The common excuse of politicians for the current economic crisis is, due to well-planned regulations, Indian economy is least suffering and has maintained a good GDP growth rate of 5.3%, while most of the other nations are suffering deep negative growth. By such bombastic claims of growth because of the government regulations, Indian government not only eludes the common man, but the current government also makes a political strongpoint for the upcoming general election.
Yet recently, one of the most prominent economists of India Mr. Surjit Bhalla has claimed that this is false comfort based on incorrect calculations. Citing OECD data, he says India actually had negative growth (-11.8%) in Q4 of 2008, not the 5.3% claimed by the government.¹
In addition, OECD based report says that in comparison, Indian economy fall with negative growth of 11.8% if we compare the GDP of 2007 for the fourth quarter with the fourth quarter of 2008.
Indian growth is far worse than in the US (-6.2%), UK (-8.4%) or European Union (-8.2%), though better than in Japan (-17.8%) or Korea (-28.8%).
Indian central statistical organization (CSO) calculates the growth rate by comparing the GDP in fourth quarter of previous fiscal year (2007) with the GDP of fourth Quarter in current fiscal year (2008). On the other hand, most of the other countries calculate their GDP growth rate by comparing the previous Quarter (Q3) of the same fiscal year with the current Quarter (Q4), adjusting the calculations and annualizing the GDP growth by multiplying it with four.
Indian government denies this standard procedure of calculation because of the agricultural dependence of Indian economy, arguing that agricultural data are too much volatile and season dependent
Indian economist Swami Nathan Ayer provided a better option of calculations. He simply calculated the change and comparison of non-agricultural growth and agricultural growth separately, and his figure suggested that the non-agricultural growth in Fourth quarter of fiscal year is 3.5% that is much less than what government has announced, also, the collective agricultural and non-agricultural growth of India for the fourth quarter of 2008 is Negative 1.6%.²
Obviously, it is clear that the government figures for GDP are nothing but sort of eluding concept to swing favours of electorate, claiming the government’s ability to tackle the tricky situation of meltdown.
Similarly, China also has registered a growth rate of 6%-7% in the recent quarter and obviously the western governments blames both India and China of manipulating their GDP rates falsely.
Yet the question is does the GDP growth rate matters?
As a matter of fact, GDP growth rate does not signify the potential of India or China to counter the global recession.
Even if we consider that the GDP of both India and China is absolute zero or may be negative, the potential China and India have to come over the current recession period is much more than USA in comparison, and till now, India and China have adopted much better policies than USA.
The main problem with emphasizing GDP is that it only measures aggregate movements of money and cannot measure whether the consumption is efficient or productive. Hence, one of the problems with any stimulus plan is that many policy makers simply look at steps to increase GDP in the short run and ignore the long-run implications — the unseen consequences of policies. For example, building pyramids could indeed boost GDP; however, there is very little economic utility gained from building pyramids and hence in longer turn, such expenses turn out to be burdensome and bad non-productive-assets, causing a new cycle of recession.
The US Keynesian economists often suggest that Americans were funded in part by Asian countries, which, having experienced a calamitous financial crisis in 1997–98, sought to park their savings in safe havens (e.g., US Treasury bonds). As a result, this immense savings distorted the marketplace and caused the ensuing bubble.
In other words, the Asian people saved too much money, lent the United States and other Western governments money at cheap rates, and therefore created an asset bubble. So according to the Western economists, the habit of Asians to save money is the basic reason behind the economic meltdown, and they say that American fell prey to this because of their habits of spending more than what they can earn.
The Keynesians on the other hand, also claims that Asian economies, specially China and India are about to roll down as the production houses and factories of China are closing down because of decreasing exports, outsourcing services are also suffering a lot, and the commercial-construction bubble has also popped up. The stock indices of both China and India have lost all heights people have lost jobs.
The Keynesians obviously claim that in order to survive the downturn, Asian economies should start spending and distributing money to encourage the Asian consumers to spend more and more. Governments should implement a universal car-ownership scheme, build hundreds of aircraft carriers, make new houses, distribute them, and reduce interest rates to zero across the board.
The first thing to be observed is, USA is suffering meltdown because of the extreme habit of spending more and saving nothing or very little. Second thing is, Americans are habitual for taking debts and loans, which often prove out to be the bad assets for the lending banks.
Asians and in particular Indians do not believe in taking loans and often try to avoid increasing any toxic asset, Indian banks also maintain proper check up for their ability to repulse the bas loans, they require 20–30% down payments on houses, and two-thirds of all loans are funded by deposits. As a result, despite huge fiscal deficits of Indian government (which are nothing huge in comparison with deficits of US government) Indian citizens are not suffering too much national debts, also most of them saves at least 50% of their earnings which proves out to be good resource for investment later on and avoid the chances of bad assets and non-payable loans.
Indian situation is way better than American in following ways—
1) Unlike Americans, Indians acknowledge that a venture can fail, and it is responsibility of the entrepreneur if they fail.
U.S government believes that if some entrepreneur fails, whole economy will go down, and hence, entrepreneurs have no right to fail, government bails them out.
On the other hand, although Indian government also seek a way to provide sympathy and to an extent a sort of protection also for the entrepreneurs and businessmen, yet Indian government have avoided providing any direct bailout package for any of the suffering enterprises. The Kingfishers and Jet Airlines did not get any economic stimulus from the government nor the government tried to sacrifice Indian tax-payers money to secure Satyam co. after the fiasco. Government have provided help in both cases indirectly to some extent, yet in comparison, Indian situation is more capitalistic and liberalized than US bailout philosophy.
2) While US have opted to turn its path from privatization to nationalization, India and China have paced up their privatization programs. The IPO of China railways are under consideration of privatization and Indian railway ministry also have plans to partly privatize railways. Obviously, both China and India are going more and more liberalized and capitalist, reducing the control of government on production units systematically.
3) Indian and Chinese GDP are not dependent on loans and household debts, in case of USA, the unpaid loans and debt is the major reason for the bad assets.
4) Although neither India nor China recognizes property rights in proper manner and are at early stages of capitalism, yet the land reforms by China and India have better the situation. This includes granting land-use rights to peasants, empowering them to lease or transfer land to others, that is, proper property rights for the farmers. Gradually, this phenomenon will establish the importance and inalienability of property rights in legal system.
5) Asian economies are opening capital markets, lowering real-estate taxes and abolishing others like the stamp tax on home purchases. Thus, providing more freedom and reducing government interventionism in the market and exchanges.³
6) India has privatized all of the big national banks and insurance agencies including LIC India co. China is obviously one step further to India, China government privatized the Agricultural bank of China recently.
7) The major point of difference is, in place of prompting up the housing bubble, both Indian and Chinese governments have restricted themselves only to reducing taxes and repo rates, as a matter of fact, this is capitalist step. On the other hand, the Fed and US government are trying their best to prevent price deflation by burdening the American tax-payers with huge fiscal deficits of hundreds of billions in form of mortgage backed securities.
Both India and China have suffered job losses. In 2008, at least 67,000 factories across China have closed down and hundreds of thousands of migrant workers have moved back to family farms. Obviously, the process is painful, yet Chinese government is not bailing out any of the factories, rather the failed companies and factories are encouraged to opt for bankruptcy to cut off the non-productive-units.
That is the proper capitalistic way. USA on the other hand have opted to cover the failed institutes, companies and factories by providing them bail out and hence adopted the socialistic frame.
9) Despite all warnings about deflation of currency, Indian and Chinese governments so-far have avoided any plan to induce currency in form of mortgage backed securities, or foreign debts and loans, not the governments have induced any sort of increased taxes on citizens. As a matter of fact, the Indian government is actually enjoying the downturn of inflation rates as fall of prices is obviously in favor of the citizens; furthermore, it increases the spending and consumption too.⁴
As the prices are falling, the huge number of people who lost their jobs and hence their purchasing power, are able to maintain their consumptions to a healthy limit, on the other hand, those who have not been affected by the downturn have got opportunities on behalf of fall of prices. Obviously, this will boost up the economic front of India. In addition, such increased spending will not affect the basic importance of the habit of savings by Asians because these spending will be natural and not enforced by government interventions.
Overall, it can be said that in present context, economies like India and China are more capitalistic and openly favoring free market than the Western economies.
Recently, India and China jointly appealed USA to maintain the standards of free market⁵ , obviously, in these changed premises, it is the east and not the best that may provide a new wave of liberalization, justice to the individual and hope for freedom.
Let us hope the changed situation bring out the betterment.

1. The Negative GDP growth rate of India, Times of India [↩]
2. The Negative GDP growth rate of India, Times of India [↩]
3. Economic Crisis and stimulus by Government, Reason for Liberty [↩]
4. Falling prices is the cure of Deflation, Reason for Liberty [↩]
5. China, India and call for Free Market, Reason for Liberty [↩]

Alan Greenspan, the former chairman of the Federal Reserve, was often considered as one of the most powerful men on earth. What is interesting about Alan is that he was once an acolyte of the novelist-philosopher Ayn Rand, and a proponent of the Gold Standard. It is indeed an irony that he later renounced his views on Gold Standard and headed the very institution he attacked–The Federal Reserve.
As advocates of a free market economy know, it is a characteristic of the enemies of capitalism that they blame the evils of interventionism on the free market. It is, they say, the “laissez faire” policies of Alan Greenspan, which caused the present economic crisis. They conveniently forget that Greenspan gave up his views on Capitalism long ago. It is also forgotten that the existence of the Federal Reserve is incompatible with a free market economy. How is Government manipulation of money and credit a free market policy? Isn’t it a form of central planning? Isn’t it ridiculous to blame the present mess on Capitalism when Capitalism never existed in the first place?
There is one thing in common between those who blame Capitalism for the present crisis. It is that they are totally ignorant of Economics, and yet hold strong opinions on the topic.
As of a gross misrepresentation of terms, anti-capitalists now hail Greenspan as a “laissez-faireist”. As everyone, including anti-capitalists know, a full free Capitalism never existed anywhere in the world. All nations known as Capitalist are “mixed economies”. Isn’t it the same men who remind us this fact when we point out the fact that higher the degree of freedom, higher the prosperity who blame all these evils on Capitalism? When an allegedly ‘Capitalistic’ nation “breaks down”, value judgment is placed on the system, ‘Capitalism’ and when a Socialistic nation is tyrannical, value judgment is placed on individual leaders and not on Socialism. It just obviates that they know the truth deep inside. In a mixture of Statism and Capitalism, it is Statism which causes all the evils and it is Capitalism which takes the blame. Statism means force and Capitalism means freedom.
The very same men argue Soviet Communism failed not because the system was intrinsically evil, but as human nature is flawed. They argue, the flaw isn’t in bureaucracy as such, but in individual men. They scream ‘evils of commercialization’ when it comes to a private enterprise. Why is value judgment passed on the system when it comes to the Free Market? Why is value judgment passed on individual men when it comes to bureaucracy or statism? The answer is obvious.
To make sense of the present crisis, one should first have a strong causal theory.
This phenomenon of boom-bust cycles is clearly explained by the Austrian theory of Business Cycles. Economic depressions are caused by nothing inherent in the free markets, but due to government interference in the market-specifically, government manipulation of money and bank credit. At any point in time, a particular amount of money would be spent in investment and savings and the rest in consumption. This investment-consumption pattern would be decided by the time preference of the people. If time preference is low, the investment consumption proportion would be high and if time preference is high, it would be low. The boom starts when banks print money and lend it at lower interest rates to businessmen and the general public. The increased money supply lowers the rate of interest below the market level artificially. This artificial lowering of the interest rates makes several projects seem profitable to businessmen which wouldn’t have appeared so otherwise. If the interest rates had fallen due to lower time preference of people, and was backed by real savings, boom-bust cycles wouldn’t have taken place. But, the artificial lowering of the interest rates sends wrong signals to businessmen about the savings-consumption pattern of individuals. Businessmen are mislead to think that there are more savings, when there isn’t. This low interest rate sends a signal to the entrepreneurs that consumers are asking for more goods and services in the future. In order to fulfill those future demands at a future date entrepreneurs starts new long term capital projects in present time which will enable them to produce more in future and thus meet the future demand of consumers. This leads to mal-investments. The recession is the necessary part of liquidating these mal-investments.
The Federal Reserve kept the interest rates artificially low and encouraged people to borrow, which lead to the housing bubble. Add to this: The community Reinvestment act forced banks to lend to poor debtors. Add to this: Government licensed rating agencies gave AAA rating to mortgage backed securities. In an entirely free market, lending to poor debtors would never have happened, as it won’t be profitable. It was Federal Reserve’s inflationary policies which made it profitable.
It makes no sense to blame the present crisis on deregulation.51, 000 new regulations were added in the past 12 years. The financial and housing system is highly controlled by the Government. There was never a free market in finance and housing. Fannie Mae and Freddie Mac are government-sponsored, government regulated mortgage giants. Banks are chartered, defined and regulated by the Government. Government promoted increased home ownership. The existence of the Federal Reserve is totally incompatible with Capitalism. Artificially low interest rates wouldn’t have been possible in the absence of the Fed. The existence of the Securities and Exchange Commission too is incompatible with Capitalism.
Let’s now analyze Alan Greenspan, the man, in detail. My introduction to Alan Greenspan was through an article-“Gold And Economic Freedom” he wrote for Ayn Rand’s “Capitalism-The Unknown Ideal”. In the article, Greenspan made a strong case for free banking, the Gold Standard and a free economy. It is safe to assume that he renounced his free market views for the Chairmanship of the Fed. He is no longer an Objectivist or a Capitalist. He might be considered as a traitor to Objectivism and Capitalism. He wrote in his autobiography about Objectivism that “as contradictions inherent in my new notions began to emerge the fervor receded”.
When Greenspan was asked whether Ayn Rand would have been a fan of the Federal Reserve, he answered that they never discussed the issue in particular. This is certainly a dishonest statement. In his 1966 article for the Objectivist Newsletter, Greenspan himself wrote these words: “Under the gold standard, a free banking system stands as the protector of an economy’s stability and balanced growth.” And More: “A free banking system would have been compelled, by economic necessity, to put the brakes on this process of runaway speculation. Credit and investment, in such a case, would be drastically curtailed; the banks which made unprofitable investments, the enterprises which proved unproductive, and those who dealt with them, would suffer—but that would be all; the country as a whole would not be dragged down. However, the “anarchy” of a free banking system had been abandoned—in favor of “enlightened” government planning.” However, when Greenspan was made the Chairman of the Fed, he didn’t even make a move to institute the Gold Standard.

In his Biography, Greenspan wrote that he has always harbored nostalgia for the Gold Standard which guaranteed price stability. Further, he wrote that he doesn’t see the likelihood of its return in the near future and it is a necessary cost for the existence of the welfare state. What is this statement intended to mean? It is certainly that the Federal Reserve creates money out of thin air to fund the welfare state.Moreover,Greenspan got it all wrong.Price stability is both unachievable and undesirable. As Friedrich Hayek had once written ,the “impossibility of achieving in practice an absolute stabilization of the level of prices in a dynamic economy has been proven time and again.”

When he was asked in a recent interview whether he was wrong, he replied-”Well, partly.”
“A critical pillar to market competition and free markets did break down,’ Greenspan said. ‘I still do not understand why it happened.’” “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.” Was this the man who wrote this about the 1929 Crash that “The excess credit which the Fed pumped into the economy spilled over into the stock market–triggering a fantastic speculative boom.”? He blamed the fraud of Enron, WorldCom and Global Crossing on “infectious greed”. Wasn’t it Greenspan who wrote for the Objectivist Newsletter that “it is precisely the ‘greed’ of the businessman or, more appropriately, his profit-seeking, which is the unexcelled protector of the consumer?”
The greatest crime that Greenspan had done was not his inflationary policies during his term. It was that he “admitted” that his belief in enlightened self interest was wrong! Greenspan was just passing the blame to the market. Surely, this man is a hypocrite!

Globalization not only has raised a stage of cultural sharing and expansions, it has provided a wider scope in every aspect of common life whole round the world.
National politics is also not unscathed of the global effects. Out national politics and economics, so much depends on the various global international groups, organizations, planning commissions, treaties and protocols.
One of the most important of them is the Kyoto Protocol and Environmentalism is the new political mantra at the helm.
Almost every other country is now whirling around to cut the carbon emission rates.
Now when there are enough evidences that global warming is nothing but a fake idea, the environmentalist politicians have a new way to rush upon their emotional tactics based on the call to “save mother earth”.
US president Obama has promised to invigorate the green energy industry as the new engine for the economic growth. The current economic crisis is providing enough chances to raise his sticks and implement his plans to create the new bubble of green economy providing millions of new jobs and to achieve that, he is going to implement some governmental “incentives” to promote green energy.
These incentives include carbon taxes and huge subsidies for innovation and development of “renewable” non-carbon energy resources.
India is also not very far behind, and as India is a signatory member of Kyoto protocol, Indian government promised it would introduce new norms that would involve tax concessions, incentive schemes including legislative framework to motivate Indian Inc. to effectively undertake carbon emissions reduction program.¹
India is already facing an electricity crisis and we really do not produce enough electricity to provide electricity in every household. A big portion of rural India still remains in dark at nights. Yet our politicians can promise to reduce carbon emission within a scheduled period.
Obviously, politicians never promise to fulfill their commitments.
On reality grounds, the “green energy” drive is fake and failure because, the environmentalists not only oppose the coal thermal electric plants, they also oppose nuclear plants too, and what they support for is the “renewable energy resources” like wind, solar and sea energy and that makes it a conundrum.
The governments, by providing huge subsidies to the innovation in green energy market can make it some heavy deal, but it will not be helping anyone.
The renewable energy resources cannot fulfil our requirements of energy not because we lack technology, but because it is not viable nor it is economic.
Around 76% of Indian energy comes through coal thermal plants, 21 % by hydroelectric plants and 3 % by nuclear plants. With the new nuclear energy deal, India will try to look for options to increase the percentage of nuclear energy.²
The “renewable” resources play almost no role. We cannot rely on wind mills because of intermittent nature of winds; also, wind mills require huge grounds. We cannot rely on solar cells, because of extremely low efficiencies of solar cells; also, it is not economically viable idea. The latest and most efficient solar cells use Lead selenide (PbSe) in their making. Just like PbSe, almost all heavy metal salts necessary for a solar cell are toxic in nature and can cause much greater harms to environment than what CO2 can cause. That is, the renewable resources can harm nature much more. In addition, heavy metals are rare, hence expensive, and thus not economically viable.
No matter how huge subsidies government provide, we cannot afford it.
Furthermore, such endeavours have already proven their failure.³
Many European countries are again returning towards coal thermal plants because their earlier initiatives to bring upon carbon taxes, investment, and subsidies in green energy are making electricity too much costly and hence common people are suffering, also, no plans are working to decrease any carbon emission.⁴
The conundrum of energy is because, fossil fuels are finite, we cannot remain dependent on them forever, renewable energy resources are not sufficient to fulfill our requirements, and nuclear energy is also not a very viable option.
Although fossil fuels may end earlier, yet the charcoal and coal tar beds will keep providing enough fuel and hence power to the world for longer periods.
The example of European failure clearly explains why taxes never work. Because of increased carbon taxes, the price of coal increased sharply and that was what government wanted to fight against global warming. Yet the result of all this is the huge increase in power rates needed for everyday usage.
India is already facing huge inflation rates. The rich can buy costly power and electricity too, the green energy steps will stress more burdens over the poor and no carbon tax can actually reduce that burden.
Carbon tax is also not a good economic move and it will increase poverty. We know that to reduce and ultimately remove poverty, production is the only way. By slapping carbon taxes on production houses, government will reduce the production and that will increase poverty.
The overall situation is government can provide no viable solution for electricity crisis and the environmental cause simultaneously. Government interference in market in support of environmentalism will not only make people poor, it will hurt the environment more. We cannot opt for hydroelectric plants because of the other side damages hydroelectric plants can cause (Earthquakes). With the limitations of wind and sea energy, and the economic failure of solar cells, we can not rely on them; furthermore, the making of solar cells can prove to be bigger danger to environment and human life. Not only Lead Selenide but polysilicons also left a huge toxic residual, which harms human life and nature much more than coal and we cannot rely on nuclear energy production too. Even in US nuclear power plants provide only 17% required energy and government are in opposition to nuclear plants because of the dangers of nuclear waste and the consequences. There is no safe way to dump nuclear wastes.
Overall, coal is the best option for our energy requirements and as we know that coal will keep serving us for many centuries more, we have enough time to innovate, invent and discover new ways, yet for that too, government interference is not viable.
In fact, the more we provide freedom to market, the more close we reach towards the solution for the energy conundrum.⁵
The current electricity losses in India during transmission and distribution are around 45%. It is huge and if we privatize the production, transmission and distribution of energy, the private owners will reduce this huge loss because of their profit incentives and that not only will bring electricity within reach or poor, it will make many dark villages bright.
The privatization of electric distribution is already an ongoing process and it is helping in reducing the wastage, yet we need a free market in electricity sector as that would induce the private investment in the innovation and development of energy production techniques and that will include nuclear techniques too.
Furthermore, if government stop interfering in oil, coal market, and stop providing subsidies, the common users will also get incentives to reduce wastage and over usage.
Thus, the real green initiative will be the reduction of government interference in market and provision of property rights as that will reduce any chances of exploitation of common man through government supported corporatism. We need to understand the difference between corporatism or crony capitalism and free market laissez-faire capitalism, and we need to adopt the later one.
The current slapping of carbon taxes on Industries and dumping of collected tax in non-viable energy resources is not going to help either environment or the economy.
Basically, the US government and other governments also, aim to slap carbon taxes just to decrease the fiscal deficits, as government know that industries cannot work without carbon. Such moves are never taken for helping environmental cause; they are rather more Keynesian economic steps to increase taxes, which ultimately hurt the economy as production reduces.
The promises of huge governmental investments and subsidies in green energy are also nothing but similar Keynesian steps to increase government spending.
Yet, it is highly improbable to help any economy with such spending in non-productive activities; they will cause further economic downturn.
Taxation and subsidies never brings any good.

1. Indian government to Introduce new Carbon emission norms, Commodityonline news [↩]
2. Electricity in India, Wikipedia [↩]
3. Failure of European Green Initiatives, Reuters news [↩]
4. Failure of European Green Initiatives, Reuters news [↩]
5. Electricity in India, Wikipedia [↩]

A new official research report suggests that India will face acute shortage of usable water¹ within few decades. Last year, N.K Garg of IIT Delhi warned against water crisis and now Mr. T. N Narashimhan, a professor of University of California claimed that Indian government has seriously overestimated the available and utilizable water resources. His report issued by the Indian Academy of Sciences says that optimistic projections made by India’s Planning Commission as late as in 2007 are incorrect.²
We discussed what causes water crisis and how it can be solved³ , yet here we will look further into the matter and how is government looking forward to solve the issue.
The major issue of water crisis as the government claims is droughts, environmental changes and increasing population. Obviously, all the causes aforementioned are irreparable. Neither we can control droughts, nor the nature change can be monitored nor can we curb the population increment unless we allow mass murders.
If we believe in what government claims, then India is sure marching towards a drastic situation. Yet, is that all the truth or government just try to hide out the real cause?
Water crisis is a looming problem, the only reason for the problem is governmental intervention in form of subsidies on water and electricity, and India is facing electricity crisis and water crisis simultaneously.
One may say that water is a natural resource much dependent on snow and rainfall and hence a scarcity of water can be natural. Yet that is not the case, almost every resource our lives rely upon is a natural resource, be it wheat or diamond.
Scarcity is not because a resource is natural, scarcity always occurs because of misuse and wastage of resource. In any governmental plan, wastage is quite natural and the reason is, government denies applying for the only possible solution.
By subsidizing water, or better say by price control, government never let the users, especially the farmers realize the actual worth of water.
When onion prices go high, what do we do? We reduce the consumption of onions as we can not afford, we reduce any wastage of onions to save our money and efforts, we use onions as little as possible and only there where it is necessary.
The increasing prices suggest us that for some reason or other, there is scarcity of onions and hence we should use it carefully.
Prices are the only possible indicator of a scarce resource and free market pricing is the only way to manage and solve the scarcity.
The major issue with Indian water crisis is, water resources are yet not privatized. As government controls the water resources and water supply, there is no check on wastage.
Yet here we will discuss about the issue of ground water. The level of ground waters is constantly decreasing in planes of North India. Farmers have devastated ground water to such an extent that it is devastating the country now.
With the dropping level of water table, farmers are investing heavily, often they borrow money to bore deeper wells and install powerful pumps.
As farmers enjoys free or hugely subsidized electricity for agricultural usage, they never realize the actual danger of the depletion of ground water bed, also the misuse of electricity causes electricity crisis, and all this wastage occurs with the help of the tax payers hard earned money.
Does this help Indian farmers and poor?
Indian tax payers generally approve hugely subsidized electricity for farmers, assuming it will help agriculture and hence will help in progress. Yet that is not what actually happens. With no knowledge of actual price of electricity and water, farmers get no idea of managing their resources well; this inability further eludes them to waste more. As they harvest more ground water than what the earth can replenish, the water bed goes down and the land goes barren. To provide further water, they need to install further powerful pumps to draw water for which they take loans and borrow money. Thus, whatever economical help they get in the form of subsidized electricity is wasted upon electric pumps and digging up the tube-wells further deep.
Now the ground water level in northern planes is extremely low and it is hard to get water at deeper levels too, thus even the costly new electric pumps also fails in helping farmers anyhow. On the other hand, the extra burden on electricity grids is not only a problem and burden for the tax-payers it also causes depletion of transmission lines and hence induces further electricity wastage. Unbridled usage of electricity further adds up in water crisis, as the electricity production in India is highly dependent on thermal or hydroelectric plants.
The depletion of ground water beds not only makes the farm lands go barren, it also hurts the ecological niche as the trees dependent on ground water fails to survive.
Last year, some government planners suggested providing new improved free electric pumps for farmers.⁴ The idea was to save farmers from wasting their money to buy new electric pumps. Such incentives further cause wastage of electricity and water.
Government on one hand keep warning about water crisis and electricity crisis, on the other hand it avoids the only possible solution.
Almost all major economists have suggested government to let Indians pay for the water and electricity according to actual prices and avoid providing subsidies.
Politicians say it is impossible to expect farmers pay for electricity for further 50 years more. Obviously, they suggest reservation in education and governmental jobs for further 100 years.
Why will a farmer even think of reducing water and electricity consumption when he will have no indicator to suggest him that he is wasting the resources and hence causing burden? In fact, by providing subsidies, free electricity, free electric pumps, government provides farmers an incentive to waste water and electricity furthermore.
On short term, it may seem as an idea of helping the farmers, but what will happen when even the new pumps will fail?
Government always tries to subvert higher prices, assuming that higher prices are evil, yet it is not so. Prices are indicators of scarcity.
If government decides to stop intervening in agriculture, electricity production and distribution and water resource management, things will be better.
Higher market prices will increase competition and supply and will encourage natural rationing of resources. Due to higher prices, the private producers of electricity, the water resource managers will get incentive to better their services for avoiding any wastage; it will provide incentive to the common users and farmers too to avoid any wastage or extra usage and will make them thrifty. Now that is the only way to avoid any scarcity.
In addition, the higher prices will force the individuals, innovators, enterprises to provide alternative ways to produce electricity, to harness usable water and increase ground water levels too.
Government monopoly and free market system have this main difference, while government have no way to acknowledge what the consumers demand, rather it dictates and directs the consumers according to the government planning, the free market acknowledges the consumers demands as supreme.
If government really want to solve the electricity and water crisis, all it has to do is to clear the market of all government interventions and let the individuals conserve themselves for their own cause at their own pace.
Yet, for the sake of vote bank and desire of power to rule, government at present allows subsidies and provides incentives to use and waste more and more water, and when the conditions will be depleted beyond the reparable limits, government will be forced to ban usage of water, dictate public and install curfews.
There is no way government monopoly can bring any good.

1. India will soon face water shortage, NDTV [↩]
2. India will soon face water shortage, NDTV [↩]
3. Water crisis and solution, Reason for Liberty [↩]
4. India’s water shortage, Fortune reports [↩]

Often people think every issue has just one possible solution, and that is voting, referendums. Voting for every other issue they think will solve the problem.
What they ignore is the most important principle of voting or democracy, democracy is not a tool of subverting Individual liberty, it is a tool to establish liberty of Individual the smallest minority, now since they forget this basic principle, they start acting like another dictator.
In the last post, one of my friend suggested that people should vote to decide whether a person could sell alcohol or not. His argument is driving after drinking may cause accidents.
Now let us discuss his idea.
A person after drinking alcohol, drives and may commit a mistake under the effect of alcohol and cause a gruesome accident that caused injuries to some people.
It is a crime, and who is the criminal?
1> Driver is the criminal, he was driving and committed mistake, he should be punished (monetarily or other ways).
2> Driver is actually not the criminal, alcohol is the criminal, if he was not in affect of alcohol, and he might not have caused accident. Alcohol can not be punished.
3> Alcohol¹ can not be termed as the criminal, actually, the person who sells alcohol is the criminal, if he had not sell alcohol, the driver might not have drunk and that might have aborted accident. Thus, the alcohol seller must be punished; Ban alcohol shops and announce selling alcohol as crime
So, which of the three ideas is reasonable?
First of all, the assumption that alcohol causes accidents is wrong, because if it is not wrong, why people of UK, France, Thailand, Malaysia, USA, Russia, Germany, India, and most of other countries do not ban alcohol. Yet, let us assume it is a point.
According to my friend, the third one is right. I see no sense in all that.
First of all, blaming the alcohol is not correct; alcohol cannot think nor can act. The person who drives after drinking alcohol is the decider of his actions.
Third option is extremely ridiculous, why should we punish the dealer of alcohol for a crime, which he never did? Why should we abort his way to earn a living? It does not make sense, moreover it is against the Individual liberty of a person, and it is against his right to act.
Now consider this fact, more road accidents are caused because of mobiles, people use mobile phones during driving which causes accidents. Alcoholic driving causes much less number of accidents.
Thus, as per the common suggestion, there should be a referendum to ban mobile phones too just like alcohol?
Anyways, one may say that although it is correct that mobiles causes much more number of accidents than alcohol does, but alcohol is injurious to health, hence we should have a referendum to ban alcohol.
Let us assume that this idea also wins approval, and there occurs a referendum to decide whether selling of alcohol be abolished or not, and let us assume that people decide to ban alcohol shops, dealers and sellers.
Now consider banning.
If you ban an alcohol seller, although he is making profits, he will start black-marketing, you will engage police, he will bribe them and still will make profit because people want alcohol, they buy it, and he provide them.
You make strict laws, he make more keen ways to black-market and bribe further more policeman, he make his gang, and then you make smuggling laws, although people are consuming alcohol and they want alcohol, that is why he is making profits. So, you waste people’s collected tax, they are now suffering under your totalitarian hands, your taxes and Non productive activities to restrict him from selling alcohol are causing burden on people, making them poorer, because you take extra taxes from them to stop the alcohol seller and many others who smuggle alcohol.
That is, you are punishing all, no matters they drink alcohol or not, but they are bearing and suffering the punishment. You loot them through taxes, make them poor and decrease their potential to create jobs to remove poverty of other workers. That is, just for the sake of your ill-logic of banning alcohol, you make whole society suffer, and you nor the society ever realizes this fact, although all keep crying against poverty.
Ultimately, you succumb, and you announce a law to shoot anyone who sells alcohol, but why? Why should not you shoot anyone who drinks alcohol? Therefore, you get that idea too and you announce a law to shoot anyone who touches alcohol, and that is the ultimate point of totalitarianism.
By banning alcohol, you are not only making people poor by looting their hard earned money in form of taxes, so that you may arrest and punish the alcohol seller (which you will find impossible because he will bribe and use other ways as he is right), you are also causing possibilities of mass murders.
So what is the result of all this, poverty, wastage of resources, corruption, bribing? In addition, even after all bans, alcohol will keep making its ways.
Let us say that the alcohol seller/smuggler reaches a point where he need to bribe the police and authorities to keep selling alcohol, but his margin of profit is decreasing too much, so what should he do? He start thinking of alternative ways, he start making cheap local wine and adulterating it with the proper healthy alcohol.
Now sometimes the cheap local wine may remain free of intoxication, sometimes it may become a poison, and cause deaths in huge numbers, because people do use alcohol. Who is responsible for those killings, Poisonous wine, or the seller, or the authority that banned the selling of healthy unadulterated wine?
Now let us discuss the market solution of the problem of alcohol.
Selling of alcohol is the Individual’s decision and his right to act. He is not forcing anyone to drink alcohol and if he does so, he will get punishment as enforcing anyone is breach of individual freedom.
Similarly, selling of mobile phones can not be stopped or banned.
Yet, we can have a referendum, and we can keep repeating such referendum in positive ways, the issue of referendum should not be Banning, but establishing the fact, that driving after drinking alcohol or using mobile phones during driving may cause accidents, so people should avoid it.
We spread the positive idea and it helps, it does not cause wastage of resources, nor it makes people poor as the banning of alcohol does.
In addition, lets say majority of people think alcohol is not good, they does not use alcohol, if the number keep increasing freely, the buyers of alcohol also decreases and that makes selling of alcohol a business of loss, hence the market force naturally suggests the alcohol seller to not to sell alcohol. Since he will not be earning anything in free market by selling alcohol, he will not smuggle it too and hence there will not be chances of mass murder due to poisonous alcohol too.
Yet, more than that, the free market force will insure that poverty of citizens may not be increased by the increased taxation for the non-productive activities, and that will decrease the corruption too, as there will not be any need to bribe police for selling alcohol.
When people are so convinced that alcohol is bad, why should alcohol be banned? As all consider alcohol is bad, they should avoid alcohol freely by their own choice and self-determination, why they need a totalitarian DANDA of police and government.
Conclusion: We should not support the idea of establishing laws and bans based on referendum and voting, because referendum and voting are more based on emotions and sentiments. We should design and decide laws on the firm base of provable, explainable REASON, and it is only “Reason” which can promote freedom, referendums are mob rules, they are often used to make slaves. Read more on banning of cigarettes here.

1. Alcohol Addict, Reason for Liberty [↩]

When in November 2008, Indian finance Ministry and RBI announced Rs2000 crores stimulus for the drowning market, we opposed it, and people opposed us. Many of my Indian friends were not even ready to accept that India will face any sort of economic crisis because as Indian politicians and politico-economists says, Indian economy is well-regulated. Yet, their false expectations and trust over regulated economy failed, and Indian government programmed a robbery of tax-payers money worth Rs2000 crores. The loot did not stop there, and again in January 2009, Indian government announced a new stimulus package of further Rs2000 crores.
Yet it did not stopped there too, and now again Indian government is planning for much bigger bail out plan.¹
Economic Affairs secretary Ashok Chawla informed about the new stimulus plan, as India’s government will sell 460 billion rupees ($9.44 billion) of additional debt in four parts between Feb. 20 and March 20.²
It has been explained many times that any such bail-out or economic stimulus proves to be disastrous ultimately, as it causes two-way depletion.³
First of all, Indian government will be increasing its fiscal deficit by huge amount to manage a stimulus package. Thus, it will be we, who actually will be burdened with all this debt, and we will be obliged to pay through our taxes, tax-rates will increase to pay-back these debts. In addition, as there are too many holes and breakage in the delivery conduits, a big chunk of money of the stimulus package will be embezzled or wasted.
Mr. Indranil Pan, the chief economist of Kotak Mahindra expressed his doubts regarding the stimulus plan as

“India’s fiscal deficit is one of the highest in the world and the additional borrowings announced today will further put pressure on the deficit.”⁴

Fiscal deficit is the difference between what Government spends, and what it actually collects from the revenues and taxes in a fiscal year. Obviously, to decrease the fiscal deficit to convincible limits, Government will enforce further strict taxes, and hence will culminate the rate of progress while increasing poverty.
The governmental plans of spending have been a failure since always. We all know how corruption engrossed billions spent in the programs like Mid-day-meal schools, and PM-employment Programs etc. Here is a combined list of wastage and embezzlement of such grants and welfare programs compiled by the NREGA authority itself.⁵
Now, it is easy to complain the failure on corruption, but the reality is, all such welfare programs are the cause of such corruption because welfare-state itself is a form of corruption⁶ , forcibly looting the producers through taxes to squander the collected loot wealth in poor can never reduce poverty, it is robbery, corruption and wrong at the base, hence it causes further corruption (Boya Ped Babul Ka to Aam Kahaan se Hoye~~ As you sow, so you reap)
Above that, to invest for such welfare programs, Indian government borrows from international communities and takes grants and foreign aids too, and as we have already discussed, it further increases burden rather than being helpful.⁷
Whenever people talk of corruption in India, they start blaming it to degradation of morals and cultural backlash etc, and hence they start making a new platform for tyranny in form of Moral Policing, but such acts further creates anomaly and disruption because of the misplaced idea about corruption.
Corruption is not because of selfishness or greed, this corruption is the result of the sense of welfare and altruism, as altruism is a fake identity and always involves a certain extent of hypocrisy, it provides space for the growth of corruption. On the other hand, the promotion of rational selfishness always provide space of honesty, hard-work, free competition and undiscriminating comparisons of success or failure.
The idea of economic stimulus and bail outs is also inspired by the sense of Altruism and just like altruism, it is a paradox which in place of helping, cause further deterioration⁸.
First of all, one should understand the meaning and importance of failure and pain in common life.

The physical sensation of pain is a warning signal of danger, indicating that the being is pursuing the wrong course of action, that something is impairing the proper function of its body, which requires action to correct it.
This natural mechanism of pleasure and pain is very essential for any living being or human to actually realize the reasons and hence reality and course of right and wrong.
The example of mentally retarded children can explain it very precisely, who are born with a deficiency of such practical innate mechanical system of learning. Such children have no means of learning that what can and will injure them. The survival chances of such children are always less. The question of the possibility of a living being without having any of the five innate senses also depends on this.⁹

Failure is no different phenomenon; failure indicates that the course of action was flawed.
Providing economic stimulus or bail outs is nothing but the case of making the enterprises just like the mentally retarded children, with the sense of stimulus and bailout, government actually reduces the market’s capacity to judge what activities are profitable and what are causing loss. Without this capacity of understanding profit and loss, a market enterprise becomes as dependent as a mentally retarded child remains who just cannot experience pain, survival chance of child and such enterprises are always less and hence even if we bail out and stimulate them, they will fail again.
They will fail because by bailing out, we just reduced their capacity and freedom to check out the faults and get better actions. We reduced their incentive to discover all “non-productive-activities” and malinvestment of capital and resources and remove those causes of failure. Thus, all such economic stimulus and bailouts will not only hurt Indian citizens through burden of fiscal deficit, it will hurt the market and enterprises too by reducing their capacity to understand cause of failure and evolve a mechanism to rectify the failure. Such stimulus will help the failure to live long.
Thus, it should be clear that all these economic stimulus and bail outs are designed to shield people from the effects of bad decisions and faulty actions.
Many people also claim that it is all because of greed and capitalism.
What these people forget is the fact, that before 1991, India was a strict socialist country with complete control of government. In 1991, Indian monetary status was zero and India was facing dangers of bankruptcy and a declared economic failure state. We improved from that situation by means of economic reforms, liberalization of markets and a drift towards capitalism. Without capitalism, there was no way for Indian government to even to think about providing any sort of stimulus or bail out.
By announcing that in a school exam, nobody will be failed; school actually removes any incentive for children to actually work hard for learning and getting good grades, and hence hurts the process of learning. Why should a beggar work when he is already getting good food and other essentialities without working and attempting?
Similarly, why will a market enterprise search for and remove the causes of failure if it is provided security against any sort of failure through such bailouts and economic stimulus?
It is not as if governments do not realize this fact, that such helps are detrimental, yet politicians always support such stimulus by exhorting at the emotional causes of helping the failed enterprises and people who lost job. They do so not for helping the market to come above economic crisis, as they know that all such helps will increase the period of crisis only. They do so to gain emotional support of the voters so that they may maintain their stronghold at power, power to rule over people and nation by means of government.
Such economic stimulus and bail outs are no better than the politico-religious issues like Ram Temple and Babri Masjid. Political parties do not raise such issues to revamp religion or morality or spirituality (whatever!¹⁰ ) they do so to raise an emotional platform to gain vote banks and hence the power to rule.
For proper corruption-less governance, it is extremely essential to limit the government and keep it out of any sphere of economy, or religion because both are the spheres of Individual Liberty and right to live, freedom to act and express.

1. $9.44 billion further for Indian economic stimulus, bloomberg.com [↩]
2. $9.44 billion further for Indian economic stimulus, bloomberg.com [↩]
3. Economic Crisis and Fiscal Stimulus by Government, Reason for Liberty [↩]
4. $9.44 billion further for Indian economic stimulus, bloomberg.com [↩]
5. Complains of corruption in governmental programs, NREGA list [↩]
6. Welfare and Embezzlement, Reason for Liberty [↩]
7. Foreign Aid Vs Foreign Investment, Reason for Liberty [↩]
8. Altruistic Paradox, Reason for Liberty [↩]
9. Happiness, pain and pleasure, Reason for Liberty [↩]
10. Shackles of Indian Politics, Reason for Liberty [↩]

India is now not only a Foreign Aid grabber, Indian government provides foreign aids to poor nations too.¹ Here is a discussion about how valid the idea of aiding poor nations is.
In 2003, Indian government took an ostentatiously brave step of denouncing the Idea of Foreign Aid and announced that India will discontinue taking grants aid from many countries. It was a positive step.
After the situation of economic bankruptcy, India faced during the crisis of 1991, Indians took off from their chosen path of socialism and adopted for economic reforms, liberalization and opening of markets towards the creation of free-markets. Obviously, it was result of that effort that within 12 years, Indian government was in position to denounce some of major foreign aids. No better evidence of failure of socialism and success of Capitalism is possible. Indian government urged that if foreign government wish, they may help NGO’s or foreign investors rather than granting aids for Indian government.
Foreign aid is a socialistic program, which runs world wide, and obviously, it fails every where.
So let us discuss why those huge amounts of money, which Indian government got from foreign countries to improve Indian conditions, suffered a complete set-back.
History teaches us that foreign aid always hurts the recipient country in long run.
The reason being Foreign Aid goes from government to government, which makes it strictly socialistic system. As it is a fact that socialists cannot calculate, they cannot plan nor they can discover or invent any system to provide a procedure of allocating optimum investment and optimum production, the failure of foreign aid is very probable. A big chunk of Foreign Aid goes for providing immediate consumptions that in effect, does not increase the productivity of the nation or its citizens. As it has been proved, that the only way to remove or reduce poverty, is to increase productivity, maximum part of Foreign Aid helps nothing for removing poverty.
The rest of the foreign aid goes in governmental five-years plan, state owned airlines, governmental hydroelectric plants and dams, etc which are raised principally for showcasing progress without any regards of their actual usability and worthiness.
Swaminathan Aiyer in his report at Times of India² mentioned how horribly failure government plans and policies are in the water resource programs and how government is causing wastage and scarcity of water. All such huge government projects remain dependent on foreign aid, which ultimately turn out to be a burden on the receiving nation.
Along with foreign aid, government wastes man-power and local resources too in such big projects, hence the economic growth is further retarded, and poverty further increase. If foreign aids are provided without conditions, they are mostly squandered and misused. An example of this fact was the misuse of the foreign aid given by UNO to Indian government to increase awareness about health care and HIV AIDS. In 2007, UNO complained of extreme corruption in the handling of foreign aid.³ Thus, foreign aid not only increases poverty (while they are meant to reduce poverty) they causes enough space and possibilities of corruption and degradation of moral of the citizens of the nation.⁴ As there is obviously a need to manage and redistribute the foreign aid, it increases the bureaucratic burden on nation too. As most of the bureaucratic works are “non-productive-activities“, they further increase consumptions without increasing any productivity hence further cause poverty.
On the other hand, if anyhow the foreign government tries to impose conditions to provide a way to reduce wastage, the recipient government opposes it as an imperialistic attempt. Thus, foreign aids are always deemed to be a failure.
In the end of 2008, Pakistan faced the economic downturn and demanded foreign aid, and Pakistan got it too. It obviously suggests that, although Pakistan got foreign aid to help its present condition, the foreign aid will not be helping Pakistan for long, just as foreign aids never helped India ever.
Foreign Investment on the other hand is just opposite to foreign aid system, and most of the economic progress and reduction of poverty in India is actually a result of economic reforms and facilitation of foreign investment.
Foreign investment is the voluntary investment of foreign entrepreneurs in a backward nation at their own risks for their own profits. As foreign investment is individual or enterprise responsibility, it involved lesser or no chances of corruption, wastage and squandering of resources. Furthermore, foreign investment increases the productivity of the citizens as it creates jobs and possibilities for innovations. Above that, foreign investment also helps the native citizens to learn new technologies and develop them further to create their own native niche technologies, which in turn helps the foreign investors too. Thus, Foreign investment not only helps the recipient nation in reducing poverty by increasing productivity, but it also increases the development of technology, knowledge and learning processes and hence, the comfort, thus decreasing the poverty, and over that, it provides the foreign investors to increase their capital honestly.
Thus, while foreign aid is disastrous for the providing nation and recipient nation both, foreign investment is profitable for the investors and recipients both. That is, if Pakistan needs to improve its economic situation, it has to provide profitable and conducive circumstances for attracting foreign investors to increase the productivity of Pakistani workers in order to remove or reduce poverty.
Foreign aids actually hurt the aid provider nations too as they looses their capital in almost non-productive ways. Now government does not create wealth, be it foreign government or our own. So the tax-payers of the other nation also feel as if they were robbed. As for example, UK citizens complained about British foreign aid to India in 2008.

May we have our money back, please? Specifically, the £1 billion we donate in aid to India, a country rich enough to enter the space race.⁵

The above discussion establishes that it is beyond any doubts that India suffered because of foreign aids, not only the government squandered the foreign money, but also it caused the national debt and fiscal deficits too. It is also an established and well-proven fact that voluntary foreign investment always helps and reduces poverty on sides of the recipient and the provider too.
So why is Indian government involving Indian Tax-Payers money in donating as Aid for other poor nations? Why not let Indian entrepreneurs and investors provide investment rather than looting Indian tax-payers and providing the robbed money to others to waste it? Why cannot we learn from our own mistakes?
For any government, providing aid to poor nation is more a cause of making impressions and false superiority, but such falsified superfluous acts increases poverty alone. Providing aid to poor nation on account of tax-payers hard earned money is just like making a new Statue of Shivaji to show how impressive a political party is.⁶
Indian tax-payer individuals must oppose any move by Indian government about providing aid to any other nation. Better is providing a free market environment to facilitate investment by Indian entrepreneurs to those poor nations.
Indian government at present is providing aid to Nepal, Bhutan, Srilanka, Burma, Afghanistan and Bangladesh.⁷ Such aids surely cause wastage and will increase corruption and poverty. A much Better way to reduce poverty of the Indian sub-continent is, providing a free-market zone in Indian sub-continent, which will inspire and invigorate Indian entrepreneurs, investors and businesspersons to provide foreign investment to those poor countries and hence reducing poverty of whole Indian Sub-Continent.

1. India providing Foreign Aid to poor nations [↩]
2. Wasting $50 Billion on Major Irrigation, Times of India [↩]
3. World Bank Slams corruption on Aided, Indian health Care project [↩]
4. Welfare and Embezzlement, Reason for Liberty [↩]
5. A Complain against UK Foreign Aid to India [↩]
6. Indian version of Statue of Liberty, Reason for Liberty [↩]
7. Indian Foreign Aid Budget, pdf document [↩]