Your Crisis, My Opportunity

Pratap Bhanu Mehta, the State-owned intellectual, has concluded his latest column, titled "This moment of crisis," on the Occupy Wall Street movement, with these words:

The terms of the social contract have to be rewritten. Capitalism has to justify itself in terms of social gains, and democracy in terms of empowerment. But at the moment no one quite understands what all of this might mean.

First, there is NOTHING called a "social contract" - because contracts are private law. Individuals sign contracts with each other - like rentals or labour. I did not sign any contract with any MP to outlaw ganja. And anyway, these guys had MGNREGA right to work, right to education and right to food - and this "social contract" - which I did not sign up for - did not work, did it? Note - no right to property!


Second, only the Market can deliver private gains - out of which taxes can be paid for security and roads. Government does not produce "social gains." Government is a cost. The Science of Economics is best defined as the study of market transactions based on money. Government is something else - to do with Law, with Politics, with Public Administration. Since Economics has nothing to do with government, laissez faire is best. Private gains are what we all need, without any State interference. Money must also be private - GOLD.


Third, democracy has NOTHING to do with "empowerment." Democracy means nothing but more and more legislation - which empowers bureaus and bureaucrats. Democracy gives them fat budgets and draconian powers. The voters get screwed. India is very low on "economic freedom." What empowers the voter is LIBERTY. This requires the Inviolability of Property. Put that in a New Constitution, Professor Mehta, and all will be well.

We Don't Get Fooled Again!

A Deutsche Bank report just reached me, warning of recession in the USSA. But their analysis is based on "consumer spending" - and this might suggest to many that another "stimulus" is required from the Fed.

This displays ignorance of Say's Law of Markets.

Last night, I watched a BBC programme called "The World Debate" on the current economic crisis, hosted by Nick Gowing. Of the four debaters, three were government people - Christine Lagarde, who heads the IMF; a guy from Obama's economic team; and a dude from the EU in Brussels.


Lagarde spoke of the need for the G-20 to get together and do what they did last time - and I could have cried out loud. That time the G-20 nations inflated their currencies along with the US Fed, which is what "central bank co-ordination" is all about, and which is why the crisis is so widespread today. Nick Gowing, on his part, asked for "more decisive political leadership."

This, too, displays ignorance of Say's Law of Markets.

Today, the Keynesians teach this law as follows:

Supply creates its own demand.

This incorrect formulation of this vital law makes their students believe that "monetary stimuli" create demand.


So, let us think things through: 


The supply of plasma TVs does not create the demand for plasma TVs. Yet, if cars sell, if jeans sell, if shoes sell, and if beer sells - then, and only then, will some people from these latter industries be tempted to buy a plasma TV. Thus, what Say's Law actually means is:

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.

So, if you want increased demand for your plasma TVs, don't go to The State asking for a monetary stimulus. Instead, make sure all those who do not compete with you are selling their stuff.


There is another reason for this: If you ask The State to inject a monetary stimulus, all that will happen is another boom-bust cycle - and inflation. The entire economy will be hurt, including yourself, and including all those who do not compete with you.


On the other hand, if you want those industries that do not compete with you to do well, you will NOT favour loose monetary policies based on the false idea of boosting consumption. Rather, you will realise the importance of SAVING and INVESTMENT. You will realise that these businessmen who do not compete with you will need to save and invest - in order to produce. You will favour "capital accumulation" and despise "capital consumption" - which is Keynesian-welfarism-inflationism. You will champion "sound money."  


That is, you will realise that production of goods and services boosts demand - not the production of money. Indeed, not even the production of gold boosts demand. All that happens then is that the price of gold falls - look at the history of Spain and Portugal when they brought gold and silver back to Europe from South America. Spain and Portugal never got rich. And there was inflation throughout Europe. Britain got rich not by digging for gold and silver - but by trading in nutmeg and pepper, and tea, and opium, and tobacco, and sugar, etc.

Increased production of "funny money" is a VERY BAD IDEA.

Thus, Nick Gowing is WRONG when he asks for "more decisive political leadership." The solution does NOT lie in politics. On the contrary. The solution lies in "private money" - and "free banking under law." 


That is: the size, scope, powers and resources of The State and the politicians must be drastically cut down. Money must be given back to the people - to save and invest, to produce. That is how demand can be permanently boosted and boom-bust cycles avoided forever.


Indeed, the current crisis is BECAUSE OF POLITICS. Central banks and their member banks are collapsing. Politics lies at the root of this crisis.


So, let us NOT GET FOOLED. 


Paper notes are just a "money substitute." This is what the "promise to pay the bearer" indicates. Something "hard" is (and always was) real money - GOLD.


So, as the song goes:

I tip my hat to the New Constitution,

Take a bow for the New Revolution,

Smile and grin at the change all around me,

Pick up my guitar and play,

Just like yesterday,

Then I get on my knees and pray:

WE DON'T GET FOOLED AGAIN!

While that covers widespread miseducation in the USSA, Britain and Germany, let us now turn to our own country.


Did you know that both Amartya Sen and chacha manmohan s gandhi were students of Professor Joan Robinson in Cambridge - who was Keynes' right-hand man, and who made it her "mission to destroy Say's Law"? It was Joan Robinson who cleverly coined the "supply creates its own demand" nonsense.


And, as I wrote the other day:

Without Sound Money - what is the State 

but a band of robbers?

That should take care of Kapil Sibal's "(mis)education."


Let us now turn to Palaniappan Chidambaram, the Central State Police Minister, whose name has cropped up in the 2G scam. There is a report written by the Political Editor of The Sunday Guardian that says that in the Nira Radia tapes, A Raja told Radia that "PC got a lot of money."


The Central State's Police Minister is corrupt?


And he has been police minister since the 1980s - and there have been no police reforms. Policing has just got worse. Now, road deaths total over 2,00,000 per annum - and the police don't even possess the "knowledge" to fix things.


We must ABOLISH THIS STATE. And replace it with honest civic corporations - one in each city and town.


A Second Republic!


A Republic WITHOUT any police - like the England of old, before Peel set up the Bobby. Like India of the Company, before the Crown passed the Indian Police Act in 1861.


TORTS - which are "crimes against the individual" and for which financial compensation must be paid by the tortfeasor to the victim: this will be better than any "criminal justice system." Anyway, ours doesn't work. And the minister is corrupt. Indeed, the Entire System is Corrupt.


So let us vow to throw the whole thing out, beginning with the Central Bank, and ending with the State Police.


Liberty! Property! Justice! The Pursuit of Happiness, Subjectively Defined!

WE DON'T GET FOOLED AGAIN!

(This turned out to be a 5-part series on Say's Law. The next post can be read here.)

Abolish All State-Owned Enterprise - By Constitutional Law

A good definition of a State-owned enterprise (SOE) is:

A firm with an unlimited capacity to make losses.

We discussed Air India the other day, in which I quoted the following from a news report:

The airline, which is burdened by an accumulated loss of Rs 20,320 crore, has outstanding loans and dues of Rs 67,520 crore -- of which Rs 21,200 crore is working capital loan, Rs 22,000 crore is the long-term loan on fleet acquisition and Rs 4,600 crore vendor dues, latest official figures showed.

Today, the bad news is about BSNL - the State-owned telecom firm - which has now accumulated losses of over 6000 crore rupees (1 crore = 10 million). Its revenues have declined - and its biggest cost is salaries for its 2,77,000-strong workforce. BSNL is opting for a voluntary retirement scheme that will cost the company Rs. 2,700 crore while the Department of Telecom (which means us) will have to shell out Rs. 18,000 crore. 


Overstaffing - the bane of the public sector: "Jobs for the Boys."


What I would like to add today on discussions against SOEs is the fact that they are "unfair competition." If a private telecom firm had made such losses as BSNL, and if its employees numbered so much, it would have folded up long ago. Ditto for Air India. New, private owners would have taken over both these firms. But with SOEs, this never happens. And these loss-makers continue to "compete" with efficient private firms, taking business away from them. Note that the news report above on BSNL says:

BSNL, which offers telecom services in all areas of the country, barring Delhi and Mumbai, had 95.14 million mobile subscribers as of July 31. It is making efforts to catch up with its private counterparts.

That is 95.14 million subscribers "unfairly" taken away from private firms. If BSNSL and Air India had been allowed to fold up, their employees would have found jobs with profit-making private firms - and contributed to national wealth.


Why should there be SOEs at all?


In the old days, like when I was in college studying Economics, we were told that Chacha Nehru set up these State-owned firms because, among other reasons, "private capital was not forthcoming." That is clearly not the case today. In telecom as well as civil aviation, in steel, in hotels, in fertilisers - in everything - private capital is doing wonders. And this is particularly true of telecom and civil aviation, two sectors where SOEs are failing dismally, showing clearly that they "work" only where competition is outlawed - like railways and electricity. This itself shows the inherent inefficiency of SOEs. Ministers and baboons are unfit to run enterprises - and they most certainly should not be allowed to do so with money pulled out from the public treasury.


So, when we have a New Constitution, when we have our Second Republic, let us include a clause that debars The State from funding any SOE.

Fiscal Independence - For Pondicherry: Take #2

:

A sweet Tamilian lady called on me this morning as I sat on my perch next to the saintly sadhu. She, too, talked about me being an Indian Police Service Officer - which is in The News - and I told her that I was in the IPS from 1984-89, after which I resigned. I added that I was also Editor of The Economic Times in Nude Elly between 1998-2002 - and that I also resigned from this position, because of grave differences over editorial content. The particular editorial I wrote, and which they rubbished, was AGAINST Sonia Gandhi.


Next, I advised her to read my books, published by Macmillan India in 2000 and 2003 and available from flipkart.com - the first titled Antidote: Essays AGAINST The Socialist Indian State; and the second titled Antidote2: For Liberal Governance. If I may add, just for the record, the latter book was originally titled "Columns For Freedom" - but the Editor of Macmillan India who suddenly replaced Joseph Mathai insisted on a change of title.


Now, the second essay in my first book is titled "State! - or Why The Socialist Indian State Is A Predator." This should be fairly obvious to us today, especially if you read Madhu Kishwar's column of just today highlighting corruption that plagues rickshaw-wallahs and street vendors throughout India.


But the political atmosphere in India in the 1940s and '50s favoured "State Socialism" as a means of "helping the poor." This, while the poor are debarred from "helping themselves."


I mean, imagine that? If our The State makes steel, the poor get rich! What FUCKING NONSENSE!


It is also IMPOSSIBLE for The Exchequer to "employ all the poor." This is LUNACY. And the "funny money" used for the purpose is a REAL CAUSE OF MASS POVERTY - because "inflationism ERODES the CAPITAL of the poor."


So, suppose a poor man tries to save 5000 rupees to buy a bunk-shop - by the time he has saved the money, the shop will cost 10,000 rupees, and he will have to save the money all over again.


The Officers of the Indian Administrative Service are all employed in this "Pork Barrel Politics." They get their Budgets from the Centre - and run a huge number of Completely Useless Departments. Like the Department of Fisheries - where the fishermen cannot even import Out-Board Motors (OBMs). I saw another van today belonging to the Department of Hindu Religious Institutions. There are so many more - like the Pondicherry Industrial Development Corporation (PIPDIC) - which surely supports "import-substitution" in a coastal city where ZERO FOREIGN TRADE occurs. 


Similarly, there is the Pondicherry Tourism Development Corporation. But Beach Road is absolutely not a "happening place" for tourism. The Traffic Police ban motor vehicles - including motor-cycles. And I wonder who bans the sale of alcoholic drinks and non-vegetarian food on Beach Road. And cigarette smoking and sales, too. This, while they are surely spending money on MGNREGA - "pork barrel politics."


Beach Road ought to be extended by 10km both North as well as South. And the entire beach opened up for the entrepreneurs and street-food wallahs of this Fair City. Remember, one single tourist creates 12 local jobs - while the MGNREGA is only "inflationary."


Then, I saw a van belonging to the Pondicherry Housing Board. Just like Nude Elly and the disastrous Delhi Destruction (Development) Authority, which has made housing out of the reach of all - especially The Poor. In Nude Elly, over 50 per cent of the population lives in SLUMS. And a second-hand DDA flat can cost 1 crore rupees (100,00,000 rupees).


There are slums near Beach Road - where I drink tea every day, and buy cigarettes. I am sure the people there have no Property Rights.


And, in Pondicherry, there are two huge drainage canals - which could easily be covered up and converted to commercial property. There is the Main Canal between the French Town and the Tamil Town. There is also a Petit Canal right here on Mahatma Gandhi Road where I work on my blogging - and around which poor people live.


This implies that Tax Money should be spent on Capital - like roads, streets, sewerage, drainage, the covering up of canals. 

NOT THIS NONSENSE!

If this is done, this Fair City will expand, and Plot Owners will build their own houses - and Pay Taxes.

Same is to do with the Education Department: they teach NONSENSE. They should be SHUT DOWN. As Ludwig von Mises wrote in his great book on Liberalism:

There is, in fact, only one solution: the state, the government, the laws must not in any way concern themselves with schooling or education. Public funds must not be used for such purposes. The rearing and instruction of youth must be left entirely to parents and to private associations and institutions.

The Good People of Pondicherry surely don't need a "Right to Miseducation."  

I am sure all you Good People of Pondicherry are also studying what is happening in the US over the US dollar. That is the illustration accompanying this post - thanks to Google Images, once again - but the same is happening in India, too.


If you have NOT been following matters in the USSA over the US Paper Dollar, I recommend this article by Robert Murphy of the Mises Institute, titled "On the Brink of Inflationary Disaster."


The solution lies in Sound Money and Free Banking Under Law in Pondicherry - which is the title of a lecture I am hoping to deliver in Pondicherry University, soon.


To conclude, the Good People of Pondicherry must realise that this BRI "funny money" is The Problem.  


When this "funny money" reaches this Fair City, the First People who get to spend it are the IAS-IPS and the Politicians. They gain - while those who spend it last, or who SAVE, lose. Borrowers gain - and all the RICH PEOPLE of India are borrowers: they borrow from shareholders; and they borrow from the banks. And this includes many Public Sector Banks - which LOSE MONEY by buying "non-performing assets."


Fiscal Independence is what this Fair City needs.


But enough for today, I will revisit this discussion tomorrow.


State tuned.

Private Property Is The Name Of The Game

There is a "natural order" in our crowded urban bazaars only because we ALL follow the Golden Rule of Property - which is, "possession is nine-tenths of the law." Thus, the street vendor is assumed to be the Proprietor of the goods arrayed before him - and if we desire any of them, we effect a "mutually agreeable trade," which is nothing but an "exchange of properties." Thus, without any legal paperwork, billions of rupees worth of goods and services are traded in our bazaars daily.


This business of Private Property is something that socialists and communists do NOT understand. They despise Private Property and want to "nationalise" all that we own. They don't see themselves as Protectors of Property. On the contrary, they see their role as Property Robbers - which is why they are so keen on a New, Improved Land Acquisition Act.


But think about it: Suppose it were announced today that everything in Bangalore is "common property," what would be the result? Obviously, there would ensue TOTAL CHAOS. Anyone who wanted something would just take it from its rightful owner - and claim this in the name of the "communist brotherhood."


And what are our State-owned factories and companies? Do "we the people" own them? Or are they "economically exploited" by some people - politicians and bureaucrats - who "claim to represent the people." Just as we CANNOT party on the lawns of a ministerial bungalow in Lutyens' Delhi - and the bungalow is the "private property" of someone who "claims to represent the people."


Collective Property is FICTION - unless it means streets, footpaths and parks and gardens.


All PSUs must be sold off.


And Private Property must be made INVIOLABLE by all - including The State.


That is the Key to Capitalism - and also the Key to Liberty.


As long as you can do what you choose to in your own Property - and none can interfere - you are FREE.


So, to sum up the discussions under the head "Second Republic" so far:


1. I began saying how the CONgress claimed to have fought a "Freedom Struggle" - but they never gave us freedom. They gave us a State - which is the NEGATION of freedom. They fought for POWER - and they are still fighting for POWER. Anna Hazare and Kiran Bedi are also fighting for POWER. We need to fight for freedom - freedom from The State.


2. I then pointed out that the BASIC POLITICAL UNIT of the Second Republic must be free-trading and self-governing cities and towns. I explained why.


3. And, today, I pointed out that Private Property holds the key - to liberty, and to prosperity, and to Capitalism and even Civilisation itself.

Free-Trading & Self-Governing Cities & Towns As The BASIC POLITICAL UNIT Of The Second Indian Republic

Mohandas Karamchand "Mahatma" Gandhi erred on many fronts: His hatred for alcohol has corrupted Gujarat, where everyone, rich or poor, drinks in hiding, and where the highest incidence of liver cirrhosis is among police inspectors; his hatred for machinery put India back by half-a-century; and, lastly, his "vision" of Gram Swaraj and "rural development" led to the utter neglect and consequent destruction of all our cities and towns. 


In the meanwhile, the villagers are moving en masse to urban areas looking for opportunities in The Market - while chacha manmohan wants them to stay back and dig ditches for his MGNREGS for inflation-affected RBI paper notes.


The village CANNOT be the basic political unit. It MUST be the city and the town. This is what "civilisation" means. This is also what "politics" means, rooted in the polis. 


Today, all our "metropolises" are seats of "higher levels of government" - and these higher levels have destroyed the cities in which they are based. Nude Elly is the best example. But not that Calcutta and Bombay are any better. Or Bangalore, for that matter.


And we have at least 150 smaller cities. And thousands of towns of all sizes. All are close to collapse.


Why do cities matter so much?


Because, where population is high, markets are bigger. In the very first chapter of The Wealth of Nations, Adam Smith says that "the extent of the division of labour depends on the size of the market." So, if you want to become a taxi driver, receptionist, plumber, electrician or even a cigarette-vendor and stay back in your sparsely-populated village, you can FORGET ABOUT IT.


The "division of labour" is what SPECIALISATION in the market economy is all about. Ludwig von Mises calls the Principle of the Division of Labour or Specialisation the "Principle of Cosmic Change and Becoming." This is how we "become" what we want to become - which is how and why I became a Philosopher of Freedom.


You cannot "become" much stuck in a village.


British India was an urban success story. Do read Anthony King's Colonial Urban Development. They built 80 "hill-stations" in 50 years - and all the Big Cities and even all the Small Towns were well looked after.


These morons have destroyed them all - including Simla, including Darjeeling, and including Mussoorie, where the IAS Academy is located.


They have built only 3 new cities - and all are State Capital Cities: Chandigarh, with its hideous Le Corbusier architecture; Bhubaneshwar, where I just returned from, and which is a disaster; and Gandhinagar, from where Narendra Modi rules over Prohibition-era Gujarat.


The Principle to invoke is Subsidiarity - which means that, first, if something is required, the Free People will be asked if they can produce it themselves, via The Market, or via Charity. If there is something the Free People cannot produce, and this is required, like a good road with a broad footpath, then this task must be handed down to the LOWEST LEVEL of government - which is the City or Town "Civil Government," which is an "honest civic corporation."


So, let this be the First Task of all the Free People of Urban India - to set up ONE honest civic corporation in their respective cities and towns. These are governments with their "nose to the ground." We need these first - and thousands of them.


We can think of higher levels of government later.

Freedom... And Our The State

Independence Day, which we Indians (and Pakistanis, too) have just "celebrated," was the climax of what the official history books call "The Freedom Struggle."


But the people who won this Freedom Struggle immediately went on to establish a "State At The Commanding Heights of The Economy."


And that is Freedom?


The most PRACTICAL DEFINITION OF FREEDOM is this:

THE ABSENCE OF STATE INTERFERENCE IN ONE'S LIFE

Nehru went The Other Way.


Look at it this way:


The Market is Liberty - and also Peace, Prosperity, Technology, and so much more, including Civilisation itself...


The State is just NAKED FORCE: The State Police, the Sales Tax, the Income Tax...


Socialists worship NAKED FORCE: which is, The State. They worship their Deity in Nude Elly. They do NOT know even the MEANING of the precious word, "Freedom."


This is the first of a series of posts that will go under the label, "Second Republic." The opening posts will just be basic remarks - such as the one today.


We need to realise that Freedom is NOT The State. The State is the very NEGATION of Freedom. This is a Huge Error on the part of that Generation. Wonder what they smoked? Nehru smoked cigarettes, alright.

The Lesson of the Day is that we need: 

A Constitution of Liberty & Property.

Tomorrow, I will proceed to discuss the basic geographical units that will comprise this polity - the physical cities and towns, both great and small, and that "Civil Government" for these cities and towns must be looked upon as something poles apart from the Vision of The State in Nude Elly. These Civil Governments in Each City and Town will be with Their Noses On The Ground. 


There is No Other Way To FIX This Rotten System.