…the pursuit of individual goals do not necessarily lead to public good. Adam Smith’s ‘invisible hand’ cannot guarantee allocation of resources efficiently.
Well, the headline news today proves the minister wrong. Over 12,000 sugarcane farmers descended upon New Delhi yesterday from the surrounds to protest sugarcane prices fixed by our The Chacha State. These prices were not determined by Adam Smith’s “invisible hand.” On the contrary, these prices were fixed by the very visible hand of State coercion – in an effort to allow sugar mills to profit at the expense of farmers. Quite obviously there will be protests.
What this proves is that it is the Visible Hand of The State that does NOT allocate resources efficiently. Further, that it causes social discord. The natural harmony of the market order breaks down as politics comes to occupy centre stage. Note that apples, tomatoes, pineapples, mangoes, grapes and oranges are bought in vast quantities by factories that convert them into juice – and total harmony prevails because all prices are determined on The Market.
So, the man to quote is Ludwig von Mises. In Omnipotent Government Mises wrote:
"The worship of the state is the worship of force. There is no more dangerous menace to civilization than a government of incompetent, corrupt, or vile men. The worst evils which mankind ever had to endure were inflicted by bad governments."
Further, in his Bureaucracy, a classic on the subject, Mises said:
"Representative democracy cannot subsist if a great part of the voters are on the government pay roll. If the members of parliament no longer consider themselves mandatories of the taxpayers but deputies of those receiving salaries, wages, subsidies, doles, and other benefits from the treasury, democracy is done for."
The following words from Mises’ Socialism are also highly relevant today:
"The desire for an increase of wealth can be satisfied through exchange, which is the only method possible in a capitalist economy, or by violence and petition as in a militarist society, where the strong acquire by force, the weak by petitioning."
Hence we see the sugarcane farmers protesting and petitioning.
The other way is the path of harmony, peaceful voluntary exchange, free markets and all prices determined by market forces.
That is the path we must now choose. Enough of State Interventionism. Away with their “visible hand”!
Sauvikda,
ReplyDeleteMy understanding of the issue is that the farmers are protesting against the Central Government fixing the price at which they sell their produce to sugar factories. What they want is the status quo, which is to let the State Governments decide on the 'support price'. The State Governments are usually forced (through methods similar to the ones adopted now in Delhi) to fix prices that are favorable to the farmers. The sugar mill owners are thus arm twisted to cough-up prices that State Government forces them to pay. This is also against the principles of free market. But should the mill owners not have the right to decide what they want to pay for the cane? (despite my belief that the mill owners largely are crooks with political connections and they deserve to get squeezed where it hurts). The farmers do not want the prices controlled by the ‘invisible hand’. They just want the hand to be that of the State Government. Amar Singh and the Reds rallying in support of these mobs makes me increasingly suspicious about them fighting for a fair cause.
Your take on this would be greatly appreciated.
Zeb
@Anon: You are dead right. It is this very "visible hand" that needs to be dealt with. Or anyone with more political influence will use it to further his benefit at the expense of the commonwealth. The interests of the commonwealth lie in cheap sugar, and nothing else. Anyway, too much sugar is bad for you. I tell all the chaiwallahs that they would serve public health better by selling beer >:)
ReplyDeleteHa ha. And we all know beer has no sugar in it - that's why doctors recommend it to diabetics.
ReplyDelete