Crisis In Mainstream Economics - And The Austrians

I was extremely happy to read this article from the Wall Street Journal that discusses, in some depth, the crisis in mainstream Economics that has occurred because of the ongoing crash. At the outset, the nature of this academic crisis - a theoretical / philosophical crisis - is described in these words:

For decades, most economists, including the world's most powerful central bankers, have supposed that people are rational enough, and the working of markets smooth enough, that the whole economy can be reduced to a handful of equations. They assemble the equations into mathematical models that attempt to mimic the behavior of the economy. From Washington to Frankfurt to Tokyo, the models inform crucial decisions about everything from the right level of interest rates to how to regulate banks.

In the wake of a financial crisis and punishing recession that the models failed to capture, a growing number of economists are beginning to question the intellectual foundations on which the models are built.

Unfortunately, the "new ideas" that are discussed are essentially the same old stuff and nonsense, only this time being paraded around using supercomputers. This is one of the new ideas presented:

Create a richly complex, computer-based simulation of the economy like those scientists use to model weather patterns, epidemics and traffic. Given enough computing power, such "agent-based" models can include millions of individual players, who don't have to be rational or agree with one another.

So, if you are a student and enter mainstream Economics, this is the direction in which you will head. It seems "scientific" - but is actually an intellectual cul-de-sac.

The WSJ article above says that a great deal of financial support to those economists who develop "new ways to model the economy" is coming from the Institute for New Economic Thinking, funded by the billionaire George Soros. Fifty million dollars has been donated to this institute by Soros, and they have already funded 27 "new models" that are being developed.

But, is this "new thinking"? And do we really need new thinking at all?

For the student of Economics looking for real, valid knowledge, the only other way to look at things, other than this mainstream modeling approach, is the "tradition" of the Austrian School. The word "tradition" needs to be stressed - because this is most definitely not "new thinking." The unique approach to this vital science that has characterised this school of thought begins with Carl Menger (1871). In the last century, these ideas were fully developed by Ludwig von Mises - and, following him, by his two most illustrious students: the Nobel laureate Friedrich Hayek, who attended his Vienna seminars; and Murray Rothbard, who attended his seminars in New York. The Mises Institute (website here) is the best place to visit if you wish to study Austrian Economics.

The most important difference between Austrian Economics and the mainstream "modeling" approach is that the Austrians reject mathematics entirely. Their Economics is "logical." Its basic element is the "acting individual" - and not the collective. Indeed, what Austrian Economics proves beyond doubt is that nothing about The Market Economy can be quantitatively predicted, and that no government intervention with its working can be "rational." Just as central economic planning fails, so does Keynesian central banking. So, indeed, does centralised legislation - which is the democratic way by which the modern State intervenes in markets. If you acquire knowledge in Austrian Economics, you will inevitably proceed into other areas - including history, political philosophy, and law. You will gradually develop an integrated world view. You will be possessed of a "social philosophy."

Recommended read: My earlier post discussing Austrian methodology - thereby showing why the standard demand-and-supply diagram of the mainstream is a wrong way to teach the subject.

Predatory State Writ Large

The central government's ministry of environment has given its clearance for the setting up of a nuclear power plant in Jaitapur, Maharashtra, on the Konkan Coast. This is an ecologically sensitive area, with fragile bio-diversity. Jaitapur is close to Ratnagiri, where the world-famous Alfonso mangoes come from. A nuclear accident here would be an unmitigated disaster - affecting even Goa, which lies a little south. It is also a fact that Parliament has passed legislation to the effect that, in case of nuclear accidents, liabilities will be "limited." So, if Ratnagiri mangoes and Goan tourism are wiped out, no one will bear responsibility.

But is a nuclear accident possible?

First: If such an accident was impossible, why would Parliament be so keen to pass legislation limiting liability - and why would the suppliers of equipment insist on such legislation? Indeed, such legislation provides them with the incentive to supply sub-standard equipment.

Second: The news report on the environmental clearance for the Jaitapur nuclear power plant contains this chilling sentence:

Jairam Ramesh, central environment minister, "pointed out that his ministry has no jurisdiction over radiology emission — a major concern among locals and environmentalists."

I also found this statement nonsensical:

"We need to change our fuel mix as 35 per cent of our carbon dioxide emissions come from electricity,” said Ramesh.

According to me, what we in India need to do urgently is change our electricity supplier - from The State to private businessmen. Let these private businessmen decide on the fuel. And let there be full liabilities in case of accidents - thereby giving them the incentive to take full precautions.

When I was in Mangalore many years ago, I was pleased to find that a barge-mounted power plant had come up on the sea, built and operated by a private company, using naptha (or was it gas?) as fuel. This is the way to proceed - especially in this ecologically sensitive Konkan Coast. If barge-mounted power plants become the norm, there would be no need for what the Maharashtra government has just announced: that "a group of ministers was working on the compensation package for the 2,335 farmers who are expected to be affected by the project." 2,335 farmers means more than 10,000 individuals if we include their families - and many thousands of hectares of precious land. This is, once again, a violation of Property.

The news on television mentioned that this nuclear power plant was being hurriedly cleared with an eye on President Sarkozy's visit to India - as this plant is to be built by the French company Areva.

This is a very big black mark on the CONgress-led government of Chacha Manmohan. His emphasis on nuclear power plants operated by The State is flagrantly anti-people - and anti-business as well. It is also anti-growth - because chronic power shortages are crippling economic activity throughout this vast sub-continent. Privatisation of power ought to have been top priority.

I found another black mark against Chacha's government this morning, in this editorial in Mint, which comments on his management of State finances. I quote:

The second supplementary demand for grants, tabled in Parliament in this session, when combined with the first one, pushes up the government’s spending plans by Rs74,400 crore, close to 1.1% of GDP, roughly 7% higher than the original budget. Much of this expenditure is on account of food and fertilizer subsidies, oil under-recoveries, defence and internal security expenditures. This spending will practically wipe out all the surplus revenue garnered from the 3G spectrum auction. In effect, recurring expenses have been met by the sale of a one-off item. There are plans to fund future expenditures of this kind by selling the government’s stake in public sector undertakings.

As the italicised portion in the quote above shows, our The State is WASTING the money it has received from the 3G auction - and it is this that should be considered a scandal. The huge amounts 3G operators have had to pay for spectrum is affecting consumers, who have to pay more for 3G services: lose-lose. Further, the manner in which 3G revenue has been wasted indicates that the "corruption" in 2G spectrum allocation was a "good thing" - for private businessmen saved money that The State would have wasted anyway. This ToI blog post by Rajeev Mantri echoes my sentiments.

Whereas Chacha Manmohan's record in misgovernment speaks loudly for itself, I found Ratan Tata's endorsement of his premiership most surprising. In this long interview, one that was broadcast on TV yesterday, here is what the chairman of the Tata Group said of Manmohan:

...he [Manmohan Singh] is a tremendously good man, we’re very lucky to have a prime minister like him.… he is one person who is truly above the allegations that have been thrown at him, a person who we are very lucky to have because it is his face that has been the face of a transforming India. And it is this person who has commanded the respect of leaders in major countries.

Let us now turn our attention to how poor people and very small entrepreneurs view our The State. Niranjan Rajadhyaksha, editor of Mint, has written a brief column on this today, from which I quote below:

The poor live with corruption as a fact of life. Almost every transaction they have with the Indian state involves payment of a bribe. The Indian chapter of Transparency International published a study in 2008 on corruption faced by below poverty line (BPL) households across the country. Eleven government services were rated according to the prevalence of corruption. Transparency International points out that the highest corruption is in need-based services that are monopolies (police) or involve asset creation (land records or housing).

Rajadhyaksha calls for police reforms and computerisation of land records. I would have preferred the words Liberty and Property. That is - not "police reform" but "constitutional reform."

Thus, to me, there is no doubt about it. Ours is indeed a Predatory State. Even the ministry of environment is a predator. If "environmental clearances" have to be given, these should come from local institutions - and not the central State.

To poor people, the police and the land administration are predators.

We Indians must think of another way - Liberty, Property, Localism, Catallaxies.

The "Education" Of Prince William

I watched a programme on BBC TV last night on the next "royal wedding" - between Prince William and Kate Middleton, who studied together in St. Andrew's, Scotland. Much of the programme was devoted to the education and training that the young prince had undergone in order to be fit to perform his future duties.

First: At St. Andrew's, Prince William studied "Art History." Later, he also studied Geography.

Second: The prince received military training. There was a clip of his "passing out parade" at Sandhurst. Of course, he also served briefly in Afghanistan.

Third: The prince was attached to an "international charity" for a while. This took him to Chile, where he spent a few months in a camp, with onerous duties. There was clip of him cleaning toilets!

Let us look into the relevance of all three above:

First: To my mind, neither Art History nor Geography are relevant "knowledge" for a future monarch. What is most essential, however, is that such a prince receive sound grounding in "political economy" - and, thereby, be possessed of a guiding political philosophy. In this context, I think the then Emperor and Empress of Austria-Hungary did extremely well by placing the young Crown Prince Rudolf under the tutelage of Carl Menger, and it is goes further to their credit that Menger was selected as teacher because of his strong "classical liberal" leanings. Rudolf's notes from these lectures (1876) are now available in print, with an English translation, from Edward Elgar - and I hope someone in Britain will recommend them to the young Prince William. This blog contains quite a few posts on these lectures, which you can find by clicking on the label "Carl Menger" on the right-hand bar.

Second: It is a matter of historical record that the last British monarch to lead his troops into battle was George II, in 1743, at the Battle of Dettingen. During the battle, George II's horse "ran off with him." The battle was won, fortuitously. On the other hand, it is also highly instructive that Carl Menger's lectures on political economy to Prince Rudolf followed Adam Smith - but with a crucial difference. In Adam Smith's "three duties of the sovereign," the first duty had been "the duty of protecting the society from violence and invasion of other independent societies." Since Austria had already suffered enough wars, Menger decided to OMIT teaching the prince this duty - and only taught the other two! The lectures emphasise the importance of the "international division of labour" - and how this requires international peace.

Third: The Third World can never "develop" through either "foreign aid" or the work of "international charities." Prince William went to Chile - where what has actually worked miracles is the Free Market. On the problems and prospects of the Third World, Prince William should read Peter, Lord Bauer - whose mantra remained: property rights, free trade and sound money.

Let me conclude with some words on the soundness of the British pound:

The Bank of England was established in 1694, shortly after the "Glorious Revolution," with a monopoly on the issue of banknotes in England and Wales, with the specific purpose of financing the government's war effort. However, from 1797 - 1821, it was unable to redeem its notes in gold - and, by then, the "National Debt" had also grown. Peel's Banking Act of 1844 attempted to set things right - but failed. The Bank of England is the world's "model" central bank - with clones everywhere. Today, it is engaged in "quantitative easing."

Interestingly, Carl Menger's lectures to Crown Prince Rudolf include two lectures on money - the first on coinage, in which the lesson imparted is that gold coins constitute true money; and the second on paper banknotes, in which the lesson imparted is that the future prosperity of Austria-Hungary depend on making these banknotes redeemable in gold on demand. At the time of the lectures, 1876, because of repeated wars, redemption had been suspended. This, as Menger painstakingly explained, was a very bad thing.

In India, you can buy the book containing Menger's lectures to Rudolf here.

It is an ancient tradition of the City of London that the Worshipful Company of Goldsmiths conducts an annual ritual in which they engage in the "testing of the coinage." Today, this annual ceremony is still held - but the Lord Mayor no longer attends.

Corruption, Tyranny - And False Hope

Yet another corruption scandal has broken - and public sector bankers have been found to have lent vast sums of money to real estate companies by bending rules. But this is nothing new. Public sector banks have been looted by State personnel for decades - and, when the banks have gone belly-up, the same State has stepped in to pump in public money.

Further, with central banking, fiat paper money and fractional reserves, which results in "credit creation out of thin air," modern banking, irrespective of the nature of ownership, is steeped in fraud. The only solution is private money - and free banking under Law: that is, money and banking governed by Property and Contract. However, just for a laugh, you might enjoy reading what Kaushik Basu, chief economic advisor to the government of India, said when asked for his reactions to this banking scandal.

Yet, I can take all this corruption without getting too perturbed. After all, corruption exists because the system is designed wrong. Indeed, the system is designed for corruption. If we design things right - as with private money - corruption will cease.

What really gets my blood boiling is reports of tyranny by the personnel of this corrupt State. Here is a report of bulldozers backed by police and municipal functionaries "razing to the ground" some of Mumbai's "dance bars." This is the destruction of Property. This is the destruction of Liberty.

Once again, we must see that the only solution is the inviolability of Property. Only if this Principle is inserted into our Constitution can Liberty prevail - for all. My sympathies lie entirely with the dancing ladies. Today, as the report above says, the police insist that these dance bars are "illegal." Tomorrow, if Property is made inviolable, then such actions by the police will become "illegal" - and that is the direction in which we must proceed.

While this blog has been consistently championing Property and Liberty - and urban self-government - the mainstream media seems stuck in the status quo. In yesterday's post, I discussed an Indian Express editorial supporting Manmohan. Today, there is an editorial in the Times of India that talks about the BJP's victory in Bihar - and concludes, therefore, that this party can be an "acceptable and credible alternative to the Congress."

In reality, 58 out of the 91 BJP MLAs in the Bihar Assembly have serious criminal charges against them. In Karnataka, the BJP chief minister is mired in corruption. And in Gujarat, their poster boy, Narendra Modi, is not exactly "my cup of tea" - and that is putting it mildly. If the CONgress is bad; the BJP is worse - according to me, because they mix Hindoo chauvinism with their politics.

Thus, just as the editors of the Indian Express displayed a "false hope" in Manmohan Singh, the editors of the ToI have placed false hope in the BJP. In stark reality, there is now no political party capable of governing this vast nation. None of them have the right kind of personnel - and that is simply because none of them have the right kind of ideology.

Majority Of Criminals Win Bihar Elections

I just read this report on Rediff.com that says, in the recently concluded elections to the Bihar assembly, 141 MLAs (out of the 241 elected) have criminal cases pending against them, and that these are to be found in all the political parties. How can such a State provide "security" to the people? How can such a State be granted Police powers?

We need the right to keep and bear arms!

As usual, the media looks only at the "clean" man on the top - and ignores the rest. This is precisely what they are doing in the case of Manmohan.

The Market - and not The State: That is the only solution.

Property, Liberty, Catallaxy.

If you haven't read it already, I recommend my last post, on "The media, Bihar and Manmohan."

The Media, Bihar, And Manmohan

Given that we Indians now have good reason to doubt the objectivity of opinions expressed by our media bigwigs, should the widespread euphoria over the results of the Bihar elections be treated with caution? I will make the case that it should.

There is also a lead editorial in the Indian Express arguing in a most convoluted way that Chacha Manmohan, whose government is now riddled with corruption scandals, is our only hope for the future. I will rebut this, too. But first, Bihar:

Opinions in the newspapers and television suggest that Bihar has finally "arrived," and that these elections prove "development" is the top issue for its caste-ridden electorate. But how is this development to be achieved? Is development something that occurs because of politicians, bureaucrats and governments - as we have been attempting for 60 years? Or is development entirely dependent on markets?

Peter Bauer, the great development economist who dissented with the mainstream throughout his long career, put it well when he wrote:

Poverty indicates just one thing - the absence of economic achievement.

He then went on to add:

Economic achievements are made in markets.

I have never heard the re-elected chief minister of Bihar utter the word "market" - ever. His election campaign promised sadak, shiksha aur suraksha (roads, education and security). The realisation that roads matter is belated - but welcome, nevertheless. The idea that State education is beneficial is wrong: this "miseducation" needs to be abolished. Further, under this chief minister, the government of Bihar has been giving away free bicycles to schoolkids. Since this government is heavily in the red, as I just wrote, such giveaways will reduce their ability to build roads. And as for security, which emphasises the role of the State Police, I would much prefer a stress on Property - especially because there are no land records in Bihar. With Property comes Liberty - and Markets. It is these ideas that are missing from the agenda today - nationwide.

Thus, in my opinion, this euphoria is misplaced. Bihar is a huge state, with a vast, poor population comprising numberless dilapidated cities and towns - run by an apathetic, mistrained administration who have their heads buried in "rural development," "panchayati raj" and, of course, the NREGA "work" that comes from Delhi. We must be realistic about what we can expect from our socialist politicians - and from the governments they run.

Let us now turn to Chacha Manmohan S Gandhi - the man on the top of the heap. Assume, for a moment, that he is indeed Mr. Super Clean. What are all his great ideas for India's "development"? There is the NREGA with its "right to work," there is the "right to food," the "right to free and compulsory education," the biometric ID card, nuclear power sans liabilities. Because of all these schemes we are suffering high inflation. Further, a huge amount of public borrowing was announced in the last Budget. Notice, Chacha never utters the words "right to Property."

Therefore, we must not overlook his political ideology - that he is a central planner, a central banker, a socialist, a welfare statist, and a Keynesian. Media euphoria greeted his arrival at the top, too. And every single one of his ideas, listed above, has been approved in glowing terms by the media.

In this context, this lead editorial in the Indian Express deserves to be carefully scrutinised for its objectivity. The editors are of the view that wee the sheeple must bear with Chacha and allow him to continue, because the "current public mood of rage against the political class as a collective" is also an "opportunity for Dr Singh to push through... [a] re-imagining of Indian governance." The editors fear that if Chacha goes then far worse things can happen - like further centralisation, regulation and licensing.

Methinks they are trying to scare us - about something that simply cannot happen. And, about Chacha, they are actually expecting us to believe that he can change his spots.

In reality, Chacha has brought about the demise of the CONgress. They were routed in Bihar. The nation needs to be woken up to this new political reality - which is precisely what this editorial is not doing.

And as for the future, let us bury centralism - and let each region think for itself. In this new scenario, it is the coastal regions that must take the lead, for they are in the best position to take advantage of globalisation. I have an earlier post on the enormous opportunities before our twin coasts.

More On Niira Radia

I had commented on the Niira Radia scandal when it surfaced, in which were exposed top names in Indian journalism, like Barkha Dutt of NDTV and Vir Sanghvi of Hindustan Times. The post was titled "Long live the free press" and it argued for greater press freedom - more TV channels, more radio stations and so on - as being the only way of better informing the public.

In the meantime, it is indeed quite peculiar that all the newspapers I read have completely ignored this case. However, I did manage to find some journalists making pertinent comments, and one interesting news story too, which I thought I must share with my readers.

The first is a ToI blog by Kingshuk Nag, who was their resident editor in Ahmedabad, and who writes about his "encounter with Niira Radia." He says she started off as Ratan Tata's PR person, when he was attempting to launch an airline some ten years ago. The post also discusses her close association with Narendra Modi, and how she was instrumental in getting Tata land in Gujarat to manufacture his Nano. And how Tata then graced a public function in Modi's honour, etc. This is interesting because, in the leaked transcripts of her telephone conversations with Dutt and Sanghvi, she appears as a lobbyist for Mukesh Ambani, with close links to the DMK.

Also worth reading is another ToI blog, by Santosh Desai, titled "The silence of the hacks." He specifically talks about the total silence on television. He says:

... the silence pervades most of mainstream media but leaps out of television strikingly because of its tendency to pounce on stories of this kind. For television channels, otherwise willing to go to any lengths for the sake of eyeballs to collaborate with each other in this way is quite unprecedented...

Finally, I found this little report in the Hindustan Times today, which lists top bureaucrats who are with Radia's firm, Noesis Consultants. The list includes:

1. Pradeep Baijal, former Chairman of the Telecom Regulatory Authority of India (TRAI),

2. Ajay Dua, former Secretary (Industry) to the government of India,

3. Akbar Jung, former civil aviation secretary,

4. SK Narula, former chairman, Airports Authority of India, and

5. DPS Seth, former member, TRAI.

All this merely serves to confirm what I wrote in my post of yesterday - that the greatest error of our socialist, protectionist, interventionist Nehruvian State is in the area of morality. The only way to put an end to all this ugliness is laissez faire capitalism.

Their Greatest Error: Morality

Another scandal has enveloped our central State - and this is serious stuff, for it concerns their anti-corruption commissar, the Central Vigilance Commissioner. It seems that the new man appointed to this post has a corruption case pending against him - and the Supreme Court has challenged his appointment, much to Chacha's embarrassment. You can read a detailed news report here.

What I would like to discuss is the fact that all this political and administrative corruption we in India suffer from is rooted in ideology. This socialist State started off on the wrong foot - with Jawaharlal Nehru saying that, for him, "profit is a dirty word." Nehru shackled enterprise. He began "central planning." He placed his State at the "commanding heights of the economy." He invested all his revenue - along with a lot of "deficit financing" - in "public sector enterprises." It is this ideology that is the root of all corruption.

Take the case in which this CVC has been implicated. It pertains to the import of palm oil by the government of Kerala. This palm oil was meant for the "public distribution system." And our man was then "food secretary" to the Kerala state government. Quite obviously, if profit had not been a dirty word, the trade in palm oil would have been left to traders - and the government would not have entered it. There would have been no food secretary. There would have been no public distribution system. The State would have been "limited" to specific functions - viz., the protection of life, liberty and property. Thus, if we wish to be rid of corruption, we must get rid of this corrupt ideology that enlarges the role of the State. There is little point attacking individuals in the system. After all, how many corrupt people have been brought to book by all the previous CVCs in all these decades?

In reality, the profit motive is the most "innocent motive" of them all. In a competitive market, the only way to earn profits is by satisfying one's customers by providing them goods and services that they prefer over what the competition offers them. "Cheats never prosper" and "honesty is the best policy" are both business ethics. "Brand equity" is highly valued by businesses. Nehru was a "pandit" - but he knew nothing of the wisdom in the Hindu saying, Shubh Laabh.

Of course, it needs to be emphasised that the key to an honest business community lies in Free Competition - and this must include competition from foreigners. But then, this State that Nehru set up, and which his descendants continue to run, has always preferred to offer favours to select businessmen, so as to "protect" them from competition. This is corruption. This is also tyranny - for, as Bastiat pointed out, "competition is liberty, and the absence of competition is tyranny."

To many people, laissez faire capitalism and unilateral free trade seem too "extreme" - and they advocate a half-way house which they call a "regulated market." It is Ludwig von Mises who has thoroughly discredited such ideas - pointing out, among other things, that such regulation (or "interventionism," as he called it) would serve to destroy democracy itself, by converting parliamentarians into representatives of various regulated business interests - for all this regulation would require both legislation as well as bureaucracy. Indeed, this is precisely what he saw unfolding in US democracy in his time. If you click on the label "interventionism" on the right-hand bar, you will find a series of posts I have written against this idea. Laissez faire pits businessman against businessman - and we all gain as consumers. The State is then truly "limited" in its scope. Political and administrative honesty prevail - if the people and the press are vigilant.

To conclude: State socialism in India, which is combined with the Gandhian village vision, is nothing but a plethora of grave intellectual errors. However, their greatest error lies in the sphere of morality. They have confused ideas of good and evil. It is this ideology that we as citizens must dethrone from the commanding heights if we are to be rid of all this rampant corruption, if we are to attain our true potential as a nation, and if we are to save our shattered civilisation.

Recommended reading: My recent column, titled "The morality of free markets."

The Biggest Problem - The State

Two chief ministers of two important states have just fallen because of land scams in their capital cities - Mumbai and Bangalore. One belongs to the CONgress; the other to the BJP. In both cases, their respective "party high commands" in Delhi are putting in "replacements." To my jaundiced eye, this does not seem "democratic"; nor is this "federalism"; rather, it is purely "clientelism" being practiced by the main "political parties" of our centralised, socialist State. Of course, this central State is itself floundering in major scandals. And both these parties are riddled with corrupt elements. One wonders whether anything will improve in either Maharashtra or Karnataka after new chief ministers take over.

In the meantime, elections are being held in Bihar - and they are due in West Bengal. More chief ministers will be installed.

What can be said about the fiscal health of our state governments? In this context, I am happy to share with my reader a study on the subject conducted by Deutsche Bank (this link will be available for 90 days only). According to this study, all our state governments are in the red, some more than others. The worst performing are West Bengal, Bihar, Orissa and Uttar Pradesh. On these huge states, the report concludes as follows:

We find that Jharkhand, Bihar, West Bengal and Uttar Pradesh are some of the states having the worst fiscal dynamic. Given that Bihar, Uttar Pradesh and West Bengal together would account for more than one-third of the rise in India’s population between 2010 and 2025, their poor fiscal ranking is particularly worrisome....

As population increases sharply in these states in the next decade and a half, the pressure on these respective state governments will mount to generate new employment and attract higher investments, failing which the incidence of poverty and human development conditions (already in a poor state) could worsen even further. Fiscal support to prop up growth and development would likely be minimal, given that these states already remain severely challenged on that front. If the incidence of migration gathers pace, as people shift elsewhere looking for employment opportunities, the fiscal position of these states could deteriorate even further, as the government’s own tax revenue falls, thereby raising the deficit and the debt. Continued and rapid progress toward fiscal consolidation, therefore, is essential.

I began this post with the crises in Maharashtra and Karnataka - and now we see that the crisis is widespread. Whereas Maharashtra and Karnataka are in better fiscal health - particularly because robust private sector growth is fueling revenues - the fact remains that Mumbai and Bangalore are very badly governed, and the biggest scam being operated by their state governments concerns urban land. I maintain that it is the poor of rural India who need urban land. Only then can widespread poverty be tackled. Only then will the size of our domestic market attain its full potential.

Interestingly, the lead article in the ToI today is by a former chief secretary of Karnataka, lamenting the poor governance of our cities, while recommending Mayors. A timely awakening, I think. Yet, self-governing cities are never clients of higher levels of government - and that is something we must also wake up to.

The Deutsche Bank report cited above, on the fiscal health of our state governments, should prompt us to realise that what we need to urgently tackle is this unlimited spending by both the Centre as well as all the states of this so-called federation. The report starts off saying that our debt-GDP ratio is 80 per cent, that we are "a high debt economy" - and that one-third of this is debt contracted by states. The report also studies inflation in India, which shows no signs of abating.

Clearly, some drastic measures need to be taken. The classical liberal prescription of sound money, limited government and local self-government are all required. While these will restrict the scope of government, and its spending, we also need to institute complete economic freedom for our people so that they can prosper in the free market. This requires the inviolability of Property and unilateral free trade. This will also spur urbanisation along our twin coasts - furthering opportunities for the advancement of our rural poor. I have an earlier post advocating new cities along our coasts, which will sprout on their own if we institute free trade unilaterally.

If we persist with our current policies, we will end up with situations like the one now unfolding in Europe - where the Irish government has gone belly-up. The "welfare state" that Chacha is trying to establish will be a huge disaster.

I will conclude with what our central finance minister is now up to, increasing the size of his budget by over 7 per cent in order to fund various subsidies, with Parliament having passed two supplementary grants to the tune of 744 billion rupees or 1.1 per cent of GDP. According to DB, this "reflects a desire to spend the windfall revenues from the 3G spectrum auctions and disinvestment." All this money will be "consumed," not "invested."

As I have maintained for long, India does not suffer from the "population problem." In India, the people are not the problem; rather, they are the greatest resource we possess. In India, on the contrary, it is The State that is the problem.

Long Live The Free Press!

The latest scandal gripping India concerns top journalists - and this has prompted many to say "we don't trust the media." But the media is not a monolith. There are many, many newspapers, magazines, TV stations and the like - and it needs to be appreciated that, in this case, two separate magazines have have exposed the wrongdoings of these journalists.

Once again, the institution that comes into play is Property. Each separate voice in the media is a piece of Private Property - and it is the existence of all these diverse bits of Property that serve to make the media free. Of course, all will not be truthful and unbiased - and that is why Competition matters so much. So, instead of slamming the media wholesale, as many are now doing, I would argue for more freedom of the press. We need more TV channels to compete with the now discredited NDTV. We need free radio too. Then, just as blogs, which are bits of Property, have given freedom to many voices like mine, there will be more opinions being aired, and the people will be far better informed.

Let it never be forgotten that, if India did not possess this great institution of the free press, the only opinions being aired would be those of The State - as with Doordarshan, AIR or Pravda. That would be truly horrible, and truth would die. In the bad old days of Nehru and Indira Gandhi, almost every top journalist in Delhi was an agent of The State - and lived in a government bungalow in a VIP enclave. Those days, The Times of India was "an extension of The State" - as one old hand told me. So, let us appreciate press freedom - and let us demand more of it.

Turning our attention to the scandal that is rocking Indian journalism today, it seems the Income Tax Department tapped the phone of a corporate "fixer" - a PR agent of sorts, a kind of influence peddler - and this woman, Nira Radia, spoke to some very big names in Indian journalism, including Barkha Dutt of NDTV and Vir Sanghvi of the Hindustan Times. Transcripts of these conversations have been published - and they don't read like principled journalism. You can read the one relating to Barkha Dutt here; and the one with Vir Sanghvi here. There are others as well. But then, as I have said, the solution lies in greater freedom of the press, in more competition.

[For more on the scandal, I recommend these two posts from the blog Sans Serif, here and here.]

What I would like to add is that in India we have a long history of good journalists being co-opted into The State. There was MJ Akbar - who joined the CONgress. There was Arun Shourie - who joined the BJP. There is Chandan Mitra, also with the BJP - and a permanent guest at the Barkha Dutt show. There are many others. Journalists are always in close contact with politicians and bureaucrats and, because of their power over public opinion, they are courted. Many succumb. They give up their power - which lies only in their independence.

So, there is a lesson in all this for all our young journalists - and that is, stay fiercely independent.

Why You Need Austrian Economics

Two articles I have just read - one on Economics education and the other on world trade and protectionism - made me realise that it is only the Economics of the Austrian School that can shed light on what has gone wrong not only in academia, but also in the practical world of business and politics.

The first article, in Mint, refers to classroom Economics "after the financial crisis." That is, it applies to the classrooms of the "mainstream" approach - especially to Keynesian "macroeconomics." Further, it refers to elite universities in the USSA, and to textbooks written there.

In truth, all this Keynesian macroeconomics, which legitimises central banking and the role of the State in creating "full employment" and smoothing out the "business cycle," is knowledge that has been proved today to be not only completely wrong-headed, but positively dangerous. If you tune into the writings of the Austrian School, you will find radically different ideas - that fiat paper money and fractional-reserve banking are not only a fraud but also the cause of booms-and-busts, and that "sound money" is essential for the survival of civilisation: that is, hard money based on commodities like gold. You will soon realise that macroeconomics is nonsense-upon-stilts. The Ludwig von Mises Institute (website here) has much of the literature online, and also offers online courses. If you wish to study the real Economics of the real world, this is the best place to hit.

Having said that about university classrooms, let us turn our attention to the real world of practical business and politics - and to the second article, in the ToI today, titled "Save capitalism from protectionists," by Jean-Pierre Lehmann, a professor of international political economy at IMD, Lausanne, Switzerland. Lehmann writes about the recently concluded G-20 meet in Seoul, South Korea, and how it has not addressed protectionism.

Again, to an adherent of the Austrian School, what the G-20 meet shows is that capitalism - and civilisation itself - needs to be saved from central bankers and their fiat paper money.

With their "competitive devaluation," what all these nation-states are attempting is "export promotion." Their economic strategies, in effect, are opposed to imports - because, as currencies depreciate, imports become more and more expensive. Thus, when all nations pursue this harmful "strategy," all nations lose, because all nations lower their imports. Global trade falls - with or without protectionism. We have seen this strategy backfiring in our own country. When the first Maruti rolled out in 1984, it was priced at around 45,000 rupees; today, it is worth 2,00,000 rupees. How can the domestic market for automobiles - or anything else - be catered to with a fiat paper money system? On the other hand, if the world was on a gold standard, all prices would steadily fall, and all Third World markets - comprising two-thirds of humanity - would be able to "effectively demand" the high-tech products of the world's leading nations. The whole world economy would grow and grow. In these Third World markets, protectionism would be vocally opposed by the citizenry - in their capacity as consumers. Just as in the India of today, none want to "protect" Bajaj as in the days of old.

The lesson: international trade is a two-way street - powered by imports as well as exports. Further, imports matter greatly, because they bring in what is not available domestically. The East India Company sent its "tall ships" out into unknown waters carrying gold - in order to import rare spices like nutmeg and pepper.

Today, no one is sending out gold, and no one wants to import anything.

Austrian Economics is not for "students" alone. It is vital knowledge meant for every citizen. Economics is the "pith of human existence" - in the words of Mises. The "mainstream" approach is wreaking havoc in the practical world - and in the minds of students too. This dangerous nonsense is threatening to wipe out human civilisation. If you wish to stem the tide, study Austrian Economics on your own - and spread the message.

Democracy - In The Philippines

As the US champions democracy worldwide and goes about installing such regimes - as, for example, in Afghanistan - and as many voices are raised the world over in support of "free elections" - from Burma to the Arab world - I thought it might be pertinent to take a look at how democracy has worked itself out in the Philippines, a former US colony, which used to call itself the "show-case of democracy." This post is inspired by Pico Iyer's travelogue on this nation, dated 1988, when Ferdinand Marcos ruled. What Iyer reveals is shocking - and it is noteworthy that he says Manila reminds him in many ways of Bombay. I quote:

I had not known before I arrived in Manila that the tourist district was the red-light district. But then I had not known that one resident in every five of the "show-case of democracy" was reduced to squatting. I had not known that the $20 million government-run Manila Film Centre, the grand creation of President and Madame Marcos, made its money by showing porno movies, uncut. And I had not known that across the street from the glittering pavilions of the Cultural Centre of the Philippines, whose futuristic ramps and landscaped gardens were a gaudy monument to Marcos splendour, families were sleeping in bushes.

Before I came to Manila, I could not have guessed that more than a thousand families in what Imelda Marcos, Minister of Human Settlements, called the "City of Man" made their homes in the central garbage dump.

This is familiar territory for us Indians - for in all our "metros" over half the population lives in slums. The only solution is Property - and roads into the vacant surrounds.

Further, the sorry plight of the Filipinos is also a story of "unlimited democracy" - where the government prints the money, runs film centres and so on. The democratic government has not been "limited" to its only legitimate functions - the protection of life, liberty and property.

Yet, this was an American colony, and it is America that has installed this unlimited democracy. Pico Iyer comments on the difference between this American colony and British India after visiting a "hill station" near Manila called Baguio that was developed as a summer retreat for the American rulers - "a kind of New World Simla" as he calls it. Here are Iyer's reflections after visiting Baguio:

For all its silvered, foggy charm, though, Baguio did not seem to have the imperiousness of a British hill station, or its weighted dignity. And in much the same way, I did not sense in the Philippines anything comparable to the kind of stately legacy that the British, for example, had bequeathed to India. India seemed to have gained, as a colony, a sense of ritual solemnity, a feeling for the language of Shakespeare, a polished civil service, a belief in democracy and a sonorous faith in upstanding legal and educational institutions; it had, in some respects, been steadied by the chin-up British presence. By contrast, the most conspicuous institutions that America had bequeathed to the Philippines seemed to be the disco, the variety show and the beauty pageant. Perhaps the ideas and ideals of America had proved too weighty to be shipped across the seas, or perhaps they were just too fragile. Whatever, the nobility of the world's youngest power and the great principles upon which it had been founded were scarcely in evidence here, except in a democratic system that seemed to parody the chicanery of the Nixon years. In the Philippines, I found no sign of Lincoln or Thoreau or Sojourner Truth; just Dick Clark, Ronald McDonald and Madonna.

If Property and Liberty are the "great principles upon which America was founded," the same is true of British India. To the civil servants of the East India Company, as Philip Mason reveals, "Locke was their prophet" - and it is Locke who said "where there is no Property there is no Justice." Further, soon after the important lessons taught by Adam Smith had been established in the British mind, the East India College was set up in Haileybury to train recruits to the civil service in India - and the most important component of this training was classical liberal "political economy," then not taught in either Oxford or Cambridge. Mason writes thus of the "Haileybury mind":

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

India under the East India Company had a laissez faire economy. The only "public investments" made were in "roads, bridges and canals." Railways were later encouraged - under private ownership. And as for their civil servants in the districts, here is what Mason says of their priorities:

India was a poor country which could not afford luxuries and a district officer had concentrated on essentials – public order, the swift administration of justice, the prompt payment of taxes moderately assessed, the maintenance of accurate land records which would prevent disputes.

So we come back to the same Principles: Property, Liberty, Justice. A government that "limited" itself. This was "classical liberalism" at work.

It is unlimited socialist democracy that has destroyed India.

I hope this will serve as an object lesson to all those who hanker after democracy in the Middle East, Africa and Asia.

Chacha's Bogus UNSC Ambitions

I found Harsh V Pant's column in Mint today, on why India's diplomatic offensive for a seat in the United Nations Security Council is meaningless and nonsensical, well worth recommending to all my readers. This question that Pant poses needs to be answered by Chacha himself:

Why should global peace and security be a priority for the Indian government, a government that has continued to fail miserably in establishing domestic order and security?

Do read the entire article, which rubbishes everything about the UN.

To my mind, it appears that the ruling elite of our country are on the lookout for clubs like the UN to prop up their misrule, nothing else. Pant quotes Vaclav Havel, former president of the Czech Republic, writing that the UN Human Rights Council is a "Table for Tyrants." As I opined a few days ago, in the context of Aung San Suu Kyi's "belief in human rights," these rights, declared as "universal" by the UN in 1948, are almost entirely meaningless. They are good for bureaucrats, for socialist politicians in socialist democracies, and for trade unionists; they are bad for people, especially poor people.

Pant, who teaches at King's College, London, says:

India’s experience with the UN has historically been underwhelming.

Pant also shows how India's enthusiastic participation in UN peacekeeping missions worldwide has been foolish. He says Indian troops have suffered the highest casualties. Who is being kept "secure" by our Chacha State? Personally, I feel most insecure on our roads.

Pant says that almost every arm of the UN is a "farce." This is particularly true of those well-funded UN bodies which profess to be dedicated to the upliftment of the poor in the Third World - like the United Nations Development Programme (UNDP) and the UN Children's Education Fund (UNICEF). The UN's "Human Development Index" serves only to misguide public opinion as to the means towards such development - for it contains no information whatsoever on vital parameters like the protection of Property and the extent of "economic freedom" available to the citizenry. The alternative Economic Freedom Index, which you can find here, is what opinion makers in poor nations should focus on. Similarly, the UN Fund for Population Activities (UNFPA) is based on "knowledge" that has been completely discredited.

But why the UN alone? The two other "great" international organisations, conceived of by Keynes, the World Bank and the IMF, are equally meaningless. The World Bank was originally called the International Bank for Reconstruction and Development; and the greatest damage it has caused to the goal of "development" has been the role it has played as the arbiter of "knowledge" in the important field of "development economics" - a role it continues to play. Development has not occurred in the Third World only because this knowledge is utterly false. And as for the IMF, it is now hoping to become a global fiat paper money provider - causing global inflation.

Pant makes an entirely valid point in his conclusion: that India should unilaterally pursue its own interests, without a care for all these international bodies. I am in total agreement with this view. Since free trade is in our own interest, we should pursue it unilaterally. Similarly, sound money is in our own interest, and we should adopt the gold standard without consulting any outside power.

I believe these unilateral measures are urgently required. I would like to also add that instead of higher levels of government - higher than our own centralised State - we Indians need to focus on lower levels of government: those that can effectively and efficiently run our miserable cities and towns. This focus on the nitty-gritty, the down-to-earth, is equally important.

India's Urban Future - On The Coasts

Met some guys from Delhi (and Gurgaon) yesterday, and we recounted the horrors of urban India in today's times: the chaotic traffic; the overcrowding; the terrible housing etc. During the discussions, I pointed out that if you drive out of Delhi - on the Gurgaon-Faridabad road, the Rohtak road, the road to Sonepat, or Meerut, or Agra - you witness the fact that there is an abundance of land, but this has not been colonised by roads. The State is a monopolist of both urban land (DDA) as well as roads - and it is this misuse of power that is responsible for the mess. I pointed out that it was indeed strange that, in New Delhi, the centre of town consists of colonial bungalows occupying one-acre plots, while 30 km away, in Gurgaon, the middle class lives cheek-by-jowl in a swarm of high-rise apartment blocks. We talked about how things are much worse in the other four "metros." I then made some points, which I will summarise in brief below.

First, that it is the "artificial order" of State controls that has made two land-locked cities - Delhi and Bangalore - the fastest-growing in India. In a free trading "natural order," all the action would be on our twin coasts, which is precisely what happened in the times of the East India Company.

Second, as far as the State and its "central planners" are concerned, the much hyped Golden Quadrilateral highway project remains mired in a 5-city vision. These highways will only serve to link the existing metros.

Third, the Konkan Coast between Mumbai and Mangalore is possessed of the potential for the building of many new cities and towns. This area has historically been a region of sea-borne trade. Yet, all the ports here are nowadays engaged solely in iron ore exports - with no imports. Further, the hills are bereft of human settlements - and, all this "unowned" land being State Property by default, what is happening is iron ore mining, and not Property. I think the "environment" would be better looked after if humans built settlements on the hills, rather than the State digging up the ground to export red mud, as at present. This is a region blessed by Nature, simply beautiful, and the weather is great too - unlike Delhi. We could "live" in this environment, instead of just digging it up.

The East Coast too is possessed of similar urban potential.

There are a few things that will have to be done to see that a new urban India is built along these twin coastlines.

First, we will require twin coastal expressways. The Golden Quadrilateral project ignores the coasts. The highway on the West Coast is a disaster. It is no wonder that I regularly see the trains of the Konkan Railway carrying fully-laden trucks up and down the coast! This RO-RO facility for trucks is a big money-spinner for the railway. This is proof that private businessmen can profitably build good highways in this region, charging tolls.

Second, we must institute a policy of unilateral free trade. This will unleash the economy, spur urbanisation, and also bring business to the private highway developers. Win-win-win.

Third, we can experiment on the ways in which these new cities and towns are administered. There can be elected Mayors. There can be private "company towns" run by the private companies that establish these - as in the cities built by the East India Company. There can be "city manager" systems. As long as these cities compete for citizens and Property owners, things will work out fine. In the 5 metros, each a thousand miles or more from the other, there is "monopoly." There are DDA-clones in each of them. Thus, there are land scandals galore.

In the meantime, the political news from our country is instructive in one way - that we must think of a way out of State control. Free trade and free cities and towns, linked by private highways, offer that way out.

On Aung San Suu Kyi, And Capitalism

Yesterday's post was on Democracy, written on the occasion of Aung San Suu Kyi's release from house arrest. Today, I read this report in which she has spoken some words on her political beliefs. She demands "political liberty" - and that is something classical liberals and libertarians also demand from our socialist Indian democracy. Apart from that, all that is mentioned is this:

I believe in human rights and I believe in the rule of law. I will always fight for these things.

Do read the Universal Declaration of Human Rights, passed by the United Nations in 1948, which you can find here. It starts off well enough, and it does include Property, but then the list goes on and on, including the "right to free education," "right to social security," "right to form trade unions," "right to just remuneration," and other such "socialist rights" that only serve to enhance the role of the State. I find Suu Kyi belief in these overblown "human rights" problematic. To me, it is Property that must be inviolable. And Contract must be free.

Second, as far as "rule of law" is concerned, the central idea is as old as the Magna Carta (1215 AD), in which one important clause read as follows:

No free man shall be taken or imprisoned or dispossessed or outlawed or banished, or in any way destroyed, nor will we go upon him, nor send upon him, except by the legal judgment of his peers or by the law of the land.

Today, to most lay people, "human rights" refer to protection from the excesses of the State Police - but that is what the notion of "rule of law" is all about. Indeed, this is what "constitutions" are really meant for. As one constitutional scholar put it:

The original idea behind constitutions is that of limiting government and of requiring those who govern to conform to laws and rules.

I think it is perhaps this idea of "rule of Law' that Aung San Suu Kyi should uphold - the idea of a constitutionally "limited government" - while jettisoning the rather dubious (and socialist) ideas behind the "human rights" that United Nations, the world's biggest and most unaccountable bureaucracy, has been tom-tomming all these years.

The word that I find missing from Aung San Suu Kyi's political beliefs is the word "Capitalism." I find this troubling, for Burma is officially a "socialist" country. It is this socialism that must be politically challenged.

In the meantime, I have been reading Pico Iyer's travelogue on Burma, dated 1988. It begins with the airport in Rangoon, and all the various forms that have to be filled up for all the various officials. Once outside, Iyer relates how "non-officials" take over - and the "black market" comes into play. The taxis are all 1950-model. The hotels are all empty. There are no tourists. And there are many reports on black markets. In one of these, his guide tells him: "This is a necessary evil. Or, you may say, and evil necessity." I found these lines worth quoting:

"Once," a gentle Burmese soldier assured me, "Rangoon Airport was one of the great international centres of Asia. Now... "

This travelogue on Burma can be found in Pico Iyer's Video Night in Kathmandu - an excellent book, though slightly dated, which can be bought here. The chapter that follows the one on Burma is on Hong Kong!

CAPITALISM - that is the word I am waiting for Aung San Suu Kyi to utter.

On Aung San Suu Kyi - And Democracy

I am overjoyed that Aung San Suu Kyi has been released from house arrest. But, since I have serious reservations on Democracy, this post is intended to temper public euphoria with a little caution. What matters most in politics are the policies espoused by a candidate - and there is little I have heard or read on Suu Kyi's political ideology.

Of course, the generals running Burma are lawless tyrants. Their power flows from the barrels of guns. But then, William the Conqueror was also such a man. Unable to take him on militarily, the merchants of London responded by setting up their "One Square Mile of Liberty." Decades later came the Magna Carta. Then, there was Liberty. It is Liberty that matters, not Democracy - and we in India should know that well. To me, it would make eminent strategic sense if Suu Kyi campaigned for a self-governing and free-trading Rangoon - to start with. After all, Democracy does not seek to concentrate power; it seeks to diffuse it - and urban self-government lies at the heart of Western Civilisation, which is where modern democracy has taken root.

It is also important to note where exactly modern democracy has gone wrong - not only in the West, but also in other parts of the world to which it has been exported, like Japan and India. In the past, the age of "classical liberalism," the highest political "value" was Liberty. The political strategy employed to attain this Liberty was "limiting" the powers of The State. If the State is thus limited to certain essential functions alone, the sphere of Liberty is maximised, and taxation is simultaneously minimised - and this is "political economy." The people are possessed of both Property as well as Liberty. With these, the progress of Civilisation is assured - and this was seen as the only way to better the lot of humanity.

In those days, a wide and unbreachable gulf separated the rulers from the ruled. The ruled people clearly saw their own interests as separate and distinct from those of their rulers. This led to the wide acceptance of the doctrines of classical liberalism.

With modern, "mass democracy," there has come about a great confusion. People tend to believe that, with the vote once every few years, "we rule ourselves." Thus, even the public debt has become something that "we owe to ourselves." Because of this confusion, the idea of "limiting" the State in order to preserve Property and maximise the sphere of Liberty has all but disappeared. Democracy today is "unlimited" - and this is nothing but a not-so-subtle kind of totalitarianism. Democracy today is not limited by the Budget - because central banks can manufacture new money out of thin air. Further, all that democratic assemblies seem to be doing these days is passing more and more Legislation - and these violate Property while also taking away Liberty. If democracy is to be preserved, it has to be severely "limited." There are two essential steps that have to be taken in this regard: first, the ability of the democratic State to print money must go - so that it is limited to its Budget; and second, Property must be inviolable, so Liberty can prevail. I hope these ideas take root in Burma, and a libertarian think-tank is established there to advise Aung San Suu Kyi.

I will conclude with the statement that emerged from the G-20 meet - the solemn promise that all these great democracies will not engage in "competitive devaluation" of their fiat paper currencies. Poppycock! Don't believe a word of this. When I was a small boy, the US dollar was worth 8 rupees or so; today, it is 45 rupees. Gold was $35 an ounce when Nixon broke the US dollar's ties with the yellow metal; and today, gold is worth over $1000 an ounce.

The lesson: We must "limit" democracy.

Is Chacha Corrupt, Too?

In yesterday's post, I discussed the huge amount of political corruption India is reeling from these days. Today, the lead editorial in the Indian Express says, in so many words, that the "mud is spreading" - to Chacha Manmohan S Gandhi himself, who so far has been looked upon as Mr. Super Clean. The editorial refers to the telecom licensing scandal, and an affidavit filed in the Supreme Court by the ministry of telecommunications, in which it is stated that the tainted minister, A Raja of the DMK, had "no difference of opinion" with the Prime Minister, and that the latter was "kept fully informed of all decisions."

Yet, there are many other actions of Chacha, in the present as well as the past, that point to "corruption" - and I do not mean graft. For example, Chacha's "free and compulsory education" is nothing but corruption to me, for it aims at corrupting all young minds with the fatal errors of State Socialism. Let us not forget that if "higher education" in India is a huge mess today, Chacha was once Chairman of the University Grants Commission. He began his career in the Delhi School of Economics - as a "bureaucrat-professor." This "premier" institution, funded by The State, teaches mathematical economics and Keynesianism, among other corrupt doctrines. It is a leading centre for the study of "econometrics."

Let us fast forward to the present day - and the G-20 meet. Here, under Chacha's leadership, what the Indian State has managed to achieve is a larger slice of voting power in the IMF. The IMF is the fount of all "dishonest money" - and should be seen as an extremely corrupt idea. Chacha is upholding this corrupt idea. He has, of course, also been Governor of our central bank in the past, indulging in "deficit financing" and instituting "foreign exchange control." He is a Keynesian. The IMF is a Keynesian idea.

Since all this "dishonest money" from central banks and the IMF will cause more and more inflation, which will permanently pauperise our poor, Chacha's great ideas of "State welfare" for these poor Indians - like "right to food" and "right to work" - must also be seen as extremely corrupt, for it is fairly obvious that the biggest gainers will be those who administer these schemes and control these huge budgets. The poor, who need Liberty and Property, will only lose. The nation will lose as well, for precious private Capital will be taxed away and consumed - not "invested" in anything worthwhile, like roads, which we badly need.

Chacha's other "achievements" during his two terms as PM are also "corrupt" in my opinion. I think the idea of The State as a producer and supplier of nuclear power is corrupt - for it enhances the role of The State. Opening up power to competing private players would have been the "honest" thing to do. In addition, Chacha is also pushing for legislation that will limit liability in case of nuclear accidents. He is making us all "insecure."

Thus, the new ambition of the Total Chacha State, to occupy a seat in the UN Security Council, should be laughed at. It will make The State and its personnel secure, not us. Just as more votes in the IMF will make the RBI secure, not us.

If we Indians want to be "secure" and "free" - and if we want "honesty" in government - we must think of another way, very different from Chacha's corruptions.

First, instead of the UN or the IMF, we must think of Mayors in our own towns and cities. We must thin of hard, private money. We must think of a free and competitive Market for all, including foreigners. For our "security," we must think of Torts, and we must also think of how we can defend ourselves and our properties.

Only if we persevere in this line of thought and action, can we be rid of political corruption. All this rampant and widespread corruption stems from a Corrupt Idea - and that is Nehruvian Socialism: "The State at the commanding heights of the economy," "central economic planning," "the socialistic pattern of society," "panchayati raj and rural development," and, of course, "poverty alleviation and employment generation." Our Chacha is wedded to all these ideas. His State plans to borrow some 3,50,000 crores to fund these corrupt ideas. All this is nothing but corruption, corruption, and more corruption.