Saturday, January 03, 2009

Interesting Views from India

Sanjeev Sabhlock’s Blog (‘promoting liberalism and good governance in India’) HERE: contains “Unbridled capitalism?” (originally published in Freedom First, October 2008):

Whatever else is true about capitalism, this much is clear that never did John Locke, David Hume, Adam Smith, J.S. Mill, Ayn Rand, F.A. Hayek, or Milton Friedman advocate unbridled capitalism or freedom. It seems that socialists like Marx and Nehru have badly sullied the reputation of liberty. The socialists have repeatedly alleged that capitalism caters to so-called ‘capitalists’ and gives them unbridled powers to exploit the weak. But that is totally false. Philosophers of liberty have always insisted that freedom comes with responsibility and justice. Adam Smith opposed mercantilism and monopolistic industrial interests. David Ricardo wanted more competition and free trade. Adam Smith and J.S. Mill advocated labour unions to face the economic power of the owners of industry.

By repeating lies against liberty long enough, socialists have made it appear that the system of natural liberty encourages corruption and things like the sub-prime crisis. But what are the actual facts? Capitalism begins by looking at human nature. The fathers of capitalism, Hobbes and Locke, pointed out that since human nature is far from perfect, some people will always try to cheat, mislead, and misuse their powers. So if anyone cheats, then systems of justice should catch and punish the cheats. Thus everyone must be held equally to account and no one is to be above the law. In this manner, by ensuring all crimes are punished, capitalist societies are today among the most ethical on this planet.

Capitalism is also a system of continuous improvement. Lessons from events like the sub-prime crisis are quickly learned and such events prevented from happening again. Some events are complex and finding their causes can take time; but overall, capitalism is a political and economic system founded on democratic choice, law and order, and continuous improvement. And since the governance of capitalist societies is built on the system of checks and balances advocated by Montesquieu and Thomas Jefferson, the concept of capitalism being unbridled simply does not arise!

We know from history that the rulers of the West did not like capitalism one bit since it insisted on equal freedom for all. Many people like Locke, Voltaire, Burke and Mill had to fight the vested feudal interests to win freedom for ordinary peoples everywhere.

And so our quarrel cannot possibly be with capitalism. Our quarrel must be with socialism. In socialist societies, based as the spurious concept of economic equality, state-sanctioned corruption is the norm. After having worked in the Indian and Australian bureaucracies for a total of 26 years I can say with confidence that there is almost no corruption in the West today. On the other hand, corruption is endemic in socialist India, where not one politician is completely honest and few bureaucrats completely so. For very fundamental reasons, no society can run ethically on the ideas of socialism. But did this eminent economist express concerns about ‘unbridled’ socialism? No! For capitalism has become the customary whipping boy. Protect the criminal and point fingers at the saint: that seems to be the norm.

Consider and compare, for a moment, how life is defended in India and in the West. Employers in India are, for all practical purposes, unaccountable for the safety of their workers. Hundreds, if not thousands of lives are lost in India every year in preventable workplaces ‘accidents’, even as capitalist societies like Australia have astonishing low rates of worker injury. While working for the safety regulator in the state of Victoria I found that not only are safety laws in the West strongly focused on employer accountability, but negligence is punished severely. If I was a mine worker I would be scared to work in socialist India but would happily work in capitalist Australia where my life is well protected.

So who is really unbridled? Who is really immoral? Is it socialist India – where the governments are totally corrupt, where industrialists are gifted monopoly powers by the corrupt state, and where lives of workers are treated with disdain – or is it the capitalist West where governments wage a systematic battle against all forms of corruption and irresponsible behaviour? Clearly, it is not capitalism but socialism we must be afraid of.

It is time that India looks at the facts. We must not be afraid to use the system of natural liberty which was invented by the Englishman John Locke just because it was invented in England. After all, the West happily takes advantage of Indian thinking by using the number system we invented. So let us listen to what Locke said

There is a trend in India that favours greater freedom from both the State, and from modern versions of what Adam Smith lambasted as “merchants and manufacturers” (if you haven’t read Wealth Of Nations look it up in the index).

You won’t find much good said about some of these people who succumbed to seeking monopoly privileges for themselves, so they could ‘narrow the market’ and increase prices at the expence of consumers.

They were able to do this because legislators and those who influenced them were persuaded by ‘authorities’ on political economy who provided arguments for why it was beneficial to arrange legal protections for their measures to exploit consumers, and to punish other countries by preventing them trading with Britain on what today we call a ‘level playing field’.

The worst example of this form of commerce was beyond doubt the British East India Company, managed by what Smith would have recognised as a ‘parcel of rogues’ and their allies in Parliament.

Wealth Of Nations is not a textbook on economics, or a book about capitalism (a word in English not invented until 1854); it was primarily a critique of the British state-managed commercial society, run by rich landowners, who shared the spoils of office and the rewards of interest groups (sound familiar in India until recently?), and held back Britain’s early progress to the spread of opulence.

Empire and socialism were two other diversions from the road to opulence. Both undermined the British economy in terms of the Smithian target of contributing to the sum total of human welfare among the poorest majority of the country.

Sanjeev Sabhlock’s exposition of the recent past in India strikes a chord with any Smithian scholars, at least those who have read his books, and not just quotations from them, mostly torn out of context.

I have reservations about some of Sanjeev Sabhlock’s analysis, but it is broadly correct and where it is absolutely correct, it moe than makes up for those parts that need, perhaps, a bit of moderating.

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Blogger michael webster said...

I like Al Roth's recent take on the same problem:

"The point of the market design movement, of course, is that markets aren't either "free" or non-existent. A better description is that markets have rules, and some rules work better than others, and the goal of regulators and others who shape the rules should be to find rules that enable markets to work better.

However the WSJ blog also quotes Professor Rajan on the difficulties facing academics who wish to offer opinions on compex issues of public policy:
"“Most academics are really reluctant to take part in the public dialog, because the public dialog requires you to have an opinion about things you can’t really be sure about,” says Mr. Rajan. “They fear talking about things where everything is not neatly nailed in a model. They stay away and let the charlatans occupy the high ground.” "

From his Market Design blog,

6:25 pm  
Blogger Sanjeev Sabhlok said...

This comment has been removed by the author.

3:56 am  
Blogger Sanjeev Sabhlok said...

Dear Professor Kennedy

I chanced by this post (I'm searching for comments on my recent book to see if I can learn anything about what people are thinking about it/ find anything to question, so periodically I type in my name on google).

First - a small correction (merely because people may search for my name and not find it) - my last name is spelled as 'Sabhlok').

I am writing mainly to find out which parts of my analysis you believe need improvement. I ask because I am writing a book on the philosophy of freedom (see and am keen to know where my analysis is flawed. I don't claim perfection of thought or analysis and so remain keen to review my thought processes.

The draft manuscript of 'The Discovery of Freedom', which is up on the web is not ready for reading at the moment (its language flow is a nightmare), but if you can raise your specific concerns about my analysis (even hints will do!) I will be much obliged for the favour.


3:59 am  

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