In a Wall Street Journal column last week, a defensive Finance Minister P. Chidambaram suggested that India's democracy necessitated an up-front investment -- a "fixed cost" as he put it -- whose dividends are only now becoming obvious.
The Acorn links today to a discussion about the linkage between economic and political freedoms. Here, Nobel-laureate Gary Becker (who we otherwise admire greatly) makes the case that political freedom flows easier from economic freedom than conversely.
These discussions are in the context of China's economic outperformance of India. Some analysts are even suggesting that China will continue to over-grow India for the forseeable future. Again, the culprit seems to be India's democracy.
Since it now appears fashionable -- neo-conventional wisdom even -- to bash democracy for its seeming inability to deliver abundant Dollars swiftly, we will do the unfashionable thing and stand up for democracy. Besides, we aren't as staggered by the Chinese economic mirage as many others seem to be.
Lets pose a basic question. If political liberty (democracy being its proxy) is the natural state of man, how come a society needs a "fixed cost" to achieve this? It would seem more natural to think, in contrast, that there is substantial "fixed cost" in holding a people in political chains, against their very nature. (Does it cost more to dam a river, or to simply let it flow?)
We did not study any economics until graduate school -- focusing instead on physics and engineering. Forgive us then if we draw our analogy from physics. The natural tendency of all things is to settle in the lowest possible potential energy configuration (that is to say a coiled spring would rather be uncoiled if it can) -- to move there requires no external impulse; in fact, external energy is required only to move a body from a low potential energy state to a high potential energy state, against its very nature.
Why is the same not true of political freedom? Why don't we talk about the enormous fixed cost that the brutal Chinese regime has to pay to crush its own people's natural thirst for freedom? Or, are we now at the moment when even intelligent Indians are conceding the folly of our having chosen democracy first and bending common sense to cow-tow before our great competitor? If so, count us out.
Next, this discussion about linkage between political and economic freedoms is enormously misguided. Why should we have to accept the notion that these freedoms come sequentially -- i.e., first the one, then the other? To us, these freedoms are not found lying on a one-dimensional road -- the x-axis as it were -- rather, these are our natural state from which we sometimes lapse via a muti-dimensional journey -- on the x-axis for political freedom, on the y-axis for economic freedom.
These axes are independent. Thus, one could easily have politically free systems lacking economic freedom (e.g., India before 1991) or economically free systems lacking basic political freedoms (e.g., Hong Kong after 1997). All manner of other combinations are also possible.
It isn't democracy that hurts economic freedom -- idiots in government, who can be found in all manner of polities, do. If India's economic growth is long stunted, it isn't because of our political freedoms, it's because we mobilize and deploy our national resources poorly -- this happens principally due to corrupt officials and corrupt politicians exchanging favors with corrupt business-people.
Are we to now suggest that corruption is a consequence of our freedom? Does chained China have no corruption (in fact, it appears eerily similar to free India's)? Can we not have a politically free system with relatively low corruption (e.g. U.S.)? Why is that not our model -- rather than, increasingly, the corrupt and tyrannical China?
In reality, we can be politically free and be sensible -- which means reducing the state's share of national resources and unleashing our people's entrepreneurial abilities -- or we could be politically free and stupid -- as we have long been. To blame our people's freedoms for our leaders' stupidity is asinine.
Also, China can be economically free and be sensible -- which means embracing the brilliantly diverse marketplace of political ideas and abandoning the reliance on a few wise (and inevitably falliable) men -- or it can be economically free and stupid -- as it has long been. To attribute the prosperity achieved through the hard work of the great Chinese people to a few old men in zhongnanhai is equally asinine.
Thus, in our way of thinking, Gary Becker and P. Chidambaram have it all wrong when they place political and economic freedoms on a sequential track -- then measure the trade-off of placing one kind of freedom before the other. In fact, there is no trade-off between liberty (political freedom) and prosperity (economic freedom). Both simultaneously are our natural state and either can be lost due to stupid dogmas of old men sitting in judgement on when to grant us OUR freedoms. Tilak was right: Freedom (both political and economic) is a people's birthright, a natural state of their being -- any abridgement of either freedom impoverishes us all.
So we don't say, give me liberty or give me Dollars, we say, liberty and prosperity are both my birthright, and I shall have them both, NOW!!!
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