For three decades, public opinion has systematically massed in favor of private enterprise and the free market. Today, almost all of us believe that profit motivation is not only good for business, but also for society as a whole. We have been pushed by the mainstream media, economists and various other experts and our netas, that the market rewards talent, merit and hard work, and punishes laziness and inefficiency. Ironically, this moral philosophical attitude has ended up favoring policies that inevitably favor the rich.
In the neoliberal fantasy world, markets are a level playing field, where citizens compete as equal economic agents. They not only exchange goods and services, but also compete with each other to provide them at the lowest cost. Those who use their resources efficiently become successful entrepreneurs, while others become their employees. Apparently, by a magic clock or by pure providence, this system is supposed to benefit everyone, whether they are owners of capital or workers.
In reality, free markets are always skewed in favor of owners of capital. Those with the money will always outperform others by offering high salaries to top talent, accessing the latest technology, and selling products below the cost of production. Firms with deep pockets can suffer losses for a long time. On the other hand, a first generation entrepreneur who borrows money to start a business cannot survive for long without making a profit. This leads to mergers in all industries, leading to monopolies.
Neoliberal economists argue that monopolies do not cause economic inequality because such behemoths are invariably owned by the public. In effect, therefore, anyone who owns shares in these companies is the owner. In reality, small shareholders have no say in how a business operates. It is the large shareholders who decide the company’s investment strategies and who should be compensated and how.
It is in the best interests of big business to ensure that this system not only works, but also happens over time. The first is to ensure that all laws relating to the economy are geared towards the free functioning of monopoly capital. Big corporations know that democratic states will have to limit the formation of powerful monopolies, but they also know that state institutions charged with implementing fair market practices work more by omission.
The second thing big business has to do is make sure government policies help them. Again, governments cannot seem to favor big business, so all economic policies must be disguised as “reforms”. Every time governments proclaim they are pulling out of the economy, they are in fact creating a political environment that favors big business.
It is therefore essential that these policies are sold to the public as beneficial to society. It must be part of a global discourse of economic growth. We have seen this happen since the early 1990s. All governments have talked about growth, or vikas, rather than equity or inclusive development. And the various Pink Book experts, opinion makers, columnists and editors have pushed this “reformist” agenda forward.
Public opinion has taken such a rigid form in favor of the market now that even governments and politicians cannot oppose it. Even if a government wants to reduce private profit, it will have to withdraw, because our captains of industry have become our natural heroes. This is why laws that restrict workers’ rights are praised by the media, as are policies that reduce regulatory oversight on India Inc. If the government acts against a business house, editorials are written for it. oppose these measures. On the other hand, if the government cuts corporate taxes, it immediately gets media support.
This is why India Inc can get away with paying little tax at a time when it is making record profits. Over the past 10 years, the contribution of corporate tax to the Centre’s total tax revenue has fallen from 36% to just 23%. On the other hand, the share of indirect taxes increased from 45 to 53 percent. This goes against all theories of fair taxation. Higher direct taxes, especially corporate taxes, are considered progressive because they place the tax burden on those who can afford them. Indirect taxes – GST, sales tax, VAT, customs, excise – affect everyone, rich or poor. The higher the contribution of indirect taxes to an economy, the more inequitable it is considered.
The pro-market economy tells us that the stock markets are the great equalizers in market economies. It has been successfully drilled into our minds that investing in the stock markets allows every citizen to share in the profits of the business. Therefore, no one protests when government policy is geared towards keeping interest rates low, as well as low taxes on capital gains in the stock markets.
Low yields on bank deposits, which are also taxed, encourage money to flow into the markets. Our policymakers tell us that this ensures that household savings go directly into the production process, without the need for bank mediation. It is also supposed to broaden the ownership base of private companies and their assets. In reality, markets benefit those who can deploy large amounts of capital. A few big investors determine which companies do well on the stock exchanges.
It is significant that the Covid year, when independent India experienced the worst recession in its history, was also a year of record profits for companies, lowest corporate taxes and a great year for companies. stock markets. While an overwhelming majority of Indians have seen their real income drop significantly, the richest 1% have gotten richer. This is an inevitable side effect of 30 years of “reform”.