Mumbai Musings # 3: Brutalism

My rides in Mumbai’s suburban trains were “brutalizing”, to use an exact word. Civilized people, I am sure, cannot ever enjoy the experience of being forced into extreme physical contact with complete strangers. In India, most people do not even shake hands, preferring to do a “namaste” from a distance. It is astounding that in such a civilization, politicians get votes for running a railway system in which everyone is crushed into everyone else.

This brutalism is also exhibited in the politics of the city – aggressive and hostile to outsiders. Civilized people who earn their keep in markets know that the secret to success of any market order is to keep on adding more and more “friendly strangers” into the overall order. But politicians in India do not survive via markets. They survive via coercion. And such a political system is bound to be brutalistic.

Spent a couple of days in Juhu – on the sixth floor of a posh apartment building. Spent some time on the balcony looking out at the uniform ugliness outside. Reminded me that there is also an architectural style called “brutalism”, pioneered by Le Corbusier, Nehru’s favourite architect, who designed the colourless concrete blocks of Chandigarh. Brutalist architecture was patronized by the welfare state in Europe, contributing to great ugliness there. In India, Delhi’s DDA colonies are an example of brutalism – and nothing can beat them in terms of sheer ugliness.

Viewed from the 6th floor of a Juhu flat, it seemed like all our cities are being brutalized in the most fundamental way – the way we build the houses in which we live. That is, the “character” of our cities.

Of course, there must be civic authorities in Mumbai with the powers to pass building plans. I suggest doing away with them. With all their powers, they have achieved nothing but ugliness everywhere. All that is required in a state of “natural liberty” is relief under torts – so if a building collapses, the builder has to fork out huge compensation. Builders will therefore insure, and insurance companies will pass their building plans. With freedom, a much more beautiful urban India can be built. Civilized, not brutal.

Duty Free Imports - From Africa!

The funniest news on the trade front that I have ever heard is this: The Manmohan Singh government has announced that imports from Africa will be allowed into India duty-free.

But suppose you were an importer: What would you want to import from Africa in order to resell here at a fat profit. Not much, I guess.

There are much fatter profits to be made by importing from Europe, the USA, Japan and South Korea. But our die-hard protectionists know that. Which is why this is basically political clientilism, and a hypocritical attitude to foreign trade. Note that the report says Indian foreign aid to these African countries will be more than doubled: from $2 billion now to over $5 billion.

That is our money going waste to finance a bogus foreign policy coupled with a stupid trade policy.

Read my free trading vision here.

Mumbai Musings # 2: Subsidies

We discussed taxation in the previous post. The critical point to remember is that the total losses caused by the tax are greater than the total revenue earned by the State. Thus, the very idea that government spending stimulates the economy is absurd: it goes not only against the teachings of Economics, it is also blind to the eternal verities of Political Science.

Let us now turn from taxes to subsidies – in this case, the low fares on Mumbai’s suburban trains. I took a ride Andheri-Churchgate 1st class at about 75 rupees. I returned 2nd class at about 7 rupees. This is a hugely subsidized fare. Anything that is under-priced is over-consumed – and the huge crowd in the train at 4 pm, long before the office rush, proves this point. There is the added fact that when something is provided by the State so cheap, private alternatives cannot compete – like buses or tramways.

But the most important loss caused by this subsidy is to the Mumbai suburban railway itself, which does not earn as much revenue as would be necessary to expand services and improve them as well. The coaches I rode in were horrible. Getting out was an incredible adventure, what with the fact that the coaches have no doors.

The assumption behind these subsidies is that the people are poor and cannot pay for an essential service. Or, what is more likely, is that the people will vote for politicians who keep this service cheap. This politician with the ‘vote motive’ is helping a section of the population with money that is not his. The poor people of Mumbai pay market rates for electricity, gas, telephones, water and everything else. They work hard (and the pace is furious) to earn the money to do so. But they are taxed to the bone, and there is the attendant inflation.

I do believe if private entrepreneurs were to take over this suburban railway, improve and expand services, charge market-based rates, compete effectively with other modes of transport (including the underground railway that is under construction), Mumbaikars would be much better off.

Better to leave such an important service to the ‘profit motive’ rather than the ‘vote motive’.

So we can all sing:

I Shot the Tariff

And I also Shot the Subsidy!

Mumbai Musings # 1: Taxation

Living in Goa, one is used to paying small change for a small beer, so it came as quite a shock when, on a hot Bombay afternoon, a cold beer in a perfectly ordinary establishment frequented by backpacking tourists – Leopold's in Colaba – a beer came for 170 rupees.

Of course, it is taxation (and licensing). But what is more important to understand is the fact that ALL TAXES CAUSE ALL-ROUND LOSSES.

If this high tax had not been there, I would have had 2 or 3 more beers – so I lost.

If I had had 2 or 3 more beers, Leopold's would have gained, but they too lost.

So did the Kingfisher company, and all their employees, distributors and shareholders.

Everybody lost.

Taxation is theft – as it too is dependent on coercion.

The purpose of democracy is to 'represent the taxpayer': "No taxation without representation" has always been a rallying call of democrats.

Who do our chaps represent?

Check out the meaning of Tax Freedom Day – and fight against this despoliation of the people.

The Intelligent Woman's Guide to Capitalism

(With apologies to George Bernard Shaw, who was a Fabian socialist and wrote a very popular "Intelligent Woman's Guide to Socialism.)

Till fairly recently, both economic as well as political activity were the reserve of men. Thus, women had to depend on men for everything, and this led to subjugation.

Fortunately, better days are here. The suffragettes fought for the vote and got it. Yet, despite 60 years of voting, millions of women in India remain backward and poor. The vote is obviously not enough. Some, like the socialist economist Amartya Sen and his protégé Manmohan Singh, say they need “education” – from the government. But prosperity is delivered by markets, and the government of India is scarcely a lamp of learning. Women must therefore think hard as to where their true interests lie. Only then can they campaign for the right policies.

It is not true that women did not “produce” or that they were “ignorant” in the centuries gone by. All over the world, women cooked delicious food, kept homes clean, and managed household budgets. In India, women produced pickles, papad, chutneys, butter, ghee and so many other wonderful things. Tribal women still produce alcoholic drinks like mahua, handia and apong. But all this was for “self-consumption”. These were not produced for “exchange”. If all these are produced for exchange in the market economy, it would become evident that women indeed possess a great deal of useful “knowledge” – even without formal education. They are not ignorant.

Thus, the first step towards the liberation of all women lies not in the vote, nor in “education”; rather, it lies in the freedom for all women to participate in the exchange economy of the market with whatever knowledge they may possess or choose to acquire. Indeed, pickles, papads and chutneys are very big businesses today. Street food is another. Entertainment is a multibillion dollar industry now and traditionally women have always been proficient in music and dance. Rather than the vote, which is “political freedom”, or government education, which can seriously damage the mind, women today should strive for the Liberty to engage in economic activity, which is Economic Freedom. This is a term not found in the lexicon of the socialists.

At the outset, let it be clearly understood that Gandhi got it all wrong. His ideal of “village self-sufficiency” means economic suicide for both rural men and women; but more so for women, because if their men are poor, women are poorer still. Self-sufficiency is production for use; capitalism is production for exchange. If rural women produce surpluses for exchange, they will discover that the markets in which they can find sufficient customers are invariably located in cities and towns. Stuck in a sparsely-populated village, a woman might sell two jars of pickles. But if she took her output to a crowded city, she might sell a hundred kilos of the stuff. Thus, villages, self-sufficiency and “rural development” must be ditched in favour of urbanization: hundreds of free trading cities and thousands of such towns, instead of millions of self-sufficient village economies. Women must produce for exchange in urban market centres. This is my Lesson # 1.

On to Lesson # 2: As far as politics and government are concerned, what these must be able to provide women is Liberty Under Law. Nothing else – no “sops”, no “reservations”. There must not be any politically imposed restrictions placed upon women (or men) when they go to the urban markets. It is here that we find the critical problem that many, many women face in our cities: that the Law does not give them Liberty; rather, the Law is an instrument of coercion. This applies not only to women street vendors and petty traders, but also to women performing artistes, right through to women working in professions like tending bars and serving food and drink. Indeed, although we in India have a huge film industry, we do not possess a “nightlife” industry – where lakhs of women could find gainful employment. There isn’t a Moulin Rouge in any Indian city. Nor are there any casinos. Even bars are strictly licensed, and entertainers are discouraged by the “entertainment tax”. These are areas where women are usually employed en masse, at least in the western world. In our own land, the nautch-girl was a fixture of the Mughal court; she was there in every city; even the British were entertained by her; but our modern-day democracy has thrown her out – and this is repression via legislation. So my Lesson # 2 reads: Fight for Economic Freedom – the liberty to engage in consensual capitalistic exchanges that hurt neither buyer nor seller.

Now, the difference between primitive “production for self-consumption” and capitalistic “production for exchange” is that the latter requires Capital as “investment”. With capitalism, we have “roundabout methods of satisfying wants”. For example, till fairly recently, all yoghurt produced in India was in the home, consumed inside the home itself. Today, we have big companies producing yoghurt. Instead of a woman milking her cow and preparing the yoghurt – which is “direct satisfaction” – we now have the “roundabout” method of companies buying humungous amounts of milk from lakhs of cattle-owners, transporting them to distant factories in big trucks, making tonnes of yoghurt and packaging it, transporting these to shops, advertising these offerings, etc. This “roundabout” method is Capitalism – and this requires capital to invest. My third lesson is on how women can save the capital necessary to invest in capitalistic enterprise.

At the basic level, we save if we spend less than we earn – and this is something every intelligent woman understands full well. (Though Lord Keynes didn’t: but that’s another story.) But there are two factors that erode our savings: taxes and inflation. It is in the interest of all women to campaign for lower taxes (so oppose Manmohan Singh’s “education tax”) and for an inflation-free currency. Inflation is a hidden tax. As the value of the currency falls, so does the value of one’s savings. The gainer is the borrower who takes a loan today and pays back many years later when the money has lost much of its value. The government also gains. Thus, women should understand inflationism and oppose it: Low taxes, balanced government budgets, sound money – these are policies that will allow millions of women to save and invest, and engage in Capitalism. Whenever a finance minister announces a “budget deficit” or another populist giveaway, all Indian women should cry “Foul!” This is my Lesson # 3.

Fourth: Capitalism is based entirely on private property (socialism exalts “collective property” – like the steel plants Nehru built). The unwritten law of any market is that the goods arrayed before a vendor belong to the vendor. If we want some of them, we must strike a bargain and make the exchange, whereupon the ownership rights are reversed. Now, imagine what would happen in the market if the Law said that bread belonged to all, and all were free to consume it: communism. The result would be there would be no bread offered for sale in any market. There would be wheat, flour, chappatis – but no bread. The “natural law” of private property cannot be dispensed with without causing immense economic dislocation.

What properties do women need? Women are homemakers: they need homes. Homes are the most essential private properties. Since all cannot afford to buy them, they rent. But what happens if the Law says that the actual owner of the house cannot raise his rents to market levels and cannot evict tenants who refuse to pay what he demands? As in the case of “collective bread” above, the result would be that rental housing would not be offered on the market. Prospective tenants would not find rental housing. They would have to stay in slums. This is what is happening in every Indian city today. Yet, every bai in Mumbai would have decent rooms on rent if all legislation on “rent control” was repealed. Slums would disappear. I hope my readers will now instruct their bais to take to the streets in opposition to rent control. This is my Lesson # 4.

Finally, what good is the money earned if there is nothing much to buy with it? – as in our socialist heydays. Women are great shoppers. They love shopping. And they have the nose for the best deals. What good can these excellent noses do if foreign products are left out? Free trade is in the interest of all shoppers – so that they can purchase, with their hard-earned wealth, the best goods the world has to offer. So campaign for free trade as an essential component of Economic Freedom – the freedom to engage in consensual capitalistic exchanges with foreigners. This is my Lesson # 5.

Free trade, sound money, private property, liberty under law, production for exchange in urban markets and the consequent rapid urbanization of India – it is with these that all women can prosper. When they do so, men will gain too, because there is a law in Economics that says: When any good is sold it creates the demand for all non-competing goods and services. Thus, when a woman sells a tonne of papad, she will possess the means to buy a good car – manufactured by male engineers.

And even we men will prosper.

Against Centralized Democracy

The US presidential elections have mesmerized the world press who look upon it as a “celebration of democracy” – just as they look upon elections in India as well. Yet, in both the USA as well as India, there is growing awareness that all is not well with the sort of government that people are getting – through all these elections.

Many years ago, just before the last elections, Ilana Mercer wrote a piece called “Democratic Despotism” that really shook me. Here she contrasted Rousseau with Voltaire – heaping a great deal of much-deserved abuse on the former.

Jean-Jacques Rousseau embedded the weasel word “social” into political discourse with his “social contract” – and ever since the individual has been sacrificed at the altar of the collective. He exalted the role of the legislator, and it is indeed he who brought about this “democratic despotism” we suffer from today.

Yet, Rousseau was Swiss; his statue sits proudly in Geneva; and we never hear of Swiss elections, nor do we even hear of any Swiss political party. The Swiss landesgemeinde practice direct democracy. The Swiss political system is entirely decentralized and a souvenir I brought back shows the flag of the nation surrounded by the flags of all the 29 cantons. I had read somewhere that no Swiss citizen knows the name of their president – and I tried it out during my week there, asking over 100 locals what the name of their country’s president is, and no one knew! This is the world Rousseau came from. To him, I am sure, US or Indian “democracy” would appear awful.

The problem, then, is over-centralization – a problem that both India as well as the US suffer from. Powerful central governments make a nonsense out of “democracy” because the democratic ideal is to diffuse power, not concentrate it.

In the US, the huge popular disaffection with George Bush’s presidency is reflected in Neil Young’s latest album, Living With War, which contains a track called “Let’s Impeach the President”. There is another plaintive one called “Looking For A Leader” – which clearly shows that what the rebels of the 60s lacked was intellectual leadership and the consequent intellectual clarity.

If America needs a real leader in thought – which always must precede action – then the man is Lew Rockwell. His latest article, “We Don’t Need A President” should be read by all Americans – and all Indians as well. The long quote from Thomas Paine should be inscribed on all public walls, for all the people to read. Paine was one of the giants of the great American Revolution – and a firm believer in a natural social order. Lew Rockwell follows the tradition, and he has noted that I do too.

Rockwell calls for canceling the elections – or putting up a president who will dissolve the central government.

This is an idea India needs as well. And elections here are just a year away. We must think now.

Republic of Disutility

There is a full page government advertisement in The Times of India of March 31 on the National Rural Employment Guarantee Act in which the banner headline reads:

TOWARDS A REPUBLIC OF WORK

But work is disutility. We do not work for the pleasure of expending energy and effort; rather, we work for the results, the output – from which we derive satisfaction. Frederic Bastiat clarified this point long, long ago.

Now, this huge advertisement, and the NREGA, are financed from taxation. In other words, we the citizenry have 'worked' to create the necessary wealth. All this money is being spent by politicians and bureaucrats – who do no useful, productive work – in order to 'create work'. Note that they do not create any useful products or services. They just create more and more work – with nothing to show for it. Like the Myth of Sisyphus.

In other words, people who actually work finance a scheme by which people who don't work get money in order to create work for the workless. Work is maximized – but the results of this work are zero. This is analogous to the Gandhian charkha, by which work is maximized, but not output.

Look at it another way.

What if those who actually work in order to produce wealth refused to pay their taxes? What would happen then? Well, in that case these citizens would either spend their money or save it. If they spent the money, they would create work.

If my taxes are refunded and I blow up the refund in all the bars of Goa, I would create work for bartenders, waiters, brewers and the snack food industry. If I save some of this refunded tax, then my banker would lend out the money to viable business ventures that would also create work. That is: The same amount of work is created if the taxpayers did not pay taxes, but spent the money themselves.

But there is an added advantage in this latter case: the work now created is 'useful' in the eyes of the citizen-taxpayer. Henry Hazlitt makes this point brilliantly in his classic Economics in One Lesson – a book that is over 50 years old. If you have a teenaged child studying nonsensonomics in school, but it for her - and read it yourself. Economics is the only engine of survival - and this teaches a child that in ONE LESSON!

There is nothing more foolish than maximizing work. We maximize the output, not the labour.

Work is disutility – even for the poor. The motto of Goa is "susegaad" which is loosely translated as "relax". There is an establishment near my house called the "Relax Bar" but I have never seen it open in two years because the owner is always relaxing, I guess. But that is Goa.

This also applies to the Assamese, whose motto is "lahay lahay" meaning "slowly, slowly" – they are also very relaxed people.

The great dissenting development economist, Peter Bauer (later Lord Bauer of Market Yard) commented long ago that many poor people of the Third World live lives of "needlessness": all their needs are supplied by nature, and they do not have the motivation to work. Lord Bauer said that if we want them to work, the best thing to do is unleash the activities of traders. The traders would offer these needless people some "incentive goods" – like, say, a radio. Hearing the music from the radio, and wanting to possess one, the Assamese might energise himself to work. As more and more incentive goods are offered, more and more people actually take on the disutility of effort in order to obtain valued results.

A Republic of Work, indeed.

We might as well call it a Republic of Disutility.