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 [↩]

War has a Role in Peace¹

While accepting “Noble Peace Prize” at Oslo, Obama did not forget to mention his recent decision to escalate conflict in Afghanistan soil. He further argued that his decision to increase 30,000 some more US troops in Afghanistan is justified to protect the world from terrorism and extremism and to maintain peace.
In short, Obama declared that wars are essential for the establishment of peace. He also paid his tribute to his “Heroes” Mahatma Gandhi and civil rights leader Martin Luther King.
Some will say that Obama wrongly mentioned Mahatma Gandhi as his ideal; Mahatma Gandhi obviously is known as apostle of peace and pacifism. How could a Gandhian support wars? Could Gandhi be a supporter of wars? Are not wars the ultimate and most excruciating form of violence?
It is a well known fact that wars ultimately causes violence, wastage and poverty. Yet, if some nation is all set to attack you and threat other nation, than the nation under the threat of attack would presumably try to defend itself. Self-defence is a natural right, no one can argue against it. Self-defence cannot be termed as violence. Yet, what about pre-emptive wars?
Is it right to attack a nation just because it may or may not attack you in future?
Does self-defence includes pre-emptive wars to be staged in order to dishevel and destroy the other nations. Is it necessary to destroy and defeat all in order to establish peace? Are wars necessary to sustain peace?

Mahatma Gandhi on Wars

As Obama reverberates himself as being a disciple of Gandhi, we should look at Gandhi’s attitude about Wars. Gandhi ji was obviously against staging any war, he was a supporter of Non-violence, yet there was not a war that he did not support. He supported all the wars in his life time. The apostle of peace Gandhi himself supported British in the Boer War, Zulu War, WW1, WW2.
In 1914, Gandhi himself joined British army as volunteer for the Ambulance corp. to serve the injured Indian and British soldiers at Zulu war. One may understand his compassion for the suffering of soldiers; he was not taking part in active violence.
Yet, in April 1918, Mahatma Gandhi urged Indian youth to take part in British army as war recruits. Perhaps to show his support for the Empire and help his case for India’s independence, he deemed it necessary to take part in the war.² He might have considered it as pacifist way of non-violence, that is rather than fighting against the British rulers, let the Indian youth fight for the British Empire and in turn demand or beg independence as reward. It should be mentioned that while he openly demanded Indian youths to help British army in World War1, he felt aghast when some Indian youth tried to protest against British brutality on Indians “violently” and because of that, he took his Non-cooperation movement back in 1922.³ Obviously, Gandhi was strictly against any form of violence against British Empire by Indians, yet he was ready to recruit Indian youths to kill enemies of British empire, including the Zulu protesters. For Gandhi, the most necessary peace was, peace of Indians against British Empire.
For Gandhi, the pacifist form of war in order to establish and sustain peace was non-violent, hence although he urged Indian youths to fight and die in battle grounds for British Empire, he also maintained that Indian youths must not fight against British rulers in India, because that would be direct violence, and that was not acceptable to Gandhi. Why was Gandhi ready to recruit Indian youths to “co-operate” with British Army in Imperial wars, while he himself was launching the Non-cooperation movement?
During the WW2 again, Pacifist Mahatma Gandhi again favored offering Indian moral support to British army in 1939 when Nazi Germany invaded Poland. Obviously, it seemed right decision as Nazi Germany obviously was violent. Yet, when other leaders of India objected Indian youth’s inclusion in British war, Gandhi declared that India could not be party to a war ostensibly being fought for democratic freedom, while that freedom was denied to India itself. As the war progressed, Gandhi drafted a resolution demanding for British to Quit India. Obviously, his pacifist support for British army during the wars became the saddle of deal for Indian independence. Gandhi realized that British Empire would be exhausted after the two consecutive world wars and hence he declared that even if some Indians directly fight violently against British Empire, he would not take his Quit India demand this time as he did after the World War1.⁴
He knew it was the ripe time to force exhausted British Empire to Quit India.
Thus, it can be seen that if Obama mentions that he took his inspirations from Mahatma Gandhi, he does not sound hypocrite or wrong.

Changing standards of Noble peace prize community

Mahatma Gandhi was nominated for Noble Peace prize many a times, but he was rejected every time. The last time Gandhi was nominated, the Noble prize committee rejected Gandhi because of his known support for Indo-Pak war.
Based on a telegram from Reuters, The Times, on September 27, 1947, under the headline “Mr. Gandhi on ‘war’ with Pakistan” reported:

“Mr. Gandhi told his prayer meeting to-night that, though he had always opposed all warfare, if there was no other way of securing justice from Pakistan and if Pakistan persistently refused to see its proved error and continued to minimise it, the Indian Union Government would have to go to war against it. No one wanted war, but he could never advise anyone to put up with injustice. If all Hindus were annihilated for a just cause, he would not mind. If there was war, the Hindus in Pakistan could not be fifth columnists. If their loyalty lay not with Pakistan, they should leave it. Similarly Muslims whose loyalty was with Pakistan should not stay in the Indian Union.”⁵

That became the reason for Gandhi’s rejection for Noble price of peace.
Yet now, when every body is familiar with Obama’s support for Afghanistan war, when Obama himself argues and justifies his decision to escalate combat against Afghanistan on the platform while receiving the Noble price, nobody really think that he should not get a Noble because his support to wars.
Maybe now, the Noble Committee agrees that War is necessary for maintaining peace and that preventive war are a part of establishment of peace. Obviously, this is a change in the attitude. Gandhi was rejected the Noble for his support to war against Pakistan in order to keep peace, while Obama has been given Noble despite of his support to war at Afghanistan to keep peace.

How Gandhian Idea would help Afghanistan Situation?

Pacifism of Gandhi suggest that the native Afghans should openly help US troops in order to fight against Taliban and Osama Bin Laden and after the end of Taliban and Osama Bin Laden, the Afghans should peaceful demand evacuation of US troops from Afghanistan. That is the appropriate way and it will ensure the non-violence of Afghans supporting US army against Taliban. Gandhi might have urged Afghan youth to recruit themselves along with US troops to fight against Taliban. A Gandhian may request Indian government too, to help US army to fight against Taliban as a “pre-emptive non-violent measure to maintain peace.”

Libertarian Idea on Pre-emptive Wars

Unlike Pacifists, a libertarian does not believe in preventive wars. A libertarian cannot support an attack on a nation or a person on the name of defensive necessity. The right to self-defense does not mean to attack first in order to remove any chances of being under attack. Libertarian sense of Self-Defense necessarily means No use of Violence at first but full right to defend yourself within your limits if you are being attacked. An Indian libertarian might not have thought of fighting for British Empire and than to argue for his own independence. Rather he would have preferred to fight against the British Empire, as they were the invaders, attackers because self-defense is not a right, it is basically a duty of a freedom lover, a Libertarian, or a Libertarian might have simply adopted non-cooperation in all accounts, including no-operation for British Empire in their wars too.
Unlike a pacifist Gandhian, a libertarian will oppose Obama’s decision to increase troops in Afghanistan and will demand a sudden end to all war fronts, just like Ron Paul did during his famous Libertarian speech “What If” in assembly–

1. Obama :War has a role in Peace, Times of India [↩]
2. Role of Mahatma Gandhi in WW1, Wikipedia [↩]
3. Mahatma Gandhi, Non-cooperation, Wikipedia [↩]
4. World War2 and Quit India, Wikipedia [↩]
5. Mahatma Gandhi, the Missing Laureate, Nobleprize.org [↩]

Long ago at the shores of Indian Ocean, there used to be a country. It was an officially democratic nation whose ruler caste (whom we now a days know as Politicians) were very happy and prosperous. As the nation was officially Democratic, no one was actually puzzled against the extreme prosperity of the politicians, the rulers of that nation. The general population was also presumably satisfied at their standards.
Many people were happy because they could get the rationed LPG fuel cylinder while standing in the queue, while some others were happy because they could get the Gas cylinder easily at a little higher price through black marketing. Most of the people were happy because they could earn two-time bread for their living and could arrange a little bit of clothing. It was a god blessed nation and as it was a secular democratic state, every religion held specific importance; the populace was religiously superstitious and god-fearing. Nobody used to believe that they are the soul earner of their living, rather they considered it as God’s blessing, and hence there were seldom any agitation for individual rights. Religion became the very power of politicians to proclaim there right to rule over the populace.
Gradually, the ruler started feeling that the “religion” is loosing its effect in the nation and that became the cause of worry for the politicians. As all “religions” were equally important tools for the politicians to rule, they realized that if the religions loose their glory, people might start feeling agitated, demanding and querying. Thus it seemed necessary for the politicians to plan and act to ascertain the importance of religion, they sincerely wanted to establish the ruling power of that nation as the protector of all religions. The think-tank of politicians was engrossed to plan the possible ways to reassert the sanctity of religion.
At last, the think-tank of ministers conjectured the importance of a very old building situated at a historical town (Ajodhya) of the country. The building was hugely dilapidated and nobody used to care to visit it. It was in a sense, unimportant for the present populace with no significance. It was believed that once upon a time, that building was a great temple, a religious place. Once, an infiltrator came and attacked that religious temple, destroying it, he ensued to make a new religious building, a Minaret and named it after his own name (Babri Masjid).
The general population was indifferent about that historically disputed religious place. There were already plentiful religious temples, minarets, gurudwaras and churches. Yet, a section of the ruler caste (the politicians) determined to make a new temple at the place of that dilapidated worthless minaret. They thought, it would bring huge applause and happiness in the masses and that will again establish a religiously sanctimonious rule over the nation. The other section of the ruler caste (politicians) used the opportunity to overplay the tool of other religion, debated about saving the already dilapidated Minaret, and proposed of renewing it. The debate grew gross and took the form of agitation accompanied with violence. Consequentially, the common men of the nation found themselves divided over the issue of religions and that became a further triumph of the politicians. At last, the old ramshackle building was attacked and destroyed. Nobody could say if the common men felt any happiness or satisfaction at the destruction, yet all sections of ruler cast (the politicians) were exuberant about the instruction, it provided them a further cause to establish their power to rule.
Thus, the ramshackle of a building that was generally of no importance for the common people of the nation suddenly became the most important issue for the public. Everyone was forced to think about it. The issue of making a temple became the hottest debate. Some people were sad for the destruction of a meagre minaret, some were happy for the hope of making of already redundant temple. The division of public grew angry and caused huge bloodshed. Women were raped, children were butchered, villages were burnt, and people were murdered. The religions were reclaiming their glory at the expense of blood of common men.
The prime ruler of the nation established a Commission¹ to examine the destruction of the minaret. The building was no longer of no importance; it suddenly became the potent farm of political ventures and profitable vote banks.
Gradually, the issue of the destruction of minaret started fading. People again found themselves busy for living their own life peacefully, trying to improve their living standards and finding ways of prosperity. They again started seeking for their happiness. The issue of temple and minaret again became obsolete. Yet, the rulers felt that it is not good and they should try to venture at the use of the tool of religion to reclaim their right to rule. Thus, they remembered about the Commission and the report of the Commission over the destruction of that minaret that was Commissioned decades ago.²
The report was announced publicly in the biggest house of public representatives (Sansad Bhawan) openly. At the report ³, the different sectors of the ruling caste (the politicians) again started debating to show how much they care for the general public and how happy the common men would be about there representatives fighting for their religious sanctity. Yet, the public was further smart this time. Common men saved themselves from the trap of the ruling caste (the politicians) to divide and rule the public. The common men already had found ways to prosperity and happiness elsewhere. The public was religious even then and used to pray every morning, but they were smart enough to ignore any debate over the obsolete dilapidated building any further. Thus, the ramshackle of that building, which was forced to be the reason of violence and agitation within the populace, again became unconcerned, unnoticed and unable to divide the public and cause further violence and bloodshed.

1. Liberhan Commission, wikipedia [↩]
2. Babri Demolition meticulously planned: Liberhan Commission, Indian express [↩]
3. Liberhan Commission report, PDF file [↩]

“Concentrated power is not rendered harmless by the good intentions of those who create it.” -Milton Friedman

One may wonder what the great economist Milton Friedman was thinking while he uttered those words. May be he was thinking of the ill-effects of price controls and how does price control¹ causes shortage and hence excruciating conditions for the most poor men of society. He might be thinking of the ill-effects of socialized medicines², or may be he was thinking about the irrationality of minimum wage law and the manner that the very intention of improving the living conditions of poor workers actually condemns many to acute poverty and unemployment.
Minimum Wage Law in India
In 1920, Mr. K.G.R Chaudhary took the initiative by setting up boards in different industries to determine the minimum wages³ . It must be recognized that in those days, the British government held total control over all of the Indian industries and law bodies and Mr. Chaudhary was an agent of British Government. The idea clearly was not at all to improve the living conditions of Indian workers whom the British government considered as slave; rather it was to pacify any possible insurgencies. It was a British government’s vicious trap to divide and rule the Indian youth and workers for their own profits. At one hand, they were luring the industrial workers by the assumingly better living conditions they were promising to provide; on the other hand, they were simply crushing out any chance by native businessmen and entrepreneurs of British India to be a successful. That initiative also created a rift between those Indians who were engaged in the British government controlled industries as they were being lured for a better life and the other portion of youth that was not working for the benefits of British government. This political step obviously divided the Indian youth and workers and hence decreased strength for struggle of freedom.
After Independence, the new democratic government of India set-up a “Committee for Fair Wage” in 1948 to provide guidelines for wage structure through out the country, it was the beginning of Minimum wage law in India. Were Indian leaders, who are assumed to be the fathers of Independent India such fools that they failed to realize the vicious trap of British Government and hence established the poisonous minimum wage law, or were they simply following the steps of British government (being the new rulers of India) to keep the policy of Divide and Rule?
Consequences of Minimum Wage Law
The rate of unemployment is directly proportional to the overload of labour cost over productivity. Minimum wage law that forcefully raises the costs of unskilled and inexperienced labour and thereby increases the labour cost, while decreasing the productivity, certainly raises unemployment, also as no one can employ a worker at a wage below the minimum wage forced by the law, the unemployed youth fails to get any chance for employment (as it would be illegal) and hence suffers extreme poverty. Often economists ignore the fact that minimum wage law actually causes unemployment and poverty because of the shear fear of politicians and rulers, who just for making their vote bank keep exploiting the poor lot.
Consider a case of a private primary school engaged in providing elementary education to the poor kids of a society. The owner of the school is obviously not a rich person, he is managing the school to earn a living and in return, he is providing job for teachers he employs and a well-managed system of education to the kids of the society at affordable student’s fees. He cannot increase the student fees to that level at which parents would find it difficult to send their children to his school. Initially, he engages 10 teachers, 2 clerks and 4 menial workers at an average salary of Rs 1000-Rs 1500 per month. In September 2007, the national minimum floor wage was increased to Rs 80 per day (that is Rs 2400 per month) for all scheduled employments from Rs66 in 2004, to Rs 45 in 1999, Rs40 in 1998 and Rs 35 in 1996⁴ .
That is, the school owner is actually doing an illegal act by giving lesser salary to the ten teachers he has employed than the salary, which government has admonished to be given to the teachers (workers). Obviously, the teachers would be happy if their salary were increased from Rs1000-Rs1500 to Rs2400 per month, it would almost be double. If government forces the school owner to give the dictated salary to all his employees, he will certainly find himself unable to give that amount to his employees and hence he will be forced to trim the number of teachers, clerks and helpers to half. That is, if government forces the minimal wage law on the school owner, he will simply remove 5 of his teachers, 1 of the clerk and 2 of the menial workers.
That would increase the salary of remaining 8 employees but will certainly throw the unfortunate other 8 people in poverty and unemployment. They will hardly find any other job because all other employers will also suffer the similar inhuman conditions of lack of money to employ the job-seekers.
In case of teachers, the school manager has option to choose the best of the teachers and remove the average or below average teachers. In case of the clerk and the menial workers, he simply does not have such a choice because almost each of his employees is similarly skilled and efficient in those works. So how would he decide whom to remove and whom to keep as his employee? He may choose to employ those, who agrees to sign at the pay slim as admonished by the government, while taking lesser salary in turn of his favour to keep them at job, that is, he would be tempted to promote corruption. Otherwise, he may keep the workers of his caste or religion while removing the workers of other caste or religion. That is, the minimal wage law will force the employer to cause hatred based on religion or caste.
On the other hand, because of lesser teachers, the burden on each to teach the students appropriately will be increased, their working hours may increase. Government can certainly admonish another law to restrict the maximum working hours for employees. In that case, either the teachers will start ignoring the students, or the school owner will have to remove some of the students to balance the workload of teachers. The owner of the school will also suffer losses because he simply cannot increase student’s fees (government can admonish against that) because if he does so, the parents by themselves will feel to remove their children from school and hence stopping their education. At any further increase of minimum wage of the workers, the poor section will suffer further. Thus, the final sufferers of the inhumanity of minimum wage law are always the poor, the workers, the consumers and the producer.
Conclusion
Minimum wage law not only increases unemployment and extreme poverty but also, it increases tensions anger in between the various sects of the society based on religion and castes or race. It promotes racism, poverty and shortage.
It would be wrong even to think that the founders of India were fool enough to miss the true nature of minimum wage law, yet they kept following the British policy of divide and rule just to keep their political vote bank strong enough while the poor public is bound to suffer. Such inhuman policies are necessities of government to exist, hence government and politicians often lure the poor public by misguiding them and pretending that the politicians are with good intentions and want to help the poor, the reality is, government exists on the principle of violence, exploitation and robbery and enslavement of poor citizens.

1. Consequences of Price Control, Reason for Liberty [↩]
2. Abolition of Cost is cause of Corruption, Reason for Liberty [↩]
3. Minimum Wages Act India, Government of India [↩]
4. Minimum Wages Act India, Government of India [↩]

The two major political propagandas of Indian political parties are “Education for All¹” and “Electricity for everyone at every Village”. Despite all the technical advancements government failed to provide electricity for every village of India, not only that, government failed to provide incessant electricity to any city too. India suffers acute electric shortage. Most of the cities suffer brownouts. Generally, any common city or town of India suffers electric cuts for 4-6 hours daily, while some more industrial cities and towns of India (like that of cities of Uttar Pradesh) suffers acute blackouts for even 12 hours a day.
It would be nothing new to stress again that it is impossible for any government to ensure and provide anything like “Free-education” or “Free-electricity” as citizen’s rights in any condition. As it is impossible, governments are bound to fail to meet such promises.
The Destruction of Power Sector under Government
We have seen how the price controls destroys the power of market and producers to supply the required commodity to meet the demands and hence creates shortages². In order to neutralize the effect of price control, government thus tends to exclusively control certain sectors of production completely under the monopoly. As government controls the production and supply of electricity thoroughly in India, it may be assumed that the price control on electricity may not affect the supply because it is the government only, that is producing and supplying electricity and hence government may provide electricity sufficiently at controlled lower prices or even at no price at all. As a matter of fact, government even tries to provide free-electricity for various purposes, yet government suffers acute shortage of electric power and hence fails to meet the demand of electricity. The natural law that price controls brings shortages works even in such exclusively government franchised production sector.
Role of inflation in electric shortages
If there is no inflation and government is providing electricity at lowest minimal prices, government often fails to gain any profit over the power sector and hence suffers acute financial deficits to increase the production of electricity to meet the required demand. Even the minimal possible price for electricity certainly remains much higher than the prices that would have prevailed in free market because not only the electric sector suffers any vital competition to increase production and decrease prices; it actually prohibits any such effort. All efforts to increase production are surmounted by the increase in demand.
If there is a genuine inflation rate, the cost of production of electricity keeps increasing, while the government and regulatory bodies either refuses to increase the price of electric power or allows only insufficient increase in prices. As a result, power sector suffers losses and deficits and ceases to grow rapidly and increase production because it gets no profit to save and invest in further production. Hence, government is forced to provide subsidies and capital for the power sector to keep producing from the compulsory tax collected. As a result, the citizens are forced to pay much higher price for the comparably insufficient and menial electric services than what they would have been paying for much better and sufficient electric services in free market. As the power sector under government regulations remains in deficit and suffer losses, it fails to replace worn-out equipments and service lines at higher prices due to inflation and that increase wastage and forces power sector to actual decline.
Corruption in power sector
Because of the natural losses and deficits in power-sector, government is forced to pay the required amounts to keep the production of electricity from the budgets of compulsory tax collected. This enforces a certain corruption where the more hardworking and able persons who are obviously making higher incomes, are forced to pay much higher prices for the power-sector (or any commodity/service under government monopoly), while the lazy, dishonest and incapable ones are getting the same services of electricity at much lower prices, often at no price at all. This obviously is acute corruption that forces every citizen to actually accept corruption in his own demeanour. As any consumer realizes that he is actually paying much higher prices for the electricity in form of various taxes he is forced to pay than the others, who are paying lesser taxes, he feels cheated, and that increases the tendency of consumer to steal electricity. Often consumers tend to tamper the electric meters and other ways to actually use more electricity and pay less. This seems to be genuine too because they are already paying much higher prices in form of other compulsory taxations. Often, because of controlled prices of electricity people over-consumes and hence waste the electricity. Overall, the power sector is forced to keep suffering great losses, insufficient amount to keep increasing production, to replace worn-out equipments, supplying lines, and almost no amount for development, innovation and inventions to reduce wastage and increase production. The amount that could have been used to increase production of electricity is wasted upon creating better meters to prohibit stealing, which seems impossible because in a way, stealing becomes necessary to reduce the already forced corruption by the government on citizens.
As government is forced to pay for the power sector through the budgets and compulsory tax collected, the amount that could have been used for progress in other sectors is wasted upon the already suffering power sector and that decreases the overall progress.
Will the Nuclear technology reduce the scarcity of power?
It is assumed that nuclear technology may increase the production of electricity and hence reduce the shortage, but it is not possible because the nuclear technology is a replacement for thermal and hydroelectric production. Thus, at one hand the production of electricity will be increased, at other hand, it will be decreased too while the basic reason for the shortage of electricity, that are government monopoly and regulation, price control and inflation, will remain unanswered.
The solution for the acute power shortage India is facing is to reduce the regulation and ultimately culminate the monopoly of government on power sector. If private bodies are allowed to invest in power sector freely with property rights, the production of electricity will increase manifolds; the wastage in supplying electricity will reduce to minimal. Because of competitive free market, the price for electricity will tend to decrease and that will promote the private electric service providers to increase the reach their facilities to more and more consumers at much lesser prices.
Furthermore, the producers and investors, in order to increase their profits will keep investing in innovating and inventing ways to increase progressive technology and production of electricity. As consumers will get their desired electric services at the genuine prices, the tendency to steal electricity will be reduced to minimal and that would further decrease the wastage to much extent.
Conclusion: The new 123 deal is hugely insufficient to solve the shortage of electricity in India. Indian government need to privatize the power sector and let the investors and entrepreneurs to invest in innovative ways and technology (including nuclear technology) to increase production of electricity and hence decrease the actual price of electricity for the consumers.

1. Education For All, Reason For Liberty [↩]
2. Reason of Price Rise and Consequences of Price Control, Reason For Liberty [↩]

The skyrocketing prices of common commodities is becoming the main political issue around which, the BJP is trying to make their case against Congress lead government. It is true that government is responsible to the price rise, but can government control the prices or the price rise?
It is a common myth that producers, hoarders, speculators and dealers control the prices and tries to bring the prices as high as possible to make maximum profits at the expense of poor consumers who have no choice but to be exploited by such corrupt speculators, hoarders and dealers. It is certainly an irrational myth because to make maximum profits in a competitive market, the speculators, hoarders and dealers need to adjust selling their commodities at the minimum possible prices.

Who Decides the Prices?

The price of a commodity depends on its demand and its supply. Demand and supply being the amount of commodity the buyers are prepared to buy and sellers are prepared to sell, at all prices.

If supply is constant, The higher the price of a commodity, the lesser is its demand, the lower the price of a commodity, the higher is its demand.

As the speculators and sellers reduce the price of their commodity, the demand of that commodity increases. People obviously are willing to buy more shirts at Rs20/- per shirt and they will buy lesser shirts at price of Rs40/- per shirt. Since the lower price increases consumers, speculators and sellers tend to decrease the price to the minimal possible value so that they can outcompete the other speculators and sellers. Most of the consumers will opt to buy from that seller who is asking the least prices and hence, that seller will make maximum profits. Obviously, a speculator cannot decide price for his stored commodity any less than the actual cost of that commodity plus cost of its storing and his share of profit.
Thus, it should be clear that speculators could not decide the price variation of a commodity as price is directly proportional to the demand of consumers. A speculator or a seller may merely speculate the increasing or decreasing trends of the demand of a commodity and adjust the supply of commodity by either storing it or flooding the stored quantity of the commodity in market in accordance with their share of profit.

Can Government decide and control the prices?

Speculators cannot decide and control prices because they cannot force anybody, they cannot use violence against anybody. So, if a speculator decides to sell stored commodity at higher prices, he will loose his consumers, as they will have choice to go for that speculator and seller that provides the commodity at lower prices.
Yet, government can decide and control the prices because government do not need to look for the supply of a commodity, on the other hand, government works under the pressure of vote banks. In order to obtain maximum of the vote bank, government can actually decide the prices of various commodities lower than the cost of production and storage of those commodities. That is why, just in order to gain maximum vote bank, government can promise to sell wheat or rice at a price of Rs2/- per kg, or even at free of price. This is absolute corruption and fraud because the cost of production of any commodity or service is always higher than the price dictated by the government and hence government always works at loss that ultimately burdens the poor consumers, voters. Government can control the prices too because it has monopoly on violence, government can force all speculators and sellers to sell the product at the dictated prices; it can illegalize speculating and selling and may control selling services completely by collectivizing the market. Government can jail speculators, sellers and dealers if they do anything against the monopoly of government, government can kill them too by means of police force.
Obviously, government has no responsibility or need to look for the quantity, quality and supply of the commodities of which it dictates the prices because the basic means of government income is confiscatory, compulsory taxation. Yet, when supply of a product reaches too much lower and the demand increases too much higher, government succumbs under the pressure of demand and supply and resorts to increase the prices, that again creates havoc for the consumers.

Reason of Price Rise and Consequences of Price Control

In order to hide its irresponsibility and fraud, government often suggests that the reason of price rise is population explosion and scarcity of products. Yet, it is again a myth. It is true that Indian population increased almost 4 times since 1947, yet the thing to be noted is, Indian production increased 100 times (or more). So comparably, production is too much more in relation with present population than what it was in 1947 in relation with the population of 1947.
Price rise is direct consequence of Inflation¹ . As government has monopoly on printing fiat currency out of thin air, it keeps increasing the fiat currency. As a result, the purchasing power of citizens increases. Since the purchasing power of consumers’ increases, their demand also increases and it exceeds the quantity of available supply.
Whenever the quantity of demand of consumers’ increases than the quantity of supply the producers and sellers can provide, the situation of shortage occurs where the consumers are willing to buy, but the sellers and suppliers cannot provide, they have nothing to sell.
Such situations creates tensions within the society and may erupt in violence as every consumers suddenly comes to realize that although they have fiat currency, they have no wealth, they have been robbed and they are poorer than what they were years before. To avoid such situation, government feels forced to increase prices of commodities because price rise actually solves out the problem of shortage. At higher prices, demand of consumers decreases and tends to come closer to the quantity of supply available in market. Yet again, government may loose vote bank because of price rise, hence it resorts to price control again.
Price control is again a fraud and creates chaos in market. Due to lower dictated prices, demand of consumers remains high irrespective of the supply and that increases wastage of scarce products causing shortage. As production and supply never meets the demand of consumers in such scenario, the consumers suffers.

Solution of Price rise and Shortage

As price rise is result of Inflation and government’s monopoly on printing currency² , the solution of price rise obviously is a denial of fiat currency and acceptance of 100% gold standardized currency and end of government monopoly at issuing currency³ . The increase in supply of such money would always be ineffective and small and would be limited by the high costs of mining additional quantities of gold.
Price rise became a chronic social problem because government replaced the Gold standard of currency by unworthy paper currency whose quantity can be raised without limit and without cost. There is no other solution for this chronic problem.
In addition, the problem of shortage and all the frustrations, corruption and violence attached with it is because of the government control over prices. In order to avoid any shortage of any commodity in market, it is necessary for government to leave the market and pricing system free of any interventions and let the producers, sellers, speculators, hoarders and dealers take care of the pricing system.
Speculators and hoarders saves the consumers from shortages by speculating any change in the trend of demand and supply and adjusting the prices to that level at which, the demand of consumers decreases or increases to the equalizing levels of the available supply.
When demand is higher and supply is less, speculators increase the prices and hence decreases the demand to equalize it with the supply and hence saves the consumers from the frustrations of not being able to buy, and thus avoids any wastage and shortage.

1. Story of Money, What Causes Inflation? [↩]
2. Story of Money, What Causes Inflation? [↩]
3. Fiat Money Versus Gold Standard, Privatization of Currency [↩]

We have seen how the state planning for alleviating famine and food shortage fails miserably in a planned economy. Often in a mixed economy, government seeks proper control over the agriculture and food sector and that becomes the reason of corruption and further suffering at the times of need, scarcity and famine.¹
On the other hand, in a free market, the profit motive acts efficiently to assuage worst kind of shortage and famines and hence actually save the populace from extreme starvation.
In a free market, there is a tendency of price of wheat, rice or crude oil (or any other commodity that can be stored), to be equal to its expected prices say after 6 months or a year, that is, free market naturally depresses the unexpected price rise.
Whenever government intervenes with the market, the market moves away from this natural tendency and the consumers suffer unexpected shortage and famine.
The force behind the tendency of uniformity of present and expected future prices of a commodity in a market is the profit motive of free enterprisers. Any disturbance in prices provides a chance for higher profit rates and as the enterprises exploit it, the discrepancy in the prices reduces to minimal.

Solving the Shortage of Grains

To understand this, let us take the case of an unexpected flood or drought in an Indian region (say Bihar, or Andhra Pradesh). Because of drought, the production of wheat will be reduced (let us say it reduces by 1/12th of the average wheat production in an year). Obviously, because of the shortage in production, the price of wheat is expected to rise after say, 6 months. The enterprisers looking for making higher profits will speculate this expected price rise and will start storing the wheat at the current lower prices to save it to make higher profits in future by selling the stored wheat at higher prices.
Their speculative storing of wheat will result in a raise of current price of wheat, as there will be lesser wheat available to be sold to consumers, and the enlarged quantity of wheat for future will reduce the future prices of the wheat.
Because of current higher prices, the consumers will also start accommodating themselves to the shortage of wheat by reducing the consumption of wheat and checking the wastage. This thriftiness on behalf of consumers will allow them to sustain the time of absolute scarcity of wheat and that will further reduce the expected future price of wheat. Thus, at one hand, speculators will increase the current prices of wheat by storing it for future sales at higher prices, on the other hand, the increased available quantity of wheat for future and the thriftiness of consumers at present will reduce the expected prices of wheat in future. As a result, the maximum possible increase in price of wheat at the period of most scarcity will also be not very much more than the current price of wheat plus the storing and preserving charges of the wheat by speculators.
In absence of speculators, as most of governments illegalizes speculation for price control, the consumers will never realize the actual shortage of wheat because there will be no sign of scarcity by means of price rise and will continue consuming wheat as normal. On the other hand, although the stored wheat will satisfy the demand of consumers for first 11 months, there will be no wheat left for the next 12th month of year as the total wheat produced is already less by 1/12th of the average required for an year. Such a situation will not only make people suffer starvation but will also fail to reduce wastage when it could have been. In addition, it will provide further chances of bureaucratic governmental corruption.
The profit motive will also alleviate the situation of famine and scarcity by means of another natural force of free market that tends to equalize the price of a commodity at all places. At a time when Andhra Pradesh or Bihar is suffering famine and food shortage, the dealers at other parts (say Uttar Pradesh, Punjab or Tamil Nadu) will seek higher profit rates by selling their stored wheat to the consumers in Bihar or Andhra Pradesh. This will result in a slight increase in price of wheat at the local markets while the increase quantity of wheat available for Bihar or Andhra Pradesh consumers will reduce the unexpected rise in price of wheat at markets there. Thus, the shortage of wheat at a region will be spread to whole India and hence will reduce its effect to minimal, all will share the increase in price of wheat, and that will reduce any extra burden on the consumers of famine suffering area to negligible.
The speculators cannot store the wheat for more than a period of 12 months as by that time, the new crop of wheat will arrive in the market and that will reduce the price of wheat to normal.

Issue of Oil Shortage because of Corrupt Oil Barons

The same principles of free market will also tackle any unwanted situation in the market of crude oil and petroleum or any storable commodity.
In the previous post, while discussing the Market Anarchy² , one of my friends raised the issue of Oil Barons, asking what will happen to free market if the Arab Oil Barons tries to control the market because of their influence on oil production.
Let us assume that all Oil Barons of Arab makes a union and tries to control the free market by imposing an artificial scarcity of crude oil (although this is impossible because reducing supply of oil will reduce all income of those oil barons as they have no other means of profitable production).
The speculators of free market will certainly foresee the future shortage of oil and will maintain their oil storage to make higher profits. That will obviously increase the current prices of available oil and hence will introduce the thriftiness in consumers, making them more able to sustain the period of oil shortage. Consequently, it will reduce the chances of unexpected increase in price of oil at extreme periods too.
On the other hand, Indian free market will also tend to increase its oil production to make higher profits. In addition, profit motive will tend the oil producers of other nations (like USA or Russia etc) to sell their oil to the Indian market. That will obviously tend to spread the scarcity of oil through out the world and hence will assuage the problems of Indian market. Hence, although the economy of India and actually whole world, will suffer a comparable loss but that would not be of any considerable degrees. On the other hand, Oil Barons depend only on oil production, their loss at not selling the oil will be huge and directly pointed towards them, and that will break their union.
Conclusion: A free market inadvertently safeguards itself against any sort of scarcity of any commodity by means of the profit motivated market forces. As speculators guard the market and hence the well-being of consumers as true and honest soldiers (as their vested profits and interests are strictly attached with the consumers), the free market necessarily remains free of any discrepancy in the prices of any commodity.
Even the administrators of mixed economy have realizes the power of forces of free market that is why Indian government issued allowance of speculations over wheat few months ago³. Certainly, it is a positive step towards the Free Market.

1. Cultivating Famine, Reason for Liberty [↩]
2. Issue of Oil Barons, The Market Anarchy [↩]
3. Ban of wheat futures lifted, Speculation allowed, Economic Times [↩]