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Re: Pre-debate Re: Nationalization


I agree with you that the US never "nationalized" during the wars.  I was
trying to point out that "Nationalization" achieves no useful purpose other
than some instant public gratification.  As Milton Friedman pointed out in
his TV series, government should govern by facilitating the smooth flow of
business transactions.  Granted that certain business activities do public
harm and should be stopped (drugs, explosive, nuclear weapons in private
hands etc.).  In general, the Hong Kong model goes towards no government
intervention in business activities to the current Indian model which
dabbles in every business activity by either managing it or imposing severe
restrictions by licencing, regulations etc.

The folly of heavy government involvement became known to Rajiv Gandhi.
However, he was half hearted in stopping the debilitating effects of
government intervention.  Manmohan Singh under the Narasimha Rao government
decided to take small steps to remove government shackles on private
business.   In a vast democratic country like India is any meaningful
changes have to be made gradually to avoid severe public backlash.  An
example, is the current minister of power Mr. Kumaramangalam's suggestion to
do away with free power to farmers led to wide public outcry from the
states, Punjab and Tamil Nadu in particular.   He had to reverse course.
Public in India and public officials are very bright and they understand the
current system is untenable.

Some simple measures at this time would be to give up public planning (get
rid of the d..n Five year plans).

Increase defense spending (Yes I said increase).  President Reagan proved
this point by pumping resources in the Military-Industrial Complex (which
led to the collapse of the Soviet Union).  The world acknowledges a strong
country an ignores weak ones.  Till 1968, China was also ran.  But the Lon
Nor tests made the world acknowledge China.  I am not a war monger.  I hate
resource diversion to non-productive military resources.  Krishna told
Arjuna that being strong and doing the right thing is the answer to his

Giver greater autonomy to States in exchange for lower subsidies.

Get a national concensus from all parties regarding divestiture of public
assets.   Set a time frame( 10 years, 20 years or whatever)  and announce

Kush Khatri wrote:

> Nationalization is a permanent thing where the government acquires
> businesses and assets for good.  What Mr. Dave Mahadevan is refering
> to are emergency powers under,  what is commonly called the "War
> Powers Act (?).  As the name itself suggest, that under a war
> situation the government can "appropriate" whatever industry or
> services or assets are needed for the war effort.  The rationale is
> very simple:  The overriding interest to protect US security overrides
> any other interest.
> However, these are only temporary powers.  As far as I know the US
> government cannot use this act to "nationalize" or to take over
> businesses and assets on a permanent basis.  The appropriated
> facilities and assets are returned to the rightful owners as soon as
> the War emergency is over.
> Whether we like it or not property rights are considered "sovreign" in
> a democracy.  Property rights have not been honored in post-British
> India. Not honoring property rights is a contradiction in a democracy.
>   Democracy does not guarantee economic equality.  However, a genuine
> democracy must guarantee political equality and equality before thee
> law.   If money buys you easy access to a politician who, in turn,
> illegally and arbitrarily controls economic activity -- that is a
> violation of basic democratic principles.  If law enforcement is so
> weak, ineffectual and worst so corrupt that people with money can buy
> their way out, you do not have democracy.
> Kush Khatri, DC
> ---Sanjeev Sabhlok  wrote:
> >
> > Dear Dave,
> >
> > That was an excellent write up. I had never known about this temporary
> > nationalization thing in the USA. Great to get this kind of knowledge.
> >
> > Could you introduce yourself a little bit so that I can update the web
> > site with your info as a contributor (i.e., if you would like to
> disclose
> > your idenitity)? I am very impressed by the learning now beginning
> to pour
> > in from all sides.
> >
> > On the specifics of nationalization, there is no doubt that the
> "public"
> > did welcome bank nationalization. The public of Germany also welcomed
> > Hitler's incursions into Poland. Of course the public loves to be
> told how
> > they have been taken for a ride by the enemy - and the enemy could be
> > anyone the leader likes to make up: our leaders, after the Avadi
> > resolution, loved to make the Soviet model as our hero; therfore all
> > business folk were painted as our enemies, rather than as role
> models for
> > our youth to look up to.
> >
> > Clearly while USSR has long ago reversed its policies, our leaders
> still
> > happily continue piecemeal things like disinvesting Rs. 5,000 crores
> of
> > public sector shares this year. That amount is a very measley
> percentage
> > of our total public sector holdings. Nearly 40% of our industry is in
> > Govt. hands (and here I am beginning to talk out of my hat, so please
> > correct me if you know the facts), which means that we have much, much
> > more to privatize.  (Help! I would have really liked to have facts
> with me
> > at this point: I am going to summarize some essential statistics on
> India
> > this weekend from the Economic Survey).
> >
> > Well, nothing can be done about history. Only about the future. We can
> > turn the future back, and so let us move on and write out a good
> > privatization policy in about half a page.
> >
> > Your points about the primary and seconary capital markets are very
> well
> > taken. These points are already in the manifesto, I think. Would you
> like
> > to help everyone out by specifying in some detail (two paras, e.g.,)
> what
> > you would do as Finance Minister to promote these markets. That
> would go
> > into the Agenda.
> >
> > The point about the Central bank is also in the manifesto. Would you
> like
> > to specify that in some detail too (for the Agenda): like, what should
> > the central bank be doing, and how do we ensure its autonomy?
> >
> > Once again, an excellent piece. If we begin to discuss things like
> this,
> > we will make much progress and I will also be able to reduce my
> antics and
> > heroics, and return to earth, quickly. It has been quite a painful
> > experience to try to get people organized, interested, and involved so
> > far. Let us do some very serious debate and hope that more solid and
> > capable Indians get into this internet coffee table for some very
> serious
> > introspection about India's future.
> >
> > SS
> >
> >
> > On Fri, 26 Jun 1998, Dave Mahadevan wrote:
> >
> > > Folks:
> > >
> > > I believe that nationalization of private enterprises should be used
> > > very very sparingly and reluctantly.  When investors (domestic and
> > > foreign) have this "nationalization" albatross hanging around their
> > > neck, they are reluctant to take the plunge.  However, even the
> United
> > > States has used temporary nationalization for urgent national needs.
> > > For example, world war production of weapons was mandated by the
> > > government to the private sector.  Chrysler, Ford, GM, US Steel etc.
> > > put their production entirely for war needs.  President Truman
> > > temporarily took over the the steel companies for a short while
> during a
> > > strike to prevent economic problems.  When Prime Minister Mrs.
> Gandhi
> > > nationalized the banks in 1969, the public did welcome it.  The
> > > reasoning by the government was flawed then and is flawed now.  They
> > > reasoned that the banks were profiting enormously and leading to a
> tight
> > > credit.   They also reasoned that a socialist economy has no use for
> > > large banks.  I want to point out that the capital limits at which
> > > nationalization is automatic has been rasied many times since
> 1969.   In
> > > fact, both Prime Minister Rajiv Gandhi and Prime Minister
> Narasimha Rao
> > > had avoided any bank nationalization during their tenure.   My
> solution
> > > would be the opposite way.  I would encourage actively,  formation
> of
> > > primary and secondary capital markets.   Capital is the fuel for an
> > > economy and a system capable of providing and acquiring capital
> without
> > > regard to emotional, political or social reasons is essential.
> Also, I
> > > would go forward and make the Reserve Bank of India, a quasi
> government
> > > organization in the mold of the US Federal Reserve.  The Federal
> Reserve
> > > makes all the monetary policy without government intervention and is
> > > solely concerned with the economy.  The RBI has been a tool of GOI
> > > (usually the Congress government) to pump liquidity during election
> > > years and subsidize individual State deficits.    Well that is my 2
> > > cents or 84 paise worth.
> > > Dave Mahadevan.. mailto:mahadevan@fuse.net
> > >

Thank You.


Dave Mahadevan.. mailto:mahadevan@fuse.net