Today, there is an interview with the central State's commerce secretary, Rahul Khullar, IAS, in Mint, that reveals much about the deep errors in how these fellows think. The title says the man is very worried about our "trade deficit." The very term refers to a fictitious "national economy," whose exports and imports need to be "balanced" by such bureaucrats. Note that at a sub-national level, such statistics are never resorted to: like, say, the trade balance of Bombay or Goa. Such a concept only matters to individuals, who need to balance their sales and purchases; that is, their income and expenditure. Since only individuals (and individual firms) engage in trade, they alone are capable of taking rational decisions on this score: that is, how much to export and how much to import.
I have only the other day written a post on the fictional nature of the "national economy": that, in truth, there are only "private economies," billions of them, and that notions like GDP and its "growth rate" are false. Today, let me extend that discussion to the ideas expressed by our commerce secretary in the above interview. These are all entirely false ideas, designed to perpetuate bureaucratic and political control over foreign trade.
But why have we Indians set up this State? Is foreign trade regulation one of those purposes? Or should we not just demand from our The State the very same "liberty to trade by land and sea" that the English people seized from King John in 1215 AD?
To begin with, let us understand that we are all, as individuals, major importers. If I sell words - my export - then I import just about everything else into my house. The same applies to my town, in which there are neither any farms nor any factories, and everything on sale in its shops and bazaars have been imported from without - but from the land, and not from the sea, which lies 200 yards away. The question then arises: Why should the sourcing of products in our town and city markets be limited to what is produced domestically? When no individual, town or city is "self-sufficient," why should the nation be so? If a merchant ship laden with goodies draws up at my nearest port, should it be turned away?
In matters economic, one must always think like an individual and never in terms of "national economy" - a false concept designed to confuse the citizenry into thinking that the personnel of The State must plan, regulate and control economic affairs. If we think deep, as the classical liberals did, then The State is nothing but an organisation based on compulsion and coercion established to secure life, liberty and property, thereby allowing each citizen to pursue happiness freely. Thus they called for laissez faire - or "let free" - which means a clear separation of State and Market.
The State, to the classicals, comprised tax collectors, policemen, magistrates, jailors and hangmen - none of whom have anything to do with business. These ideas were lost when the concept of "national economy" took over the public mind, thanks to public education, and each nation-state, with its own fiat paper currency monopoly within its territory, began to intervene in matters economic.
While looking at our own The State in Nude Elly, we must note that this institution cannot even "balance" its own budget! It has always been in the red. It continues to be so. They live off the "perpetual irredeemable debt" - and some 3,50,000 crore rupees are being borrowed this year. Should we not ask of our The State: Hey, dude, why don't you "balance" your own budget instead of trying to fool us all with this bull about a "trade balance"?
Matters become clearer when we think about gold as money; that is, "private money" neither produced nor regulated by The State. Then, just as none think of how many rupees are travelling in and out of Bombay, none will bother about how much gold is flowing in and out of our borders. Each individual will manage his own gold hoard and freely speculate with it, and this includes speculation on imports. Then, just as the East India Company sent out its "tall ships" laden with gold to buy up all the spices in the fabled East and bring them back so as to be able to sell them domestically at a huge profit, many Indians will prefer to be importers rather than exporters. They will send out their gold and impatiently wait for their "ships to come in." Today, the commerce ministry in Nude Elly is giving out "incentives to exporters"! This, while the value of the rupee is in constant decline - thereby discouraging imports! If we adopted a gold standard, things would be the other way around, and imports would become progressively cheaper, especially if the rest of the world stuck to fiat paper money, which would always decline in value against gold. We would become big importers. And our exports would benefit too, because imports of raw materials, components, and technology would become cheaper. We would export high-tech stuff - not low grade iron ore dug out surreptitiously from State Property in the Western Ghats by politically connected "contractors."
With cheap imports, even our poor people would be able to consume foreign wines instead of the harsh grogs of IMFL - and the very idea of Indian Made Foreign Liquor is a product of "import-substitution industrialisation," another of the false theories our State universities teach.
Away with all these theories!
Let us instead use common sense - and let History be our guide. Ancient civilisation developed by the sea - the Mediterranean, in particular - only because there were huge gains from overseas trade. These civilisations flourished only because there was no ruler strong enough to control what went out or what came in - and gold was private money.
One account of the river Thames outside London in the 12th century described the scene as a "forest of ship-masts." This was about the time the Magna Carta was signed, delivering the people the "liberty to trade by land and sea."
Cochin, Mangalore, Surat, Porbandar (where Gandhi was born) - there are so many ancient ports on our shores. Let them all be free to trade with the world outside. And let many new port cities emerge.
Liberty!
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