While we have moved away from the license raj of times past to a market based economy, it is becoming depressingly clear that the vast majority of Indians view the market based economy as a different methodology to be used by central planners. Most people still feel that it is necessary for the government to intervene and plan the economy for the well being of the country. If the government has to think hard and act to %u201Cprotect%u201D every trade and industry in the country, then it needs to have awfully bringht people and it needs to be really big, afterall, silk is just one of the millions of products india produces. But does the government really need to do that?
Charles Wheelan in the book %u201CNaked Economics%u201D asks the poses the same question differently by asking %u201CWho feeds Paris?%u201D. There are millions of people living in Paris and they need to eat three times a day. It has to be a daunting task for any government to make sure that they get to eat what they want. Yet the French government is not involved in this process. No goverment beareaucrat is taking orders from Frenchmen every day and orders the right amount of fruits, vegetables and meat for them. In spite of very little government involvement, Wheelan says, %u201C%u2026somehow the right amount of fresh tuna meks its way from a fishing fleet in the south pacific to a restaurant on the Rue de Rivoli. A neighborhood fruit vendor has exactly what his customers want every morning-from cofee to fresh papayas-even though those products may come from ten and fifteen different countries%u201D.
If millions of people can accomplish the awfully important task of feeding themselves without the government getting involved, then why should the government get involved in more mundane tasks such as regulating and %u201Cprotecting%u201D this or that trade? We dont the government to plan our economy like it used to do during the licence raj, nor do we need it to %u201Cfine-tune%u201D it now, using tariffs and import quotas and so on. The governments needs to just let them be! Laissez faire.
RE:RE:Let them be!
by Sid on Apr 23, 2007 12:03 AM Permalink
I agree with your comments. Just to elaborate on them: 1) Indian economy is still in transition from it's socialist roots to capitalist philosophy. For about 40-50 years, we have been driven by subsidy-based, closed economy, thereby limiting competition and disincentivizing innovation. 2) In a capitilistic society, Government should limit it's role to a large extent as a regulatory body. It should let the market forces play out but should promote innovation and entrepreneurship. 3) It is clear from the article that these weavers suffer as much from the lack of market access as such from the Chinese competition. Consumers would be willing to pay that much more if the "Benares" brand is promoted appropriately (perhaps more as a luxury good). 4) In terms of access to market, the intermediaries have to be cut, the supply-chain made more efficient, and innovative practices encourages. This can be effectively done with academic-industry partnership - something India lacks to a large extent. Imagine, our premier academic institutions working actively (with a grant from Government or Private foundations) in researching cost-effective ways of making these sarees (process innovation), designing better sarees (product innovation) to reflect changing societal trends, and redesigning the supply-chain (market innovation) to sell directly to the consumers. 4) We need to understand that "information" is a key aspect of revitalizing these industries. These weavers lack the information about the changing consumer preferences, newer techniques, and newer markets. Perhaps, Sarees, are not the only good these Weavers could manufacture. They should be constantly innovating. This is where Government has it's role - to promote and encourage innovation in each and every industry.
