Thoughts on economics and liberty

Where I differ – and quite strongly – from Rajaji

I’ve by now had a good look at Rajaji’s writings. There is much to admire about him.

He has no doubt about socialism being a bad idea. He repeatedly shows how socialism and communism will achieve the same – bad, violent, coercive – outcome. He is prolific in his critique of socialism. To that extent I’m with him.

BUT he was not an economist and didn’t know about the price system and the benefit of trade. And so he did end up with a number of policy errors. E.g.

a) Trusteeship

I agree that trusteeship is a kind of capitalism – but it is based on wishy-washy subjective ideas of “dharma” which no one can explain. That’s not a good basis for policy making

b) Reservations of some textiles for handloom industry

He wrote an essay on handlooms in which he advocated that the textile industry be stopped from manufacturing a few things that handloom industry specialises in. That’s a terrible policy, and prevents the evolution of markets to the more productive forms of production. He wanted production but since he didn’t understand markets, he thought that allowing textile mills to produce sarees would harm the handloom producer. Wrong. Since a handloom producer is not a museum piece, a handloom producer in perpetuity. He and his children will get educated and move up the value chain.

c) Prohibition

This is something inspired purely by Gandhi and without reference even to the massive failure of the constitutional amendment for prohibition in the USA. Rajaji at least ought to have known about that, even if he did not understand the underlying economics.

Moreover, was he unable to see that prohibition is nothing but coercion? The purest form of violence?

d) Social justice

He allowed the socialists to dictate key terms like “social justice” which is a meaningless pile of rubbish.

e) Capitalism 

Whenever he wrote about capitalism it was with a negative connotation, in opposition of his “good” idea of trusteeship. But that’s simply because he didn’t understand economics.


My comment on this article by Students for Liberty, on Rajaji.

Hi Akash, thanks for this article – which will hopefully educate a lot of people. No, Rajaji’s was NOT a classical liberal party in the true sense nor was JP’s Lok Satta party. These were conservative parties not classical liberal. The more I discover about Rajaji, the more convinced I am that he doesn’t understand liberty. His insistence on reserving certain textiles for the handloom sector, his insistence on prohibition were both illustrations of his lack of understanding of liberty.

I did not know about Rajaji’s work (apart from the fact that he was a governor general of India) when I decided to quit IAS to work towards a liberal party. SV Raju, who had worked with him, educated me a lot about Rajaji, but whatever I learnt (and have learnt to date) does not persuade me that Swatantra was a genuine liberal party. There was a lot of talk about social justice and a number of restrictions inspired by Gandhi – who hated Adam Smith.

Yes, I have come to admire Rajaji and acknowledge him as one of India’s fighters against socialism, but I’d not join his party if it was in existence today.

Btw, there is no point mentioning SBP – for it is not going to go anywhere unless the people of India want it. I’m quite fine in Australia and I do this for people like you to take up the opportunity. If, instead of merely pontificating and writing and thus feeling good, you really want to DO something, then join SBP and lead India.

Sanjeev Sabhlok

View more posts from this author