Alternative Nation The Public Administration of Anarchy

Alternative Nation The Public Administration of Anarchy by Sauvik Chakraverti           


Published in the Times of India on 25/04/2002

Statism has failed both India and Pakistan. The future of both nations lies in a completely free market with free immigration. This is perfectly Islamic. The Prophet Muhammad, peace be upon him, was a free trader. The Islamic calendar starts on the date of migration from Mecca to Medina. Islam is based on free trade as well as free immigration. These are also in total agreement with the basic tenets of the Hindu faith which said Shubh Laabh, or profits are auspicious, aeons before Adam Smith laid down the philosophical foundations of modern capitalism. The Hindus also said that the four ends of Man are dharma, artha, kama, moksha. We can all happily and unitedly reject statism and opt for a vast free market. Both nations can reject the Hobbesian Leviathan together – that which has brought ruin, degradation, poverty and corruption to one of the most beautiful places on the planet, peopled by a deeply moral people.

The question does arise: Does anarcho-capitalism have a public administration? To answer that, let us imagine a scenario when there is no state, when there are no rulers, and let us think of ‘what’ and ‘where’ we will have to ‘organise’ things? We will feel the need for collective action mainly in our cities and towns, where people are densely crowded. We will scarcely need any organisation in scantily populated villages. This means that we will have to set up sound municipal organisations.


Now, contrast this with the socialist state’s public administration. Socialist India does not possess a single properly functioning municipality other than the NDMC which services the VVIP class. All talk about local government relates to panchayati raj, as though villages are in need of government. What villages and villagers need most of all is good connections to urban markets. Without roads, panchayati raj is just clientelism of the most perverted kind. As Arundhati Roy says: India does not live in her villages; India dies in her villages.
Hence, if we abolish the state, we will think up a far better alternative system of social organisation based on our needs. We will have municipalities that will focus on garbage collection, traffic regulation and the provision and upkeep of urban roads of good quality: because we will need just these services and nothing more. Today, municipalities run schools! Tomorrow, these municipalities can be run by just a handful of honest public spirited public functionaries, who can ‘contract-out’ the work to competing private firms. In this way, we can build an India and Pakistan of some 600 free trading cities.


This will be the best thing that can be done for our villagers. Urbanisation will allow them to find niches in the market economy and reduce dependence on agriculture. Today, the share of agriculture in GDP is declining; but more people are dependent on it. Poverty is the inevitable result. With urbanisation, rural India will depopulate, reducing pressures on land. Agriculture will commercialise. There will be no need for land reforms. Mere property rights will suffice.


Now, in public administration, as in management, there is no one correct method of organisation. With 600 free trading cities, each can experiment with laws, rules, and systems. This will allow for diversity. Thus, there can be towns like Haridwar where it is illegal to consume alcohol or eat meat but it is perfectly legal to smoke a chillum of hashish. The US local government scenario presents us such a view: the system is not uniform. There is strong mayor-weak council; weak mayor-strong council; there are city managers. The same can be allowed in India. Let the ants decide how to run their anthills. Thereafter, free immigration will force the municipalities to compete for tax-paying citizens. If Karachi offers better public goods at lower taxes than Bombay, it will prosper as more people flock there.


In this scenario, politics will be restricted to the polis, as it rightly should. There will no longer be the politics of empire: no New Delhi lording over Kohima, Kargil, and Kanyakumari. There will also be no small imperialists either: like Kolkata lording over Darjeeling, or Patna over Muzaffarpur, or Mumbai over Pune. It will be each to his own. Without the politics of empire, and without the economics of statism, it can safely be predicted that there will be very little need for collective action on a national level. Inter-city expressways can be provided by the private sector. Without statism in India and Pakistan there would be very little need for a large defence establishment. In either case, cities can contribute to a fund to finance a small force for the region for emergencies. Today, the defence establishment is hopelessly corrupt. After Bofors and Tehelka, the socialist state cannot be trusted to handle even national defence honestly.


Now, cities are not self-sufficient. They procure their needs from outside. Cities have ‘footprints’. In anarcho-capitalism, rural roads will be provided because this will be in the interest of the cities. It is said that every great city sits like a giant spider on its transportational network. Socialists have reduced our cities to blobs of jelly on the map. Tomorrow, reason will prompt us to build nimble spiders, so that the maximum amount of trade can take place at the least cost of both money as well as time. Today, our trucks do 250 km a day compared with 600 km a day in the rest of the world.


The poor will prosper in anarcho-capitalism. With 600 free trading cities, there will be plenty space for hawkers, who are a hounded lot today. Without rent control, there will be no slums; instead there will be a vibrant market for cheap rentals. Any poor villager will be able to opt for a city or town of his choice, shift, and rent a room with a toilet. Urban overcrowding will end as more land is colonised by roads. There will be a huge real estate boom. Land in the villages will also become real estate as cities and citizens spread out, equipped with modern transportation.


We must think we can do it. We must believe in ourselves. We have too long been dependent on the state. We must now believe that we do not really need it. We do not need our rulers. We can manage perfectly well without. After all, Man is a socially co-operative, moral creature.

http://ccsindia.org/ccsindia/people_sc_public_admin.htm

Funny Money

Funny Money by Sauvik Chakraverti, Apr 7, 2007, 12.00am IST Times of India

Inflation is not new. In my teens, Coca-Cola was 40 paise, a pack of Wills cost a buck and petrol sold at three rupees a litre. A beer was five bucks. 

This inflation has nothing to do with either the demand or the supply of the articles of everyday consumption. 

Rather, inflation is a disease that afflicts money, being but a gradual and continuous erosion of currency value. 

Since the government is the monopoly issuer of our money, we know who the culprit is. The game that politicians and central bankers play is best understood by a parable from Ken Schooland's charming The Adventures of Jonathan Gullible. 

In the story, the people use an inconvertible government paper money called 'kayns', named after John Maynard Keynes, the economist who designed today's world monetary system after centuries of the international gold standard. 

This particular parable tells of a circus coming to town. A big tent is set up and the people gain entry by paying 10 kayns per head. 

Once inside, the show commences, with the ringmaster, every once in a while, picking one member of the audience and showering him with 1,000 kayns. 

When Jonathan remarks that the game is odd, he is told that this circus is a standing institution: it passes by every month, and all the townspeople play the game hoping they will receive 1,000 kayns someday. 

This is 'the kayns conspiracy'. The crucial thing to note is not that the game is a fraud — 'attempting to purchase public affection through gratuitous alienations of the public revenue' â” but that the money used to play the game is fictitious too. 

One can perhaps feel sorry for those who worship Mammon, but what can one say of those who chase this 'funny munny'? Mankind's collective ignorance regarding the most important regulator of the market economy, money, is truly astounding. 

And the education cess will only pay the salaries of armies of Keynesians employed in government universities. This is in addition to the battalions of Marxists already there. Catch-44. 

What is extremely important for the layman to understand is that, since real goods and services are exchanged for this 'legal tender' funny munny, inflation has losers and gainers. 

The gainers are those who get to spend the kayns first — the personnel of the government, their contractors and those cronies who get generous loans from banks. The losers are savers and the poor, who earn eroded money on a daily basis. 
There is thus a 'transfer of real wealth' that occurs alongside creeping monetary inflation, with savers and daily wage-earners losing the most. 

Further, the statistical indices used to 'measure' inflation give a false picture of a 'price level' that is rising uniformly. 

In reality, there are zillions of prices and these move up and down in a totally uncertain world. There is no price level. 

Cellphone and computer prices, for example, are falling steadily. Stock markets and real estate values, on the other hand, are rising much faster than the statistic suggests. 

Wherever the new money (and the new credit) goes, there the price effects are most strongly felt. Again, because inflation affects some prices more than others, the effects are differently felt, and some people gain while others lose. 

This is why inflation continues — because those who produce it, the kayns conspirators, gain anyway. The solution to inflation is essentially a legal one as the existing system is based on legal fiction and fraud. 

When we pick up a Rs 100 note, we see a 'promise to pay' signed by the central banker emblazoned upon it. Under the rule of law, he must redeem his notes on demand. 

This is what prime minister Robert Peel attempted to achieve through his Act of 1844, but he made a crucial error in leaving out bank demand deposits. 

A banker can increase the money supply by making a loan and opening a current account in the borrower's name with that 'money' in it. 

Bankers therefore created so much deposit money (to finance the railway boom) that the currency principle which lay at the heart of Peel's Act became unworkable, and had to be repeatedly suspended — until it was finally abandoned. 

This failure to apply good law to money and banking lies at the root of modern-day inflation, whose only cause is excessive creation of money and credit. 

A recent study of legal history reveals that, long before legislation was invented, Roman and Continental law always recognised the vital difference between a demand deposit (which is placed in the banker's custody for safekeeping) and a term deposit (which is a loan to the banker for a stipulated period). 

These two kinds of deposits were governed by two different contracts. In the first, the private banker was compelled to keep money deposited with him for safekeeping constantly available to the depositor, without being able to lend out any portion of it — a 100 per cent reserve. 

In the latter case, the banker could loan out the money, and was only bound to return it with interest at the end of the contracted term. 

Under such legal principles we can have free, competitive, private banking and sound money without central banks and their fraudulent fractional reserve system. Currency notes will always be convertible, and all depositors will be secure. 

Inflation and boom-bust business cycles will never recur. The poor will steadily accumulate capital. Prices will keep on falling. 

The writer is an economist.

Time to scrap Planning Commission

Time to scrap Planning Commission by Sauvik Chakraverti

Economics is about the allocation of resources and something is very wrong with the manner in which resources have been allocated in India. Money has not been invested in the "infrastructure". Technically speaking, it can be said that "planning" has diverted scarce resources away from public goods especially roads to finance statist schemes, Laloo's fodder and the entire politico-administrative spoils system. The theoretical shortcomings of central economic planning, with which we continue, therefore needs to be thoroughly examined.

Resources can be allocated through two markets: the private market and the political market. The principal players of the private market are businessmen and consumers. The principal players of the political market are politicians, bureaucrats, vested interest groups and voters. In the private market, everyone is assumed to be working in their self-interest, trying to obtain the best deals. Towards this end, they possess the incentives to minimise costs, trace out and correct past mistakes, to innovate and to acquire all the necessary information. Resource allocation through private markets is therefore `efficient'. Political markets are different. The self-interest of its participants works to disprove its claim to `intellectual-moral superiority'.

Politicians are primarily interested in re-election, and will pursue expenditures that will return them to seats of power. They will lavish money on `populist' measures. Our State Electricity Boards have all been bankrupted by politicians allocating scarce resources through the political market.

The self-interest of bureaucrats comes into play in two ways. First, they will tend to protect their `turf', and second, they will `rationally' seek the maximum possible budgets for their departments. All over the world, this led to the phenomenal growth of statal budgets, which refused to come under control despite strong political will. A nation with a history of imprudent deficit financing, whose completely dysfunctional bureaucratic machine has just extracted huge undeserved pay awards in the face of a spiralling deficit, should note that a vast, entrenched bureaucratic system is not as `benevolent' as it is assumed to be.

Judging from the self-interest of the participants in the political market, it seems fairly obvious that if this nation continues to place reliance on planning as a system of resource allocation, the real wealth of the country will simply be frittered away. The theory of planning assumes away all imperfections in the planners. They are supposed to be dispassionate experts. This theory does not look into the motivations of the players in the political market.

The same point can be put another way. There are four ways of spending money. You can spend your own money on yourself; you can spend your own money on someone else gifts; you can spend someone else's money on yourself as on the `company account'; or you can spend someone else's money on someone else planning. Efficient resource allocation occurs when all the wealth of society is well invested. That will only happen when people spend money in a manner that seeks to minimise costs and maximise benefits. People who spend other people's money on other people do not spend money efficiently. We live in a country that has opted to place maximum reliance on the state in resource allocation. Statal personnel have no interest in spending money efficiently.

Development planning in India also rests on very shaky economics. For example: employment is not `generated' when taxpayers' money is spent by the state. If the taxpayers had spent the money themselves, or invested in the market, the same amount of employment would have occurred `efficiently'. The fatal errors of the Planning Commission's development economics on poverty, population, urbanisation and especially on the key question that all development economists must answer, how do we become `developed'?, makes it an institution that should be immediately scrapped, and its false ideas discarded. Let the private market guide resource allocation. And let the public purse invest in what our great planners have not public good. 

Caste and the Market Economy

Caste and the Market Economy by Sauvik Chakraverti

Antidote/

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


RSS Feeds| SMS NEWS to 8888 for latest updates

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.

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?