Chacha Speaks - And I React

Prime minister Chacha Manmohan S Gandhi has spoken - to an audience in Malaysia - unveiling a six-point programme for a "new stage in India's development." An editorial in the Indian Express has faithfully reproduced these six points:

First: rapid growth, to create wealth and fund ambitious welfare programmes.

Second: regional and social balance.

Third: a focus on a modern, knowledge-based economy.

Fourth: environmental sustainability.

Fifth: cooperation with our neighbours to our mutual benefit.

And sixth: to retain the framework of our plural and secular democracy, a goal and a value in its own right.

I examine each of these in turn:

First - rapid growth, to create wealth and fund ambitious welfare programmes.

The two objectives are contradictory. If wealth is created - and then our The State taxes it away for "welfare," all is consumed, nothing is left for investment, and so the engine will come to a spluttering halt. Chacha has already derailed growth for the ambitions of welfarists - and the proof lies in our high inflation. Perhaps Chacha has not heard of what they are doing in Britain today.

What is needed for economic growth? Well, I recently answered that question in a post. I established the fact that The State has NO ROLE in the processes that cause economic growth. I concluded saying: "Liberty! Property! Contract! That is all it takes to make a country grow." I then added another post on the importance of roads. In this speech in Malaysia, Chacha lamented the sorry state of India's "infrastructure." But he himself is spending all our money on welfare - not roads.

Second - regional and social balance.

Dunno what these mean. All that must "balance" are the scales of Justice - and here in socialist India, where there is no Property, these do NOT balance. "Regional balance" is poppycock. All our regions are diversely gifted - not only by Nature, but also in terms of human capital. The old idea of "balanced regional development" espoused by our central planners has never worked. It is a goal as unattainable as "economic equality." As far as "social balance" is concerned, I repeat myself - all that is needed for "balance" in a vast society of numberless individuals is that the scales of Justice must balance, and that requires Property to be inviolable.

Third - a focus on a modern, knowledge-based economy.

There is no need for us as a nation to undervalue ancient and traditional knowledge - like the mahua that our tribals happily distil. In the developed nations of the West, a lot of traditional knowledge thrives - as in wine and cheese making. Our common people possess all kinds of old knowledge and skills - as in the case of carpenters. As far as "modern knowledge" is concerned, the best we can do for ourselves is to unilaterally free trade. Import the knowledge developed overseas and use it - as with our modern mobile phones and cars. No IIT could produce either. Incidentally, in this speech, Chacha quoted Keynes - and that puts a big question mark on his own knowledge.

Fourth - environmental sustainability.

Chacha is a great "climate change" alarmist - another phony "knowledge" he has espoused. Methinks it would be preferable if our The State would focus on the "sustainability" of their budget expenditures - their welfare programmes. It is these that are "consuming Capital" - and are totally "unsustainable."

Fifth - co-operation with our neighbours to our mutual benefit.

I agree with that - but then, why stop at our neighbours? Why not co-operate with all the nations of the world? There is much more we can buy from Europe than Bangladesh! Unilateral free trade - the only way.

Sixth - to retain the value of our plural and secular democracy.

Funny thing, ain't it - that Chacha has never won a Lok Sabha election himself. Is this a "plural" democracy when classical liberals and libertarians are not allowed to form political parties of their own? Is this a "secular" democracy when the likes of the BJP are given free rein? No, siree - this is a centralized, socialist, communalist sham democracy.

One word to describe Chacha's six-point programme: Mendacity.

For Peace, For Trade, Against War

The 20th century will go down in history as an age of wars, wars and more wars. And these wars have not yet stopped. They continue - and threaten to continue forever. The 21st century has barely begun - and there are wars all over the place.

The 19th century was different. There was a time then when many people thought that an era of free trade between nations had dawned - an end to wars, an era of perpetual peace. This was particularly true of the "Manchesterites" led by Cobden and Bright. They led a working class movement - the first "mass movement" in history - for free trade in the 1830s and '40s. Cobden sat in Parliament but never joined government - yet, he was the most highly feted politician in Europe. It is indeed tragic that this great beginning of "liberal politics" came to an end by the time the 20th century dawned. From the 1850s, the masses became attracted to other political visions - including communism, socialism and democracy. Protectionism became the norm, and the slogan "free trade" was never uttered again. Nations retreated behind tariff walls, pursued the goals of "national economy," and international co-operation gave way to perpetual war. "When goods do not cross borders, armies will," said Bastiat, a free trader and associate of Cobden.

There is simply nothing "good" about war. Wars cause death and destruction. Huge amounts of precious Capital - including human capital - are blown away. Wars are barbaric. Civilisation, on the other hand, requires peace and trade in order to flourish. Only peaceful trade results in the accumulation of Capital - which translates into "investment." Adam Smith thought that if his "System of Natural Liberty" was put in place in every nation, the result would be "universal opulence." Half the planet is still mired in poverty - and the only cure is peaceful trade. "Foreign aid," on the other hand, is positively harmful - as Peter Bauer tellingly argued. It is in peaceful foreign trade that the salvation of humanity lies. This is the only way to save civilisation, and also to spread its benefits. "Universal opulence" - how I love that phrase!

International trade is also "win-win" - but even more so than domestic trade. Goods that come in from abroad are invariably those that are not available at home, and are therefore highly prized by all consumers. This is particularly true of India, where "firang maal" has always been treasured, despite all the "swadeshi" rhetoric. By closing our vast markets to foreign trade, we are not only impoverishing ourselves; we are also impoverishing the rest of the world. Lose-lose.

Protectionism is an anti-consumer, pro-producer philosophy. It is also "nationalistic" - with roots in "mercantilism" and "national economy." These are all extremely vile and corrupt ideas - and they end up "politicising economic life." Corrupt cronyism develops at home. Foreign trade is politicised as well. Instead of international co-operation and peace, we have the roots of perpetual international conflict. The ordinary people suffer as consumers, as taxpayers, and as soldiers. The "worst get on top."

It is often argued that trade benefits the rich nations alone. This is as false as the other argument that free markets benefit rich people alone. Just as the poor gain as consumers in an era of mass production, just as poor people gain as workers in factories employing Capital which does not belong to them - so too does international trade benefit poor countries and their people the most. Just look at Hong Kong and Singapore.

In a global free market, each of us will have to specialise in the "international division of labour." We will therefore choose our specialisations according to our own, individual "comparative advantage." Now, it is a great error to think that comparative advantage implies that only the fittest and the best will survive. In fact, if we notice spontaneous specialisation in the world around us, we will see that it is filled with instances of individuals who are better at a particular task and yet gain by associating with those who are in fact worse at the same task. For example - the owner of a car is often a better driver than the chauffeur he has hired. This principle of comparative advantage, credited to David Ricardo - but faultily explained by him - is what Ludwig von Mises called the "law of human association." It is the First Law of Sociology. It tells us that all are gainers in free association - and that this is the pathway to building a Great and Open Society comprising the whole world. This is how we can end war forever. I have written a column explaining this important law, which you can read here.

Living on the Konkan Coast for so many years, travelling up and down watching the action in all its ports, I am often overcome by a great sadness. These are almost all ancient ports. Before anyone understood "Economics," there was trade, trade and more trade. If a ship came in, loaded with goodies, everyone cheered. Nowadays, things are starkly different. Be it Mangalore, Karwar, or Mormugao - all that seems to be happening is the exportation of low-grade iron ore, and the importation of nothing. All exports; no imports. This is the Kamal D Nutt theory of international trade. This is the theory that politicises international trade. We must get politics out of trade. We must get The State out of The Market.

These politicians and "diplomats" often argue that there must be "reciprocity" in international trade - and they have a vital role to play in negotiating the terms of this reciprocity. Actually, all trades are inherently reciprocal, and that is why both the buyer and the seller agree to undertake them. Bastiat has written two wonderful, short essays against this phony doctrine of reciprocity, which you can find in my collection of his writings, here. These two essays of Bastiat's, written in the golden age of Manchesterism, give the clarion call for unilateral free trade. Free international trade - without politicians and diplomats having anything to do with it.

Trade is the health of the people. War is the health of The State.

Think about it.

Two Tales From The Kumaon

Smoked a great big spliff this morning with an old friend from Holland who resides nearby and regaled her with stories of some of my travels. So I thought I'd share two of these tales with you, both from the Kumaon, the district made famous by Jim Corbett. But these stories below are not from the tiger forests at the foothills; rather, these are from the high mountains further north.

LOHARKHET: I reached Loharkhet after a long uphill trek, pitched my tent beside a babbling brook, and spent a few days - the year was 1995 or thereabouts. It was a pretty large village, with a jumble of houses on the hill, and I guessed the population to be about 1000. No road. There was an old PWD bungalow opposite - dating back to British times. But no road. All the action occurred in the tea shop - where all the locals turned up, smoking beedis laced with hash. I bought a goodly quantity of the stuff.

I noticed a big, ugly, yellow building high up on the hill and inquired of the tea-shop owner as to what it was. He said it was the government school. Just then, a gaggle of school-boys and -girls passed by, dressed in uniform. I inquired as to whether these kids were headed for the government school on the hill. The reply:

No, sir. No one goes to the government school. There, the teachers don't teach and only keep applying for transfers out of here. These children all go to a Baba down the road who has come here from Bengal. He teaches them English for 50 rupees a month. All our kids go to the Baba's school.

No road - but a school that doesn't work.

Second: On another occasion, I inquired of the tea-shop owner if there was any crime here, for I had noticed that the village was without a police station. His reply:

Yes, sir. They had sent the police up here once long ago, but they were bad people, and we shooed them out.

In Loharkhet, en route to the Pindari glacier, the hash was good. Real good.

Next, MUKTESHWAR: Around 2003, I arrived in Mukteshwar by car late in the evening. Horrible drive. It was October, and quite cold. For accommodation, we had booked some tents on a hillside. Upon arrival, the chap looking after the tents told me the meaning of the name of the village. He said mukt means "free" and eeshwar means "god" - so Mukteshwar is "where God comes to be free." Wanting freedom myself, I inquired after the local hash - and was soon in possession of a very large quantity. Great smoke. Lasted me months.

One day, as I was sunning myself on the hillside, a villager approached me. He said he had heard I was a writer for some big English newspaper in the city, and wanted to tell me something about his village in the hope that I would write about it, thereby informing public opinion. I told him to go ahead with his tale, and this is what he said:

Sir, we are a small community in this village, and there has never been any crime here. We live in peace and harmony, and we don't even lock our front doors. All this changed when the government installed a police station here. Now, trouble is regular. Will you please inform the government that we would very much prefer if they took the police away and built a good road here instead.

Yes, I believe in Liberty. And I also believe in good roads. I hate the idea of government schools. And as for the cops... it seems the people think they don't need them. Who am I to disagree?

Natural Order?

Private Law Society?

Think about it.

On Morality... And Corruption

These days, both television as well as newspapers are full of reports of a government inquiry into all the corruption that took place in the CONgresswealth Games. In my view, this is just symptomatic of a much larger disease - socialism.

To begin, let us understand morality. What is the moral way of survival? The only answer to this question is "exchange." When we exchange, both sides gain - win-win - everything is voluntary, no force is used, no fraud, and justice prevails along with morality. The golden rule of Property is followed, and civilization gallops along. There is a "natural order." Note that most people go through life, exchanging every day in markets, without ever requiring the services of the police or the courts. This is morality. This is the "economic means" of survival.

What is immoral? To survive through force, fraud, coercion, theft, plunder, loot - this is immoral. These disturb the natural order. The police and the courts must be called in.

And what is "socialism"? In India, socialism has always meant an antipathy towards free exchange, a hatred of free markets. Further, the socialist conception of government is of a "State at the commanding heights of the economy."

What is a State?

To all classical liberals, the State is nothing but an institution of compulsion and coercion. Its only weapon is Force. This collective force was deemed necessary for but one purpose - and that is the preservation of the market order. Thus, the classical liberals conceived of a free society as one in which everyone was possessed of Liberty Under Law - and all sought survival through free exchanges in The Market. If anyone turned out to be an enemy of this market order, and plundered, stole, robbed, coerced, defrauded - it is only then that the State must act. This was the classical liberal conception of the "role of State" in a free society. The word "free" meant "free enterprise" and "free market." This freedom is "social." This is what Adam Smith called the "System of Natural Liberty."

When our socialists, led by Chacha Nehru, installed the State at the commanding heights of the economy, they altered the means of survival. From then on, the market and free exchange has been hampered by State controls - and all the people have had to seek the "political means" of survival. This is the "politicization of economic life" that Peter Bauer wrote against, when referring to countries like India. As he pointed out, as far back as the '50s and '60s of the last century, this is the root of all corruption. In other words, the socialist project in India was born corrupt. As I argued in an old article, Jawaharlal Nehru was an "evil man."

Once a State starts off on a corrupt project, things proceed to deteriorate more and more. The Socialist State, after all, is also "democratic," and there is the added necessity of keeping a "political party" together. In time, the only glue that binds all the party members and makes them "loyal" to their leader is corruption. There are the loaves and fishes of office. The democratic ideology becomes one of "to the victor goes the spoils" - the precise ideology of bandits. This corruption then seeps into the bureaucracy.

In any centralized socialist government, the ruling elite practise "dual subordination": they control subordinates in both the party organization as well as the bureaucracy. They invariably end up corrupting both. We have seen this in India. In 1947, the officers of the (British) Indian Civil Service were highly respected - and it is this respect for The State, earned by their hard and honest work, that made Indians think Nehru was right, and expanding the role of the State was a good idea. Today, the officers of the Indian Administrative Service are treated with derision and scorn. They are always referred to as "baboos," not "officers." And, today, if anyone suggested placing the State at the commanding heights, he would be shot.

Thus, we Indians must beware of the new role of the State that Chacha Manmohan is busy trying to usher in. Chacha and Sonia want to build a "Welfare State." Their ideas include "free and compulsory education" as well as a "right to work" and a "right to food." The right to work for wages paid by the State and the additional right to food from State granaries mean nothing else but asking the poor, dumb masses to seek the "political means" of survival. It means further corruption of the bureaucracy. And there is worse...

To the classical liberals, the State was an expenditure. You had to pay taxes for the services rendered - the police, the courts, the prisons and the hangmen - the organized "compulsion and coercion" they deemed necessary for the preservation of the market order. The citizenry had to survive through the "economic means" - exchanges in free markets. With the advent of the Welfare State, a corollary of mass democracy and the need to "woo voters," the State has become the fount of a wide range of "benefits." For the mass of voters, the "political means" of survival has become the norm. This means heavy taxation, heavy borrowing, huge bureaucracies with a vested interest in "budget maximization" - and it is this that has destroyed the currency. Money meant gold and silver till fairly recently. Today, it is just paper with an empty promise on it. Mises wrote that the principal idea of the Keynesians was to "cheat the workers." Now, they are cheating everyone. Corruption has been institutionalized and universalized.

"Budget maximization" is the very opposite of "capital accumulation." All welfare is about "consumption" not "investment." The accumulation of Capital is the only means of advancing civilization and the standard of living. Capital consumption leads to "de-civilization." Inflationism is basically nothing but capital consumption. The entire world is being destroyed.

What is the way out? I think Bastiat understood it best when he said that it was not a matter of any importance as to which "class" ran the State. France was run by an aristocracy - and they got rid of it and installed the bourgeoisie under Louis Phillipe. But that didn't work either and so they turned to socialism and the idea that the proletariat should now rule. This was the critical year 1848 - when Marx and Engels published the Communist Manifesto. This was when the idea of democracy spread - and Reform Acts were passed in Britain, and the march towards universal suffrage began. In Britain, by 1905, the Liberal Party of Gladstone folded, and the Labour Party took its place. Socialism was popularized by a wide range of "intellectuals."

What Bastiat said in 1848, in France, was this - no matter who runs the State, which "class," what is of utmost importance is that the State must never be allowed to exceed its domain. Its only function must remain the use of compulsion and coercion against enemies of the market order. Liberty must prevail. Markets must be free. Everyone must seek the "economic means" of survival. If ever the State were to exceed these limitations, it would become an enemy of society - a "Predatory State."

To conclude: The corruption we see in India is ideological. The corrupt ideology at work in this country is socialism - now being disguised as "welfare." If we want to be rid of all this corruption - which is entirely political and bureaucratic - we must stand for the ideology of Capitalism: of free markets, of survival through exchange, the "economic means" of staying alive. Our poor huddled masses must be given the Liberty to trade freely, to accumulate Capital, and to be able to keep and invest it, without fear of predation. Money must be sound - and that means "hard money." You can read my article advocating a return to the Gold Standard here.

If their idea was corrupt to begin with, our idea must be honest. And, as a good man once told me, "there is nothing more innocent than the profit motive." Yeah, it is the "vote motive" that is dangerous.

Shubh Laabh.

I also wrote a column last year on the morality of markets, which you can read here.

Shiv Sena, Catallaxy, And Universities

The Shiv Sena's latest outrage - the banning of Rohinton Mistry's novel Such a Long Journey from the Bombay University syllabus - has evoked this powerful response from CP Surendran. After reading Surendran, I thought that I ought to add a few further points to the public discussion.

First - to me it seems that the fundamental choice facing the citizens of Bombay as they consider their future and that of their megapolis, is between a free market, multi-cultural catallaxy and the Marathi manoos vision of the Shiv Sena. The Shiv Sena vision is shared by the BJP Hindutva "cultural nationalists." And, from what Surendran writes, quoting from Mistry's banned novel, the CONgress started it all off, when Indira Gandhi championed the creation of a separate state of Maharashtra.

The urban catallaxy is an Open Society - open to all "friendly strangers." No one is excluded - because that is not how a market order expands.

As to the alternative Shiv Sena / BJP vision, a cautionary tale that I just read in William Dalrymple's From the Holy Mountain comes from the ancient city of Alexandria, Egypt. (I have written before about this book - here.) Alexandria was always a multi-ethnic, multi-cultural, multi-lingual city. There were always lots of Greeks there, since the city's founding. In fairly recent times, this city was the most culturally advanced city on the Mediterranean, home to lots of Europeans. Then along came Gemal Abdul Nasser, the socialist who was a good friend of Chacha Nehru. He evicted all "outsiders." Today, the great city is virtually dead. Egyptian peasants stroll around. The cafes are deserted. The hotels have all closed. The great mansions are all vacant and crumbling.

Dalrymple's book also talks of ancient Byzantium, where 72 languages were spoken in its bustling bazaars, and contrasts it with modern Istanbul, from which all "outsiders" have been evicted - because of "nationalism" and "socialism." Well worth reading, this book. Perhaps Bombay University might like to include it in its syllabus.

What seems obvious to me, especially after reading Dalrymple, is that nationalism and socialism (as well as religious fundamentalism) are fundamentally incompatible with a free market "natural order" - which must be inclusive and open. Bombay is India's leading commercial city - and its businessmen and women must decide on their city's future, before it is too late, and all these anti-market ideologies gain the upper hand.

There is also historical evidence of Kabul being a catallaxy when Babur ruled. In the Babur Nama, written in Chagatai Turk, he boasts that in his capital seven languages are spoken. Thus, linguistically homogeneous "nation states" of the European kind - and the dangerous philosophy of "national economy" - are incompatible with our part of the world. In any case, the Europeans have almost given it up totally and opted for a "common market."

Second - the banning of Mistry's novel also raises fundamental questions about "academic freedom" and what a "university" is all about. To my mind, State-owned universities can never ever deliver academic freedom. State ownership must necessarily politicise everything. With State ownership of universities, all "knowledge" that is imparted, and all knowledge that is researched and produced, must necessarily be "politically correct." The "professors" in State-owned universities are all actually "bureaucrats." For the growth and dissemination of real, useful knowledge, we need private institutions of learning. This is another reason to clamour for education without The State.

Why Roads Matter Most

Yesterday's post concluded saying:

Liberty! Property! Contract! That is all it takes to make a country grow.

Today, let me add just one thing to that list - and that is ROADS.

Roads matter greatly for economic growth. Growth occurs when every individual enterprise grows - and since each individual enterprise is engaged in "production" and "exchange," it follows that their produce must be physically transported from the place of production to the big centres of exchange - the markets. In India, perishable commodities like fish, fruit and vegetables are wasted in megatonnes because of poor roads. And all the other trades suffer as well.

Our horrible roads provide evidence of the fact that "pseudo-economists" dictate government spending policies here. Real economists have always emphasized the importance of roads. In the Wealth of Nations (1776), Adam Smith makes the comment that the new roads being built then were the "greatest improvement," for they enabled every remote village gain proximity to the mighty city. Carl Menger, in his lectures on Political Economy to Crown Prince Rudolf of Austria (1876), stresses the importance of roads in the very first lecture. He begins, like Adam Smith, with the "division of labour" - and then goes on to say that the better the roads, the greater the division of labour. Thus, if good roads exist between your remote patch of land and the mighty city, you might become a specialized orchard-owner. Without these roads, you will be stuck in "self-sufficiency," growing your own food and probably spinning your own yarn as well.

Then there is history. Sher Shah Suri was an Afghan warrior who took North India from Humayun, and he possessed no "economic advisors" - but it is he who built the Grand Trunk Road from Peshawar to Bengal, that is still the life-line of North India. There is the story of Akbar taking 5000 workmen personally to the Khyber Pass so as to built a road smooth enough to take wheeled vehicles. In Srinagar, Kashmir, I was told of the existence of an Old Moghul Road leading down to the plains - and that it now lies disused and abandoned. We also know that "all roads led to Rome" in very ancient times.

Ancient cites were inevitably crowded, with narrow lanes. People lived cheek-by-jowl because transport was primitive. You walked, or rode a horse, or, more likely, an ass. All old cities are like that, including the older parts of London. With modern transportation, we now have "suburbs" - and people live in space and comfort. If Indians want their overcrowded cities to become modern cities, and if they want to build new cities and towns, they will have to lay great stress on road-building. I am also a great fan of tramways. In London the Underground was built around 1905 - railways came before the car - and it is this that enabled Londoners to spread out. In India, the State is building underground railways in a few cities - but not building roads that car owners could use to spread out. They are also not allowing private entrepreneurs to build tramways that could serve all the smaller cities and towns. Calcutta's tramway was also built around 1905 - by a private company. In 1905, I am confident, there were no cars in Calcutta.

How do we build an excellent roads system in Indyeah? Well, I wrote a post on that some weeks ago.

To conclude: The "pseudo-economists" who dictate government spending policies in India, who have never invested in roads for 60 years, are utterly ignorant of both Economics as well as History. Their vision of India is Gandhian - "self-sufficient village economies." This means no division of labour, no specialization, no trade, no markets, no cities, and no civilization. It means permanent poverty for all villagers. It means ghastly overcrowding for all city-dwellers. This, in a huge country with super-abundant land. The "rural-urban divide" throughout India is because of these ignoramuses.

I hope my readers now see the colossal error we are making by entrusting this The State with "education." Once again, we must pin down the political philosopher who is really to blame - and it turns out to be the very same madman Jean-Jacques Rousseau. It was Rousseau who popularized the idea of mass education by The State. I remain firmly on the side of Frederic Bastiat, who despised Rousseau, and who wrote these telling lines:

If you want to have theories, systems, methods, principles, textbooks and teachers forced on you by the government, that is up to you; but do not expect me to sign, in your name, such a shameful abdication of your rights.

You don't need this "miseducation."

The Causes Of Economic Growth

There is an old Dylan song in which JFK asks the singer:

"My dear Bob, what does it take to make the country grow?"

And Dylan answers:

"My dear John - Brigitte Bardot, Anita Ekberg, Sophia Loren... country'll grow."

To an economist like me, Dylan answered well. There is NOTHING that a politician like JFK can do to "make a country grow." Economic growth does not occur because of governments - but despite them. Economic growth occurs when individual enterprises flourish, when Capital is accumulated and invested, when more goods and services are produced and consumed, when science becomes technology, and, thus, productivity increases, thereby raising wages, which further fuels consumption... and so on and on, in an endless virtuous cycle. None of these have anything whatsoever to do with The State.

Of course, the study of economic history suggests reasons why some areas have prospered more than others - as, for example, England during the so-called "industrial revolution." What the history suggests is that this was no sudden "revolution"; that it was gradual progress; and that the most important factors behind it were the laws - the laws that protected Property and Contract. It is these that led to the accumulation of Capital.

Two other contributory factors need to be mentioned. First and foremost - Liberty. In England, constitutional liberty dates back to the Magna Carta (1215 AD) in which a specific clause granted the City of London and all other boroughs the "freedom to trade by land and sea." The City of London is possessed of an even older institution, its free corporation with its Lord Mayor, which was established around 1185 AD. Tradition has it that the King of England cannot march his army through the City of London without the permission of the Lord Mayor. It is the Lord Mayor who upholds the Civic Sword within the City. It is these merchants, possessed of Liberty, who accumulated the Capital necessary to launch many global enterprises long before modern capitalism - like the Honourable East India Company, whose merchant ships sailed into Surat harbour around the year 1605. And there were other great companies as well - the Virginia Company, the Levant Company, the Muscovy Company, the Trader Adventures, and many more. I have an essay on this "One Square Mile of Liberty" in my latest book, which you can read here.

As far as modern times are concerned, the most important factor behind capitalism in England during the "industrial revolution", going on till about 1905, when both Queen Victoria and Gladstone were gone, was the enormous prestige that the ideas of the great classical liberal political economists commanded. Since government rests on public opinion, and since public opinion had been entirely won over on the side of what Adam Smith called the "System of Natural Liberty," all the numerous controls over economic activity that characterized the preceding era of "mercantilism" were speedily demolished. Liberty! Cobden and Bright led a working-class movement demanding free trade in the 1830s - and Bastiat in France was hugely inspired.

From about 1850, other ideas started dominating the public mind - like socialism and democracy. But these have not helped economies grow. These have only consumed Capital and stifled enterprise. Without these, the world would have seen far higher growth.

Max Weber's influential thesis that the Protestant work ethic is the reason behind modern capitalism does not stand in the face of the evidence. Modern capitalism in Hong Kong, for example, had nothing to do with Protestantism - and everything to do with Liberty and Property and Contract. Ditto for Singapore, or the various emirates of the Middle East. Capitalism is human nature - and has nothing to do with religion. It used to be said that India was poor because of the anti-materialist religions of the people - but today, it is quite clear that these religions present no obstacle to enterprise. Murray Rothbard's history of economic thought also details the huge advances made in capitalism, in pre-Protestant, Catholic times.

So here is the real secret: it is the Rule of Law. That is, when the rulers - the State or the King - are UNDER the law themselves, and when Property and Contract are protected, and Liberty Under Law prevails for all.

Liberty! Property! Contract! That is all it takes to make a country grow.

On Property... And Barbarianism

To a libertarian, Property is inviolable - that is, in our private conduct. The First Principle of the practising and believing libertarian is Non-Aggression. Thus, when someone's Property has been brutally violated by our political rulers, it gets me wild. Injustice!

We were at Margao today - and lunched at Lounguinho's, the old and quaint restaurant-cafe in the heart of town. The restaurant is not closed and air-conditioned; rather, it is wide open and breezy. Some years ago, we used to smoke there. But then, a crazy nut called Ramadoss became Health Minister in Nude Elly - and he forced through legislation banning smoking in restaurants. I had to carry my gin outside in order to smoke - and it was there that I met the owner. We discussed Property - that it is only he who has the power to make rules as to what cannot be done inside his establishment. The State cannot do that.

Makes you think of the "character" of people like Ramadoss who would bully their way into other people's Property. "Barbarian" is what I call them.

John Locke said:

Where there is no Property, there is no Justice.

So we now know why there is NO JUSTICE in India. Socialism. The unholy myth of "collective property." Barbarians let loose to trample upon the rights of all Individuals - in the name of the Collective.

The bad news is that we are not alone. There are many states that are doing the same thing. I have just finished reading William Dalrymple's From the Holy Mountain, in which he records his travels through Turkey, Syria, Lebanon, Israel and Egypt. If you are a libertarian who practices Non-Aggression, you will surely weep copious tears after each chapter. The book is a horror story. The root causes - nationalism and socialism. Politics, not markets. Guns. War. Not peaceful trade. Monoculturalism.

The story of Israel was particularly horrifying. They claim that Israel is the "only democracy in the Middle East." The story Dalrymple tells is proof of Hans-Hermann Hoppe's contention that democracy is incompatible with Property. The State of Israel is barbaric. Period. I once read a statement by an American Jew that said, "Hitler made us afraid of being Jews; Israel makes us ashamed of being Jews." And what is barbaric about the State of Israel is precisely what we are facing here all over India - the systematic violation of the Property of citizens. The State of Israel has made it its standing practice to take over other people's Property - and then build "settlements" on them for Jews. Frankly, I prefer the philosophy of "diaspora."

Then there is Lebanon - and its once glorious multi-cultural city, Beirut. Now bombed out. Christian militias fighting Muslim militias. Mafia wars everywhere. Communalism.

Are these examples of "religion"?

Throughout the book, Dalrymple follows the travels of a 6th century monk. He visits ancient monasteries everywhere. He talks of innumerable "saints" who inhabited these monasteries - many now gone because of monoculturalism and nationalism. That was the "Holy Land." Today, it is quite someplace else.

I was particularly horrified by the stark poverty of the people who live in Lebanon's Bekaa Valley. Dalrymple writes that they produce 10,000 tonnes of hashish every year. Whatever happened to Property?

Anyway, do read the book. It deserves to be widely read, for it is a very courageous piece of journalism. We read about these places only in brief news reports. A detailed travelogue through these territories tells us much more.

And think about these words: Non-Aggression, Property and Justice.

On Scarcity... And Abundance

I discussed some of the differences between the natural world of "biological competition" and the free market's "catallactic competition" in my post of yesterday. Today, I shall continue on the same theme, and discuss yet another important difference between the jungle and the urban catallaxy.

The world of nature, characterized by pitiless "biological competition" and the "survival of the fittest," is so because of the simple fact that all resources are strictly limited by nature itself. On the other hand, what characterizes Man in the market order is that he is a "producer." The market order is about "production" and "exchange" - and we are all producers first. Each participant in the market catallaxy produces a "surplus" above his needs - and all these surpluses are bought by the same people in their capacity as consumers. Thus, the resources available for consumption far exceed what niggardly nature would have produced. The best example is chicken.

Not very long ago, before the advent of modern poultry farming, chicken was a rare and special treat in Indian homes. Today, we have chicken coming out of our ears - it is abundant. This is not chicken supplied by Nature; rather, this is chicken we have "produced" through farming. In the jungle, we all would have to hunt chicken - to extinction. Now, because of the market, chicken will never become extinct. Farming is good for endangered species. Ostrich, crocodiles and even the tiger (in China) are surviving well because of farming.

Thus, whereas nature has been niggardly, and only the fittest survive there, the urban catallaxy has literally poured the fabled "horn of plenty" onto mankind. There is scarcity, of course, because of nature, and all "economic goods" are so because of natural scarcity, but what the market economy does is create conditions of abundance. The needs satisfied by modern markets far exceed what could be extracted from nature by primitive man. In all "developed" nations, agriculture is just a small fraction of the overall economy - and, it is noteworthy that we now have a "leisure industry" larger than the food industry. Tourism is the world's biggest industry.

Modern capitalism is "mass production for mass consumption." This is what has dramatically improved the conditions of the masses in the West - they succeeded as consumers. In the market system of "production" and "exchange" the production part is the "disutility." The real "utility" comes from the goods we purchase after selling what we have produced. Consumption is the goal of all our efforts. And it is here that we need modern Capitalism and unilaterall free trade. This is especially important for the masses and the workers - the social classes whose cause our socialists profess to champion.

Recommended readings:

1. Frederic Bastiat's essay "Scarcity and Abundance" available here. Bastiat shows how governments that support producers create scarcity; whereas if all economic policy favoured consumers, there would be abundance.

2. There is also a published debate between Julian Simon and the environmentalist Norman Myers titled Scarcity or Abundance? that is truly worth reading. Simon establishes the case that the planet Earth is a huge place, that all "natural resources" are abundant in the catallactic sense, and that the environmentalists' who spread fears of the earth "running out" of everything because of human "overpopulation" have got their facts wrong. Simon, of course, is the author of The Ultimate Resource, which first established the fact that the human mind is the most precious resource we have. It is this mind that seeks out and makes available all the "natural resources." You are a possessor of one such mind. Take good care of it.

The Free Market... And The Jungle

Yesterday's post briefly touched upon the differences between the natural order of the market economy - the "catallaxy" - and the other "order without design," that of nature, the jungle, the world that Darwin studied.

Yesterday, I touched upon just one difference - that species survive through camouflage in nature, while in the market economy human beings loudly advertise their wares; that there is no "predation" going on at all, and that each is trying in his best way to serve his customers, his fellowmen.

Today, let me point out two more important differences between the Darwinian natural world and the market order, a product of "human nature." These are important because there are many "social Darwinians" out there who do not see these vital differences.

Let's begin with the chief bogey of the Social Darwinians - and that is "competition." Now, Darwinian competition is biological competition. It is in this pitiless competition of the natural world that "only the fittest survive." Competition in the market economy is "social competition" - and it is its life blood. Everyone engaged in catallactic competition knows it is good for him. In this competition, we all survive, and not just the fittest. The bottle of finest Scotch will sell alongside a bottle of the worst plonk. The best musicians and actors will prosper - and the worst will also survive. The best books will sell - as well as the worst trash. The next time you go to market, do keep an eye out for all the second- and third-best products on sale - and you will get my drift.

It was Frederic Bastiat who understood well the nature of market competition, which the socialists of his age considered "anarchistic." Bastiat wrote:

Competition is Liberty - and the absence of Competition is tyranny.

In a free market, we are all free to realise our dreams through competition. Many rise to great heights of super-stardom. Yet, in an all-embracing socialist order - a tyranny - the only way to achieve such heights is by pleasing the socialist rulers.

That the Social Darwinians have got it completely wrong is also apparent when we consider one peculiar fact about those who survive pretty well in market competition - that many are, in fact, biologically the weakest. When man was still a nomadic herdsman, the blind or the lame were simply abandoned. With progress to civilisation and cities, and their markets, what we see today is that the vast majority of those humans who survive pretty well are precisely those who are physically weak. Obesity, blood pressure, heart disease - these are common among corporate managers. And there are the superstars like Stevie Wonder, blind from birth, but a multi-millionaire - because of the rise of the "music industry."

There is a reason for this. The "division of labour" based on the "fragmentation of knowledge" requires us to be possessed of just one specialised skill. It is because of this that there are blind musicians and so on. In the pitiless world of biological competition, the world Darwin studied, these people would have been wiped out.

So think of the urban catallaxy as a "garden of Eden."

It is not where only the fittest survive.

Rather, it is the beneficial order of Providence by which all survive.

Order Without Design... And Fatal Conceit

A chance conversation during our walkabout last evening led to some interesting philosophical insights - and I thought I ought to write about them. It all began with a kingfisher perched atop a post, and the discussion turned to how its brilliant blue feathers are hidden when it sits, and how this might be its means of camouflage and survival. The discussion then turned to Darwin and his theories of "evolution" and "natural selection." Darwin established that the order of the natural world we are witness to is an "order without design." The comings and goings of the species has proceeded without the services of any supreme designer of all the various species.

We hemmed and hawed about this idea of "order without design" when I turned the discussion towards the worldview of "classical liberals" - from Adam Smith to Frederic Bastiat to Carl Menger, right down to Friedrich Hayek - that they too saw the market economy as an example of natural order: an "order without design."

Take Adam Smith and the "invisible hand." He begins by saying that the individual entrepreneur "neither intends to promote the public interest, nor knows how much he is promoting it." He goes on to say that the individual entrepreneur "intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good."

Adam Smith was a bitter critic of all those who fancied themselves capable of "designing" the market order - and we can see from the following quote why our "central economic planners" do not like students of Economics to read Smith. These are his famous words on the "conceit" of such people:

The man of system... is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it.... He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse [sic] to impress upon it.

Frederic Bastiat wrote with awe about the "natural order" - which, to him, a devout Catholic, was a testament to the wisdom of God. The "invisible hand" of Smith became, to Bastiat, the hand of God. When Bastiat argues in favour of Liberty, he argues in favour of a world that Providence has ordained. The world of government controls and dirigisme was, to Bastiat, an "artificial order." His book Economic Harmonies is entirely devoted to showing how the natural order of Liberty is devoid of conflict, is harmonious.

Carl Menger, of course, put it best when he wrote - and this marks the beginning of a true "science of Economics," for here he is writing about method, about epistemology:

How can it be that institutions which serve the common welfare and are extremely significant for its development come into being without a ‘common will’ directed towards their establishment?

It was left to Hayek to develop these ideas to their fullest, especially in his last book Fatal Conceit: The Errors of Socialism. The opening chapter is titled "Between instinct and reason" - and, in this, Hayek makes the case that the natural order of human society, including markets, laws and morality, has "evolved" and is a part of our "culture." We have suppressed our instinct to snatch and grab, to plunder, and prefer to trade instead - but we have not reasoned why. We do not even know that the golden rule of our market order is Property. We therefore cannot see through the madness of communists and socialists - and I read just the other day that one more appeal has been filed with our Supreme Court on our non-existent right to Property. Between instinct and reason, indeed.

The word "conceit" is common to both Adam Smith and Hayek. It is a fitting word for all those "intellectuals" who believe that they know how to "design" something that is beyond the comprehension of any single mind, or group of minds. The market order utilises the knowledge of each one of us - it relies on the "fragmentation of knowledge." The conceited planner imagines himself to be a super-mind, capable of "centralising knowledge."

The idea of an "order without design" is a powerful one - and the idea of "central economic planning" is as ridiculous as considering the diversity of nature to be the product of "intelligent design." What reason informs us in all these matters is that there are limits to reason. There is much that reason cannot accomplish. Designing a market order - which is the ONLY "Social order" - is one of them. Its diversity is the product of human diversity. It is God's work. No mortal man should be allowed to tinker with it. Note that these mortals use another extremely evil term to designate their intentions, a term far more evil than "central economic planning" - and that term is "social engineering." Today, they call it "public policy" - and the "knowledge" contained in this "subject" should be treated with extreme suspicion.

Of course, the human market order is different from the Darwinian natural order in some very important ways, which we must carefully note. In the jungle, every species survives through camouflage; its survival depends on its ability to hide from predators. In the market order, there are no predators, and we all try to loudly advertise our wares. The market order is the truest human society - for in this, every man gains only by serving his customers better than his competitors. All entrepreneurs are driven by the desire to serve their fellowmen better. The flourishing of human society depends entirely on the universalisation of this natural, market order.

On Contracts

Perhaps the greatest mistake mankind has ever made is to believe that human society is in need of "lawmakers." We do not observe the "natural order" and see that we are all "rule-following animals"; that there are ancient laws working within society anyway - like Property, Contracts and Torts. I have written many posts on Property; and quite a few on Torts. Today, let me talk about Contracts.

I was prompted into this discussion because of this video of a Freedom Watch programme with Judge Andrew Napolitano, in which he interviews Jim Rogers. They discuss gold - and the US dollar. How gold is going up and up, while the US dollar is going down and down. Rogers refers to the Nobel laureate economist Paul Krugman as an "idiot" - because Krugman the Keynesian does not understand money. They discuss free trade - and Rogers makes some very pertinent remarks in its favour. After that, the Judge talks about the fact that the US Constitution authorises the government to make coins, not paper notes, and that the original legislation prescribes the death penalty for those who would debase the currency.

I also think Contract should be brought in here - for most paper notes are emblazoned with a "promise to pay." These notes are therefore contracts and the issuer is bound by "private law" to redeem his notes in real money. The notes are clearly "money substitutes."

So, forget about written constitutions, governments all around the world are violating Contract.

In which case, what do we have to say about Jean-Jacques Rousseau and his disastrous idea of a "social contract"? It was Rousseau who "placed the legislator far above mankind" - as Bastiat wrote. Do read Bastiat's The Law sometime - for it contains biting criticisms of Rousseau. What meaning does a "social contract" have when the simple currency note contract is being violated universally?

John Rae's Life of Adam Smith talks about Smith and Hume's encounters with Rousseau - and, in these, Rousseau emerges as quite a bounder. However, towards the end of the book, Rae mentions that Adam Smith once commented to a friend, pointing to Rousseau's Social Contract, that this book would have a tremendous impact some day. What is not clear is whether Adam Smith made this remark in a good sense or a bad sense: that is, whether he thought the book would have a beneficial impact or a disastrous one. Rae does not elaborate on the point.

Methinks it is quite likely that Adam Smith thought Rousseau's book would have a disastrous impact. After all, Smith lectured on Jurisprudence. He would have known that contracts are "private law" and not "public law." There can never be any "contract" - in the sense of a binding agreement - between a mass of people and their rulers or "representatives." To me, the very idea of a "social contract" is a great big piece of fiction. I would much rather prefer to live in a world wherein the actual Contract on the currency note is complied with.

Adam Smith was an admirer of Voltaire, not Rousseau. He met Voltaire many times in Geneva - and the two philosophers got along famously. I have written another post on Rousseau, Adam Smith and the republicanism of Geneva, the city Rousseau came from, here.

Feudalism? No, This Is "Roving Banditry"

Of all the Sunday columns, the one that caught my interest is this by Tavleen Singh, commenting on our democracy, titled "We live in neo-feudal times." Do read the comments too.

My fundamental objection is this: We err when we do not appreciate all that was good about feudalism - not only in Europe, but also here. Our rajas, maharajas and nawabs were certainly better than our current socialist democrats. It was the CONgress that convinced the nation, when taking over all the "princely states," that these were "feudal," and that the CONgress would be "modern." I have written a post contrasting these princely states to our modern democracy just the other day. Today, let me take the arguments further.

Tavleen Singh talks about all the "political parties" we have today - except the CONgress. This is unfortunate - and even biased - because it is the CONgress that set the trend, and this is a hereditary party. The question I would like to raise today is: What are all these "political parties" all about? In the good old days, political parties were differentiated by their political philosophies. There were fundamental philosophical differences between the Whigs and the Tories, for example. Today, we live in a world where, even in western democracies, there is very little that distinguishes one political party from another - as in the case of the Republicans and Democrats in the USSA. But what about our multitude of parties? Is there any fundamental philosophical difference between one and the other - or are they just "factions" vying for power? Many commentators write in favour of "multi-party democracy" - and we have just that. Yet, their rivalry is NOT "political" in the sense of philosophy. It really doesn't matter which party takes over, or which combination of them, for in the end, we get the same old shit.

So let us get back to feudalism. Mancur Olson wrote a very perceptive paper once, in which he contrasted "roving bandits" with "stationary bandits." Roving bandits were like Hagar the Horrible, conducting raids on other lands and scooting back with the loot. Stationary bandits were those who stayed back to rule - and taxed the people instead. Olson wrote that great good has come from stationary banditry - that they were "sheepdogs, not wolves." They were not "predatory." This is the essential difference between a Babur and a Nadir Shah. This is why Sher Shah Suri built the Grand Truck Road - so he could encourage trade, and thereby increase his revenue.

In our "modern" socialist, multi-party democracy, all we have are "factions" of roving bandits. Modern ideas are sometimes very wrong and dangerous. There is all-round predation - plus taxation. This is a rare form of tyranny, never equalled by even the worst forms of "Oriental despotism." And, we must never forget, there are no roads.

As for feudalism - it reached its highest form in the West, because it was there that the people stumbled upon the idea of the "Rule of Law." There, it was said that "there is no King where will rules and not the Law." It was said that "the King is under God and the Law." It was here that the "majesty" lay in the Law - and civilization flowered as never before. Even here, today, Legislation rules, and not Law. The law has become a laughing-stock, and has lost all its majesty. Everyone breaks the law every day - and I once bought some ganja on the streets of London, a short distance away from the headquarters of Scotland Yard. Rizla is headquartered in Great Britain.

We in India must realize that there is something seriously wrong with our modern, multi-party socialist democracy. We must think of another way - and all that can guide us is the Philosophy of Freedom. We must discover this philosophy - and learn that we can well manage without the State. This predatory centralized State. This State has destroyed our civilization, and is destroying our lives.

The Word

The illustration accompanying this post is that of an advertisement for LewRockwell.com. The logo stands for "Anarchy" and the lines at the bottom say "The State is the Problem / Anarcho-Capitalism is the Answer." Lew Rockwell is the Founder and President of The Ludwig von Mises Institute, which has for long been "advancing the scholarship of Liberty in the tradition of the Austrian School." The original Austrians - Menger, Mises and Hayek - called themselves "liberals" in the classical European sense. Hayek preferred to call himself a "Whig" - and that was the word Adam Smith applied to his own politics. How did this term "anarcho-capitalism" come about?

In America, the word "liberal" was corrupted. It was robbed by those who are essentially "socialist." Ludwig von Mises was quite horrified. In his preface to Human Action he takes pains to point out that he uses the term "liberal" as it was used in 19th century Europe. It was in America therefore that a new word had to be found by those who, like Mises, believed in laissez faire capitalism - and that new word was "libertarian." The word "anarcho-capitalist" was first used by Mises' greatest American student, Murray Rothbard, who was Dean of the Austrian School after Mises' death. Today, Hans-Hermann Hoppe, Rothbard's illustrious successor, calls himself "anarcho-capitalist."

In my own case, I have preferred to call myself "Austro-libertarian" - thereby differentiating myself from other libertarians like the Ayn Randians. My last book is titled Natural Order - and this is an expression classical liberals in Europe were quite fond of. Frederic Bastiat, for example, wrote favourably of the "natural order," contrasting it with the "artificial order" of State controls and dirigisme. Adam Smith himself championed the "System of Natural Liberty."

In my opinion, it is extremely important to stress that a "natural order" exists in human affairs - that Thomas Hobbes was very wrong. Men are NOT lawless - and the "state of nature" is NOT that of a "war of each against all." As Hayek wrote, Man is a "rule following animal." The basic rule of market exchanges is Property. We see our teeming hordes all following this golden rule in all our bazaars. Hayek wrote that this rule is the product of evolution and is part of our culture - that it is not the product of "reason." No "common will" pronounced this rule. Rather, it operates "between instinct and reason." I believe it is a fundamental aspect of our innate "sense of justice."

If I may add, I was prompted to pen the opening essay outlining the features of the "natural order" after reading, many times over, Hans-Hermann Hoppe's mind-blowing Democracy: The God that Failed a few years ago. The sub-title of this great book reads "The Politics and Economics of Monarchy, Democracy and Natural Order." However, what is conspicuously missing from this book is a description of what "natural order" is all about. I therefore decided to fill in the gap. Ever since then, my e-mail ID has been "naturalorder."

However, in America, libertarians seem to prefer the word "anarchy." There is this excellent article by Robert Higgs of the Independent Institute I read yesterday - and he too prefers to use this word. The article is an important contribution to our understanding of whether a State is necessary - for when I say "natural order" the cynic will immediately reply that "men are not angels." Higgs effectively blows this objection aside and argues thus:

A stateless society will sometimes be bad. Not only are people not angels, but many of them are irredeemably vicious. The outcome in a society under a state will be much worse, because the most vicious people will tend to gain control of the state.

I strongly recommend that you read this article - and think. Yet, as I said, Higgs prefers the word "anarchy" - although he notes that the dictionary gives three different meanings to it, including "chaos and confusion." It worries me - to use this word "anarchy" - since most people do not understand the "natural order" at all. In politics, we must convince, and words are all we have. They are labels with meaning. If most people possess a different meaning to a political word than the one intended, we are lost.

If "anarchy" is problematic - and it is - what word can replace it? Over the last few years, I finally decided on the exact word I personally want to use - and that word is "catallaxy." Ludwig von Mises was very fond of this word, and the entire section of Human Action that discusses what most people would call "Economics" is titled "Catallactics." Mises says that this word was in vogue in the 19th century too - and was first used by Archbishop Whately, who was a prominent political economist of his day, apart from being a theologian. The word is derived from the Greek word for "exchange" - and it is Hayek who researched its meaning and discovered that among the ancient Greeks this word possessed two additional meanings - first, "to welcome into the community"; and second, "to turn from enemy into friend." These additional meanings convey something about market exchanges that is extremely important in our troubled times.

The scourge of the modern world has not only been the hideous philosophy of collectivism, but also its natural corollary - something indispensable to statolatry - and that is "nationalism." The Nazis, of course, were "national socialists" - but narrow nationalism, powered by the dubious (and collectivist) idea of "community" - has torn our world apart. Protectionism and wars have been the natural outcome of the philosophy of "national economy." And we still live with these disastrous ideas.

The word "catallaxy" - and especially Hayek's discovery of the other meanings to this word - suggests something other than narrow "community." After all, the urban market economy is individualistic. Further, the most important "social" advantage provided by the urban, cosmopolitan market is that it provides a means of gainfully interacting with complete strangers - and the more strangers the merrier. This word therefore conveys a very powerful meaning - and suggests a rational, natural order in which all individuals can peacefully survive, and human civilization can progress without the "narrow domestic walls" of the closed community. I wrote a column on this word some months ago, and it concludes thus:

Thus, there is a “natural order” in all cosmopolitan open catallaxies. Posses of armed policemen are not required to “maintain order” in any crowded marketplace anywhere in the world. This order exists on its own. Without the “narrow domestic walls” of community, the idea of catallaxy solves the social problem for all individuals, while also uniting humanity in a rational, natural order.

To conclude: I am currently halfway through William Dalrymple's fascinating travels through the territories of ancient Byzantium, From the Holy Mountain. About the capital city, which is now Instanbul, Dalrymple notes that 72 languages were spoken in its bazaars in ancient times. Today, thanks to "national socialism," every minority has been chucked out, millions massacred and widespread tyranny rules. Dalrymple notes that this is where Christianity was born - and then taken to the West. He visits communities where Aramaic, the language of Jesus, is still spoken, where worship is still conducted as in those early days, where the most ancient hymns are still sung. He further writes about shrines where the common folk of today, both Muslim as well as Christian, continue to worship together. Yet, he also portrays a civilization that might just disappear - to be replaced by the uniformity of "community" imposed by the guns of "nationalists." This is what happened to India during the Partition. This is precisely the direction in which the "cultural nationalists" of the Hindutva type are leading our nation today. In the meantime, the USSA is spurring Islamophobia. War and civilization cannot go together. For the furtherance of civilization, cities, and markets, I do believe the word "catallaxy" is best.

Look Who's Unstable

The government of India has set up a Population Stabilisation Fund. I got the news from this article by Naveen Jindal, a young CONgress MP who seems stuck in old, misconceived ideas. In this article, Jindal suggests that the government should sterilise 1,00,000 poor couples every year. He seems to think that if this is done, and the population is "stable" - in the sense that births and deaths cancel each other out and there is no growth in human numbers - some great "good" will be achieved. He wants India's human population to be "manageable."

However, I wonder exactly what resource India is running out of that such a drastic course of action - and such public expenditure - is deemed necessary.

Is India running out of food? Or are our granaries overfull?

Is India - a vast country - running out of land?

In truth, we are wasting foodgrain - because of State mismanagement. Indeed, we ought to call this "criminal mismanagement."

What about land? - for in India, our The State is the biggest landlord. All "unowned" land is by default State Property. How is our The State "managing" its own landholdings?

I have been living in the Western Ghats for over six years now - and there is so much vacant space here that I do think it is criminal the way in which the cities and towns in this region are so "overcrowded." This overcrowding has nothing to do with "overpopulation," in the sense of a "shortage of land." Urban overcrowding, throughout India, has to do with "mismanagement" by our The State: they have not built roads into the surrounds so that satellite towns and suburbs can grow. Roads are a State Monopoly.

In the Western Ghats, there is abundant free space. Abundant. Even super-abundant. If you fly Mumbai-Goa, you will see hundreds of virgin beaches. If you drive anywhere in the area, you will pass through miles and miles of virgin forests. But Mumbai, Panjim, Margao, Mangalore - all are "overcrowded." Urban land is therefore unaffordable to the poor - and Jindal suggests we sterilise them! He calls it "management." The government he belongs to calls it "stabilisation."

Interesting report in the ToI today on the Western Ghats - that this government has just issued 49 leases for iron ore and bauxite mining; that too, in a declared "eco-tourism district"! They cannot manage the cities - this we well know - and they cannot manage the jungles either. They want to "manage" the population!

Stabilisation!

This word, "stabilisation," is also being used by the finance ministry and the central bank nowadays - especially because of runaway inflation. They found one way of stabilisation alright - they simply changed the price index! But why are we suffering from such high inflation? Only because they are "managing" the currency. Inflation is a purely monetary phenomenon. It occurs because they are issuing too much currency and creating too much credit - "mismanagement." The only cure is private money - gold and silver - which no government can create out of thin air.

In the same vein, population must be a "private" matter - and couples must "manage" their own fertility.

Government land must also be privatised - so that ordinary people can "homestead" it, thereby creating Property, instead of our The State digging out red mud for exportation.

Stabilisation?

It seems fairly plain to me that what is really "unstable" in this country are the mental faculties of our rulers. They are, technically, "mentally unstable." They don't know how to think.

And, of course, they want to teach!

And you, the sheeple, let them. You willingly pay the "education tax." A recent editorial in the ToI is titled "Release the Stranglehold" - referring to the control these mentally unstable people have over "higher education."

Professor Roger Waters needs to tour the country again.

And as for Naveen Jindal - he's "just another Prick in The House."

So here are some new lines for my song:

The boys sing -

Hey! MP!
Leave our balls alone!

And the girls cry -

Hey! MP!
Leave our eggs alone!

And all the boys and all the girls sing together -

All in all, you're just another,
Prick in The House.

To conclude, here is a quote:

I never could believe that Providence had sent a few men into the world, ready booted and spurred to ride, and millions ready saddled and bridled to be ridden. : Richard Rumbold

Recommended readings: My old essay, titled "Population Causes Prosperity." Read it online here. Another brief essay of mine I recommend is "Bungalows for All: A Critical Assessment of India's Human Habitat," available online here.

On Sociology - As An "Abuse Of Reason"

Today is Margaret Thatcher's 85th birthday. As Prime Minister of Great Britain, she famously declared: "There is no such thing called society." This post is written in full support of her view.

If you visit Delhi University, you might notice that right opposite the Delhi School of Economics stands the Delhi School of Sociology. From the former emerged Amartya Sen and Manmohan Singh - both calling for State "education" for the sheeple. And, from the latter, comes Jean Dreze, Professor Emeritus, great champion of NREGA ditch-digging, "right to food" and other statist schemes. Indeed, Dreze has co-authored many books with Amartya Sen; they are bosom buddies. I have just discussed the "corruption in Economic Science" (in two parts, here and here). Today, let me say something about Sociology.

Jean Dreze is French - and Sociology originated in France. The man who invented this subject is August Comte, considered by many to be a "madman." Comte was a student of Henri de Saint-Simon (1760-1825), one of the world's first "socialists" - and his great idea was to vest all Property in the State, and have the State directed by industrial chiefs and "men of science." As to what exactly was the "science of society" Saint-Simon had no real answer. This was what August Comte (1798-1857) served up to humanity. Comte called his science "positivism" - and, with this epistemological principle, Sociology was born. The central tenet of positivism is that human behaviour is objectively measurable. Thus Emile Durkheim, another French sociologist, studied suicide by examining statistical suicide rates! So, the idea was that society would be subjected to measurement, and these sociologists / social scientists would then run the whole of society in a scientific manner.

Quite naturally, a science that offered so much power to those who mastered it spread rapidly. In Vienna a school of "logical positivism" emerged - and they were enemies of the Austrian School economists like Mises, also in Vienna at the time. But positivism entered Economics too - and no less an economist than Milton Friedman has upheld positivism as THE method of Economics. Positivism entered Law - and stood opposed to all those who believed in "natural law." Positivism entered Psychology, through "psychometrics" - and also in the works of "behaviourists" like John B Watson and BF Skinner, who, like Comte, thought they had found ways of controlling society and even re-making it. Megalomaniacs, all.

But what is "society"? And how is society to be studied and understood? Here again, it was the great Carl Menger (1840-1921) who provided the answer, and thereby lit the path for all his worthy followers. After his path-breaking Principles of Economics (1871), Menger wrote just one more book - and this time it was on the Methodology of the Social Sciences (1883). The key question Menger put forward was this:

How can it be that institutions which serve the common welfare and are extremely significant for its development come into being without a ‘common will’ directed towards their establishment?

It is this question that establishes the central difference between all the positivists and the Austrian School economists. To positivists, society is inert and what matters are the commands given to it. Social scientists measure society and come up with the "correct" commands. Central economic planners do this - with all their data. Sociologists do this - after Comte and Durkheim. And so do lawyers who view law in the positivist light - as "commands of the sovereign." Note that Professor Jean Dreze of the Delhi School of Sociology is relying on Professor Suresh Tendulkar of the Delhi School of Economics to correctly "measure" poverty. Bah!

What Menger and his followers - true scientists, all - established is that society produces a lot on its own, because of the workings of INDIVIDUALS. Language, money, markets, and even law have emerged from within society, without any "common will" directing things, without any commands from on high. The real mystery we must investigate is how this happens. How do the individuals who make up society "act"? I have written a newspaper column describing some of these issues, here.

To truly understand the "madness" of Saint-Simon and August Comte, I suggest a slim book by Friedrich Hayek called The Counter-Revolution of Science: Studies on the Abuse of Reason. It is perhaps Hayek's greatest contribution to the history of ideas. The title is dramatic - and apt. What positivists parade as "science" is nothing but the "abuse of reason." It is extremely dangerous. And our universities are full of it.

Another recommended read: My brief article on why the political value of "community" is unsuitable to a market society, which is individualistic. This article takes the Hayekian argument one step forward.

The Corruption of Economic Science - Part 2

In continuation of yesterday's post, I would like to add the following.

Let me begin with the opening paragraph of the Royal Swedish Academy of Sciences' "Information for the public" document on this year's Nobel Prize in Economic Science. That is, the opening paragraph of the section "The theory takes shape," wherein the achievements of this year's awardees is described. The Academy says:

In the 1960s, researchers had already begun to use mathematical models to study the best possible way in which a buyer can try to find an acceptable price. In a renowned article from 1971, Peter Diamond examined how prices are formed on a market where buyers look for the best possible price and sellers simultaneously set their best price while taking buyers’ search behavior into account. Even small search costs turned out to generate a radically different outcome compared to the classical competitive equilibrium. In fact, equilibrium prices are equal to the price which a monopolist would have set on a corresponding market without search costs. This result attracted considerable attention and initiated intensive research on search markets.

The notion of "equilibrium" is entirely foreign to Austrian Economics. Equilibrium is a concept borrowed from Physics by mathematical economists of the Lausanne School - and its most horrible result has been the utterly fantastic idea, one that has no bearing whatsoever with reality, of "general equilibrium." Combined with the equally fantastic notion of "perfect competition," these absurd ideas have been used to berate real markets for falling below the "standards" set by these mathematicians / pseudo-economists. Their ideological father is Leon Walras, credited with the discovery of the "marginal revolution" in 1871, along with Carl Menger of Vienna, who founded the Austrian School. Yet, Walras' ideas were totally different from Menger's, who shunned mathematics and inaugurated a true science that is realistic, subjective, individualistic and entirely logical. It was Ludwig von Mises who, in the twentieth century, developed on Menger's initial ideas and built the towering edifice of Austrian Economics that stands proud and tall today.

To the Austrians, markets are ALWAYS in disequilibrium. There is a TENDENCY towards equilibrium, but this is always disturbed by the emergence of fresh data. The idea of an "evenly rotating economy" is just a mental construct, used in an extremely limited fashion, in order to understand real life markets better. In real life, there is never any equilibrium. The "evenly rotating economy" never happens. Thus, the "science" of the Austrian School is vastly different from that which the Royal Swedish Academy of Sciences is referring to.

Of course, in order to understand the complexities of the real world, Man has always looked out for "regularities." Without regularities, all would be chaos and confusion, nothing would be understandable and predictable, and Man would be utterly clueless. The earliest regularities observed and recorded had to do with the appearance of day and night, the moon and the stars, the tides - and these led to the emergence of almanacs and calendars. But the Science of Economics presented Man with grave difficulties, because NO regularities could be observed. This absence of regularity is only because of the absence of "equilibrium" - for all prices and quantities are always in a flux.

However, the Austrians did discover regularity, of course, but not "out there." Rather, the regularities they discovered were all "in there" - inside the mind of the "acting Man," the individual, in the "logical construct of the human mind," something he shared with all his fellow men. The Austrians, thanks to their individualistic and subjectivistic methodology, their proud inheritance from Carl Menger, discovered "laws of thought" - and since humans act according to these laws of thought, their Science of Economics predicts with "apodictic certainty."

For example, the concepts of Capital and Income are "mental categories" - present in the mind of even the most primitive of herdsmen, who carefully count their sheep and cattle to ensure that they are not "consuming capital." I have another post here on how the Laws of Demand and Supply are "laws of thought," mistaught today by the mainstream.

Indeed, to the Austrians, all phenomena must be traced back to the mind of the acting individual. Menger's Principles of Economics (1871) thus traces back money to the mind of the thinking and trading man. Money is NOT a creature of The State.

Let me now quote for my readers the opening paragraph of Ludwig von Mises' Human Action: A Treatise on Economics, pdf here.

Economics is the youngest of all sciences. In the last two hundred years, it is true, many new sciences have emerged from the disciplines familiar to the ancient Greeks. However, what happened here was merely that parts of knowledge which had already found their place in the complex of the old system of learning now became autonomous. The field of study was more nicely subdivided and treated with new methods; hitherto unnoticed provinces were discovered in it, and people began to see things from aspects different from those of their precursors. The field itself was not expanded. But economics opened to human science a domain previously inaccessible and never thought of. The discovery of a regularity in the sequence and interdependence of market phenomena went beyond the limits of the traditional system of learning. It conveyed knowledge which could be regarded neither as logic, mathematics, psychology, physics, nor biology.

Yes, Economics is an extremely young science - and it really begins with Carl Menger's Principles in 1871, barely 140 years ago. Menger's followers alone have built upon his achievements, against huge odds, complete neglect, and total disregard. This, indeed, is the story of Mises' life. It has been reported that, towards the end, Mises was so utterly despondent and pessimistic that he told a friend: "Perhaps, a thousand years from now, they will discover my writings like the Dead Sea Scrolls."

Allow me now to quote the last paragraph of Human Action. Mises concludes his magnum opus with these ringing words:

The body of economic knowledge is an essential element in the structure of human civilization; it is the foundation upon which modern industrialism and all the moral, intellectual, technological, and therapeutical achievements of the last centuries have been built. It rests with men whether they will make the proper use of the rich treasure with which this knowledge provides them or whether they will leave it unused. But if they fail to take the best advantage of it and disregard its teachings and warnings, they will not annul economics; they will stamp out society and the human race.

I therefore advise all my readers to ignore and disregard the sort of thinking - if it can be called that - being promoted by the Royal Swedish Academy of Sciences. I suggest you carefully study Human Action.