India - As A "Nation Of Shopkeepers"

Continuing from where I left off yesterday, let us note that expanding commercial space is "economically sustainable" in the precise sense that this will not require any welfarism; no freebies will have to be doled out to "the poor." Rather, it will enable millions to earn their own living - and further, these self-supporting people will pay taxes instead of huftha. This is precisely what happened in Singapore.


When Singapore gained independence in 1964 (shortly after Nehru's death) the city-state was poor. The area now known as the Central Business District (CBD) was a place where over 200,000 street hawkers and vendors plied their trade. Lee Kwan Yew then readied a "design" for the place by which the CBD would be hawker-free - but he also designed residential areas on the fringes of his territory, and built special markets for re-locating the CBD hawkers there. Today, these very hawkers are tax-paying middle class citizens. 


In Singapore, furthermore, street food is big business - and a great tourist attraction. There is really nothing much in Singapore worthy of tourism; but they have created their city in such a way - shopping, food and drink, Sentosa Island, underwater park and the zoo - that millions of tourists, including lots of Indian tourists, flock there year after year.


In other words, all this is eminently feasible. It just needs sensible city management. This needs mayors with budgets and authority. It needs Subsidiarity - so that mayors can keep local taxes, and are more important than the Central State or the Federal State. We in India need to re-build all our existing cities and towns, and also create many, many more.


I may add that I am no great fan of Singapore's "authoritarian capitalism" - to borrow Cristopher Lingle's phrase. But Lee Kwan Yew has built Singapore into what it is today, while our rulers have destroyed each and every city and town - without exception.


Welfarism is "economically unsustainable." All welfare is about "consumption" - not "investment." In the final analysis, we in India need Capital investments - and roads are Social Capital. Roads are also "collective property" in the sense that everyone can use them. (I am not referring to highways, which can be private, from which those who do not pay the toll, or who use inefficient vehicles like bullock-carts, can be kept out.) 


Thus, roads are the collective property we need - not Air India, SAIL and ONGC. If we privatised the entire public sector, there would be enough money to invest in world class roads. These roads would lead to a re-building of our urban areas, especially all the satellite towns. They would be much more commercial space for all, including all those who are hawkers today. In time, I am confident, all traders would own proper shops.


I have myself seen this happening in a posh South Delhi market. When the market was built in the 70s (Delhi is a "new city"!) there was a chap there who sold salt peanuts from a pushcart. His peanuts were good, his customers liked what he sold, and today he owns a little shop in that very same market.


Of course, New Delhi is a very bad "model." This "planned, new city" has almost no commercial space. There are lots and lots of "parks" - but there are very few markets. The Mughals built Chandni Chowk, the Brits built Connaught Place, but these jerks only built Nehru Place - a disaster. In Delhi, zoning rules are flouted openly - there is no other way - and huftha rules.


These socialist jerks only thought about "housing." They never thought of The City as a commercial hub. Thus, they never built any commercial spaces - like markets. Hence the disaster.


Today, they are talking "welfare." That is NOT what we need. We need cities and towns - and markets. We also need housing - and there is enough space for that. But people will buy houses only after they have earned enough through market activities.


So why just Bengal? The whole of India can be a Nation of Shopkeepers. 


"Into that haven of freedom, my Lord, let my country awake."


Amen.

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." 

The Chakra... And The Blind

The invention of the wheel was a tremendous achievement of the ancients - including in India. Not all societies discovered the wheel, but here in India it was celebrated by kings and commoners alike.


The wheel - which we call chakra - is therefore seen in our State Emblem, which dates back to Ashokan times (4th century BC), right at the base. This chakra is a spoked wheel - that is, its design is that of "hub-and-spoke." It was a very advanced wheel. A horse and an ox are also depicted - because the spoked wheel increased their efficiency.


Now, hub-and-spokes are basic to transportation systems. Such systems evolve to carry goods from the place of production to the place of consumption - that is, from the fields and the farms to the cities and their markets. Cities become hubs - and spokes are built into the countryside. Thus, "all roads lead to Rome." And, in Old Delhi, the various "gates" of the ancient city lead to destinations in the manner of spokes from a hub.


Hubs-and-spokes are seen even in civil aviation. Every major airline has a home airport which serves as its hub. It is from these hubs that flights take off to various destinations, which lie on spokes.


Ditto for the railways - and their "junctions."


Funnily enough, the layout of the Lutyens' Bungalow Zone (LBZ) in Nude Elly is also a hub-and-spoke design. The LBZ is where all our ministers and top officials live. When chacha manmohan leaves his residence on Race Course Road to go to his office in South Block, he immediately encounters the Akbar Road roundabout, from which one spoke leads to Indira Gandhi's old house on Safdarjung Road, and another spoke leads to Nehru's house on Teen Murti Road. There are two more roads leading out of this roundabout. Hubs-and-spokes are what the LBZ is all about.


With the chakra on the State Emblem, and chakras on the road layout in the LBZ, one would think this "design" ought to penetrate the minds of our "planners" - especially those who plan transport networks.


Yet, when we look at their most ambitious highway project, we do not find this design. Rather, we find a "quadrilateral." What kind of stupid design is that?


Indeed, the road layout of the rest of Nude Elly (a "new city") is along the pattern of multiple T-junctions! No hubs-and-spokes here. Not even the standard "grid pattern." This faulty road design is why Nude Elly is doomed to eternal traffic snarls. The city must either be abandoned - or re-built.


The British built 80 "hill stations" in 50 years using a hub-and-spoke design for transportation. These 80 hill stations - a tremendous burst of urbanisation - were all linked to their "primary city" (which was the hub) by spokes:

• Poona, Mahabaleshwar, Matheran, Lonavla, Khandala, Panchgani - were on spokes leading out of Bombay.

• Darjeeling, Kalimpong, Shillong - on spokes leading out of Calcutta.

• Ooty and Kodaikanal on spokes leading out of Madras.

• Simla, Kasauli, Mussoorie, Dehra Doon, Nainital, Landsdowne on spokes leading out of Delhi.

Today, all the primary cities are overcrowded and close to collapse, as are all the wonderful hill-stations. In the meanwhile, all urbanisation has stopped - because the Gandhian State pursues nonsensical "rural development." Summer is here - and there are no pretty hill stations for us to holiday in any more.


Of course, we could build many new cities and towns, and new hill stations too, if we fixed our transport system. It must be HUBS-and-SPOKES - the chakra. Only then will thousands of "satellite towns" develop around the cities. The cities will decongest. And we will all have some lebensraum. The whole of India will become a great piece of real estate.

And as for all these blind planners of Hindostan:

Throw them out of the LBZ!

 

(Read the second part of this post here.)

The Indian Civilisation - And The West

A chance conversation over some terrible ganja brought out from me why I personally prefer India to the West - and that is, we in India are more naturally "anarchistic" than the West, which is rule-bound for only one reason: They simply love rules, and everything in their "democracies" is rigidified and regimented - they are "overgoverned" because they like things that way. They like making rules.

I gave the example of cricket - and its rules, which keep changing, and the game with it. But you can see this everywhere - in all "sports," which are almost entirely from the West. Our fellows play cricket without too many rules, with rubber balls and often without umpires. For the rest, they just watch cricket on TV - they never play. It is like the Roman Emperors diverting public attention from their misdeeds by giving the people games to enjoy at the circuses.

In India, wherever you go, unlettered people exhibit a "natural order" - and wherever this order is disturbed, as in Bastar today, it is our The State that is upsetting it, not the people. 

I also gave the example of the Hindu "religion" - which is completely anarchistic, with many gods and goddesses, many holy books - which the vast majority have never read, not knowing how to, but know all the tales. Among Hindus, priests are on The Market, temples compete for attention as well as donations. There is no Hindu Pope or Imam.

While there are many who hate the word "anarchy" because they confuse it with "chaos," let me point out at least one area where complete anarchy MUST prevail - and that is The Market. For this is what laissez faire means - that The State, with its force, must stay out of all business affairs. After all, policemen, judges, jailors and hangmen cannot run business affairs. Hence, competition must be completely free - and never forget Bastiat's golden words:

Competition is Liberty - and the Absence of Competition is Tyranny.

To me, Kingfisher beer and Amul butter and cheese are tyrannies. And there are so many more. Free and open competition among all producers, including especially foreigners, is in our best interests as consumers. We can either have policies that favour producers, or those that favour consumers. Since our The State chose to favour producers, this is another instance of "misuse of force," which is nothing but Tyranny. To end this, we must unilaterally free international trade. No more Kamal D Nutts and their diplomats fooling around at the WTO - which they have deliberately wrecked.

In what other areas of our life do we need State-produced rules and regulations - especially if we do not want to be like the regimented and rule-bound West?

Functional zebra crossings, for one, which we do not have anywhere in this vast sub-continent, and all are forced to scamper dangerously around. Over 200,000 people, mainly pedestrians and cyclists, die on our anarchistic roads every year - many times more than get killed in a small war like Kargil. And these "representatives of the people" prefer spending on "national defence" - which is just another nationalistic myth.

What else do we need from the force of The State?

Zoning rules? Building bye-laws?

Actually, if torts are relied upon, everyone who constructs buildings for others will be doubly careful about the quality of his construction than any government bureau can ever be.

Sometimes, do travel around the countryside and see for yourself how much "natural order" prevails. So, don't fear the word "anarchy" or confuse it with "chaos." Anarchy means "no ruler"; it does NOT mean "no rules."

The FACT is that even all the unlettered are "rule-following" - and the basic rule they all follow is the Inviolability of Property. The goods arrayed before a vendor are always treated as his Property - and anyone who violates this is called a thief and roundly thrashed. 

And look at our The State - which violates Property every single day. This is not even a "right" in our sacred Constitution!

All the chaos that exists in our society is because of this Predatory State - and not the simple, rule-following people, who display both "natural honesty" as well as "natural religion."

I leave you with these words from Ludwig von Mises' Omnipotent Government to mull over:

The worship of the state is the worship of force. There is no more dangerous menace to civilization than a government of incompetent, corrupt, or vile men. The worst evils which mankind ever had to endure were inflicted by bad governments.

Solution? Why I provided you with that long ago: A New Magna Carta.

Gujarat, Maharashtra, And Goa - Observed

I travelled by bus from the southern tip of Goa, via Bombay, to the Gujarat city of Baroda. Then, I travelled a fair bit within Gujarat, by road. Finally, I returned to Goa via Bombay, entirely by road. Below are some of my observations - and I'll bet these offer a better picture of these parts than statistics - mere numbers collected by government clerks - can ever do.

Gujarat is an urban as well as rural mess. In other words, the human habitat has been destroyed. Apart from Baroda, I saw Surat, Valsad, Ankleshwar and Rajpipla. They are all disasters. I saw poverty-stricken villages made up of rickety hutments, and I saw lots and lots of messed up small towns.

The taxi ride to Bombay took me through wide open spaces with low hills. Greenery. For hundreds of miles on end. Quite pretty. Totally "unowned." Of course, no land is really unowned in India. All such land is by default State Property. My point is that all this State Property is out of bounds for the citizens. It is thus sheer waste. We need to be free to "homestead" unowned lands like these.

I finally arrived in Virar, a far-flung suburb in northern Bombay - and it was a mess. I trained it to Bandra - and that was a mess too. I then took a taxi to Colaba - and on this ride I passed some well laid out areas, surely dating back to British times. I was driven through Marine Drive - built because then there were no environmentalists who preferred mangroves. In Colaba, I saw many splendid old buildings, now in disrepair, surely because of rent control. This legislation violates both Property as well as Free Contract - and destroys buildings because, with rents frozen, landlords can no longer maintain them. For the tenants, it is "legal plunder" - as with all such "socialist" legislation.

I then took the bus to Goa. The bus left at 5:30 pm - and it was quite dark by the time we were finally out of the city! All along, the city stretched on and on, endlessly - and all through everything seemed an almighty mess. Old, dilapidated houses, shops, shops, and more shops, dirt and filth, a uniform greyness, crowds bustling around. Commerce, yes; but civilisation, no.

Finally, when we were out of city limits, I saw a sign saying Panjim, the capital of Goa, was 560 km away. I was awake right through the night, much of the time in the cabin upfront, alongside the driver, smoking and looking out. One observation: There wasn't a single urban settlement of any size or quality the entire 560 km distance between Bombay and Goa. Except for Sawantwadi, which we reached at dawn. But Sawantwadi is not an "Indian city"; rather, it is another of those Princely States that Sardar Patel and Lord Mountbatten took over for IAS administrators. Sawantwadi borders Goa from the north.

Goa stretches 150 km from north to south - and there are three big cities: Mapusa, Panjim and Margao. These are all Portuguese-built, but today all face overcrowding and over-building. Then, there are lots and lots of little towns. Of course, they too are quite unkempt today.

All visual observations, however, strongly suggest that life in Goa is much, much better than anywhere in Maharshtra or Gujarat - including Bombay. The chief reasons for this are: far greater urbanisation and also a far greater degree of economic freedom.

There are bars in Goa everywhere, including in the villages, and even for the poor - and I mean the very poor. There are casinos. Gambling on numbers is an open business - for poorer people. The economy is also diversified, especially because of tourism. But this tourism occurred after the Portuguese had been chucked out in 1962 - and then the hippies came. Tourism ought to have urbanised the coast, but this has not transpired under IAS administrators who love panchayati raj. The beaches may be great, yet the settlements on the beaches are but overgrown, overcrowded villages. The Coastal Zone Regulations legislated by Nude Elly are only worsening things for human beings. Long live the mangroves, eh!

It is in the area of housing that Goa really stands out as compared to both Gujarat and Maharashtra. Here, everyone owns a small cottage, quite pretty. Tiled roof. Property is secure. Titles, at least to newer properties, are clear. But then, urban overcrowding is leading to a Bombay-like situation - and ugly apartment blocks have mushroomed. With so much free land around, and with better roads, Goa could urbanise in a far better fashion, spreading itself out. There could be little cottages everywhere. Towns everywhere.

Maharashtra and Gujarat - and, I daresay, the rest of India - have a lot to learn from tiny Goa. What I discovered, to my delight, is that you also get GOOD ganja here.

Boom Shankar!

This Gujarat Village Ought To Be A Town

I am now living in a remote village on the banks of the Narmada in Gujarat. Opposite are fields. Bullock-carts ply on the road. There is one tea shop, and one pushcart selling (excellent) samosas and pakoras. My host runs a healthcare NGO, offering free medical care to the villagers.

Gujarat is very different from other parts of India because here the British did not rule directly. Rather, local princes ruled. My nearest town is Rajpipla - which was a 13-gun salute State ruled by a Rajput Maharaja up to 1947. My history book says the State of Rajpipla used to measure 1518 square miles - so this village must have fallen within its realm. After Sardar Patel threw out the princes, the IAS took over - and Gandhian panchayati raj. 

I am pointing this out because I have stayed long in French Pondicherry, in Portuguese Goa, and in may parts of India that were under direct British rule. This place is very different. Further, this is Gujarat - that is, Gandhi's own Gujarat. This is a Gujarati village, under panchayati raj.

The other day, I borrowed a motorcycle and checked out the place. Turns out that this is quite a well-populated village - but very poor. The village stretches over a few kilometres, and there are a few, extremely narrow side roads leading this way and that. I checked them all out. Lots of houses, about 200 or so, many just mud huts. All piled higgledy-piggledy. No real shops. Perhaps half-a-dozen tiny stalls. No local economy at all. What was noteworthy is that there has been no "development" of riverside property, keeping in mind the fabulous view. Indeed, on the motorcycle, I could not even find an approach to the river!

Having lived so long in Goa, where the Portuguese established municipalities in such places - and where tourism has yielded rich dividends - I could muster up an alternative vision. In my mind, this "village" ought to be run by a local municipal board, providing basic services like roads and streets, footpaths and drainage, and garbage removal as well as street-lights. A small central market area could be established, and tourism could be actively promoted - along with the development of real estate on the riverside. If retirees from Baroda and Rajpila moved here, if tourists came to enjoy water sports, the views and suchlike, if a promenade was built along the riverbank like the Strand in Calcutta or Pondicherry's Beach Road - and if there was Liberty! - this place would become a flourishing small town. The economy would diversify to a great extent. Life would be much better for everyone here.

Yes, there is agriculture: bananas, papaya, sugarcane and other crops. Lots and lots of cattle - the principal wealth of most people. There is a school - from which I could hear the sounds of patriotic songs of the "freedom struggle" as I walked past. There is even a college. There must be NREGA ditch-digging going on. There must be other kinds of "welfare."  But these don't really make an economy - that is, a local economy capable of sustaining a small town. Panchayats never think of how a town can be built. Or what an urban, diversified economy is all about.

Thus, it appears quite plain to me, top-down central planning has failed - and the bottom-up panchayati raj has failed too. What we really need are local institutions that use local knowledge to diversify local economies so that their full potential can be attained - and these potentialities include real estate and tourism.

I was sitting last evening in the local desi sharaab "pub" - a large hut in a large hutment, poverty everywhere, and my thoughts turned to Goa. I told the old crone who was running the show about life there - about Liberty, and about tourism. I told her that riverside property could be worth a fortune if Liberty prevailed and tourists were attracted. They were all watching Bollywood song-and-dance routines on a large colour TV. I told her about live music and dance. And then I trekked it back to my abode - darkness everywhere, not a single street-light, bright stars, a thin crescent moon. Only one word to describe the lives of poor people here: Misery.

I thought of the colour TV in the hut - and the Janis Joplin song came to mind. If Liberty prevailed, if a local municipality got things right - perhaps this old crone would ride a Mercedes-Benz too, I thought. And smiled to myself.

Tomorrow, I plan to check out Rajpipla in the daytime and write about it in the evening. Stay tuned.

The Corruption Of Economic Science

The Nobel Prize in Economic Science has finally got my goat - and a "tipping point" has been reached. This year's prize takes the entire cake shop and represents what I believe to be something extremely dangerous - the deliberate corruption of a vital science. I have been watching this prize for many years now, and seeing it go to complete clowns and dangerous demagogues - Paul Krugman being the best example. But this year...

Let's begin with the opening statement of the "information for the public" issued by the Academy. It begins:

According to a classical view of the market, buyers and sellers find one another immediately, without cost, and have perfect information about the prices of all goods and services. Prices are determined so that supply equals demand; there are no supply or demand surpluses and all resources are fully utilized.

The document then goes on to say that the awardees have shown that this so-called "classical" view is false, that there are "search costs and frictions," and that their research has important practical applications in the labour and housing markets.

Anyone who has looked for a job or tried to rent a house knows that there is a long search process, and it has costs. This happens precisely because market participants do NOT possess "perfect information." They never can. There are therefore market solutions - like real estate agents for housing and newspapers that advertise job vacancies.

This is something everyone knows - and it is most evident in the area of advertising, which is such a huge industry simply because "perfect information" is a great big fiction. Advertisements tell the consumer "what he did not know that he did not know" - and this is a market solution to imperfect knowledge and information.

But what does the research of our awardees suggest? The Academy states:

In the classical model of competition, the unregulated market outcome is both unique and efficient. But in a world with search costs, there can sometimes be several possible market outcomes. This was shown by Peter Diamond, who also pointed out that only one of these outcomes can be the best. This, in turn, implies that there is reason for governments to try and find ways of inducing the economy to move towards the best outcome.

Thus, at a time when all the real economists on this planet are trying to roll back the State, these three blokes have discovered yet another reason to expand State interference in the market economy; another wretched form of interventionism. What is their research based on?

The answer: MATHEMATICS!

These blokes have developed a mathematical "model" to explain unemployment: the Diamond-Mortensen-Pissarides (DMP) model. The Nobel Academy tells the public that "today, the DMP model is the most frequently used tool for analyzing unemployment, wage formation and job vacancies." I find this portion of the text most significant:

It has been known for a long time that the labor market fluctuates between situations of either high unemployment and few vacancies or low unemployment and many vacancies. This empirical pattern, known as the Beveridge curve due to the British economist William Beveridge, is illustrated in figure 1, based on data on the U.S. economy in the 2000s. The DMP model provides a theoretical explanation for the Beveridge curve.

The DMP model can be used to explain the position of the Beveridge curve and the location of the economy on the curve. If unemployment and vacancies move in opposite directions, then changes can be regarded as reflecting variations in the demand for labor which occur over a business cycle.

Lord William Beveridge once headed the London School of Economics, the birthplace of "Fabian Socialism," and it is he who pushed that nation onto the disastrous path of the "welfare state."

But what of the business cycle itself? What causes all these booms and busts? No answer. No logical economics. Just loads of maths, and a frightful diagram. Is this "economic science"?

I found an independent assessment of this year's prize thanks to LewRockwell.com here. It is by Robertt Wenzel of EconomicPolicyJournal.com, and it is bitterly critical and extremely sarcastic - deservedly. On Peter Diamond, this report says:

Diamond, 70, is an economist at the Massachusetts Institute of Technology, and a specialist in Social Security. Bernie Madoff would have loved to have Diamond on his team, since Diamond completely ignores the Ponzi like aspects of Social Security and tinkers with "fixing" the scam. Going beyond Madoff, Diamond then ignores the coercion involved in Social Security. He focuses with tunnel-like narrow vision beyond the coercive aspects, and Ponzi like aspects, to pontificate in numerous journal articles and books about how to "save" Social Security, including recommendations to cut "benefits" and aggressively increase Social Security taxes.

He adds that Diamond was "elected a fellow and has served as President of the Econometric Society." In my opinion, econometrics is a proven failure. The Nobel prize also went to the founders of Long Term Capital Management, which crashed. Forgotten already? Econometrics has nothing to do with the true science of Economics. It is a corruption of science.

The author of this report adds, on the other awardees:

Mortensen, 71, is an economics professor at Northwestern University in Evanston, Illinois. He studies frictional unemployment. This is like studying half time in a basketball game. Yeah, it exists, but it is a pretty simple concept that doesn't tell you much about the game. Frictional unemployment simply means that if someone loses a job, it takes them time to find another job.

Mortensen along with Pissarides (who is 62, and a professor at the London School of Economics) and, to some degree, Diamond have taken the simple concept of frictional unemployment and put it in mathematical form to create search and matching theory. There appear to be no successful practical applications for the Alice in Wonderland equations created. Their only valuable input is one we have been pointing out here regularly: "that more generous unemployment benefits give rise to higher unemployment and longer search times."

Read the full report.

Let us now turn to the true interests of the working classes, especially those who are unemployed. Booms and busts - the "business cycle" - are caused by central banks, that is, by governments, and the only way to ensure steady economic growth is sound money, the gold standard, and free banking under Law.

Further, ALL State interventions in the labour market - beginning with "minimum wage legislation" - cause unemployment. Labour unionism causes unemployment. And it is in the completely unhampered market that all workers can find work and survive.

What I have written above is according to the established science of Economics of the Austrian School. You can find these views scientifically explained and established logically in the works of Ludwig von Mises and Friedrich Hayek. There are innumerable scholars belonging to this school whose work needs public recognition - simply because the public must be made aware of where their true interests lie. The Nobel prize has gone, once again, to peddlers of nonsense, and propagandists for misgovernment. This is against the general public interest. It is also a corruption of science. This should be widely condemned.

[This post is continued in Part 2, available here.]

The Car... And The Town Planner

Gautam Bhatia, an architect – and all our “town planners” are architects – has written a leader article in the ToI today arguing for measures designed to “curb the growing menace of the private car.” This is like pot calling the kettle black, for the real “menace” to our society is the town planner. The car is our only hope.

Take New Delhi for example. This is a “new city” and much of south Delhi, where I now live, did not exist when Maruti made its appearance in 1984. Now, new cities are usually laid out in a “grid pattern.” Lutyens’ Delhi, of course, was superior, laid out in “hubs-and-spokes,” with Connaught Circus as the main market, with over half-a-dozen “radial roads” leading to it. This part of New Delhi was modeled after Bath, a pretty English town that I had the good fortune to visit.

How did the town planners of The Chacha State lay out the rest of New Delhi? Well, they laid it out in a series of double T-junctions. All the traffic jams on Outer Ring Road between Nehru Place and the airport are because of T-junctions.

This is also true of the Delhi Development Authority’s premier south Delhi residential colony, Vasant Kunj. This huge housing development is laid out along one central road, on which there are over a dozen T-junctions. Traffic crawls in this “new” area.

Further, the markets of Vasant Kunj, like all south Delhi markets, are too many and too small, unlike Connaught Place, which was one big market, a Central Business District (CBD). Even if 5 cars visit a Vasant Kunj market, there is no place to park.

And talking about cars: Vasant Kunj was built for people who owned scooters – this was the “vision” of the future. Every flat here has a “scooter garage.” Today, every flat-owner has two or three cars, and there is no place to park. Residents report that fights regularly break out over parking rights on common spaces, which are too few.

Is it the car at fault, or is it the town planner?

If another enemy of society is to be blamed for this mess, then it is the economists of The Chacha State, including Chacha himself, an economist and former head of the University Grants Commission. For decades, our school and college students have been “studying” this total bullshit called “The Theory of the Vicious Circle of Poverty.” This argues that poverty is inescapable. Poor nations are condemned to remain poor. They need “foreign aid.”

Peter, Lord Bauer dismissed this nonsense with just one sentence:

“If this proposition were true, the whole world would still be in the Old Stone Age.”

Even the USSA started of poor. But they have one of the world’s highest car ownership figures today, at over 850 cars per 1000 population. India is still one of the world’s lowest, at about 13 per 1000; though in cities like New Delhi the figure goes up to about 150 per 1000. This is still low. But it will accelerate at a dizzying pace because poverty is going to vanish one day if The Market gets free play. Our society can either make space for the automobile in our city and town layouts – or continue with chaos.

New Delhi has to be re-laid in parts. We need an aerial Outer Ring Road, and the old Ring Road is not too good either. Areas like Vasant Kunj need to be demolished and rebuilt. We also need to build more and more satellite towns, entirely from scratch, keeping the car in mind, and therefore connecting these satellites to the CBD by good roads.

We need cars. We need roads. We need well laid out cities. It is our town planning that has failed.

For more, read my Four Wheels For All: The Case for the Rapid Automobilization of India, available as a free download here.

There is also my Mint column titled “The Car… And The Planner,” available here.

And Merry Christmas to one and all, especially all automobile enthusiasts.

On Their Top Professor... And Second-Class Citizens

Thanks to Hayek Order providing the link, we have the Swaminathan Aiyar-Jean Dreze debate on the NREGA (rural workfare scheme) – the Flagship of the Chacha State – as the first topic on our agenda this misty morning.

Although Aiyar concludes against this corrupt idea, nowhere does he use the term “economic freedom.” Both of them concur that the “Tamil Nadu model” is best, where good roads have made villages into towns. Yet, neither talk of aggressive urbanization as a solution to poverty; indeed, nowhere do they talk of Property for the urban poor. Their entire focus is on the rural poor. A village-centred idea of poverty removal – via The State. In the meantime, villagers are moving in hordes to our cities, where they get fucked by the cops, the municipal authorities and all the other parasites – and end up living in slums without titles to their Property.

What I would like to draw my reader’s attention to is the following extract from Jean Dreze, who is, I believe, Professor Emeritus of Delhi University. He says:

State governments now have an incentive to maximise labour intensity, because the government of India pays for all the wages, but only part of the material costs. And climate change may increase the value of labour-intensive environmental protection works. So, there may be lots of hidden possibilities here.

The man is a Luddite. He champions “labour-intensive” workfare – which means more labour and less capital, so lower productivity and lower wages. And all this at State cost. The man is nutts. And he’s a climate change wallah too. And he’s the State’s top professor. Now do you see why I advise all our youth to drop out of this State Education System?

Next: I would also like to draw my reader’s attention to a news report that says the Orissa government has shut down 64 mines. There seems to be something seriously wrong with the mining sector in India – and the only cure is Property. And this is also the only Law that will deliver Justice to poor rural- and forest-folk who should be the real owners of their mineral-rich lands, and are now turning to Naxalism. I have an earlier post on mining.

Anyway, I do not just surf the web to find interesting things to write about for my reader’s enjoyment; I also surf the city. This morning, I discovered a huge market inside my nearest slum, Govindpuri. From the main road, where I was parked, you cannot see a single shop. But once you step inside, and walk down the extremely narrow pathway, there are shops, shops, and more shops. Someone told me there are over 150 shops – excluding the fish market. I found a music CD shop, and also a VCD DVD shop. There was a barber shop, a sweet shop, some “general stores,” a shop selling cloth. All kinds of little, little shops, in a place where all have little, little rooms to live in. I made inquiries about the cost of these shops, and was told that “property” on this hidden “main street” went for over 200,000 rupees. I advised the people to develop their own Property title system. Perhaps they do have something like that already – for these properties are bought and sold, and rented.

I am back home now, and here we have roads, property titles, sewage lines – and I hate it. I do not believe in cities where over half the population are second-class citizens. There is enough unowned land around Delhi for all these people. If this land was colonized, property prices would fall, for the benefit of the poor.

I too have the interests of the poor at heart. I too go to their slums to actually see things for myself. And my prescription varies significantly from that of the State’s Professor Emeritus:

My prescription is Aggressive Urbanization powered by good roads; colonization of land around cities for the urban poor; Property titles; sound money; free trade; and total economic freedom – the “system of natural liberty.”

The Road To Greater Tyranny

What would it be like to live in a country where The State has taken on the task of feeding and housing the masses, the vast majority?

What kind of country would this be, where millions and millions are dependent on State handouts?

In either case, this is the immediate future of India.

The poor will get rice for 2 rupees a kilo, and they will receive housing in both urban as well as rural areas – from the Chacha Manmohan sarkaar. The goal: A slum-free India in 5 years. Read the news report here.

But how can our The State dole out benefits to the vast majority other than by taxing the productive few to the hilt? It is surely no co-incidence that a senior civil servant has written arguing for higher taxes on the well-to-do, inviting, among others, this piece of sharp criticism .

In other words, the idea of feeding and housing the masses is nothing but a road to greater tyranny – in the form of heavier taxation.

Reminds me of a kind of beggary we often see – a healthy dude taking around a blind or lame guy, begging in his name. This is what our The State is doing. Its only claim to legitimacy is the poor. These poor people cannot be left to markets, it says.

Of course, if you visit the poor in the slums, you will see that they rely entirely on the market for both food as well as housing. The State might give them rice or wheat cheap, but the poor also buy vegetables, dal, cooking oil, spices and fuel. And water. Rice may be 2 rupees a kilo, but potatoes come at 12 rupees.

They also buy mobile phones. They have cable tv.

And as for the dwelling in the slum, they pay rent to slumlords.

Therefore, at a deeper level, we must ask ourselves the question: Why is urban land so expensive in India? Surely it cannot be that there is a shortage of land, for India is a huge country. Travel around Delhi, Calcutta, Bangalore, Bombay or Madras, and you will see vast open spaces. If these open spaces were connected to the city by good roads, the supply of urban land would increase and its price would fall. This would benefit the poor.

Further, if we look at the socialist policies of our The State, we find the culprit: they have a monopoly on urban land as well as urban roads. This dual monopoly operates as a double whammy. It is destroying all our cities.

Then there is rent control, without which the poor could easily rent cheap rooms. This is very important for poor people, who cannot buy homes. For them, there must be a vibrant market for cheap rentals.

In a liberated, free market scenario, with private sector real estate development, and a vibrant rental market, the poor would be much better off – if roads are built. The central problem with Chacha’s idea is that the State monopoly over urban land would continue. This would be fatal. Chacha is also devoid of a roads' vision - "hubs-and-spokes" etc.

Note how in 40 years, the Delhi Development Authority (DDA) has failed to house even the people of the middle class, and the price of their shoddy housing has only sky-rocketed. DDA clones exist in all our cities and towns today. They are The Problem.

In our socialist heydays, it was the common belief that State monopoly over land and housing would benefit the people. This idea has been proved wrong – even for the middle class. Thus, there is no chance that the continuation of such policies will benefit the poor. The State will only politicise outcomes, building politicised “vote banks.” There will be more and more uglification of our cities and towns – as with the DDA. There will also be political consequences because of open “clientelism.”

The best way to look at it is by comparing housing to other areas where State monopoly has withered – as with phones and airlines. Today, because of markets, everyone has a phone. Today, the cost of an airline ticket is affordable. When only Indian Airlines ruled the skies, it was hell. We must therefore have free markets in housing too. Note that the idea of cheap “nano homes” has already popped up in the minds of housing entrepreneurs.

To conclude: I find it horrifying that our The State has taken upon itself the task of both feeding as well as housing the vast majority. I find it horrifying that it thinks it can accomplish these tasks. I also find the prospects of living in such a country horrifying, for it will be a huge tyranny.

A good society is one in which people are free to make their economic achievements in markets; where The State exists only to act against enemies of The Market. Thus, under Chacha, we are not progressing; we are going back to an even worse kind of Socialism.