Thursday, June 09, 2005

On Socialism and Diversity

Socialism has been the guiding philosophy of independent India. With the 42nd Amendment, Indira Gandhi introduced the word in the preamble of the Indian Constitution. Yet the fruits of socialism in India so far are at best debateable. In short, socialism has not worked. The question is, why? Michael Higgins thinks he knows why:
Socialism can be modeled by a simple game: the commons game. In the commons game there are n (n greater than 1) participants. For every dollar that the participant puts into the common pot, the society can buy a public good worth 2/n to everyone. Obviously, if everyone puts in the same amount, everyone gets a good that is worth double what he or she paid for it, which is a really good deal. But the free rider will think: if everyone else puts in their money and I don’t I get the benefits for nothing. Obviously the free rider is a stinker, but these people do exist, and they more likely to exist among groups that feel that they have been abused in the past.

This is the important point: people who don’t trust others in society will act less cooperatively and make socialism unworkable. They will shirk their responsibility to work hard, pay lots of taxes, and avoid taking too much from the public pot. They won’t feel so bad about their anti-social behavior because they don't care so much about these other people. They will feel that the money in the public money-pot is going to those others and they would prefer that the money would stay within their own family.
India's problem, then is its diversity. There are simply thousands of religious, ethnic, linguistic and caste groupings in India. How can you be expected to cooperate economically with another group when you refuse (for example) to use the same water source as them? The sheer diversity means that people usually think of their own communities first, and others later. This, however is not a sentiment restricted to India, however, its universal:
I believe that we humans have an instinct for cooperating with the “tribe”. The commons game came up all the time in our prehistoric past and humans did not have capitalism to help overcome the free rider problem. Think about warfare. People in the tribe had to put their own interest aside for the common good or the tribe might lose to another tribe. But this feeling of cooperation did not extend to other tribes for obvious reasons: the other tribe might be your enemy, either today or tomorrow. Instinctively, we will feel bad if we are uncooperative with our own tribe but less concerned about other tribes.
The conclusion drawn from this theory is that socialism works best in countries that are almost completely homogenous. The Scandinavian countries for example have created seemingly successful welfare states that work. However, a diverse, heterogenous country like India or the US is best off following a free market laissez faire system where everyone's best interests are served by each individual following his personal interest. An Invisible Hand, if you will.

The whole article (which you can read here) is well explained and logical, and no, you don't need a PhD to understand it. The strange thing is, a couple of months back a Sinhalese friend of mine, who happens to be a communist, told me something similar. The best thing for India, he said, is to adopt a free market economy. It will be a boon for small businessmen, traders and farmers: in short, for the backbone of the economy. Socialism won't work here as well as (he believes) it will in Sri Lanka.

It's got to be true if even the commies believe it!

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