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Free markets and Caesarean sections

Free markets and Caesarean sections
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First Published: Tue, Mar 02 2010. 09 56 PM IST

Updated: Tue, Mar 02 2010. 09 56 PM IST
On 1 March, The Indian Express newspaper reported that a government scheme for expecting mothers saw almost one in two Caesarean sections over a nine-month period in one district in Madhya Pradesh. The World Health Organization norm for C-sections is about 10-15 Caesarean deliveries per 100 births. The private clinics accredited with the government got four times more money for a Caesarean surgery. It doesn’t take a genius to connect the dots. This practice, we know anecdotally, is not restricted to one area of Madhya Pradesh.
A study led by S.K. Bhasin and published in the Indian Journal of Community Medicine in 2007 confirmed the correlation of private hospitals and a high C-section figure. The study found 34% C-section rates in east Delhi, with almost 92% of these being reported from private clinics and hospitals.
The practice of putting money before ethics isn’t confined to C-section deliveries, or even to the medical profession. Doctors tell stories of heart surgeries that were performed and were not really needed. Architects tell stories of builders colluding with other architects to make brick foundations instead of concrete. Bankers tell stories of incentivizing staff to sell single premium life insurance policies to 80-year-old NRI (non-resident Indian) women as something mandatory to open an NRE (non-resident external) rupee account.
Though the conflicts between ethics and quick money have always been there, what is new is the vast mass of professional middle-class India that is faced with this choice today.
Neither the business nor consumers had either the products or the money to make this choice become significant at a mass level. After the first two decades of feeling good about choice and service, middle-class India is seeing the flip side, as consumers, professionals and employees. So, we are suddenly wary of corporate hospitals that have “footfall” and “revenue” targets, of a financial sector that puts its own bonus before ethics. Stories that friends in different professions tell don’t help.
An architect friend had this to say about the growing chasm between ethics and ground reality: “I wonder if we will survive the next 10 years. We came to terms with the fact that we will not grow exponentially, but now the question is of survival.” He’s upset about the fact that architects (who were supposed to be on the side of the client) have crossed the line to collude with contractors to pad up costs.
A doctor-run small hospital in south Delhi has doctors who wonder the same—how long will they survive putting the patient first. A financial planner, who has consistently refused to sell investment-linked insurance to people looking to buy just investment products, feels cheated as he sees no check on others who wilfully harm their clients. A dermatologist friend talks of the big conflict of interest he sees in junkets that doctors (along with their families) go for, fully funded by pharma companies.
Going back to the old way of no choice, no service and high costs is not an option anybody wants. And that is not an Indian peculiarity.
A GlobeScan (a global polling firm) survey conducted with the University of Maryland in the US, found a “striking global consensus that the free market economic system is best” in a 20-country study that included China, India, the US, Russia, Brazil, among others. But that is just half the result. The second half showed that free markets were preferred, but people wanted that “governments should also do more to regulate large companies.” The “near-unanimous rejection of unbridled capitalism” that the study found also points to the worry that large companies have too much influence over the government.
If free markets (from the point of view of consumers) promise choice, they need to be accompanied by the two legs of ratings and regulation to rest on. Product, service and company ratings will allow the problems of asymmetric information (where the consumer knows less than the seller) to get sorted out to a large extent and allow lay consumers to make decisions based on research done by experts.
Regulation is key to keep the firms paying the full costs they generate and not leave some to be picked up by the public and the environment at large. Firms, left to themselves, will look after their own interest and not that of consumers, the environment or the public, hence the need for regulation. Both the institutions of regulation and rating are in disrepute in the biggest free market country of the world. Cosy relationships between rating agencies allowed harmful financial products to get top ratings. Soggy regulation allowed these relationships to continue and the harmful products to be sold. How “free” markets should be is now in debate in the US.
Joseph Stiglitz, in his latest book released last month called Freefall: Free Markets and the Sinking of the Global Economy, wrote: “Bankers acted greedily because they had incentives and opportunities to do so, and that is what has to be changed.” India needs more debate on which model of free markets we will adopt as we go along. Right now there is no discussion, only a rampage to make money.
Monika Halan works in the area of financial literacy and financial intermediation policy. She is consulting editor with Mint and can be reached at expenseaccount@livemint.com
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First Published: Tue, Mar 02 2010. 09 56 PM IST