“If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion.” – Friedrich August von Hayek
In the process of conceptualising this issue of Pragati, I asked the contributors to discuss “how the laws, their enforcement and the judiciary affecting can be reformed in India.” In my effort, I revisited the Constitution to understand the rules of the game and how it affects human action in areas of life as diverse as financial regulation and sexual freedom, and realised that Ludwig von Mises got it right when he said that “the idea that political freedom can be preserved in the absence of economic freedom, and vice versa, is an illusion. Political freedom is the corollary of economic freedom.”
The fundamental criterion for preserving individual freedom within a state is a constitutional democracy. After all there is no difference between the absolute power of an autocrat and the absolute power of a democratic state. The difference arises only when there are limits to this kind of power imposed by a constitution.
While it may seem contradictory at first thought, but the Constitution is the most undemocratic document. It poses strict limits on what a representative legislature can and cannot do. The most important part of a constitution consists of “negative rights” which imposes restrictions on the state to interfere with an individual’s life, liberty and pursuit of happiness.
In India however, we haven’t been so lucky and are stuck somewhere between the unlimited power of a democratic state and a constitutional democracy. This is because the limits imposed by the covenant that India’s founding fathers conceived have been deleted, diluted and disregarded at every opportunity. One may be tempted to ask why this is important to anyone other than lawyers and judges? The Constitution lays down the rules of the game for each player. And every Indian citizen has been cheated in the game because the opposing side keeps changing the rules for its benefit.
This is been done for various reasons. Some rules are changed because of a specific cause such as equity or social justice, others to preserve a specific social or moral goal, and yet others to protect individuals from their own folly, and most often for the private benefit of the powers that be.
The aim of this issue is to discuss how these rules affect incentives and thus influence human action.
The most fundamental of all is the right to private property. What does this right really mean? The right to private property essentially creates a sphere in which the individual is free of the state. So while it begins with the ownership of capital without interference, it also means the ownership of one’s bodily integrity and the fruits of one’s labour. The abridgement of this right in India was originally to take land from the zamindars and has extended to taking land from poor farmers, nationalising banks and businesses, preventing the use of one’s property without interference and has stretched into the realm of political freedoms such as the right to expression through a work of art or to publish a book.
Individual rights and freedoms — which have conventionally been classified as “economic rights and freedoms” or “political and social rights and freedoms”—are uni-dimensional labels. This becomes more clear as the various themes in this issue are explored.
TCA Anant discusses the role of the judiciary in preserving these property rights and charts the change in this role from a conservative to an activist judiciary. He discusses the role of separation of powers, where each function of the state is performed by a different institutional entity, in preserving a limited constitutional democracy and the economic rationale for such a system of separation of powers and checks and balances. He sheds light on how the role of the judiciary as the protector of individual freedoms has now metamorphosed into an activist judiciary which can be as arbitrary as the other wings of the government. Most importantly, it becomes clear that men can be arbitrary in a position of power whether they legislate from a parliament or rule from the bench.
On the one hand, Barun Mitra uses the right to private property, conventionally an economic right, to defend the right to freedom of expression of homosexuals, and to analyse the recent Delhi High Court judgement de-criminalising unnatural intercourse. A similar case can be made to defend MF Husain’s right to paint, book publishers’ right to publish Satanic Verses and Salil Tripathi’s right to comment on free speech in his latest book Offence – The Hindu Case, which is reviewed in the books section.
On the other hand Atanu Dey discusses the right to religious freedom, conventionally a socio-political right, and the separation of the church and state to expose the economic tyranny brought about by arbitrary and discretionary taxes and religious subsidies. An economist would tell you that subsidies are justified for the provision of a public good or when the provisioning is suboptimal. Mr Dey exposes how the Haj subsidy does neither and is an arbitrary use of power by politicians to gain votes subverting one constitutional pillar of the separation of church and state in the name of another value of religious freedom. Such arbitrary laws only invite more of the same and politicians are now advocating that poor Hindu and Christian groups get similar subsidies for their pilgrimages.
This analysis has been extended to the functioning of industries in the markets by Harsh Gupta in his critique of India’s competition and antitrust policy. While the abolition of the Monopolies and Restrictive Trade Practices Act is a welcome institutional change, the new Competition Commission suffers from the same fundamental problem of arbitrariness in its rulings, penalising firms for charging a high price as well as a low price, subverting rule of law.
While constitutional rights and liberties determine the limits on how much the state can interfere in the sphere of individual action, there is a host of laws and regulations which interferes with the economic actions of almost every Indian. The adage that the road to hell is paved with good intentions is fitting for most Indian regulation. Indian laws and regulations often try to fight economic freedom and market forces to protect individuals. However, these have unintended and often disastrous consequences. The first and perhaps the most pervasive of these are labour laws. Jaivir Singh analyses how these well-intentioned labour laws protect a small proportion of the formal labour force while marginalising a majority of the workforce in the “unorganised sector”. Mr Singh explains how these paternalistic laws, created to protect the worker, often deprive her of the choice between work conditions and higher income or the ability to work in a legitimised status.
The plight of the labour force is also shared by the capitalist due to the myriad of regulation on entrepreneurs. Aadisht emphasises the need for industrial liberalisation along with market liberalisation to allow the entrepreneur to unleash prosperity. The current regime only fosters corruption and preserves special interests and hurts the small businessman it sought to protect.
How changing the rules changes the behaviour of the players can best be seen at work in Ajay Shah’s analysis of financial regulation and environment. Repealing the archaic law controlling capital issues and legislating to set up the stock market regulator changed the institutional structure of the financial markets, in particular making the equity market take off. An excellent juxtaposition is offered with the banking sector which is still shacked in an old institutional framework. If the magic of changing the institutional structure is to be believed, there is a strong case for creating such institutional changes in other sectors.
K Satyanarayan calls for similar institutional reforms in the education sectors to make schools flourish like equity markets. He suggests that allowing for-profit educational institutions will do the trick.
The purpose of the issue is not to just to catalogue the various areas that need reform, but also to highlight many ways in which the state infringes on individuals using the legislative and judicial machinery at its disposal. Mises said that “freedom is indivisible. As soon as one starts to restrict it, one enters upon a decline on which it is difficult to stop.” This has become the reality of the Indian social, political and economic spectrum where no means are left unused to abridge the rights of individuals and their ability to make decisions. This issue is in defence of our right to think, talk and trade without interference. It is in defence of our liberty.
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