A return to the gold standard

A return to the gold standard by Sauvik Chakraverti

The rupee must be anchored to a tangible commodity. For the Indian economy, the benefits would be great

Posted: Thu, Oct 15 2009. 8:44 PM IST

To classical liberals, money was gold, and gold was money. There is a letter David Hume wrote Adam Smith dated 1776, wherein Hume berates his friend for writing in his recent great book that the king of France took a seignorage of 8% for minting coins. Hume writes that if this were true, Frenchmen would take their gold to Belgium or Holland, whose monarchs minted coins for 2%. This was the limited role of the monarch vis-à-vis money then. The monarch did not manufacture money; it was a world of “private money”. In his Wealth of Nations, Smith lists the “three duties of the sovereign”; there is no mention of money. If Hume or Smith were to visit the modern world, they would consider our fiat paper system a scandal, and heap derision and scorn on our professional economists.

How did it all go so wrong? Without getting into the gross errors that have taken over economic theory, I would like to focus here on legal issues. Money has no legal definition anywhere in the world today. This was never the case before. In 1776, the King’s coin was defined as containing a specific quantity of gold of prescribed fineness. In 1776, when the constitution of the US was being drafted, the federal government was granted the power to mint coinage, not create paper money. If we look at the India of those days, Smith himself was picked to lead a Commission to Bengal—to suggest a reform of the coinage.

Our first effort today, therefore, must be towards once again defining money in law. A rupee must be so much gold. If we do not anchor money to a tangible commodity, we will forever be using a measuring rod for economic calculation that is ever-changing and flexible, thereby throwing all economic decision making astray. This means a return to gold and silver coinage. This must be the real, legal money.

Let us turn to paper notes. In Smith’s time, these were redeemable in gold on demand. Smith and Hume both admired the Bank of Amsterdam, which maintained a 100% reserve against deposits then. But neither understood fractional reserve banking or central banking —the scourge of the modern world. Yet, the common masses of those days, untutored in political economy, would never accept irredeemable paper as money. This explains Sir Robert Peel’s Banking Act of 1844, which sought to make Bank of England notes redeemable in gold on demand but failed, because neither the great prime minister nor his government understood the mystery of banking.

The extremely shallow debates of those days between the currency and banking schools have been adequately detailed in Murray Rothbard’s magisterial history of economic thought, which is exceptionally unjust to the memory of Smith; but that aside, the point that needs to be emphasized is this: Because of the deficiencies in Peel’s Banking Act of 1844, both money and banking operate outside the law today. Money has no legal definition, and banking is, therefore, a fraud. Central bankers run unaccountable and illegal monetary systems. This is fatal for the economic health of all nations, especially poor nations.

The crux of the matter is that currency has become a “property title without property”. Now, this little deception by which profits could be hugely augmented was known to the goldsmiths of yore. If their notes “gained currency”, they would lend out notes on interest, thereby rendering their gold reserves a “fraction” of their outstandings. Profits were earned by lending out paper, not gold. But this was still legal, and such notes are called “fiduciary media” in the old textbooks, or “money held on trust”. But this is how the problem of “property titles without property” first appeared. It is intimately connected with fractional reserve banking and is a practice based on fraud. If this is outlawed, we can have sound, private money, including paper, and free banking under law. It is either that or unaccountable central bankers.

This will be of great succour to the average bank customer. He can then make two kinds of contracts with his bank—“demand deposits” and “term deposits”. Against the former, the bank will have to keep aside a 100% reserve, for property has not been transferred. The latter will be a loan to the bank, earning interest, which the banker can lend out, provided he returns it at the end of the stipulated time. Without any “lender of last resort”, every bank depositor will be secure. This is actually ancient commercial law.

When paper money is a “property title without property”, and “legal tender” forces its exchange in markets for real goods and services, nothing is exchanged for something. When these propertyless notes multiply, while the real goods and services do not, there is only redistribution in society, away from savers, away from fixed-income earners, in favour of borrowers—all perverse incentives that destroy the character of society and promote “decivilization”. Unsound money is terrible.

Any nation can unilaterally revert to the gold standard whenever it chooses. If we do so, our rupee, now pegged to gold, will always appreciate against the rest of the world’s fiat papers. This will help us become big importers. And cheap imports, including of capital goods and components, will make our manufactured exports competitive in terms of technology, quality and price. Our banks will attract the world’s savings, and we will possess capital, the vital ingredient of “capitalism”. All prices will steadily fall and the consumption of the poor will rise in leaps and bounds. This is the power of “sound money”.

Sauvik Chakraverti is an author and columnist.

He blogs at sauvik-antidote.blogspot.com. Comment at theirview@livemint.com

The road to trade and growth

The road to trade and growth by Sauvik Chakraverti

Posted: Mon, Sep 21 2009. 9:45 PM IST The livemint

History shows that better transport means more prosperity. The pathetic state of India’s transport infrastructure is a major reason it still isn’t very prosperous

The history of human civilization is nothing but a story of the close links between trade, transportation and urbanization.

The Mediterranean became a cradle of civilization because the small sea served as the transportation backdrop, enabling diversely gifted cities along its coasts to easily trade among each other. This hold of the Mediterranean over trade was broken only when Venice was upstaged by the Portuguese, who found a sea route to the East, and also built and manned the ships that could carry gold out and bring nutmeg in. The honourable East India Company would have been nothing without their “tall ships”.

But this link between trade and transportation—and the growth of cities and civilization—is apparent in Indian history, too, for the Indus and the Ganges were also the best way to transport tradeables up and down the river. Mohenjo-Daro and Harappa were served by the seaside port of Lothal. And the Ganges valley cities were organically linked to the port cities at the mouth of the river. When the British came to Bengal in the early 1600s, the province was already conducting flourishing trade with the outside world.

Why is transport so important to trade?

Simple. The ancient principle of trade is “to buy in the cheapest market and sell in the dearest”. In other words, if you buy apples in Kulu there is little to gain by selling them in Manali. To book great profits, you must transport these apples to where they do not grow, where they are scarce and highly prized—to Mumbai, Kolkata and Chennai. Venice was upstaged by Europeans buying nutmeg in the Banda Islands, transporting the nutmeg home, and then selling it there. The overland route, with many intermediaries, disappeared from use. This is the power of transportation. This is proved by history.

Having said that, let us turn to transportation in present-day “centrally planned” India. Even strong words like “disaster” or “catastrophe” fail to describe the situation on the ground. Be it roads, railways, ports, airports or even fishing boats, our country is a shambles. It is this that is holding our nation down. The problem is not the illiteracy of the poor Indian; rather, it is the illiteracy of those who wield power.

Let us list the losses we suffer because of this “planned catastrophe”. Topping the list is the reduction in productivity for each of us. Productivity is measured in time. And a disaster of a transport system wastes time—the most important factor of production. The human engine can work only so many hours in a day. The more hours eaten up by transportation, the less there are left over for work and production. As Lord Peter Thomas Bauer famously remarked: “What limits growth in poor nations is not the limited capacity to export. Rather, it is the limited capacity to produce.”

The second major loss lies in the destruction of all goods that are perishable, such as fish, milk, fruit, vegetables and so on. In my travels in Coorg and Jharkhand, I was often told of the potential these regions have for exporting cut flowers. But the horrible transport system lets these regions down. In these instances, the flower farms never happen. They comprise losses that are not seen.

The third loss we face because of our nuclear disaster of a transport system is the destruction of our urban habitat. Satellite towns do not develop, primary cities face overcrowding, urban land becomes hideously expensive—all these are the result of poor transport links. The destruction of our urban habitat, of course, should be considered “de-civilization”—the very opposite of progress.

What can be done immediately to rectify the situation?

First: Look at the 7,500km coast. The open sea is the world’s biggest highway. So, declare unilateral free trade and let loose the forces of urbanization along our coasts. Build twin coastal expressways. This will, to a great extent, solve the urban habitat problem as entirely new cities and towns erupt along the twin coasts and outcompete existing ones.

Second: Build expressways in a “hub-and-spoke” pattern around every city, connecting all the outlying towns. This will allow a spread of urban population, lowering overcrowding.

Third: Empower one official in each district to look after the building and maintenance of all roads in the district. Since the price of rural land rises when connected by road, this will, along with clear property titles, increase the capital available with every rural landowner, including especially small plot-holders.

I have focused entirely on roads because markets can provide everything else. This includes tramways in small cities and towns. This includes modern ships and boats. This includes modern cars for every Indian. Indeed, the cars are already here. It is the roads that are lacking.

Our state must, therefore, think like the Roman emperors of yore, who did not teach their subjects, but constructed roads everywhere in their vast domains. The Old Roman Road is still in existence leading up to Hadrian’s Wall in the UK. And in Cologne, Germany, outside the great cathedral, I found that the old Roman stones paving the roads have been carefully preserved.

The lesson from history that transportation matters most is irrefutable. The state must build a pan-India toll-free road network as top priority.

Sauvik Chakraverti is an author and columnist. He blogs at sauvik-antidote.blogspot.com Comments are welcome at theirview@livemint.com

Saying no to ‘social justice’

Saying no to ‘social justice’ by Sauvik Chakraverti

Posted: Wed, Sep 2 2009. 9:16 PM IST

Advocates of social welfare all have different ideas. But they invariably champion state redistribution

Michael Jackson was a very wealthy man. And there are millions without shelter, education and nutrition. Is this unjust? To answer this question we must ask ourselves another: Did Michael Jackson acquire his wealth unjustly? Of course, not. Michael Jackson thrilled billions with Thriller. They flocked to the stores to buy the album. This is how and why he got rich. There was no injustice at all.

Let us be very clear in our thinking: Justice is an attribute of individual conduct. Further, the free marketplace has nothing to do with either justice or injustice. As long as the rules of just conduct are being followed, the resultant “distribution of wealth” in a free society can only be called “natural”. This distribution can neither be called “just” nor “unjust” because individual shares are neither intended nor foreseen. There is no one “distributing” anything. And chance plays a big role.

So what about the fate of the poor? The fact is that modern capitalism is mass production for mass consumption. The masses gain as consumers. Henry Ford invented the Model T in 1908. Within 25 years, every American had a car. Very few Indians had cars 20 years ago. Or phones. Or TV sets. Since “liberalization” began, free markets have allowed Indians to succeed as consumers. None can deny the fact that free enterprise has hugely empowered the poor Indian during these last 10 years. My prescription for improving the lot of the poor is free markets. Period.

Advocates of “social justice” differ. They champion “redistribution” through state action. Thus, their ideas lead to heavy taxation and even heavier state expenditure. Whereas classical liberals conceive of a civil government that only acts against the unjust and nothing more, those who advocate social justice also advocate a role of the State that goes well beyond governance. They call themselves “socialist” but they are really étatists—worshippers of the State.

Unfortunately, heavy taxation and an overweening state are actually bad for the market economy. Savings decline. Investments decline. The poor suffer. And if the State engages in monetary inflation to fund itself, the poor lose even more. As Nobel laureate Friedrich Hayek says, “Rules of just individual conduct are as indispensable to the preservation of a peaceful society of free men as endeavours to realize ‘social justice’ are incompatible with it.”

Hayek goes further: He says, “No one has yet found even a single general rule from which we could derive what is ‘socially just’ in all particular instances that would fall under it.” Welfare is such a loose concept that “some will put it here and some will put it there”. Amartya Sen will champion nutrition, Jean Dreze employment generation, and Manmohan Singh education. A fourth person might find something else, say, healthcare. The decline of the modern West is indeed such a story, thanks to ideas of social justice, which produced the “Illfare State”.

Hayek also offers an explanation for the popularity of social justice: The idea appeals to our primitive instincts. Whereas liberalism is modern and individualistic, social justice yearns for a return to the happy days of hunter-gatherer tribes where there is the “leader” who shares the prey with all members. Yet, we emerged from primitive society only by disregarding the principles that held the old tribes together. The pioneers abandoned the old closed groups and sought unknown people they could trade with. This is how we created cities and towns, settled agriculture, and the Great and Open Society. Social justice is “atavistic”. As a theoretical concept, Hayek calls it “intellectually disreputable”.

This conclusion is strengthened by the fact that, while eminent étatists champion social justice, there is little real justice in India. The National Human Rights Commission registers 75,000 cases a year—against the State’s police! There are at least 30 million cases pending in courts. Murders and rapes go unpunished. Injustice rules the land—and these étatists wave the flag of a phoney justice, a mirage, an illusion, a trick. They must be defeated.

It is undoubtedly true that millions of Indians are miserably poor. However, their only hope lies in economic freedom, free trade, private property and an equal justice. Under these conditions, none of which exists today, each can try and improve his position. That is, the individual matters; not the State. All that a civil government can do is apprehend the outlaws and the unjust, maintain the peace, keep accurate land records, build roads, roads and more roads, and manage the cities and towns. Even if it performs these tasks tolerably, the poor will slowly but surely climb out of poverty. Recall that in the US, black slaves made it big in show business and sports. Even these avenues are not fully open to India’s poor today.

Lastly, we undermine ourselves and civil society when we do not champion the case for private charity and philanthropy. Where taxation is heavy, private charity is low. All the money is taken by the State and usually wasted. Government is not charity. It cannot “attempt to purchase the affections of the populace by gratuitous alienations of the public revenue”. Social justice is a sham. Say no to it. Loudly.

Sauvik Chakraverti is an author and columnist. He blogs at sauvik-antidote.blogspot.com. Comment at theirview@livemint.com

Austrians! The Indian Market Beckons

Austrians! The Indian Market Beckons by Sauvik Chakraverti

The LewRockwell.com August 24, 2009

India today is a nation where everyone can see and feel the benefits of private enterprise, including multinational companies; and, at the same time, everyone can see state failure writ large in each and every area where this socialist state is active. Housemaids have mobile phones; college students now own cars; but roads, electricity, sanitation, water supply – these areas of state monopoly cry out for a solution. The situation is no different in education.

A new word has been coined in India – "edupreneur." Indeed, in India, it is edupreneurs who have created the vast pool of software engineers this country now boasts of. Today, there are thousands of private institutes teaching management, medicine, engineering, hotel management and so on. We even have an institute teaching retail management although the government is yet to allow foreign retail chains to set up shop. We also have many private universities. Most of these are successful in the sense that they earn profits. But as I told the chancellor of one of these private universities, they are all engaged in "training," not "education."

Yet, the rapid growth of a vibrant private sector in education in India cannot be denied. There are glossy magazines catering to the sector. The Times of India, for over a decade now, has a weekly pullout on private education – and there are lots of advertisements.

I had the occasion to visit Manipal, a sleepy south Indian village where an edupreneur set up a medical college twenty years ago. They have expanded their operations since, covering many disciplines, and Manipal is now a bustling boom town. Students come from all over the country. I also met many foreign students.

There is another word that has gained currency in India – "educrat." So far, all these private institutes have had to seek permission from educrats. Recently, corruption was revealed. Coupled with this was a widespread realization that higher education under the state has been a failure. Delhi’s Jawaharlal Nehru University has produced the chief ideologue of the Maoists running Nepal today. It has become obvious to parents and students that state institutions are sinecures for étatists, Marxists, Keynesians and so on. To paraphrase Ludwig von Mises, these are the "intellectual bodyguards of the House of Nehru." This painful reality was apparent to all, students and parents alike. Many elite schools now offer the International Baccalaureate.

Public opinion demanded complete liberalization of higher education. No more educrats, the English press cried. We want foreign universities to set up shop here, cried the students and their parents. The education minister has just announced that his top-most educratic agency is to be closed down. There will soon be complete liberty.

Of course, our state is a wily customer. Parliament has recently passed The Right of Children to Free and Compulsory Education Act. Yet, I sincerely doubt the administrative capacity of this state to implement this evil agenda. There are already hundreds of thousands of "unrecognized" schools for poor children operating throughout India, as James Tooley’s studies have documented. Poor parents prefer to send their children to these unrecognized private schools because they see government schools as the pathway to failure in the great game of life. In time, I am confident that the state’s grip over schools will also go. Some people are suggesting voucherization – and this call has been taken up by many leading opinion makers. When I asked James Tooley about vouchers he nonchalantly replied: "The poor don’t need it. They are happy paying for the schooling their children are getting." Thus, we can visualize India soon becoming a country "where knowledge is free" – in the free market, that is.

Let me turn to education in economics. Here, the state dominates the field. No private edupreneur has ventured into this critical area, perhaps because they don’t have the knowledge. Yet, the fact that state education in economics is bogus is beginning to dawn on many bright students. As in eastern Europe, so too in India, really bright and hardworking students have turned to other sources for knowledge in economics. The two libertarian think-tanks in India, both active for more than a decade now, have done commendable work in fostering this changed intellectual climate. Mention must also be made of the activism (among the youth) of the Friedrich Naumann foundation.

Thanks to them, the philosophy of liberty has made deep inroads into the élite of the student community. A college topper recently dropped out of the Delhi School of Economics in order to pursue studies in the Austrian paradigm in Europe. And there are many others like him. Where do they go? Another student wants to apply for a PhD program in America – but cannot find any institution run by Austrians. Étatists rule the "official" academic world in the USSA.

India is a nation of over a billion people and the vast majority is young. They are witnessing the success of the market economy and they seek their future in it. Finding mainstream economics irrelevant, they turn to management institutes. But these teaching shops do not teach them any economics at all. They therefore come out "trained" as managers who cannot fathom how an economy really works. I say this from personal experience. Over the years, I have delivered lectures in many prominent management schools throughout India, and the ignorance on economics they cultivate has never ceased to astound me.

There is thus competitive space in India for a for-profit, independent institute of catallactics that offers a diploma based on its own academic standing, without anything to do with the state. I have long been thinking about this, more as a pipe-dream, but it was the anguish of the student who wanted to pursue Austrian studies in the USA but could not find a suitable institution that really energized me. This is "effective demand." And I do not exaggerate when I say that there are hundreds (if not thousands) like him. There is an opportunity here for Austrian scholars. I am told that most of these scholars today work in mainstream economics departments where they have teaching duties that include teaching much that they dislike. They have to find time off for pursuing their own studies. A new institute of catallactics can employ many such scholars and give them teaching assignments they will enjoy performing. We can build a small temple of learning.

To conclude: India is heading towards capitalism – slowly, but surely, despite political obstacles. There can never be a return to state socialism. Knowledge of catallactics, which is knowledge of how human beings act in markets, and how these markets work, has a definite demand, and this demand will only grow. I am therefore confident that Austrian economics can thrive in the Indian education market, while also contributing hugely to the nation’s knowledge pool.

JK suffers from over-centralisation’

‘JK suffers from over-centralisation’
Sauvik Chakraverti's interview with Greater Kashmir

Arjimand Hussain Talib

Srinagar, Jul 1: Sauvik Chakraverti, an IPS officer, resigned as the Deputy Commissioner, Delhi Police, in 1989 to study higher economics at the London School of Economics. Having developed a strong critique for the failure of Socialist model of development in India, Sauvik served as Senior Editor, The Economic Times, and authored highly acclaimed books like Free Your Mind, 2002; Population Causes Prosperity, 2001 and Antidote: Essays Against the Socialist Indian State (Macmillan, 2000).

On his first-ever visit to the Valley on the invitation of a local NGO, HIMAYAT, to deliver lectures on Population: Kashmir’s Path to Prosperity, Sauvik spoke to Greater Kashmir on a wide range of issues. Excerpts.

In the course of your two lectures in Srinagar on the usefulness of human resources in Kashmir, what impressions did you gain?

I found the students, both boys and girls, very disciplined, eager, curious and intelligent. I feel Kashmir’s future is really very bright.

Our State has had a very limted private enterprise in making productive use of our human resources. Which are the areas you feel we could use them productively?

Every Kashmiri I met is a skilled trader, fluent in English, capable of winning in the globalising world. Kashmir needs free trade to use this resource, more business and less politics.

I remember when you arrived at Srinagar airport you were stunned to see your mobile phone dead..

(Smiles)...All I can say is that in the modern world, to be forced to spend five days without my link to the outside world was extremely frustrating. I hope things change soon.

So are you surprised how people manage things here without mobile phones?

I think when progress passes you by because of State restrictions, it is lamentable indeed.

You have left IPS for academic research and activism. What prompted you to do so?

You see by 1988, I was convinced that socialism was a failure. I applied to the London School of Economics for higher studies and got admission in 1989. My department did not grant me study leave and so I resigned and proceeded anyway. It was the time of Tiananmen Square massacre. Within months, Berlin wall collapsed and within a month Soviet Union was no more. I was convinced that I had done the right thing and since then I have never looked back.

In your many books critiquing socialism’s failure in delivering well in India, you lay a lot of emphasis on developing cities and roads.

Cities are the basis of the civilisation, which began around the Mediterranean with the building of the first cities. Cities are the ant hills of human colonists, because here the division of labour is at a maximum and these are engines of wealth creation. The socialists in India neglected the cities, destroyed all the ones British had built and focussed on a rural utopia that was never realised because it was a false idea anyway.

Roads are important because these enable trade to take place between cities. The socialists neglected this vital area despite being planners. This is really amazing because despots like Roman emperors and our own Shershah Suri built roads.

How you feel about Kashmir’s road connectivity?

Kashmir, like the rest of India, suffers from extremely bad roads. It is vital that this be addressed by inviting private sector paticipation. And if this is left to the State it will only politicise things - as with the Mughal Road - and delay matters endlessly.

The golden quadrilateral is no solution to India’s problems. Our country’s future prosperity critically depends on getting the State out of the inter-city express ways.

What do you think Kashmiri youth should do to improve their condition?

I believe that they should thoroughly study the liberal critique of socialism and convince themselves of the need for free trade and free markets. Thereafter they should totally avoid the politics of empire and focus on urban local self government. As with anywhere else in the world where Socialism entered, Kashmir is suffereing from over centralisation.

An elected mayor and a council, fully responsible for Srinagar and empowered as per the principle of subsidiarity is the first thing Kashmiri youth should struggle for. Then they will be free economically and will be able to prosper without interference.

In your interaction with our Finance Minister what impressions did you gather about the government’s economic priorities?

Although I could note that his government has started doing some positive things on the financial front, I was rather saddened to hear him stress that high on his priority list were the so-called social sectors like health and education.

In both these areas, evidence from allover the country indicates that the State has been a failure. It has denied literacy to the poor and targetted subsidies for the rich. There is a cap of 26 percent on FDI in the insurance sector. If this cap was removed, health insurance will flood the market. Education and knowledge should be freed from State control and immediately as much of it is becoming politicised propaganda. I would advise your Finance Minister to focus on roads. All the roads I travelled on here were terrible. And tax money should be spent on what a private businessman cannot supply on his own.

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 sauvik-antidote.blogspot.com. Comment at theirview@livemint.com

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.