigantic informal markets statistically have recorded the greatest deviation in wealth creation possibilities between the rich and the poor, not because the rich benefits from capitalism at the expense of the poor but because missing markets or informal markets allow the rich to disproportionately accumulate wealth which are untaxed and unaccounted for in GDP estimates. Informal employment also indicates the absence of the requisite legal infrastructure and a massive governance failure.

Concentrating on the specific example of India, let us all ask the following questions ?

How and why is Agriculture untaxed-We never hear about the rich in the agricultural sector since formal estimates are impossible ?

Why do we not have formal credit systems in the agricultural heartland ?

Why are formal work contracts absent in the gigantic informal sector of our country ? --The informal labour market is the worst affected, heavily exploited with no access to housing, food or any of the basic living standard estimates of ILO.

The greatest advantage of capitalism is perhaps its informality and most importantly money by definition doesn't discriminate, discrimination- financial or otherwise is a problem of failed or informal markets, skewed political incentive structures and massive governance failures.

Some might still be more interested in debating Capitalism & Socialism but such is democracy. Isn't it ?

1 comment:

Bejugam Vinith said...

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