Putting consumers first

Business Standard, June 14, 2013

A festschrift with contributions from leading global and Indian economists examines the world economy from an unusual angle

All growth models talk about enhancing efficiency, and elaborate on the policy enablers to ensure that we are on the right path. It’s not surprising that the focus of policy is almost always on business and that we tend to forget about the consumer. It is not just a case of consumers not being informed or getting an unfair deal; at times, policies that enable successful business end up making consumers pay more.

Take, for example, those banking services whose fine print you do not notice. Or a standard parking ticket that takes no responsibility for theft. Or the pension fund that actually takes away a large portion of your savings as operating expenses. This is where Consumer Unity and Trust Society (CUTS) comes in. It has been working for the last 30 years to deliver consumers a better deal in all respects. The credit goes to Pradeep Mehta, whose 65th birthday has been celebrated with a rare tribute – a collection, or festschrift, comprising 30 essays in his honour. Nitin Desai and Rajeev Mathur, editors of this volume, cover three areas – trade and development, competition and regulation, and governance within the country and globally – and draw attention to the importance of addressing consumer interests. Some of the best minds of the world and India, such as Pascal Lamy, Bipul Chatterjee, Martin Wolf, V Vyas and T C A Srinivasa Raghavan, share their views through a set of terse writings that highlight the inadequacies in our systems and the way ahead.

We all talk about free trade and the need to make the World Trade Organisation (WTO) work. But we have seen that, ever since the multiple global crises, most of these rules have been flouted: countries, pursued by interest groups, have worked towards ensuring that goods do not traverse borders seamlessly. Therefore, all the engines working towards solving problems in trade, climate, food security, poverty and so on have come to a standstill. With the growth of mercantilism, trade is manipulated through the subtle use of non-tariff barriers – such as exchange rate variations and subsidies – within the broad guidelines set by the WTO. One of the biggest losers, according to Ratnakar Adhikari, is the entire set of less developed countries that have been marginalised, even as the rest of the world has exploited their fuel and mineral resources with little value addition along the way.

Competition is desirable, and good regulation is necessary to ensure that rules are obeyed. Here, S L Rao laments the phenomenon of a multiplicity of regulators – with the appointment of retired bureaucrats, who are subservient to ministers and other bureaucrats in service. It is, therefore, natural that one cannot expect fair play. In this context, T C A Srinivasa Raghavan differentiates between three kinds of institutions: those created by the Constitution that “work”; those created by Parliament that “do not necessarily work” the way they are supposed to; and those created by the government that are least independent and almost “never work”.

At the global level, too, Frederic Jenny points out that while competition per se went outside the purview of the WTO in 2004, it cannot be ignored and we need to check the proliferation of cartelisation. An interesting example quoted here pertains to the weak laws in Peru that protect only “reasonable” consumers, where one is defined as being reasonable if he or she knows what they buy – quite absurd for any developing country where a large number of people are illiterate.

On the issue of governance, Arun Maira discusses the need to ensure that the institutions serve the broader community for the system to work more efficiently, while Bibek Debroy talks about a participative approach between institutions, urban local bodies, and communities for better healthcare delivery. An interesting detail shared by Rajeev Mathur is that India, with just one per cent of the global vehicle population, scores very poorly on road safety – one in 10 road accidents takes place in our country and we account for every sixth road crash. Evidently, there is a problem with the way roads are built and traffic managed.

At a different level, Rohinton Medhora discusses the changing balance of power in the world. He feels that if more fair-play policies are to be enunciated and accepted, there is a need for greater inclusion of countries that are smaller and less developed but matter in the larger scheme of things. This is where institutions like the G20 matter.

Martin Wolf seconds this view. In fact, he goes one step ahead and suggests that developing nations should assume a more aggressive role. He looks closely at India and presents three choices: do nothing, turn away from the world economy, or become a leader. He fears that we may go for the first one, which would be incorrect because free riding will no longer work.

This collection is not just interesting but also enjoyable because the authors have discussed issues from the consumer’s point of view. Several lessons can be drawn. One, consumers are citizens who deserve a decent life. Two, their interests must be powerful and we should not let other interest groups trample over them. Finally, voices must be raised for affirmative action and continuance of fair-market practices supported by strong legal, political and social systems. And CUTS has done a great service by reinforcing these concerns in various fora. We can expect more to come.

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