Wednesday, August 20, 2014

On "Opportunity gaps", free-market and individualism



"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantages." 
                                                                    - Adam Smith (The Wealth of Nations)

We keep hearing about "opportunity gaps" (both in the US and India). But one must ask whether even the existing opportunities have been fully taken advantage of by those whom they are meant for. Although many like to delude themselves into thinking that the solution lies in the bottomless pit of govt.  spending of taxpayer's money to create more "opportunities", the bottom-line is that upward mobility is not something that can be handed down, it is something that individuals have to be determined to achieve through hard work, prudence, austerity, and personal responsibility. 

Instead of acting like an omniscient benevolent dictator and perpetuating a system of dependency, every govt. should focus on reducing bureaucracy, ensuring competitiveness in the market, and securing private property. Let the market create opportunities for those that can utilize them the most - entrepreneurs, innovators, bright students, skilled workers, and job creators. And that is trickle-down economics in action. It doesn't mean that the gap between the rich and poor won't increase, it doesn't mean that everyone will be better off, and it doesn't mean that there won't be anyone trying to manipulate the system (and that's why a minimalist govt. is needed to enact laws on safeguarding private property, anti-trust regulation, etc). But what it can achieve is the improvement in the condition of the most economically downtrodden and create market-driven opportunities, which if taken advantage of, can help them to escape the cycle of poverty. It is not that free-marketers have no sympathy for the poor, it is that they view competition as the only way to help improve quality of life, especially for the poor. 

"Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man or order of men." 
                                                                   - Adam Smith (The Wealth of Nations).
However, an overall improvement in the financial condition of the lowest income group does not mean that there will be income equality across the population. Income equality should not be a goal at all, for it is simply unrealistic, and mostly inconsistent with the aforementioned Darwinian view of perpetual competition. Income equality is not to be confused with "fairness" either; there is nothing fair in rejecting all heterogeneity in abilities, merits, skills, perseverance, and other attributes that make us "individuals". Individuals must strive to use the opportunities that the market presents to them and determine their own place in the world. It therefore should come as no surprise that free-market and individualism go hand in hand, and that the US has embraced capitalism and individualism as its economic and social theories, respectively. 

In India, we are transitioning from a socialist and collectivist philosophy to this other mode of thinking. What is often seen as a clash between the skeptical old guards and the self-assured young India is in reality a manifestation of this much deeper shift in the economic and social philosophy of the country. The young India's growing disdain for the govt. bureaucracy and red-tape, mistrust of corrupt politicians, and rise of an entrepreneurial culture in a land that has always preferred the "safety net" of cushy government jobs, can only be explained by a conscious reinterpretation of the govt.'s role by Indians. Perhaps America's greatest success in promoting its democratic values hasn't been in the Middle East, it has been in India where the young generation has decided that the govt.'s role is not to behave like a benevolent dictator (like members of the Nehru-Gandhi dynasty do), but to actually get out of the way of businesses and let the free-market create opportunities that can improve everyone's life. India has made a conscious choice.
"As soon as government management begins it upsets the natural equilibrium of industrial relations, and each interference only requires further bureaucratic control until the end is the tyranny of the totalitarian state."   
                                                                   - Adam Smith (The Wealth of Nations).

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