On November 19, 2021, Prime Minister Narendra Modi declared his government’s intention to withdraw the three controversial laws that were passed to reform the agriculture sector. The government followed up by passing a Bill to repeal the laws in parliament. The laws were met with stiff resistance since they were initially enacted as ordinances. Farmers pointed to multiple consequences of the laws – including the withdrawal of state and the potential corporate capture of agriculture. The three laws put together aimed to reform the agriculture sector with a focus on private players, specifically supply chain actors. The most controversial among them is the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, which allowed the bypassing of the mandi system.That the mandi system as it exists needs reforms is a foregone conclusion. The mandis are often captured by local elites, resulting in collusive practices by traders and agents and subsequent loss of revenue for farmers. However, the law to bypass the mandi system was based on heroic assumptions and had notable gaps which are widely documented. Now that the government is going ahead with forming a committee consisting of multiple stakeholders to reform agriculture, there is a need to focus on the nature of that reform. Our focus here is on outlining a broad progressive vision for this reform. For progressives to take a lead in this reform, it is imperative to go beyond dirigisme inspired policies while steering clear of “the market”. While there is huge diversity in the ways different countries implemented policies of dirigisme, the doctrine represents an economy largely owned and directed by the state.For the Indian progressives to win the narrative and to have a real shot at leading the conversation on agricultural reforms, there is a need for a new set of principles that will guide reforms. This new set of principles yields a new set of tools; the market is one such tool. However, to use this tool for progressive purposes we should ask: how did markets always end up on the wrong side of the progressives? How did markets become the demarcating line of ideological wars and reified one’s commitment towards or against social justice? Farmers gesture as they block a national highway during a protest against farm bills passed by India’s parliament, in Shambhu in Punjab, India, September 25, 2020. Photo: Reuters/Adnan AbidiThe illusive thing called ‘market’What exactly is a “market”? In different contexts, “market” connotes different meanings. As a noun, it is a gathering of people for economic transactions, a space where vendors gather for selling their goods, an area or arena in which commercial dealings are conducted, a demand for a particular product or service and state of trade at a particular time or in a particular context. Then there are specific phrases like “make a market” as in finance and more politically charged ones such as “free market” and “global market”. Between all these meanings and usages, our understanding of the market remains shrouded. But don’t we have an entire discipline dedicated to the study of markets and shouldn’t this body of knowledge serve us with the necessary understanding of markets? Unfortunately, according to some of its own high priests, that discipline paid scant attention to markets and more than often treated markets as synonymous with institute-free exchange. From general equilibrium models of Walras and Arrow-Debreu to modern portfolio theory, economics has no details about markets and how they work in the real world. The focus is always on agents and their (lack of) capability to maximise gains through hyperreal “market” transactions.While mainstream economics went about studying “markets” without markets, a silent revolution that would change our understanding of markets was taking place both within and outside economics. The development of computers and computer-mediated markets demanded economists to pay more attention to the details of markets. As they were called to design and implement markets, some economists realised that details such as rules of trade, trading privilege available to each participant and inventory available with the market makers were important in deciding market outcomes. Branches such as market micro structure, mechanism design and engineering economics examined and modelled hitherto overlooked aspects of markets.For the last three decades, the dominant thinking in economics shifted to viewing markets as allocative mechanisms and information processors. This meant that economists were involved in engineering markets in ways that helped their clients, i.e. particular stakeholders. This exercise forced economists to appreciate the diversity among different markets and abandon the generic, institution-free idea of “the market” which dominated conventional economic thinking. While economists celebrated the success of their discipline in engineering markets, scholars from other social science disciplines were investigating this success. A host of studies revealed that the markets engineered by economists were not politically neutral. For example, in the case of auctions for radio spectrum throughout the world, economists were working at the behest of different corporates – each advancing the objectives of their masters.Different arguments, rules, and methods were proposed by economists, all based in economics and in theory were supposed to serve the dictum of “efficiency.” However, in actuality, markets were engineered and built in ways that suited the particular goals of corporates or governments which hired these “experts” in the first place. In other words, an outcome could be selected apriori and the market could be designed to favour the chosen outcome. Markets, like other machines, were being engineered for specific outcomes.Representational image. Paddy procurement is at full swing at the new grain market in Patiala city. Photo: Vivek Gupta.Building markets for workers and farmers While this episode sounds like a retelling of the progressive fable of “markets working for the powerful”, it opens up a door which progressives have so far overlooked. If markets can be designed for a particular set of stakeholders, why can’t progressive economists design markets for progressive ends? Economists have shown that market design is both engineering and politics. All engineering necessitates choices and therefore trade-offs, creating winners and losers. In other words, all engineering has implicit politics. So why not make the politics of market design explicitly progressive?Indian progressives always had an antagonistic relationship with the totemic “market” and often equated markets with everything wrong with capitalism. In doing this, progressives conflated capitalism with the market as a mechanism of resource allocation and information processing. But “the market” is a social institution of exchange where one or another exchange equivalency exists; each market is different from the others and does specific things.For example, each APMC Mandi is a different market trading in one or more commodities, with its own trading rules and practices, customary rights, transactional relations and unique cultural meanings. A change in any of these factors such as the accepted quality parameters of traded commodity, weighing measurements, credit facility or governing structure can fundamentally shift who can benefit from the mandi. These are simultaneously design choices and political choices; a market can be designed to reflect these choices.Markets have myriad rules regarding who can trade, how to trade, what can be traded, what counts as an excessive price movement for circuit breakers, what counts as fair trade, what trading times are and so on. There is therefore never such a thing as a “free market.” Online marketplaces have shown what has long been sociological common sense – that markets are bundles of rule structures and social algorithms.What is actually meant by the “free market” is that the market designers using this term do not want the government to set the ever-present rules of the market. They naturally want that privilege for themselves to set the rules in a way that favours their interests.Therefore, one basic way of democratising markets is to make sure the representatives of all stakeholders have a seat at the table that decides the rules of any particular market – from the national commodity exchanges to the APMCs. These stakeholders can jointly decide what the market ought to optimise. Perhaps the net result might be a preference for price stability over allocative efficiency that the market collective is willing to pay for.Markets can coordinate up to a point. Needless to say, those operating in markets need to be endowed with basic rights and capabilities in order to enhance their bargaining power. The traditional social democratic concerns to enhance welfare through basic health and education at a high level will remain but with renewed focus. The aim will not be to merely ameliorate the outcomes of a marketplace that is assumed to be unfair but to equip the market-citizen to both cooperate in the design of market rules and to compete in a market she has helped create.Also Read: Turning the Fantasy of ‘Free-Markets’ and ‘Choice’ in Indian Agriculture Into RealityIndeed, we can rethink the state itself as an enabling venture capitalist rather than merely a facilitator for private capital. The aim is to rid ourselves of the false dichotomy of market and state and learn to use the state to design the market for people.As the protest against the government’s reforms has demonstrated, there is a need for the state to direct and invest in the agricultural markets. While it is important to argue against the retreat of the state from agricultural markets, progressives should not make the error of falling back on dirigisme and instead focus on policies that will promote genuinely competitive markets. Building markets for farmers and workers is an important principle that the progressives should make a part of their political programme. For this, progressives need to stop treating the market as anathema and understand that markets are, among other things, allocative mechanisms that are always designed in some fashion. If they are designed and built for farmers and workers, they can achieve their allocative ends in inclusive and productivity enhancing ways.Tony Kurian is a PhD candidate in sociology at the Department of Humanities and Social Sciences, IIT Bombay. Anush Kapadia is in the sociology group at the Department of Humanities and Social Sciences, IIT Bombay.
