Walled-in Ideas | We No Longer Need Economists
The Times of India , 06 Feb 2005
Our adversaries rail at us liberals for being ideological; they say we are full of empty theories. So here is a simple travelogue. For some months now, I have been living in Mangalore, an ancient city on the west coast. A 13th century Kannada poet has marvelled at the fact that as many as 38 different kinds of coinage circulated in the city's markets then. It becomes obvious that the city owes its existence to overseas trade: At the centre of the old city is the Bunder, the port.
It is another ancient trading city that came up by the sea, like Alexandria or Venice . They were all glorious centres of civilisation although there were no economists then. In modern Asia , Hong Kong and Singapore are thriving port cities and neither has produced a single economist of note. The other day I was taken to a beach just beyond the New Mangalore Port Trust. What struck was the wall. The entire port is surrounded by a 20 ft high wall.
So, because of some theory, Mangalore has moved away from having a port open for the citizens to trade, and now possesses a walled port to which citizens are denied entry. The gates to the walled port are manned by armed guards paid for by the taxpayer. Also at the taxpayer's expense are a whole lot of customs officials who do not permit trade without prohibitive exactions. All this must be justified by reams of economic theory, for there is an economics department is St Agnes College here, the oldest women's college in south India . There is a Mangalore Economics Association.
Driving along the wall, I passed some towering examples of industrialisation: Nehru's theory. A sizable amount of prime beach-side land is occupied by a phenomenally ugly public sector iron ore exporting plant.
There is a fertiliser factory which surely survives on production subsidies. So the deal between New Delhi and Mangalore is clear: We stop you trading and then we give you industrialisation. There is, at the taxpayer's employ, an entire Indian Economic Service wedded to this theory. The wall is bad for sailors as well. I was with a ship's engineer when he suddenly announced his departure, saying that if he did not return by 10 p.m. , he would get into trouble with the personnel manning the wall. He said that even an ordinary sailor spends at least $20 a day while ashore but here the wall keeps them on board.
Mangalore is a dream city for eating and drinking out, famous for its cuisine. The seafood is superb, and much, much cheaper than Goa . Mangalore also possesses many establishments where what is offered might be called cabaret. Surely anyone will realise that we do not need economists to know what is good for Mangalore. What sense does the wall make? The path to commercial success and the regaining of the city's old glory should be obvious. The citizens of Mangalore should do to the wall precisely what Berliners have done to theirs. Then, as with the old Bunder, they should set up a big market there. After all, didn't God promise Jerusalem greatness by making it a mart for all nations? The mayor of New Jerusalem should issue externment orders to all the customs officials and the armed guards.
The prime land occupied by the ugly iron ore plant and the fertiliser factory ought to be seized and auctioned so that hotels, shopping malls and beach resorts take over the landscape. Within a decade, this will be India 's leading city, especially considering the fact that all the others, including Bangalore , are perishing. To unravel the sophisms in the theories justifying the wall, I recommend Frederic Bastiat, who did not have a formal education in economics, who never taught at university, and who was just a journalist and pamph-leteer. In one essay he put the point across thus: There is this steel magnate in France . He sees cheap steel imports coming in from Belgium and this threatens his profits. He now has two choices. One, he can hire a posse of men and arm them with guns, with instructions to shoot anyone who brings steel into France from Belgium . But such a course is highly inadvisable.
So there is the other option: Go to Paris and pay some politician there to do it for you. He will deploy armed men at the borders at the taxpayer's expense. And the two of them will share the profits, while the taxpayers who paid for the guards will now pay out even more for steel. After reading Bastiat I arrived at a conclusion: We don't need the WTO; we need unilateral free trade. Get every government out of trade. And every trade economist too.
The late professor B R Shenoy, a classical liberal who studied under Hayek himself, was the only economist to dissent officially with Nehru, and in writing. His daughter, Sudha Shenoy, an eminent liberal economist, in a recent interview, said that nearly every economics depart-ment in the world could be shut down without having an ill-effect on the world of ideas.
Strong words indeed. She bemoaned the sad fact that economists do not study the real world of human action any more; they are all lost in theories and models and mathematics and statistics. I entirely agree. The wall proves it.