The big catch out there!

Guest Columns by Sauvik Chakraverti,

The Newindpress on Sunday, 2007-2008

The big catch out there!

I was walking down Goa’s Palolem beach when the fishermen returned with their catch. That is when the thought struck: Do these fishermen harm society when they ‘import’ fish from overseas duty-free? Would society gain if fishermen are debarred from venturing out into alien waters and ‘import substitution’ measures are put in place to ensure that all fish production takes place on land, through pisciculture. After all, the latter path would ensure more employment.

Of course, the very idea is ridiculous. Society loses nothing when fishermen sail abroad and return home with bumper catches. Indeed, the bigger the catch, the better for society, for prices fall and that is good for everyone. If this be true, then what is wrong if big ships and big aeroplanes do the same thing? If big ships and big aeroplanes sail abroad and return with oodles of ‘imports’ of all kinds of goods other than fish, then surely society gains in exactly the same way.

There is an abundance of goods in our markets, and every citizen gains when he goes out to make his purchases. If these imports are banned, every citizen loses, because he fails as a consumer. He works and works in order to earn his money, but when he goes about spending that money in order to fulfill his needs, he finds that the goods on offer are not only of poor quality but more expensive to boot. His hard-earned money is wasted.

One of the reasons why Indians are poor today is that we have not been allowed to import for over 60 years. We kept foreign goods out of our markets and opted to produce everything we needed on our own, native soil. This is not sensible economics; rather, it is stupid. For just as we go to market to buy, so do we enter international trade in order to import. We export what is abundant and cheap in our own land while we import what is not available locally and hence highly valued.

The people of the Kullu valley do not value the apples their region is famous for. They export these apples in order to import what is not locally available — like mangoes. It is in order to import mangoes, cloth, automobiles etc. that the people of the Kullu valley export their apples. It would be senseless if these people produced apples and sold them abroad and received no imports in return.

Similarly, we Indians have been senselessly engaged in ‘export promotion’ for 60 years, without any ‘import promotion’ in exchange. Indeed, this bizarre philosophy still marks our stand at the WTO, for we are leading a group of developing nations who want to export everything but import nothing. It is a case of the blind leading the blind. And it beggars the whole world.

Economic history reveals how nations got rich by importation. John Keay’s history of the spice route is highly instructive in this regard. The west discovered the sea route to India and Indonesia only in order to import spices. They had nothing to export in exchange except their gold. They traded their gold, which they had enough, in order to import nutmeg, cloves, cinnamon and pepper, which they had nothing, and which were therefore highly valued in their own land. Indeed, radical bullionists attacked the East India Company for exporting gold — which the bullionists wrongly equated with national wealth — in order to import what to them were mere luxuries and fripperies: our spices.

It took two centuries before the first classical economist, Adam Smith, revealed that the ‘wealth of nations’ did not lie in its stocks of gold; rather, national wealth consisted of the properties and possessions of all citizens. Adam Smith therefore championed free trade, for that was the only way by which every Brit could be possessed of all the goods available from all over the world, at cheap prices.

Similarly, Indians too would be wealthy individually if they could import goods that are cheap abroad (like used cars) while exporting their gold. We are one of the world’s biggest consumers of gold, but that is not making us rich. If we, as individual buyers in the market, willingly gave up some of our gold in order to buy cheap imported goods, we would each be wealthy in terms of our personal assets.

It is worth remembering that the Thames outside London in those days was described as a ‘forest of ship-masts’. If every Indian port was such a forest, and if every Indian airport was a forest of Boeing 747 tail-fins, and every Indian market was stocked with all the goodies the whole world had to offer, then only would every Indian be individually better off.

In such an open economy, every Indian fisherman would be well off too. I was gazing at the sunset from a hill next to Palolem beach when a traditional fisherman’s craft sailed into view. I was immediately transported back to 2000 BC. The fisherman’s boat was an ancient dugout canoe, the kind a Robinson Crusoe might have used.

We now have modern cars, modern planes and modern everything else, but whatever happened to our boats? Free trade in modern fishing vessels would improve the productivity of every Indian fisherman. Today, they are hobbled by import restrictions, and it is no wonder that those in the know say ‘fish die of old age in the Indian Ocean’.

If India embraces free trade, our greatest asset will be our twin coastlines, one facing west, and the other east. All along these coasts, many, many trading cities will mushroom, and the entire landmass will become the world’s largest duty-free shopping area. Every Indian shopkeeper — even our paan-bidi wallahs — will operate a duty-free shop, and every Indian consumer will gain. Getting there requires a new kind of lobbying.

We have had enough of exporters and indigenous manufacturers lobbying for policies in their favour. We now need a lobby of importers and consumers. Such a lobby will champion policies that will make India rich.