Say's Law versus The Marxists

The critical question before a poor nation like India is whether the market and laissez faire capitalism will raise our masses out of poverty - or should we stick to étatism? That is, how will the poor get "according to their needs"? Who will think of their needs, and invest in producing them - entrepreneurs or planners? Is Keynesian funny money financed welfare the way out? Say's Law holds the answer.


Say's Law of Markets says that if any poor person manages to sell his produce or services, he will be possessed of the means to demand non-competing goods on the market. This, as we have already discussed, implies the need for economic freedom.


Further, as also discussed yesterday in Part 2 of this 4-part series on Say's Law, modern capitalism is about mass production by Big Companies for mass consumption - by the poor, as in the case of shampoo in sachets or simple mobile phones. 


Thus, the poor, if possessed of economic freedom, will have the proverbial horn of plenty poured upon them by all the Big Companies. And many of them will be small investors in shares, too. In time, they will have TV sets, motorised personal transport, and what not. They will eat better, drink better, smoke better and live better. This is GUARANTEED if markets are free.


Now, this knocks the bottom out of the "iron law of wages" that Marxists believe in, as do Ricardian-Marxists like Piero Sraffa, whose blind follower teaches Economics at the IAS Academy. According to this law, the wages of workers must remain at subsistence. This is untrue - as proved above, looking at consumption. It is also proved by history - looking at the British working class during the 19th century, the heyday of classical liberalism, free trade and laissez faire. 


Further, if capital accumulation proceeds apace, and per-capita capital invested rises, the wages of all workers will also rise, because each one's productivity will rise. Ricardo erred on this score because he and the classical economists did not look at the consumer; nor did they know anything about "marginal productivity." Once we factor these concepts in, thanks to the advances made in economic theory by Menger and later Austrians, we can be sure that, if the Keynesians and the welfarists are prevented by public opinion from consuming capital, wages will rise along with consumption. Demand will continuously rise.


It must also be noted that if money is gold, inflation will end, and all prices will steadily fall - increasing consumption. The poor will inherit the earth.


So there are the following prescriptions:


1. Economic freedom.
2. Capital accumulation.
3. No funny money.
4. No welfarism.
5. No interventionism.
6. Laissez faire, laissez passer, laissez aller.


On the other side we have centralised economic planning - and Montek!


Now, the real Marxist question is: How will "each have according to his needs"? Montek is busy "measuring poverty" - for which purpose he has sanctioned State funds to hundreds of economists and statisticians, and confusion still prevails. When this confusion is finally settled, some poor people will get rice cheap. The planner will provide the poor with rice.


What is the market and the entrepreneur?


As Mises defined it, "the social function of the entrepreneur is to make provision for the uncertain future." It might rain - and so entrepreneurs invest - "make provision" - in making umbrellas. And shopkeepers stock them. If it rains, you can always get umbrellas. 


Now, smart entrepreneurs are ALWAYS surprising you with goods you never knew you needed. Smart entrepreneurs invest - "make provision" - to research consumer wants, they invest in R&D, and they come out with all kinds of surprises for satisfying unspoken needs. Skype is a great example. Poor people in India go to internet cafes and speak to loved ones abroad using Skype. It is cheap. And there is video. 


Meanwhile, the planner is thinking of rice. He has "made provision" for NOTHING. He is in perpetual DEFICIT. 


Anything to do with the market works - cars, mobile phones, civil aviation... anything. 


On the other hand, anything to do with the State fails - highways, railways, Air India, BSNL, electricity, water, drainage.


I think the choice should be clear.

Away with the Marxists!

Away with the planners!

Away with the socialists!

Away with the Keynesians!

Away with the welfarists!


Away with the protectionists!


Away with the trade unionists!


Away with the interventionists!


Away with immigration controls!

Laissez faire capitalism - for the poor!

PS: The final summing up post can be read here.