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.