Tagore: "India is that sacred land of cultural union which never sent anyone back"

[A shorter version of this article titled “Who is a foreigner?” was published in The Economic Times, on 22 May 1999.]

Tagore's India

"India is that sacred land of cultural union which never sent anyone back", the Prime Minister quoted this line from Tagore, live on national television recently, on the occasion of the release of a special CD containing recitals and songs by the poet himself. It is ironic that the same Prime Minister also wants a "national debate" on whether any foreign-born person should be allowed to hold highest political offices in the land.

One does not know whether the PM has lately read that poem of Tagore from Gitanjali (1910). Because just prior to the lines which the PM quoted, the poet says "hethai arya, hetha anarya, hethai dravir o chiin, shok, hun dal, pathan o moghoul, ek dehe holo leen". That is the Indian civilisation has successfully assimilated the aryans, the non-aryans, the dravidians, the Chinese, the shaks, the huns, the pathans, the moghuls. The CD has the poet himself reciting these famous lines.

The poet ends this stirring poem by inviting all - the aryans and the non-aryans, the hindus and the muslims, the English and the christians, the brahmins and the untouchables - to join hands and together fulfill the promise of this holy union. Of course, the poet did not foresee the Italian!

While Tagore represents the very best strands of Indian heritage, like all cultures, the Indian heritage also has some very dark shades. And true to the latter, like their predecessors at the battlefield of Kurushetra, the political gladiators of today often seek to put up a Shikhandi to hide their real motives. Bereft of any other achievements, the issue of Sonia Gandhi's foreign origin is clearly aimed at camouflaging their own failures.

The Sonia factor

If Sonia is a dumb doll, as the critics say, who cannot say a word without a written script before her, how can she get elected, leave alone help her party to victory, and then hope to become the PM?

This debate truly reflects the status of the political leadership in the country today. The pretenders to the throne are mortally scared and incapable of fighting politically the "mere housewife", and "the political novice", despite decades of real politick behind them!

She, a "foreigner", is hardly responsible for the state of the nation, fifty years after our "tryst with destiny" when the country was in the able hands of the native born. Particularly in the last eight years the country has had the privilege of being led by people from different regions and with diverse backgrounds and vast experiences.

The Indian Voter

Much more importantly, behind this veneer of concern for the future of the country in hands of one "foreign born", the true sovereign in any democracy - the demos, the voting citizens - is being subjected to an ultimate insult. What these self-proclaimed champions of national self-respect are saying is that the voters are politically too dumb, emotionally too naive and therefore prone to being swayed by just one inexperienced foreigner.

This is the same voter who has single handedly ensured that since the general elections of 1971, not one ruling party or coalition returned to power at the Centre but once, and that was in 1984 in the aftermath of the assassination of Indira Gandhi.

Not very surprising, since statistics at the election commission show that legislators in India have one of the lowest re-election rates among world's major democracies. Barely a third survive battle of the ballot, and return to the hallowed precincts of the Parliament. Illiterate and undernourished the voter may be, but in political savvy they are second to none. It is the leadership that has constantly failed to get the message that the electorate has been sending - either deliver or you will be delivered.

Today, this gap has widened to such an extent that the political leadership is desperately trying to clutch at any straw that might help them tide over the electoral battle, and enable them to once again settle down to self-serving, rapacious ways till the next elections. Like the issue of Ram temple earlier, Sonia's foreign origin has come handy when no other visible issue could be found.

Leader in a Democracy

Apart from the obviously obnoxious racist underpinnings of the foreign-born debate, there is another equally important question. Should those aspiring to hold high offices need to have a certain level of experience and expertise so as to tackle the enormous "complexities" of governance that any leader of such a large and diverse country would face? Rajiv Gandhi was sworn in as Prime Minister in 1984, when he was not even a Member of Parliament, and had only spent about a couple of years as an office bearer of the party. Nevertheless the country overwhelmingly endorsed this inexperienced man in the general elections of 1984. Just as it decisively rejected him the next time he went to seek a mandate from the people in 1989. His five years of experience as Prime Minister did not impress the voters!!

A democracy is different from all elite forms of government - be it the Ram Rajya, the benign and benevolent dictatorship, or the socialistic dictatorship of the proletariat. The members of the Constituent Assembly had after prolonged debates, accepted the idea of universal adult franchise irrespective of social, educational or economic status. It was felt that although many voters may be materially deprived, illiterate and driven by many passions, nevertheless, still possessed the basic wisdom and therefore, fully capable of participating in the political processes, and shaping the destiny of the nation.

By demanding a qualification for holding political office, we are rejecting this most fundamental principle of adult franchise. And this franchise does not end with casting of the ballot alone. It includes the right to contest in elections, win the support of ones fellow countrymen, get elected, and hold an office where possible, at every level of government. Indeed, it may be argued that the present "complexities" of governance are a creation precisely to deprive the proverbial common man a say in the affairs of the state although it affects him the most.

Opposition to the Congress Party

Opposition to the Congress can be on many counts. It was the socialistic pattern of development followed by Nehru that is responsible for perpetuating our poverty and laid the seeds of corruption by institutionalising controls over the marketplace. Indira Gandhi sought to subvert the democratic process itself, and contributed significantly to lumpenisation of politics. Rajiv Gandhi frittered away the unprecedented parliamentary majority and goodwill of his fellow countrymen in only three years by gross insensitivity and ineptitude.

Likewise, opposition to Sonia could be wide ranging: her policies, her actions, her inexperience, her dependence on the coterie, her attempt to sideline mass leaders and undermine second rung leadership and concentrate all powers in her hands like her mother-in-law, and so on.

Ideological common ground

But, no doubt the Congress is changing. It was the Congress that initiated the steps towards economic reforms, howsoever reluctantly and surreptitiously that may be. And the opposition has changed too. Given an opportunity, it walks the road to reform, however slow that may be, while continuing to talk of a return to the old socialist moorings. This shows the enormous ideological common ground that exists, cutting across all party lines. This also explains the reason for the apparent animosity between parties and leaders. Unable to provide a broad alternative vision, the political actors have to stoop to the lowest levels in order to highlight their differences with the rest.

The real tragedy of our democracy is that despite an apparently vibrant and diverse polity, a large political space has remained unexplored. Hardly any one think that the idea of less government, faster reforms, accelerated development is politically viable, economically sensible and electorally saleable an option.

This narrow vision has also helped us escape some of the distinct political possibilities. Congress may not win, and people may through the exercise of their democratic rights reject Sonia and her party. Even if the party emerges as a major political player, out of sheer political necessity it may have to decide on someone as politically insignificant as I. K. Gujral in order to be able to form a government with the support of others. Or even if the party wins, Sonia could opt to stay out of the PM's office and help Congressmen rediscover the art of leadership and good governance.

Politics of Exclusion

Instead we have the issue of political exclusivity. For a diverse and pluralistic society such as India, any attempt to draw boundaries to exclude some will logically lead to ever-narrower boundaries, and could ultimately end in a tragic fragmentation. The tragedy of the Balkans should be fresh in our minds.

Moreover, will the line end at geographic or biological boundaries? What about the influence of foreign ideas and religions? What about the linguistic and ethnic diversity that might be engulfed in this game of drawing boundaries? What about exclusion on caste lines? What about the different historical experiences?

A maratha leader today has raised the banner of revolt in the Congress party against the "foreign hand". But just a couple of hundred years ago, marauding hordes of marathas used to periodically descend on Bengal and Bihar to loot and pilfer. So traumatic that it has left permanent marks on Bengali folklore and even children's rhymes. Do we really need to relive the tragedies of the past? Or should we accept that the only lesson we can draw from history is not to repeat the same mistakes.

Future at Stake

By raising the issue of Sonia's foreign birth, we are putting at stake much more than the futures of the Congress party and its leader. At stake is the future of our civilisation, our identity itself. Will we rise to our best point, as Tagore had hoped, and continue to assimilate all in our fold, or discard the poet and accept the politics of exclusion and travel on the road to 'where the world is indeed broken up into narrow domestic walls'.

There cannot be a starker choice. It is time we saw through this game of political brinkmanship. There are times when the domestic hand turns out to be much more insidious than a foreign one.

A few related articles in the media:

• K. R. Malkani, Prof. M.N. Panini, and Mani Shankar Aiyar in the Perspective Page - Does Sonia's birthplace matter? in The Economic Times, 1 June 1999.
• Sashi Tharoor's column "A View of the World" in The Indian Express, 30 May 1999.
• Prof. Mushirul Hasan "She is here to stay", in The Indian Express, 22 May 1999.
• B. Raman in The Statesman, 16 May 1999.
• Saeed Naqvi in The Indian Express, 14 May 1999.
  

The market is green

The market is the natural ally of the environment. Environmental resources, like other economic resources can be most efficiently allocated if these are brought under the discipline of the marketplace. It is ironic, therefore, that at a time when the economy is being liberalised, rather than creating a market for environmental resources, new restrictions are being imposed on the economy in the name of protecting the environment.

Environmental quality is like a value-added product that becomes economically affordable and technologically viable with economic growth. It is no paradox therefore that the environment is much cleaner and safer in industrially developed countries that adopted a more market-friendly approach, than in centrally planned economies. Clearly, it is policy that is responsible for continued environmental resource depletion or pollution.

Let us take a closer look at some of the policies that have had an impact on our environment. According to the WHO, much more serious than vehicular pollution is the issue of indoor air pollution caused primarily due to poor ventilation and use of firewood, coal and cowdung as fuel in most poor countries.

Energy markets are severely restrained and regulated. As a result, India’s per capita energy consumption is among the lowest, at 1/10th of that in developed countries, and even then there is a substantial shortfall in supply. Energy consumed per unit of goods produced is among the highest–reflecting the inefficiency caused by poverty. Yet, rather than freeing the energy related products market, like lighting and other equipment, we promote the production of inefficient incandescent bulbs, while imposing taxes on the latest and much more efficient compact fluorescent tubes. According to one estimate, replacement of all domestic bulbs by CFLs could at once eliminate the daily shortfall of electricity in Delhi.

(The interesting point to note is that in the past 100 years, energy efficiency of light bulbs have increased nearly 6 times. This was primarily an outcome of relatively competitive market, stimulating the innovative and entrepreneurial spirit, leading to better product. As a result, it contributed to improved environmental quality, as well as better quality of life.)

The story is the same with vehicular pollution. First, state monopoly in the petroleum sector has contributed to poor fuel quality and no variety. Second, the restrictions and taxation policy have ensured that we are saddled with obsolete and polluting automobile technology. The combined effect has been that we have become world leaders in low efficiency, high polluting, and also more accident prone, two-stroke two-wheeler and three-wheeler vehicles.

Let us consider water. Water is life. It has been said that countries may go to war over water in the coming century. Again, the state exercises almost total control over it. The result, over half the people do not have access to safe drinking water, while agriculture and industry continue to consume water most inefficiently. Devoid of any pricing mechanism and a legal market to trade in water rights, water has become the most politicised of all resources.

It is a pity that the idea of a water market is an anathema in India. Around the world, there is an increasing recognition of the role of the market in efficient allocation of water resources. Farmers, for instance, are finding that selling water rights to cities or industries can be more profitable than raising a crop.

The need is to ensure efficient utilisation of environmental resources, like other economic resources, by bringing them under the discipline of the market forces. The market allows the consumer to register his price preference for a particular quality of product, including environmental quality. As the consumer rises up the economic ladder, he is able to afford a better quality of life.

Free trade and open competition provides the necessary incentive to the suppliers of goods and services to continually try to improve their product quality, including environmental quality, at the lowest possible price. Consequently, the economics of the marketplace help create a win-win situation for the consumer, the producer, and the environment.

The environmental cost of restricting the market has become obvious. Let us not succumb to the rising green protectionism from within and without in the name of protecting the environment. By restricting the market, we will only end up obstructing the improvements in environmental quality that we all cherish.

The Legacy of Hayek

My article titled "The Legacy of Hayek" was published in The Economic Times, 8 May 1999.

Friedrich A. von Hayek, the philosopher of freedom and Nobel laureate economist, was born on 8 May, 1899 in Vienna, one hundred years ago. The man, who went on to become one of the greatest champions of liberty, however, had begun his life as a young soldier in the Austro-Hungarian Empire, and was sent to the Italian front in 1917.

An academic, whose “controversial ideas” were eventually recognised by the Nobel committee in 1974, Hayek was also an activist who was among the founders of the Mont Pelerin Society in 1948, an organisation dedicated to pursue the intellectual battle against all forms of authoritarianism and tyranny.

While we in India were fascinated by government planning, a quarter century ago, the Nobel Academy held that “von Hayek’s analysis of the functional efficiency of different economic systems is one of his most significant contributions to economic research in the broader sense. His conclusion is that only by far-reaching decentralisation in a market system with competition and free price-fixing is it possible to make full use of knowledge and information.”

If, today, the world is witnessing a perceptible change in its mode of thinking, it is in no small amount due to the legacy of Hayek. No wonder commemorative events are being organised in London, Paris, Vienna, Washington DC, Montreal, Eastern Europe, and Central America.

The Adam Smith Institute in the United Kingdom has named him the man of the century. Earlier this year, The Wall Street Journal named him among the most influential economists of this century.

In the 1920s, Hayek was part of that heady circle in post-war Vienna, a group that featured some of the greatest minds of the century. He earned two doctorates, one in law and another in political science. He studied economics under Ludwig von Mises, one of the greatest exponents of the Austrian School. Hayek mainly taught at the LSE, but had short spells at universities around the world including Cambridge, Chicago, Stanford, Tokyo, and Freiburg.

In the 1930s, Hayek was the principal opponent to Keynes. In various scholarly publications – Monetary Theory of Trade Cycle (1933), The Pure Theory of Capital (1941) – he had pointed out that business cycles are caused by monetary mismanagement. Subsequent events have completely vindicated Hayek. Concerned about the stability of value, he wrote a radical essay in 1976, “The Denationalisation of Money”, in which he argued that it was a serious mistake to allow governments to monopolise the legal tender. He called for the freedom of individuals to trade in whatever media of exchange they thought best.

He also published works more accessible to a wider public, which included books such as The Road to Serfdom and The Constitution of Liberty. The former has been nominated by journals like London’s Time Literary Supplement as one the noteworthy books of this century. Dozens of unauthorised editions of it were known to be in circulation among the underground activists in the Eastern block during the cold war.

Unfortunately, Hayek is hardly known in India today, and very few of his titles are available in the market, even though his relevance to us cannot ever be underestimated. Today, we are visibly concerned about corruption and criminalisation of our public life. But over five decades ago in Serfdom, he had outlined how the worst got to the top by taking advantage of the power of patronage vested in political establishments through “legalised” intervention in the economy.

Today, we are concerned that after fifty years of Independence, poverty is so widespread; and as a measure to speed up the process of redistribution of wealth, we thought it prudent to abolish right to property as a fundamental right. Hayek had cautioned all those years ago that “The system of private property is the most important guaranty of freedom, not only for those who own property, but scarcely less for those who do not”.

We want “social justice”, while Hayek warned that “There is all the difference in the world between treating people equally and attempting to make them equal”, and to attempt otherwise would only contribute to social collision.

As we, in one of the last remaining “socialist republics” in the world, grope to find a way to shed the statist mindset, it may be quite illuminating to go back and take a look at Hayek.

While the world marks his centenary, the next century could well belong to him.

Hayek's Road to Freedom

My article titled "Hayek's Road to Freedom-A Centenary that may hold the Key to the Next Millennium-A Tribute to Friedrich A. von Hayek on his Birth Centenary" was published on May 8, 1999.

Introduction

This month marks the birth centenary of Friedrich A. von Hayek, one of the greatest philosopher of freedom and Nobel laureate economist.

While we in India were fascinated by government planning, a quarter century ago in 1974, the Nobel Academy held that "von Hayek's analysis of the functional efficiency of different economic systems is one of his most significant contributions to economic research in the broader sense. His conclusion is that only by far-reaching decentralization in a market system with competition and free price-fixing is it possible to make full use of knowledge and information."

Impact of Hayek

Today, a wide range of people has acknowledged his contribution all over the world. From philosophers like Karl Popper, Robert Nozick and Michael Focult, to political leaders like Ronald Reagan, Margaret Thatcher and Vaclav Kalus, to Nobel laureate economists like Milton Friedman, James Buchanan and Ronald Coase, and countless others. As the iron curtain was being built in the aftermath of World War II, Ludwig Erhard, the finance minister of West Germany turned to Hayekian ideas to rebuild his country. Half a century later when the iron curtain collapsed, leaders in many countries in Eastern Europe again turned to Hayek in their attempt to rebuild their societies. And Hayek is reportedly available on the bookshelf of even the Chinese Prime Minister.

If today, the world is witnessing a perceptible change in thinking, it is in no small amount due to the legacy of Hayek.

Economic historian J. Bradford De Long of University of California at Berkeley, says,
"Hayek's adversaries -- Oskar Lange and company -- argued that a market system had to be inferior to a centrally-planned system: at the very least, a centrally-planned economy could set up internal decision-making procedures that would mimic the market, and the central planners could also adjust things to increase social welfare and account for external effects in a way that a market system could never do. Hayek, in response, argued that the functionaries of a central-planning board could never succeed, because they could never create both the incentives and the flexibility for the people-on-the-spot to exercise what Scott calls metis.

"Today all economists -- even those who are very hostile to Hayek's other arguments -- agree that Hayek and company hit this particular nail squarely on the head. Looking back at the seventy-year trajectory of Communism, it seems very clear that Hayek .. [is] right: that its principal flaw is its attempt to concentrate knowledge, authority, and decision-making power at the center rather than pushing the power to act, the freedom to do so, and the incentive to act productively out to the periphery where the people-on-the-spot have the local knowledge to act effectively."

No wonder commemorative events are being organised in London, Paris, Vienna, Washington, D.C., Montreal, Eastern Europe, and Central America. The Adam Smith Institute in the United Kingdom has named him the man of the century. Earlier this year The Wall Street Journal named him among the most influential economists of this century. The Economist, the weekly journal, has marked the occasion.

Hayek, the academic activist

Hayek was more than a Nobel Prize winning academic. He was an intellectual giant, who was also a gentleman to the core. The man, who went on to become one of the greatest champions of liberty, had begun his life as a young soldier in the Austro-Hungarian Empire and sent to the Italian front in 1917. An academic, whose "controversial ideas" were eventually recognised by the Nobel committee in 1974, Hayek was also an activist who was among the founders of the Mont Pelerin Society in 1948. This was an organisation dedicated to pursuing the intellectual battle against all forms of authoritarianism and tyranny at a time when it was fashionable to call oneself socialist. Today, it has hundreds of members, including many Nobel laureates, spread across all the continents. He inspired many to take up intellectual activism like the late Sir Anthony Fisher, the British businessman who founded the Institute of Economic Affairs in London in 1955. Over the years, IEA, an independent think tank, have produced countless policy papers and books on contemporary issues, and is recognised to have contributed to changing the popular perception that made the Thatcher revolution possible in Britain in the 1980s.

Hayek was born in Vienna, Austria, on May 8, 1899, to August Edler von Hayek & Felicitas von Hayek. Even as a teenager, he was interested in philosophy, economics and ethics. But his studies were interrupted as he was called for military duty in 1917, and saw action on the Italian front. On his return from service he went back to college. In the 1920s Hayek was part of that heady circle in post-war Vienna, a group which featured some of the greatest minds of the century. He earned two doctorates, one in law and another in political science. He studied economics under Ludwig von Mises, one of the greatest exponents of the Austrian School. He left for England in 1931 worried about the rise of the Nazis in Germany. Hayek mainly taught at the London School of Economics, but had short spells at universities around world including, Cambridge, Chicago, Stanford, Tokyo, and Freiburg.

Hayek was one of those few fortunate people who lived to see the tumultuous events that shook the socialist empire, and be vindicated. In a letter written in 1989, he noted, "the ultimate victory of our side in the long dispute of the principles of the free market."5 He must have been saddened at the enormous cost, both human and material, that was paid in pursuit of a doomed experiment. Hayek died in Freiburg on 23 March 1992.

Dispersed knowledge

In the 1930s, Hayek was the principal opponent Keynes. In various scholarly publications - Monetary Theory of Trade Cycle (1933), The Pure Theory of Capital (1941) - he had pointed out that business cycles are caused by monetary mismanagement in. This contribution of Hayek was noted by the Nobel committee. Subsequent events have completely vindicated Hayek. Concerned about the stability of value, he wrote a radical essay in the 1976, "The Denationalisation of Money", where he argued that it was a serious mistake to allow governments to monopolise the legal tender. He called for the freedom of the individuals to trade in whatever media of exchange they thought best.

For a ten-year period spanning over both sides of the Second World War, Hayek developed his ideas about knowledge and its relationship with economics. The papers were put together in Individualism and Economic Order (1948). Apart from questioning the economic basis of central planning, he dealt with "The Use of Knowledge", and "The Meaning of Competition."

Hayek emphasized that division of labour and division of knowledge was complimentary. Every individual possessed some specialised and local knowledge that was particular to his situation and preferences. Yet, the market, through the competitive price system, successfully coordinated all these bits of knowledge. Prices provide the incentive to invest in certain areas, and the information regarding the possible opportunities.6 Hayek explained, "We must look at the price system as such a mechanism for communicating information if we want to understand its real function… … The most significant fact about this system is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action."

Jan Tinbergen, another Nobel laureate in economics, recognising the significance of Hayek's theory of knowledge says, "The key importance of the amount of information available and the frequent lack of relevant information have been dealt with only in the last decades. Ludwig von Mises and Friedrich A. von Hayek can rightly be regarded as pioneers in this connection." 8

Spontaneous order

Hayek also developed the idea of "spontaneous order" to describe the progress of civilisations. Language, customs, traditions, rules of conduct, have all evolved without any conscious design, and without that freedom societies may not have evolved beyond primitive levels, he held. Advancement of society was dependent upon no one overall "plan" being imposed over the actions and plans of the individuals making up the society. Building on Adam Smith's "invisible hand", Hayek showed that planning need not necessarily lead to order and lack of a guiding hand need not degenerate in to chaos.

Hayek argued that the most advanced institution of a modern society - the market - belonged to this third category. Each member of this third group would be bounded by rules, have its own order and increase in complexity in a way that would not be fully understood. According to Hayek, the evolution of language best illustrated this aspect. No single individual or group thought it up. Yet, it has its own rules of grammar, and language continues to evolve as mankind advances. Nevertheless it could not be described in complete detail even with the help of all the modern technology.

Wrote Hayek: "… … it is largely because civilization enables us constantly to profit from knowledge which we individually do not possess and because each individual's use of his particular knowledge may serve to assist others unknown to him in achieving their ends that men as members of civilized society can pursue their individual ends so much more successfully than they could alone."

This characteristic of the market where order seemed to develop quite spontaneously, along with dispersed nature of knowledge, raises one the most fundamental question on the utility of government intervention in the economy to achieve a particular end. The institutions created by government decree to provide direction to such intervention would under the best of circumstances simply be overwhelmed by the sheer volume of knowledge that they will need to process.

In contrast, the market routinely brings to order millions of evaluations undertaken by each individual participant. Hayek showed that progress arises from a continuous process of "discovery" wherein a variety of producers and consumers experiment with a wide range of possible opportunities to make profit.11 Most such experiments fail in the marketplace, and the innovators bear the cost taking the risk. But some succeed, and the benefits are enjoyed by all. That is the reason why in a free market, voluntary trade creates a win-win situation for all participants.

Increasingly, there is appreciation of the advantages of the dispersed knowledge. In his Nobel Memorial Prize lecture, economist Ronald Coase said, "In fact, a large part of what we think of as economic activity is designed to accomplish what high transaction costs would otherwise prevent or to reduce transaction costs so that individuals can negotiate freely and we can take advantage of that diffused knowledge of which Friedrich Hayek has told us."12

The Road to Freedom

Hayek also published works more accessible to a wider public, which included books such as The Road to Serfdom (1944) and The Constitution of Liberty. The former has been nominated by journals like London's Time Literary Supplement as one the noteworthy books of this century. Dozens of unauthorised editions of it were known to be in circulation among the underground activists in the Eastern block during the cold war. This book has now been published in many languages across the world, In the 50th anniversary edition of Serfdom, Milton Friedman has written an introduction.

Unfortunately, Hayek is hardly known in India today, and very few of his titles are available in the market. While his relevance to us cannot ever be underestimated. Today we are so concerned about corruption and criminalisation of our public life. But over five decades ago in Serfdom, he had outlined how the worst got to the top by taking advantage of the power of patronage vested in political establishment through "legalised" intervention in the economy. After all, as Hayek put it, "From the saintly and single-minded idealist to the fanatic is often but a step."

We are concerned that after fifty years of independence, poverty is so wide spread, and as a measure to speed up the process of redistribution of wealth, we thought it prudent to abolish right to property as a fundamental right. Hayek had cautioned all those years ago that "The system of private property is the most important guaranty of freedom, not only for those who own property, but scarcely less for those who do not."

We want "social justice", while Hayek's warned that "There is all the difference in the world between treating people equally and attempting to make them equal", and to attempt otherwise would only contribute to social collision. "Equality before the law and material equality are therefore not only different but are in conflict which each other; and we can achieve either one or the other, but not both at the same time", wrote Hayek.

The world has had a bitter experience in the 20th Century. The dreams of a socialist-collectivist utopia were shattered by economic collapse and degenerated in to tyrannical police states. According to historian Thomas Sowell, if one was to mark the time when the intellectual tide began to turn against the ideal of socialism then it was with Hayek's Serfdom.

As we in one of the last remaining "socialist republics" in the world, grope to find a way to shed the statist mindset, it may be quite illuminating to take a look back at Hayek. We, at Liberty Institute are brining out small volume soon that will contain Hayek's stimulating essay "Intellectuals and socialism".

Julian L. Simon, the noted economist and a professional colleague of Hayek, recounted the following anecdote that demonstrated why Hayek stood out as an intellectual. "After receiving the Nobel Prize, Hayek wrote that the prize should not be awarded in economics. His reason? Once a person receives the prize, he or she is inevitably asked by journalists about subjects outside his or her special knowledge. And too often the laureate responds to such questions. The answers have a good chance of causing damage because they are taken as statements of expert knowledge even though they are nothing more than uninformed opinions. Hayek's personal modesty, reflected in this view of the Nobel prize, is part-and-parcel of his abhorrence of the "fatal conceit" -- the title of his final book -- that the reasoning powers of clever people are capable of successfully remaking society at will."

While the world is marking his centenary now, the next century could well belong to him. And ideas do change the world. Let us hope that the intellectual tide in favour of Hayek will become a tidal wave in the next millenium. Hayek's Road to Serfdom may actually help pave the road to freedom for all of us.

Who is an Indian?

My article titled "Who is an Indian?" appeared in the newsletter of Liberty Institute in May 1999.

It is ironic that the Prime Minister has sparked off a “national debate” on whether any foreign-born person should be allowed to hold the highest political offices in the land, because only a few weeks earlier, he had quoted from Tagore in a programme broadcast live on national TV–"milibey aar milabey; jaabey na pheerey... Aiyee bharoter mahamanober sagaro teere"– From these sacred shores of cultural union, India has not sent any one back.

More so since, in the lines preceding those that the Prime Minister quoted, the poet says the Indian civilisation has successfully assimilated the Aryans, the non-Aryans, the Dravidians, the Chinese, the Shakas, the Huns, the Pathans, the Moghuls.

The question of the “foreign born” was settled by the members of the Constituent Assembly after substantive deliberations fifty years ago. It is strange that the question of nationality and citizenship has emerged as the first major issue in the coming elections.

Clearly, bereft of any other achievements, the political gladiators today are once again seeking to raise an issue only to camouflage their own agendas. This debate truly reflects the status of the political leadership in the country today. This country has been ruled by experienced native born leaders for the last 50 years, and the results are for all to see.

Much more importantly, behind this veneer of concern for the future of the country in hands of one “foreign born”, the true sovereign in any democracy–the demos, the voting citizen–is being subjected to an ultimate insult.

What these self-proclaimed champions of national self-respect are saying is that the voters are politically too dumb, emotionally too naive and therefore can be swayed by just one inexperienced foreigner.

Illiterate and undernourished the voter may be, but in political savvy they are second to none. Except for 1984, never have the voters reelected a ruling party or coalition back to power since the general elections of 1971. It is the leadership that has constantly failed to get the message that the electorate has been sending– either deliver or be despatched.

One could oppose the Congress on many counts. It was the socialistic pattern of development that perpetuated our poverty and laid the seeds of corruption by institutionalising controls over the marketplace. In the 1970s it subverted the democratic process itself, and contributed significantly to lumpenisation of politics. Likewise, opposition to Sonia could be faulted for any number reasons–her policies, her actions, her inexperience, her dependence on the coterie, her attempt to sideline mass leaders and undermine second rung leadership and concentrate all powers in her hands, and so on.

The real tragedy of our democracy is that despite an apparently vibrant and diverse polity, vast political spaces have remained unexplored. Congress initiated the steps to economic reforms, even if reluctantly and surreptitiously. Given an opportunity, the non-Congress parties too would walk the road to reform, however slowly, while continuing to talk of a return to the old socialist moorings. Hardly any one realises that the idea of less government, faster reforms, accelerated development is also a politically viable, economically sensible and electorally saleable option. This shows the enormous ideological common ground that exists between political parties, and explains the level of animosity between parties and leaders.

Unable to provide a broad alternative vision, the political actors have to stoop to the lowest levels in order to highlight their differences with the rest. Instead, we are now confronted with this issue of political exclusivity.

Tagore had hoped that we would continue to enrich ourselves by assimilating all in our fold. Today, at the threshold of the next millennium, we are being asked to accept the politics of exclusion and travel down the road to ‘where the world is broken up into narrow domestic walls’. This is not the India the poet dreamt of. It is time we saw through this game of political brinkmanship. Let us take this opportunity to remind ourselves that Tagore had ended that stirring poem by inviting all–the Aryans and the non-Aryans, the Hindus and the Muslims, the English and the Christians, the Brahmins and the untouchables–to join hands and together fulfil the promise of this sacred union. Who indeed is a foreigner in a land that has provided a home to all?

Conquest Without Victims-Another look at Kashmir

My article titled Conquest Without Victims-Another look at Kashmir appeared in the newsletter of Liberty Institute, May 1999.

War clouds are again gathering over Kashmir. While the political divide is obvious, effective steps towards open trade and travel in Kashmir and in South Asia, would go a long way in building a market based relationship. And this, in turn, could help ameliorate the political pressures.

The specter of balkanisation on race, ethnic, religious or linguistic grounds around the world has generated the realisation that no society is immune to this pressure and “ethnic cleansing” is a completely unacceptable solution. This century is replete with instances of horrendous crimes committed in the name of defending one's community.

For instance, Pakistan was created on the basis of a particular religious affinity, which claimed to be irreconcilably different from other major religions in the sub-continent. However, within two decades, it was clear that Pakistan’s religious homogeneity was not sufficient to overcome the linguistic divide, and Bangladesh was born. Since then, there is growing evidence that even an apparent religious and linguistic homogeneity has failed to smoothen the communitarian fissures, be it the Shia-Sunni or the Islamic fundamentalist-moderate divide, or even the tribal variety. This also highlights the enormous disruptive potential of trying to reshape India on any idea of exclusion, in an attempt to mirror Pakistan, as some alleged nationalists have been promoting.

In contrast, the unique Indian experience with democracy shows, that despite enormous political and economic blunders, it is possible for a pluralistic society to retain its basic political unity. Because, the democratic institutions, despite their many flaws, have succeeded in building a sense of participation in the political process among the diverse communities.

The major problem in India has been that while political participation has increased, participation in the economic domain has remained greatly restrained. As a result, the economic process became politicised with ever increasing pressure group warfare, at times fuelling various forms of fissiparous tendencies.

The key, therefore, is to recognise that while democracy enables political participation, an open market enables economic participation. Democracy maximises choice in the political domain, while market maximises choice in the economic domain. Attempts to intervene in the market process, therefore, to achieve certain political objectives actually harm the very process of participation that is essential for the sustenance of a diverse and pluralistic society.

In the context of Kashmir, this means that people on both sides of the Line of Control, be allowed the opportunity to travel and trade with those on the other side of the political divide. A healthy relationship at this level is the best guarantor of peace and prosperity for the people on both sides of the divide. Kashmir is much more than just prime real estate.

There is no doubt, that the Indian soldiers, braving the harsh environment, will eventually succeed in defeating the infiltrators. Although the cost will be not insubstantial, the country will bear it unitedly. Even if full-scale hostility does break out between the two countries, there is little doubt that India will once again triumph, as it has in the past. But equally certain is the fact that, like in the past, such victories will not help us move any closer to a solution on Kashmir.

On the other hand, market may achieve without much humdrum, what the military manoeuvering will almost certainly fail.

There is no other choice. With the end of colonialism, the focus is no longer on armed conquest of foreign territories for gaining access to resource and markets. Today, the only way of gaining a market is by free trade and open competition, a continuous battle in search of better products and services at cheaper costs. The political borders of nation states are increasingly vulnerable to technological advances, and freer trade is opening up large windows of new opportunities for populations in remote corners of the planet. It will be a losing battle if India and Pakistan try to hold on to their physical borders, with the exclusion of everything else. The tide of civilization is against it.

Unlike armed conquests, conquests by the market forces leave no victims, only winners–peace and prosperity. Let us now give the market a chance in Kashmir and the whole region.

Union Budget 1999-2000: Some unanswered questions

My article titled "Union Budget 1999-2000: Some unanswered questions" was published in the newsletter of the Liberty Institute in May 1999.

The 1999-2000 budget has tried not to tread too hard on any toes. In view of the rollbacks that had to be undertaken last year, this was perhaps inevitable. But by the same token, the budget has left many questions unanswered.

Rural development

The budget has outlined many measures. But it has failed to deal with two basic questions. First, as a former Prime Minister had noted only 15% of all developmental funds actually reach the target. Merely allocating more funds is not an answer to this structural problem. Secondly, the fundamental cause for this is the abject rural productivity. Rural India continues to support 60-70% of the population while the contribution of agriculture to GDP has fallen from over 70% in 1950 to about half that level today. The lesson to be drawn is that the fundamental way to eliminate poverty in the countryside is to improve its productivity, and dramatically lower the size of the population dependent on land. This pattern is seen in virtually every country that has experienced economic development. Most of the developed countries of the world today have less than 5% of their population dependent on land.

Employment

Lack of mobility in labour is directly related to the almost total lack of employment opportunity in the organised sector. Over the past decade, annual growth of employment has been a pathetic 1%, even when the economy experienced a healthy growth. The real cost of organised labour - in terms wages, benefits, and security - in a country with abundance of labour is extremely high. The policies that have been pursued to protect the workforce have had the effect of pricing labour out of the market. And this when barely 10-12% of the workforce is in the organised sector. Unless this trend is recognised and reversed, rural India cannot escape perpetual poverty.

Infrastructure

A lot has been said about the need to develop the basic infrastructure - power, telecom, roads, ports, etc. Again the whole focus has been on providing fiscal sops, tax holidays, assured returns, and other such measures. Very little attention has been paid to the regulatory bottlenecks that has ensured that despite tremendous demand for infrastructural services, investors and entrepreneurs remain uninterested. Whatever little has been attempted over the past few years is too little too late. There is an urgent need for radically fresh thinking if the Gordian knot is to be cut.

Housing

The shortfall in housing is staggering. Fiscal sops are unlikely to make a dent. While the Centre has repealed the urban land ceiling law, hardly any of the states have moved in that direction. Just as there has been very little movement to change archaic rent control laws. This apart, thousands of crores of rupees are lying tied up, because of the failure of state agencies responsible for providing facilities like water, sewage, road, power, etc., in the newly built areas, even in and around Delhi. Even as these properties remain unoccupied, unscrupulous builders are squeezing hapless investors in housing societies, by escalating the price.

Gold deposit

Various kinds of gold deposit schemes have been tried for long to draw out the supposed unproductive asset. All these barely skimmed the surface. Yet, no attention has been paid to understand this phenomenon - why do people in one of the poorest countries in the world are so lured by gold. In a country where in the last thirty years the consumer price index has risen by a whopping 800%, the real value of gold to the people is not hard to understand. Already the proposed increase in duty on gold has led to reports of increasing smuggling.

Government expenditure

While statistical jugglery has made the deficit look better, the government has provided no clue as to how it proposes to keep its expenses in check. Yet another commission is unlikely to find anything that is not already known - gross overstaffing, bureaucratic wastage, and corruption.

Budgets need to reflect the broad vision of the government. And it is this political vision that has been singularly lacking in our union budgets most of the time. They have become much-hyped non-events, as the country and the economy lurches on from one crisis to another.

Market is environment friendly

My article titled "Market is environment friendly" was published in the newsletter of the Liberty Institute in May 1999.

The market is not necessarily the enemy of the environment, as is generally made out to be. A competitive market is actually the best friend of the environment. That was the conclusion of the study the Liberty Institute carried out to find out about the lack of enthusiasm for a government scheme introduced in 1991to promote environment friendly products.

The Ecomark scheme was initiated in 14 product categories. Standards were set for these products in terms of efficiency, biodegradability, recycle levels, etc. The idea was that if the products met these standards, then they could receive the Ecomark label, and thus, helping consumers to make better decisions.

The underlying assumption for such a scheme was that though the consumer wanted products that had less impact on the environment, there was no mechanism to communicate that information to him, which he could use to make his purchases. Yet, the market can and does provide a wide range of product information through advertising, price and labeling, brand names, etc., to communicate to the buyer various aspects of the products.

More significantly, the study found that there were serious problem involved with standardization and labeling regulations. For instance, in case of electrical lighting, the Ecomark provided standards for the filament lamp, and the tube light, but did not do so for the most efficient lighting devices available today - the compact fluroscent lamps. These clearly suggests that rather than encourage the development of more efficient products, the standards actually set a ceiling on product performance. Apart from technology lock-in, such an approach actually provided a disincentive to growth of new knowledge.

Determining the relevance of some standards under Indian conditions is also problematic. For instance, phosphate free detergents are to be encouraged, but phosphate run-offs from soap is estimated to be only 1% of the total phosphate released into the environment, which mainly comes from agro-chemicals. So a technologically valid standard is defeated by the ground realities.
Also, the incentive structure is weak, leading to lax monitoring and prosecution in case of spurious use of the mark, as can been in case of ISI mark.

The report concludes that improvements in environmental quality can be seen as a value-added product that becomes economically affordable and technologically feasible with economic growth. And when the consumer is able to afford such benefits free markets have many ways of communicating that information. Free trade and open markets, therefore provides a win-win situation for the consumer, the producer and the environment. The report also found that quite a bit of the demand for such schemes come from the developed world, which was seeking to use the environment to introduce a new form of protectionism.

IPR protects Indian agriculture

My article titled "IPR protects Indian agriculture" was published in the newsletter of the Liberty Institute in May 1999.

A lot has been said over the consequences of IPR in agriculture, and in areas where knowledge is said to have been traditionally handed down the generations. However, a proper IPR regime can help protect not only the foreign inventors, but also the domestic players. Following is a summary of the present status of IPR in some of the most prominent instances.

TURMERIC

In 1993, two American scientists of Indian origin filed a patent for use of turmeric to heal wounds. Initially the specification contained information on the prior knowledge of the various uses of turmeric and it also acknowledged that the pharmaco-kinetics involving the safety toxicity dosage and biological properties of turmeric are well known.

It also said the main object of the invention is the use of turmeric powder at the site of injury by topical application and/or oral intake. The other claims related to optional features of the powder — oral and topical.

The US Patent Office in 1995, granted the patent claim, reversing its earlier ruling that had held the invention not novel.

CSIR challenged it, providing 32 references from ancient texts to show prior knowledge on the use of turmeric as a powder. The US Patent office reexamined the claim, maintained that the invention lacked novelty and revoked the patent.

NEEM

There are more than 40 patents, mainly for neem pesticides, held by laboratories in the US and Europe. A US company, W R Grace, was granted a patent for neem as a pesticide. India couldn’t challenge it because the patent was for a formulation which increased the shelf life of neem extract. It was a valid patent and so protests had no effect. Indian scientists had been experimenting with this but since they had not applied for a patent for this process, they couldn’t challenge it.

Incidentally, even India has granted more than 80 patents on neem, 48 of them of Indian origin. None of these patents have prevented Indians from using neem nor has anyone paid royalty.

COTTON

In October 1992, Agracetus Inc, a subsidiary of W R Grace, got a patent for rights on all forms of genetically engineered cotton, no matter what techniques or genes are used to create them. It was challenged in court and the US patent office revoked it in 1994.

Baruch S Blumberg, a US virologist, obtained a patent for a formulation of phyllanthus amarus, a plant used for centuries in south India for the treatment of jaundice. On the face of it, this does not satisfy the criterion of novelty, but Blumberg obtained the patent for viral hepatitis, not mentioned in earlier texts. So his innovation satisfied the criterion of novelty.

BASMATI

In September 1997, Ricetec obtained a patent for calling aromatic rice grown outside India as basmati and selling it under any brand name. Ricetec has already been selling brands like Kasmati and Texmati claimed to be basmati type rice. With the patent, Ricetec will be able to label its exports of rice also as basmati.

Company claimed basmati is a generic term and that it had invented certain novel basmati lines and grains which make possible production of high quality, high yielding basmati rice worldwide. It claimed to have isolated specific scientific parameters like length-width ratio, starch index, percentage increase on being cooked etc.

Otherwise authentic basmati is said to be available only from India and Pakistan due to the unique and complex combination of environment, soil, climate, sowing practices and genetic variety.

The invention, Ricetec claimed, “is based, among other things, on the surprising discovery that certain basmati plant and grain characteristics and aspects of the growing environment for traditional basmati rice lines are not critical to the perceived quality of the product.”

This is not an issue of patents but geographical indication. This relates to the area of production of a premium product like champagne can only be from the Champagne district of France even if those grapes are grown elsewhere and feta cheese is goat cheese from Greece.

India still doesn’t have any law relating to geographical indication but is expected to use this line of defence to argue its case. Darjeeling tea and other similar products could benefit from this, just as Champagne has.

IPR promotes knowledge and economic development

My article titled "IPR promotes knowledge and economic development" was published in the newsletter of the Liberty Institute in May 1999.

Over the past couple of years, the debate over Intellectual Property Rights (IPR) has increasingly become quite shrill. However, this seemed to have not enlarged the scope of the debate. The opponents have tried to portray IPR as a sell out to foreign interests, while the supporters of IPR reform keep repeating the necessity of IPR in the era of globalisation. However, the distinct advantages of having a good IPR regime, have rarely been highlighted.

IPR was first recognised in England in the 17th Century, just as the industrial revolution was beginning to have an impact. The aim was to protect the interests of the inventor, and thereby encourage the development of newer and better products so that the society benefits as a result.

Another critical component of IPR was that once the right was recognised, the new knowledge was open to public scrutiny. The inventor, knowing that his interest is protected, did not feel the need to cloak the invention in secrecy. This openness encouraged competitors and critics to scrutinise its weaknesses, and find ways of improving upon the existing products. This process has now established itself in what is known as peer reviewed publications, which have become the main vehicle of spread of knowledge in this information age.

Many countries that initially wanted to catch up with the industrial and economic leaders of their time had resorted to copying these products without regard for IPR. But as history has shown real scientific and technological progress has taken place only in countries that had finally accepted effective IPR laws. Germany and Japan are very good examples of this. On the other hand, the cost of rejecting IPR, whether on ideological grounds (as in the former socialist countries) or on pragmatic grounds in the hope of bringing immediate benefits to the people (as in India) are increasingly becoming obvious. It is not coincidence that even with one of the higest scientific and technical manpower, India has failed to develop the scientific temper and make her presence felt globally.

Two points must be taken in to account here. IPR is not a monopoly right granted by the government to the inventor. It is the recognition (just as all other political rights are) that since the invention may not have seen the light of the day without the genius of the inventor, therefore due credit should go to the latter. Secondly, the inventor can, of course, decide to keep his formula a secret in an attempt to protect his interest. But this would lead to a great waste of time and energy as others make the effort to reinvent the formula (or the wheel!). And the whole process may actually lead to the ultimate death of a special line of knowledge.

Experience of Ayurveda illustrates this point well rather tragically. It is not difficult to imagine that as knowledge of medicine in ancient times grew, physicians would have increasingly felt vulnerable due to lack of protection and recognition of their particular contribution to the development of knowledge in this field. So rather than participate in open debates and discussion of the progress being made, they increasingly sought to enclose themselves within the boundaries of their own school of thought. As time progressed, these physicians were only confident of passing down their knowledge on to their own family members and their own select pupils. It may not be very farfetched to say that as a result the practitioners felt no need to try and expand their knowledge base. The outcome was that in due course, the knowledge that was once a subject of open scrutiny, was turned in to a dogma. As a result a time came when even the practitioners did not retain the ways of validating their practice, and resorted to ritual. And it is only in recent years that some efforts are being made to revive the knowledge that has been lost. The cost has been enormous. The Liberty Institute is preparing a report on the impact of IPR on India, and other developing countries.

Clearly IPR has intellectual as well as practical advantages for every one. Today, more than ever before, economic advances are critically dependent upon progress in science and technology. An effective IPR, along with open competition and free trade (including exchange of ideas), are the only ways of ensuring an expanding knowledge base so essential to sustaining economic progress.