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RE: on free trade and markets
On Wed, 13 May 1998, Charudatt wrote:
> I believe it is an incorrect assumption you seem to make that the only
> alternatives are to either be exploited or to be the exploiter. Or
> that the only viable social organizations are power hierarchies.
Charu, I never said that we have to be an "exploiter." To promote
enterprise, competition, and success is not to promote exploitation. On
the other hand, we are moving toward policies that will bring us on par
with the most most powerful - not through nuclear might - but through
success in selling legal goods and services.
Capitalism, in its "purest" form (i.e., perfect competition) is the most
democratic kind of economic transaction that can ever be envisaged. Barter
was capitalism: not exploitation. So is the act of going to a supermarket
and chosing to buy diet Pepsi and not diet Coke. The key thing behind
capitalism is (a) voluntarism [i.e., you may buy a soda or a cooler,
purely in pursuit of your own self-interest: quenching your thirst] and
(b) choice [i.e., I chose diet Pepsi but you choose diet Coke, and do not
stop me from selling any "legal" commodity to restrict my choice].
Voluntarism + choice = democracy and respect for each individual
and =/= (not equal to!) exploitation.
Exploitation is when someone restricts my action (makes it involuntary)
or restricts my choice. In the case of our economic model, the social
planner decides what is legal and what is not, what is to be produced,
what is to be sold, what price it is to be sold at, etc.,; and restricts
choice as well as voluntarism. To me that is exploitation and invasion of
basic individual freedom.
the trans-national capital that would start flowing into
> India by "free trade" would primarily benefit the controllers of the
> caital and a small set of its local agents but not the majority of the
The term "free trade" should be accorded the suspicion it
> deserves based on long historical precedent, whether it is the case of
> the US threatening Thailand, China, or Malaysia with trade sanctions
> for restricting cigarette advertising by US tobacco companies, or
> Britain and the US waging war on China defending their "right" to
> conduct a trade on opium (grown in India, incidentally).
> The point is that before allowing incursions of foreign capital we
> need to carefully analyze who benefits. Historically, from Vasco
> daGama onwards, it has rarely been the local population.
I will deal with these issues in two parts. One, I will elaborate the
concept of exploitation and two, I will deal with foreign capital. Please
bear with me. These arguments should be carefully read and understood, so
sip them over a cup of coffee:
I am a scientist, through and through. I measure people's "demand"
functions by their actions and not by their statements.
My measurements show that there is a huge "demand for exploitation" in
"What rubbish is this now!" you exclaim. "How?"
Let me explain:
>From the claims that have been made so far about foreign exploitation and
capital, etc., I make an index of exploitation and rank USA as 10, Britain
as 8, Australia as 7, and India as 0 (i.e., no exploitation since we were
the "exploited" and the exploited have no one else to exploit!).
Now I take observations on the best Indian students of the past 50 years.
I notice that about 50% of the IIT engineers are in the USA and about 50%
of our doctors are in the middle East or in England. I also observe many
of our better physicists (and you are one of them, Charu), and all kinds
of well-qualified Indians in all disciplines are to be found in the
If at all an IIT engineer considers it fit to stay behind in India (in the
land of no exploitation!) he or she must enter either a top private
sector company [exploitation!] or the bureaucracy (the IAS is literally
flooded with IIT engineers over the past 15 years!), and bureaucrats, you
well know are more exploitative than others.
I observe that very few IIT engineers have entered the "rural development"
NGO field (and I know quite a few of those guys too, having been the
founder Secretary of one of the largest and most active NGOs in the North
East, called Shram India - I'm developing its web page at this stage), and
almost none is working in the deep North Eastern villages of India, where
there is no electricity, and a farmer, to light his lamp, has to purchase
kerosene oil from the local "Fair Price shop" at prices at least three
times that fixed by the "noble, non-exploitative government."
On the whole, from the behavior of our best people, I observe that they
are severely masochistic, seeking to inflict high doses of exploitation on
themselves, by migrating to exploiter countries, or to the exploiter
I hope you have no objection to my very scientific argument.
Well, apart from this non-serious discourse on the nature of exploitation,
I wish to ask you a few pointed questions.
Are you (and I don't mean you, Charu, but all of us in the USA and in
other "capitalist" countries) personally being "exploited" by the USA or
are you "exploiting" them by grabbing their dollars and using the
artificially high rate of the US dollar when you return to India to build
huge houses in NRI colonies? [remember, at the PPP rate, the fair value of
a dollar is only Rs. 10 even today]
Were you forced by the USA to come here and "slave" for them at high
salaries? Have I been forced to come here to this country to be
"brain-washed" by their Professors: i.e., did they drag me, protesting and
kicking, from my job in the National Academy, to come to this country as a
student and live a better life than I ever lived as a top civil servant
and "Professor" in India? I think right now, I am exploiting them by using
their own knowledge and learning to work toward upsetting their boat and
help bring India (hopefully) to the forefront as their major competitor.
[They will yet rue the day they decided to impart knowledge to me (!)]
Who is the exploiter? What is the truth?
Exchange vs. Exploitation:
If you have not been personally exploited, then please stop expressing
such needless concerns and let us call a spade a spade. The process of
fair and voluntary exchange (trade) is mutually beneficially to all
parties (the US benefits from you as much as you from them). That is the
meaning of trade or exchange or barter.
It is also known as a Pareto optimal outcome, no matter how ghastly this
The issue that seems to exercise most of us is: the distribution of the
surplus from this exchange (i.e., whether the US gains more from your
presence or you do, or India - the people who trained you. The only way to
solve that puzzle is through bargaining in the market).
The Bogey of the Political role of Foreign Capital
Coming to foreign capital. Let us be very very clear on one thing. India
did **not** lose its sovereignty to the British because of the technical
superiority or might of the British, or even because of this "ghost" of
foreign capital. For 150 years from about 1600, the British and French and
other traders only performed voluntary trade in India. Both sides gained.
As always, our wonderful people, by fighting with each other, helped bring
the British and French into the political processes of India. That did not
really matter: they would have only remained in the sidelines had one
particular thing not taken place: the Battle of Plassey.
We had to gift the key of India to the British. How else could we remain
India gifted away the key to its sovereignty to the British in the
infamous "Battle" of Plassey: which was never truly fought and never
truly lost. Only gifted away to the British. Because of the treachery and
betrayal of Mir Jafar, who took bribes, and various other commitments in
return for the handing over of the Treasury of Bengal to Clive. Clive was
losing that battle badly when Mir Jafar misled the Nawab and declared a
loss in the battle. Poor Indians! Even after 250 years we still think the
British took us over because of their "capital"! The British came
virtually as beggars to our shores, and we (well, I'm not responsible!)
GIFTED them our country.
Let us read history and marvel at the power of our home-grown traitors to
gift India away repeatedly. We need only these kind of traitors to help us
lose soverignty again and again.
Poor foreign capital never had these properties of being able to take away
So, let us always lay the blame on the correct door, and not scatter it
Lesson: Trade and exchange are good. Traitorship is bad. Period.
(If you like, one can make a clause in the Manifesto: Traitors who gift
India away will be themselves gifted away!)
Coming to the political issue of our sovereignty: today, if the USA
wanted, it could completely crush the Indian armed forces in a few hours
and fully take over India. Our nuclear might would be no match for the
superior power of the USA. Do you agree with me on this? If not, please
remember that the USA has been spending in the range of about $300 billion
on its defence since ages, while India's expenses came to about $7
But the USA is least bothered about political control over India. It
serves no purpose and will only increase the level of misery in the world
and in the US. The people in the USA hate "taking over" far off lands.
Foreign capital always goes to places with the highest rate of return, and
is NOT, I repeat, is NEVER, driven by political motives. Please do not
feel scared of foreign capital, whether "true foreign" or of an NRI. These
are businessmen wanting to earn more for their families by providing
services and goods and living a better life, going to a movie or opera in
the evenings with their wives and children.
Contrary to the fears expressed by you, today, foreign capital is NOT
seeking India. If political goals were important, billions of dollars of
investment would have gone into India by now. In any case, India would
have been completely taken over by the West, ages ago. But people -
including the "vicious" foreigners ! - are peace loving and do not want to
get involved in petty terrorist attacks on their people by getting
involved in far-off lands. To be precise, businessmen HATE political
disturbances of any kind.
We can of course further scare away foreign capital by talking like this,
raising completely false fears (bogey?) about foreign capital and
"exploitation," and help scare away the few brave souls who thought that
now they could go and try their fortune in India, since it claims to have
"liberalized." Please look at the thing called country risk studies. India
is so risky that few "exploitative capitalists" are willing to risk their
money in India. Even if they do go in, we change our policies every two
days (a la Enron) and ensure that they are completely tortured.
I know personally the Indian head of Singapore Airlines, located in
Madras. I happened to meet this gentleman only today, about an hour ago,
in a car repair shop. His son is doing an MA in Economics in this
university and is a close friend of mine.
The horror stories that he has to narrate about his experiences in India
in the recent past are to be heard to be believed! Their experience of
trying to form a private airlines with Tata is too well known to need
repetition here. What can this poor little country like Singapore do to
us? They cannot even prick a pin in our thick hides, so big are we in
comparison to them. So much love do these SE nations have for India. These
countries look upon us as an elder brother and we run away like a demented
coward with our tail between our legs?
Our Prime Ministers, Finance Minsters, top bureaucrats, etc., run around
in circles, scared of ants like Singapore!
Are we pathetic cowards or what? Are we not even slightly ashamed of
ourselves? Raising these bogeys of foreign capital and its political
"interest"? Being scared of every little businessman who tries to come to
our shores to set up a business for himself and his family: are we not
men? Do we not have the ability to defend our own land against Singapore?
Now that we have nuclear weapons, are we confident enough to let Singapore
enter and invest in India or not? Or do we need to raise the bogey of
Vasco Da Gama (who at least did something brave)?
Let us diversify our foreign investments by getting them from all over the
world so that all nations get the golden opportunity to invest in our
great and magnificent land. Then maybe some of our fears may be put to
Foreign capital brings resources, technology and competition. Let us not
be afraid of capital, whether domestic or foreign. Let us not be afraid of
the game of competition and voluntary exchange (international trade).
Let us be afraid mortally of ourselves, our traitors like Mir Jafar who
sold off Bengal for his temporary, personal gain. Let us be afraid of
driving ourselves psychologically impotent by these irrational fears of
tiny ants like Singapore.
Let us wake up and realize that this is not 1757 but 1998. Abraham Lincoln
and Mahatma Gandhi have come and gone, and left a completely different
world for us today.
Take precautions against monopoly, etc. (we've discussed that). But please
do consider the usefulness of an open economy and free (non-exploitative!)