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Archive for July 2010

Devil’s Advocate – I

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There is one thing I don’t understand about the Socialist utopia. Everyone will have food,clothes, houses, the morning Hindu, free IPL tickets etc etc. But think about the average dweller. All around him he sees the same kind of houses. Every month he gets the same pay, same as everyone else, same always. Every girl around is wearing the same damn dress. And of course everyone loves all his fellow men and loves to kiss all their a##es.
Seems heavenly indeed. But I want no part of that. Let me rot in this greedy capitalist hell. I love differences. I appreciate inequality. And more than anything else I always love a good debate. So let me go ahead and start a few on the issues where I feel there is a mind numbing confromity of views. In fact to make matters easier, I would play the Devil’s advocate.
1. The %$%$%$%$  Rupee Spectrum scam:
Before discussing the issue, we need to know the data first. So what is the issue here. A corrupt central minister cost the exchequer nearly 10,000 Cr. No wait it is 30000 Cr. No no 60000 Crore. Well can someone give me a number? No? Of course no. One thing I don’t understand is, who came up with all these numbers? The logic seems to be, now that the government has garnered for itself funds to the tune of 67,000Crores from 3G allocation, if it had done the same for 2G too, we would all have been richer by some 60,000 Crore. (Again this linear reverse calculation of possible price is senseless )
Right?
Wrong. We would have been all the more poorer. 3G is going to take a real long time to establish itself in India and even if it does it is going to be quite costly. All the mobile operators have emptied their pockets out for the auction. They had to. Business logic dictates that a failure to get the lucrative portion of the spectrum, however high the cost may be, would convert into a huge loss in market share. So most of their bottomlines are hurt. Now who is going to bear these costs ultimately? The consumer of course. The competition towards zero tariff that we are all enjoying in voice and messaging services may never happen or might take a long time to happen in 3G services. Companies will try to maintain a lower bound. But there are still a dozen players in the market and competition is inevitable. So they would look to cut costs in other areas. One possible effect could be a freeze in expansion of infrastructure. This again would only hurt the consumers.
Oh my God. Why are you whining so much like you own these companies, I hear you say. Doesn’t government get all the money. Isn’t it our money? Well you wish.
How can one be happy about wealth being transferred from the private economy to the government? The only aim of the politicians is to win the next elections while making some money for themselves. So a part of these funds would disappear into a black hole and the rest would go just to bridge our deficit. Our profilgate, over spending politicians just got a relief for themselves, without changing their habits a bit. And we are celebrating that our deficit is wiped a little. But at whose cost?
Do I have a solution? I hate proposing solutions. I believe it is immoral to tell others what to do with their lives. But I would just postulate what would have happen if a free market lover ( definitely not our current Prime Minister ) comes to power. He would decide that the government played no role in the creation of wireless technology.  So it is wrong to claim the wireless spectrum as it’s property and levy ownership tax for it. The dozen or more telecom companies would then be in a bit of a spot. How to settle the ownership claims among themselves. Well they would have probably formed a consortium (like FICCI ) and worked out property arrangements among themselves through contracts. Any company that owns a part of spectrum would pay all others some amount for their sacrifice of ownership. In this way all the funds would have stayed within the telecom industry and no one would have lost at net. But I am just theorising ( a fancy word for dreaming ). One or other of our businessmen would have sent a delegation to Delhi complaining of foul play by  competitors and requested the government to intervene. Isn’t it more important that your rival suffers, even if it means you suffer a bit too?
(Check Swaminathan Iyer’s views on this topic here. He is my favourite Indian economist- one who actually understands economics as something more than statistics)
2. A tale of two brothers:
Media loves villains. And our political establishment keeps providing them some. Two brothers from Karnataka are the latest and the scariest of the lot. Here are two corrupt politicians who are stealing all our natural resources. If only we could get a few honest bureaucrats to kick them out, our country would be richer.
Right?
Well exports are a very funny issue in economics. Sometimes people bereave that the country is exporting less than it imports, we are becoming poorer etc. At other times people complain about resources leaving the country as exports. Both these views have a fundamental flaw. They view the country as one big grocery store. I would love to discuss this particular notion in detail. But in a latter post.
Now to the issue at hand. I am not a paid agent of these people. I do not know them. I have never visited that place and hell I have never been to a mine. And that’s precisely my point. People may be right in saying that these two men have no right over those lands. True. But you and I don’t either. How can we complain that someone is stealing something from us, when we don’t even know what the thing is. To say that all ores are national resources is simply, well to put it mildly Socialistic ( Atrocious is the correct word ). Why should anyone particular resource be classified as national resource? How would you like it if your industry were declared a national resource and all those who profit from it declared criminals. Now don’t say, this is different. Iron ore is a raw natural resource. It is crucial to safety, etc etc. You can come up with any reason you want if you have passed judgement beforehand. Recently Tamilnadu government nationalised ( Yes, that’s the word ) all the schools. How does that sound?
So are these politicians faultless? Most probably not. With the huge power they enjoy, they could have scared competitors out of business. Illegally appropriated someone else’s property etc etc. But are these the reasons they are being hounded? No. Do the rival politicians who hound them want to correct these wrongs. No they want to nationalize them so that these resources will forever stay the personal fiefdom of their sons and daughters. Infact the prime reason why only corrupt people flourish in mining business in this country is the immense number of regulations. We have denied private players a proper chance for decades. It is foolish to believe that in the absence of an owner, a property will stay in public hands. If you believe that, you are under a socialist delusion. Any so called common property is always exploited by the most powerful man around. So nationalization simply transfers wealth from private players who frugally administer the wealth, to corrupt men who do not care heck about it. Why would these politicians care not to mine every tiny bit out without saving for the future, when they know that the mine is not theirs.
In all the history of the world no one has ever washed a rented car. Just remember that.

(To be Continued)

Written by Surya

July 27, 2010 at 4:25 am

Sometimes a great nation

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It is not midnight in America yet. So I guess I can very well make this 4th of July post. What better day to start a blog on free markets than the day America was born.
Someone said this – “There is a word sweeter than mother, home or heaven. That word is liberty.”

I know another word – America. A word that has given hope and inspiration to millions of frustrated souls around the world. Whenever the rulers of their land became predators, whenever their life and property were no longer theirs, people always had one escape – a flight to the land of opportunities. America was the exceptional nation, a nation devoted to a great cause, an island of hope and joy amidst the hell that the world was becoming. It was indeed a paradise on earth. It was.
This post will not be a commentary on the present state of America. It will just be an attempt to remind myself and the world around what the idea of America means to us. Some people seem to relish America’s fall from grace. I have a lot of issues with the way America functions today. But to discredit the idea of America itself? The day the American dream is finally forgotten, will be the day when we would have hit the final nail in the coffin of civilisation and prosperity. It will be the day when finally barbarians would have run amok on our cities.
On this day in 1776 was born the American dream. This was the day the declaration of Independence was ratified by the Congress. No other document before or after has so beautifully captured the essence of human struggle for liberty.

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed. That whenever any form of government becomes destructive to these ends, it is the right of the people to alter or to abolish it, and to institute new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness.”


It is hard to believe that this was written two hundred and fifty years ago. Freedom is still a radical idea to many. To constitute a nation with freedom as the underlying fabric required great courage, imagination but more importantly enormous restraint on the part of the founding fathers. These were a group of men who had just won a war and had the immense trust of their people. But they had the farsight not to take this trust for granted. They did not misuse this trust to create a government that would have given them personal profit. Nor did they impose their vision of utopia on the people like the other bloodier revolutions did. They were wise enough to understand the best government is the least government. And they codified this into a written document to protect generations to come. Note the crispness of the words and the succinctness of the message. The document declares that men are created equal, thus shunning all the elitist and aristocratic impulses that characterised Europe’s rulers then. But the founding fathers were also careful on what the word equal meant – Equal before law, not the monstrous idea of compulsive equality that other latter day revolutions imposed on their people. The words are very clear – every man has an unalienable right to his life, liberty and pursuit of happiness. The keyword is pursuit. Each person has to pursue his own happiness. No one else has the right to hinder your pursuit as long as you don’t hinder someone else’s. All of America’s prosperity was due to this single line. People are free to profit from their dreams. Call it whatever you want – free market, capitalism, laissez faire. The idea is simple, what I do is none of your business as long as it doesn’t touch your nose. If America is to stay the land it’s founding fathers meant it to be, then it can only be a capitalist nation . And what role does government play here then?Again it is very clear, governments are instituted among men only to secure these rights. In other words government’s only business is to protect the people’s right to their life and property. They have made it very clear that conducting business is not government’s business. And the framers also make it very clear that a government is just only as long as it has the consent of the governed. This leaves no room to doubt that the framers did not intend for America to become an imperial power.
The declaration is an exceptional document that attempted to create an exceptional nation. And it did indeed serve the nation well for several years. A century later, America had become one of the most proserous nations on earth. And it derived it’s prosperity from the sense of liberty, innovation, competitiveness that characterised it’s people. The American entrepreneur was a special breed of mankind. He was the ultimate ideal of manhood. He was the one who took challenges head on. One whose spirit of resilience was matched only by his thirst for freedom. For the first time in human history, men from ordinary station grew to extra-ordinary prosperity within a life time. All this was achieved peacefully, without the violent wars that characterised Europe. At the dawn of the twentieth century it would have seemed to the average American that he was in God’s own land. No they did not have air cooled apartments we have today. They did not have fancy cars to drive around. They did not have TV, they did not have internet. But they had one thing I am not sure Americans have today- Freedom. Freedom to lead their lives as they pleased. People did not emigrate to America then to get free food, free lunch or free health care. They went there because they knew that America was the only nation on earth where any person with a great idea in mind, a few saved pennies in pocket and a burning ambition in the stomach could make it big in life. And many did. There were innumerous rags to riches stories. And prosperity was not confined to the best among men. America’s was a unique system where a person could get prosperous only be making others prosperous. Ford became rich by bringing automobiles within the reach of common man. Transport was no longer a luxury. Edison was not a lonely scientist working on a stupid mathematical problem. He was a prolific inventor who profitted by giving his countrymen a new product every day. The Statue of Liberty stood proud and tall knowing that she was indeed the beacon of hope and aspiration for millions. At that point of time, any person who had said that the twentieth century would be a century of wars, mass murders, endless expansion of government and growth of horrific ideas like Communism and Fascism would have been dismissed as a crackpot.

A decade later, the first world war would break out. America would drag itself into the conflict. Lenin would begin the mad experiment in Russia. A few years later Hitler would rise to power in Germany.  Thirty years later  New Deal would have been put in place in America that would send a tailor to jail for daring to price less than his competitors in the free land. But that is another story.

Written by Surya

July 5, 2010 at 7:57 am

Posted in America, Liberty