Tuesday, 29 May 2012

Paradigm of the Market as an Instrument of Political Control and Exploitation in Developing Countries

The widespread market failure and the resultant chronic economic crisis in developing countries is seen as a consequence of the absence of social fabrics that can make markets function perfectly well. The problem is that developing countries are poorly endowed with virtues of trust, cooperation and integrity that cut across
parochial identities such as clans, tribes, regional enclaves etc. The foregoing virtues are reportedly very crucial for market transactions. Any attempt, in the absence of the virtues outlined above, to transform a traditional society into a market based one is likely to be frustrated by entrenched acts of fraud and deceit. This is to say that economic development is difficult in countries where norms of limited group morality prevail and do not readily give way to ‘generalised morality’

The common argument is that market institutions are embedded in cultural values and norms of particular societies. This means that even if conscious efforts can be made to transfer the market logic to social set-ups to which it is exogenous, markets can hardly function exactly in the same way as in societies in which the market logic is entirely a spontaneous phenomenon. Markets are reported to have thrived in the West because of the development of ‘generalised morality in which abstract principles of conduct are considered equally applicable to a vast range of relations beyond the narrow circle of acquaintances’. The performance track record of markets in developing countries is awful because of the resilience of relationships patterned on parochial identities. People tend to remain entangled into all sorts of tightly knit networks of personalised relationships encompassing the family, the clan, the religious sect, the ethnic group, the locality of birth and so on. These patterns of social interaction are inimical to the development of functional market societies because the sort of trust that govern trans actions in developing countries rest exclusively on clientelistic networks. Given the inherent limited scope and density of clientelistic relationships, it is argued, a great deal of functional trade relationships are under-exploited in developing countries.

This argument hinges on the fragmented nature of societies in developing countries along the lines of parochial identities. These invariably permeate the state apparatuses and have, therefore, far reaching implications for the effective operation of the market institutions. The state institutions are consequently conglomerates of rival networks, which makes the attendant social, political and economic milieu hardly supportive to the creation of truly market driven societies. The attempted wholesale transfer of Western market institutions to developing countries is, therefore, the cause of the current economic malaise. It has also been argues that ‘markets cannot be made to work efficiently and effectively by a simple act of will’. Taken in this light, the argument is that the importation of market institutions to social set-ups unfamiliar with their under lying logic will not automatically make the market order an effective self regulating device. To work, markets need to be supported by norms and values that span beyond particularistic identities that still reign supreme in developing countries. Thus, the ‘diverse sets of cultural beliefs place societies on different trajectories of economic growth’.

The advice to policy makers in developing countries is that they should not get bogged down into prescribing market friendly policies as remedial measures for the prevailing economic problems. Instead, they should question the appropriateness of market based policies for developing countries as a mechanism to get their ‘economics right’. Unless conditions propitious to market development exist, policy strategies guided by market logic are more likely to cause further dislocations in the economies.

The above argument was countered by contending that it is based on a rather biased judgement to justify its pessimistic conclusions. The major shortfall is that it does not fully elucidate on how exactly the problem of trust is resolved in advanced market societies. Moreover, in arguing for the functional importance of trust, the above fails to distinguish between consumer and inter-business market transactions. The problem of limited trust in consumer markets is more likely to engender deceit and fraud since transactions are often one-off exchange relations between buyers and sellers. The situation is totally different in inter-business transactions whether in developed or developing countries. The question of establishing enduring relations of trust is a business imperative because the same people engage in transactions on a regular basis. The argument that lasting trust relations and integrity are business attributes peculiar to developed countries is obviously a complete perversion of the reality of business dealings. The conclusions that it reaches are, therefore, to a large extent, speculative because ‘who businessmen transact with, and under what conditions and understandings constitute valuable and confidential pieces of information’.

When experts argue that ‘the social fabric and the culture of human societies matter a great deal, and the extent that norms and cultural beliefs are rooted in historical process, necessarily determines the development trajectories of particular countries’, it is vulnerable to further criticism. They quoted North to emphasis the role of history in development who posits that ‘economic history is overwhelmingly a story of economies that have failed to produce a set of sustained growth’. Ironically, their work justifies our inquiry into the implications of colonialism on the subsequent growth prospects for developing countries. It is, for all purposes and intents, an integral part of the wider historical process which, very rightly for that matter, they claim plays a vital role in weaving social fabrics congenial to the ultimate development of market based societies. Norms and values of trust exist in the Third World but perhaps what is really at stake are enforcement mechanisms which, paradoxically, smack of a colonial flavour.

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