Free Enterprise and Government Regulation- An Indian Perspective – M.S. Srinivasan

The traditional capitalism based on free enterprise and minimum government intervention is floundering in a mud of widening inequality. Emerging economics powers like India and China are experimenting with new forms of capitalism with greater governmental control. We have to do some fresh rethinking on the limits and boundaries of free enterprise and government control. This article examines this problem in the light of Indian insights.

Communal freedom is a central and integral part of the Indian social synthesis. In ancient India, each community ─ religious, social and commercial ─ was given the complete freedom to organise its life according to its swadharma, which means one’s own unique and intrinsic nature and the values , ideals, aims and function derived from our nature. The other universal aspects of dharma are all values and ideals which lead to the higher evolution of the individual and collectivity in the mental, moral and spiritual realms. In this Indian perspective, government has no right to interfere in the life of individuals and communities who live in harmony with dharma. In an interesting dialogue in Panchatantra, a queen say to her husband, the king, “you are the master of your kingdom. You must have complete control over your subjects.” But the king answers, “No, my dear queen, I am a master of only the criminals who violate dharma. Those who live according to dharma are their own masters. I have no right to interfere in their life.” This Indian perspective throws some luminous hints on the limits of free enterprise and the role of government in regulating business.

Firms should be given sufficient freedom to create wealth, provided it is done within the boundaries of corporate dharma. But what is the Dharma of business? The main dharma of business is to create wealth for the society, not exclusively for shareholders or for itself, but for the stakeholder- community like the suppliers, employees, customers and the society as a whole. A profound Indian scripture states that a householder who doesn’t make any effort to earn wealth is a sinner and also a householder who doesn’t distribute his wealth for the benefit of the society is equally a sinner. This principle applies very much to business. To create wealth through an efficient and productive utilization of available resources and ensure its equitable distribution in society are two equally important dharma of business. The Government should not interfere as long as firms create tangible wealth for the society in a dharmic way. But government cannot remain a passive spectator when the corporate greed or power tries to dominate or monopolize the economy or society, overriding the interest of other organs of the society or when its products, practices or processes become harmful to people or the community.

A disturbing trend in some of the richer nations of the west is the incessant demand of the rich and powerful sections of business for “freedom” from all government regulation and for unrestricted expansion of their corporate power, all in the name of “free enterprise.”   But “freedom” for a few big corporate barons to endlessly fatten themselves or rob, exploit and dominate the world cannot be part of corporate dharma. In a brilliant and thoughtful article in the Guardian Newspaper, British environmentalist, George Monbiot calls this illegitimate demand of the rich and powerful for unrestricted freedom as ‘liberationism synonymous with injustice” because they are using the concept and word “liberty” to indulge in exploitation and self-glorification. As Monbiot puts it forcefully:

“In the name of freedom — freedom from regulation — the banks were permitted to wreck the economy. In the name of freedom, taxes for the super-rich are cut. In the name of freedom, companies lobby to drop the minimum wage and raise working hours. In the same cause, U.S. insurers lobby Congress to thwart effective public health care; the U.K. government rips up our planning laws; big business trashes the biosphere. This is the freedom of the powerful to exploit the weak, the rich to exploit the poor.”

Self-regulated freedom may be the ideal to be achieved. But not many of us are prepared for self-regulation. The aim of external regulation is to make people and institutions aware of the limits and boundaries of personal and corporate freedom and keep them within those limits. My freedom ends when it begins to interfere with others’ freedom or adversely affects the wellbeing of others. Madmen and robbers, exploiters and oppressors cannot be given the “freedom” to do what they want with impurity. But this is what the rich and powerful want in the name of freedom and the governments should not succumb to such an unjust demand. As Monbiot aptly concludes his article:

“Modern libertarianism is the disguise adopted by those who wish to exploit without restraint. It pretends that only the state intrudes on our liberties. It ignores the role of banks, corporations and the rich in making us less free. It denies the need for the state to curb them in order to protect the freedoms of weaker people. This bastardised, one-eyed philosophy is a con trick, whose promoters attempt to wrong-foot justice by pitching it against liberty. By this means they have turned ‘freedom’ into an instrument of oppression.”

Here comes the role of government in regulating business and the market. The market of the traditional capitalist, driven by self-interest and greed is incapable of self-regulation. It is the outer expression of the lower nature in human being with no dharmic or evolving thrust towards higher motives or ideals. This market of the capitalist left to itself may promote short-term efficiency but cannot bring long-term sustainability and wellbeing. For the higher evolution of capitalism, market and business needs a conscious higher direction on dharmic lines. This can happen either through dharmic self-regulation of business or enforced dharmic regulation from the government or both working together. On the part of business, the more enlightened and progressive sections of business must provide the dharmic leadership and direction to the corporate world by thought, action and living example.

The government should formulate and enforce an enlightened legal and regulatory framework which leads to a healthy, efficient, sustainable and equitable creation of tangible wealth for the society. This regulatory mechanism has to be evolved in consultation with the corporate community but at the same time taking into consideration the interests, wellbeing and progress of other limbs and organs of the society, especially the weaker and vulnerable sections of the community. The best way to achieve this task is through a collaborative effort which includes the four organs of the society: Culture, Economy, Polity and Labour-force. Leaders, representatives and experts from business, government, civil society, polity, culture and work-force must sit together and figure out how to create an economic, social, political, legal and cultural environment where those who follow or adhere to dharma gain a decisive competitive advantage over those who violate dharma or in other words where dharmic Darwinism prevails.

But if self-regulation is the ideal to be achieved, the way to progress towards it is not entirely by compulsion but more by incentives to dharmic behaviour. These incentives have to be in direct proportion to the quality and extent of dharmic behaviour. This brings us to the question what is dharmic behaviour? It is, in simple language, all actions which contribute voluntarily and positively to the wellbeing and progress of the larger whole of which we are a part, like the community, stakeholders, society or community. Those companies who go beyond legal compliance and excel in this dharmic behaviour should be provided with large incentives which will give them a competitive advantage over others who are not dharmic.

However in assessing this dharmic behaviour, we have to consider the net total impact of the company on the wellbeing of people and not merely some isolated CSR project. A company may do great things in its CSR project, but if its products and practices are harmful to the people and the society, it cannot be called dharmic. For example gun companies in US may do exemplary charitable works or CSR projects but their products are powering psychopathic killers!

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