Who will back such a policy?
Luigi Zingales has a brilliant essay [LT: Amol Agarwal] on meritocracy and free markets in the City Journal. The complete essay is worth a read but this extract should educate those who often mistake pro-business to be pro-market, particularly in the Indian context.
But it isn’t necessary to support big business to support free markets. Indeed, the two positions are often at odds, which is why so many Americans who love competition and freedom of choice nevertheless distrust the power that big business is gaining in our society. What we need is something that we might call a pro-market, not pro-business, agenda, one that defends the market system that has served America so well without supporting the businesses, whether they’re banks or car companies, that have grown, as the phrase has it, “too big to fail.”
Unfortunately, the pro-market, not pro-business, agenda fails to find much representation. Businesses—in particular, large businesses—often use their political muscle to restrict new entries into their industry, strengthening their positions but putting customers at a disadvantage. A pro-market policy, by contrast, favors competition, new entries to markets, equal starting points, and firms competing with one another on an even footing. But who will back such a policy? Not the traditional pro-business forces, obviously, and not the antibusiness ones either, which have little interest in free markets.
A pro-market, not pro-business, movement could redefine the political landscape, however. Consider, for instance, the problem of growing income inequality. Currently, the two approaches are either to deny the problem or to try to diminish it through taxation and redistribution—redistribution that reduces the incentives to create wealth to begin with. It’s as though you were to play a round of golf and then, at the end of the game, add strokes to the most successful players. What golf actually does, of course, is equalize the starting points of the players by imposing handicaps. That’s an approach that, if we imitated it in our economy, could make markets more inclusive and reduce income inequality.[CJ]
Do read the complete essay. It will be well worth your time.