Oligopoly in Oligarchy

Author(s): S R Sen
Source: Economic and Political Weekly, Vol. 26, No. 36 (Sep. 7, 1991), pp. 2089-2090
Published by: Economic and Political Weekly
Stable URL: http://www.jstor.org/stable/41626974
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 Oli
Pacific Asian countries where social
discipline was good and poorly in many
African and Latin American countries
S R Sen where it was not so. Most South Asian
countries were somewhere in the middle,
with periodical ups and downs.
What the world is really heading for is oligopoly in oligarchy
quite different from 4 market economy in democracy 9 that the
Recent Changes
liberals wanted and 1 command economy in a proletarian
dictatorship 9 that the Marxists fought for. The command economy countries like
USSR and China did quite well in the 50s
EVEN 200 years back, the dominant and 60s when the patriotic urge for
pounded his strong opposition to Adam
political economic system was largely Smith's laissez-faire and invisible hand reconstruction motivated the people,
feudal status and mercantile contract and system, which threatened to give rise to political discipline was strong and isola-
tion from the consumerism of market
the prevailing ideology was a mixture of serious inequities and crises and ad-
religious codes and mercantilist prescrip- vocated the need for a command economy economy countries could be maintained.
But decadence set in later when these were
tions. The role of the state, represented by in which the state run by the proletariat
an absolute monarch, was mainly to sus- (instead of the nobility and the bour- eroded and economic troubles multiplied.
tain these two and arbitrate between con- geoisie) would exercise full control. The Ideological orthodoxy working against
flicting 'private* and 'group' interests. The system of market economy in a demo- adoption of Lange's prescriptions for
result was serious inequity, inefficiency cracy was to be replaced by a system of planning, proliferation of a power and
and economic stagnation. command economy in a dictatorial polity rent-seeking and procrastinating bureau-
In 1767, the author of the first book en- in the interest of the proletariat. cracy, failure to make timely adjustments
titled 'Political Economy', Sir James to changing situations and very heavy
Steuart, proffered a new ideology ad- Reaction burden of defence expenditure were large-
vocating free competition in a market ly responsible for these troubles. The com-
economy in normal times but recommen- As a reaction to Marx's challenge,
mand the
economy had to be considerably
ding state intervention whenever the ideology of Adam Smith was further
diluted and even dismantled, more so in
market economy tended to go wrong. He developed by neo-classical economists
USSRlike
than in China. As a result the polity
Mises, Hayek and Friedman. Mises became basically oligarchical and
had a fear that the market economy might
sought to prove that collectivist economiceconomy oligopolist in these countries as
not always be self-correcting and,
therefore, the hand of the state had a cor-
planning was inefficient and almost well as the other countries of the former
unworkable. communist bloc.
rective role to play in the 'social' interest.
In his scheme, the state was represented This was countered by further refine-
On the other hand, in the capitalist
not by an absolute monarch but by a con- ment of Marx's ideas by Neo-Marxian countries also the emerging socio-
stitutional government. economists like Feldman, Lange and
In 1776, Adam Smith, taking his cue Kantorovich. Lange sought to prove that economic forces tended to make the polU
ty veer gradually towards oligarchy and
from the Physiocrats, strongly advocated collectivist economic planning could be the economy towards oligopoly. The
priority for natural law as against state law
quite efficient and practicable if certain
dominance of the military industrial com-
and the cleansing of the prevailing augean basic principles were followed. plex and giant corporations, both national
stable of 'man-made control laws by a A middle path of 'mixed economy' was and multinational, accelerated this trend.
flood of free competition in a laissez-faire developed, especially after the crisis fac- The multinational corporations became
market economy, any aberration in which ed, by laissez-faire economies and relative even more powerful than some govern-
a self-regulating invisible hand auto- stability of the planned economies during
ments. If the giant corporations of the
matically corrected. 'Social' interest the Great Depression of 1930, by market
west collaborate in future with the giant
was best served by the state remaining interventionist eonomists like Keynes, enterprises of the east, for which there is
passive in economic matters. Lerner and Myrdal, who followed rather
a move, their clout may become even more
unconsciously the lead originally given by
The Zeitgeist of the times being what it strong. In their internal management, they
Steuart.
was, eventually Steuart lost out and Smith smack of neo-feudalism and in their ex-
won. The slogan of Smith's followers (the Experience of economic interven- ternal operations they appear to pursue
liberals) was 'competitive market economy tionism during the depression years and neo-mercanti lism.
in a competitive democratic polity'. From the war years that followed led to a new
The mixed economies in most other
the repeal of the com laws in 1846 in use for mixed economy called 'develop-
countries are also moving in the same
Britain up to the Great Depression in ment economics' from the 50s onwards. direction.
1930, the protagonists of the free market The relative proportion and role of market
and invisible hand ideology became competition and state command in the What the world is really heading for is
stronger. There was unprecedented 'mixture' varied, however, widely fromthus oligopoly in oligarchy , quite different
economic growth but also acute destitu- country to country and situation to from market economy in democracy that
tion and distress. situation. the liberals wanted and command
The system of mixed economy seemed economy in a proletarian dictatorship that
In the third quarter of the 19th century,
Karl Marx (who admired Steuart) pro- to work better in the Scandinavian and the Marxists fought for.

Economic and Political Weekly September 7, 1991 2089

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 Studies Needed result in 'private' and 'group' interests get-
also threatens to make our economy
ting preference over 'social' interests. unstable and inefficient and our polity un-
In both oligopoly and oligarchy some
principled and unjust - much more than
competition exists but serious obstacles Inadequate
to democratic functioning
Karl Marx or Adam Smith or even James
new entrants also prevail. Leaderswithin of civil
and caucus domination of leading
and defence services, which have middle Steuart imagined. Instead of either
political parties and their dependence on
socialism or liberalism, we seem to face
class traits, play an important role money
along and muscle power in elections
the prospect of even reviving some of the
with entrepreneurs in oligopoly and along
(partly due to a faulty electoral system),
features of pre-Steuart mercantilism or
with politicians in oligarchy. As a result,
concentration of state power in the hands
Parkinsonian motivation tends toofsupple- cameralism, with all their inefficiency and
a limited number of key politicians and
ment basic factors like horizontal com- inequity, unless effective corrective
government officers (partly due to a faulty
petition and profit' and 'vertical com- measures are taken early.
government system) and overshadowing
mand and rent' respectively in the com- of the voting power exercised by the peo-A silver lining in this dark cloud is pro-
bination of oligopoly and oligarchy. ple after long intervals by the lobbying vided by the fact that a great deal of
In view of the growing importance power
of exercised by powerful groups pressure of freely expressed public
criticism and powerful economic and
this combination, there is urgent need for
almost continuously are increasingly mak-
intensive research in this area. Some political competition still persists.
ing our polity more of an oligarchy than
How best to check the undesirable
democracy.
rigorous theoretical research has no doubt
trends and promote the desirable ones
been done in oligopoly in recent years The triangular interaction between en- needs urgent attention of our scholars,
[vide, Carl Shapiro, Theories of Oligopo-
trepreneurs, politicans and officialdom media and policy-makers.
ly Behaviour' in Schmalensee and Willig
(eds), Handbook of Industrial Organi-
sation , Vol I, North Holland, 1989]
but it is still inadequate and that on
r VIOLATION OF DEMOCRATIC RIGHTS IN INDIA >
oligarchy is even more so. Research in the
A.R.Desai (Ed.)
area of combined functioning of oligopo- The United Nations General Assembly passed in 1948 The Universal
ly and oligarchy is almost non-existent. Declaration of Human Rights opening a new chapter in the history of mankind.
Approach to research on Oligopoly in India, as a new nation was party to this resolution. In 1950 the Constitution of
oligarchy' has necessarily to be substan- India was framed incorporating in it the fundamental rights for the citizens of
tially different from that on either 'market India. Are these fundamental rights guaranteed by the Constitution enjoyed by
economy in democracy' or 'command the people of India ?
economy in a dictatorship'. The triangular " - Each case history, recounted in the book, etches an image on the mind akin
relationship of the entrepreneurs, politi- to Kafka's imagination. Read the book and enrich yourself."
cians and government officers in a few The Tribune, Chandigarh.
typical variations of this combination pp xxxl +624 Royal 8vo hb Rs. 350.00
should be worth studying in depth.
Such research should open up exciting
vistas for both neo-classical and neo- REPRESSION AND RESISTANCE IN INDIA
marxist economists. However, mere refine- A.R.Desai (Ed.)
ment of methods of analysis will not suf- Repression and Resistance in India gives a record of lhe violation of the various
fice. There is need to examine very careful- sections of the people such as women, workers, minori tics and DaliLs who have
ly the basic hypotheses themselves. It is slowly but certainly started asserting these rights.
instructive to recall that all the brilliant
M - All people eager to know the real condition in India will profit from it. Two
analyses of talented astronomers like groups will essentially find it fascinating. One, students who want to know the
lycho Brahe did not enable them to make
socio-economic scaffolding of backward, rural and tribal tracts. Secondly,
much advance in their science until a
journalists and media people, who, if they are honest enough to confcss how
genius like Copernicus questioned the
inadequate their coverage has been and should after reading resolve to correct
received hypothesis of geo-centric universe
their lapse."
itself and replaced it by a new hypothesis
Chancha I Sar kar in Hindustan Times.
of helio-centric universe. The progress pp xxii + 370 Royal 8vo hb Rs. 375.00
thereafter was phenomenal.
The same is true of the science of
economics now. Economics badly needsEXPANDING GOVERNMENTAL LAWLESSNESS AND
a Copernicus today. ORGANIZED STRUGGLES WWfM
A.R. Desai (Ed.)
Indian Situation While there has been continuous viol
there has been organized efforts to d
According to the constitution, India
emerging and many activists are flgh
should be inter alia a socialist democracy.
But in reality it is today nearer an Desai has given a historic account of
oligopolist oligarchy than is commonly democratic rights organizations in In
perceived. limitations of these organized efforts
The domination of a handful of con- pp 400 Royal 8vo hb Rs. 375.0
trol administrators and big businessmen
POPULAR PRAKASHAN
(apart from farmer and labour leaders) in 35-C Pt M.MJVf alaviya M arg, Tardco, Bombay 400 034
mixed economy frequently tends to

2090 Economic and Political Weekly September 7, 1991

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