On Capital, Civilization, And The State

Yesterday, I wrote about the government’s massive borrowing programme and, quoting Mises extensively, showed how this is capital consumption. Let me now continue further today. In the meantime, Mint has a little piece that says one-third of all government expenditure is financed by borrowing, and one-fifth of all expenditure goes towards paying interest. They add that out of every 100 rupees spent, 14 rupees goes towards creating assets, while the rest goes towards salaries – that is, towards consumption. Note that “welfare” and poor relief also have nothing to do with production; they are all matters relating to consumption. Also note that, in India, most of the “consumption” is done by the personnel of The State itself – the politicians and the baboons.

Now, capital consumption is the highway to de-civilization. Progress and civilization has always meant increased saving and investment – that is, the accumulation of capital. This capital, when invested in production, raises the wages of labour and results in an abundance of goods and services for all. This is how, throughout history, civilizations have arisen.

What about those who “invest” in government bonds? Their savings do not go into capital creation or production. They merely finance the consumption activities of The State and they are rewarded with interest that comes from us taxpayers. How can this be called “investment”? It is not. It therefore becomes clear that all government borrowing is nothing but capital consumption – the highway to de-civilization.

I am therefore of the opinion that widespread awareness must be created about the pernicious consequences of putting private savings into government bonds. Investors should be made aware of the fact that they are destroying precious capital in a capital-poor country, and that they would be doing their bit for the nation if they made genuine investments either in the stock market, with the banking system or elsewhere within The Market. Further, public opinion must demand that all these perpetual irredeemable loans be repudiated at once. Those who will lose money have only themselves to blame, for they “invested” their money in an insolvent institution. They did not invest in The Market. So theirs were not “capitalist investments” at all. Throughout history, many foolish people (including the Medicis) have lost fortunes by lending to monarchs. Let this important lesson be learnt once again.

The most desirable and socially beneficial effect of such a campaign will be that panic will be created in the bond market, and our The Total Chacha State will find no takers for its bonds. Then, and only then, will the government be forced to downsize and cut their long-tailed frock coat according to the size of their loin-cloth. Privatization will have to be pursued. NREGA will have to be dumped. Armies of tax-parasite baboons will have to be sacked.

A severely down-sized bare-bones government, as prescribed by classical liberalism, is the only way we can progress as a civilization. Then, taxes will be moderate, capital will remain in private hands, investments will be in The Market – and the whole engine of progress and civilization will chug along merrily.

Our The Total Chacha State is not only borrowing, but also inflating. Barely 10 per cent of its expenditure comes from taxation, so Mint informs us. Inflation is also a way of consuming capital. This is disastrous for the poor, the working classes, the labourers – who need capital. Further, our The Total Chacha State is also disallowing foreign capital entry – as in retailing – and thereby making things worse.

Commenting on the economists attached to the BJP during the Vajpayee regime, Jagdish Bhagwati made the acidic comment that “if they are economists, then I am a Bharatnatyam dancer.” Methinks the same comment can be applied to Chacha Manmohan S Gandhi, montek, amartya sen, jean dreze, kaushik basu, rangarajan, suresh tendulkar and all the rest of the CONgress’ economists. What they call Economics is nothing but the justification of State parasitism accompanied by widespread pauperization of the people.

But one solution is in sight: Do not buy their bonds, and ask others not to do so.

To conclude: Let's not forget that great civilizations have also perished in the past. The Roman one collapsed because of debasement of the coinage and State interventionism in markets, both of which destroyed the division of labour.

Our civilization has more or less collapsed. We may have cars and cellphones, but every city and every town (and every village as well) is a disaster. When the Roman civilization collapsed I am sure people owned horses and the postal system worked. That is our condition today.

Time to wake up to the fact that Chacha & Co. are hell-bent on destruction, parasitism, capital consumption and their inevitable consequence – de-civilization.

The Monster's Budget

The Budget reminds me of the Bob Marley song:

Here comes the con-man,
Coming with his con-plan…

Mint has this brief on the key features of the Budget, and these facts stand out:

=> The Plan and Non Plan expenditures in BE 2010-11 are estimated at Rs3,73,092 crore and Rs7,35,657 crore respectively.

=> The “labour army” idea of the Mahatma Gandhi National Rural Employment Guarantee Scheme gets Rs40,100 crore

=> Allocation for road transport increased from Rs17,520 crore to Rs19,894 crore.

=> Net market borrowing of the Government in 2010-11 would be of the order of Rs3,45,010 crore.

In this post, let me focus on the borrowing.

Now, all this borrowing is obviously to fund consumption. So this is “capital consumption” – another step towards de-civilization.

Further, the interest that will be paid on these loans will come from taxation, so the creditors are being guaranteed returns that will we squeezed out from the rest of us. The creditors are, in effect, partners of The State and are being given a safe haven for their capital – safe from market competition – at the expense of the rest of the citizenry.

This is what is meant by “perpetual irredeemable debt.” This is why I recommend that such debts should be entirely repudiated in an ideal scenario.

Allow me to quote Ludwig von Mises on this, from Chapter XII of Human Action: A Treatise on Economics, a chapter on “The Sphere of Economic Calculation,” from the section titled “The Root of the Stabilization Idea.” PDF here, see pages 223-228.

The problem assumed much greater importance when governments initiated their policies of long-term irredeemable and perpetual loans. The state, this new deity of the dawning age of statolatry, this eternal and superhuman institution beyond the reach of earthly frailties, offered to the citizen an opportunity to put his wealth in safety and to enjoy a stable income secure against all vicissitudes. It opened a way to free the individual from the necessity of risking and acquiring his wealth and his income anew each day in the capitalist market. He who invested his funds in bonds issued by the government and its subdivisions was no longer subject to the inescapable laws of the market and to the sovereignty of the consumers. He was no longer under the necessity of investing his funds in such a way that they would best serve the wants and needs of the consumers. He was secure, he was safeguarded against the dangers of the competitive market in which losses are the penalty of inefficiency; the eternal state had taken him under its wing and guaranteed him the undisturbed enjoyment of his funds. Henceforth his income no longer stemmed from the process of supplying the wants of the consumers in the best possible way, but from the taxes levied by the state’s apparatus of compulsion and coercion. He was no longer a servant of his fellow citizens, subject to their sovereignty; he was a partner of the government which ruled the people and exacted tribute from them. What the government paid as interest was less than the market offered. But this difference was far outweighed by the unquestionable solvency of the debtor, the state whose revenue did not depend on satisfying the public, but on insisting on the payment of taxes.

Mises goes on to show how the investor in government bonds is only fooling himself, and how the government, in turn, is trying to fool everyone: the “con-plan.”

Now, the irredeemable perpetual public debt presupposes the stability of purchasing power. Although the state and its compulsion may be eternal, the interest paid on the public debt could be eternal only if based on a standard of unchanging value. In this form the investor who for security’s sake shuns the market, entrepreneurship, and investment in free enterprise and prefers government bonds is faced again with the problem of the changeability of all human affairs. He discovers that in the frame of a market society there is no room left for wealth not dependent upon the market. His endeavors to find an inexhaustible source of income fail.

There are in this world no such things as stability and security and no human endeavors are powerful enough to bring them about. There is in the social system of the market society no other means of acquiring wealth and of preserving it than successful service to the consumers. The state is, of course, in a position to exact payments from its subjects and to borrow funds. However, even the most ruthless government in the long run is not able to defy the laws determining human life and action. If the government uses the sums borrowed for investment in those lines in which they best serve the wants of the consumers, and if it succeeds in these entrepreneurial activities in free and equal competition with all private entrepreneurs, it is in the same position as any other businessman; it can pay interest because it has made surpluses. But if the government invests funds unsuccessfully and no surplus results, or if it spends the money for current expenditure, the capital borrowed shrinks or disappears entirely, and no source is opened from which interest and principal could be paid. Then taxing the people is the only method available for complying with the articles of the credit contract. In asking taxes for such payments the government makes the citizens answerable for money squandered in the past. The taxes paid are not compensated by any present service rendered by the government’s apparatus. The government pays interest on capital which has been consumed and no longer exists. The treasury is burdened with the unfortunate results of past policies.

So, there we have it, from The Master himself. Our Total Chacha State is squandering Capital. And bondholders should be viewed as people on their side, not ours.

A good budget should contain no borrowing, even in times of war (as Mises makes clear in the same section quoted above, so study the entire section). The government should spend its legitimate tax revenues on its legitimate activities – and that should be that. Hence, a minimalist government, as prescribed by classical liberalism, is the best, the ideal. This maximalist Total Chacha State is a horrible, ugly monstrosity. This Budget proves it.

Not Professors, But Baboons (Updated)

When I speak of the evil “professors” of Delhi University, it is important to keep in mind the fact that they draw their salaries from The State. They are therefore a special class of “civil servants” to whom The State has affixed the title “professor,” just as to someone else The State may affix the title “commissioner.”

These professors of Delhi U are therefore baboos (or “baboons” as I prefer to call them) and they have a special duty towards their employer, viz., the duty of indoctrinating the student community with the “ideals” of their The State.

Ludwig von Mises writes about the “civil servant professors” of the Historical School in Germany, the “intellectual bodyguards of the House of Hohenzollern.” These German baboons inflicted great harm upon Germany by indoctrinating their people with the ideals of “statolatry”: the worship of The State. It was therefore natural for them to later worship their Führer.

In precisely the same way, these “civil servant professors” of Delhi University, in particular, of the Delhi School of Economics, have indoctrinated statolatry in the minds of their students. They are the “intellectual bodyguards of the House of Nehru.” Subjects such as “Indian Economics” have no purpose other than Nehru-worship. The objective of these baboons has never been the transmission of knowledge, for they have always been mere propagandists, never real knowledge workers. You will never find their articles in the scholarly journals. They do not produce any new knowledge themselves; they merely “teach.”

Real universities and real professors are never such. Real universities are where knowledge is cultivated, sheltered from any interference on the part of the rulers. Real professors do not teach; their primary purpose is the production of new knowledge. Adam Smith was a real professor. Ludwig von Mises was a privatdozent in a real university. Both produced a whole lot of real knowledge.

Judging from the miserable state of affairs in India’s higher education system, entirely monopolized by the Total Chacha State and its baboons, I do believe that there is no option before the Indian nation than to completely shut down the State-owned university system, and lay open the field to private enterprise, including foreign investors. If there are any genuine knowledge workers within the State system today, they will be the ones who will flourish in the new scenario. Students, of course, will gain the most. Real knowledge will be produced and transmitted. Truth will triumph.

UPDATE: Chandra has a post informing us of a paper by Professor Suresh Tendulkar, till recently Director of the Delhi School of Economics, in a volume entitled - and this is what should NOT surprise us - Essays in Honour of Montek Singh Ahluwalia.

The paper, to Tendulkar's credit, discounts the great "value" of EQUALITY that socialists like him have always placed above the value of FREEDOM. But as a Hayek quote says on Chandra's blog:

"There is all the difference in the world between treating people equally and attempting to make them equal."

There is also the Dylan song:

A self-ordained professor's tongue,
Too serious to fool,
Spouted out that Liberty,
Was just Equality in school.

Anyway, Chandra read about this paper by Professor Tendulkar from a review of this book in honour of Chhota Ustad montek, in ET, written by their Senior Editor. Do read it and see the "economists" cited to buttress her case. Of course, Adam Smith is mentioned right at the beginning!

I hope more and more of you are switching to Mint.

On The Evil Professors Of Delhi U

There is a huge taxpayer-funded advertisement in my newspaper of yesterday on the NREGA. It features the smiling face of a village woman with the caption: “Not just livelihood, it earns me respect too.” In the backdrop there is a long line of village women, all bearing headloads. At the bottom right-hand corner are photos of Madamji Soniaji Gandhiji and Chacha Manmohan.

Can “respect” be earned by queuing up before government clerks for money and carrying headloads at their behest?

Anyway, the ad got me thinking of the “labour armies” that socialist professors of the Delhi School of Economics have always advocated. In yesterday’s post, I discussed Professor KN Raj’s many evil schemes, but omitted writing about the “labour army.” Today, let us probe this evil idea of theirs.

I quote from the same book by Peter Bauer I cited yesterday. Here are the words of Professor KN Raj:

In view of the social objectives underlying the Plan, and the large employment opportunities proposed to be created in the investment projects, it will be desirable to give up the present system of recruiting labour at random and discontinuing their services on the completion of particular projects, and instead organize labour armies on a more permanent footing. In view of the uneven disposal of agricultural labour in the country referred to earlier, the recruitment will be confined in the main to a few States where distress is the greatest. The potentialities, implicit in the organization of such labour armies, are immense from many points of view.

Professor BN Ganguli was then KN Raj’s boss, and Director of the Delhi School of Economics. Bauer quotes at length from his memorandum entitled Institutional Implications of a Bolder Plan with special reference to the Chinese Experience. Professor Ganguli favours the “planning of consumption” through State-trading and “control over private savings.” He goes on to suggest that “all transport in India must be under the authority of a single State-owned enterprise.” He advocates compulsory co-operatives in agriculture along Chinese lines, because the “vast private sector in the countryside can no longer be left to the devices of anarchical individual operation of farms.” And finally, he too advocates direction of labour and the setting up of labour armies in the manner of totalitarian states. Professor BN Ganguli writes:

One way of inducing social change that is needed and of also completing our vast construction projects quickly is to organize a trained and disciplined national labour force which, like the armed services, does not recognize differences of caste or community and which can be deployed all over the country like a vast mobile force imbued with patriotic emulation to undertake and complete in record time projects of national construction. People belonging to the depressed classes should form the bulk of this force. The idealistic youth of this country may easily form a powerful element of this force as members of the technical, supervisory and teaching cadres. The Indian Army, as the People’s Army in New China, may very well find scope for its wonderful capacity for leadership, discipline and hard work… in peaceful constructive activities in collaboration with the civilian labour force. The national labour force that I contemplate should not be a voluntary labour service corps which may operate on small projects for short periods….

The Grand Vision of the Delhi School of Economics can be summarized as follows: The Total Chacha Nehru State employs us all – the poor, the depressed classes, the idealistic youth, the army, all are at the service of the Total State. Has any King ever employed all his subjects? What will happen to his Treasury if he does so? Does the smart King not encourage his subjects to create wealth themselves, in Liberty, so that his Treasury is always full?

Further, labour is not performed by the Individual for anything but what he can buy from its proceeds. We all work to consume. But here, the Delhi School of Economics advocates “planned consumption” and, not only that, the total appropriation of all savings too. Sounds like criminal insanity to me. But we were talking about the NREGA of Chacha Manmohan.

Let us not forget that Manmohan Singh was very much part the faculty of this Delhi School of Economics, as was Amartya Sen. Thus, the NREGA remains very much the same old idea of The Total State employing “labour armies.” There can be no “respect” in working for such an army; and certainly not “self-respect.” On the contrary, it is but degrading servitude.

Let is therefore salute the spirit of Professor BR Shenoy, who alone dissented – and suffered the consequences with stoic composure. I have written of him in a recent post. Bauer called him a “hero and saint.” He was also the only true economist.

The Delhi School of Economics should be closed down. Their professors are pure evil, enemies of truth, enemies of reason, enemies of the youth.

A Joke On Soniaji & Co.

Wasn't in the mood to blog today, so I thought I'd leave you with a children's joke I heard yesterday:

If "pro" is the opposite of "con," then what is the opposite of "progress"?

Methinks this applies equally to India as well as the USSA.

On The Evil Professor KN Raj - Take #2

Chandra has a post on the death of the famous Indian economist KN Raj, who studied under Harold Laski at the LSE, played an important role in India’s early central planning, and, in the field of Economics education, helped set up the Delhi School of Economics and also served as Vice-Chancellor of Delhi University. Chandra has provided many links to glowing obituaries on KN Raj, and the one I read is this from Mint, based on a PTI report, that quotes all the great and famous, including Chacha Manmohan S Gandhi, on the "undying legacy" of the man.

I have in my library Peter Bauer’s only book specifically on India, with the unsexy title Indian Economic Policy and Development, published in London in 1961, shortly after the Nehru-Mahalanobis Second Five-Year Plan was launched, that began “heavy industrialization” here on the lines of the Soviet Union. This book was republished in India in 1965 by Popular Prakashan, but has never featured in university curriculum here. It should.

The sixth chapter in this extremely important book is titled “The Politics of Indian Planning” and here Bauer quotes many eminent Indian economists of the day, including KN Raj.

Bauer specifically alerts us to the fact that these sycophants of Nehru were leading India towards totalitarianism and ruin.

KN Raj was then Professor of Monetary Economics at the Delhi School of Economics and wrote a memorandum titled The Second Five Year Plan; Investment Magnitudes and their Implications. Bauer says “his proposals include extension of state trading, nationalization and physical controls, the institution of compulsory loans and the maintenance of labour armies.”

Bauer provides a long quote from this memorandum, from which I offer a brief extract below:

… the government should be prepared to go outside the field of basic industries and services, where, precisely because they are basic, it is difficult to use them for the purpose of making profits. State trading in the commodities indicated above [foodgrains, cloth, sugar, vegetable oils, kerosene] will not be adequate for this, since they are, by and large, essentials; greater scope for making profits can be found only if the government enters the field of luxuries and semi-luxuries. One possibility to be explored in particular is the nationalization of plantations, covering tea, coffee and rubber…. Another possibility closely bordering on this is the nationalization of sugar factories.

Actually, "essentials" are highly suitable for raising government revenues (not "profits") - as in the case of salt monopolies used for such purposes over millennia.

Raj then goes on to talk of compulsory loans from the public to the government, and the setting up of labour armies.

The portion on compulsory loans from this Professor of Monetary Economics is also worth quoting:

In the borrowing programme of the government, greater accent must be placed on compulsory loans and non-transferability (except under special conditions) of the securities offered; for, the merit of expenditure financed by borrowing from the public over expenditure financed by creation of money is only in so far as it exercises a restraint on private expenditure.

Other economists quoted in this chapter are Professors VKRV Rao, BN Ganguli, DR Gadgil and, of course, the great Mahalanobis himself, whose portrait proudly hangs in the LSE. Professor Gadgil was the Director of the Gokhale Institute of Economics & Politics in Poona. Both VKRV Rao as well as Ganguli served as Directors of the Delhi School of Economics, and Rao was also Vice-Chancellor of Delhi University.

So, Chacha Shah Alam, you can keep Delhi upto Palam, and you can keep your propaganda arm, Delhi University, too.

Students: Drop out and save your intellects. Ask Vipin Veetil for advice on this subject. Another student of the DSE, Nandita Markandan, who attended my seminars, once cried on my shoulders and said, “I wanted to study Economics, but they only teach me Mathematics.”

There is no mathematics in Ludwig von Mises Human Action: A Treatise on Economics, PDF here. No graphs or charts or pretty curves either. Only words: "logical economics." But each word weighs a ton.

Indeed, in Chapter 26 titled "On the Impossibility of Economic Calculation Under Socialism" there is an entire section under the heading "The Differential Equations of Mathematical Economics" (Page 710) which will instruct you that the mathematics taught in the DSE is not "economic calculation"; on the contrary, it is SCIENTISM, the pretence of science, the "abuse of reason."

Drop out, and study real economics - at home.

And stay far, far away from the LSE.

Professor Harold Laski, the "star" of the LSE, unleashed an army of evil men such as KN Raj upon India. Laski was also Chairman of the British Labour Party, and he personally spoke of the desirability of using strong measures that would discourage the British workers from spending their money on the movies, and spend it on more "socially worthwhile" things instead. Someone in England ought to make a movie on this monster.

In Hayek on Hayek: An Autobiographical Dialogue, a book-length interview with the philosopher, there is a part where Hayek, who was a minor figure in the LSE at that time, is quizzed about Laski. Hayek says that after the purges of Stalin, Laski denied ever having supported his evil regime! Harold Laski was, says Hayek, an "inveterate liar."

Songs From A Room

Began Sunday with this great travelogue in Mint on Marrakesh, titled “Souk for the soul.” It's the world's oldest MARKET!

My mind immediately raced to that old CSNY song, “Marrakesh Express”:

Blowing smoke-rings from the corners of my ma-ma-ma-ma-mouth…

That was the theme song of the hippies, white folk who loved the Noble Herb. Some came to Goa directly from Woodstock, and never returned. You sometimes come across these nice folk in these parts.

Anyway, I didn’t have “Marrakesh Express” in my poor CD collection, but so what? I put on Marley, who loved the Noble Herb too. Marley was not black. He was mulatto. Some white genes there. And he sang in English. That’s why he became a Third World Superstar. Makes absolute sense. Peter, Lord Bauer, often said that those underdeveloped nations that never had any contact with white folk were worse off. Goa had 500 years of the Portuguese.

So Mr. Marley started to play his stuff:

It’s a natural mystic blowing through the air,
If you listen carefully now you will hear,
This could be the first trumpet,
Might as well be the last,
Many more will have to suffer,
Many more will have to die,
Don’t ask me why….

Then he went on to “Rat Race”:

There’s a horse race,
There’s a dog race,
There’s a human race,
But this is a rat race.

It is here he makes the famous shout:

Rasta don’t work for no CIA.

That’s me.

And then on to “Exodus: Movement of Jah People”:

Wipe away transgressions,
Set your captives free.

A movement of Jah people got me thinking about Chacha in New Delhi. And of Dylan’s “Ballad of a Thin Man”:

You walk into the room
With your pencil in your hand
You see somebody naked
And you say, “Who is that man?”
You try so hard
But you don’t understand
Just what you’ll say
When you get home
Because something is happening here
But you don’t know what it is
Do you, Mister Jones?

I found these lines especially appropriate:

You have many contacts
Among the lumberjacks
To get you facts
When someone attacks your imagination
But nobody has any respect
Anyway they already expect you
To just give a check
To tax-deductible charity organizations

You’ve been with the professors
And they’ve all liked your looks
With great lawyers you have
Discussed lepers and crooks
You’ve been through all of
F. Scott Fitzgerald’s books
You’re very well read
It’s well known
Because something is happening here
But you don’t know what it is
Do you, Mister Jones?

Yeah. Something’s happening out there all right. I get all the signs. Wonder if Chacha gets them too. Or is he headed for the fate of that Last Mogul:

Poor old Shah Alam
He rules from Delhi to Palam.

Palam is the village where Delhi’s airport is located. Lots of property without titles in Palam.

But who wants Delhi? Recall Babur, when Humayun brought him Ibrahim Lodi’s severed head. Two of his top generals immediately revolted, saying Delhi was too hot. They deserted ship and rode off back to Kabul and Kandahar. And summer is approaching. The Brits always vacated Delhi in summer, taking their The State to cool Simla. Chacha and Pachauri prefer air-conditioning. And then they talk of global warming. Funny old world.

So, if I don’t want Delhi, where do I go?

Actually, Harare sounds like a great opportunity for conquest. They surely need a sound money man there. And Harare is the city in the world with the maximum number of golf courses. Great city, I am told. So we could paraphrase Marley, who supported independence for Zimbabwe:

We’re gonna chase that crazy Mugabe outta town…

What about Goa? Well, this is no Rasta place. The Noble Herb is smoked here in hiding, and sold in hiding. The mafia rules. There are no freedom fighters. And no freedom songs either. You don’t find a single shack on Palolem Beach, where Rizla papers sell by the bucketload, playing Rasta music. No Marley T-shirts are sported. My other serious option is Jamaica, where they could do with a Professor of Rastanomics. Ha ha.

Anyway, my Marathi manoos girlfriend in Goa complains if I have another beer.

I thought women complain if you have another woman.

But see how the mighty have fallen.

Calling Cobden

Kudos to Mint for their editorial “Back to the farm is a bad idea” – the first editorial ever written in the mainstream press against Chacha Manmohan S Gandhi’s NREGA. From now on, Mint should be seen as the nation’s leading financial daily. ET must be abandoned – their editor has just called for a new State-owned company, to manufacture telecom equipment, of all things. Incorrigible? Anyone remember ITI?

Anyway, hats off to Mint. Too many editors are but shills of the regime. Mint has showed it is something different.

The editorial is first-class. I myself said the same in different words recently. However, one sentence in the edit did not quite jell with me:

Farmers point out that NREGS effectively puts a floor under rural wages, leading to labour shortages during harvest time.

Theory indicates otherwise. What NREGA actually does is subsidize landlords by “topping up” the income of farmhands. They stay back on the farm. If this topping up did not take place, they would flee, and the wages of those farmhands left behind would rise. Further, agriculture would be forced to modernize and mechanize.

Not only theory, history can also be called in to aid our thinking on the perversity of Chacha’s NREGA. The Speenhamland System of providing relief to the rural poor accomplished exactly the same in Britain in the 1790s: subsidizing the wage bill of landlords. At the same time, it “pauperized” all farmhands; in effect, disallowing them to escape rural poverty and seek better conditions in the factories of the new, industrial towns. NREGA is India’s Speenhamland System.

Mint is dead right when they say that the only future for the rural poor lies in cities and towns, outside traditional agriculture. This is precisely how the rural poor of Britain rose to unprecedented standards by 1890 – the height of Gladstonian liberalism.

Leftist historians lie about the Industrial Revolution when they depict the factory system as “exploitative” and the pre-industrial days as idyllic. In Human Action: A Treatise on Economics, Ludwig von Mises has a section titled “Remarks About the Popular Interpretation of the ‘Industrial Revolution’”: this is from Chapter 21 on “Work And Wages”, pages 617-623; PDF here. I will quote briefly below, but I suggest you read the entire section.

Mises says:

The truth is that economic conditions were highly unsatisfactory on the eve of the Industrial Revolution. The traditional social system was not elastic enough to provide for the needs of a rapidly increasing population. Neither farming nor the guilds had any use for the additional hands. Business was imbued with the inherited spirit of privilege and exclusive monopoly; its institutional foundations were licenses and the grant of a patent of monopoly; its philosophy was restriction and the prohibition of competition both domestic and foreign. The number of people for whom there was no room left in the rigid system of paternalism and government tutelage of business grew rapidly. They were virtually outcasts. The apathetic majority of these wretched people lived from the crumbs that fell from the tables of the established castes. In the harvest season they earned a trifle by occasional help on farms; for the rest they depended upon private charity and communal poor relief.

Mises then goes on to say what a boon factory employment was for England’s rural poor:

The factory owners did not have the power to compel anybody to take a factory job. They could only hire people who were ready to work for the wages offered to them. Low as these wage rates were, they were nonetheless much more than these paupers could earn in any other field open to them. It is a distortion of facts to say that the factories carried off the housewives from the nurseries and the kitchens and the children from their play. These women had nothing to cook with and to feed their children. These children were destitute and starving. Their only refuge was the factory. It saved them, in the strict sense of the term, from death by starvation.

Mises then goes on to say some important things about economic policy in Third World countries like India:

Vast areas—Eastern Asia, the East Indies, Southern and Southeastern Europe, Latin America—are only superficially affected by modern capitalism. Conditions in these countries by and large do not differ from those of England on the eve of the “Industrial Revolution.” There are millions of people for whom there is no secure place left in the traditional economic setting. The fate of these wretched masses can be improved only by industrialization. What they need most is entrepreneurs and capitalists. As their own foolish policies have deprived these nations of the further enjoyment of the assistance imported foreign capital hitherto gave them, they must embark upon domestic capital accumulation. They must go through all the stages through which the evolution of Western industrialism had to pass. They must start with comparatively low wage rates and long hours of work. But, deluded by the doctrines prevailing in present-day Western Europe and North America, their statesmen think that they can proceed in a different way. They encourage labor-union pressure and alleged pro-labor legislation. Their interventionist radicalism nips in the bud all attempts to create domestic industries. Their stubborn dogmatism spells the doom of the Indian and Chinese coolies, the Mexican peons, and millions of other peoples, desperately struggling on the verge of starvation.

If you want to read more about the non-Marxist view of the Industrial Revolution, I recommend Capitalism and the Historians, edited by Friedrich Hayek, available here on sale. I hope the Mises Institute will put up a pdf copy of this important resource online.

In Great Britain, the 19th century was the golden age of liberalism. This is what lifted the masses out of poverty. This is when Samuel Smiles' Self-Help became a bestseller, and none looked for charity. Liberty Institute has published this great book in India, with my foreword.

As far as 19th century British politics is concerned, full credit is due to Cobden, Bright and the Manchesterites. Their activism changed everything. Bastiat was much influenced by Cobden and travelled to England to meet him. He then set up a Free Trade League in France modeled after the English one. Similar free trade leagues mushroomed all over the Continent; in Germany under John Prince-Smith. Cobden became the most highly feted politician in the whole of Europe. There is an excellent history of the Manchesterites in my The Essential Frédéric Bastiat, in the introduction by Detmar Doering. You can download the book here.

Yes, we need a Cobden in India today. I hope this will serve as an inspiration to many young activists.

Black Is Beautiful

MK Venu of the Financial Express has written about Hernando de Soto’s recent comments on the “shadow economy” and has drawn the erroneous conclusion that what needs to be done in India is to tax the “black economy” and bring it “out of the shadows.”

Methinks this eminent economic journalist has completely misunderstood what de Soto said, so let me quote the master himself, from his interview to Mint that I referred to in an earlier post.

Q: Since your visit to India in 2007, the world has undergone a dramatic reality check on market economics. Do you still believe in the power of the markets?

A: I asked my friend Chris Cox, over in 2009, who was chairman of the Securities and Exchange Commission, how much there was, of these derivatives. And he brought out a reply in an article saying his estimate is that there were $600 trillion (Rs27,840 trillion today) of them. Now to get an idea what this means, the whole production of the United States—the GDP (gross domestic product)—is $13 trillion. The whole production of the world altogether is $55 trillion. So $600 trillion is nearly equivalent to 12 times the production of the world. That’s a lot of money..., but it’s not written.

But now, we are going to find that truth will be established. I figure, the next two-three years, as all of a sudden everybody starts beginning to understand that the recession we’re facing, is basically an epistemological crisis. It’s the lack of knowledge of how much paper there is representing wealth that could be either very deflationary or very inflationary... So I maintain my faith in markets that are ruled by law. When markets are not ruled by law, they become shadow economies. And what is surprising since the time you and I last met, is that I would have expected a developing country to produce the biggest shadow economy. It is the West that has produced the largest shadow economy.

In other words, there is a vast difference between the shadow economies of poor countries like India and rich countries like the USA. In India, we have Property Without Titles. In the USSA, they have “property titles without property.”

The existence of the Third World "shadow economies" based on Property Without Titles is caused by governments acts of omission: they are not performing their duties. On the other hand, the existence of First World "shadow economies" based on Property Titles Without Property is caused by government acts of commission: the governments are engaged in fraud, in league with their "banksters."

The solution does not lie in taxing the Indian "black economy," as Venu prescribes.

I have earlier called for a tax revolt.

The solution lies in India unilaterally adopting the gold standard, the subject of my recent column, where I also discuss the critical problem of “property titles without property.”

Further, all Property should be titled in India. And as for the fraudsters, they should be punished - and the best and easiest way to accomplish this is by repudiating all government debt. I will write more on this in a future post.

In India, the black economy is the beautiful economy. It is how all honest people survive the depredations of the Total Chacha State, create assets, set up enterprises, employ people, satisfy customers – all outside the official property title system.

Black is beautiful.

Chacha Is Devoid Of Reason

There is this nonsensical news report in Mint today on how Chacha Manmohan S Gandhi’s National Rural Employment Guarantee Scheme is “preventing villagers’ exodus to cities.” Now, tell me, which reasonable man would try to prevent such a natural occurrence. And by “reasonable man” I mean a man equipped with human reason.

Why do villagers living in isolation prefer to migrate to teeming cities? The answer: Because they possess reason. Their reason prompts them to realize that their needs are better satisfied under the division of labour than by isolated production. What is the “division of labour”?

The division of labour is nothing but specialization. An isolated villager is not specialized. He must build his own house, look after and milk his own cows, work his fields, spin his yarn, weave his cloth and so on. Thus, he can satisfy his needs only to a limited extent. As Time is limited, as is Energy, there isn’t much isolated labour can accomplish. So the villager gives up his Robinson Crusoe existence and migrates to the Big City. What happens?

Take the case of Guru who runs a small tea-shop where he also sells some snacks. This is all he does all day. He makes profits. He uses these profits to buy clothes, shoes, food and drink, charas and ganja, and what not. When I mention his village, he shudders. No more farming and buffalo-herding for him, he says. Life in the tea-shop, in the Big City, is just fine.

Note that this is "society': Guru serves others, and yet others serve him. Further, all he serves others is cups of tea, while society serves him with everything else. He is now planning to buy a Honda scooter. Lakhs of Honda employees will collaborate to sell him one, all for some pretty ordinary tea. Thus, Reason shows us all how we benefit from the division of labour and specialization.

But then, why can’t Guru set up his tea-shop in the village? Obviously because there are much fewer customers in the village. In the Big City, Guru sells thousands of cups of tea every day. In the village, he might never sell more than a dozen at most.

As Adam Smith pointed out in the VERY FIRST CHAPTER of the Wealth of Nations:

“The division of labour is limited by the size of the market.”

To be an electrician, plumber, security guard, receptionist, taxi driver, chef, bartender, waiter… indeed, to be anything, the isolated villager must physically migrate to where The Market exists – which is the Big City. Indeed, millions of isolated villagers are already doing so, prompted by Reason, something they possess.

It is fitting that the NREGA is now named after Mahatmaji Gandhiji. This man was not “reasonable” as defined above. His vision was of an India of “self-sufficient village economies”: no division of labour; each man spinning his own yarn. Such a vision is actually “anti-social” – for the division of labour is where human society and social co-operation spring from. As Mises says, “society is division of labour and combination of labour.” Nothing else.

But Mises says more, much more, about this great principle by which isolated men form society and co-operate. This extract is from Chapter VIII of Human Action: A Treatise on Economics, from the section “Human Co-operation,” PDF here (see page 144):

[The] Principle of the division of labor is one of the great basic principles of cosmic becoming and evolutionary change. The biologists were right in borrowing the concept of the division of labor from social philosophy and in adapting it to their field of investigation. There is division of labor between the various parts of any living organism. There are, furthermore, organic entities composed of collaborating animal individuals; it is customary to call metaphorically such aggregations of the ants and bees “animal societies.” But one must never forget that the characteristic feature of human society is purposeful cooperation; society is an outcome of human action, i.e., of a conscious aiming at the attainment of ends. No such element is present, as far as we can ascertain, in the processes which have resulted in the emergence of the structure-function systems of plant and animal bodies and in the operation of the societies of ants, bees, and hornets. Human society is an intellectual and spiritual phenomenon. It is the outcome of a purposeful utilization of a universal law determining cosmic becoming, viz., the higher productivity of the division of labor. As with every instance of action, the recognition of the laws of nature is put into the service of man’s efforts to improve his conditions.

Earlier, Mises says why society and civilization came about:

The fundamental facts that brought about cooperation, society, and civilization and transformed the animal man into a human being are the facts that work performed under the division of labor is more productive than isolated work and that man’s reason is capable of recognizing this truth. But for these facts men would have forever remained deadly foes of one another, irreconcilable rivals in their endeavors to secure a portion of the scarce supply of means of sustenance provided by nature. Each man would have been forced to view all other men as his enemies; his craving for the satisfaction of his own appetites would have brought him into an implacable conflict with all his neighbors. No sympathy could possibly develop under such a state of affairs.

Thus, the conclusions are clear. Mahatmaji Gandhiji was devoid of reason. Ditto for Chacha Manmohan – who is only furthering the processes of “de-civilization” by destroying cities and “preventing villagers’ exodus to cities” with his Mahatma Gandhi NREGA. For our villagers, for society, human co-operation and civilization, we need more and more cities. We need aggressive urbanization.

Pink Slips For the IPS Too

The news today is all about the slaughter of 24 cops in Bengal by Maoist rebels. What is truly shocking is this report on how poorly secured the police camp was. If the senior officers of the Indian Police Service (IPS) cannot look after their own men, how will they ever look after us?

Actually, senior IPS officers are known to extort bribes when recruiting their men. I was at a seminar in Devlali when I heard Sharad Joshi reel out the “rates” for police recruitment to a former Director-General of Police – who did not, or could not, contradict this claim. It would seem that police jobs are deemed “cushy” for lumpen youth, with good pay and perks, and also the opportunity to earn a lot “on the side.” Thus, senior officers in the police do not “look after” their men. Everyone is busy looking after himself. Of course, there is this vast pretence that they look after us.

I think things will change drastically now that Maoists are killing cops by the dozen. I was watching TV last night, and they showed footage of angry relatives of the killed cops attacking police headquarters. If things continue in this manner, no one will join the force. Quite certainly, no one will pay a bribe to join up. It is fortunate that the private security industry is expanding at an incredible pace. Able-bodied young men will join up as private security guards. They will protect themselves. They will also protect us.

What will happen to the IPS? In yesterday’s post, I argued that the IAS should be entirely sacked. Today, I will add that the same should be done for the IPS. Our police forces are a disgrace. Their top officers should all get the pink slip – a dishonourable discharge.

It needs to be underlined that this top echelon of the police is heavily politicized. They do not serve the people. They do not look after their men. They only look after their political bosses. VVIP Security is the only job they perform.

This is also true of the IAS. I wrote about Wajahat Habibullah yesterday, Director of the IAS Academy in 2001. What I forgot to mention is what one of his deputies told me in hushed tones. Wajahat, he said, was “very close to the Gandhi family.” I have kept a close watch on Wajahat’s career since he left the Academy, and indeed he is one of the favourite courtiers attending upon the Queen of the CONgress these days, a permanent fixture at the Imperial Palace on 10, Janpath. If the IAS are like this, can the IPS, who work under the IAS, be any different?

All this shows that we do not possess an “apolitical bureaucracy” – which is the “theory” constantly fed to us. In truth, all these baboons are de facto members of political parties. The goals they pursue are political in nature. They are therefore as “self-interested” as their political masters. They all must go.

Give me self-interested businessmen any day – who compete to serve their customers better. Of course, there are some good men in the bureaucracy, but, as ET reports today, they are quitting in droves, joining MBA programmes, and opting for the private sector. They are the good guys.

On Hernando de Soto, Maoists, And IAS Baboons

The slaughter of 24 policemen by Maoist rebels in Bengal’s West Midnapore district has occurred exactly while the Peruvian economist Hernando de Soto is visiting India and holding consultations with industry and government. When his own country, Peru, was being ravaged by left-wing guerrillas of the “Shining Path” – in that atmosphere of civil war, de Soto spoke of the “other path,” of property titles for the poor, of free markets and, of course, democracy. They had a dictator then, and they have a general now.

Mint today is carrying a detailed interview with Hernando de Soto, and it is worth reading the full four pages. He records his impressions of Bhateeja Rahulji Gandhiji, who asked him, “How can we help the poor?” As if The State is a charity organization!

De Soto also talks of the futility of cash transfers like the NREGA and the fruitlessness of a biometric ID card system when property titles are not in place. Most importantly, he says that the success of guerrilla movements lie precisely in that they provide services that governments do not.

Our country is rapidly falling into the clutches of these armed guerrillas. We need to heed de Soto’s clear message.

The conclusion I draw from this interview is that our Indian Administrative Service (IAS) baboons must be entirely sacked. There ought to be nothing novel to the Indian district administrator about the importance of property titles. Philip Mason’s The Men Who Ruled India makes it clear that, for the first district officers in Bengal, “Locke was their prophet.” It was John Locke who, in 1690, said that “where there is no Property, there is no Justice.” This quote is illustrative of how the Honourable East India Company’s district collectors operated:

In India, by accepting the revenue for a plot a collector automatically bestows a title; gradually it comes about that the Collector of Land Revenue spends only a few minutes a week on seeing that collections are coming in to his subordinates, but many hours deciding disputes.

Under the IAS baboondom, the district collector has become a “district spender” – the bestower of political largesse all around, all the money financed by inflationary means, as it still is today. (And IAS baboons head the central bank.)

Revenue is no longer collected; titles are no longer awarded. The entire administrative system has collapsed. Mason, who was an ICS district officer himself in the 1930s, gives an account of how the rot set in, after CONgress governments took over the provinces in 1935:

India was a poor country which could not afford luxuries and a [British] district officer had concentrated on essentials – public order, the swift administration of justice, the prompt payment of taxes moderately assessed, the maintenance of accurate land records which would prevent disputes. Those had been the four first things. But by 1939, the emphasis had changed and rural development, co-operative banks and village committees were inclined to come first…. The district officer must add to his innumerable duties the maddening and infructuous business of answering parliamentary questions, the host of subjects included under the head of Rural Development….

That was why to some at least of the service it seemed that it was time to go. Rule of the old kind was running down; districts were being administered in a new way, which might be better, but was not the British way. A district officer might find, perhaps, when he had time to look, that a peasant had been brought into headquarters a dozen times before his case reached even the first formal hearing, or that someone had been forced to spend all he had to defend his holding against some fabricated claim, simply because the land records were not up to date. As to Rural Development, most British officers would have agreed that a great deal of what was proposed was admirable if the villagers would do it themselves, but they were skeptical about trying to change habits from above – and much of the effort put into the attempt seemed to them wasteful and incompetent.

This is why the descendants of the HEICS and the ICS are learning lessons that were taught by John Locke in 1690 from a Peruvian economist in 2010. Disgraceful!

Twenty-four policemen were killed in West Bengal yesterday by rebels because they represent a bad government. There is no Justice in India because there is no Property. The unjustly treated will naturally try their utmost to overthrow bad rulers.

The IAS must go. Barun Mitra of Liberty Institute and I visited their Academy in Mussoorie in 2001. India had been “liberalizing” for over a decade. But the professor of Economics at this important Academy was a Marxist! He handed me a copy of Piero Sraffa’s mathematical tract On the Production of Commodities by the Means of Commodities – and I handed it right back, knowing well the difference between Economics and bullcrap.

Barun and I later called on the Director of the Academy, Wajahat Habibullah, IAS, and I told Wajahat that his choice of Economics professor was most peculiar. He replied that Marx may have been wrong in his Economics, but his Politics was right. Methinks Kishanji, the Maoist leader who claimed credit for the killing of these 24 cops, would agree with him. Ideas have consequences.

I conclude with some words on the East India College at Haileybury where HEICS officers were trained. According to Mason:

At Haileybury, everyone had learnt that political economy was a matter of laws, that money and goods would move by themselves in ways beneficial to mankind. The less any government interfered with natural movements, the better.

Haileybury, set up in 1805, shortly after the wisdom of Adam Smith had dawned on the English people, was a college where primary focus was given to teaching the rudiments of classical liberal political economy – then not taught in either Oxford or Cambridge. India benefited hugely from this knowledge. Men like Munro were much loved by the people of South India for the system of property titles they created from scratch – and the Justice that naturally followed. Even today, children in Salem are named after Munro – they call them “Munrolappa.”

It is an excellent thing that Hernando de Soto has taught the basic principles of good government to our Total Chacha State. I just hope they ACT upon it. For Kishanji and his merry men are waiting in the wings – with GUNS.

For MBA Students And Aspirants

I have often lectured at B-Schools throughout India, including IIMs, and found the students woefully ignorant of basic economics. Yet, these bright and hard-working students only attend B-Schools to learn about The Market.

For all those who are preparing for CAT exams and are planning to do an MBA, I thought that these words of Ludwig von Mises from his magnum opus, Human Action: A Treatise on Economics, would inspire them to see things as they truly are. This is from Chapter 15, titled – you guessed it – “The Market”:

It is often asserted that the poor man’s failure in the competition of the market is caused by his lack of education. Equality of opportunity, it is said, could be provided only by making education at every level accessible to all. There prevails today the tendency to reduce all differences among various peoples to their education and to deny the existence of inborn inequalities in intellect, will power, and character. It is not generally realized that education can never be more than indoctrination with theories and ideas already developed. Education, whatever benefits it may confer, is transmission of traditional doctrines and valuations; it is by necessity conservative. It produces imitation and routine, not improvement and progress. Innovators and creative geniuses cannot be reared in schools. They are precisely the men who defy what the school has taught them.

In order to succeed in business a man does not need a degree from a school of business administration. These schools train the subalterns for routine jobs. They certainly do not train entrepreneurs. An entrepreneur cannot be trained. A man becomes an entrepreneur in seizing an opportunity and filling the gap. No special education is required for such a display of keen judgment, foresight, and energy. The most successful businessmen were often uneducated when measured by the scholastic standards of the teaching profession. But they were equal to their social function of adjusting production to the most urgent demand. Because of these merits the consumers chose them for business leadership.

If you want, you can read this Chapter 15 by following the link below to the PDF file of Human Action:


[This PDF file of Human Action is very well indexed and easily searchable.]

It is a very long chapter, but you will learn everything you need to know about “The Market” – and by “everything” I truly mean everything. You will be much better prepared for an MBA.

And, if you study the entire book, you will be better educated than any MBA in the entire world.

Farmers! Fight For Bt Brinjal

I believe our farmers need the freedom to access modern technology. Thus, I am strongly opposed to the anti-farmer “green lobby” that is blocking Bt Brinjal in India. As this recent editorial in Mint makes clear, “per hectare, pesticides for Bt brinjal cost Rs752 against Rs5,952 for the non-Bt variety.” The editorial is titled “False fear of GM foods,” and, in the context of this false fear, I have an interesting anecdote to report on the pesticide-laden brinjal we all eat today.

Once, many years ago, I was traveling by train, and my traveling companions were a medical doctor and his wife. After dinner, the wife took to cutting some apples and serving them to her husband and me. I commented to the doctor that wasn’t it strange that she was peeling the apples, for was not apple peel healthy? He said, “No, apple peel contains pesticides and it is better to peel them.” As we discussed pesticide use in agriculture, he told me something fantastic about brinjal. He said that in the old days you always got brinjal with holes, because of insects that would bore into them. People cut these portions out of the brinjals and ate the rest. That was a good practice he said, and far healthier that the shiny brinjals you get today, without holes, but covered with pesticide.

The enemy of public health is not Bt; rather, it is the excessive use of pesticide. Bt Brinjal reduces pesticide use by over 75 per cent. Such brinjal is good for the health.

While I was with the Economic Times in New Delhi in 2002, a similar fuss was made over Bt Cotton. Then, farmers took to illegal Bt cotton farming and protested loudly for the formal approval of the new seeds. At that time, I interviewed Professor CS Prakash, who teaches plant biotechnology at Tuskegee University in the USSA, for my paper. The interview had a tremendous impact and Bt Cotton was formally approved within a few days of its publication. This interview is still available online, and can be accessed here. It reveals a lot about the Bt technology, and the anti-farmer, anti-poor and anti-science attitudes of the “green lobby.”

As I said, at the time of Bt Cotton, it was farmers who took up arms against the State. For Bt Brinjal, it is once again up to our farmers to take up their cudgels against the establishment, and against the greens. As the editorial in Mint says, yield per hectare of Bt Brinjal is double that of the traditional variety. Farmers not only get to grow double the output, they also save hugely on pesticide costs. Thus, the economics is entirely on the side of farmers – and, let us not forget, consumers benefit hugely too.

There are many great farmer leaders in India. My friend Sharad Joshi is probably the greatest of them all, and the tallest Maharashtrian in Indian politics. He is a true-blue classical liberal, and a trained economist. He is also a great fan of Frédéric Bastiat. He believes strongly that Indian farmers need open access to modern technology, and he fought valiantly for the approval of Bt Cotton. I hope farmers’ organizations like his will now take on the establishment and the greens over Bt Brinjal.

On Political Villains... And Academic Saints

Madame Soniaji Gandhiji has spoken: “It is difficult to remain a saint in politics,” she says.

Simultaneously, ET has a detailed report on a “land grab” by our President’s husband. She is the Head of State and Commander-in-Chief of the armed forces. The report also details many unsaintly acts committed by her, including robbing her own bank.

Speaking of saints, I forgot to mention the name of a great Indian in yesterday’s post on altruistic intellectuals: Professor BR Shenoy. He was on the official panel of economists set up to examine the Nehru-Mahalanobis ambitious Second Five-Year Plan (the plan that followed the Soviets by initiating “heavy industrialization” in India under the Chacha Nehru State) – and he goes down in history as a hero for submitting a “Note of Dissent.” This note was, of course, ignored. But what followed for Shenoy was a horror story: he was hounded out of academia and died in obscurity.

Peter, Lord Bauer paid a great tribute to Shenoy after his death, calling him a “hero and saint.” This essay is to be found in the new festschrift to Bauer, titled Peter Bauer and the Economics of Prosperity. This is jointly published by Cato Institute of Washington DC and Liberty Institute, New Delhi.

The Cato book is available here.

The Liberty Institute book is available here.

My own tribute to Bauer is also contained in this book, but that can be freely downloaded here. It contains a brief quote from Bauer's tribute to Shenoy.

Do read Bauer’s tribute to Shenoy in the above-mentioned festschrift if you can. Shenoy was a true “hero and saint.” I dedicated my first book, Antidote: Essays Against the Socialist Indian State, to the memory of Professor BR Shenoy. Professor Shenoy prophesized that socialist Indian planning in India would result in “planned chaos.” It has.

We began with Soniaji Gandhiji on the difficulty of saints surviving in Indian politics. Shenoy’s career shows that saints had difficulty surviving even outside politics. Socialism, central planning and public education make for a totalitarian state, where dissenters are harshly persecuted.

Yet, it is only if these voices of dissent are widely heard that we can cure the system of its ills. The socialists are wrong in theory; hence they are wrong in practice.

Professor BR Shenoy was a true blue classical liberal. His daughter, Sudha Shenoy, was a pioneering libertarian, editor of that classic work of Hayek on Keynesian inflationism, Tiger by the Tail (pdf here). Both are gone now. Both were heroes. Both might be considered saints when compared to evil politicians.

And look at the cost of ignoring these voices: look at our President and her family. Look at Soniaji Gandhiji and the CONgress. Look at Sharad Pawar. Look at Chacha Manmohan, the inflationist, who must have played a big part in ensuring that Shenoy was hounded out of every Economics course.

I have a personal memory of Shenoy. When I enrolled into a BA (Hons.) Economics programme in Hindu College, Delhi University, in 1974, Professor BR Shenoy’s young son, Siddhartha, was my classmate. It was rumoured that his father was an eminent economist, but we never studied any of his works, and were not even made aware of the famous “Note of Dissent.” Siddhartha dropped out after the first year. Probably his father decided that the course was not worth pursuing. Lucky man. I wish my father had done the same for me.

On Political Selfishness... And Intellectual Altruism

Yesterday, I discussed selfishness – good and evil – and concluded that political selfishness is evil, while commercial selfishness is good. Our Chacha State’s food minister, Sharad Pawar, is an excellent example of the former. He is known as a “sugar baron” – but he is no entrepreneur. He runs a vast sugar empire through his “nationalist socialist” (Nazi) politics, and it is he who is directly responsible for the astronomically high prices of sugar in India these days. I have an earlier post on his thuggery, where I referred to him as a “rascal.”

As ET has commented today, Sharad Pawar is playing Marie Antoinette, telling us all that sugar is bad for the health, that people should consume less sugar, and that sugar is not an “essential food” for the poor. These views have been echoed in his party mouthpiece, ET says.

Actually, sugar is an essential source of energy – especially for the poor. The tea that poor people drink is always heavily loaded with sugar, because it instantly delivers the “sugar rush” and enables these poor people to continue with their back-breaking labours. Truck drivers in India, for example, refer to a heavily sugared cuppa as a “100 mile tea” – because of the energy received. For all these poor people, tea is now unaffordable. And Sharad Pawar, the political sugar baron, is saying, “let them eat gur.” This is political selfishness at its worst. The man is not just a rascal; he is actually an unapologetic gangster masquerading as a politician. And he is Chacha Manmohan S Gandhi and Soniaji Gandhiji’s closest “ally.” It is rumoured that he is now chumming up to the Shiv Sena. Welcome to Indian socialist politics, where all “political parties” are but gangs of thieves, ruffians and murderers.

Talking about selfishness, Anoop Verma has left another comment on my post of yesterday. He says he found the post useful, but he sticks to his stand on altruism being evil. I would have let it pass – for did not Ayn Rand title her book The Virtue of Selfishness – but for his comment on men of ideas. Anoop writes:

Altruist intellectuals have been in the business of dishing out false propaganda for thousands of years. They have managed to impart false meaning to almost every concept. That is why selfishness has such a bad name, and people think that altruism is a good. The reverse is true.

I am a great admirer of men like Ludwig von Mises and Murray Rothbard, who suffered greatly for their views, but steadfastly maintained their integrity. I suppose they could be called “altruistic intellectuals,” though I would prefer to call them “creative geniuses.” In a chapter in Human Action on “Action Within The World,” in the section on “Human Labour As A Means,” Mises discusses the creative genius from the praxeological angle – that his work cannot be called “labour” as such, for it satisfies its performer neither mediately nor immediately. Indeed, his work is his personal struggle, an agony, and its benefits flow freely to mankind, although the common people mostly sneer at the man who struggled to create his books, theories, poems, plays or novels. I reproduce the entire section below, for Anoop’s education. The PDF file of Human Action is available here. For this section, go to page 139.

The Creative Genius

Far above the millions that come and pass away tower the pioneers, the men whose deeds and ideas cut out new paths for mankind. For the pioneering genius to create is the essence of life. To live means for him to create. The activities of these prodigious men cannot be fully subsumed under the praxeological concept of labor. They are not labor because they are for the genius not means, but ends in themselves. He lives in creating and inventing. For him there is not leisure, only intermissions of temporary sterility and frustration. His incentive is not the desire to bring about a result, but the act of producing it. The accomplishment gratifies him neither mediately nor immediately. It does not gratify him mediately because his fellow men at best are unconcerned about it, more often even greet it with taunts, sneers, and persecution. Many a genius could have used his gifts to render his life agreeable and joyful; he did not even consider such a possibility and chose the thorny path without hesitation. The genius wants to accomplish what he considers his mission, even if he knows that he moves toward his own disaster.

Neither does the genius derive immediate gratification from his creative activities. Creating is for him agony and torment, a ceaseless excruciating struggle against internal and external obstacles; it consumes and crushes him. The Austrian poet Grillparzer has depicted this in a touching poem “Farewell to Gastein.” We may assume that in writing it he thought not only of his own sorrows and tribulations but also of the greater sufferings of a much greater man, of Beethoven, whose fate resembled his own and whom he understood, through devoted affection and sympathetic appreciation, better than any other of his contemporaries. Nietzsche compared himself to the flame that insatiably consumes and destroys itself. Such agonies are phenomena which have nothing in common with the connotations generally attached to the notions of work and labor, production and success, breadwinning and enjoyment of life.

The achievements of the creative innovator, his thoughts and theories, his poems, paintings, and compositions, cannot be classified praxeologically as products of labor. They are not the outcome of the employment of labor which could have been devoted to the production of other amenities for the “production” of a masterpiece of philosophy, art, or literature. Thinkers, poets, and artists are sometimes unfit to accomplish any other work. At any rate, the time and toil which they devote to creative activities are not withheld from employment for other purposes. Conditions may sometimes doom to sterility a man who would have had the power to bring forth things unheard of; they may leave him no alternative other than to die from starvation or to use all his forces in the struggle for mere physical survival. But if the genius succeeds in achieving his goals, nobody but himself pays the “costs” incurred. Goethe was perhaps in some respects hampered by his functions at the court of Weimar. But certainly he would not have accomplished more in his official duties as minister of state, theater manager, and administrator of mines if he had not written his plays, poems, and novels.

It is, furthermore, impossible to substitute other people’s work for that of the creators. If Dante and Beethoven had not existed, one would not have been in a position to produce the Divina Commedia or the Ninth Symphony by assigning other men to these tasks. Neither society nor single individuals can substantially further the genius and his work. The highest intensity of the “demand” and the most peremptory order of the government are ineffectual. The genius does not deliver to order. Men cannot improve the natural and social conditions which bring about the creator and his creation. It is impossible to rear geniuses by eugenics, to train them by schooling, or to organize their activities. But, of course, one can organize society in such a way that no room is left for pioneers and their path-breaking.

The creative accomplishment of the genius is an ultimate fact for praxeology. It comes to pass in history as a free gift of destiny. It is by no means the result of production in the sense in which economics uses this term.

There are extremely great men who live lives far above those whose only concerns are “breadwinning and the enjoyment of life".

On Selfishness - Good And Evil

Not much news, so let us continue with our discussions of yesterday, for Anoop Verma has made another interesting comment to my post, and the points raised merit further thought.

Anoop says:

It is the selfish people who end up doing the greatest amount of good. I would prefer to live in a world run by a selfish capitalist than in a world run by a compassionate social servant or a messiah.

This point is well taken. This is indeed the credo of Adam Smith’s Wealth of Nations, where he says we get our lunch not from the benevolence of the butcher, the baker and the brewer – a steak, some bread and some beer – but from their “self-love.” He added that he never saw much good accomplished by those who "professed to trade in the public interest" – like Air India, SAIL or ONGC.

But it was a different Adam Smith in A Theory of Moral Sentiments, who wrote so much about Sympathy. Indeed, this seeming contradiction in his philosophy was dubbed “Das Adam Smith Probleme” in Germany of the 19th century, where Smith was much sneered at – entirely to Germany’s loss. It was only in the principality of Hanover that Adam Smith was translated and studied – because of their connection to the British throne.

Yet, “Das Adam Smith Probleme” is based on a gross misunderstanding of the philosopher. Moral Sentiments was not a book on political economy, but on natural ethics, or natural religion. And yes, as I said yesterday, it is true that the rise of socialism in Britain as elsewhere had much to do with “misplaced sympathy.” In Britain, the Labour Party received wide support from the early 20th century onwards, only because everyone, especially the “intellectuals” (Orwell, Shaw, Wells, the Webbs and all the “Fabians” of the LSE) sympathized with the working classes – and look at the disastrous results. The same happened in Germany, though on a worse scale. Misplaced sympathy created a trade union elite, who were a law unto themselves. The working classes would have been much better off with laissez faire capitalism. This is a lesson we must learn in India today, for our socialism and trade unionism and welfarism have everything to do with the same misplaced sympathy for “The Poor.” This sympathy has been used to our collective disadvantage by selfish politicians and bureaucrats.

However, it is not true that “a world run by selfish capitalists” would be devoid of Sympathy. We have only to read the history of the institution of Lord Mayor of London, the bastion of British “John Bull” capitalism, where the Honourable East India Company was born, to see that these extremely wealthy capitalists – each far richer than their king – bequeathed vast sums to worthy causes. Indeed, it was a tradition that each of them left at least one-third of his estate to charity. This is seen in the career of Dick Whittington, and it is seen right up to the relief sent for the Great Bengal Famine. Even the school in Stratford-upon-Avon where a young William Shakespeare studied was set up by a Lord Mayor, as charity. So was the bridge upon the Avon, which must have been a boon to all the residents of Stratford.

In fact, right up to this day, almost all worthy causes, including, for example, the Ludwig von Mises Institute, are funded by capitalists who earn their keep in markets. Mises was ably supported by the Volcker Fund. There are, of course, capitalists who get it wrong – like the Rockefeller and Ford foundations, but that cannot be helped. I wonder what Bill Gates and Warren Buffet are achieving with their philanthropy, given that the very foundations of Capitalism have been totally eroded in the USSA. Ted Turner, for example, gifted a fortune to the United Nations bureaucracy!

But the point must not be missed: A Capitalist has within himself the power to do good, to channelize his Sympathy for worthy causes. If we do not want The Chacha State to “help the poor,” then we must encourage private philanthropy, private charity hospitals, schools, colleges, academies, and the like. There is no “Das Adam Smith Probleme.”

I also found much to appreciate in these words of Verma:

… I am deeply suspicious of compassionate people. The road to hell is paved with good intentions. All social servants usually end up messing up the lives of the people they want to serve.

Today, social work, social service, aid and charity are run by extremely selfish “professionals.” They serve their own selfish interests. You see them everywhere, thriving on poverty. There is this excellent poem by Ross Coggins titled “The Development Set” that speaks volumes about the criminally selfish self-interest of these types:

Excuse me, friends, I must catch my jet
I’m off to join the Development Set;
My bags are packed, and I’ve had all my shots
I have traveller’s checks and pills for the trots!

The Development Set is bright and noble
Our thoughts are deep and our vision global;
Although we move with the better classes
Our thoughts are always with the masses.

In Sheraton Hotels in scattered nations
We damn multi-national corporations;
Injustice seems easy to protest
In such seething hotbeds of social rest.

We discuss malnutrition over steaks
And plan hunger talks during coffee breaks.
Whether Asian floods or African drought,
We face each issue with open mouth.

We bring in consultants whose circumlocution
Raises difficulties for every solution –
Thus guaranteeing continued good eating
By showing the need for another meeting.

The language of the Development Set
Stretches the English alphabet;
We use swell words like “epigenetic”
“Micro”, “macro”, and “logarithmetic.”

It pleasures us to be esoteric –
It’s so intellectually atmospheric!
And although establishments may be unmoved,
Our vocabularies are much improved.

When the talk gets deep and you’re feeling numb,
You can keep your shame to a minimum:
To show that you, too, are intelligent
Smugly ask, “Is it really development?”

Or say, “That’s fine in practice, but don’t you see:
It doesn’t work out in theory!”
A few may find this incomprehensible,
But most will admire you as deep and sensible.

Development set homes are extremely chic,
Full of carvings, curios, and draped with batik.
Eye-level photographs subtly assure
That your host is at home with the great and the poor.

Enough of these verses – on with the mission!
Our task is as broad as the human condition!
Just pray god the biblical promise is true:
The poor ye shall always have with you.

What we must also understand today is that, just as these “aid workers” are selfish, even more so are the personnel of The State. The founders of “public choice theory,” James Buchanan and Gordon Tullock, have spent their lives demonstrating how Uncle Sam is self-interested. How much worse must Uncle Sham be?

But the self-interest of the Capitalist can only be achieved by serving his customers better. The self-interest of the personnel of The State is achieved only by screwing the people. One works for good things; the other is pure evil. Gordon Tullock's little book, The Vote Motive, proves that this is the motive that is pure evil. On the other hand, the much maligned "profit motive" is totally innocent, seeking only to benefit the customer, as in this old song.

As far as our own Uncle Sham is concerned, I found Niranjan Rajadhayksha’s column in Mint today most noteworthy. Beginning with Friedman’s “Law of Spending,” which showed how government spending (or central planning) is “some people spending other people’s money on other people,” Rajadhakshya presents us with some statistics on Uncle Sham, our Chacha State:

Here are some numbers. Finance minister John Mathai had estimated total revenue of Rs347.50 crore and total expenditure of Rs338.88 crore in 1950-51, leaving a budget surplus of Rs9.62 crore. Finance minister Pranab Mukherjee had in July budgeted for a revenue of Rs6,19,842 crore and expenditure of Rs10,20,838 crore, leaving a fiscal deficit or borrowing requirement of Rs4,00,996 crore.

Let’s work the numbers. Government spending grew 3 percentage points a year faster than India’s gross domestic product at current prices, going by compounded annual growth rates over 59 years. The absolute numbers are truly astonishing: The size of the economy grew 578 times since 1950 while the size of the government’s spending bill grew 3,020 times.

This is pure theft. This is the root of inflationism. This is the selfishness to watch out for.

A world run by Capitalists would be far, far better. Give me a Lord Mayor of London anyday. Incidentally, the Prophet Muhammad, peace be upon him, was a trader, as was his wife, Khadija. Islam is a religion of traders, not soldiers. And they too have their charity – zakat. Sikhs are hardy entrepreneurs, and their gurudwaras have daily langars for the poor.

So there is selfishness, and there is selfishness. And there is sympathy and there is sympathy. What we need today is to clearly see which is good, and which is evil.

Hope you find this post useful, Anoop.

On Misplaced Sympathy, Ignorance, And Hope

My recent post on the National Rural Employment Guarantee Scheme, which I dubbed “Flagship of the Pirate Fleet,” has drawn many comments, and some of the points raised there, I thought, should be addressed on the main page, because they concern fundamental issues in political and economic philosophy.

In particular, Anusthubh, in a series of comments, demonstrated his deep-felt concern for the rural poor and the undernourished children – and the firm conviction that the Chacha State should do something about this. He is opposed to “free market fundamentalism” and favours “the right kind of intervention.” Towards the end, he wrote that what matters is that the “efficiency” of these right kind of interventions be increased, and “pilferage” reduced.

In response, Anoop Verma, who seems to be on my side, said:

“…leftist ideology happens to be the illegitimate offspring of altruism. And majority of the people are born with an altruist gene. They are compassionate and have a sense of pity. They want to help others, be charitable. But the thing is that altruism is the most evil concept.”

First, let us not shoot altruism. We have so much of naked selfishness all around us that some altruism could do a lot of good. Compassion and a sense of pity are also good, essentially human qualities. Adam Smith said that Sympathy was a “moral sentiment.”

Leftist ideology is not an “illegitimate offspring of altruism”; rather, it is the illegitimate offspring of Sympathy. Anusthubh sympathizes with the poor and the undernourished. Who wouldn’t? When I see the miserable conditions in the slums of Mumbai and New Delhi, I too feel that something needs to be done urgently to improve the living conditions of the majority in our cities of joy. Fortunately, I have studied a little Economics, and a little Law, and my knowledge leads me to oppose rent control, to uphold Property, to champion road building, to advocate aggressive urbanization, and to call for complete economic freedom.

Unfortunately, the vast majority have never studied these subjects; and, if they have, they have been mistaught. Thus, their moral sentiment of Sympathy leads them towards completely erroneous prescriptions. They call in the Chacha State. For the rural poor they champion a “right to work.” For the undernourished they champion a “right to food.” For the illiterate they champion a “right to education.” This makes the personnel of the Chacha State very happy, because they have public sanction for more and more “schemes” – that is, more and more “pilferage.”

Further, as Frédéric Bastiat tellingly wrote, socialist politicians, who are essentially demagogues intent on fooling the people, do not tell their unenlightened supporters that The State has two hands.

There is one hand that takes (the tax-man), and there is the other hand that gives away (the spending programme).

They only show the hand that gives, while completely concealing the hand that takes away.

If a thorough audit was to be conducted on any government programme, from the food distribution system to their schools, it would become apparent that The Market could perform these functions at a far lower cost. How much does it really cost the Chacha State to purchase foodgrains at high “support prices,” store the same in huge godowns (where rats eat up most of the stock), and distribute these grains through their “fair price shops”? How much does the Chacha State spend per student in a government school as compared to a private school?

Sympathy is not the problem. Sympathy is there within us. Altruism is not the problem. True altruists are the salt of the earth. The real problem is ignorance – in the absence of the faculty of being able to think things through to their logical conclusions. It is this ignorance, this lack of thinking correctly, that we must fight against. And in this fight, there is hope. There is hope precisely because The Total Chacha State is such a Total Failure.

So don’t be so pessimistic and cynical, Anoop.

All the forces of history are on our side.

For Gold, Guns, Secession, And Liberty

Chacha Manmohan S Gandhi, the inflationist, has spoken about “security threats” that face our people, and has called for strict action on the part of all his Bhateeja States to tackle the same. Just another chief ministers’ conference in New Delhi. Yawn.

Just as inflation robs us all of our savings, so do the Chacha State’s police forces rob us of our earnings. Just the other day, there was a major scandal in New Delhi’s CR Park #1 Market, about a police inspector named Mukesh, who was extorting money from all the shopkeepers and vendors; and, not only that, beating them up as well. He was transferred.

A few days later, I visited the local florist, who operates from the footpath, to buy some flowers on the occasion of my father’s birth anniversary. The florist told me that Mukesh’s replacement had raised the huftha (weekly bribe), and they were now being fleeced even more.

This is the common story throughout India. And, as I said a few days ago, the Rule of Law means that, if the citizens cannot kill and rob, neither can their rulers. Our rulers kill and rob. Here is the latest from Chattisgarh. Srinagar is up in flames because the cops killed a little boy.

What about terrorists? During the Mumbai massacre, I read a report, recounted here, that brave citizens threw stones at the terrorists who were armed with AK-47s. Our Chacha State is disarming us – and not protecting us either. Further, there is this inflation. To combat inflation, we must make Gold our money; and to be secure, we must have our own Guns. Today, the Chacha State is making private gun ownership even more difficult. Should we depend on the State Police for our security, or should we depend on our own selves, and our own guns? I suggest: Gold, Guns and Liberty.

Now, Liberty is always from the actions of the government. We need Liberty from the Chacha State. It is robbing us blind with its inflationism. It is looting us and killing us with its lawless police. But there is more. We need Economic Liberty to survive. We need the freedom to buy and sell freely, to set up enterprises, to keep our customers happy. The Chacha State is not allowing us to do that. For Chacha, free enterprise means Ambani, Tata, Birla, Bajaj, Mahindra, Mallya, Thapar et. al. For me, Capitalism means the Liberty of the Street Vendor. Today, the cops are fucking these poor businessmen.

Not only that: The Chacha State’s policies do not look at India as one nation. There are over 100 brands of feni in Goa – but none are allowed to be sold anywhere in India. You will not find feni at a liquor store in New Delhi, or Bangalore, or Mumbai, or Chennai, or Kolkata. What sense does it make for Goa to “belong” to India? So let us add a third word to our list: Gold, Guns, and Secession. If India is to be One Nation, it must be one undivided market; otherwise, the whole idea is meaningless.

So, Chacha Manmohan S Gandhi is indulging in demagoguery, as usual. He is trying to fool us. As far as “national security” is concerned, he has only sold our national interests to the USSA and earned the enmity of all Muslims. I recommend Shekhar Gupta’s column, “Goodbye America.” It proves that Chacha is wrong on this score as well. I wrote yesterday that Chacha’s “stimulus package” was aimed at befriending Ben Bernanke. Indeed, it may well be that the CIA has taken over our Chacha State.

Yes, our nation is in a deep mess. The Central State has now proved to be our national enemy. The solutions are clear: Gold, Guns, Secession and Liberty.

Chew on that.