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Category: Economics

Ambedkar’s key economic views – sadly he was a socialist at heart

I’ve written a lot about Ambedkar on this blog, including calling him a classical liberal. Given the great paucity of any competent thinkers during India’s independence movement, I gave him more credit than he deserved.

Compared with most of the highly regarded “freedom fighters” of India, he is perhaps closest to being classical liberal (Gandhi is close enough, as well). Perhaps that is why India’s Constitution is broadly in the mould of a classical liberal constitution.

But we also know that the Indian Constitution is seriously flawed in crucial aspects. I’ve elaborated in BFN. These flaws derive from the tugs and pressures that arose in the Constituent Assembly from ultra-socialist forces and from ultra-communal (largely Hindutva focused) forces. That’s why we have “directive principles” with absurd things like cow protection and a host of other ridiculous ideas.

But also we have a range of other illiberal things in the Constitution, including the reservations policy which was promoted by Ambedkar. And later, the shelter for land ceiling laws, and other obnoxious interventions in trade.

His degrees: B.A.(Bombay University), MA.(Columbia university), M.Sc.( London School of Economics), PhD (Columbia University), D.Sc.( London School of Economics), L.L.D.(Columbia University), D.Litt.(Osmania University) , Barrister-at Law(Gray’s Inn, London)

I’m linking below a few recent articles/ writeups on Ambedkar’s economic views.

The Practice of Economics by Dr. Ambedkar and its Relevance in Contemporary India – by Padmaja Saxena Bagga, Associate Professor, Dept of Economics, National Defence Academy, Pune, India, published in Journal of Business Management October 2014

Economic ideas of Dr. B.R. Ambedkar and its relevance for Indian economy by Sunil Malkani,  published in KCG-Portal of Journals, October 2016

The economics of Ambedkar – Pramit Bhattacharya April 2016

The summary of these articles is provided below. I have directly quoted the papers.

1. He wanted “positive” fundamental rights

It was Ambedkar who proposed to the Constituent Assembly that the chapter on fundamental rights in the Constitution should include both negative rights (relating to civil liberties) as well as positive rights (relating to social and economic justice). In a memorandum on this subject, Ambedkar outlined his vision of the rights of citizenship in a free India, and explained why it would entail extensive state control over the economy.

[Sanjeev: This concept – of positive rights -is comprehensively inimical to liberty as I’ve explained at length in DOF.]

2. He wanted State Socialism:

Dr. Narendra Jadhav, in his research paper, ‘Neglected Economic Thought of Babasaheb Ambedkar’, states that, “Ambedkar’s concept of State Socialism is based on three basic tenets: (i) state ownership of agricultural land and key industries to meet the demands of the poorer strata of society; (ii) maintenance of productive resources by the state; and (iii) a just distribution of the common produce among the different people without any distinction of castes or creed.” [Sanjeev: the very idea of the State undertaking business is totally antithetical to liberalism.]

3. He wanted central planning but some private sector:

In his memorandum submitted to the British Government titled “States and Minorities” in 1947, Dr. Ambedkar laid down a strategy for India’s economic development. The strategy placed “an obligation on the State to plan the economic life of the people on lines which would lead to highest point of productivity without closing every avenue to private enterprise and also provide for the equitable distribution of wealth”. He had an “emphasis on the need for industrialization so as to move surplus labour from agriculture to other productive occupations, accompanied by large capital investments in agriculture to raise yields” [Sanjeev: There can be no “mixed” economy – it is nothing but a socialist idea.]

4. He was concerned about economic inequality:

In his speech on the eve of the signing into law of the Indian Constitution, delivered on 25 November 1949, he said: “On the 26th of January 1950, we are going to enter into a life of con­tradictions. In politics we will have equality and in so­cial and economic life we will have inequality. In politics we will be recognizing the principle of one man one vote and one vote one value. In our social and economic life, we shall, by reason of our social and economic struc­ture, continue to deny the principle of ‘one man one value’. How long shall we continue to live this life of contradictions? …We must remove this contra­diction at the earliest possible moment or else those who suffer from inequality will blow up the structure of political democracy which this Assembly has so laboriously built up.” [Sanjeev: concern for inequality is wasteful and disruptive. All we need is social insurance and elimination of dire poverty]

5. He wanted to nationalise land:

He sees an extremely important role for the state in such transformation of agriculture and advocates the nationalization of land and the leasing out of land to groups of cultivators, who are to be encouraged to form coopera­tives in order to promote agriculture. … During the framing of the Constitution, Ambedkar had visualised that agriculture shall be a State Industry, and be organized by the State taking over all land and letting it out for cultivation in suitable standard sizes to residents of the villages to be cultivated as collective farms by groups of families. The State had the responsibility to supply capital necessary for agriculture as well as for industry.” [Sanjeev: property rights are inviolable. This idea is obnoxious in the extreme]

6. He wanted sound money:

Ambedkar was a believer in the quantity theory of money. In his book, “The Problem of the Rupee”, Ambedkar’s main thrust was the criticism the “reckless issue of rupee currency”. By removing the automatic link between money supply and gold reserves of the country, enormous power was vested with the government to expand money supply, without similar expansion in production of goods and services, leading to an unstable currency value. Ambedkar took the position that an unstable currency could lead to uncontrolled inflation; since a “man­aged currency system” allowed the government to in­dulge in fiscal extravagance and wasteful government expenditure. [Sanjeev: this is fine, but overall, Ambedkar seems to have been a very poor economist]

7. He wanted labour market interventions by government:

In 1936, Dr. Ambedkar founded the Independent Labour Party. As a Labour Member of the Viceroy’s Executive Council from 1942 to 1946, Dr. Ambedkar was instrumental in bringing about several labour reforms including establishment of employment exchanges, generally laying the foundations of Industrial relations in Independent India. [Sanjeev: once again, the focus should be on ensuring freedom in industrial relations]

CONCLUSION

So what can we say about Ambedkar?

One can say he was trained in economics and that’s a good thing. We, however, note a very strong Marxist influence in his work.

He took on some elements of liberalism but then tried to graft Marxism to it.

That’s something impossible to do.

So what should we conclude?

Ambedkar was a POOR ECONOMIST and did not understand markets or the price system. He was not a classical liberal in the genuine sense. His views are highly distorted and statist.

India is fortunate to have had at least a half-competent person like him to help draft its constitution. But the defects in India’s constitution are just too many and to Ambedkar – in addition to to Nehru and the other socialists – must go the blame for letting India down.

Sad, indeed, that there was virtually no leader at the top in India for the past 100 years who understood (and therefore was able to promote) liberty

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Goodbye banks – the forthcoming wipeout of the inefficient financial sector

I came across https://transferwise.com/ (it was cited in this The Age article).

I am sick of using my Citibank India account to transfer funds to India and am thinking of transferring funds either through Bitcoin or through such a website in the future.

Ultimately, Bitcoin is going to be too expensive. From what I’ve researched, Dogecoin (DOGE/ XDG) is actually the cheapest way to transfer funds (just 1 Dogecoin, which is worth less than 2 US cents – $0.0171 – no matter how big the amount being transferred). IOTA is probably even cheaper ($0) – but I’ve not yet understood it properly.

I must add that banks are keenly aware that the carpet is being pulled from below their feet, and are actively working to reduce such costs. Ripple (XRP) is being tested by many banks as a means to minimise such costs.

The financial market creams around 6-8 per cent of GDP every year for providing its services. It remains mired in ultra inefficient practices and technology of the 1970s and 1980s.

My bet is that its share is going to decline to less than 1 per cent within the next 10 years – and potentially less than 0.1 per cent in 20 years. A wipeout.

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How governments can benefit by imposing a range of taxes on cryptocurrency

This author raised concerns about government regulation of cryptocurrencies.

I’m coming to the view that such regulation is not only necessary but will be extremely beneficial both for the market and for governments. [See my comments here].

Cryptocurrency has two qualities in one: asset (store of large amounts of value) + money (being easily transferred in extremely small quantities).

While no taxation can be imposed on the money component, there is a huge taxation opportunity for the asset component, given that many cryptocurrencies are skyrocketing at 1000 or more per year.

Some governments are already starting to regulate cryptos. Such regulations will massively increase the legitimacy of cryptos in the eyes of the sceptical masses, who will then jump on (finally) into the bandwagon, thereby massively increasing the price of these currencies.

Governments should get a share of the profits from cryptos to plough that money into infrastructure and public goods. It will only be a really stupid government that kills the chicken that lays a golden egg.

Having myself made a small paper profit (currently a notional profit of $4000 AUD on my small investment), I see no reason why government should not be able to apply the following taxes on crypto transactions:

CRYPTO-CRYPTO TRADES

The tax would need to be very small on tiny trades (such as for a cup of coffee), but it could be incrementally larger for larger trades.

A tax of up to 0.05 per cent on crypto trades will harvest significant gain for governments.

Of course, traders will then shop jurisdictions and move to exchanges in countries that do not charge such a tax. Or the exchanges will go off-line (peer-to-peer).

FIAT-CRYPTO-FIAT CONVERSIONS

Two choices:

a) at the standard GST rate (possibly at BOTH ends of the transaction).

b) as capital gains tax at the end of the transaction (this, of course, also would allow investors the option to track any capital losses).

What about the ability of crypto-owners to move their conversion to a different jurisdiction?

Yes, they can. For instance, a number of exchanges now offer USD debit cards that can be used anywhere in the world. So I can transfer funds to a US exchange, then convert to cryptocurrency, then buy a world-cruise from USA which will totally short-circuit the Australian system.

But if I wish to convert my crytpo-money into AUD (to be drawn as cash or deposited into my bank account), then generally only an Australian exchange will do so. The Australian government could require all Australian exchanges to charge a GST on such conversions. It could alternatively require me to track all my crypto investments and report on any capital gains.

Of course, there remains the option of peer-to-peer exchange in which I can find someone in Melbourne who wants bitcoin and get sell it to him in exchange for cash. This will be entirely off the record keeping system and will evade any tax.

It is not my job to think on behalf of governments about how they can tax cryptos. But this is clear: they can’t avoid cryptos. These are here to stay. The only choice they have is to work out how to benefit from cryptos, which are essentially a great productivity enhancing device.

BTW, I agree with commentator Andrew Robbins here:

If a government starts to heavily regulate Cryptocurrencies they give themselves a massive disadvantage compared to other governments who don’t. We’re already starting to see this with ICOs preventing U.S. based IPs from participating. You do this too much, and people will eventually leave your country.

So, any government that regulates/ taxes will need to be keenly aware of competitive issues of this sort.

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The ultra-puerile, nonsensical “good people” theory of governance

Key comments from my FB post here. The “good people” theory of governance is the most obvious sign of someone’s ignorance about basic economics and governance. This theory is typical not only of the socialists but of the thousands of half-baked “economists” and “liberals”.

===MY COMMENTS==

India’s problem is the design of its governance system and policies. If people don’t understand this point, they can be as honest as they like and they will totally fail to change anything.

Half baked ideas continue to flourish. No takers for serious work, that will involve a lot of thinking and understanding.

FURTHER

It takes ENORMOUS intelligence to create good institutions, which neither you have a clue about nor most Indians. I’ve not seen one single writing of yours which shows how to create good institutions in India.

Hence the delusion that “good” people can do anything good for the country.

FURTHER

Just like LKY is not a “good” people alone, so also the leaders of Australia are not “good” people alone.

It takes ENORMOUS sense and competence to design good institutions. 99.99999 per cent of Indians have no policy competence or sense and hence cannot design good institutions.

You may be a “good” people yourself but will be entirely useless to India unless you understand this point that governance is a science, not some random thing that any “good” person can do.

Then you will need to start studying how good institutions in India must look like. Then work out a transitional path.

If you are interested, all this is already explained in BFN + SBP manifesto.

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