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The latest in the unending line of expensive, top-down, bureaucratic, feel-good (and basically useless) ideas to get "India Shining" is the idea of buying, with public funds, a million of Nicholas Negroponte's $100 PCs (which will actually cost $170 each, or more). How do I count the ways in which this idea is braindead?
For starters, used laptops from the West could already be had for less than $100 apiece in India, if the same government that is mooting this oh-so-humanitarian OLPC idea didn't categorize that as "dumping" and outlaw the import of used PCs with "anti-dumping" legislation. This same obstructionist state has levied customs duties in excess of 100% on new computer imports till very recently, and continues to levy 35% customs duties on handheld PCs, ostensibly for the purpose of protecting a non-existent domestic computer hardware industry (there are no indigenous manufacturers of handheld PCs in the country - the much-hyped Simputer is neither a significant nor even mildly competitive product), despite the fact that such policies do immeasurable harm to the domestic software industry, which actually does exist! The Real Opportunity Costs I object to Atanu Dey's objection - that the opportunity cost of buying a million laptops is huge, and that this cash could be spent on many other schemes for social upliftment - by pointing out that the Indian government has already spent untold billions on schemes for social upliftment, with a return on investment that's precisely nil. Indeed, taking opportunity costs into account, state-sponsored social upliftment schemes actually have a significantly negative RoI - they increase poverty and illiteracy, by removing capital from the hands of the most productive (capitalists in the market, who know how to create wealth, and jobs) and transferring it into a bureaucratic machinery that knows how to do only one thing efficiently - throw ridiculous amounts of stolen money at useless, grandiose schemes which make only for flattering headlines. In practice, all that will really happen with a scheme like OLPC is that a million poor families will make $200 apiece by selling their freebie laptop to someone else, who has more use for it, and use the cash to buy food, or more likely, booze. They will then report the laptops as lost, or stolen. If state-sponsored schemes for social upliftment were so great at achieving anything of the sort, why did Mao's many schemes for Communist China do nothing more than sentence hundreds of millions to death by starvation? The same result has been achieved in India as well, where 2.5 million children die of malnutrition every year, and 200 million people live in a state of chronic malnutrition (a quarter of the world's malnourished). Let Them Eat Cake, But Don't Let Them Earn In fact, the problem with India isn't a shortage of government social upliftment schemes, but a glut of them. Such schemes steal money (by threat of physical force) from productive capitalists capable of generating wealth and employment, and throw it down the endless money sink of wasteful public spending (and private siphoning into the secret bank accounts of politicians and bureaucrats). The reason millions of children are dying of malnutrition in India isn't that the government hasn't done enough to rob from the rich to (ostensibly) feed the poor for free. The reason is that the government has, in order to be able to rob from the rich, created huge barriers to commerce - hurdles to the effective development of productive business enterprises in the country - thereby robbing millions of potential entrepreneurs of the ability to create new businesses and new wealth, and robbing hundreds of millions of potential employees of the opportunity to earn a decent living working in the enterprises those entrepreneurs could have created in a free market. That bureaucratic hurdles prevent millions of Indians from creating productive businesses (thereby preventing millions of others from earning money as employees) is amply proved by the fact that a very large proportion of the Indians who manage to leave India for countries with more economic freedom succeed beyond their wildest dreams. It is obvious that there's nothing wrong with Indians. They can make money hand over fist when left free to do so. The problem is with India and its market unfriendly regulations, which cripple the ability of entrepreneurs to create wealth. People are dying by the millions in India not because the government isn't giving them free food (which is never free, only stolen), but rather simply because the government isn't letting them earn a living! The Mightiest Are Humbled Don't believe me? You can hear it from the lips of some of the very people celebrated by the media in India as examples of "Indian success stories". Laxmi Mittal, the much hyped steel tycoon "of Indian origin" (in much the same way as Sergei Brin is "of Russian origin") said as much in a TV interview with Simi Grewal. Asked if he could have created such a successful enterprise if he had been based in India, Mittal replied emphatically in the negative. Prodded further to estimate if he could have done it now, in post-liberalization India, he still replied with a very skeptical "I don't know". Sabeer Bhatia, of Hotmail fame, feels the same way. At a press conference in Chandigarh he said he could not have created Hotmail, and indeed would not have even thought of doing it, had he not moved to the US. These are modern-day legends, revered and hero-worshipped in India. They say unequivocally that they couldn't have achieved the successes they have if they'd stayed in India, due entirely to government bureaucracy, red tape, and market unfriendly regulations. What hope, then, does a small business owner or bootstrapping entrepreneur have of creating wealth in such an environment? And if he can't create wealth, how will he feed and educate his family, or pay wages to employees? How will all those impoverished millions get a chance to earn a living, or educate their children? The Market Creates Wealth, Government Destroys It Wealth and jobs are created by entrepreneurs in the market. This wealth increases the standard of living of everybody who comes in contact with it. Suppliers, employees, contractors, agents, distributors, retailers, transporters, advertising professionals, all depend on the entrepreneur who must first create a product and bring it to market. No amount of feel-good headlines can erase the fact that the government is incapable of generating wealth. Wealth is created by individuals operating in a free market, motivated by profit. India's pathetic per capita income isn't going to increase by the expedient of robbing more wealth from the most productive, then channeling it through notoriously wasteful kleptocracies into social programs of highly dubious worth. It may make bureaucrats feel powerful, give the media nice headlines and sound-bites, and fool voters who have never learned to read, much less think coherently and rationally about complex economic issues. But it will not help lift the Indian masses out of poverty or illiteracy. Only the wealth-generating power of the free market can do that. What we need in India isn't more bureaucratic schemes like the OLPC, but rather more economic freedom, to free entrepreneurs to build wealth and employment generating enterprises that can actually lift India out of its 60-year long (and counting) dark age.
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