April 24, 2005

Breach of Trust

The Telegraph, 24.04.2005

Dipankar Dasgupta has used an isolated incident to make sweeping generalizations about the market economy. First, a market economy creates a dynamic society in which companies compete to deliver better results. In a free market, a consumer can choose from a wide range of goods and services, and a supplier also endeavours to provide the best at the cheapest possible rates.

Problem may arise in a free market when the regulatory framework is not vigilant enough — there is nothing wrong with the concept per se. Even if we concede Dasgupta’s point about markets breeding corruption, a more relevant criticism could be that in India, it is more expensive to adhere to rules than to break them. Doing business in India is a costly affair, which forces firms to cheat their way out. The real solution lies in making compliance cheaper and evasion expensive.

- 5 comments by 1 or more people Not publicly viewable

  1. I agree absolutely. I got back from a trip to Russia recently, where extremely strict laws governing business have bred high corruption levels and a culture of evading the rules whenever possible.

    Combined with this, you frequently see five people lazily doing jobs that two could do, a hangover from the Communist days. It reminded me why a market economy is the best type, even if it's not perfect!

    24 Apr 2005, 11:42

  2. Edward I think you might be putting the cart before the horse there. I think it was actually the fact that after the communist disintigration there were hardly any business laws that led to corruption. The laws there have been put into place in order to stem the massive corruption.

    26 Apr 2005, 16:41

  3. Again- the idea that harsher laws per se will curb corruption is a misnomer. Where the laws have to be harsh is in the case of evasion. Compliance needs to be cheaper than evasion for a market economy to work. In Russa and other transitional economies (including India until recently), the socialist mindset was prevailing and thereby the harsh restrictions on enterprise.

    26 Apr 2005, 17:57

  4. Vadim

    Edward Cooper corruption is because many people are too poor and must do what they can for more money. It is the means to the ends. But the most corrupt is the militsia, so often the do not enforce the laws – they are more interested to fine the tourists for any reason because it is more profitable. And yes there are so many people with useless jobs (like the babushkas at the photo boxes, instead of automatic here), but still many people in the RF would prefer the old governments, maybe from the 60's or 70's. After perestroika was hijacked by the bandits and oligarchs and people resent the inequality.

    04 Sep 2005, 16:51

  5. Vadim

    And also it was always like that – with too many people doing unnecessary jobs and not working properly "they pretend to pay us and we pretend to work

    04 Sep 2005, 17:14

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