Every political leader, a representative of “the people” realizes that nobody in “the people” like to face poverty. Yet, poverty is wide spread. Every government aims its political and ruling program at reducing scarcity and helping the poor. Often the statist argues that government is necessary because if there will not be a government, who will care for the poor, the depraved ones. Politicians often use this “altruistic” propaganda to lure the voters.
The only practical solution to the problem of poverty in masses is to increase the productivity of individuals. In absence of government interventions, for the rational profit motive, free market provides an explainable way to make most efficient way for the usage of resources and to minimize the wastage, thus free market naturally is the solution to poverty. Yet, by means of interventions, government induces irrationality in the market and hence, reduces the productivity while increasing the wastage of resources. Obviously, with reduced productivity and enhanced wastage of resources, the government itself becomes the cause of mass poverty and scarcity.
At the failure of all their agenda to reduce poverty, they further come up with same propaganda of “helping the poor”. Well, the end results of government interventions just come out to be opposite. Does government really want to help poor?

Inflation

In order to hide the evil result of government interventions, it becomes necessary for the government to play with its own issued “Fiat Currency” to manipulate the illusionary GDP figures. As a result, poor people become further poor while government keep emphasizing on the increased GDP rates. When a common man asks, how is that possible that with increase in GDP, poverty is also increasing? He gets the answer that although GDP is increasing at a fixed positive rate (Indian GDP is supposed to be 7%); the prices are increasing at much higher rate. Government than stress that although Gross Domestic Product is appreciable, but inflation is the cause of concern. When government decides the prices and inflationary rate, why is it increasing? Terms like Gross Domestic Product or National Domestic Product has no meaningful relation with productivity of market. When government introduces new currency either by printing currency, purchasing bonds, manipulating interest rates, or by announcing bailouts and help packages, those who use the money at first (obviously, the rich), may get benefits, but the same money becomes the reason of Inflation (Price Rise) and Poverty. No government takes responsibility of Poverty though.

Minimum Wages¹

Minimum wage law is commonly known as the saviour of poor and unskilled minority workers. What are its real effects? Minimum wage law forces employer to pay workers no less than Rs80/- per day. At a higher wage, more workers seek employment, but the employer suffers loss of income and hence desires fewer workers to employ. It is simple, if price of sugar will increase, one will use lesser sugar, if price of labour will increase, one will wish to employ lesser workers. In addition, when one can employ a better and skilled worker at say Rs100, why will he employ an unskilled workers at Rs 80/-? That is, the chances of employment for the poor become further less and he is forced to absurd poverty. On the other hand, because of general decrease in will to employ people, even the skilled labour suffers unemployment. Without employment, unskilled worker never gets a chance to work and improve his skills. Thus, he remains without work with any chance to gain any skills. He may choose to beg or be a robber. Obviously, unemployment increases crime rate too, further causing problems to poor.
Thusly, Minimum wage law is compulsory unemployment, reduction in production and it is an incentive to crimes in society.
Furthermore, employers, knowing demand for employment is more, can afford to discriminate between workers. They may employ only the workers of their own caste or religion, as they will have to give Rs80/- to whosoever they employ. Thus, minimum wage law creates caste and religious tensions, hence further crime in society.

Government Health Care²

Government health care system is another such propaganda that is meant to help the poor. First of all, government controls the medical fraternity and education board of India and does not allow free market to produce medical practitioners in enough quantity to serve the ever increasing number of patients. Than, government makes the medical education so clumsy, time consuming, tough and costly that seldom youth want to be a medical practitioner. Again, government forces those “so less in number” produced medical practitioners (doctors, nurses, medical assistants) to work “involuntarily” in villages at least salaries for first few years, and hence makes the medical sector unattractive. With so less number of medical practitioners, the cost of health care reaches enormous heights. In addition, doctors employed at government hospitals suffer the pressure of extreme work-load and to reduce that, they start discriminating and ignoring the patients. Obviously, the poor suffers. Government try to help poor by subsidizing some common medicines. Thus, the profit of medicine production reduces and hence investment also reduces resulting in scarcity of not only doctors and equipments, but scarcity of most common drugs and medicines too.
Government hospitals cannot be maintained properly because of lack of incentive of profits and the natural competition to provide cheapest, best and trustworthy services to the patients. Hence, although poor may go to government hospitals, they seldom get any proper services and treatment. On the other hand, the richer government officials often enjoys the benefits of government hospitals while the common middle class men prefers to go to private clinics.
Overall, only the people of the poorest section that suffers lack of medical services because of Government intervention.

Higher Education

As explained above, Government has a unique fetish to control the Higher education sector. Universities and higher colleges get massive government funding via tax-payers. Seldom has a poor kid gone to higher education. On the other hand, among the rich, it is customary to graduate, no matter they many of them never learns anything and even if they learn, they never uses it ever. While the poor, because of government intervention in education sector, suffers even a scarcity of good and cheap primary education.

Denial to earn an honest living

Government surely causes poverty through its interventions in market, yet government let the poor to earn a proper living, Government is not stopping any poor person to work hard and make fortunes, is it? Yes, government strictly denies the poor to earn honest living by enforcing various barring laws like permits, licenses, regulations, bureaucratic hurdles, zoning laws etc. A rich person can simply bribe the government official and start making money through his business, a poor man even cannot get enough land to open his tea stall nearby a main road. He will have to bribe the police constable, the municipality officials and many more. Thus, by stamping out potential competition from small business, government serves the big business of rich people. On the other hand, the poor again suffers unemployment, as they can not pertain to self-employment. Thus, they find only two possible ways for them, either to be a beggar, or to be some sort of criminal.

Way to Oligarchy

Government control over market is the reason of all types of corruption. In a free market, if a person want to accomplish a project, he need to pay the exact price that the project will cost, not more, nor less. Under government, the person can simply bribe the politicians and bureaucrats to favour him by employing certain policies to reduce the cost of his project. Thus, government control over market always turns out to be oligarchic in nature where some politicians and rich businessmen makes a cartel to maintain the monopoly and control the poor public.

Conclusion:

As one can see, not only the aforementioned government interventions but any form of government intervention in market destroys the natural order and ability of the free market to reduce poverty and create peace and prosperity. By means of cost control³ , government actually increases the prices of necessary commodities while production and supply reduces vastly, hence further causing poverty.
Whenever in whatever way government intervenes with market, it creates chaos resulting in wastage of scarce resources, unemployment, and reduced productivity. As a matter of fact, although politicians propagandize their political motives as to help and serve the public and poor society, the government actually is the worst enemy of poor and whatever way it intervenes with Market, it does so just to hurt and inflict poor further.
Hence, in order to really help the poor and let India progress, government needs to leave the Market Free. As free market will reduce the employment rate to zero, (human labour is scarce resource) productivity will increase and poverty will reduce.
No person able to produce and earn a good honest living will choose to be a criminal or beggar.
That will surely reduce the extremes of poverty and hence will reduce the crime rate too.

1. Inhumanity of Minimum Wage law, ReasonforLiberty
2. Abolition of Cost is Cause of Corruption, A discussion about socialized medicines, Reason for Liberty
3. Reason of price Rise and effects of Cost Control, Reason for Liberty

The inflation rate in Indian economy is sharply decreasing since some weeks and now it is around 0.44%. As some economic pundits have predicted, India may face deflation eventually. Obviously, it is an alarming effect of the deep recession India is facing and will have to face.

Is Deflation good or Harmful?

Today’s Economic Times has the screaming article Indian Economy staring at deflation. Is it good news ? in its front page that claims that, deflation is a threat, which must be tackled with.
The most common belief about deflation is that falling prices constitute deflation and thus must be feared and, if possible, prevented.
As Economic Times explains the belief

“If deflation lasts for some time, as seems possible, it would be a new experience for India. Japan went through a decade-long deflation in the 1990s, termed as the “lost decade” for that country. At present, most major economies are witnessing disinflation — a lowering of the inflation rate — and some have also seen deflation kicking in. Japan and China have already reported negative inflation rates in the latest data and there are signs that the US, too, could be heading the same way.
While a fall in prices may sound like good news to most laymen, economists see this as an ominous sign of a collapse in demand in the economy.¹ “

While ET demonstrated, deflation as falling prices, deflation is not falling prices but a decrease in the quantity of money or the measure of spending in the economic system.
Deflation actually is fall in demand. Falling prices are an outcome of deflation, not the deflation itself.
If prices fall even though demand remain steady or may increase, than it is prosperity and profit for the consumer and the producer both, and that happens in a free market with enough options of competitions between producers.
On the other hand, if demand decreases, (that is, deflation occurs) the prices falls as a result of decrease in demand.
Deflation is obviously harmful, yet the falling price is not harmful, in fact, falling prices is the actual and only possible cure for the deflation.
Falling prices are that cure to the economy, which is suffering from deflation that makes it possible for the economy to recover from the situation of deflation and start enjoying the economic progress again.
Let me explain this again. Deflation is decrease in Demand, or decrease in willingness to spend, it is a dangerous situation as it causes unemployment and chaos, the solution is Falling prices, that is, the falling prices indicates that the economy is at the path of recovery from deflation, how is it possible?
Let us consider that before any deflation Mr. Ramesh used to go once a week to buy flour from the shop, he could afford to spend Rs20 for the flour per week, at a price of Rs2 per Kg, he used to buy 10 Kgs of flour. Suddenly the economy suffers deflation and victimizes Mr Ramesh too. Now he is not willing to spend Rs20 for flour and at most, he can spend only Rs10.
If the prices will not fall, Mr Ramesh will be able to buy only 5 Kgs of flour, while his weekly need is of 10 kgs, that is, he will suffer a loss of 5 Kgs of flour, and He may starve. On the other hand, if prices fall from Rs 2 per Kg of flour to Rs 1 per Kg of flour, Mr. Ramesh will be able to buy 10 Kgs of flour for a week at his affordable spending of Rs10.
If one look for the situation properly, they will understand that deflation was Mr. Ramesh’s lack of will to spend Rs 20 to buy 10 Kgs of flour, his demand for flour was forcibly reduced, but as the prices fell down, he again bought 10 Kgs of flour, that is, his demand reached the proper need and that is the cure of deflation.
What is Mr Ramesh deny buying a commodity even at reduced prices, will it help economy?
Let us say Mr Ramesh used to buy 2 Litres of milk every day before deflation at a price of Rs8 per Kg, that is, he was ready to spend Rs16 per day for milk before deflation. Due to deflation, that is, due to lack of money, he reduced his demand to 1 litre per day as he wished to spend only Rs 8 for milk per day. To counter the deflation, the prices of milk fell down to Rs 4 per litre, that is, now he can buy 2 litres of milk for Rs 8. Yet, if Mr Ramesh decide not to buy extra milk, which will save his Rs4 from the amount he decided to spend on milk. Obviously, he will be able to spend that extra Rs 4 on some other commodity, say he will buy a packet of Biscuit Parle G. Overall; the fall in prices will help in reducing and eventually completely curing the effect of deflation.
Thus, although deflation is a sickness to an economy and hence it is harmful, yet the falling prices is the only possible solution for deflation and the current scenario in India where the deflation will soon signify its consequences in form of falling prices, the things will better by themselves.

What is the cause of Deflation; can government intervention solve the situation?

India is facing liquidity crunch since last November. Finance ministry and RBI issued three stimulus packages to solve out the credit crisis, yet it provided no betterment in situation, the bail out of economy in form of economic stimulus absolutely failed. It was obvious as any governmental intervention can never help any market, it may cause havoc though. We explained it here and we discussed why economic stimulus is nothing but robbery of common citizen.²
The liquidity crunch in India is because of the bad assets of the government and private banks and the lost money in failed credits. Government and the centralized bank RBI control the repo rates, credit and lending policies in India. In order to increase GDP and profits, government and RBI always try to stimulate government and private banks to lend credit as easily as possible, and that often causes bad assets.
Some times, for the cause of making greater profits, the private banks also make risky adventures and fails miserably, and that all causes credit crunch. As the money in market decreases, the demand starts decreasing and hence the deflation.
The reason for such failure is the obvious monopoly of the government and RBI over currency supply in market, and the flaw in the system is because of the Fiat Currency system. The fiat currency often forces high inflationary rates, which may reach the hyperinflation rates and the forced bad risk dealings in the environment of economic bubbles often leads to a situation causing deflation.
Thus, initially, the fiat currency system, government monopoly and interventionism in market and bad decisions based on fake profits due to economic bubbles causes the cycles of Inflation, hyperinflation and deflation.
As demonstrated earlier, the falling prices cure this sickness of the regulated mixed economies.
The falling prices not only cures the problem of deflation, it also cures the mystery of economic bubbles and provides a clear picture of actual market growth by eliminating almost all the non-productive and non-profitable activities in the market.
As the enforced policies of regulatory government and institutions like RBI causes the cycles of inflation, hyperinflation and deflation in a market by misleadingly regulating the supply of currency in market, we cannot expect further supply of currency by government to solve out the liquidity crisis. That is the reason why the economic stimulus plans of various countries including USA, India and China are actually providing no results.

Will the government interference in form of economic stimulus change the situation?

Government talk of providing economic stimulus to counter the falling prices.
As falling prices are, the solution to deflation, by trying to avoid falling of prices, governments actually increases the tenure of economic crisis. It happens because the stimulus leads people to postpone buying even in situations where they have ability to buy, the consumer prefer to wait for falling of prices. On the other hand, the falling prices stimulate the consumer to buy the commodities.
Thus, whatever interventionism a government adopts to provide economic stimulus, further increases the mess in the economy.
Also, considering the fact that Indian government suffers one of the highest fiscal deficits everyday, we know that Indian government does not have potential to provide any economic stimulus, yet the government already have provided three economic stimulus of amount Rs2000 crores each, and now, the upcoming elections will further cause Rs10,000 crore of spending.
When government is already going in fiscal deficit, how will the government manage these extreme spending?
Government have three ways to support these already provided stimulus packages, the election expenses and further Rs30,000 crores of stimulus government have promised by any of the following ways
1. Higher government taxes
2. More government borrowing
3. More, freshly printed Reserve Bank notes.
Any of these moves will further deteriorate the economy by giving birth to a new cycle of economic boom and burst.
Taxation is a failed measure of revenue projection that is why Indian government always remains in fiscal deficit. Besides, higher tax rates discourage people from saving and investing, especially when such taxes target the rich.
Increasing taxes on middle or poor class makes no sense, and increased tax on rich deprives the economy of the funds necessary to grow production, income, and employment.
Thus, the first option is failure by default.
Indian government already have asked for economic help from World Bank and IMF, thus we can expect that Indian government may take further loans and debts. We know that foreign aids never helps an economy, we discussed how foreign aid actually harms a nation’s economy.³
The government monopoly over the currency is the ill-power, by which government can create money from thin air any time, but printing more currency does not help any body, it causes further extreme problems though which we discussed here.⁴
Thus, no matter what way government adopts to fight against the falling prices, the way will lead to further deterioration, not only that, countering the falling prices itself means strengthening the deflation.
We have already seen how economic stimulus proved a big failure in USA, Indian government should take lesson from the failure of Obama stimulus packages and should keep away from market, adopting the policy of free market, no interventionism.

1. Deflation, is it good news?, Economic Times
2. economic stimulus is not cure, it is venom, Reason for Liberty
3. Foreign Aid Versus Foreign Investment, Reason for Liberty
4. The story of Money, What causes Inflation, Reason for Liberty

Keynesian economics basically considers two major economic aggregates while checking the health of an economy: the income-output scale, and the savings-investment scale of the economy. The total income must necessarily equal total output, but savings need not always equal investments unless the economy is in a equilibrium. When people decide to save too much for any reason, Keynes argues, the economy would dive into a recession because businesses would have unsold inventories (which in turn induces them to cut jobs and halt expansion). The government could actually play an important role in this situation by encouraging people to spend, or even take the initiative itself and start disposing huge public public spending–all this to get rid off the lack of demand and make businesses sell their products.

This reasoning forms the policy advise of journalists and economists who advise government spending to remedy recessions. Some even go further and say while savings of an individual could mean that she has an essential safety buffer to sustain herself through a gloomy future, on the larger scale however, as in the case of an entire economy savings have unfavorable effects since the economy is spending based. This was called by Keynes as the “Paradox of thrift” or the “Paradox
of Savings”.

Keynes’ proposition could be right if we are to consider ourselves to live in an extremely simple economy, where consumers like us can get our products ready in a very short span of time. Like for example, how we could order water from the stream and the workers would get it for us in no time at all. In such a simple economy where ends are met in a very short span of time with very little complications involved in the process Keynes’ proposition that spending keeps our economies running could work. (It would pay here to notice that we have not accounted capital goods in this very simple example. This will turn out to be the key point when we enter into a complex economy.)

There is fundamentally everything wrong with Keynes’ proposition when we place ourselves in a complex economy. Keynes’ fallacious argument roots from the basic lack of understanding of the `structure of production’ which is very complex in a division-of-labor society. Any product we use in today’s extremely complex economy is provided after complex levels of processes which happen at different points of time, and at different pace. This is called the economy’s `inter-temporal
structure of production’. So there is essentially a time lag involved in the production process. This basic understanding can travel us long forward in understanding the economy and refuting arguments of economists like Keynes.

Now we consider ourselves to be in a complex economy, and so, we have extensive division of labor using capital goods to produce products which serve as inputs to subsequent levels of production before arriving at the consumer market as finished consumer goods. The introduction of capital goods into our economy also brings to our purview the importance of savings. The most important function of savings is that they render capital construction, as the following example will explain.

Lets consider a fisherman who is accustomed to catching fishes with bare hands decides to have a net for himself to boost production. He could fish 10 fishes working 8 hours a day with his bare hands. When he decides to have a net to catch fishes he dedicates 3 hours of his normal work schedule towards building a fish net, thus lowering his time spent on catching fishes and thereby essentially cutting down on his present yield of fishes to say 6. What the fisherman actually
does, from an economic point of view, is to annul 4 fishes from his present consumption to save the time equivalent of catching 4 fishes to concentrate on building a net which could boost his future catch of fishes. In simple words, the fisherman forgoes present consumption to fund his future. He simply saves.

Anybody who hears this example should now be able to understand the importance of savings to genuine growth of any economy. But it is this very foundational principle which most economists have done away with.

Now getting back to the issue in hand, excessive savings can actually in no way, as Keynes fears, affect the economy. When people decide to save more of their income, that is when people decide to cut down on their present consumption, they effectively provide a signal (through low interest rates) that they do it to fund their hefty future needs (perhaps a boost in production). This requires investment in capital equipments construction. The entrepreneurs in the economy are those who receive this signal (again the low interest rates). Sensing the availability of loans at low rates entrepreneurs would decide to invest in capital equipments construction projects which essentially require a lot of time lag before the final product reaches the consumer.

The reader must now be able to guess what would happen if people don’t want to save. It essentially means that people don’t wish to cut down their present consumption to fund their hefty future needs. So that would mean higher interest rates, and discourage entrepreneurs to take up loans for capital equipments construction. The economy would essentially, however, keep producing consumer goods with the present amount of capital equipments available at its’ disposal, without any boost in production.

What we see here essentially, and that’s exactly what is pertinent to the issue in hand, is that high savings by people only lengthens the `inter-temporal structure of production’. It would not lead the economy into recession as Keynes fears. It is not that people never spend, only that they decide to save now to spend it at a future date. The bonus consumers get is a boosted future production because of investment in capital goods.

The next question that arises is how then does this model explain recessions that happen so often in modern economies? I will deal with it in the next article I write. Till then people could try to guess it from the alleged mismatch between savings and investments in the economy.

1. China joins India against Protectionism, Times of India
2. GM Genocide, Reason for Liberty
3. Water Scarcity in India, Reason for Liberty
4. Population, Poverty and Production, Reason for Liberty
5. Indian Health care requirements, Reason for Liberty

1. The threat of Protectionism, Reason for Liberty
2. USA will suffer the cost of loosing the best talent, Times of India
3. Obama the new Robin Hood, gargid
4. Obama the new Robin Hood, gargid
5. Population, Poverty and Production, Reason for Liberty
6. Story of socialism, welfare and brain drain, Reason for Liberty

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

The Machines

A very famous economic fallacy that has won a huge number of supporters has been the belief that machines cause unemployment. Such preposterous beliefs which have neither rational justification, nor any empirical validity have been the roots of growth of primitive ideologies, which have called for mankind’s return to it’s “glorious” past.

For centuries men have believed that machines, or technological changes in general, destroy jobs on a large scale, and that they’d have to stay home jobless the next day on. It is true that technological changes destroy particular jobs, at least partially if not completely, but it should also be understood that these technological changes create new avenues of growth which will create new jobs.

The improvement of production techniques and the resultant mass displacement of jobs from agriculture a century ago, might seem like an unacceptable act of cruelty against the masses. But it’s quite the exact opposite, that is, the technological changes have benefited the masses.

More than half of the labor force of North America and Europe was employed in production of food stuffs during the early twentieth century. But today, less than 3 percent of the labor force is required to feed a population that has grown many times more. In fact, in the last century, the population of North America has increased four times, and Europe’s population has roughly doubled, while the percentage labor force required to feed the increased population has shrunk by about 15 times.

It makes sense to track the fate of those displaced workers. The technological change has in fact helped mankind, by releasing labor from agriculture to be used for production in other sectors of the economy. The advantage of technological changes is that it increases the marginal productivity of labor, that is, the quantity of goods a laborer can produce has been increased by the use of machines. This is the only way the living standards of the masses could be improved.

The dislike for technological change could be seen pronounced in the writings of economists of the modern era as well. Their concern is about the Information Technology revolution that has made economies knowledge intensive, and the disparity in wages among the members of the labor force.

But this could be no reason to stop technological growth, since even though there may be differences in relative wages, which in fact is an unavoidable character of economic competition, the real wages of laborers increases due to increase in the total wealth of the particular society. That is the real purchasing power of a laborer’s wage money increases as wealth of the society increases.

This sort of faulty reasoning of economists is the product of undue emphasis on the immediate effects of technological changes, with no heed to their tremendous beneficial effects in the long run.

As Austrian economist Henry Hazlitt says:

“Economics is a science of recognizing secondary consequences. It is the science of tracing the effects of some proposed or existing policy not only on some special interest in the short run, but on the general interest in the long run”.

Outsourcing Companies

US President Barack Obama has announced his intent at withdrawing tax-cuts to American companies that outsource work to foreign countries. This announcement comes in as one of the many ingredients, of a slew of populist measures that Obama has been churning out since assuming office last month. Policy-makers claim that heaping the tax burden on American companies that outsource jobs to foreign countries could save American jobs.

This sort of an economic policy could be disastrous to general efficiency of the economy and slacken creation of new jobs. One must take care of the fact that work is always there to be performed in any economy, since human needs are without boundaries. We essentially live in a world of scarcity, and any level of increase in the productivity of labor will never suffice to satisfy the immeasurable needs of the society. So the basic point is, labor is scarce, and will always remain the same.

But what are those statistical figures we get as unemployment numbers in government reports? Nobody could deny unemployment does exist. But such unemployment in today’s world is usually a result of government policies which adversely affect job prospects, and in turn efficiency of the economy in the long run. In a truly free market, the only two kinds of unemployment that could exist are frictional unemployment (that is, the temporary unemployment during the period when people search for new jobs) and voluntary unemployment (where people make a voluntary choice not to work).

Talking about outsourcing of jobs and it’s impact on domestic unemployment, it should serve us better first to imprint in our mind that labor is scarce, as already mentioned. The next important step is to understand and trace the consequences of discouraging outsourcing of jobs to foreign countries.

There are three important points to be considered here:
1) The basic reason why companies from developed countries outsource jobs is the availability of cheap labor from developing countries. So this means the products that these companies produce to serve mainly the American consumers become cheaper considerably. This implies that the real purchasing power of an American dollar should increase.

2) The funds that American companies save by employing cheaper foreign labor while compared with high salaries previously paid towards Americans, could be used as investment in other sectors of the economy, or to increase the size of existing industries which would create new jobs for Americans. In the absence of the outsourcing option, the American companies would be forced to spend comparatively more in the already existing industries (that is when compared with costs incurred when foreign labor could be employed), without having a chance to invest in new industries (or expand existing industries) which could create new jobs.

3) The availability of cheap labor also means American companies become more competitive and efficient than their counterparts in other countries. It also makes Americans compete and become more efficient. More than anything it makes specialization of jobs, which is the reason for the riches of today’s industrial civilization.

The only thing that policy-makers need to understand is that businesses need to be given the complete economic freedom worldwide to create new jobs at home, and increase living standards of Americans. Any short-sighted measure to save current jobs, will definitely halt growth in the long-run.

while nearly 26.7 per cent of non-poor households have at least one graduate, just 8.5 per cent of ‘poor’ households qualify under this attribute.⁴

That clarifies the fact, that even a graduate can be a poor. As explained earlier too, poverty is comparative; we all are poor in some sense or other. A study on poverty in India by Planning Commission and NCAER under Mr S.L Rao⁵

In contrast, 8 per cent of ‘poor’ households own colour television sets, 4 per cent have telephones, 3 per cent have refrigerators, 3 per cent own cellular phones, and hardly 1 per cent have cars and credit cards each. But these ‘poor’ do own them.⁶

This shows that even many of us can be called poor by the measures of government, and even a “poor” can have cars and credit cards, refrigerators, mobile phones and colour television. This shows that the standards of poor are increasing progressively.
Obviously, the reason is the increased productivity of India through the liberalization process towards a more open and free economy as it was before under totalitarian socialistic system. As far as we go towards liberalism and libertarianism, towards free-market individualism, towards freedom from government and politicians, poverty reduces further.
Hence, political parties cannot make any of issues like poverty, education or employment as a political issue for the elections. What is left is again the dirty vote bank politics of caste, creed, and reservations, and religious differences and divide and rule politics, and unworthy ignorable issues of tussle like the Ram Temple.

1. BJP raising Ram Temple Issue, Times of India
2. GM genocide, Reason For Liberty
3. Population, Poverty and Production, Reason For Liberty
4. Planning Commission and NCAER study on Poverty in India, Rediff News
5. Planning Commission and NCAER study on Poverty in India, Rediff News
6. Planning Commission and NCAER study on Poverty in India, Rediff News

Human wants are unlimited. There is no limit for the work to be done in this world. To assert otherwise would mean that we are in the Garden of Eden and have no need left to be satisfied. I don’t think that I have to state that we haven’t reached such a state and will never ever do so. It should follow from this that in a non-coercive society, there is no reason for involuntary unemployment. In a free society, free of government regulations and taxation, there would be employment for everyone who is willing to work.

Economists and other intellectuals who make a case for make work schemes pay no attention to this fact. I will let one among them to speak. “Take the case of education. There is an estimated under-supply of 400,000 schools. Can you imagine the number of jobs we would create if we decided to address this? Simply having one teacher per class, instead of the current one per five classes, would create two million jobs. The construction of the schools, canteen services for them, and all the eco-systems around each school would create millions of more jobs.” says the “brilliant” journalist, Sainath.

If there were truly an undersupply of schools, the market would have solved the situation (provided schools aren’t choked by government regulations which prevent them from making profits). Businessmen seeking profits would find the situation appealing and step in. The fact that they haven’t proves that it apparently isn’t the case. It is understandable that what Sainath would have meant is that there is a need for education. Need, however, is not demand. Need, to be demand, should be backed by adequate purchasing power.

“Government spending cures unemployment”, is an old fallacy in economics. It is backed by no theoretical or empirical evidence. The amazing naiveté with which the intellectuals push this theory is shocking indeed. I hope that everyone would agree that two and two equals four. If this much is understood, the fallacy in this view becomes evident. The government doesn’t create wealth. Everything that it spends is taken from the innocent tax payer-directly or indirectly. (Inflation is an indirect form of taxation.) If this very money which the government spends is let to the tax payer, he would have either invested it or spent it on consumption. Both would have created as much employment or more. There is no reason to believe that private spending creates fewer jobs than public spending. There is no reason to believe that a bureaucrat, who has only the moral responsibility, in general would spend the money more efficiently than the tax payer who has both moral and financial responsibility. Another fact which is being forgotten is that the money taken from the tax payer won’t be spent in the same manner the tax payer wants it to be spent. If it were so, there would be no reason for the government to step in. The tax payer would have managed by himself. The fact that the tax payer is being called to spend for some ventures is adequate proof that no one would willingly spend for these projects.

I have said that what the government spends is the money of the tax payer. How moral is it to tax individuals for ventures which they may not approve of? Wouldn’t taxing A to spend on B reduce incentives for both-the productive and the parasite? Wouldn’t taxation preventing employers from expanding production and prospective employers from being employers itself? Such coercive actions would indirectly lead to more unemployment, not less.

It is worth examining why the very problem of involuntary unemployment exists. If there is no limit for the work to be done, why should some people go without jobs? The answer is: Government regulations and labor union coercion. If a minimum wage is set at a particular rate, employees who aren’t worth that much would be laid off. The same goes for labor union coercion. Labor unions use coercion to prevent employees working a wage lower than they have decided. Intellectuals who advocate such measures are hurting the poorest among the workers-the very people they claim to protect!

Let’s see how viable is the idea of education for all?

If India is 100% educated with reading/writing skills to everyone, which educated guy will clean the toilets, work on the construction site, do the entire blue collar labor which do not require that much education?
Those jobs still do not require reading/writing skills. Although people might say that by educated they mean having basic reading/writing skills,and that does not really qualifies a person for a white collar job. So its overall good for the society to have 100% educated society.

The problem is that people in India don’t realize the economic costs of teaching everyone, we were brainwashed into thinking that if we study only then we will be able to make a future, so we presume if everyone studies then it will make their future. Unfortunately it’s not true. Just studying does not secure your future. You have to be really good. For that bottom 1/3rd, its better that nobody waste their money on them, and let them do blue collar jobs.
I know people would hate me for saying these things, but imagine this, lets say the cost of teaching all the kids of India is half the wealth of Mukesh Ambani, and since Mukesh Ambani will not come to street just because we take half his wealth and invest it in educating the kids below poverty line, most people will suggest that we should take half of his wealth.
But the problem is, most of his wealth is in terms of investments, he will have to shut down half of his business, now imagine half of the Reliance industries shuts down, do people realize how many hard working workers will be out of job because of that?
And so many people dependent on them, what are these people going to do?
In fact if we reduce the taxes on everyone, it will actually help in the creation of more jobs.
Would you like to be served by a cup of tea by a child during your lunch time?
Sure I would love to, in fact a child DOES serves tea in most of the offices. Serving tea is a much better job for children rather than working in coal mines or candle factory.
Many people die of hunger and politicians uses it for their propaganda.
Why a person dies of hunger if he is not a lazy bum?
I mean isn’t the sheer fact that they are dying of hunger an indication that they are useless or lazy bums?
Don’t get into societal propaganda that poverty is something written in your fate, or some people are just born with it. Its bull shit.
Indian Govt is airing a ‘public service’ advertisement on the Television these days. It goes on talking about the thousands of villages that are still there without any proper sanitation hygiene available, and the diseases the people are suffering from.
It then suggest the necessity for hygiene to build a nation.
At one point you might even wonder after looking at the public service ad, that we do need a hygienic environment in India for our society to develop fully. But if you think a bit more morally, a question arises, should we spend money on “development” and welfare by unfairly taking it from those who really earn it (the honest tax payers), rather than allowing those people who earned it to spend it on their kids and make their lives better?
An average Indian would say that education is necessary for all because people lacking this basic skill of reading and writing, the illiterates are being cheated in the every sphere of the society, they are deprived of what they are supposed to get . But the irony of the fact is that also don’t know what they are loosing.
The question is, in order to provide them the basic opportunity, should we rip off the hard working people who work hard just to be make the lives of their kids better?
We believe in equality and equal opportunity, our govt tells us to take care of our parents, it provides us water, electricity, and god knows what not.
It is this deep hand of the government shoved in our throat which stops us from speaking or doing anything, leave alone growing. We have a development fetish, we think that in order to have our Mumbai and Delhi be like New York and Shanghai we must do something, get rid of the slums, kick out those people from Dharavi.
But this is the sole cause of all our problems. We KNOW government is inefficient, we know no matter how many times we put honest people out there, still they end up becoming corrupt, YET we cannot think beyond government, its like our only option. But it is simply not true.
So all we do in the end is hope for an honest person out there.
It is not the corruption which is the enemy of development, it is the government itself which is the enemy of development.

We should not forget that the population of whole USA is just around 310 million now and it has 99% literacy rate. We should also understand that with 61.8% of literacy rate in India, we have just double the number of literate people as there are in USA.

Second problem is our fetish with our culture. We must preserve our Indian culture, we must try to give our children some values. WE give them all the values but the ones really required.
Our kids copy all sorts of values from America, like dating, flirting kissing, but they fail to capture the most important value from America, that is, every man is for himself.
Do we teach the importance of “self-reliance” “self-importance”, “self-defense”, “self-respect” and selfishness? Do we teach them that they should not look for looting or begging from others for their own benefits?
If there is a vote, everybody must vote for everybody else. a farmer in Maharashtra must vote how the factories of UP must be run, no wonder people hate each other in India, and these differences are going to grow up real fast.
Our problem is, we are like a really rich man who rose from the rags, but still thinks like a slum dweller. We must vote for the guy who takes care of the poor, we are not poor statistically, but we must vote for a party which works for the poor.
We vote for a party which promises us everything in the world, but never promises what we really want. Why the politicians never fulfill their promises?
Because you want something they cannot give us, but since we want it, so they still give us the promises.
We want electricity without paying for it, we want education for your kids without actually paying for it. We want safe-drinking-water without actually paying for it, We want subsidized food without actually earning it.
If a politician promises to open a school for free education, for all, whom do you think is going to pay for the expenses of the school?
If politicians squeeze the tax payers too much they will simply revolt by not giving up their hard earned money to the government. Why will they accept the blatant loot of their hard earned money?
Seriously do we even think before we demand “we want education for all” that who is going to pay for it?
Money and wealth does not grow from trees. Some hard working businessman works for it, you demand more from him, and he starts to steal taxes (after all it’s HIS right to keep his money, not ours.)
Maybe its time when we should stop dreaming, stop drinking that Bhang every Holi and come down on earth and ask for something real. You cannot ask job for your son, because government cannot provide job to everyone, but ask something for the guy who would provide a job to your son, the businessman, the rich corporation.

The Nobel Laurete Paul Krugman, in his shockingly offensive article has put forward some solutions to the present economic crisis- Each one of them wrong and a dangerous step to take. He says that the non-financial economy is too desperately need of “help”. “The government should spend and spend. Let fiscal responsibility go to hell. We shouldn’t be concerned about the budget deficit at all.”

Let us take his points one by one.

1) “The Federal Government can can provide extended benefits to the unemployed, which will both help distressed families cope and put money in the hands of people likely to spend it.”

Wouldn’t extending benefits prolong unemployment? Wouldn’t it delay the shift of workers to fields where jobs are available? In the first place, the money put in the hands of the distressed families is taken from the tax payer. To say that it would increase spending is tantamount to saying that a robber would give a boost to the retail trade. In the second place, what we need isn’t more spending and consumption, but more saving and investment.

2) “The Federal Government can provide emergency aid to state and local governments, so that they aren’t forced into steep spending cuts that both degrade public services and destroy jobs. And this is also a good time to engage in some serious infrastructure spending, which the country badly needs in any case. What we need right now is more government spending.”

The only way the government can help not to prolong the depression is to reduce its role in the economy.It involves cutting taxes-especially taxes which tampers with saving and investment. It should also be kept in mind that all government spending is consumption. The ideal policy is laissez faire- Not to interfere in the economy in any manner.

]]> http://www.reasonforliberty.com/current-affairs/government-stimulus-during-recession.html/feed 1 http://www.reasonforliberty.com/economy/critiques-of-some-popular-explanations-of-inflation.html http://www.reasonforliberty.com/economy/critiques-of-some-popular-explanations-of-inflation.html#comments Wed, 20 Aug 2008 02:29:46 +0000 Deadman On Campus http://www.reasonforliberty.com/?p=656 Cost-Push Doctrine

The believers of the cost-push doctrine think that an increase in demand would not raise prices in a situation where unemployment exists. They think that it would lead to more employment and hence, more production. They blame the price rise on some arbitrary power such as the rise of some costs. The prices, in their opinion rise when certain costs rise and they would be satisfied to leave the matters at that. Let’s perform a mental experiment. Let’s keep the demand constant imagine what should happen in order to the prices to rise. It should be obvious that the supply should fall is the demand is kept constant in order for the prices to rise. We have already rejected a fall in supply as the cause of inflation. Hence, we should reject the cost-push doctrine too.

Wage-Push doctrine

People unsympathetic to labor unions hold that it is labor union coercion and wage demands that lead to a rise in wages and hence inflation. It is true that labor union coercion has serious repercussions. But, if it was only labor union coercion that was in action, it would only lead to more unemployment. When the funds to pay wages are fixed, the demand for more wages would lead to the firing of some employees. Yet, if the question is whether labor union coercion would lead to inflation, the answer would be that economically “No” and politically “Yes”. When labor unions demand for more wages, the government injects more paper money into the system to prevent unemployment. This leads to inflation. Here again, it is proven that the quantity theory of money is the only explanation for inflation.

Profit-Push Doctrine

The advocates of Profit-Push doctrine believe that the businessmen rise the prices in order to raise profits and this leads to a general rise in prices and hence, inflation. This stems from a gross misunderstanding of the market economy. It is obvious that they will have to cut down the sales when prices are raised recklessly. It is a characteristic of market economy that a striving for profits leads to an increase in supply and hence lower prices. Unfortunately, in many cases, the lowering of prices is obscured by inflation, the injection of paper money. What gives credence to this Profit-Push doctrine is that the nominal profits rise during inflation. Inflation shows the profits of business firms as a lot higher than it is. But, the fact is that real profits fall during inflation.

Crisis-Push Doctrine

Crisis-Push doctrine holds that a certain crisis as the Arabian Oil embargo of 1973 is the cause for inflation. A crisis can of course, explain a price rise of a particular item, such as oil or wheat, but it can’t explain a general rise in prices. When the price of a particular item rises, the price of other items does not rise, they in fact fall. People will have to divert their resources to products which’s prices rise and hence they would have to cut short their purchase of other items and hence their prices fall. When the price of oil increases, for instance, it reduces the sale of automobiles and hence its prices are likely to come down. A rise in price of oil too is likely to make substances such as copper, rubber, iron etcetera useless. The wage rates of the workers who work in processes of production that depend on oil also comes down. Hence, we will have to reject the Crisis-Push Doctrine too.

Wage-Price-Spiral Doctrine

Wage-Price-Spiral doctrine holds that the wages rise because prices rise and prices rise because wages rise and both leads to a spiral. The arbitrary rise in prices and wages were already rejected as the cause of inflation.

Velocity of Circulation Doctrine

Velocity of Circulation doctrine holds that an increase in velocity of circulation of money causes inflation. It is a classic example of the effect being seen as the cause. The increase in velocity of circulation is merely a cause and inflation is the effect. It is a rise in paper money that leads to high velocity of circulation of money and not the other way round. When there is a rise in paper money, people tend to buy anything and everything as they find it dangerous to hold money in their hands. This leads to a rise in prices. Here, it should be kept in mind that this phenomenon is only an effect of the injection of paper money, not as some statists would want us to believe.

Inflation Psychology doctrine

The advocates of inflation psychology doctrine are of the view that it is an inflation psychology that leads to a general rise in prices. When the workers anticipate that there would be a rise in inflation, they would demand higher wages. When businessmen anticipate inflation, they would raise the prices. But, this is not an adequate explanation. In the first place, how did this inflation psychology come in being? It is out of the hard won experience of people. If we had instituted a gold standard, there wouldn’t be any inflation and hence there would be no inflation psychology. Such explanations should be rejected beforehand.

Credit Card doctrine

The supporters of the credit card doctrine thinks that people holding credit cards needn’t hold as much money as they have to and this leads to more spending and hence an increase in prices. This, but, is an entirely fallacious notion. It would only lead to an increase in prices only because the banks can extent the line of credit. They can extend the line of credit only because they can create checking deposits which they lend out. Thus, we again come to the conclusion that only an expansion in money supply would lead to inflation.

Consumer-Installment-Credit doctrine

Advocates of this doctrine believe that the granting of consumer installment credit leads to more spending and hence inflation. This is true only to the extend that credit is granted out of newly created money. It would not be true if the credit was granted out of saved funds. If the credit was granted out of the saved funds, the savers first have to restrict their consumption before the consumer borrowers can expand their consumption. There is only a transfer of spending power from one group to other.

Consumer Greed doctrine

American President George Bush has accused that it is the greed of Indian consumers that leads to inflation. The supporters of this doctrine hold that it is the greed of consumers that lead to a rise in prices. But, it doesn’t give us answer to the question that where does they get the funds to spend according to their new greed. It may give us an explanation for the rise in price of a particular item, but not the rise in prices in general. They would have to restrict their consumption of other items if they purchase a particular item in excess. Moreover, greed would lead not to more spending, but harder work and greater supply.

Oil and commodity prices are soaring. Inflation has reached a sixteen year high. As the thief who cries “Catch the thief!” the politicians are blaming it on everyone else, except their own policies. Economists are placing the blame on a food shortage. Everywhere, the effect is being confused with the cause.

Inflation is, and always is, an increase in the supply of paper money or bank credit. When there is more supply of money, people value the money less. This leads to a general increase in prices. An increase in supply of bank credit too would lead to the same.

When money is injected in this mode into the economy, it first reaches the people whom the governments pay. Let’s assume that these are the defense contractors or the farmers whom the government pays subsidies. Then, the money ripples out and spreads through out the entire economy. When it ripples out, the demand for the goods increase and hence, the prices rise.

Usually, when there is a budget deficit, the Reserve Bank of India purchases government securities, against which it creates checking deposits. This is how paper money is created. It should be kept in mind that budget deficits in itself are not inflationary. Budget deficits are not inflationary if they are financed by bonds sold to the public paid out of real savings.It certainly doesn’t mean that budget deficits financed in this manner doesn’t have harmful consequences. It hampers production and misallocates resources.Inflation can occur even if there is a budget surplus if there is an increase in money supply notwithstanding.

Governments usually inflate in order to buy armaments during a war period. They inflate in order to buy the votes of the public without their knowing it. They inflate in order to provide subsidies to certain political pressure groups. They inflate under the false belief that it would cure unemployment. Inflation is in fact a tax we pay irrespective of our income levels. It leads to reckless income redistribution in a wanton fashion. It discourages saving and encourages speculation. It wipes out morality.

Inflation would always end in a crisis and a depression and worse, people would then blame the depression on the inherent defects of capitalism. It is worth remembering that people blamed the great depression on the inherent defects of capitalism and that led to sweeping reforms that took people into a welfare state oriented society.

The only cure for inflation is to stop the expansion of money and credit. It is as simple as that. If we had instituted a gold standard, which means, if paper money was redeemable in gold on demand, it would have put an automatic rein on the extent over which they can inflate. It would have stopped inflation altogether. And this exactly is why they abandoned the gold standard. And this is why we badly need it.

Inflation derives from the doctrine that what we need is not a gold standard, but monetary management. Monetary management, but is a euphemism for government manipulation of money and credit, which is the root of inflation. It should be remembered that a century back, every economist of repute believed in a gold standard. It required decades of government propaganda and obfuscation to change the tide.

The gold standard was abolished only because it wouldn’t let them inflate when it seems to them that they should. On a gold standard, each money would be defined in terms of gold and all international currencies would be anchored to each other. It would put a stop to fluctuating exchange rates and would lead to a fixed exchange rate.

There are economists who believe that monetary management is needed and we should increase the money supply in relation to the increase in goods and services. They believe, otherwise, that it would lead to deflation and depression. The absurdity of the doctrine becomes clear when we think that how we would compare the increase in goods and services in relation to the increase in money supply. It is true that if let alone, the prices would fall every year, but that wouldn’t affect the profit margins. The total demand would be sufficient to buy the products at lower prices and there wouldn’t be a depression or unemployment.

It is also believed by some pseudo-economists that inflation would cure unemployment. But, the real effect of inflation is to hamper production and reduce employment. The only situation in which inflation would boost employment is when a deflation has occurred and the labor unions are not to use their power to raise wages. But, to say that inflation is a cure for unemployment is tantamount to saying more drugs is a cure for withdrawal symptoms.

It should be evident from the very fundamentals of economics that such make work projects as NREGA hamper productivity and aggravate the very problem it was supposed to solve-unemployment. It is well known that such make work projects involve workers in some boondoggling projects which are of no value to the public. Let’s for the sake of an argument suppose it is not so. Let’s imagine that the money forcefully extorted from the tax payer is spent on a project which is of some value to the public. It should be emphasized that still the money for the project is being taken from the tax payer. If the taxpayer is allowed to keep the money he would have either invested it or spent it on consumption. Both would have created employment. It is not just that. The taxpayer has both moral and financial responsibility over the money (unlike the bureaucrat who has only a moral responsibility) and he would spend the money on projects where the work done is of more productive value. Thus doing away with NREGA would only increase employment opportunities. It should also kept in mind that it is immoral to tax some to make job for others.

Let us now come to the root of the problem-why unemployment exists, in the first place? There is nothing as easy as to obtain as full employment. Back breaking employment has been the characteristic of the most poor of societies. It is the minimum wage laws and labor union coercion that leads to unemployment.

When a minimum wage is set, it becomes unprofitable to hire those workers whose marginal productivity is lower than that of that wage. Hence, such workers are fired. The same goes for labor union coercion. When labor unions forcefully keep wages above the norm, some workers are to be laid off, as it becomes impossible to pay all of them. It should be, but, kept in mind that it is not the labor unions as such, but their forceful tactics which lead to unemployment. Such problems can easily be tackled and a full employment obtained by repealing minimum wage laws and labor union coercion.

Is Sainath’s mind so feeble that he can’t conceive of this simple logic? Not, it can’t be that. He is a power hungry monster who would come up with anything that would make his political masters happy. Let’s not pay heed to the words of such intellectual thugs.

Read a related article “Reason for Interest”

The labor is waiting!
Take a look at a person who invests $5 million dollars in bank for 10 years, and he earns (at 6%) $300,000 per year, a salary good enough for a 5 years exp project manager in America. You might say, that man is not working at all, and he is living off the interest. This is no labor, but here is the thing, he is deferring his enjoyment of those $5 million dollars. He is surely getting $300,000 every year, which is a quite a large sum of money and he is surely enjoying that too, but if he uses that $5 million dollars he can do a zillion things, he can buy a big house, a big yacht, a helicopter and scores of other things. BUT he is not able to do all those thing, for next 10 years. He is simply waiting, the 5 million dollars are right now being used by someone who needs it, and using it to make more money.
He is doing the labor of waiting.

Now you may say waiting is not labor. Well lets say a girl told you that she will meet you on the bus stop, and you forgot to ask her what time, so you decide that you will stay there for the whole day on the bus stop waiting for her. But instead you ask a jobless guy standing on the bus stop wanting to go to his home. Well he would be doing your part of labor if he waits for say till 6PM from 6AM in the morning. He had to go to his home, but can’t till the wait is completed. You are not only giving him compensation for deferring his departure to his home, you are paying him for his labor of waiting.

Lemme bring common story flowed across among socialists which has a big fallacy.
The story goes like this. OF course some agitated communist wrote it to me, but I couldn’t really get the actual text of story, I am sure you might have read it.

A Capitalist owns a pair of Nike shoes. He is a fat dumbass lazy bastard. So he decides to find someone whom he can exploit with the Nike shoes. There’s a 100 metres running race happening at a place. He finds a well built talented guy who can run very well but does not have a pair of shoes. This lazy bastard decides to hire the young guy and makes him run the race with the nike shoes. The young guy wins the race and gets a hot cash prize of 10,000 bucks. The capitalist immediately takes away the 10,000 rupees from the young guy and gives him just 100 bucks. And when we Communists ask the lazy capitalist bastard “why are you getting the money while the young guy ran and won the race?” And the capitalist bastard comes up with useless senseless answers which you would be knowing or comes up with ant grasshopper story.

Can the readers see the fallacy in this story?
The fallacy in the story is that it ignores the labor of the Capitalist in the athlete winning the race. It presumes that somehow its the duty of the Capitalist to provide the athlete with shoes.
Lets presume Capitalist himself is a hard working runner, and with proper training he can also win the race. But his problem is the same as the athlete, he does not have the shoes to run for the race. So both the capitalist and the athlete decide that the capitalist is going to use his time and resources to make the shoes for the athlete who will train himself and then run in the race, and once he wins the race they both are going to share the prize money.
My question is, do you now see the labor of the Capitalist? The capitalist didn’t run in the race, but he could have, in face he contributed in the athlete’s victory, by spending his time in doing something in which he is more proficient at, i.e. making shoes.

Lets see another scenario, lets say a trainer trains an athlete for a race. Trainer demands 50% of the prize money once athlete wins the race. Do you think the demand of the trainer is justified? If yes then the capitalist who provides shoes to the athlete is also justified in his demand. Its because of HIS shoes which enables athlete to win such a race, its because of HIS labor in the shoes that now athlete can win this race. There is no exploitation as long as athlete is free to reject the deal.

Now about the issue of Capitalist leaving only Rs 100 for the athlete and taking Rs 10,000/- with him, then we will have to look at some auxiliary conclusion we can derive from the example. First of all, the athlete and capitalist both must have agreed upon the prize money distribution, and if the athlete agreed upon such a deal it simply means that the marginal utility of Athlete’s labor was very little to the Capitalist and he could have gone to any other athlete and given him the shoes and have him win. If the athlete was irreplaceable, and still the capitalist insisted on such a deal, then the athlete could have gone to some other capitalist who would supply him with shoes and give him a better deal. Since the athlete did not go to any other capitalist that means there were no other capitalists available to supply him with shoes and since the deal really took place means Capitalist was in the position to replace the athlete with any other person.

So this means that irrespective of the fact that it was athlete who ran, without the Capitalist’s labor he couldn’t have won the race. Any other participant could have won the race using his shoes. That simply means that it was a win-win situation for both of them. The capitalist was irreplaceable to the athlete, and the athlete was easily replaceable to the capitalist. Therefore this 1:100 distribution of the prize money is perfectly justifiable.

]]> http://www.reasonforliberty.com/anarcho-capitalism/labor-behind-rent-and-interest.html/feed 5 http://www.reasonforliberty.com/current-affairs/the-objectivistic-victory-of-british-doctors-of-indian-origin.html http://www.reasonforliberty.com/current-affairs/the-objectivistic-victory-of-british-doctors-of-indian-origin.html#comments Thu, 01 May 2008 13:50:00 +0000 Unpretentious Diva http://www.reasonforliberty.com/?p=81 “I work for nothing but my own profit—which I make by selling a product they need to men who are willing and able to buy it. I do not produce it for their benefit at the expense of mine, and they not buy it for my benefit at the expense of theirs. I do not sacrifice my interest to them, nor do they sacrifice their interests to me. We deal as equals by mutual consent to mutual advantage and I am proud of every penny I have earned in this manner.” (Atlas Shrugged)
On April 30th (yesterday), House of Lords ruled in favor of overseas doctors against British Government, suggesting that the discrimination against foreign employee in health services of UK is wrong and should be curbed out.
In 2006, British government ordered the hospital trusts whole round UK to employ non-EU medical practitioners “only if” no candidate from EU is vacant.
Obviously, the rule was derogatory to the standards of freedom of the employer.
The British Association of Physicians of Indian Origin (BAPIO) challenged against it in court and the House of Lords favored the Indian employees.
It is expected that now, UK government will treat the foreign origin doctors, specially the Indians on fair and equal terms on the foundation of skills and merit for the jobs at National Health services of UK.
As a matter of fact, discrimination on any grounds for jobs is illegal and immoral and is against the freedom of the employer and the immigrant in the quest for employment.
Let us consider a scenario in India. There is a job for which there are two contenders and you have to employ one of them.
One of them is a hard-working, brilliant and motivated. He has endeavored allot to acquire high education and skills which are requisite of the job. His mark sheets are excellent with top grades; his previous record shows that he is honest and trustworthy worker with high admirations from his previous employers. Above all that, he came to India from a far nation (say Nigeria, or Kuwait, or Bangladesh, or say Pakistan to set-up in a new culture risking allot just to pursue a career he wishes to work for and gain a better life.
Other person has mainly no skills for the job and he expects training for it, he is not a good learner his mark sheets show it. He is just an average worker with no knowledge about the work you are going to offer.
Which candidate would you appoint for the job?
I would employ the first one because he will be more fruitful for me. It would be a decision of justice, a deserving incentive for the one who has worked hard to gain proficiency and improvement.
There won’t come any discrimination on grounds of nationality or ethnicity or religion, there should not be.
Now, if the Indian government says that you cannot appoint the first employee because he is not Indian and no matters the second employee is lacking skills and ability, he must be appointed because he is Indian, won’t it be injustice against you?
Injustice because it will be against your right of freedom to chose the best worker for your benefits. You do not do business for the nation; you do business for your own profits and improvement. It would be Injustice against that employee too who clearly deserves the job.
Being an Indian doesn’t make him any better nor provides any right for the job which he simply cannot do better.
Now, some will say, being the employer, I must train the Indian employee who is skill less so that he may also become fruitful, but I should not employ the first one just because of the duties towards the nation.
The question is, why should I waste my efforts, energy, resources and money to train an unskillful person while I denounce the skillful person who will surely be much more profitable for me?
On the same grounds of argument, The British Association of Physicians of Indian Origin (BAPIO) won against the UK Government and got the decision of House of Lords in their favor.
Each individual has rights as an individual, not as a member of this country or that nation. One has rights not by virtue of being an Indian, but by virtue of being human.
There is no immorality if a person come far away from his home to work here in India, nor there any wrong if does an employer appoint him for the job on the basis of his skills and honesty.
There can be no good in any policy which discriminates a person from other on any grounds like religion or ethnicity or caste or region or nationality or gender etc.
A person gets the right for a job not by virtue of his birth in a particular area or nation or family, but by virtue of his skills, he earns that right.
So, none of such discriminatory laws can be justified.
Obviously, the win of BAPIO against the UK government is a moment of enjoyment for the victory of Individualism and Objective premises of living.
But, in our own country, in our own land, how much objective and justified we are?
We discriminates, we discriminates and opposes others earned rights on the grounds of caste, religion, region and language.
We are suffering from ills of quotas and reservation on grounds of caste and religion. We attack each other on grounds of regional discriminations. It is Injustice against Individual liberty of the employers and the skillful employee. And it is wrong. There can be no justified ground for any sort of discrimination on grounds of caste, religion, region, language, color, gender, nation…
The reservation policies of government are corrupt and injustice against the Individual liberty and must be culled, because we don’t work for nation, we work for our own life.

Achievement of your happiness is the only moral purpose of your life, and that happiness, not pain or mindless self-indulgence, is the proof of your moral integrity, since it is the proof and the result of your loyalty to the achievement of your values.
Ayn Rand

]]> http://www.reasonforliberty.com/current-affairs/the-objectivistic-victory-of-british-doctors-of-indian-origin.html/feed 5 http://www.reasonforliberty.com/current-affairs/strange-kind-of-socialistic-madness.html http://www.reasonforliberty.com/current-affairs/strange-kind-of-socialistic-madness.html#comments Tue, 15 Apr 2008 02:47:00 +0000 Unpretentious Diva http://www.reasonforliberty.com/?p=66

While browsing net, I got a page of discussion where some pea-head brain put up this question—
First poster: Will someone please explain to me why it is
important for Lenovo to spend god knows how many dollars creating an Olympic Torch that is really a cigarette lighter on steroids, and why so many more hundreds of thousands of dollars are being spent on carrying it by trains and planes and limousines around the world so people can run with it down city streets, why thousands are spent in putting it up in five star hotels and hundreds of thousands in guarding it, when that same money could feed all the people of Haiti for a year?
Second Poster: Response: No, you idiot, no one can explain symbolism to you, nor can they explain how pissed the people of Haiti will be when you stop feeding them after a year!
http://www.prempanicker.com/index.php?/site/point_counterpoint/

It seems to be a by-product of a pea-size brain.The first poster knows nothing about consumerism and he certainly doesn’t know that any socialistic/communistic taxation system cannot gain the huge amount of money which the airlines, the Olympics games and the five star hotels can make. and after the making of money, it can be used for feeding the poor (if the politicians are righteous).

This is called voluntary taxation. Organise such games, sell lotteries and tickets, provide reason for the people to spend and they will shed their money for basic reason of helping the poor and minor reason of their entertainment.

Amitabh, or Sachin or Mahendra Singh Dhoni or Shah Rukh Khan provides maximum taxes to RBI, why? it provides them strange kind of fame, people thinks they are great patriot doing so much sacrifice for nation. But that is not so…

They earn fame and people’s good opinion about themselves by paying that lump sum amount of taxes.
What I gain after paying tax?

Nothing.

Even many people just dont pay taxes to get a income tax raid…because an IT raid creates a special niche for them and automatically declares them as crorepati. it is considered as a mark of fame.
It’s a fact that compulsory taxation can never succeed but voluntary taxation will never fail.
And also, a special exclusive section of the finance/insurance sector runs to help (loot) people for income tax. And there still are many baniyas and rich people living in small towns who don’t give damn to IT, many even don’t know that its that much required.

India must remove compulsory taxation and apply voluntary taxation. It is much more beneficial on all accords.

About the first poster in that page, I wonder from where such socialistic madness comes out in human mind. Why they just cannot think positive, right and reasonable?

The second commenter correctly slapped the first one. Its true that while saving the money from dislodging Olympics games from Haiti, they may feed people of Haiti for one year, but by organizing the Olympics games, they will earn enough to feed people of Haiti for 10 years. Money makes Money, and use of money by entrepreneurs creates Job opportunities for poor.

India will gain alot via the upcoming Commonwealth games to be organised in Delhi.

]]> http://www.reasonforliberty.com/current-affairs/strange-kind-of-socialistic-madness.html/feed 0 http://www.reasonforliberty.com/current-affairs/the-similarities-between-indian-and-american-politicians.html http://www.reasonforliberty.com/current-affairs/the-similarities-between-indian-and-american-politicians.html#comments Wed, 09 Apr 2008 00:32:00 +0000 Unpretentious Diva http://www.reasonforliberty.com/?p=63
Despite of the difference between basic democratic system of India and America there’s something very peculiar and common in between the politicians of the two countries.
And that peculiarity is in the politicians being politically reasonable, but economically irrational.
I am not one to suggest that most of the reasonably well-educated politicians are stupid or ignorant of fundamental economic principles. Yet I have seen that most of the politicians of India or America or anywhere else in democratic socialistic statistic system simply stresses over their political rationalities alone and forgets about economic rationalities.
Hillary Clinton and Barack Obama both are promising great change and upbringing of millions of jobs, and removal of poverty, but none of them is ready to explain how they will do it.
It’s just as similar as the Indian congress’s election spree against Bhartiya Janata Party in the last session.
Despite the India Shining Campaign, Atal Bihari Vajpayee failed to provide the proposed development and creation of 1 million jobs and education for all every year. Congress attacked at the failure of the Shining India campaign and stressed over the general questions of inflation, poverty, unemployment, illiteracy etc. and the “option less” India voted for ManMohan Singh against Atal Bihari Vajpayee. It is redundant to say about who is better leader amongst them because on economic base, both are big failure.
Man Mohan Singh is a well-known and adulated economist, yet he forgot all economic fundamentals and stressed over political reasons alone and as a result got the big seat of Indian premiership too with the help of Madam Sonia, but was it genuine of Man Mohan Singh to promise or even say about creating and providing 1 million jobs every year and to provide help for rural weaker farmers and creating better situations for education and controlling inflation?
Now at the failure of Congress government at creating jobs and controlling inflation, Bhartiya Janata Party has started its campaign of Mahangai TV.
As a matter of fact, ManMohan Singh must know being an economist, that
“Entrepreneurs create jobs. Business creates jobs. The Politician’s job is to get out of the way.”
A person of ManMohan Singh’s economical stature when says something about creating millions of jobs and controlling inflation should damn well be able to articulate exactly and eloquently how the government is going to create millions of new jobs in a manner that is more efficient and well-organized than the market. As a matter of fact, it is just unacceptable to expect the government creating jobs. What a socialist government can do at the most is to provide jobs by taxing its citizens and redistributing the money according to its own plans, which may or may not be beneficial or economically correct for the citizens, but yes, those plans will be politically correct and reasonable.

The best the politicians can do is to talk about “investing in infrastructure” of their politically strong and stable grounds. Yet in doing so, the political motives are always stressed over which causes a loss on overall economic progress (although public in general cannot grasp it).
This despicable habit of politicians to stress over political benefits and putting economical benefits of the citizens down causes hazardous situations. It’s a well known fact that Bihar, north-eastern states, Uttar Pradesh, Laddakh, Madhya Pradesh were never given enough importance for economical development because of which alone the naxalites and terrorists and Maoists got hold in these area of India. It was never like government was unable to control the situation and provide a homogenous development, but that is just not possible because socialism basically is a flop idea. On the name of Kashmir, Indian government kept looting whole Indian citizens via taxation, but no infrastructural development was ever stressed over in Jammu and Ladakh.. Bihar always felt lack of interest of economical developers and government never stressed over it. MP is now trying to get on the right lane yet Bastar has suffered a lot already on the hands of Maoists and Naxalites.
The reality is entrepreneurs create jobs, government regulations; restrictions and high taxes drive them away. Proof is Singur case, from where TATA Nano project ran away!
How can any average level mind even think that government at the central level, with all of its red tape and bureaucracy, will use all the taxes it collects more effectively than the thousands of taxpayers it will be confiscated from? The truth is that, as Thomas Sowell mentioned in his book Basic Economics: A Common Sense Guide to the Economy ,

there will always be people more in number who do not comprehend economics than people who do, and the kinds of empty-headed platitudes that these politicians spouts are always designed to appeal to a broad audience of economically unaware voters.

First of all, they misuses the definition of ‘job-creation’ from a free-market construct that people will freely chose to pay a mandatory tax with their free-market purchase which actually is not free as it will taxed and levied at various stages and by using that tax and the other income taxes government will provide legislated services—a necessary evil for the socialist governments.
Politicians do not create the citizen’s income, the citizens generates it. Politicians are merely forcible Robin Hoods which loots the hardworking and earning people via taxation and re-distributes money created by the citizens.
Second important thing is to be mentioned is, although by showing the dreams of investing in infrastructure, politicians can state that infrastructure development will create jobs, but will those jobs be appreciated?
Why an age-old farmer would like to work at a road or dam-construction site? The freedom to choose the job is needed and legislation cannot provide that.
The Soviet Union had a technical 0% unemployment rate but that didn’t meant they had a healthy and vibrant economy.
So even if government may provide some jobs by investing in infrastructural development, its not always sure that it would be appreciated, plus the politicians will always stress over investing at their politically strong areas. Hence, it is useless to expect politicians and governments to remove unemployment. Entrepreneurs, businessmen, innovators and the youth itself can only do it.
What government can do is to provide freedom, lack or removal of compulsory taxation, licensing systems and red-carpetism.
Recently, it was found that the Rs40 million provisions for help of rural unemployed areas were completely wasted in frauds and cheats of bureaucratic system. Even the various monetary help provided by world banks and UNO were being embezzled. It is just an indication that taxation and collective helping attitude can never work. Only individuals’ entrepreneurs can actually help (success of Vikram Akula in south is a proof of it).
Even the politicians cannot provide a developing education system. At the most they can stress over political benefits here again by announcing various reservations for various caste and sect based communities and hence further divide the people amongst themselves. Where poor are even not able to feed there children, how can one expect that more IIT’s IIM’s and more reservations will actually help the poor?
The only way for India is to keep economics aside of these politicians.
Economic freedom and reduction of taxes will not only help the common Indian to try to start creating job within and by themselves but also, it will decrease corruption, which is the necessary demon of the socialist taxation system.

]]> http://www.reasonforliberty.com/current-affairs/the-similarities-between-indian-and-american-politicians.html/feed 23 http://www.reasonforliberty.com/current-affairs/current-problem-in-india.html http://www.reasonforliberty.com/current-affairs/current-problem-in-india.html#comments Fri, 25 Jan 2008 05:03:00 +0000 Unpretentious Diva http://www.reasonforliberty.com/?p=95 Recently, there were debates and talks over reservation for the Dalits (SC/ST) in private sector in India.
It is a well-known truth that in social democracy, hopes and optimism works a lot. It is just an example of the sarcastic Utopian world of “The Brave new World” of Aldous Huxley. The commons even do not realize the actual situations and problems, and the rulers, the socialistic politicians always keeps denying them to understand it. They elude them by providing false optimistic hopes which serve as placebo, while the major problems remain untouched and hence unsolved.
The politicians have nothing to do with development of Dalits (SC/ST). Their main objective is to provide a false optimistic hope so that their power forts may remain safe.
And congress is a perfect player of this game since always. In fact communists and socialist have no choice but to keep doing that, to fool the public by showing paths of sympathy, development and false optimistic traits of socialism. They do not realize that sympathy won’t help. The real help can only be done by promoting the attitude of self help.
Economic policy making on the basis of caste and religion is a common trend in India since 1947, and it had always proved to be a failure abysmally.
The reality is, in India there is a very large economic underclass which is a menace for the economic development, hopes and aspirations and social harmony. It is very difficult to keep peace within the underclass. And the intensity of this threat increases by the fact that the socialist/communist government of India always kept trying to develop this underclass, but failed miserably.
Why it all happened?
It is all because of the socialistic attitude India kept following for a larger part of its history. Recently India started to open its economic policies and to provide some options for the people to look solutions for the upcoming problem.
In India, the employers are very few, while labor in demand of work is very large. Jobs are less and number of graduates is very large. That is, in India the providers are very few, and the dependents are extreme in number. The process of self-employment, self-help, and self-development is almost negotiable in India. And this all is because of the very basic socialistic attitude which kept flourishing. Now it cannot hold the tides of the underdeveloped class, as it has no way to help them. If, the sense of self-employment, self-development is created, and the attitude being dependent is exorcised from the Indian youth, then the youth will act like Individualist, will seek ways, and evolve methods to create options of entrepreneurships. At least they will get ways for earning their own bread by themselves. Individualism is the need, as there’s no one and no way to help.
The second problem of Indian socialist government is India is YOUNG. More than 50 per cent of India’s population is aged below 25. Their literacy level is just over 74 per cent. More than 65 per cent of the young are `stuck’ in the villages (and all this after the so-called socialist helps).
And even now the urban youth, actually do not want to be entrepreneurs and self-employed. They do not want to be capitalist. How and who will develop chances for work and jobs for those 65% youth in villages?
The Central and State Governments in India are high-wage places that are too saturated to offer any gainful employment to the young. There actually is no work in government. They have little reason to be pleased about how they have thwarted the hopes of the young. Very earlier the government was needed to promote self-help, self-employment, and individualistic attitude in youth. But for the cause of Vote-bank games and power-hungry policies, political parties kept fooling the Indians, and now there’s lack of jobs. People say that it is due to lack of education, the reality is even the graduates are not getting jobs. There are no jobs and there is no trend in youth to create jobs. They still want socialistic begging; they still want to remain dependent. But that is simply not viable.
As a matter of fact, the youth remains susceptible. Youth becomes an easy victim to despair and despondency. And to avoid that, there is a strong need to provoke the youth for self-employment, self-development and self-help.
Although I am totally against any sort of reservation, still if the Indian youth takes the right signals and understand itself that self-help is the only option available, then even providing reservation in private sector won’t be too bad.
Because, although it will not make any significant good for the under-class youth, still it will invoke a sense of hope which may make them feel strong and inspire them to be self-reliant.
Self-reliance is the key, every Individual must understand this. In stead of remaining dependent on government or corporate, if the Individual started looking for self-employment, then he/she may start providing job opportunities for others too. As the number of providers will increase, the problem of dependents will decrease.
The only hope of India now is the youth with capability to live as Individual of courage rationality and mental ability to create new streams and jobs, to be entrepreneurs and self-reliant. So that they not only may become a living inspiration for the other youth, but also may develop provide job opportunities and employment for the very large portion of economic underclass which is young.
Reservation won’t do any good on real grounds though. Why?
In US, Affirmative Action is like a reservation, though government does not enforces a specific percentage, but they would like to see how many racial minorities work in your establishment, if there are none or very less, they try to investigate if the company is doing racial discrimination. Hence, most of the companies give some seats to African Americans. It works like this, if the fine is $400,000 per year, they hire 4 black dudes for $50,000 per year each, making them do anything (the company does not count them as resources, but just another regulatory expense).
Same will happen in India, as it happens with colleges. If you get into colleges through reservations, then professors does not care about you at all(unless he is also there through reservation), he simply gives you barely above marks to pass but never bother to see if you are studying or learning anything or not.In private sector most of the reservation related hiring will be on a lower end job, like data entry etc (even when they don’t that job to be done), or hire one reservation-beneficiary project manager but never give him a good and important project. And add his salary as business expenses. For any real development, the individual need to help himself.
And the examples of successful heroes will provide strength for others too.
India needs successful Individuals and heroes; Indian youth needs examples of self-reliance, self-help, and self-employment.

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