For almost two decades, I have found myself in a saga exploring the Rule of Law, the nature of justice and freedom, and the nature of racial animosity and xenophobia in the United States. Judge it here for yourself. There are 10 pdf files in a password protected post of the same name. Please send me an email identifying yourself and offering any reason, including curiosity, that you may have to want to examine the matter. Files 1 and 2 marked SCOTUS are the front-matter and Petition for Writ of Mandamus as received by Circuit Justice Sandra Day O’Connor of the Supreme Court of the United States in February 1996. Files 3 to 10 constitute the Appendix of Record giving the rulings of the US District Court for the District of Hawaii and the US Court of Appeals for the Ninth Circuit, including especially in File 8 the “after-discovered” evidence of how my attorney had been covertly purchased by my opponent. An example of perjured trial testimony is contained in File 2. In September 2007, I asked my opponent — the Government of one of the 50 States — to voluntarily admit its wrongdoings to the present Chief Judge of the US District Court as is required by law. Government lawyers should, after all, try to act lawfully.

Our cook said she would be gone for three days next week. No leave was due so she faced the risk of having her wages docked. It did not matter to her, she would be going anyway. It transpired she was going home to vote for the local “panchayat” elections, so she would in fact be going at full pay. Her home is in the Sunderban jungles, where there are tigers; she said she had heard of four villagers being lost to man-eaters over the years. Bee-keeping and honey-making are among the many crafts and trades besides farming and fishing there. It takes her five hours to get home from Calcutta, two hours by train, two more hours by bus, then an hour walking along unpaved roads. One day to travel each way, and one day to cast her vote for the local government that will hold office for the next  five years.  The politics are split two ways: there are the official communists versus a coalition of the unofficial communists allied with non-communists. The local offices of both sides had recently telephoned her residence in Calcutta urging her to come back home and had canvassed for her vote. One vote among many hundreds of thousands. She is confident her vote will be secret (by electronic machine) and the political parties do not know who voted for whom. But they do try to pressure people in informal exit polls afterwards to figure out who voted which way if they can. What does her vote matter, she was asked. Suppose she went on holiday for three days instead, what would happen? Well, she said, I would be in trouble with the panchayat if I needed their signature on something and they knew I had not come back home to vote; they would say, well, you live in the big city, why do you need our decision in your favour? Indian democracy at work. A committed free thinking electorate. She makes about Rs 4000 per month and lives comfortably; she is a widow with a son in his twenties; she put him through a post-graduate college studying Bengali literature in which he has a Master of Arts. But he is also training to be an auto-mechanic which will have better job-prospects. India’s political economy at work.

Subroto Roy

Some 20 years ago I recall watching James Webb, then Secretary of the Navy in the Reagan Administration, on the MacNeil-Lehrer NewsHour and thinking “this man would be a great US President”. He then seemed for many years to disappear from the public eye, perhaps due to personal problems, until he returned recently as a Democrat and the junior Senator from Virginia. I am delighted to see his name being floated as a possible Vice-Presidential running-mate for Barack Obama, e.g. by Professor Gerald Pomper at

http://www.realclearpolitics.com/articles/2008/05/obama_should_pick_webb_for_run.html

I agree with Professor Pomper’s analysis. An Obama-Webb ticket would be unstoppable for the reasons he has given and more. It will also be good for America and the world in the 21st Century.

I say this as a Ron Paul fan who — had I been an American voter, which I am not — would have voted for Carter 1980, Reagan 1984, Bush Sr 1988, Bush Sr 1992, Dole 1996, Bush Jr 2000 (ok ok, I did not think he’d be that bad), Kerry 2004.

Hillary Clinton’s name has been floated as a possible Veep candidate — for John McCain! Wouldn’t that be fun? Obama-Webb vs McCain-Clinton!

Subroto Roy

John Wisdom (1904-1993), Main Philosophical Works:

Interpretation and Analysis, 1931
Problems of Mind and Matter 1934
Other Minds, 1952
Philosophy & Psychoanalysis, 1953
Paradox & Discovery, 1965
Logical Constructions (1931-1933),1969
Proof and Explanation (The Virginia Lectures 1957), 1991

Secondary literature:
Wisdom: Twelve Essays, R. Bambrough (ed) 1974
Philosophy and Life: Essays on John Wisdom, I. Dilman (ed) 1984.

Renford Bambrough (1926-1999), Main Philosophical Works:

“Socratic Paradox”, Philosophical Quarterly, 1960

“Universals and Family Resemblances”, Proceedings of the Aristotelian Society 1960-61

“Plato’s Modern Friends and Enemies”, Philosophy 1962

The Philosophy of Aristotle, 1963

“Principia Metaphysica”, Philosophy 1964

New Essays on Plato and Aristotle (edited by R. Bambrough), 1965

“Unanswerable Questions”, Proceedings of the Aristotelian Society Supplement 1966

Plato, Popper and Politics (edited by R. Bambrough), 1967

Reason, Truth and God 1969

“Foundations”, Analysis, 1970

“Objectivity and Objects”, Proceedings of the Aristotelian Society 1971-72

“How to Read Wittgenstein”, in Understanding Wittgenstein, Royal Institute of Philosophy 1972-3

“The Shape of Ignorance”, in Lewis (ed) Contemporary British Philosophy, 1976

Introduction & Notes to Plato’s Republic (Lindsay trans.), 1976

Conflict and the Scope of Reason, 1974; also in Ratio 1978

“Intuition and the Inexpressible” in Katz (ed) Mysticism & Philosophical Analysis, 1978

Moral Scepticism and Moral Knowledge, 1979

“Thought, Word and Deed”, Proceedings of Aristotelian Society Supplement 1980

“Peirce, Wittgenstein and Systematic Philosophy”, MidWest Studies in Philosophy, 1981

“The Scope of Reason: An Epistle to the Persians”, in Objectivity and Cultural Divergence, Royal Institute of Philosophy, 1984

“Principia Metaphysica: The Scope of Reason” also known as “The Roots of Reason”; a work and manuscript mentioned several times but now unknown.

A personal note by Subroto Roy for a public lecture delivered at the University of Buckingham, August 24 2004:

“Renford Bambrough and I met once on January 31 1982, when I had returned to Cambridge from the USA for my PhD viva voce examination. He signed and gave me his last personal copy of Reason, Truth and God. Three years earlier, in 1979, I, as a 24 year old PhD student under F.H. Hahn in economics, had written to him expressing my delight at finding his works and saying these were immensely important to economics; he invited me to his weekly discussion groups at St John’s College but I could not attend. Between 1979 and 1989 we corresponded while I worked in America on my application of his and Wisdom’s work to problems in economics, which emerged in Philosophy of Economics: On the Scope of Reason in Economic Inquiry (Routledge, International Library of Philosophy 1989, 1991), a work which got me into a lot of trouble with American economists (though Milton Friedman and Theodore W. Schultz defended it). Bambrough said of it “The work is altogether well-written and admirably clear”. On another occasion he said he was “extremely pleased” at the interest I had taken in his work. The preface of my book said he was not responsible for the use I had made of his writings, which I reiterate now. Returning to Britain in 2004, I find the work of Wisdom and Bambrough unknown or forgotten, even at the great University North East of Buckingham where they had lived and worked. In my view, they played a kind of modern-day Plato and Aristotle to Wittgenstein’s Socrates; in terms of Eastern philosophy, the wisdom they achieved in their lives and have left behind for us in their work to use and apply to our own problems, make them like modern-day “Boddhisatvas” of Mahayana Buddhism. My lecture “Science, Religion, Art, and the Necessity of Freedom” purports to apply their work to current international problems of grave significance, namely the cultural conflicts made apparent since the September 11 2001 attacks on America. As I am as likely to fail as to succeed in making this application, the brief bibliography given above is intended to direct interested persons to their work first hand for themselves.”

April 2007: See also Preface 2007 to the republication here at www.independentindian.com of Philosophy of Economics: On the Scope of Reason in Economic Inquiry, and also the 2004 public lecture “Science, Religion, Art & the Necessity of Freedom”.

I was graced with the selfless friendship of this great American from 1983 onwards. We met last at the University of Chicago in the summer of 1992 when I flew from Washington DC to see him. He was without a doubt among the most decent, honourable and scholarly of all economists in the 20th Century.

Not only did he write this, he later deposed on my behalf as an expert witness in a US federal court.

A Man of Reason
Milton Friedman (1912-2006)

Obituary Notice in The Statesman,

Perspective Page Nov 22 2006 www.thestatesman.net

Milton Friedman, who died on 16 November 2006 in San Francisco, was without a doubt the greatest economist after John Maynard Keynes. Before Keynes, great 20th century economists included Alfred Marshall and Knut Wicksell, while Keynes’s contemporaries included Irving Fisher, AC Pigou and many others. Keynes was followed by his younger critic FA Hayek, but Hayek is remembered less for his technical economics as for his criticism of “socialist economics” and contributions to politics. Milton Friedman more than anyone else was Keynes’s successor in economics (and in applied macroeconomics in particular), in the same way David Ricardo had been the successor of Adam Smith. Ricardo disagreed with Smith and Friedman disagreed with Keynes, but the impact of each on the direction and course both of economics and of the world in which they lived was similar in size and scope.

Friedman’s impact on the contemporary world may have been largest through his design and advocacy as early as 1953 of the system of floating exchange-rates. In the early 1970s, when the Bretton Woods system of adjustable fixed exchange-rates collapsed and Friedman’s friend and colleague George P. Shultz was US Treasury Secretary in the Nixon Administration, the international monetary system started to become of the kind Friedman had described two decades earlier. Equally large was Friedman’s worldwide impact in re-establishing concern about the frequent cause of macroeconomic inflation being money supply growth rates well above real income growth rates. All contemporary talk of “inflation targeting” among macroeconomic policy-makers since the 1980s has its roots in Friedman’s December 1967 presidential address to the American Economic Association. His main empirical disagreement with Keynes and the Keynesians lay in his belief that people held the intrinsically worthless tokens known as “money” largely in order to expedite their transactions and not as a store of value - hence the “demand for money” was a function mostly of income and not of interest rates, contrary to what Keynes had suggested in his 1930s analysis of “Depression Economics”. It is in this sense that Friedman restored the traditional “quantity theory” as being a specific theory of the demand for money.

Friedman’s main descriptive work lay in the monumental Monetary History of the United States he co-authored with Anna J. Schwartz, which suggested drastic contractions of the money supply had contributed to the Great Depression in America. Friedman made innumerable smaller contributions too, the most prominent and foresighted of which had to do with advocating larger parental choice in the public finance of their children’s school education via the use of “vouchers”. The modern Friedman Foundation has that as its main focus of philanthropy. The emphasis on greater individual choice in school education exemplified Friedman’s commitments both to individual freedom and the notion of investment in human capital.

Friedman had significant influences upon several non-Western countries too, most prominently India and China, besides a grossly misreported episode in Chile. As described in his autobiography with his wife Rose, Two Lucky People (Chicago 1998), Friedman spent six months in India in 1955 at the Government of India’s invitation during the formulation of the Second Five Year Plan. His work done for the Government of India came to be suppressed for the next 34 years. Peter Bauer had told me during my doctoral work at Cambridge in the late 1970s of the existence of a Friedman memorandum, and N. Georgescu-Roegen told me the same in America in 1980, adding that Friedman had been almost insulted publicly by VKRV Rao at the time after giving a lecture to students on his analysis of India’s problems.

When Friedman and I met in 1984, I asked him for the memorandum and he sent me two documents. The main one dated November 1955 I published in Hawaii on 21 May 1989 during a project on a proposed Indian “perestroika” (which contributed to the origins of the 1991 reform through Rajiv Gandhi), and was later published in Delhi in Foundations of India’s Political Economy: Towards an Agenda for the 1990s, edited by myself and WE James.

The other document on Mahalanobis is published in The Statesman today for the first time, though there has been an Internet copy floating around for a few years. The Friedmans’ autobiography quoted what I said in 1989 about the 1955 memorandum and may be repeated: “The aims of economic policy (in India) were to create conditions for rapid increase in levels of income and consumption for the mass of the people, and these aims were shared by everyone from PC Mahalanobis to Milton Friedman. The means recommended were different. Mahalanobis advocated a leading role for the state and an emphasis on the growth of physical capital. Friedman advocated a necessary but clearly limited role for the state, and placed on the agenda large-scale investment in the stock of human capital, encouragement of domestic competition, steady and predictable monetary growth, and a flexible exchange rate for the rupee as a convertible hard currency, which would have entailed also an open competitive position in the world economy… If such an alternative had been more thoroughly discussed at the time, the optimal role of the state in India today, as well as the optimum complementarity between human capital and physical capital, may have been more easily determined.”

A few months before attending my Hawaii conference on India, Friedman had been in China, and his memorandum to Communist Party General Secretary Zhao Ziyang and two-hour dialogue of 19 September 1988 with him are now classics republished in the 1998 autobiography. Also republished there are all documents relating to Friedman’s six-day academic visit to Chile in March 1975 and his correspondence with General Pinochet, which speak for themselves and make clear Friedman had nothing to do with that regime other than offer his opinion when asked about how to reduce Chile’s hyperinflation at the time.

My association with Milton has been the zenith of my engagement with academic economics, with e-mails exchanged as recently as September. I was a doctoral student of his bitter enemy yet for over two decades he not only treated me with unfailing courtesy and affection, he supported me in lonely righteous battles: doing for me what he said he had never done before, which was to stand as an expert witness in a United States Federal Court. I will miss him much though I know that he, as a man of reason, would not have wished me to.

Subroto Roy

Assessing Manmohan:

The Doctor of Deficit Finance should realise the currency is at stake

by Subroto Roy

First published in The Statesman, Editorial Page Special Article, April 25 2008, www.thestatesman.net

The best thing that may be said of the Manmohan Singh premiership is that when it began in May 2004, it seemed, for a short while, refreshing in comparison to the dysfunctional arrogance and brutality displayed by its predecessor. By the last months of the Vajpayee-Advani Government, there were party appointees who had ended all pretence of purportedly Hindu values and were raking it in shamelessly. The Golden Rule of Democracy is “Throw the rascals out”, which is what Indian democracy upheld as it has done time and again. By 2009, India’s electorate will have the chance to decide whether the incumbent government deserves the same fate.

Lok Sabha

Manmohan Singh was seriously discussed as the Congress’s putative nominee for PM as early as 2001. The idea brewing at the time with the party’s next generation of wannabe leaders (in their 50s and 60s, where Manmohan was near 70) was that they needed to maintain good relations with the Great White Queen and wait out one term of an inevitable Singh premiership before having a shot at the top job themselves.

What is surprising is Dr Singh appeared never to feel it necessary to educate himself privately on how to retool himself for the necessary transformation from being the archetypal bureaucrat he had been in his working career to becoming the national statesman he wished to be after retirement. It is doubtful, for example, if he ever stood in front of a mirror and practised an extempore political speech in Hindi in preparation for the highest executive post in the country, let aside writing a clear-headed, original vision or mission statement of substance as to where he wished to lead it. As Narasimha Rao’s Finance Minister, he could meekly take orders from his PM; it seemed he wished to continue in the same mode even when PM himself.

Jawaharlal Nehru is supposed to have been a hero of Dr Singh’s ~ but Nehru was a thorough parliamentarian, among the finest anywhere, and someone who always respected the Lok Sabha immensely. Dr Singh, after he lost to VK Malhotra for the South Delhi seat in 1999, made not the slightest effort to enter the Lok Sabha again, even when the Akalis indicated they might not oppose him in a Punjab contest. When asked specifically at a large press conference about not entering the Lok Sabha, Dr Singh murmured words to the effect he had better uses of his time ~ a display, if anything, of the misplaced arrogance of many New Delhi academics and intellectuals. Dr Singh may be the first PM in any parliamentary democracy never to have won a seat in the lower house nor felt a need to do so.

Dr Singh’s bureaucratic expertise assisted him well in the first national crisis that came his way, which was the Tsunami of 26 December 2004. There appeared to be an air of efficiency about the Government’s response and he seemed in his element as commander of bureaucratic forces while working with Pranab Mukherjee in enlisting the military. George W. Bush (not a great geographer or historian) was apparently impressed to see on a map that India had naval forces deployed as far as the Andamans.

By 2005 though, Dr Singh’s bureaucratic mindset had its negative impact. Montek Ahluwalia had been his Finance Secretary when he was Finance Minister. Mr Ahluwalia’s spouse had been a main supporter of Dr Singh’s unsuccessful Lok Sabha attempt. During the Vajpayee Government, Mr Ahluwalia remained a Planning Commission Member for several years before moving to Washington. With Dr Singh as PM, Mr Ahluwalia returned from the USA in mid 2004 to become Deputy Chair at the Planning Commission. Simultaneously with his return, the idea that the American nuclear industry would like to sell “six to eight lightwater reactors” to India arose.

That is as much as is presently known in public. Dr Singh and Mr Ahluwalia may in the national interest want to frankly and precisely explain to the Indian people the full story of the sudden origins of this idea. Certainly, none of the lessons of the Dabhol fiasco a decade earlier seemed to have been learnt, and the Maharasthtra Government (and hence the Government of India) ended up paying some $300 million to General Electric and Bechtel Corporation for Dabhol before any nuclear talks with the USA could begin. Nor had any serious cost-benefit analysis been done or discussion taken place comparing nuclear energy with coal, hydro and other sources in the Indian case.

Indian foreign policy became frozen in its focus on nuclear negotiations with the USA, swirling around Dr Singh’s fife-and-drum welcome at the White House and President Bush’s return visit to India. At the same time arose the issue of Paul Volcker’s UN committee mentioning the name of India’s foreign minister. As The Statesman put it, regardless of the latter’s involvement, “the damage to India’s diplomatic reputation in the world” was done and it was inevitable a new foreign minister would be necessary. After dilly-dallying and much 10 Janpath to-and-fro, Dr Singh followed Nehru’s mistake of becoming his own foreign minister. The idea was that this would be temporary but it became almost a year.

Instead of transforming himself towards Indian political statesmanship, Dr Singh advanced other retired bureaucrats’ ambitions on similar career-paths. Foreign policy went out of the MEA’s control and seemingly into the control of the new “National Security Adviser”. Dr Singh, sometimes with MK Narayanan beside him, travelled a large number of countries from Brazil to Finland and Uzbekistan to South Africa and Japan. Dr Singh also found time and willingness to accept honorary degrees from British and Russian universities during these short months.

While Dr Singh seemed thus preoccupied, two of India’s main neighbours underwent massive democratic revolutions (leave aside magnificent Bhutan). Nepal’s people practically stormed their Bastille while Dr Singh and Mr Narayanan visited Germany to discuss BMWs. Pakistan’s democratic forces could hardly believe the cold indifference shown to them by a New Delhi merely following Bush’s support for Pervez Musharraf. While Pakistan and Nepal, and to lesser extent Bangladesh, saw movements towards better governance, Sri Lanka descended towards civil war ~ India’s PM remained obsessed with the magic wand that the nuclear deal was supposed to be.

Inflation

Then suddenly the magic vanished ~ Dr Singh seemed to finally come to a silent private recognition that the economics of the nuclear deal simply did not add up if it meant India importing “six to eight lightwater reactors” on a turnkey basis from the USA or anywhere else. Dr Singh seemed to come out of his self-imposed trance and return a little better to reality. By the time he visited China, although he was as deferential to Hu Jintao in his body language as he had been to Bush and Musharraf and even accepted an indoor guard of honour, he also seemed willing to stand up for India. The Arunachal visit was a reality-check.

Now there is inflation ~ and one year left in the UPA’s term. What the country needs is tough sensible macroeconomics and clean public finance. A pandering profligate budget in February was not a healthy sign. Instructing Mr Ahluwalia to close down the Planning Commission and make it a minor R&D wing of the Finance Ministry would be instead a good step. Instructing the RBI to clean up its bureaucratic wastefulness and prepare itself for institutional independence from the Finance Ministry would be even better. Getting proper financial control over every Union and State government entity spending public money and resources would be most important of all. Such major institutional changes in the policy-making process are what an economist might expect of an economist prime minister who wishes to lead India in the 21st Century. India’s currency is at stake.

Indian Inflation: Upside Down Economics From The New Delhi Establishment

By Subroto Roy

First published in two parts in The Statesman, Editorial Page Special Article, April 15, April 16 2008, www.thestatesman.net

Suppose there are only three real goods and services in the economy, and their prices per unit expressed in terms of money were Rs 3, Rs 2, Rs 6 respectively. If those money prices per unit doubled to Rs 6, Rs 4, Rs 12 respectively, we would say inflation of 100% occurred during the relevant time-period. If the prices had gone instead to Rs 4.50, Rs 3, Rs 9, we would say inflation was 50%, and so on. Notice the ratios between the three prices have remained the same in these examples; i.e., while the money prices of the items have changed, relative prices between them remained constant. In reality, there are many hundreds of millions of differentiated real goods and services in any economy though the logic stays the same.

Decline of money
It is well within living memory that the monthly salary of a Government of India Joint Secretary was Rs 3,000. Middle class parents would wed their daughters respectably to a groom earning such a figure. A Joint Secretary today makes 20 times as much and Rs 3,000 is made by his driver or children’s nanny whose equivalent back then made perhaps Rs 150 per month. The relative distance between the Joint Secretary and his driver has not decreased but the absolute amount of rupees made by each has been multiplied by a factor of 20. That indicates the fall in the value of rupees or rise in prices of goods and services relative to rupees during that period.

One reason this has happened is that the monopoly issuer of rupees, namely the Government of India, has vastly enlarged the stock of rupees present in the economy, both paper-notes and bank-deposits.
Inflation, strictly speaking, is uniform decline in the value of money or, what is the same thing, uniform increase in all rupee prices, including wages, with relative prices constant. The time-period could be a year or even a month; “hyperinflation” may start to be defined if the value of money falls at more than 10% per month.

The main problem with inflation is that rupee prices never expand uniformly and hence some classes of people gain unexpectedly while others suffer catastrophe. E.g., all those with debts expressed in rupee terms pay back less in real terms while their creditors go bankrupt. Those with fixed or slow-changing incomes (like old people, unorganised non-unionised workers etc) and those with paper assets (like currency rather than land or jewelry) are all made worse off by inflation. Unionized workers, like Government employees, do very well from inflation relative to others in society as their compensation is inflation-indexed. And the Government of India itself, as the largest debtor in the economy, gains massively from inflation; indeed, printing more paper is a standard way for all governments around the world to reduce their real debts by subterfuge.

The farmers at Singur or the SEZs who hand over their land for paper rupees from the Government will find the value of that paper declining and the value of that land rising over future years ~ which may help explain the recent keenness of city-people to take over rural India.

Rupee prices are one key variable that tend to expand via inflation with expansion of money stock. The other main change occurs in real income through growth. The Joint Secretary and his driver both use colour TVs for entertainment and gas-stoves for cooking these days; their earlier counterparts would have used transistor radios and coal-fired ovens.

To that extent, we have superior standards of living than we did in the past. There has been enormous technological progress, mostly through spontaneous learning and productivity increase, and that leads to vastly greater commerce and transactions between people, hence greater income and wealth through specialization. The vastly increased volume and value of commerce requires more money to expedite its turnover.

India’s money stock in recent decades has been growing at no less than 15% per annum, most recently reaching an all-time high of 22% per annum last year. Even if current Government estimates of growth of real income at some 9% are taken at face-value, that may mean growth in all rupee prices, i.e. inflation, near 22-9=13% per annum. TV economists parrot Government WPI inflation at 5% per annum, and now newspaper headlines are screaming WPI inflation is at 7.4% ~ more realistically, the decline in the value of India’s paper money has likely been in double-digits for years.

Paper money is a peculiar thing as it has no intrinsic value ~ even a hair pin or shirt-button has more usefulness as such. Paper money derives whatever value it has only because each of us in the economy believes everyone else will accept it in transactions in payment of wages or to purchase food and other items with.

Gold standard

The currency note in your pocket may carry the signature of the RBI Governor and his “promise to pay the bearer” the face-value ~ as if he is going to pay you its equivalent in gold held by the Government. But this is open humbug, a childish fiction. In 1931 the British pound, and the Indian rupee which linked to it at the time, went off the “gold standard” and there has been no backing of the Indian currency with gold ever since then.

In a pure gold standard, gold is money ~ interchangeable in the sense the central bank guarantees it will exchange gold for the paper it issues at an announced price. If that price changes up or down, there is devaluation or revaluation of the currency with respect to gold (depending on how you count it).
A gold exchange standard is similar except gold is not used as money and central banks of nations guarantee the announced prices of their paper moneys with respect to gold in transactions with one another. In the dollar exchange standard (or Bretton Woods system from 1944 to 1971), the US Government alone and uniquely undertook to guarantee the price of the dollar at $35 a troy oz of gold in transactions with all other central banks. That was the underpinning of the international financial system until Richard Nixon “closed the gold window” on 15 August 1971 because the US had largely financed the Vietnam War through money-creation, and other countries’ central banks (like France) had accumulated large dollar-balances.

The “gold standard”, “gold exchange standard”, and “dollar exchange standard” are all examples of “fixed” exchange rate systems which came to end in 1971-1972. The price of gold at $35 an oz was obviously unrealistically low, and it shot up at once, and has even reached $1000 an oz recently. Since 1972, the Western world has been on “floating exchange rates” where currencies find their own values and gold is merely one asset among many. Fixed exchange rate systems can lead to speculation, runs against currencies and the irresponsible international export of inflation which floating exchange rate systems tend to avoid because there will tend to be market-determined movement in the exchange-rate instead.

Elite capital flight

India today has neither a proper fixed nor a proper floating exchange-rate system but instead continues a system of highly discriminatory exchange controls. Twenty or thirty million people in our major cities know how to use the present system well enough to exchange their Indian rupees for as much as US $200,000 per annum to send their children and relatives settled abroad as foreign nationals. Plus Indian corporations have been allowed to convert rupees to buy sinking foreign companies. Foreign-currency reserves have vastly climbed too as domestic Indian companies have been allowed to incur foreign-currency denominated debt. Hence the thirty million special people are rather cleverly able to borrow foreign currency with one hand and then transmit it abroad with the other.

The net result is a clear policy of government-induced elite capital flight, unprecedented in its irresponsibility anywhere in world economic history ~ signed, sealed and delivered by the Montek-Manmohan-Chidambaram trio now just as Yashwant-Jaswant-KC Pant and friends had done a little earlier. The Communists would only be worse, as their JNU economists renounce all standard textbook microeconomics and macroeconomics in favour of street-shouting instead. Outside the thirty million Indians with NRI connections, the average Indian today is disallowed from holding foreign exchange accounts at his/ her local bank or holding or trading in gold or other precious metals freely as he/she may please ~ the physical arrest of Mohun Bagan’s hapless Brazilian footballer by our inimitable Customs officers the other day reveals the ugliness of the situation most poignantly.

Every TV economist in Delhi, Bombay and Kolkata now seems to have a solution about India’s inflation and all sorts of fallacious reasoning is in the air. Some recommend the rupee appreciating or depreciating ~ as if anyone in the country has the faintest idea how elastic imports, exports and capital flows may be in fact to changes in the (controlled) exchange-rate. The Finance Minister and PM keep saying inflation is being “imported” because international commodity prices are high ~ someone should explain to them inflation is “imported” when fixed exchange rates allow transmission through the price-specie flow mechanism, and that is far from being India’s main problem. The extra-constitutional “Planning Commission” has, we may be thankful, remained silent about inflation, and seems to have abandoned earlier misconceptions about using forex reserves for “infrastructure”. The UPA Chair, we may be thankful, also has been silent and admits innocence of all economics, implicitly trusting her PM’s wisdom in all such matters instead.

What no one wants to talk about is the hippopotamus that is present in the room, namely, the chronically diseased state of accounts and public finances of the issuer of India’s paper-rupees, the Union Government, as well as the diseased accounts and finances of more than two dozen State Governments that are subservient to it. The macroeconomic and fiscal policy process that the Congress, BJP, Communists and everyone else in the political class in New Delhi and the State capitals have been presiding over for decades is one that turns normal economics upside down.

What happens in the West is that an estimate of technological progress and population growth is made by policy-makers, then an “acceptable” or “unavoidable” or “natural” rate of inflation is added (the figure of monetary change needed for efficiency in the real economy so relative prices adjust to equilibrium in response to demand and supply changes), then a monetary growth target is set, to which the fiscal authority ~ i.e. the legislature handling the Government’s budget ~ must adjust taxation and spending plans accordingly.

What has been happening in India every year for decades is that each of some two dozen state legislatures runs up a large deficit, which are all added up and passed on to the “Centre”; the “Centre” and its “Yojana Bhavan”, at the behest of every conceivable organised interest-group with access in Delhi especially government unions and the military, runs up its own vastly larger fiscal deficit, and then this grand total of fiscal-deficits is offered to the Reserve Bank at the end of a loaded pistol ~ to pay for one way or another via new public debt creation and money printing. Subtract the WPI rate from the Money Supply Growth rate and government spokesmen and their businessmen friends then exclaim that the economy must try to reach the difference as its “warranted” growth rate! It is all economics upside down from people who have either learnt nothing significant in the subject or forgotten whatever little they once did.

Fragile financial state

The net result has been a banking system (mostly nationalized) in which the asset side of banks’ balance-sheets is made up almost entirely of rather dubious government debt, interest payments on which are received every year from fresh money-printing. The liability side of those balance-sheets consists of course of customer-deposits. In this fragile monetary and financial state, a government-induced capital flight has been allowed to continue under pretence of liberalization ~ with Indian companies being allowed to borrow from foreign markets many times their domestic rupee-denominated net worth by which to acquire ailing foreign companies and brands. Furthermore, there has been a massive fiscal effect as vast new Government spending programs ~ like buying foreign aircraft carriers, fighter-jets or passenger aircraft or writing off farm loans ~ come to be announced and absorbed into expectations of future inflation. A monetary meltdown is what the present author cautioned against in 1990-1995 and again, publicly, in 2000-2005. Economics, candidly treated, tells us not only that there is no such thing as a free lunch but also that chickens come home to roost.

The writer is Contributing Editor, The Statesman

University of Hawaii Project on India’s Political Economy 1986-1992

This is dated May 21 1989 and located at the University of Hawaii President’s House. Prof. Milton Friedman and the Indian Ambassador to the USA are wearing Hawaiian leis. The academic result of this project was the work Foundations of India’s Political Economy: Towards an Agenda for the 1990s edited by myself & WE James and published by Sage. The practical and political result was the origin of the 1991 Indian economic reform when the project manuscript in unpublished form reached Rajiv Gandhi through my hand on September 18 1990 at 10 Janpath New Delhi; the story of my encounter with Mr Gandhi has been told elsewhere here.

Two cheers for Pakistan!

by Subroto Roy

First published in The Statesman, Editorial Page Special Article, April 7 2008, www.thestatesman.net

A century has passed since British rulers in India like Curzon and Minto became self-styled interlocutors between Muslims and Hindus of the subcontinent. Up through the 19th century there had been no significant national political conversation between India’s main communities. The “Chief Translator” of the High Court in Calcutta was highly prized for his knowledge of Sanskrit, Persian and English because at least three different sets of laws governed different people in the country. Maulana Abul Kalam Azad wrote of his experience in the Bankim-inspired revolutionary societies of Bengal who treated him with extreme suspicion because they could hardly believe a Muslim wanted to join them as an anti-British rebel.

Jinnah vs Azad

Then came MA Jinnah, Iqbal, Rahmat Ali and others, initial creators of Pakistan whether through greater or lesser motives. Azad, Zakir Hussain, Sheikh Abdullah and other Muslims were equally firm the Pakistan idea was not only bad for India in the world it was bad for Muslims in particular. The Azads condemned the Jinnahs as greedy megalomaniacs, the Jinnahs condemned the Azads as minions of the Hindus. Larke lenge Pakistan, marke lenge Pakistan, khoon se lenge Pakistan, dena hoga Pakistan was the mob-cry during the bloody Partition, while the British, weakened by war and economics and bereft of their imperial pretensions, made haste to leave “this beastly country” to its fate ~ rather hoping the bloodshed would be such someone might hire them to stay on.

Certainly, having used the Indian Army for imperial purposes in the War, Britain (represented locally by a series of smartly dressed blundering fools) behaved irresponsibly in not properly demobilizing that Army during a period of intense communal tension. There were no senior Indian officers ~ KM Cariappa became a Brigadier only in 1946, Ayub Khan was a Colonel under him. Then there were the fatuous “princes” the British had propped up in “Indian India”, few being more than cardboard creatures. Among them was J&K’s ruler who was a member of Churchill’s War Cabinet and had come to harbour illusions of international grandeur. Once J&K’s Muslim soldiers returned to their Mirpuri homes, Jammu and Punjab were in communal conflict, months before the decision that Pakistan would indeed be created out of designated areas of British India just before British India extinguished itself. Army-issued Bren guns came to be used by former soldiers in communal massacres of the convoys of refugees going in each direction.

Part of the problem over J&K since then has been that it seems a dialogue of the deaf. Pakistanis since Zafrullah Khan claimed it was communal violence against Muslims in Jammu and Punjab that prompted the Pashtun invasion of Srinagar Valley beginning 22 October 1947; Indians have always claimed the new (and partly British-officered) Pakistan Army organized and instigated the invasion, coinciding with the planned takeover of Gilgit.

As in all complex moral problems, there was truth on all sides though no one doubts the invasion was savage and that the Pashtuns carried off Kashmiri women, Hindu, Muslim and Sikh. J&K descended into civil war, Abdullah’s secularists backed by the new India, Ibrahim’s communalists by the new Pakistan. Field Marshall Auchinlek, who commanded both Indian and Pakistani armies, had the decency to resign when he realized his forces were at war with one another. That J&K could not be independent in international law was sealed when the 15 October 1947 telegram sent by Hari Singh’s regime went unanswered by Attlee. The tribal invasion from Pakistan caused the old State of J&K to become an ownerless entity in international law, whose territories were then carved up by force by the two new British Dominions (later republics) and the result has been the “LOC”.

ZA Bhutto was perhaps Pakistan’s only politician after that time. The years between the assassination of Liaquat Ali Khan and the rise of Bhutto saw Pakistan’s military begin its liaison with the Americans ~ from the US Ambassador’s daughter marrying the Pakistan President’s son to the leasing of Peshawar’s airfields for U-2 flights over the USSR. Yet Bhutto’s deep flaws also contributed to the loss of Bangladesh and to brutality, supported by the Shah of Iran’s American helicopters, against the Baloch.

Bhutto’s daughter now may have succeeded in death where she could not in life. Like Indira Gandhi, there seemed a shrill almost self-sacrificial air about Benazir in her last days, and, like Indira, her assassination caused all her countrymen including her enemies to undergo an existential experience. Perhaps the public death of a woman in public life touches some chivalrous chord in everyone.

Benazir’s husband was transformed from seeming a rather dubious self-seeker to becoming a national leader of some sobriety. Her old adversary Nawaz Sharif, brought to power by one Army Chief and removed by another, is now a constitutional democrat – seemingly adamant that there be the Rule of Law and not of generals. Most of all, Benazir’s death seemed to completely shut up that most loquacious of Pakistanis: Pervez Musharraf. Musharraf seemed stunned and promised free, fair and transparent elections; though no one believed he would deliver, he somehow did. He would like now to be a senior statesman though it seems as likely his countrymen will not forgive his misdeeds and instead exile him to America.

Afghanistan

Pakistan’s main international problem is not and has never been J&K. It has been and remains its unsettled western border and identity vis-à-vis Afghanistan (as India’s problem has been the eastern border with China). Dr Khan Sahib and Khan Abdul Ghaffar Khan knew this but they were not allowed to speak by Pakistan’s Kashmir-obsessed elite. Zaheer Shah’s Afghanistan was the only country that voted against Pakistan joining the UN sixty years ago.

The present author has said before that Osama bin Laden may well be safely and comfortably in the deserts of North Africa while NATO and the Americans raise hell in Afghanistan and Waziristan pretending to look for him. It is not in India’s interest as it is not in Pakistan’s interest that Western militaries, who seem to have nothing better to do, brutalize Afghans of all descriptions in the name of nation-building or fighting “terrorism”. Afghan nation-building can only ultimately come from the Afghans themselves, no matter how many loya jirgas it takes. What Pakistan dislikes emerging from New Delhi is the sometimes rather supercilious and ignorant condescension that our officialdom is infamous for. Instead, with a new, seemingly clear-headed and well-intentioned Government in Pakistan elected for the first time ever, it may be time for all good people in the subcontinent to raise a glass of fruit juice and say “Two cheers for Pakistan!”

It is now one year since this blog began, and the number of pageviews is approaching 50,000. A list of the works published or republished here may be helpful. It is in approximate order of popularity, though older posts obviously have an advantage over newer ones. The list is not an index nor even a table of contents, and readers wishing to find a piece of work and its place of first publication may please place it into the search-engine on the right hand side.

Introduction and Some Biography

Rajiv Gandhi and the Origins of India’s 1991 Economic Reform

India in World Trade & Payments

Separation of Powers: India, the USA, Pakistan

The Greatest Pashtun: Khan Abdul Ghaffar Khan

Iqbal & Jinnah vs Rehmat Ali in Pakistan’s Creation

Can India Become an Economic Superpower?

Economic Assessment of India-USA Merchandise Trade

India’s Macroeconomics

Gold standard etc: Fixed versus flexible exchange rates

Mob Violence and Psychology

India, Pakistan, Sri Lanka, Bangladesh Merchandise Exports

Philosophy of Economics: On the Scope of Reason in Economic Inquiry

Surrender or Fight? War is not a cricket match

The Dream Team: A Critique

To Clarity from Confusion on Indo-US Nuclear Deal

The Mitrokhin Archives II from an Indian Perspective

China’s Commonwealth

Understanding China

India’s Moon Mission

Revisionist Flattery of Indira Gandhi

Pricing, Planning & Politics: A Study of Economic Distortions in India

Pakistan’s Allies

History of Jammu & Kashmir

Unaccountable Delhi: India’s Separation of Powers’ Doctrine

Swindling India

Science, Religion, Art & the Necessity of Freedom

On the US Presidential Elections 2008

A General Theory of Globalization & Modern Terrorism

The Politics of Dr Singh

China’s India Example

Milton Friedman on the Mahalanobis-Nehru Plan

Of JC Bose, Patrick Geddes & the Leaf World

New Foreign Policy? Kiss Up, Kick Down

India and “Energy Security”

Is Balochistan Doomed?

Understanding Pakistan

D.H. Lawrence’s “Phoenix“

Towards a Highly Transparent Fiscal & Monetary Policy

Sonia’s Lying Courtier (with Postscript)

India’s Energy Interests

Presidential Qualities

Lessons from the 1962 War

Uttar Pradesh Polity and Finance

India-USA interests: Elements of a serious foreign policy

India’s Budget Process (in Theory)

Nixon & Mao vs India

Against Quackery

John Wisdom, Renford Bambrough: Main Philosophical Works

Solving Kashmir: On an Application of Reason

The Physician Tames the Lions: Ron Paul in the Nitze School

Lal Masjid ≠ Golden Temple

An Open Letter to Professor Amartya Sen

FA Hayek’s letter to me when I was 26

A Philosophical Conversation between Professor Sen and Dr Roy

Auguste Rodin on Nature, Art, Beauty, Women and Love

Political Paralysis

China’s India Aggression

Indian Money and Credit

On a Liberal Party for India

Our Dismal Politics: Will Independent India Survice Until 2047?

Three Memoranda to Rajiv Gandhi 1990-1991

US Espionage Failures

America’s Pakistan-India Policy

Our Policy Process: Self-Styled “Planners”

The Case For and Against “The Satanic Verses”

China’s Secretly Built 1957 Road Through India’s Aksai Chin

India and Her Neighbours

Surendranath Roy (1860-1929)

Racism New and Old

Transparency and Economic Policy-Making

Saving Pakistan

On Hindus and Muslims

Fallacious Finance

A Modern Military

Fiscal Instability

Indian Money and Banking

Assessing Vajpayee: Hindutva True and False

On Land-Grabbing

Milton Friedman: A Man of Reason (1912-2006)

Science, Religion, Art & the Necessity of Freedom

Iran’s Nationalism

Pakistan’s Kashmir obsession

Has America Lost?

American Turmoil

Waffle but No Models of Monetary Policy:

Land, Liberty & Value

Atoms for Peace (or War)

On Indian Nationhood

Martin Buber on Palestine and Israel

A Note on the Indian Policy Process

If I was an American voter in 2008

Modern World History

Maharashtra’s Money

Letter to Forbes.com

Is Hillary’s candidacy legal?

Political Stonewalling

Apropos “Philosophy of Economics”

No Marxist MBAs? An amicus curiae brief

Hypocrisy of the CPI-M

American Politics: Obama-Clinton Contest

Bengal’s Finances

Works of D. H. Lawrence

Lessons for India from Nepal’s Revolution

Law, Justice and J&K

Dalai Lama’s Return: In the tradition of Gandhi, King, Mandela

My meeting Jawaharlal Nehru

Justice & Afzal

My letter to The Times of London

Himalayan Expedition, West Sikkim

Map of Chinese Empire c. 1900

A Current Example of the Working of the Unconscious Mind

How to Budget

Pakistan violates Nawaz Sharif’s rights

Karl Georg Zinn’s Review of my Philosophy of Economics

What To Tell Musharraf

University of Hawaii Project on India’s Political Economy

Iran, America, Iraq

Anarchy in Bengal

Announcement of My “Hahn Seminar” 1976

Of Communists and Constitutions

Constitution for a Second Indian Republic

Unhealthy Delhi

Logic of Democracy

American Democracy

Median Voter Model of India’s Electorate

Hutton and Desai: United in Error

Theodore W. Schultz 1902-1998

After the Verdict

Growth & Government Delusion

Diplomatic Wisdom

Home Team Advantage

Bengal Legislative Council 1923

Of Graven Images

Irresponsible Governance

On Lawrence

Theodore W. Schultz’s defence of my book

Fifty years since my third birthday: on life and death

The May 29 1984 lead editorial in London

War or Peace

Evaluations by my Graduate Students, Fall 1988

Where I would have gone if I was Osama bin Laden

The Roys of Behala 1928

Myself

IndiaSeminar Yahoo Group

Taxation of India’s Professional Cricket: A Proposal

Tax professional cricket:

Hockey’s debacle shows the distortions in India’s sports markets

by

Subroto Roy

First published in The Statesman, April 1 2008, Editorial Page Special Article

www.thestatesman.net

All cricket involving professional international-level players, whether Indian or foreign, that comes to be broadcast to Indian audiences or played before Indian spectators, deserves to be subjected to a new, severe, discriminatorily specific excise-tax. Cricket below professional international level would be unaffected. Revenues received by the Union or State Governments from a new “International Cricket Tax” should be specifically “earmarked” to subsidize other sports as heavily as possible. Individual Indian athletes, gymnasts, swimmers, archers etc. as well as Indian teams in soccer, hockey, rugby, volleyball and other sports would be encouraged and enabled to train or compete at sporting events around the world using revenues raised from taxation of professional international cricket involving India. Had our Ministry of Finance or any other New Delhi ministry any serious sense of the economics of public finance, they would have proposed such a simple device of national policy years ago, certainly after the Hansie Cronje gambling scandal broke.

National policy

The distortions of our sports markets have come to be highlighted today by the collapse of Indian men’s hockey coinciding with Indian men’s cricket ballooning from a little international success and a lot of greedy consumer-fed wealth. The public is hardly aware of it but Indians have in fact done very well recently in several international sports ~ especially women’s and men’s boxing, women’s weight-lifting, athletics, archery, table-tennis, swimming, women’s hockey and men’s soccer. Yet youngsters around the country face extremely distorted decisions between investing their time and energy in any sport other than cricket ~ on the outside chance they might hit gold like a Sachin Tendulkar or MS Dhoni or Irfan Pathan and improve their families’ material well-being for ever more, rather like buying a winning lottery ticket.  As a general rule, the structure of economic incentives should be such that a physically talented 10 or 11 year old male or female child should be indifferent between choosing among different sports in which to specialize, cricket being one possibility. Physical fitness through sport along with proper nutrition for all children in the country needs to be the general national goal.

Notwithstanding its virtues, joys, pleasantries and sportsmanship, cricket cannot be considered a nation-building sport for India’s masses. Cricket in England and the West Indies has long declined in face of more vigorous mass sports like soccer and basketball (“West Indian” athletes emigrating to North America). Australia and New Zealand love cricket but they tend to love and excel in many sports and cricket to them is just another ~ if cricket suddenly vanished they would merely move more towards rugby, swimming, tennis etc.

In India, Pakistan, Sri Lanka and Bangladesh as well as South Africa and Zimbabwe, cricket does have some political nation-building role via the secular symbolism involved in choosing a representative national team on merit ~ but that still does not make cricket the single most suitable sport for mass physical or moral upliftment among scores of millions of poor children.

Cricket is similar to baseball and American football in requiring quite a lot of equipment per player; in requiring relatively high technical specialized training (opening batsman, spin-bowler, pitcher, quarter-back); and in not providing all who play it a “total body workout” within a short length of time. One may need to be fit to play cricket but playing cricket in and of itself is not the best route to physical fitness.

Professional international cricketers thus need to be provided with a lot of support ~ gyms, massages, fitness sessions, physiotherapy etc. Field games like rugby, soccer, hockey or basketball do provide “total body workouts”, do not require nearly as much equipment per player and call for much less technical specialized training.

For sake of national policy-making, relevant comparisons should not be made at first class or professional levels but rather on the level of school playing fields, village playgrounds or urban parks and open spaces on any bright day where a bunch of lads have nothing better to do than create a game for themselves. In India as around the world, all that a dozen or more lads need to make a game of it is a ball that can be kicked between them. America’s inner cities have a single basketball hoop around which a game comes to be played.

The high life-time earnings of professional international Indian cricketers arises ultimately from television advertising of mass consumer goods and services ~ aerated sweet drinks, mobile telephone services, chocolates, potato-chips, soaps, shampoos, detergents etc. There is in general nothing wrong with such outcomes of a free process of contracts. The late libertarian philosopher Robert Nozick in Anarchy, State and Utopia gave a classic case of the great basketball player Wilt Chamberlin earning a vast income and wealth because very large numbers of people were freely choosing to part with their money to watch his genius at play.

America, however, has had a long history of sports during which sporting markets have become very competitive in the economic sense. Indian cricket reveals monopolistic trends. Selection at national level, hence to an international professional career of about a decade or so, contains a strong random or arbitrary element to it. At the same time, since the early 1990s professional cricketers in India (unlike those in other countries) have refused to gracefully retire even after poor performance and have had to be chucked out after titanic political struggles that sometimes find mention in Parliament. There is hardly any of the “free entry” or “free exit” that define competitive conditions in an industry.
India’s international cricketers play under India’s Flag and sing the Indian National Anthem; the economic externalities involved are so obvious and the monopolistic or cartel power of Bombay’s cricket and TV businesses so severe that even nationalization of the sport at professional international level might have been considered ~ except for the sheer incompetence our government displays at handling any nationalized industry properly. Thus taxation of cricket and earmarked transfer of those revenues to other sports in India may be the most effective way to move towards a proper structure of incentives.

Sin taxes

Though our Finance Ministry seems quite unaware of it, excise taxes are supposed to be “sin taxes” only ~ e.g. on tobacco and alcohol to try to reduce their consumption and, if demand is inelastic, to extract as much revenue as possible out of them to put to healthier purposes. One reason consumption of professional international-level cricket in India has become unhealthy has undoubtedly to do with the gambling that takes place behind the scenes on innumerable aspects of the game. Placing a severe “sin tax” on professional international cricket will reduce its consumption and hence reduce the gambling deriving from it too. Even the masses who do not gamble but merely watch it on TV for vicarious pleasure and entertainment may need a jolt to prevent addiction. The way to implement a severe discriminatory tax on professional international level cricket in India may be by government control or nationalization of the public arenas in which it comes to be played as well as of course control of the television-broadcast rights. One of our many problems has become that our politicians and senior bureaucrats long to mingle freely with big business and cricket and Bollywood icons themselves; amidst all the glamour and fun that they would much rather be part of, they are unable to think about the public interest less obscurely than they might have done.

This is a 1928 group photo of the male members of the Roy Family of Behala, south of Calcutta, along with the children. Adult women would have been behind an effective “purdah”. The bearded patriarch in the middle is my g