On Street Vendors... And Kaushik Basu

My morning began with a nasty piece of news from Bangalore, about street vendors being “evicted” by the city authorities. The report mentions a street vendor policy of the NDA in 2003, and of the UPA in 2006 – but neither policy has worked. Our street vendors, the smallest businessmen of the country, are a hounded and harassed lot. It does not comfort the soul to read that Forbes has placed 20 Indian companies on its worldwide list of successful businesses. What good is this when there is no market access for the poor?

In my book, economic freedom must come first – especially for the poor.

As I surfed the web for other interesting topics to blog about, I chanced upon Kaushik Basu’s column in today’s HT. Professor Basu is a student of Amartya Sen and is chairman of the economics department at Cornell University in the USSA. His column begins by pouring scorn on Adam Smith. According to Basu, Adam Smith "placed self-interest on a pedestal." Basu says that “modern economics” – must be the stuff he teaches at Cornell – has demonstrated that “altruism, personal integrity, and appropriate social norms and institutions are vital for economic development.”

Adam Smith, in the Wealth of Nations, did put self-interest on a pedestal. This is the only basis for trade among strangers. We do not get our lunches from the benevolence of those who supply us. Smith added that he never saw much good accomplished by those who purported to trade in the public interest – like Air India or ONGC. Or any other PSU for that matter. This is incontestable.

However, to do justice to Smith, in an earlier work, A Theory of Moral Sentiments, he put “sympathy” on a pedestal. This was what the German Historical School dubbed “das Adam Smith probleme.” Smith was a moral philosopher. He saw sympathy and self-interest working together in the human soul. Basu omits mentioning this.

Further, modern economics, especially the “public choice school,” led by the Nobel laureate James Buchanan and Gordon Tullock, have used the concept of self-interest to analyze governments, politicians and bureaucrats – and found them all self-serving. This is why the public choice school has concluded that “government failure” is more rampant than “market failure.” Kaushik Basu, of course, misses out on these intellectual developments in economic science. Although public choice theory is over 30 years old, it is still not taught in the Delhi School of Economics. Must be self-interest at work – the self-interest of our sarkaari self-serving socialist academics.

But we were talking about the “eviction” of street hawkers in Bangalore. In this connection, Basu is worth quoting at length. He writes:

In India, today, there is worry about our high growth not being sufficiently inclusive, and leaving segments of the population abysmally poor. Some clues to this lie in our neglect of non-economic factors. Consider the simple act of trying to bring marginalised people into the mainstream of the economy. This is, of course, something that we should aim for; but, if this is done without giving these people basic education, a sense of their fundamental rights, a modicum of understanding of how the modern economy functions, and also some basic health facilities, there is a risk that they will get no benefit by being drawn into the market economy, and may actually lose out.

Whaddya make of this? Claptrap?

Basu wants us to give these hordes of evicted street hawkers “basic education, a sense of their fundamental rights, a modicum of understanding of how the modern economy functions, and also some basic health facilities…”

I would suggest we give this “basic education” to the bureaucrats and politicians of Bangalore, Delhi, Calcutta, Bombay, Madras et. al. The street vendors are smart enough. And honest too. It is the authorities who are predatory. If, as Basu says, “altruism, personal integrity, and appropriate social norms and institutions are vital for economic development,” then these values should be taught to the personnel of our The State. It is they who need to learn.

In my book, we must amend the Constitution of India to make room for Mayors of cities and towns. The amendment should also contain the “duties” of these mayors, which should include overseeing the smooth conduct of ALL businesses in the city or town, including, most importantly, street hawkers.

When Singapore became independent in 1965 (after Nehru’s death) there were 2,50,000 street hawkers in the city-state. They are all part of the tax-paying middle class today. The same can – and must – happen here.