In recent times, the world and economists have experienced an increase in GDP per capita and education while at the same time seeing a decrease in global poverty. With that being said, the wealth gap in countries such as India continues to increase. There are many possible explanations for this, but the two I will focus on in this essay stem from the central belief that the free market is to credit for the substantial economic growth seen throughout the world. In “An Uncertain Glory: India and its Contradictions” by Jean Drèze and Amartya Sen, the focus is specifically on the juxtaposing increase in economic growth of India with the corresponding decrease in social conditions. They believe the economic growth comes as a result of many different factors in collusion with free market policy. On the other hand, Andre Shleifer’s view is much more simplistic in nature. He believes that the free market itself is the sole reason for the growth and the government should have very limited if any intervention in free market policies. Upon reviewing the arguments of both sets of authors, I have come to the conclusion that Shleifer is, in fact, wrong in his beliefs. While free market policy has played a tremendous role in the economic growth of many countries like India in South Asia, it is not the sole reason. In contrast with Shleifer’s views, it is obvious that in order for there to be a change in social conditions for a country there must be government involvement in the creation of social policy.
Shleifer’s argument no doubt contains a great deal of substance superficially. Free market policies definitely have had a positive impact on the economic growth of countries throughout the world. However, as shown in countries like India where social conditions either haven’t changed or have worsened, government intervention is a necessity for meaningful social change to occur. Social issues will not simply solve themselves as a result of free market policy without government input (Shleifer, 123). Shleifer in his argument fails to realize this, which negatively impacts its accuracy.
In “The Age of Milton Friedman”, Shleifer attempts to convey a direct correlation between the rise of free market policy and the increase in world social conditions. He provides many graphs and other forms of data to show that there is a corresponding improvement in infant mortality rates, life expectancy, and education with the introduction of a free market to many countries (Shleifer 126-128). For example, the average the number of years of schooling a child will attend in every region of the world has increased by about 2% from 1980-2000 (Shleifer 128). In addition, the infant mortality rate has seen substantial decreases in all regions of of the world except for Sub-Saharan Africa where it has decreased only slightly. Nonetheless, there is no explicit data that shows that the increase in social conditions has a direct relationship with the rise of free market policy. Though Shleifer indeed shows that there is “an association between free market policies and social progress,” his belief that the institution of a laissez-faire free market will dramatically improve the lives of all citizens is still lacking in support (Shleifer 123).
The main reason that Shleifer’s argument contains no more than a little substance superficially is because he fails to bring the light the issue of the still widening gap of wealth in countries in South Asia or specifically India. Drèze and Sen reveal this issue in their book and expand on it. They analyze the the general inequalities between the rich and poor that still exist and point them out to the public (India 213). They do however support the notion that free market policies have a had a positive impact in certain areas that make up the general standard of living in the world. One of those being the worldwide increase in the GDP per capita that Shleifer explains in his data (Shleifer 125). Despite this, due to the still withstanding and in some cases, widening wealth gap and other economic inequalities, Drèze and Sen firmly believe that government intervention does and should play a major role in the growth and expansion of the the economy and social standards in many countries. Specific evidence of this can be seen in Drèze and Sen’s data where which shows that even though the GDP of India has risen and is among the highest in South Asia, other key social factors, such as the life expectancy at birth, that determine a countries standard of living are among the lowest in the group of the 16 poorest countries outside of Sub-Saharan Africa (India 49). This does not by any means support Shleifer’s simplistic idea that free market with no government support will increase social conditions.
Shleifer’s argument is also flawed in the sense that it in no way mentions the fact that some countries in South Asia like India have a caste system currently in place which in itself breeds immense social inequality. A caste structure put simply, is a social class structure that is determined at birth. Meaning for the most part, if you are born poor you will remain poor and vice versa. The caste system presents major boundaries between those at the top and those at the bottom, which as a result has led to the widening of the wealth gap in India and other countries with a similar set up. The GDP of the countries may be rising, however with the current social class structure that they have in place, all the wealth is going to the top couple social classes instead of being distributed evenly. It is in cases like these where the government could play an instrumental role in creating social change by implementing public policy that could help support the groups in the lower class levels. For example, in India the government has instituted a “school meal program” which was created in an attempt to entice more underprivileged children to attend public school and stay in school in order to have a chance to better their social standing (India 193-94). Another example of government support that can be provided is the concept of Conditional Cash Transfers or “In Kind” Transfers. These are given to families to encourage certain behaviors, such as when they send their child to school, or take them to get vaccinated (India 196). Because of this, there is a much better possibility that the overall standard of living in India will increase soon then with the alternative of no government support at all.
If Shleifer’s argument were to be true, then there would’ve been a strong positive correlation between the the rise in GDP of India and its social conditions. As a result, it is apparent that the argument Drèze and Sen pose proves Shleifer to be wrong. In order for the positive effects of a free market economy to impact a country with a strict social class system like India, the government must implement some form of social policy that helps to distribute the increase in overall wealth more evenly. The lower classes need more support from the government in order to continue the upward trend of economic growth for the country as a whole.
Overall, Shleifer’s idea could have some relevance in a more developed country such as the United States where there is no established social construct such as the caste system. The belief in the American Dream still exists and prospers in underprivileged communities throughout the country; there are less obstacles in the way of people in pursuit of a better life for themselves. With that being said, the idea that the rise of the free market automatically has a positive impact on the social conditions of a country without government intervention still isn’t completely proven. In my opinion, large gaps in wealth are and will continue to be a persistent issue for many countries in the world and specifically for our case study of India unless government intervenes and creates public policy to contain the economic disparities that are present.