Economics

Akhilesh Yadav on Rahul Gandhi

Remember how Rahul Gandhi shot his mouth off a couple of days ago? Well, Akhilesh Yadav, Mulayam Singh Yadav’s son, has responded in an interview:

Q: What do you think about Rahul Gandhi’s comment that his family divided Pakistan?

A: See, our socialist values do not encourage division of society. In fact, we encourage a European Union model where everyone can live together. Rahul, who the Congress says is its prime ministerial candidate of the future doesn’t know anything.

Heh. Such options we have when it comes to political leadership, no?

Anyway, I was informed by Mint that my column last week, “The Nehru-Gandhi Legacy of Shame,” got large amounts of appreciative mail. Here’s a cross-section of them. I thought N Bala Ganesan made a great point:

Ill-conceived policies and callousness can be as deadly as tyranny.

Indeed. The only difference is that you can’t count the lives lost due to the former.

Where your taxes go: 19

Subsidies for pilgrimages. The Times of India reports:

In its determination to protect Haj subsidies, particularly in view of the ongoing elections in UP, Centre has told Supreme Court that it was ready to offer similar support, at state expense, to pilgrimages organised by other communities.

Positing its offer as being in sync with the “secular ideals” of the Constitution, Centre virtually made a policy announcement by agreeing to provide financial assistance to Hindus, Sikhs, Christians, Jains and other religious communities.

This is not secularism. To me, secularism has two implications:

1 A complete separation of state and religion.

2. Every person in this country having the right to follow a religion of their choice, as long as they don’t impose it on others.

The right to follow a religion of your choice, of course, is completely different from a right to having your religion sponsored by other people’s money, which is nothing short of theft. Do remember, after all, that “state expense” comes from my pockets and your bank account and suchlike. Money does not fall from the skies, and even if the government actually printed money to afford these subsidies, inflation would result, which is an indirect form of taxation.

If Sonia Gandhi or Manmohan Singh genuinely believe that pilgrimages deserve to be funded, I recommend that they shell out their own money for the purpose. There is no justification for taking away our hard-earned money and spending it on building votebanks for themselves.

(Link via SMS from little n.

Where your taxes go: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18. Also see: 1, 2, 3.

My essays on taxes and government: Your maid funds Unani, A beast called government.)

The Nehru-Gandhi legacy of shame

This is the ninth installment of my weekly column for Mint, Thinking it Through.

Last week I caught an episode of the charming show, Koffee with Karan, in which Karan Johar was chatting with Shobha De and Vijay Mallya. I enjoy the rapid-fire round on this show, because it reveals much about the celebrity-culture of our times, as well as about our celebrities. One question Johar asked De and Mallya on the show stood out: “Rahul or Priyanka?”

Now, Johar wasn’t asking De and Mallya which of the two Gandhis was better looking or suchlike. He wanted to know who they preferred as a politician. There was an implicit assumption that one of them is certain to be a future prime minister. This has nothing to do with with their political skills or leanings, of which little is known. It is all about their last name, which is the most powerful brand in the biggest market of India: our democracy.

Rahul understandably wants to exploit this, and build the brand: a few days ago, while campaigning in UP, he spoke of how the Babri Masjid would never have been demolished had the Gandhi family been active in politics. It’s natural for Rahul to invoke the Gandhi brand, given the resonance it carries in this country. But it’s also somewhat ironic. Despite their iconic status among our economically illiterate masses, the Nehru-Gandhi family has been nothing but disastrous for our country.

Jawaharlal Nehru was one of our foremost freedom fighters, but the freedom he fought for was restricted to the political domain. Once the British had been ousted, he replaced them with a new oppressor: the Indian government. He distrusted free trade, and once famously told JRD Tata that profit was “a dirty word.” He shackled private enterprise with a license-and-regulation raj and tried to build a command economy where the state was all-powerful. His fatal conceit, to borrow Friedrich Hayek’s phrase, ensured that India limped into the modern age while other Asian countries, once behind us, leaped ahead.

One can be charitable and say that the well-intentioned Nehru was a creature of his times. It is hard to give his daughter similar benefit of the doubt. Indira Gandhi not only took Nehru’s policies forward at a time when it should have been obvious that they weren’t working, she systematically began to strip away the little economic freedom that existed in the country. In colleges it would make good material for a course titled “How To Savage An Economy 101.”

She nationalised all our big banks. She stopped foreign exchange from kick-starting the country’s development, and thus creating employment and productive growth, with the Foreign Exchange Regulation act in 1973. The Urban Land Ceiling Act of 1976 distorted land markets, thus raising land prices and aggravating the problem of slums in cities.  The Industrial Disputes act (1976 and 1982) distorted labour markets and acted as a disincentive to industrial expansion. And so on and on.

With our natural strengths, India should have dominated labour-intensive manufacture and become a manufacturing superpower decades before we started doing well in services, but Jawarharlal and Indira never let that happen. The consequences of Indira’s policies look dry in economic terms, but by perpetuating poverty and shackling growth, they unquestionably had an impact on millions of lives.

Indira attacked more than economic freedom, of course. The emergency was a period of shame for our country, and yet, quite what you’d expect from a leader who took ruling India as a birthright. Her son, Sanjay, had authoritarian instincts even more pernicious than hers, but we were thankfully spared his rule. Rajiv Gandhi, when he took over, seemed a good man, if an inexperienced one. But can naïvete – he was in his 40s during his prime ministership – serve as a suffiicient excuse for, say, Shah Bano, or the foolish intervention in Sri Lanka?

Sonia Gandhi, while she had the character to refuse the prime ministership, also has all the wrong ideas. Her doubts about foreign investment and her support for well-intentioned but short-sighted programs such as the Rural Employment Guarantee Act demonstrate that the lessons of the past haven’t been learnt, and that the communists in the UPA aren’t the only forces holding back India’s progress.

It would be unfair to hold this shameful legacy against Rahul Gandhi. Even if political leadership comes to him as inheritance, he may turn out to be his own man, and recompense for the sins of his forefathers. But here’s what worries me: the best we can do, in our elite drawing rooms watching elite TV shows reading elite papers like Mint, is hope that he turns out well. Of his coming to power, there is no doubt at all. Isn’t that scary?

Legalize poppy production in Afghanistan

The Independent informs us:

Tony Blair is considering calls to legalise poppy production in the Taliban’s backyard. The plan could cut medical shortages of opiates worldwide, curb smuggling – and hit the insurgents.

This is immensely smart. George Bush is opposed to it, but it’s probably about time that Blair said to him, “I’m a poodle, here’s my paw, it has a middle finger.”

And do check out General Musharraf’s quote in the piece about buying all the poppy so that it can be destroyed—what a clown.

(Link via email from Gautam John. And on the subject of legalizing drugs, here’s my essay, “Don’t punish victimless crimes.”

How to save the tiger

A few months ago, I’d linked to a superb piece by Barun Mitra about how endangered species such as the tiger could best be saved by market economics. To recap, Mitra had written:

[L]ike forests, animals are renewable resources. If you think of tigers as products, it becomes clear that demand provides opportunity, rather than posing a threat. For instance, there are perhaps 1.5 billion head of cattle and buffalo and 2 billion goats and sheep in the world today. These are among the most exploited of animals, yet they are not in danger of dying out; there is incentive, in these instances, for humans to conserve.

So it can be for the tiger.

Well, Arvind Kala has a piece today in Mint that makes a similar argument.

Right now, our wild animals are a wasted resource. Only private companies can unlock their true value by turning them into a dollar-earning tourist attraction. Wild animals flourish in South Africa, Zimbabwe, Namibia and Botswana because these nations treat their wildlife as an industry. They give land owners full property rights over the wild animals that roam on their land. The rights include hunting the animals and selling their meat, hides and horns. Thousands of privately owned ranches in these countries have switched to wildlife and safari tourism. They attract wealthy Americans and Europeans who pay $500-1,000 a day to go on photographic or hunting safaris, which typically last two to three weeks. So we have a paradox. These countries have booming wild animal population. But India’s wildlife diminishes even though shooting a partridge is a criminal offence. The paradox stems from a simple reason. Landowners of southern Africa protect their wildlife because they earn from it.

India’s tigers or elephants die because nobody owns them.

In other words, it’s the tragedy of the commons. Kala asks later in the piece: “If the private sector can run our phones, airlines and high-tech hospitals, why can’t it run game sanctuaries?” Indeed.

Or do you trust the government to protect these animals? Heh.

Three percent of GDP

After reading my piece, “Don’t Punish Victimless Crimes,” and the follow-up post to it, my friend Devangshu Datta was kind enough to send me an old article of his on legalising betting. It’s a wonderful piece, and was first published in Business Standard, though they don’t have it online anywhere. With Devangshu’s permission, I’m reproducing some paras below the fold. Note that it was written in January 2001, but though the absolute numbers would have changed, the arguments and the macro percentages probably remain valid:

An “I, Pencil” moment

Banker Friend writes in:

I have been working this week on a credit limit for a customer of ours who export most of their production to Africa where its used as raw material by local FMCG industries. The application will run into trouble with Credit Acceptance because the customer’s repayment record has not been faultless.

So probe. Why hasn’t his account been faultless? Because he was late on an export bill payment.

Why was he late paying the bill? Because his export customer, a distributor in Ghana, didn’t have the cash to pay the full amount, and delayed paying our customer.

Why didn’t the customer’s customer have the cash? Because his customers, the manufacturers in Ghana had temporarily stopped manufacturing and weren’t buying raw materials any more.

And why is that? Because there have been severe power cuts in Ghana and industries have had to cease production.

Not that I like having to answer even more queries from credit, but I find the fact that a power shortage in Ghana creates extra work for me in India to be weirdly delightful.

It reminds us (me and Banker Friend) of one of our favourite essays, Leonard Read’s “I, Pencil.” If you haven’t read it, please do, it is magnificent, and illustrates the power of freedom better than whole books on the subject.

Reading about libertarianism

There’s a feast of good reading on libertarianism available at the moment: the latest issue of Cato Unbound has a lead essay by Brian Doherty mapping the growth of libertarianism through the last few decades and speaking about its prospects. In a reaction essay, “Libertarians in an Unlibertarian World,” Brink Lindsey explains why he feels optimistic despite the fact that:

As an intellectual movement, libertarianism has come a long way. As a political movement, however, we’re still pretty near square one.

Tyler Cowen’s essay, “The Paradox of Libertarianism,” takes a contrarian view, which is responded to superbly by Arnold Kling and Bryan Caplan. Also read Tom G Palmer’s essay, “Libertarianism or Liberty?” in which he explains the perils of confusing “the promotion of liberty and the promotion of libertarianism.”

The greatest insight of all, though, comes from a fine essay, “Horror and Freedom,” in which we are informed: “Cthulhu is the State.” Immense trembling ensues.

(Links via separate emails from Confused, Kuttan, Gautam Bastian and Nitin Pai.)

Free markets and democracy

Imagine you want to buy a cola. But you’re not allowed to just buy the cola you want. Instead, all cola drinkers in the country get to vote for a cola brand of their choice. Whichever brand the majority chooses, that’s the one you’re forced to drink. So if you like Coke and the majority votes for Pepsi, too bad. Coke will have to wait four years.

That’s the difference between democracy and free markets.

Now, obviously I’m not suggesting that we all have the MP we want and have separate governments for each of us. That would be absurd, if enjoyable to watch. The point I’m making is this: people who praise democracy for empowering individuals with the power of choice should like free markets even more, for offering that empowerment to a much larger degree. But too often in our country, votaries of democracy rant against free markets. Isn’t that strange?