Saturday, October 14, 2017

Is Sex with an underage wife Rape?

The Supreme Court of India on Wednesday ruled that a man is committing rape if he engages in sexual intercourse with his wife who is aged between 15 and 18. How logically sound this Supreme Court ruling is? To know the answer of this question we must first understand what ‘rape’ is. An online dictionary of law defines rape as the crime of sexual intercourse (with actual penetration of a woman’s vagina with the man’s penis) without consent and accomplished through force, threat of violence or intimidation (such as a threat to harm a woman’s child, husband or boyfriend). This means, a rape basically is a violation of others’ bodily property right. It is an initiation of aggression against others’ private (bodily) property. Any case of such initiation of aggression re sexual intercourse is a rape no matter what the age of the person whose bodily property is violated is. The age factor is irrelevant here.

The ruling of Supreme Court is purely arbitrary and illogical having no basis in any sound legal principle. Why only wife between 15 and 18 years old? What if the wife is 18 years and 1 day old? What if she is 19 years or 20 years old? In any case of rape the only thing the court has to decide is whether any kind of sexual aggression has took place or not without looking at the age of the victim or aggressor. A rape is a rape. A sexual aggression against an 80 year old wife is also a rape and 16 year wife is also a rape. The Supreme Court is unduly complicating the matter and the law. By doing this, they are inviting all kinds of troubles for people who will get falsely accused of rapes in future.
The fact of the matter is, in India the judiciary system lacks any basis of sound legal principle. Whatever principles they are using are all arbitrary subjective values of the judicial body members.

The state judiciary system functions like this only everywhere. Their goal is not of producing ‘Justice’ for the victims, but to endlessly complicate matters so that the institution of state and its organs like the justice system can be perpetuated indefinitely. As long as the state is in charge of the judiciary system, there is no hope for the victims of getting ‘Justice’.

Monday, October 2, 2017

Coalition Governments and Economic Growth in India

Former RBI governor Y V Reddy said that Coalition governments in India have produced better economic growth rates in the last three decades than a strong majority government… Interestingly, the highest growth in India from 1990 to 2014 was really during coalition governments… So, in a way it’s consensus based… in Indian situation, a coalition probably produces better economic results than a strong government.

Mr. Reddy is committing a logical fallacy of Cum Hoc, Ergo Propter Hoc. Just because two things are occurring simultaneously and are closely connected with each other doesn’t mean one is causing the other. Better economic growth has nothing directly to do with what kind of governments, either coalition or majority, India has. What matters for growth is what kind of economic policies these governments are going to follow. If the government is small and less meddling in the free market enterprise system then it will produce stronger economic growth like what happened after 1990 economic crisis and following Rao-Manmohan liberalization reforms. And if the government is totalitarian and imposes its controls on the free market enterprise system then it will strangle the growth like what is happening under present Modi government.

The only reason Mr. Reddy sees this correlation is because India is a typical Wittfogel style oriental despotic country where demagogue despots are lurking in the background to seize the power and impose their will on people whenever opportunity allows them. The coalition government restrains such demagogues so they have to listen to others’ wishes and stay away from totalitarian controls. Coalition government works under restrains because it is working constantly under threat of losing power if they ignore others’ wishes. Such government also results into more political log-jam in parliament so they can’t pass draconian controlling bills easily. But majority government doesn’t face such restraints. Whenever one party is successful in getting full power via full majority, like what Narendra Modi got in 2014, they impose their totalitarian controls on everyone resulting into dismal economic performance.

Tuesday, September 19, 2017

Narendra Modi Government Faces Economic Reality

The full impact of Narendra Modi government’s economically unsound policies of demonetization, GST as well as lose money policy of RBI in the form of lending cheap artificial credits to insolvent borrowers via commercial banks resulting in huge load of unproductive debt has started to show on the Indian economy.

Finance ministry officials are now saying that India could be forced to cut spending on key infrastructure such as railways and highways as lower-than-expected tax collections and sluggish growth have upset the government’s budget calculations. This was well expected. As we have said in past here on Mises India, when the government gets bigger and totalitarian, the economy tanks rapidly. When the business environment becomes extremely uncertain, entrepreneurs will halt their business plans and stop any further present or future investments, and this will hit the economy hard because only production, saving, investment and capital accumulation can increase economy’s future growth. As Thomas Sowell famously said, the first principle of economics is that there is scarcity of everything, and the first principle of politics is to disregard the first principle of economics! Politicians like Narendra Modi think that they can disregard the laws of economics, which are absolute a priori laws of human action, forgetting the consequences of ignoring them. They forget that the forces of market are much more powerful than any politician and his political power. Market forces are always working in the background, and in the end they will force politicians like Modi to stop wasting society’s resources, and that is what is now happening in India. The report throws light on this fact:
The main problem has been the introduction of the GST, billed as India’s biggest tax reform in 70 years.
Ambiguous rules, an onerous return filing system and glitches with its IT back-end have made doing business far more complicated for many companies. Frequent changes in tax rates after the GST’s launch have heightened business uncertainty, resulting in many firms failing to register for the new tax.
India’s GDP growth itself has slowed to 5.7 percent in the April-June quarter from 7.9 percent a year earlier, a slowdown also partly blamed on the introduction of the GST, adding to the pressure on the state coffers.
Dividends from state-run companies are expected to fall and a $11 billion share sale programme is slowing down.
Complicating the finance ministry’s budget arithmetic further, the Reserve Bank of India announced last month that its annual surplus, a dividend transferred by the central bank to the government each year, would be only $4.9 billion, less than half the initial estimate, largely due to costs of Modi’s shock “demonetisation” initiative last year.
If Narendra Modi is not going to learn any lesson out of his momentous mistakes then the Indian economy is just going to go in a total free fall in future. If he continues his binge spending programs and RBI keeps on cutting interest rates to boost growth artificially then the economic woes of Indians are just going to become astronomical in future. Government spending and RBI manipulation of interest rates can’t create or boost growth. Government spending is always inimical to progress because what government spends on A, it has always took that forcefully from B; spending on A is always wasteful because it ignores the individual’s subjective preferences embedded in price signals, and so it lacks the market test of profit & loss. Progress requires government spending of 0 rupees.  As long as that is not happening, do not expect any real growth in India. The disaster in India continues to unfold.

Monday, September 4, 2017

The Demonetization Disaster

The exercise of demonetizing around 87% of all circulating currency note supply taken by Narendra Modi and RBI last November has resulted into nothing but overall disaster for the economy. In his televised speech on 8th November, 2016 Narendra Modi talked about three main goals of the whole demonetization exercise, and they were:
  1. Curbing financing of  terrorism through  the proceeds of Fake  Indian Currency Notes (FICN)   and use of such funds  for subversive activities such  as espionage, smuggling of arms , drugs and other contrabands into India; and
  2. For eliminating Black Money which  casts a  long shadow of parallel economy on our  real economy
At that time Modi government was expecting that the substantial amount of black money that people were hoarding will never return in the banking system and that will become a windfall gain for RBI which it can then transfer in the government account. Now that 10 months have passed and data are coming in, what is the outcome of this exercise? Did this exercise bring back any windfall gain to RBI which it transferred to the Modi government? Did a substantial amount of black money never returned to the RBI vaults? Did the fake currency notes stopped circulating in the economy? Did the terrorism financing stopped and so terrorism stopped?

Even after 10 months of this exercise the Indian central bank RBI has yet to release full figures, but in their annual report, released few days ago, the RBI said that total 99% of all banned notes have returned in the system: India received a total of Rs 15.28 lakh crore in banned 500 and 1,000-rupee currency bills, the RBI said, which means 99 per cent of the banned cash has been legally returned in the eight months since demonetisation. The one per cent that has not returned to the RBI adds up to around Rs 16,000 crore. This means the demonetization exercise failed in unearthing any black money. In fact, people were able to convert their black money into white using the demonetization exercise itself! After this news came out, the finance minister Arun Jaitley was seen changing objectives of this whole exercise to hide his government’s failure by saying that, that was not the objective of demonetization…it was not an exercise to confiscate money but to nudge India towards digitization, ending anonymity of cash. Basically the government is now saying that the whole aim of demonetization was making India a ‘cashless digital economy’ and not curbing corruption and black money as originally stated by them.

Did RBI receive any windfall gain which it then transferred to the Modi government? Not at all. In fact, the recent data released by RBI show that instead of getting any windfall gain, RBI has made losses and it is only transferring Rs 30,659 crore, less than half the amount Rs 65,876 crore it transferred last year, dividend to the government this year implying lesser non-tax revenues to the government. This means, demonetization exercise turned out to be very costly for the government! It cost more money to RBI to print new currency notes and bring back old notes in the system than any so-called benefit of demonetization exercise!

Demonetization has also failed in curbing terrorism as can be seen in the on-going almost daily insurgent attacks on Indian nation state forces in places like Kashmir, North-East etc. The data released by the South Asia Terrorism Portal shows that, after demonetization exercise in year 2017 132 security personnel and 139 civilians have died in Jammy and Kashmir region itself. The three years of Modi government has turned out to be more deadly for the security forces compared to past years of Manmohan Singh government.

And, the fake currencies of even the new currencies introduced by the government started circulating in the economy during the demonetization exercise itself.

Not only this, the latest GDP data released by the Central Statistics Office (CSO) show that the first quarter GDP growth rate of the Indian economy has hit the lowest in last 3 years of 5.7% only, which is the slowest pace of growth under the Modi government. The demonetization exercise and then implementation of GST last July has hit the Indian economy hard. This was expected because when government fiddles with 87% of economy’s money supply, increases taxes on its people incessantly and also makes tax compliance so complicated that no one knows what is going on, the economy is going to tumble. Businesses survive and thrive in an environment of secure property rights and lower future uncertainty. When the economy gets one shock policy move after another in the form of demonetization and GST, it creates an environment of extreme suspicion and uncertainty among the business community. They start expecting more such shock policy moves from the government and stop any big present or future investment plans, which results into economy almost halting.

All in all, demonetization has resulted into total disaster for the Indians and their economy. The former RBI governor Dr. Raghuram Rajan warned about the dangers of demonetization and told Modi government about its heavy short term cost which will far outstripped its any presumed long-term benefits (sic), but Modi didn't listen to him and removed him from his position. The present BJP government is not ready to accept its failures and make corrections, but is busy making excuses. In such an environment expecting anything positive in future is going to result into disappointment only. We must brace-up for even worst situation in future because the world itself hasn’t got out of the deep depression that started in 2007.

Friday, August 25, 2017

Is Privacy a Human Right?

Yesterday a 9 judge bench of the Supreme Court of India gave a so-called historic decision of declaring privacy a fundamental human right now enshrined in the article 21 of the Indian constitution. Many are saying that this for the first time that some verdict is given unanimously by the bench 9 judges. This verdict now includes privacy also as a part of fundamental rights in article 21 of the Indian constitution, which wasn’t the case previously. Most people of the country and intellectuals have cheerfully welcomed this verdict hoping that this will stop the ruling BJP government from becoming totalitarian. The legal experts have hailed this verdict as historic, a watershed moment and a victory for common citizens by saying that it has far reaching implications for the matters like the beef ban, forceful use of Aadhaar card, government telling people what to wear and eat, abortion, LGBT rights, government surveillance in the form of reading peoples’ emails, text messages, listening to phone calls (wiretapping), and married women will have the right not to get raped in marriage etc. etc.

Most freedom loving people of India are also cheering this verdict because they think this is a blow to the Modi government who was arguing that people don’t have a right to privacy.

I think this is a moment which needs a calm reflection without any kind of such euphoria. I can understand that people are happy because the way Modi and his government are trying to control the body and mind of people this verdict seems like putting a break on those efforts. Notwithstanding this perception, the fundamental issue involved here is, should we give so much of importance to the issue of right to privacy and think it is a fundamental human right? What if the fundamental human right is something else and Supreme Court is not talking about it at all? In that case all hope of this verdict stopping Modi and his government from trampling on human rights turns out to be delusional. A careful logical analysis of ‘privacy as a human right’ issue will make this clear.

Is Privacy a Human Right?
Before answering this question of whether privacy is a human right or not we have to understand what human right actually is. To show that something is right for the humans we have to understand the basic human nature. Anything that is in accordance with this human nature is right and if it is not then it is wrong. The basic human nature is that nature has given all of us life. The basic life form is our own body. This life we can all sustain and enjoy only if we are free to use our bodies without any kind of restrictions from outside. Our body is thus our own i.e., we are the ultimate owners of our body, and ownership means this body is our property. For sustaining and enjoying our lives to its fullest potential we also need other resources like food, water, clothes, home, cars, computers etc. etc. We can acquire and own these prior unowned physical scarce resources via use of our bodies by appropriating them first. By this way we can make these resources our property too. Thus, as long as we are free to use our bodies and resources appropriated by using that body, together called our private property, we fulfill our nature. Anyone who infringes on the use of our private properties is violating our right. This proves that human right is nothing else but property right. This also proves that human right is basically a negative right i.e., others cannot stop me from using my property and similarly I cannot stop others from using their properties. As Prof. Murray Rothbard, the great 20th century philosopher of ethics, said:
And yet, on the contrary the concept of “rights” only makes sense as property rights. For not only are there no human rights which are not also property rights, but the former rights lose their absoluteness and clarity and become fuzzy and vulnerable when property rights are not used as the standard.
In the first place, there are two senses in which property rights are identical with human rights: one, that property can only accrue to humans, so that their rights to property are rights that belong to human beings; and two, that the person’s right to his own body, his personal liberty, is a property right in his own person as well as a “human right.” But more importantly for our discussion, human rights, when not put in terms of property rights, turn out to be vague and contradictory.
After elucidating what human right is, we are ready to tackle the question of privacy as a human right. As Murray Rothbard above said, when human rights are not defined based on the bedrock standard of property rights they lose their absoluteness and clarity and become fuzzy and vulnerable to misuse. The case of privacy as a fundamental human right, as declared by the Supreme Court, falls in this category of defining human right without the firm base of property right. As Prof. Walter Block said, privacy is a benefit and not a right. To understand this fact let us take an example involving the issue of privacy. In this regard I am going to quote Prof. Murray Rothbard. Rothbard is using an example:
Does Smith, for example, have the right to print and disseminate the statement that “Jones is a liar” or that “Jones is a convicted thief” or that “Jones is a homosexual”? There are three logical possibilities about the truth of such a statement: (a) that the statement about Jones is true; (b) that it is false and Smith knows it is false; or (c) most realistically that the truth or falsity of the statement is a fuzzy zone, not certainly and precisely knowable (e.g., in the above cases, whether or not someone is a “liar” depends on how many and how intense the pattern of lies a person has told and is adjudged to add up to the category of “liar – an area where individual judgments can and will properly differ).
Suppose that Smith’s statement is definitely true. It seems clear, then, that Smith has a perfect right to print and disseminate the statement. For it is within his property right to do so. It is also, of course, within the property right of Jones to try to rebut the statement in his turn. The current libel laws make Smith’s action illegal if done with “malicious” intent, even though the information be true. And yet, surely legality or illegality should depend not on the motivation of the actor, but on the objective nature of the act. If an action is objectively non-invasive, then it should be legal regardless of the benevolent or malicious intentions of the actor (though the latter may well be relevant to the morality of the action). And this is aside from the obvious difficulties in legally determining an individual’s subjective motivations for any action.
It might, however, be charged that Smith does not have the right to print such a statement, because Jones has a “right to privacy” (his “human” right) which Smith does not have the right to violate. But is there really such a right to privacy? How can there be? How can there be a right to prevent Smith by force from disseminating knowledge which he possesses? Surely there can be no such right. Smith owns his own body and therefore has the property right to own the knowledge he has inside his head, including his knowledge about Jones. And therefore he has the corollary right to print and disseminate that knowledge. In short, as in the case of the “human right” to free speech, there is no such thing as a right to privacy except the right to protect one’s property from invasion. The only right “to privacy” is the right to protect one’s property from being invaded by someone else. In brief, no one has the right to burgle someone else’s home, or to wiretap someone’s phone lines. Wiretapping is properly a crime not because of some vague and woolly “invasion of a ‘right to privacy’,” but because it is an invasion of the property right of the person being wiretapped.
Similarly, the reason why government cannot stop us from eating whatever we want (beef) or force us to use Aadhaar card by making it compulsory everywhere is not because these actions of government violates our ‘privacy right’ but it violates our ‘property right’. The government cannot invade our privacy not because we have such ‘right to privacy’ but because the government itself has no rights at all. The government itself is an illegitimate illegal institution because it violates property rights of everyone, by initiating violence against all of us in the form of taxation etc., for its existence! Because of this reason, the government has no right to do anything.

As we have seen above, privacy is not a human right let alone a fundamental one. The only fundamental human right is property right. The Supreme Court ruling never ever mentioned this property right. In fact, the Indian constitution nowhere mentions property right as a fundamental human right. In fact, the Indian constitution is replete with rights like right to education, right to be not discriminated against etc., which are not rights at all but violation of (property) right! The fact remains that there is no concept of property right in India!

The danger of cheering for Supreme Court’s decision of including privacy as a fundamental human right in article 21 of the Indian constitution is the implicit acceptance of whatever the Indian constitution is saying. This constitution is a flawed document designed, prepared and signed by few people six decades ago. That document cannot bind billions of Indians in some imaginary implicit social contract with the Indian nation state (aka government). In this regard the great American legal theorist Lysander Spooner said:
The Constitution has no inherent authority or obligation. It has no authority or obligation at all, unless as a contract between man and man. And it does not so much as even purport to be a contract between persons now existing. It purports, at most, to be only a contract between persons living eighty years ago. And it can be supposed to have been a contract then only between persons who had already come to years of discretion, so as to be competent to make reasonable and obligatory contracts. Furthermore, we know, historically, that only a small portion even of the people then existing were consulted on the subject, or asked, or permitted to express either their consent or dissent in any formal manner. Those persons, if any, who did give their consent formally, are all dead now. Most of them have been dead forty, fifty, sixty, or seventy years. And the constitution, so far as it was their contract, died with them. They had no natural power or right to make it obligatory upon their children. It is not only plainly impossible, in the nature of things, that they could bind their posterity, but they did not even attempt to bind them. That is to say, the instrument does not purport to be an agreement between any body but “the people” then existing; nor does it, either expressly or impliedly, assert any right, power, or disposition, on their part, to bind anybody but themselves.
The Indian constitution has no authority over us. It is a ruse used by the state officials to rule and control us for centuries. As long as Indians continue to be ruled by these state officials, by using the document that they designed, Indians can never be free to enjoy their lives, property or even privacy.

Thursday, August 24, 2017

Is Artificial Intelligence Threatening India Inc. Jobs?

A recent news report said that in India The IT services industry alone is set to lose 6.4 lakh low-skilled positions to automation by 2021.

Is this true? Let us scrutinize.

What is Artificial Intelligence?
As Jerry Kaplan, the author of Artificial Intelligence: What Everyone Needs to Know, has said, there is no one all agreeable definition of Artificial Intelligence in the computer community today. Roughly speaking, Artificial Intelligence means, as its founding father John McCarthy said, a process “that of a making a machine behave in ways that would be called intelligent if a human were so behaving.” Artificial Intelligence is an all encompassing name given to different automation technologies that is coming in the market since last couple of decades. From the economic perspective AI is nothing but just another type of capital good (machine) that is going to make the life of humans more comfortable because it increases human labor productivity. It is a form of technology that is part of the fourth industrial technological revolution, and is nothing very different from the three technological revolutions that preceded it. It is true, as Thomas Davenport and Julia Kirby, the authors of Only Humans Need Apply, have argued that these AI technologies are not only going to complement the labor, as previous technologies have done, but they will also substitute and replace them because they can do exactly the same type of work that the human workers are doing. But we should not overly worry about this fact because by doing so they will only free up more labor force to work on fulfilling other endless wants of the people. A world without work is impossible simply because of the fact that human wants are unlimited as Milton Friedman famously observed, you could reach a point where you pay a personal psychiatrist to follow you around!

Yes, during the transition period there will be some dislocation of jobs; some workers will lose jobs but they will get new ones soon as have always happened in past. The Indian laborers will have to learn new set of skills that are going to be in demand in the coming automation AI economy. As Geoff Colvin, the author of Humans are Underrated, has argued, in the age of machines consumers and thus employers are demanding more human like skills from the employees. Deep down in our nature we humans are social animals and ultimately we prefer to interact with other humans rather than with robots. He lists down some of these social skills as follows: 1) Empathy 2) Team work 3) Storytelling 4) Innovation and creativity etc. Thomas Davenport and Julia Kirby also have presented an alternative strategy both for the human workers and their employers for tackling the machine age changes. Their suggestion is to augment instead of automate. The meaning of augmentation is that instead of simply replacing a human worker with machine, it is better to augment the productivity of that worker by allowing him to work with an automation technology i.e., laborers working in partnership with the machines. They also present five other pathways of career for humans to adapt to the changes that are coming in the labor market, and they are: 1) Step up 2) Step aside 3) Step in 4) Step narrowly, and 5) Step forward. Briefly, step up means you step up to the cognitively higher ground where the rational decision making work is not yet conquered by the computers.  Stepping aside means moving to a type of non-decision-oriented work that computers aren’t good at, such as selling, motivating people, or describing in straightforward terms the decisions that computers have made. Stepping in means engaging with the computer system’s automated decisions to understand, monitor, and improve them. Stepping narrowly means finding a specialty area within your profession that is so narrow that no one is attempting to automate it-and it might never be economically to do so. And, stepping forward means developing new systems and technology that support intelligent decisions and actions in a particular domain i.e., inventing new AI technologies.

Once workers make these adjustments and learn how to work with the machines, jobs will no longer pose a problem.

How The Indian Government Is Destroying Jobs?
The AI technologies are not really threatening the India Inc. jobs. The entity that actually threatens jobs of India Inc. is the welfare-warfare Indian nation state (aka government) itself. By interfering in the workings of the freely functioning market, especially the labor market, the Indian government either directly destroys jobs or hinders job growth. To understand this I will work with an example. We all know about Government’s minimum wage laws and how they are deployed to benefit the poor unskilled workers, who mostly work in the unorganized sector, whose wages are low. Although everyone knows that minimum wage laws are suppose to help poor unskilled workers by raising their wages, but the actual impact of these laws is to make these very same poor unskilled workers unemployed! We now see how minimum wage laws destroy jobs. It is a well known economic fact that no private sector company can survive in the business without making profit. Profit is calculated by subtracting total cost out of total revenue. Now, total revenue is determined in the market by the marginal revenue product of every individual labor i.e., the marginal contribution of every laborer in company’s revenues via their marginal productivity. Every individual laborer receives his wages according to this marginal contribution in company’s revenues. And labor wage bill forms the significant part of any company’s total cost. Suppose before the passage of the minimum wage law, a company is employing 100 laborers and paying each laborer 1000 rupees per month wage then their monthly wage bill will be 100,000 rupees. If non-wage bill of that company is 50,000 rupees then their total cost is 150,000 rupees. On the other side if their total revenue per month is 200,000 rupees then their total profit is 50,000 rupees. Now the government imposes a minimum wage law on them and forces them to pay 1600 rupees to their laborers. In this case now their total cost will go up to 210,000 (160,000 wage bill plus 50,000 non-wage bill) rupees while the revenue remaining the same because revenue will not increase automatically after the imposition of minimum wage law. We can now see that the profit of this company has disappeared and it is actually making 10,000 rupees losses. This situation cannot go on for long for this firm, and to survive in the market it will have to fire some workers to lower its wage-bill and total cost. If it cannot fire workers because of the provisions in the law then in the situation of continuously mounting losses it will be forced to shut down in the long run unemploying its whole labor force! In both conditions the end result of imposition of the minimum wage law is unemployment for the workers. This unemployment is structural one in-built in the design of the system because minimum wage laws are here to stay for a long period of time, and so they cause very long term permanent unemployment.

Like minimum wage laws myriad of other laws of the government like work condition laws, labor union laws, payroll tax laws, anti-hawking laws, license raj laws, job security laws, unemployment insurance laws, equal pay laws etc., etc., causes long term unemployment. Also, government’s direct and indirect taxes siphon off the productive saving resources from the private sector, where they can be used to start new businesses or expand old businesses and generate new employment opportunities, and divert them to wasteful unproductive consumption activities of the government and their welfare schemes. Government’s central bank RBI also generated business cycles in the economy which also destroys jobs.

So India Inc. jobs are under threat not from the AI technologies, which are only making our lives better, but from the very Indian government which promises to secure these jobs! It is better for the Indians to stop worrying too much about the artificial intelligence machines and start worrying about their big intrusive government which wants to control everything. If India Inc. wants to save jobs of people then they must pressurize the government to remove their regulations and controls and free the economy for market competition, which will not only generate more jobs but also improve everyone’s standard of living too.

Wednesday, August 16, 2017

Can Monetary Easing Increase India’s Economic Growth?

The second volume of government’s Economic Survey recently flagged a great risk of faltering economic growth in India, and demanded a loose monetary policy stance from the RBI in the form of further easing of the interest rate to combat this downside risk. The report said, Forecasting “greater downside risks” to economic growth, the Survey, tabled in Parliament Friday, argues that the “scope for monetary policy easing is considerable” and could go up to 75 basis points.

The underlying theoretical basis of this recommendation of monetary policy easing is that a loose monetary policy in the form of lowering of interest rate will revive the economic growth. This means, this policy of loose money will only work if that underlying economic theory is correct. In this article we will analyze this theory and its implications. Is it true that a loose monetary policy can revive economic growth? To understand the answer of this question we need a quick short lesson of sound economic theory, which I present below.

What is the real Wealth of Nation?
As most economic thinkers like Adam Smith, John Stuart Mill, J B Say or Frederic Bastiat etc., of the past age said, the wealth of a country is nothing else but the amount of economic goods that it produces in a given time frame. It is measured by the supply of things like food, potable water, clothes, homes, shoes, cars, computers etc., etc., myriad of endless products. The modern way of measuring wealth, what the mainstream economists call GDP (Gross Domestic Product), by combining these goods and then multiplying them by market price is faulty (see here and here).

What is Economic Growth?
Economic growth is nothing but yearly growth in the above defined wealth of nation e.g., if the Indian economy last year produced 5 homes, 10 pairs of clothes, 15 pairs of shoes and next year it produces 10 homes, 20 pairs of clothes, 25 pairs of shoes then we say that the economy is growing; the economic growth rate can be calculated by above given YoY (year over year) numbers of homes, clothes and shoes.

What Determines Economic Growth?
After understanding what wealth and its growth is, we can now understand what determines the economic growth of an economy.  We all know that to produce wealth any economy requires different factors of production. The original factors of production that nature has endowed us with are land and labor. But by using just land and labor the production process is less productive. What makes land and labor both more productive is the use of capital goods like an axe or a spade or a shovel or modern day automatons like factory robots etc.  For example, if I ask you to dig a 10 feet deep and wide hole in a ground with your hands then you might take 10 hours to do that job, but if I give you a hand shovel then you will be able to do that job just in an hour. The problem that primitive humans faced was that like land and labor capital goods are not readily available in nature. What makes the capital good a unique factor of production is that we have to produce it first before we use to produce goods meant for final consumption. Only the use of these capital goods will help any economy grow in future. But the problem for any economy is to produce these capital goods in the first place before they can be used to increase the future production of final consumption goods. This means, to understand what determines an economy’s economic growth we have to understand the whole process of producing capital goods first and I now discuss that process. We use the method of Crusoe economics for this purpose. Suppose Robinson Crusoe is stuck on an island and now he needs to survive. He is catching 10 fish with his bare hands everyday working for 10 hours, and he consumes all 10 fish daily for survival. In this condition his life and production method is primitive like our ancestors. He knows that this type of hand to mouth survival is dangerous because if he gets injured or sick for some days then he has nothing in spare for survival; he may die. He decides to better his condition in future. For increasing his chances of survival and standard of living he needs a buffer stock of fish i.e., saving and for that he will have to produce more fish than he is consuming right now i.e., he will have to produce more than 10 fish daily. In our modern day language Crusoe will have to increase economic growth of his economy. What should he do to catch more fish daily? He will need fishing net, of course. Only the use of capital good (fishing net) can increase his labor’s productivity. The problem here is, fishing net is not available ready in nature; he will have to produce it first. Crusoe decides to make the fishing net. Now, suppose making a net requires 10 hours a day work. This means, when Crusoe is making this net he cannot catch fish on that day. This is the economic cost of making the net. He will have to make provision of food for that day when he will make the fishing net so he decides to eat only 5 fish out of his total 10 fish catch today and save 5 fish for the next day consumption when he will sit down to make the net. We can see that he will have to sacrifice some of his present consumption (5 fish) in order to make his future better and secure. The next day now he will invest 5 fish that he has saved yesterday in making the fishing net (basically Crusoe will give wages to himself in the form of 5 fish out of his saving, and he will use this wage for consumption). This way the next day the fishing net (the capital good) is ready and now Crusoe can catch 30 fish using that net working 10 hours a day; he can now consume his daily quota of 10 fish and save 20 for any kind of future unforeseen contingencies. We say that Crusoe’s economy has experienced economic growth; his economy is growing making his life safe and standard of living higher.

We can break down the whole process presented in above analysis in simple economic principles, and I quote Robert Murphy, in the jargon of economics, we can step back and describe what Crusoe has done. By consuming less than his daily income—by living below his means—Crusoe saved fishes in order to build up a fund to guard against sudden disruptions in his future income. Moreover, Crusoe then invested his resources into the creation of a capital good that greatly augmented his labor productivity. (I have replaced coconut, the original example used by Murphy, with fish in this quote).

Now we know what determines any economy’s economic growth. The citizens of an economy first must produce more than what they are consuming, then they must save the surplus production and invest it in producing physical (and human) capital goods. Only this accumulation of physical and human capital will then increase the future wealth (income) of the economy and the economy will grow. There is no escape for any economy from this process. There are no other short cuts.

What is monetary policy? Can it increase economic growth?
After seeing the whole process of generating economic growth above now we can answer our original question, but before that we briefly need to understand what monetary policy is. Monetary policy is nothing but the decision by central bankers to either increase or decrease the supply of fiat paper currency (what they call money) in the economy. We have to understand that money is just a common medium of exchange and nothing else. Injection of more money, via lowering interest rates, will not do anything to increase production of economic goods in future. As long as real pool of saving (i.e., savings of formerly produced goods) and investment is not increasing, economy cannot grow. Injecting more money in an economy will only increase prices of various producer and consumer goods. It will only distort the production structure of the economy by transferring available limited resources, without augmenting them, from productive desirable sectors to unproductive undesirable sectors i.e., it will only generated business cycles further damaging the economy and economic growth.

Here I cannot elaborate all the complex processes involved in above analysis, but those who are interested in understanding can read Peter Schiff’s book, How an Economy Grows and Why It Crashes.

As we saw above, only production, saving, investment and accumulation of physical and human capital can increase economic growth of the Indian economy. Any manipulation of the market interest rates by manipulating the supply of paper currency rupee by RBI will not increase economic growth. In fact, it will only damage the economy by generating inflation and business cycles. This means, RBI and government’s actions will decrease economic growth of the Indian economy.

Tuesday, August 1, 2017

The Myth of Political Opposition

We are witnessing an age old fact about the State playing out in front of our eyes in India today. This fact is that of, as Murray Rothbard said, the state as an apparatus of parasitism which uses, as Franz Oppenheimer said, political means for its survival. The state is an institute which represent political power which its officials like politicians and bureaucrats use to parasitically live-off productive people on whom they forcefully and clandestinely rule by use of propaganda. One of such propaganda is that there are opposition parties in politics. Of late opposition party politicians are joining the ruling BJP party en-masse in India e.g., many Congress politicians switched over to BJP in the state of Gujarat, The Bihar chief minister Nitish Kumar broke-off his alliance with Congress and other so-called anti-BJP parties like Lalu Yadav’s RJD to form a new government with its enemy BJP party, quite a few MLAs from the SP and BSP parites also joined BJP etc. These events illustrate the above mentioned fact that the whole concept of political opposition is a myth. This myth is perpetrated by the politicians themselves to misguide the public to rule over them. The fact of the matter is exactly the opposite. All political parties only represent political power over people, which they use for the parasitical survival whether they are in government or outside it for a while. There is no actual battle between BJP and Congress and other political parties when it comes to fleecing the productive tax payers for their parasitical survival. They all agree on that common purpose. The only disagreement is about the speed or manner of fleecing. None of these parties represent the real opposition against the coercive state power. That opposition remains with individuals and institutions that are fighting the state power root and branch. The real political battle is always between the people vs. the state (aka government).

Tuesday, July 25, 2017

Indian Nation State is Shooting in its Own Foot

In the zeal of controlling everything that either walks or doesn’t walk, the present Narendra Modi government of India is shooting in its own foot. It is giving one shock after another to the society and economy in the form of mob lynching of innocent people in the name of “cow protection”, beef and myriad of other bans, attacks on minority communities, compulsory use of Aadhar card, demonetization of 86% of total currency supply, GST etc.

Why am I terming these policies as government shooting in its own feet? The reason can be understood with the aid of the laws of human action. Any individual needs freedom to achieve his full potential and flourish e.g., if I chain you in one room or throttle you then you cannot act to do something progressive and you will most probably die. The same is true for the body economy and society. Freedom is the precondition of any growth or development process. If people and businesses are strangulated by myriad of controls and regulations by the government, they cannot flourish and progress. On the other hand, an economy without the government interference will flourish to its full potential e.g., a free market enterprise economy, where there are zero taxes and controls and regulations of the government, will thrive due to market process of competition among entrepreneurs who will be competing to win over the businesses of their customers by providing them best quality goods and services at the cheapest possible prices. Competition will fuel the innovation process which will continuously improve the quality of products while lowering their cost of production and price. A society free of controls, both physical and importantly mental, can experiment with different social, cultural, political and religious ideas and can launch itself on the path of the civilization process. A place where dissent is not suppressed can quickly go on the path of renaissance and enlightenment. A society with a close and static mind will stagnate and decay sooner or later.  Only a dynamic society can become civilized.

In light of the above mentioned facts it is easy to see that the policies of the present Indian government is reversing all the progress that this country has achieved after 1947, especially after 1990 economic reforms of leaning more in the direction of market and private sector. Under the weight of these myriad of controls the economy is crumbling. Indians are becoming poor. The middle class is slowly vanishing. And here remember, a poor nation state can never defend itself from anyone either internally or externally! The way Modi government is locking its horn with the Chinese nation state right now a conventional war cannot be ruled out. And, if tomorrow there is a war the Indian nation state only has resources enough to fight a war for 10 days! The controls that the present government is putting on physical lives and minds of people and the way one after another community is targeted for hatred and violence, the day is not far enough when the Indian nation state, which is a forcefully put together artificial entity, itself will stop existing.

Thursday, July 20, 2017

Should Indians Boycott Chinese Goods?

The on-going stand-off between the armies of the Indian and Chinese nation states on the Sikkim border has created quite a bit of ruckus in the, now very nationalistic, Indian public. People in India are calling for a total boycott of Chinese goods. This demand for boycott of Chinese goods is nothing new.

Economics of Boycott
The relevant question here is that, what consequences will follow if India’s nationalistic public actually decide to boycott Chinese goods? Without going into the details of numbers of what is the volume of trade between India and China etc., let us carry out a theoretical analysis of the consequences that will necessarily follow this action of boycott.

What will happen in India after the boycott?
The first thing that will happen in India is that the consumers will be at a loss immediately because they will not be able buy and consume the cheap Chinese goods now. They will have to spend more on acquiring the same product because similar Indian good will be of high price. This means their standard of living will now be lower compared to the situation of no boycott.
Second, now because consumers are forced to spend more of their limited income on costly Indian goods, they will be left with less income to spend on other Indian goods being produced by other Indian industries. This in turn will lower the demand and employment in these Indian industries. For example, if before the boycott I was spending 50 rupees on buying a Chinese bulb out of my total 100 rupee income and 50 rupees on buying Indian pen then now after the boycott I will be forced to spend 70 rupees on an Indian bulb leaving me with spare income of only 30 rupees which will not be enough to buy the 50 rupee Indian pen; this means the pen industry suffers losses and they either shutdown or downsize and fire some of their workers unemploying them. This in turn will result in pen producers and laborers spending less on other Indian goods in turn lowering income of other producers too. This will be a cascading effect engulfing the whole economy. A boycott basically will make everyone poor in India compared to the scenario of ‘no boycott’. This poverty will kill many in India; surely more will die compared to deaths right now in Sikkim border confrontation!
Third, investment activities in India will also slowdown because now saving will reduce due to the fact that the boycott forced the consumers to spend more on costly Indian goods. This lowered saving in turn will lower investment which in turn will lower the future income of Indians again making them poor!
Fourth, Indian producers will also suffer the same fate as consumers. They will also have to spend more on buying costly Indian capital goods for their businesses. This high cost will lower their efficiency and production. It is very much possible that some businesses will simply shutdown because they totally depend on imported cheap Chinese technology. This will again make Indians unemployed and poor. Again like consumers, because producers will be forced to spend more of their limited income on costly Indian capital goods, their saving and investment activities will suffer. This will again make Indians poor.
And last but not the least, as the French economist Frederic Bastiat said, when goods will not cross borders, armies will!   This boycott can actually start a real all out conventional war between the Indian and Chinese nation state. And we all are aware of the fact that war only means ‘death and destruction’. The Indian nation will be destroyed. All the progress that has taken place in last 70 years will turn into rubble in a matter of minute. India will be back in the dark ages.

All in all, if Indians want to be poor, hungry, unemployed and if they want to totally destroy their country then they can happily go ahead and declare a boycott of Chinese goods.

Monday, July 3, 2017

Should Indians pay taxes to become a developed nation?

The finance minister of Narendra Modi government Mr. Arun Jaitley recently, in the Institute of Chartered Accountants while celebrating Chartered Accountants  Day (sic), said that India should have a “new normal” with citizens ready to pay the taxes they need to pay and a new mindset to move from a developing nation to a developed one … During the time of demonetisation I have said that India now needs to define the new normal. And the normal is whatever taxes I have to pay, I need to pay”.

Is this true? Will paying taxes make India developed as a nation? Not at all. Quite the contrary. It will make India and Indians poor. Let us see why.

Any society, at a given time, has a limited amount of resources which it can use to fulfill various unending present and future consumption needs of its citizens. The first stage of any development process requires the fulfillment of basic material needs of people. A nation of hungry people can never develop. Now, a society can either use all its resources to fulfill the present consumption needs by consuming those resources immediately or use them to fulfill present as well as future consumption needs by consuming some and investing the rest of resources in accumulating capital (both physical and human). As any sound economist will tell us, the basic requirement for a growing (developing) economy is that it uses large part of its present resources in investment to accumulate capital so that the future growth can be higher. This is like our Mr. Robinson Crusoe, on an island economy, consumes 5 fish out of his daily 10 fish catch and saves 5 fish which he invests the next day when he is manufacturing fishing net for catching more fish with less effort the day after tomorrow. If Mr. Crusoe will consume all his 10 fish catch everyday then he will remain on the 10 fish per day standard of living forever because he can’t manufacture fishing net. Without the present investment (and sacrifice of present consumption), future cannot be better. In this process the government taxation is like Mr. Jaitley forcefully taking away 5 fish of Mr. Crusoe, which he saved for investment, and distributing it to some so-called poor Mr. Friday who will use it for immediate consumption because he is poor with many unfulfilled present needs. Mr. Jaitley’s taxation thus will make Mr. Crusoe and Friday both poor in future, and not rich or developed! The same economic process of this island economy takes place at a larger scale in a nation like India. Mr. Jaitley’s taxation will make all of us poor and not developed.

Also, the idea that Mr. Jaitley – i.e., the government – somehow knows where and how to invest Mr. Crusoe’s saved resources (fish) is false. Only and only Mr. Crusoe knows what he wants in his life. Only he knows what is good for him and what is bad. Only he knows well his subjective needs. No Mr. Jaitley can replace that subjective calculation of an individual citizen of any nation. If on one hand Mr. Crusoe wants fishing net then on other hand Mr. Jaitley will use Mr. Crusoe’s saving in starting a Smart Island or Swaccha Island or any such boondoggle project wasting that saving in things that no one wants!

In conclusion, as professor Mises said, the poverty of the backward nations is due to the fact that their policies of expropriation, discriminatory taxation and foreign exchange control prevent the investment of foreign capital while their domestic policies preclude the accumulation of indigenous capital (The Anti-Capitalistic Mentality, p. 83). Government taxation, no matter how small, wastes precious resources of a nation; it crowds out all productive investment activities in a nation, and so makes it poor and not developed. Mr. Jaitley either doesn’t understand basic economics or, as usual, he is taking gullible Indians for a ride!

Tuesday, June 27, 2017

Discrimination is a Human Right

Recently a woman named Tailin Lyngdoh from Meghalaya was removed from the Delhi gold club premises by staff officials because she was wearing a traditional dress ‘Khasi’ and was apparently looking like a ‘maid’. The union government minister Mr. Kiren Rijiju has protested against this incident by saying that it is a clear case of racial discrimination and is wrong. He is asking the Delhi police to investigate this matter and punish the club owners.

Now, instead of making noise like the minster, let us analyze this case logically. The real question here is: is there anything wrong in such discrimination? Not really. Discrimination per se is not wrong or bad. In fact, it is a right of every individual. Let us see why.

Right to discrimination is a human right which in turn, fundamentally, is a right to private property. As Murray 
Rothbard said, all human rights are basically property rights.  As property owners we all decide everyday to whom we are going to give admission in our home or office or a golf club and to whom not. There is nothing wrong in this. Discrimination is a basic outcome of individual choice. Every human being is at liberty to choose what they want as long as they are not violating others’ similar liberty by aggressing upon their person and property.

As Prof. Mises said, the right to ones property implies not only the ‘right of association’ but also the ‘right of disassociation’. A person is free to associate, with mutual consent, with other person and also disassociate whenever he feels the reason to do so. Such discrimination is a normal day to day behavior of all human beings as can be seen in everyone making choices e.g., if a girl chooses one bridegroom for herself out of total fifty then we don’t say that the girl did something horribly wrong by discriminating against remaining forty nine candidates; if person X goes to buy his grocery from a particular store like the Big Bazaar then we don’t say that he is an evil racist who discriminated against the local grocery stores! Like that with all other choices that we make daily. We live our lives in a general condition of scarcity and that means we have to choose one thing over another; we have to prioritize everything because choosing everything at one time is impossible. We all face such trade-offs at every moment of our lives. Such choice of one thing over another is not bad, but necessary. Discrimination, stereotyping etc., are necessary part of our day to day normal lives.

So fundamentally it was the Delhi Gold Club owners’ right to remove Ms. Tailin Lyngdoh from their premises because their rules didn’t allow her to be there. Ms. Tailin, or the minister, has no right of accusing the golf club of doing something wrong by practicing discrimination because she was the one who was violating their rules in the first place!

N.B.: Anyone interested in pursuing this idea of right to discrimination further is advised to study Prof. Walter Block’s brilliant book, The Case for Discrimination.

Sunday, June 11, 2017

The Suffering of Indian Farmers

Farmers from various states of India like Madhya Pradesh, Maharashtra, Punjab, Gujarat etc., are right now agitating against their local state governments demanding, mainly, cancellation of their debts as well as better minimum support prices of their products. In the on-going agitation already six farmers have been killed by police firing.

This agitation is a sign of total dependency of Indian farmers on the state. The reason why they have to demand cancellation of their huge debt burden today is because in past they were given easy loans by the government’s central bank RBI and its commercial, mostly state run, banks. Specifically, these protests and killings of farmers are a making of RBI’s cheap money and credit policy. Overall, this uprising is yet another making of the failures of the state’s central planning socialist policies.

In the absence of these policies of cheap money and credit and central planning, farmers would be careful in borrowing money from the banks. More than farmers, private banks, working in a competitive environment of free market, would be extremely cautious in giving loans to sub-prime credit customers like many of the farmers who are right now agitating for cancellation of debt because they can’t repay it. Such banks will check the creditworthiness of their borrowers extremely carefully before lending them any money of their depositors. They would surely want to avoid the kind of NPA (non-performing assets i.e., unpaid loans) problems that is right now endangering the Indian banks. In a free market banking system the lending and borrowing activities will be regulated by the natural rate of interest which will be determined by the saving and consumption choices of Indians. In that system only economically viable projects will get loans from the banks, and that will definitely lower the possibilities of future debt default scenarios.

In the absence of availability of such easy artificial credit from the state run and regulated banks farmers will also be careful in starting new ventures or expanding the present ones. In the absence of minimum support price policy of the government, farmers will only do farming if they find it profitable. If some crop is unprofitable then they will either change the crop or get into some other line of business which is now profitable. The market price of agriculture products will efficiently regulate the farming sector activities. Basically, in the absence of welfare state policies, farmers will rely more on their own abilities of managing their affairs instead of looking at the government all the time for help. The way farmers in India are committing suicide is a sure sign of farmers’ inability to manage their own affairs and handle stress. Government’s years of easy money policies have corrupted hard working habits of farmers. Such policies have also destroyed local communities and self help groups which used to exist in past. Farmers together used to manage their own affairs, but now they can’t even take one step without government’s help! This situation is sad and deplorable. The welfare state has put the very welfare of farmers at risk!

The Indian welfare state, in its zeal of controlling and regulating everything, is meddling everywhere in the economy and making a mess of everything. The present suffering of farmers is just another such mess.

Thursday, June 8, 2017

Affordable Healthcare?

Since coming to power in 2014 one of the aims of the Narendra Modi government’s welfare state is to make healthcare more affordable in India by, mainly, trying to curb prices of drugs used to treat critical ailments such as cancer, HIV/AIDS and diabetes. In their efforts to do so they have declared some 350 drugs as essential drugs and imposed a price ceiling on them. Not only this, in February this year they also cut the price of some heart stents by 75 percent. Now a letter from Modi government’s drug price regulatory bureaucracy The National Pharmaceutical Pricing Authority (NPPA) shows that they intend to add four more medical devices to a list of products eligible for price controls to reduce costs to patients.

Making healthcare affordable is a noble objective, but the real question is whether the method of using government price control measure will achieve this objective? Only sound economic theory can shed light on this issue.

Economic science tells us that, any market, whether that be apple or healthcare, requires freely functioning price and profit & loss system for efficient (and just) allocation of given scarce of resources. For example, in a freely functioning market, if at a given time the price of heart stent is very high then that will attract new sellers from outside who will now enter that market because they see possibility of making high profit; as these new sellers enter the market with their fresh supply of heart stents, the supply of stent goes up in turn lowering its price. Similarly, if the price is too low, it will result in sellers exiting this market until the time when the losses disappear. The same will happen in any freely functioning market when the price and profit & loss system is working without any impediments.

Now, what happens when the government doesn’t allow the price and profit & loss system to work freely by imposing its price control measures? Four things will follow immediately after the imposition of the price control measure. Because we are here discussing the method of price ceiling – price ceiling means the government doesn’t allow the producers/sellers to charge higher prices than the price stipulated by the government – imposed on the healthcare market, I will only discuss the case of price ceiling (other form of price control is price floor where government stipulates to producers/employers to pay prices higher than the stipulated amount e.g., the minimum wage law).
  1. Immediate shortages: the first consequence of price ceiling measure will be an immediate shortage of the product on which the measure is imposed. In our case these products are the heart stent, possible four more medical devices as well as those 350 essential drugs. The shortage will occur because now at a new given lower prices production of these items will become uneconomical and a loss making enterprise. A simple example will help here. Suppose a medical company X is making 10 heart stent at total cost of 1000 rupees per stent (100 rupees per stent); it is selling 1 stent at a price of 120 rupees so its profit is 200 rupees (10 stent sold at price of 120 rupees means 1200 (120×10) rupees revenue; profit = total revenue – total cost so here 1200 – 1000 = 200 rupees). Now the government imposes a price ceiling of 80 rupees per stent. At this government controlled price now our company X can not make any profit; in fact, it is now making a loss of 200 rupees. Remember, the government can easily impose a price ceiling, but the company cannot easily and immediately bring down its production cost. Because no company in a competitive market can survive without making profit, company X will lower its production to lower losses. This in turn will create shortage of stent in the market. And we all know that this shortage of stent will make it even more unaffordable to the very patient for whom the government wanted affordable healthcare! A short supply of stent means it is not available for all patients.
  2. Lower supply in the long run: In the long run it is possible that many or almost all producers of medical equipment exit the market because there is no chance of lowering losses or making profit! If that happens then the heart stent, and all other price controlled devices and drugs, will totally disappear from the market putting lives of millions of patients at risk!
  3. Non price rationing: One of the chief aims of the price system is to allocate scarce resource efficiently between various competing demands of that resource. When price system couldn’t do that work because of price control measure, the market participants will start to ration that resource by other non-price means e.g., as it is happening in the case of heart stent the sellers are now charging higher price of other equipment accompanying heart stent as reported by the news report cited above: It has been found that after the price control of cardiac stents several hospitals have increased the various ‘procedure charges’ in order to compensate for their losses … In some cases the cost of balloons and catheters have been charged at (a) much higher level than the cost of (the) stent itself! This totally defeats the whole purpose of government making healthcare affordable!
  4. Drop in quality: Not only the above dire consequences will follow the policy of price control on medical devices and essential drugs, but in the longer run the quality of these devices as well as drugs will also deteriorate. Producers will lower the quality of these products to lower their cost to compensate for the drop in price and revenue due to government’s price control measure. Instead of using high grade material to manufacture their products now they will use cheap material. This lower quality means these devices will not work as well as they would have if their quality didn’t deteriorate because of price control measure. Again, this lower quality devices and drugs will defeat the whole purpose of providing healthcare to patients!
All in all, as we have seen above, the price control measure of Modi government on the healthcare industry will only lower the health standards of the Indians. Instead of making healthcare affordable, it will make it unaffordable and inefficient.

If the Modi government is serious for making healthcare affordable and efficient for the Indians then they must immediately remove these price control as well as all other regulatory measures which are stifling competition in the healthcare market. Only market competition can lower the prices of healthcare devices and drugs as well as improve their quality. Healthcare companies competing for every rupee note of consumers will do everything possible to make their goods and service affordable and efficient. The price control measure of the Modi government is only going to kill more Indians.

Monday, May 15, 2017

Deadly Military Industrial Complex Rising in India

Since the Narendra Modi’s BJP government came to power in 2014 the dreaded military industrial complex is taking its firm roots in India e.g., recently the present defense minister of India Mr. Arun Jatiley held consultations with representatives of Chambers of Commerce and Industry (CII) on the proposed Strategic Partnership (SP) model meant to promote the private sector in defense manufacturing. Not only this, already many Indian private companies are diverting their manufacturing businesses from consumer goods to war machines e.g., Tata Advanced Systems won a contract of surface surveillance radar project for Navy from the Ministry of Defense; Reliance defense also bagged a contract of 916 crore from the defense ministry; Mahindra group also signed a deal with Airbus to manufacture parts of its Panther helicopters in India. 

These are all the worrying signs of the dangerous military industrial complex taking its deep root in the Indian economy and society. Already the Indian nation state is no. 1 in terms of foreign arms imports in the world, and now within its boundaries too the government is pushing for more resource allocation towards manufacturing of arms and ammunition. This military industrial complex is dangerous because once it gets firmly rooted in an economy it will have to be kept going at any cost because the whole economy will start to depend on it heavily for jobs and growth! The American nation state is the prime example in the world today of the dangerous effects of this military industrial complex. The then retiring US President Dwight D. Eisenhower, in his 1961 farewell speech, warned against this rising military complex in America (see the video below):

No one listened to him and now the US Empire goes on waging one war after another all over the globe just to sell the arms and ammunition being produced by this complex. There are so many vested interest involved in this complex in America right now that simply shutting it down is no longer an option. It will collapse only after it collapses the whole American economy and society. The same will happen in India in future. Just to keep the entrenched military industrial complex going the Indian nation state officials will also go on looking and waging wars everywhere. 

Economic science tells us that any economy, at any time, has scarcity of resources to fulfill goals of its inhabitants. This scarcity means people, in reality the so-called public representative policy makers like the politicians or bureaucrats, will have to choose their ways of using these scarce resources very carefully otherwise there will be a huge wastage of resources, which no country can afford. In a country like India where still around 30% of its people are living below the poverty line such extravagance expenditure by the government – in the fiscal year 2017-18 government budget allocated 3,59,854 crore rupees to the Ministry of Defense – on manufacturing war weapons is absurd and antithetical to its goal of progress. 

I know many will say that India is surrounded by enemies like the Pakistani and the Chinese nation states so it must keep a big military force for the purpose of national defense, but there is little evidence in theory and history in believing that the Indian nation state will be attacked and taken over by either the Pakistani or Chinese nation states in present or in foreseeable future. In fact, if we look at the recent history, then it is the Indian nation state who engineered the disintegration of the Pakistani nation state into modern day Pakistan and Bangladesh! Historically speaking India has been the country with imperialistic dynasties like the Mauryas and the Cholas! The Indian nation state is the reason of worry for most of its smaller neighboring nation states like Nepal or Sri Lanka. And besides that, the whole idea of national defense itself is flawed. There are much better alternative ways of protecting the Indian populace other than state’s standing military forces. 

All in all, the people of India will have to decide, in the end, whether they want their government to use resources in the making of ‘bullets, guns and bombs’ or ‘daal and roti’! If they choose the former, they will starve to death. If they choose the latter, they will survive and thrive.

Saturday, May 6, 2017

Venezuela again proves that Socialism Kills

The latest victim of Socialism is Venezuela. Following are some headlines of past few months concerning that country:
  1. Venezuela Is Starving Once Latin America’s richest country, Venezuela can no longer feed its people, hobbled by the nationalization of farms as well as price and currency controls
  2. Venezuela death toll rises as unrest enters fourth week 
  3. Death toll jumps to 20 in Venezuela protests 
  4. GM halts operations in Venezuela after factory is seized 
  5. Maduro orders Venezuela army into streets 
  6. Clashes in Venezuela as Maduro starts constitutional rewrite
  7. Ranks of Political Prisoners Grow as Democracy Ebbs in Venezuela 
  8. Venezuela has a bread shortage. The government has decided bakers are the problem 
  9. Emaciated Venezuelan elephant becomes latest symbol of food crisis   
  10. Venezuela's epileptic patients struggle with seizures amid drug shortage 
  11. Venezuela is down to its last $10 billion 
  12. Venezuela Follows India’s Example and Voids Half of Its Cash
  13. Heartbreaking image of newborn babies being kept in cardboard boxes in Venezuela due to 'hospital crisis' 
  14. Venezuela: Over 15% of People Eat Garbage to Survive
  15. Venezuela's "Death Spiral" - A Dozen Eggs Cost $150 As Hyperinflation Horrors Hit Socialist Utopia
  16. Hungry gang butchers thorough bred horse after breaking into zoo in search of food 'due to economic crisis'

I can go on and on like this for a little while, but this, I think, is enough to prove the fact of the futility of Socialism. Venezuela is flirting with Socialism since long , and its ugly head came to fore under the charismatic leader Hugo Chavez and his successor Nicolas Maduro. Under them Venezuela tried socialism and failed spectacularly, as expected. Venezuela once was an oil rich country which in the 1950s had a fourth highest GDP ranking in the world, but now it is dirt poor. 

This result was well expected because theory and history both show the impossibility of socialism. The great Austrian economist Ludwig von Mises proved long ago that under a socialist economy, in the absence of the price system, economic calculation of how to efficiently allocate society’s scarce resource is impossible. And this impossibility means wastage of resources on a gigantic scale ultimately resulting into huge chaos as Venezuela’s case proves once again.  

The choice against any country then is between Capitalism (in its pure form) on one side and Socialism on other. The so-called "middle of the road" policy of interventionism will always lead to full Socialism in the end as exhibited by Venezuela. If a country chooses Capitalism then it survives and thrives, but if it chooses Socialism then it kills itself and die as Venezuela shows.