Further Implications Of Say's Law Of Markets: Part 2

So far, I have shown how Say's Law disproves the Keynesians, the protectionists and those who oppose free immigration, like the trade unionists. Today, let us take the arguments a few steps further, and also counter the points raised by Murali yesterday - "legal and cultural objections" to free immigration.


Let us begin with the example I gave yesterday - of the bhel-puri wallah. As Say's Law reveals, once he sells his stock, he is possessed of the means to demand other stuff on the market, except for bhel-puri, of course, which he will not buy. Thus, the sale of bhel-puri creates the demand for all non-competing goods. Our bhel-puri wallah might buy a mobile phone!


There are two important aspects worth noting at this stage: first, who are his customers; and second, the fact that the bhel-puri wallah is really a "poor" man, a very small businessman, often hounded by the cops. I will examine each aspect in turn. 


First: the customers of the bhel-puri wallah are a diverse bunch of people who produce a diverse bunch of goods and services, which they have successfully sold, and which has given them the means to enjoy some bhel-puri. This shows that widespread diversity - a hugely diverse division of labour - is good for all businessmen, because there are then more and more "non-competing" goods and services on sale. In other words, the more non-competing goods on sale, the better it is for all businessmen, the greater the demand for his own produce. 


Thus, Say's Law of Markets allows us the possibility of restating Adam Smith's dictum: "The division of labour is limited by the size of the market." This could be also put in the following form: "The greater the division of labour, the greater the demand for all goods on the market." Thus, free international trade is good - because then we have the "international division of labour."


Second: We noted that the bhel-puri wallah is a very small businessman. Now, especially in a poor country like India, the bulk of the businessmen are of this variety in our cities and towns - very small businessmen. And they are victims of the police. They are hounded, robbed, and their surpluses go in paying bribes. 


Yet, capitalism is all about Big Companies. And these Big Companies are ALL producing for the "mass market." Modern capitalism is nothing but "mass production for mass consumption." Our bhel-puri wallah bought a mobile phone - and he will spend the rest of his life re-charging it. Another example: 70 percent of all shampoo sold in India comes in little 1 rupee sachets - for the poor. This has enormous implications for policy.


This shows that the bulk of demand comes from lesser off people - and, if we want prosperity, every effort must be made to ensure that these people are able to sell whatever goods and services they wish to sell.

There must be economic freedom!

And State Predation on these people must end. This is a very different approach from Keynesian "funny money" welfarism of the kind chacha manmohan s gandhi has instituted, copying the West (where it has failed most spectacularly). 


Thus, either we institute Liberty - by which we will become the world's fastest growing market for mobile phones and other gizmos; or we continue with the charade of a Predatory State pretending to be a Welfare State: free rice for all bullshit.


Murali pointed out that westerners are opposed to "illegal immigration." But what does True Law state on Private Property. Does the US Immigration Department own the United States of America? Or is there, indeed, a "patchwork" of private property? In which case, each private property owner has the full right to decide who should enter his area. If I rent a room in a US hotel, US Immigration should not be able to disallow me entry.


As far as "cultural" objections to free immigration are concerned, these are "tribal mindsets" at work - not the sort of "rugged individualism" capitalism is all about. In any case, they make zero economic sense. Immigrants from different cultures are good for a country precisely because they make the division of labour more and more diverse. In Pondicherry, for example, I met a Frenchman who has been living there for 40 years, running three French restaurants. Such immigration is for bidden in Goa. And in Pondicherry of the old days, there were lots of Vietnamese running their own restaurants - and the city is poorer because they have upped and left. Mexicans in the US have popularised their cuisine. 


There is much people of diverse cultures can successfully sell that is "non-competitive" - like handicrafts and jewellery. Would the USA be a better place with just European food, burger joints and the like? And have you ever tried Vietnamese nouc mam sauce? Isn't Britain better off with all the Indian restaurants? And I did find a Vietnamese restaurant in London! Give me a "cosmopolitan" city any day. And do note that all these diverse restaurants ADD to overall demand - unlike Keynesian funny money.


We in India should therefore consider ourselves fortunate that none of our cities are homogeneous. They are all true "catallaxies." Catallaxies, which are "open trading arenas" - open to strangers, that is - are the "key to an Open Society," something I discussed in a column once. We can either have catallaxies and open societies - based on rugged individualism - or we can have "closed communities." 


Say's Law, as I discussed yesterday, makes a strong case for rugged individualism. Our heterogeneous society is best placed to make such a world, and such an Open Society, happen.


(This series on Say's Law is continued here.)

Further Implications Of Say's Law Of Markets: Take #2

Today is the 130th birth anniversary of Ludwig von Mises. This post is written in his honour. He hated the Keynesians and he upheld Say's Law against their vicious attacks. It is Say's Law that proves the truth of Mises' words below, written for the benefit of the working classes who mistakenly support socialism, unionism and Keynesianism:

In the capitalist society there is a place and bread for all. Its ability to expand provides sustenance for every worker. Permanent unemployment is not a feature of free capitalism.

Murali's comment to my previous post - on Jean Baptiste Say's Law of Markets, and its implications on the current economic crisis, has prompted me to write another post on this vital law, this time explaining some of its other practical implications. In the world of classical liberal political economy, if you were not an adept at Say's Law, you were not considered a political economist worth your salt. It is therefore important to know all about this law of markets - a law that John Maynard Keynes thought he had disproved.


First, let me restate the law:

The sale of X gives rise to the demand for all non-X.

If X sells, it creates the demand for all non-competing goods.

Thus, if a bhel-puri wallah sells his stock, he will be possessed of the means to purchase all other, non-competing goods on the market, except bhel-puri, which of course he will not buy. This disproves the deliberately misleading Keynesian formulation of Say's Law as "supply creates its own demand." The supply of bhel-puri does not create the demand for bhel-puri. The supply and sale of all other, non-competing goods and services do.  


Now, the first objection the Keynesian will have to this formulation is that the market tends towards over-production, so without Keynesian monetary boosts, recessions are inevitable. But Say's Law says:

Markets Clear - If Prices Are Not Rigid Downwards 
(due to interventionism).

Thus, ANYTHING PRODUCED will finally be sold - even as junk, if prices are allowed to fall. There is NO OVERPRODUCTION. And there is NO CASE for any monetary boost to "stimulate consumption." 

Indeed, as the Austrian School of economists have proved with theory, and as history has proved today as well, it is this sort of monetary tinkering based on Keynesian "macroeconomics" that is the root cause of all boom-and-bust "business cycles."

Say's Law asserts the obvious: That SAVING and INVESTMENT and INCREASED PRODUCTION lead to INCREASED DEMAND for ALL GOODS AND SERVICES. This is the ONLY WAY to boost demand permanently. 


Keynesian inflationism destroys savings; erodes capital; and thereby reduces production. If at all it boosts consumption, this is during the temporary, heady and short period of the artificial boom, for inevitably the bust must follow, and this is invariably of longer duration than the boom. Further, there have been historical periods of "stagflation," when inflationism failed to boost consumption at all, and economic stagnation combined with high inflation.  

Second: Say's Law proves that all businessmen are best off if they DO NOT COMBINE in protectionist groups. Such groups, if successful, reduce the supply and sales of all non-competing goods - and this reduces demand for all businessmen who do NOT compete with these goods. Thus, whereas Amul Cheese may want protection, it makes no sense for Kingfisher Beer to support this claim, and vice versa. 


Recall that, in our protectionist heydays, there was precious little available in Indian shops - and all businesses suffered. Our markets had zero catallactic energy. 


Thus, Say's Law proves that the business interests of a particular class of traders called "importers" must be supported by all. 


Further, it makes a rock-solid case for "rugged individualism" on the part of all businessmen. It opposes mixing politics - particularly protectionist politics - with business.

The same is true with regard to immigration restrictions. These exist in the West because of a few very powerful trade unions, like the US Automobile Workers' Union. These unions demand visa restrictions because they fear that immigrants will "take away their jobs." 


But the fact remains that all immigrants are NOT competing with autoworkers. Some may come as doctors and nurses. Some may come as dishwashers and construction labourers, restaurant waiters and cooks. And some as software engineers. After all, labour is NOT a homogeneous entity. And there is therefore nothing called "unskilled labour." Further, the demand for labour is always the demand for a particular skill.

If immigration was free, Say's Law proves that overall demand would rise, because as the workers in the non-competing areas managed to sell their services, they would buy whatever they needed from that very same market. I daresay if the USSA had opened up to immigration two years ago, their crisis in the housing market would well nigh be over.

There is more: Because automobile workers' unions are so influential and powerful, the US automobile industry has collapsed. General Motors has been nationalised! Obviously, an important cause of this collapse is the high cost of domestic labour. 

So here is a third and final implication of Say's Law: That all non-competing businessmen gain the most if ALL goods and services are sold at their most competitive price, which is, of course, the LOWEST PRICE.

THIS INCLUDES LABOUR.

Thus, cheap and abundant labour is good for an economy, just as cheap and abundant coal or oil or natural gas or timber is. If labour is cheap, all businesses benefit. All costs are lowered. More goods and services are produced and there is more competition. Thus, workers in all industries gain as consumers - even though their individual wages may be lower. For example: If waiters and cooks can be hired cheap, restaurants will be cheap, there will be more of them - and more workers will be able to eat out.


Cheap labour is beneficial to other, non-competing businesses in another, vital way: consumers have more to spend on the other offerings of the market. Thus, if cars are cheap in the US, the US consumer has money left over to buy beer, jeans, CDs and books. 


This implies that free immigration and cheap labour are GOOD for all American businessmen. Further, there is NO REASON for all workers to join socialist trade unions. Karl Marx's slogan, "Workers of the world - Unite!" makes as little sense as "Businessmen of the World - Unite for Protectionism!"

So, just as Say's Law of Markets suggests RUGGED INDIVIDUALISM as the best policy for businessmen, so also does it suggest the same for workers. Trade unionism and labour market restrictions hurt all workers outside the combination - and thereby hurt all other businesses, and the workers employed in them, too. Workers must compete with each other - just as businessmen must, too. After all, workers in the same factory compete for the next promotion, don't they? As Mises put it: 

Under capitalism everybody is the architect of his own fortune.

Say's "Law of Markets" thus makes a water-tight case for free trade, for free immigration, and for laissez faire. It supports the logic of open borders and the free mobility of capital, goods and labour. It tells us what really boosts demand permanently - which is, increased production of goods and services, based on higher savings and investment. It totally explodes the Keynesian myth that monetary stimulation to boost consumption is good for an economy.

Jean Baptiste Say was known as the "Adam Smith of France." His Law of Markets is as unshakable as the Law of Gravity - despite all the efforts of the evil, lying Keynesians. Truth keeps on working, as Mises said, even if the textbooks contain lies. This law makes a logically indestructible case for free markets and free competition. It makes a solid case for rugged individualism. It opposes politics - which is what the Keynesians, Marxists, protectionists and union bosses have injected overdoses of into our lives, thereby damaging civilisation, even to the point of destroying it.

If you want to learn more about Say's Law, I suggest the late Professor WH Hutt's A Rehabilitation of Say's Law, available from the Mises Institute in PDF, as an e-book, and also as a proper book. Follow this link.


WH Hutt was an outstanding classical liberal; that too, despite being educated at the London School of Economics during the heydays of Fabian Socialism. Hulsmann reports that Hutt, while a student at the LSE, attended a guest lecture by Mises - and then he "broke on through to the other side."


Hutt was born into the British working class - which is why his works against trade unionism are all the more worth studying.


Part 2 of this post can be read here.

Nilekani's UID - Passport To Totalitarianism & A Police State

Before assessing Nandan Nilekani's UID (Unique Identity) Scheme for iris-mapping and fingerprinting each one of us for Police Records, it might be useful to read Wendy McElroy's recent article against passports titled "Passport to a Total State." UID could be a means to convert our totally failed The State into a Total Police State. McElroy, a US citizen, begins thus:

"Your papers!" In old movies, the demand is barked at trembling travelers by a Nazi with a guttural accent. If the demand is made in the opening scene, then the audience knows immediately that they watching a totalitarian state in which travelers are in danger.

"Your papers!" now rings out at every American airport and border crossing. The accent is different but travelers need to recognize with equal immediacy that a totalitarian state is playing out in front of their eyes, and they must be careful.

McElroy asserts: "It is the mandatory nature of any travel document that converts it into a violation of rights." UID will be mandatory, too.

  

She adds: "With the exception of trespassing on private property, people have an absolute right to travel in peace and at their own discretion." 


And she ends her piece with these ringing words:

The passport has grown into what is arguably the single most powerful tool of totalitarian America, second only to law enforcement [read "legislation-enforcement"] itself. It no longer pretends to protect individuals; not a single terrorist has been apprehended as a result of passport checks. But it does cement the totalitarian state. The mandatory passport should be reviled and rejected as an abuse of human rights and common decency. A nation that requires one cannot be free.

 In my life I have never suffered more than at the hands of passport officials and, of course, their counterparts, the visa officials. And The Police, of course. 


The question is: Do we strengthen these bastards? Or, do we get RID of them?


In my book, in a market economy, citizens must have secrets, including especially business secrets. Bank accounts must be secret - as they were in Switzerland once-upon-a-time. 


On the other hand, whatever is done in the political-bureaucratic sphere must be completely OPEN. No "official secrets."


Think about it.


Song of the Day: Mr. Bob Marley, of course, singing:

Why can't we roam,

This Open Country?

Why can't we be

What we want to be?

WE WANT TO BE FREE!

Hey! Mr. Cop,

Ain't got no Birth Cerfiticate (sic) on me now...

You can watch the video of this great song here.

On Pornography... And Private Property

The photo alongside this post is from Khajuraho - that too, from a temple there - and my purpose is to illustrate the fact that ours used to be a sexually liberated society. Not any more. Not even in the internet age. Today, despite the internet, Playboy magazine - which once published an interview with Ayn Rand - is banned. Though thanks to "import substitution" we do have our desi version - Debonair - of which a great man like Vinod Mehta was once editor.

I was drawn to this subject by a report in the ToI which begins as follows:

Consumption of pornography is no offence. All that the law forbids is its publication or transmission. If the railway police in Mumbai could still terrorise an IIT student, just by claiming that his mobile phone stored pornographic video, they were riding roughshod over his human rights.

Once again, the only way out is the Inviolability of Private Property. It begins with the human body, and each of us is the Sole Proprietor of his or her body. We can thus display this body unclothed - if we choose to do so. Some of us do possess bodies that others consider beautiful - the "subjective" factor - and we can take advantage of this fact by posing naked for money. We can pose for stills - or for films. These stills and films will be shot in studios - which are also private property. These shots will be printed in magazines - private property once again, as are reels of film. Finally, these will be displayed in magazine shops or movie theatres, which are private property, too. The audience that buys the magazines now possesses them as private property. Similarly, those who buy tickets to see blue films possess temporary property rights to be seated in the theatre. If private property is inviolable by all, including The State, all is hunky-dory, none can interfere, and business can carry on as usual.

Now, a strange kind of man-made law like the IT Act, which allows the consumption of porn but not its production or distribution, is not unlike the Narcotics & Psychotropic Substances Act which allows smoking ganja but not its cultivation or sale. But as any ganja smoker will tell you, how can one peacefully smoke ganja if farmers cannot peacefully grow it and dealers cannot peacefully sell it? Such man-made laws are stupid - not based on any sound principle, like Private Property.

Private Property must be inviolable if we are to be completely free. Even immigration restrictions can be shown to violate property: for example, if one rents property in the US, even a hotel room, and if one is not allowed to enter the country, then the immigration authorities can be shown to have violated the property rights of both the foreigner who has rented it and the American citizen who owns it. Thus, a great deal depends on this principle - Complete Freedom.

Mises wrote something very important about Private Property:

Private property creates for the individual a sphere in which he is free of the state. It sets limits to the operation of the authoritarian will. It allows other forces to arise side by side with and in opposition to political power.

With our Socialist Constitution which glorifies "collective property," we have very little Liberty to celebrate. All we have are Air India, SAIL, ONGC et. al. What would you choose? PSUs or Liberty?

Hence, a New Constitution is an imperative. We must proceed forthwith to The Second Republic. We must be free! Liberty!

The "Good" Life

In the Market Society, every individual survives by satisfying his Customer - who is his King, his Lord. Whereas the actual King taxes him, the Customer-King is his Patron, who understands and appreciates his Product. He comes in the shape of Man - and namaste means "The god in me salutes the god in you."




So, as the Dylan song goes:

It may be the Devil,
Or it may be the Lord,
But you gotta serve somebody.

Thus, to serve The State is to serve the Devil. To serve the Customer is to serve the Lord. If you do so honestly and faithfully, you will surely prosper. Your life will be a "good" one.


The question then arises about "politics." How much of this do "good people" need in their lives? I thought up the answer as follows:


Suppose we are all citizens of a small town. In the town, there is a Town Hall - for "civic politics." And there are bars, cafes, theatres, nightlife and so many other diversions and entertainments. Would you like to attend a Town Hall meeting every day? Every other day? Or only once in a long, long while? Quite obviously, the "good life" contains very little politics.


But this much "free politics" is an essential component of Liberty. There must be Town Hall meetings sometimes, when important issues arise that affect all. In Goa, for example, I would recommend town hall meetings over the issue of State Police harassment of ganja-charas tourists - who are their Customers, and from whom they would like repeat business. Without the essential Liberty of free, civic politics, there is no way of acting "politically" to solve this problem.


But once the purpose is attained, and police harrassment is permanently eliminated, it must be business as usual. The "good life."


Democratic socialism - or Statism - with all its "multi-party" gangs of "politicians" - has had one dreadful impact: they have politicized everything. Peter Bauer was the first to point to the "politicisation of economic life" under Statism. With rampant interventionism, businessmen devote more time to politics than enterprise. Politics determines everything. Thus, "democratic socialism" means nothing other than total politicisation, while a Free Market Society is its very opposite.


So, in socialist Goa these days, there is a great deal of "politics" over what language a child should learn. As if such decisions must be made by "elected representatives" and not by the parents, who would surely consult the child. If there was no State Education, this decision would be taken by individuals in a free market for knowledge.


This politics is a disease - and it has nothing to do with the "civic politics" of a Town Hall Meeting. Yet, we don't want too many town hall meetings to attend, do we? We would rather attend to business, or pursue leisure, than spend time on free, civic politics.


In the Olde City of London, the "one square mile" that has preserved its civic independence and traditions for over 800 years without ever increasing its "territory," they elect a Lord Mayor and two Sheriffs once a year - and everyone returns to "mind his own business" after that, for another year. These public officials, on the other hand, lose - for they are unpaid, and their businesses might suffer. Yet, this "politics" is important - for this is what has kept the King out of the City, right to this day. But the real purpose of the citizens in not politics; it is commerce. The City is the epicentre of Capitalism - or should I say "was"?


For serious students I recommend Anthony de Jasay's Before Resorting to Politics.

Against The Passport-Visa Regime

Visa scams are a regular feature of life in India - and there are visa touts aplenty in Nude Elly - but the scam I found today in the Express occurred in the USSA, in California, and was committed by an educational institution; that too, mainly on Indian students.

On this touchy subject, my song is the one Bob Marley sang:

Oh why can't we roam,

This open country?

Why can't we be

What we want to be? -

We want to be Free.

Surely, there are better ways of proving one's identity to a foreign State official than a passport? Even an International Driving License is better. And as for the visa - why should a local cop be perturbed if a stranger in town is spending his money in the bars and pubs, and in the high-street shops, armed with a credit card called Visa that guarantees not only his identity but also his economic worth; that is, his credit-worthiness? Why do these have to be counter-checked by a tax-funded bureaucRAT (white-skinned) in an embassy? These embassy-based visa bureaucRATS - the rudest of their ilk on the planet - are the cause of all these scams.

Let us not entertain arguments over "community" and how immigrants "do not integrate" themselves into this mythical social entity. The urban market economy has nothing to do with community; rather, it is individualistic. Immigrants must integrate themselves in the "division of labour" alone, and it can never be reasonably expected of them that they must integrate themselves with a mythic host community.

Further, the chief advantage of the urban market catallaxy is that it enables gainful trades between complete strangers. As tourism is the world's largest industry these days, more strangers in every nation is a great idea, for it would give this great industry - which is all about holidays and good times - a boost.

The real reasons for the continuation of the passport-visa regime by Western nations lie elsewhere - in their desire to keep out cheap labour, in order to favour trade unions. This backfires on them - as with every single instance of interventionism - for their own citizens cannot consume labour services any more; no more gardeners and maids for them. And their exports dwindle too - because high labour costs make them uncompetitive.

If we look at the Western nations of Europe - they are all linguistically homogeneous, excepting Switzerland. This homogeneity made them nation-states, nothing else. Thus they came by nationalistic chauvinism. And proceeded to hate "outsiders." Hitler was the worst of the lot - but there are many others, from Enoch Powell (see his "rivers of blood" speech) in Britain to Jean-Marie Le Pen's Shiv Sena-like anti-outsiderism in France.

In India, every city is a melting-pot - there are multiple communities, multiple languages, multiple religions. Let us endeavour to keep things that way. In our neighbouring area, there are lots and lots of poor people, who want to come here for various reasons: to work and integrate in the division of labour - like the ubiquitous Nepali chowkidar; to obtain medical attention - as with Afghanis and Africans; or to get themselves some educational "degree" - as with many youngsters from Africa and the Middle East; and finally, as genuine tourists. I would insist that they do not hurt us in any way by coming into our country. 

So let them come freely. Let us be the first to dismantle this horrendous passport-visa regime created by the West - as an example to them. 

The Mughal Emperor was also called Jehanpanah or "Refuge of the World" - and this was "fiscally rational" policy, because if someone escaped the clutches of the Shah of Persia and settled in Mughal territory, the Mughal Exchequer would gain. What better way to tax Bangladeshis other than letting them settle freely in India? To spend tax revenues to keep prospective taxpayers out - which is what the West is doing these days - is "irrational." It is absurd. And it goes against the "sentiment" engraved upon an international monument.

The poem by Emma Lazarus inscribed on the Statue of Liberty in New York is titled The New Colossus, and goes thus: 

Not like the brazen giant of Greek fame,

With conquering limbs astride from land to land,
Here at our sea-washed, sunset-gates shall stand
A mighty woman with a torch, whose flame
Is the imprisoned lightning, and her name
Mother of Exiles. From her beacon-hand
Glows world-wide welcome, her mild eyes command
The air-bridged harbor that twin-cities frame.

"Keep, ancient lands, your storied pomp!" cries she,

With silent lips. "Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore;
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!"

The Statue itself was a gift from the people of France. The money was raised through holding a public lottery - that is, it was built on gambling money.

In the meantime, The USSA is no longer the "golden door": since Nixon, the US dollar remains just paper debt piling up and losing value with every passing day. When you read debates over free immigration there, the only defenders of the regime are those who wish to avail themselves "social security benefits" while denying these to outsiders.

Reminds me of the story of the first Muslims of this world, who fled with their Prophet from Mecca to Medina. There, the local inhabitants rushed out to greet them, offering every hospitality - and even the Prophet encouraged this bonhomie, saying, "Fraternise in Allah."

But these, the first Muslims, would have none of it, and said, in one voice:

Show us the Way to the Market,

And we will make our Way by Working.

Who the fuck wants "social security" from some foreign State anyway?

Central Asia, once part of the USSR, has disintegrated today - and each nation-state has established its own passport-visa regime, thereby hurting traditional itinerant businessmen. No more "Silk Route."

Yes, the passport-visa regime must go - and Indyeah should take the lead.

Choose Between Shopkeepers And Planners

In my previous post, I wrote how "improved consumption" should be seen as a sign of "economic development." Since there are many among us who deride "consumerism," allow me to elaborate. After all, from the 1950s to the 1990s, why did millions of Indians migrate to the West - if not for "improved consumption"? If some nations are considered "developed" today, the only reason for this status is that their citizens are able to consume more and better goods. In the socialist India I grew up in, there was nothing at all to consume. The fact that the Indian consumer is far better provided for today than he was then is in itself proof of the validity of "economic reforms" in the 1990s. So let us not underrate the importance of consumption. Consumption is the goal of all production. We produce in order to consume.

In that post, I discussed the Bania shopkeeper:

In the small market town 3 kms from the village where I live in south Goa - the only market town in a vast, rural (and forested) district - is a Bania shopkeeper. His little shop is always crowded with poor villagers who come from miles around to buy this or that, in very small quantities. And he never fails them. I always get my carton of cigarettes from him - and he stocks hundreds of other goods. We should pause to appreciate the tremendous amount of diligence that goes into running such a shop, upon which so many rely, and how he "improves their consumption." When shops and markets close, people suffer - especially in far-flung parts of the empire. We may also note that all the mathematics the Bania uses are the four operations of Arithmetic.

Some additional points need to be noted: First, that this Bania, like all entrepreneurs, "makes provision for the uncertain future." When he buys his stocks, his mind is on the future needs of his customers, which he tries to successfully anticipate. Further: he invests his own money in provisioning for that future. He is a capitalist and speculator - and he "serves the people" in a very important way, and that is by improving their consumption.

Now, there are two ways by which we can pursue "economic development" - one is by using such shopkeepers as the vehicle, and the other is by using the central planners of The State.

When we contrast shopkeepers with planners, we see that the two perform very different kinds of "work." The shopkeeper has his eye on physical stocks and their rate of depletion as he sells hundreds of goods to his customers. The planner has no customers. The planner studies government files and government reports. On the basis of the recommendations in these files, the planner decides to allocate "public capital" towards certain projects aimed at improving the lives of the people. All these projects are executed by the bureaucracy. In all these cases, the bureaucracy benefits - not the people, whose needs remain unsatisfied, despite all the complex mathematics and detailed statistics. It is no coincidence that anything planned is in short supply - like roads and electricity. Only entrepreneurs can produce "goods"; governments produce "bads."

Let us also not forget that the planner is spending money that does not even exist - by borrowing and by printing - and that both taxation and inflation impair consumption.

We in India therefore have to choose between the Market and the State. We must see that only shopkeepers and free trade can improve our material lives - not planners. We must call for a completely free economy.

No more 5-year plans. No more "Indian Economics" textbooks.

I have been singing this song for a long, long time. Barely a week into my stint as editorial writer for The Economic Times (1998-2002) I wrote one titled "Close it down, Monty" in which Montek, then heading the Planning Commission, was advised to close down this house of horrors. The next morning, I was surprised to find that my editorial had not appeared. I called the editor and he replied that he simply could not publish such an opinion. I immediately offered to quit - for I said I was unwilling to co-exist with central planning. The edit was published the next day. The time has now come for more and more journalists to think along these lines - and shout, "Close it down, Monty."

Open Society & Economy - And The North-East

The plight of North-East India was brought to mind by this recent editorial in Mint recommending that the "troubled frontier", i.e. the border with Bangladesh, be "fenced and sealed." This is a recipe that will cost the taxpayer hugely - and lead to the proliferation of border guards, guns and checkpoints. The North-East is underdeveloped because it is not properly linked to the rest of India. Today, Sikkim and Arunachal are hoping to open the border with China. Will autarky be good for the North-East?

Socialism, central planning, and "balanced regional development" have all failed the North-East. So the very idea as to what constitutes "development" must change. No longer must centrally funded "projects" constitute development. Rather, development must be seen as increased "consumption" on the part of the ordinary people. Ordinary people buying mobile phones should be seen as development - and not some PSU.

When we turn the discussion to market-led development, the focus immediately shifts from politicians, planners and bureaucrats to traders and entrepreneurs. In many cases, those who undertake such trading activities will necessarily be "outsiders." These outsiders should be seen as valuable and useful - and not as easy pickings. I have for long heard horrible stories of how Bania shopkeepers who venture into the North-East are treated - especially by all the "rebel" groups. So, to begin, let us understand how these Bania shopkeepers benefit a local population.

In the small market town 3 kms from the village where I live in south Goa - the only market town in a vast, rural (and forested) district - is a Bania shopkeeper. His little shop is always crowded with poor villagers who come from miles around to buy this or that, in very small quantities. And he never fails them. I always get my carton of cigarettes from him - and he stocks hundreds of other goods. We should pause to appreciate the tremendous amount of diligence that goes into running such a shop, upon which so many rely, and how he "improves their consumption." When shops and markets close, people suffer - especially in far-flung parts of the empire. We may also note that all the mathematics the Bania uses are the four operations of Arithmetic.

The land-locked North-East, the furthest-flung part of this empire, presents to The Market the appearance of an unexplored (and unsafe) "frontier." The real foot-soldiers of The Market in this frontier are the intrepid traders. Small traders. Outsiders. Travellers. The specific purpose they serve is that they improve consumption for the local people. Thus, they should be encouraged. Just as any "trade delegation" from abroad is to be welcomed.

The alternative, "closed society" view of one state-one people-one leader - what the Nazis called ein reich, ein volk, ein fuhrer - is seen far too much in local politics these days, all over the land. This view requires fences, border guards, checkpoints and "papers." Consumption does not improve. Taxes are misspent.

Since the editorial specifically recommends a border fence between Meghalaya and Bangladesh, allow me to add something about Shillong. The British built this city, which was then the capital of the entire North-East and is today the region's educational capital. I have never visited Shillong, but I recently read a great contemporary novel set in this city, and the picture it offers is of a town with many markets, trades and professions, churches, schools and colleges - and also a very mixed population. The protagonist is a Muslim girl from UP, a college teacher, with a Manipuri boyfriend (she even eats pork momos!). There are, however, some boors who go round harassing outsiders and extorting money from shopkeepers. One shopkeeper is even shot dead. (Brings to mind a thought: A gun is a consumer durable that serves to make the consumer more durable.)

Instead of a border - fenced and sealed - between Meghalaya and Bangladesh, I suggest a great big highway running from Shillong to the Bangladesh port of Chittagong, so that container traffic can enter the North-East directly from the nearest port. Chittagong is also close to Tripura and Mizoram. The investment in the highway could well come from an entrepreneur in The Market.

There are troubled parts of the North-East - the entire border with Burma is troubled - but there will perhaps always be troubled parts on this troubled planet. All we can do is promote the market ethic. And hope it spreads. But it bears repetition that small traders are the foot-soldiers of the market economy in such "frontiers." I borrow this particular word from Peter Bauer's The Development Frontier: Studies in Applied Economics, in which he writes about Africa - and the skills of the small traders there.

These "development frontiers" of the Third World - or should I say the "socialist" Third World - present a picture that is not very different from parts of Eastern Europe in the 15th and 16th centuries, when Poland-Lithuania was underdeveloped and underpopulated. The lords of all the vast lands were poor. What saved them were the great migrations of the time, which brought urban Jews from west to east. The Polish lords responded by settling them in their own towns and letting the urban market economy develop. This is how vodka came to eastern Europe. All these urban trades "improved consumption." Bangladeshis are great migrants. They are found all over India and are hard-working and honest. It was 7 AM one morning in London when I went out looking for cigarettes. Only one little cubbyhole was open - run by a Bangladeshi.

There is lots and lots of hope for the North-East. Scotland was extremely underdeveloped compared to England in Adam Smith's time. It was trade that made Scotland flourish - a trade that was encouraged and studied in Glasgow University. In those days this university produced more useful knowledge than Oxford and Cambridge combined. There was Adam Smith, of course. But also James Watt, inventor of the steam engine that powered the next century. And there were others as well, in Physics, and in Geology. The novel I read about Shillong paints a horrible picture of the State-run higher education system today.

Like the North-East, Switzerland, too, is land-locked and mountainous - and was once poor. At a souvenir shop in Interlaken I found figurines of Swiss women carrying bundles of firewood on their heads. The Swiss have succeeded because of peace, free trade and free enterprise, urbanisation and a top-class transportation system. Goods have to physically travel. Transport is the key, not border fences.

Recommended reading: My recent column in Mint, titled "Catallaxy: Key to an Open Society."

In Defence Of Migrants

Our Central State Police Minister's comment that crime was on the rise in Nude Elly "because of migrants," reminded me of an "experiment with truth" I once conducted, some ten years ago, while an editorial writer with The Economic Times in this very city.

For two hours every morning, some eight of us would meet to discuss the events of the previous day and then decide on our three editorials. One morning, I asked the group if any of them had been born in Delhi. Not surprisingly, all of them answered "No." They were all migrants. So was I. Just then, there was a knock on the door and a bearer entered with our tea. I asked him his place of origin, and he replied, "Nepal."

There are precious few "Original Dilliwallahs" in Delhi.

Indeed, I daresay that if the minister checks the personnel records, the police commissioner of Delhi will turn out to be a migrant - same as the chief minister. Anyway, the entire police constabulary is composed of migrants - mainly village lads from Haryana.

The Central State Police Minister's irresponsible comment has found a sympathetic echo in Mumbai - with the Shiv Sena mouthpiece, Saamna, asking the central minister to implement a "permit system" for migrants into Delhi and Mumbai. "Internal visa"? What an idea, sirjee!

History reveals that successful cities are those that have been open to migrants. This is particularly true of the Olde City of London. Lombard Street, where banking began, is named after the area in Italy these bankers came from. There were merchants from Flanders, from France, from Holland - and, of course, all the Hansa cities. Almost every Lord Mayor in its 800-year history has been an "outsider" - usually a younger son who would not inherit his father's estate and had to make his own way in the world by moving to the Great City and taking up an apprenticeship. Indeed, the very word "mayor" was an import: it originated in Rouen, France, the first place where an association of citizens addressed their leader by that title. Long before the Norman Conquest, a community of merchants from Rouen inhabited one corner of Olde London. It is said that this word came to London from them.

This openness to migrants is also true of Cochin, a very old port city, much older than Bombay. There is a very old synagogue in Cochin; there are old churches of Syrian Christians; and old mosques too. All these served communities who had migrated from over the seas. These arrived here long before the white man.

Cities have always attracted migrants: this is the story of civilisation. In highly developed nations, very few people live in the countryside. The vast majority are city-dwellers.

In India, the biggest problem is that there are very few cities. And these are getting horribly overcrowded. The only solution is aggressive urbanisation - the building of hundreds more "satellite towns" around the five "metro" cities; the building of entirely new cities along the coasts; and re-building all the smaller cities and towns in the interior. Many more "hill stations" too.

The US has 350 million people and 200 cities. India has 1000 million people and 5 cities.

India needs aggressive urbanisation - not this "rural development" bull. The very fact that villagers are migrating en masse to the cities - "voting with their feet" - proves our poor people want urban opportunities. The Gandhian vision of "self-sufficient village republics" run by village panchayats must be dumped. Globalised Indyeah of the future must aim to be urban - thousands of free trading and self-governing cities and towns run by mayors.

The Shiv Sena attitude can only then be effectively countered - by Competition, as cities compete for citizens as well as commerce. Then, the migrant will be recognised as a valuable resource.

Further, only when urban competition kicks in will our cities and towns be well run. This valuable insight, that competition between local governments for citizens who "vote with their feet" matters more than ballots in local elections, is credited to Charles Tiebout.

The Votometer Scam?

Are the Electronic Voting Machines (EVMs) being used in our elections tamper-proof?

From a news report I saw today, it seems our The State is misusing force to stop the dissemination of scientific research that indicates EVMs are NOT tamper-proof.

A "Votometer Scam"?

Two computer scientists, J Alex Halderman and Hari Prasad, who have successfully conducted independent research to conclude that the "electronic voting meters" (EVMs) used in our elections can be intentionally tampered with, were coming into India to speak about their findings at a "technical meeting" of computer scientists in Gujarat.

Halderman was stopped at Delhi Airport - and "deported on arrival."

The news report says:

Speaking to The Indian Express from the airport, Halderman said: “I am about to be thrown out of this country and there is no reason anyone is giving me. There is just no explanation, they are not letting me enter.”

Ha! Even their Votometers are rigged!

Let's get these scientific facts on The Internet fast.

And let's raise a LOUD SHOUT for the Liberty of Halderman.

Interventionism - And The Labour Market

Interventions in the labour market are directed towards the goal of increasing wages above the market rate. There are minimum wages stipulated (which cause permanent unemployment); there are trade unions which are protected in their violent and coercive actions (which cause more unemployment); there are doles for the unemployed (which cause even more unemployment); and finally there are immigration restrictions (which cause unemployment by making exports uncompetitive). Thus, these make no sense whatsoever. Rather, they are a fitting illustration of Lingle's Law:

Government intervention-> Distortion -> Impact on special interest groups -> demand for government intervention-> Distortion -> Impact on special interest groups -> demand for government intervention -> Distortion ->Ad infinitum /ad nauseum ….

Let us begin with the basic objective: raising wage rates in the domestic market. Now, in a completely unhampered market, all goods and services are sold at their competitive price. Thus, the benefits go to everyone as consumers of goods and services. It is in no one's interest as a consumer of, say, motor cars, that the trade unions make them costlier. It is also not in the interest of the "nation" taken as a whole, for export markets shrink, capital is transferred abroad, and the factories open in foreign countries.

Yet, Lingle's Law tells us that nations persist with these interventions because of the pressure of small groups who benefit from these interventions. These lead to more and more interventions - ultimately, to the complete destruction of the market economy. In the case of the market for labour, unemployment doles are the price paid for all the unemployment caused by minimum wages and trade unionism - and these are paid for by printing money. Since this cannot go on indefinitely, the international capital market is torn asunder and the gold standard destroyed. Each and every nation retreats into a "national economy" - and this is a recipe for war. Instead of mutual co-operation, we have mutual antagonisms.

The root of all this is the false and corrupt idea that the role of national governments lies in increasing the income of certain groups - either domestic workers, or domestic producers. What the science of Economics teaches is that there is no such role for the State. The government is nothing but the social apparatus of compulsion and coercion, whose only role is to act against enemies of the free market, enemies of natural social co-operation. With interventionism, it is the government itself that becomes such an enemy. The Predatory State is just a short step away from the Interventionist State.

This is the fourth post on the subject of interventionism. All these posts can be found by clicking on the label "Interventionism" on the right-hand bar. Tomorrow, I will conclude the series by discussing interventionism on "environmental" grounds. We will see that the environmentalists are enemies of Liberty and friends of the Interventionist State. Very misguided people, indeed.

More Singers Of "Immigrant Song"

Two more voices have been raised in favour of free immigration. These are important to take note of in view of the strict legislation Arizona has just passed. From the USSA, there is Steve Chapman, writing in Reason, that the Arizona idea sucks bad. Chapman concludes, most realistically:

If there is any lesson from recent experience, it's that foreigners are going to come here one way or another. The best option is to admit far more of them through wider legal channels. The alternative is to keep Arizona's southernmost ranches as the front line of a war the immigrants don't want and we can't win.

The article is short, and well worth a read.

The second singer of "Immigrant Song" (the original is by Led Zeppelin, and if you haven't heard it, you must) is our very own Shanu A of Liberty Institute. Shanu takes a principled libertarian stand. He supports free immigration and answers its critics on their principal objections: that it would increase crime; that it would lower wages (how nice!); that it would cause unemployment; that it would increase the burden on taxpayers and the Welfare State (why not abolish Welfare?). This is a great article from a young Indian libertarian, one that I heartily recommend.

I am reminded of the time I visited Kargil in 1985. I was taken up a mountain to a border outpost manned by Indian soldiers. They had their guns pointed at a similar Pakistani outpost just metres across a deep chasm. And the two sides were busy hurling choice Punjabi abuses at each other. Quite disgusted at all the foul language, I ventured out and looked down the chasm that separated India from Pakistan. A river flowed below. And villagers from both sides, with their goats and sheep, were happily going this way and that, crossing the border that tax-funded soldiers were defending with so much passion. Reminded me of that song:

All that you protect,
All that you defend,
Is just a borderline,
Another borderline.

If you have missed the thread of previous discussions on immigration, here are two recent posts: the first on Walter Williams vs Lew Rockwell on the subject; and the second on Kane, a US wrestler, and a principled libertarian, who also sings "Immigrant Song."

Good Morning, America! Anyone not read that yet? It is the greatest "Immigrant Song" ever, by the great Baba Pagal Nath Charsi. To read, click here.

US Wrestler Sings "Immigrant Song"

A few days ago, I blogged about an eminent “libertarian” professor at George Mason University, Walter Williams, and his “bipolar” views on US immigration: how he salutes the words inscribed at the base of the Statue of Liberty to start with, but ends up recommending strict enforcement of legislation on immigration.

Today, I have for you the views of a professional wrestler on the subject, and this man, Kane, whose real name is Glenn Jacobs, has indeed successfully wrestled with all the issues involved, proving himself to be a principled libertarian.

The most potent argument Kane uses is the inviolability of Private Property, which is the hallmark of libertarianism. But he goes further: He also shows up the hollowness of the idea – one that Williams espouses – that America “belongs” to the US government and they are therefore authorised to decide who will enter this nice piece of “collective property.” Kane sees no reason why, if he invites a friend from Mexico over for dinner, that friend should not be allowed to attend by State decree. He sees no reason why the US State should be able to decide which human being is “illegal” and which “legal.” As he sees it, illegal immigration is just another “victimless crime”: the only people objecting are the minions of the State. A great article, well worth the read.

Kane’s enlightened views are totally in agreement with my friend and alter-ego, Baba Pagal Nath Charsi, whose Good Morning America many of you have enjoyed. If you haven’t already read this “immigrant song” you can read the free e-book here. The Baba tells me that he has placed the manuscript up for sale on Scribd in the USSA, and I recommend it to all courageous libertarian publishers who would like to scandalise America on this important issue.

The only “visa” I need is the one on my credit card.

That, indeed, is what I call Liberty.

Williams Vs Rockwell On US Immigration

LRC said: "Walter E. Williams is the John M. Olin distinguished professor of economics at George Mason University, and a nationally syndicated columnist." So I clicked and read his column titled "Immigration and Liberty."

Williams starts off saying:

My sentiments on immigration are expressed by the welcoming words of poet Emma Lazarus' that grace the base of our Statue of Liberty: "Give me your tired, your poor, your huddled masses yearning to breathe free".

But his conclusion reads:

Here's Williams' suggestion in a nutshell. Start strict enforcement of immigration law, as Arizona has begun. Strictly enforce border security.

He calls himself a libertarian and addresses his audience in these terms:

Libertarian Fellow Travelers

What are the factors that led this libertarian's "welcoming sentiment" to such a bizarre public policy prescription?

Williams begins with a completely alarmist question, aimed not at fellow libertarian travelers, but at fellow small-town Americans:

There are close to 7 billion people on our planet. I'd like to know how the libertarians answer this question: Does each individual on the planet have a natural or God-given right to live in the U.S.?

Williams seems to be imagining that the California Gold Rush is still on. I don't think the USSA is such an attractive destination - and certainly not for ALL the 7 billion people on this huge planet. I'm heading for Jamaica myself.

Lew Rockwell's recent column titled "Renounce American Citizenship" offers Professor Williams a reality check. This most eminent libertarian, founder of the Mises Institute, an institution that teaches libertarian fellow travelers around the world, thinks that the Gold Rush days are long over, and that it is time to quit the USSA. He concludes:

[We] advise the young and successful families who ask us, to get out while the getting is good.

Rockwell, an Austrian economist, writes of the US economy today:

Far more frightening is the sense that financial calamity is around the corner. A look at the data seems to suggest that. Vast reserves are sitting in the banking system, waiting to be unleashed to create what could be total destruction of the dollar. The deficit is rising so fast that it is hard to chart.

The jobs situation is terrible, especially for young people (and adults often make decisions based on what is best for their kids' future). Personal income is falling and falling. Investment is not recovering after its cliff dive in 2009. The social welfare state is broke. Private debt is rising even though lending has not restarted.

Rockwell goes on to say:

The policies of the fiscal and monetary authorities are absolutely terrifying. The Fed is keeping rates at zero. The government is spending and spending beyond belief. Tax receipts are falling as never before, unleashing the greedy hand of the predator state to extract every last dime.

And look at what the US congress and president are doing about this terrible mess: they are working to socialize health care, start a war with Iran, impose tariffs on China, and otherwise tax, regulate, inflate, and control more more more. An economy that is heavily capitalized and driven by the entrepreneurial spirit can stand a surprising amount of abuse. But that reserve capital is being drained away into new bubbles, and the entrepreneurial spirit is being crushed at every turn.

I strongly commend both columns to my reader, a study in contrast. Professor Williams says of libertarians who believe in the Inviolability of Private Property that we have some "blind spots." Perhaps it is he who suffers from such spots. Seven billion people rushing to the USSA! What nonsense!

Private Property includes a hotel room. It means that if a foreign tourist has a coco-hut on a beach in Goa, paid for, all local property owners should unitedly protect his unfettered enjoyment of his Property. This is the very foundation of local Justice. This is the way of openness and a big tourism industry. It is how to develop local property. It is the path to prosperity.

But then, in Goa, I am preaching to the converted.

Ha ha.