Monday, October 11, 2010

Caste and the Market Economy

Caste and the Market Economy by Sauvik Chakraverti


IT was my first day in London, my first visit to the 'developed' world. I had been invited to a pub in Leicester Square by a former girlfriend who wanted to show off her brand new husband.

So there I was, spending the evening with a completely estranged woman and a complete stranger.

The pub was quite full, but I managed a bar-stool, when suddenly there entered a handsome young man in a black suit accompanied by three extremely attractive young women.

They ordered drinks and, as luck would have it, I had to pass their glasses on to them, being closest to the bar.

I noticed that the pale yellow drink had a familiar aroma and inquired of the man as to what he was drinking. He said, "Pernod" and added that it was a French drink flavoured with anise (saunf).

This got us talking and the group and I exchanged pleasantries for a while. The conversation then turned to occupation. I said I was there as a student at the LSE.

The man said he was a 'sanitary worker'. I couldn't get what that meant and he explained: Every morning, he puts on his overalls, boots and gloves, gets into a truck, and goes about collecting garbage.

I understood immediately that the market could do more to correct casteism than any amount of state action. In my country this handsome young man would suffer caste discrimination.

In Margaret Thatcher's England he was entertaining not one, not two, but three lovely women in a pub in Leicester Square. An he was not drinking 'country liquor'; he was imbibing Pernod.

I must say that I learned more Economics living in London and observing life than I did in the classrooms of the LSE. When I lived in Hammersmith, I used to pass an undertaker's shop every day on my way to the tube station.

I used to think: In my country, this man would be a dom - the lowest of the low. I moved to West Hamstead and took up a room in a house run by an Indian landlady where many students stayed. Once a week, an English maid would come and vacuum the entire house and clean the loos. She came in her own car!

In New Delhi, anyone in such an occupational class lives in a jhuggi and does not even dare to dream of car ownership.

A recent television debate on caste featured a Dalit leader who kept talking about carriers of night-soil. Obviously, this is an urban phenomenon.

There cannot be such a caste in underpopulated villages. With open markets and urbanisation, this caste would prosper and get absorbed in the larger, more prosperous, and more cosmopolitan society. Very few people had flush toilets in the USA in 1900.

One good thing: the Dalit leader was making noises in favour of globalisation.

I suggest Dalit leaders get interested in the Economics of prosperity. We urban liberals dream not just of making India prosperous; we dream of making India obscenely rich.

The Dalits will gain enormously from open markets, economic freedom and urbanisation. As they claim, in their respective economic niches, a greater share of a rapidly growing pie, and as they mingle with caste anonymity in bustling metropolises, they will find the old caste equations disappearing.

This is already happening: at the TV debate, when the issue was opened up to the audience, many urbanites responded saying that caste was a factor that never entered their lives.

The socialist state's response to the caste question has been insincere.

Politicians have used the state's powers of patronage to promote clientelism.

By refusing to urbanise, and by throttling urbanisation, they have reinforced and perpetuated the 'rural-urban divide'.

There is thus an India where caste does not matter; and there is a Bharat where caste is the sole basis of identity. With free markets and urbanisation, India will take the lead.

Dalit leaders should also read Thomas Sowell's slim book: Preferential Policies: An International Perspective. It shows how reservations have destroyed societies.

And this, from an African-American scholar! In free market India, the state will be so small that reservations will be unnecessary.

Instead of the clientelism and tokenism that reservations represent, Dalits should opt for the prosperity that economic freedom will bequeath to them and the caste anonymity that will certainly follow urbanisation.

Auction Ayodhya: We'll Have Both Freedom and Justice

Auction Ayodhya: We'll Have Both Freedom and Justice by
Sauvik Chakraverti

Nov 19, 2003, 12.01am IST Times of India

The judiciary is blocking India's liberals. The Bombay high court has been sitting on a public interest litigation filed by the Indian Liberal Group for over five years.

ILG is appealing against the section in the Representation of THE People Act restricting electoral competition to socialist parties. So let us attack socialist jurisprudence, for we have the longest constitution in the world but little justice.

Obviously, there is something wrong with socialist law. An economist commenting on law what cheek, the legal community will cry. I must inform them that great economists have all written on law. Adam Smith's Lectures on Jurisprudence are a classic. Frederic Bastiat's slim volume The Law has been published in India. I guarantee that anyone who reads the book will be convinced that the Constitution of India is not quite all right. Friedrich Hayek wrote The Constitution of Liberty, a book Margaret Thatcher swore by; and there is Murray Rothbard's The Ethics of Liberty.

Let us begin by understanding the origin and purpose of law. It is because of property that law was necessary. That is, it is not because of law that property exists; it is because of property that there is law. The common law evolved to sort out disputes related to the natural right to property. Liberal judges take this as their guiding principle so let us apply it to important issues before our socialist judiciary and see what results we get.

Take, for instance, what a liberal judiciary would do if Parliament passed a law banning cow slaughter: It would simply tear up the law on the grounds that cows are private property. Each man must be free to do what he wants with his own cow and the state cannot interfere. Did any legal luminary speak this language? Now, apparently our rulers want to de-politicise Ayodhya and the issue is before the courts. What did the courts do? They asked the Archaeological Survey of India to dig up the disputed site and discover what lay underneath. Is this the application of our principle? If a temple is discovered under my house, can anyone lay claim to my property? Certainly not.

If liberal jurisprudence is applied to Ayodhya, the solution is clear and simple: There is no clear title to the site; there are various claimants, each possessed of little legitimacy; therefore, the site must be auctioned. Socialist jurisprudence is not justice. Socialists reject the natural law of property and believe that the purpose of the law (and the state) is to redistribute property. Theirs is a Robin Hood ideology but it is time we stopped looking at their legal plunder (what they call redistributive justice) as romantic.

Rent control, for example, is the only cause of slums. They have destroyed the market for cheap rentals. They do not like landlords so they created slumlords. And they did not settle disputes, the first purpose of law. Rather, they prolonged disputes. My uncle spent 20 years of his youth battling a rent control case. A long-term solution is to promote the teaching of law and economics. We have few economists in law schools all over the country. This must be tackled. As far as the short-term is concerned, there is no solution. We in India must face up squarely to the fact that the socialist state which we placed on the commanding heights is reporting symptoms of multi- organ failure. This is entirely because socia-lists apply completely wrong principles to government. Behind this multi-organ failure lies a far deeper knowledge failure. I can personally testify to the poor quality of teaching at the IAS Academy in Mussoorie. I went through my son's ICSE economics textbook and advised him to drop out of school.

I find it amazing that Amartya Sen is recommending mid-day meals in state schools: It is a prescription to assuage physical hunger while ignoring the mind. If, in the short-term, we wake up to the fact that we are faced with a powerful, centralised, nuclearised state that is reporting multi-organ failure, then the medium-term solution would be to challenge what is being taught in economics, political science (or civics), public administration and law. Let us include liberal jurisprudence in law schools. Let us have the political value of freedom included in civics textbooks. Let us teach students of economics how wealth is created, so they value freedom and understand markets. Let us make a bonfire out of Indian economics textbooks, a bonfire of the socialist central planners' vanities. The liberal only appeals to reason, and it is to reason that we must appeal, even if denied entry into the electoral fray.

In this way, liberalism will gain ground and someday soon we will have the critical mass necessary to re-invent every aspect of our government, including the law and the judiciary. A note of hope: We go through life, getting all our needs from the market, usually without recourse to either civil or criminal law. So we don't need courts that badly. Second, we have a proud history of private courts in the cities run by the East India Company. Sir Elijah Impey was a great EIC judge. With sound jurisprudence, simple law, and a short constitution, we can have freedom as well as justice.

DEVIL'S ADVOCATE: Gandhian Violence

DEVIL'S ADVOCATE: Gandhian Violence by Sauvik Chakraverti

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Whereas Gandhi advocated non-violence, his followers have always utilised violence in order to promote their leader's ideas of a good society.

For example, in Gujarat, where Gandhi came from, violence is still used by the police to enforce the prohibition of alcohol.

Gandhi's hatred for alcohol has meant that, all over India, the excise officialdom has obtained political sanction to entangle the retail trade in alcoholic beverages in a labyrinth of red tape, all of which is enforced with violence.

Then there are the ideas of khadi and swadeshi. Gandhi's preference for homespun cloth meant that the government used violence and force in order to promote one kind of cloth at the expense of another.

India's blooming textile industry was made into a bonsai using state violence. As far as swadeshi is concerned, the customs department enforces this idea of autarky.

If any citizen returns from abroad with goodies and gadgets, these armed personnel of the Gandhian government use force and violence in order to deprive the citizen of his rightfully acquired properties, or to charge him a hefty fine if he wants to take them home.

An enormous amount of violence continues to be perpetrated in order to promote Gandhian ideals. This very Gandhian violence is best exemplified by the currency note, which has Gandhi's photo on it.

Even up to fairly recent times, eminent businessmen became victims of violence on the part of an enforcement directorate empowered to ensure that these notes of the Gandhian government could not be privately converted. Gandhian violence is a very real phenomenon.

It exists because Gandhians have never understood the purpose for which a government is constituted. To Gandhians, and this includes all Congressmen, government exists to do 'good things'.

This fatal flaw in their thinking occurs because their master didn't realise that any government is but a monopolist in the use of legitimate force, and that the crucial question political science must answer is to what ends this legitimate violence must be used if it is to remain legitimate.

Since Gandhi and the Gandhians never considered this question, they continue to use violence towards illegitimate ends. Gandhianism lies at the root of bad government.

Tuesday, June 29, 2010

The swadeshi serpent bites its tail; and a response

The swadeshi serpent bites its tail; and a response by Sauvik Chakraverti

21 December 1996 Indian Express

History does not reveal the lurid picture of colonial exploitation that Indian economic historiographers have painted in our minds. Well into this century, when laissez-faire ruled British thinking, it was quite clear that foreign capital was a good thing, and that foreign capitalists were profit-seeking individuals with interests quite distinct from that of the imperial state. Further, that the laissezfaire imperial state providing high quality administration should perhaps be the 'model' to be emulated today, given the dismal record of socialist interventionism.

India had its trains and telecom decades before Japan (Perry presented the Shogun with a miniature railway), and Indian cities had modern, efficient and economical electric mass transportation system - so it is quite clear that infrastructural development was proceeding rapidly with the inflow of foreign funds, much of it private.

When we examine the mind of the foreign capitalist, there does not seem to be any indication that he is an agent of the imperialist state: he is a private man, interested in private gain. The mistake made by exponents of swadeshi (or those who see a sinister neo-imperialism at work in the global market) is that they do not see individuals: they see states. Where liberals look upon the state with unconcealed scepticism, they see states in business, and they want their state to protect their businesses - at our expense of course.

The real problem with swadeshi - as with any other false ideology - begins when you place yourself at the receiving end: when the serpent bites its tail. If it was true that the best way to ensure national prosperity and general well-being is to consume only locally-produced goods, India wouldn't have had a caste of trader, or entire communities of them. Trade would be uneconomical, unintelligent, and not worth the trouble. If you look at our traders carefully, you do not see them as political agents they are economic actors.

They work in a self-regulating civic society, buying and selling for a margin. You see them everywhere: from the North-East to the deep South, you will find shopkeepers who all hail from some part of western India. They contribute to the local economy. What do they do when swadeshi strikes deep, and sub-national political movements espouse ideologies that look towards Indians from other parts of the country as foreigners? Keeping Indian markets for Indians may be fine for some big industrialists, but what happens when people want Maharashtra for Maharashtrians, Assam for the Assamese and so on.

Not having thought out its economic ideology clearly, the Government of India is making a fool of itself 'protecting national interests'- as at the WTO meet in Singapore. Where children study the swadeshi movement in government-approved textbooks as a logically correct way of securing national prosperity, how can our bureaucrats think differently? The ideology filters through and is adopted at sub-national level by sub-nationalists. Fast-food outlets owned by Americans are demolished by those who do not bother to notice that ITC was free to set up Indian food restaurants in the US: the Government of India's exchange regulations were the only hindrance!

Swadeshi is not truth. Chandni Chowk, where the world came to do business in a prosperous India, is. Swadeshi is merely the ideology of Congress nationalism. It should not be the ideology of the Government of India. It should also not be taught to children in the manner in which it is done today. They will soon be young voters, and so should be politically aware. Economic historiography should not be nationalist propaganda that borders on hysteria. Congress Raj - socialist and nationalist - must be compared with British Raj - imperial and liberal.

It will be seen that we had a far greater share of world trade then than we do now. That money was coming into the infrastructure. The government was standing by, running things, and not getting in the way. That money was convertible, and we were freer, economically. Big cities were built. Municipalities worked. Is Seshan calling for a second freedom movement?

Gandhi's mistake, Gunnar's too; and a response

Gandhi's mistake, Gunnar's too; and a response by Sauvik Chakraverti

The Indian Express 10 December 1996

Going through Gandhi, one sees how his mind was working on the confusing question of technology - boon or bane? In Young India, November 13, 1924, he attacked machinery: "Helps a few to ride on the backs of millions". He warned that 'the machine should not tend to make atrophied the limbs of man'. And he made an 'intelligent exception' of the Singer Sewing Machine because it had 'love at its back': Mr Singer saw his wife labouring over her sewing and invented a device that would save her trouble! Gandhi approved.

And he was honest about his confusion a long time later: In Community Service News, September-October 1946, he said: "As a moderately intelligent man, I know man cannot live without industry. Therefore, I cannot be opposed to industrialisation. But I have a great concern about introducing machine industry. The machine produces too much too fast, and brings with it a sort of economic system which I cannot grasp."

Why is it so difficult to grasp what machinery does? Only because we look at immediate - and not long-term consequences. Industry - Gandhi agrees - is a basic human impulse: we all strive to do whatever we do such that we save effort. Machines do the same. If they were bad, we would all be unemployed, our limbs atrophied, and we would yearn to be back in the Stone Ages, when we could have been much more active. But the obvious fact is that machines have raised production, wages, the standard of living and the sum total of human life on Planet Earth.

To examine the question, we look, like Henry Hazlitt did, at what happens when a new machine enters the factory of an overcoat manufacturer. Since it raises productivity, it displaces, say, 25 per cent of his workforce. This is more than what has been employed in manufacturing the machine itself. But look at the long-term consequences.

In a few years the machine `pays for itself. It has saved more than it was worth. These excess savings come to the man who bought it, who can either reinvest in his business, invest elsewhere or spend it thereby adding to employment. Further, the machine would probably have reduced costs in manufacture, giving the leader in introducing it an edge over his rivals.

Today, technophobic arguments are still heard all over the world. The anti-word is 'automation'. It is bad, and it reduces employment. The automobile industry is one in which automation is greatly opposed. Here is an industry
which has mechanised itself greatly, and the statistics are telling. In the US: 1910 - 140,000 workers; 1920 - 250,000; 1930 - 380,000; 1973 - 941,000.

Evidence indicates that the khadi philosophy is seriously wrong. It cannot be a way of either increasing employment or national wealth. It can, at best, create a constituency. What it will not offer this constituency is a means by which their produce gets treated as art - as hand-work should be considered - instead of a subsidised, protected something that needs the state to shelter it from the machine. It does not call for the artistic pride of the weaver. It asks for his submission to state patronage under the aegis of Gandhians whose only claim to fame is that they worship their God without original - or even critical - thinking.

What is surprising is that a Nobel Laureate in Economics (1974) is committed to the same error. Gunnar Myrdal, shortly before he won the prize, wrote that machines which increased output should not be introduced into underdeveloped countries because they 'decrease the demand for labour. Can this be for real? At a time when Malaysia has decided it will be 'developed' by 2020 (Mahathir drives a car numbered 2020!), how can we languish between socialism, and the unintelligent economics of a Nobel Laureate who has been hugely felicitated by the Indian state.

We live in times when even the existence of an intellectual-moral elite is doubtful - forget its capacity to guide the destiny of millions. Good economics and sound political science can offer some respite. This will never happen unless we are willing to sift through the heap of ideology we lug around and discard whatever is false.

Monday, June 7, 2010

Is This 'An Occasion to Celebrate'?

Is This 'An Occasion to Celebrate'? By Sauvik Chakraverti - August 27, 2003 12:00 AM

My friend Sunondo has four children. I asked him which one he loved the most and he said the youngest one. Now, this is contrary to Carl Menger's law of diminishing marginal utility, which holds that the more we have of anything, the less we love it. So, if it was cake you were consuming, the first slice would be heaven, but by the fourth you would be sick and want to throw the rest of cake into the waste bin. How come Carl Menger's law -- and law it is -- applies for cake and for everything else we have, but not for children?

I ask this question in a particular context: that of the so-called "population problem" which has had a host of Third World governments, including mine in India, taking out stringent policies in order to limit the number of children people have. Recently, in India, many states have debarred candidates with more than two children from contesting local elections. If every succeeding child gives us more pleasure, what sense does it make to penalize fertility?

In China, the "one-child norm" was enforced because, after several generations, there were millions of Chinese with no brothers, no sisters, no aunts, no uncles, no cousins, two parents and four grandparents. What is better for a child? A large family? Or a strong state?

The Reverend Thomas Robert Malthus worried that a growing population would outstrip a society's ability to feed itself. At the time he was writing, Malthus had many eminent classical liberal economists opposing his predictions of doom. Jean Baptiste Say and Frederic Bastiat both wrote tellingly of the mistake Malthus was making: assuming technology to be constant. In modern times, the economist Lord P.T. Bauer was a prominent critic of the "population problem" and, after him, Julian Simon proved convincingly that human beings are not a problem, but the world's "ultimate resource."

The planet Earth is bountiful. There will always be an abundance of resources, including energy, so long as we allow human beings the freedom to utilize the Earth's bounty and serve the needs of mankind through the free market and the price mechanism.

However, Third World governments and the United Nations are still on the side of Malthus. The Indian Parliament, in a unanimous resolution recently passed on the 50th year of independence, asserted that population was India's biggest problem. That is, the representatives of the people were united in saying that their constituents and their children were a problem.

And as for the United Nations, recently a baby girl was born and promptly billed as India's billionth citizen. The UNFPA representative in New Delhi said in a press statement, "This is not an occasion to celebrate." What should we celebrate instead -- the fact that tens of thousands die on our unsafe streets every year?

India is an overwhelmingly young country; 96 percent of the people are below the age of 59; 74 percent are below the age of 39; and 34 percent are below the age of 15. This young country is ruled by aged rulers who believe that our babies should not have been born. What could be worse than that?

Third World governments like those of China and India, which endorse the population problem and coerce citizens into having fewer children, should be disgraced, as should the UN. Every couple in the world should be free to decide how many children they can have. And every child should be welcomed into the world. Every birth should be celebrated and every death mourned. And it is not just additional children that give us pleasure: This pleasure is multiplied when we have more and more grandchildren. Carl Menger may have been the Emperor of Economics, but his "law" certainly overlooked the issue of reproduction. So let us have more children; let every child give us increasing marginal utility; let us have more and more grandchildren too, where marginal utility is even higher, and let us bury the ghost of Thomas Robert Malthus who was, after all, a priest who disapproved of poor English people having sex.

Sauvik Chakraverti, is a winner of the Frederic Bastiat Award for journalism (2002). He was senior assistant editor at The Economic Times in New Delhi, and is the author of Antidote: Essays against the Socialist Indian State (2000), Free Your Mind: A Beginners Guide to Political Economy(2002), Antidote 2: For Liberal Governance (2003), Antidote 3: From the Hair of Shiva to Hair of the Prophet and Other Essays (in press).

Forget the WTO; Concentrate on Trade

Forget the WTO; Concentrate on Trade By Sauvik Chakraverti - January 12, 2006 12:00 AM

The failure of WTO talks in Hong Kong wasn't difficult to predict. It has been obvious for some time that vested interests have hijacked the original agenda. Instead of free trade, influential voices are promoting a different message: poorer WTO members should seek to export everything, but import nothing.

In the face of such a bald illogic, perhaps we should reiterate a simple fact: just as we produce in order to consume, so we export in order to import. And just as consumption is the most important aspect of our visit to the market, so imports are the most important part of international trade.

Developing countries, led by India, whose people are poor in part because they have been unable to import for decades, are waiting for EU concessions on agriculture before allow them to open their markets. Many have criticized the EU's intransigence on the issue. And they should. But many others, quite rightly, have asked developing nations to look at Hong Kong's example of unilateral free trade and draw important lessons from it. Indeed, developing countries like India should proceed forthwith to free trade unilaterally -- even if the US and EU continue with protectionism and subsidy of agriculture.

Unilateral free trade is a very good idea for a huge country such as India. If subsidized grain enters the market, poor marginal farmers, subsistence agriculturists and day laborers get cheap food. They will move away from subsistence farming as grain will be cheaper to buy in the market. They will move 'from subsistence to exchange', in Peter Bauer's words, and integrate themselves with the urban exchange economy. Instead of grain, Indian farmers will produce fruits and vegetables or even flowers -- solid cash crops. And this benefit will be paid for by US and EU taxpayers.

Indian farmers are also consumers. Farmers should look not only at what crop they will sow or where they will sell it, but also at the more important question of what they will buy with their money. The personal possessions of every poor Indian will record a quantum jump -- and this is the only true measure of the 'wealth of nations'.

People trade, not nations

So why is this so difficult to understand? On a simple level, trade talks of any kind -- multilateral or bilateral -- are doomed to failure because they occur between nations, while it is individuals who actually trade in the market. When individuals trade "reciprocity'" is meaningless. We never make it a point to buy from those who buy from us. A butcher does not go to the tailor who buys his cuts. He simply sells his cuts and goes to the best tailor that his money can buy. Buying and selling are independent decisions, and we seek benefit in both -- but separately. When reciprocity does not exist between individuals, what hope can there be to find it between nations?

In view of this argument -- and the dismal hijacking of the WTO by other political interests -- one is tempted to propose a radical solution: the WTO should be abandoned altogether. Nations and their governments will only get in the way of trade and cause economic losses all around. Each privilege they grant a few producers will in turn be a punishment that will rain down on the majority of consumers. If India opens up its borders to trade unilaterally, the developed world will benefit too, and the global recession that looms will have a softer impact when it arrives. Thus, the entire world stands to gain if more poor nations adopt free trade unilaterally

Indians should see their 2000-mile long coastline as a huge, unutilized economic asset. With free trade, great trading cities will mushroom all along the twin coastlines. Both Hong Kong and Singapore prospered because of their harbors. In China, it is the coast that is taking the lead. The same will happen to India if trade is made freer.

Fifteen years of 'liberalization' have convinced Indians of the need for free markets. Those who want free trade are upset that WTO talks are stuck. They have long endured protectionism at the hands of the Indian state. To these people, my message is: don't expect free trade as a result of government initiative. The government will only try to sell favors and Indian businessmen are notorious favor-seekers. Call for free trade as a removal of all state interference in the global market. That is, call for unilateral free trade. The rest will fail to follow at their own peril.

Sauvik Chakraverti is a journalist based at the Centre for Civil Society in New Delhi He is author ofArticles Against the Indian Socialist State and For Liberal Governance.

The Illiberal Democracy of India

The Illiberal Democracy of India By Sauvik Chakraverti - February 27, 2006 12:00 AM

Indians often boast that theirs is "the world's largest democracy", but electoral politics in India offers the voter surprisingly little choice. The Indian voter can choose between the socialist, dynastic Congress party; the Hindu nationalist BJP; and the Communists. Tweedledee, tweedledum and tweedledumber. None of these parties is liberal in a free market sense. Currently, voters are stuck with the Congress party, which is stuck with Communists in a coalition.

At the last election, neither Manmohan Singh, the current prime minister, nor Sonia Gandhi, currently head of the Congress party, could generate a clear majority. As a result, the Congress is in office only with support from India's Communists. This support has meant that every liberal policy option is vetoed by the Communists, who decry the "crisis of bourgeois rule" in India.

But there is something more fundamentally illiberal in India's democracy than the current parliamentary arrangement. Indian liberals are legally barred from forming parties and contesting elections, because legislation has decreed that all "recognized" parties must swear by India's socialist constitution. This is reflected in legislation and has enormous consequences for the quality of electoral politics in India.

Take the current situation: in all other ways, the situation is ripe for a liberal, pro-market party. In the past 15 years the ordinary Indian has seen ample evidence of the benevolence of market forces and the malevolence of statism. For example, long distance phone charges have plummeted, as have airfares, as private companies have been allowed in. In areas like consumer electronics and automobiles, Indians now have quality, choice and low prices. A newly formed liberal party could have a go at translating this positive experience into electoral victory, if given a chance, and could thereby free the rest of the economy. But this would require the liberalization of the political sphere, through the repeal of restrictive legislation.

The failure to embrace markets has immediate consequences for social cohesion. As is commonly known, the inability of socialist policies to help the poor in neighbouring Nepal has meant that many have opted for armed insurrection, based on Maoist thinking.

Less well known, in many states of India in dense forests there are alarmingly frequent reports of "Naxalite" activity. The term is used to describe armed revolutionaries who routinely attack and kill police to carry away their guns. As with Peru's misguided Shining Path guerrillas, these rebels need to be weaned away from violence and ultra-left thought by liberals offering them market solutions, like property rights and free trade. If this does not happen soon, social decay will continue.

Liberalism also needs to be allowed to enter the educational system, hitherto exclusively the domain of Marxist professors. Westerners have hailed the current government's stress on education, but the real danger is that this education will consist only of socialist and communist propaganda.

If the political sphere is liberalized, then liberal ideas will float in the open, liberals will be heard, liberal policy options will be mentally weighed by the people -- and then only will the contents of state education be challenged. The liberalization of politics will lead to the liberalization of the mind of the average Indian.

Many years back a group of Mumbai liberals petitioned the courts, challenging the restrictive legislation that reserves India's democracy for the illiberal parties that hold sway today. This has been pending hearing for almost a decade. It is time pressure is built towards securing a speedy hearing of this petition. It is only through liberal politics that India's future can be secured.

Two Indias?

Two Indias? By Sauvik Chakraverti

March 15, 2006 12:00 AM

When in India, President Bush cited a range of initiatives for U.S.-India cooperation and touched on ideals the two nations should seek to work towards. Of course, the President has his own foreign policy goals to pursue and the ideas he described were noble. But he could have been talking about a different country. If we look at Indian foreign policy, its nuclear industry and the weak link between freedom and democracy, we can see how far India must go to match such lofty rhetoric.

Nuclear energy is a state monopoly in India and helping this sector strengthens the Government's hand in power generation. Indians are plagued by power cuts as a result of state intervention in this industry. Further, "safeguards" have little meaning in India where there are no tort laws. If there were a nuclear accident, no Indian would receive compensation. The Bhopal industrial disaster, for example, occurred in the mid-80s. Until now, precious few have received anything. Indians routinely die from building disasters, adulterated food and medicine and the like — but rarely receive any relief from the law of torts.

The President also spoke of cooperation on defense. Once again, this is a fine idea in theory. The President spoke widely of multi-role combat aircraft, helicopter gunships and other high-tech initiatives. The truth is that India's defense establishment is hopelessly corrupt. They continue wars where no wars are necessary. Rajiv Gandhi was charged with receiving kickbacks when Swedish Bofors guns were purchased for the Indian army. Recently, India's Defense Minister was implicated in a shameful scandal, when it was discovered that kickbacks were paid for purchases of U.S. coffins for soldiers killed in the Kargil war.

As far as the senselessness of India's security establishment is concerned, the 25-year-old war with Pakistan on the frozen wastes of the Siachen glacier is a good example. I was close to Siachen once: it was -40 degrees Celcius in the sun! If we auctioned off the entire area, no one would offer a penny for it. But India has been spending over 300 million rupees every day for over 25 years in this senseless war. When the war began, we were informed that the 'strategic' goal was to command the heights dominating the proposed Karakoram highway. (William Dalrymple's In Xanadu recounts his travel from Pakistan to China by bus over the Karakoram highway 10 years ago.) India would do better to build its own highway in the region than fight this war, but it may be that the defense establishment is merely interested in budgets, rather than any serious security concerns.

After all, over a million Indians are killed every year on the unsafe streets of India and millions more are seriously injured. Thus, the 'security' concerns of the Indian citizen are very different from those of the Indian state.

President Bush's speech in New Delhi spoke of the link between 'democracy' and 'freedom'. Again, these are laudable ideas. Yet, despite India being a democratic nation, the Economic Freedom of the World Index rates India close to the bottom and the U.S. close to the top. The title of Deepak Lal's book on India,A Repressed Economy, says it all. Indians were freer under feudal lords and even the colonial Brits than they are today. Feudal lords routinely fell in love with dancing girls; but dancing girls have been outlawed by legislative fiat today. Democracy and freedom doesn't always go hand in hand, and nowhere is this truer than in contemporary India.

Free trade between the people of India and the people of America is desperately important for average Indians. Indians would benefit from buying used cars, buses and trucks. Indeed, Indians would even buy insurance write-offs, which could be cheaply repaired in India. Americans would benefit from better prices for their old cars, and lower insurance costs as well. Taking the point further, Indians would also buy used refrigerators and television sets. Cheap American wine would also be a big hit, and yield public health benefits, for Indians are killing themselves with the hard liquor they are forced to drink today. There are a host of trading gains to be made, for the benefit of both ordinary Indians as well as ordinary Americans, which citizens on both sides are being denied. Instead, the corrupt and repressive socialist-communist Indian establishment — and its powerful bureaucratic elite — remain as strong as ever.

Sunday, May 23, 2010

Catallaxy, key to an Open Society

Catallaxy, key to an Open Society by Sauvik Chakraverti

For a market society, the appropriate political value is not a sense of ‘community’. Rather, it is ‘catallaxy’

The political value of “community” is collectivist. Community lies at the root of communism, socialism and nationalism. It stood behind Nazism, apartheid and white supremacy. It justified “ethnic cleansing” in Eastern Europe recently and promotes immigration barriers worldwide. In India, the idea of community lies behind the Hindutva and Marathi manoos agendas. The scheming politician loves a homogeneous community.

Yet, community is a bogus value in a market society, which, in order to succeed, must be urban and cosmopolitan. Community makes sense in a village comprising one caste or in a small, exclusive tribe where everyone knows everyone else. It makes no sense in a city where individuals operate, peacefully trading with complete strangers. For such a society, the appropriate political value is “catallaxy”, which means an open trading arena. But first, a little about this word.

In the 20th century, Austrian economists alone used the word “catallactics” to denote the science of exchange. In Ludwig von Mises’ Human Action(1949), the section dealing with traditional economic issues is titled “Catallactics”. Derived from the Greek word for “exchange”, Mises mentions that catallactics was first used by the British economist and theologian Bishop Whately in the previous century, which means the word was well known to the classical political economists. Mises’ student from his Vienna years, Nobel laureate Friedrich Hayek, confessed to having “fallen in love with this word”, for which he discovered two additional meanings that the ancient Greeks ascribed to it: first, “to welcome into the community”; and second, “to turn from enemy into friend”. These connotations of the word indicate its importance to an Open Society.

The ancient Greeks traded and mingled with all nations around the Mediterranean. Their societies employed special people, called xenos, or “guest-friend”, who looked after foreigners and their wares as they went about their trades in the Greek city-states. At the pinnacle of their glory, in Athens, they achieved an Open Society, as Pericles’ “Funeral Oration” teaches us. There was no “xenophobia”, as in our modern world.

The success of any market society lies in its openness and inclusiveness, and not in a narrow sense of community. There is no “chief” issuing commands to all traders. A market society is not a “command economy”. Such a society is strongly individualistic, wherein each trader takes independent decisions and is responsible only to himself for his own gains and losses. Further, such a society is marked by “impersonality”. There are good manners, yes, but there is no personal relationship between trader and customer.

Going deeper, a market society is characterized by “competitive individualism”: we all compete as sellers; we all compete as buyers. We all realize that we prosper when this catallactic competition is at fever pitch. We gain when there are a huge number of sellers as we go to buy. We gain when there are a huge number of buyers as we go to sell. The bazaar that is humming with catallactic energy is the crowded bazaar, not the vacant one. Thus, we all realize that openness matters. A successful catallaxy is open to strangers from all parts of the globe and hospitable towards them. It is not a closed community.

As we witness the economic decline of Western nations, we must realize that the primary cause of this decline is their misplaced faith in community. All of them operate “national economies” with national fiat currencies, central banking, immigration barriers, protectionism and rampant interventionism. Socialist India follows the same path.

However, the great thing about India is that all our cities are cosmopolitan. They are truly “melting pots” of humanity. This is our inherent strength. If we are to use it to get ahead of the competition, we must ditch the political value of community and opt instead to become a nation of free-trading and self-governing cities and towns—all of them catallaxies that are open to strangers. We must do away with trade and migration barriers. Our bazaars must be possessed of the highest degree of catallactic energy to be found anywhere in the world. Our biggest industry must be tourism.

Hayek defines community as “a common recognition of the same rules”. Such rules can be religious or tribal—or they can be secular. In an open catallaxy, only one rule need be recognized by all: private property. Happily enough, as Hayek also points out, this rule has been the cornerstone of open markets for millennia. Whenever people exchange, they exchange properties. Thus, most trade takes place without legal paperwork of any kind. Hayek said that the rule of private property operates in all of us “between instinct and reason”. We follow the property rule without knowing why. We have given up the instinct to plunder, to snatch and grab—but we don’t know why.

Thus, there is a “natural order” in all cosmopolitan open catallaxies. Posses of armed policemen are not required to “maintain order” in any crowded marketplace anywhere in the world. This order exists on its own. Without the “narrow domestic walls” of community, the idea of catallaxy solves the social problem for all individuals, while also uniting humanity in a rational, natural order.

Sauvik Chakraverti is an author and columnist. He blogs at

Comments are welcome at

Sunday, February 14, 2010

Bt Cotton Should Be Formally Approved: Interview/ C. S. Prakash

Bt Cotton Should Be Formally Approved: Interview/ C. S. Prakash

Biotechnology is a fast growing area filled with controversy. Is it the answer to Malthusianism? Or is it a Frankenstein's monster? To get answers to these questions, Sauvik Chakraverti spoke to Professor C S Prakash, who teaches plant biotechnology at Tuskegee University. He also advises the government of India on these matters. Excerpts from an exclusive interview:

*What is your reaction to what happened in Gujarat regarding the release of Bt cotton seeds?

- It was inevitable. For two years, the Indian regulatory authorities have been dragging their feet on the issue. On June 19, they had absolutely no logical, rational or scientific reason to say 'No'. My reaction is of mixed delight. But I would not like to condone any illegal cultivation of unapproved biotech crops, since it undermines consumers' confidence. The situation the government finds itself in is like finding your daughter pregnant. There is no other choice but to get her married. So, I do hope that the use of Bt cotton will be formally approved and that farmers will not have to go for contraband seeds.

* Do you think that the popular adoption of genetically modified seeds in Gujarat is something that was waiting to happen in India? Did you expect the farmers to adopt Bt cotton, given all the protests and demonstrations we have seen around the world?

- Definitely. It is just that farmers have finally spoken out. We knew all along that, given a choice of superior solutions, farmers make rational decisions, based on simple economics and cost-benefit analyses. Quite rationally, they are willing to bear additional costs if these bring them substantial returns.

* What do you think explains the contrast between the reaction of environmentalists overseas and in India? While internationally they have gone around uprooting trial fields, in India they have not entered any field planted by farmers.

- It is surprising that Indian environmentalists are now so quiet. Earlier, they maintained that BT is not good for Indian farmers, that the technology has no value, and that we have to preserve the existing system of saving seeds for the next planting. The fact is, these environmentalists have absolutely no knowledge of farming and do not speak for farmers. So, when real farmers get involved, environmentalists do not have any say.

* Did the company that released this BT variety violate IPR regulations?

- No, they did not since the patent has not yet come into effect. What they did violate is the bio-safety regulation of the Indian government. Under it, any genetically modified product requires a local approval before it can be released into the environment or commercialised. India has a two-step approval process. We have six years of Indian data on Bt cotton, and so far its agronomic performance has been spectacular. There is not one single safety incident of any concern. The irony is that India imports over ten lakh bales of cotton, much of it being Bt cotton from such places as Australia and China. It is absurd that we force our farmers to spend on pesticides, given the often irresponsible manner in which these are used, rather than just approve Bt cotton.

* The introduction of genetically-modified products has been slow since existing food and environmental regulation is based on the precautionary principle. If this principle were to be thrown to the wind, what is the worst case scenario?

- The worst case scenario would be the introduction of minute levels of allergens into food. Take the case of peanuts. Some people are highly allergic to them and may have a fatal reaction from eating just one. Now assume a genetically-modified chickpea, in which one peanut gene has been introduced. A peanut-allergic person would have to eat about a tonne of chickpea to get the same level of protein present in a single peanut. In fact, there is far more danger in eating normal food.

The reluctance of the Indian authorities to approve Bt cotton has interesting historical parallels. For instance, when the first motor car was introduced in England, the British government ruled that the speed limit should be five miles an hour. Moreover, regulations required someone to walk in front of each car and announce its imminent arrival. Needless to say, the development of the motor car was blocked in Britain.

Similarly, electric lights were banned in Britain for thirty years after they were first introduced, due to the gas industry lobby. Italy has absolutely little or no corporate bio-medical research, due to overt regulation, despite its robust economy and high per capita income. Mindless regulation is similarly killing agricultural biotechnology in Europe.

Everything has a risk, but that the risk must be put into its proper framework. About 300,000 children die in India every year due to rota virus, which causes dysentery and diarrhoea. A vaccine was developed in the National Institute of Health, Washington, but was abandoned this year since it caused rashes in few US children.

In the United States, just one or two children are hit by rota virus every year. The risks in vaccinating against this virus are, therefore, unacceptably high. It is outrageous that the Americans shelved the vaccine, given that in India the risk factor is irrelevant. Every society must look at risk for itself.

* Please explain the BT concept for a lay reader.

- BT stands for 'Bacillus thuringiensis', which is a common soil bacterium. This bacterium has been used as an organic pesticide for about forty years. When you spray the bacillus onto the plant, caterpillar larvae eat it. The bacillus is only toxic to caterpillar larvae. It does not kill butterflies, beetles or bees. However, the bacillus never caught on commercially as a pesticide, because it gets degraded in the sun. Farmers have to keep on spraying all the time. Genetic engineering came along and took the Bacillus thuringiensis gene and put it straight into the relevant crop plant. So the plants produce the protein, instead of it having to be sprayed on.

*So, if BT was sprayed and the product was sold, it would be called organic food?

- Ironically, yes.

* What about the growth of resistance to other pests?

- If Bt cotton is used too much, pests may become resistant to it. This, in any case, is likely to happen even with spraying or antibiotics. This is why we are telling farmers that 10 per cent of their crop should continue to be regular cotton. Pests can feed on that and not be compelled to adapt. This strategy seems to have worked. There are millions of acres under Bt cotton cultivation, yet no pest has developed resistance.

* What about the gene flow issue?

- Look at rice, for instance. After they discovered dwarf rice in Taiwan, every rice became dwarf because we put that gene into all popular rice varieties around the world. This is because dwarfness is a big asset in agriculture. Not one single wild rice has acquired this dwarf gene, despite thirty-five years of dwarf rice on probably 250 to 300 million hectares. The point is that dwarfness has no positive selection value in a wild rice. Even if the gene were to be there, it would just get eliminated.

So there are two ecosystems - the man made one and the wild one. The man made one began with the domestication of grain, mainly for making alcohol. The rice was shattering, so man collected a mutant where the grains did not shatter.

The seeds in the wild are always dormant, and now are germinating immediately depending on their survival mechanism. We are making sure that they do not germinate on the stock itself and also that they do not stay dormant for too long.

So we made a lot of little changes. Take the instance of corn that is in the wild, it looks like a small little pencil. But modern corn is about two foot long and big. They were all changed over ten thousand years. So, if you put most of the modern varieties of crop food plants into the wild, they would not survive for one day. It is like taking a little Chihuahua or Daschund and throwing it to a pack of wolves. It would not survive for one hour. So, similarly, except in a few instances, these new varieties are of absolutely no evolutionary significance.

Wednesday, January 6, 2010

For a private law society

For a private law society by Sauvik Chakraverti
Posted: Tue, Jan 5 2010. 9:03 PM IST The Live Mint

The coercive power of law lies in the idea that it can be centrally made. We need to kill this notion

Friedrich Hayek pointed out the phenomenon of “fragmentation of knowledge” in markets—the butcher, the baker and the barber—showing that central economic planning can never work, because such knowledge can never be centralized. However, it is Hayek’s friend Bruno Leoni, the great Italian classical liberal, lawyer and legal philosopher, who provides us with the parallel insight: that this very same problem affects centralized lawmaking, which is democratic legislation, or “public law”. We do not study the works of Leoni only at our own peril, for when the law goes wrong, society cannot function as it should.

How is public law created? A description of a division bell at the House of Commons, the acknowledged “mother of all parliaments”, by Anthony Sampson in his Anatomy of Britain goes somewhat as follows: The MPs are all at the bars, drinking and talking, when the bell rings. They leave their drinks and rush to the doors of the House, where they are met by their party whips, who direct them which way to vote. They troop in and vote. They promptly troop out again, back to their drinks, which are kept lying exactly as and where they left them. Cheers!

The other method of arriving at law is through the decentralized actions of individuals in markets. In this method, each of the two persons in a dispute engages a private scholar in law to argue their respective cases before an impartial judge. These private scholars—lawyers—scour through the books for past decisions in similar cases. Here, the law is not “made”; it is “found”. The law always comes from the past. Very rarely does a judge set a “precedent” by which the law advances a small step.

However, under public law, all law is “new law”. Legislatures manufacture such spurious new laws every day. This is “democratic tyranny”—and it plays a crucial role in imposing not only socialism, but also bureaucratization, both inter-related phenomena. It is through coercive legislation that socialist governments attempt to direct all economic activity. It is “subordinate legislation” that empowers all the bureaus. This is how tyrannies are multiplied; how liberty is lost.

If history is to be our guide, then it must be concluded that neither in ancient Rome nor in “common law” England did centralized lawmaking play an important role. According to economic historian Sudha Shenoy, ordinary English people of the Middle Ages looked upon legislation as the king’s instrument, as an interference in their lives. For justice, they always turned to the common law, which was “found”: Stare decisis, as they say.

The great 13th century English judge Bracton writes that whereas on the continent they had written laws, the English never had them, preferring custom and tradition to written law—the law being “found”. Bracton, it is said, modelled himself after Ulpian, the great Roman jurist. Both were private scholars in law. In Rome, as in England, society lived in harmony under private law. None presumed to know how to make laws for all. Even Justinian’s Corpus was a compilation of old laws and decisions, including the opinions of private jurists such as Ulpian.

We all make private law. A tenancy agreement that is binding on the parties who sign it is an example of law that is privately made, as is a deed of sale. The world of private law is a world of property, contracts and torts. Indeed, as Professor Bruce Benson points out in his classic The Enterprise of Law, among the ancient Anglo-Saxon tribes there were no “crimes” except crimes against individuals, which were torts. Greedy Norman kings legislated “crimes against the king” in order to appropriate the fines established by the old tort laws. In the end, this is why we suffer under state police forces all over the world today. And victims are never compensated. Benson underlines the fact that tort laws are the oldest laws of the Anglo-Saxons. In India, we do not have them. But we have a state police. And all crimes are “crimes against the state”. Victims get nothing—see Bhopal. Or take the case of traffic accidents, or hooch tragedies, or building collapses. Further, property titles don’t work for a majority of the population. Contract enforcement is poor, too. We need to strengthen private law—not turn to the state for help.

What is public law meant for? The only purpose of democratic assemblies today is “running the government”. They control the budgets and the powers of the various departments of their government. The public law should only apply to these departments. It is precisely these which are “lawless” today, in the strict sense of the word. The best democratic society, then, is one in which there are clear and separate spheres of private law and public law. Civil society lives under private law; the constitutional government functions under public law.

Law is a very serious thing. It is the protection for every individual. Today, especially in socialist India, the law is but naked coercion, offering zero protection. At fault is the pernicious idea that law can be centrally made. Or, to put it another way, law is that which is “legally made”. Kill this idiotic idea—and we will not only be secure, but also free.

Sauvik Chakraverti is an author and columnist. He blogs at Comments are welcome at