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 sauvik-antidote.blogspot.com Comments are welcome at theirview@livemint.com

On capitalism and the State

On capitalism and the State by Sauvik Chakraverti
Posted: Mon, Nov 30 2009. 9:17 PM IST

India’s bureaucracy is wasteful and cumbersome. Instead, we need a truly capitalist public administration

The idea of the “State” is a metaphysical concept, like the Pharaoh. Classical liberals preferred to talk about “government”, that too “civil government”. This was the subject of John Locke’s two treatises of 1690, where he famously said: “Where there is no Property there is no Justice.” In India, we just have our State; we possess nothing that could be called “civil government”. Our elite bureaucrats are part and parcel of the huge State Failure we see around us, and all the corruption. As we move away from central economic planning towards capitalism, we need to think of what kind of State as well as what kind of government we must install.

All the great classical liberals, from Locke to Adam Smith to Frederic Bastiat to Ludwig von Mises, with the sole exception of Gustave de Molinari, believed that a civil government was not just necessary but also vital. But such a government, to them, existed only to act against the lawless, and that too in full accordance with the “due process” of law. Such a law-abiding government comprised magistrates, policemen, judges, jailors and hangmen—nothing more. Yet, in India today, we also need certain services to be provided by the local government—services such as garbage removal, for instance. How would such a service be delivered in a capitalist society?

Capitalist public administration is based on the principle that the government does not “produce” the services it “provides”. Thus, it opposes bureaucratic organizations in this field. If we look at how garbage collection is being provided today by the socialist Indian Administrative Service (IAS), it is all bound up in bureaucracy. It sets up a “department” with many rungs, recruits thousands of sweepers, buys hundreds of trucks, and so on. There is probably a very big jharoo tender—jharoo being the Hindustani word for broom.

Under capitalist public administration, the entire department would be sacked. There would be just one civic official who would “contract out” the work to private companies. Thus, the market would “row” the boat; the civic officials would only “steer” it. This manner of thinking about public administration is called “new public management”, or NPM. This is now a major movement in practical public administration. There have been many successful experiments in NPM worldwide. These are not particularly new ideas either; they have been with us from the Thatcher years—what she called her “next steps programme”. Ideas of “education vouchers” and “food stamps” also fall within the ambit of NPM solutions—though I myself prefer to stress the importance of garbage collection.
In the West, NPM came to the fore at a time when government budgets needed controlling. Thatcher’s 3Es slogan for her government was “economy, efficiency and effectiveness”. We in India, too, face a spiralling government deficit. In all our cities and towns, huge bureaucracies have been set up which contribute nothing towards improving our lives or our urban environs. These must be sacked and the system of government service delivery drastically reformed. Further, if we save money by contracting out garbage collection, we will have more left over for building roads. In my book, roads and garbage collection must be top priority for all urban local governments—and both must be provided non-bureaucratically.

In my honest opinion, the IAS officials are part of the problem. Further, they control all the academies of public administration here. They are the practitioners; they are also the academics. This is intellectual incest. And they are quite clear as to what kind of ideas they will oppose: After I lectured a group of them on NPM, one IAS officer told me, nonchalantly: “We are knowledge-proof”. Theirs is one huge collective effort to ignore principles, to ignore teachings. They refuse to see their own failures. And they want to continue practising their witchcraft upon us forever. Mention must also be made of land records—the first basic task of any district administration, a task that is no longer being performed. We no longer have “a law of the land”. Our socialist public administration is, therefore, in dire need of drastic reform.

The socialists erected the huge big centralized State—while neglecting “government”. They worshipped their Pharaoh and enjoined upon all of us to do the same. We now need to demolish this metaphysical idol and think in terms of urban local self-government, one that is non-bureaucratic, economical, efficient and effective. We need to think in terms of “subsidiarity”—wherein the local government handles most things, and the central State handles just defence and international relations. In other words, we need to invert the pyramid.

Of course, while IAS sticks its head in the sand, the market is marching ahead. There are many advertisements these days of entirely new cities being built by private developers. In these “company towns” there will be no elections, nor any bureaucracy. There will only be city managers using NPM—because this is cost-effective, provides the required services excellently and maximizes profits for the developer. Competition between cities will surely result in failure for the IAS-run cities. Perhaps then they will learn.

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

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.