Sanjeev Sabhlok's blog

Thoughts on economics and liberty

The case against the flat tax


I advocate a slightly graded but clearly progressive tax, based on first principles.

However, to get this argument accepted, it is also perhaps necessary to demolish the imposter that has emerged in the last few decades and threatens to swamp liberalism. Regrettably, Hayek himself has added to the confusion on an inappropriate ground, even as he acknowledged the need for at least two levels of progression (one, because of the social minimum; the second, to offset the regression of consumption taxes). Hayek makes one very good point against progressive tax, though. That must be taken into account, and that is why I argue for a very slightly graded progressive tax.

I argue the case for progressivity  separately. This blog is tries to argue the case against flat tax.

This is work in progress and so the stuff provided here will change. The arguments are listed in no particular order. The only reason why liberals can reach two views on any issue is if their assumptions are different or one persons’ logic wrong. In the case of flat tax, it is clear that assumptions of flat-taxers are questionable.

No link of flat tax with the theory of the social contract
The argument for the flat tax has no relationship to a social contract designed to defend life and liberty. One needs to make the necessary link between the state as monopoly, the social contract and the tax system. I’ve yet to see the linkage drawn by any thinker between the inevitable necessity of a progressive tax once we have a monopoly government (Leviathan). A social contract will need to be strategic and just; balancing out responsibilities of participants in their ability to bear these responsibilities. Anything else will ultimately fail as the society slowly but surely converts into a feudal society

Flat tax violates Economics 101
It violates Economics 101, basically violates the diminishing marginal utility of income. This validity of the diminishing marginal utility curve is demonstrated by the simple fact that the solution to the incentive problem in firms has been to increase salaries disproportionately with seniority. That is why CEOs are paid 100 times more than a business analyst. Without paying disproportionately more, sufficient incentives aren’t created for harder work, as the value of money keeps declining. Even the most basic experimental economics proves the existence of the diminishing marginal utility curve.

Note that the rich will never fight wars for their nation. They always leave the dying and bleeding to middle class soldiers and armed service officers. The progressive tax makes sure that the rich – who never pay with their lives for their country – compensate at least by paying a bit more through progressive taxes for their safety and for the upkeep of their nation. They live the cushiest lives. No dirt, no sweat, no blood. We all work hard for them. There is therefore no reason why an army officer must pay 30% tax on income and Ambani must pay 30% as well. The flat tax is purely a whim of the rich and upper middle classes to trick the poorer and lower middle classes into not only slogging for them and shedding their blood for them in war, but also paying for their upkeep! Very clever sleight of hand! Indeed, as I show elsewhere, not only will flat taxes shift the burden to the poorer sections, they will hit them with a much higher tax bill! Great way to give the future generations of Ambani a great free ride.

The flat tax debate takes us away from the key issue that we should pay as low as necessary to get the best government services we need
I’ll let Murray Rothbard speak on my behalf. ‘The flattax movement is part of a process by which the government and its allies have been able to split and deflect the tax protest movement from trying to lower the taxes of everyone, into trying to force everyone into paying some arbitrarily defined “fair share.”’[1]

‘Thus, let us compare two hypothetical tax systems. In system A, there is a progressive income tax, ranging from one to ten percent. In system B, everyone pays a flat, strictly proportional income tax, of 20%. I have a hunch that, in choosing between these systems, even the upper-income groups would opt for the far more progressive, but much lower tax burden. The central point is the lowness of each tax, rather than the distribution of the burden.’[2]

Now let C. Lowell Harriss speak: ‘Clearly, the present system, with federal plus state rates of over 50 per cent at the margin, must deserve criticism. Significant rate reduction, however, does not require a shift to a single rate’[3]

Murray Rothbard again: ‘One of my favorite economists, the 19th-century Frenchman, J. B. Say, after pointing out that taxation is a coercive transfer from individuals and groups to the government, crippling their ability to produce and consume, concluded: “The best scheme of finance is to spend as little as possible; and the best tax is always the lightest.”’[4]

There is nothing in the progressive model that says one can’t flatten and reduce tax rates overall (that is why tax revenues go up in some cases where flatter taxes are introduced, due to the Laffer curve argument – but also by slugging the poorer for greater share of taxes – not because of the flattax per se). I have nothing against a modest progression, and one that kicks in strongly after a much flatter range, with only the richest required to pay the highest marginal tax. Also, no one is saying the highest rates must be 90%. 40% is more than enough (current highest slab in Australia is ; even less is fine depending on what a government needs. But there must be progression. That principle is crucial to a free society where everyone behaves responsibly as a citizen. Everyone who can afford to must contribute as a citizen and not free ride on the poorer sections of the community who are hit hardest by flat tax which is essentially regressive.

The flat tax is essentially progressive, but the flat-taxers don’t explain why!
No one has ever proposed a genuinely flat tax. They are all degressive taxes, with at least two taxthresholds, zero up to a particular amount, and then flat thereafter. (J.S. Mill first proposed this model which calls for zero or negative taxation till a particular point, followed by flat tax).
What justifies this? The flat tax must be purely flat (assuming it has any logical sense at all!). Why is it progressive? And if it is to be ‘slightly’ progressive, why is it progressive at all? What is the justification for that? How do flat-taxers justify this abrupt progression?

Now, I’ll let Murray Rothbard speak:

“The flat tax, quite simply, proposes that every individual and every organization be subjected to the same, uniform proportional income tax. To achieve that uniformity, the flattaxers propose the ruthless suppression of all credits, deductions, exemptions, and shelters, all of which are sneered at as “loopholes” in the tax system. In the flat-taxers’ pure theory, the proportional income tax would apply to everyone regardless of income. But early in the development of the flattax movement they decided that, politically, the poor would have to be exempt from the tax. As a result, all flat taxschemes are now “degressive”: proportional above an arbitrary minimum income floor, below which line income receivers pay no taxes, The “degressivity” leaves an important element of progressivity in what has been touted as a strictly proportional plan.”[5]

To remain revenue neutral, the government would heavily slug the working classes

“Under any conceivable shift to a flat-rate system, the total tax of the highest income groups would be reduced.”[6] The only way to fix this would be by significantly raising the taxes on those who currently pay a lower rate.

Flat tax would allow a larger number to live off the labour of workers

Flat tax would definitely lead to a ‘number of families living very well indeed on inherited wealth as distinguished from income from their own industry and thrift. Desirable?’[7]

The pathetic argument of ‘fairness’
Our personal perceptions of fairness are totally irrelevant to policy discourse. We need to root our policies in a consistent theory of the free society. So if the state we create through our social contract is a monopoly, and it is best that a monopoly price discriminates, and also that marginal utility of money falls dramatically, then there must be a proof that the flat tax model is the necessary outcome of this model.

I’ll let Murray Rothbard speak on my behalf. ‘The major argument for the flat tax is not economic but moral, namely that this is the only fair way to distribute taxation. The assumption is that, given an arbitrarily determined total revenue to the government, that revenue should be distributed in a uniform, flattax manner. But the flat-taxers do not really argue their point; they simply assume it as self-evident to all people of good will. Well, sorry, but I don’t see it.’[8]

‘More specifically, I don’t see why proportional taxation is any “fairer” than many other possible patterns of distribution. Take, for example, Mr. A and Mr. B, each of whom earns a net income of, say, $50,000 a year But Mr. A is a young man, just starting in life, with virtually zero assets. He depends on personal savings to finance a future business. Mr. B, on the other hand, is an older man who has already built up or inherited millions of dollars in assets. Why is it manifestly fair for him to pay the same tax as Mr. A? Neither is it obvious to me that a sick person with heavy medical bills should pay the same tax as a healthy man with the same income. Note that I am not saying the opposite: I am not advocating a tax on health or on wealth. I’m simply saying that there seems to be no convincing argument for the fairness of one pattern of taxation over another.’ [9]

‘In fact, I will go even further, and say that fairness has little or nothing to do with the matter, that, in fact, TANSTAAFT (“there ain’t no such thing as a fair tax”). Conservative flat-taxers like to analogize to the free market, and maintain that they are trying to achieve neutrality to the market. But consider: what in the world is a “fair” price on the market?’[10]

The nonsensical ruse of simplicity
Tax system complexity NEVER arises from the 2-3 marginal rates that form part of the progressive system, but from the identification of income. The arithmetic of calculating tax is the least important part of the tax return calculation. Anyone who has passed primary school can do it. And if one can calculate a flat tax based on a standard deduction, so can one calculate a progressive tax.

The flat tax does NOT mimic the market
I’ll let Murray Rothbard start the ball rolling on this: ‘The flat-taxers have strongly implied that, in contrast to the progressive tax, the uniform proportionate tax is neutral to the market—for the market would pay in this way for the services of government. But would it really?’[11]

However, Murray Rothbard’s rhetorical answer (see his actual paper) to this question only covers a small part of the reality. Yes, the cost of a bread is the same (not proportional as flat-taxers want it to be), but the reality is that markets set a range of prices for the same good which is cosmetically different – that is called price discrimination. It is a fundamental feature of all markets. I have a Toyota Avalon with the same chasis and engine as a Lexus, but with cloth fittings instead of leather. Put in $2000 leather seat covers, a few other minor tweaks and the same car is sold for $40,000 more!

An FTI member wrote: “This model [flat tax] would hold taxes steady at current levels or lower them as appropriate, while making the govt expenditure more efficient and market-driven. Such a model would seek to maximise efficiency, at the least cost.”

As shown above, all claims made in this regard are wrong. But since when is efficiency the objective of freedom? And efficient for whom? Are we talking Pareto efficiency? Then the price discriminating monopoly model is most efficient. Are we talking ease of collection of taxes? Then socialism is most efficient. It can be (really!) efficient [ie. cheap; quick] to sell all of Bill Gates’s assets now that he is no longer Chairman of Microsoft and get the taxpayer $50 US billion. Thus it can be really efficient to confiscate all the wealthy. The liberal wants to maximise equal freedoms subject to accountability, not to achieve efficiency. Efficiency is one of the many minor issues to be considered, but can’t drive our fundamental theories.

[1] The Case Against the Flat Tax by Murray Rothbard []

[2] The Case Against the Flat Tax by Murray Rothbard []

[3] C. Lowell Harriss, ‘Important Issues and Serious Problems in Flat-Rate Income Taxation’, American Journal of Economics and Sociology, Vol. 43, No. 2 (Apr., 1984), p. 161.

[4] The Case Against the Flat Tax by Murray Rothbard []

[5] The Case Against the Flat Tax by Murray Rothbard []

[6] C. Lowell Harriss, ‘Important Issues and Serious Problems in Flat-Rate Income Taxation’, American Journal of Economics and Sociology, Vol. 43, No. 2 (Apr., 1984), p. 160.

[7] C. Lowell Harriss, ‘Important Issues and Serious Problems in Flat-Rate Income Taxation’, American Journal of Economics and Sociology, Vol. 43, No. 2 (Apr., 1984), p. p. 161.

[8] The Case Against the Flat Tax by Murray Rothbard []

[9] The Case Against the Flat Tax by Murray Rothbard []

[10] The Case Against the Flat Tax by Murray Rothbard []

[11] The Case Against the Flat Tax by Murray Rothbard []

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Some (a very few!) of my comments on other blogs

(I make most of my comments on Shantanu's blog. However, I get links passed on to me by others and therefore at times comment on other blogs as well. I propose to use this blog post as a sporadically record of my comments on non-Shantanu blogs. Not all, but a few of them will be recorded here. Please note that due to the extremely short time spent on drafting these comments, the language used is often very clumsy. For my articles I would normally spend at least 50 times more time, revising the language, etc. I hope the meaning somehow comes through in these comments made in great haste.)

The partyless wonders

Comment 6 May 2009: I totally support (in principle) what you've said, leaving aside minor details. Contesting elections as independents or a small party, and hoping to get elected and change things is like Don Quixote's tilting at windmills. The Indian voter will shift allegiance from existing corrupt formations only when a major national party is available as an option at the hustings, with hundreds of outstanding leaders speaking from the same song sheet, communicating their message over the course of a few years.If our new breed politicians are serious they must unite into one or two major groups based on their policy preference, and work strategically and systematically over the next few years. Indeed, Shekhar, aware of such basic matters, a group (Freedom Team of India) has started about a year ago to work through this slower but surer option. I encourage you to drop by at and provide us with your common sense and strategic thinking.

Akerlof and Shiller’s Economic Authoritarianism

Comment – 7 May 2009: So did the Austrian school (ie. predict the GFC) – well before others. Stiglitz (if I'm not mistaken) came in much later. Do read the numerous articles at:

I don't quite understand what sits behind the claim, "Austrian business cycle theorists also claim they can account for every historical business cycle, but in practice, many Austrian economists have turned their theory into little more than a fundamentalist cult."

I agree that some Austrians are more like fundamentalists than scientists, but that is a personal problem of personality, not of the underlying plain common sense science.

The more I look at the Austrian trade cycle the more sense it makes. And to the best of my knowledge I'm not a fundamentalist but a sceptic (of course it is hard to tell once one thinks that a theory makes sense whether one has 'converted' into a fundamentalist… you be the judge).

The Austrian school makes sense for a very simple and obvious reason: If you force interest rates down (a natural central bank bias, to paternalistically help people can buy houses), then savings will plummet, and capital investment (over production of cars, for instance) and long term investments (houses) will boom. Low savings and excess investment in long term assets is the typical cause of a market correction which is then very painful (as we can see through the GFC).

Is that being fundamentalist? I thought that is Economics 101 unless I learnt my basics of economics wrong. What bothers me is that some senior economists seem to have ignored the most fundamental issue: they are not God.

Yes. Economists aren't God. A surprise to some?

A sensible economist will NEVER interfere in the price mechanism (price of money). But, instead, we act like socialist dictators, fiddling with the price of money each month, so called 'fine tuning' interest rates, and expect we can control the economy!

Pardon me, but people are actually rational, and it makes sense to ONLY splurge and overinvest when interest rates are lower than they would have been in the free market. Show me one reason to save when bank deposit rates are 0.1 per cent and inflation is 3 per cent? What's irrational about humans who over-invest in car factories hoping that they will skim off profits well before the inevitable decline sets in? A Ponzi game established on the backs of central bank charity is quite rational, if you were to ask me.

Sanjeev Sabhlok
PS If anyone has time, happy to get comments on both my books (one published, one under way), linked at:

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Time to bury India’s antiquated bureaucracy

Sanjeev Sabhlok

(article published in Freedom First, April 2009)

Over the course of 150 years the British Imperial civil services in India mastered the art of maintaining a semblance of law and order even under difficult circumstances. It was therefore natural for India to continue with these services after independence. They provided a steel frame which held India together.

Even today, these (by now rickety) tenured civil services continue to offer some value. For instance, about half the new recruits in each state to the Indian Administrative Service (IAS) are from other parts of India; this helps in India’s integration as a nation.

The great problem with tenured services
Unfortunately, the few benefits we get from such services are overwhelmed by their many shortcomings. Their main drawback is poor performance since it is not merit but sycophancy (and in India’s case, corruption) that is rewarded; and punishment for bad performance is not an option.

Thus we have a great dichotomy between our public and private sectors today. While Indian business performance is often second to none, the results of India’s public sector are poor beyond description. Delivering simple things like water, electricity, roads, and education is well beyond the capacity even of our elite IAS.

The fault lies with the structure and incentives of our bureaucracy. When seniority is all that matters, incentives for policy expertise and leadership quickly fall apart. In India, this weakness is compounded by relatively low salaries and massive political corruption. The result is simply disastrous. Nothing works, and corruption reigns supreme.

Having worked for 18 years in the IAS and, later, for 8 years in the public services in Australia, I have seen first hand the difference between good and bad bureaucracies. When I started my migrant life in a middle rung of the Victorian bureaucracy in 2001, I was surprised to find that the performance of senior Australian bureaucrats was significantly better than anything I had come across in my Indian peers. Virtually no IAS officer knows more in the relevant subject area, can think as well and as strategically, or lead a team of professionals better than his or her Australian counterpart. Similarly, Australia constantly benchmarks its performance in every sphere with the world’s best, but in India it is enough to be a touch better than Bihar.

The goal of our reforms
In my book, Breaking Free of Nehru (available from Oxford bookstores now), I have analysed our current bureaucracy and proposed a process to build a dramatically better one. I believe the change must begin at the top. We need to begin by transforming the incentives of our senior bureaucrats – the secretaries. This can be done by:

  • abolition of tenure at senior levels;
  • open market recruitment for each position;
  • contestability of policy advice to political leaders;
  • market competitiveness of remuneration;
  • extensive delegation of responsibility; and
  • provision of access to the latest technology, information and training.

The validity of these principles becomes clear when we consider how our national cricket team is built. Cricketers are required to demonstrate a continuing strong track record if they want to retain their position in the Indian team. If our selectors were to stop weeding out non-performers, our team’s performance would collapse. A cricket team built on the principles that currently apply to our bureaucracy would have Pataudi as its captain (even today – because of his seniority!) and Sachin would have to wait his turn as the 800th man… and every school level cricket team in Australia would soundly thrash this ‘national’ team!

Obviously, what applies to cricket does not apply fully to a bureaucracy. But recognizing and rewarding merit appropriately is the pivotal issue. While merit is taken into account at the time of entry into the IAS, merit can’t be a one-off measure. A secretary to the government must have a track record of world-best performance as a subject-matter specialist and management guru, and also be a great leader of people. What has writing a good essay in an examination at age 21 got to do with these higher competencies?

The incompetence of the Indian bureaucracy is aggravated because our constitution (effectively) prevents public servants from being punished even when caught taking bribes – let alone demoted for non-performance. With our society thus signaling their invincibility, most officers become indolent, arrogant and supremely ignorant, and yet advance smoothly to senior roles.

Indian taxpayers have continued to fund this useless bureaucracy believing perhaps that there is no alternative. But excellent alternatives are readily available. Advanced countries have used the findings of agency and public choice theory to design systems that reward expertise, leadership and good performance. They also ruthlessly punish bad performance. In doing so, they have transformed their public servants into dynamic agents of change and excellence.

The change process
In Breaking Free of Nehru, I have detailed a suitable change process. We need to begin by making a fundamental shift in accountability. Our bureaucracy must become only one of the many potential service providers to our elected representatives. Ministers should begin by hiring world-renowned subject-matter specialists committed to their party’s policy platform as Ministerial advisers. No paper would then go to a Minister without the (political) advisers having had a good look.

A team of Ministers should then (separately) recruit secretaries through an open advertisement. In the first instance, this appointment would be on a two year hire-and-fire performance-based contract ? paying a salary comparable to what senior MNC executives get in India. Secretaries would then similarly recruit their joint secretaries. To ensure continuity, leadership change would need to stop at this point in the first phase. In this phase – during which the future restructure is planned and embedded – no government employee would lose his job.

Each of the newly appointed secretaries would implement a two-year strategic process to restructure the bureaucracy into ten departments: freedom, defence, justice, external affairs, public finance, physical infrastructure, social infrastructure, commerce, social capital and community, and sustainability. This would involve significant re-training and redundancy planning.

A Public Administration Act would underpin the restructured, new bureaucracy. All positions requiring significant judgment and leadership skills would be brought under a three-year performance-based contract. Upon the Act coming into force, all constitutional provisions related to civil services would be repealed.

I am not suggesting that these reforms are a panacea for all governance problems of India. Our political and electoral systems need fundamental reforms, and must preferably come first. Numerous policy changes are also needed. But we can’t change India’s misgovernance without completely changing India’s bureaucracy. The sooner we give our tenured senior executive services like the IAS, IFS, IPS, Forest service, and all ‘central services’ a burial, the better.

Freedom Team of India (FTI)
As you might be aware, FTI is now growing steadily. It aims to deliver these (or similar) reforms to India through a mandate to be obtained in due course through elections. Please visit and consider joining or supporting this national, liberal effort. I would even venture to suggest that you will do yourself a great favour by supporting these liberal leaders who will create the new India of tomorrow.

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Comments on Chitra Sudarshan’s review of my book

I welcome reviews of my book, Breaking Free of Nehru, whether positive or negative. Indeed, I look forward to useful information that I may take up for further investigation. Unfortunately, this particular review (here), despite being sympathetic to my work in many ways, has technical flaws that have meant my work has been misrepresented quite significantly! For a classical liberal to be depicted as an unthinking libertarian can lead the liberal to serious heartburn!

I appreciate that a reviewer's job is very hard and thankless, and it is not hard to get away from one's preconceptions about terms like 'capitalism' and 'free markets'. So while I thank Chitra Sudharshan for her review, could I suggest she consider reading the book once again, with a mind that is open to reading carefully and understanding what I'm trying to say? The points below may help in Ms. Sudarshan forming the correct impressions about the contents of the book, should she read the book again.

"Sabhlok equates ‘freedom’ with capitalism, believes that Adam Smith had all the right answers, and that laissez faire is not only economically sound, but morally superior. … And he is not quite happy with the steps taken in the last 18 years – he believes India has far to go in the free market path yet. …Sabhlok’s holding up of the US, the UK and Australia as perfect capitalist examples for India to follow is naive at best."

My comments:
While Ms. Sudarshan has got the broad idea correctly, the way it is represented shows she has clearly failed to appreciate that I'm not advocating a 'free market' in the sense of freedom to cheat or harm others, but in the sense of the freedom to be moral. It is thus the freedom to be good that I'm advocating.

What could possibly be wrong with the demand for freedom subject to accountability and integrity? I'm calling for a free market with good regulation so that accountabilities are enforced. This is what I have actually written: "We can define markets that are minimally regulated in the manner discussed above, as ‘free markets’." The discussions preceding this comment talk (at huge length!) about the need to ensure accountability and prevent cheating, harm to health and safety, environmental damage, and so on. Indeed, I've discussed at quite some length the ethical failures found in the market and what needs to be done to reduce them.

I've also got major sections in Chapter 2 and in the last chapter (through the Online Notes) outlining good regulation and the kinds of processes we need to consider before framing regulations. We need good regulation, not absence of regulation! No unregulated market do I advocate!! Unfortunately, all this finesse, the complexity of argument, the detail, has been lost while simplifying my message to make me sound like an extremist.

Hayek had this great problem as well. Even after his death people (including the Australian Prime Minister Rudd) constantly misrepresent him – poor man. No one reads him. Even if they read him they don't really read him. Virtually the first thing he said in his book, The Road to Serfdom was, 'Probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rough rules of thumb, above all the principle of laissez faire.' I'm not a wooden 'liberal'. I have not only cited Hayek in terms of why the market is to be preferred for its price system and allocative efficiency, but I've extensively outlined why good regulation is needed.

I feel that Ms. Sudarshan has 'read' my book, but not really read it. How could she miss out tens if not hundreds of signals about good regulation and accountability strewn across the book? For instance she has completely ignored the concept of accountability that I have discussed at length in the Appendix. I have insisted repeatedly that there is no freedom without accountability. That is my fundamental claim, made repeatedly and persistently. But that was perhaps not made sufficiently persistently!! for Ms. Sudarshan has completely misread the message of the book.

More details on this concept of freedom are provided in my second (sister) book (currently manuscript) The Discovery of Freedom. I hope Ms. Sudarshan will read that some day to understand what I'm trying to say.

Re: comparison with US, Australia etc., I've not suggested they are perfect! Far from it. I've had this to say: "most of ‘my’ ideas are road tested, many of them being things I have seen and experienced first-hand as practical working solutions to the problems of governance in the USA and Australia. Some of my ideas, of course, go well beyond the levels of freedom experienced by citizens of these countries; for I assure you that even these countries could do with more freedom." There are many freedoms that are unnecessarily blocked in the West.

But this book is not about the many defects of Western nations. I have (briefly, again) touched upon their defects in my second book, The Discovery of Freedom, currently a draft manuscript. I have said they are NOT role models, but they have got many things right. I have plenty of thoughts about what needs to be improved in the West (and part of my job in Australia involves helping to make such improvements).

But my point in this particular book is that the differences in ethical behaviour between the West and India are so vast (On a scale of 1 to 100 on corruption, India is at 99 compared with, say, Australia, at 1) that we will be better off in India by not wasting time thinking of improvements to be made by the West, and focus on getting our own house in order.

India is a moral midget compared to the moral giant – the West (on average! I don't claim that everyone in the West is a saint, or even that sainthood is a requirement for a moral society. Please do read me carefully!). So we should not worry about why the Western giant is not even taller, and focus, instead, on our improving own tiny height – a height in comparison where we cannot even rise above the soles of the feet of a fly stuck in garbage? The total corruption found in India is a shame to humanity. I've called for hanging our heads in shame.

"Sabhlok does not seem to be aware of studies that show otherwise: that land ceiling laws can actually facilitate industrial development and growth as they did in Japan and Taiwan. This is just one instance of how misplaced his criticisms are of certain progressive steps that the Indian government took in the early years"

My comment
Of course I'm aware of a range of research in this area! But the research is highly mixed in its findings. Some research shows minor benefits to the poor; other research shows significant harm to farm productivity. The examples of Japan and Taiwan are not comparable since in India land ceiling was not even 'properly' implemented except in communist Bengal and Kerala – and we know how little any of these reforms have helped these two states in any way. They are among the worst performers in India – which is not to say that India performs better than them in any significant way!

But the main point that Ms. Sudarshan has clearly missed that this book is not about economic 'benefit'! This is a moral book, not an economic book. The debate I'm having in this book is a MORAL DEBATE – not an 'efficiency' debate. I'm talking ethics, not economics.

The point in relation to 'land reforms' is this: Of course if we steal someone's property and give it away to someone else, that someone else will 'benefit'. But the much DEEPER question is the moral one: is theft a moral option for anyone in a free society?

I couldn't care the least if India became rich at the expense of its ethical foundations.

That is my main message. We want an ethical country first. Then comes wealth. Not the other way around.

Sanjeev. 8 April 2009

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