Why is the Modi Government So Against Middlemen? They're Just Earning a Livelihood.

No one can deny the vital role middlemen play in modern commerce; they facilitate transactions and ensure that goods and services reach their intended buyers. However, the critique against middlemen, especially in countries like India under the Modi regime, points to deeper issues regarding fair trade and economic efficiency.

Common Misconceptions about Middlemen

Commonly referred to as brokers, middlemen do not inherently add value; their primary role is to facilitate transactions for a commission. In some specialized fields, brokers like IT consultants or legal advisers do add value through their expertise. However, in many other cases, their role is merely to mediate transactions, often at the cost of the producers or consumers.

Role of Middlemen in Modern Commerce

With the advent of information technology, the role of middlemen has significantly diminished. Digital platforms have reduced the need for intermediaries in many areas of commerce. However, some consumers still prefer using the services of brokers to avoid the hassle of dealing with direct transactions or to benefit from expert advice, opening up a space where these intermediaries can still operate.

Issues with Middlemen

The controversy arises when middlemen exploit their position to the detriment of the producers or consumers. One of the primary concerns is the commissions they charge. These high commissions often end up being passed on to the end consumers in the form of higher prices, contributing to inflation.

The Guilds and Unions Phenomenon

Middlemen often form guilds or unions to negotiate better terms and protect their interests. In doing so, they sometimes end up imposing unfair restrictions on the supply of goods. For instance, some middlemen may refuse to sell certain products that do not offer substantial commissions, leading to a skewed market supply. This not only deprives consumers of options but also creates a bottleneck for producers.

Impact on Consumer and Producer

Eliminating middlemen can potentially benefit both consumers and producers. Consumers benefit from lower prices as producers can pass on savings, while producers can cut out unnecessary costs. However, this ideal scenario is often difficult to achieve as middlemen often have significant control over the market and exert their influence to protect their interests.

Cases of Middlemen Misuse

One of the most cited examples is the defense sector in India, where middlemen have been accused of inflating costs and profiting from the black market. Brokers in this sector often act as a middleman between suppliers and the government, leading to a situation where the ultimate beneficiaries are a small group of individuals, while the broader public suffers.

Conclusion

The relationship between the government and middlemen is complex and fraught with challenges. While middlemen serve a useful function in modern commerce, their potential exploitation and the unfair practices they employ can significant impact economic efficiency and transparency. Therefore, it's crucial to strike a balance to ensure that these intermediaries do not become a hindrance to fair trade and economic progress.