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.

Continue With Rural Development? The Same Old Crap! Or Urbanisation Powered By Unilateral Free Trade?

What is the greatest threat to our lives: Terrorists or Maoists?


I would say: ROAD TRAFFIC!


200,000 people die on our unsafe roads every year, and many times more are seriously injured.


But at a a national workshop on rural development programmes in areas most affected by the Maoist movement, our Central State Police Minister, Palaniappan Chidambaram, said that Maoists are a bigger threat than terrorists - while forgetting all about road traffic deaths, of course.


The news report says:

In the first eight months of this year, the number of civilians killed by Maoists is 10 times more than those killed in terror attacks, he [Chidambaram] said at a national workshop on rural development programmes in areas most affected by the rebel movement.

The one-day "workshop," held in Nude Elly, was attended by all the top brass connected with "rural development": first, the Rural Development Minister, Jairam Ramesh, a political flyweight, Rajya Sabha MP from Andhra Pradesh; there was Montek, who heads the Planning Commission, the "economist"; there was minister for road transport and highways C.P. Joshi and tribal affairs and panchayati raj minister V. Kishore Chandra Deo.


The Annual Budget for rural development is 87,800 crore rupees. (One crore is 10 million.)


The news report says:

The rural development ministry is the nodal agency for development schemes, including the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), the Indira Awas Yojana, the Pradhan Mantri Gram Sadak Yojana (PMGSY) and the National Rural Livelihood Mission. It has been allocated 87,800 crore rupees in the year to 31 March to implement these programmes. This includes the allocation to the department of drinking water and sanitation.

s.

But, obviously, all this SHIT is not working - because it cannot. Economic Law cannot be violated. Economic Law says the "division of labour" - which is the "specialisation" by which wealth is created - is maximised in cities and towns, because there are bigger markets there, because population density is high. A tea-shop in Pondicherry earns much more than a tea-shop in the jungles of Jharkhand - and it is not surprising that there are migrants from Jharkhand to be found in Pondicherry (I met two young boys) as also in Nude Elly. In Nude Elly, in fact, girls from Jharkhand are to be found working as housemaids. They have their own church in Green Park, where they meet their fellow Jharkhandis on Sundays, worship, socialise, and exchange news.


Nothing much can be achieved by spending 87,800 crore rupees on Rural Development. It is just "pork barrel politics." Corruption. It is interesting that chacha manmohan s gandhi bravely told the audience at this workshop that "there must be 'zero tolerance for corruption' in the implementation of schemes intended for these regions." Then how come he "tolerates" so much corruption in his own Cabinet?


There is ANOTHER WAY - and that is URBAN DEVELOPMENT, that too, along the twin coastlines, powered by unilateral free trade.


So, imagine a libertarian politician at the helm making a speech to the Jharkhandis:

Ladies and gentlemen,

There is NO HOPE for you in these jungles. If you want to progress, you must shift to where the MARKET beckons - and that is the COAST. So, go, all you tough young men and women, go to a coastal town or city of your choice and engage in free international trade. Come home with your profits - and return again.

For those who cannot go or do not want to go, government handouts are NOT the solution. Government CANNOT create jobs. But government can DESTROY jobs - by overtaxation, by restrictive licensing, and by the OUTRIGHT BANNING of trades.

Your trades in MAHUA and HANDIA are banned because of the previous government. We are setting them FREE - alongwith ganja. Sell these lovely drinks and smokes to tourists. Let there be mahua plantations instead of tendu leaf collection. Smoke cigarettes. Smoke ganja.

And remember: If you want tourists to come, there must be PEACE. No tourist will come to where he can get SHOT! That is why there are no tourists in KABUL these days.

So say OM SHANTI. And let there be peace.

Oppose the Maoists - tooth-and-nail. They are zeroes even in CHINA!

It is either Capitalism - which requires peace.

Or Communism - which requires WAR.

Choose ladies and gentlemen.

(Wild cheering.)

Get my drift, dudes?


MORONS ON TOP!

Memories of Montek Singh Ahluwalia and his wife Isher Judge Ahluwalia

I have met Montek Singh Ahluwalia just once - at the launch of Deepak Lal's book Reviving the Invisible Hand: The Case for Classical Liberalism in the Twenty-first Century at the India International Centre in Nude Elly. By the time Montek, then Deputy Chairman of our Planning Commission, entered the room - late, of course - the dais was occupied by Lal and Swaminathan Aiyar of The Economic Times. Upon seeing Montek, Swami said:

Hey! Montek! How come you wear blue turbans in Delhi and pink ones in Washington DC?

Interesting, what?


Speaking on this important book by India's greatest living free-market economist, Montek mumbled this and that, admitting he had not had the time to read the book as yet. I wanted to ask him whether he had read any of Lal's previous books - like The Poverty of "Development Economics" which asserted that poverty was sustained - and would be eternally perpetuated - by this pseudo-science. But the moderator closed the session down.


As for Isher Judge Ahluwalia, my first encounter with her was over the telephone, during the days when I was Editor of "The Tuesday Debate" on the op-ed page of The Economic Times. Every week, I had to choose a topic of debate and three debaters. For that week, I had decided upon Isher and, after obtaining her number from one of the secretaries, dialled it - and her secretary picked up. She was then Director-General of the Indian Council for International Economic Relations (ICRIER). I told her secretary who I was and why I was calling. But, as soon as Isher came on the line, she asked me if I would be willing to write a paper for her! Thereafter, our conversation went as follows:

Me:        A paper on what?

Isher:    Poverty.

Me:        But I am NOT interested in poverty!

Isher:    What interests you then?

Me:         Prosperity!

Isher:     But poverty is a huge industry!

Interesting, what?


I actually met Isher Judge Ahluwalia just once, some years later, at a student seminar organised by the Centre for Civil Society (CCS). I was the second speaker of the day, but I came in early to hear her. She spoke what these students hear in their classrooms every day, and she lauded all the professors who taught her at the Delhi School of (Mathematical) Economics. I wondered as to why CCS had invited her at all - that too, as the Chief Guest.


After her talk, there was a group photograph - but I decided not to be at the centre of the group alongside her, standing on the extreme right instead. One of the students asked as to why I was not standing next to the Chief Guest. My answer:

I am on her Extreme Right.