First, not by any stretch of imagination, this unofficial deal goes against Narendra Modi's 'minimum government, maximum governance' idea but it also breaks all rules of free markets and tries to regulate the basic tenets of the same.
Media reports suggest that the Civil Aviation Ministry is seeking an unofficial anti-poaching deal among airlines. The deal will effectively bar airlines from poaching cabin crew and pilots from their competitors.
There are many things that are wrong with seeking such a deal.
First, not by any stretch of imagination, this unofficial deal goes against Narendra Modi's 'minimum government, maximum governance' idea. But this is just a small part of the bigger picture.
What, in essence, this meddling of Civil Aviation Ministry does is that it breaks all rules of free markets and tries to regulate the basic tenets of the same.
Adam Smith, in his book The Wealth of Nations, talks against protectionism and government's regulation of markets by giving example of the invisible hand.
It simply means that if individuals are left to choose what's good for them, the the resultant benefit will be shared by the society as a whole.
This is also the essence of free market theories and the cost of labour is driven by a similar thought.
Airlines have found difficult to find pilots to fly their planes and this is the reason pilots command better pay.
This is also the reason why there is so much lateral movement in the airline business.
The airlines may be happy about the move and may have triggered the ministry to think of such move but it only exposes the dichotomy of their interests.
On one hand, airlines in India complain of excessive regulation by the Centre and demand easing of rules and freer hand in running their businesses and on the other they may be nudging the government to push for such an agreement within the industry.
Although the stand of airlines on the matter is currently unknown but the Minister of State for Civil Aviation has indicated that a meeting with the airlines on the issue will be undertaken very soon.
Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG, told The Indian Express, “In a free market economy, pilots should be free to move across employers. Airlines that spend money on training etc can always recover the same in part or full, from departing pilots as per the employment contract. Pilots in India suffer an unduly high notice period of six months instead of two-three months."
Outlining the role of government in a free market, Milton Friedman said that the existence of free market does not eliminate the need for government but makes it role important for determining the 'rules of the game' and to enforce those rules.
However, the market still provides economic and political freedom and coercion has no place in free market but is a sign of a totalitarian state. For a free market place, voluntary cooperation is needed.
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