Wednesday, August 22, 2012

Coming Gutka Ban in Gujarat and Its Dire Consequences

Gujarat's notoriously popular chief minister Narendra Modi has decided to ban the consumption of Gutka products in Gujarat beginning from 11th September, 2012. Modi said, I have to save the youths of Gujarat, from the dreaded evil of cancer and that’s why a decision to impose a complete ban on gutka has been taken (is he not worrying about saving the lives of old people who also consume Gutka? Are old people expendable?). Modi's zealous and blind worshiping supporters are going gaga over this policy. His supporters are blind and they have a vested interest in promoting Modi cult in Gujarat so they will never bother about the consequences of this policy. In fact, they are more than happy in promoting this policy because it is going to finally help them win the votes and political power. Modi's supporters are either knaves or ignorant of the consequences of this policy, but Gujarat's society can not afford to remain so ignorant. Every sane person must analyze this policy logically. Sound economic investigation - i.e., the economics of prohibition - tells us, that this policy is definitely going to be yet another disaster for the economy and society. Below I briefly discuss some of the major harmful consequences of this policy (those who are interested in reading more on the economics of prohibition should consult Mark Thornton's work).

Firstly, understanding of human nature and history tells us that banning consumption of any product hardly stops or even reduces its consumption in reality. The evidences are clear in Gujarat itself. Gujarat already has a ban on alcohol consumption, but still it is one of the wettest state in India (see here, here). Gujarati population, especially youngsters, are obsessed with alcohol. The history of alcohol ban in USA also shows the same evidences where during their 'prohibition era' initially the alcohol consumption fell by approximately 30% but later on it increased sharply by 60-70% (see here). The same consequences will follow the ban of Gutka products also. Human nature is such that the banned products become more attractive to many people, especially youngsters about whose health the chief minister is allegedly worried.

Secondly, the ban will immediately reduce the supply of Gutka products in Gujarat, which will increase the prices of these products in the absence of immediate drop in demand. In fact, the prices have already started to go up (see here). Sellers have started hoarding Gutka products in anticipation of this ban and they are, rightly, preparing to cater the demand of these products in future. As I said above, as a result of this rise in prices, Gutka demand will slow down initially, but that drop in demand won't last for long because the rise in price of these products will make the Gutka selling industry more profitable and more sellers will enter this market increasing the supply of these products, which will reduce the price from its initial high level. The more worrying thing for the society is what kind of sellers will now enter this market. Without the ban private companies and normal people were selling these products, but the ban makes the selling illegal and thus the business is now highly risky. Private companies and normal people will not be entering this risky and illegal market. Only anti-social elements like mafia and bootleggers will be ready to supply these Gutka products in the underground market. Due to their entry, the simple health problem will become a social and criminal problem too. Crime will increase and society will be more chaotic. Gujarat already has a strong presence of liquor mafias, and now we will see Gutka mafias! Addicted people will also commit more crime to obtain money to pay the high prices of these products. Thus, Narendra Modi, by banning Gutka, is only going to create more criminals in the Gujarati society. This is what always happens. Government itself is a gang of criminals and thus it is going to help, directly or indirectly, other criminals only.

Thirdly, those people who have intensely studied such bans of various harmful products know about the 'Iron Law of Prohibition', which states that, the more intense the law enforcement, the more potent the prohibited substance becomes...It is based on the premise that when drugs or alcohol are prohibited, they will be produced only in black markets in their most concentrated and powerful forms. If all alcohol beverages are prohibited, a bootlegger will be more profitable if he smuggles highly potent distilled liquors than if he smuggles the same volume of small beer. In addition, the black-market goods are more likely to be adulterated with unknown or dangerous substance. This iron law of prohibition will work in the case of Gutka ban too. Gutka products will become more potent and mafia and bootleggers will use all kinds of dangerous substances to make alternative cheap Gutka products. Consumers, who are not in a position to afford the now post-ban higher prices, will turn to these cheap but dangerous substitute products, which will result in more health problems. Gujarat has a history of many people dying because of consuming cheap liquor called hooch (see here). No one should get surprised when in future such health tragedies will take place due to dangerous Gutka consumption too.

Fourthly, economy will also suffer due to this because people will be spending more of their income on these post-ban costly Gutka products. This will divert precious scarce resources into wrong un-healthy Gutka industry and due to that other sectors will be in trouble.

This ban will also help create one more governmental bureaucracy to enforce this ban. More policemen will be recruited and more other such non-productive public jobs will be created. This means, innocent tax payers will again be on the hook. They will be footing the bill of these bureaucracies. Police force will surely be very happy because this ban will give them one more excuse for looting the innocent public. The major work of these policemen is of enforcing liquor ban in Gujarat, but now they have one more pretext of showing that they are doing some work. I strongly think, that if we remove liquor ban in Gujarat then most of these policemen will become unemployed! Actually that is the major reason why they are, instead of removing the ban on liquor, introducing one more ban on Gutka.

As we can see, Modi's ban on Gutka is not going to solve any health problems. It is only going to create more health, social, economic and criminal  problems. The only entities that will benefit from this ban are the mafia and bootlegging industry and police and other government enforcement bureaucracies. Consumption of Gutka will not stop and youngsters' health will only deteriorate. As is the case with all the governmental policy, this policy will also be counterproductive in nature.