The Unknown Ideal

Why Indians Hate Capitalism?

There is no social system more rational, benevolent, or just than laissez-faire or free-market capitalism; no social system which can bring to man as much freedom, prosperity, and peace as free market capitalism; and ironically, even with socialism in its death throes all over the world, there is no social system which is still more misunderstood than free-market capitalism. This ignorance has lead well-meaning people to believe that capitalism is the system of exploitation, monopoly, and class warfare. Yet without exception, all accusations that are made against capitalism rest upon a flawed moral theory or an economic fallacy, or in other words, to condemn capitalism is to misrepresent capitalism.
Most of us realize the importance of the separation of church and state: the institution which leaves people free to form and act upon their own values without the threat of others imposing their own values upon them through aid of the government. What most people do not understand, however, is that the separation of economics and state -- laissez-faire capitalism -- is just as important for human prosperity as is the separation of church and state. Put simply, the vast majority of mankind is wholly ignorant of the life-serving nature of capitalism and, as a consequence, ignorant of the solutions to modern day politico-economic problems.
The concept of free-markets was first introduced in an economic perspective by Adam Smith in his seminal work Wealth of Nations. This remarkable book was published in 1776, at a time when the power of free trade and competition as stimulants to innovation and progress was scarcely understood. Governments granted monopolies and gave subsidies to protect their own merchants, farmers and manufacturers against 'unfair' competition. The guilds operated stern local cartels: artisans of one town were prevented from traveling to another to find work. Local and national laws forbade the use of new, laborsaving machinery.
And, not surprisingly to us today, poverty was accepted as the common, natural, and inevitable lot of most people.
Adam Smith railed against this restrictive, regulated, 'mercantilist' system, and showed convincingly how the principles of free trade, competition, and choice would spur economic development, reduce poverty, and precipitate the social and moral improvement of humankind. To illustrate his concepts, he scoured the world for examples that remain just as vivid today: from the diamond mines of Golconda to the price of Chinese silver in Peru; from the fisheries of Holland to the plight of Irish prostitutes in London. And so persuasive were his arguments that they not only provided the world with a new understanding of the wealth-creating process; they laid the intellectual foundation for the great era of free trade and economic expansion that dominated the Nineteenth Century.
Adam Smith and later day free-marketers argue that maximum general good can be achieved by allowing the market to take care of itself and hence the absence of government interference is desirable. To explain this Smith used his famous metaphor: " It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self interest."The individual intends only his own gain but is led by 'an invisible hand' to promote the general good. It is this famous image of invisible hand that perform complex operations of market forces, just like the division of labor to bring great benefit to society and raise the standard of living. Here again the benefit is not planned. Buyers and sellers in the market are motivated purely by self-interest but they serve the general interest without having intended it. It is this portrayal of the natural process, which is central to the concept of free-markets. The division of labor and the workings of the market constitute between them the main causes of the wealth of nations. Both are natural, unplanned, and best left alone to proceed without political interference.
Contrary to popular perception the concept of free markets has been prevalent in India since time immemorial. Hindus first discovered the morality of the market in just two words 'shubh laabh' or 'profits are auspicious'. Profits augur well for society, they found. They said man pursued four ends: dharma, artha, kama, moksha. The doctrine of four ends of Man says that we pursue both dharma as well as artha and we wish to live moral lives while we pursue wealth. This suggests that Hindus considered the market to be an enforcer of morality; something that Henry Hazlitt uncovered only some decades back in his path-breaking 'The Foundations of Morality'. Hazlitt showed how markets promote the core of all morality: good manners.It is also interesting that Prophet Mohammad was a free trader. Islam, equally, is morality of the market. We can happily co-exist in a free market.
Unfortunately our statist parties, even those that are avowedly Hindu, have not understood this. The denial of the economic principle is completely against Hinduism, which assumes that all people are quite capable of pursuing their own artha. There is yet no political party that has recanted the failed Nehruvian economic ideology, which emphasized planning over market determination of economic variables. It was about equality, not efficiency; the state over individual enterprise; subsidy programmes and affirmative action, not building capability; dependence on bureaucracy and not participative efforts of the people.
Even today there is no political party, which is passionately committed to an efficient and competitive Indian economy, in all sectors. There is no commitment that government is an incapable owner, controller and manager of business. Jobs are to be preserved at any cost to the country. Prices are not seen as signals that encourage or discourage production and consumption. Government interference with the price mechanism through administered prices, price controls, movement restrictions on goods, changing tax rates, subsidies, cross-subsidies is easily condoned. Support to vested interests, among rich farmers, the creamy layer of small-scale units, or urban workers are unquestioned. Government is still regarded as the most competent to decide what is right for farmers, investors, pensioners, stock markets, the sick or those who seek education. All positions with authority, however specialized, are filled from among administrators. All these against the principles of free markets and to the detriment of our country. The idiosyncrasies reaches its height when we trust the government which cannot produce even simple things like cement or bicycles efficiently to provide such a complex and far reaching thing as education.
The problem of socialism is of performance, not of faith. If socialism had worked we would all be socialists today. It was the noblest vision that man ever had - to build a compassionate society, which would sweep away poverty and oppression. Alas, every time it was tried it led to statism and oppression. That evidence is no longer in dispute.
A series of controlled experiments were conducted in the last fifty years on a scale that is the envy of every social scientist. Germany, Korea, Vietnam and China were sawed into two and capitalism was installed in one part and socialism in the other. In every case the capitalist part not only out-produced the non-capitalist one, but it also delivered freedom and opportunity.
Free trade has always acted as a catalyst for growth and this can be substantiated by the growth experiences of countries like South Korea, Singapore, Taiwan, Hong Kong and others. Noted economists like Jagdish Bhagwati, Anne Krueger, Ian Little, T N Srinivasan have taken the view that outward orientation and pro-market policies were the primary forces behind the stellar performance of these economies. These authors generally downplay the role of interventionist policies and argue that export subsidies neutralized the anti-trade bias introduced by import barriers, yielding domestic relative prices that more or less correspond to world prices.
The hollowness of the arguments put forward by anti-trade lobbies was best revealed during the Seattle round talks of WTO where protesters against globalization and free markets indulged in violent riots and disrupted the meeting to the detriment of developing countries. While developed countries protestors argued that free market would favor the of Third World low wage laborers and hence threaten their employability, Third World workers or rather their leaders also feel that globalization shall be a threat to their job security too. These paradoxical arguments best reveal the unfounded fear and misinformation that surrounds the concept of free- trade.
Contrary to popular perception the concept to free trade faces maximum opposition from developed countries. Entities like European Union and the USA have shown little enthusiasm for freer trade, for the developed world today survives on what Joan Robinson used to call the age of 'neo-mercantilism'. In fact, the national egoism of market-based systems is clearly seen in the sphere of international trade. Strong farmer lobbies and arbitrary use of anti-dumping clauses against developing countries exports has acted as major hindrances in the practice of free trade.
Trade is the very first economic activity known to man: take this, give me that. The ability to trade is almost instinctive to human nature Man is Homo economics. None of Gods' other creatures possess this remarkable facility. Their lives lack economics. Denying man this basic right is probably the biggest sin. Under a division of labor capitalist society, by rearranging the physical world in such a way so as values which did not previously exist now do, wealth is created. For example, if I put two potatoes in the ground and cultivate five, three new potatoes have been created not only at the expense of anyone else, but also actually to the benefit of others who want a potato and are willing to trade for it. Thus, under capitalism, one man's economic gain is another man's economic gain.
In India our politicians and 'economists' have failed to understand this basic truth. Indians prosper everywhere save in India itself. We have world famous trading communities, but have very few Indian (by residence) industrialists. The reason for this may be our inability to give our own businessmen the incentive to do business. Our politicians never believed in the ability of the common men. They undermined the poor by giving them a bagful of subsidies and put a dozen bureaucrats to see over the distribution, but never gave them a chance to earn for themselves.
The license raj has played havoc with the common men. You need a dozen clearances to run a rickshaw in Delhi and twenty seven licenses to open a school! Our socialist state has taught us that being rich is sin and being poor is glorious. That's why we are still in this Third World. Its time we change. Time we curtail the government's power to decide what is good for us. Time government shifts from manufacturing bread and scooters to providing good roads so that we can ourselves produce and buy what we need. Time government shifts from producing to provisioning for manufacture of economic good(s).The first major reform should be a change over from policies of interventionism to increasing relevance on the free market and the free pricing system." - Prof. B R Shenoy, 1966.

Most Interesting Part :- If you wish to start a political party with these liberal ideas you cannot . It is banned under Section 29A of Representation Of Peoples Act. In India a political party must have socialist ideals ... And still we call ourselves the largest democracy! Its time friends we start deciding what is good for ourselves, time we start acting.

One of my first articles, this appeared in Presidency College Annual Magazine, 2002. Presidency College, Calcutta has always been known for its strong leftist-leanings, but this article was very well received by my friends and well-appreciated by my professors