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Simplest argument for free trade



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On scarcity... and abundance

 http://www.economictimes.com/articleshow.asp?art_id=1368030062
ANTIDOTE / SAUVIK CHAKRAVERTI

 [ MONDAY, JANUARY 28, 2002  10:38:59 PM ]

VER wondered why, when we go to the capitalist west, we see
supermarkets with shelves overflowing with every possible goodie the
heart may desire.

This phenomenon occurs despite the fact that they have lower population
densities, and hence less customers. On the other hand, here in
socialist, swadeshi India, where the density of population is high,
there are no supermarkets at all!

What explains this curious phenomenon? I searched high and wide for a
possible answer - and finally found it in my good old friend, Frederic
Bastiat.

Batsiat's logic goes something like this. Whenever we go to the market
as sellers of a product or service, we desire a situation in which we
do not face competition. Thus, we ask for laws that outlaw foreigners
and seek high tariff walls against them. We thereby invoke the doctrine
of scarcity.

On the other hand, when we go to the market as prospective buyers of a
product or service, we seek a situation in which there are huge numbers
of competing sellers of the product or service in question, so that
there is keen competition, and we can arrive at attractive bargains and
thereby obtain both better prices as well as quality.

In this capacity, we welcome free trade, for it gives us the best the
world has to offer. Thus, as buyers, we invoke the doctrine of
abundance.

>From the preceding logic it becomes fairly clear that, if the state
frames policies that are in accord with our instinct as sellers, then
there will be high tariff walls and all of us will feel happy when we
go to the market with our offerings.

However, this means adherence to the doctrine of scarcity and so, after
we have sold our product, when we go to exchange what we have received
to satisfy our consumption needs, we lose terribly.

Thus, in the good old days of socialism, Rahul Bajaj must have been
happy to see people queue up for ten years outside his scooter factory;
but when he himself went to market to get, say, cheese, he could buy
only Amul: The Taste of India. He could forget a nice Camembert, an
Edam, or an Emmentaler. The doctrine of scarcity means that, as buyers,
we fail as economic agents.

The Nehruvian, socialist state wholeheartedly supported all of us in
our instinct as sellers, and thereby invoked the doctrine of scarcity.
So, when we went to the market as buyers, we found nothing much. Food,
toiletries, cosmetics, wine, beer and spirits, cigarettes, clothes,
shoes, motor vehicles - in every area we found shoddy swadeshi goods.

There was all round scarcity. Hence no supermarkets with overflowing
shelves. Obviously, from an economic point of view, this was a huge
mistake. There are two aspects to economic achievement: one is selling;
but the more important one is buying. We produce in order to consume.

If we succeed as producers and lose as consumers there is scarcely any
point. What is the point in working hard for this newspaper and not
being able to use my salary to throw a lavish wine and cheese party for
my friends?

The state must correct itself and now fully support our instinct as
consumers -- and this means free trade. That will bring all round
abundance. We will all make significant economic achievements. We will
eat better, drink better, smoke better, clothe ourselves better and
also drive modern automobiles.

When an American comes across us we will not be smoking only Charminars
and Wills or drinking IMFL, wearing Newport and driving second-hand
Marutis. We will have a choice of imported substitutes. With free trade
India will be a rich country.

All Indians will make superlative economic achievements as buyers --
and become rich. In our socialist heydays, when the Yankee saw us, we
looked poor. We were poor because we failed as consumers. This should
never be allowed to happen again. Ever.

Of course, today it must be realised that these scarcity invoking
policies were designed to keep clients happy. These clients prospered
while the people stayed poor. This wasn't Economics. It was cheap,
thieving politics. The kind the Swadeshi Jagaran Manch plays today.




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