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The number of Indian families earning about $4500 to $22000 (Rs2,00000, Rs10,00000) per anum, which constitutes the middle class as per the World Bank’s definition of middle class in 1995-96 was 4.5 million, the number of such households grew to 0.7 million in 2001-02. Now India has 28.4 million such families by 2009-10. One can say that the Indian families are growing rich, from poor or deprived families; they are traversing towards the middle income group range. Irrespective of the higher inflation rates, one can justifiably state that the number of high-income households in India has exceeded the number of low-income households and similar is the assertion of National Council of Applied Economic Research (NCAER).¹

Can India achieve richness?

The first issue is about the term India, how can a geographical region grow rich? Individuals in that region may surely gain prosperity but the region in itself is not able to achieve richness. Another issue is, even if India represents its people and not the geographical region, then how can a group or collective society or state grow rich? To grow rich is a Human Action,and a Human Action can be performed only by individual actors, only individuals possess ends and goals and the means to achieve those goals. A group or a collective society or a state cannot act, it even cannot decide. In fact a society cannot exist without the actions of individual members² .” This certainly means that “India growing Rich” is a metaphor. India cannot grow rich, it cannot be poor, what is being said is that the number of individual families that are now in a richly or prosperous state is increasing. Obviously, it has nothing to do with the society or state or country that is represented by India. Yet, it certainly has a lot to do with the freedom individuals have in the Indian society and how is it influencing their person conditions.
This follows that although a society cannot exist independently without the actions of Individuals, the individuals and their actions can be affected by the society, state or country. That is, if a person in India or his family is growing rich, it is but obvious the result of his hard work and talent, but if a person is living in dire conditions, one of the many reason behind it can be the restrictions or the influence of the society or country he is living in. But how can a country restrict anybody from being rich or poor? Since country cannot act, it cannot restrict, nor can a society restrict. Yet, the “government” representing a society or community or country can surely restrict the individuals it represents. Yet again, what is government? It is a group of some individuals that take decisions and enforces their decisions and policies over the population of their state. When someone says that “government act” what he means is to say that certain individuals are in a certain relationship with other individuals and act in a way that they and the other individuals recognize as “governmental’³ .” The issue is very important to understand. To explain it further, take the issue of tobacco. Indian government pays farmers to grow tobacco; on the other hand, it forces all the companies selling tobacco products to include anti-smoking, anti-tobacco-chewing advertisements on their products. Both actions are contradictory, one may say government should make up their mind and take a consistent action. The thing is, government has no mind, it cannot think, it cannot act. Rather, there are individuals, politicians, judges, bureaucrats, etc. who thinks and take actions.
Thus, even a government cannot act; ultimately the individuals only can take actions; only individuals can have ends and the means to achieve those ends.

Is India really growing rich?

While talking about NCAER results, Martin Ravallion suggest that all these estimates by NCAER far exceed the likely number of people in India who are not poor by US standards. At the start, he simply ignores the importance of Purchasing Power Parity (PPP) and blatantly states that “I will not say that someone has entered the Western middle class until the person has reached the US poverty line”⁴ . Obviously it is not so easy to understand that a person cannot buy a Reynolds’s ball pen in Rs 5 (approximately $0.1) but one can buy the same ball pen in India at that price. Irrespective of that fact, one cannot say that NCAER’s research is free of errors.

Why India is growing rich?

Now when I have explained that India cannot grow rich, Individuals and their families certainly can grow rich if government (some other ‘individuals’) may not restrict them, I should talk about the current phase of change in the status of individuals in Indian sub-continent. Why are Indian individuals enjoying this progress? Are the new generation of India much better, intelligent or harder working then the individuals of subcontinent before 1991? What has caused this economic progress? Is it the government (the group of ‘ruling individuals’) that has brought this progress?
The fact that India (Indian government, a few individuals who thought they could decide the fate of all individuals in India and who did) deprived itself of many free market benefits for more than 40 years during the Cold War while it flirted with political “neutrality” between East and West, but sought to build much closer economic ties with the Soviet Union. It is only since the collapse of the U.S.S.R. that Indian government started realizing its failure and allowing individuals to act for their prosperity by their own.
The question is, if government is allowing individuals to act for their own prosperity, is it doing any good? Or was it bad when government (or the group of some individuals) restricted individuals to pursue their prosperity and happiness? It is undeniable fact that with the emergence of free market and libertarian approach in Indian sub-continent, Indian individuals are now much freer to think about their ends and to act to achieve those ends. Since they can think for their prosperity and they can act to achieve it too, they are becoming rich.

Is Government Facilitating this Prosperity?

All the welfare and redistribution attempts of Indian government failed in 1991 and it accepted the defeat of Nehru’s centralized socialistic system. After 1991, India accepted the path of decentralization and government started shedding the so-called responsibility of making Indians prosperous and rich. Privatization is the name of mantra; freedom is the message of prosperity.
Obviously, a government (set of ruling individuals) can hinder the progress of individuals, they can legally and coercively ban, restrict and punish individuals from trying to get rich by legislating some senseless national laws, social contracts etc. But when a government realizes its failure and starts decentralizing, allowing individuals to live at their own, then one cannot say that it is the government which is facilitating the prosperity of individuals.

Conclusion:

Individuals in Indian sub-continent are certainly growing rich, they are now freer and hence more able to grab the opportunities to use their mind and act to pursue their goals, their happiness and hence they are rich. No governmental group or political party can take the fame of making Indians rich. On the other hand, Indian government should be blamed for keeping Indian individuals under poverty for so long. With the current pace of anti-state trend in Indian sub-continent, as India will enjoy more privatization, decentralization, free market, economic, religious and political freedom, Indian individuals will attain more freedom.
These facts strongly suggest that all the welfare and income redistribution talks of Indian socialistic groups are futile. Lesser governmental control on individuals means lesser poverty, No governmental control over Individuals means No Poverty. Poverty will vanish in a no-government-state.

1. Times of India, August 1, 2010, India has more rich people than poor now
2. Murray Rothbard, “Man, Economy, and State”, Auburn, Ala.: Ludwig von Mises Institute, 2004, pp. 2–3.
3. Murray Rothbard, “Man, Economy, and State”, Auburn, Ala.: Ludwig von Mises Institute, 2004, pp. 2–3.
4. Martin Ravallion, January 2009, The Developing World’s Bulging (but Vulnerable) Middle Class, The World Bank Development Research Group

India was one of the earliest issuers of coins since circa 6th century BC. Indians never used paper currency before 1770, when the Bank of Hindustan under British Empire. The General Bank of Bengal and Bihar, which was established by Warren Hastings¹ , also issued paper currency in 1773. It should be noted that Indian currency is known as Rupees since long. Rupee is derived from a Sanskrit word “Raupya”, which means silver, the silver coin was always the currency of India. With the discovery of vast amounts of Silver in U.S and other European colonies, the relative value of silver reduced a lot in comparison to gold, that incident is known as “the fall of rupee”² .
With the fall of silver in 1873, Indian Currency Committee suggested British India government to adopt for gold standard and in 1898 British government instead of adopting a Gold Exchange Standard, pegged Indian rupee with British sterling.
After Independence, Indian government started minting Indian coins (rupees); Indians thus never got a gold standard for representing their money
Now since last 63 years, Indians have so much used to the government issued currency, cycles of inflation and depression and always increasing price rise, that even talking about gold standard and private coinage seems to be impossible. Yet, since Indians were in habit of using private monometallic coins in past, it is imperative to discuss the issue of private coinage. Taking the premises of Freedom for everybody and the Self-Governance (Swaraj), which has been extolled by the Indians as a basic Mantra of life, let us examine the case of private currency carefully.

How the Private coinage will work?

The private coinage will work just like any other commodity (say mobile phones, or jewellery or wrist watches). Minters will produce coins of different shapes, sizes and weight according to the desires and demand of his customers. The free competition of the market will set the price of the coins of the minter. Second issue is about the trouble that the coins may create when weighed or evaluated at every deal or bargain. It is true that it would be difficult to evaluate the purity of gold coins every time a transaction would be made. To solve that issue, the minters will stamp the coins and guaranty the weight and purity of the coin. Private minters can guarantee the coins just like the government do. The profit will be, when government mints, there is no competition for government to be truthful, alert and honest, it is monopoly of government over minting coins, but when the private minters will guarantee their coins, their guarantee will weigh more because if the private minter will cheat, he will loose his market and consumers to other honest minter. Just like a government paper currency or coin holds the governmental promise to pay the bearer of that note an amount equal to the price of that paper currency or coin, the coin of private minters will also hold the promise from the minter that he would pay an amount of gold equal to be mentioned on the gold coin of his brand.
People against the idea of private currency will say that it would increase the chances of frauds. Same people never object to the miserable record of the governmental frauds, swindles and mismanagement. Every time the government issues stimulus to a particular industry, or forgives the loans of some conglomerate by explaining that it is working for social profits, the government actually is committing a fraud against the general public. Every time a person faces the devaluation of his savings in governmental currency because of extreme price rise and inflation, it is the example of regular fraudulent and untrustworthy behavior of the government regarding paper currency issuance and minting coinage. In case of private minters of gold coins, the chances of inflation and abrupt price hikes will lessen to minimum. More over, the free market competition for consumer satisfaction, the various minters will compete to be more honest and better customer service providers. The more a particular private coinage minting agency will be honest and better product and service provider, the more will be its consumer base and profits. Thus, in free market private coinage system, the competition for profits would be competition for honesty and consumer satisfaction. In addition, the problem of fake currency will also be eliminated because each private coinage agency would try to defend their brands by their own and the government also will be able to devote all its energy to safeguard the private minters against duplication and fake currency. In case of private coinage, one can trust that the government will prevent and punish frauds. The integrity of private open market operators cannot be discarded in favor of government monopoly, because in case of monopoly, there is no need for the government to be honest, but in case of private free market operators, to be honest is prerequisite for gaining any profit and healthy share of consumers.³
Furthermore, whole market works on guarantee of standards. A medicine store sells a tablet of aspirin of mentioned weight and dosage, a butter seller sells packed butter slices of mentioned grams of butter. The buyer trusts these guarantees, and they prove to be true. In a case when a person buys a product with a certain warranty and guarantee and somehow the product fails to prove the standard mentioned, than in most cases, he gets a replacement for the ill-manufactured product. That is, even if by mistake a product of a company fails to fulfill the standards demanded by the customer and provided by the manufacturer, then either it pays back the money of the customer or replaces the product with new and better one. Market of mobile sets, or laptops or packed meat, butter or cheese, or other things does not fail even though government does not hold a monopoly on any of the products. Thus, we can trust that the customers of a private minter will be safe against any possible fraud because of the presence of other competitors of the minter in market. The minter’s customers themselves will be keenly alert about the weight and fineness of the coins just as they remain while buying and using other commodities.

The problem of wear and tear of currency

The current government regulated currency, paper notes and coins holds no worth in themselves apart from the governor’s pledge to pay the bearer of the note or coin, a definite amount of money. The value of money obviously keeps going low and lower because of inflation and price rise. Along with this, the paper currency issued by government often suffers wear and tear causing further loss of money. Most of the governmental coins are eroded or torn out and government keeps forcing the usage of same old notes and coins. The old rag-tagged coins and paper notes are to be considered of the same value as of a fresh note or coin. By doing so, the government actually forces a certain type of price control over the old paper notes and coins and provide them the equal price as that of newer notes and coins. Because of this, the older coins and notes are overvalued, while the new notes and coins suffer undervaluation. All this amounts to nothing but mal-investment. Everybody loves to circulate the older worn out coins and paper currency while they have a tendency to keep newer notes and coins safe.
Consider the case of free market where minting of coins is not a monopoly of government. Assume that there are gold coins of 10grams well circulated in market. After a few years of constant usage, the coins may suffer wear and tear and lets say that they weigh only 9 grams of gold after 10 years (assume). In a free market, a coin that has been reduced from 10 grams of gold to 9 grams will not be overvalued and it will gain only the price of 9 grams. Obviously, nobody would like to use the 9 grams coins at the price of 10 grams of gold, hence the worn out coins will be driven out of the market, or they may be used at reduced price. Thus, nobody would be deceived by the forced insistence of overvaluation to the older coins. This will avoid malinvestment. To solve out the problem of wear-tear of the coins, the private coin minters can either set a time limit on their stamped guarantees of weight or agree to provide a new coin in exchange of every old coin with reduced weight. Thus, there will not be any compulsory standardization of currency, which is a feature of monopoly of government.
Conclusion:
Since long governments have tried to control the currency circulation in market so that they can restrict and control the progress and prosperity of citizens. Yet, from time to time, private bankers have issued their own minted coins (Know more about Private Coinage and Good Money)) . The gold standard with privatization of issuing currency and minting coins will not only end the monopoly of government over currency, which is the major reason of acute price rise and inflation, but also it will avoid any chance of fraud as the free market will tend the virtue of more honest and better services for gaining more consumer base and high profits. In addition, if coin minting is privatized, the government can also try to serve the public by ensuring security against any sort of fraud. In any case, privatization of currency would be a much better option than the monopoly of government over currency.
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1. Warren Hastings (1841), an essay by Thomas Babington Macaulay.” Columbia University in the City of New York
2. The Fall of Rupee, CRN India
3. Know more about the evils of Monopoly of government in Market and currency read What Has Government Done To Our Money by Murray Rothbard, One may listen the whole book and save the audio link here

So what can help to eradicate the poverty?

As per World Bank’s estimates, 60% of Indian population was living in poverty in 1981, during the socialistic regime of Indian government.
Since 1991, India enjoyed the streams of economic liberalization and stepped towards the making of a free society. As a result, the current estimates of World Bank suggests that 42% of the total Indian population now live under the global poverty line of $1.25 per day (PPP). That is quite a big sweep.
Similarly, in China, since the far changing economic reforms and liberalization were made in the late 1970s, the growth fuelled a noteworthy decline in the poverty rate from 64% at the beginning of reform to 10% in 2004.
Obviously, the data suggests that economic reforms and liberalization is the key to the eradication of poverty. Before 1991, the government controlled almost all industries and production sectors of India but after that, step by step liberalization of industries from public sector to private sector took place and the OECD states the result in following words

Annual growth in GDP per capita has accelerated from just 1¼ per cent in the three decades after Independence to 7½ per cent currently, a rate of growth that will double average income in a decade. [...] In service sectors where government regulation has been eased significantly or is less burdensome – such as communications, insurance, asset management and information technology – output has grown rapidly, with exports of information technology enabled services particularly strong. In those infrastructure sectors which have been opened to competition, such as telecoms and civil aviation, the private sector has proven to be extremely effective and growth has been phenomenal. – OECD¹

Similarly, China confronted economic reforms and liberalization in 1978 and now, as of 2005, 70% of China’s GDP is in the private sector. The relatively small public sector is dominated by about 200 large state enterprises concentrating mostly in utilities, heavy industries, and energy resources.²

Free Market Entrepreneurship is the Key to riddle of Poverty

The examples of China and India clearly show that a free market based on Individual freedom is obviously a solution for the poverty in the society itself.
What impels an entrepreneur, investor, producer or creator in a private sector to remove poverty is not his “altruism”, rather it is his selfishness, his motive to produce and earn more, bigger profits. Yet for making profits, he needs to increase the productivity of the workers. As productivity of workers increases, the poverty reduces.
Social governmental constraints, regionalism, nationalism, license raj, price controls, taxes and subsidies etc only reduces the productivity of individuals and hence causes further poverty.
Examples of Entrepreneur trends eradicating poverty
While the politicians and government of Maharashtra is playing cards of protectionism, regionalism and linguistic discrimination by framing such ridiculous rule like permitting a taxi license only for those who can speak and write Marathi,³ the youth from North East is enjoying various job ventures in private sector freely in Indian metros. For their productive efficiencies, girls and boys from North East are in great demand for jobs in private sector as service providers, sales persons, mall, showrooms or boutique managers etc.⁴
This contrasting difference between the private entrepreneurs and government authorities is because of the fact that private entrepreneurs are motivated by the single aim of satisfying their customers in best possible and productive way for doing which, they need to come above any such linguistic, regional or religious discriminations. On the other hand, government and politicians have nothing to do with customer’s satisfaction or individual rights; what they look for is potential vote bank.
The Astaire Research suggests the hurdles in Indian economic reforms and progress in following words–

A Balance of Payments crisis in 1991 pushed the country to near bankruptcy. In return for an IMF bailout, gold was transferred to London as collateral, the Rupee devalued and economic reforms were forced upon India. That low point was the catalyst required to transform the economy through badly needed reforms to unshackle the economy. Controls started to be dismantled, tariffs, duties and taxes progressively lowered, state monopolies broken, the economy was opened to trade and investment, private sector enterprise and competition were encouraged and globalisation was slowly embraced. The reforms process continues today and is accepted by all political parties, but the speed is often held hostage by coalition politics and vested interests. – India Report, Astaire Research⁵

Another example of entrepreneurs helping the cause of eradicating poverty is the success of entrepreneurs like Vikram Akula⁶ or Irfan Alam.
Irfan Alam an MBA from prestigious IIM-Alhmedabad is the founder and chairman of the SAMMAAN Foundation. His enterprise innovated for the help of the millions of Rickshaw pullers across the country. Most of them are illiterate and poor. Over 90% of them are farm workers who migrate to cities for want of employment at home. They hire rickshaws for which they pay owners Rs 30 to Rs 40 per day and end up with a pittance for themselves.
He managed and persuaded banks to finance rickshaw-pullers. His enterprise SAMMAAN designed rickshaws that can put on hold newspapers, mineral water bottles and other such small items for sale if the passenger needs them. These rickshaws also carry advertisements and the pullers get 50% of the ad revenue, the remainder going to SAMMAAN.
Thus apart from the fare, the rickshaw-puller also earns from the ads and the sales. Gradually they become the owners of the rickshaw after re-paying the bank loan in instalments.
Irfan started off with 100 such rickshaws in 2007. Today, over three lakh rickshaw-pullers from across the country are registered with SAMMAAN. While 10,000 and odd are pedalling the special rickshaws, the process is underway to benefit others.⁷
Conclusion: It is the selfish motive of the entrepreneurs to make profits that entails the solution of poverty. As the governments will start to leave the market and society free of their dictatorial regime, the society itself will reduce the poverty to minimum.

1. “Economic survey of India 2007: Policy Brief”, OECD, pdf
2. China is a Private-Sector Economy, Economist Fan Gang points to a 70% share of GDP now in private hands, but he acknowledges that much improvement is still needed
3. Want a taxi permit in Mumbai? Read, write Marathi, Mumbai: The Maharashtra government framed new rules for taxi drivers to get permits in Mumbai.
4. North East Youth ride high on Reatial Boom, The Economic Times
5. “The India Report”, Astaire Research.
6. Vikram Akula, CEO and Founder of SKS Microfinance
7. Obama invites Bihari Entrepreneur to entrepreneur summit, The Economic Times

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

Cause of Depletion of Indian Forests

Often it is said that increasing population is the main reason for forest depletion, yet it is a false idea. The major reason for the loss of Indian forests is the government.
Despite the fact that forests are the basic natural resources for the economical activity, Indian government since from the start, keeps full control over the Indian forests without providing any private initiative and free market incentives to preserve forests and solve out the problem of scarcity.
During the 19th century, the British government confiscated most of the Indian forests to rob them for their imperial needs. After independence, Indian government took the robber’s position and stated Indian forests as public property under the conservations of government. In 1952, some well-intentioned politicians recognized the importance of forests and declared the new forest policy aiming at maintaining 1/3rd of India’s land area under forests. Yet, just like all other governmental interventions¹ , this initiative also proved to be futile and results came against the intentions of preserving the forests. Until 1976, the forest resource was seen as a source of earning money for the state and therefore little was spent in protecting it or looking after it and then Indian forests became a playground for political briberies, corruption and mismanagement of Indian forest ministry and department. At one hand, the government has the mighty resource in its hand to extract the wealth from it without proper procedures for recognizing the prices in accordance with profit or loss, on the other hand, government applies confiscatory taxes on citizens for maintaining the forests. Result comes out to be wastage of resources, burden on citizens and further depletion of forests.

Why Government cannot preserve Indian Forests?

Government systems are simply redundant and incapable of protecting Indian forests because such system of forest conservation lacks the incentive to preserve the forests while cutting trees down definitely provides the short term profits. Corruption in the aim of government authorities to preserve the forests is obvious as no individual has any means to feel the direct responsibility to conserve them. As nobody own any property rights on forests, nobody cares for them, on the other hand, people keep using the forests to fulfil their needs. Common person uses forest wood as basic fuel and cattle grounds while the executives often uses them for commercial wood and coal and none ever think of maintaining the equilibrium between usage and production of forests. Furthermore, a person cannot use his owned land for commercial forestation because he is not free to make profits from commercial forestation. The government authorities fail in protecting and preserving the forest because of lack of labour, security techniques while negligence, bribery, and corruption remains the basic ill of all such public resource ministries and departments.

Necessity of Privatization of Forest Resources

Trees are nothing but long-term crops and forests are similar to farmlands of those long-term crops. The forests necessarily need human endeavour for their proper growth and conservation. As human endeavor is necessary for protection and growth of forests, they are not free resources rather they are economic commodities and means of production, that is, forests are wealth and hence need to be subject of private property rights. Privatizing the forests will reduce the unbridled felling of trees because the private owners will have the responsibility to safeguard their property. The private owners will safeguard their forests with utmost sincerity and honesty because the protection and preservation of their forests will be profitable to them.
A farmer safeguards his farmland and crop because his crops are the basic means of his earnings and well-being, similarly, the private owners will have proper incentives to maintain the equilibrium of forests. At one hand, they will use the forests for commercial benefits, while they will have to maintain the growth of new trees to keep up and increase their personal earnings and profits. Entrepreneurs will not only look to provide enough derivatives from their owned forests to the market, they will have to innovate ways to increase the productivity and proper care for the maintenance of the forests.
As forests are not only scarce resources, they are scarce products of human endeavour too, the demand of forest and forest derivatives will naturally increase the supply and that will necessarily mean the increase in area and density of forest land. More and more people will become interested in forestation and attaining profits and the competitive market of forestation and forest conservation will provide ample opportunities of improvement in technique of forest protection and growth and security. Entrepreneur will look forward to convert the available wastelands to profitable forests by planting commercial trees, shrubs and herbs. As market forces will recognize and establish the importance of various trees and products of forests, the various species of trees will be preserved according to the degrees of profitability in their growth and protection and that will provide a completely planned, progressive and profitable system to conserve trees and forests.

Will Partial Privatization Help?

Partial privatization is the process of government to apply private enterprises for protecting and growing forests on contract basis while the authority essentially remains in government hand. Such government interventions often prove out to be futile because of the short term of contracted property rights. If the private contractor of a forest knows that he may earn the benefits of the forest only for a limited time period (say five years) he will certainly look to decrease the amount of spending in growing and preserving the trees and forests, rather he will look forward to attain maximum profits of the existing trees and forests by exploiting them irrationally. It will be no different from the complete authority of government over forests while it will increase the possibilities of corruption and negligence in maintenance of forests.
Conclusion: The incapability of government control over forests to conserve them is beyond any doubts, partial privatization of forests will also fail to provide better results. The only way to conserve trees and forests is to let the private initiative and free market introduce the incentives of profits in forest management and growth of trees. Privatization of forests will not only reduce the cutting of trees for their rational usage, it will provide incentives for planting further trees and new forests. Property rights on forests will increase the endeavours of individuals in preserving and growing the forest land.

1. Irrespective of their supposedly good intentions, interventionists through their planning of mixed economy results in chaos and exact opposite results to their interventions, Mixed Economy or Interventionism

1. It is a common trend going on these days. School children commit suicides because of the “oppressive school system”. It is “Oppression” that some students get higher marks while some fails. Thus, there should be a grading system. Anybody getting 80% and above, should be graded A+. Alas! So, there is no incentive for a student to master a subject and gain 100% marks. Even if he gets 80%, he will be at the top. In addition, he can never fail. It is the making of mediocre.,ReasonForLiberty
2. Division of labor, ReasonforLiberty

Why Participation of Indian citizens in elections is reducing?

In a democracy¹ if a majority of voting population ranging from several hundreds to several hundred millions (depending on level of election –Municipal, state, or national) vote against an existing policy, the policy will likely be changed, replaced or aborted. That does not mean that electorate controls government. As far as an individual citizen is concerned, he has no control over the democratic majority government. For example, in the government controlled retirement savings account and pension policies, if an individual wishes to use his earned savings to pay for the home he want to buy, he must wait until tens of millions of other citizens agrees to join with him to bring about a change in policy to make it possible. He would have to wait for very basic decisions to be made, if a set of parents in a village decide to have a school in their village where their children may get elementary education instead of going to another village 10 miles away, they may be forced to wait until whole majority voters of the city municipality under which the village comes, may decide to make an elementary school in that village. An Individual cannot decide to speculate and accumulate stocks of commodities to ascertain future profits, he cannot decide what prices he can demand from the consumers for his own products, he cannot decide to free a certain sector of production of varied levies and taxes (and subsidies) until he may not gain the approval of big chunk of voters.
If a set of intelligent voters want to restrict government monopoly over printing of fiat currency² , they will have to wait until whole populace of the country realizes the basic flaw in fiat currency. An individual by his own cannot decide what wages he may give to a worker, he cannot decide whom he should consider poor or whom he should provide voluntary charity or benevolent help as all relief funds are controlled by the majority rule government and so on. Since an individual electorate have no significant control over government bribery, corruption and frauds are common illnesses of democracies.
As people are realizing the fact that government control under democracy means collectivization of power and hence is a violation of Individual liberty and freedom of choice, that majority government robs the citizens of their power of self-governance and self-responsibility, they voluntarily become uninterested in political elections as they know that their mere voting is in no way capable of bringing about any progressive change.

Destruction of Individual Causal Role in Democracy

Democracy destroys the causal role of an individual. Instead of being the cause of his own success, well-being, and development, he becomes dependent on the majority rule, as until the majority will not agree with him, he cannot act upon his decisions and choices. The destruction of Individual causal role in his life signifies the violation of Individual freedom.
Individual freedom and his right of self-governance are the basic requirement for a definite progressive and developed system of division of labour³ . Thus, democracy robs and reduces the power of an individual to be the cause of varied economic achievements, success or failure.

Incompatibility of Democracy with Division of Labour causing Poverty

It is an established fact that the prosperity and productivity of a society hugely depends on the progressive division of labour. Collectivism in any form (feudalism, communism, dictatorship, democracy, socialism, theocracy etc) is incompatible with “division of labour” as such systems do not recognize importance of freedom⁴ , self-ownership and property rights. It destroys the individual causation and creates “forced economic inequalities”. Collectivism demands that everyone think and act as a unit and provides no space for the vast differentiation and individuation of the knowledge on which the division of labour resides and hence any collectivist society suffers lack of production, retarded process of development, poverty and wastage of human labour, it kills hard-work, honesty, genius and talent.
In a socialist bureaucratic system (like that of former USSR or China) the specialized dictators represented by “central planners” controls all the resources and means of production, as irrespective of their specialization, they lacks knowledge in compared to the knowledge pool provided by free society under division of labour, they never achieves enough rate of progress and suffers impoverishment, poverty, injustice and unhealthy conditions for the common man. In a democratic socialist system (like that of India), situations are even adverse as the specific set of specialized dictators is replaced by the ignorant, unspecialized masses representing majority rule. When such system tries to provide a systematically regulated division of labour, it results in contradicting partial planning under the head of different ministries trying to control different sets of productions and that further provides economic chaos, corruption, bribery and further partial slavery of individuals making them to suffer poverty and extreme scarcity of wealth.

Cure of the Problem

Since the fall of Soviet Union, India is gradually turning from collectivism towards principles of self-ownership, individualism and division of labour, and hence the standards of living is improving, of Indian society are also improving. As the Indian government is adopting disinvestment procedure and providing freedom for market and individuals, the proficiency of labour is increasing. The progress itself is a validating example of the fact that government interventions in market cause poverty, reduction in production and impoverishment of citizens while individual freedom, and property rights of means of production brings progress, prosperity and bettering living standards of citizens. Thus, the cure is definitely freedom of citizens establishing a free society in India, that is Limited government system, where the only purpose of government remains to safeguard individual freedom, property rights, restrict initiation of force and to provide justice, and peace by providing a democratic system controlling police and law bodies, strictly maintaining the principles of non-initiation of aggression, self-ownership and property rights, and all means of production including roads, railways, natural resources etc be privatized.
Private security and arbitrary third party justice system would further reduce the role of government only to provide security against external dangers in form of national defence, it would be further move towards anarchocapitalism⁵ establishing individual right of self governance and self-responsibility.
It is a basic fact that government monopoly in any form including limited government system represents partial slavery to some order and incurs poverty⁶ and destruction of wealth and means of production, for progress and betterment of citizens, freedom lovers advocates Anarchocapitalism⁷ rather than government limiting individual freedom.

1. The Impasse of Democracy, voting is not a solution, it is a killer
2. Fiat currency Versus Gold Standard, Privatization of Money
3. Division of Labour, Productivity and Prosperity of Labour
4. Freedom, meaning and importance
5. Defending Anarchy, Reason For Liberty
6. Population, Production and Poverty, Cure of Poverty
7. Defending Anarchy, Reason For Liberty

In the case mentioned above, If I am a customer of Reliance Defense Company, and you are a customer of Tata Defense company, our dispute would first be set for arbitration in the court of the plaintiff (I)-which means: a court of, or patronized by Reliance Defense company. If the defendant (You) is found innocent, the matter has come to an end. If you are found guilty, then the arbitration would run in the Court of Tata Defense Company. If that court too finds you guilty, you would be punished. If it finds you innocent, the arbitration would move to an appeals court. The decision of the appeals court would be respected. If a person (defendant) refuses arbitration, the arbitration would be held in the court of the plaintiff, and the decision would be binding. So, a person who didn’t commit a crime will not refuse arbitration in normal cases. If he disagrees with the decision, he can take the case to his court, or a mutually consented appeals court. It is rational to assume that if the defendant and the plaintiff are customers of different Defense Companies, these Companies together might decide the court in which the arbitration would run. The courts would try to be as honest and objective as possible, as their profits depend on the number of cases they receive for arbitration. People won’t deal with dishonest Insurance companies, or their customers, as no sane person would want to be taken advantage of. So, a dishonest Insurance company would soon find it deserted by almost all its customers. An Insurance company which patronizes poor courts too would be soon deserted by its customers.

Wouldn’t Defense Companies battle?

Battles could be ruled out for two reasons.
1) Wars are costly and would result in high Insurance premiums. Most customers would desert Insurance Companies with high premiums.
2) People won’t deal with the customers of warring defense agencies as they would lose in any case. As of it, the customers of the warring agency would be forced to patronize another Insurance company, if they want to get into contracts with other people.
A court too should be honest if they want more cases handed over to them. What if a rich person bribes the court of Insurance company? If that is the case, most people won’t use those courts and Insurance companies. Nothing like that happens in the case of Government courts. People are forced to use them, even if they don’t trust them.

Fraud under Anarchy

Fraud would be kept at minimum as Defense Companies would lose their profits if they don’t. If a defense company engages in fraud, most of its customers would desert it, as people won’t deal with the customers of such a defense company, as they don’t have a legal recourse in case of crimes.

Poor under Anarchy

It is often argued that poor will be defenseless under Anarcho-Capitalism. However, the argument completely lacks sense-For several reasons.

1 ) It is very unlikely-nearly impossible that there would be extreme poverty as of now under anarchy.

2 ) Under the present system, a rich person can easily bribe a bureaucrat or a judge and get his things done as bureaucrats and judges are not risking their own funds. A private judge is risking his own funds and profits, and he would lose his income or profits if he isn’t honest or objective. It is very unlikely that bribery is going to work.

3 ) Customers would desert courts which have a poor reputation.

4 ) Insurance companies selling defense wouldn’t patronize corrupt courts as, if they do, their customers would patronize another Insurance company. Such a court would be soon out of business. Nothing like this happens under statism.

5 ) One might argue that public courts can work with proper regulation. It will inevitably founder upon these questions-Who regulates the regulators? What is the incentive? How does such a system make profit and loss calculations? Without profit-loss calculations, how does one know whether job is being performed well or not?

6 ) As Roderick Long has pointed out, “any court that got the reputation of discriminating in favor of millionaires against poor people would also presumably have the reputation of discriminating for billionaires against millionaires. So, the millionaires would not want to deal with it all of the time.”

7 ) Under anarchy, the media won’t have to spend most of its space on politics. They would divert more of their energy to exposing corrupt institutions and extraordinary achievements of men. People won’t deal with customers of dishonest defense companies, and these customers will be forced to move to another Defense company.

8 ) A rich person who commits a crime would suffer from boycott by his clients and customers when insurance companies reject him. Such a boycott affects the rich more than the poor.

9 ) Even if a poor person can’t afford to file a case, he can sell that claim, or part of that claim to a rich person. Such a system existed in Iceland. That would make sure that eventually, all sorts of criminals are punished. One can’t commit a crime against a poor person and go unpunished. If someone murders a poor person, the person who has homesteaded the estate of that poor person can file a case and get compensation.

Do Anarchists assume a change in human nature?

No change in human nature is assumed here. We, libertarians don’t take a rosy view of human nature. We see human nature rightly, and admit all its flaws. Three things have to be pointed out
1) If you believe human nature is flawed, you have to admit that the politicians and bureaucrats chosen by these flawed creatures too would be of that sort, and there would be no excuse for state action.
2) A change in human nature is not necessary for libertarian anarchy to work.
3) People with power lust are more likely to rise to the top under statism. The state attracts all kinds of rascals.

What libertarian anarchy does is that it leads to a system in which criminal acts are hard to perform. It also punishes those who resort to such acts in a just manner. Under the present system, a judge has no financial incentive to be honest and objective. He has only a moral incentive. Under anarchy, he would have both financial and moral incentive. Ask yourself which system will deal with criminals better.

Why Anarchy?

Almost every major problem mankind faces can be traced back to the state. The state drags innocent people into war. Involuntary unemployment results when a minimum wage law is passed and labor union coercion is sanctioned. Price controls result in shortages. Protectionism leads to poverty and wars. High prices and poor quality products result when Government monopolizes certain industries. Taxation prevents capital accumulation. Credit expansion leads to inflations and bubbles. Some estimates say that there were nearly 262 million deaths caused by the Government in the twentieth century. In the light of all this, I see no reason for a person who loves humanity to support the state. It should be obvious that in any sector, monopoly is bad. How do statists get around this fact? In any monopoly, there is an incentive problem. There is no incentive to provide better service at a low cost. It is not just that. There is no way to know whether the service is provided in the best possible manner in the absence of competition.

Isn’t voluntary taxation better?

Voluntary taxation is a contradiction in terms. Taxation implies that money is collected at the muzzle of a gun. How could it be voluntary? Lets forget the definitions for a moment. Voluntary taxation is defined by minarchists as, people are not coerced to pay their taxes. People are free to pay their taxes. But this sheer aspect doesn’t make the taxation voluntary. If an area milkman forces every other milkman to stop selling milk in your neighborhood, and then says ‘you are free to buy milk from him, by your own volition’, is that really voluntary, or are you forced to buy milk from him because he has eliminated all the possible options using force. Lets say you say ‘I want to raise my own cow and make my own milk’, to which the milkman forces you to do it. Although he is allowing you to pay him voluntarily, he is forcing you to seek anybody else’s services thereby making it involuntary taxation. The problem with minarchy isn’t just that state collects its revenues using coercion. State prevents anyone from competing with it.

Why do minarchists make an exception for defense, law and police? Some minarchists believe in the Non Aggression Principle. Why don’t they apply it to the case of Security? How monstrous is it to forcefully extort money from a person maintaining the pretense of protecting him? It could be argued that these are public goods and can’t be provided privately. But, this argument was refuted several times. In the past, most of the roads and lighthouses (Public goods theorists usually point out the case of light house. Ronald Coase has pointed out the fallacy. Light house owners charge people for using the harbor) were privately owned. By 1800 there were over 60 private road companies in the United States and by 1830 they had built over 400 private “turnpikes” (highways). Out of 46 Lighthouses in England in 1820, 34 were privately owned. There was privately produced law in the ancient Ireland and medieval Iceland, for instance. And several thinkers have envisioned how libertarian anarchy would work- and it sounds perfect.

Why do I want to impose anarchy on people against it?

Some argue if people don’t want Anarcho-Capitalism, imposing it over them would be violating their freedom. If you tell a thief to not rob from your house, will you be imposing your views on him? If someone takes your money by force, gives you stale food, forbidding you from buying food from anyone else, is that right or wrong? If you tell that person to not do it, will you be imposing your views on him? Will you be violating his freedom? That precisely is what Government does. It forcefully takes money, gives poor quality defense, and forbid us from buying the service from private organizations.

Is human nature consistent with anarchy?

State is a relatively new institution. Mankind has lived hundreds of thousands of years without a state. If so, is it true that human nature is not inclined to live under a state? How come we are living under a state then? Slavery and serfdom existed for a long time. Doesn’t that mean slavery is consonant with human nature? If so, how men got out of it? Obviously, when people realized the advantages of co-operation, people shifted to the present system. When people realize the advantages of anarchy, they would move into such a system. No change in human nature is required. Blaming human nature for being flawed doesn’t make any sense. People are mostly corrupt under the present system as people respond to incentives. Under statism, men have every incentive to be corrupt. To say that anarchy won’t work as human nature is flawed is tantamount to saying that capitalism won’t work as most people are poor. A person who makes such an argument fails to understand that it is precisely the lack of Capitalism which made the people poor.

Minarchy isn’t sustainable

There is no empirical or theoretical evidence to prove that a constitutionally limited government is sustainable. Government power has increased steadily in countries like United States and Britain. Tax experts like Irwin Schiff has pointed out that according to the law and constitution of United States, taxation is illegal. He is in jail now, and his book “Federal Mafia” is banned. That’s not an aberration, but the result of a limited Government. I admit that Anarcho-Capitalism was not the dominant form of social organization for the large part of human existence. But so wasn’t democracy or a limited Government. These are recent developments. The limited Government in United States broke down after 8 decades as of a civil war-But it took 1000 years for the near Anarcho-capitalistic system to break down in Celtic Ireland, and 290 years in Iceland. Who do minarchists support democracy and a limited Government then, when it is obvious that anarchy is far more workable?

How can one support Anarcho-Capitalism when it was never practiced anywhere?

It is true that pure Anarcho-Capitalism was never put into practice anywhere. However, that can’t be an argument against anarchy. A person who invents an electric bulb doesn’t have to prove that there were electric bulbs in the past. A new invention, innovation or theory is something which crushes all existing conceptions. It is unprecedented. I think this should be obvious and it makes no sense to argue against it.

Empirical Evidence for Anarcho Capitalism

Anarcho capitalism was not practiced in most parts of the world for most of the human history. However, there were societies which were really close to Anarcho-Capitalism. There was the law merchant in the past, as Bruce Benson has pointed out. Such a system has worked in Iceland, Celtic Ireland, American old west, British colonies in North America, Rhode Island, Albemarle, and Pennsylvania. There is a lot of historical evidence to prove that these societies worked really well and had sophisticated legal codes. Crime rates were strikingly low. In Celtic Ireland, it lasted for nearly thousand years. It was a civilized, advanced society as there was no Government administered justice. Even when these societies collapsed, it was not due to extreme anarchy, but due to contradictions in the anarchistic structure. Iceland is a classic example, where chieftains were granted more power, and religious issues led to a civil war.

Further Empirical Evidence: Present day Somalia

Somalia hadn’t a central Government since 1991. Yet, it has an efficient telephone system and mobile phone network, which is far better than that of its neighboring countries. The same is true of the electricity system. The situation is Somalia is much more peaceful than it was under the Government, and hence it is easier to do business there. There is a clan system which enforces contracts, though there isn’t a monopoly Government to enforce law. There was an improvement in 14 out of 18 development indicators after the collapse of the state in Somalia. One indicator was the same, and the other one, GDP, was blown up by the Government during its rule. Peter Leeson points out that “Under statelessness life expectancy in Somalia has grown, access to health facilities has increased, infant mortality has dropped, civil liberties have expanded, and extreme poverty has plummeted. In many parts of the country even security has improved. In these areas citizens are safer than they’ve been in three decades.” Even World Bank Economists like Tatiana Nenova and Tim Harford admit that things are getting better in Somalia. These Economists aren’t anarchists by any stretch of imagination.

1. Universal Health Care system, Wikipedia
2. Separation of Science and State, Reason For Liberty
3. Indian Insurance System and Free Market., Reason For Liberty

Those who do not wanna watch it, its an investigative report on Chennai private colleges where Taliban-style rules were enforced on the students. There is so much segregation among guys and girls in those colleges that Americans are going to be reminded of the Jim Crow laws era when blacks and whites were made to attend school separately.

This did not come to me as news, I had friends from those universities who told me about these things years ago. I went to a much more liberal private college so all those things came as a big shock to me. I was told that if a guy was found talking to a girl, he was fined(not always through money, but through social service etc etc).

Contrary to the natural reaction(which would be appalling at the horror of these policies), my topic is different. Considering the fact that all the colleges covered were Deemed Universities(they don’t receive any funding from the government, but only have accreditation from the government regarding their course work), that is they are private colleges, it begs the question, would free market serve Taliban and enforce Talibani rules if its participants demanded things that way? Would salons refuse to cut beards? Would private roads refuse to allow cars with female drivers in them? Would a private pond owner refuse to allow Buddhists to drink water from their pond?

The answer to all these questions is a shocking YES. The truth is, for all theoretical purposes, it is clearly possible that the Market would serve those things. There can be salons which refuse to shave men, private roads where women are not allowed to drive, and ponds which do not serve Buddhists, blacks, or the lower caste people. Just like in Chennai Deemed universities do not allow their boys and girls to mix socially.

But to understand why it is so, we must first ask the question, are any of these an act of aggression against anybody’s private property rights? Second question is, if it is not an act of aggression against private property rights of any individual, is it any kind of moral violation of an individual’s right to equality(if not right against his liberty). The answer to the first question is clear, when a salon refuses to employ its employees and its property to be used in a manner they don’t deem fit, when a private road does not deem fit to allow a certain type of individuals to use their property, when a pond owner does not allow the people of a certain religion, race or caste to use his property, none of these actions are a violation of anybody’s private property rights. In fact the whole point of “property” is to restrict non-owners from using the object against the wishes of the owner.

If I can prevent you from entering my house without actually violating your rights in any manner, how come by not allowing you(a black guy) in my saloon a violation of your rights of any kind.

Similarly when the Chennai private college owners refuse to allow their male and female students to mingle with each other, its their private property rights to enforce any laws they deem fit. If the parents do not think that their kids should be brought under this rule they are free to take their kids out and put in a more liberal college. The only place where this kind of rules would be private property rights violations if parents were forced to pay for these colleges through taxation and they had no choice.

In addition to that, the college cannot beat the students, or physically punish the student in any form for any kind of non-aggressive violation, because the body of the student is his property, irrespective of where it is located. Colleges have full rights to fail such a student or kick him out from the college for violation of their rules.

Second question which I asked earlier whether it is some sort of moralistic violation of an individual’s right to equality, well the answer is, that there is no such thing as universal “right to equality”. I might be a barber who promises right to equality to all my customers, but that does not mean everybody must be obliged to do the same in a free society. A white supremacist should be equally free to serve only white customers.

In a liberal(and free) society there will be standardized label adopted by the companies, claiming to be “equal treatment business establishment”(that is they serve all customers equally), and liberal minded customers would flock to businesses bearing such labels. Just like there will be “Whites Only” labeled restaurants who would shoot in their foot by not serving all the non-white customers, and white liberal customers.

What is the Market’s nature against such discriminatory institutions?

Market forces clearly work against the discriminatory institutions. The road owner refusing to allow women to drive through his road is directing all that traffic to other road owners. Since private roads will operate on subscription basis, families with women drivers will have even their male drivers using the non-discriminatory road networks, clearly damaging the male-drivers only road owner.

Similarly a college institution which pops into Chennai which puts no such Talibani restrictions on their students will attract all sorts of liberal students. The conservative schools must find other ways to actually attract the market. For example in America private catholic schools are more desirable even among the non-Catholics because of their performances. Also if you are a liberal, there is no more liberal school than the public schools in America. So all the Market demand for a Liberal school is crunched in by the public schools, therefore most of the good private schools in America are run by conservative Catholics.

Conclusion

If a newspaper editor refuses to publish your opinions, it is not a violation of your constitutional “freedom of speech” or “first amendment” rights. There is no right to equality on private property, because guaranteeing a right to equality means violating the right to liberty. Only one of these can be upheld at a time.

The market serves its participants. If there are enough number of irrational individuals who wanna follow their own irrational way of life, the market will serve them without prejudice. It may be an issue of rationality vs irrationality, but it is not an issue of Libertarianism.

About the above mentioned Chennai colleges, they will have more to worry about in the coming years when they will realize that Gay and Lesbian rights movement get huge support from their colleges.

If the supply is going to go down considerably(say because in Southern India its going to rain a bit too much thus destroying the wheat crop), the wheat farmers will be geared up to produce more wheat that season to compensate for the fall in supply thereby fulfilling the demand of the market. Thereby benefitting both the consumer and the farmer.

Similarly if its going to rain pretty well and it will result in sufficient harvest, the farmers will produce less, put less money on the crop and it will create a bountiful harvest.

Wouldn’t this foresight into the future going to help the poor farmers. Unfortunately we face two problems in realization of this scenario.

1. You don’t have such a psychic ability.
2. You cannot just convince the farmers out there that what you are telling them is true

That is, there is no such psychic ability possessed by anyone who can predict the future demand and supply with accuracy. The closest to such a prediction you can come to, is to study weather, study the crop cycles, study the soil, and then make an educated prediction. Even when you are able to make such a prediction you face the problem of convincing the farmers. Why should farmers believe you who says that there will be a shortage of Wheat coming harvest season, or believe me who says that there will be an abundance of wheat this harvest season. There must be a solution to this problem.

I bet the way most Indians are educated to think will think of a centralized government solution of this problem. One possible solution which was given to me by someone really smart went something like this:

Govt should organize a national level exam(on the scale of IAS-Indian Administrative Services exam), to find out the most intelligent soil, agriculture, wheat scientists and form a group which will then issue advisories on how much wheat the farmers must produce. This committee must be kept away from the political pressures, and must be paid very highly so that we are able to attract the most intelligent IITians-Agro scientists etc etc.

The problem with the above solution is, that it simply is the worst possible solution of the problem, it is so bad that its just going to worsen the problem. As long as the “National Advisory Committee” gives good recommendations its good, but when they will screw up which will happen more often than not, its going to create disaster. Plus it is actually no different than the Central Planning we have followed from Independence till 1990s, I am sure that gave us some amazing results. Also it basically excludes 99.99% of other people who could have been right.

So what’s an alternate more efficient solution? Wouldn’t it be better if every individual can take part in this process of prediction the wheat prices in future? Not only anyone wishing to take part must be able to take part, it should work more efficiently than handing out the power to a few individuals. It must penalize the participant if their prediction turns out to be wrong, and must give more weight to the prediction of an accurate individual.

The system would basically allow the farmers to sell wheat at a fixed price on a future date. That is if a farmer is producing wheat for the harvesting of June 09, and currently it is Jan 09, then he must not worry about the uncertainty of the wheat prices in future. Someone must assure him the price he is going to get.

Ladies and Gentlemen, presenting Commodity Futures.

Let me first explain you the concept of Futures contract. In finance a futures contract is a standardized contract to buy and sell a standardized quantity of commodity at a future date at a market determined price. The price is determined by the instantaneous equilibrium between the forces of supply and demand among competing buy and sell orders on the exchange at the time of the purchase or sale of the contract.

In simple words, if I am a wheat farmer, and you are a wheat price speculator, buy the wheat from me now, which will be delivered to you on a future date when the harvest occurs. If you think in the future the wheat price is going to be $700 per quintal, then lets sign a contract where you pay me $700 per quintal, and I will deliver to you wheat on that future date. If on that future date, the price of wheat is $700 or more, you make profit, if its less than $700 then you make loss. In either case the headache from my head of worrying about the future wheat demand is gone. My work as a farmer is now to simply grow wheat, and not worrying about the trading of the wheat.

This is a much better way to discover the future prices of any commodity compared to putting the burden on the poor farmers, or to give the task to one elite intelligent group of Oxford graduates. In this way anyone in the market can take part in the price discovery of the commodities. The risk of wheat prices plummeting has been taken off from the farmer, and is handed to the guys who are more focused on the task of predicting the future prices. If they succeed they make the profit, and they will trade even more futures and become larger contributor in the price discovery. If they fail they will be penalized for making the wrong prediction.

Futures trading is not new to the world. In fact from wikipedia entry on Futures:

The origins of futures contract can be traced to Ancient Greece, in Aristotle’s writings. He tells the story of Thales, a poor philosopher from Miletus who developed a “financial device, which involves a principle of universal application.” Thales used his skill in forecasting and predicted that the olive harvest would be exceptionally good the next autumn. Confident in his prediction, he made agreements with local olive-press owners to deposit his money with them to guarantee him exclusive use of their olive presses when the harvest was ready. Thales successfully negotiated low prices because the harvest was in the future and no one knew whether the harvest would be plentiful or pathetic and because the olive-press owners were willing to hedge against the possibility of a poor yield. When the harvest-time came, and many presses were wanted all at once and of a sudden, he let them out at any rate which he pleased, and made a large quantity of money.

In the modern times, Futures trading has been around in America for over two centuries. In 1848, the Chicago Board of Trade (CBOT – the world’s first modern futures exchange) was formed. In India the futures trading has been going on with some big government support since 2002. In terms of trading volume Mumbai Stock Exchange is world’s largest stocks and futures trading exchange.

Since my article is focused for Indians and I am using Wheat as an example, let me talk a bit about two major Commodity exchanges in India(there are more than 20 overall).

1. National Commodities and Derivatives Exchange(NCDEX) – Wiki – A regulated online commodity exchange based in Mumbai.
2. Multi Commodity Exchange of India Ltd(MCX) – Wiki – An independent commodity exchange based in Mumbai with 84% of Market Share in 2008.

Lets take an example of what a Wheat futures contract specifications in India consists of.

http://www.ncdex.com/product/Agro_product.aspx?comm=WHE

Name of commodity – Wheat
Ticker Symbol – WHTSMQDELI
Unit of Trading – 10 Metric Tonnes (That is one contract deals with 10 metric tonnes of wheat)
Quotation Price – Rs per Quintal (This means that if you read the price of Wheat contract Rs 830, it means that on the delivery date market thinks the price is going to be Rs 830 per quintal).

Tick Size – 20 paisa (that means the price of Futures contract can go up and down by 20 paisa or more.

Delivery center – Delhi (once the Futures contract expires you can take the delivery of the contracts from Delhi delivery center)

There are many other things involved with trading commodities, the details of which are out of scope of this article. The conclusion I wanna put in is that Grain futures trading can be a very powerful way to actually serve the people, to help the poor farmers by taking the risk off their hands, as well as make a living while doing that. There are tremendous risks involved with futures trading and you might lose all your capital in it. So instead of trying to become all out commodity trader, try to hedge your wealth with a real job.

Before you become any kind of trader I would suggest you to read this book by Nicholas Taub:
http://en.wikipedia.org/wiki/The_Black_Swan:_The_Impact_of_the_Highly_Improbable

1. CPM releases manifesto, Livemint news
2. China, India call for Free Market, Reason for Liberty
3. Foreign Aid versus Foreign Investment, Reason for Liberty
4. Population, Poverty and Production, Reason for Liberty
5. Swaminath Aiyer, Times of India
6. Self-Defense, Reason for Liberty

Venezuela is currently suffering from severe shortages in the supply of various goods, in particular rice. The nation reminds us of the erstwhile USSR in this aspect, as it does in many other perspectives. Only that direct physical force against the masses has not been let loose yet. Venezuela has been reeling under the impact of shortages in the supply of various goods since 2003, and now the crisis has hit rice supply as well. Keeping up with propaganda records, Chavez has launched a propaganda tirade against private suppliers. He has accused private suppliers of hoarding supply of rice. There could be a certain element of truth in it, suppliers could indeed be hoarding supplies to a certain extent. But that’s definitely not where the fundamental problem lies. The causal problem of this crisis lies in price-controls which have grown in size ever since 2003.

I will first explain the economic basics of prices, and then lead into the cause of shortages, inflation and hoarding.

What are prices, and what do they say? The price of a product simply shows how much money you should give up to obtain it. Then, what do you prices say? And why do prices of commodities change so often in markets? The answer is, people are willing to give up different quantities of money for the same homogeneous product at different points of time. This might sound vague, so lets get on with an example.

You are given 3 bags of rice. You have a particular preference scale based on your individual liking, and it shows those immediate needs that you would like to satisfy with the three bags of rice. The first immediate need that you fulfill with a bag of rice is to feed yourself. So, the first bag of rice goes to feeding yourself. You decide to use the second bag of rice to make some cakes. The third bag goes to feed your pet dog. This explains your preference scale. Your highest valued purpose is to feed yourself, followed by making some cakes, and finally feeding your dog.

Now imagine, you have only two bags of rice, and you are to decide what among the different uses of rice you are going to sacrifice. Since you have feeding your pet dog the least important of all uses, you decide to let your dog starve. Now suppose your neighbor has some extra bags of rice in his kitchen and he is ready to sell it to you for some money. How much would you be ready pay for that extra bag of rice which you would use now to feed your dog? You would see if the utility (or use) you gain from that extra third bag of rice is more than the utility you attach to the money you pay to your neighbor for that extra bag. Lets assume you would probably pay $2 to get a third rice bag from your neighbor, and you use it to feed your starving dog.

Lets further assume now that you have only one bag of rice. So you would have to give up on both feeding your dog as well as making tasty cakes. Now again, your neighbor has an extra bag of rice. How much would you be ready to pay for that second bag of rice? The same kind of reasoning as used earlier applies here as well, you would buy the second bag of rice only when the utility you achieve by buying it is greater than the utility you attach to its price. Perhaps you’d be ready to pay $5 to get the second rice bag from your neighbor, to make some cakes.

Now lets go further and assume that you have no rice bags with you. And again, your neighbor has an extra bag to sell. This time too you’d buy the bag of rice only when the utility you gain from the rice bag you buy is greater than the utility that you attach with the money that you spend to buy it. Now, you would be ready to pay almost anything to buy that bag of rice from your neighbor, and that’s because the utility you attach with the bag of rice is your life itself. You would have to starve without that bag of rice.

We have now seen three instances where the price offered to buy an extra bag of rice varies, quite drastically in fact. Economists explain this as the “law of diminishing marginal utility”. Marginal utility of a commodity is the utility that you gain (or lose at times) from an additional unit of the commodity.

This explains why prices change at different moments in the market. When there is excess supply of a commodity in the market, people would have the liberty to use those commodities for less valuable goals, like how you used the third bag to feed your pet dog. So they are willing to pay only low prices. On the other hand, when there is deficit in the supply of a commodity, people are strained to obtain sufficient goods. They are forced to cut down on their frivolous expenses, like your preference to feed your pet dog. The price of the commodity in this case is high. This explains how prices are set in a market.

What the market does is it rations the goods that are available to the most immediate needs by raising prices when supplies are constrained. So, high prices enables everybody to satisfy their most intense immediate demands, while restricting them from using further units of the commodity towards less intense needs.

So when supplies are inadequate, the price of the commodity increases to make sure that the commodity is diverted towards the most urgent needs rather than being wasted in satisfying less intense needs. This means that suppliers would gain lots of profits.

The suppliers then invest this extra revenue to expand their production in order to gain more profits. Note, monopolies might restrain from producing more to maintain current profits, but they won’t be able to do it for long, until competing firms sensing profits enter the business to produce more of the commodity. This increase in supply would cause prices to go plunge. So high prices leading to high profits are market signals to encourage increased production. And this is how the free market deals with the economic problem.

Governments on the other hand have a very different way of dealing with high prices due to insufficient production of a commodity. They deal with the economic problem with price ceilings. The Government sets arbitrary prices to commodities whose prices are “too high”, and it thinks the problem is solved. But that’s exactly where the problem starts. The lower prices leaves no profits to be gained or even sends firms right into losses, and that discourages firms from increasing production. Witnessing lower prices, consumers demand more of the commodity than they would at the genuine free market price level. That is like, if a sack of rice were available for just 50 cents you’d probably buy hell a lot of rice bags and waste them for weird reasons. We have in hand a very critical situation, production of the commodity plunges due to decreasing profits or outright losses, but at the same time people are demanding more of the commodity. This leads to shortages.

This is what is being experienced in Venezuela because of price controls imposed by Chavez’s government.

The other fact to remember is that price controls which are imposed initially on a a few commodities are spread to other commodities as well. In fact governments are forced to spread the price control regime because of their initial mistake of controlling prices of a few commodities. Why does this happen? When the price of a commodity is arbitrarily set low, people are encouraged to demand more of the commodity but since there is not sufficient supply available, goods are sold to people on a first come first serve basis. This could have a very important side-effect. The supplies do not get diverted to the most intense needs because those customers whose demand for the product is extremely important is prohibited from bidding higher prices for the commodity.

So when such needs are not satisfied, consumers search for alternative goods to buy. People who failed to secure rice because of the shortages would try to buy wheat which is not controlled by the government’s price control regime. As more people who failed to get rice start bidding for wheat, the price of wheat skyrockets. And now the government steps in again to impose price controls on wheat as well. And thus, the price control regime keeps spreading and turns into a universal price control system, with no kind of free market pricing to guide production and consumption.

Now coming to the problem of hoarding. First reason why some people hoard supplies is because they are unsure about the availability of future supplies due to chronic shortages. The second type of hoarding is carried out by speculators who expect a higher price for the product in the future when the price control regime collapses, or they might sell the supplies in the black market at prices higher than the government set arbitrary ones. It must be realized that the problem of hoarding is definitely not the cause of the shortage, it is a minor side effect of the real culprit–price controls.

The Venezuelan economy is in the mud, and the price control regime is spreading all over the economy. The system is bound to collapse and cause serious problems to the Chavez government. It should also be observed if Chavez does a Stalin here, to use force against his own people. Reports emanating from Caracas already show the seizure of rice processing units, and also the spread of the price control regime towards other goods like meat, sugar ad other goods. Just another case of price controls bringing disaster.

Venezuela will not be able to reach Socialism because Socialism is an impossible theory, it demonizes the same tools by which pro-Free Market economies achieve efficiency in distribution of resources and satisfies the demand of the market. In the name of achieving more Socialism Hugo Chavez keeps on grabbing more and more power, and this is causing Venezuelan people to lose their Liberties.

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

Education is a valuable tool required for survival of which the formal education forms a very small part. There isn’t anything special about education which makes it a birth right. Yet, I have found that a lot many libertarians make exceptions for education. Inspired by economists like Milton Friedman, they support programs such as “School Choice”. It makes one wonder whether they have any real understanding of the market economy. If they really believed in the superiority of the market in providing for the society, they wouldn’t have supported School Vouchers. They would have let the market take care of the situation.
There are several problems with the voucher system. The most important one is that School Vouchers don’t eliminate taxation. Public funded education is the exemplification of the Marxian idea “From each according to his ability, to each according to his need”.¹ Every one, including homeschooling parents, and childless ones are forced to pay for the education of the children who they may or may not care for. Tax payers pay according to their ability. Parents who recklessly produce children get according to their need. Nothing can be more monstrous than that. Taxation diverts production to fields which may not satisfy the needs which are more urgent for the people.
What most of the supporters of the voucher system pretend not to understand is that if Government is to fund the education of children in private schools through taxation, it is obvious that Government would have a say in how these funds are being utilized. One who pays the piper calls the tune. It would eventually lead to a total control of the education system by the Government. It goes without saying that under this system most of what children would be taught under this system in the name of Social sciences would be mostly Government propaganda. There wouldn’t be autonomy even in the case of private institutions. There would be a call for more accountability and regulation which would lead to stagnation and less innovation in the field of education.
On an entirely free market, schools would have to compete with each other in providing better education at a lower price. The voucher system clearly tampers with it. It reduces all incentives for cutting costs as the fee is not given out of the parent’s pocket, but from the Government. The result would be inefficiency and a high cost for maintaining the system. It in turn leads to less children receiving quality education.
Some schools would be out of business due to the voucher system. Schools which don’t accept the vouchers would find less people to pay for the education which it provides. Voucher system, needless to mention, breeds parasitism and dependency.
What most libertarians forget is that the voucher system is against the founding principle of libertarianism: The Non Aggression principle. No one has the right to take from other in the name of noble motives. To begin with, it is not a noble motive to take from the producer to give to the parasite. Coercion is hardly a libertarian principle.
It is interesting that the supporters of this program call it “School Choice”. What does that mean? Should the tax payer be molested in order to provide parents with enough choice? There are always enough options to choose from under a free market. The voucher program would only reduce this choices by leading to Government dictated syllabus and curriculum. It is utterly naïve to think that Government would fund the education without having a say in it. Notice the secret admission of the proponents of this policy that the government is a failure in providing its citizens with quality education.
Why are these libertarians calling for free food, housing or health care when it is well evident that these are more important and urgent needs than education? If they have real faith in the superiority of the market, why don’t they call for an all-out privatization? The answers are not obvious.

1. Story of Socialism and Public Welfare, Reason for Liberty

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

1. Bioethics, Medical experiments and case of TGN1412, Reason for Liberty
2. Bioethics, Medical experiments and case of TGN1412, Reason for Liberty
3. Pharmaceutical patents, Legal Services India
4. Pharmaceutical patents, Legal Services India
5. Pharmaceutical patents, Legal Services India

1. Surrogate Mothers:Renting the Womb, world reports

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

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

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