Producer and consumer interests do not have to be antagonistic forces, one at the cost of the other. In fact, successful societies seek a convergence of the two. Efficient producers give the consumers a better deal and create jobs. In return, producers get a bigger market, fueled by consumer spending.
This convergence is not organic. Left to their own devices Producers will take advantage of the consumer. Left unprotected, consumers won't have much of a choice. They will get adulterated food and spurious drugs, often at much higher price than the cost of production and distribution.
There are several forces that help strike a balance, foremost being institutions, media, and the State. When these get neutered, freeing the producers of countervailing checks, the consequences go far beyond the Producer-Consumer balance. They threaten the social contract that undergirds this balance.
Even societies with established institutions and respect for consumer rights are beginning to chaff at the growing producer-power. Echoes of "Lobby groups are controlling regulation. Media cannot be trusted. Democracy risks becoming nothing more than a sham contest among oligarchs" resonate with many, not just yellow vests or the sterile world of academia.
Stalwarts of Capitalism are beginning to wonder if capitalism has morphed into another conduit for the wealthy to rig the game in their favour. More and more tomes are appearing with titles like 'saving Capitalism from itself' or 'saving Capitalism from capitalists' (Raghuram Rajan). The latest to join the battle is Joseph Stiglitz (People, Power and Profits).
The case is being made for more effective government intervention. Free markets, it is argued, are beneficial but can flourish only if the government lays down the rules. The problem is government too often succumbs to influence by organized private interests.
Policy capture, elevated to 'State Capture' in World Bank lingo, is now at the centre of debate on development. The developed world still has certain bulwarks against policy capture. The developing world, in contrast, largely stands defenseless.
Meanwhile, back at the ranch the issue of policy capture seems lost in the din created by the megaphone of 'corruption'. Amusingly, the emphasis has been reduced to 'living beyond known means', and not how 'loot and plunder' takes place. Simple 'kickbacks' is a last century machination that only the simpletons now resort to.
Amassing wealth today is a sophisticated policy game. It consists of 'managing' the regulator, the dispenser of subsidies, the provider of tariff protection; where a group of individuals or entities secures favours in a seemingly legal manner. In the West they do it through lobbying; here at home we do it by parachuting our agents, even principals, into the government, and muting resistance.
Is it a mere coincidence that we see so many active business people in government? Over time, many politicians became business people and quite a few business people entered politics. The malodorous conflict of interest, at least potential conflict, can be smelled miles away.
Some magnanimously announce 'resignation' from their business upon entering the government. Once out of office they seamlessly slide back into their business. Even today you will have to look hard to find people in the government free of clash of interest charges.
Apparently they break no law; and propriety is an alien concept. Crony capitalism, the bane of development that many consider more pernicious than commissions and kickbacks, manifests itself in many ways. The lightest form is collusion among market players that is routinely tolerated by the government.
Asymmetry of information and high entry barriers are the cause and effect of crony capitalism. Either through lobbying, or placing 'like-minded' people in positions of influence, fair competition is smudged.
This is not the only way that consumer interests get hurt and development suffers. Producers thwart external competition through high tariff walls and domestic through cartelization, as a hapless Competition Commission wrings its hands.
In most countries a neutral bureaucracy stands as the institutional buffer between corporate welfare and public welfare. Our policy capturists have consistently chipped away at this last resistance level. Politicised, vilified, and demoralized, our bureaucracy is too weak, too fragmented, too pliant, to protect the interests of public at large.
Of course, our bureaucracy didn't help its cause by letting its competence and integrity guards down. It allowed its ethos to degenerate from enlightened guardianship to 'who you know is more important than what you know' and 'show me the person and I will show you the rule'. The watchdog became the lapdog.
Those expected to check the ingress and power of elitism became the elite themselves. IMF keeps coming back preaching structural reforms. Each time it gets checkmated by vested interests stalking the corridors of power. Needle any issue requiring reforms and you will see the visible hand of policy influencers, some of whom have become policy makers, subverting the reform process.
The days of mulching government contracts, transferring the yield to Swiss bank accounts, and transferring them back as white money are gone. Today the name of the game is 'legalized corruption': making money through government policies that you shape to your advantage.
What better example of legalization than amnesty schemes?
Distorting public policy, at its cleverest best done in the name of the masses to actually benefit a few, is far more damaging to the development process than the hideous crime of receiving commissions on favours doled out. It weakens faith in the system. It encourages 'short cuts' instead of honest endeavor. It accentuates inequalities.
We are sure the PM is determined to root out corruption. What we are less sure of is if he knows corruption is of many kinds. Is he looking under his feet?
Public service is a privilege and a challenge. It needs the best talent available; but not talent that uses office for personal gain. Talent needs to be disciplined to preempt conflict of interest.
Let's say the incumbent should stop receiving any emoluments from his previous business; there should be a 'cooling off' period - he should not walk into government office straight from his business office; there should be a 'non-compete' clause - that he will not go back to a business related to his government office for, say, one year. Producer interest is well represented in the team. How many for consumer interest; for the common man?
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