Re: Ashish' post dated November 21 ---One version of free trade

[Ashish Hanwadikar <ashish_hanwadikar@yahoo.com>]

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IPI_Marker

Hi Venugopal,
> Are you suggesting opening up imports while the developed countries
> continue
> giving huge agricultural subsidies to their farmers? What about the
> TRIPS?
> How would these things possibly promote free trade?
I am suggesting exactly that! As I explained in my previous email
developed Nations giving huge subsidies is really good for countries
like India. The subsidies essentially are a way to transfer wealth from
taxpayers (from Developed countries like US) to us. It is very easy to
explain if you stick to economics!
Suppose US Govt. is subsidizing wheat production. Now, this essentially
means US Govt. is forcibly collecting taxes and giving it to farmers so
that they can produce wheat at lower cost of production in order to
stay competitive in world markets. In other words, if we decide to
import such a subsidized wheat we will be getting wheat at lower price
compared to what we would have got without US subsidy. This is nothing
less than wealth transfer.
Wait a second! It gets even better than that! Because the capital that
was used to subsidize wheat production cannot be continued to be used
for other purposes (say for producing software. This is just an
example.) That means, those goods and services will become expensive to
produce in US and hence their price in world market will rise.
Now taking advantage of some of the resources (land, human and capital)
released because of import of wheat Indian exporters can produce some
of those goods and services at a lower cost of production. This will
increase our competitiveness in those goods and services vis-a-vis US.

Thus you see there are two benefits of the subsidies. One you get
subsidized goods and services at lower cost and second you can attack
US dominance of other goods and services.

Thus whether subsidies promote free trade or not importing countries
will always get benefitted. Also, by not repeating the mistakes of
other countries (of giving subsidies to our own industries) we can
avoid such transfer of wealth. I believe if we follow what I just said
developed countries will realize sooner or later that subsidies are
causing transfer of wealth and they will stop them. If they do not it
is still good for us.


>Which are the
> stupid
>
> regulations? Can you identify some of them? Perhaps they can be dealt
> with
> case by case.

You want to know stupid regulations? Can you give me 10 examples of
good regulations? If you can I will give you 100!
Here is a not so exahaustive list:
1) Regulations related to minimum support prices for various
agricultural goods
2) Regulations not allowing free movement of agricultural goods across
state borders.
3) Govt. monopoly on distribution of oil, natural gas, kerosene etc.
4) Govt. monopoly on Radio, Telecommunications, production and
distribution of electric power, international internet gateways
5) Govt. monopoly on public transport like Buses, Railways, postal
services and telegraph, Airlines.
6) Regulations related to reservation in Govt. jobs, and education.
7) Govt. regulations in accredition of education institutes, control of
school and college syallbuses, their entrance exams. Full control of
Govt. over appointment of teachers, professors and other staff through
UGC, UGC itself.
8)Govt. monopoly over utilities like water supply
9) Govt.'s role and investment in such stupid things as Bakeries,
Condom production etc.
10) Govt.'s control and monopoly over space travel and research
11) Govt.'s control and investment in textile production, handicrafts
and their distribution
12) Govt.'s regulations in travel sector like running of hotels,
tourism development corporations
13) Govt.'s regulations regarding minimum wages, labour disputes, rules
related to hiring and firing labours
14) Govt.'s regulation related to various subsidies like no income tax
for agricultural production, free electricity to farmers, building of
dams, and so on so forth
15) Govt.'s regulations related to reservation of certain sectors for
Small Scale Industries
16) Govt.'s control over entertainment like National awards for
artists, and films etc., censorship, regulation of prices of theaters,
and movie shows etc.
17) Total control of Govt. over sports (Olympics sponsorship, control
over various sports venues and stadiums and rules of various games).
Govt. monopoly over sports like Cricker through BCCI etc.
18) Govt. control of natural resources like land, forests, underground
mineral resources, oil, water
19) Govt. control and monopoly over currency, nationalized banks, UTI,
LIC, Provident fund, SEBI etc.
20) Licensing of various professions like Taxi service, Chartered
Accoutants, Company Secretaries, Actuaries, Medical professionals
21) Licensing of pharmaceutical drugs and their distributions

Is that enough! Tell me one aspect of your life which is not controlled
and regulated by Govt.

Are you going to deal with those things case by case? As I mentioned in
my previous emails only thing that Govt. has which is lacking in
private people or organization is physical power. Govt. has power and
ability to collect taxes, it maintains military and police force and
has total monopoly over use of physical force. So if private
transanctions go wrong Govt. can always use its physical force to
capture the property and nationalize it or regulate it. So the burden
of proof should be on the Govt. to prove beyond reasonable doubt that
its involvement will actually increase efficiency of economy or provide
benefits way beyond what private sector can provide. If it can't
justify its regulations then we should not allow it. So my case by case
approach will start with total privatization and then ask Govt. to
justify its policy of regulation as they proposed on case by case
basis.

As for your comments on World Bank I will have to admit that I haven't
studied them carefully. But I promise to be open minded and do my due
diligence and get back to this debate within a week.

Regards,
Ashish
--- venugopal <gvvs@nird.ap.nic.in> wrote:
> ---------------------------------------------------------------------
> Please help make the Manifesto better, or accept it, and propagate
> it!
> ---------------------------------------------------------------------
> IPI_Marker
> Hello Ashish,
> Are you suggesting opening up imports while the developed countries
> continue
> giving huge agricultural subsidies to their farmers? What about the
> TRIPS?
> How would these things possibly promote free trade? Which are the
> stupid
>
> regulations? Can you identify some of them? Perhaps they can be dealt
> with
> case by case. In this post, I want to quote from an article about
> Stiglitz.
> Of course, all this may or may not be applicable to India's
> situation.
> Nevertheless, it gives some idea of the picture:
>
> Nobel Prize winning economist Stiglitz, who was earlier Chief
> Economist
> of
> the World Bank is reported to have admitted that before prescribing
> country-specific strategy, the World bank team conducted thorough
> investigations. These investigations " consist of close inspection of
> a
> nation's 5-star hotels. It concludes with the Bank staff meeting some
> begging, busted finance minister who is handed a 'restructuring
> agreement'
> pre-drafted for his 'voluntary' signature"
> It is also interesting that each Nation's economy is individually
> analysed.
> But the same set of 4 prescriptions are given to everybdoy. 1)
> Privatisation: " Step One is Privatization - which Stiglitz said
> could
> more
> accurately be called, 'Briberization.' Rather than object to the
> sell-offs
> of state industries, he said national leaders - using the World
> Bank's
> demands to silence local critics - happily flogged their electricity
> and
>
> water companies. "You could see their eyes widen" at the prospect of
> 10%
>
> commissions paid to Swiss bank accounts for simply shaving a few
> billion
> off
> the sale price of national assets."
> 2)"Step Two of the IMF/World Bank one-size-fits-all
> rescue-your-economy
> plan
> is 'Capital Market Liberalization.' In theory, capital market
> deregulation
> allows investment capital to flow in and out. Unfortunately, as in
> Indonesia
> and Brazil, the money simply flowed out and out. Stiglitz calls this
> the
>
> "Hot Money" cycle. Cash comes in for speculation in real estate and
> currency, then flees at the first whiff of trouble. A nation's
> reserves
> can
> drain in days, hours. And when that happens, to seduce speculators
> into
> returning a nation's own capital funds"
> 3."Step Three: Market-Based Pricing, a fancy term for raising prices
> on
> food, water and cooking gas. This leads, predictably, to
> Step-Three-and-a-Half: what Stiglitz calls, 'The IMF riot.' The IMF
> riot
> is
> painfully predictable. When a nation is, "down and out, [the IMF]
> takes
> advantage and squeezes the last pound of blood out of them. They turn
> up
> the
> heat until, finally, the whole cauldron blows up," as when the IMF
> eliminated food and fuel subsidies for the poor in Indonesia in 1998.
> Indonesia exploded into riots, but there are other examples - the
> Bolivian
> riots over water prices last year and this February, the riots in
> Ecuador
> over the rise in cooking gas prices imposed by the World Bank. You'd
> almost
> get the impression that the riot is written into the plan. (....and
> by
> riots
> I mean peaceful demonstrations dispersed by bullets, tanks and
> teargas...) "
> 4."Now we arrive at Step Four of what the IMF and World Bank call
> their
> "poverty reduction strategy": Free Trade. This is free trade by the
> rules of
> the World Trade Organization and World Bank, Stiglitz the insider
> likens
>
> free trade WTO-style to the Opium Wars. "That too was about opening
> markets," he said. As in the 19th century, Europeans and Americans
> today
> are
> kicking down the barriers to sales in Asia, Latin American and
> Africa,
> while
> barricading our own markets against Third World agriculture. In the
> Opium
> Wars, the West used military blockades to force open markets for
> their
> unbalanced trade. Today, the World Bank can order a financial
> blockade
> just
> as effective - and sometimes just as deadly.
> Stiglitz is particularly emotional over the WTO's intellectual
> property
> rights treaty (it goes by the acronym TRIPS, more on that in the next
> chapters). It is here, says the economist, that the new global order
> has
>
> "condemned people to death" by imposing impossible tariffs and
> tributes
> to
> pay to pharmaceutical companies for branded medicines. "They don't
> care,"
> said the professor of the corporations and bank loans he worked with,
> "if
> people live or die."
> By the way, don't be confused by the mix in this discussion of the
> IMF,
> World Bank and WTO. They are interchangeable masks of a single
> governance
> system. They have locked themselves together by what are unpleasantly
> called, "triggers." Taking a World Bank loan for a school 'triggers'
> a
> requirement to accept every 'conditionality' - they average 111 per
> nation -
> laid down by both the World Bank and IMF. In fact, said Stiglitz the
> IMF
>
> requires nations to accept trade policies more punitive than the
> official
> WTO rules."
> The quotes above are from an article by Greg Palast published in the
> 10th
> October, 2001 issue of The Observer, London. Following is the link:
> http://www.zmag.org/noblestiglitz.htm



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