Keynes folly on trial

Keynes, Hayek Preside at Washington Jobs Debate: Caroline Baum

China's eclips

"China is a keen student of economic history, and can be persuaded that multilateralism is better for a superpower: it produces world order, yet leaves lots of space for superpower bullying." 


Some one said to me some years ago when I was attending the international workshop for Young Scholars on Social Sector in China that "If you are able to read Chinese mind, well, then you can pass any exams on this earth!!".

Asian Swaraj

The iron lady of today's opposition politics in India argues (rightly so) that:

• "A maritime perspective necessarily means sea power but I do not imply by this just the need for a strong navy. It is rather a web of economic, commercial and political ties with the countries in Southeast Asia and North Asia, as well as the wider Pacific community, that we have to reach out to. This perspective, in fact, means also returning to our roots in ancient maritime history — the Mauryas, the Chalukyas, the Cholas and other kingdoms and dynasties who were flourishing maritime entities... It is my view and conviction that in the next decade or two we will see a full flowering of this maritime perspective in India with its attendant scholarship and also retrieving from the annals of history our ancient and historical links with the countries of Southeast Asia and beyond."

I G Patel on Indian economics

Given the periodic drought-fuelled food price-led inflation in India, IG’s policy prescription was forthright. “The only solution when it comes to controlling inflationary pressures which arise from periodic shortages of basic commodities is to eliminate these shortages — either by producing more on an average, or by importing more while the former is being attempted.” He felt “inflation ought to be controlled not just by control of demand but by stimulating supplies. Indeed in the long run, the latter is the only acceptable solution…”

Godscience

"Hindu thought was inclusive; the healer Charaka, the astronomer Aryabhatta and the mathematician Brahmagupta were as much part of the Vedic ethos as Agastya. The great Bhaskara—whose work on the calculus predates Newton—was taught math by an astrologer. His thesis, the Siddhānta Shiromani, is not just about arithmetic and algebra, but also covers planets and spheres—the fundamentals of astrology. From antiquity, cosmic mysteries were part of Hindu science: architecture has a spiritual aspect, like the Thachu Sastram of Kerala; so does Ayurveda, that celebrates the animistic aspects of botany and the arcana of planetary influences. Divinity wasn’t segmented: science, mythology, mysticism and mathematics together made up God."

Consultants for Courts in Jharkhand

There is a news which says;

"Jharkhand High Court has moved to appoint 24 professionally qualified court managers — armed with B-school degrees in management and IT systems — to reduce the tottering backlog of cases."

CPI

Do you know, how Communist Party of India (CPI) lies?


Here is an example:


"Vajpayee’s NDA appointed a committee under Aditya Birla to recommend reforms in higher education in 2009"


Let me say what I heard about the writer of the above line-D Raja. He is my district in Tamil Nadu, in the north western part of the State. He was a middleman for disputes cases, yes all kinds of cases. Mostly he got huge money from farmers by playing middleman in doing all kinds of odd jobs between the high officials of district collector and the farmers.


Secondly, during my visit to Kolkata early this year in one of the function organised by some local group reportedly circulated some notices that under the 2G spectrum it was D. Raja who looted all that thousands of crorers and not the A Raja! Whatever may be the mistake, the story is aptly fitting.

Property or Poverty

T N Ninan writes: "The poverty industry has its own rackets, and if public money is to really go to the poor, we need realistic definitions based on proper data."

"Property rights are not universal entitlements. If I own some land then you do not own it. You lack entitlements that I enjoy, such as the profits made by farming that land. Such inequalities are inherent to property rights. Which may explain why human rights activists do not care for them."

Old mind

In this high-tech age. When so many things are in public domain to have better view on it. Many take escape root to be on wrong side. That is how it has been happening with the Planning Commission figure mentioned in its reply to the apex court in India.

To my surprise, I was on a discussion in telephonic-call from London!! I was trying to tell them what Sunil Jain has greatly pointed out in his column today in the FE. Finally, they-the London wallas could not get it!! and kept on and on asking how does that matter. Yes, it does matter a big way.

Without the body

Sufferings are as universe as the happiness in the human life. It's not just that I discovered from the book "Does he know a mother's heart How suffering Refutes Religions" by Arun Shourie.  But the fact that if any one try to understand his/her actions of at least past few years, one can surely get the answers nearly for the sufferings. but always questions remain questions.

Bad politics kills easy life

It's raining laptops in Tamil Nadu

Poor ranking of India (85 in 2011 in 141 countries) in the world economic freedom index of 2011. See page 85.

Refuting the sufferings of gods child

“The secret to writing 26 books is to be unemployed from time to time,” quipped Arun Shourie, author, journalist, scholar and politician, releasing Does He Know a Mother’s Heart? - his 26th book."


It only sounds modest when Arun himself says" “I am not a creative writer. I am lawyer, and all my books are arguments for the prosecution, whether it is on Ambedkar or on suffering.” 


I just received the copy of this book, was curious to read this book as I read his other book worshiping false god.

Foolish governments, smart women

The title of this post is the beautiful chapter in the great slim book "India Unincorporated" by Professor R Vaidyanathan.

SOme blinking Links:

The another round of crisis is already underway either by the actions of Indian government or by the actions of other countries especially the USA and the EU. More here.

"Put the three together and you get the logical conclusion that the government’s heavy role in the sector has been only to distort pricing. Its involvement has neither resulted in energy availability for the consumer nor a friendly climate for investors"

Reading Hayek

From Sylvia Nasar article here: Nasar, a former New York Times economics reporter and the author of “A Beautiful Mind,”

Reading Hayek

• En route to the Bretton Woods conference, on the Queen Mary, Keynes had lounged in his deck chair devouring, among other books, “The Road to Serfdom” -- written by Friedrich Hayek at Keynes’s old college in Cambridge.
• Although just 40, Hayek too was feeling his age, and was troubled by deafness and a sense of uselessness. His emigre status had shut him out of any active role in Britain’s fight against fascism.
• During World War I, he had been a corporal in the Austro- Hungarian army and, in the cold, dark, hungry years that followed, a university student in Vienna. A moderate socialist who was repelled by his family’s enthusiasm for German imperialism and anti-Semitism, Hayek grew disillusioned with central planning when he witnessed the new Austrian state and hyperinflation destroy the middle class’s faith in democracy.
• Keynes had been Hayek’s hero since “The Economic Consequences of the Peace” was published in German in 1920. But like many young men who seek immortality in economics, Hayek launched his career by attacking the reigning king, beginning when he was an impecunious graduate student on a Rockefeller fellowship at New York University. When he met the great man in person at a conference in London, in 1927, he picked a fight about interest rates. And when he started Vienna’s first economic forecasting institute, Hayek ridiculed the confidence of Keynes and Irving Fisher that the next recession, whenever it came, would be mild, thanks to managed money and the Federal Reserve. In February 1929, in his monthly forecast newsletter, he predicted instead that the American boom would result in a crash.

Great Depression Debate

• This strategy succeeded brilliantly, snagging Hayek an invitation to Beatrice and Sidney Webb’s London School of Economics, which a group of young Turks were itching to turn into a libertarian antipode of interventionist Cambridge, where Keynes’s disciples were. With Hayek on the LSE team, young economists everywhere followed the furious debate that ensued with the passion and partisanship of soccer fans.
• As the Depression deepened, Hayek held that it was “due to monetary mismanagement and state intervention operating in a milieu in which the essential strength of capitalism had already been sapped by war and by policy.” Overinvestment during the boom -- not underinvestment, as Keynes contended -- had produced the slump. Consequently, what was needed was “time to effect a permanent cure.”
• “The creation of artificial demand,” Hayek argued, would only lead to another burst of inflation and another downturn. Like most American economists -- as well as President Herbert Hooverand his political rival, Roosevelt -- Hayek opposed going off the gold standard, and favored spending cuts and tax increases to balance the budget. Give the economy time to heal.
• When “nature’s cure” failed to end the Great Depression, Hayek’s star hurtled to earth. As Beatrice Webb wrote in her diary of Hayek and his allies in 1936, “They and their credo are sidetracked, without influence or even relevance to the present state of the world.” According to Nicholas Wapshott’s new book about the Keynes-Hayek disagreement, Hayek was so discouraged that he essentially gave up economics and turned instead to philosophy.

Blinking links

school talk is often just an oblique way of hinting at pedigree

Basic knowledge of economics has become a prerequisite to enter any sector of the economy

"Last year I wrote, “... the seas east of Singapore hold the key to the lands west of the Indus.” I should have added that the rules made on the banks of the Yamuna hold the keys to those seas."

"Between them Pranab Mukherjee, Manmohan Singh and P Chidambaram have presented 18 of the past 30 budgets. The UPA also has in its Cabinet nine former chief ministers of whom four are two-time chief ministers. This Government has set up over 90 committees, so there is no dearth of ideas either. Which begs the question why the UPA cannot get its act together on fixing inflation that has dogged voters and the economy since 2004?"

Govt-cut

"A World Bank study by Das and Hammer found that more than half the treatments suggested by government doctors were likely to make patients worse, not better."

How did academic publishers acquire these feudal powers?

"The knowledge monopoly is as unwarranted and anachronistic as the Corn Laws. Let’s throw off these parasitic overlords and liberate the research which belongs to us."

Amendments History of Private Property Right

I post here the full article for record:

Land acquisition and right to property by Sudhanshu Ranjan

"Right to property has seen various mutations, in effect, granting more powers to the State to acquire for ‘public purposes'

The issue of land acquisition by the State and the compensation paid to the owner has been a cause of turmoil in recent times. The problem, however, is not new. This is borne out by the repeated amendments that have been made to the ‘right to property'.

The proposed new law on land acquisition, which may be placed in Parliament soon, would virtually re-open the legal debate on the right to property, where the courts and Parliament have been at loggerheads.

The power of eminent domain — the legal capacity of the State to acquire the private property of individuals for public purposes— has been recognised as an essential attribute of a sovereign State.

The Supreme Court, however, held in Kameshwar Singh v. State of Bihar (1951) that though this power is recognised, Constitutional provisions define safeguards subject to which the right may be exercised. The State has, in turn, sought to spell out exceptions to the right to property from time to time. What we see today is a situation where eminent domain has been exercised on dubious grounds.

Statute changes

Article 31 of the Constitution made the right to property a fundamental right, which clearly stated that no person would be deprived of his property save by authority of law, and it would not be acquired save for a public purpose, and most crucially, it provided for the payment of adequate compensation.

Article 31 was amended six times before it was repealed. In its place there were a number of Constititional Amendments, essentially circumscribing the right to property.

The Fourth Amendment to the Constitution stated that acquisition of property cannot be challenged on grounds of adequacy of compensation. The six amendments to Article 31A were aimed at enhancing the power of the State.

The Fourth Amendment restated more precisely the power of the State for compulsory acquisition and requisition of private property, and distinguished it from cases where State caused “deprivation of property”. The Seventeenth Amendment further restricted the fundamental right to property. The concept of “estate” was expanded to overcome the Supreme Court's decisions and those of the Kerala High Court. Ryotwari estates were specifically included in Article 31A, even as the Supreme Court held in Karimbil Kunhikonam v. State of Kerala that ryotwari estates did not fall within the ambit of Article 31A. At the same time, the State was restrained from acquiring any self-cultivated land within the ceiling fixed by law till compensation not less than the market value was paid.

DIFFERING VIEWS

Many of these changes were placed under the Ninth Schedule, rendering them immune to judicial review.

The confrontation between the court and Parliament veered around the right to property. When the court persisted in its interpretation of the word “compensation”, Parliament substituted it with the word “amount” in the Constitution (Twenty-Fifth Amendment) Act, 1971. During Nehru's time, 17 amendments to the Constitution were effected.

The controversial ones were those which restricted judicial review in respect of the right to property.

The propertied class was worried and challenged the validity of those amendments on the grounds that they attacked the fundamental rights.

The issue was whether Parliament could use the power of amendment to deprive the people of fundamental rights guaranteed by the Constitution.

Article 13 (2) says that the State shall make no law that takes away or abridges the fundamental rights. The question is whether Constitutional amendments are “law” or not.

In a landmark judgement in 1967 the Supreme Court in I. C. Golaknath v. State of Punjab held that a Constitutional amendment effected under Article 368 was a “law” within the purview of Article 13(2). The case called into question the inclusion of the Punjab Security of Land Tenures Act, 1953, in the Ninth Schedule, the court observing that the First, Fourth and Seventeenth Amendments themselves were unconstitutional as they precluded judicial review of laws relating to property.

The inclusion of the Mysore Land Reforms Act (10 of 1962 as amended by Act 14 of 1965) was assailed on the same grounds.

A Constitution Bench of 11 judges heard it and the court decided by a majority of 6:5 that none of the fundamental rights could be taken away or even abridged.In 2007, the Supreme Court held that laws placed under the Ninth Schedule after April 1973 would be open to review.

Current context

The recent agitations of farmers against land acquisition and compensation stem from the fact that the State governments have been behaving like property dealers. In Uttar Pradesh, land acquired at the rate of Rs. 880 per square metre was sold to builders at the rate of Rs 4,800 and an additional Rs 2,600 was allegedly paid ‘below the table'. If farmers sell directly to builders they could have earned more.

The Land Acquisition Act, 1894, provides for taking private property for public purposes, the eminent domain principle. In 1984, this Act was amended radically, providing that compensation once announced by the government cannot be reduced as could be done under the 1894 Act, and that compensation is to be provided at projected market rate.

Besides, it provided for ‘solatium compensation' for psychological injury caused because of displacement.

Now, another Land Acquisition Bill is likely to introduced in the next session of Parliament.

A just formula of compensation has to be worked out, and the buyer must be forced to return the land to the seller if it is not developed within a reasonable time span."

(The author is a Senior TV journalist and columnist.) (This article was published on June 14, 2011 in The Business Line)

Imminent domain

"The Chinese economy may soon be larger than America’s, if measured at prices that reflect purchasing power. And the renminbi could even displace the dollar as the premier reserve currency within the next decade or soon thereafter."

To act on them again is mistaken folly

The RBI has justifiably criticised our statistical system for the amount of random noise it generates. But either the physician should heal itself or Caesar’s wife should be above suspicion. There is more noise generated by using year-on-year data than by CSO’s incompetent reporting of data. The IIP and GDP data are a mess, and their updating methods leave a lot to be desired. But that shouldn’t be an excuse for bad data to be transformed into badder policy.

Dear Delhi dudes...

Excerpts from a 'Madrasi' girl's scathing letter to all Delhi boys that has now gone viral 

Unbound Links

we don’t know how to teach you the stuff that really matters in life; how to be more kind, patient, just, more bold. So make sure that a soft heart goes with your tough mind and thoughtful choices. Good luck and godspeed.


Life for India’s burgeoning middle class has changed beyond recognition in almost every way.


How many more plans?


All Khans road to online!

Government has never been central to out lfie

That is all.

Here is must read article published in today's Financial Express with many insights from Gurcharan Das.

No Big Surprise

Here is leading Dalit intellectual's criticism on my Ambedkar's article (Pdf). This is one criticism I have waited for long to kick off the lies and misunderstanding of Ambedkar's free market ideas. Of course, it was not big surprise to me.

In my view it is he who counts as completely misunderstood Dailt. It is the disgrace to the Dalit community. Of course, it is the disgrace to the writings of Dr Ambedkar who stood most of the time while analyzing economics outside the ideology of any particular.

Here I stop.

Rests you know, if you have some time, please go through the relevant literature available in the internet. 

Just asking

"Shouldn't we as a nation now move on in our political style from Gandhi's ideas to something more appropriate for our time and global circumstance? Just asking."

All our political groups swear by reservation of Scheduled Castes (SCs), Scheduled Tribes (STs) and the lower castes as their programme for making India a truly socialist state...........Our politicians are like the one who rides a tiger but cannot get off — but the Supreme Court need not be! 

Men at work, Don’t disturb Economists!!

A veteran liberal politician Jaswant Singh wrote on Arun Shourie in the Indian Express-Financial Express which has published a collection views focusing last 20 years and next 20 years of Indian economy.

The following lines are greatest among I read on economists of this sunny world in policy making. Singh wrote:

• The policy I took in the Finance Ministry was that we must put money in the hands of the citizen and give him the encouragement to save and also spend. I am extremely suspicious of economists. I toyed with the idea of putting up outside my office a placard saying ‘Men at work, economists please stay away’. My officers persuaded me not to. But I did persuade my colleagues in the Finance Ministry of getting out of the habit of saying no. We, I told them, are not a new version of Dr No made famous in a James Bond movie. Instead, we are in the business of improving the general mood of the country through our policies and actions. During my time, we worked out a resolution of the L&T issue from Grasim. The process worked beautifully. There were so many of those (p.23).

He is writing a book on our greatest liberal Rajaji, I can't wait for long!!!

Ford's disgrace!

Professor Sowell on:

"Henry Ford benefited millions of other people by creating mass production methods that cut the cost of automobiles to a fraction of what they had been before — bringing cars for the first time within the budgets of people who were not rich. But the Ford Foundation has become a plaything of social experimenters who pay no price for creating programs that have been counterproductive or even socially disastrous."

New from the Takshashila

1. September Issue of Pragati "Gandhi won't Return" (pdf)
2. Demystifying India-China Trade Possibilities Should India sign a free-trade agreement with China? by V Anantha Nageswaran & Ritwick Ghosh, Policy Brief September 2011 (PDF)

'India's decentralized principalities have been merged into one bureaucratic morass'

Thanks to Sauvik! Excerpts from The Daily Bell article:

• This is the conclusion to the article, and while it sounds reasonable, it seems to us that the assumptions on which the article is built are not necessarily accurate. For one thing, the article glosses over the fairly Draconian authoritarianism of the anti-corruption movement.
• For another, the article assumes that the current Indian vitality is the result of inexorable cultural and entrepreneurial shift. We would argue this is entirely incorrect. India's resurgence is driven by central banking money printing and may not be seen as a natural expression of industry and society.
• It is extremely important that the progress of the BRICS be placed in perspective. Brazil, China, India, even Russia, all have aggressive central banking policies. China and India, especially, have economies that are obviously being stimulated by excessive money printing. Both countries have a problem with price inflation as a result.
• Progress built on printing money from nothing is ephemeral. In America and Europe, thanks to the debasement of money and the vast resources it grants (temporarily) to government, economies can seem quite healthy  one moment and then ill the next.
• Money printing hollows out economies. It distorts business and job growth. It makes people feel wealthier than they are in reality. In both China and India, economic implosions will eventually take place. It cannot be otherwise, because central bank money stimulation inevitably leads to an exaggerated business cycle and subsequent busts.
• For this fundamental reason in particular, the Wall Street Journal article is flawed. India has not necessarily experienced a resurgence of business and market creativity. It is simply going through the same cycle of monetary stimulation that the European PIGS and America went through recently.
• Such monetary stimulation inevitably leaves behind ruined and fractured societies. In the case of India, the anti-corruption movement will likely make things worse, as it is in no way an expression of ancient Indian culture, which was decentralized and extraordinarily tolerant.
• The India of today, based on reports having to do with the anti-corruption movement, would seem to be inheriting the worst parts of Western socioeconomic systems. India's decentralized principalities have been merged into one bureaucratic morass.
• Money printing, in fact, is fooling the Indians into believing their economy is far stronger than it is – and also increasing the corruption of the bureaucracy. The anti-corruption movement is providing the Indian middle class with a simplistic approach to dealing with such problems.
• The real issue of the way the West has organized Indian society from the top down, starting with central banking stimulation, are not being addressed. The solution is seen as one of authoritarianism rather than a reconfiguration of India's basic institutions.

Make sense

Shankkar Aiyar writes:

• India is doubtless the home of paradoxes. It has arguably the largest number of banks and the lowest level of financial inclusion. The RBI informs us that there are 33 foreign banks, 21 private sector banks, seven new private sector banks, 20 nationalised banks, six banks of SBI and its associates…not to mention a host of cooperative institutions. And yet over 50 per cent of the households find themselves outside the formal banking and financial system, and 73 per cent of farmers have no access to formal credit. Is it then the claim of the government that new banks and indeed corporate houses will deliver what the existing pantheon of 80 banks and over 1,000 cooperative institutions are struggling to achieve?

• The very obvious need is for more branches or access to banking services. If financial inclusion is the stated objective, why has the policy shut out public institutions like the Life Insurance Corporation and India Posts which have been clamouring for banking licences? Indeed, if there is one organisation which can deliver access, geographical reach and inclusion, it is the India Posts which has over 155,000 offices of which 1,39,000 are spread across rural India. Yet, India Post has been shut out of the process of expanding banking and delivering financial inclusion.

It makes sense to argue like this but the services delivery is terribly poor in post offices. I have experienced all kinds of non senses in vising post offices for years. Unless, the post office system takes help of technological development it cannot provide any kind of services with cost effective.

Demo-cursing!

"Why is there so much hysteria against politics, parliamentarians and the Parliament itself in our country? Does this means that the upper class in India is looking for and wanting to change the way the country is being governed today? Are they heading towards the path that Britain’s elite once did? Will we see a change, for the better, in the coming years? Is our democracy heading for a complete revamp?"

From friend Nitin Pai's article published in the The Atlantic:

• The mainstream political parties missed the plot entirely. The Indian National Congress-led United Progressive Alliance (UPA) coalition government, which first came to power in 2004, set back the process of economic liberalization, by stalling on economic reforms, ostensibly in the name of the "common man." This led to cronyism on the top -- the last decade saw the expansion of family-held conglomerates rather than the start-up successes of the '90s. It also led to rampant corruption in sectors of the economy that were untouched by reforms. The Congress and its allies purchased electoral mileage by introducing entitlements for the rural poor, but Middle India was too rich to be bought off and too poor to be sold to. The Bharatiya Janata Party (BJP), which demonstrated a reformist outlook when it led a coalition government at the turn of century, has since become loath to challenge the Congress party's economic idiom, even after this approach failed it in the 2009 elections.

Michhami Dukkadam to you all

 That is what Gujarat CM say's to all. "Michhami Dukkadam means i ask forgiveness for any hurt i may have caused you by thoughts, words or actions, knowingly or unknowingly."


What I liked very much from his article is the below lines:

• When i was a student i really loved celebrating Teacher's Day. Students were given a chance to become teachers for a single day. We observed our teachers and their way of teaching. This chance observance gave us an insight into building our future lives. 

• After becoming chief minister, i had two desires. I located some 25 of my childhood friends and called them to my house. The second strong desire i had was to call all my teachers to my home and show my love to them and acknowledge their contribution in shaping my life. I got that chance on November 17, 2005 during my book Kelave te Kelavani's release function, where i called all my teachers. I publicly bowed to them in deference for being my tutors once. On this function, a 90-year-old teacher of mine along with over 35 others gave me their blessings which deeply touched me. 

My latest article in Yojana Magazine!

Here is my latest article (with my friend Saravanan) on 'Growth Trends in Service Sector in India' which has been published in the Yojana (Planning) magazine in the September Issue, 2011.

"Yojana is a monthly devoted to socio-economic issues and started its publication in 1957 with Mr. Khuswant Singh as its Chief Editor. The magazine is now published in 13 languages viz. English, Hindi, Urdu, Punjabi, Marathi, Gujarati, Bengali, Assamese, Telugu, Tamil, Kannada, Malayalam and Oriya."

Here is gist of the article. It has interesting analysis covering last sixty years growth trends of service sector. It also looks at the sub-sectors growth within service sector of India. One of the key findings is that Indian economy has moved (income wise) directly from agriculture to services sector rather then the usual textbook method or the way the developed world experienced like agricultural to industry (or manufacturing) and then to services oriented economy. This is something that many people take no notice or ignores without understanding the structural changes that has taken place.