The book, In Service of The Republic: The Art and Science of Economic Policy by Kelkar, Vijay, and Ajay Shah has a strong focus on promoting the idea that state intervention in market failure should be discouraged as the first solution to issues impacting the market. Since the state has a monopoly of coercive power and other factors which makes governmental failure capable of far-reaching effects, we need to carefully weigh the pros and cons of state intervention and only promote it when it is the most viable and beneficial option to pursue.
India shares extreme similarities with my country, Nigeria. They were both colonized by the British, currently have a huge predominantly young population and are facing similar developmental challenges despite recognizable potentials. They are also struggling with issues of state capacity and frequent unstable interference of the government in economic activities. In fact, one of the major challenges to investment in Nigeria is incoherent governmental policies[1]. The government is usually swift to intervene when it could let the market decide and with policies which may not have been efficiently designed or properly executed.
This makes me agree with the authors that the crucial steps to follow in policy thinking is first confirming that there is indeed a market failure, then identifying the appropriate solutions to address it and finally accepting that it may or may not have the ability to implement proposed solutions.
I appreciated the arguments made with respect to considering civil servants, not as altruistic people but as individuals with vested interest, and that policy frameworks should be designed to reduce the emergence of detrimental self-interests. Several developing countries suffer the debilitating effects of corruption and I see this approach as a solution which if promoted would make it difficult for corruption to thrive. For example, designing adequate record keeping and strengthening accountability structures have been identified as one of the means of tackling corruption.[2]
However, I do not fully agree that we should discard criminal sanctions in economic laws. As rightly recognized by the authors, market interactions have unintended consequences. I believe individuals and businesses who have such enormous powers to engage with market forces in a society must exercise caution and be held liable when their willful actions or inactions negatively impact on the society.
They do make a strong point on the need for public policy to address root causes of the diseases, not the symptoms. In Nigeria for example, fuel subsidy is a contentious issue which politicians and government have turned into a tool for appealing to the masses during elections and disturbing them afterwards. Despite the arguments that the subsidy is used to reduce the pump price of fuel for the masses, fuel subsidy is unsustainable[3], and the government should instead of paying subsidies, explore building functional refineries and promoting reforms to encourage private investments in the sector so we can reduce the costs associated with exporting our crude oil to foreign refineries and use our resources in an efficient manner.
Conclusively, in the context of developing countries, I do not subscribe to a total abandonment of the market by the governments because such countries are yet to fully develop capacity to engage with the market, I however agree that such interventions should be minimal. Interventions should be aimed at addressing issues which require central planning, conducted after adequate cost and benefit analysis, focus on protecting economic rights and reforms aimed at establishing a vibrant market economy and strengthening the capacity of private individuals to engage in production. Constant reviews of these interventions must also be done so governments can monitor when they have met their objectives and begun to outlive their usefulness.
[1] Policy Inconsistency in Nigeria, accessed via https://www.stearsng.com/article/policy-inconsistency-in-nigeria, on April 26, 2021.
[2] Palmer, Marlize. (2000). Records management and accountability versus corruption, fraud, and maladministration. Records Management Journal. 10. 61-72.
[3] Nigeria Fuel Subsidies Near $300 Million a Month, NNPC Says, accessed via https://www.bloomberg.com/news/articles/2021-03-25/nigeria-fuel-subsidy-hits-nearly-300-million-a-month-nnpc-says, on April 27, 2021
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