VANISHING POINT

Or How Public Money Disappears Over Rural India

Sixty thousand crore rupees is being spent by our government to waive the loan outstandings of our rural brethren, small and marginal farmers. Just how huge a sum of money this amounts to is apparent if you consider this: if you spent eight lakh rupees each day, every day since the birth of Jesus Christ, the total sum spent would add up to 60,000 crore rupees in a few years from now. This is very big bucks.

But what is the money going to be spent on? Writing off bad debts is not the same as productive investment. Rather, it is a condoning of malinvestments. There is no reason why any section of the population should be indemnified thus. If this is a political gimmick to buy votes, then surely I can win elections in any Indian city promising to write off car and motorcycle loans. What makes it more ethical to write off the loans of poor farmers but not the loans of poor traveling salesmen?

Indeed, ethics and justice demand that the government put its weight behind all debt contracts: All must pay their debts, without exception. That is what 'the rule of law' means. This would be the natural course of events if money and banking had been retained in private hands. However, with both money and banking in the hands of the State, there inevitably ensues the blatant misuse of power for personal, political ends. And, what is worse, it is somehow deemed 'legitimate' in our intellectually corrupt country that those who command the State can nakedly attempt 'to purchase the public affection through gratuitous alienations of the public revenue'.

Yet, this is but a vain delusion. You can certainly buy individuals, but you cannot buy the votes of large masses of people in this way. The 60,000 crore rupees will soon vanish over the parched soil of rural India and not a single Indian will experience even the slightest improvement in his condition. Another government will come and another government will go. They will all perform other such vanishing tricks with 'rural development' in mind. But I bet my bottom dollar that the plight of the peasant will only worsen – especially because of the consequent inflation.

Let us not forget our recent history. Every "big idea" of the Manmohan Singh government is a very old Congress idea. They started 'employment generation programmes' more than 30 years ago. Are peasants better off today because of all this spending? 'Loan melas' were another Congress idea: the result of political control over money, banking and credit. Was a single such loan productive? – in the sense that it generated employment, profit and paid back the principal with interest? Certainly not. Of course, with all this spending, client individuals and groups were cultivated and maintained, as they still are today – but nothing was achieved in the larger interest. And certainly not any improvement in the human condition in either rural or urban India.

In the ultimate analysis, 'rural development' is the greatest hoax ever. No development has occurred anywhere in rural India because of this. Yet, in the same period, every city and town throughout India has been systematically destroyed. Further, during the same period, vast hordes of the rural poor have migrated to cities and towns. Most farmers today want their children to escape farming and set up shop in a city. Yet, a government that so easily throws 60,000 crores away on the rural poor cannot find even 10 percent of that amount to spend on 'urban development'.

Throughout history, great kings have been 'builders of great cities'. Our latter-day rulers are destroyers of great cities – not that they are builders of great villages either.

What should be done? First and foremost, get the Law and Economics theories right, so that the rule of law prevails, and all debt contracts are honoured. Privatize the banks as well as the money so that political tinkering with money, banking and credit can never be attempted by any government in India again. Then, institute free trade with sound money: end both protectionism as well as inflationism. With complete economic freedom added to this, all the right conditions would exist for all the people, especially the poor, to work hard towards improving their own condition.

Next, the voice of the people must be heard. Vox Populi, Vox Dei said the Romans. What are the people crying out for? Are all the people all over the country crying out for loan waivers? Are they crying out for daily wage employment guaranteed by the State? Certainly not. They are all crying out for bijli, paani, sadak – so much so that the acronym BIPASA has been coined to reflect these political demands. Now, bijli must be privatized. Paani too. What the government must step in to provide are roads. By which I mean good, motorable roads. Every village must be meaningfully connected to every single city and town in its neighbourhood. With free trade in used cars, this revolution in transportation will fuel an aggressive urbanization: the winds of urban commerce will fan over rural India. It can never be the other way around – as surely Manmohan Singh and his caucus of central planners should have realized by now.

Today, all the public money is being uselessly spent on things that the people did not demand, but politicians (and the 'spending bureaucracy') did. And it is a lot of money. Miles and miles of good roads could have been built with this money. That is the 'opportunity cost' of bad Economics. False ideas are draining away our national wealth. And these false theorists control 'education'. Give me hope, Joanna!