Sunday, May 25, 2014

A Note on Arvind Panagaria's - the likely chief economic advisor of PM Narendra Modi - Economic Views

Arvind Panagaria is a, as newspapers are describing him, renowned economist from the Columbia university. He and his senior professor colleague Jagdish Bhagwati are famous for supporting and favoring Narendra Modi's so-called market oriented economic model of Gujarat. Panagaria recently gave an interview to TOI where he outlined his main economic views for the Modi government if he becomes PM's chief economic adviser. One look at his views makes it clear that if Panagaria gets his way and becomes PM Modi's adviser, then, we are surely heading for more economic troubles. Below I present Panagaria's views immediately followed by my comments.

1. Upon asked what should be the three priority areas of Modi government, Panagaria said:
End the paralysis in decision-making in the Central government, end the policy uncertainty for investors including retrospective taxation and other surprises visited upon entrepreneurs by the authorities, and replace the current draconian land acquisition act by a more pragmatic one.
Except the second policy of removing the policy uncertainty (he should better focus on removing the much broader problem of 'regime uncertainty' (as first discussed by Prof. Robert Higgs) which is quite different from the narrow idea of policy uncertainty), both measures of ending paralysis of decision-making and replacing current draconian land acquisition act by a more pragmatic one will be a big danger for the common man. Ending paralysis of decision-making can be good for people only when those decisions are in the direction of ending government intervention in economy or in peoples' lives; only when the government is rolling itself back, people can be free to pursue their ends of living a happy life. If decisions are made for more interventions and more crony capitalist fascist policies where businesses will loot the public, then, it is better that such decision making process remains paralyzed.

And, the only interpretation of land acquisition act is that many more land owners - mainly poor farmers - are going to lose their land to the State in the name of phony development and growth. Arvind Panagaria or Narendra Modi or general voters who voted for Modi have no idea of 'Justice' in their mind. The thought that you can not take away someone's property against his wish never crosses their mind. People won't bother for property rights issues as long as they are not losing their land.

2. He was asked about the possibility of lowering the rate of interest to kick start the lack luster economy, and the following was his answer:
The real issue is whether we are willing to tolerate 8-10% inflation or insist on bringing inflation below 5%. If the latter, the answer has to be in the negative. On the other hand, if we show more tolerance for inflation, it is possible to ease up on monetary policy and let the interest rates fall.
In simple words, get ready for more inflation. The whole idea that people are tolerating even 5% inflation is insane. No one tolerates even 0.1% inflation willingly. Will you tolerate government stealing 5% of your annual income every year? And who are these "We"? "We" here only means common man. Inflation benefits government officials and other people who are well connected with the government (people like Panagaria himself), so they are never going to bother about inflation. It is only the common man who gets crushed beneath the weight of creeping inflation. If Modi government is going to go and print more money to fund these mammoth infrastructure projects, then, that will surely kill the Indian economy because printing and spending money is not real growth.

3. On Welfare programs like MGNREGA, Panagaria has this to say:
Definitely. In the current form, both Public Distribution System (PDS) and MNREGA are failing miserably in meeting their objectives, with vast leakages along the distribution chain.
So, Modi government is not actually going to totally end these wasteful welfare programs; they are only going to rework them and change their current form! That is a pure baloney. Making an economically wasteful program more efficient means making the whole process of wasting our precious resources more efficient!!! Changing current form of so-called welfare program is not free market economics; it is not even leaning in the direction of market. Such middle of the road interventionistic policies, as Ludwig von Mises said, only leads to disaster and full socialization of the economy in the long run.  What we need is an end of the whole welfare state itself. We don't need the Nanny government itself.

As I said above, if Panagaria becomes PM Modi's chief economic adviser, then, expect more inflation and more fascism in India. This ain't any free market economics; This is pure fascism.

Thursday, May 22, 2014

On Narendra Modi and his alleged Free Market Economic Vision

So, Narendra Modi and his BJP party won a clear majority in the just concluded 16th Lok Sabha election. On Monday Modi will become the new prime minister of India. The atmosphere all around the country, mostly as seen in the mainstream media frenzy, is euphoric at this moment of so-called historic win of Modi. Most people see Modi as some kind of messiah who will save this country from corruption, economic stagnation, lack of political power and influence with her neighbors etc., etc. I want to focus here on one alleged thought that is going around mainstream media re Narendra Modi's economic vision. Many articles are describing Modi's economic vision - I have dealt with his development model in past article - as, lo and behold, "Free Market" vision (see this for example)!!! Is it really true that Modi's economic policies in Gujarat were free market policies? The best way to tackle this question is to first see the true definition of the free market, and then contrast Modi's actual policies with this definition. If what Modi did resembles this definition then the mainstream media is correct in terming Modi as a free market prime minister. Any deviation means media is, as usual, lying.

First, we see some definitions of 'free market' from varied sources. Wikipedia defines 'free market' in this way:
A free market is a market economy in which the forces of supply and demand are free of intervention by a government, price-setting monopolies, or other authority...The laissez-faire principle expresses a preference for an absence of non-market pressures on prices and wages, such as those from government taxes, subsidies, tariffs, regulation (other than protection from coercion and theft), or government-granted or coercive monopolies.
Investopedia defines it as:
A market economy based on supply and demand with little or no government control. A completely free market is an idealized form of a market economy where buyers and sells are allowed to transact freely (i.e. buy/sell/trade) based on a mutual agreement on price without state intervention in the form of taxes, subsidies or regulation.
World English Dictionary defines it as:

an economic system that allows supply and demand to regulate prices, wages, etc, rather than government policy 

Merriam-Webster dictionary defines it as:
an economic market or system in which prices are based on competition among private businesses and not controlled by a government
And most importantly, the famous free market economist of the twentieth century, Ludwig von Mises, defined a market economy as:
The market economy is the social system of the division of labor under private ownership of the means of production. Everybody acts on his own behalf; but everybodys actions aim at the satisfaction of other peoples needs as well as at the satisfaction of his own. Everybody in acting serves his fellow citizens.
Another champion of free market, Murray Rothbard, outlined the necessary condition for the existence of the market economy:
This means that the key to the existence and flourishing of the free market is a society in which the rights and titles of private property are respected, defended, and kept secure. The key to socialism, on the other hand, is government ownership of the means of production, land, and capital goods. Thus, there can be no market in land or capital goods worthy of the name. (Read the whole article What is the Free Market).
Now, contrast these characteristics of a free market economy with Modi's policies in Gujarat. Do Gujarat has any private property rights regime - which is secured by the State itself - in the means of production? Not at all. In fact, Modi has robbed many farmers of their land during his 13 years stint in power. Do we have different prices like wages, rents etc., being regulated by the free market forces of demand and supply in Gujarat without any interference from Modi's state? No. Just like any other state we have myriad of legislative acts interfering the free exchange between a buyer and a seller. Modi's government taxed like any other government. Modi's government gave subsidies to farmers and industrialists like any other government. Modi's government gave monopoly powers to business tycoons like Tata, Adani etc., like any other government. Modi government has put the people of Gujarat under a heavy burden of public debt like any other state government in India (see this). In fact, Narendra Modi dictated every policy in Gujarat from the get go.

If someone truly understands the system of free market, then, he can immediately see the logical fallacy of the term 'Narendra Modi's Free Market Policy'. If there is a free market, then, there is no Narendra Modi because, as Ludwig von Mises explained:
The market economy [capitalism] was not devised by a master mind; it was not first planned as an utopian scheme and then put to work. Spontaneous actions of individuals, aiming at nothing else than at the improvement of their own state of satisfaction, undermined the prestige of the coercive status system step by step. (The Ultimate Foundation of Economic Science, p. 109)
And, if there is Narendra Modi's free market policy, then, there is no free market. It is Modi's whatever vision that is forced on people!

Actually, Narendra Modi is a fascist leader. There is no free market in Gujarat. It is only socialism where, in reality, government owns the means of production. It is fascism where the state and big corporations loot the hapless public. It is crony capitalism. There ain't any free market in Gujarat, and there won't be any in India now that Modi is the PM of India.   

Saturday, May 3, 2014

Inside the Belly of the Election Beast: My Experiences of Lok Sabha Election 2014

I am back from my drafted duty of working as a presiding officer in the on-going Lok Sabha election 2014. As you all know I and thousands of others like me were forced by the Indian government and its Election Commission to work in this one of the longest rounds of election. In this short article I want to describe the harrowing experiences that I had during two days of my duty - 29th and 30th April - as a presiding officer.

The Training Period
Before the day of election - 30th April in Gujarat - the district collector and his other election officers arranged three training programs for election officers like polling officers, assistant presiding officer and presiding officer. Anyone who attended this training program would have immediately noticed how confused the trainers themselves were regarding various election proceedings. I have already discussed elsewhere about the kind of bureaucratic mess this election is. There are so many rules and regulations that anyone will go crazy remembering let apart following them. This was reflected in those three training sessions e.g., in the last training session the master trainer for EVM (Electronic Voting Machine) himself was confused about how to seal the machine! He was frequently forgetting to fold A side of the strip seal on B and B on C and C on D etc.! He was, in fact, properly guided by some experienced presiding officers who were sitting in the training session. Not only that, the whole training sessions were a sheer waste of time because instead of giving a logical step by step presentation of the whole election process, all the trainers were explaining various things to us as it came into their mind. In such situation it was very hard to keep track of the logical process of each steps of conducting election voting. All the top officers - like the Mamlatdar, Deputy Collector and Collector himself - were so confused in between themselves that they were confusing the polling officers too e.g., when Mamlatdar told us that we need to submit two Mock poll certificate, the deputy-collector told us to submit only one! There were many such issues and queries of the election staff which was simply ignored by these training officials. And the irony was, that in such state of their own confusion the district collector decided to take exam of the polling staff! During all sessions trainers were assuming that all polling staff is experienced, which was not the case because there were many novices sitting in the audience. In whole training program they were just showing videos from Election Commission's website. It would have been better if they just instructed us to watch these videos of YouTube and learn everything instead of wasting time and money in such sessions!

The Dispatch Day: 29th April
After the training sessions were over, the actual day of dispatching election teams to voting booths arrived. Training sessions didn't clear anything, and the same state of confusion was visible on 29th April too at the receiving and dispatch center. Most presiding officers were looking for their respective teams till the moment when they were given all the election material! All the government staff at the center was busy making sure that they don't have to do much work. Everyone there were busy passing the buck to the presiding officers. I personally shouted numbers of my team's booth and assembled my team finally. The real mental harassment started the moment I was given the election voting material. After receiving these material, I have to check if something is not missing! The tedious work of counting everything took more than couple of hours. I am presenting below the photos of the check-list of this material. You can see for yourself how anyone will go mad going through this check list. There are at least 30 to 40 items in each list which we have to check in the sack bag which they have given to us! If you have seen all the teams going through this labyrinth, you would've surely laugh and cry at them at the same time.

During this check list counting, we were told that we can get any missing item from room no: 2. When I went there to find some address tags, there was total chaos. There was no official person attending anyone; all team members ransacked the whole room; all forms were lying on the floor teared and other material too misplaced all over the room. In such chaotic environment me and my team, after hours, somehow managed to check all the items. After that ours and other teams were ready to go to the polling booth. Our team's route was route 9, and our bus number provided on the room notice board turned out to be wrong! So, at the parking plot, I had to go around asking all drivers whether they are going to route 9. After checking 10-15 buses personally, I could figure out our route bus. I called my team and we boarded the bus finally. In the bus there was chaos again. They hijacked some small school buses in which they stuffed at least 5 to 6 teams with 5 members each with heavy voting material! Those teams who came late couldn't find place to even sit in the bus, so they came standing!

Upon arriving at the voting booth we left the bus and tried to settle down. My booth was a village community hall so it was thankfully bit clean. But, as usual, the toilet and bathroom were in a horrible condition. There was no running water supply, and all the sleeping mattresses were dirty, as usual. I was totally confused about various forms, but my experienced assistant presiding officer and husband of one of my female polling officers helped me a lot to arrange all covers and forms properly. Once that work was done, I stamped and partially sealed all the forms thus completing most of the election day work. It took 5 hours for me to do this work! My mind already was numbed by now. I was not in a position to think anything properly. I had to spend night over there guarding the EVMs and election material! Election commission has given this responsibility to the presiding officers, so I had to stay there overnight with my peon. Collector and his election team sent some food packets prepared by a local NGO called Akshay Patra. Food was horrible; It was all stale. I was never going to eat anything outside for two days so I straight away declined to eat it. My peon decided to try the food, but he couldn't put one bite in his mouth. He said, it is all stale and he don't wanna get sick. We throw away both food packets. Similar things happen in all other booths. I am sure the local election officials and Akshay Patra NGO made lot of money in this botched food contract. That same stale food they sent to us even on the day of election, which we again threw away! Somehow I tried to sleep. I could sleep only for 3-4 hours because of the horrible condition over there.

The Day of Election: 30th April
I woke up at 4 am early morning. It was night time and dark outside, so I took my bath in open!  Bathroom was not in a working condition, so I had to take my bath in open. By 5:30 my staff came and I conducted mock poll, sealed EVMs and at 7 started the actual voting. From the local BLO (Block Level Officer) I came to know that all male voters in my booth area are drunkards! The first male to arrive in my booth was BJP party booth agent, and he was drunk! Then two Congress booth agent arrived who were drunk too! BLO was absolutely right. Whole day such drunkards voted in my booth. This is the true color of the dreaded demoCRAZY. Almost all the voters were totally clueless about even which button to press on the electronic voting machine to cast their vote. How can anyone with a sane mind seriously think that such people can choose the leader who is going to lead this country on the path of progress? The whole election process is total farce. If you will watch these voters whole day voting, whatever little (false) faith you have in democracy will vanish in a blink of an eye. Everyone over there were blindly pressing buttons. Many of them didn't even know how to hold a pen (many held it in reverse and tried to sign in the voter register!!!). This comic situation continued whole day. I just sat there laughing at this mad state ritual of election. At 6 we closed polling, and after that it took further one hour for me to fill all the forms and put them in their respective covers! There were around 40 different types of covers that the presiding officer will have to prepare and seal or keep unsealed. Total chaos. I am producing the check memo of all these various forms and their respective covers below. See for yourself how horrific and nonsensical this work is.

After sealing the EVMs and all covers we sat in the bus to go back to the receiving center. My team was the first to board the bus, so we have to take other teams with us on the way. When we reached other voting booths, I realized that my team finished work pretty early because most other teams were struggling to arrange forms even after two hours of closing of the poll. It took 3 hours for us the gather all the teams and reach the receiving center. Upon reaching the center, there was again that scene of utter chaos. All teams were confused about the places were they have to give back various forms and all other extra material. Election officials again changed some rules, and team members were furious about that. Many were fighting with the receiving staff. I saw many teams sitting on the ground sealing and unsealing various covers or doing some other work upon arrival! My assistant presiding officer was smart, so he and I submitted all our covers and materials within half an hour. But even that half an hour was like a hell for me. In the end the guys who were receiving the material also realized that if they sat to check everything, then, whole night will pass, so they also started accepting everything quickly. I don't know what happened to other teams, but I came back home only at 10 pm in night! After coming home I realized that my brain stopped working for few hours due to this harrowing experience of two day chaos. Any sane person will go crazy in such messy environment.

This is the short story of my two days in this election hell.

As I said above, if someone wants to see the ugliness of demoCRAZY, then, they should work in elections. DemoCRAZY and its election ritual is a pure dungeon; pure hell. The whole idea that on election day people can chose their rulers is totally lunatic. Why the heck people want to get ruled in the first place is the most important question no one wants to ask or answer. Election commission is spending crores of rupees on these crazy elections. It is a sheer waste of society's resources. Innocent productive people like me and others are forced to work in a process which is going to elect bunch of criminal unproductive politicians! For whom we are wasting our resources? For criminals like Narendra Modi or Rahul Gandhi or Mulayam Yadav or Banerjee or Jaylalita? How can these bunch of fools run our country? Central planning is a disaster. None of these people, even if they are angels, can run our or any other country. It is a technical problem. A problem which no government can solve. Only free market capitalism is capable of solving our economic problem. Instead of wasting our resources in these political elections, we need the everyday election process of the market place. Free market is a true democracy where every vote, which an individual consumer casts via his money, counts. This fact of the market democracy was very nicely explained by the great Austrian economist Ludwig von Mises. In his magnum opus Human Action he wrote:
With every penny spent the consumers determine the direction of all production processes and the minutest details of the organization of all business activities. This state of affairs has been described by calling the market a democracy in which every penny gives a right to cast a ballot. It would be more correct to say that a democratic constitution is a scheme to assign to the citizens in the conduct of government the same supremacy the market economy gives them in their capacity as consumers. However, the comparison is imperfect. In the political democracy only the votes cast for the majority candidate or the majority plan are effective in shaping the course of affairs. The votes polled by the minority do not directly influence policies. But on the market no vote is cast in vain. Every penny spent has the power to work upon the production processes. The publishers cater not only to the majority by publishing detective stories, but also to the minority reading lyrical poetry and philosophical tracts. The bakeries bake bread not only for healthy people, but also for the sick on special diets. The decision of a consumer is carried into effect with the full momentum he gives it through his readiness to spend a definite amount of money. 
The day Indians will chose this market democracy of free market over the evil political democracy, things will start to change for better. Until that time arrives, we all must get ready for more troubles ahead.