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.

Bengal - As A "Nation Of Shopkeepers"

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thus, the poriborton that Bengal needs is just this: 

Communism must be replaced by Capitalism.

No more a "nation of baboos."

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


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

They Think We're Stupid Because They Teach Us Economics

As inflation rages on, and State-employed professors like Pratap Bhanu Mehta write their columns suggesting the cause to be "supply-side bottlenecks" - this blog has always stuck to revealing the real cause: that is, increases in the supply of money by The State. Inflation is a purely monetary phenomenon. It is a "deliberate policy" used to finance The State and its welfarism. Thus, the only solution is a balanced budget. 

However, today, a new solution has been proposed by the Chief Economic Advisor to our The State. The news report says:

The country’s Chief Economic Advisor, Kaushik Basu, has made a formal pitch to the government for permitting foreign direct investment (FDI) in multi-brand retail in a bid to tackle inflation.

In case you don't believe this, here is another report on the above recommendation by a committee of baboos headed by Kaushik Basu.

To disprove this bald lie - that inflation in caused by supply bottlenecks and supermarkets are the cure - here is a post from Robert Wenzel at  EconomicPolicyJournal.com on inflation in the USSA. Wenzel shows how the cost of a barbecue has risen by 29 percent over last year. And this is not by his own calculations; rather, he provides his reader with a CNBC television clip in which the anchors made the calculations. The data is as follows:

Prices for a barbecue this year vs last year: +29% 

Ground beef: +14%

Lettuce +28%

Tomatoes: +86%

Potato Salad: +27%

Corn on the Cob: +150%

Coffee: +20 % 

The CNBC television clip is available here. 

Wenzel has also provided a link to a NYT column dated April 16, 2011, by the Keynesian Nobel laureate Paul Krugman, in which the conclusion reads: 

"But there’s nothing here to suggest any reason to consider inflation a problem." 

Krugman has been a leading voice arguing in favour of bigger and bigger "stimulus packages" of easy money to "get the economy out of recession." This is the advice our The State also took - hence there is inflation all over the world, including, of course, in the USSA, which began it all.

But let us ask Professor Kaushik Basu of Cornell University in the USSA: 

Why is there such high "food inflation" in the USSA, where they have huge supermarkets in every city block?

Obviously, supermarkets are not going to cure inflation. The inflation in India was not caused by the absence of supermarkets. Rather, it was caused by the Finance Ministry and the Reserve Bank of India.

Let us now put the Bozo-Brigade aside and hear the great Ludwig von Mises himself on inflation:

A government may finance its budget deficit by inflation. Then the government puts itself and some groups in a profiteering position and the majority of the population in the losing position. No new material means of production, no new capital goods are added to the wealth and income of the nation. Here, too, the government's additional spending power is entirely derived from the income or capital of its citizens. The nation's material potentialities are not improved a bit. 

The same is true in case of war.... 

Whether in peace or war, inflation as a method of financing government expenditure is always the outcome of a deliberate policy. We do not have to deal with the problem of determining which method of war financing is best. We have only to emphasise that in times of war, too, inflation is neither necessary nor unavoidable. There are, of course, politicians who consider inflation as a lesser evil when compared with a total financing of war expenditures by taxes and loans from the public. These men underrate the danger of domestic unrest brought about by inflation and still more the futile attempts of the government to fight its unavoidable consequences - the rise of prices - through price controls.

I see domestic unrest ahead - in the USSA.

And as for Kaushik Basu & Co. - the title of this post says it all.

Drop out of their Economics courses and log on to www.mises.org.

You're Crazy, Mr. Customs Man!

Mint has had a conference on "luxury" - and two reports I read on that set me thinking. I have often written that our Customs Department ought to be closed down unilaterally and free trade instituted with all nations. But these reports - and other sundry observations - make it clear that those in charge of this massive power over the domestic economy are completely crazy. Mad.

Let us begin with the interview with Armando Branchini, executive director of Fondazione Altagamma, a trade body of 74 Italian luxury brands such as Gucci, Bulgari, Fendi and Valentino among others, having collective sales of €45-50 billion. He says that the customs duties on his products are so high in India that people prefer to buy them in Singapore and bring them in - by simply wearing them on their person, like a luxury bag or a watch or shoes or whatever. He says something on the regulation of "luxury brand retail" (some famous 51-49% scheme) - and it sounds ridiculous when you hear that they are willing to invest 100% in their own retail stores @ US$ 3 million per store for 50-60 stores a year! The interview concludes with the statement: "This market and economy is over regulated by the government." Betcha! They're nuts!

The second report is on luxury yachts - and since I have been living on the coast for a long time, it is my view that as the roads and highways are so horrible, free imports of all kinds of boats could allow our coastal cities and towns to decongest and let property and real estate be developed along the coasts. This report says that the Italian luxury yacht-maker interviewed sells 60 a year in Brazil, but only 2 or 3 in India - because of customs duties. We have a 3000 mile coastline! We can have many, many free trading port cities on these coasts. Where are we headed?

Actually, the same applies to luxury cars, to liquors and wines, and to everything else we desire to import. The import duty on cars is over 100% - and this makes no sense since so many MNCs have already set up base here. Does it make sense to charge 100% duty on an imported BMW or Mercedes while charging less for a locally assembled model? Certainly not to the consumer. Nor to the poor manufacturer. Is this some kind of return to the ghastly days of "import-substitution industrialisation"? As with boats and yachts and other luxury goods, the idea of automobilisation should be to see maximum ownership - that more and more Indians own good cars. And by "good cars" I don't mean Tata Nanos. I mean second-hand Mercedes or BMWs. They'd make great taxis - especially when a Bajaj auto-rickshaw costs over 4 lakh rupees (US$ 10,000).

Similarly, we could be big importers of wines, beers and quality liquors - which we don't produce domestically. There are 600 brands of beer in tiny Belgium, for example. What about Bohemian beers? There are so many beers of so many kinds in Germany. And Guinness? Irish pubs, here?

All this could be big business - for importers. A 100% duty on these merely makes the IMFL peddlers rich - while the poor Indian consumer gets screwed. A gourmet restaurant owner once told me she is forced to sell $5 wines for $30! A wine producer from California I once met in Nude Elly complained about our "tariff walls."

The term tariff WALL reflects the craziness of our rulers.

Obviously, with such high tariffs there is little or no trade, so there is little or no revenue. Why do they do it? Obviously, for bribes from domestic cronies. Or perhaps these are called "political contributions" to their parties. All this goes against the "national interest."

Frederic Bastiat was the greatest free trader ever. He put it squarely when he wrote way back then that a State can pursue either the "producers' interest" or the "consumers' interest." In the former case there will be shortages and scarcities. In the latter case, there will be abundance. Then, there will be Supermarkets all over the place with their shelves overflowing with goodies from all over the world, from Japanese saké to everything else that can be called "exotic." Thus, only the consumer interest coincides with the true national interest.

Socialists and communists - who lead trade unions - fool their followers with deluded ideas of a "workers' paradise": but workers are consumers too! Only Capitalism - which is mass production for mass consumption - makes ordinary workers enjoy consumption standards medieval monarchs would be envious of. Socialist, "centrally planned," and communist nations were hell for all consumers - especially their workers, who had to queue up for anything and everything, and where smuggled electronic toys were the rage. India was like that - and North Korea still is. The North Korean ideal is juche - which means nothing else but swadeshi.

Ludwig von Mises added the insight that protectionist producers are all "schizophrenic" - they exhibit "divided selves." They do not see themselves as both producer as well as consumer. They do not realise that while they sell just one thing, they buy everything else. It makes no sense to lose out as consumers. After all, we produce in order to consume. What is the point producing, say, a Bollywood blockbuster - and not being able to buy a yacht or speedboat and zipping off to Alibag after work every evening, just half an hour by sea? Makes no sense to drive 4 hours on a crowded, broken road - in a luxury car!

With unilateral free trade - the abolition of the Customs Department - all Indians will be better clothed, better fed, they will smoke and drink better, drive better, sail better. Everything they do, they will do better. Swadeshi is nonsense - another of those crazy Gandhian ideas that has resulted in Gujarat closing down all her port cities, including Porbandar, where Gandhi was born. Including Surat, where the East India Company first landed.

Gandhi is amazing in this sense, for both Bastiat as well as Adam Smith realised the vital importance of free trade because they lived in port cities: Bayonne in the case of Bastiat, and Glasgow in the case of Smith. And Gandhi was a bania!

I checked the Internet for our list of customs duties and found they have "98 Chapters" on these - different duties for different goods. And there are additional levies on these duties as well - including the famous "education tax"!

We Don't Need No State Education!

We Don't Need No Customs Department!

Song of the Day: Arlo Guthrie's "Coming into Los Angeles" - watch the video here.

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Deal of the Day from Amazon: The Best of Arlo Guthrie.

Rukawat Hatao!

The Central State's finance minister has just announced that these socialist jerks of the CONgress whom our extremely naïve ancestors - who were all singularly unlettered in Economics - placed at the "commanding heights of the economy," have yet to take a decision on allowing foreign direct investment into the supermarket - or "retail" - sector. Over 10 years have gone by since Big Time foreign investors first applied - and the State of Rukawat ("obstruction" in Hindi) continues to mull over their proposals. Which means, in India, to sit on the files. And keep on sitting. Sitting on the files - as they get bulkier and bulkier. And we all know why they do this, don't we?

In the meantime, many business schools teaching retail management have already opened up (such as this) - and many thousands of graduates have already been trained for such jobs.

Various questions arise - especially for GenNext - and below is the most important one:

Should our The State have any role in such decisions? Or should they just occur "automatically"? Any foreigner who wants to invest in India can do so, buy land, build shops and stores, hire people and so on, without requiring State approval of any kind. Should the future be laissez faire, laissez passer or not?

While our youth think over their response to the above question, let me list some basic truths of Economics to guide them along:

First: In a country that is predominantly poor, supermarkets can never wipe out small stores and informal street-hawkers because poor people never buy in bulk. They receive their wages daily, and buy their needs in small quantities to last them short periods of time. That is why 70% of all shampoo sold in India retails in small sachets costing just one rupee (one-fourth of a US cent). Supermarkets will sell shampoos in big bottles - and will cater to car-owners who will purchase a month's supplies at one shot. Supermarkets will sell cigarettes by the carton; the poor man will buy his cigarettes from the street-vendor, one cigarette at a time. Supermarkets will sell booze in 750 ml bottles and cases of them - while the poor man will buy his 180 ml "quarter" every evening from a small liquor shop. So, the market segments are different; they do not clash. There is not even the remotest reason to fear that big-time organised retailers who operate supermarkets will wipe out small and informal traders.

Second: The State's "concern" for the informal sector and the street vendors comprising it is false. These are preyed upon by State functionaries - from both the police as well as the municipalities - in every Indian city and town. Everyone knows this. This is "common knowledge" throughout India. Over 10 years ago, Madhu Kishwar made huge noises about this State predation on street hawkers in Delhi with a documentary that filmed some horrendous scenes - and the noise became so deafeningly loud that the then Prime Minister, Atal Behari Vajpayee, responded by issuing a note calling for a "national policy on street vendors." Of course, nothing has come of it. It is just another file - and some other socialist jerk is sitting on it. Meanwhile, this open predation continues - that too, throughout India.

Third: The State's faux concern for small shopkeepers and street-vendors is false at another level as well - for this very same State was quite happy to run State-owned supermarkets and shops when it could. In Delhi's Connaught Place you can still see the Super Bazaar of our The State. There are also quite a few Kendriya Bhandars in Nude Elly that steal business from ordinary shopkeepers.

Fourth: Since India is predominantly a nation of poor people who work at low pay, it follows that the ONLY method of raising wages permanently is by allowing in foreign Capital: the more foreign Capital allowed in, the merrier, for the higher will average wages rise. So, to take the example of retailing, a shop assistant in a small store may get one or two thousand rupees per month - but if the same girl was employed by a supermarket, her salary would be much higher, perhaps ten thousand, only because she would be combining her labour with lots of Capital, like bar-code readers and computers, and so her productivity would be much higher as well. This applies equally to the Gandhian charkha - and hence the chowkidar outside the gates of a modern spinning factory earns many times more than a dude who spends all his time on a charkha.

Fifth: The Central State's finance minister cited above is running a hugely "deficit budget": he not only has to print money to pay State bills, he is also borrowing to the tune of Rs. 3,50,000 crores (3,500 billion rupees). This is the "Monster's Budget" - as I called it in an earlier post. All this will end up "consuming capital" - and screw up the economy. Private investments will falter. Public expenditures will be mainly on "welfare" - so, this money will be "consumed," and not "invested." All this will hurt India's teeming poor: the masses.

Thus, what is really in the "public interest" is that foreigners be free to open supermarkets (or anything else) - while our The State be closed down! Then, graduates trained in retailing will be immediately well employed. And all this Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS)  ditch-digging to "create jobs" will end.

This is because these foreigners will INVEST their own resources in order to see that we are supplied with better goods and services, while our The State will make it its business to CONSUME our own resources - by borrowing them, and also by fraudulently creating new money via the printing press. In the former case, Capital will combine with labour, improving productivity and raising wages - and also keeping customers happy. In the latter case, precious Capital will be foolishly wasted by baboos, impoverishing us all.

In any case, at least the Foreign Investment Promotion Board (FIPB) ought to be shut down pronto. They have never "promoted" any foreign investment. They are part and parcel of all the obstruction - the State of Rukawat.

Rukawatein Hatao - aur gareebi apney aap hutt jaayegee.

That is: Remove all the obstacles (including the Customs Department, Excise licenses etc.) - and poverty will be eliminated too, on its own.

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Yes, from now on, I will try and promote some Amazon product or the other at the end of every post.

4 Idiots

Take this, from a news report, for starters:

"Shopping malls are vulgar display of wealth and a vulgar wastage of energy and space," minister of state for urban development Saugata Roy (Trinamool Congress) said at a seminar, agreeing with environmentalist R K Pachauri who also described the malls as "energy guzzlers".

This minister - and Pauchauri too - ought to have been asked some very hard questions. There is surely more to reportage than dumb reportage.

The Central State ministry for urban development, which this fellow now heads, has always been in charge of the "planning" of Nude Elly - which is a planned, "new" city. This ministry controls the Delhi Development Authority (DDA - on which I wrote yesterday) which is a land and housing monopolist. They have built DDA housing - a very vulgar display of socialist architecture. Over half the city's inhabitants live in slums and "unauthorised colonies": should we applaud this vulgar display of poverty?

Note that these "central planners" who planned the very city they live in, never thought of physical markets. In the older parts of the city, there are huge markets: Chandni Chowk, Daryaganj, Sadar Bazaar, Connaught Place, Karol Bagh... But look at the tiny market places in the newer localities of swank South Delhi: Defence Colony, Panchsheel Enclave, the four Greater Kailashes, and all the rest. These planners have, however, dedicated huge spaces for "parks." They don't know anything about cities as market centres, as commercial engines. After all, they are "socialists": IAS officers and CONgressmen. Contrast Saugata Roy's CONgress mind with that of Sir Stuart Hogg, who built Calcutta's "New Market" - still "The Shopping Mall" of that city. Every British hill-station has a central shopping mall - the "maal road," as locals call them.

Let us turn to Dr. RK Pachauri, Nobel laureate. He thinks malls are "energy guzzlers." This seminar was held in the Habitat Centre, where TERI occupies a few centrally air-conditioned floors. The reporter ought to have asked Pachauri if the Habitat Centre was not a guzzler of energy too.

The same report says that the Central State minister for environment is also very upset about energy guzzlers on wheels:

Recently, environment minister Jairam Ramesh termed sports utility vehicles (SUVs) as diesel guzzlers and called their use in the country "criminal".

If you are seriously concerned about wastage of energy, you would fix the roads and the traffic chaos first. Bad roads and choked traffic cause even tiny Marutis to waste enormous amounts of fuel. You cannot drive 25 metres in Nude Elly without having to change gears thrice. Just as land is a DDA monopoly, so also roads are a State monopoly. Both are therefore being "undersupplied" to benefit the monopolist State and its functionaries. India's roads and highway system - a State monopoly - causes a huge amount of energy wastage. When I drive the 35 km stretch between south Goa and my nearest city on the National Highway #17, I encounter at least 25 speed-breakers each way. Some positivist ought to measure how much fuel is wasted because of the speed-breakers and pot holes all over the country's highways.

I have another report on what the Communist MP Sitaram Yechury said in another seminar in another city. For example, this commie called for:

a powerful people’s movement against this crass consumeristic culture unleashed by market forces...

Yechuri studied his communist theories in Nude Elly's Jawaharlal Nehru University in the good old days when everyone worked and the shop-shelves were all empty - as were the streets. If you really "care" for the working classes, do you not feel happy when they consume better in exchange for their hard work? Why do people labour? - if not for the sake of enjoying whatever fruit that labour yields. Consumption is the purpose of production. The word "crass" means "vulgar." These union bosses want higher wages, but oppose "wage goods" as vulgar!

Not much difference between the minister, Pachauri, Ramesh, and Yechury- all a bunch of commies.

What is decidedly dangerous is what the minister is aiming at, which Pachuri, an intellectual bodyguard of The State, is strongly supporting:

"It is high time the society steps in and puts certain regulations on shopping malls which are energy guzzlers," Roy said.

Society never steps in anywhere; society is just a myth. Parliament will step in and pass Legislation - and then armies of baboos will step in, all answerable to this minister, and to all his successors - these self-styled "representatives of society." This is the root of all the "delegated totalitarianism" I wrote about yesterday, which connects bureaucracy with democracy in totalitarian states. This is precisely how Jairam Ramesh's baboos in Goa are going about "implementing" the Coastal Regulatory Zone Act - an invasion of Private Property I wrote about the other day.

The minister should be told to disabuse himself of the notion that private citizens and businessmen are in the habit of wasting energy - or anything else. On the contrary, it is The State that wastes, and wastes, and wastes. In the energy business, all the electricity companies monopolistically owned by our The State "waste" trillions of rupees of our money every year. Because of erratic electricity, all of us "waste" trillions on inverters, generators, UPS systems etc. Such regulations as the minister and his ally Pachauri desire will waste time and human energy.

Notice how statists of all hues inevitably turn into totalitarians, hungry for power. Commies!

My message to these 4 Idiots is:

1. Get our The State out of the energy business.

2. Get our The State to fix the roads and regulate traffic - not business.

3. Get out of the highway business.

4. Get out - period.


Quite frankly, I don't know what exactly a "vulgar display of wealth" is. If you've got it and you flaunt it, who is a minister to complain about your aesthetics?

What I find offensive are "vulgar displays of power" - like the 12-car motorcades of our socialist ministers, complete with "commandos" openly carrying machine-guns. How much energy does that guzzle?

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."

On Capital, Retailing, And Memories

A column by Niranjan Rajadhyaksha of Mint set me thinking. He seems to have done some number-crunching and has come up with interesting information on where the Indian economy stands as compared with, particularly, China, whose economy is said to have overtaken Japan's recently. This para is particularly noteworthy:

The average Indian earned $255 in 1980, while the average Chinese earned $313. Thirty years later, there is a yawning gap between the average incomes of Indians and Chinese: $1,124 and $3,999, respectively. India keeps company such as Bhutan ($2,042), Djibouti ($1,369), Pakistan ($1,067), Senegal ($1026) and Zambia ($1,317); even Sri Lanka ($1,806) is ahead of us. China is in the same range as countries such as Macedonia ($4,560), Peru ($4,949), Thailand ($4,402), Bosnia and Herzegovina ($4,302), Jamaica ($4,601) and Ecuador ($4,328).

Obviously, there is something very wrong with India's economic policies - but before we get into that, let us look at another statistic Niranjan offers:

There is another way of looking at the issue of a large economy with very low average incomes. Twenty-two million Australians produce almost the same value of annual output as 1.2 billion Indians do. In other words, the average Australian produces nearly 55 times more than an average Indian. That is a rough indicator of the large gap in the output per worker in the two countries. Indians need access to capital, credit, skills and markets to climb the productivity ladder. It is bound to be a long and arduous journey.

In the portion of the text above that I have italicized, Niranjan, a trained economist, has hit the nail on the head - we need Capital, without which we cannot "climb the productivity ladder." However, this certainly need not be "a long and arduous journey." If this nation is short of Capital, it can import it, offering higher returns than available in saturated, developed markets. Towards this end, anyone from abroad who wishes to invest in India, and India's future, should be welcomed - but our The State inevitably obstructs them, as in the case of retailing. There is also the issue of importing second-hand Capital goods from abroad - which our moronic The State is strongly opposing. Actually, most of the machinery used in Nehru's steel plants was imported second-hand. Actually, many of our low-cost airlines operate second-hand aircraft. I see no reason why all our poor entrepreneurs should not be able to access second-hand Capital equipment. This is the fastest way to climb the productivity ladder. Machines are good for us - and Gandhi was wrong, as always.

Let us now turn our attention to retailing - an area where foreign Capital is being denied entry because of obstruction by The State. Now, retailing is an area where there are enormous productivity gains to be made. As Peter Bauer's pioneering field studies in Africa and Asia showed, the distribution chain which "breaks down bulk" - from wholesale to retail - is extraordinarily long and inefficient in poor countries. If foreign retailers are allowed to inject much needed Capital in this vital area, huge efficiency gains can be made all around. Ultimately, let us never forget that it is the poor consumer - the forgotten little man - who will gain the most. Real estate and construction will benefit hugely - and our cities and towns will gain as well.

Why is The State blocking all this? From what I could gather, it seems the excuse being paraded around is the health of our kirana stores - the little shops which now form the lowest rung of the distributional chain. Theoretically, this is nothing but Luddism - a very Gandhian mental disease. But I do believe that, as usual, our The State is being hypocritical. Allow me to explain why I think so.

The other night, while I was "under the influence," and my mind was silently raging against all the economic repression unleashed by this socialist The State, my memory was suddenly jogged and I recalled a great big multi-storeyed building on the outer circle of New Delhi's Connaught Place called "Super Bazaar." In the 1970s, this Super Bazaar was the great socialist supermarket - and, of course, it was run by an IAS officer. I am sure it made losses. Funny how they never thought about the kirana wallahs then.

Even today, in New Delhi, this socialist The State runs many retail shops that actively compete with the small businessman - like Kendriya Bhandar.

And as for Goa, where I now live - most of our provisions are bought from a government supermarket - a co-operative - that occupies prime space in Chaudi, our nearest market town. This government supermarket is hugely popular, and the small shopkeepers here also manage to survive quite well, just as they do in New Delhi, or in London, where almost all the "corner shops" are owned by Indians and Pakistanis.

So, when Niranjan writes that our climb up the productivity ladder is "bound to be a long and arduous journey," I must insist that the only reason it appears so is because of State intervention. Remove this intervention - and we will be on an escalator. We will progress fast and smooth.

As I often say - Rukawatein Hatao, Garibi Apnay Aap Hutt Jayegi.
Translated: Remove the obstacles, and poverty will vanish on its own.

This Socialist, Gandhian, Luddite. Interventionist The State can never be an agent of "development." It is only when this The State is totally removed from the economic arena that development will occur.

Chew on that, folks.

On David Cameron's India Visit

The new prime minister of Britain, David Cameron, visited India while I was in Hassan, Karnataka, and, especially since he also visited Bangalore, I read all about it in the daily papers. From what I could gather, deals have been struck for 47 fighter jets, for civil nuclear technology and not much else. Luckily, a friend in England had mailed me the link to this story in The Telegraph (UK) on what the British people expected of this visit. It seems that this was primarily a “trade delegation.” David Cameron and his band of merry men were here to do business. Two particular areas of interest mentioned in the report in The Telegraph are retailing and infrastructure. But, from what I could gather, no progress was made on these fronts. So, there has not been any people-to-people trade; there has only been some government-to-government deals. We have been seeing this story replay itself over and over again for 50 years and more.

Perhaps since I was then living right on a city high street – and a devastated one at that – I wondered to myself what would have transpired if the merchants of this street had sent a trade delegation to Britain. They would land in London and immediately rush to check out Oxford Street and its surrounds. They would see all the huge shops – and realize that it takes Big Capital to set up such high street stores. As they walked up and down this very important city street, they would realize that none of the shops there sell fighter jets or nuclear technology. They sell other things, lots of other things – for ordinary people like you and me to buy. They would realize that the Capital Value of their own high street would rise substantially if some of these London retailers could be persuaded to set up their stores in Hassan. They might even approach John Lewis, or Hamley’s, or some of the other establishments there in order to extend a hearty invitation.

Of course, this trade delegation would also visit other parts of London. They would see that this great city is full of “corner shops” owned by Indians and Pakistanis, who survive quite well despite the existence of supermarkets. Maybe they would reflect on the fact that no Indian or Pakistani has yet managed to open a big store on Oxford Street for only one reason: they don’t have the Capital. They would understand the vital need to import Capital into Hassan, and act accordingly.

Indeed, there was a pullout on education in the Deccan Herald one day and I was not surprised to read that “retail management” had already become a hot area of specialized study, thanks to private enterprise in the business of education.

But the people who take decisions in New Delhi do not see these things. These truths. The real interests of the nation taken as a whole. Or even the real interests of the planet taken as a whole. They just sit on thick files. They sit and they sit and they just keep on sitting. I am sure they also call this “socialism.” They are making the whole world a poorer place.

I hope my reader will see the importance of the words “laissez faire,” which means “let free.” Laissez faire capitalism means a State that does NOT get in the way of business. We must take urgent steps to head in that direction. The socialist “decision makers” sitting on files in New Delhi have no business interfering in these vital matters of trade and business, matters upon which so many lives and careers depend. What I realized in Hassan is that we in India need to give up our obsession with New Delhi and focus on the nitty-gritty – local self-government in cities and towns, and the proper building and maintenance of city and town high streets. On my last day in Hassan I found both the ATMs near my lodge out of order and took an auto-rickshaw to the HDFC Bank down the road – and there was no road at all! Just big holes. Above the HDFC Bank was a Bata showroom. Opposite was a steel-and-glass modern building with a branch of State Bank of India on the ground floor. And no road.

And so it was that I also thought of how a trade delegation from Main Street, Hassan, composed entirely of merchants, would do if they went for a drive on Britain’s highways – they call them “motorways” – and even toured around the country roads to enjoy the pretty countryside. They would immediately realize that it is these roads that they most urgently need to import into their area. Great Britain may not have invented the car, but they sure as hell invented the road, for Macadam was a Scot. They invented coal tar and even coal gas – the latter being piped into “gaslit London.” The trade delegation from Hassan would surely invite the interest of British firms in the area of infrastructure – not just roads, but also pipelines for gas in their fair city. No more cylinders being transported up and down Main Street.

My intention in this post has been to show the great error of entrusting the personnel of this socialist State in New Delhi, all of whom love to sit on files and delay progress, with decision-making powers that affect businesses. Public opinion must demand that they get out of the way.

Laissez faire, laissez passer, laissez aller.

Liberty!

Sense And Nonsense - On Getting High

One of the biggest hassles I face while living in Delhi is buying beer. This hugely profitable retail trade is a State monopoly in Delhi – so there are very few shops. I have to drive many kilometres to a marketplace where there is a sarkaari shop, and where there is also adequate parking. After making my purchase, there is the long and meandering drive back. This is unnecessary use of the car. If this retail trade were freed, there would be shops selling booze everywhere, and cases of cold beer would be home delivered – on trolleys.

Why is our The State so keen on running Delhi’s booze shops? The answer lies not in the retail monopoly, but in the purchase monopoly: The State is the monopoly buyer of booze and can decide what brands to push through its retail shops. This is the real ugly side to this policy: the "monopsony." It is designed for corruption – and also for the exploitation of the consumer. The consumer, of course, in their scheme of things, is just a daroobaaz with an addiction problem. No thought is ever given to him.

I can contrast this to Goa, where I lived in a sleepy village for long. There, beer is no problem. Of course, I have to drive out, but once I reach the crossing where the shops are located – barely 300 yards away from home – there is a booze shop on the left, one on the right, and another if I go straight ahead. Alternatively, if I want to just drink a cold beer, there are two bars right at the crossing itself. Somehow, Goa seems much more “civilized” than Delhi – and both are in the same country. Why can’t the Goa scenario be replicated in the Capital?

I can therefore only “look and laugh” at Chacha Manmohan S Gandhi’s exhortation to anti-corruption officials to “catch the big fish.” The real corruption in India is political – that is, the corruption lies in their evil idea as to what the “Role of State” should be. Their core belief is that The State has a big role to play in The Market. It is this idea that is corrupt.

Perhaps political corruption of this sort can never be ended. But then, I would much prefer to live in a country where the corrupt among the “small fish” are weeded out. It is these small fish that we encounter in our day-to-day existence – and they are the ones who should be straightened out. So Chacha gets a big “zero” from me on his latest soundbytes.

Apart from “cannabliss,” which is my flag, and this flag flies high, I am also a big votary of cheap beer for the masses. Today, they are all hooked to sugary tea. Too much sugar is bad for the health. Beer contains neither sugar nor salt. And it has been boiled, so there are no germs. It is made with barley – so there is some nutrition in it.

In my view, beer should be totally delicensed, so that microbreweries sprout all over the nation, selling draught beer on tap to all comers, cheap. Let beer displace tea and the national drink.

In the meantime, while cannabliss is illegal and beer is over-regulated, these new “energy drinks” like Red Bull and Cloud Nine are to be found selling everywhere. They are also very expensive. And they pack a mighty punch. One young lad who tried these said that he felt completely drained out when the trip was over. These cannot be good for the health. A tea of coca leaves is surely much healthier if you want some faux energy.

So, no matter what you look at, the policies of The State are not only corrupt, but actually harmful.

We need complete freedom, so we can choose our highs. These choices must not be made for us by The State, which encourages the wrong things and discourages the good.

No more prohibitions.

We need the Freedom to Get High.

A Sad Tale Of Bad Theory

“The Sad Tale of Indian Retail” – such is the title of an informed article in Mint today, an article that saddens the reader. As with another potential boom sector – civil aviation – in retailing too it is our The State that is screwing up the whole scene. As I recently blogged, IKEA has opted out of India – and we consumers are losing. But when an entire sector is prevented from growing by State diktat, there are lots of other losers as well – employees, real estate and construction, supply chain vendors and so on.

And all this to “protect” mom-n-pop stores. What a joke on the sheeple!

Recall that our The State has always been in the big-ticket retailing business itself. Super Bazaar is a State-owned retailer, as is Kendriya Bhandar. I wonder why our Nehruvians of today, led by Chacha Manmohan, didn’t think of the harm they would do to small shopkeepers when their The State entered large scale retailing in the 50s and 60s – when there was nothing much to sell!

It shows: These guys have no Principles.

They are confused. Duds.

And they want to teach!

About retailing, allow me to tell the tale of Chaudi, the main market town of South Goa, which lay 3 km from the small cottage I lived in. So, for almost all my shopping needs, I had to drive there.

The biggest shop in Chaudi is a government sponsored co-operative supermarket. It is no Wal-Mart. It is no Tesco’s. It is no Sainsbury’s. But it is the most popular shop in Chaudi. It is always packed with customers. Chaudi is the main market town for villagers in a 15 km radius – and all these villagers like to shop at the co-op supermarket.

The question I wish to pose is this: Would the people of South Goa not be better off if real supermarkets – like Wal-Mart, Sainsbury’s or Tesco’s – opened up in Chaudi? Indeed, just by entering the market these retailers would raise the value of all the real estate in the town. Locals would shop better, obtain better buys at better prices. Locals would get jobs. Tourists would be happier too.

The critical error in official policy in India remains the same: They do not care for the consumer. Of course, socialist theory is to blame, because this theory looks at the “capitalist” as being in control of the market economy. In reality, the capitalist only serves the consumer. It is consumers who are the real bosses in Capitalism. The socialists cannot admit that.

Away with socialist theory. Away with their errors. Away with their teachings.

And full power to the Consumer.

On IKEA Opting Out Of India

I have always been a big supporter of allowing FDI into Indian retailing. Read my old ToI article on the side of liberty here.

I am therefore extremely disheartened to read the news that the great European furniture design company, IKEA, has shelved its plans to enter India. The nation has lost 1 billion dollars in FDI. For a poor country, this is extremely bad news. Poor countries need Capital, without which productivity cannot be raised. If productivity is not raised, wages cannot rise.

Why did IKEA opt out? According to the news report, the obstacles placed in its way by our The State were insurmountable. This included the stipulation that they must have an Indian partner. What nonsense! We already have many MNCs in India with Indian partners – and there is nothing much to say for them. Honda has for long been tied with Hero Motors and SIEL. And in insurance we have Tata- AIG and Bajaj-Allianz. These partnerships make no sense. In either case, they must not be forced by State policy. Remember, it is the Misuse of Force that must always be opposed. That is why the libertarian ideal is Liberty Under Law. If foreign firms operate under law, our The State should have nothing to complain about. Just collect the taxes, build the roads, and stay out of all our faces.

On IKEA’s operations in India, the news report says:

IKEA has been sourcing many materials from India and employs around 11,000 in this operation, while it claims to be indirectly employing another 60,000. This outsourcing business is estimated at around Rs 1,900 crore.

This figure could have quadrupled if Bharat Sarkaar did not operate as One Big Roadblock.

As I have always maintained:

Rukawatein Hatao, Gareebi Apnay Aap Hutt Jayegi.
Remove the obstacles. Poverty will vanish on its own.

In India, quality furniture is hard to find. And it is either hideously expensive or just hideous. IKEA furniture is based on classic Swedish design, good looking, and quite inexpensive. If a giant in the business like IKEA were allowed to enter the Indian market, there would be all-round gains – especially for the consumer. There would be even greater gains if the timber trade was left to market forces.

I visited an IKEA store in Germany. It was an eye-opener. The store was enormous. I went through each of the floors gaping open-mouthed at the many wonders on display – and the amazing prices at which everything was offered. I bought a few small knick-knacks because anything bigger would have been impossible to carry back on the aircraft. And I have two memories of the visit that I would like to share.

First: When I returned from my IKEA visit, my Frankfurt-based cousin Arpitha, with whom I was staying, asked me what I thought of the store.

I replied: I would like to tie a rope around the store and drag it to India.

Everybody in the house laughed. They all agreed with the sentiment. They said that whenever they visited a supermarket, this was their precise sentiment too: Tie a rope around the store and drag it to India, where nothing much is available.

Laugh about it – but do note that the politicians in Delhi do not share this sentiment. Of course, they shop-till-they-drop whenever they visit the West. An Indian diplomat once told me that much of his time was spent escorting Indian politicians around on their shopping expeditions.

What rogues!

Second: After having gone through all the floors of the IKEA store I finally landed on the top floor, where there was a self-service restaurant-café. It was lunch-time, so I took a tray and wandered around looking at all the goodies on offer. Finally, finding one meaty dish interesting, I asked what it was. “Venison,” replied the lady behind the counter. I had a double helping.

Yes, both timber and wildlife can be harnessed by market forces to benefit everyone. Today, both are under the control of Jairam Ramesh and the Forest Department.

What a waste!