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.

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."

Amartya Sen... And His Evil Metaphysics

Amartya Sen, the only Indian "economist" to win the Nobel prize, received this award for his "contributions to the economics of welfare." This is an entirely metaphysical discipline, resting, as it does, on a mythical "social welfare function" that supposedly inhabits the minds of the wise, caring and benevolent personnel of The State. He has thus championed the "right to work" programmes of the mammoth MGNREGA, and his protege, Jean Dreze the "sociologist" - another metaphysical discipline - sits on the National Advisory Council with soniaji and they are now coming up with more and more nonsensical ideas, from cheap rice to what not. Mint has an editorial today on "another flawed rural scheme" - designed to "promote rural livelihood." This is the metaphysical social welfare function at work.

Reality suggest something else is at work - a Predatory State. I am living on Station Road, Bhubaneshwar; there is no road to my hotel, and the establishment does not possess a license to serve alcohol. There are very few such shops on this road, and last evening I had to walk more than a mile - through slush and filth - to obtain some beer, which has been heavily overtaxed. Poor people cannot afford this healthy drink - and their traditional toddy is banned. There goes an important "rural livelihood."

The same is true for ganja. There is a hole-in-the-wall shop just outside the station where I bought a tola of fuck-all smoke. If the stuff is being sold, then why not sell it openly? Liberate the people. Let them enjoy quality. Let us think like Amsterdam. Cannabliss Indica - and not the Tata Indica.

Amartya Sen does not believe in Liberty. His two anti-market and pro-State books are Development as Freedom and Rationality and Freedom. In the former he has argued that people cannot be free without "development" - which is something the chaps with the "social welfare function" embedded in their brains must bring about. In the latter, he has argued, quite unabashedly, that poor people cannot be free because they are NOT "rational." Hence they need his "education." I reviewed this book - most unfavourably - for the New York Sun, and you can find it online here. The review was titled "Why Amartya Sen Is An Enemy Of The Poor: Freedom Matters More Than Education."

Talking about education, I met some young students of electrical engineering on the train to Sambalpur. When I asked about their career prospects, they said their hopes lay in State employment - that is, working for the Orissa State Electricity Department. I advised them against it, saying they would be not only corrupted, they would also never learn anything about modern "technology." I advised them to work for private firms, preferably cutting-edge foreign firms. To drive my point home, I have the example of the State Railway we were riding. It did the 350km journey from Puri to Sambalpur in 7 hours, averaging 70 km an hour. A modern bus on a modern highway could have done the distance in less than three hours, I told them. So if you work for the State Railway, you will never "learn" anything about technology; all you will learn is corruption.

They are corrupting the minds of the youth with their metaphysics. They are corrupting all whom they employ. And there is surely no "social welfare function" in the mind of the Railway Minister, is there?

Amartya Sen comes from a generation that claims to have "fought for freedom." Utter nonsense! These guys merely wanted State Power - to unleash their own horrors on the poor people.

We need to fight for freedom again. This must begin with a freeing of our minds from their metaphysical delusions and seeing reality as what it is - a Predatory State writ large.

Bengal - As A "Nation Of Shopkeepers"

While some have concluded, quite correctly, that the West Bengal elections were won and lost on the issue of Private Property, this blog took the point further and argued that, for the new regime, road-construction must be a top priority, because roads automatically increase the value of lands they link to. Oddly enough, the news has it that the Mamata Banerjee government has 35 ministers - but no mention is made of a roads minister!

Today, there is another piece of news from Calcutta that suggests roads must be top priority. Referring to Calcutta's street hawkers, this news report concludes with the following paragraph:

The Chief Minister said she had been holding discussions with officials concerned for improving the traffic system that would entail, among other things, widening of some roads without evicting hawkers on the pavements.

Why are there so many street hawkers in Calcutta? Two reasons: First, Calcutta is the only Big City - and so it attracts migrants like a magnet; and second, these migrants cannot afford to buy shops. How will roads help?

With roads into the surrounds, satellite towns would develop, and more and more commercial property would be built, bringing down the cost of shops. In time, more and more of these hawkers would become regular shop-owners. That is the direction in which Bengal must proceed - build roads so as to urbanise aggressively; and put an end to zoning rules so that commercial property grows without any legal restrictions.

The West was also like this. I recall visiting the ancient City of Cologne in Germany some years back, and walking about its markets with a local journalist who told me that, in the olden days, one of the legal responsibilities of the City Mayor was to oversee the smooth conduct of all business on the streets: that is, business conducted by street hawkers and vendors. 

My guide told me that in ancient times, poor people from afar would travel to Cologne to sell their wares in its markets - and the Mayor had to look after their interests. But now, said my guide, everyone owns a shop - and this legal responsibility has recently been deleted from the duties of the City Mayor. The same can happen in West Bengal - a state that has many big cities and towns apart from Calcutta. Economic progress ought to mean that street-hawkers become shopkeepers.

Of course, western cities still have informal markets and street hawkers can still be found - as in Amsterdam - but these are run by quite prosperous folk, and they rake in bigger profits than regular shopkeepers because tourists prefer to shop in such informal markets. And overhead costs in informal markets are quite low.

It is also my opinion that aiming for a Bengal that is a "nation of shopkeepers" would totally destroy the appeal of Communism, which has held the average Bengali in its thrall for decades - and encouraged him to become a government clerk: a baboo. Indeed, the very word is Bengali. 

Bengal was the first province in India to be ruled by by the British - and it was Napoleon who ridiculed the British by calling them "a nation of shopkeepers." Napoleon preferred France to be "a nation of patriotic soldiers" - but it was Britain and not France that emerged victorious. It was the nation of shopkeepers that ruled the world. Mises says something noteworthy about these shopkeepers - and the civilisation they begat:

The much abused shopkeepers have abolished slavery and serfdom, made woman the companion of man with equal rights, proclaimed equality before the law and freedom of thought and opinion, declared war on war, abolished torture, and mitigated the cruelty of punishment. What cultural force can boast of similar achievements?

The Brits built all the great markets of Calcutta - the very old "New Market" was built by Sir Stuart Hogg - and a section of it is still named after him.

Bengal has voted for poriborton - or "change." Let that change first emerge in ideology. Let Capitalism replace Communism.  The common people of West Bengal, the peasants and the workers, swallowed all the commie propaganda - and lost. Lost badly. For them, I have another noteworthy quote from Mises:

There is but one way toward an increase of real wage rates for all those eager to earn wages: the progressive accumulation of new capital and the improvement of technical methods of production which the new capital brings about. The true interests of labor coincide with those of business.

So, it not only Private Property that matters for Bengal's future. It is the entire Capitalist prescription that needs to be implemented - beginning with Free Trade, so that all the swanking new shops will have shelves overflowing with the best goods from all over the world. Calcutta Port must become a very busy port. Since this is a river port, some deep water sea ports must also be found.

And add Sound Money to the list - for the same news report quoted above talks about Mamata Banerjee's "rice for 2 rupees a kg" scheme for the poor in Jangalmahal: the area where Maoism / Naxalism is rife. This may be necessary now, for where there is no peace there can be no market. Peace is another prescription for Bengal - if she wants Capitalism.  But so long as this cheap rice is paid for by printed paper rupees, it makes no sense - for the cost of everything else rises: inflation.

Thus, the poriborton that Bengal needs is just this: 

Communism must be replaced by Capitalism.

No more a "nation of baboos."

From now on, let Bengal be a Nation of Shopkeepers!


PS: Part 2 of this post can be read here.

Mises - On Mexico's Economic Development

I spent a happy morning reading a monograph on Mexico's economic development penned by Ludwig von Mises in the early 1940s, shortly after he had moved to America, but before the end of WW2. The monograph has much of interest to other Third World nations, in Latin America, Asia and Africa, including especially India, which took all the wrong advice from all the wrong economists. Let us begin with "industrialisation."

Over 70 per cent of Mexico's population was engaged in agriculture in the 1940s - and Mises rightly asserted that the country needed to industrialise. Mises begins with a critique of the "closed door method of industrialisation": that is, which aims not at securing the nation in the "international division of labour," but which aims at the "commercial insulation" of one's own country.

This foolish path is what we followed in India, thanks to Raul Prebisch and Hans Wolfgang Singer, who had the full support of every United Nations development organisation. Prebisch and Singer had argued for "import-substitution industrialisation" - and Mises writes about how foolish the idea is, "to cheer when the statistics show a decline in imports." He rightly says:

The advantage derived from foreign trade lies entirely in importing, not in exporting. An increase in exports is only the means to increase imports. A reduction in imports is not a blessing, but a calamity.

The lesson: You must integrate your nation into the international division of labour by specialising in the export of those goods you can produce efficiently and in which you can compete - and use the proceeds to import all your needs, including especially capital goods for your factories.

Import-substitution, on the other hand, penalises domestic consumers - while also hurting foreign nations. When these foreign nations cannot sell to you, they cannot buy your exportables either. Double whammy!

Autarky, or economic self-sufficiency, is "economic suicide."

Another point that Mises makes - extremely relevant to all under-developed nations - is that they need to import Capital. Thus, policies of expropriation, taxation, currency control, and nationalisation which hurt foreign foreign investors must be done away with. If foreign investors are not secure in their investments, the nation will lose.

Today, India is holding up foreigners who wish to invest in supermarkets - and this hold-up is nonsensical, according to Mises. Indeed, there is an entire section in the monograph on "Small Business and Distribution" in which Mises champions the small shopkeeper - and says how his "eminence lies in his adaptability," while the chain store is standardised. The small shopkeepers of North America have survived chain stores and supermarkets, Mises notes, because they adapt themselves faster and better to local and personal conditions. In any case, in poor nations, people buy in small quantities - from small shops.

Mises pays great attention to transportation - favouring the privatisation of Mexico's horrible railways. He says they should be expanded with an eye on freignt and not passengers, which also means lower investments. For passenger traffic, Mises favours building roads and airports - so that civil aviation, personal automobiles, and motor buses can flourish. Indeed, this sentence, written in the early 1940s, before India gained independence, is worth quoting in the India of 2011:

Under present conditions, the construction of modern motor roads is more important than the improvement of the railways.

Mises, thus, would not have advised us to build the Konkan Railway. Rather, he would have insisted on an ultra modern coastal highway. And we would have been immensely better off. Mises waxes eloquent on Mexico's tourism potential, and also on the possibility of her "coastal regions" taking a lead in "processing industries" catering to the export market.


On currency policy, Mises praises The Banco de Mexico for allowing the free purchase of gold and advises this poor nation to refrain from inflationism - a foolish policy to which the US and Britain have "sold themselves." He points out that if the Mexican peso is pegged to gold, it will appreciate against the currencies of these great economic "powers." Then, of course, Bretton Woods was yet to happen, and a world fiat currency system was unthinkable.


On government spending, Mises was no Keynesian, writing that:

When the government spends more, the individual citizens spend less.

He advised low taxation, too.


But it is the section on education that deserves our greatest attention today, not just in India, but in the West as well. I will quote it in full:

Mexico is a country rooted in an old civilisation. Its universities are notable seats of teaching and research. It has succeeded in the last decades in the establishment of an efficient system of primary education for the masses. It is anxious to further vocational and technical schools. All foreign experts are unanimous in the praise of Mexican achievements in this field.

However, the economist must warn of the dangers of some trends in contemporary education. Germany and France were paramount in the development of teaching and instruction. But the results did not come up to expectations. Germany is today [1943] a nation of barbarians; Germany, once styled as a nation of poets and thinkers, is now a nation of gangsters. The high state of French education did not prevent a moral and political collapse.

The truth is that the French and German schools instilled in their pupils a pernicious mentality. The students were imbued with the religion of étatism [French term for "statism"]. They were taught that the State is God, that nothing counts but its power, greatness, and glory. And they were also taught to despise and to hate all other peoples. Graduates looked down upon the business of private citizens. Their only aim was to obtain jobs in the service of the government. The ideal of the Frenchman was to be a fonctionnaire, that of the German to be a Beamter. [Both words mean "civil servant" or "State functionary."] They were not eager to work; they wanted to give orders and to be paid out of funds collected by taxation. They preferred the parasitic life of a bureaucrat to the industrious life of a plain citizen. They did not care for anything other than a career in the daily increasing body of State employees.

Corrupt politicians and unprincipled civil servants have ruined the glorious civilisation of Western Europe. The institutions of learning and of education were instrumental in creating the vicious mentality that led to this disaster. It is a characteristic fact that many of the most eminent harbingers of the new barbarism were professors of the German universities or members of the Académie Française. Intellectuals have built the houses in which Hitler, Mussolini, and Laval lived at their ease. It was a real trahison des clercs ["treason of the intellectuals"] as Julian Benda stigmatised it in his well-known book.

A nation that would guard itself against such a catastrophe has to watch its educational institutions. The youth have to be protected against the arrogant self-conceit that makes them disparage ordinary business activities. It is true that one goal of learning is to train people for the correct fulfilment of duties in the civil service. But the first requirement of a government employee is due regard for the individual citizen, for the man whose work produces the means of supporting the nation and the State.

The worst outcome of the étatist superstition is the habit of considering the "State" as a mythical being, commanding inexhaustable treasures that it can lavishly spend. The State should do this, and this, they say; it should pay more and more for various purposes. It never occurs to the étatist mind that the State cannot spend except by collecting taxes or by incurring debts or by embarking upon inflation. They do not realize that "The State" that pays is the citizenry itself and not some mythical Midas.

The problem of a balanced budget and of an equilibriated economc system are not political and technical; they are moral and intellectual. If public opinion is convinced that The State has never-failing sources of income, and that the only decent way to make a living is to get salaries or subsidies from the Treasury, then even a well-intentioned government and parliament cannot succeed in making both ends meet.

One of the main purposes of education must be to dispel the superstitions of étatism.

It is a common mistake of our contemporaries to view a country's economic problems primarily as a matter of "material" factors and of technical changes. The main issue is intellectual and moral; the spirit is supreme in this field, too.

Thereafter, Mises makes some concluding remarks:


1. Civilisation depends on material well-being. The richer a nation, the better.


2. There is only one way to get richer - Production.


3. To produce more requires Capital - and the private accumulation of Capital is a blessing, not a curse.


4. Private Property and Free Enterprise are the foundations of civilisation.


The final paragraph is worth quoting in full:

The German socialist and harbinger of National Socialism, Ferdinand Lasalle, sneered disparagingly at liberal civil government as a "nightwatchman" and proclaimed, "The State is God." It is this superstitious belief in the omnipotence of government that has brought about the present crisis of civilisation.

Unfortunately, this paper is not available in PDF on the internet. You can buy the book containing this essay - and many more - in India here. And from the Mises Institute here. Well worth buying, and studying - and telling others, too.


The fact that State-employed professors in Indian universities were teaching State-worship to their students is well brought out in my old post titled "The Evil Professors of Delhi U."

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. 

Arundhati Roy, Division of Labour, And Cities

Arundhati's latest book is out. Called Broken Republic, excerpts from the introduction have been published in Outlook. Below is how she begins:

The minister says that for India’s sake people should leave their villages and move to the cities. He’s a Harvard man. He wants speed. And numbers. Five hundred million migrants, he thinks, would make a good business model.

She then proceeds to demolish the minister. And I thought it was Ms. Roy who once wrote, "India does not live in her villages; she dies in her villages."

Frankly, I am on the side of the minister on rural-urban migration. 500 million such migrants is a great idea - and we could easily be a nation of 1000 cities then, instead of just five. The USSA has 350 million in 200 cities. Very few Americans - less than 2 percent - live on farms. If we did the same in India, farm labourers would be rich - because their wages would shoot up when the majority of them shift to urban areas and out of agriculture. And farms would be mechanised - hence, more productive, too.

In either case, whether Ms. Roy likes it or not, Indian villagers have been migrating to cities in droves - just look at the slums and the overcrowding. Why do they do that? The only answer: these villagers are better off in crowded cities than in the vacant countryside; further, they know their fortunes improve because of the greater division of labour in the cities. Allow me to explain this point in some detail, beginning with an example that came to mind the other day.


I saw a construction labourer the other day, and his shirt was dirty and torn. My question: Why does this man not sit with a charkha, spin some yarn, weave some cloth, and make himself a new shirt? Why does he work at construction instead - that too, building a house for someone else? The only answer: He sees his work as a faster and better way to obtain not only a shirt, but all else that he needs to survive. This is the magic of the division of labour - which is specialisation and not self-sufficiency. Each human mind is capable of realising this - we all possess a "sense of gain."


As Mises put it (and this was quoted in an earlier post, too):

The fundamental facts that brought about cooperation, society and civilisation and transformed the animal man into a human being are the facts that work performed under the division of labour is more productive than isolated work and that man's reason is capable of recognising this truth.

The extent of the division of labour is limited by the size of The Market. A chai shop in a tiny, remote village may not be able to yield much profit. You cannot be a taxi-driver, receptionist, plumber or electrician in a sleepy village. It is for this reason, to participate in the greater division of labour possible there, that people migrate to cities. They are attracted by The Market; they smell economic gain. In the cities, they "become" what they want to be: actor, dancer, musician, writer... whatever. No one is "self-sufficient." All are specialised. It is in order to specialise that people move to cities.


There is no reason why India should remain a nation of just 5 big cities - and not 1000. There is enough land, for sure. With unilateral free trade, just the twin coasts could host 100 new cities. Add to that their satellite towns - and we are looking at an Indyeah that is predominantly urban - and rich. With so many new cities and towns, urban overcrowding would end. With good transport connections - roads, railways, tramways, the automobile - there would be enough urban space for all, because transportation adds to the supply of urban land. We must therefore dream a new dream: not the Gandhian dream of "self-sufficient village republics," but an Indyeah of thousands of free trading and self-governing cities and towns - that is, an Indyeah fully incorporated into the "international division of labour."


The division of labour is elaborated upon in the very first chapter of The Wealth of Nations - but it is Mises who put it best when he wrote:

The principle of the division of labour is one of the great basic principles of cosmic becoming and evolutionary change.... Human society is an intellectual and spiritual phenomenon. It is the outcome of a purposeful utilization  of a universal law determining cosmic becoming, viz., the higher productivity of the division of labour.

Arundhati Roy needs to study some basic Economics. I am confident that, if she does so, she will eventually come on to the right side in the State-Market Debate. Today, she is anti-State - and anti-Market, too. But there is no Third Way! It can be either the State or the Market; either coercion or voluntarism; either Force or Liberty.


The Welfare State is what has brought Europe and the USSA down. In India, where the vast majority are poor, welfarism cannot work. A big Welfare State printing money, borrowing, and taxing us to the bone will only wipe out Capital - which needs to be invested in real businesses and in physical infrastructure like roads if the poor are to benefit. In my view, the poor need Liberty, Property, Free Trade, Urbanisation and Sound Money. Welfarism funded by inflationism will destroy them. I hope all those who have the true interests of the poor at heart realise this.

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.