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.
But one solution is in sight: Do not buy their bonds, and ask others not to do so.
ReplyDelete----------------
As usual I agree with every sentiment that has been expressed. But we can’t simply ask people not to buy government bonds. They are going to do that anyway. The government has too many tools that it can use to pressurize the big investors, bankers, mutual funds and hedge funds. Even if the investors are convinced that the buying govt. bonds is not in their interest, the government is going to squeeze the money out of their pockets. The governments around the world are too powerful.
In any case, bankers don’t have a backbone, or common sense and so they are easily bullied. You can never expect a fat cat banker to fight in the name of ideology or principals. Look at those idiots who wrecked Wall Street and now they are whining in front of Obama for doles. They have still not been able to find out how much more bailout AIG, Citibank or others will need. A child with a calculator could have found that out by now, but these bankers don’t know how to us a calculator.
People need to understand that the governments, any government at all, has the potential to be the root of all evil. These ministers and bureaucrats are the “paid” servants of the people. They get good salary, all kinds of perks, but they behave as if they are working for charity. The sanctimonious attitudes that that they display on TV is most disgusting. They think that they are doing everyone a favour by merely being there.
With all due respect to Dr Bhagwati, those duffers from BJP at least made tiny steps to privitize state-onwned cos and also put fiscal on a better footing than what they inherited from CONgress-backed UF Govt! And, it is less risky to criticize them than the "eminent" economists of Gau-Bachada CONgress whose undertaker is Chacha Fake Singh Serf.
ReplyDelete@Anonymous: Good point. Back home in Blighty, Bhagwati is a card-carrying Democrat (ugh!), Obama-worshipper, and welfare statist, so he can never take on the CONgress pseudo-economists, who, like him, are committed welfarists. However, to his immense credit, Bhagwati took on Stiglitz - the World Banker, Nobel laureate and anti-globalizer - and argued for the benefits of globalization for poor countries like India. So he is still a "good guy" to the Indian press.
ReplyDelete@Anoop: Your pessimism is entirely misplaced. You over-value the coercive powers of The Chacha State; and you under-value public opinion, without whose support no coercive State power can survive.
Our task is to convince the people at large that buying government bonds is against the interests of the citizen as taxpayer. If this opinion is widely held, even State-owned banks will not buy RBI bonds, knowing well their depositors will desert them. Thank God there are so many private banks, and foreign banks, now.
Anyway, I have made the water-tight theoretical case against government borrowing. Let us see how the financial papers take up the issue.
Sir, I agree about power of ideas. Rajaji's was among lonely voices in the 50's and 60's against statism (he coined the word "quota-permit raj). His Swaraj Weekly had small circulation but ideas are powerful. People fawn at Chacha Fake Singh Serf as the "architect of reforms" but I would call him the "chacha", or "mama" of the economically worst, the evil regime of First Mrs Gandhi in 70's. It is so inconvenient for our "embedded" media to be reminded of this fact that Dr Fake Singh Serf was CEA when such enlightening acts as sundry nationalizations, FERA, control over simple things like pay of company directors were inacted or was RBI Governor when our banks were looted under the guise of Rajiv Loan Melas and he, the supposed custodian of our banks, kept quiet. You do not propser in Delhi under ALL regimes if you have intellectual backbone and integrity. He has none. He was a close associate of the economically most evil regime we ever had. That was done in the name of Socialism an "Garibi Hatao" and now "inclusive growth" and "aam aadami" - whatever that means. He will again put us back by several generations.
ReplyDeleteI recall how our seth-owned papers esp TOI and HT (with few exceptions such as IE and Statesman) went gaga on "Socialism" during that avatar era - sort of CONgress version of Mao's cultural revolution and daily lambasted Swatantra, BJS and Cong (O) for opposing "Sarkarikaran". I always wonder why our media is so silent on this when they do not hesitate in digging up irrelevant things said or done 50 or 100 years ago!
A good case has certainly been made in this blog against govt. borrowing, and yet the governments are on a borrowing spree. Thank God for the fact that there are few people in the world who refuse to get bullied by the Chacha state. The government is taking the hard earned income of the middle class and pouring it down the great altruist toilet, which is managed entirely by leftist ideologues.
ReplyDeleteWhat is NAREGA, if not a gigantic conspiracy to obliterate the collective wealth of the Middle Class by pouring it all down the great altruist toilet. Many people don’t dare to speak against NAREGA, because the votaries of this scheme have been able to brainwash and bully everyone that this scheme is all about offering altruistic assistance to the poorest of the poor. That is not the case.
There is no one you can trust in the world. Even the leaders of the so-called private banks are acolytes of the chacha state. All the Wall Street managers had degrees from Harvard. Many of them were Noble Laureates. That is probably the reason why Wall Street has failed. Even in India, the private bank managers are at the beck and call of the ministers.
We have a strange scenario where the Chinese govt. is buying US debt to the tune of hundreds of billions of dollars. Why should the dirt poor Chinese subsidise the lifestyle of the BIG FAT Americans! This is a strange case of inverted altruism.
Ultimately you have nowhere to go. Almost everyone is infected by the altruist virus, which prods him to sacrifice the healthy in order to pour life’s blood into the already dead.
In his second post “Mr. Anonymous” has made some very valid points. I agree with his sentiments.