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India! I dare you to be rich

One more revision of the draft SKC agenda attachment on misconceptions about socialism and capitalism

I've further revised the draft attachment I had shared a few days ago

It should be ready to be attached to the agenda after one more revision. Please review and comment  (only 8 1/2 pages).

DOWNLOAD (only in Word),

I am toying with the idea of saying that capitalism is more 'socialist' in its outcomes than any socialist could possibly imagine (high level of economic equality of the middle class). So maybe we should call the system socialist capitalism.

What do you think?

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CRIMINAL Arvind Kejriwal talks ‘anti-corruption’ but actively seeks out CORRUPT CONGRESS MLAs

My impression about Arvind Kejriwal went down pretty quickly (in just a few months) after I met him in February 2012.

In early 2014 I called him an anti-national hooligan for trying to block the Republic Day parade. 

Now, I must call him a TOTAL CRIMINAL. 

For only a criminal will actively seek out criminals. ALL Congressis are criminals. ALL are corrupt. ONLY the corrupt join Congress. For someone to ACTIVELY seek out corrupt Congress MLAs means only one thing: that person himself is a TOTAL CRIMINAL.

On FTI we have a strict rule that no one associated with Congress/BJP or other corrupt party can be involved with our work. We believe ther are millions of honest Indians we need to get in touch with. The day Nandan Nilekani joined Congress, he became a criminal. Even if he may not be personally corrupt, he is ACTIVELY supporing the corrupt. He is an accomplice to criminality. That is a crime. Even if NN were to get out of Congress, he'd need to swear by FTI's code of conduct before we'd consider having him on board.

INTEGRITY IS NON-NEGOTIABLE ON FTI. CLEARLY NOT SO ON AAP.

In this tape AK is VERY clearly soliciting CORRUPT Congress MLAs. 

Undoubtedly AAP is a corrupt party. The letters from Prashant Bhushan and Yogendra Yadav stand confirmed.

ADDENDUM

AAP says nothing wrong in what Kejriwal said on tape – An amazing situation – with the party that committed to not consorting with Cong, is justifying Arvind's actions.

ADDENDUM

My further blog post on this topic:

The EXTREME DECEPTION OF “honest” Arvind Kejriwal. Blamed BJP but himself sought Congress MLAs.

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SKCF audit update – papers provided, some formalities left.

I've gathered that the various FTI members involved have provided relevant documents to the auditor.

There has, however, been slackness in:

- obtaining exemption under s.12A of Income tax despite a lot of work being done on this issue last year

- writing to the bank to obtain PAN numbers of donors – a simple letter had to be sent to the bank; it has not been sent despite REPEATED reminders.

This means there will be some legalistic comments on the audit report (unless these issues are fixed immediately).

I remain unhappy with the way things have been managed. However, the incapacity of the Delhi SKCF team in managing accounts and income tax issues can't stop the work of addressing India's governance issues. This incapacity or slackness (there are NO integrity issues involved) will need to be reviewed and fixed in the coming weeks/months, through training or otherwise.

I've now decided, on the basis of telephonic reports and emails received to continue with FTI/SCKF/SBP. 

While the final audit report may take some more time, I'm comfortable that there are three outstanding people now managing the matter:

1. Supratim Basu

2. Rakesh Agarwal

3. Anil Sharma.

I'm reliably informed that my key concerns have been addressed and now, some further formalities remain. I hope any further explanations can be provided to the auditor and appropriate action/s taken (on s.12A/ PAN) immediately. 

I will now leave the future of this audit in the capable hands of Supratim, Rakesh and Anil.

Once completed and published, I will INSIST on a thorough review of what happened, and that FTI/SKCF/SBP take remedial measures. 

At the end of this ONLY those with THOROUGH understanding and capability in accounting will be given any office bearer responsibilities for SKCF/SBP. All legal requirements would need to be met.

Without a strong accounting focus we can't do anything big or worthwhile.

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Why PK Siddhartha of Bharatiya Suraaj Dal is wrong in his understandings about capitalism

I'm not commenting on Indian events as temporary withdrawal from Indian affairs till I get  a clean audit report on SKC Federation's funding.

Even if the accounts are finalised, I want want strong warnings to be issued against the FTI members involved. By delaying accounting of public money they have let me down. Throughout my life I have hit VERY hard against even the smallest financial impropriety. People's hard earned money was contributed to SKCF and if any FTI member charged with this money took it for granted, he should be punished/ reprimanded. If FTI refuses to pass STRONG WARNINGS against such FTI members, I will take unilateral action to publicly name and shame them after leaving FTI permanently. 

Integrity must be maintained at ALL costs. Liberty without accountability/ integrity is the most dangerous ideology.

* * * 

Anyway, there is one thing I had committed (in relation to India) which I will now attend to. This is about PK Siddhartha, former IPS officer (1981 batch, one year my senior).

I engaged with PK during 2010-2012 with the hope that he would join FTI. But ideological issues came in the way. After taking voluntary retirement from IPS he formed his own political party, Bharatiya Suraaj Dal. The party contested in the December 2014 Jharkhand assembly elections. Siddhartha polled 1659 votes and came 7th

Recently, PK resumed our conversations. He sent me a draft script (in Hindi) for educating political workers, and asked me for my opinion on the script. I had a quick look at it and noted that it it was ill-informed, and that I could only comment on it publicly, if he was agreeable. On 3 February 2015 I wrote to him: "I can discuss on my blog. Are you OK with that? I'll publish your draft script and critically comment on it and show in detail why the script is misleading. I can't spend time on private email on such a public issue." 

On 11 February 2015, PK responded: "U may discuss my script on isms in yr blog. Just be factual and dignified."

I'm now responding. 

* * *

First, download the script here. Note that it is a draft script and PK is willing to amend it, based on feedback. I commend PK on this open approach.

Now, what's good in the script?

PK gets the definitions of socialism and capitalism right. In particular it is hard to find any fault in his definition of capitalism (which he calls "punjiwaad", others call "udaarvaad": that's irrelevant). [Click for larger image]

So far so good. 

But then the script goes off in a tangent.

1) He misrepresents capitalism from the word "go", even while praising communism.

This is fundamentally wrong at TOO many levels. First, as I have clearly demonstrated in BFN, the claims of Marx against "capitalism" were ALL false. There is simply no doubt that the living standards of the workers and their children went up dramatically during the early stages of the industrial revolution. Second, WELL BEFORE MARX CAME ON THE SCENE, classical liberals had been at the forefront of reforms that allowed unions to form, to protect workers' rights. And strong occupational health and safety laws emerged well before the communists came on the scene. Indeed, socialists like Marx vigorously opposed workers' unions. 

ALL reforms in the conditions of workers are attributable to classical liberals, NOT to communists.

Second, the excesses of the welfare state (which PK praises!) are a perversion of the requirements of a social insurance scheme under a classical liberal (capitalist) model of society. The fact that the social insurance system has excessively grown in the West is an outcome of democracy, which leads to pressures on politicians to give away freebies to voters. Recall that initially only those with property had a right to vote. As voting rights became more widespread, it was increasingly impossible to get elected without throwing money at the poorer sections among voters, who formed a majority. In addition, Keynesian became influential in the West in around the 1930s – which led governments towards fiscal deficits and throwing public money down the drain. This is a really bad set of policies. It hasn't benefited but harmed the poor in the West, by making the entire economy vulnerable and fragile. The West is not a role model for capitalism. I've explained at length in my notes for the SKC agenda

2) PK writes about socialism as if it is GOOD thing. He misleads the people of India by suggesting it is a part of the Indian constitution (it is NOT, it was imposed by Indira Gandhi during the Emergency). He makes NO criticism of the inbuilt incentives in socialism towards corruption. He writes:

3) Finally, he makes the WILDEST AND MOST ILL-INFORMED CLAIMS ABOUT CAPITALISM.

What can I possibly say to such EXTREME falsification of the system of capitalism and freedom? One can hardly begin. Most of these are strawmen fallacies, i.e. fallacies based on severe ignorance or distortion of the facts. 

Let me begin with the last comment, that capitalism is not an Indian system. That' is a lie. As I've shown clearly in DOF and repeatedly on my blog, the key elements of liberalism (free thought, free trade, limited restrictions on types of occupations) were part of India's culture and economic system around 2500 years ago. Arthashstra is anything but socialist. The use of incentives in the Arthashastra to control corruption is a remarkably modern idea. Capitalism is a PURELY Indian system that most Indians have forgotten, due to shallow thinking.

There are a vast number of claims about "immorality" of capitalism being bandied about by PK in this script. As far as I know (from personal experience of spending over 20 years of my life in the West) there is almost no corruption in governments, there is rule of law, and policies are evidence based. The West is constantly improving its policy frameworks. Any policy must demonstrate why the government must restrict people's freedom. 

That the internet is free is a mandatory requirement of free society. Does PK want it to be controlled by the government, like China (even India) does? Does PK want to impose his views on morality on the whole of India? I don't think that's the role of government. 

Regarding any foreign policy disasters of the West (and there have been many), these should not be conflated with capitalism. The interaction between nations is entirely driven by self-interest, and is entirely amoral. The law of the jungle applies. The world is not a peaceful place. Terrorism – and communist/socialist repression (as in China, N.Korea, even India) can't be dealt with by sweet words alone. Chanakya's way of thinking was absolutely right on this issue. Let's not mix up foreign policy with economic policy.

The first goal for India should be to become EXTREMELY wealthy. As a poor bankrupt socialist nation, India has often been forced to tie its destiny with third rate countries like the USSR. PK would do well to distinguish foreign and economic policy.

Anyway, I've elaborated enough. I doubt PK will bother to read/understand and change his mind. PK offers us a Gandhian model, without explaining what it means and how it will eliminate poverty. Gandhi's knowledge of economics was next to zero. He  was an ILLITERATE on basic economics. Clearly PK hasn't bothered to understand public policy, but imagines that by waving his arms around, he will persuade the people that he knows what good governance looks like. He doesn't.

I would urge PK to do what I've already asked him to do: read BFN/DOF and UNDERSTAND these books. Then read SKC agenda, then read classical liberals widely. And economics, including Arthashastra

To become a Sone Ki Chidiya India needs to revert to its indigenous CAPITALIST model. Socialism or Gandhism won't work. 

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Per capita GDP increase over time (when controlled for quality) is around 36 times in 100 years

GDP serves an excellent purpose, and its annual growth is a useful indicator of improved wellbeing and prosperity.

However, comparing GDP cross-sectionally across countries is hard. The exchange rate applies only to the traded sector, so comparisons using this value are fraught. So the purchasing power parity (PPP) methodology corrects for this difficulty. I generally prefer PPP calculations to exchange rate-based comparisons of GDP.

There is another major difficulty, however. While technology can be assumed to be similar over two years, it is actually changing quite rapidly. Comparing GDP growth across time (time-series) within the same country is fraught, even if we control for inflation using the consumer price index (using CPI is fraught, as well).

The issue of quality becomes quite serious when we compare the market value of output across more than 2-3 years.

Let me illustrate.

My father purchased his first car (a Fiat) in 1970. The interior of the car was tolerably comparable to the interior of modern cars. However, its engine (of 1.1 litre, I think) and mechanics was very poor. The car broke down frequently.

35 years later I purchased a Toyota Avalon (3.5 litres engine). This car has never broken down for the past ten years. I perform the usual servicing (around once in 15-18 months) but it is sturdy like a rock. To get such a car in 1970, my father would have had to pay a lot more (even assuming that such quality was available in the market).

The same applies to telephones/mobile phones, washing machines, computers: things that have significantly improved in quality as a result of technological change. 

Question: How can one compare quality changes over time in an meaningful way?

if a buyer in 1970 had a choice between a 1970 Fiat and a 2005 Toyota Avalon, what would such a buyer have paid for the Avalon? An alternative way is: How much would someone in 2005 pay for a 1970 Fiat? This is far more practical.

I paid $19,000 for my 1.5 year old Toyota Avalon. I would not have paid more than $500 for the 1970 Fiat. Its value in 2005 would be little more than scrap metal, even as a brand new car.

If one controls for engine size, etc. one could reasonably conclude that quality had increased by at least 20 times, possibly in the range of 50 times, over 35 years.

Using such market-based approaches, we could compare high value goods across time, thereby attributing a quality factor into the GDP calculations. 

Note that there has been very little change in teh quality of a number of things: food, bricks, houses. So the overall quality inflator for GDP would be much lower than 20, possibly in the range of 3.

But even that (3) is HUGE. In merely 30 years, the true TIME-CONTROLLED MARKET VALUE of what I own has increased by 3 times, just because of an improvement in technology.

Over 100 years, per capita income, as measured by GDP, generally increases by around 6 times. But if my calculation of quality is approximately correct (note that quality is accelerating rapidly), that adds a quality inflator of around 6 times over 100 years (3 x 2 x 1).

This leads to a net improvement in REAL prosperity of around 36 times over 100 years.

This is merely the sketch of a possible methodology to assign a market-based measure to quality improvements over time. I'm sure others have explored this topic in much greater detail. Do let me know about any such work you know about.

(I realise that the simplistic methodology I've outlined above is full of holes, but something on these lines would perhaps be needed to value quality changes).

ADDENDUM

A few days after I posted this, I came across this: We are better off than GDP suggests

 

 

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