One-stop shop to make India 20 times richer

Category: Economics

Lee Kuan Yew never committed the blunders of the socialists. No nationalisation.

Did I ever contemplate nationalisation, socialist planning for industrialisation and economic transformation? Frankly, no. For there was precious little to nationalise, apart from office furniture and equipment, bank offices, shops, hotels, and some factories. Further, I had before me, by 1965, the salutary lessons of U Nu’s Burma, Bandaranaike’s Ceylon, and Sukarno’s Indonesia, Nu’s Burma, Bandaranaike’s Ceylon, and Sukarno’s Indonesia. – Lee Kuan Yew

[Note: there are numerous public sector undertakings but these are managed in a totally hands-off manner through Temasek]

 

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Please download and share free e-books on economics for children, by Michael A. Malgeri

Michael A. Malgeri has just sent me an email which I’m sharing here (and will also share on my Economics for Children Facebook page) [Writing for children continues to be one of my goals – but it is on the back burner at the moment, given many other priorities.]

Btw, I had introduced readers to Michael Malgeri’s work in 2013, here.

EXTRACT OF EMAIL FROM MICHAEL

We corresponded several years ago about my children’s book series that teach young people the fundamentals of Capitalism.

I’m offering the ebooks as FREE downloads on my website http://www.kids4biz.com/ and thought you might be interested in spreading the word to your community.

The “Johnny Profit” series teaches Capitalism and other free enterprise concepts through short, simple fiction.

The series has been endorsed by Steve Forbes, Larry Kudlow and Joseph Bast of the Heartland Institute (see below my signature).

I’m currently involved in helping spread ideas of innovation, entrepreneurship and liberty among the youth of Africa.

Please consider visiting http://www.kids4biz.com  where you can download each of the books in the series.

There are also pictures of the programs in Africa.

Thank you for your consideration.

I look forward to hearing from you.

Best Regards,

Michael A. Malgeri

“Michael Malgeri has created a series of small books that could change the way an entire generation views individualism, profit-making, and capitalism. The books are easy to read and fun to discuss with children of all ages. They capture the imagination and explain the moral foundations of the free society with just a few words and pictures. Adam Smith and Milton Friedman would have approved!”  – Joseph Bast, President, The Heartland Institute.

“Kids will learn from these. But adults would, too! Should be mandatory reading in Washington.”  – Steve Forbes, Forbes Magazine

‘Johnny Profit’ bucks convention and takes the labels of guilt and greed out of honest profit making.” – Larry Kudlow, host of CNBC’s The Kudlow Report

 

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Why people must pay a small premium for lower level government employees over comparable private sector employees

Richard Ebeling has published an article here: WHAT IS A GOVERNMENT WORKER WORTH WITHOUT A FREE MARKET?

MY COMMENT

I’d generally agree with a small premium for working in a government job compared with a private job – at the lower levels.

Mises and most economists forget that we are facing a principal-agent-sub-agent problem here. The challenge of ensuring honesty among the employees is always greater than that of ensuring honesty among private sector employees.

So a certain “incentive” pay is necessary to attract and retain talent – while ensuring it is honest. This will need to be less where the organisation is autonomous and small. It will need to be higher where the organisation is large huge (e.g. police).

This becomes relatively less important at the higher levels, where parity is not desirable. Even then, salaries at the higher levels need to be quite competitive.

This is the problem with standard economic analysis – which doesn’t even know that we are facing a complex principal-agent-sub-agent problem.

Chanakya and Lee Kuan Yew understood this, but they are among the very few who did so.

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The need for (almost entirely) private ownership of infrastructure

Someone asked me about SBP’s manifesto: It’s not clear to me how creation and maintenance of infrastructure would be achieved in building/maintenance of roads or airports?

MY RESPONSE

First, read the whole section carefully:

Government to facilitate/regulate, and only rarely directly build infrastructure

It is sometimes taken for granted that infrastructure should be created and maintained only by the government. But even infrastructure should be subject to the laws of market and private initiative. Inefficiency and waste resulting from unnecessary government involvement has resulted in severely stunted infrastructure in India. Our railways, roads and energy deficits are a serious bottleneck to economic activity.

Wherever possible, we will hand over the creation and maintenance of infrastructure to private initiative and subject it to the normal laws of markets. Except in the rarest of cases, the direct construction and maintenance of infrastructure by government departments will be brought to an end. Even in areas of potential monopoly such as water, sanitation and laying internet cables, we will advance significant private sector involvement under regulatory oversight. We will also support high speed rail networks where these are economically self-sustaining and without taxpayer subsidy.

Where competitive ownership and/or management of infrastructure by the private sector is not feasible, we will procure work from private vendors through competitive bids, with accountability of relevant public sector managers to deliver results at more competitive rates.

Some local infrastructure will continue to be built through work created as part of emergency relief, although such emergency situations are likely to be fewer in the future, given our social insurance scheme which will kick in for those impoverished through natural calamities.

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Well, the first question: should always be: why should government be involved in this (or that) activity in the first place.

Almost all infrastructure in the world was ALWAYS built by the private sector in the first instance. Study some economic history. Almost all railways, all buses, all airports, all airlines, all power stations, even water supplies. It is only later that governments decided to step in and meddle. In some cases they improved things, in most cases they harmed the entire society.

Vast swathes of roads across the world (generally toll roads) are built and managed by the private sector. Japan’s famed train system is privately owned. Electricity generation, distribution and retail is entirely privatised in Victoria, where I work (in the USA the idea that government would produce electricity never even came into question. ALL power plants in the USA (including nuclear plants) are privately owned. Water is privately owned in the UK. Vast dams and irrigation facilities are privately owned in Tasmania. All major airports are privatised in Australia (and I’m sure in most parts of the world).

ANYWHERE, where it is possible for a private operator to put a barrier around a service (e.g. train/ airlines/ water/ electricity) and charge for specific use, it is possible to fully privatise – in some cases under regulatory oversight to minimise the effect of monopoly ownership.

Where there is some difficult (e.g. most roads), the government probably needs to play some role (but not all: merely a facilitator).

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Jayant Bhandari’s prediction for the mining sector in India – the pits

I quote from here. This is consistent with my many writings on this subject. It is GROSSLY inconsistent with bootlicker Gina Rinehart’s assessment of Modi (see my FB post).

====EXTRACT====

Recent reports on India’s courting of private investment to raise $15 billion over five years “to double mining output and cut mineral imports” as it strives to boost domestic manufacturing under Modi’s landmark ‘Make in India’ drive, have been accompanied by India mines minister Piyush Goyal’s push to increase mineral exploration spending. The government wanted to boost exploration spend, “partly through taking upfront payments for discovered deposits when the mines are auctioned”, Bloomberg reported.

Global consulting group McKinsey has observed that without “accelerated growth in mining” India will rely heavily on imported raw materials to supplement local supply into its manufacturing sector, with increased forex spending on thermal coal, coking coal and iron ore alone reaching an estimated $58 billion, “a staggering 180% of today’s current account deficit”. Domestically, McKinsey says, “the Indian mining sector has been a success story in waiting for decades”.

“The mining industry could contribute an additional US$125 billion to India’s output and $47 billion to India’s GDP by 2025,” it says.

Bhandari is typically blunt in his assessment of recent public statements from Indian government leaders.

“In a very Orwellian sense this is good news for the international commodity prices. India … is incapable of ramping up its mining output. In fact, over the last 15 years when the world was rapidly ramping up its commodity production and increasing its exports to China, India was turning it down.

“There are simply no institutional capacities in India that make the ramping up of production of commodities possible. It is for this reason that despite having among the largest coal reserves, India imports from Indonesia and Australia, and these imports are growing.

“There is always hope for India. And they always stay hopes. Indians loves talking but avoids walking.

“Doing business in India is impossible enough, mining is much more difficult.

“The [mines] minister and Bloomberg should have at least used their calculators before writing and talking about [the investment required to double domestic mining output]. The US$3 billion per year [over five years] is about 0.0017% of the Indian GDP. US$3 billion is equivalent to just over US$2 per Indian, small change even for a poor country like India.

“If this amount could really double Indian mining output, it could be found from many places internally. A mid-sized mining company could single-handedly supply such an investment.”

And on the hoped-for recovery of advance payments for mineral exploration tenements, Bhandari was quizzical: “Corruption, planning and confused thinking is part and parcel of public servants in India. Would you give advance payment to India for minerals?

“I can think of no sane company that will do so.”

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