Role of markets in the Society

After watching the TED talk by Michael Sandel [6], it kept me constantly worrying about the situation in India. My head is always spinning and constantly searching for clues to connect the dots.

India was a prosperous country 2000 years ago, and presuming based on the quality of life during that period, most of the citizens had access to all the common shared resources equally. Inequality didn’t matter much. This affluence can only have resulted from the free market economy.

Today the equality-gap has widely increased in Indian society.

“Despite the proportion of the poor declining between 2004-05 and 2011-12, their gap with the rich has risen for the first time in rural areas in about 35 years and to an all-time high in urban areas.” [4].

The poor have minimalistic access to good quality of life resulting in lower life expectancy and poor education. It had been proven that nutrition and health affects the child’s educational capabilities and his ability to break out of poverty, depending on various poverty factors [5].

So, what went wrong? How did we ended-up with inequality and corruption? One might fall back to the invasion(s) theory. Invasions started around 518 BC, but the country never saw its economic downfall until 12th century. So what set the path of degradation?

I am a proponent of a free-market economy. Free markets adjust themselves to create wealth and prosperity. But as Sandel suggests, economists treat goods as inert entities that don’t change its nature, and thus markets should be limited to these entities and should carry value. He argues that “in a society where everything is for sale, life is harder for those of modest means.” He presents some examples that when markets put a price on everything,  it corrupts and degrades institutions and social practices. He calls this a market society, where everything is up for sale.

“A market economy is a tool; it’s a valuable and effective tool for organizing productive activity. A market society is different. A market society is a place; it’s a way of life where market relations and market incentives and market values come to dominate all aspects of life.” [1].

Is this the cause of the downfall of Indian society? Did India slip into a market society?

If so then what is the fine line between the market economy and market society? This is the next big question to be answered as human behavior is complex and market dynamics is hard to predict.

If I limit the market only to exchanging inert goods then how can I justify the cost of labor? If I am assigning a cost to the time spent, then how can I value the skills and quality of the work. How to justify why high quality of work draws premium value?  The question then comes on how to define and label morality.

But definitely, Sandel raised a very important question and pointed out how corruption and inequality are caused by market society. Thus it is definitely a time to decide where the market belongs, and where it should be kept at a distance. We have to decide how to value the goods in question—health, education, family life, nature, art, civic duties, and so on.

I believe the answers can be found by studying the decline of Indian society. If so then it is my belief that it will not be hard to reverse corruption and inequality.

References:

[1]  Michael Sandel, “The Vital Difference Between a Market Economy and a Market Society“, August 14, 2013, 2:30 PM , http://bigthink.com/in-their-own-words/the-vital-difference-between-a-market-economy-and-a-market-society
[2]  Ryan Anderson, “Free Market Economy v. Free Market Society”,
http://www.libertylawsite.org/book-review/free-market-economy-v-free-market-society/
[3] Sarah Cassidy , “The Big Question: Why has the equality gap widened even through the years of plenty?” Thursday 28 January 2010,
http://www.independent.co.uk/news/uk/home-news/the-big-question-why-has-the-equality-gap-widened-even-through-the-years-of-plenty-1881025.html
[4] Somesh Jha, “Rich-poor gap widens in India”, August 10, 2013,
http://www.business-standard.com/article/economy-policy/rich-poor-gap-widens-in-india-113081000072_1.html
[5] HB Ferguson,  S Bovaird, and MP Mueller, “The impact of poverty on educational outcomes for children”, http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2528798/
[6] http://www.ted.com/talks/michael_sandel_why_we_shouldn_t_trust_markets_with_our_civic_life.html