On Capital, Civilization, And The State

Yesterday, I wrote about the government’s massive borrowing programme and, quoting Mises extensively, showed how this is capital consumption. Let me now continue further today. In the meantime, Mint has a little piece that says one-third of all government expenditure is financed by borrowing, and one-fifth of all expenditure goes towards paying interest. They add that out of every 100 rupees spent, 14 rupees goes towards creating assets, while the rest goes towards salaries – that is, towards consumption. Note that “welfare” and poor relief also have nothing to do with production; they are all matters relating to consumption. Also note that, in India, most of the “consumption” is done by the personnel of The State itself – the politicians and the baboons.

Now, capital consumption is the highway to de-civilization. Progress and civilization has always meant increased saving and investment – that is, the accumulation of capital. This capital, when invested in production, raises the wages of labour and results in an abundance of goods and services for all. This is how, throughout history, civilizations have arisen.

What about those who “invest” in government bonds? Their savings do not go into capital creation or production. They merely finance the consumption activities of The State and they are rewarded with interest that comes from us taxpayers. How can this be called “investment”? It is not. It therefore becomes clear that all government borrowing is nothing but capital consumption – the highway to de-civilization.

I am therefore of the opinion that widespread awareness must be created about the pernicious consequences of putting private savings into government bonds. Investors should be made aware of the fact that they are destroying precious capital in a capital-poor country, and that they would be doing their bit for the nation if they made genuine investments either in the stock market, with the banking system or elsewhere within The Market. Further, public opinion must demand that all these perpetual irredeemable loans be repudiated at once. Those who will lose money have only themselves to blame, for they “invested” their money in an insolvent institution. They did not invest in The Market. So theirs were not “capitalist investments” at all. Throughout history, many foolish people (including the Medicis) have lost fortunes by lending to monarchs. Let this important lesson be learnt once again.

The most desirable and socially beneficial effect of such a campaign will be that panic will be created in the bond market, and our The Total Chacha State will find no takers for its bonds. Then, and only then, will the government be forced to downsize and cut their long-tailed frock coat according to the size of their loin-cloth. Privatization will have to be pursued. NREGA will have to be dumped. Armies of tax-parasite baboons will have to be sacked.

A severely down-sized bare-bones government, as prescribed by classical liberalism, is the only way we can progress as a civilization. Then, taxes will be moderate, capital will remain in private hands, investments will be in The Market – and the whole engine of progress and civilization will chug along merrily.

Our The Total Chacha State is not only borrowing, but also inflating. Barely 10 per cent of its expenditure comes from taxation, so Mint informs us. Inflation is also a way of consuming capital. This is disastrous for the poor, the working classes, the labourers – who need capital. Further, our The Total Chacha State is also disallowing foreign capital entry – as in retailing – and thereby making things worse.

Commenting on the economists attached to the BJP during the Vajpayee regime, Jagdish Bhagwati made the acidic comment that “if they are economists, then I am a Bharatnatyam dancer.” Methinks the same comment can be applied to Chacha Manmohan S Gandhi, montek, amartya sen, jean dreze, kaushik basu, rangarajan, suresh tendulkar and all the rest of the CONgress’ economists. What they call Economics is nothing but the justification of State parasitism accompanied by widespread pauperization of the people.

But one solution is in sight: Do not buy their bonds, and ask others not to do so.

To conclude: Let's not forget that great civilizations have also perished in the past. The Roman one collapsed because of debasement of the coinage and State interventionism in markets, both of which destroyed the division of labour.

Our civilization has more or less collapsed. We may have cars and cellphones, but every city and every town (and every village as well) is a disaster. When the Roman civilization collapsed I am sure people owned horses and the postal system worked. That is our condition today.

Time to wake up to the fact that Chacha & Co. are hell-bent on destruction, parasitism, capital consumption and their inevitable consequence – de-civilization.

The Monster's Budget

The Budget reminds me of the Bob Marley song:

Here comes the con-man,
Coming with his con-plan…

Mint has this brief on the key features of the Budget, and these facts stand out:

=> The Plan and Non Plan expenditures in BE 2010-11 are estimated at Rs3,73,092 crore and Rs7,35,657 crore respectively.

=> The “labour army” idea of the Mahatma Gandhi National Rural Employment Guarantee Scheme gets Rs40,100 crore

=> Allocation for road transport increased from Rs17,520 crore to Rs19,894 crore.

=> Net market borrowing of the Government in 2010-11 would be of the order of Rs3,45,010 crore.

In this post, let me focus on the borrowing.

Now, all this borrowing is obviously to fund consumption. So this is “capital consumption” – another step towards de-civilization.

Further, the interest that will be paid on these loans will come from taxation, so the creditors are being guaranteed returns that will we squeezed out from the rest of us. The creditors are, in effect, partners of The State and are being given a safe haven for their capital – safe from market competition – at the expense of the rest of the citizenry.

This is what is meant by “perpetual irredeemable debt.” This is why I recommend that such debts should be entirely repudiated in an ideal scenario.

Allow me to quote Ludwig von Mises on this, from Chapter XII of Human Action: A Treatise on Economics, a chapter on “The Sphere of Economic Calculation,” from the section titled “The Root of the Stabilization Idea.” PDF here, see pages 223-228.

The problem assumed much greater importance when governments initiated their policies of long-term irredeemable and perpetual loans. The state, this new deity of the dawning age of statolatry, this eternal and superhuman institution beyond the reach of earthly frailties, offered to the citizen an opportunity to put his wealth in safety and to enjoy a stable income secure against all vicissitudes. It opened a way to free the individual from the necessity of risking and acquiring his wealth and his income anew each day in the capitalist market. He who invested his funds in bonds issued by the government and its subdivisions was no longer subject to the inescapable laws of the market and to the sovereignty of the consumers. He was no longer under the necessity of investing his funds in such a way that they would best serve the wants and needs of the consumers. He was secure, he was safeguarded against the dangers of the competitive market in which losses are the penalty of inefficiency; the eternal state had taken him under its wing and guaranteed him the undisturbed enjoyment of his funds. Henceforth his income no longer stemmed from the process of supplying the wants of the consumers in the best possible way, but from the taxes levied by the state’s apparatus of compulsion and coercion. He was no longer a servant of his fellow citizens, subject to their sovereignty; he was a partner of the government which ruled the people and exacted tribute from them. What the government paid as interest was less than the market offered. But this difference was far outweighed by the unquestionable solvency of the debtor, the state whose revenue did not depend on satisfying the public, but on insisting on the payment of taxes.

Mises goes on to show how the investor in government bonds is only fooling himself, and how the government, in turn, is trying to fool everyone: the “con-plan.”

Now, the irredeemable perpetual public debt presupposes the stability of purchasing power. Although the state and its compulsion may be eternal, the interest paid on the public debt could be eternal only if based on a standard of unchanging value. In this form the investor who for security’s sake shuns the market, entrepreneurship, and investment in free enterprise and prefers government bonds is faced again with the problem of the changeability of all human affairs. He discovers that in the frame of a market society there is no room left for wealth not dependent upon the market. His endeavors to find an inexhaustible source of income fail.

There are in this world no such things as stability and security and no human endeavors are powerful enough to bring them about. There is in the social system of the market society no other means of acquiring wealth and of preserving it than successful service to the consumers. The state is, of course, in a position to exact payments from its subjects and to borrow funds. However, even the most ruthless government in the long run is not able to defy the laws determining human life and action. If the government uses the sums borrowed for investment in those lines in which they best serve the wants of the consumers, and if it succeeds in these entrepreneurial activities in free and equal competition with all private entrepreneurs, it is in the same position as any other businessman; it can pay interest because it has made surpluses. But if the government invests funds unsuccessfully and no surplus results, or if it spends the money for current expenditure, the capital borrowed shrinks or disappears entirely, and no source is opened from which interest and principal could be paid. Then taxing the people is the only method available for complying with the articles of the credit contract. In asking taxes for such payments the government makes the citizens answerable for money squandered in the past. The taxes paid are not compensated by any present service rendered by the government’s apparatus. The government pays interest on capital which has been consumed and no longer exists. The treasury is burdened with the unfortunate results of past policies.

So, there we have it, from The Master himself. Our Total Chacha State is squandering Capital. And bondholders should be viewed as people on their side, not ours.

A good budget should contain no borrowing, even in times of war (as Mises makes clear in the same section quoted above, so study the entire section). The government should spend its legitimate tax revenues on its legitimate activities – and that should be that. Hence, a minimalist government, as prescribed by classical liberalism, is the best, the ideal. This maximalist Total Chacha State is a horrible, ugly monstrosity. This Budget proves it.

Not Professors, But Baboons (Updated)

When I speak of the evil “professors” of Delhi University, it is important to keep in mind the fact that they draw their salaries from The State. They are therefore a special class of “civil servants” to whom The State has affixed the title “professor,” just as to someone else The State may affix the title “commissioner.”

These professors of Delhi U are therefore baboos (or “baboons” as I prefer to call them) and they have a special duty towards their employer, viz., the duty of indoctrinating the student community with the “ideals” of their The State.

Ludwig von Mises writes about the “civil servant professors” of the Historical School in Germany, the “intellectual bodyguards of the House of Hohenzollern.” These German baboons inflicted great harm upon Germany by indoctrinating their people with the ideals of “statolatry”: the worship of The State. It was therefore natural for them to later worship their Führer.

In precisely the same way, these “civil servant professors” of Delhi University, in particular, of the Delhi School of Economics, have indoctrinated statolatry in the minds of their students. They are the “intellectual bodyguards of the House of Nehru.” Subjects such as “Indian Economics” have no purpose other than Nehru-worship. The objective of these baboons has never been the transmission of knowledge, for they have always been mere propagandists, never real knowledge workers. You will never find their articles in the scholarly journals. They do not produce any new knowledge themselves; they merely “teach.”

Real universities and real professors are never such. Real universities are where knowledge is cultivated, sheltered from any interference on the part of the rulers. Real professors do not teach; their primary purpose is the production of new knowledge. Adam Smith was a real professor. Ludwig von Mises was a privatdozent in a real university. Both produced a whole lot of real knowledge.

Judging from the miserable state of affairs in India’s higher education system, entirely monopolized by the Total Chacha State and its baboons, I do believe that there is no option before the Indian nation than to completely shut down the State-owned university system, and lay open the field to private enterprise, including foreign investors. If there are any genuine knowledge workers within the State system today, they will be the ones who will flourish in the new scenario. Students, of course, will gain the most. Real knowledge will be produced and transmitted. Truth will triumph.

UPDATE: Chandra has a post informing us of a paper by Professor Suresh Tendulkar, till recently Director of the Delhi School of Economics, in a volume entitled - and this is what should NOT surprise us - Essays in Honour of Montek Singh Ahluwalia.

The paper, to Tendulkar's credit, discounts the great "value" of EQUALITY that socialists like him have always placed above the value of FREEDOM. But as a Hayek quote says on Chandra's blog:

"There is all the difference in the world between treating people equally and attempting to make them equal."

There is also the Dylan song:

A self-ordained professor's tongue,
Too serious to fool,
Spouted out that Liberty,
Was just Equality in school.

Anyway, Chandra read about this paper by Professor Tendulkar from a review of this book in honour of Chhota Ustad montek, in ET, written by their Senior Editor. Do read it and see the "economists" cited to buttress her case. Of course, Adam Smith is mentioned right at the beginning!

I hope more and more of you are switching to Mint.

On The Evil Professors Of Delhi U

There is a huge taxpayer-funded advertisement in my newspaper of yesterday on the NREGA. It features the smiling face of a village woman with the caption: “Not just livelihood, it earns me respect too.” In the backdrop there is a long line of village women, all bearing headloads. At the bottom right-hand corner are photos of Madamji Soniaji Gandhiji and Chacha Manmohan.

Can “respect” be earned by queuing up before government clerks for money and carrying headloads at their behest?

Anyway, the ad got me thinking of the “labour armies” that socialist professors of the Delhi School of Economics have always advocated. In yesterday’s post, I discussed Professor KN Raj’s many evil schemes, but omitted writing about the “labour army.” Today, let us probe this evil idea of theirs.

I quote from the same book by Peter Bauer I cited yesterday. Here are the words of Professor KN Raj:

In view of the social objectives underlying the Plan, and the large employment opportunities proposed to be created in the investment projects, it will be desirable to give up the present system of recruiting labour at random and discontinuing their services on the completion of particular projects, and instead organize labour armies on a more permanent footing. In view of the uneven disposal of agricultural labour in the country referred to earlier, the recruitment will be confined in the main to a few States where distress is the greatest. The potentialities, implicit in the organization of such labour armies, are immense from many points of view.

Professor BN Ganguli was then KN Raj’s boss, and Director of the Delhi School of Economics. Bauer quotes at length from his memorandum entitled Institutional Implications of a Bolder Plan with special reference to the Chinese Experience. Professor Ganguli favours the “planning of consumption” through State-trading and “control over private savings.” He goes on to suggest that “all transport in India must be under the authority of a single State-owned enterprise.” He advocates compulsory co-operatives in agriculture along Chinese lines, because the “vast private sector in the countryside can no longer be left to the devices of anarchical individual operation of farms.” And finally, he too advocates direction of labour and the setting up of labour armies in the manner of totalitarian states. Professor BN Ganguli writes:

One way of inducing social change that is needed and of also completing our vast construction projects quickly is to organize a trained and disciplined national labour force which, like the armed services, does not recognize differences of caste or community and which can be deployed all over the country like a vast mobile force imbued with patriotic emulation to undertake and complete in record time projects of national construction. People belonging to the depressed classes should form the bulk of this force. The idealistic youth of this country may easily form a powerful element of this force as members of the technical, supervisory and teaching cadres. The Indian Army, as the People’s Army in New China, may very well find scope for its wonderful capacity for leadership, discipline and hard work… in peaceful constructive activities in collaboration with the civilian labour force. The national labour force that I contemplate should not be a voluntary labour service corps which may operate on small projects for short periods….

The Grand Vision of the Delhi School of Economics can be summarized as follows: The Total Chacha Nehru State employs us all – the poor, the depressed classes, the idealistic youth, the army, all are at the service of the Total State. Has any King ever employed all his subjects? What will happen to his Treasury if he does so? Does the smart King not encourage his subjects to create wealth themselves, in Liberty, so that his Treasury is always full?

Further, labour is not performed by the Individual for anything but what he can buy from its proceeds. We all work to consume. But here, the Delhi School of Economics advocates “planned consumption” and, not only that, the total appropriation of all savings too. Sounds like criminal insanity to me. But we were talking about the NREGA of Chacha Manmohan.

Let us not forget that Manmohan Singh was very much part the faculty of this Delhi School of Economics, as was Amartya Sen. Thus, the NREGA remains very much the same old idea of The Total State employing “labour armies.” There can be no “respect” in working for such an army; and certainly not “self-respect.” On the contrary, it is but degrading servitude.

Let is therefore salute the spirit of Professor BR Shenoy, who alone dissented – and suffered the consequences with stoic composure. I have written of him in a recent post. Bauer called him a “hero and saint.” He was also the only true economist.

The Delhi School of Economics should be closed down. Their professors are pure evil, enemies of truth, enemies of reason, enemies of the youth.

A Joke On Soniaji & Co.

Wasn't in the mood to blog today, so I thought I'd leave you with a children's joke I heard yesterday:

If "pro" is the opposite of "con," then what is the opposite of "progress"?

Methinks this applies equally to India as well as the USSA.

On The Evil Professor KN Raj - Take #2

Chandra has a post on the death of the famous Indian economist KN Raj, who studied under Harold Laski at the LSE, played an important role in India’s early central planning, and, in the field of Economics education, helped set up the Delhi School of Economics and also served as Vice-Chancellor of Delhi University. Chandra has provided many links to glowing obituaries on KN Raj, and the one I read is this from Mint, based on a PTI report, that quotes all the great and famous, including Chacha Manmohan S Gandhi, on the "undying legacy" of the man.

I have in my library Peter Bauer’s only book specifically on India, with the unsexy title Indian Economic Policy and Development, published in London in 1961, shortly after the Nehru-Mahalanobis Second Five-Year Plan was launched, that began “heavy industrialization” here on the lines of the Soviet Union. This book was republished in India in 1965 by Popular Prakashan, but has never featured in university curriculum here. It should.

The sixth chapter in this extremely important book is titled “The Politics of Indian Planning” and here Bauer quotes many eminent Indian economists of the day, including KN Raj.

Bauer specifically alerts us to the fact that these sycophants of Nehru were leading India towards totalitarianism and ruin.

KN Raj was then Professor of Monetary Economics at the Delhi School of Economics and wrote a memorandum titled The Second Five Year Plan; Investment Magnitudes and their Implications. Bauer says “his proposals include extension of state trading, nationalization and physical controls, the institution of compulsory loans and the maintenance of labour armies.”

Bauer provides a long quote from this memorandum, from which I offer a brief extract below:

… the government should be prepared to go outside the field of basic industries and services, where, precisely because they are basic, it is difficult to use them for the purpose of making profits. State trading in the commodities indicated above [foodgrains, cloth, sugar, vegetable oils, kerosene] will not be adequate for this, since they are, by and large, essentials; greater scope for making profits can be found only if the government enters the field of luxuries and semi-luxuries. One possibility to be explored in particular is the nationalization of plantations, covering tea, coffee and rubber…. Another possibility closely bordering on this is the nationalization of sugar factories.

Actually, "essentials" are highly suitable for raising government revenues (not "profits") - as in the case of salt monopolies used for such purposes over millennia.

Raj then goes on to talk of compulsory loans from the public to the government, and the setting up of labour armies.

The portion on compulsory loans from this Professor of Monetary Economics is also worth quoting:

In the borrowing programme of the government, greater accent must be placed on compulsory loans and non-transferability (except under special conditions) of the securities offered; for, the merit of expenditure financed by borrowing from the public over expenditure financed by creation of money is only in so far as it exercises a restraint on private expenditure.

Other economists quoted in this chapter are Professors VKRV Rao, BN Ganguli, DR Gadgil and, of course, the great Mahalanobis himself, whose portrait proudly hangs in the LSE. Professor Gadgil was the Director of the Gokhale Institute of Economics & Politics in Poona. Both VKRV Rao as well as Ganguli served as Directors of the Delhi School of Economics, and Rao was also Vice-Chancellor of Delhi University.

So, Chacha Shah Alam, you can keep Delhi upto Palam, and you can keep your propaganda arm, Delhi University, too.

Students: Drop out and save your intellects. Ask Vipin Veetil for advice on this subject. Another student of the DSE, Nandita Markandan, who attended my seminars, once cried on my shoulders and said, “I wanted to study Economics, but they only teach me Mathematics.”

There is no mathematics in Ludwig von Mises Human Action: A Treatise on Economics, PDF here. No graphs or charts or pretty curves either. Only words: "logical economics." But each word weighs a ton.

Indeed, in Chapter 26 titled "On the Impossibility of Economic Calculation Under Socialism" there is an entire section under the heading "The Differential Equations of Mathematical Economics" (Page 710) which will instruct you that the mathematics taught in the DSE is not "economic calculation"; on the contrary, it is SCIENTISM, the pretence of science, the "abuse of reason."

Drop out, and study real economics - at home.

And stay far, far away from the LSE.

Professor Harold Laski, the "star" of the LSE, unleashed an army of evil men such as KN Raj upon India. Laski was also Chairman of the British Labour Party, and he personally spoke of the desirability of using strong measures that would discourage the British workers from spending their money on the movies, and spend it on more "socially worthwhile" things instead. Someone in England ought to make a movie on this monster.

In Hayek on Hayek: An Autobiographical Dialogue, a book-length interview with the philosopher, there is a part where Hayek, who was a minor figure in the LSE at that time, is quizzed about Laski. Hayek says that after the purges of Stalin, Laski denied ever having supported his evil regime! Harold Laski was, says Hayek, an "inveterate liar."

Songs From A Room

Began Sunday with this great travelogue in Mint on Marrakesh, titled “Souk for the soul.” It's the world's oldest MARKET!

My mind immediately raced to that old CSNY song, “Marrakesh Express”:

Blowing smoke-rings from the corners of my ma-ma-ma-ma-mouth…

That was the theme song of the hippies, white folk who loved the Noble Herb. Some came to Goa directly from Woodstock, and never returned. You sometimes come across these nice folk in these parts.

Anyway, I didn’t have “Marrakesh Express” in my poor CD collection, but so what? I put on Marley, who loved the Noble Herb too. Marley was not black. He was mulatto. Some white genes there. And he sang in English. That’s why he became a Third World Superstar. Makes absolute sense. Peter, Lord Bauer, often said that those underdeveloped nations that never had any contact with white folk were worse off. Goa had 500 years of the Portuguese.

So Mr. Marley started to play his stuff:

It’s a natural mystic blowing through the air,
If you listen carefully now you will hear,
This could be the first trumpet,
Might as well be the last,
Many more will have to suffer,
Many more will have to die,
Don’t ask me why….

Then he went on to “Rat Race”:

There’s a horse race,
There’s a dog race,
There’s a human race,
But this is a rat race.

It is here he makes the famous shout:

Rasta don’t work for no CIA.

That’s me.

And then on to “Exodus: Movement of Jah People”:

Wipe away transgressions,
Set your captives free.

A movement of Jah people got me thinking about Chacha in New Delhi. And of Dylan’s “Ballad of a Thin Man”:

You walk into the room
With your pencil in your hand
You see somebody naked
And you say, “Who is that man?”
You try so hard
But you don’t understand
Just what you’ll say
When you get home
Because something is happening here
But you don’t know what it is
Do you, Mister Jones?

I found these lines especially appropriate:

You have many contacts
Among the lumberjacks
To get you facts
When someone attacks your imagination
But nobody has any respect
Anyway they already expect you
To just give a check
To tax-deductible charity organizations

You’ve been with the professors
And they’ve all liked your looks
With great lawyers you have
Discussed lepers and crooks
You’ve been through all of
F. Scott Fitzgerald’s books
You’re very well read
It’s well known
Because something is happening here
But you don’t know what it is
Do you, Mister Jones?

Yeah. Something’s happening out there all right. I get all the signs. Wonder if Chacha gets them too. Or is he headed for the fate of that Last Mogul:

Poor old Shah Alam
He rules from Delhi to Palam.

Palam is the village where Delhi’s airport is located. Lots of property without titles in Palam.

But who wants Delhi? Recall Babur, when Humayun brought him Ibrahim Lodi’s severed head. Two of his top generals immediately revolted, saying Delhi was too hot. They deserted ship and rode off back to Kabul and Kandahar. And summer is approaching. The Brits always vacated Delhi in summer, taking their The State to cool Simla. Chacha and Pachauri prefer air-conditioning. And then they talk of global warming. Funny old world.

So, if I don’t want Delhi, where do I go?

Actually, Harare sounds like a great opportunity for conquest. They surely need a sound money man there. And Harare is the city in the world with the maximum number of golf courses. Great city, I am told. So we could paraphrase Marley, who supported independence for Zimbabwe:

We’re gonna chase that crazy Mugabe outta town…

What about Goa? Well, this is no Rasta place. The Noble Herb is smoked here in hiding, and sold in hiding. The mafia rules. There are no freedom fighters. And no freedom songs either. You don’t find a single shack on Palolem Beach, where Rizla papers sell by the bucketload, playing Rasta music. No Marley T-shirts are sported. My other serious option is Jamaica, where they could do with a Professor of Rastanomics. Ha ha.

Anyway, my Marathi manoos girlfriend in Goa complains if I have another beer.

I thought women complain if you have another woman.

But see how the mighty have fallen.