India: Libertarian Utopia or Anarchist Dystopia?

India can be described as a giant living experiment of a society with minimal government. Theoretically, India has a Westminster system of government with all the accompanying civil institutions. In reality, however, these institutions are weak, underfunded and often effectively non-existent in many spheres of Indian life. The resulting dynamics of Indian society can give us a glimpse into a stateless society.

While elements of Indian life seem to echo libertarianism, India overall cannot be described as a libertarian paradise, due to the absence of certain fundamental freedoms.

Economic Freedom

Due to weak governmental structures, private property rights are not adequately protected in India. Land owners risk encroachment and even expropriation from land mafias. There is corruption in the police force, and while the courts are fair and free from corruption, they are underfunded, and it can take more than a decade for justice to be served. Needless to say, justice delayed is justice denied.

Officially at least, India is very far from a libertarian paradise as far as economic freedom is concerned. It is consistently ranked amongst the bottom in international economic freedom. For example, starting a business in India is a bureaucratic nightmare and can take a month on average. India’s socialist past still heavily influences its labour laws.

In reality however, many small businesses operate without being registered, with off-the-book employees, sometimes including child workers. They rely on good relations with the local law enforcement community, occasionally resorting to bribery to circumvent the law. Approximately 85% of the total workforce is estimated to work in the informal sector.

There is certainly something libertarian about a community consensus which turns a blind eye to market interventions and labour regulations. For example, auto-rickshaw fares are supposed to be set by the government, but they never keep pace with inflation, and are ignored. No customer expects to go by the meter, which only serves an ornamental purpose, and fares are agreed laissez faire by bargaining.

While there are many episodes of abuse, child labour is also used in mutually beneficial situations. It is common for local grocery stores to hire poor children to run the shop and small errands, and for middle class homes to hire teenagers to clean their homes and wash their dishes. As poverty rates reduce however, more poor parents are sending their children to school and this practice is thankfully becoming less prevalent. Middle India is suffering from a shortage of domestic workers similar to England during the Victorian era.

It can be argued that India’s informal labour market shows that unregulated labour markets can function relatively well and meet the needs of society. Of course, an unregulated market leads to many more instances of abuse than would occur in a regulated one, and critics could claim an anarchist dystopia of sorts. However, the free market largely sorts itself out. A natural minimum wage is one whereby less energy is expended than justified by the wage being offered. Similarly, reputational damage tends to limit the worst excesses of unscrupulous employers.

India is also a bit of an unofficial libertarian paradise in its widespread tax evasion. While India has an elaborate tax code, only about three percent of Indians pay any tax. Considering a large part of their taxes will mostly be siphoned off to line the pockets of corrupt politicians and public officials, it is not difficult to sympathise with this attitude. 

However, unregistered small businesses are exposed to harassment by law enforcement authorities and often need to offer bribes to stay in business. In such a quasi-libertarian society, the public generally tries to avoid any interaction with the authorities, especially the police, who can be a law unto themselves.

However, given the police are also badly under-resourced, there is a mutual dependency. Some police stations have to rely on the goodwill of local communities to function, and some give-and-take thus ensues.

India’s illiberal economic framework affects big businesses most, as they are most visible and have to abide by the red tape. This leads to lower rates of investment and job creation than would otherwise be possible. It also helps to entrench existing big businesses by raising barriers to entry for serious entrepreneurs. It is noteworthy that many of India’s biggest businesses are those which flourished under the crony socialism of the pre-liberalisation Licence Raj. 

In that era of economic stagnation, a nexus of politicians and businessmen had connived to create a cosy oligopoly closed to competition. So badly was innovation stifled that Indian roads saw no significant change in car design until 1993, with the now iconic Ambassador cars being continuously produced in almost the same form for decades on end.

Combined with low tax receipts and a dysfunctional public sector, India is strangled by a lack of investment in vital infrastructure. Its vast economic potential remains latent as opportunities to trade are squandered because goods and services cannot be moved efficiently from supplier to customer.

Freedom of Speech and Individualism

A big stain on India’s libertarian credentials is its poor record on freedom of speech. Riveted by caste and minority religious politics, the Indian government censors opinions which may offend minority communities. India was one of the few non-Muslim countries to ban Indian-born author Salman Rushdie’s Satanic Verses. It even effectively barred him from visiting the country to attend the Jaipur literary festival, when the government publicly declared it would not provide him security to protect him from Islamic fundamentalists who have placed a bounty on his head. A few Indian states banned public screenings of The Da Vinci Code, when Christian groups complained it was offensive. A few months ago, controversy erupted when Hindu groups legally pressured publishers to recall and cease publishing Wendy Doniger’s book The Hindus, complaining it offended Hindu sentiment.

Another key element of a libertarian society is being treated as an individual, and India fails abysmally on this score. The historical social rigidity caused by the caste system needs no introduction. But even after millennia of judging individuals on their birth, modern Indian society decided to continue the same approach, but just reverse the direction of discrimination.

In India today, the vast majority of jobs in the public service are reserved for members of backward castes and religious minorities. Even university entrance scores are determined by an individual’s caste. Nowadays, this can sometimes mean a wealthy lower caste student can be given preference over a poor Brahmin student. 24% of seats in the national parliament are reserved for low-caste members.

The government has even mooted plans to force private schools and universities, as well as privately-owned businesses to implement caste-based quotas! 

Verdict           

India's problems are too intractable to be solved by altering the influence of government.

Overall however, India is probably closer to an anarchist dystopia than a libertarian utopia. It is how the world's citizens would have seen the country as they heard of the ghastly gang rapes that plagued the nation's capital. It is the world of hundreds of millions of Indians struggling below the poverty line fending for themselves, and that of middle-class Indians who do daily battle with corrupt public officials for basic tasks like receiving birth certificates and driver's licences. 

Nonetheless, in the economic sphere, India's laissez-faire small business scene shows the world doesn't end without government.