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.