My Sympathies Are For The Poor Alone

The June 11 issue of Outlook Business dedicated to "corporate social responsibility" (CSR) to which I had contributed against the motion was not available anywhere in Orissa, and I managed to find a copy only in the swanky Rajiv Gandhi Airport in Hyderabad. Yesterday, I read through the issue and quite frankly must confess that I have never read such a load of patronising and condescending tripe in my life before. You can find the entire issue here.

To begin, the proponents for CSR assert that "hunger is India's greatest problem" and they quote the fucking World Bank "measurement" that since 90 percent of Third World people survive on less than $1.25 a day, they must be hungry. I wonder if any of these bozos have ever walked the streets of our cities - like I do. This morning, for instance, here in Pondicherry, I breakfasted on 5 steaming hot idlis and one fat dosa for just 15 rupees (20 cents) from a roadside stall opposite the railway station - and that should keep me going till sundown. Lots of poor and hungry customers were being fed via the "division of labour." None had to buy "cheap rice" from our The State, nor did they have to grind it, steam it, fry it, or make coconut chutney. Just 15 rupees - and clean, healthy food at that.

But if we were to really examine the conditions under which these businessmen and women work to stave off real - and not imaginary - hunger, we will surely discover that the "health inspector" (there was a huge Public Health Department building nearby) preys on them, as do other predatory government agencies. This is a Predatory State - from Top to Bottom.

There are other problems such people face as well. For example, these food stalls never get water supply. They have to carry water from far distances. Further, if commercial space was increased, its value would fall - and these stall-owners would graduate to shops. 

Nearby was a very wide open drain that the French built to separate the "white town" from the rest. Even in the 1980s when I lived here I often told people that this should be covered and the space gained thereby used for shops - because the commercial areas were, even then, overcrowded. No one has thought of this during these 25 long years - while fools fed on fucking World Bank data feel concerned about "hunger."

Every single "philanthropist" arguing in favour of CSR has a deep desire to "educate the poor" - but these people do not need to be taught by Anu Aga or Shiv Nadar how to make idlis and dosas. Anu Aga - who sits on the National Advisory Council (NAC) that hangs around sonia suggesting ways and means of widespread "capital consumption" writes that she wants to educate the poor so that her engineering firm can hire trained people. In which case, she ought to set up a Thermax Engineering College - which is all that Thermax knows. Shiv Nadar writes that he is setting up a Shiv Nadar University to teach "arts & sciences" - but he doesn't say that State Universities should be shut down and top-notch foreign universities freely allowed to set up shop - for shop it is, and education, we all know, is a Big Business, and has nothing much to do with philanthropy.

There are some goras on their side as well - the head of Dell computers, some woman from Hewlett-Packard, and some "management guru" totally ignorant of even the basics of Market Economics. I recently bought a Dell laptop and threw it into the sea! Shouldn't these people focus on creating better products - as Steve Jobs of Apple is doing. I have earlier written how both Azim Premji as well as Bill Gates are engaged in "false philanthropy."

Then there is Mahindra Motors writing about how they renewed a forest near their plant in Nashik. But forestry and timber could be Big Business for the poor. Imagine sandalwood, ebony, teak, rosewood and mahogany being freely grown instead of being State Property. And shouldn't Mahindra's own products be better? I recently drove a Mahindra Scorpio jeep my friend owns - and gave up! Felt like a bloody truck!

There is also a "measurement" of CSR provided by the Tata Institute of Social Science (and another by KPMG). What has this Tata Institute ever contributed to our understanding of society? And have you ever taken a ride in a Tata Indica - as I did from Madras Airport to Pondicherry? Incidentally, the library at the Delhi School of (Mathematical) Economics is named after Sir Ratan Tata.

We have also had a Birla Institute of Technology co-existing with the Ambassador car. Not to mention a Bajaj Institute of Management.

To understand what can really help the poor, you must read ALL of Peter Bauer, who was a "development economist" who toured the entire Third World, observed the poor in markets - especially "informal markets" - and wrote about what he saw. It was he who said something very important about Third World poverty - and that is:

Poverty indicates just one thing - the absence of economic achievement.

He then went on to add:

Economic achievements are made in markets.

All these corporate types who profess to being philanthropic ought to read Samuel Smiles' Self-Help, written in Victorian England - a book that outsold the Bible, and fired the Japanese in their catch-up with the West. It tells the stories of many, many people of humble origins who struggled against great odds - including poverty - and rose to incredible heights through sheer effort, perseverance and dogged hard work. Such books are positive motivators - and I am proud to say that I personally edited and wrote a foreword to an Indian edition of this great book, published by Liberty Institute many years ago.

Poor people need Liberty. They need Property - including commercial property: shops. They need roads. They need modern modes of transportation, especially urban transportation. And they need encouragement. They do NOT need this patronising and condescending CSR bullshit - that too, from a bunch of CRONIES of our The State, who do not want to compete with foreigners themselves, and want to keep on selling second-rate "capital goods" to our poor people. Such people deserve to be DISGRACED.

We have had endless people faking concern for the poor - from Nehru to Manmohan to Sonia to all the NGOs put together; and now we have these rich bozos who know nothing and want to "educate" poor people who are already possessed of knowledge valuable in the market. They never utter the sweet word LIBERTY! - only because they fear it. They thrive on the misuse of State Power: the "customs barrier." Which is why I tell all poor people - never buy swadeshi; always buy videshi. Buy the best. Unilateral free trade - for the poor, against all these bozos. I have no sympathy for these bozos. All my sympathies lie with the poor.

The only true friend of the world's poor was Peter Bauer - and do read my eponymously titled tribute to him.

In the end, if there is anything that everyone needs to understand, it is Economics. It is this vital subject that is being mistaught by our The State in India, as I pointed out yesterday. If these CSR bozos go about "educating" our people, with State support, it will be DISASTER!

To conclude, let me quote Ludwig von Mises:

Whether we like it or not, it is a fact that economics cannot remain an esoteric branch of knowledge accessible only to small groups of scholars and specialists. Economics deals with society's fundamental problems; it concerns everyone and belongs to all. It is the main and proper study of every citizen.

I hope you get the reason for my strong moral outrage.

The Haunted, Frightened Tree Of Complete Ignorance

Vaclav Klaus regaled me with the story of how some World Bank - IMF "economists" phoned him when he assumed office as President of the Czech Republic, seeking an appointment so that they could offer him "advice." He told them he knew more Economics than them, and did not need their advice. Fuck off from Prague, dudes, he told them. Return to Washington DC or wherever the fuck you came from.

Sonia Gandhi has a National Advisory Council (NAC). She needs advice. Why does she need advice? Because she is Ignorant. According to Shekhar Gupta of the Indian Express, these "darbari jholawallahs" of the NAC are "IAS dropouts and retirees." These guys have dreamt up a new scheme for promoting "rural livelihood." But markets are in crowded cities and towns - not in the vacant countryside. As Adam Smith said in the very first chapter of the Wealth of Nations, "the extent of the division of labour is limited by the size of the market." The Principle of the Division of Labour, by which we all specialise, is what Ludwig von Mises called the "principle of cosmic change and becoming." Each of us chooses to "become" someone - singer, dancer, actor, writer, whatever. We do not all sit in villages and spin yarn for our own use. We are NOT "self-sufficient." We specialise - and this requires physical marketplaces in physical cities and towns.

While Sonia Gandhi and her darbari baboons dream of a rural utopia, it is worth noting that all our cities and towns are disasters, including Nude Elly. These socialists built three cities in the past 60 years - while the Bris built 80 "hill-stations" in 50 years - and all three are State Capitals: Chandigarh, Gandhinagar, and Bhubaneshwar, where I am now located. 

I travelled around Bhubaneshwar a fair bit by auto-rickshaw yesterday, and the broad roads lined with trees are all for The State, just like Nude Elly. I asked the driver to take me to the Central Commercial District - and there was none. At least the Brits built Connaught Place, grandly designed. 

In Bhubaneshwar, the streets where shops are located are all disasters - and this affects the poorest of the poor, who eke out their "livelihoods" on the streets, since they cannot afford proper shops. They sell bananas, coconuts, pakoras and what not - this is the division of labour. And you cannot sell coconuts where there is no market - which is the vacant village.

Population causes Prosperity - in cities and towns, and their markets.

While Sonia Gandhi and her darbari baboons dream of rural schemes by which huge amounts of fraudulent money will be spent by younger IAS baboons, the fact remains that poor people from villages are continuously coming to these ghastly cities and towns - and getting fucked. See the jhugggis of Nude Elly, the slums of Bombay and Calcutta, and from my train window I saw the poor of Bhubaneshwar too, trying to survive in huts by the railway track. All around is ABUNDANT UNOWNED LAND.

There is the metaphysical - and there is the physical: cities and towns are our Fixed Capital. City and Town Roads are Social Capital: they are "public thoroughfares" and hence "collective property." They are NOT investing in these because they know not what Capital is, the life blood of Capitalism. Rather, they are "consuming capital" - which is the highway to "de-civilisation." The Professor of Economics at the IAS Academy in Mussoorie is a Marxist - as I reported on the Barkha Dutt Show many years ago.

There is "authority" - and sometimes there comes about the total absence of authority, because of Ignorance. The Delhi Development "Authority" is NOT an acknowledged "authority" on anything: just check out the disaster called Vasant Kunj, built and designed by a bunch of assholes. Similarly, the National Highway "Authority" of India is NOT an "authority" on highways - which would be Gabriel Roth. Our National Highways are all "notional highways." The Traffic Police know nothing of the science and technology of traffic management. Everything about The State is marked by complete and total Ignorance. From top to bottom. And they want to teach your children!

The Science of Economics is the most important science for humanity to know and understand. I am proud to be an Independent Authority in this science.

And as for our The Corrupt & Ignorant State Devoid of all Authority - I have only pure contempt. You look at human society with the "evil eye" - the buri nazar. You desire not that each Indian youngster "becomes" what he or she wants to become. You desire only that they become your servants - that is, "government servants." So you want to employ "the masses" in your "work schemes." You are inventing work in villages - and stealing all the money through your "political and bureaucratic organisation" - while, simultaneously, you are hurting all livelihoods in cities and towns. In Bombay, girls can't dance free. In Nude Elly only The State can open booze shops. In Bhubaneshwar I saw many "musical bands" who had set up their counters on a roadside. One said "Brass Band." And one actually said "ROCK BAND." There are no bars in the city where live music is played. What is "knowledge"? And how much of it comes from schools, and books?

If the CONgress is so ignorant, the Opposition is even worse. The BJP's slogan remains the metaphysical - a God, and his Temple. As if any God can be found in temples. I smoked a chillum with a sadhu in Gangotri. He told me the people worshipping at the temple there were fools, and God is found in solitude, in peace, and in the Holy Smoke. Instead of the metaphysical Lord Ram the BJP has given us Narendra Modi at the top and Dara Singh at the bottom. They are as evil and ignorant as the CONgress; maybe worse. And then we have the Commies - the most Ignorant people ever born. Democracy is also metaphysical. The "power of the vote" is no power; and most people don't vote. So there must be someway outta here. And that lies in Liberty.

I conclude this post with two quotes Peter Bauer ended his essay on "The Disregard of Reality" with - an elegant essay penned on the disaster mainstream Economics has become, written towards the end of a long and productive life championing Liberty for the poor of the Third World. The first is from Pascal, and it goes:

"Let us labour at trying to think clearly: herein lies the source of moral conduct."

And the second is from George Orwell, a socialist hero who did see the horrors of statism:

"We have sunk to such a depth that the restatement of the obvious has become the first duty of intelligent men."

The Gandus... And Their Metaphysics

Orissa is a truly beautiful state, abundant in fertile land, forests and hills, a country that ought to be peopled by a population enjoying life in pretty towns - but the place is an urban disaster. Juggernaut Puri was an almighty mess, and my excursion to Sambalpur revealed the futility of Nehru's Big Dams and our The State's "steel policy." For Sambalpur is the shittiest town I have ever seen - and I quit it as fast as I could.

It struck me that mainstream Economics is entirely "metaphysical" - in the sense that "economic development" is expected from a metaphysical entity like The State. We need a good chief minister to develop Orissa or Bihar, the mainstream editors always write. Nitish Kumar and Naveen Patnaik are media favourites as was chacha manmohan singh. But the fact is that Economics is NOT a Metaphysical Science; rather, it is a Science based on the "laws of thought" that guide human action in exchanges in markets. The laws of demand and supply are not the product of metaphysical "market forces"; rather, they are laws of thought determined by human self-interest. All humans are self-interested, and public choice theory has adequately proved that State actors - politicians, bureaucrats and even voters - are self-interested as well. We cannot replace capitalist self-interest with the planner's "intellectual-moral" values, as Gunnar Myrdal imagined, and he was a victim of the metaphysical delusion that the Science of Economics, especially in the area of "development," has something to do with The State. All this is the Economics of Delusion. Peter Bauer, the only dissenting development economist, therefore penned an important essay titled "The Disregard of Reality." These planners sitting in Nude Elly do not know anything about conditions in Orissa, and the complete urban mess here. And it points to the fact that their "political and bureaucratic organisations" are pure evil. They must be replaced by business organisations, which are benign.

Everything about The State is metaphysical. The Big Dam in Hirakud produces metaphysical electricity, for the power failed in Puri, in Sambalpur, just 10 km from the dam, and even in Bhubaneshwar this morning. In the same way, State Money is "metaphysical" - for the paper note is just a "money substitute" as the promise printed on it, and signed by the RBI Governor, indicates. The whole of "macroeconomics" is metaphysical, being the "knowledge" employed by The State to develop and grow the "national economy." In reality, there is no national economy. All this is bull - for each ordinary person is busy trying to rnind his own, private economy, to accumulate Capital for himself. In this, our The State is not helping at all - rather, it is the hindrance, the rukawat. It is always The Predator.

For example, an extremely fat fire department official landed up in my hotel this morning to inspect the fire-prevention system - and The State has not built a road to the hotel wide enough to accommodate a fire tender! It is a metaphysical notion that The State is looking after all of us, just like a God. CONgressmen like chacha manmohan are no different from the pandas at the Jagannath Temple, who charge for a darshan. Chacha is a panda of sonia. All is metaphysical. Their development economics is metaphysical; the "planning" taught in "Indian Economics" is metaphysical as well; the "macroeconomics" is metaphysical - and I have already shown how "microeconomics" is metaphysical as well. There are no "market forces" out there, like the Rain God or the Wind God. It is all in the Mind of the acting man.

The Science of Economics is the most important science for human survival - that too, in the urban, concrete-and-bitumen jungle, interacting peacefully with strangers. The point about strangers must be emphasised, for we open shops to sell to strangers, and not to our relatives and friends. Market Economics has nothing to do with "society" or "community." Ultimately, this Science must be called Catallactics - the Science of Exchange - because mainstream Economics is complete bullshit. It is a Science of Individualism, and not Collectivism. It proves that political and bureaucratic organisations are evil. It proves that "corporates" who curry favour with The State are evil as well. It proves that Interventionism is evil. It proves that all must be let free - laissez faire - and a "natural order" will prevail.

In Orissa, what is not metaphysical is State Interference. Like the Fire Department. The Police Department. The Forest Department. The Excise Department. The Customs Department. The IAS has destroyed this ancient civilisation with their corrupt and senseless urban administration, licking the boots of socialist politicians who look towards Nude Elly in this non-federation, in this Centralised State. The entire place is a DISASTER writ large. And all the "knowledge" on which it is based is "metaphysical." There is a complete "disregard for reality."

And you want The State to teach your children? You willingly pay chacha manmohan the "education tax."

Yes, what is tangible and real about The State is the Danda - the MISUSE OF FORCE. Every force, every power, is being misused. These are gandus - fucking you in the ass, and all their knowledge is metaphysical, like that of the pandas. Keynes was a gandu too, and in his diary he once recorded how he fucked a pretty liftboy in the ass, and how "it was nice." His metaphysical money is now fucking the whole world in the ass. And Hayek has recorded a speech Keynes delivered in which he made the bold assertion that he was an "amoralist"; further, Keynes added, "it is too late to change, and I will forever remain an amoralist." Both chacha manmohan and amartya sen studied under joan robinson, who was Keynes' #2. This is how the gandus took over the planet, with their ass-fucking metaphysics.

Anyway, I am fucking off from here soon. Stay tuned.

I will leave you with a quote from Mises to mull over:

"The desire for an increase of wealth can be satisfied through exchange, which is the only method possible in a capitalist economy, or by violence and petition as in a militarist society, where the strong acquire by force, the weak by petitioning." 

It is all metaphysics dude, employed by these fucking gandus. 

Africans Needs Liberty, Too

The news that India has extended credits of over US$5 billion to Africa should be treated with scepticism. All the talk of our "shared struggle against colonialism" is nothing but hogwash - but let me explain.

Some years ago, I had the good fortune to attend a seminar at the International Academy of Leadership in Gummersbach, Germany. The seminarians there were from all over the Third World - including, of course, from Africa; in particular, Egypt, Ghana, and Tanzania.

All three countries were ruled by "friends of Nehru": 

• Egypt was ruled by Nehru's socialist friend, Nasser;
• Ghana by Nehru's socialist friend, Nkrumah;
• and Tanzania by Nehru and Indira Gandhi's socialist friend, Julius Nyrere, who also happened to be a teacher. 

During the seminar, it became apparent that each one of Nehru's African friends had destroyed his country with his socialism. The people I met from these countries were political activists fighting for Liberty and Free Markets. They hated socialism. They hated Nehru and his friends.

The news report on what the Government of India is spending on in Africa therefore raises concern - since much of the "aid" is going towards "education."  Only yesterday I commented on the fact that the educational institutions we possess - all State-owned, including IITs and IIMs - are NOT "world class." I insisted everything to with education in India, because of State-ownership, is "Third World Class." Is this what we want to bequeath to Africa?

Let us not forget that the great African musician, Fela Kuti, has a classic song called "Teacher, Don't Teach Nonsense"!

Luckily, Africans are not waiting for us to show them which way to turn. In Egypt, radical change is on its way; Nkrumah is long gone from Ghana; and Nyrere has been overthrown in Tanzania. 

The best performing African country today is Botswana - with a per capita income of $14,800, which is ONE HUNDRED TIMES higher than ours, where "the masses" who are supposed to receive State Welfare earn less that Rs. 578 a month or about US$ 154 per annum, according to the Planning Commission. There is an article on this in today's Times Crest here - but you have to register to read it.


Botswana suffers from the "natural resource curse" - being blessed with diamonds - but they have conducted their affairs well after the Brits departed in 1966. Today, Botswana is the least corrupt country in Africa, according to Transparency International. All this is because of a Free Market and Free Trade policy. Botswana has achieved all this despite being land-locked. Could any Indian state match this? Then what business do we have to go about lecturing Africans and extending them aid - when many of our own states are far worse than anything in Africa.


Africa needs Liberty - just as we do. A presidential candidate from Tanzania whom I met at the same seminar spoke with reverence for Peter Bauer. I was left hoping for such people in India! Yes, it is Bauer's "classical liberal" stand on "economic development" that needs wide publicity in Africa; and if official Indian education takes over there, the very opposite doctrine, of State planning, will rule the roost - and take Africa backwards. Let us say no more statism for Africa - and liberty for all. "Teacher, don't teach nonsense" - as Fela Kuti sang.


To me, it seems absurd that an impoverished socialist nation like India should be extending "foreign aid" to Afghanistan and Africa. We had better use these resources for our own development, for our own roads. We have NO BUSINESS to teach Africans anything. We are far worse off than many parts of Africa.


What should we do in India? The answer was given by Cicero in 63 BC:

The budget should be balanced, the treasury should be refilled and the pubic debt should be reduced. The arrogance of public officialdom should be tempered and controlled. And the assistance to foreign lands should be curtailed, lest we become bankrupt.

India cannot lead the Third World unless she improves herself. Her cities are a complete mess - as is the countryside. More than half the territory is lawless. Land records do not exist for the most part of the sub-continent. We are still a socialist country. We are even now attempting - foolishly - to become a Welfare State. This, despite the fact that Europe has got screwed following this path. What we need to do is to embrace the Principles of Classical Liberalism in full - Private Property, Sound Money, Liberty, Free Trade. In which case, we must embark upon a non-interventionist foreign policy - we trade with all nations, and do not indulge in any political entanglements with them. Indeed, if fossil fuels and minerals are required from Africa, private firms will venture out to procure them - and not The State. 

Let the Chinese State do whatever it likes in Africa - but let us not follow their example. On our part, let us spread the idea of Liberty. That should be our principal export - the ideology. If we can do this, Africa and all the Third World will thank us. The silly path chacha manmohan s gandhi is embarking on will get us nowhere - nor will we make any lasting friends.

Recommended reading: My earlier post on Zimbabwe going for a Gold Standard - while chacha is donating funny money to Afghanistan. 

Inflation - And the Crony Academic "Sophistocrat"

Pratap Bhanu Mehta (whom I have lambasted on an earlier occasion) chairs a State-owned "think tank" - and is best described as a "sophistocrat": like the sophists of old, he "specialises in ‘making the weaker argument the stronger,’ or, in other words, convincingly presenting lies as truth by dressing them in the misleading cloth of the arguer’s expertise." 

In his regular column, he has this time focused on inflation. This former Professor of Law & Government at JNU says inflation is "governance induced" and caused by "governance failures" - and I wonder why he does not use the word "government." The word "governance" is pure fiction - as I have explained in an earlier post. These are failures of The Government of India, Professor Mehta!

What is inflation? Older economists looked differently at this word. Ludwig von Mises (1881-1973) wrote how the very meaning of this word had changed during his lifetime:

What people today call inflation is not inflation, i.e., the increase in the quantity of money and money substitutes, but the general rise in commodity prices and wage rates which is the inevitable consequence of inflation.

This is the "classical quantity theory of money" - which was NOT mechanistic and mathematical like that of Irving Fisher's MV = PT. But even Fisher knew that increases in the quantity of money cause a rise in all prices. The difference between the classical and modern quantity theories is just that the modern version says prices rise "proportionately" while the older economists knew that prices rise depending on "where the new money goes." So, if you "follow the money" all will be clear.

Today, money is NOT gold. It is just fiat paper - monopolistically produced by The State. Thus, increases in the supply of money are caused by The State. It is The State that produces inflation - deliberately, to fund its expenditures and to buy support. As Mises wrote:

The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy.

Professor Mehta does not say this. Instead, he says:

When inflation is persistently high there is good reason to believe that there are significant supply bottlenecks in meeting increased demand. So the question is: what is it about the Indian economy that is making it difficult to generate supply responses to increased demand? In certain areas of agriculture there are long-term issues around productivity. There is simply no excuse why these issues should not have been addressed seven years into the UPA. But the supply of every single input cost, from energy to services, from land to credit for small businesses, seems to be alarmingly high. Each of these input costs can be directly linked to governance failures. Proper regulation is needed in many areas. But the form in which regulation is administered at so many levels of government is exacting a huge toll on the ability to create supply responses.

This is Professor Mehta's sophistry: to blame inflation on something else - like demand and supply of various goods, instead of nailing The State as the only cause. Yet, "creeping inflation" has been on for decades: when I was a little boy, a bottle of Coca-Cola cost 30 paise. When I bought my first motorcycle, petrol was 3 rupees a litre. When the first Maruti 800 rolled out, it cost 45,000 rupees. Inflation is nothing "new." As long as deficit financing continues, inflation will continue too.

Under the old International Gold Standard, if a nation "inflated" the supply of paper notes to finance The State, this would affect the foreign exchange market, and all foreign currencies would rise in value relative to the domestic currency. This would make imports expensive and exports cheaper. The public then viewed this as a "bad thing" - and condemned it. Today, however, people think this is a strategy to "boost exports" - and they cheer! This is because Keyenesian "education" has dulled and corrupted their minds. As Mises explains:

In the course of the depreciation, foreigners are in the profit-making position while domestic residents are in the losing position. Foreigners can buy more of the domestic products of the country that has inflated its currency and have to pay for their purchases by selling a smaller amount of their own products. The inflation-producing country, its is true, exports more, but it receives less for its exports. Inflation forces upon that nation a restriction on consumption. Only people completely blinded by mercantilist fallacies can view such an outcome as advantageous.

The Indian rupee has been losing value internally as well as externally - for decades. The US dollar was worth 8 rupees, the Deutsche Mark was 2.50 rupees, and the UK pound was 27 rupees in 1989, when I went to study abroad. Today, the dollar is 45 rupees, the Euro is over 60 rupees and the pound about 80 rupees. My course fee of £5000 cost me less than Rs. 1,50,000. Today, the same course would cost Rs.4,00,000 - and, yes, the exporters are laughing! When will we realise that foreign trade is about imports, about improving domestic consumption?


Indeed, Professor BR Shenoy's "Note of Dissent" to Nehru's Second Five-Year Plan was on precisely this point: inflationism. As Lord Bauer wrote in his tribute to this honest Indian economist:

They [the majority of economists] envisaged large-scale money creation for the financing of the highly ambitious Second Five Year Plan, maintenance and expansion of a wide range of economic controls, and extensive nationalization. In his Note of Dissent, Shenoy rejected the general spirit of the Majority Report as endangering personal freedom and a democratic political system. He also disagreed with several major proposals, including the scale of money creation, the maintenance and extension of state economic controls, and the scope of nationalization. He argued specifically that money creation on the scale envisaged by the Majority Report and under the Second Five Year Plan would result in inflation or a balance of payments crisis or both—a prediction that was fulfilled barely a year after the inception of the plan.

The difference between now and then is just this: then, they printed money to build steel plants under their ownership; today, they want to fund "welfare." And our chacha (and his guru Amartya Sen) were on the inflationary side then, just as they are now. Interestingly, both are from Cambridge, and both were taught their craft by Keynes' greatest disciple, Joan Robinson. In Sen's case, he was also a member of the secret Cambridge group called "The Apostles" - a group to which Keynes himself belonged, and who called themselves "amoralists." (See the wiki on Amartya Sen.)

Let us return to Professor Mehta's piece and his critique of chacha manmohan's claim that "there is a trade-off between inflation and unemployment." This is typical Keynesian bull - the notion that the more the government spends, the better the fate of the economy, "because there is more money floating around." 

In reality, this is but a means of cheating the working class - by agreeing to the trade unions' demand for higher wages, while at the same time engaging in inflationary finance. By inflation of the currency, The State "consumes capital." This is bad for the nation - though a handful of people gain, including crony exporters. The working classes lose because there is less Capital to invest, less jobs on offer, and wages cannot rise because productivity does not. Consumption falls - including consumption of imports (like oil). As Mises wrote:

Keynes did not teach us how to perform the miracle of turning a stone into bread, but the not at all miraculous procedure of eating the seed corn.

It is time we realised that the lesser a State spends, the better-off we all are: that is, the more of our income we ourselves retain, to save and invest; the less we pay in taxes; and that the same applies to government borrowings as well as money creation. I have an earlier post explaining this in full.

The only real solution is a return to the International Gold Standard - which will place "golden handcuffs" upon the wrists of every finance minister.

But there is still more sophistry in Professor Mehta: this time, he also talks about the high price of land - that is, urban land. Mehta writes, in support of a new Land Acquisition Act:

The bill will, if well drafted, help create fairness and transparency in compensation. But it will not solve all the principle land issues. It will solve the fairness issue. But whether it will solve the shortage or zoning issues is still an open question. Some land acquisition is location-specific. Land-acquisition problems are a product of the fact that the entire ecosystem for land planning is mismanaged. 

Actually, urban land is expensive only because of one reason: The State (of course!) which is a monopolist of urban land (the "urban development authorities") as well as a monopolist of roads. Around all our metropolitan cities there is abundant land - that is, "unowned land" that is not linked to the city by roads. 

Thus, the dual monopolist exploits us for his own, selfish gains. He makes urban land prohibitively expensive - deliberately; by "policy." Ditto for inflation, which is also "deliberate policy." 

All the urban development authorities must be abolished. And the road monopoly must go too. City mayors must be constitutionally installed - with the specific constitutional duty of providing roads to any real estate development coming up in the periphery of the city; further, roads must also be built to connect all the satellite towns to the primary city. 

Here again, all we have from Professor Mehta is blather and sophistry. Below are words that Mises' himself might have directed at Professor Mehta had he been alive now. But these words were targeted at people like him and his boss, chacha manmohan:

The pretended solicitude for the nations welfare, for the public in general, and for the poor ignorant masses in particular was a mere blind. The governments wanted inflation and credit expansion, they wanted booms and easy money.

Mises said "it is not the duty of the economist to be fashionable and popular; he has to be right. Those timid souls who fear challenging spurious doctrines and superstitions because they have the support of influential circles will never improve conditions. Let them call us "orthodox"; it is better to be an intransigent orthodox than an opportunist time-server." 

Fukuyama, Hayek, Sen - and a Cop

Francis Fukuyama, who once wrote a book arguing that liberal democracy is the "end of history," has reviewed a new edition of Friedrich Hayek's The Constitution of Liberty for the New York Times, in which he has pitted Amartya Sen against Hayek. Fukuyama writes:

There have always been two major critiques of Hayek’s arguments, neither of which are fully answered by a re­reading of “The Constitution of Liberty.” The first comes from the left. Hayek provides a very minimalist definition of freedom as freedom from coercion, and particularly coercion by a central government. But as the economist Amartya Sen has argued, the ability to actually take advantage of freedom depends on other things like resources, health and education that many people in a typical society do not possess.

Fukuyama does well to categorise Amartya Sen's critique of Hayek as "coming from the left." Sen is a "welfarist" – he won the 1998 Nobel prize for his work on “welfare economics” - and it is he who has championed and supported the "right to free and compulsory education" as well as the "right to food" and the "right to work." These are all disastrous ideas that merely serve the bureaucracy by giving them very big budgets to spend. All this big government spending does nothing for the poor - indeed, it actually hurts them by consuming precious capital and causing inflation.

Today, in India, we are suffering because Chacha Manmohan S Gandhi has followed Sen's ideas - as expressed in his Development as Freedom (1999) and its sequel Rationality and Freedom (2003). Sen's acolyte, the professor of sociology Jean Dreze, is a senior member of the National Advisory Council attached to Sonia Gandhi. In that position, Dreze supported all kinds of rights - except the Right to Property!

Fukuyama notes that:

Hayek always had problems getting the respect he deserved; even when he was awarded the Nobel in economic science in 1974, the awards committee paired him with the left-leaning economist Gunnar Myrdal.

Actually, Myrdal and Sen are more or less identical in their thinking: both believe that the masses are stupid - without "the ability to actually take advantage of freedom" - and that the baboos of our The State are an "intellectual-moral elite" who must plan the economy and take "collective decisions" on behalf of these dumb masses. These baboos must impart "education" to them, too.

It was Peter Bauer who demolished these nonsensical ideas – so contemptuous of the poor, and so much in praise of The State. And Bauer was a “development economist” who had studied the Third World - and the “informal sector” in which the poor operate - very closely.

Fukuyama therefore treads dangerous ground when he pits Sen against Hayek by writing in support of Sen’s claim that “the ability to actually take advantage of freedom depends on other things like resources, health and education that many people in a typical society do not possess.”

Did the bar dancers of Bombay lack “resources, health and education”? Do ganja farmers need freedom or welfare? Is Sen’s welfarism going to “help the poor”? Or do they need Freedom from the Centralised State? What about the Right to Property – the only solution to the “mystery of capital.”

Think things over – but I am on Peter Bauer’s side, opposed to both Myrdal as well as Sen. You can read my (unfavourable) review of Sen’s Rationality and Freedom, published in the New York Sun, here.


As far as the critique of Hayek that "comes from the right" - the charge of "moral relativism" that Fukuyama mentions - the philosopher Tibor Machan rebuts it roundly here. Machan concludes:

The relationship between objective personal morality and the principles of politics which are basic to a constitution such as Hayek's constitution of liberty is a challenging aspect of political philosophy. It does not help to casually dismiss Hayek's approach by caricaturing it as moral relativism.

After writing The Constitution of Liberty (1960), Hayek published three volumes on Law, Legislation & Liberty between 1973-79, and then The Fatal Conceit: The Errors of Socialism in 1988. He died in 1992 – at the age of 92. So it cannot be said that The Constitution of Liberty was his last word on the subject. Indeed, in Law, Legislation & Liberty he outlined the respective spheres of “private law” and “public law” – the latter being legislation. These pioneering ideas have been carried forward by many since then: you can read Hans-Hermann Hoppe arguing very strongly in favour of a private law society here. I have also written a brief column on this subject, available here.

Fukuyama concludes his review by saying that Hayek “proves himself to be far more of a hubristic Cartesian than a true Hayekian.” Actually, it is in the first volume of Law, Legislation & Liberty – titled “Rules and Order” – that Hayek demolished Cartesian rationalism and “legal positivism.” Fukuyama ought to read this too. Also, the Hayekian insight that when we buy and sell in the market we do so “between instinct and reason” – the opening chapter of The Fatal Conceit – proves that Fukuyama’s assessment of Hayek is totally unfounded.

To conclude: Here in Goa, the people suffer from various repressive pieces of legislation passed by the Central State – from the Coastal Zone Regulation Act to the Narcotics & Psychotropic Substances Act. Both are in violation of the Right to Property – a right not guaranteed to us by the socialist Constitution of India.

The other day I had a chance to interact with a Goan cop. I told him to resign from service – pointing out that he was doing “bad work” and not “good work.” There were quite a few Goan people listening in on our discussions – and they all agreed with me. In the end, the cop agreed too!

This itself is proof of the fact that our The State is repressive – and that the people need Freedom and Property. It was a vindication of Hayek’s contention that “liberty, property and law are an inseparable trinity.” So much for Amartya Sen and his “welfarism.” This welfarism funded by Keynesianism is the bane of India, detrimental to the poor. It must give way to Liberty and Sound Money.