Quake lesson: Building bye-laws or strict liability
ANTIDOTE, The Economic Times, MONDAY, JANUARY 28, 2002
BEVER 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.