Opposition to SAITM: violation of fundamental right to free enterprise in a democracy

by R.M.B Senanayake


Liberal democracy where fundamental rights are recognized and protected depend on the existence of a private enterprise economy. We saw how fundamental rights to freedom of speech and association could not exist in the Communist States where the right to own private property and engage in free economic enterprise was deprived to the individual.

There are no democratic states where there is no freedom for the individual to own private property and the freedom to engage in private economic enterprise. It is these rights that allow for the individual to assert his rights against the State where the State violates his other rights like freedom of speech and association. The necessity to own private property and engage in free economic enterprise are the bedrock of the other freedoms of the individual like freedom of speech and association for such right gives the power to the individual to challenge the State where it violates his fundamental rights.

The individual, if he cannot own private property and engage in private enterprise, cannot have the economic independence to assert his rights against the State if and when the State violates his fundamental rights to freedom of speech, association etc.  The right to freedom of association includes not only the right to meet and come together with other people for social activities but also includes engaging in economic activities as well. This includes the right to set up an economic enterprise jointly with others.

Where there is no freedom to own private property and the freedom to engage in private economic enterprise there cannot be a democratic state. This is why freedom perished in the former Communist States. The need for economic rights to ensure individual rights is not appreciated in our country which is unfortunately called a "socialist democracy".  If the right to private property and freedom of private economic enterprise are denied there cannot be a democracy where there is freedom of the individual to exercise such rights as freedom of speech, association etc. this was clearly seen in the former Communist States where private enterprise was banned.

It would seem that some self interested professionals in the medical profession want to preserve the monopoly of the profession to themselves and reduce if not shut out competition. By doing so they wish to keep their earnings or remuneration high since they could then decide for themselves how much to charge their patients knowing that no competitor will cut into their clientele. So they seem to want to arrogate to themselves the right to decide who should or should not be allowed into the profession. They may argue that they want to maintain the standards of the profession. Yes but they also have a selfish motive to limit the numbers entering the profession in order to keep their earnings or remuneration high.

Their earnings like that of any other profession are determined by the economic forces of supply and demand. In a free market economy this sort of price or income fixing power is not given or cannot be gained by any person or persons for the entry to the profession or service is not limited according to the numbers in the profession or what some one might think is the demand. Demand is determined in the market and is always relative to the price. It is also not static. If the price rises there will be less demand while if the price falls there will be a greater demand. This price is what the producer receives, be he the supplier of a service (professional) or some economic good.

This price in the case of a free market is the result of competition between suppliers to meet the demand and of the buyers to meet their need.  This sort of power to producers was available only in the Middle Ages when the craft guilds decided how many apprentices to take and thereby limited the number of new entrants to the craft or profession after the end of their apprenticeship period. This sort of power enabled those who exercise it to control the numbers entering the profession. But in a free market there is nobody and no authority which decides how many persons should enter a particular profession or provide a particular service.

The aggregate number in the profession or service is the result of free or unregulated market forces and not decided by anybody or by the regulatory body or any professional body relating to the profession. Each person decides for himself which profession or occupation he or she will enter and must then seek to obtain the necessary minimum qualification required to enter the profession. If he satisfies the minimum requirement, it is not open to anyone to prevent his entry to the profession or service. Where there is a regulatory authority for the profession or service such body is required to lay down general qualifications for entry and cannot decide between individuals as long as they satisfy the minimum eligible requirement. It cannot limit entry on the ground that a surfeit of new entrants will reduce their wages or remuneration. This should not be a criterion.

 Throughout history all occupations and crafts wanted to limit the numbers in the craft or profession in order to prevent excessive competition among themselves which would drive down their wages or remuneration. This same tendency exists even today as it did in the Middle Ages.  For a long time the Institute of Chartered Accountants was accused of limiting entry to the Accounting profession to keep their remuneration high. There was considerable criticism from the public and the professional regulatory body seems to have increased the numbers. 

The argument of the professional bodies regulating the professions was that the standards of the profession would be diluted if too many persons were allowed entry. But this was a spurious argument for standards can be maintained without reducing the numbers. Similarly those in the Faculties of the Government Universities who are enjoying free education want to enhance their post qualification earnings by reducing entry to the profession. The usual argument they imply is that free education is being ignored. But surely they must understand that there is nothing free in the world except for what is provided by nature such as fresh air and water and even these are scarce in some places.

So where water is scarce in relation to the demand for it there is a price for water even if it does not involve costs. But often the water must be transported from where it is freely available to where it is in demand in addition to being purified. It must also be stored to be dispensed in smaller quantities needed at a time by those who want it. So there are costs of purifying the water, storing and transporting it which have all to be covered if the water is taken from the place where it is available to the place where it is demanded. All these costs must be recovered when the supplier of the water gives it to those who want it. He cannot afford to give it free since he has incurred costs. If he can’t recover these costs he would be foolish to supply water to others but would confine his storage of water only for his own needs and that of his family.

Even if the government were to supply the water it too would incur the same costs and perhaps even higher costs. So we cannot say that the supply of water should be given to the government and expect the government to supply the water to us free of charge. When some good or service is supplied by the government free it only means that the cost is borne not by the direct beneficiaries of the  supply or service but by the whole community- by all and sundry.- those who use the service as well as those who do not because they have their own arrangements for supply.

There are costs to any service that uses scarce resources be they men or materials. There are those who argue that the costs should be as far as possible borne by the direct beneficiaries. This is an argument against free education. But others say since the benefits also accrue to the general public as well, they should be borne by the general public through the State and not necessarily by the direct beneficiary. 

Free education also means that the market forces cannot regulate demand and supply for the market price mechanism is the instrument by which resources are allocated in a free market economy.  But where the aggregate demand and supply are not regulated by the market and must be determined by some authority, then the issue of resource allocation becomes important. For example in our case education is more or less a state monopoly and the State must decide how much to allocate to education and how much to its other functions. So we hear politicians saying they will allocate 6% of the GDP to Education, a figure totally unrelated to the availability of funds for allocation.

From an over-all resource allocation point of view resources must be allocated through the free market in a accordance with supply and demand so that the supply should balance the demand without creating a waste of resources. Yes the theory of Economics says that this should be done not by some regulatory authority but by market forces. Each person can decide for himself whether he wants to study for a particular professional course which will entitle him to enter the particular profession. His decision is free and not forced by any authority. But to maintain the minimum standard of knowledge and experience before the profession is practiced by any person the regulatory body can and must maintain certain minimum standards by way of qualifications and experience. But it is not to be done to limit the supply to equate the demand.

animated gif
Processing Request
Please Wait...