Free Market Economist Prof B.R. Shenoy and German Socialism

The thirty years After Fall of The Berlin Wall is now a major debate around the world. The main comparison being made by many are on socialism vs capitalism, the free market capitalism. It is interesting that the Indian free market economist Prof B.R.Shenoy's article has been widely referred on the east Germany vs western Germany.  Prof Shenoy wrote a article titled "East and West Berlin: A Study in Free vs. Controlled Economy" on August 15, 1960 issue of The Indian Libertarian.

The following are some excerpts of article referred by different writers on the eve of thirty years Fall of The Berlin Wall:

From Rep. French Hill: 30 years after the fall of the Berlin Wall, America can't repeat East Germany's mistakes

An economist from India, B.R. Shenoy, had a first-hand look at the difference between the east and the west. In a 1960 article, Shenoy documented, “The main thoroughfares of West Berlin are near jammed with prosperous looking automobile traffic, the German make of cars, big and small, being much in evidence. ... The departmental stores in West Berlin are cramming with wearing apparel, other personal effects and a multiplicity of household equipment, temptingly displayed.”

Like my visits to East Berlin in 1986, Shenoy continues, “Food shops in East Berlin exhibit cheap articles in indifferent wrappers or containers and the prices for comparable items, despite the poor quality, are noticeably higher than in West Berlin. ... Visiting East Berlin gives the impression of visiting a prison camp.”

From "30 Years After The Fall Of The Berlin Wall, Socialism Is Staging A Comeback"

B.R. Shenoy, a prominent economist in India, noticed the significant differences of the two economic models in the divided city of Berlin in as early as 1960. He observed that in West Berlin, “Rebuilding is virtually complete…The main thoroughfares of West Berlin are near jammed with prosperous looking automobile traffic, the German make of cars, big and small… The departmental stores in West Berlin are cramming with wearing apparel, other personal effects and a multiplicity of household equipment, temptingly displayed.” 

In contrast, when Shenoy went to East Berlin, he saw “a good part of the destruction still remains; twisted iron, broken walls and heaped up rubble are common enough sights… Buses and trams dominate the thoroughfares in East Berlin; other automobiles, generally old and small cars, are in much smaller numbers than in West Berlin… The food shops in East Berlin exhibit cheap articles in indifferent wrappers or containers and the prices for comparable items, despite the poor quality, are noticeably higher than in West Berlin.”

Interestingly, if we leave the specification of location in this paragraph blank, what Sheony observed could have been replaced by any socialist countries mirroring the same scene, whether of China in the 1970s, or Venezuela in 2010. Socialism consistently produces similar devastating results, no matter where it has been attempted.

Shenoy wasn’t the only one who noticed the drastically distinct economic situations of East and West Germany in 1960. People in East Germany were aware of their poverty and political oppression, in contrast to the freedom and prosperity their families and friends enjoyed in West Germany since as early as the 1950s. East Germans wanted out.

Dharma -Individual social responsibility

Author Gurcharan Das has very interesting article in the Times of India about functions of capitalism and revisit of Corporate Social Responsibility in India. What interest me more is the below para:

"Although two decades have passed since the reforms of 1991, capitalism is still trying to find a comfortable home. Indians still believe that the market mostly helps the rich. They do not distinguish between being pro-market and pro-business. Being pro-market is to believe in competition, which helps keep prices low, raises the quality of products, and serves everyone. Being pro-business is to allow politicians to distort the market through excessive intervention, resulting in ‘crony capitalism’. The result of this confusion is the timidity of reform, excessive number of dysfunctional public sector companies, and a nation that is not performing to potential."

Good reading

Piketty’s “Capital,” in a Lot Less than 696 Pages

The Oligarchy Fallacy

Hard-wired to extinction

Former CACP Chairman Dr. Ashok Gulati on ariculture growth in Gujarat in the 1990s and in 2000s

Why Modi's selfie campaign is not picture-perfect

Writings on the wall: Navi Calcutta

This anti-Modi battle cry is lazy, illiberal and an affrontto Muslims — and to Hindus.

The dangerous disconnect

Just name calling and fooling time and again

The secret election-day diary of a Lutyen’s Delhi liberal

Some links-worth to read

The rediscovery of India by Gopalkrishna Gandhi

The first three Bharat Ratnas saw the future with clarity by Gopalkrishna Gandhi

"Indian capitalism is the single biggest obstacle to further economic reform. It still inhabits a world of deals rather than rule"

Fixing Governance with Reforms and Economic Freedom

Some links

The chimera of Dalit capitalism

Arun Maira slams Food Security Ordinance as unsustainable

Narendra Modi's projection as PM candidate is inevitable: Arvind Panagariya

Vivekananda’s 120-year-old 9/11 speech

10 things Nelson Mandela said that you have to know

Capitalism, Caste and Society (CCS)

Here is a very interesting interview with two powerful, yet persuasive minds working on mission to do something concretely with the idea of Capitalism, Caste and Society. And thus they say "'Capitalism is changing caste much faster than any human being. Dalits should look at capitalism as a crusader against caste". A bit from the interview:

"What has happened during the past 50 or 60 years is that the state's welfare measures or methods or reservations got slightly misunderstood and also slightly misused by the "victims".

...10 per cent of MSMEs registered with the Government of India are Dalit-owned, which is about 1,64,000 across the country. 

...the silencer in the Tata Nano is produced by a Dalit entrepreneur.

Affirmative action has given Dalits a launch pad. A launch pad is a launch pad. You need that to take off. Ambedkar gave you the launch pad. Now don't run on the launch pad, take off.

Because of economic reforms, globalisation, you can't produce everything under one roof. You will have to outsource work. Most of the Dalit entrepreneurs of today are beneficiaries of outsourcing.

Along with globalisation came Adam Smith to challenge Manu. So that's why for the first time, money has become bigger than caste.

there is an economic process, that capitalism is changing caste much faster than any human being. Therefore, in capitalism versus caste, there is a battle going on and Dalits should look at capitalism as a crusader against caste.

what man failed to do, capitalism is doing. Let us go with capitalism that is changing caste faster than your reforms

People who are working on poverty have a better life than people like us, because if you work on poverty, then you fly. You work on poverty, you live in five-star hotels. If you work on poverty, you are in touch with big foreign funding agencies. So, talking poverty makes you strong, makes you rich.

The inspiration behind DICCI is the economic thought of Dr Babasaheb Ambedkar. The second is the black capitalism in America."

New age of Liberalism in India

Two friends have contributed interestingly. Rajeev and Harsh has a piece in the Indian Express here, their other articles are here. Ghanshyam has  a piece on Hinduism and capitalism in India in Centre Right India.

Rajeev and Harsh concludes with the below paras:

• Liberals of all hues should advocate for strengthening the law-and-order machinery so that no violence — irrespective of its antecedents — goes unpunished. State welfare programmes should be targeted to those in economic need, and not bluntly based upon caste or religious identity. The government also shouldn't have discretion on what constitutes offensive speech, to prevent politicians from fuelling competitive intolerance.
• When the state has no discretion to pick certain groups as winners, fraternity is more likely to prevail because socio-economic intercourse, unlike political competition, is not a zero-sum game. India needs more liberalism — rule of law, open markets, separation of identity and state — not its leftist perversion.

Some links

Interesting readings:

How far ahead of India is China?

Why Chinese capital outflows need to be watched in India

What I Learned From Reading Every Last Word of India Today

"Here is a moment for considerable serious reinventing of capitalism"

Crack-up GOLD

Protect our gold from the beast!!

"Those who control the economy describe gold as a “dead investment”, oppose its import, and talk of putting the “gold to work”.

Significantly, the proposals of Raghuram Rajan, the government’s chief economic adviser, favor foreign bankers who seek to hoard gold to protect themselves from a major economic collapse. Raghuram Rajan was formerly with the International Monetary Fund and is currently affiliated with the secretive BDT Capital based in Chicago. He also works for the University of Chicago whose endowment fund operates like a hedge fund with a portion of its investments tied to gold. Yet, Raghuram Rajan opposes the ownership of gold by Indians who want to protect themselves from the impending economic downturn."

Read the full article here.

Making capitalism work

"What we are witnessing, globally as well as in India, is the end-game for fiat currencies (for the scholarly-oriented, the present conditions could be best summarised as the “Crack-Up Boom,” as defined by Ludwig von Mises, an economist from the liberal, laissez faire-oriented Austrian School of Economics.). From now on, all Keynesian stimulus policies would actually go on to worsen the imbalances rather than revive growth." More here.

New Year 2013 reardings

"economics does not say that unfettered markets are better than state intervention or even state capitalism. The problems with state capitalism are primarily political, not economic"

Skilling the labour capital

" the next wave of public policy impact does not lie in poetry, but plumbing, because voters recognise that state governments control delivery systems"

Feted globally…

Just taking the main quote portions only from this interesting piece for the benefits of readers:

• In a confidential memorandum in December 1991, Lawrence Summers, World Bank Chief Economist, urged his colleagues: “‘Dirty’ Industries: Just between you and me, shouldn’t the World Bank be encouraging MORE migration of the dirty industries to the LDCs (Less Developed Countries)? I can think of three reasons.”

• Mr Summers elaborates: “The measurement of the costs of health-impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health-impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that”.

• Second, he says, “The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost. I’ve always thought that under-populated countries in Africa are vastly UNDER-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City. Only the lamentable facts that so much pollution is generated by non-tradable industries (transport, electrical generation) and that the unit transport costs of solid waste are so high prevent world welfare enhancing trade in air pollution and waste”. Put simply, he regrets it is not economically possible to transfer waste and pollution wholesale to the developing world.

• Finally, he asserts, “The demand for a clean environment for aesthetic and health reasons is likely to have very high income elasticity. The concern over an agent that causes a one in a million change in the odds of prostate cancer is obviously going to be much higher in a country where people survive to get prostate cancer than in a country where under-5 mortality is 200 per thousand. Also, much of the concern over industrial atmosphere discharge is about visibility impairing particulates. These discharges may have very little direct health impact. Clearly trade in goods that embody aesthetic pollution concerns could be welfare enhancing. While production is mobile the consumption of pretty air is a non-tradable”.

Capitalism = Insights

From A N Shroff memorial lecture delivered by Arun Maira on 9th October, 2012.

"Revisiting the role of India’s Planning Commission

When I joined the Planning Commission as a Member in 2009, one of the tasks the Prime Minister assigned to me was to determine what role the Planning Commission should play in 21st century India. I asked Montek Ahluwalia, the Deputy Chairman of the Planning Commission to give me a list of 20 persons to whom I should ask this question. He gave me a list of 20 respected citizens of the country. Some of them had worked in Government in very senior positions, in the Reserve Bank, in Parliament, some even in the Planning Commission in the past. And several others were respected industrialists of the country.

I asked each of these 20 leaders the following questions:

• Is the Planning Commission playing a useful role for the country?
• If not, is there another role that the Planning Commission could play in India’s progress?

The answer to the first question was unanimous. The Planning Commission was no longer making a significant contribution to the progress of the country. The country had changed. It was more decentralized politically and administratively. The private sector was playing an increasingly large role. The Indian economy was more connected with the international economy. For all these reasons, five year plans and budgets made by some experts in Delhi, which had then to be implemented by people all over the country, was an outmoded idea. 

However everyone, including the industrialists, said that the dynamic nature of changes in India and outside required a strategic group that, like a radar, could sense the forces that were causing change to happen and that could provide governments in the center and in the states, and private industry too, with insights into the forces shaping the future.

A More than Perfect Storm
I will now give you a picture of the forces shaping our future. I will also explain their effects on institutions of democracy, capitalism and government. I will use two images for you to visualize these forces and their implications. One, an image of a storm. The other, an image of a globe in stress.

First the image of the storm. Many of you may recollect the ‘Perfect Storm’ that Sebastian Junger described in his book. Not two, but three storm systems converged in the North Atlantic. This was unprecedented. No ship had been designed for such conditions. And no captain had the skills to steer a ship in such a ‘perfect’ storm.

As the 21st century unfolds, there are four strong winds blowing across the world and converging to create a more than perfect storm which is challenging captains of business and government institutions that are not designed for these conditions.

Free Markets and Capitalism
The first strong wind is the idea of free markets and capitalism. This is not a new idea. Often attributed to Adam Smith, it has been around for at least 200 years."

Stunning self-correction

Sentence to ponder over (Fixerpreneurship by Shekhar Gupta):

• If you draw a simple chart of the large companies that have lost the most value on the stock markets over the past three years, you’d notice that almost all of these were doing business on the same cusp of politics, finance and natural resources. To that extent, you have to admit that the market has been the first to sense the rot and has applied a stunning self-correction, severely punishing those responsible for it. Many of those who called themselves masters of the universe until just the other day, flaunting Bentleys, private jets, yachts, Swiss chalets and more, are now hiding from their bankers and shareholders and blaming the “system”. Obviously, there can be no sympathy for them or for their bankers. The small shareholder is always the victim of hype. So the markets, at least, have responded to this multi-layered crisis of governance.

Prof Ajay has very interesting post here discussing about the Indian capitalism and its wings of fire.

Sadanand Dhume point out that unlike India "Japan, South Korea and Singapore didn't start seriously expanding their social welfare programs before they were well into middle-income status—at which point growth had begun addressing the major woes."

Capitalism in India

Madly rushing political analysts writes:

• The spirit of Jawaharlal Nehru, to some extent, endures. He wrote nearly seven decades ago: “It would be absurd to say that the profit motive does not appeal to the average Indian, but it is nevertheless true that there is no such admiration for it in India as there is in the west. The possessor of money may be envied but he is not particularly respected or admired. Respect and admiration still go ... to those who sacrifice themselves ... for the public good.” Doubts about the profit motive are lower today, but they have not vanished. India is embracing capitalism by stealth.

Arundhati Roy, a Ghost, has got it all wrong!!

I never expected this wonderful surprising commentary article by Aakar Patel who refutes on well grounded basis, the false propositions of cunning socialist and communist leaned Arundhati Roy. 


I must say that when I read Roy's article which was based on a lecture she gave in Mumbai some time ago, I was deeply worried about the false propositions against folly ideas of her.


Patel concludes that:

• When all’s said and done, the solution to such problems in dysfunctional societies like India is simple, though boring. Communities must start taking responsibility for themselves. They cannot wait for a revolution to come to their doorsteps and clean their neighbourhoods, or to care for their infants, or to teach hygiene to their women or to educate themselves. Nor can they entirely depend on the state either, though they must vote against those who fail to help them do this.

• Experience has also shown that in tribal areas where external influence has been allowed, it can be a force for good. The tribals of Mizoram have 90 per cent literacy because of work done by the Presbyterian church. Shielding tribals from the outside world keeps them just as they are. This might have aesthetic appeal for some, but most tribals don’t think so. That is why the Salwa Judam militia attacks those who are their brothers and sisters. Unfortunately, this isn’t the sort of thing we can blame the whole world for, and so it isn’t good material for belles lettres.

One year after birth of Ambedkar's free market liberal economics in India

On April 14th, 2011, I had written a article titled "Ambedkar, the forgotten free market economist" in the Pragati The Indian National Interest Review published by The Takshashila Institution founded by Mr Nitin Pai on Dr B R Ambedkar's 120th Birth Anniversary. The article received quite undue criticism from utterly misguided and misunderstood followers like Anand Teltumbde.

Subsequently, I also published another article titled "The Untouchable Case for Indian Capitalism" in the Wall Street Journal Asia on May 31, 2011. 

In general, both these articles were welcomed by many well established authors, economists, historians and other social scientists in India and abroad. It was really a great encouragement for me. I had no dream in my life to receive such a generous positive motivation from many great people. 

I also briefly met today the leading proponent of India's Dalit capitalism movement Mr Chandrabhan Prasad, (http://www.chandrabhanprasad.com/index.aspx).

In fact, I started writing quit a bit after these articles were published in early months in 2011.  

What I saw today in the Parliament Street: 121st Birth Anniversary of Dr B R Ambedkar

The entire Parliament Street become like any "market place" with book stalls, free distribution of posters, etc mostly news items covering the legacy of B R Ambedkar.

The one big change in all these years on this street is the big stall of Dalit Indian Chamber of Commerce and Industry (DICCI). Dicci distributed not only the corporate style of cake cutting but also a half a liter mineral water bottle to people at free of cost. All others distributed the tiny water pockets. Dicci''s unique proposition for all the dalit people is "Be Job Givers, Not Job Seekers". It also proudly says that dalit capitalism is a antidote for most of the ills associated with its people. This is a big change "Yes we can".

But there is a long way to go. Let me end with a interesting fact about Jotirao Phule. Those you read the book India after Gandhi by Ramachandra Guha can recollect that great Jotirao Phule was a successful entrepreneur before becoming a social reformer in 19th Century India. Perhaps, it took six decades to realise the dalit community in India that the populist policies of government is no use for removing away from poverty and hunger.

CAPitalism

From "Capitalism in jeopardy: Why India holds thekey" by R Jagannathan 

• For evidence, look at the number of capitalisms competing for survival. In Europe we havewelfare capitalism in crisis. In America we find the Occupy Wall Streeters questioning laissez faire capitalism; in China we have a thriving authoritarian capitalism, and we also have partly successful chaebol-keiretsu capitalism in the rest of Asia (minus China and India).
• In India we have what I would call “Hindu capitalism” – a huge diversity of approaches where we have an Infosys at one end that runs to western notions of institutional capitalismand corporate governance, and huge, family-controlled business empires that are representative of feudal capitalism, at the other. Corporate governance is a secondary goal here.
• In nowhere land is Indian muddle-path state capitalism – encompassing highly profitable companies in the raw materials and energy sectors (ONGC, Coal India, Nalco) and unprofitable basket cases that operate in competitive industries like telecom and aviation (BSNL, Air India).
• Little wonder, The Economist, which has devoted a special issue to India Inc, concludes that “while India’s capitalism does have oodles of vim, it is writing its own rules, some better than others.” In the magazine’s view, Infosys is the exception, not the rule. “A Martian investor landing on Mumbai’s streets of gold might judge its business scene a mix of Sao Paulo, Seoul and Shanghai, with only a dash of Silicon Valley.”
• Where The Economist goes wrong is in assuming that India needs a Deng Xiaoping or Margaret Thatcher to give Indian capitalism a new lease of life.
• However, Indian capitalism is about diversity, not homogeneity. Which is why it is more appropriate to call it Hindu capitalism – which is the acceptance of multiple approaches to capitalism without prejudging what will work. It is a non-ideological approach to see which capitalism works.
• As any evolutionary biologist will tell you, when you have diversity and multiple approaches, you are more likely to stumble upon the right answer in due course.
• Different countries in the world are adopting different approaches to capitalism. In India, we have adopted all the major approaches. May the best approach win.

A line of thought

Ponder over this lines from Professor Mehta's article in the Indian Express:


"...The terms of the social contract have to be rewritten. Capitalism has to justify itself in terms of social gains, and democracy in terms of empowerment. But at the moment no one quite understands what all of this might mean."

Free market is good for dalits

Milind Kamble, chairman of Dalit India Chambers of Commerce and Industries said: 

• Casteand capital can't coexist: "Capitalism dismantles rural societies and feudalism. Capitalism dismantles traditions and traditional cultures. Capitalism produces urban societies, democracy and modernity. India's caste system thrived and survived on agrarianism and traditional culture. Caste is losing its grip over dalits because India is industrializing, urbanizing and modernizing. Dalit capitalism will accelerate that process and will accord a human face to Indian capitalism. Caste and capital can't coexist. One has to give way to the other." 

Also read “Caste and the Market Economy” by Sauvik Chakraverti

• “I suggest Dalit leaders get interested in the Economics of prosperity. We urban liberals dream not just of making India prosperous; we dream of making India obscenely rich.
• The Dalits will gain enormously from open markets, economic freedom and urbanisation. As they claim, in their respective economic niches, a greater share of a rapidly growing pie, and as they mingle with caste anonymity in bustling metropolises, they will find the old caste equations disappearing.”

Chetan Bhagat writes:

• “I have nothing against commercialisation of education. Commerce and business are a good thing. However, when it comes to education, it needs a sense of ethics and quality. Good people must be incentivised to open colleges. Say, by a simple policy fix like allowing private institutes to make a profit……………. These private colleges have played the role of providing students with a chance to earn a degree of their choice. There is nothing wrong in this. It fact, it is even good that the private sector is playing a role in educating our students.”

Mere populism

“The small-is-beautiful communitarians often ignore the many cases of local communities tyrannizing minority groups (Forms of lynching reminiscent of the U.S. South continue today in the ethnic villages of Africa and India.) And small local producers often cannot benefit from economies of scale and technological upgrades or invest in high-risk-high-return projects, which require risk pooling with non-local entities. As a result, they remain on the margins, mired in low productivity. While there are scattered examples of dynamic small producers, they don’t represent a viable systemic alternative. When real capacity to create wealth is missing, social activism is often reduced to mere populism, which in the long run can be wasteful and counterproductive.”