Bastiat Demolishes The MGNREGS: Take #2

To understand why chacha manmohan’s Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) is an extremely screwed-up idea, it is best to begin with Frédéric Bastiat’s “Broken Window Fallacy” – found in his essay “What is Seen and What is Not Seen.” Hayek considered this essay a work of “true genius.”

Even in France of the 1840s, there were socialists who had the idea of running State-owned “National Workshops” with the intention of providing employment to all. In their case, they employed city mobs and used them to beat up dissenters. A dangerous notion, that The State should employ all.

The Broken Window Fallacy runs as follows:

A mischievous boy hurls a brick into a shop-window and smashes it. He runs away. Local people gather and conclude that this is GOOD for their city, as now the glazier has got some business.

Bastiat points out why these bystanders are dead wrong. They see that the glazier has got business. They do not see that the shopkeeper had saved money for a new suit, which he will now have to use for a new window: that is, the tailor has lost business. This is “what is seen and what is not seen.”


As far as the shopkeeper is concerned, if the boy had not smashed his window, he would have possessed a suit and a window; while now, after the repairs, he has just the window, same as he had before, minus his savings, minus his suit. The city has actually LOST.

Thus, reconstruction after a war is NOT good business. Destruction is never good business. Epidemics are not good because doctors make money. Potholes are not good because mechanics gain by them; our cars get destroyed.

Similarly with MGNREGS: We see the district collector – or should we now call him “District Spender”? – spending MGNREGS money. We think the countryside will be better off. But do we do not see where the money came from.

If we look into that, we would see that the money came from us – the taxpayers. And if we had spent the money ourselves, we could have generated “useful employment” (instead of “tax parasitism”). For example, if we had drunk beer with that money instead of paying taxes, brewers and bartenders would have been employed usefully.

Indeed, even if we had saved the money with commercial banks, they would have lent it out – and even better employment would have occurred. Maybe a borrower would have invested in a brewery.

Further: chacha manmohan is also spending freshly printed rupee notes to fund this MGNREGS: “Inflationary Finance.” This erodes the Precious Capital of all citizens. It makes no sense at all. It makes all of us poorer. The value of the currency unit declines. All prices rise.

Lastly: What kind of stupid idea is it that our The State must employ all? Is that a role of the State? Is not our The State already too bloated with employees? Should they not be cutting down on State employment instead of adding yet more tax parasites?  

And is not this same State misusing force to shut down many, many trades – from ganja-charas to dance bars to nightclubs, discos and casinos? Indeed, in India, there is NO nightlife industry.

If all these trades were free, would not “real, useful employment” occur?

Thus, chacha manmohan is NOT an “economist.” He is best called a “diseconomist” – for he is a “dissaver.” He is consuming capital. His State is always in “deficit.”

All this MGNREGS money is best invested in Capital Goods like roads, sewerage, drainage and the like. With MGNREGS, all this money will just be “consumed,” with NOTHING to show for it – except a huge entry in the Union Budget.