Sanjeev Sabhlok's blog

Thoughts on economics and liberty

Good governance

In 1998-99 I started a handful of articles/ academic papers which I never got to progress, having come down with the most acute case of RSI. I accidentally came across some of these old writings a moment ago. Some of these papers are over 14000 words long and not suitable for a blog post. But a few short ones might be OK for a blog.

This one, on good governance, is a preliminary paper of 1999. Some of this material has flowed into BFN. The rest remains unexplored/unpublished. 



The demand for good governance is voiced  across the country, but few have stated explicitly the fundamental changes it will take to arrive at this objective. We have dug our head into the sand regarding the analysis of the fundamental deficiencies in our democracy, and this is now beginning to take a heavy toll on our daily lives. I will touch upon four issues here which I believe are fundamental problems of our system needing to be addressed urgently.

Four Issues

1. Democracy costs a lot of money

Democracy does not come for free. Enormous expenses are incurred both in the organisation of elections by the Election Commission and in contesting elections by candidates. Whereas the first of these easily runs to many hundreds of crores per general election, and has our sanction as a citizenry, we seem to balk at considering the likelihood of candidates spending similar sums of money. We have not only imposed limits on electoral expenses, which are flouted blatantly by candidates, but we have also kept no relationship between the expenses incurred in election by candidates and the remuneration received after elections by the successful ones. The limit of expenditure in a Parliamentary Election is now Rs. 15 lakhs, a number of reports — informal as well as formal — prove that candidates spend on average well over Rs. 1 crore (for example, see pp. 272-278, pp.296-298 of The Black Economy of India by Arun Kumar, Penguin, 1999). At the end of this process in which one out of many are elected, the take-home pay of the successful representative, a Member of Parliament, is Rs.4,000 per month (details in Annexure I, including why other expenses are not part of this take-home pay). Clearly in this process there would be some who wish to provide charity to us citizens by spending their own money with no thought of returns, but on the whole, the main category of persons who enter this absurd process are those who have no compunction about misusing their elected office to capture rents from the Government machinery to recover their heavy investment . In not-so-polite language, we can say without fear of being rebutted that a vast majority have come into public office with the primary objective of looting the system. The N.N. Vohra Committee report on the nexus between politicians, bureaucrats and criminals including the Mafia is as explicit a statement of fact as any one can get from within the system. “In certain states … these gangs enjoy the patronage of local level politicians, cutting across party lines and the protection of  government functionaries.”  Democracies do not run on charity and we should not be depend as citizens on the good will of a few charitable souls who spend their own money in order to ‘serve’ us. Our representatives must not have to depend on loot and black money for their sustenance.

To make matters worse, the Election Commission of India prevents debate on whatever expenses have been declared to it by political parties. The mystification of the basic processes of democracy is causing large scale corruption in India. It is the root cause of corruption and unless this is removed, no amount of economic liberalization will help.

In brief, the solution here is (a) to remove limits on electoral expenses but to insist on transparency, and (b) to drastically increase the take-home remuneration of MPs while completely eliminating their ‘perquisites’ except those that are necessary in the interest of security. 

2.         Transparency

The Official Secrets Act of 1923 talks about not disclosing secret official information which is likely to assist, directly or indirectly, an enemy or which relates to a matter the disclosure of which is likely to affect the sovereignty and integrity of India, the security of the State or friendly relations with foreign States. However, the system has made it a point to cite this Act each time any information which is relevant to the people is sought to be made available to them. This Act was designed for an imperial Government and not for a democratic India. There is no information in most departments of Government which is potent enough to affect the sovereignty or integrity of India in any way. India’s defence and security has been compromised by rampant corruption in the entire system. Transparency will help reduce corruption. That is a major priority. All information handled by the Government must be made accessible to citizens through the internet except in very rare cases. We also need statutory provisions to protect whistle blowers in the Government who bring to public notice the serious discrepancies that are occurring in their Departments. In April, 1997, the Conference of Chief Ministers on Effective and Responsive government recommended some of these steps. A bill on these lines is being brought to the Parliament soon, but mere information on demand will not do. Citizens will have to play an active role, and the internet will have to be fully used.

3.         Supervision of Government Machinery

We can skirt the micro-  issue of supervision of the government machinery at our own peril. In order to be truly representative, a democracy has to be designed to leave the control over, and superintendence of, governance, with the citizens at all times. India’s democracy does not meet this criterion principally because we have never explicitly enunciated or desired this control so far.

Under the current dispensation, we have a system of representing ourselves democratically at the highest level of governance. We give to ourselves a government every few years in order to carry out functions that we cannot perform ourselves as individuals. This representation is very thin, though. As a ratio, at the national level, one out of every twenty lakh people represents us. At the state level, this is slightly better, but still very thin. The actual structure of government is many tens of thousands of times larger than the number of representatives.

Our representatives are authorised to create laws and statutes by which we are to be governed. Some of these representatives are then empowered to execute these laws. We also expect the representatives to supervise — through the use of mechanisms such as government auditors and committees of the legislature — the actual implementation of these laws and the thousands of rules framed thereunder. Unfortunately, due to the way the system of supervision has been designed, most of the laws are violated fearlessly by the very same gargantuan governmental machinery which was designed to assist our representatives execute them. I believe that a vast majority of these violations are never even brought up to the notice of various committees of the Assembly or Parliament, and therefore, functionaries continue to violate laws with impunity.                              

Once the contentious process of framing laws is resolved democratically, each of us should resume to ourselves the power to verify that these laws and rules are being followed strictly. The Local Board that I envision would be attached to each local office of the government, such as each district library, each post office, each branch office of each public sector undertaking. Without having any power to legislate or to execute, its sole function would be to supervise the procedural aspects of functioning of the governmental organisation to which it is assigned. Voters of the city or village in which the office is located would be eligible to apply for membership of such Boards. A public drawing from among the eligible applicants would take place. Members of the Board would be authorised to inspect all records with due advance notice. Members would be responsible for pointing out errors of omission and commission in procedure to the concerned elected representatives and to the people directly through the press. They would, in addition, be invited to all statutory meetings, where they would act as observers, such as at the time of opening of sealed tenders.

            Local Boards will ensure that the fundamental control of our country’s governance vests with citizens at all times.  As part of the process of deepening and strengthening democracy in India, and as part of the package of reform of governance, such direct supervisory mechanisms need to be designed and implemented.

4.         Using the best technology 

By now India could have been be a powerhouse of technology. Instead, it is hobbling along using primitive technology in most cases. There is an urgent need to educate our government machinery about technology. Technology, by definition, is labour-saving. By enabling us to do many more things in the time available to us on this planet, technology — embodied in the latest discoveries and inventions, latest machines, the latest software, the latest management tools — multiplies the power of the labour that we possess, improves the quality of our life, and increases our life span by destroying disease. Its economic effect is seen through lower costs, such as in the case of USA where it costs 20 times less in real terms to produce a bushel of wheat today than it cost 150 years ago. Ayn Rand very aptly called machine “the frozen form of intelligence” (Atlas Shrugged, Part 3, Ch. 7).

This does not necessarily mean that the use of latest technology is optimal for each situation. In the case of private goods, the most labour-saving technology chosen — and the availability of this choice is of the essence — by a self-interested individual facing a personal budget constraint can be defined as optimal. If all technology, of all vintages, is freely available, then all individual decisions made in the marketplace of technology are optimal and thus appropriate, making the term appropriate technology tautological, merely representing free choice. It then does not possess meaningful content for a policy maker, leaving no scope to interfere with the forces of the market.

            For public goods, the choice of appropriate technology is not quite as obvious. It is difficult to choose between hand-made roads (labour-intensive) and machine-made roads, for example. Since social cost-benefit analyses have serious shortcomings, I suggest that human dignity, safety and standardisation of quality be considered in making these decisions.

Using manual labour for tasks such as collection of garbage in cities, cleaning public drains, breaking large stones into gravel and carrying bricks up bamboo scaffolds, is inhumane. These activities are almost always carried out without concern for the safety of the citizens involved. Since labour is cheap, the life of these temporary workers, often hired newly each day by contractors, is itself felt to be cheap, and little is heard of their injury, disease, and consequent lay-offs in government sponsored projects, except when a major accident takes place and tens of them are crushed to death here or there.

Machines provide dignity and also standardise quality. The construction of roads by machines leads to durable roads, permitting the use of larger trucks of higher quality to operate, reducing the cost of maintenance of roads as well as the cost of transportation of goods across the country.

As a very important spin-off, machines demand and indeed compel, the development of indigenous skills, both to handle them properly and to build and manage them. Vocationalisation of education will become meaningful if government insists that contractors employed by it should employ only licensed technicians empowered with the best tools.

Paradoxical though it may appear, societies which set incentives for the best technology generally enjoy a low rate of unemployment. The compulsion to use the best technology forces an entire society to become intellectually competitive over time. Competitive societies in turn overwhelm other countries with their exports and ability to lower costs internally. Japan did not become a great competitor on the foundation khadi and pot-holed roads.

Thus as a nation, only the world’s best technology is appropriate for us. We have to put an end to the annual sacrifice of thousands of citizens at the alter of our Temple of Low Standards. 


I have touched briefly upon some of what I thought were the more important issues relating to the strategy for improved governance. These are of course many more areas which deserve our urgent attention, and we must try to set aside time in our daily lives to look into these matters. For example, improved governance needs vast improvements in economic and social policy at the same time. These are vast topics in themselves and need further debate. As a matter of principle, a free democracy needs much more open debate and interaction in order that  its citizens understand the issues involved and to collectively act in order to bring about significant change in the lives of the common man. Bureaucrats are citizens first. They should come out and talk about what they have learned from their experience. 









Rs. 4,000/- per month

Rs. 4,000/- per month



Daily Allowance


Rs.400/- the MP have to sign the register except on holidays.

Zero. Given in lieu of expenditure on being out of their place of residence. Similar DA given to all government servants.


Other Allowance

Constituency Allowance @ Rs. 8000/- per month and Office Expense  Allowance @ Rs.8,500/- per month, Out of which Rs.2,500/- should be for expenses on stationery etc. and Lok Sabha/Rajya Sabha Secretariat may pay upto Rs. 6000/- per month to the person (s) engaged by the MP for obtaining secretarial assistance.

Zero. MPs are expected to incur miscellaneous expenses for their constitutency. In fact they probably spend more than this per month. The others are in lieu of actual expenses on PA/ stationary.



1,00,000 free local calls per annum on both the telephones Delhi and Constituency residence pooled together. Trunk call bills adjusted within the monetary equivalent of the ceiling of 1,00,000 local calls per annum. Excess calls made over and above the quota allowed to be adjusted in the next years quota.

Zero. A necessity for MPs, just like similar entitlements to senior government functionaries.



Rent free flats only (including hostel accommodation). If a Member is allotted bungalow at his request, he shall pay (a) Full normal rent if he is entitled to such accommodation; and (b) Full normal rent and a non-entitlement charge of Rs.500/- per month, if he is not so entitled.

Rent free furniture upto the monetary celling of Rs.24,000/- for durable furniture

and Rs.5,000/- for non-durable furniture.

Free Washing of sofa covers and curtains every 3 months.

Tiles in bathroom, kitchen wherever demanded by MP.

Zero. MP has to maintain his original establishment elsewhere. This is more like free hostel accommodation and you do not get to take it in cash, home.


Water & Electricity

25,000 units of electricity per annum 12500 units each on Light/Power meters or pooled together Members who have no power meters installed are allowed 25000 units per annum on light meter and 2,000 kl. of water per annum beginning January every year.

Zero. Addition to above accommodation.



As available to Grade-I Officers of the Central Government under CGHS.

Zero. Govt. servants get similar facilities.


Conveyance Advance

Rs.1,00,000/- on interest as applicable to the Central Government Employees recoverable within a maximum period of 5 years not extending beyond the tenure of MP.

Zero. Govt. servants get better facilities.


Pension to ex-MPs

(i) Minimum pension of Rs.2,500/- per month for membership of 4 years and Rs.500/- per month for every year in excess of five without any maximum celling.

(ii) Pension to Members with two terms of Lok Sabha and to all the Members of Provisional Parliament (Constituent Assembly). Minimum Rs.2,500/- per  month.

(iii) (a) In case where the elections are not held due to unforseen  circumstances like weather conditions etc., such as in Ladakh in J&K and Mandi in Himachal Pradesh, such period should be counted towards their eligibility period for grant of pension.

      (b) Where in any General Elections held for the purpose of constituting of a new Lok Sabha, polls were delayed in any Parliamentary Constituency of any part thereof on account of terrorism, Insurgency or public order problem, the delayed period will count for pension purpose at the rate admissible under the law for the time being in force and from the date on whcih the dissolution of such House took place.

(iv) Ex-MPs pension allowed irrespective of any other pension without any upper limit on the aggregate.

This has a positive Net Present Value to be determined separately in each case.


Pension to the spouse/ dependent of an MP dying in harness.


Rs. 1000/- per month for a period of 5 years from the date of death of MP, to the spouse, if any, or dependent.

Very small, almost like that given to Jawans. Best ignored.


Travelling Allowance

RAIL     One 1st Class + One  II Class fare


AIR       One and one fourth air fare. Also air fare for one companion in case of a blind/physically incapacitated MP.

STEAMER One and 3/5th of the fare for highest class (without diet).

ROAD  (i) Rs 6/- per km (ii) Minimum Rs.120/- to/fro from Delhi airport and residence at Delhi. (iii) TA by rail or by road during session/committee meetings for to and fro journeys between usual place of residence/place of duty to the nearest airport even when the places are connected by rail. (iv) TA for air journey (s) during the short interval between two sittings of a Departmental related standing Committee during budget session recess, limited to one air fare + DA for the days of absence. (v) Also admissible for the journey by road by the spouse of a Member when not accompanying the Member.

Zero. No take home cash component. Govt. officers get similar facilities for official duty.


Travelling Facility

(1) Railway pass for MP for travel in AC 1st Class or Executive Class of any Indian Railway. Spouse can also travel with MP in the same Class. If such journey or part thereof is undertaken by air from place other than usual place of residence of the Member to Delhi and back, to an amount equal to the fare by air for such journey or part thereof or the amount equal to the Journey performed by air from usual place of residence of the Member to Delhi and back whichever  is less.(ii) Companion can also travel with MP in AC II tier. (iii) To and fro air travel for the MP from Ladakh for Member and Spouse/companion. (iv) To and fro air travel facility for Member and spouse/companion between the Island and the main land. (v) Thirty-two single air journeys in a year from any place to any other place in India either alone or alongwith spouse or any number of companions or relatives within this ceiling. (vi) Steamer passes for highest class of steamer for MPs and spouse/companion  (without diet). (vii) To and fro air travel when the usual place of residence is inaccessible by rail, road or steamer, between the nearest place in his constituency where there is air service and the nearest place having rail service.

This has some value (only as far as spouse is concerned. MP is supposed to be doing official duties) depending on how much the spouse uses this. If spouse flies 10 times at an average of Rs. 5,000 each, it is worth Rs. 50,000 per year.


Travelling facility to ex-MPs

Ex-MPs alongwith a companion are entitled to free AC two tier rail travel facility from any place to any other place in India, on the basis of an authorisation issued for this purpose by either Secretariat of Parliament as the case may be.

Part of pension benefit. Has “take home” value in some cases. Should be added to pension and included in NPV of pension.


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Tips for writing and managing a good blog

In the nine years (2000-2008) when I was mostly off the internet, nursing my RSI and trying to write a book or two, the internet world changed. I was a creature of Web 1.0, but now we have Web 2.0. Indeed, prior to June 2010 I was stuck in paper-based communication (books, articles) with a little internet use and blogging on the side (I did own and maintain a few websites, but my knowledge about the internet was getting rapidly dated.) 

And so, one fine day in June 2010 I realised that I've not been using even a fraction of the potential that blogs have to reach out to my target audience: Indians. It finally dawned upon me that blogs are a powerful medium to reach out to others – particularly after I figured out how to use RSS Graffiti to link up to my blog to Facebook. One can now rapidly multiply one's "subscribers". That was quite a discovery. 

And so in June this year I moved from blogspot to this blog, and significantly intensified my blogging efforts. In this post I will summarise my thoughts on the use of blogs as a medium of communication and share some learnings as I move from the "blog newbie" I was to a lower end "intermediate" blogger. The fact that I'm providing some guidance here doesn't mean that my blog is particularly good or that I'm an expert. All I hope through this post is to provide some useful insights to those who haven't yet thought about using blogs, or to those who want to use their existing blogs more strategically.

This post aims for a two-way exchange. I'm keen to learn from you so I'll be very happy to receive your comments/ thoughts on this post. But first let me make my pitch to the Indian liberals. This post is not a random blog. It is strategic. It has a purpose.

The Indian liberals must take over the internet!

The internet represents a  great revolution in information-sharing and freedom. It represents the essence of freedom of expression and the freedom to communicate, allowing people to choose between competing ideas. Moreover, its marginal cost is zero. What better way than this to get out one's message? Indian liberals should use the blogsphere actively as a marketing and educational tool. Blogs have become both sophisticated and easy to manage, so now there is no excuse for liberals to not use them. 

Like everything else in life, there are trade-offs. Is it worthwhile educating the current generation or is it better to write good books that can inform future generations? It it worthwhile reaching out to a few extra people given they might not join FTI and contest elections? Of course they could become Freedom Partners. There are also other spinoffs: some blog material could be converted into FTI flyers, some could flow into TAGI editorials. Some could even inform a further book. Either way, a good blog must form a necessary strategic complement to the communication toolkit of a liberal. 

Tips for running a good blog

These are early suggestions. I'll keep adding thoughts and links to this post in the coming months/years. Your comments will be appreciated, as they will provide me with food for thought. This lists below are in no particular order.

1. Establish a neat and tidy blog

1. Buy your own domain. I think owning one's domain is a fundamental requirement. I had operated a blogspot blog for a few years, but blogspot has very poor text editing features. Also, once you get your own domain, you gain greater control over its features. Of course, you can start on blogspot, for your posts and comments can be transnferred to your domain once you are ready. Note, though, that it is quite a challenge to transfer blogspot posts to your own domain, but if you search around on the internet you'll find instructions on how to do it. 

2. Use WordPress themes and plugins. I use WordPress on this domain. Do make sure your theme is not cluttered and that the published text reads easily. I like the Whitehouse theme that I'm currently using because it allows me to use a customised image as a header, and its published text reads nicely without hazy "fancy" colours that strain one's eye. The text should be simple: just plain black against a white background.

3. Provide Feedburner feeds. Feedburner offers email subscriptions – a great boon to novices who find RSS daunting. For an internet novice, understanding "feeds" can take quite some time (I didn't understand them till recently), but many internet users now actively use Feed readers like the Google reader. They don't need the email option. A good number of my readers have chosen the direct feed option ( They are RSS experts and that's fine. But I'd like to be able to reach out to internet novices, as well. As a result of the combination of options I now offer, I'm able to reach out to quite a few people with each post. I'm also going to hook up the IndiaPolicy Yahoo group to my blog posts. 

4. Use multiple languages. I'm still struggling with this, but I'd like to publish both in Hindi and English. I've tried to use a few plugins, but they don't seem to work. I'll keep trying. Publishing in multiple languages is particularly important for a political blog like mine. My audience largely speaks Hindi. I should therefore write for them directly in their own language. 

5. Provide good navigation to your posts. Categorise systematically and provide archives. I don't like tag clouds, though.

6. Use videos liberally. But don't use the autoplay option!

7. Don't clutter.  Avoid all kinds of clutter. I'm trying out Google Adsense advertisements, but these should be used in moderation I'd suggest. Plus it is crucial control your Adsense settings to avoid rubbish showing up on your blog.

2. Let the world know your blog exists

There's not much point in having a blog without letting others know of its existence. A blog is a communication tool. It must aim to reach out as widely as possible. So do the following:

1. Write to your friends. Send them an email requesting them to subscribe to your blog. 

2. Comment on related blogs. When you do so, provide a link to your blog. Comment on Facebook sites (e.g. Economist) and provide links to your relevant posts. I don't do this – commenting on other's posts/Facebook sites – as much as I should. I must do more. There's NO POINT in my writing if people for whom my posts are intended aren't reading what I write!

3. Get your blog registered in relevant directories. As you'll note I've registered my blog in a few directories. That apparently helps get some more visitors, particularly if the listing is well-targeted. This is a matter of searching on Google and finding such directories, then writing to them.

4. Hook up to Web 2.0. Hook up your blog to Facebook, Twitter, Friend Feed, BlogFrog, etc.

5. Do a few SEO [search engine optimisation]  things (like 'meta'). On WordPress there are "widgets" (ready-made computer programs) that help you set up meta tags. Use them, particularly the title of your blog. Also check around on the internet to learn more about SEO. I'm still learning.

6. Download and install Alexa toolbar. This is important since for some reason Alexa is now the default method to determine a website's rank. Putting your Alexa code (widget) on your blog is good. Note that Alexa counts your entire domain's rank, so if you set up subdomains with useful mini-blogs/ information sites on them, your overall rank will rise. It is crucial to always remember that most of us will remain on the 'long tail' end of global traffic. My blog (actually my combined domain) receives only 0.00026% of global traffic – only one out of every 384,000 website visits on the internet comes to my blog. So remember that there will be a lot of variation in your blog's rank.

6A. Keep posting. If you don't post sufficiently regularly, your blog rank will fall off. Keep posting! Traffic is king. In my case I want millions of Indians to read my blog. That can't be achieved if I keep quiet.

7. Go to Stumbleupon and 'like' your blog. This requires setting up a Stumbleupon account and downloading the Stumbleupon 'bar'. One of the pages I 'liked' received over 100 hits suddenly. I don't know the long-term benefits of this strategy, but there is no harm in spreading the word around. Who knows where you find your readers.

8. Monitor your pagerank: There are websites that let you monitor your pagerank. Apparently the more links your have on higher ranked sites the higher your own pagerank. What does this do? Don't know. You can't do much about your pagerank, though. Much depends on how others choose to link your blog.

9. Follow Google's advice! Here's excellent piece of advice from Google. 

3. Write well and respect your readers

1. Use the save option and revise before publishing: In June I started pumping out blog posts in one hit, without revision. Then I found my posts had a lot of typos. I soon realised that one should try to avoid typos, as a courtesy to ones readers. Good content must be smooth and easy to read. So I have now started drafting and saving my posts. I then try to check them at least once before publishing. Of course, if something is urgent one can't be so choosy. And a blog does not aim to be the same as a book (which I'd revise at least 7-8 times before publication). One first draft plus one revision (ideally two) is good enough for a blog. There are always going to be trade-offs between quantity and quality.

2. Be yourself. Most of use will naturally disclose our thoughts and preferences on our blog. But definitely don't try to be an expert in something you are not! 

3. Be strategic. I don't write because I like to write. I would much rather walk in the hills and paint. But circumstances have shown me that I should try to change India in my lifetime – that will add greater value than my walking in the hills. And so my goals from blogging are very clear: I write to influence positive change in India. I want Indians to become critical thinkers, to become free. The point about being strategic is to realise that ALL of one's public (and private) writings could one day be used to evaluate one's work, and could come back to 'bite' if one has not been careful. Let your writing be guided by a clear purpose.
4. Re-edit and update published posts. I try to re-edit/update previously published posts when time permits. This will ultimately make those posts easier to read for future visitors. Keep an eye on the future!
I hope this information is sufficient to persuade ALL FTI MEMBERS and FREEDOM PARTNERS to start their blog if they don't already have one. And in doing so don't forget to insert the following text widget on your blog: 
<center><a href = ""><img src ="" width = 150 height = 160></a> 
Let us, the Indian liberals, take control over the Indian internet space!  – through persuasion of the merits of our arguments. Let the best argument win. As Shantanu Bhagwat so well says it, Satyameva Jayate!
If you are an FTI member, I'd like to include your blog on this page. Send me the link.
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Inoculating India against the mental disease of socialism

We teach children hygiene to protect them against bacteria. But we don't teach them economics to protect them against mankind's worst mental disease: socialism. 

In a democracy, voters choose amongst various policies on offer. In order to make good judgments, they must be enabled to understand the basics of economics. Else they'll fail to distinguish between good and bad policies, and thus between good and bad political parties. It is therefore not sufficient for children in India to be taught Engish, mathematics, science, geography, history and one Indian language. It is essential that they are taught basic economics, by which I mean non-mathematical micro-economics (not macro-economics – they don't need to know anything about GDP and such things). Such basic education should be imparted in year 7 and 8 when the child is able to sense his or her needs and make generalisations.  

Unfortunately, today even our smartest children – e.g. doctors, engineers, and lawyers, are economic illiterates. Their thinking on policy is absolutely confused, as confused as the actual illiterate (indeed often worse). Economics is the most counter-intuitive discipline, and requires some amazing mental gymnastics in order to understand its principles. Indeed, I would argue that most professional economists (particularly macro-economists) don't understand economics, either).  

If we try to apply our illiterate intuition to matters of economic policy, we will be quickly led astray – to socialism! Socialism is thus the disease of ignorance. Unfortunately, since almost no one in India understands economics (perhaps 1 out of 100,000?), Indians tend to vote with their 'instinct', not through their head. Therefore they vote for socialists, thus unwittingly destroying their own nation.

Given the abysmal level of basic economics education in India, finding good political leaders is virtually impossible. Even if such leaders are somehow found, persuading the economics illiterate electorate (both illiterate and educated) is next to impossible. And so India will continue its precipitous slide towards anarchy. I do remain an optimist, though, given that the internet now permits the liberals to radiate their message to India.

Once every child in India understands how the price system operates, India will be saved. Our children will then also understand how international trade works and how centralised planning (a crucial part of socialism) is the greatest folly. They will then readily appreciate how mercantalism (e.g. swadeshi) is self-destructive. Once our children understand such basic things,  India will become immune to the more dangerous forms of socialism. There may still remain some fuzzy welfare socialists – as there are in the West – but at least the main disease, of socialism, would have been eradicated.

Such education, to be imparted in years 7 and 8 in school, should make use of Hayek's foundational logic of information being local. I have tried to explain this in chapter 3 of BFN, which could well form the basis of the school coursework.

But our educationists themselves don't have a clue about economics, so they don't see its value, and hence won't implement this proposal. Our leaders like Sonia Gandhi are semi-literates who are blind to all logic including fundamental economics. And the BJP types are so confused that it is not worth mentioning their name. In other words, we face the classic chicken-egg problem: HOW can we educate children in economics without first forming a liberal government? And WHY will the voters want a liberal government if they don't understand economics? I'm hoping that FTI will find sufficient leaders in the coming years to break this vicious cycle.

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The dangerous idea of equality

Here are extracts from BFN about the dangerous aspiration for equality. This is a quick cut and paste without footnotes and referencing. The actual text can be readily accessed. But first a short (one and half minute) video from Youtube by Milton Friedman:

*  *  *

The real choice before us today is between the two western models of governance – socialism or capitalism; between the life-denying concept of equality and the life-sustaining concept of freedom. Even if we don’t care about the philosophy of freedom, pragmatism would lead us to the more successful model. Capitalism is dramatically successful, just as socialism is dramatically unsuccessful. 

But there are far more important and compelling reasons to follow the path of freedom. Of these, delivering a society based on ethics and morality ranks the highest. Despite the noble intentions of its practitioners, socialism is immoral and destroys the moral fabric of entire societies. Freedom, on the other hand, delivers the highest ethical values and creates for each individual a level playing field by providing equality of opportunity through which the individual is enabled to discover his or her talents and achieve his or her highest potential. While the individual is the moral centre of a free society, the society is the immoral centre of a socialist one. Freedom is about far more important things than economic success, although a poor country like India should welcome its merits on that ground alone.

But at times, markets challenge us emotionally as they appear to be heartless. We are not comfortable with the outcomes of a free market which we may reluctantly agree produces great wealth, but which we find also results in increased inequality. We tend to see inequality as fundamentally wrong, even though we know that every individual will actually become much better off in a free market than he or she is today. 
*  *  *
I wonder, though, about the hypocrisy behind our alleged preference for equality. Gandhi once asked some socialists who had come to visit him, ‘Now tell me how many of you have servants in your homes?’ The socialists Gandhi was talking to said they had a servant in each home. Gandhi replied, ‘And you call yourself Socialists while you make others slave for you! It is a queer kind of Socialism which, I must say, I cannot understand’.  If we genuinely wanted everyone to have exactly the same income, why do we bargain so hard with our poor garbage pickers and maidservants and pay them only the market rate? And if bargains of this sort are good for us (it being a free market for the services of these poor people), why are these negotiations bad for the society as a whole? 
I will show that not only has equality no real content, but that it is dangerous. On the other hand, I will show that equality of opportunity is a critical requirement for a free society, and helps us to eliminate poverty.

The Problem with Equality

Everyone knows that 2 = 2; a trivial equality. Its use in driving our life’s goals is very limited in consequence, for it is merely a tautology – a statement which uses words to pointlessly say the same thing. What does it matter if two equals two? What can we derive from it? 
Similarly, economic equality among people is neither here nor there; a trivial curiosity. Attaching an ‘equal to’ sign between our incomes (or wealth) does not add any significance to our lives; it doesn’t say whether we are free, whether we are experiencing a high quality of life, whether our children are likely to succeed. If two people achieve equal income through the free markets it is of no import; it is a mere statistical coincidence. 
The key question that we need to ask is: did these two people get to function in a free society with equality of opportunity? If they were provided with an equal opportunity then their equal outcome is unexceptionable; albeit coincidental. The more common, and expected, outcome of a free market, though, is a vast increase in individual wealth accompanied by significant inequality among individuals, noting that this inequality does not remain static. Unlike in a feudal society, the level of economic inequality as well as the persons who are wealthy or poor changes dramatically with time in a free society. The children of workers can become far richer than the children of people who are rich today, depending on how diligently they apply themselves.
The key driver of a free society is justice. Our economic worth is a function of justice, not some tautological concept like equality. While our lives have infinite intrinsic worth and we are all equal in the eyes of law, our economic worth must be determined in the market by the balance between the demand and supply for the services we provide. We may find ourselves ‘valued’ by the market on the basis of our beautiful voice that people like to hear, our philosophy that people enjoy reading about, or because of a drug we invented to save people’s lives. In each case, the fair and just price for our service is what is negotiated and agreed to in a free market. 
Where wealth of any sort is acquired by trading our services in the marketplace in this manner, where all trades make the parties to the trade better off, there all outcomes of these trades are just, and therefore morally superior, irrespective of the society’s Gini coefficients and Lorenz curves.  Equality is not an issue that is considered even in the passing in a free society; justice drives all understandings. Indeed, honestly acquired wealth is virtuous wealth; it must be applauded through a standing ovation. Each great singer, each great philosopher, each great inventor, and each business leader becomes rich by his or her own effort; each of them is worthy of that wealth. Who cares whether that creates inequality in society? Why should the inequality created by Lata Mangeshkar’s voice bother anyone?
And yet equality is relevant in a free society, at the commencement of the ‘race’. Everyone must be given a similar opportunity to run, to sing, to invent, or to play. But at the end of the race, only the best athlete, singer, inventor, or tennis player must win. The effort put in by an individual and his contribution being perceived as valuable by others tells us about the justness and morality of the acquisition of wealth. That is very important. For instance, wealth acquired through corruption is not just, and is therefore immoral. John Ruskin  said that ‘the beneficialness of the inequality depends, first, on the methods by which it was accomplished; and, secondly, on the purposes to which it is applied’. On Ruskin’s second point, we note two things:
  • We note that the very process of generation of inequality through ethical trades is beneficial. We, the consumers, benefit through the products made by hard working innovative people. Most of us will find purposeful employment through jobs that such people create.
  • Second, if left to their own devices, many wealthy people promote the arts and sciences as well as other forms of philanthropy. They don’t have to do so, though, since they have contributed enough if their wealth was acquired through ethical trades.
Inequality is not the same as poverty. Extreme poverty diminishes our capacity to act freely and reduces equality of opportunity. A free society needs to take strong action against poverty. On the other hand, even the most extreme inequality does not in any way diminish anyone’s freedom if all people are well above the poverty line. In the USA or Australia, which are relatively freer than India, some people are extremely rich, but most are at least well-to-do. 
Therefore India must banish poverty if it wishes to be free. Reducing inequality on the other hand, is neither here nor there; it is but idle talk for a few jealous people who are afraid to put in the hard work needed to succeed. Indeed, each of us must aspire to be dramatically unequal to others; to be rich, to be happy, to be great! A free society doesn’t countenance these utterly feeble ambitions of equality. It teaches its children to be great, to be better than others in every way; not to seek trivial equality with others. And the way a free society encourages infinite ambition in the minds of its children is by way of its government completely getting out of the way! 
Indeed, equality should be banished from our list of priorities because it is extremely dangerous. Equality is not an innocuous concept – something to be had if we can: ‘And oh, yes, by the way, can I get a glass of equality with two spoons of sugar?’ Equality invariably takes us on the path to perdition. It is a poison that allures us with a strangely beautiful fragrance; but a society that drinks of it will be racked by endless pain; its members will lose their intellectual prowess and die an early death. Its people will multiply like flies; its rulers will be cruel and rapacious. Anyone who is sane and healthy flees a society where equality has poisoned the minds of its leaders.
The reason equality is dangerous is because the only mechanism available to us to create genuine equality is to redistribute wealth, not to create it. That can only be done by plundering those who are richer than us. But to steal and plunder is violation of the fundamental principles of freedom; it is an attack on our life itself. It is a crime no matter whether it is committed by an ordinary robber or an elected prime minister. 
And therefore economic equality is associated only with those political ideologies which oppose freedom and which disrespect life; ideologies that do not hesitate to violently coerce others to cough up their property. The main such ideology, of socialism, aims to abolish property rights and vest all property in the state. But there is only one way to abolish property: through the use of force. Hence, socialists do not hesitate to decapitate the rich or otherwise threaten them with state-controlled violence to grab their property. 
Indeed, property is anathema to socialists because of its dangerous disease of equality. If they could, they wouldn’t allow anyone to even own a pen, for even a pen or paint-brush can spew unbelievable wealth. Socialists probably hate J K Rowling with all their heart for creating Harry Potter, and Pablo Picasso for making his paintings. And they almost certainly hate Lata Mangeshkar with all their might; if they could, they would rip out her vocal chords to stop her from getting rich. The great problem from the socialists’ perspective is that no matter how hard they divest us of property and force us to become equal, then put us together inside a box, lock the box and throw away the key, inequality always springs out like Houdini – strong and triumphant. 
Their problem is that the aspiration to be unequal to others, to be richer than others, to be faster and healthier than others, is unique to the human species, and cannot be abolished. Each of us spends a lifetime yearning for greater wealth, wanting to be at least equal if not better off than our neighbours. We seek the best jobs; we want to look smart and dress up in flashy clothes; we want to drive around in a fancy Porsche. Just look at the craze for lotteries – the millions of people who plunk their hard earned money into the dream of inequality; the dream of becoming richer than others. Even those who seek God seek to be selected by God ahead of others; they want to achieve nirvana before countless other lesser qualified souls. Inequality is our deepest ambition; no amount of socialism will rid us of it. Only some silly politicians seem to want such equality, but even they actually yearn to be our rulers and to be remembered by others. Stalin and Mao were not interested in equality of fame – they ruthlessly destroyed their competitors in order to remain the rulers, and as to wealth, their wealth was unlimited. Even Nehru’s family’s wealth is not equal to others; its scale is unknown, but it is nowhere near the per capita income of an 
Indian. Socialist Ministers grab money with both hands and build untold wealth their family has never seen before.
Since inequality is like a starfish whose arms grow back no matter how many times they are cut off, a socialist society has no choice but to continuously plunder. The socialist society must also tell people what to produce. Picasso must be licensed to produce any painting at all; and then he is to be given a quota on how many paintings to produce. Having done that, the socialist society then has to take away his paintings so that he cannot become rich. 
The socialist society has an impossible task laid out for it. Starting with an abundant faith in the idea of equality, it degenerates rapidly; its leaders fight among themselves and often kill each other; its people finally rebel against the decadence and corruption they see around themselves, as they did in the erstwhile USSR, and they will do in India upon reading this book (!). In fact this book itself is a rebellion against the much milder, but equally problematic Nehruvian socialism. Socialism comes to grief in the end for what we really crave for is freedom; not equality.
We could, under a distasteful counterfactual scenario, be persuaded to tolerate the ideology of equality could it be demonstrated to unequivocally increase our wealth to an astounding level – well beyond what free-market capitalism routinely generates. But socialism fails bitterly on this front, too. Human beings are not robots. We work hard to generate wealth only if we are free to think, free to produce what we wish to produce, and free to keep the rewards of our efforts. Creativity and innovation decline precipitously under socialism; socialism impoverishes entire societies and makes it hard for them to recoup their energies for decades. India’s example is in front of us, but there are many worse examples. When the Soviet Union tried to collectivize its agriculture in order to make each farmer ‘equal’, it quickly came on to its knees. The entire Soviet Union could not produce enough to feed itself. Tens of thousands perished of starvation. Its mighty armed force and secret service (KGB) were able to compel its scientists, under close observation, to produce, or rather, to steal the design of weapons and spacecraft, but until its end the socialist USSR could not produce enough bread for its people. 
Taken to the extreme, as with the (erstwhile) Soviet Union, Maoist China, or Naxalites, socialism physically assaults and kills people. Millions of people have been murdered by Marx’s equality-driven ideology over the twentieth century. If we add to this the far more numerous indirect killings –namely deaths through hunger and preventable disease arising from socialist mismanagement in countries like India – then the number of people killed in the cause of equality runs into the hundreds of millions; possibly a couple of billions. Equality is not a hot cup of coffee that we may order if available. It is deadly poison. Once this disease of equality infects somebody’s mind, the consequences for that society can become extremely bad. People infected by equality are infinitely more dangerous than those who go berserk and shoot people at random. Equality is as bad as religious fundamentalism in its disastrous consequences for society.
Socialist countries are also some of the most unequal, the difference being that their inequality is derived from corruption and the misuse of power, and is therefore immoral inequality. Corrupt politicians in India have misused socialist controls to acquire untold wealth and create great immoral inequality in India. Our socialist ministers never hesitate to loot even those public funds intended to assist the poor. I talk about this from personal experience, including one involving a Chief Minister. 
Plunder need not be pursued through physical coercion alone. It can be more sophisticated, such as under the guise of ‘welfare’ socialism. One of the most apt descriptions of socialism comes from Frédéric Bastiat (1801–50) who fought Karl Marx’s ideas tooth and nail even in Marx’s time. Unfortunately Bastiat died very young. It is possible that if he had he lived longer the world might have been saved from the killing fields of socialism. Bastiat noted in 1850 that: 
[L]egal plunder can be committed in an infinite number of ways. Thus we have an infinite number of plans for organizing it: tariffs, protection, benefits, subsidies, encouragements, progressive taxation,  public schools, guaranteed jobs, guaranteed profits, minimum wages, a right to relief, a right to the tools of labour, free credit, and so on, and so on. All these plans as a whole – with their common aim of legal plunder – constitute socialism. 
The message for us is simple – be extremely wary of anyone who preaches equality. You never know when this person is going to shut your mouth, steal your wealth and property, and kill you and your children. There are some Indians who ‘accept’ equality as a good thing if it happens by itself. Such people are merely misguided for statistical equality is meaningless and can never be ‘good’ in isolation of the reality of that society. But if someone genuinely believes in equality, then run for your life as fast as you can! Freedom is as basic to us as life itself. Equality is simply nowhere in that league. It is a curiosity for economists who idle their time making Lorenz doodles. To consider even slightly diminishing our freedom in order to promote equality is like throwing away a priceless pearl necklace and picking up a slithering, poisonous snake to hang around our neck, instead; a snake that will bite us while we are sound asleep.
And yet, socialism will always remains tantalizingly hypnotic to people who have not understood the magic of free markets and equality of opportunity. By painting a rosy but false picture of the world, socialism ensnares children every day and continues to have a vast following among those children who never grew up. The arguments of capitalism require enormous critical thinking since the invisible hand is actually invisible! Not being a socialist is hard work for our brains. I will try to make the invisible hand a bit more visible in this book so that more of us can see through the great pitfalls of socialism. 
But one need not be ashamed of having been a supporter of equality sometime in our life. The disease of equality strikes almost everyone once, like chickenpox. I too caught this disease momentarily during one of my early years in university. Who isn’t fascinated by an ideal world where all of us are somehow blissfully equally competent and equally resourced? Some residual virus of this disease remained in my head until as recently as 1995 when, during my mid-career PhD studies, I expressed concern about economic inequality among nations in one of my term papers. What I should been have concerned about, instead, was about the self-inflicted poverty of nations like India which insist on being poor despite the prescriptions for wealth being available off the shelf. 
There is a strong leftist bent in most academic discourse which arises largely from desktop academics who never grew up; never got rid of their chicken pox. They have a dreamy-eyed view of politicians, bureaucrats, armed forces and the police. These academics project their own virtuous feelings about other human beings on government functionaries; and in doing so they make a fatal blunder. The good thing about Nehruvian socialism is that being a less extreme form of socialism than Russian communism, it has probably inoculated us. Once India fully recovers from its socialist fever and its head clears up, it should remain free of equality and socialism forever, unlike Russia which may yet revert to communism once again.
The thing we really want when we talk of equality is the eradication of poverty. That also remains a matter closest to my heart; and it is to a discussion of removal of poverty that I will now turn to. Just a brief comment first – poverty cannot be eliminated unless we foster conditions which create great wealth and great inequality. We need sufficient numbers of extremely rich people whom we can tap into, both as taxpayers and high calibre experts, to help us banish poverty.

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