Thursday, July 23, 2009

The morality of free markets

The morality of free markets by Sauvik Chakraverti

Posted: Thu, Jul 23 2009. 11:31 PM IST, The Mint

The moral life is pursuing one’s own economic means, and not Nehruvian socialism’s political means

The first question in economics comes from moral philosophy: What is the moral way of seeking survival? Or, deeper still: What is good and what is evil? The answers to these questions must lie at the foundation of any political order; indeed, of the rule of law itself. They are anterior to any written constitution.

In a civilized world, where there are cities and markets, one way of survival that billions have chosen for millennia is the “economic means”. They have specialized in the “social division of labour”, produced for the satisfaction of others, and from the gains obtained their own needs from yet others. This is the market order, based on peaceful, voluntary exchanges among strangers.

This is a “natural order” in that it is based on human nature, on what Adam Smith called our “natural propensity to truck, barter and exchange”. It is a natural order also to the practical world of government, for posses of armed policemen are not required to “maintain order” in any city market anywhere in the civilized world. Any conception of “civil government” must, therefore, be based on this natural order.

In which case, our opening question has been answered. We deem survival by the “economic means” to be moral. Thus, we outlaw theft, plunder, fraud—crimes against the morality of the market order. These we call “evil”. We consider profits earned in free competition to be moral and honourable. This is our idea of “good”: shubh laabh.

Philosopher Franz Oppenheimer in his classic The State identified another means of survival, which he called the “political means”. Bureaucrats fall in this category. Their wages are paid from taxes coerced from the rest of us who employ the “economic means”. Thus, if our market-based political order is to be fiscally sustainable, then the State must be small, so there are not too many people employing the political means of survival at society’s expense. And they must uphold the market order; not work, nor declaim, against it.

The greatest failure of socialism in India lies in the moral sphere, confusing ideas of good and evil.

Let us now look back at 60 years of Nehruvian socialism. To Jawaharlal Nehru, profit was a “dirty word”. He strangulated all enterprise. He called upon the best and the brightest to join the State—and in many more ways, he unleashed upon our society a dominant mode of survival using “political means”. His daughter took this evil idea further by nationalizing vast swathes of the economy. In her time, almost all Delhi University graduates ended up in government jobs. None was encouraged to be entrepreneurial. The Indian Institute of Management (IIM), Bangalore, trained managers for public sector units (PSUs) then. The whole of society was politicized. The markets were barren. The shop shelves were bare.

Yet, has much changed? If we look at Manmohan Singh’s “flagship” National Rural Employment Guarantee Act (NREGA) in the light of the above discussion, we must conclude that he is encouraging millions of poor people to seek the political means of survival. Meanwhile, our markets are still strangulated by predatory bureaucrats. Many trades are suffering. There is protectionism enforced by the customs bureaucracy. There is the excise department that strangulates the hospitality trade. And it is indeed strange that Singh should create menial jobs in villages with our money while the high-paying jobs of 70,000 dancing girls in Mumbai were destroyed by ex post facto legislative diktat. This is economic repression. Tyranny!

Something has gone terribly wrong with the great Indian dream that Nehru foisted upon his gullible followers. It has turned into a nightmare. I have only just returned from my nearest market—and this is New Delhi—and found fear and helplessness in the eyes of every hawker, vendor, chai and beediwallah (tea and cigarette vendor). They all say: “The Committee is coming!” How truly fascistic it sounds: “The Committee”. Who are these worthies? There is no market in Delhi upon which they do not prey. Is this “civil government”? If poor people are obstructed from earning their keep in the markets, what will they do but turn to crime?

The greatest failure of socialism in India lies in the moral sphere. The socialists have confused ideas of good and evil. Their ideology is such that they are unable to comprehend a world of civilized individuals freely trading among strangers: not a “community”, but a “catallaxy”. They do not comprehend this world. They have theories of “classes” in their heads. They do not see that the chaiwallah is also a capitalist, a speculator and an entrepreneur. As, indeed, is the dancing girl.

Classical liberals, from John Locke to Ludwig von Mises, believed in “civil government”. Such a government is necessarily based on the market order. Thus, in our own country, the first truly civil governments were those of the Honourable East India Company (EIC). EIC recruited the first professional “civil servants”. One history of the Honourable East India Company Service (HEICS) says of these pioneers that “Locke was their prophet”. Locke wrote his Two Treatises of Civil Government in 1690, in which he famously said that “where there is no Property there is no Justice”. The first task of HEICS was land records: the administration of property. Under the “uncivil government” of the Indian Administrative Service (IAS), our land records system has collapsed. And Singh wants ID cards for all people!

I offer Bob Marley’s prayer: “Lord, guide and protect us; when we’re wrong, please correct us.” Amen.

Sauvik Chakraverti is an author and columnist. He blogs at Comment at

Wednesday, July 1, 2009

The flavour of freedom

The flavour of freedom by Sauvik Chakraverti

28 Jan 2006, 0000 hrs IST, The Times of India

Journalists are the first to defend the 'freedom of expression'. However, in reality, this is a completely meaningless right. Private property rights alone enable the freedom of expression.

Where these rights are non-existent, or flouted by the authorities, the freedom of expression disappears. To begin, let us take an example from my own life as a journalist. A newspaper just rejected one of my articles.

Can I complain that my freedom of expression has been violated? Certainly not! My freedom ends where someone else's property begins. The newspaper is the private property of its proprietor; the editor is his appointee.

They must be free to publish what they like on their property. However, this does not leave me 'unfree' or 'victimised'. Rather, I have the freedom to send my article to other newspapers, whose editors may take a different view.

If my article is still rejected, I could try to install it in the blogosphere. It is the existence of all these little, little pieces of private property that enable me to enjoy my 'freedom of expression'.

If all these private properties had not existed, and we had a monolithic state media, millions would find themselves with no freedom to express themselves, despite any 'right' granted by law.

Thus, journalists should not fight for the freedom of expression; rather, they should fight for private property rights. There is a lot at stake, especially if you value liberty.

I am upset at the manner in which the dancing girls of Bombay have had their freedom of expression violated by the legislators of Mumbai.

As one who enjoyed many an evening in these establishments, my mind can instantly conjure up the horrifying picture of hundreds of thousands of musicians, crooners, waiters, bouncers, cooks and bartenders losing their livelihood and, along with the dancing ladies, hitting the streets in order to survive.

Again, we must see that the only cure lies in private property rights being inviolable by the state. Thus, every dance bar is the private property of its owner or lessee with 'rights of admission reserved'.

Under the common law, even the king cannot violate the private property of an Englishman. Private property rights are a protection against the sovereign and his officials.

Each of these private properties is a sanctuary maintained by the owner where many a flower can bloom. The owners of these bars need to focus on the loss of their private property rights and secure them and that is the only way to secure the 'freedom of expression' of the dancers.

These swinging ladies, it must also be noted, are the owners of their own bodies and must be free to do what they like with their bodies within the 'private law' system operated by the proprietor of the establishment.

The audience, who have tickets, possess temporary property rights to be where they are. My reader can now sit back and dream of the limitless world of 'expression' that will open up if the state is kept out of private property.

We can have cabarets that challenge the Moulin Rouge. We can have XXX movie theatres for the sex-crazed. We can have access to all kinds of 'adult' literature andmagazines that are still banned in the Internet age.

Indians who want to model nude in any of these magazines will only have 'freedom of expression' if property rights are respected of the model, the studio, the photographer, the publisher and, finally, the magazine vendor.

Private property rights are not only the secret to discovering the 'mystery of capital', they are the key to liberty itself. People who believe in liberty do not succumb to the seductive lure of collectives.

To them, there is nothing called 'we': no nation, no society, no commune. There is only I, me, myself. I must be protected, along with my liberties and properties.

That is, for libertarians, the only true purpose of both the law and the state: To preserve and protect individual rights and individual liberty.

The state violates private property rights, as with nationalisation and taxation — it only plunders. We need to strengthen private property rights. Therein lies capitalism and liberty.

The writer is an economist.

Ban Communism

Communists despise private property and idealise commonly held property. But I’ll bet Brinda and Prakash Karat don’t share a toothbrush! So let us conduct a “reductio” thought experiment as to what would happen in a city or town if private property were abolished and all property declared to be held in common.
Well the first thing that would happen is that everyone would stop working. If someone needed something he would simply go to the house or shop where the object of his desire was located and demand it in the name of communist brotherhood. “How can you refuse me, comrade?” he would ask, “for we are all brothers now.” Within a few days of the establishment of the communist fraternity, all shops would be stripped bare, as would be all the mansions of the rich. All economic activity would come to a standstill. The redistribution of all property in the name of communism would lead to the “leveling down” of all the members of the commune. Further, instead of the polite civilization that existed previously, bound by the “natural law” of private property rights, the commies would soon descend to barbarianism – snatch, grab, loot, scoot.
Observing markets easily reveals the natural law of property at work. When a fisherman returns from the sea, no one forcibly takes fish away from him because the ocean has not furnished him with a title deed to his catch. No one snatches bananas from any of the millions of fruit vendors throughout India – except for cops and monkeys. Look at any big market and you will see thousands engaging in the great game of trade, respecting private property rights. If this natural law was overthrown, man would be reduced to the status of ape, snatching bananas instead of paying for them.
Indian commies do not practice what they preach to the level of the above reductio ad absurdum. They idealise some supposedly commonly held properties, especially the state-owned industrial sector. However, these are all really “private properties” in the control of individuals or groups claiming to represent the public. The minister’s official bungalow is his “private property”. Wee (sic) the people cannot enter it freely. The PSU is the minister’s fiefdom. Neither are “common property” in the sense that the term would be used for a public thoroughfare or a public park, which all can use. Thus, communism is so totally wrong, it should be banned.