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FREEDOM, NOT CONTROLS, WILL END

GRAFT
ARVIND KUMAR | ARUN NARENDHRANATH | Mon, 2 May 2011-05:00am , Mumbai , dna

The governments accession to the demands of those who want to draft the
proposed Jan Lokpal bill is not a cause for celebration but for alarm. This action
amounts to a promise by the government to abdicate its duties and transfer its
powers to a small group of unelected people. The motives of those demanding
that NGOs have a say in the affairs of the country are questionable, and will result
in more rules and bureaucracies, making it counterproductive to the cause of
rooting out corruption as the new setup will inevitably descend into another
scheme replete with corruption. The key to ending corruption is not more
controls some of which will be concentrated in the hands of a chosen few but
a reduction in controls.
For several decades, the term civil society has been used as a euphemism by the
Marxist and Maoist varieties to refer to one of their own kind. This groups
proposed anti-corruption draft allows for foreign interference in Indian affairs.
The demand to include Nobel Prize winners of Indian origin as part of the
proposed de facto courts, if put into practice, will potentially allow citizens of
other countries to act as judges, and who could, at least in theory, owe allegiance
to forces inimical to India.
The demand to include Magsaysay Award winners and Nobel Prize winners, if
implemented, will allow foreign powers to determine who would control law
enforcement in the country. The Magsaysay Awards organisation is based in
Philippines, ranked as one of the most corrupt countries by Transparency
International and several notches below India. The award is sponsored by the
Rockefeller Foundation, which was once involved in funding the infamous

eugenics programmes. The Nobel Prize Committee was caught in a corruption


scandal when its members went on an all-expenses paid trip to China.
Even as ordinary Indians understand that secrecy is the cloak behind which
corruption occurs, the anti-corruption draft overlooks the fact that the selection
processes for both the Nobel Prize and the Magsaysay Awards are secret. In
recent years, the Magsaysay award has been given to an unusually high number
of Maoist sympathisers from India. It is well known that international awards are
given to groups that lobby for them. Once they win, these groups gain an
advantage as the recommendations of past winners carries weight in selecting
future winners.
Every situation in which the government redistributes the countrys wealth to a
few opportunists is made possible by the concentration of power in the hands of
the government. The fact is that corruption in India is systemic; it isnt merely the
corrupt nature of a few individuals. A system that grants too much power and
control to the government invariably deteriorates into a corrupt system when
corrupt people take over the system and perpetuate their rule. Corruption all over
the world stems from government control over the vast majority of the people
while granting favours to a few well-connected individuals. In every act of
corruption, at least one party involves a government or its agent.
The 2G spectrum scam could have been avoided if the government had not
exercised control over the frequencies, but had applied common sense property
laws and the principle of homesteading to determine ownership of a frequency in
a specific geographical area. Government control of frequencies is based on the
myth that frequencies are a scarce resource. The reality is that government
control and regulations are the reasons for the scarcity. And even if we grant for
the sake of argument that frequencies are a scarce resource, government
interference only exacerbates the problem.

For example, as long as the government controlled telephone allocation,


corruption was the norm. Once the private sector entered the arena, people not
only got telephones in quick time, but also benefit from discounts and
promotional offers given out by operators.
Thus, corruption can be removed with less control and more freedom. Only
unfettered free enterprise can eliminate corruption. Even in market-based
economies in which corporations receive unfair favours from governments, do
note that one party is the government.
To remove corruption, we must not only dismantle the socialist institutions and
other laws that create unnecessary restrictions, but also guard against vested
interest groups that seek to seize control of Indias polity and channel public
money into their coffers.
Unless we keep watch, we might also see foreign groups influencing Indias
politics. It is for us to remain vigilant and prevent our freedoms from being
further usurped, for, as it has been stated many times in the past, the price of
freedom is eternal vigilance.

INDIANS INCLINED TOWARDS FREE


ENTERPRISE
ARVIND KUMAR | ARUN NARENDHRANATH | Mon, 27 Jun 2011-08:00am , Mumbai , dna

The Congress party could be divided into three distinct factions based on their
views on the economy: Members of the first group who formed the majority
were called the capitalists and included leaders like Rajendra Prasad, Sardar
Patel and C Rajagopalachari.
This month 20 years ago, India embarked on the path of economic liberalisation. Since
then, despite change of governments with parties of different ideologies ruling, the
country has not swerved from liberalisation. In this eight-part series, the authors explore
the contemporary history of the Indian economy, starting from the discussions of the
1940s to what economic system the country should follow to the present. In this, the first
part, the authors describe the economic debates during the 1940s.
The subsequent parts will be published every fortnight.
One of the great myths about India is that it chose the path of socialism because that was
the prevailing thought in the years after the British left India. In those days, a vigorous
debate raged in India about the merits of private enterprises and the demerits of a statecontrolled economy. Those in favour of the free enterprise system vastly outnumbered
their opponents.
This should surprise no one as Indians had demonstrated remarkable wisdom in
consistently opposing state-controls imposed by the British. Indians had protested the
regulation of industries such as the textile industry, opposed taxes on salt and other
goods, opposed the setting up of the Reserve Bank of India, and also objected to linking
the rupee to the British currency that was not backed by gold.
The Congress party could be divided into three distinct factions based on their views on
the economy: Members of the first group who formed the majority were called the
capitalists and included leaders like Rajendra Prasad, Sardar Patel and C Rajagopalachari.

The second group consisted of the socialists like Ram Manohar Lohiya, Jai Prakash
Narayan and Acharya Kripalani. The third group, the Marxists, consisted of just
Jawaharlal Nehru and a couple of minor politicians. Although Nehru later called himself
a socialist, he was labelled as a radical and a Marxist by the press.
Although the term socialist is a euphemism for communist or state-control, the
socialist wing of the Congress was harmless and limited itself to wearing khadi and
dreaming of eliminating all misery by serving the poor. In their world, the economy
would not be state-controlled, but would contain cottage industries run by cooperative
societies. This group vehemently opposed the communists and revolted against Nehru
when he attempted to define the economic policy of the Congress.
During this period, India had industries that had been developed by Indians despite the
British virtually destroying the Indian economy. Walchand Hirachand had started an
aircraft-manufacturing factory that supplied state-of-the-art aircraft to the British during
World War II. Other industrialists had built dams to generate power. Earlier, back in the
19th century, the Indian tea industry held an edge over the Chinese industry as Indians
used steam-based technology in the manufacturing process.
It was thus natural that Indians were in favour of a free-enterprise system and found the
word socialism to be anathema. Rajkumari Amrit Kaur, who was the health minister,
called for supporting the existing or future private enterprise which has nothing but
service to our people as its goal and stated that any other attitude would be both narrow
and unwise.
The debates were not limited to the fields of business and politics: An editorial in The
Hindu in the early 50s quoted Friedrich Hayek when it described the progressive
socialisation of industry as the road to serfdom. A strong proponent of the free enterprise
system was the celebrated physicist, Sir CV Raman, who argued, We must largely build
upon the intelligence, energy and enterprise of individuals, which can only be
forthcoming if they can hope to reap the results of their personal efforts. I do not think
state enterprise as such is likely to be very

successful in Indian conditions. When he visited


the United States, he attributed the prosperity and efficiency of the country to the system
of free and unfettered private enterprise.
The first test of how the debates would translate into action came with the Industrial
Policy Resolution Act of 1948, which set the tone for Indias economic policy. Much of
this act was drafted by the economic committee of the All India Congress Committee
(AICC) and the few proponents of nationalisation managed to push their agenda. When
the fight came back, it merely resulted in a feeble compromise with a few sectors being
marked for nationalisation and a few others being granted a breathing time of 10 years
before they were taken over by the government. The proponents of nationalisation called
the 10-year breather as a sell-out to the capitalists.
However, the events that panned out over the next few years showed that the compromise
was really a case of allowing the proverbial camel to get into the tent. The freedoms of
Indians were gradually chipped away over the next decade. As the state put itself on the
path to wielding total control over the people, it breached its promise of gaining freedom
for India from the British.

ARVIND KUMAR & ARUN


NARENDHRANATH: THE MISERY OF
SOCIALISM
ARVIND KUMAR | ARUN NARENDHRANATH | Mon, 8 Aug 2011-12:30pm , Mumbai , dna

This is the fourth part of an eight-part series on the contemporary history of the
Indian economy.
Fabian socialists claimed they wanted to achieve the goals of communism in a
gradual manner without a bloody revolution. By the 1970s, the Fabian socialists
had kept their promise in India.
Unlike the communists, they took control of the Indian economy without
bloodshed but the effects of their rule were similar to those under many
communist regimes.
While the communists in the former Soviet Union executed millions of people,
the hundreds of millions of deaths due to socialism in India were not bloody in
nature but resulted from infant mortality, poor health care, undernourishment,
and in some cases, starvation.
The inspiration for Indias economic system was the Soviet Union and India
implemented Lenins idea of the state controlling the commanding heights of
the economy. Indias fourth Five Year Plan declared, ...the public sector can be
expected more and more to occupy the commanding heights of the economy.
It alone would be in a position to undertake investments of the requisite
magnitude in such industries of vital importance to us as steel, machinery,
machine tools, power generation, ship-building, petrochemicals, fuels and
drugs.
Leaving aside the fact that the inability of the private sector to invest freely in
certain sectors was due to the restrictions placed by the government, there were
many striking similarities between India and the Soviet Union.

The concept of waiting lists for getting telephone connections or to purchase a


vehicle originated in the Soviet Union. This idea found expression in India after
Indian bureaucrats went on study tours to the Soviet Union and were highly
impressed by the system. Just as in the Soviet Union, many activities related to
trading became crimes.
Farmers were routinely arrested for forward trading on the charge of gambling
and it was not uncommon for the authorities to impound airplanes on the
grounds that some passenger was in possession of gold.
Expectedly, these policies damaged Indias economy. However, instead of
admitting their mistakes, the rulers turned against the people of the country.
Indira Gandhis Emergency can be compared to the restrictions of freedoms in
the former Soviet Union. The only consolation, as the Fabian socialists had
promised, was that there were no mass executions in India.
By the time Indira Gandhi had consolidated her position, she had changed the
political landscape of the country to such an extent that every politician claimed
to be a socialist. When the Janata Party came to power, it pursued socialism with
great zeal. By the end of the 1970s, support for the free enterprise system had
completely disappeared.
Apart from the politicians and bureaucrats, people in the academia too were
responsible for the sorry state of affairs. They believed in the scientific
socialism of Friedrich Engels and came up with models of the economy which
were incorporated into Five Year Plans. Indira Gandhi extolled the virtues of
these methods and stated, My father often said that planning is the application
of science to national problems.
Any attempt to model the economy was doomed to fail, but the politicians and
professors always found excuses for their failures. Sometimes they blamed the
people as the population of the country exceeded the number used in their

calculations and their models did not incorporate the simple idea of removing
controls to increase production and meet the demands of the people.
At other times it was the fault of the foreign hand that was out to destabilise
India. They even blamed the Hindus for the socialist rate of growth.
Yet another feature of Indian socialism that paralleled the Soviet system was
corruption. With a bloated bureaucracy and everything in short supply,
government employees with any sort of control extorted money from the citizens.
However, the ruling class had its own privileges. The bureaucrats and politicians
in the Soviet Union had their dachas and their Indian counterparts had their
bungalows. They granted themselves many other perks that insulated them from
the hardships faced by the rest of the society.
Socialism had succeeded only in creating poverty, spreading misery and
institutionalising corruption. Life in India became harsher under socialism.
However, as George Orwell wrote in Animal Farm, his satire on communism, the
rulers always came up with lists of figures, which invariably demonstrated that
everything was getting better and better.
Ironically for the Fabian socialists, the eventual rejection of communism and
socialism would mirror their description of the difference between the two
systems. While many countries would overthrow communism in a violent
manner, India would move away from socialism without bloodshed.

MANMOHAN SINGH'S ROLE IN INDIA'S


ECONOMIC RUINATION
ARVIND KUMAR | ARUN NARENDHRANATH | Mon, 22 Aug 2011-10:15am , dna

In the fifth of their eight-part series on the contemporary history of the Indian
economy, the authors focus on the excessive spending of the 1980s that
eventually led to a balance of payment crisis.
By the 1980s, the Indian government had become dependent on foreign aid and
loans. If it was not the US, UK or the former USSR that the government
approached, it was the World Bank or the International Monetary Fund.
These loans made it worse for the economy as the Bretton Woods system had set
up the World Bank and the IMF in such a manner that the former colonial
powers would benefit from the resources of the developing countries.
Aid was always tied aid and was contingent upon purchasing goods and services
at arbitrarily high prices from specific American and European corporations and
non-profit groups. Many times, these goods and services were of little use and
even frivolous in nature.
Thus the corporations and non-profit groups in the West received the money
from aid programmes while the recipient nations received only goods and
services. However, the recipient nations had to repay these loans in cash to the
IMF despite IMF not being the source of the money. This was an onerous task
since the nation never received any money that could be used to invest and grow
the economy.
In addition, the IMF always violated the principles of the free-market system and
forced the recipient nations to hold their interest rates and exchange rates at
artificial levels that stifled economic growth but ensured that the interest paid to
the IMF had a high value.

The conditions removed all risks for the corporations benefiting from the
programmes and at times even forced the recipient government to use public
funds to guarantee profits for the corporations. These measures typically
devastated the economies of the countries that received IMF loans.
Many times, American politicians pressured the unwilling leaders of developing
countries to sign up for IMF loans as they viewed the loans as opportunities to
transfer American taxpayer money to certain corporations.
Thus the Bretton Woods system merely legitimised the 18th century
mercantilism with the addition that the American taxpayers as the major donors
to the aid programmes were also victims of the system.
The economists who advised the IMF and the World Bank claimed that excessive
spending on imported consumer goods would make India a wealthy country and
that India should spend beyond its means. Professors from Harvard University
and Columbia University claimed that spending sprees, inflation, being in debt
and running up deficits were the keys to economic prosperity.
The Planning Commission followed these prescriptions during the periods of the
Sixth and Seventh Five Year Plans and India saw high inflation and an influx of
consumer goods. Manmohan Singh, who as the governor of the Reserve Bank of
India was responsible for the inflation, was the secretary of the Sixth Plan and
headed the Seventh Plan.
The Sixth Plan promised to tax, ban, control and regulate a number of economic
activities and asserted that the commanding heights of the economy must
continue to remain with the public sector. In the document containing the
Seventh Plan, Manmohan Singh called the planning process a precious gift of
Pandit Jawaharlal Nehru to the people of India. Predictably, the socialist system
combined with the binge spending led to a balance of payment crisis.

The first signs of the crisis were visible when Indias current account went into
deficit after the the Sixth Plan. By the end of the Seventh Plan in 1990, a
desperate India sought yet another IMF loan.
It would be wrong to blame only the Bretton Woods organisations and their
partners for preying on conditions favourable to them.
The conditions in India had been created by politicians who were willing parties
to the transactions with the IMF and who pursued socialism with a great zeal.
Rajiv Gandhi as prime minister continued the socialist policies of his mother and
his grandfather and stated at the Qinghua University, The focus of our socialism
is the uplift of the poor, succour to the weak, justice to the oppressed and
balanced regional development. To attain these ends, we believe the State must
control the commanding heights of the economy...
As the 1991 elections approached, the manifesto of Rajiv Gandhis Congress party
promised another heavy dose of socialism. As India resigned itself to its plight, an
unexpected sequence of events would propel Narasimha Rao to power and he
would then set in motion the changes in the countrys economy.

HOW INDIA'S ECONOMY TOOK OFF


ARVIND KUMAR | ARUN NARENDHRANATH | Mon, 5 Sep 2011-09:15am , Mumbai

The authors describe the details of the economic reforms that changed India.
While many people have credited prime minister PV Narasim-ha Raos vision for
Indias economic reforms, others have claimed that the government was merely
following the diktats of the IMF. To understand the reform process, it is
important to note that it consisted of two prongs liberalisation and
globalisation. The ministry of industries handled liberalisation, and the finance
ministry took care of globalisation. The policies related to globalisation were
based on IMF conditions and were in the interests of IMFs partner firms.
Manmohan Singhs first speech as the finance minister focused so heavily on
pleasing foreign firms that he mentioned the words foreign or international
over 30 times while there were no references to benefits for India. His sole
reference to the removal of licences in India was related to removing import
licences to help foreign firms enter the country. As a surprise inclusion in the
cabinet, Singh was clearly unaware of Raos plans to move away from socialism
and expected to merely implement the IMF policies. In his budget speech, Singh
declared, Markets can only serve those who are part of the market system. We
need direct credible programmes of direct government intervention focusing on
the needs of these people.
Among other enablers of the globalisation process were Raja Chelliah and
Jagdish Bhagwati. Chelliah helped restructure the tax system and was working
with the IMF when the Rao government came to power. He advised the
government to expand the tax base when people were already overburdened by
various taxes including the notorious inflation tax. The aim was to service foreign
debt, a euphemism for paying IMF.
Bhagawati of the Columbia University openly represented the interests of
international organisations and equated free trade with trade managed by these

organisations. At one time, his writings on property rights, inheritance laws and
appointments in the private sector had read like inflammatory communist
pamphlets, but he changed his tune after he started working for mercantilist
organisations like the IMF, General Agreement on Tariffs and Trade and WTO.
He claimed that holding ones savings in gold was a social waste and opposed
people buying homes. Instead he said India needed to import consumer goods
from the West. Even his suggestion to privatise PSUs was dubious as his aim was
to raise money to pay foreign organisations.
The cynical policies of the globalisation process resulted in several controversies.
One policy guaranteed 16% profits to several foreign power companies that
invested in India. Another policy attempted to impose unfair patent laws upon
the country by forbidding farmers from sowing seeds from the previous years
harvest of certain crops and mandating them to purchase seeds on an annual
basis from MNCs that were World Bank partners.
The firms in the West would also own the rights to turmeric, neem and other
Indian food and medicinal items. Sanity returned only after farmers destroyed a
unit of Cargill Seeds.
Meanwhile, the liberalisation agenda was starting to take off under Rao, a shrewd
politician who had taken control of the Congress. He retained the industry
portfolio and the new industrial policy removed the requirement for many types
of licenses.
The first effects of the liberalisation program soon became visible across the
economy. With new competition, the Indian automobile industry quickly
improved the quality of its vehicles. The software industry became an oft-quoted
example for positive effects of the lack of controls. It benefited by both
liberalisation within India and real free trade at the global level that was not
under the management of international organisations. Soon, other sectors
followed suit.

While Rao took the first steps in reforming the economy, the process intensified
under Atal Behari Vajpayee, leading to the widespread improvement in the lives
of Indians. These changes showed that removing controls at the national and
international levels were beneficial to the economy. More than 50 years after the
British left the country, the economy had finally taken off and India had arrived
on the world stage.

THE BRITISH HANGOVER THAT


DEVASTATED INDIAS ECONOMY
ARVIND KUMAR | ARUN NARENDHRANATH | Mon, 19 Sep 2011-08:00am , Mumbai , dna

The authors compare the policies of various Indian governments with the
policies imposed by the British.
In the seventh of their eight-part series on Indian economys contemporary
history, the authors compare the policies of various Indian governments with
the policies imposed by the British.
When India fought for freedom from British rule, much of the opposition was in
response to the economic policies imposed by the rulers. These related to
regulations on industries, taxation, the controls on the monetary system and
activities related to trading.
In response to the destruction of Indias textile industry and its conversion into a
supplier of raw materials for the industry in Britain, Indians protested by burning
clothes imported from Manchester. The taxation policies of the British too led to
repeated protests by Indians. One of the most famous protest movements related
to taxes was the opposition to the tax on salt.
After the British left India, it was hoped that India would free itself by
dismantling the British system. Instead, the Indian government took over the
existing institutions and continued with the British policies. In many cases, the
Indian government intensified the controls put in place by the British and made
life worse for the people.
Within a decade of taking over the reins of power, the Indian government
targeted businesses and took over many industrial sectors. The government also
competed against traders by participating in trading activities. Businesses were
regulated to such an extent that it was impossible for the business community to
be productive. Policies that banned the Indian industry from manufacturing

weapons while the government imported arms and other military equipment
from British firms were a continuation of the policies that benefited the British
industries at the cost of Indian industries.
Various Indian governments have fared no better on the taxation front. They
have introduced a variety of taxes and have set prohibitively high tax rates. When
the British introduced a 50% excess profits tax on businesses and a super tax
on individuals, they faced protests. Yet, the corporate tax reached a whopping
63% in the years before India began the process of liberalising the economy.
Under British rule, traders objecting to the taxes wanted to know what the British
had done for Indian traders that a tax on traders could be justified. This question
is highly relevant today. While the government claims that it collects taxes for a
variety of purposes including supplying drinking water, providing uninterrupted
power, and clearing garbage, it has failed on all these fronts. Just as in the case of
the former British rulers, the taxes collected by the Indian government are used
solely for the aggrandisement of the ruling class. Yet, politicians and bureaucrats
do not hide the fact that their aim is to maximise the revenue they generate for
themselves.
Indias monetary policies too left much to be desired. Under British rule, there
were persistent demands over the years from various quarters including Gopal
Krishna Gokhale and Mohandas Gandhi to link the rupee to gold. When the
British proposed setting up the Reserve Bank, they faced vehement protests from
the members of the Swaraj movement. Instead of reversing the British policies,
the Indian government has continued with the Reserve Bank of India and used it
to impose inflation on the country. Its measures to confiscate gold from the
people and force a dependence on the paper currency of the government leave
people with no escape from inflation leading to the value of their savings being
diminished. These policies are influenced by the West and the justifications for
them come from universities in Britain and the US.

Indias relationship with various international organisations is another aspect


that is detrimental to the country while benefiting Britain and other western
nations. Despite banning the use of gold as currency within India, the
government has used gold in its transactions with the IMF. This is identical to the
British policy of demonetising gold for Indians while hoarding it up in Britain.
Today, the IMF is an organisation that allows only an European to be its head.
A similar law under the British would have been criticised, yet, Indian politicians
accept Indias subservient role in its relationship with the IMF.
Just as the British policies devastated the Indian economy, various policies of the
Indian government too have contributed to the impoverishment of the Indian
population. In the recent past, Indias steps on removing regulations on
industries have been in the right direction. However, it still has a long way to go,
and for it to truly prosper, it needs to tackle the major issues related to taxes,
monetary policy and the relationship with international organisations that
indirectly control various aspects of the economy.

INDIA MUST EMBRACE UNFETTERED


FREE ENTERPRISE
ARVIND KUMAR | ARUN NARENDHRANATH | Mon, 3 Oct 2011-09:30am , Mumbai , dna

India has been a victim of various economic systems imported from the West.
In the final part of their eight-part series on the contemporary history of the
Indian economy, the authors make recommendations for the Indian economy.
The earlier parts compared the policies of various Indian governments
between the 1940s and the 1990s with those under the British rule.
India has been a victim of various economic systems imported from the West. It
has pursued various aspects of communism, socialism, Keynesian economics and
the monetarist theories despite their failure elsewhere. India must learn from its
and other countries mistakes and make appropriate changes to strengthen
its economy.
Among the first steps, India must dismantle the Nehruvian establishments and
get rid of the planning commission along with the five-year plans. It must also
aggressively pursue the deregulation of industries and completely eliminate the
license raj that creates unfair monopolies while excluding smaller businesses
from participating in the economy. Indias experience shows that sectors with
fewer regulations thrive while those with many regulations stagnate and become
mired in corruption. Jawaharlal Nehrus so-called land reforms that retarded the
growth of the agricultural and housing sectors too must be reversed and the
government must respect everyones property rights.
India must also avoid the mistakes of the West and must not set up welfare
systems like government-controlled social security schemes, education subsidies
and free healthcare. Americas government-run social security scheme is on the
road to failure and has rightly been likened to a Ponzi scheme. A scheme run by
the private sector without the government forcing individuals to participate in it

will be a fairer and more efficient method as all losses will be limited to voluntary
participants in the plan.
The policies related to education in the western countries too have led to wasteful
spending as bloated universities use massive grants from the government to
generate research papers with trivial ideas and dole out degrees in frivolous
subjects like gender studies, womens studies, journalism and economics. To
prevent this scenario and in the interest of fairness, the Indian government must
abrogate all laws that make college degrees a requirement for any job and instead
allow the market to make this determination.
The socialised healthcare systems too have failed in the West. In a reversal of
roles after India liberalised its economy, patients from Canada and UK seeking to
escape their systems that keep them on waiting lists for several years now flock to
Indian private sector hospitals for surgeries.
The Western fiscal policies too are flawed and emphasise consumption and treat
debts and deficits as necessary components of a strong economy. These ideas
have predictably led to the Western economies becoming unstable and their
currencies rapidly losing purchasing power. The Indian government must change
its ways and align itself with the Indian ethos which stresses prudent savings.
Indians have historically converted their savings to gold as they distrust the
currency issued by the government. The government has retaliated by regulating
the possession and exchange of gold.
The government must respect the rights of the people by getting off the fiat
currency regime and allowing the unregulated use of any commodity including
gold as the currency. In addition, it must shutter the Reserve Bank and stop
interfering in the interest rate market. Such steps together with curbs on the
fractional reserve banking system will lead to a stable economy with a stable
currency.

Indias politicians and bureaucrats have pursued the cynical goal of maximising
their revenues even at the cost of imposing tyrannical measures on the people.
Their goal implies that the people exist for the government and this has led to
many unfair taxes and tariffs which need to be abolished.
Many of Indias policies result from imitating the West and following the
suggestions of international organisations. Those who run these international
organisations have created rules that favour a small set of people while causing
instability in the economies around the world. They have used every crisis as an
opportunity to set up yet another international organisation that takes the wealth
of the developing countries in the guise of helping them. The current crisis in
Europe too has led to calls for the creation of a global tax on trading along with a
new organisation to regulate banks around the world. It is important that India
eschews the suggestions of these organisations.
Following these steps will create a robust and vibrant economy while
simultaneously addressing the problems of corruption, inflation and poverty. At
the same time, India can provide leadership for the world to move towards a
completely unfettered free enterprise system. To avoid the existing tyrannical
systems, people too must remain vigilant and refresh the tree of liberty from time
to time.

RESPONSE TO THE MINISTRY OF TRUTH


AND PROPAGANDA
ARVIND KUMAR | Mon, 28 Nov 2011-11:35am , Mumbai

The attribution of motives, ad-hominem attacks and the use of words such as
of his ilk show that the rulers consider the people of India to be in a state of
peonage.
The response by an official of the Press Information Bureau (Akash will change the face of
Indias education system ) to a piece in DNA on the Akash computer reveals the attitude of the
ruling class towards the people of India. The attribution of motives, ad-hominem attacks and the use
of words such as of his ilk show that the rulers consider the people of India to be in a state of
peonage.
By evading the points on government schemes descending into corruption, the illiterates subsidising
relatively wealthier people, the low quality of India's education system, the creation of a loss making
scheme, and the moral question of using other people's money to pursue one's whims, the
government confirms that it has no answers to the legitimate arguments against Kapil Sibal's
scheme.
Instead, it makes the fictitious claim that the author scoffed at the low cost of the computer and
makes the false charge that the motive of the article was to launch an attack on Kapil Sibal. This
allegation is quickly refuted by pointing out that similar actions by other individuals who use other
people's money would also be unacceptable. Two previous efforts, the marketing of the Simputer by
two Indians and the attempt to sell a 100 dollar laptop by a professor at MIT, were equally immoral
as they sought to channel government subsidies their way.
Arguments favouring the free enterprise system contain two aspects. The first deals with the process
and raises moral objections to the government trampling on liberties while it implements its system.
The other angle focuses on the outcomes and highlights the inefficiencies and failures of the
government-run system as opposed to a free enterprise system. These two aspects are in harmony
with each other as the system that does not usurp our freedoms is also the more efficient one in
which there is less poverty, more equality, less corruption and more stability.
In its response, the government ignores these ideas, appeals to emotions by mentioning children,
and then congratulates itself for allegedly empowering them. No one, not even Kapil Sibal, believes
that the government's education system is of a decent quality. After all, Kapil Sibal sent his sons to
the US and the UK for higher education. Sibal himself pursued his education outside India and
obtained a degree in law from Harvard University. Sibal's degree in law brings us back to the moral
angle and he would be well advised to mull over the point raised by Frederic Bastiat his
book, The Law, to identify plunder by the government,See if the law benefits one citizen at the
expense of another by doing what the citizen himself cannot do without committing a crime.
The government's response also purports to read minds and makes a determination on what
constitutes a misplaced thought. If this goes unchallenged, it will take us down a slippery slope and
it won't be long before the government publishes a list of accepted and forbidden thought processes.

It may even take the dangerous step of telling Indians the exact number of days one would be
allowed to fast in protest against corruption in the government.
The government's claims cannot be taken seriously as it comes from the Press Information Bureau of
the Ministry of Information and Broadcasting. This bureau is really the division of disinformation
and has a sordid past. As for the Ministry itself, Orwellian ministries should have Orwellian names
and it ought to be called the Ministry of Truth and Propaganda. Mentioning the success of the mobile
telephone market while questioning the government is typical of such a ministry. The telephone
industry underwent explosive growth only after the government loosened controls and allowed the
private players to enter the arena. The areas in which the government still retains control, such as the
allocation of frequencies, are still steeped in crony capitalism and massive corruption.
Rather than take credit for providing good schools in the future, the government should take a hard
look at its record in providing drinking water, supplying electricity, removing poverty and clearing
garbage. Even if it learns to perform these tasks some day, it would still not change the fact that by
assembling the Akash computer, the government has merely performed a task that is routinely
performed by Chinese imitators who produce cheap electronic goods in their shacks. The pricing of
the Akash computer in US dollars also makes it hard to believe that the purpose of the scheme is not
self-aggrandizement.

SPECIAL: ECONOMIC MELTDOWN


VINDICATES FORGOTTEN INDIAN
ECONOMIST
Lamps are lit ARVIND KUMAR | Mon, 5 Dec 2011-08:20am , Mumbai , dna

The imminent collapse of the European monetary union is a welcome


development as it will herald the end of the Keynesian economic system that
has been responsible for various economic crises around the world.
The imminent collapse of the European monetary union is a welcome
development as it will herald the end of the Keynesian economic system that has
been responsible for various economic crises around the world. For several
decades, most governments and international organisations have based their
economic policies on debt, deficit and inflation, as their policies have been
shaped by the ideas of John Maynard Keynes, a British bureaucrat who once
worked at the India office.
Nearly a 100 years ago, in 1915, even before Keyness star had risen, an Indian
economist, SV Doraiswami, published his book, Indian Finance, Currency And
Banking. Doraiswamis ideas were opposed to those of Keynes and his views are
vindicated by events today.
Doraiswami had already published his views in several outlets like
Londons Statist, and his book was reviewed around the world. In the decades
that followed, though Doraiswamis work was known in academic circles, the
Keynesian economists who gained control of academia were dismissive of his
ideas and relegated him to the footnotes as they had memorised the claims of
Keynes and were conditioned to believe that governments could solve all
problems.
Doraiswami faulted the British economic policies in India and demanded that the
central bank be an instrument for allowing and encouraging the free and

unfettered inflow of gold into India. He wrote that a gold standard without a
gold currency is an absurdity and wrote in support of a resolution by Vitthaldas
Thackersey in the Imperial Legislative Council calling for the opening of mints for
the free coinage of gold. Doraiswami wanted the exchange rate of gold to be
automatic by leaving it to the forces of supply and demand and opposed the
government setting its price.
If these suggestions for sound money by Doraiswami had been followed around
the world, the current crisis in Europe as well as the Great Depression of the
1930s in the United States could have been avoided. Instead, it was Keynes whose
ideas held sway leading to many problems in the world.
Keynes was an influential figure in the British government and opposed the
setting up of gold mints in India as he considered gold to be a social evil and a
barbaric relic of the past. He did not have an understanding of the nature and
function of money that Doraiswami had lucidly explained in his book, and some
of his ideas were bizarre. He confused cause and effect after observing greater
amounts of spending during times of prosperity and concluded that more
spending would lead to more wealth. He even famously argued that hiring people
to dig holes in the ground would increase the real national dividend of useful
goods and services.
In contrast to Keyness views, Doraiswami objected to wasteful spending and
blamed the British for creating huge debts for India through reckless railway
construction and funding wars using Indian money. Although Doraiswami was
harsh on the British, he was also very objective and pointed out that the British
Conservatives did a better job than the British Liberals in managing Indias
finances. He pointed out that the policies of the Conservatives in currency
matters were sounder and more sensible than those of the Liberals.
Doraiswami was also very knowledgeable about the banking systems of various
countries and described them in his book. He pointed out that the reason that

Indian banks did not do well was that the British government competed against
them.
Today, Doraiswamis views gain centre stage as several governments that swore
by paper money, and even the International Monetary Fund, scramble to increase
their reserves of gold after realising that gold is the only stable currency.
Meanwhile, as the European Union teeters on the brink of collapse due to its
debts, it would be apt to recall the prescient words of Doraiswami from his book:
'The State Bank should do nothing to increase credit currency, as some would
advocate, or in any way meddle in the increase of note circulation, as such a step
would only lead to the inflation of paper money and end in disaster.
As discredited Keynesian ideas are on the way out, the Indian government too
should move away from running up debts and deficits and printing paper money.
It should replace these Keynesian policies with Doraiswamis suggestions as it is
now safe to state that the entire literature produced by the Keynesian economists
is not worth a page of wisdom in Doraiswamis book.

HE GREAT GLOBAL CLIMATE CON


ARVIND KUMAR | Tue, 27 Dec 2011-10:30am , Mumbai , dna

India must eschew the global climate deal that was recently proposed in
Durban as it will infringe on the economic freedom of Indians.
India must eschew the global climate deal that was recently proposed in Durban as it will
infringe on the economic freedom of Indians. The proposal seeks to raise money for a
global climate fund by setting up an international license-raj for industries and imposing
shipping and carbon taxes. The taxes and fees will result in the transfer of wealth from
India and China to the West as the two countries will contribute the most to global
economic activity in coming years.
The shipping tax will increase the cost of various goods while the carbon tax will reduce
Indias competitiveness by retarding the growth of its industries.
While India potentially faces these hardships, supporters of the fund have prepared
themselves to reap a windfall. The licences, known as carbon credits, will be traded on
financial exchanges resulting in billions of dollars in transaction fees and profits for the
European Climate Exchange and financial firms like Goldman Sachs.
A former adviser of the American presidents Bill Clinton and Barack Obama has even
patented a carbon trading plan.
As the creation, supply and demand of the licences depend on legislation, it is certain that
lobbyists will pressure governments to pass laws favorable to them. This is already the
case with Al Gore, whose London-based firm, Generation Investment Management, has
hoarded up carbon credits from the scheme implemented in several countries. The prices
of these credits have crashed as troubled east European industries have flooded the
market with the credits after getting them for shutting down manufacturing units.
Investors left holding these carbon credits can be bailed out only if an international treaty
forces Indians and Chinese to shop for carbon credits.

Other lobbyists include associates of American politicians who have invested in


expensive, unprofitable and inefficient technologies that they have labeled clean tech.
They seek subsidies and legislation to create a market for their products by outlawing
goods like incandescent light bulbs.
The proposed climate fund will be similar to other international funds that award
contracts and grants to corporations and non-profit groups based in the US and Europe.
Many members of the Intergovernmental Panel on Climate Change will receive huge
grants. It is little wonder, then, that despite claims of helping poor countries, it is the
politicians in the West who are eager to set up the fund.
The rationale behind the fund too is unconvincing. Proponents of the fund claim that
global warming is underway and warn of a catastrophic flood of biblical proportions if
they are not given money. Supporters of the claim have been likened to members of a
doomsday cult. In the 1970s, they predicted the onset of an ice age due to smoke from
stoves in India blocking out sunlight. At that time, India was forced to purchase so-called
clean stoves from the World Bank for millions of dollars. In recent times, Al Gore, the
messiah of global warming believers, has accused Indias poor of heating up the earth by
using kerosene stoves to cook food. Ironically, Al Gores private jet plane burns up
thousands of gallons of aviation grade kerosene on each flight.
Data related to the global warming claims too have not been without controversy and
some scientists have invited ethics investigations due to scientific misconduct. Jairam
Ramesh, as the environment minister, countered claims originating at NASAs Goddard
Center by pointing out that Himalayan glaciers had not shrunk but grown in size.
In recent years, NASA has also quietly lowered its baseline long term global average
temperature from 15 to 14 degrees Celsius, allowing it to claim higher temperature
deviations. Despite the change, collating NASAs press releases over several years shows
a decline in global temperature. NASA now puts out numbers from a computer software
model instead of actual temperatures.

Indians who oppose corruption should also fight it at the global level. The desperation of
the proponents of the climate fund to clinch the deal is seen from their wooing of Indian
politicians at conferences organised at Copenhagen, Cancun and Durban. It is important
for India to reject the climate deal and ensure that its interests are not sold by politicians
for personal gains.

GIVING CURRENCY TO A BLATANT LIE IN


GANDHIS NAME
ARVIND KUMAR | Wed, 1 Feb 2012-10:00am , dna

The pieces of paper issued by the government are neither backed by any
asset nor redeemable for real money such as gold or silver.
I promise to pay the bearer the sum of one hundred rupees, reads a promise on
a hundred-rupee note. This is, of course, a lie propagated by the government and
the lie is accompanied by a picture of Gandhi. This lie appears in various
magnitudes on different currency notes. Bigger the face value of the currency
note, bigger the lie. The lie is repeated hundreds of millions of times every day
when currency notes exchange hands.
The pieces of paper issued by the government are neither backed by any asset nor
redeemable for real money such as gold or silver. If anything, even the empty
promise starts depreciating in value as soon as one receives the promissory note.
The depreciation is solely due to the inflationary policies of the government. That
is the reason people move their savings to real estate or gold instead of holding
on to the paper notes.
Even illiterates show that they are smarter than the proponents of paper currency
when they discard the government-issued paper and acquire small amounts of
gold ornaments as soon as they can do so. This is an indictment of the poor
intellectual abilities of the countrys politicians and their economic advisers who
have degrees from British and American universities. One economic adviser to
the government has even described gold as a social waste, thus revealing his
poor understanding of the nature of money.
The rupee has depreciated so much that it is not even worth the scrap metal it is
minted on. There is even an entire cottage industry in Kolkata that melts onerupee coins and makes razor blades out of them. This in turn has created a
shortage of one-rupee coins in some areas leading to local businesses issuing

cardboard pieces in lieu of the coins. That is a startling development and


highlights the worthless nature of the government-issued currency.
It is high time that the government ended the system of forcing the people to use
its continuously depreciating currency. The government should repeal all laws
related to legal tender and remove every restriction on the mining, import, export
or exchange of gold and other precious metals. There must also be no taxation on
the earnings from transactions involving precious metals.
If precious metals circulate as currency and the government is forced to actually
redeem its debt notes for gold, it will enforce fiscal discipline on the government.
That in turn will prevent politicians from burdening the people with debt to
enrich themselves. Consequently, inflation will be kept under check and this will
lead to economic stability.
Gold and silver constitute real money and their value will not degrade to such an
extent that they can be substituted by cardboard pieces. The pieces of aluminium
or carbonised iron issued by the government do not constitute real money. Paper,
too, is not real money even if such paper is issued by the government.
India is a nation of savers and the punitive inflation rate due to the the ban on the
use of precious metals as money results in the rapid depreciation of savings. Poor
people are hit the hardest by the ban as precious metals are the only source of
financial stability within their reach. While wealthy people can buy real estate
and protect themselves from inflation, this option is not easily available to the
poor due to the high cost of real estate.
It is a tribute to the wisdom of the Indian people that they prefer gold over
government-issued currency and are the worlds largest consumers of gold.
Politicians should respect this choice of the people instead of imposing their
paper as the currency.

The use of precious metals as money will ensure that no one has monopolistic
control over the currency system. Gold and other precious metals accord freedom
while the existing system is akin to slavery as the government can confiscate the
stored fruits of ones labour through the process of printing paper currency notes.
The existing system that is based on a lie in the name of Gandhi also goes against
Gandhis own words in 1932 when more than 100 million dollars worth of gold
was shipped to Britain: If the outflow of gold continues, India soon will become
bankrupt. We shall therefore be fools if we part with our gold in exchange for
rupees or notes whose future value promises to depreciate toward zero, as did the
value of the German mark.


Jat agitation
1.

Home

2.

Analysis

HUMAN RIGHTS GROUPS ARE THE NEW


EXTORTION GANGS

0
ARVIND KUMAR | Mon, 5 Mar 2012-10:15am , dna

These so-called human rights groups have politicians on their rosters and
lobby for laws that impose restrictions on businesses knowing they will reap a
windfall.
Until a few years ago, it was common for extortion agencies to target business houses and
demand ransom in exchange for letting them continue with their operations. The
businesses were accused of having a harmful effect on the civic system and were told that
they needed to pay money to function as a part of society. While such extortionists have
been eliminated for the most part, their activities have resurfaced in another form and are
carried out by groups that call themselves human rights organisations.
These new extortionists come armed with MBAs, wear business suits, and speak in a
polished language, but their actions are not very different from those of the traditional
crime syndicates. They identify a profitable sector of the industry, accuse businesses in

that sector of destroying the environment or harming the poor, use their political clout to
pass dubious laws that criminalise the business operations, and then demand hefty fees to
certify the businesses as compliant with the new laws.
These so-called human rights groups have politicians on their rosters and lobby for laws
that impose restrictions on businesses knowing they will reap a windfall. The laws are at
the national and international levels and typically authorise the self-appointed human
rights groups to either distribute certificates or participate in the scheme in some other
capacity. The certificates mean nothing except that their issuers have been paid a ransom.
Many harassed businesses even end up hiring these groups as advisors to ensure that they
are not denied the certificates. These groups, listed as non-profit entities, are taxexempt, collect money in the form of grants, and use governments to intimidate
businesses.
One such group, Rainforest Alliance, issues certificates to coffee farmers for growing
something called sustainable coffee. Like other such entities, this organisation too
claims to alleviate poverty and uses images of poor people in Africa and Asia to justify its
existence. However, neither poor people nor farmers get any money. Instead, the New
York-based organisation, which is supported by UNDP, receives large amounts of money
as grants. Other beneficiaries of the program are corporations like McDonalds and
British Airways, which are partners of Rainforest Alliance.
This scheme is backed by the International Coffee Agreement, which stipulates that only
qualified agencies can issue certificates. Many countries have been arm-twisted into
signing the agreement, thus bringing farmers in those countries under the control of a few
people in Western nations.
There are many such programs designed to squeeze money out of businesses. One
scheme issues certificates for not using child labor and another supposedly keeps out
blood diamonds from the market by certifying that diamond miners and traders do not
help warlords. The diamond certification program, known as the Kimberley process
certification scheme, has been criticised by libertarians as a giant hoax and a farce.

The cynical nature of these schemes is further highlighted by the fact that Britain is not a
producer of coffee, but benefits greatly as the International Coffee Organisation is
headquartered in London. Likewise, diamonds are produced mainly in Africa, and the
cutting and polishing industries are dominated by Gujaratis in India and Belgium, but the
idea of controlling the diamond trade originated from a Canadian politician who has
earned the nickname Teflon Bob for repeatedly evading corruption charges by using
political machinations.
Corruption is rampant in the so-called human rights organisations and they routinely
make false charges against weaker countries. These charges are used either to justify
some aggressive action of the governments in Europe and the US or to bully the weaker
countries into joining their certification schemes. Those who do not cooperate are
blackballed as violators of human rights and trumped up charges are made against them.
Leaders are accused of oppressing the people, riots are described as pogroms, and the
employees in the human rights industry write articles in the media against their targets
without revealing their affiliations.
The human rights industry naturally attracts and employs those who feed off the system
the leftists, the centrists and the socialists. Many organisations like Amnesty
International push the leftist agenda and are guilty of participating in extortion schemes.
There is no reason to let the human rights industry harass businesses and live off the hard
work of other people. They must be given the same treatment as extortion gangs and must
be put out of business.
arvind@classical-liberal.net

Beware of Americans who bear aid


(dna - Sudhir Shetty)
ARVIND KUMAR | Fri, 12 Jul 2013-11:12am , dna

India should treat US Secretary of State John Kerrys announcement of aid for
the victims of the Uttarakhand disaster and other programmes with trepidation.
American aid agencies have a reputation of fomenting civil strife and being
conduits for bribes to be paid in exchange for advancing the interests of American
politicians.
These groups seldom help the victims of disasters and instead use calamities to
make money by preying on the goodwill of people. The American Red Cross
raised 486 million dollars by appealing for donations to help the victims of the
earthquake in Haiti in 2010. This amount was nearly 7 per cent of the GDP of
Haiti and could have been used to rebuild the country, but very little was done in
this regard. There is almost no visible evidence of the efforts of Red Cross in Haiti
where most victims still fend for themselves. The little money that went to Haiti
was in the form of perishable goods like flu shots, water, cookies and cheap tents
which mostly served to provide photo opportunities for Red Cross.
During his tenure in the US Senate, John Kerry was the main advocate for foreign
aid. He lobbied for setting apart four billion dollars as aid for Pakistan.
After this effort failed, he wanted the same amount of taxpayer money earmarked
as aid for other countries although he failed to clearly articulate the objectives of
the proposed aid programmes.
This should surprise no one as it has been estimated that each dollar of American
aid benefits American businesses and non-profit groups to the tune of two

dollars. This is because American aid always comes with the condition that the
recipients of the aid procure goods and services from American businesses and
non-profit organizations. Tied aid is no aid but a mechanism to funnel money to
privileged people while hiding behind a humanitarian mask.
Another disturbing aspect of American aid agencies is their support for violent
groups like the Maoists. Maoists are able to wage a prolonged war and purchase
sophisticated weapons only because wealthy nations support them with money
and indulge in propaganda on their behalf. Indian Maoists receive support from
Jimmy Carter and the international human rights lobby.
Many Indians who routinely defend the Maoist terrorists have received grants
and awards from American universities and groups such as USAID, Ford
Foundation and Rockefeller Foundation. Not long ago, the University of
Pennsylvania hosted a conference titled the State of Maoism and Indian Left and
had Communists as participants.
The US government too generates reports that make false accusations against the
opponents of Maoists. India must also remember that Americans sheltered the
Mumbai terror attack mastermind David Headley from the Indian justice system.
Now, John Kerry wants Indias support to set up an international agency to
control the global license-raj for industries with the excuse of preventing global
warming. Such a move will have no impact on the environment while retarding
the growth of the Indian economy. Indians will have to obtain licenses from a
Western institution to carry out legitimate economic activities and will also have
to pay taxes to this institution.
The fact that John Kerry has sought support for his political aims while offering
aid should set the alarm bells ringing. Unless Indians are vigilant, Indian
politicians may broker away the interests of India in exchange for donations to
their charities. John Kerry should be asked to base the India-US relationship on

good faith and honest business transactions, but India would do well to beware of
Americans who bear aid.

Banking transaction tax is a dangerous


idea
ARVIND KUMAR | Wed, 5 Feb 2014-09:39am , Mumbai , dna

The idea of taxing every bank transaction has recently gained ground in India as
it has been advocated by both political and religious leaders. This idea gained
traction in recent years after European Union countries suffering from an
economic crisis proposed a global transaction tax with the hope that such taxes
from India and China would bail out the European economies. The United
Nations has supported the imposition of such taxes.
Statements of support have also been released by the Vatican both under the
current Pope and the previous Pope. Now, Indian politicians and religious
leaders, without realizing that they are under the influence of global financial
institutions, have started talking about imposing a transaction tax on Indian
citizens. This concept is detrimental to Indian society as it is intended to drive a
stake through the heart of the economic ethos of India which is based on savings
and financial stability.
Transaction taxes are closely tied to the concept of a cashless society and both
these ideas are usually mentioned in the same breath. In a cashless society, it is
proposed that no one will use any money and that everybodys wealth will be in
the control of banks which will work as tax collectors for governments.
American bureaucrat Larry Summers who has served the World Bank and the
American government in various capacities recently gave away the real intent

behind a cashless society when he stated that a cashless society would prevent
people seeking shelter from inflation and negative interest rates.
Negative interest rates is another way of saying that the government will
confiscate wealth from bank deposits. Bank deposits would constantly diminish
in value as the government gets banks to take away a share of ones hard earned
money. Summers used the disparaging word hoarding to refer to savings. The
statement by Summers illustrates the fact that inflation in an economy is not the
effect of uncontrollable forces but is by the design of those in power.
Summers also added that he advocated inflation and negative interest rates so
that people are forced to spend their savings thus transforming societies into
consumption-based economies. These actions will not only penalize those who
have saved money but will also have a destabilising effect on society. A banking
transaction tax within India is merely the first step towards a global banking
transaction tax. Such a tax in individual countries is sure to be followed by an
international agreement to regulate such taxes, effectively creating a global
cashless regime in which India will yet again be treated as a second-class
member. Taxes from India will be used to fund American corporations and
European bureaucrats.
Money cannot be replaced by numbers stored in bank accounts without giving up
on the definition of money. One of the prime characteristics of money is that it
should be durable and should not deplete in value. Today, people seek shelter in
real estate and gold when irresponsible governments increase the supply of paper
based currencies. In a cashless society, people will become utterly helpless as they
watch themselves and their family members reduced to misery.
Proponents of the transaction tax have appealed to emotions by framing the
arguments as a fight against black money. They hide the fact that the banking
transaction tax is merely the first step in the creation of a global taxation regime
combined with a cashless society. Their arguments must be rejected as their

system combined with restrictions on gold and a ban on other forms of trade,
including barter, would usher in totalitarian rule.

India needs neither Amartya Sen nor


Jagdish Bhagwati
ARVIND KUMAR | Thu, 1 Aug 2013-11:05am , dna

A public spat has erupted between the economists Jagdish Bhagwati and Amartya
Sen. Bhagwati has highlighted the ill-effects of Sens policies that focus on wealth
redistribution while ignoring economic growth.
Bhagwatis assessment is correct and the reasons for the deteriorating economy
under the UPA government can be traced to Amartya Sen. Failed policies such as
NREGA were based on Sens ideas and put in place by his long-time collaborator
Jean Dreze who served on the National Advisory Council.
Sens views are shaped by his Communist background as a student. His much
touted Kerala model is simply an expression of the romanticised notion that
Communist rule creates a utopia. The harsh reality of Kerala is that endless
strikes by labour unions led to industries shunning the state and nearly 10 per
cent of the population fled to the Middle East in search of jobs. Even Keralas
high literacy rate is independent of Communism. By 1947, half the state was
already literate despite the national average hovering around 10 per cent.
Even so, Amartya Sens support for boosting literacy rates reveals his flawed
thinking.
Literacy rates are good tools when used as indicators of the overall wellbeing of
societies since more prosperous and better nourished societies typically contain

many more literate people, but programmes that directly target and adjust
literacy rates amount to rigging the indicators without fixing the fundamental
problems. Besides, equipping people with just kindergarten-level education helps
nobody.
Among Sens views, his explanation of how famines arise is truly bizarre. He
claims that gluttonous eating habits among wealthy people cause famines that
deprive the poor of their share of food. In reality, famines in British India
resulted from government controls which impoverished people to the extent that
they could not even purchase food from neighbouring places during times of food
scarcity in their regions. Such effects of government interference should have us
worried about the latest efforts of Amartya Sen and Jean Dreze. Their Right to
Food law will create problems as government interference in any sector is always
followed by large scale misery.
Many economists have exposed Sens errors, but his harshest critics are on the
internet.
Unlike the academia which has become a mutual admiration society due to the
peer review process, the participants on the internet have high standards and
ridicule bad ideas.
Jagdish Bhagwati is right this time, but his career has charted a strange
opportunistic trajectory. Like the bat in Aesops fable describing a war between
the birds and the beasts, Bhagwati has always positioned himself on the side of
those in power. In 1973, he advocated a progressive India using Communist
rhetoric. By 1983, he was a Keynesian who regularly served international
institutions.
In 1993 his was the loudest shill for the World Trade Organizations mercantilist
policies of consumption-based economies and destructive patent regimes
couched as globalisation. For a brief period, when compassionate capitalism

became the fashionable term to justify controls, Bhagwati joined in with


globalization with a human face to justify WTOs controls, but by 2003, he had
reinvented himself and had become a champion of liberalisation.

ARE GMOS KILLING OFF BEES ALL OVER


THE WORLD?
ARVIND KUMAR | Tue, 26 Nov 2013-08:48am , Mumbai , dna

Some of the worst fears expressed against genetically modified products may be
coming true in India. The shortages of onions and problems with other crops may
be the result of using genetically modified seeds, but these problems may not be
occurring in the manner normally associated with damage caused in genetically
modified plants. The usual arguments centre around the lack of genetic diversity
in various species of genetically modified organisms (GMOs) making them
vulnerable to large scale destruction during the outbreak of diseases, but we may
now be witnessing a more insidious effect of tampering with nature.
Around the world, entire colonies of bees have been dying off and farmers
suspect these deaths to be the result of exposure to pollen from genetically
modified plants that weaken the immune systems of bees. This recent
phenomenon, known as Colony Collapse Disorder, has resulted in more than a
third of the bee population in the US dying off. Several European countries have
already banned MON810, a brand of maize created by Monsanto, on the grounds
that its pollen has a harmful effect on bees.
Monsanto recently acquired a firm that was developing a product to make bees
resistant to mites, but at a recent conference in the US, a farmer expressed
concern that he would need to keep the bees continually treated with Monsantos
product as taking the bees off the product would result in their deaths.

India is yet to awaken to these dangers as the main narrative has centred around
cotton crops.
The success of genetically modified cotton crops in India tells us only part of the
story because cotton is predominantly self-pollinating and does not depend on
bees. Other crops may already be facing the destructive effects of the mass deaths
of bees. The formation of seeds in onion plants depends on pollination by bees. It
is significant to note that almost all the recent crises related to the shortage of
onions were related to the shortage of seeds.
The recurring shortages of onions are of recent making and have occurred only
since the late 1990s after firms selling genetically modified seeds entered India.
Even in 1980, when extreme drought conditions pushed up the prices of
vegetables, the price of onions remained low and farmers agitated for higher
support prices from the government.
After the shortages of onions, problems are now rearing their heads in other
crops. The apple crops in some regions of Jammu and Kashmir and Himachal
Pradesh, the two main apple-producing states, have been affected by strange new
phenomena. Both these states are among those that have entered into
agreements with Monsanto. The cold weather has been blamed in some places in
Jammu and Kashmir for the failure of the apple blossom to convert into fruit, but
such weather conditions are not new to the region.
In Himachal Pradesh, it is acknowledged that the bee population has declined
drastically in recent years. Mites from Nepal have been blamed for the deaths of
bees, but the mass deaths indicate that the vulnerability to mites is most likely
the result of a weakened immune system.
Although mites, disease, and the weather have all been blamed for poor harvests
around the country, the real problem could lie elsewhere. India should step back
from its embrace of genetically modified products and tread this area with

caution. Otherwise, farmers who depend on business houses for seeds and
medicines to keep bees alive will soon see their livelihoods end up on life-support
with the corporations becoming their caregivers.

RBI must not be a puppet of


international powers
ARVIND KUMAR | Wed, 11 Jun 2014-06:00am , Mumbai , dna

Finance Minister P Chidambaram's statement that Raghuram Rajan should


continue to head the Reserve Bank of India under any new government, and
Raghuram Rajan's call for a global financial system, give away the fact that those
who want to control the Indian economy view RBI as a suitable tool for this
purpose.
Any new international financial system in the name of stabilising the global
economy will lead to the transfer of wealth from India and China to bail out
European and American banks. The demands for such a system typically arise
from global institutions which are responsible for the current global economic
crisis and which were established to supposedly ensure global economic stability.
One such institution, the International Monetary Fund, has such a dismal record
that it has destabilised the economy of every country in which it has interfered.
Its prime role has been to help American corporations and European bureaucrats
siphon off money from various countries in distress. Even the distress was
usually the result of pursuing some economic policy prescribed by so-called
experts in American and British universities. Raghuram Rajan has the dubious
distinction of not only working for the IMF but also belonging to the class of
experts in American universities responsible for various economic crises.

It is important that India does not become a pawn in the hands of those who want
to make its economy subservient to foreign powers. The plan for the creation of a
central bank in India was first made by the British in the 19th century as a means
to help Britain control the gold in India. Among the advocates of the bank was
Alfred de Rothschild whose proposal was made to the Currency Committee of
1898 and 1899. The Indian economist RC Dutt argued before the same committee
that the currency rates in the country should be set by the market.
When the British tried to pass a bill to set up the Reserve Bank of India in 1928,
Indian freedom fighters successfully blocked the move as they believed that it was
against the interests of India. However, during the Round Table Conferences held
in 1931 and 1932, the British insisted on the establishment of a Reserve Bank as a
condition for the transfer of power to India. They also wanted the Indian
legislature to have no powers over the bank and Britain to retain the right to
appoint the top two positions in the bank. Such extraterritorial controls form the
basis of the calls for RBI's complete 'autonomy.
'RBI's recent actions have been aligned with current American objectives and the
aims outlined by the British before they left India, and these actions have
vindicated the fears of Indian freedom fighters. For example, it has imposed
curbs on the import of gold thus shoring up the US dollar while depriving Indian
citizens the opportunity to seek shelter from inflation. Such curbs do not exist on
the people of Europe or the US. It is thus important to review the reasons for the
existence of the RBI and find an alternative currency system that is not based on
central control either at the national or the international level.
The creation of a global economic system combined with the 'autonomy' of RBI
would only mean that the RBI will be unaccountable to the people of India while
it actively works for international powers. India must swiftly act to prevent this
situation and forbid the RBI from coming into contact with foreign institutions.

Focus on productivity and stability instead of growth and investments


ARVIND KUMAR | Mon, 15 Sep 2014-09:09am , Mumbai , dna

The government must move away from targeting investments and economic
growth in the interest of creating a stable environment for productive activities
while allowing people to save enough money to tide over bad times. A stable
system can be achieved by reining in inflation, removing hurdles that hinder
production, and making it easy to convert ones savings into assets that do not
depreciate over time.
A productive economy results in growth and attracts investments that can be
used to fund new productive activities, but directly targeting growth and
investments amounts to tweaking the outcomes rather than creating an economy
with solid foundations. Such tweaks will lead to bad investments which chase the
illusion of high returns and result in massive failures. Deficits in government
budgets are major contributors to this illusion of growth in the short term but
contribute to the accumulation of debt and an eventual crisis in the long run.
The current crisis in the EU can be traced to the focus on growth instead of
ensuring stability in the economy. When the European monetary union was
formed, Germany demanded economic stability but France insisted on growth
and managed to replace Germanys proposal for a Stability Pact with a Stability

and Growth Pact. As growth is usually a euphemism for excessive spending


fuelled by growth in money supply, it was inevitable that an economic crisis
would occur. The dotcom bubble and the Asian economic crisis of the 1990s too
resulted from the focus on growth to attract investors. In both cases, investments
chased growth without sufficient productive activities to back such growth
leading to a bubble that eventually burst with severe consequences.
Only a small fraction of the population consists of investors and if the
government solely targets the creation of rewards for investors instead of
allowing everyone to have opportunities to advance, it would create a system that
benefits just a few people. The result of such a system would be a Shining India
for around 3% of the population who are either investors or work for the
businesses owned by these investors.
If the government is sincere about the entire country doing well, everyone
including those in rural areas should have the opportunity to become
entrepreneurs. Existing policies favour the members of the English-educated
urban class who are treated as potential entrepreneurs while people in rural areas
are treated as though they only deserve handouts from the government. The
government recently allocated Rs10,000 crores to fund new startup ventures
while earmarking 1% of that amount for local programmes in rural areas. The
former is really a welfare scheme for the educated class in India while the latter
exemplifies the patronising attitude towards Bharat. Government-funded venture
capital schemes are nothing but a system of socialised risks and privatised
rewards and fly in the face of the definition of entrepreneurship which involves
risk-taking. The government also hurts small entrepreneurs when it favours large
business houses and it needs to stop this practice. This means bank guarantees,
license fees, and auctioning of resources, all of which shut out smaller players
from participating in economic activities, must be eliminated. The economy will

become strong only when the greater number of people become self-supporting,
and achieving such self-sufficiency must be the main goal of the government.

Globalisation has turned India into a


coolie economy
ARVIND KUMAR | Mon, 16 Mar 2015-05:00am , Mumbai , dna

he thought process of Indias ruling class is shaped by British and American


universities and should be termed the coolie mindset.
A common complaint when the British ruled India was that they impoverished
India while using Indian resources and labour for the betterment of Britain.
Indian labourers who worked for their imperial masters, particularly the British,
were called coolies. The vast majority of the Indian population did not have any
economic opportunities and were left out of the system. Only those who knew
English could find a job, and even then only as a white-collar coolie or as a bluecollar coolie.
The situation today is no different with globalisation exacerbating the problem
under the direction of institutions like the World Trade Organization (WTO).
Almost every economic policy in India is oriented towards increasing exports to
the West, getting a job from some Western country, or increasing profits of
Western firms, that is, bettering the lives of people in the West using Indian
labour and resources.

Many people in India look forward to becoming some type of coolie as a career
choice. Today, every person who receives money, prizes or titles from the West
for the work he/she does is a neo-coolie. This is the case regardless of whether
such a person lives in India or elsewhere. The list of such coolies includes doctors,
engineers, management consultants, activists, writers, professors and
entrepreneurs. Even the business firm typically symbolised as the bellwether of
Indias globalised economy, Infosys, is just a successful herding of coolies into a
mega coolie shop. Those who aspire to become coolies cannot be faulted as the
blame lies with those who run the country. The rulers have created an education
system that, instead of benefiting India, prepares a small minority of people who
speak in a foreign language to become coolies.
The thought process of Indias ruling class is shaped by British and American
universities and should be termed the coolie mindset. Shamefully, even the
Indian Parliament sends a few of its members every year to attend a course at
Yale University to supposedly learn leadership skills from professors who have no
experience with either politics or leadership. That Yale University was built using
money looted from India adds a layer of irony to the situation.
With the belief that the instructions received from Western universities equates
to knowledge, Indias politicians, bureaucrats and official economists have
allowed the WTO a free run in India. The WTO plays the same role as the former
imperial British government and ensures that the labour and resources of the
world exist solely to benefit Western powers. Despite its rhetoric of free
multilateral trade, WTOs rules are heavily skewed to favour Western countries.
These rules forbid most subsidies but allow for subsidies provided by the West by
categorising them as research grants.
At least one economic adviser to the Indian government is a WTO loyalist and has
a conflict of interest as he is beholden to his employers in a university which is
part of the American establishment. He is called a trade expert and judges

economic performance based on the value of exports and imports, a method that
originated for assessing the success of the East India Company by measuring its
net trade volume out of India. Mutually beneficial trade should be welcomed but
it must not be subject to oversight by the WTO. India can move away from its
coolie economy only if it removes all external influences and stops hampering
productive economic activities which directly contribute to the countrys
development.

How the US uses WTO to act against


India's interests
ARVIND KUMAR | Wed, 1 Jul 2015-06:35am , Mumbai , dna

In recent months, the American government has used the World Trade
Organization to target India for creating a buffer stock of food grains for use
during emergencies. According to the WTO economists, this is an unfair subsidy
which distorts the global markets. At the same time, these economists have
neglected the fact that the US government has created a huge reserve of crude oil
and natural gas.
The US and its allies which are members of the International Energy Agency
stock up hundreds of millions of barrels of crude oil as part of their strategic
reserves. The US also hoards up on heating oil ostensibly to prevent disruptions
to the supply.
In other words, it is unacceptable when India creates a buffer stock of food grains
as it distorts the marketplace, but it is perfectly acceptable that the American
government hoards up on petroleum products as it supposedly prevents the
distortion of supplies.

The quantity of crude oil in the US governments reservoirs has a direct impact on
the global markets. Every Wednesday, at exactly 10:30 in the morning on the east
coast of the US, the US Department of Energy puts out its storage numbers for
the week. Almost every trader who trades in crude oil ceases trading before the
numbers are put out while some firms speculate on these numbers and publish
their expectations. Within an instant of the actual number being published by the
government, there is a great frenzy in the markets as the traders run like a huge
herd of stampeding buffaloes in one direction or the other depending on whether
the numbers indicate a shortage or oversupply as measured against the
speculations of the industry. The same process is repeated for natural gas on
Thursday mornings. If the distortions in the global markets due to hoarding is a
concern, the American reserves clearly need to be eliminated.
American policymakers have also distorted the education and housing markets
by actively interfering in these sectors. When the US government, on the advice
of the Nobel Prize awardee Paul Krugman, created a housing bubble by forcing
banks to lend to people without the ability to repay the loans, it resulted in a
massive economic crisis and disrupted the global markets when the bubble finally
burst. In the education sector, the American government distorts the information
economy when it subsidises the lack of intellectual abilities by giving huge grants
to universities that churn out graduates in frivolous subjects.
A US State Department cable that was leaked on the website of WikiLeaks
illustrates how the US pushes its agenda while masking its true intentions by
using terms like transparent and sound science. According to the cable which
described the objectives of a proposed activity, US Government Objectives: This
activity would build on the objective of bringing support to USG positions in
international fora, mostly related to the World Trade Organization.

This activity would reinforce adoption of science based trade and regulatory
policies in Brazil and would present the US Government regulatory system as
transparent, predictable, open to public comment, and based on sound science.
The US also manipulates public opinion as revealed by another cable on
WikiLeaks which cynically states, And we will place op-eds and interviews to
support the US Position in the WTO case.
Before using the WTO to accuse India of distorting the global markets, the US
may want to first set its own house in order. As the old saying goes, those who live
in glass houses should not throw stones.