Thursday, May 30, 2013

Despotism of Democracy

Alexis de Tocqueville was a 19th century French political thinker and a historian. He is best known for his excursions in, then newly born democratic country, America (United States of America). In 1835 and 1840, he published his famous work, Democracy in America, on the basis of his observations of the American society and its democratic political state during his travels. In this book's later parts - vol 4, chapter 6, What Type of Despotism Democratic Nations Have to Fear (Liberty Fund edition) - he warned the people of the world about the kind of possible despotism that can arrive in a democratic country. I am reproducing his warning here because his prophesy turned out to be totally correct. As Robert Nisbet, after reproducing the same paragraphs of Tocqueville in his The Quest for Community, said, here, in these paragraphs, lies one of the most astonishing prophesies to be found anywhere in political literature. Here is Tocqueville writing in 1840:
"I think that the type of oppression by which democratic peoples are threatened will resemble nothing of what preceded it in the world; our contemporaries cannot find the image of it in their memories. I seek in vain myself for an expression that exactly reproduces the idea that I am forming of it and includes it; the thing that I want to speak about is new, and men have not yet created the expression which must portray it; the old words of despotism and of tyranny do not work. The thing is new, so I must try to define it, since I cannot name it.

I want to imagine under what new features despotism could present itself to the world; I see an innumerable crowd of similar and equal men who spin around restlessly, in order to gain small and vulgar pleasures with which they fill their souls. Each one of them, withdrawn apart, is like a stranger to the destiny of all the others; his children and his particular friends form for him the entire human species; as for the remainder of his fellow citizens, he is next to them, but he does not see them; he touches them without feeling them; he exists only in himself and for himself alone, and if he still has a family, you can say that at least he no longer has a country.

Above those men arises an immense and tutelary power that alone takes charge of assuring their enjoyment and of looking after their fate. It is absolute, detailed, regular, far-sighted and mild. It would resemble paternal power if, like it, it had as a goal to prepare men for manhood; but on the contrary it seeks only to fix them irrevocably in childhood; it likes the citizens to enjoy themselves, provided that they think only about enjoying themselves. It works willingly for their happiness; but it wants to be the unique agent for it and the sole arbiter; it attends to their security, provides for their needs, facilitates their pleasures, conducts their principal affairs, directs their industry, settles their estates, divides their inheritances; how can it not remove entirely from them the trouble to think and the difficulty of living?

This is how it makes the use of free will less useful and rarer every day; how it encloses the action of the will within a smaller space and little by little steals from each citizen even the use of himself. Equality has prepared men for all these things; it has disposed men to bear them and often even to regard them as a benefit.

After having thus taken each individual one by one into its powerful hands, and having molded him as it pleases, the sovereign power extends its arms over the entire society; it covers the surface of society with a network of small, complicated, minute, and uniform rules, which the most original minds and the most vigorous souls cannot break through to go beyond the crowd; it does not break wills, but it softens them, bends them and directs them; in certain moments of great passions and great dangers, the sovereign power becomes suddenly violent and arbitrary. Habitually it is moderate, benevolent, regular and humane; it rarely forces action, but it constantly opposes your acting; it does not destroy, it prevents birth; it does not tyrannize, it hinders, it represses, it enervates, it extinguishes, it stupifies, and finally it reduces each nation to being nothing more than a flock of timid and industrious animals, of which the government is the shepherd." (bold mine).
Nisbet further said, the merit of Tocqueville's analysis is that it points directly to the heart of totalitarianism-the masses; the vast aggregates who are never tortured, flogged, or imprisoned, or humiliated; who instead are cajoled, flattered, stimulated by the rulers, but who are nonetheless relentlessly destroyed as human beings, ground down into mere shells of humanity. 
And that's exactly what the dreaded democracy has done to our societies and its individual members. This is a new type totalitarian despotism: despotism of democracy; and it is the most dangerous form of despotism we have seen so far in human history. It is very subtle and so not easily perceived by its victims. As long as people don't realize that they are victims of democratic despotism, it is difficult to get rid of totalitarian democracy. Democratic states right now are going through crisis - economic, political etc. - and we have to see whether they withstand this crisis or collapse in future. If people become aware of their enslavement by democratic governments then only the chances are high that the latter event will take place in future. 

Sunday, May 12, 2013

RBI's Plastic Rupee

RBI is all set to launch its plastic rupee notes on an experimental basis in Kochi, Mysore, Jaipur, Bhubaneswar and Shimla. Initially they are going to issue one billion pieces of 10 rupee notes. RBI governor Subbarao gave this reason for his choice of plastic notes: the central bank was trying to introduce plastic currency, as they have longer shelf life. It is estimated that every year something like 20% of total paper notes (some 2 lakh crore rupees) get soiled and had to take out of circulation to dispose it off. RBI is saying, that introduction of plastic (or polymer) currency notes will help them tackle this problem of soiled notes! RBI is giving another excuse, that because other central bankers - Australia is the pioneer [sic] - are already experimenting with plastic notes, so they will also imitate them. Another reason, which seems to be the major one, is that, these notes can be produced at a faster rate than paper notes! No wonder RBI and other central planners want to use plastic notes! Central bankers exist to print and produce lots of money (i.e., inflation).

I had a big smile of my face when I read this news few days ago. People who know the theory and history of money (see, Menger, Mises, Davies, and Money Museum) will immediately realize the idiocy of such crazy innovations. I understand there is nothing wrong in introducing plastic currency notes per se, but to call it money is absurd. These currency notes are not money because they are not backed by any real commodity money like Gold or Silver. These notes are in circulation only because of government's legal tender laws. They are forced on people by the politicians.
If the goal of RBI is to give people a choice of money which can last long - has a longer shelf life - then the clear choice are precious metals, Gold and Silver. No other money can last as long as these two metallic money. They were formed at the time of formation of Earth itself some 4.5 billion years ago, and since that time they were lying in Earth's crust to be found out by humans some 6000 years ago (see this). The chemical properties (see this) and human yearning for them made these two metals winners in the historical competition between different monies. Free market participants chose them as money because of their unique money like properties. Paper, plastic, leather etc., are no match against these two metals. What India needs is a 'pure gold standard (even a Silver standard will do), and not some plastic currency notes!
But, I know, people, mostly academicians and mainstream Ph.D. economists, will say, that the supply of Gold is scarce so it can't function as money. It seems their Keynesian university econ degrees have killed their thinking power. They don't understand, that scarce supply is a necessary prerequisite for any commodity to become money in the market. Scarce supply of commodity money is a good thing. We don't have to worry about Gold's supply because it's purchasing power will adjust according to the transaction needs of market participants. People who argue about scarce supply of money easily forget, that money is also a commodity whose value is determined by its demand and supply.

This policy of RBI will go in history as yet another lunatic scheme of central planners. When some future Charles Mackay will write another edition of Extraordinary Popular Delusion and the Madness of Crowds, he will surely include this scheme in his list.

For present we hapless subjects of the Indian state will have to get ready for yet another experiment on us by the central planning social engineers.

UPDATE: News are coming in that Canada is already facing problems with their newly introduced plastic - they call it polymer - currency notes (here). There are already fake (counterfeit) plastic notes circulating in the Canadian market! People are so confident of these phony plastic notes, that they are not even checking fake notes before accepting them! There you go. And RBI is telling, that these plastic notes will be secure! The important thing is, that the RBI notes themselves are fake. RBI is a giant legal counterfeiting machine. Real money is Gold and Silver.  

Saturday, May 4, 2013

Narendra Modi: An Extraordinary Popular Delusion

I was recently reading Charles Mackay's famous book, Memoirs of Extraordinary Popular Delusions and the Madness of Crowds, which discusses some of the major popular delusions like the Mississippi bubble, the tulip mania, the south sea bubble, the alchemists, the witch mania, crusades etc., of the known human history. These popular delusions exhibit a kind of madness of crowd which we see every now and then in all ages and at all places wherever human beings are present. The evolutionary brain, which has primed human nature for a kind of herd behavior, is the root cause of this phenomena, but I won't discuss this matter at length here in this post. I want to focus on one such extraordinary popular delusion and madness of crowd type of episode which is right now on-going in India. This episode is of the cult of the popular chief minister of Gujarat, Narendra Modi. The crowd is in frenzy re his name. Many deluded people want him to be the next prime minister of India and rescue the country from the evil hands of Congress party, particularly now hated Gandhi family. Many people are seeing him as a kind of messiah, a savior who can increase India's economic growth, remove political corruption and make it a Super Power! Although Modi's popularity is mostly manufactured by his own lackeys via false propaganda campaigns, but as always happens, this has fooled many people. The next national assembly election is approaching, and it is important to expose this Modi cult. That is the task I am attempting in next few paragraphs. This surely will not be an exhaustive treatment of this subject. I will only focus on major theoretical arguments which are not only applicable to Modi, but to every other state official.

Is Modi responsible for Gujarat's growth?

The first major delusion re Modi is that he has single handendly put the economy of Gujarat on the path of growth and development. Modi's fans don't get tired of telling everyone, that he is solely responsible for Gujarat's high economic growth rate. Is it true? Is this possible? For those who understand the true nature of the state and who are having a knowledge of sound economic laws, the answer is easy, a clear cut no. And for those who don't understand the true nature of state and economic laws, I have to draw their attention to Bastiat's famous 'Broken Window Fallacy'. Broken window fallacy (see video below) is a logical method of analyzing any governmental action.

People need to understand, that whatever work government is doing on the one hand is done by taking money forcefully from the productive sector of the society on the other hand e.g., when Narendra Modi government builds a road, this road is financed by Gujarat tax payers. Without tax payers' productive work this road will never come into existence. That means, Narendra Modi is not building this road; tax payers of Gujarat are building it. People very easily forget, that society comes first and then only comes the government. Government exists because of society and its productive people and not otherwise. Without the work of productive tax payers, governments won't be able to do anything. But without the government, productive people will not only survive, but, in fact, thrive. And we also need to remember, that whatever works government is doing is all political in nature. There is no market test of profit and loss to evaluate the efficiency and desirability of such works. Politicians love power, and all their works are directed only in the direction of gaining more power. They use these phony works to purchase voters for their elections. All the special interest groups - big corporations and other government cronies - determine what kind of work government officials are going to carry out. Anyone familiar with the 'Public Choice Theory' knows this fact. The most important fact that these works were not carried out by the private market itself suggests that they were not demanded by the market participants. 

Not only Narendra Modi didn't carry out any of these works on his own, he, in fact, diverted precious scarce resources from the productive sector of the economy towards the unproductive parasitic consumption sector. The unseen effect of Modi's so-called growth drive is those projects which private entrepreneurs could not accomplish because their profits were forcefully taken away from them via taxation by the Modi government. In the absence of this taxation, entrepreneurs would've surely used these resources to fulfil the most urgent needs of their consumers in the best possible way of producing highest quality products at the lowest possible prices. But they couldn't fulfill these consumer wants just because Modi robbed them of their profits. When I talk about entrepreneurs here, I am  talking about honest entrepreneurs only, and not those fascist corporatists like Adani, Reliance, Tata etc., who are enriching themselves by working in cahoots with Modi government. They are not real capitalists. They are fascist robbers who are looting Gujarati public, especially small farmers. What Modi is doing in Gujarat is nothing but stealing farmers' land and giving it to his crony corporatist friends at absolutely discounted prices. This is not growth. This is not development. Some urban dwellers are benefiting because of this robbery, and they are the major cheerleaders of Narendra Modi. Modi is a shameless liar e.g., his claim that his government is providing 24 hr electricity supply is totally bogus. I live in the financial capital of Gujarat, Surat, and here itself there are frequent power cuts every week!  

What is more important to understand is, that Gujarat's growth is possible because Gujarati people themselves are very hard working since ages. Gujarat is a prosperous state since ages. The entrepreneurial populace of Gujarat is world famous. The business acumen of Gujarati people is known everywhere. Gujarat is prosperous because of its hardworking entrepreneurial populace. To think that some fanatic guy like Modi is responsible for Gujarat's growth is showing a disrespect to the hardworking productive populace of this state. It is undermining the importance of productive members of this society. It is a supreme folly. A madness of crowd who believes in such fairy tales.

In fact, what is true is that Modi has put Gujarat under a heavy burden of debt in the name of his growth policies and extravagant expenditures (see this, and this). He recently said, that I have repaid mother Gujarat's debt and now I am ready to repay mother India's debt. It will be more appropriate to say, that he has put mother Gujarat under heavy debt, and now he is aspiring to put mother India also under a burden of heavy debt. Watch out, mother India!!!

What kind of development is taking place in Gujarat under Modi government?

I already alluded to this issue above. Narendra Modi is a fascist dictatorial chief minister and whatever growth and development people are talking about is nothing but enriching his corporate buddies at the cost of common man, especially poor farmers (see this, this, this, this, this, and this).  I am sure people know about the recent CAG report which implicates Modi's favors for his criminal fascist pals like Adani, Reliance, Essar, L&T etc. (see the CAG report here, here, here, and here. Also see, this, this and this).

Modi cult will be exposed if he becomes PM of India

Notwithstanding the fact that no Narendra Modi is responsible for Gujarat's growth, I wish he becomes PM of India just so as to break the delusion of people re his charismatic powers. Once on the national stage, this fascist dictator's real colors will be in front of everyone, and that will spell a doom for his cultist figure. Modi is a mad leader and I won't get surprised if on the first day of his inauguration itself he declares a war on Pakistan or China! It will be very comic to see him deal with national political morons like Lalu Yadav, Mamta Banerjee, Mulayam Singh, Nitish Kumar, Jay Lalita, Benni Prasad etc., etc. To handle 20-30 different parties won't be easy for him because he is ruling like a king in Gujarat, and so is not habituated to any kind of opposition. I wonder he will turn out to be even a good politician on the national stage!

As Charles Mackay said in his book, such delusions are seen in every age and at every place. What we are witnessing on the Indian political scene right now is just another example of that popular delusion and madness of crowd. I am quite sure, that when Modi bubble will burst in future, people will find another Modi for themselves instead of learning the supreme fact, that no one person can rule over their life and make it better. Government is a parasite and it can only suck productive society's blood. It can never do any productive work. To expect that some guy will come and save peoples' lives is a height of (false) human expectations. 

As long as individuals don't assume responsibility of their own lives, their situation won't improve for better.