Blog Symposium on From Free to Fair Markets

A Comment on Democratic Liberalism: Blog Symposium on ‘From Free to Fair Markets’ #3

Dr Jaivir Singh

This is the third piece of LSPR’s Blog Symposium on ‘From Free to Fair Markets’.

What is the book saying? 

I would like to begin by listing what I understand From Free to Fair Markets: Liberalism After COVID to be doing or saying. The book uses the event of our times, COVID-19 to point to the fault lines that characterise the contemporary world. Taking the event as a departure point, it is said that the vulnerabilities concerning the environment, labour markets, international trade, healthcare and extreme inequality that are now staring at us in the face, having been exacerbated by the pandemic, demand an urgent  solution. Broadly speaking the book tries to provide a framework that can address these problems and it does so by suggesting a political formation that is referred to as Democratic Liberalism. This interpretation of liberalism eschews reliance on the market as the primary allocator of resources in the manner of so called ‘neoliberalism’ but also does not align itself with democratic socialism which pushes power of allocation almost entirely to the state; this brand of liberalism is also naturally at variance with economic nationalism that seeks an illiberal ‘economic sovereignty’. Instead ‘Democratic Liberalism’ is constructed as a push for markets envisioned in a particular manner – not free markets but rather fair markets, with the fairness being chartered  by correct intervention of the state, a state that is sensitive to the insights of the capabilities approach pioneered by Sen and Nussbaum.  To elaborate, the emphasis is to push systems that privilege the interests of market players understood as citizens, workers and consumers and not just as employers, multinationals and producers. The envisioned system pushes for individual freedom and dignity and keeps state intervention as an exercise in correcting externalities generated by the economic system. 

Among my many reactions to the book – one point stands out in that the interventions proposed by the book are economics literate. For instance, we know that a prominent scourge of our time is the enormous size of firms involved in the digital world and the progressive impulse is to crop them. Due caution is voiced in relation to this impulse, pointing out that the economics of network effects of the products in question lead naturally to a few dominant firms in the market. To chop such large firms is to destroy the market , instead the better route is to think very hard as to how to regulate these markets – so that future innovation as well as inequality concerns are addressed. This sensitivity to economic theory and empirical finding is characteristic of the book as a whole, whether using property rights theory of the firm to think about which tasks should be performed by the state directly and which tasks can be contracted out, or invoking empirical work that can best provide insights on how to generate resources for the democratic-liberal state. 

The book (to repeat)  is an attempt to convince readers that a set of economically realistic policy formulations  can offer the contemporary world a political configuration  – a configuration that allows individual freedom while not leaving social harms unaddressed and an ability to steer away from an economic nationalism, the type characterised by Trump’s America. Over the book we are given real world examples of current governments that approximate the democratic-liberal states or at least echo the values therein – prominently the Biden administration’s two trillion-dollar expenditure plan to spend on various social, economic and environmental programs. Another notable instance is that of the healthcare system provided in Australia, which provides state sponsored baseline access to all with individuals free to purchase additional features. These prominent examples (along with the many points of emphasis over the book, for example the labour market problematic of the book is often centred on the loss of manufacturing jobs on account of globalisation) are symbolic of an orientation geared towards contemporary politics in the developed world.

Other locations 

This speaking to politics from a certain position can mean a set of diverse things for those of us who are situated in material circumstances that are different from the developed world. However, the bigger difference from a positional perspective is that many of us find ourselves not just in a different material position but a very different political position – as the authors of the book make clear that their notion of democratic liberalism demands a commitment to rule of law backed by a system of democratic constitutionalism. It is definitely not my intention to engage with the book to say that it does not speak to this or that circumstance – that would be inane, rather it is to say that the ideas of the book are developed in relation to certain positional contexts and as we engage from other positions the upshot can be somewhat variegated. 

One straightforward reaction is to say that the contexts are too different to engage but that is to feed the inanity mentioned above – instead let us attempt to get some of the core ideas of the book to engage with a location like India. For, surely there is a way in which the  passages in the book regarding the environment, labour markets, international trade, healthcare and extreme inequality speak to the Indian situation. Ostensibly, India has a commitment to the rule of law supported by a system of democratic constitutionalism, albeit a system under stress. If we look at the Indian trajectory since liberalisation one can discern elements of the democratic liberalism at least in the UPA I government, which among other things brought into place an  employment guarantee scheme – the Mahatma Gandhi National Rural Guarantee Act (MNREGA), mentioned by the authors while drawing an occasional policy example outside the developed world. So too with the UPA II government, which while it can be accused of being more ‘neoliberal’, did try to expand education by enacting the Right of Children to Compulsory and Free Education Act. It also enacted the National Food Security Act that aims to provide a specified quantity of food to about two thirds of India’s population at subsidized prices. The subsequent NDA governments have of course not enacted legislations in a similar vein but that is not the point of comparison here. Rather, with the advent of the NDA government it is more difficult to think of India as a democracy dependent on a citizenry whose main concern is to vote in governments that would further their economic interests.  Instead democracy has come to mean the representation of sectarian interests. The object up for vote is for an identity rather than an equitable sustained economic betterment. In this setting much of the education, health care, labour entitlements are secondary concerns, appurtenant to a sense of well-being that originates in gaining a sense of identity, making it very difficult to distinguish between the rhetoric and the reality on the ground. An illustrative recent example is the persistent win of the incumbent party in the state of Uttar Pradesh, successively in spite of many downward trends in economic indicators across the board. It is also the case that it is widely anticipated that the current NDA government is set to continue after the elections in 2024. 

This is a crucial point for a conversation with the content of the book – it was possible to write From Free to Fair Markets: Liberalism After COVID-19 with conviction and real world backing because President Biden managed to win the election in November 2021. But, the victory was and continues to be thin and this tells us that even in circumstances very different from India, how very important it is for the institutions of democracy to deliver a state that will support the tenets of democratic liberalism (at one level the difference between America and India blurs once we acknowledge the role of identity politics in creating the crisis of democracy).  The state in democratic liberalism is, as per the arguments of the book, very important and central to counter the ills of the market, but a democratic state that is captured by obscurantist forces cannot by definition sustain democratic liberalism. In this, towards the end of the book there is a brief discussion on the necessity of having a voting system that correctly captures voter preferences. I do think that we have to look more carefully at the translation of individual political preferences into aggregates in democracies more closely if we are to think of more sustained democratic liberalism. At least in some quarters it is suggested that the non-transparency funding elections in India has been an important factor in establishing the hegemony and persistent consolidation of power by the current ruling party. 

Before we move on from the Indian case – if the book is, among other things, an attempt to throw up ideas that could potentially persuade politicians and voters to the model, then one of the biggest problems from an Indian perspective is the position of the entity that is the local community in India. Over the course of the book a premium is put on the community – it is suggested that as one transits from a more ‘neoliberal’ orientation to one that is more sensitive to the tenets of democratic liberalism, the role of community in the allocation of resources should come to the fore. In India the presence of the caste system in all its many dimensions is a persistent and all-pervading social fact and more often than not colours the hegemonies of certain groups in society over others. Thus, a politics that thinks of handing power to the community may be reproducing particularly non-progressive outcomes. To phrase the problem differently, if democratic liberalism were to be pushed in the Indian context – it is not just a matter of correcting or responding to economic inequality (that too, very strongly) but also a social inequality which pervades all of Indian society (except perhaps in tribal or indigenous societies). 

The International Order 

Of course, we can move on to thinking about democratic liberalism in China but perhaps we are forced to think of something even more apparently oxymoronic, democratic liberalism in the international world. Given the huge importance of environmental sustainability for the future existence of the planet it is very important to realise that the problem is a global commons problem – it can be addressed up to a point by national governments but beyond that point it demands international governance. The book advises that environmental governance within the country should proceed with the imposition of a carbon tax, with the proceeds being used to support citizens, thereby gaining democratic legitimacy as well as being less demanding on the national exchequer. However, not all countries are going to do this and their carbon emissions are going to continue imposing an externality – the atmosphere, as is often said, does not recognise borders. While developments in monitoring technology may shame some states, a stronger system of global governance is required, given the urgency of environmental disaster awaiting the planet. This raises design issues – just as much individual countries need a design to sustain and allow democratic liberalism, so does the international order. This is of course a very large issue but a conversation about democratic liberalism must perforce engage with this at some point. This requires the United Nations to become a much more democratic body, gaining legitimacy to sanction behaviour from democratic representation, away from the hegemony of veto powers prevailing under the current system. Some of these issues of redesigning the United Nations are discussed by Lopez-Claros, Dahl and Groff in their recent book titled Global Governance and the Emergence of Global Institutions for the 21st Century (2020, Cambridge University Press), where they argue for an international level governance system that replicates national systems based on “rule of law, legislation in the common interest, an executive branch to implement the legislation and courts to enforce it.” 

This would of course require a change in the charter of the United Nations but as they say such change is very much potentially possible, were we to invoke Article 109 of the UN charter. Article 109 can generate a Review Conference that can reorient the UN Charter to be more closely allied to solving the overwhelming environmental emergency we face. This echoes a basic intent with which I understand Dixon and Holden to have – that is to say that if liberal democracy is elections, constitutional rights, protection of minorities and markets then democratic liberalism is a demand for a state that regulates markets with democratic input. The big question that remains is the design at both the national and international level that allows such democratic input to truly reflect collective and not sectional interest so that we can be governed democratically.                  

Jaivir Singh is a Professor at the Centre for the Study of Law and Governance, Jawaharlal Nehru University. His research work aims at an interdisciplinary exploration of law and the economy, and he has published on diverse topics that include the Indian Constitution, Regulation, Labour Law, Competition Law, Corporate Law and International Investment Treaties.