Legalise Prostitution to Fight Trafficking

This essay, which I co-wrote with Manasa Venkataraman, was published in Pragati, the online magazine I edit, on May 24.

It would be amazing if prostitution was legal in India. Over here, we use the law as an enforcer of morality, and prostitution is considered deeply immoral. The word itself is a pejorative. ‘Whore’ and ‘randi’ are used as terms of abuse, and the choice cuss word for our age is ‘presstitute’, implying that the press is prostituting itself, as if we are not all prostitutes.

All of us trade on our skills or assets to make a living. Writers sell their writing skills. Lawyers get paid for legal expertise and experience. You could be a construction worker or a fashion model or a software engineer or a banker, and you’d be doing the same thing that a prostitute does: trading on a part of yourself to the mutual benefit of both parties involved. Why, then, is prostitution effectively banned in India? (Strictly speaking, it is soliciting in public which is banned, which in practical terms renders prostitution itself effectively illegal.)

Also, what is the impact of this on our society?

The Moral Dimension of Banning Prostitution

A few years ago in a talk show, Kiran Bedi insisted that all prostitution involved coercion. No woman would want to be a prostitute of her own volition, she argued. On the show with her were actual members of the flesh trade, who laughingly told her she was wrong, and that they had joined the profession of their own free will. Bedi refused to engage with them, and just blocked them out. The dissonance was too much.

There are other jobs as well that one would hate to do. (Working crazy hours in a sweatshop or toiling in a farm as a labourer under the hot sun or spending one’s best years underground in a toxic mine.) Why do people willingly do them, then? It is because, of the options open to them, they feel that this is the best. If they had a better option, they’d go for it. They don’t. It’s sad, but it is what it is.

To deny them of their No. 1 choice, therefore, is to condemn them to alternatives they consider worse. This is repugnant and immoral. If there are women who would willingly become prostitutes, then to ban prostitution is to rob them of choice. It is an attack on their personal autonomy. It strips them of dignity, far more so than any customer could by having consensual sex with them.

‘Consensual’, of course, is the key word there, and the nub of the confusion. What implications does criminalising prostitution have for consent?

The Practical Impact of Banning Prostitution

Prostitution, per se, is a victimless crime. What happens when you criminalise it is identical to what happens when any other victimless crime is banned. (Such as drinking alcohol, gambling or inhaling cannabis.) The underworld gets involved, and that’s when the shady business starts.

In the context of gambling, you will note that matchfixing happens wherever gambling is illegal. Spurious liquor thrives when bootleggers are the sole source of alcohol. An unholy nexus springs up between the underworld and local politicians (The Bootlegger and the Baptist, basically), and everyone else suffers.

In the context of prostitution, this means that the business is all underground, and therefore not regulated. No safeguards can be instituted by either industry organisations or the government. Most importantly, the rights of the women working in the business cannot be protected. They can be coerced into the business, and exploited while in it.

Everything that is appalling and unwholesome about prostitution is actually true of trafficking. There is a difference between prostitution and trafficking, and criminalising the former enables and abets the latter. But Indian law seems not to understand that difference.

Prostitution vs Trafficking

The Oxford Dictionary defines prostitution thus: “The practice or occupation of engaging in sexual activity with someone for payment.”

India’s Immoral Traffic (Prevention) Act defines prostitution as “the sexual exploitation or abuse of persons for commercial purposes.” The italics are ours.

In other words, Indian law, like Kiran Bedi, assumes that coercion is a given. According to the law, prostitution and trafficking are the same thing. If we accept this definition, it would seem natural that prostitution should be banned. But the definition is wrong!

Why is our law like this? Is this some kind of patriarchal virtue-signalling? Is this Victorian morality at play, part of a weird colonial hangover? These questions are moot. Whatever the reasons are, for both our law and our social attitudes towards prostitution, we must move forward. And there is hope.

The famous Justice Verma Committee report categorically stated that voluntary sex work does not equal exploitation, contrary to our penal code. And the Gujarat High Court gave a great judgement recently when it ruled that a transaction between a sex worker and her customer is purely commercial, and when both parties have consented to it, the law has no business interfering.

What does legal prostitution look like?

What would happen if prostitution was legal? Take a look at Amsterdam, famous for its red light areas, and where the law’s approach to it is based on the simple yet sophisticated model of consent. Under Dutch criminal law, there are specific protections covering coercion and violence against prostitutes, and the whole business is above-ground and relatively respectable. Social attitudes towards prostitutes are similarly enlightened. (The causation probably goes both ways.) We do not think that ‘presstitute’ would be a pejorative term over there.

India will not turn into Holland overnight if prostitution is legalised. But there is both a strong moral and practical reason for decriminalising it. The moral reason is that the law would then cease to prevent women from making decisions about their own bodies. The practical reason is that it will get the underworld out of the business, and make trafficking less likely. It is a no-brainer. It is about time.

One Tax To Rule Them All

This is the 35th installment of Rhyme and Reason, my weekly set of limericks for the Sunday Times of India edit page.

GST

The Goods and Services Tax is here.
Most other taxes will disappear.
One massive overhaul.
One tax to rule them all,
Till the slabs and exemptions appear.

OVERDOSE

So much cricket is driving me mad.
The IPL had seemed just a fad.
Cricket is such a bore,
I will watch it no more.
(Except today’s final, let me add.)

*

Also hear: Episode 3 of my weekly podcast, The Seen and the Unseen, with Devangshu Datta, which was about the GST:

Here’s What It Means To Not Own Your Body

This is the fourth installment of The Rationalist, my column for the Times of India.

A century ago, when India was still a British colony, some of our most prominent freedom fighters were lawyers: Gandhi, Ambedkar, Nehru, Rajagopalachari, Mookerjee and Patel, among others. It is fitting, then, that a few days ago, it was a lawyer who made an eloquent plea for freedom against a government that is arguably as oppressive, and certainly more powerful, than the British were. Remember the name: Shyam Divan.

Divan was arguing against the government’s recent decision to make Aadhaar mandatory for filing income tax returns. Previous challenges to this act, on the basis of the Right to Privacy, were held up in court, and Divan could not make that argument for technical reasons. Instead, he based his argument on a person’s ownership of his own body.

“My fingerprints and iris are my own,” he said. “As far as I am concerned, the State cannot take away my body. Others cannot act in a way that subjects my body to their interests.” Divan argued that the imposition of Aadhaar “completely takes away your political and personal choices. You are a dog on an electronic leash, tagged and tracked, your progress hobbled.”

A person’s body, Divan pointed out, could not be “nationalised.”

This is not a new argument. Divan cited both Enlightenment and modern-day philosophers during his masterful submission, and John Locke was among them. It should be intuitive that all humans own their own bodies, but it was Locke, in the 17th century, who gave the first clear articulation of this: “Every man has a property in his own person. This no Body has any right to but himself.”

What does it mean to own yourself? Well, there are three implications of this. One, for the ‘Right to Self-Ownership’ to have any meaning, you need to respect the corresponding right of others. This leads to what libertarians call ‘The Non-Aggression Principle.’ You cannot initiate violence against another person.

Two, all legitimate rights flow from this right to self-ownership. The right to free speech – for your thoughts are yours, and you should be free to express them. The right to property, which is a result of your labours, and of voluntary exchange. The right to interact with any other consenting adult in any way you wish – economic or personal – that does not hurt anyone else.

Three, because a situation where every person has to fend for themselves is unviable, and likely to be violent, the state is a necessary evil. It commits some violence on the people – for taxes are violence – but only to the minimum extent required to protect our rights. Note that these rights are not granted to us by the state, as if they are favours. Instead, we have these rights to begin with, and we have brought the state into being to protect them. The purpose of the constitution is to limit the power of the state, and not to be, in Divan’s words, “a Charter of Servitude.”

Here, then, are the two visions of the state. The old one, where the people are mere subjects, ruled by the state, for all practical purposes owned by the state. The modern one, in which the state is an instrument of the people, tasked only with protecting their rights.

Deep inside the belly of any modern state, though, is the old one waiting to spring forth. Governments consist of humans, who are corrupted by power. The state, with its monopoly on violence, has tons of power. Thus, states tend to grow endlessly, and become an ever-present parasite on its people.

Divan’s argument was based on personal autonomy and consent, and the attorney general of India, Mukul Rohatgi, was ready with a response. Indians do not have a right over their own bodies, he said, adding that there are “various laws which put restrictions on such a right.” This made for a shocking headline, but he was stating the obvious.

India is a country where you can go to jail for what you say or what you eat. There are countless restrictions on markets, which are basically networks of voluntary exchanges. (If two consenting adults can be put behind bars for engaging in an act that infringes on no one else’s rights, can they be said to own themselves?) There are laws against victimless crimes (like gambling and alcohol). And there is an arrogant condescension by the state towards common citizens, as if it exists to rule us, and not to serve us.

Our constitution paid lip service to individual rights, but did not do enough to safeguard them. It will not save us – and thus, nor will the Supreme Court. It is up to us to snap out of our apathy and declare, as that battery of lawyers did a century ago, that we will not be ruled any more, that we own ourselves.

What is your view on this? Do you own your body?

Whose Money is it Anyway?

This is the 37th installment of Lighthouse, my monthly column for BLink, a supplement of the Hindu Business Line.

The other day I was out at a restaurant with a friend. I thought we would go Dutch. At the end of the meal, the friend insisted on paying the bill. “Damn,” I said jokingly, “had I known I would have ordered dessert.”

Now, in the sense of that specific incident, this is not true because I am on a Keto diet and would not have ordered that dessert no matter what. (Sugar is evil.) Also, as a matter of courtesy, if a friend was paying, I would either order the same as always or even less. But my awkward quip reveals an important truth about us and our money. This was best articulated by the economist Milton Friedman, who once famously laid out the four ways of spending money.

One, you spend your money on yourself. (Example: you go out dining alone.) You will be careful both about the value you get, as well as on about not spending too much. In other words, you will both economize and seek value, and will thus get maximum value-for-money.

Two, you spend your money on someone else. (Example: you buy a proforma wedding present for someone you are not close to.) Here, you don’t care so much for value – as you are not the beneficiary – but you will certainly economize, as it is your money being spent.

Three, you spend someone else’s money on yourself. (Example: You are on a foreign trip for your company at a five-star, all expenses paid for.) You will seek maximum value for yourself, and won’t be so careful about economising, as it is not your money that is being spent.

Four, you spend someone else’s money on someone else. In this case, you will neither economise, for it is not your money spent, nor look for value, as you are not the beneficiary. It is in this fourth instance that the most money is likely to be spent for the least benefit.

This is government.

image

Some of us tend to think of government as this divine body run by angels where all good intentions are transformed into good outcomes. But government is really a collection of human beings, and human beings respond to incentives. Friedman’s Law of Spending, in other words, applies to them. And they are spending someone else’s money on someone else.

Let’s look at an illustration of this: the potholes of Mumbai. Now, there is a department in the local municipality that is supposed to look after our roads, and it does not do so well enough. This is not a consequence of the badness of the individuals involved, but of the system itself. These government employees are tenured and unaccountable. Also, they’re spending someone else’s money on someone else. They are likely to overspend and underdeliver. And indeed, every year our potholes get repaired before the monsoons, and in a few months, the roads are pockmarked again.

This is actually a best-case scenario. To begin with, a government is inefficient by inadvertent design. As time goes by, as a consequence of this design, it becomes dysfunctional by deliberate action. In the case of the roads of Mumbai, it is likely that the government servant involved gets work done by a contractor at a higher price than normal so that he can take a hefty bribe for himself. It is also likely that he makes sure the work is shoddy so that more repairs are required soon, necessitating more bribes for himself. That’s the ecosystem right there.

And indeed, that’s all government. Consider public education, where we spend more and more every year and get worse outcomes than low-cost private schools spending a fraction of what the government does. The real travesty here is that the government not only fails to provide quality education, but it puts up barriers for private players to do so. In truth, private entrepreneurs are far likelier to provide good services because their incentives are better. Their survival and their profits depend upon their providing value. Not so in government.

Government is India is bad at two levels. Level one, it spends other people’s money on other people, which is a hopelessly inefficient structure to begin with. Level two, it has become an instrument for individuals to prey on citizens in a parasitic way, making money not by providing value but by robbing others of value. The government is not much more than a legalized mafia, extorting hafta, and yet we behave as if those who avoid paying hafta are the ones in the wrong. Isn’t that perverse?

The great Frédéric Bastiat once said: “Government is the great fiction through which everybody endeavors to live at the expense of everybody else.” It’s a great game. Even if we cannot win this game, we should at least see it for what it is.

The Seen and the Unseen: Episodes 11 to 16

As usual, I’ve been lazy about mirroring my weekly podcast, The Seen and the Unseen, on this site. So I’ll clear my backlog now. Here are episodes 11 to 16, in reverse chronological order.

Episode 16: Artificial Intelligence

Like all technology, Artificial Intelligence (AI) will make humanity better off in the long run. But in the short run, it will cause much disruption, including mammoth job losses in India’s services industry. Futurist Ramez Naam and policy wonk Pavan Srinath join Amit Varma to talk about the Unseen effects of AI.

Episode 15: Kannada Dubbing Ban

For decades, there has been a stricture in Karnataka that non-Kannada films cannot be dubbed into Kannada. The idea behind this was to protect the local film industry—but were the unintended consequences just the opposite? Pavan Srinath joins Amit Varma to discuss the Unseen effects of this ban on Kannada dubbing.

Episode 14: Rent Control

Rent control is a classic example of a regulation meant to help the poor that ends up hurting everyone. Alex Tabarrok joins Amit Varma to discuss how real estate in Mumbai would be so much cheaper if not for such government regulation.

Episode 13: The Anti-Defection Law

It is a sad day for any democracy when MPs and MLAs sell themselves to the highest bidder. Horse-trading is monstrous. It was to prevent exactly this that the Anti-Defection Law was passed in 1985. But did it end up doing more harm than good to democracy? Barun Mitra joins Amit Varma to discuss the unseen effects of this famous legislation.

Episode 12: Futures Markets in Agriculture

For decades now, India has either banned or heavily regulated futures markets in agriculture. The conventional wisdom is that futures markets can turn farmers into gamblers. But what if the Unseen Effect of such regulation is exactly the opposite? Karthik Shashidhar joins Amit Varma to chat about the unintended consequences of such well-intentioned but misguided regulation.

Episode 11: FSI (Floor Space Index)

Mumbai is one of the most expensive cities in the world, and one of the reasons is that there is too little land and too much sky. Alex Tabarrok joins Amit Varma to discuss Mumbai’s insanely low Floor Space Index (FSI), a key reason why real estate here is at such a premium.

The Seen and the Unseen: Episodes 6 to 10

I just realised that I haven’t been mirroring episodes of my weekly podcast, The Seen and the Unseen, on India Uncut. So here, at a go, are episodes 6 to 10, in reverse chronological order.

Episode 10: Digital India

Big Brother is watching you, and you have no protection. There has been much hype about how ‘Digital India’ will transform our lives, but there are unseen elements to it that should make you worry. Devangshu Datta joins Amit Varma to discuss why it is so alarming that there are no laws in India to protect privacy and defend against data theft.

Also read: A Billion Indians With Their Pants Off—Devangshu Datta.

Episode 9: The Profit Motive in Education

Jawaharlal Nehru once said that profit is a ‘dirty word’. He wasn’t alone in his distrust of the profit motive, which is effectively banned in education in India. Amit Varma chats with education reformer Parth Shah on why this thinking is misguided, and might be responsible for the pathetic state of education in India.

Episode 8: The Medical Council of India

Healthcare in India is in a dismal state, and so is the state of medical education. Pavan Srinath joins Amit Varma to discuss the role of the Medical Council of India in this mess. Is it a responsible industry watchdog helping keep standards high—or is it a part of the problem?

Episode 7: MRP

For any shopper in India, there is no acronym as comforting as MRP: Maximum Retail Price. When you see that on any packaged good, you feel assured that you won’t be ripped off. But is it really that simple? Prithwiraj Mukherjee joins Amit Varma to discuss the seen and unseen effects of MRP.

Episode 6: Surgical Strikes

On September 18, 2016, a group of terrorists attacked an Indian army brigade headquarters near the town of Uri in J&K. Nineteen people died, and there was immense pressure on the Indian government to retaliate. The prime minister, Narendra Modi, eventually launched what he described as ‘surgical strikes’, meant to be a show of strength and resolve. Defence analyst Pranay Kotasthane joins Amit Varma to discuss the Seen and Unseen effects of these surgical strikes.

The Return of Pragati

A few days ago, the magazine Pragati relaunched under my editorship. This was the editorial I wrote to mark its return.

One of my babies on that space: a section called Brainstorm, which aims to “create a space where diverse minds can discuss big issues in a respectful way.” The first such discussion, on ‘The Future of the Indian Republic’, is underway. Here’s my intro post to kick that discussion off. You can read all the essays in that discussion here

Watch that space!.

The Baptist, the Bootlegger and the Dead Man Walking

This is the 35th installment of Lighthouse, my monthly column for BLink, a supplement of the Hindu Business Line.

Appearances can be deceptive. I saw two Bollywood films recently that evoked different reactions in me. One was supposed to be gritty, realistic and well-researched, but actually showed completely ignorance of the world it was set in. Another had a small story at the start of it that seemed outlandish, the product of an imagination gone wild, but was spot on. Sometimes the most obvious truth can be a falsehood; and the most surreal story can be true.

Let’s start with the believable story. Shah Rukh Khan plays a bootlegging gangster in Raees, a film directed by Rahul Dholakia, who had made the acclaimed Parzania ten years ago. Raees looks real, and some reviews called it well-researched, but this is a façade. The writers seem to have no actual knowledge of the criminal underworld and the political economy in Gujarat. While the film is full of implausible events, one particular arc gives it away.

You would imagine that a man who sells alcohol would be the enemy of the man who wants alcohol to be banned. So when a sanctimonious politician plans to carry out a Darubandi Yatra (pro-prohibition march) through Gujarat, Raees Alam, our hero bootlegger, warns him not to bring it through his area. He fears it will affect his business. This seems intuitive and natural. These men are working at cross-purposes, right?

Well, in the real world, these men are allies. Prohibition is the greatest boon to a bootlegger. It is the main reason he exists. And a politician who supports prohibition should be his greatest ally. He should support him to the point of funding him, and even share his profits with him. This is best illustrated, in economics, by the concept of Bootleggers and Baptists.

The regulatory economist Bruce Yandle first coined the phrase ‘Bootleggers and Baptists’. It describes how regulations evolve, and how the different interest groups that benefit from them become unlikely allies. For example, take a Baptist who preaches that alcohol is evil, and makes sure it is banned. Where there is demand, supply will spring up, so enter the Bootlegger.

Bootleggers and Baptists share a symbiotic relationship. In Yandle’s words, “Baptists flourish when their moral message forms a visible foundation for political action. […] Bootleggers, who expect to profit from the very regulatory restrictions desired by Baptists, grease the political machinery with some of their expected proceeds.” In other words, not only are their incentives aligned, they might sometimes be overtly hand-in-glove as well, with the Bootlegger funding the Baptist.

Look at the regulation around you, and you will see Bootleggers and Baptists everywhere. Every government regulation on free markets benefits a specific interest group at the expense of the common people. These interest groups then funnel some of their gains back into politics, in the form of donations to the very politicians who create, perpetuate and expand these regulations. It is a vicious cycle in which the common man gets shafted.

Let’s move on, now, to a better movie. Akshay Kumar’s entertaining Jolly LLB 2 gets a few details wrong about the legal system, but the most outrageous story in the film is actually true. Jolly LLB, played with impeccable comic timing by Kumar, takes on a case at the start of the film on behalf of a man who’s been declared dead by his family so that they can take his property. All government papers say he’s dead, and the judge refuses to believe that he is alive. He needs proof that he exists, and he eventually gets it by throwing a shoe at the judge. (This scene was censored, so you won’t actually see it, just the commotion afterwards.) The cops have to record his name as they arrest him, and boom, that becomes the proof that he’s looking for.

Surreal, eh? You haven’t heard the half of it. This story is actually all a true story – and if anything, understates it. Its inspiration is surely a gentleman named Lal Bihari, a farmer from Azamgarh in Uttar Pradesh. Lal Bihari was born in 1951 – and was told by a government officer in 1976 that he was dead, and that his land now belonged to his cousins. “But I am here before you,” he said, as reported in Open magazine. ““You know me. I have met you before.” But nothing doing, he had no proof that he was alive.

That’s only where the story begins. Lal Bihari renamed himself Lal Bihari Mritak (dead man), and went about proving himself alive. To do this, he organised his own funeral (Munnabhai style), applied for compensation for his ‘widow’, threw stones at a police station so that he would get arrested and his existence would be recorded, kidnapped his cousin, and finally, stood for election.

He took on VP Singh from Allahabad in 1988 and Rajiv Gandhi from Amethi in 1989, but dead men don’t win elections, and he didn’t either. By this time, he found that there were many others in the ranks of the walking dead, and founded the Uttar Pradesh Mritak Sangh, an association of legally dead people. At last count, they had 20,000 members, of whom four had managed to come back to life. One of them was Lal Bihari. From 1994 he was no longer Mritak, and when he really dies, I bet the authorities will be, like, been there done that.

You can’t make this shit up, right? Bollywood filmmakers should learn this lesson from Jolly LLB and Lal Bihari Mritak: real life has all the great stories you need. Just dig into that.

The Seen and the Unseen 5: This Is All Because Of Rupal Ben

This is the fifth episode of my weekly podcast, The Seen and the Unseen.

A few years ago, a photo studio in Ahmedabad offered its customers free passport photographs. There was no catch, no small print. It was a free lunch. Amit Varma is joined by Mohit Satyanand, as they explore how this free lunch transformed financial regulation in India. They also discuss how bad incentives can lead to corruption becoming a cultural phenomenon.

The Landscape of Freedom in India

Here’s the video and transcript of a keynote speech I gave at the Asia Liberty Forum on January 11, 2017 in Mumbai.

Note: In this conference, the word ‘liberal’ was used in its classical, European sense, not in the American one. I’ve used it in the same sense in this speech, almost interchangable with ‘libertarian’, though I usually prefer not to use the word as it means so many things to so many people.

Before I start, I want to congratulate Parth Shah for 20 years of CCS. Parth, I’ve lost count of the number of young people I have met to whom you’ve been a teacher and a guide, and there is one thing common to all of them: not only do they respect you enormously, but they also love and adore you even more than they respect you. That’s remarkable. Thank you for existing!

I’ve started on a happy note, but I’m afraid that the rest of my speech will contain both sadness and anger, and maybe a little hope. The topic of my keynote speech today is “Freedom in India.” Now, I’m not going to talk about the history of what I call this ongoing freedom struggle in India: most of you know that story too well. Instead, I want to share my personal feelings about where we stand today.

I think the quest for freedom in India that all of us care about so much is at an important crossroads. We face challenges we did not face before. We have opportunities we did not have before. And to understand the road ahead, I think there are two things we have to do. One, we must come to terms with Narendra Modi.

Let me first lay the context for why Modi became such an attractive figure for many freedom-loving people before 2014. Eric Hoffer writes in his book The True Believer, which is a book about the rise of mass movements, that they are driven by frustration. Modi tapped into different kinds of frustrations during his rise to power. Among them were classical liberals who cared for freedom -- both personal freedom and economic freedom -- and were frustrated by nearly seven decades of state oppression that had kept hundreds of millions of people in poverty for much longer than they should have. The reforms of 1991, we must remember, were a product of circumstances, and were not driven by political will. They did lift millions of people out of poverty, but they were limited and half-hearted, and once the balance-of-payments crisis was over, they more or less stopped. We still remain largely an unfree country. In the 2016 Index of Economic Freedom, India was still at a miserable 128 -- eight places lower than 2014, by the way. This is trivial -- most of you know this.

Modi appeared, to many of my friends, as a beacon of hope. The Congress was -- and is -- feudal party ruled by a repugnant family that has harmed India immeasurably, and most regional parties were focussed on narrow identity politics. Modi is a master of optics, and as he built himself up as a national leader, he became a bit like a Rorschach Inkblot Test -- you could see in him what you wanted to.

No wonder many classical liberals fell in behind him. They were willing to give him the benefit of the doubt for the Gujarat Riots of 2002, and put that down to incompetence rather than collusion. They were sick of the status quo, and he represented a hope for change. As my friend Rajesh Jain put it, he was “a lighter shade of gray.” At least he made the right noises -- his slogan ‘Minimum Government, Maximum Governance’ was music to my ears.

Now, a party on the campaign trail is like a young man wooing a woman: he’s on his best behaviour, and he’ll tell her just what she wants to hear. But governance is like what happens after marriage: the girl find out the truth about the guy: he farts all the time, he snores like a hippopotamus getting dental surgery without anaesthetic, he surfs porn all night, he beats her up, indeed, he beats her up day after day after day -- and very often, she rationalises this, because she made this choice, and there seems to be no alternative.

Let’s take a brief look at how the Modi government has performed. The first thing we learned about Modi is that he is no reformer. Under him, government has grown bigger and more authoritarian. The welfare schemes he once criticized have grown, and some of them have been renamed and he has pretended that they are his ideas. He has not carried out any of the reforms he promised to, including low-hanging fruit like privatising non-performing public sector units that no one would have fought for. Indeed, he has shown us that he is actually a true heir of the Congress party: he has the economic vision of Nehru, and the political instincts of Indira Gandhi. And I mean both of those as a criticism.

Like Nehru, Modi has a top-down, command-and-control vision of the economy. To him, society is a machine to be engineered: he considers himself a better engineer than his predecessors, but he is an engineer nonetheless. And like Indira, he uses power as a tool to oppress and harass his opponents, and to clamp down on dissent, and to reward his cronies.

For two years between 2014 and 2016, Modi carried out almost no reforms, despite making some noises in the right directions: remember, he is a master of optics. But then, in November last year, he showed his true colours as an authoritarian social engineer. There is a thought experiment that I sometimes throw to my friends: It’s the morning of November 8, 2016, and you are the prime minister of India for exactly one day. In that day, you have to enact exactly one policy which, without breaking the law or going against the constitution, harms the people of India the most. The maximum damage to the maximum people. What are you going to do?

Think about this and let me know if you come up with an answer better than what Narendra Modi actually did. Allow me to break down for you what Demonetisation actually did. Modi essentially took all 1000 and 500 rupee notes out of circulation. Now, a 1000 rupees is equal to around 15 dollars. It is not really a high-denomination note. Modi had perhaps not bought anything from a store in two decades, so he didn’t realise that these notes are not used mainly for as unit of storage, as high denomination notes are in some other countries, but as a medium of exchange. Common people use these notes. So much so that 86% of the currency in use consisted of these notes. 86%!

Let me share some more figures with you. Before November 8, 97% of the transactions in this country were cash transactions. Contrary to the blatant lies of the government, only 53% of all Indians had bank accounts. That’s 600 million people without bank accounts. How do you think they stored their money? Yes, you could notionally go to a bank anyway and exchange this money for new notes, but you need a government ID for this, and again, despite the lies spread by the government, 300 million people in India had no form of government ID at all. And even those who did have bank accounts could deposit their money after standing in a queue for hours, but had limits placed on withdrawals. Get this, they were not being allowed to withdraw their own money!

I wrote at the time that it was the largest assault on property rights in the history of mankind, a point that my friend Barun Mitra reiterated in his excellent speech yesterday. The opportunity costs were huge -- people spent hours in queues begging for their own money, and could not use either their time or the money they had productively. Much of the economy is informal, because of structural failures of the state itself, and it came crashing down. Migrant workers across the country were laid off because there was no cash to pay them, and they went back home. Farmers could not sell their produce or buy seeds for the next harvest. Truckers lined up on roads with nowhere to go and nothing to carry. Thousands of businesses across the country shut down.

In all this, the rich got away. The government kept changing the goalposts for why they did this. First, they said it was to counter black money. But a finance ministry estimate, based on thousands of income tax raids in the past, shows that only 6% of black money is kept in the form of cash: the other 94% is in gold, real estate and foreign accounts. Even that 6% was laundered. You see a reflection of this in automobile sales. They have plummeted for two-wheelers and three-wheelers, but SUV sales are steady. The rich got away.

The government also said that Demonetisation would kill fake currency. Well, their own estimate showed that only one in 4000 notes was fake, a perfectly acceptable figure, and the usual way of tackling this, practised across the world, is to phase out old notes. The government also said that terrorist activity would be hurt by this, but cross-border attacks have actually gone up in this time. Yes, criminal activity has been affected, but that’s because ALL business has been affected. You do not cure a cold by cutting someone’s head off.

So there was no benefit, and the cost is incalculable. Some more figures: According to the All India Manufacturer’s Association, in a report released last month, employment is expected to fall 60% by March, and revenues will come down by 55%. And the IMF released a forecast that said that India’s GDP will grow by only 6.6% this year, a full percentage point lower than last year. Let me tell you what that number means. My friend Nitin Pai of the Takshashila Institution recently estimated that with every 1% rise in the GDP, 2 million people come out of poverty. Two million people. That is the opportunity cost of Demonetisation in just the short term: those two million people trapped below the poverty line because of one man named Narendra Modi. This is both a humanitarian disaster and a moral outrage.

Now, the question here is, all these classical liberals who supported Modi in 2014, have they seen the light now? This is a man who doesn’t give a damn about liberal principles, and is taking the country backwards. Friends of mine who are here tonight have invoked The Road to Serfdom to describe what is happening, and some talk of creeping fascism. But what do our classical liberals have to say?

My friend the economist Suyash Rai said an interesting thing to me a few days ago. He said, “Mujhe communist se dar nahin lagta, mujhe classical liberal se dar lagta hai.” (“I am not scared of communists, I am scared of classical liberals.”) There are too many people who pay lip service to freedom but support this oppressive regime. There are a number of reasons for this: Some of them invested too much emotionally in Modi, and will rationalise anything he does. Others have been co-opted into the establishment, with Padma awards or seats on the Niti Aayog or Prasar Bharti or the RBI Board of directors, and now that they are finally establishment intellectuals, they ain’t gonna give it up.

I met one of them the other day and said to him, “Isn’t modern technology wonderful?” He said, “Why?” I said, “Bro, this is the first time I’ve seen a man without a spine stand up straight.”

But leave aside the narrow compulsions of weak men without principles. What are the lessons I draw from all of this? Lesson number one: You can never depend on politicians to advance your principles. David Boaz once said, “There are only two political philosophies: liberty and power.” These are necessarily opposed to each other. Those who enter politics lust for power. If your ideas or your support seems useful to them, they will pretend to be on your side, but when they’ve gotten what they wanted, they will spit you out. Their incentives come firstly, from the special interests that fund them, and secondly from the people who elect them. And that brings me to lesson number two.

Lesson Number Two is that policy advocacy is mostly useless. If you want to make an impact on the political marketplace, you need to attack the demand side, not the supply side. You need to go to the people!

I said earlier in this talk that there are two things that people who care about freedom have to take into account today. One, we have to come to terms with Narendra Modi. Two, we have to understand this political marketplace. And the most important thing to understand about India is its changing demographics.

India is rapidly growing younger and younger. The average age in India today is 27, and 60% of the country is born after the liberalisation of 1991. This is both a problem and an opportunity.

Here’s the problem. These young people are growing up in an India that needs 1 million jobs every month -- 12 million jobs a year -- to accommodate this new workforce. These jobs aren’t there. One of the reasons Modi won in 2014 was that he promised to create these jobs. He hasn’t delivered; he can’t deliver The government can’t create jobs, it can only enable job creation. But the reforms that would make this happen -- labour reforms, ease of doing business reforms -- simply aren’t happening.

It’s no surprise then all the recent agitations in India have been centred around reservation in government jobs: The Jat agitation in Haryana, the Patidars under Hardik Patel in Gujarat, and so on. And this will get worse. Artificial intelligence will now decimate jobs in the service industry, where we’ve done relatively well recently. And automation will mean that the window for becoming a manufacturing superpower because of cheap labour will be closed to us forever. So there is a coming crisis.

Now, how are we to sell our ideas in times such as these. Classical liberal notions like spontaneous order and the positive-sumness of things are unintuitive and hard to sell in the best of times, but even more so in times of scarcity. I used to think that rising prosperity will end identity politics in India, but no, identity politics is on the rise, and we are becoming tribal again. No wonder populism is winning.

But there is also an opportunity here. These young people are not bound up in the dogmas of the past. They are not necessarily believers in the religion of government. If we manage to get out there in the marketplace of ideas, they will be more receptive than any generation before them. And that is the principle challenge before us. How can we get into the culture? How can our ideas be part of the discourse? Understand this: the prime minister of India in the year 2050 could be a 15-year-old girl who is sitting in a small town in India somewhere at this very moment, doing her boring homework. How can we reach her with our liberal ideas? Can we shape the way she thinks about the world? Can we package our ideas in an empathetic way that appeals to her emotions? Can we get her off Snapchat? Can we reach her on Snapchat?

In another two or three decades, this demographic tide will reverse itself, and we will become a rapidly ageing country. Will we still be poor or illiberal then, or will we be a beacon of freedom for the world? I can’t answer that -- and I don’t even have any specific answers as to how we can get there from here, but I thought it important to highlight the challenges we face. Things are not rosy, freedom is not on the march. But we have to try, and I know this: just by the size of the battlefield alone, this battle for freedom in India will be the most significant freedom struggle in the history of humankind. And we can only win it on a full stomach. It’s time for dinner, guys, thank you for listening to me.