Sanjeev Sabhlok's blog

Thoughts on economics and liberty

Why socialism can’t work for India

While searching for some data from my old records, I found this draft article on socialism in one of my early 'computer writings'. Never attempted publication. It is dated 25 October 1992, when I was studying in Curtin University. I’ve made no attempt to edit it or polish it up except to get rid of a couple of obvious spelling errors using Word. It was a draft anyway. Also, a wide range of my writings on policy are found at the IPI archives at (1998-2001). Sanjeev 22 Feb 07.

In 1977 (check) India passed the amendment to the Constitution, making India a socialist republic. Practically from the time of our independence we have followed socialistic practices, though in a less draconian manner than the true socialistic countries.

But in each and every endeavour where we have applied the tenets of socialism, we have failed. The ruinous public sector, instead of reaching the commanding heights of the economy, actually reached all the depressing depths which could possibly be conjectured. They sank like a heavy anchor into the depths of losses and have almost pulled the entire ship of India along with them to disaster.

The bureaucracy, given a cosmetic facelift (by browning its face and calling it the IAS and allied services), was expected to maintain its trust-worthiness and hard-working spirit to help the country achieve its socialistic goals. Bureaucrats got busy in creating more and more wasteful programmes, arrogating to themselves the entire wisdom of the Indian people and recruiting more and more lowly qualified and politically supported people into government. Their fundamental premise was that the businessman who can produce is an enemy of the people, since he may become rich. There could perhaps be no greater crime in their eyes than a person becoming rich. They wanted to be the richest of all themselves. After the ministers, perhaps. So all kinds of laws and rules were invented in the name of socialism to curb production, both in the private and in the public sectors. The net result was an unprecedented increase in corruption. Almost everything that has been created by governments in the past forty-five years has bred corruption. And ever-increasing innovations have been made in this field of "knowledge".

By attempting to do everything itself, while at the same time aggrandising itself, the bureaucracy (including its lowest rungs), effectively became anti-socialistic: look at the practice of having a large bunch of peons both in the office and at home: bureaucrats love servants. And servants are often treated as inhumanly as can be expected in the old-fashioned Marxian capitalistic societies where the bourgeoisie discriminates against the working classes. Even feudalism is perhaps better. We should modify our Constitution to state that we have socialistic republic for the ruling class and feudalism for the poor. Could no one get rid of the system of peons in the past forty five years of socialism? What kind of society are we trying to achieve? Where one human being has to serve the petty needs of another human being? Will that be termed a civilised society? And at the same time this is a system which destroys the productivity of a large body of people. What, after all, does a peon produce? Does a peon's work go into the GDP of a country? Is a peon efficient? Why cannot the "officers" clean their rooms, and carry their files and briefcases? If at all someone is required to be provided, perhaps he can be a common office boy, rather than a personalised peon.

Thus much of the "respect" given to working classes is hypocritical. In a so-called capitalistic developed country such as Australia, on the other hand, one is forced to respect the working classes. All kinds of blue collared workers work with sophisticated machines which increase their output nearly thirty to forty times of that of an average Indian worker. Even sweepers sweep the roads with special machines which blow the dirt to particular areas from where it is removed.

Consider the garbage lifter. Each household is provided with a large plastic black bin with a cover, which is supposed to be filled up with the garbage of the house. This garbage bin is kept in a particular place outside the house, where a garbage collector can reach and collect. The garbage collector comes in a huge truck fitted with complicated mechanical devices, and picks up the garbage bin with the machine and empties it without touching the bin at all, before putting the bin back, with the help of the machine, to its original place. This garbage collector performs his work at an amazing pace, and one such garbage collector with his machines would be able to pick up the garbage of more than one thousand households in a given day.

Then there is an employee who waters the public lawns. Now, there are a huge number of public lawns, and since Perth has almost no rain in its very hot summer (where temperatures reach nearly 50 degrees centigrade), there would be no possibility of grass growing on the lawns unless there were special machines which are available for this purpose. And so there are. One "gardener" or "lawn-engineer", as I see him, is capable of watering huge bodies of lawns, and mowing them too, with his machine, yielding an output which exceeds by over ten thousand times the efficiency of an average Indian gardener. Keeping a city of the size of Perth clean would require thousands of employees if it were located in India, but it takes surprisingly few employees to keep it the cleanest city in the world (Perth has won many international shields as the cleanest city of the world).

These workers are paid at very high rates, and often the manual worker earns more than his white-collared counterpart. Does that mean that Australia is more socialistic than India? After all, the main purpose of uplifting the working classes to the level of the bourgeoisie has been achieved here. Further, social security offers huge benefits for unemployment, and disability.

So what is this illusive socialism that we are running after, so hypocritically? Can we not be honest with ourselves now at least, after the great fall of the Humpty Dumpty (USSR)? What do we need this futile stupidity called socialism for? To produce more clerks and servants for our pampered ruling classes? To create public sector undertakings whose raison d'atre to exist is the amount of money the politicians can make from them? To have electricity undertakings which provide power only to the chosen few, and a great amount of illegal money to its officials? What has socialism done for us except to impoverish us both physically and mentally?

India exported two percent of the entire world's exports in 1947, but today we export only one half of one percent of the world exports. We had Nobel Prize winners even in Physics in the first half of the century. Now we are incapable of even mimicking the Nobel Prize winners in science, not to talk of achieving a Nobel Prize of our own. We did somewhat well in the Olympics in the first half of the century, but now we are reduced to the most pathetic position which even the worst enemies of India could not have imagined for India. We have been made almost impotent in the world stage. This great country, with great people, and great potential – ruined, corrupted and destroyed – all by itself, internally. By socialism. The scourge of mankind. The diseased look at human beings. We even lost our sense of human decency, and allied with the terrible empire of the Soviets which systematically got rid of its best people, and we did not condemn its shoddy trampling over human rights as done by Stalin.

We have become afraid. I am sure that is not what Gandhiji wanted us to become. We have to reaffirm our capacity as a great
people; we have to regain our self-confidence and hew a great country once again from start: only, this time we are in a worse position relative to the world than we were in 1947. We have lost forty five years in stupidity. Let us learn from our blunders and at least now think of the tasks before us.

There is no alternative to capitalism.

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Be careful while giving. Giving can give offense.

Sent to The Age on 8 January 2007 for publication but not published. Hence put up on my newly re-activated blog.

Many of the arguments by Peter Singer ("Giving till It Doesn't Hurt") in The Age of 6 January 2007 to persuade developed countries to open up their purse strings to alleviate poverty in developing countries were so misplaced that I couldn't help throwing my hat into the ring.

First, it is insulting to be at the receiving end of someone’s charity. Self-respecting people do not care for displays of charity towards them. Trade on equal terms, yes. Open exchange of ideas, sure. But for the West to take upon itself the role of looking after the poor of other sovereign countries is paternalistic and reeks of the "white man's burden". Self-respecting peoples everywhere simply ask to be left free to determine their own destiny, even if this destiny seems to others to include a fair share of poverty and disease. Unwanted donations are a form of political humiliation.

Second, Singer fails to show how the aid, even if it were free of political complications, will actually reach the poor. Singer suggests that $808 billion can be raised each year. Presumably this must reach the poor. But the reality is that most of it will end up in the Swiss bank accounts of illegitimate or corrupt politicians and bureaucrats.

Indeed, Singer himself has identified the rampant political corruption in these countries by citing Thomas Pogge: "international corporations are willing to make deals to buy natural resources from any government, no matter how it has come to power." In reality this is an absolutely chronic problem. Even when aid is directly supervised by the West, as in the case of the reconstruction of Afghanistan or Iraq, corrupt practices nullify the entire effort. And in my previous life I have personally witnessed the active misuse by politicians and bureaucrats of aid funneled through grossly over-paid United Nations officials.

And as foreign aid is fungible, it also arms and strengthens corrupt regimes everywhere. Therefore, foreign aid almost invariably makes poverty much worse than it was before. Foreign aid is mostly poison.

“Give a man a fish and you will feed him for a day. Teach him how to fish and you will feed him for a lifetime.” Erstwhile poor countries that took the path of freedom and good governance – the lessons from the West, experienced economic growth and were able to eliminate poverty. South Korea and Hong Kong readily come to mind. The West must teach its methods, not provide fish to the corrupt.

Third, my calculations show that even poor countries like India possess sufficient money to completely eliminate poverty, if they choose to adopt a negative income tax model. Instead, India has a range of subsidies and other “poverty alleviation programs” that are primarily used by its politicians to line their pockets. The point is that poor countries do not need anyone’s charity to eliminate poverty. They consciously choose not to.

However, not all is lost for those of us who are appalled at the ongoing poverty in the world today. We can do quite a few things to assist. But that does not require spending $808 billion annually to spoon-feed people in developing countries.

The West can conclusively transform the world through free trade and by communicating the message of freedom and good governance to recalcitrant countries.

Singer rightly cites Herbert Simon’s view that social capital is responsible for 90 per cent of what people earn in wealthy societies. Indeed, the level of freedom in a society is the primary determinant of its governance, and hence of its success.

As the demand for freedom must necessarily be ‘home grown’, ie. endogenous to the poor countries, methods of the sort suggested below will do far more for poverty than a trillion dollars spent on a war of freedom or on charity: (a) significant increase in the funding of high-quality students from developing countries who must then commit to return to their countries for at least five years after their education, and (b) bringing in senior bureaucrats from developing countries into long term “training-cum-secondment” roles within the local, state and federal governments of Western countries. This will enable these public servants to experience at first hand how freedom is operationalised.

The principles of freedom and good governance will then flow back to these poor countries, motivating the necessary change in social and political perspective.

There are no shortcuts to the elimination of global poverty.

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These views are entirely my own, based on experience in working in Indian state governments, and do not represent the views of any organisation I work with or have worked in the past.

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