FOR CIVILISATION

AGAINST POLITICS
Arguments for an Intellectual-Moral Revolution
Or

A Flaming Thunderbolt Of Divine Wisdom

By Sauvik Chakraverti www.TheAntidoteBlog.com

Hold on to instruction, Do not let it go; Guard it well, For it is your life. Do not set foot on the path of the wicked, Or walk in the way of evil men. From the Book of Proverbs

The Old Testament

Dedicated to the poor, unlettered, huddled masses of my country, India, whose honest, backbreaking toil and endless suffering will forever continue, or even worsen, unless the establishment economists of today as well as the teachers of law moral sciences, both are proven to be in grave error.

PROLOGUE

Gold there is, And rubies in abundance, But lips that speak knowledge Are a rare jewel. From the Book of Proverbs, The Old Testament.

Whereas this little book is dedicated to the unlettered poor, almost all the vital knowledge contained in it has been gleaned from the works of an aristocrat from Old Europe Ludwig von Mises (1879-1973), surely the greatest economist ever born, whose biography is aptly titled The Last Knight of Liberalism. The Germanic von is equivalent to the English Sir. During a long and productive life, he produced many immortal works, foremost among them being Human Action: A Treatise on Economics. The English-language version of this book was published after Mises had fled to the USA during WW2, in order to escape the Nazis. He was well over 50 then, and had to begin his life anew. Yet, despite decades of work in the USA as a defender of capitalism and free markets, and the greatest enemy socialism ever faced, he ended up a pessimist, seeing little hope for the future. During his last years he confessed: I started off as a reformer, but ended up a historian of decline. Shortly before his death, he

told a student: Perhaps they will discover my works a thousand years from now like the Dead Sea Scrolls. Indeed, if nothing else, the second half of Mises long life indicates clearly that something had gone terribly wrong with the great American dream. It is simply astonishing that he never received a professorship in any American university. As far as the elite Ivy League universities are concerned, his biographer writes that only once did his words penetrate the classrooms of Harvard, when a 5-minute recording of his was aired to the students. Even worse, Yale University Press deliberately misprinted much of the second edition of Human Action and a new publisher had to be found. Whereas Mises did conduct a weekly seminar at New York University for decades, he was not paid anything for his efforts, at least not by the university. Today, the entire planet is in economic and political turmoil. Many nations of the Middle East and North Africa are in open revolt. Many European governments are broke and there are serious doubts about the future of the Euro, and hence, of the European Union as well. In the USA, there are street protests in every major city, including Washington DC. In New York, protestors have been occupying Wall Street for months now which tells much about their education, for they all seem to think it is capitalism that is to blame. The only defenders of capitalism today are the East Europeans and, perhaps, the Chinese, both of whom have seen the horrors of socialism, and remember them well. It needs to be emphasized that the US establishment does not champion capitalism and never has. When American politicians and diplomats speak of freedom overseas, what they champion is democracy. But capitalism is all about free markets and economics; while democracy is, at best, all

about free elections which is politics. Is the vote motive morally superior to the profit motive? The former gives us politicians who tax us and also use State force against us, thereby taking away many of our liberties; the latter gives us businessmen who compete in order to serve us better and who use no force at all. I recommend Gordon Tullocks The Vote Motive to all. When the Frenchman Alexis de Tocqueville toured America in the early 19th century, admiring its democracy, what he admired most of all was the self-help attitude of the people, and their tendency to set up friendly societies on their own to promote any and every worthy cause they themselves deemed fit. The USA is a very different place today dominated by politics, special interest groups, and lobbying. There is very little freedom Americans possess nowadays. The USA today has the dubious record of holding the worlds highest number of prisoners as a percentage of population. Most of these prisoners are black; and most of these blacks are in prison for violating drug laws the majority of them in cases pertaining to the possession and use of marijuana. US prisons are private and the more the prisoners, the more these private prison contractors earn. Thus, they are another vested interest and they lobby for more and more legislation that will criminalize more and more voluntary trades, and thereby bring in more and more prisoners for correction. Does this look even remotely like the land of the brave and the free? Yes, much has changed since Tocqueville wrote Democracy in America. Indeed, two excellent books have recently emerged from the US condemning democracy in the harshest terms: the first, Parliament of Whores by PJ ORourke; and the second,

Democracy: The God That Failed by Hans-Hermann Hoppe. Whereas Hoppes book is against democracy in general, ORourkes is specifically about democracy in the US. In which case, what can I say about Indias socialist democracy except to reveal through these pages that we Indians have destroyed our civilization itself, and all we have gained is politics, politics and more politics. And as for Africa do hear Fela Kutis song ridiculing democracy on his continent. Ludwig von Mises always wrote in favour of democracy and against all anarchists, and he was sternly reprimanded by Rose Wilder Lane in his own time for being an unrealistic dreamer. But it ought to be remembered that he started off a reformer. By the time of his death in 1973, the US dollar had been de-linked from gold and the decline had set in. Since then, Misesians in the USA have turned away from such reformism. Mises most famous American student, Murray Rothbard, coined the term anarcho-capitalist to describe himself. Hans-Hermann Hoppe, who has succeeded Rothbard as Dean of the Austrian School of Economics, uses the same expression for himself. As does Lew Rockwell, who founded the Ludwig von Mises Institute, which does so much, thanks to the Internet, to promote the scholarship of liberty in the tradition of the Austrian School worldwide. Mises was an Austrian from Imperial Vienna. Ludwig von Mises was undoubtedly the last knight of classical liberalism. This was the liberalism of Old Europe the liberalism of the Whigs, of Locke, Adam Smith, and of Frederic Bastiat. It is certainly not the liberalism of modern America, which is welfarism a seemingly soft variant of

socialism that, as Mises warned, would lead to more harmful forms and thereby destroy the market society upon which the greatness of America had been built. General Motors is now a State-owned company! To Mises, the classical liberals had erred on one respect: they had placed too much faith in the wisdom of the voter. But the average voter can always be led astray by demagogues, said Mises, and socialist-welfarists can purchase his votes by offering him freebies. What mattered most to Mises was restricting the State to its proper domain: and this meant limited government. Limited, that is, by statute. A government restricted to protecting the market society against its enemies and that is all. Further, Mises was first and foremost an economist. His Theory of Money and Bank Credit is now celebrating its centenary. Mises was a hard money man: gold and silver coins were money to him, while paper notes were just money substitutes that must be redeemed by the issuer on the note-holders demand. There were thus two checks on the limited government he had in mind: first, a constitution which limited its powers; and second, the budget, which limited its finances. A government that is able to create money and credit at will is just an unlimited government which is surely the worst kind of tyranny, as these pages will reveal. Thus, to Mises, government was nothing more than civil authority meant to bring outlaws to justice and that is all. In this, he was in agreement with Adam Smith, who famously said that all that is required for civilization to progress are peace, easy taxes and a tolerable administration of justice.

Mises was all for peace. To him, the purpose of classical liberalism was to secure peace both internal and external. Without peace, markets cannot operate. Peace was the goal of all political activity to these classical liberals. But they never wanted a world empire or a world government. They were sure that such a goal could be better achieved with small, local governments coupled with the unification of law. This is precisely how the British once thought of the vast territory they governed, over which the sun never set an empire of laws and not of men. This leaves no room for politicking. And uniformity of law enables everyone to plan long term. When most individual long term plans succeed, civilization progresses worldwide. This little book is for civilization and civilization is about human progress in all its forms: literature, art, poetry, music, dance, theatre, philosophy, science, and technology. All these diverse forms of progress depend on the creation and accumulation of wealth which is capital. This wealth is saved and then invested which is where sound economics comes in. Without wealth, who can enjoy the good life? If the vast majority only manages to eke out a bare existence, as in India, then this cannot be called civilization. Further, and most importantly, civilization is all about cities. The very word itself has its root in the Latin civitas, which means city. The civilization of the ancient Greeks centered on city-states like Athens. As did our own Indus Valley Civilisation: Mohenjo-Daro and Harappa were cities, still admired by archaeologists for their elaborate drainage systems this, while modern Mumbai is knee-deep in rainwater during every monsoon. In India, Gandhian socialists have been pursuing rural development for over 75 years. During all these years, our

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villagers have migrated en masse to our few cities, abandoning their verdant, open fields for life in overcrowded and dirty slums. Every Indian city and town is filthy, overcrowded and unlivable. The wealthy few are as badly affected, possessing hideously expensive properties in hideous cities and towns like modern Mumbai, where all our film stars live. What, indeed, is civilization? This book is written in India for Indians, and then, after them, for the big, wide world beyond our shores. We therefore proceed first to an examination of the economics and politics of civilization. As an Indian, I must begin here.

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1. Lessons from the Rise of Civilizations:

A large population is a kings glory, But without subjects a prince is ruined. From the Book of Proverbs The Old Testament

Man is far above all other living creatures only because of his trading mind. We humans all possess what Adam Smith first noticed: A natural propensity to truck, barter and exchange. We alone can trade while all other animals snatch and grab. We dont steal and trade depends entirely on both parties respecting each others properties. Further, trade is all about serving others our customers. All the other animals are self-sufficient: they fend only for themselves. They are all poor. They are all naked. We alone possess wealth which is what we have acquired from others, from the proceeds of what we have provided yet others with. Trade is our mode of survival. It is the basis of civilization. Trade is made possible because people and the regions they live in are all differently gifted, and produce different goods. If everyone produced the same thing, no trade would be possible. Thus, whereas all our trading minds are identical for all practical purposes, we are all unequal and this is a blessing. It is because we all possess different faculties and talents that we all specialize and there are bakers,

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butchers, brewers, tailors, farmers, fishermen, barbers, carpenters and so on. This is what Adam Smith called the division of labour. But this is not theory. On the contrary, this is mere data. This is what we see all around us. We see this all around us because we all realize, because of our trading minds, that we will benefit most by fitting into this division of labour in the market society: that is, by specializing in what we are best at, supplying others with things they need, and thereby obtaining all our own needs from yet others, who are also specialized. No kindergarten child will answer, when asked, What do you want to be when you grow up? with a Gandhian reply: I want to grow up and spin yarn to make cloth for myself. The collapse of Indian civilization has much to do with deep errors in the Gandhian vision of self-sufficient village republics. For civilization is all about cities and about specialization, which is the basis of trade. Why do cities arise? Once again, everything has to with our trading minds because these minds direct all our activities towards economic gain. This is how we act because trading is our mode of survival, and to survive we must look for gains while avoiding losses which will bring ruin upon us. Now, as Adam Smith also noted indeed, in the very first chapter of his An Inquiry into the Nature and Causes of the Wealth of Nations the extent of the division of labour is limited by the size of the market. A large population in a city makes for a big market hence, more specialized activities are economically feasible here. You cannot run a tea shop in a vacant village. Thus, the shores of the Mediterranean Sea witnessed the birth of civilization. The sea itself is small and easily

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navigable. Here, Europe, Asia and Africa meet so there is much diversity, and hence many different goods to trade. Cities erupted all along the shores of this small, safe sea. More and more people moved to them and their populations swelled. With bigger populations, more and more specialized trades could be supported, from leatherworkers to potters to jewelers and so on. And, of course, the blessings of civilization soon followed: art, sculpture, pottery, theatre, music, dance, mathematics, astronomy, philosophy and all the rest. It is wealth that lies at the base of all these human achievements. A city is nothing but fixed capital: with houses, shops and workshops, theatres and inns, drinking taverns and houses of entertainments - and its roads, streets and public spaces. Indeed, I recently read an account of the nomadic tribes of central Asia, which revealed that these wandering people used to trade with the Greek cities, bringing them hides and other stuff, while buying from them jewelry, wine, cloth and trinkets even, with which to decorate their bodies and their horses; and that these nomads thereby supported thousands of artisans in these Greek cities. In time, there were no nomads left apart from a few gypsies. All the wanderers had settled into civilization. This is the rise of civilization. The same happened in British India too an urban success story if ever there was one. Apart from all the great port cities of the coasts, numberless hill stations were built: Darjeeling, Shillong, Simla, Ooty, Mahabaleshwar, and so many more. The greatest beneficiaries were the poor people who inhabited these remote hills, with their tough terrain. Switzerland is land-locked and mountainous and yet highly urbanized. This is why the Swiss are rich today and they

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practice free trade, specializing in watches, cheeses, and chocolates, and importing everything else. The Geneva Motor Show is the most important automobile fair in Europe and the Swiss do not make cars. To really understand how wrong the Gandhians are, do read about the disaster that the socialist Julius Nyrere was to his native Tanzania, where this Great Teacher of Economics, no doubt implemented his grand vision of a village utopia he called ujjuma. A caustic account of the human tragedy that followed is available in Peter Bauer and the Economics of Prosperity. Nyrere was a good friend of Indira Gandhi, always to be seen as chief guest in many of her important State functions. Now, in independent India, the powers-that-be have simply no clue as to what civilization is: trade based on specialization, cities and towns where big markets exist because of the fact that more people live in them, and more people means more buyers as well as sellers: the more the merrier. Further, they see rural-urban migration as a problem as well and they have always been attempting to halt this natural migration, thereby attempting to halt the rise of civilization. They are busy spending tax money on their delusionary rural utopia with rural development and rural employment schemes, by which they intend to send migrants back to their villages! They dont see that urbanization is the way forward. What is rural development but the rise of cities and towns in the place of villages and their mud huts? Whereas in British times some 80 hill stations were built in 50 years, and all the big cities and towns were carefully looked after, independent India is an urban disaster story. Only three new cities have been built all government

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cities: Chandigarh, with its ghastly socialist architecture; Bhubaneshwar, another ugly mess I visited only recently and ran away from; and finally, Gandhinagar, the capital of Gujarat. The old British cities have all collapsed, as have all the great hill stations. Even tourism has collapsed despite India having so much potential in this area. Today, more Indian tourists go abroad on holidays than foreigners come in. Tiny Singapore gets more tourists than the whole of India. And the authorities run an expensive campaign with the slogan Incredible India! Incredibly Stupid India would be more appropriate. India is a huge landmass with more than enough unowned land to build many, many new cities especially on the coasts. The Western Ghats between Mumbai and Goa and between Goa and Mangalore a stretch of over 800 kms, is completely vacant, with hundreds of virgin beaches as well as endless rolling hills. Ditto for the beautiful Eastern Ghats between Vizag and Paradip, Orissa. With free maritime trade, hundreds of new port cities could blossom just as they did under the Portuguese, French and British. None of these great powers built cities inland except for New Delhi, and that was only in 1911; and that too only because of Curzons disastrous decision to partition Bengal between Hindus and Muslims. The second point worth noting is that trade and transportation go together, because goods must be traded across distances if the greatest profits are to be made. These goods must be transported from where they are abundant and cheap to where they are scarce and dear. The Mediterranean served as the transportation backdrop to the civilization on its shores. Ships carried more than camels and traveled faster, too. India is a transportation disaster today. A 16-wheeled modern truck travels more that 800 km

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in one day in the developed world, while one of our pygmy trucks does 250 km a day on our broken highways, or even less. On our roads, breakdowns and accidents are frequent. Huge losses are made in the case of perishable commodities like fruit and vegetables, fish, milk and so on. In any case, the open sea has always been the biggest factor in building civilization and in Asia, both Hong Kong and Singapore have succeeded so spectacularly only because of their deep ports. With autarkic attitudes, hostility to foreign trade, and a protectionist mindset, the powers-that-be have missed the boat as far as our 3500 km long coastline is concerned. Here again, it is the false idea of self-sufficiency that is to blame. Cities are not self-sufficient. They must procure all their needs from outside from farms and factories beyond the city walls. And also from the great big world outside. Cities are best understood as ant-hills of human colonists. Just as ants go out of their ant-hills to procure their needs, for there is nothing inside the ant-hill to sustain them, so too must humans. There is much to learn from ants: indeed, another proverb from the Bible says, Perceive the ant, thou sluggard. Lastly, civilization is all about the good life which is the enjoyment of all the various pleasures that only cities can offer. There is leisure and not just work. Clive Bells brief book titled Civilisation is a must-read written at a time when Allied soldiers were fighting to save civilization. Bell ends discussing Platos Symposium as representing the epitome of Western civilization. The word symposium means drinking party in Greek and in this book Plato tells the tale of one such party that Socrates attended. A great deal of wine was drunk, of course. And serious discussions

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then took place on the nature of Eros, the God of Love. These discussions were so serious that the flute girls were sent away to entertain the servants. Interestingly, the host was a politician, and the guests included a poet and a playwright yet, no politics was discussed! Towards the end of the book, drunken revelers from the street outside gatecrash the party and pandemonium ensues. After they leave, all the guests at the symposium pass out, one by one, including the host all except Socrates, of course, who rises from the table, ponders his fallen buddies, and walks back to his home, bathes, and begins a new day. The Greeks, and then the Romans after them, both had a God of Wine: Dionysus and Bacchus, respectively. The Roman festival Bacchanale in honour of their God of Wine was a wild party and at least one philosopher has held that it is from such wild celebrations that Western philosophy was born. Civilisation is a strain and a burden on man for it imposes on us a culture of politeness that is often suffocating. Civilisation is learnt behaviour. Civilisation inhibits all our instincts which is why alcohol is so popular, because while it is a depressant, it also depresses our inhibitions. The escape from civilization that festivals such as the Bacchanale offer enable us to rediscover our primal selves said some philosophers and there is much truth in this assertion. Even today, wild rave parties are what many holidaymakers seek, in order to forget about their working lives in the midst of civilization. The culture of Western civilization is all about wine and beer the first alcoholic drinks known to man. Every nation of Europe has a word for cheers! in its own language. There

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are old pubs to be found in every ancient city and especially so in London. The word pub is an abbreviation of public house it is a place where people meet, drink, and hang out. This is where friends meet for you cannot invite everyone to your home, which is a private place. That would disturb the wife and kids. These pubs have always been known as the busy haunts of men. And these are the public sphere of civic life. There are no such pubs in India. In the capital, New Delhi, the poor quickly quaff their strong drinks in hiding, in dark corners of by-lanes, fearing the wrath of the police. Oddly enough, there is no word in any major Indian language for cheers! The culture of the Indian civilization is based largely on the consumption of cannabis which is the preferred high of Lord Shiva, the greatest god of the Hindus, the predominant majority. The holy men of the Hindus, the sadhus, are mostly smokers of cannabis. There are hundreds of salutations to Shiva in every major Indian language used when lighting a chillum the traditional clay pipe in which cannabis is smoked. The holy cities of the Hindus like Haridwar are places where alcohol consumption in public would draw public ire. But everywhere in these cities you will see sadhus openly smoking their chillums. The plant, after all, is called cannabis indica. We have a 5000-year-old history of its use. Yet, it is illegal here because of democratic legislation passed by our elected representatives! Other highs have been introduced from overseas, many of them harmful from strong alcohol to tea, coffee and tobacco. In the meantime, quite a few nations of the West have made cannabis legal like Holland. When I visited Amsterdam some years ago and saw their coffee

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shops where cannabis of high quality can be bought and openly enjoyed, I realized that we Indians have not only destroyed our civilization; we have also lost our culture. Ours is nothing but naked tyranny. Tyrannies are not civilization. What European scholars learnt from the ancient Greeks, after discovering Greek classics from the Muslims of Spain during their own Dark Ages, is something called liberty. It is liberty that fired the Enlightenment and the very word democracy and thus the idea itself, came from ancient Athens. It is Liberty that built America as the famous statue at the mouth of the harbour at New York City testifies. In India, the official history books tell us that Gandhi and Nehru and their followers fought for freedom and even won it. Where is that freedom today? Without liberty, without freedom, no civilization can flourish. Repression and tyranny crush the human spirit. Where the human spirit is crushed, despots multiply. And civilization dies. The history of civilization is a long story of rise, decline, and fall. Over the past many millennia, civilizations have waxed and waned. Today, around the Mediterranean, there is little left of civilization. Today, the USA is seriously looking at decline. Today, Old Europe looks like it is heading into very stormy waters. China, on the other hand, seems to be rising once again. As do the nations of East Europe. There is also an Arab Spring in the air. Perhaps there is hope for our petrified Indian civilization as well.

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2. Some Lessons from the Politics of Western Civilisation:

Wisdom is supreme, Therefore, get wisdom, Though it cost you all you have, Get understanding. From the Book of Proverbs The Old Testament

Some years ago, when I visited the German Embassy in New Delhi to obtain a visa, I saw posters on their walls recounting the glory of the Hanseatic League. The historian Arnold Toynbee refers to this loose association of free-trading cities that originated in Germany, in Hamburg and Lbeck, and then stretched its tentacles all over, from the Mediterranean to the Baltic, and with everything in between, including London as well as Reykjavik, as an aborted civilization. However, even till today, Hamburg calls itself a Hansastadte a Hansa City. The port city of Hamburg remains an independent state of the German federation. And the national airline of Germany is Lufthansa. The word hansa persists in the German imagination, although that civilization is long gone. The Hanseatic League arose at a time when political rule collapsed all over Europe between the 13th and 15th centuries. This resulted in unprecedented freedom for traders and merchants in the cities and towns and

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especially so for those open to maritime trade. Hansard merchants were soon seen everywhere and a new prosperity came about. Bereft of political rule, the merchants codified their own law the Law Merchant and settled their own disputes. All this died when political rule emerged once again, dividing the continent into nations and states. So there is no reason to wonder why the German Embassy in India looks towards the Hanseatic League for inspiration. It is my belief that the clue to the success of Western civilization lies in civic independence from the city-states of ancient Greece to the Hansastadtae to the principle of subsidiarity that the European Union as well as The Roman Catholic Church swear by. Max Weber, for example, looking at his civilization, penned a general history of the rise of cities and towns in Europe. After going through all the hassles of obtaining a visa, I finally landed in Germany where, one bright afternoon, while I was walking around the old parts of Frankfurt-am-Main which was once a Freireichstadt or a Free Imperial City I passed the beautiful old building that houses the mayoralty, what the Germans call Brgermeister. There were three flags flying atop: the flag of the European Union, the flag of Germany, and then, the flag of the Free Imperial City of Frankfurt-am-Main. On another occasion, a local musician took me for a walkabout through the old open markets of this city a very enjoyable experience for an economist who believes in free markets. During this walkabout, we came across a squat, gray building that sat right in the middle of a road. I was told that this building once housed the citys own police, which served under their own Brgermeister. But now the police

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came from the federal state of Hesse and this building was a caf. So we dropped in had some coffee there. The same is true of the Olde City of London the one square mile that dates back to pre-Roman times. Even today, the Lord Mayor of this old city has his own police and the Bobby of Metropolitan London, established by an Act of Parliament a parliament that sits in the City of Westminster, the Kings City, which lies outside the borders of this old city has no authority within Old London. The lesson: the politics of Western civilization are rooted in civic independence. Western politics has nothing to do with what we now call State and the word politics is also a Greek word, with its root in the word polis, which means city. Hence, Persepolis was the City of the Persians. Rather than state, the word to use for Western civilization is government and here again we must qualify this word: the exact expression we must use is civil government. The Lord Mayor of Olde London, thus, till today, following a tradition that was established before the Magna Carta, bears the Civic Sword within his jurisdiction. The King of England can only enter this Old City after the Lord Mayor ceremonially surrenders the Civic Sword to him at the City Gates. The King cannot march his Army through this Old City without the Lord Mayors permission. And, in the official protocol a protocol that dates back to when Henry V was ceremonially sent off by the Londoners to fight the French at Agincourt the Lord Mayor of London is second only to the King. There was no prime minister those days. While in Germany, I once asked a citizen: How do you choose a Mayor? His reply: Just as you would choose a

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king. I thought he had spoken without thinking, and so I pressed further, inquiring as to what specific qualities he looked for in a Mayor. It was only then that he revealed mayors were chosen among successful local businessmen, those who enjoyed a good reputation in the business community of that town, and who provided gainful employment to many local people. The same is true of all the Lord Mayors of London: they have always been among the richest people in the entire realm, always far richer than their king. It is they who set up the Honourable East India Company, filling its ships with their gold, with which to purchase spices from our shores and bring them back so that high profits could be booked by selling them in Europe. It is they who funded the Virginia Company and that is how tobacco came to the rest of the world. They lent money to their king. They paid taxes to him. And they did not ever receive any salary for serving as Lord Mayor. This has never been an office of profit. Germany has a long history of free cities and towns. HansHermann Hoppe has an essay on the political scene around Goethes time, and the great man himself. In this essay, Hoppe writes: From the 1648 Treaty of Westphalia and until the Napoleonic wars, Germany had consisted of some 234 "countries," 51 free cities, and about 1,500 independent knightly manors. Out of this multitude of independent political units, only Austria counted as a great power, and only Prussia, Bavaria, Saxony, and Hanover could be considered major political players. In another essay he includes a long quote from Goethe, from which I produce the following extract:

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Then think about cities such as Dresden, Munich, Stuttgart, Kassel, Braunschweig, Hannover, and similar ones; think about the energy that these cities represent; think about the effect they have on neighboring provinces, and ask yourself, if all of this would exist if such cities had not been the residences of princes for a long time. Frankfurt, Bremen, Hamburg, Luebeck are large and brilliant, and their impact on the prosperity of Germany is incalculable. Yet, would they remain what they are if they were to lose their independence and be incorporated as provincial cities into one great German Empire? I have reason to doubt this. I had an enjoyable and extremely enlightening experience one day in Germany, spending the morning is the quaint old town of Esslingen, which is so pretty that the Allies deliberately refrained from bombing it. The center of Esslingen is, of course, a market square, and the prettiest building on that square is, of course, the Mayors office. Atop the building is one of those old clockwork contrivances that, at the stroke of the hour, rang bells while figurines of musicians and dancers revolved to amuse the people. I was quite enthralled. From Esslingen we drove to a castle some distance away where the Hohenzollerns once lived. The castle could be noticed from afar an imposing, gray and gloomy structure high up on a solitary hill. The drive uphill was steep. And, after parking, the walk uphill was quite strenuous. The castle was walled with imposing cannons at the gate. Within, we saw all the Hohenzollern memorablia and these pertained

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only to wars and battles these princes fought. Nothing else except war. And this, indeed, is what Western civilization is all about, whether English or German or French. The kings were all warlords. Nothing more. The cities and towns, where the markets existed, where merchants lived, and which paid all the taxes these were run by mayors. Mayors are the politics of Western civilization. I saw this truth in just one day. It is precisely this that we see in Old America the Wild West and so on. We see new settlers building a small town, electing a mayor and a sheriff and then getting down to business. Old America had nothing to do with a strong, central State. The original Constitution was based on the principle of federalism and all the states of the federation had substantial freedoms, while the Union was limited. Yet, below the states, all politics was local, centering on the mayor and the sheriff. The television serial Picket Fences captures it all quite well. We in India have gone completely wrong here as well and what we call politics has nothing to with what the Greek word means, or what it means to the West even today. The Hindi word for politics is rajniti which translates to the ethics of political rule and this Hindi word has nothing to do with the polis, the city. Indeed, in practice, rajniti has a distinctly Machiavellian ring to it, and it is nothing but Chanakyaniti: saam, daam, dand, bhed. We therefore have nothing called local self-government in any of our urban areas which is another reason why they are all in such a horrible condition. We have a centralized State; we have a quasi-federal constitution that could also

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be called quasi-unitary because the states are all beholden to the center, with few rights of their own; and we have nothing below that. Further, all the major political parties are centralized and hierarchical. In our multi-party democracy there are hundreds of political parties and all appear as nothing more than gangs of robbers out to usurp political power only in order to oppress the people and loot the exchequer. Everything has gone wrong and, anyway, there is little peoples participation in this socialist democratic experiment, for most people dont vote. The poor are usually persuaded to vote by political agents who offer them alcohol and other inducements, and also provide them transportation to and from the polling booths. We have the Sword of State all right. But we do not have the all-important Civic Sword. That is, we do not really know what civilization means.

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3. Lessons from the Decline and Fall of Civilisations:

The Lord abhors dishonest scales, But accurate weights are his delight. From the Book of Proverbs The Old Testament His offering was one silver plate weighing a hundred and thirty shekels, and one silver sprinkling bowl weighing seventy shekels, both according to the sanctuary shekel From the Book of Numbers The Old Testament What was money before the invention of paper? The two quotes above from the Old Testament say it all. The index says that a shekel was about 11.5 grams which is approximately what we Indians call a tola. So, money was precious metal of specified weight. This was the law. Money had a legal definition. The decline and fall of the Roman Empire is nothing but a tale of debasement of the coinage. Continuous expansion of the Empire cost money but the expenditure did not match up to the revenues collected. Emperors were also very extravagant. So they faced what today we call a deficit. While the good thing to do would have been to curb expenditures and balance the budget, Roman Emperors

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preferred to do the wrong thing: and that is, mixing some base metal into their coins. Thus, for the same amount of gold and silver they issued far more coins, all purporting to be of the same value as pure coins. With this counterfeiting they met their immediate expenses and paid their bills while causing all round inflation. In time, even their soldiers refused to accept their wages in coin, and they had to be paid in salt instead, which is how the word salary came about, as well as the expression not worth his salt. The fall of the Roman Empire was horrific with the death of money all exchanges ceased, the urban division of labour ended, everyone returned to agricultural estates, and a primitive subsistence economy was all they had to survive on, for hundreds and hundreds of years. More recently, the German paper mark collapsed after WW1 and, even more recently, the Zimbabwe paper dollar saw its value wiped out. Now, another important book that Ludwig von Mises wrote is Theory and History: An Interpretation of Social and Economic Evolution. One of the lessons I have learnt from this book and I have learnt a great many is that we can always let history be our guide, especially when the arguments of all the theorists escape our readers grasp. This little book is therefore proceeding with History and, only towards the end, will I introduce my reader to Theory: the true Science of Economics that Ludwig von Mises firmly established. To get to the root of our current crisis, the real problem is paper money that is, money based on nothing, something weightless, something that governments create at will, and

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something that is forever declining in value. This paper money has no legal definition as with the sanctuary shekel of old while the paper note that weighs nothing is legal tender! Legal Plunder would be a better term to use for the fraud currently underway. This legal plunder means that the paper legal tender loses value with each passing day inflationism while the price of gold, silver and platinum are on a constant rise. This is how capital consumption is underway on a massive scale. This is why the whole world is riding on the highway to decivilisation. What would you prefer as money? Paper which is losing value with every passing day? Or coins of precious metal whose value is forever on the rise? And, do you want theory or history? Of course, you would prefer coins of precious metal of standard weight and fineness. But the question remains; How did we get to such a sorry pass? Let us begin looking into the matter from the year 1776, when America gained independence, and when Adam Smiths An Inquiry into the Nature and Causes of the Wealth of Nations was published. Incidentally, the same London firm published Edward Gibbons The Decline and Fall of the Roman Empire that very same year. Both were bestsellers though Gibbon outsold Smith. Adam Smith, in his book, advocated the system of natural liberty and, in this system, he prescribed only three duties for the sovereign that is, the king, for there was no democracy then. Indeed, mass democracy of the kind we have today was unthinkable to Smith. He admired the

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republicanism of Geneva and even visited this great city, where Rousseau came from. Below are the exact words of Smith on the three duties of the sovereign. Do note two things: there is no mention of money; and there is no mention of the sovereign having to make law. All the king is required to do is establish an exact administration of justice. According to the system of natural liberty, the sovereign has only three duties to attend to; three duties of great importance, indeed, but plain and intelligible to common understandings: first, the duty of protecting the society from violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and, thirdly, the duty of erecting and maintaining certain public works and certain public institutions which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit could never repay the expense to any individual or small number of individuals, though it may frequently do much more than repay it to a great society. The original Constitution of the United States of America gave the federal government the power to issue coinage not paper money. In 1776, money was gold, and gold was money. The world was on the International Gold Standard. But there were

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problems with banking. In Scotland itself, there were many bank runs and Smiths most famous student, the young Duke of Buccleuch, lost a lot of his money in one such bank run, which dented his teachers reputation quite a bit. Thus, Smith was forced to take a re-look at the matter of money and banking. His inquiries led him to the Bank of Amsterdam, which had a rock-solid reputation then. Smith wrote to an Englishman settled in that city to inform him as to how this bank operated. He then learnt that this bank maintained a 100 per cent gold reserve against its note issue. He included this newfound knowledge in the fourth and final edition of the Wealth of Nations, showing great approval for this Dutch tradition. In other words, Smith found, the hard way, that bank runs could only be avoided if banks could not issue paper notes in excess of the value of their gold reserves. And this finding he dutifully reported to his readers. Adam Smith was Professor of Moral Philosophy at the University of Glasgow. In his time, there were no economists other than the physiocrats of France, who sometimes used that title. Smiths beloved teacher, the unforgettable Francis Hutcheson, also taught Moral Philosophy and the questions that these philosophers of the Scottish Enlightenment sought to answer largely concerned moral issues, both private as well as public. This is how the ideas of a free market and laissez faire, and of free international trade, were born and then firmly established, albeit for a brief time. These ideas had their roots in Whiggism Smith was a staunch Whig in his politics. They opposed corruption in the State because of the interventionism that the mercantilists advocated. They also opposed malpractices in the Church. Natural Theology thus came about.

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Even in revolutionary America it was an English journal called The Independent Whig that is credited with the fact that Liberty and Property were ideas that dominated the minds of the people then, and therefore formed the basis of the original US Constitution. Adam Smith died in 1790 but his book had a powerful effect all over Old Europe. In London, in the Olde City, the one square mile that was the center of British John Bull capitalism then, the foremost company was none other than the Honourable East India Company. The directors of this company had witnessed America going its own way and they were simultaneously seeing the possibilities of making great fortunes in India. In the works of Adam Smith they found the answers they were looking for. By then, Clive had taken over Bengal. The EIC was now administering some districts. Unlike America, in India the masses were poor and they were far more numerous than the whites. To stay in India, the EIC had to govern well. Further, they had to ensure that the masses also prospered because where the masses are poverty-stricken, what revenues can their government collect, and what goods can businessmen sell. Therefore, the EIC established Haileybury College to train its recruits to the civil service specifically in political economy a subject then not taught in either Oxford or Cambridge. From all accounts, the recruits were taught, clearly and forcefully, that the government was not to interfere in the market: laissez faire. The policies adopted by the EIC in India point to the following: first, prompt collection of taxes, moderately assessed. But in exchange of this property tax, the collector issued a property title. These Englishmen wanted to create a properties class in India, the bedrock of

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their own prosperity back home. In addition, their government invested in roads, bridges and canals which would be according to Smiths third duty of the sovereign. Also, the administrators of the EIC laid great stress on the prompt settlement of disputes something made possible only because of their excellent property title records, which were constantly updated. Add to this a swift administration of justice and we have exactly what Smith prescribed. Nothing more. Nothing less. It must be added that the covenanted civil servants of the EIC prided themselves over the fact that they taxed the people less than their predecessors, the Mughals, did; and further, that they invested these proceeds in worthwhile social capital like roads. In addition, they were proud of the fact that they worked while their predecessors were just lazy Asiatic chiefs. Unfortunately, this experiment did not last too long. In 1857, there was the Sepoy Mutiny and the Crown took over India. Haileybury College was closed down. Within 50 years, in India, the nationalist agitation began, what with Curzons disastrous partition of Bengal. Simultaneously, in 1905, in England, the British Labour Party was formed and the old Liberal party of Gladstone folded up. Nationalism and socialism were mixed in a heady political cocktail all over the world with disastrous effects, many of which continue till this day, particularly in India. The 19th century was truly the golden age of classical liberalism. Many rightly call it Globalisation 1.0. The world had one money and it was hard money: the International Gold Standard. Capital flowed freely, from where there was more to where there was less, where returns could be higher

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and all the poor nations, with very little domestic capital, benefited. This is how India got its mammoth rail network. With Cobden and Bright leading the British working classes on ideas gleaned from Smith, a huge free trade movement came about in that nation a movement that forced Peel into declaring unilateral free trade. Now, both goods and capital flowed freely across the world. Not only that, the international movement of people was free as well. All this mobility these three freedoms raised wealth all over the world. It was Liberty and not government, which is the negation of liberty that caused worldwide prosperity, and millions of poor people came out of grinding poverty, all over the globe. There is nothing corrupt about liberty about poor people honestly working their way up the economic ladder by satisfying their customers. This came about only because of the classical liberals and the prestige their ideas commanded in the public domain. Then, things changed first in the USA, with the strengthening of central government after the Civil War. Lincoln fought for the Union, not the States. Within another 50 years, the US Federal Reserve was set up resulting in the Great Depression. That put an end to Globalisation 1.0. Soon, protectionism raised its ugly head. As did welfarism what with Roosevelts New Deal. The government that caused the depression with paper money now tried to alleviate poverty with more of the same. Nationalism, which is protectionism, as well as socialism, which is welfarism, were born and two world wars followed in quick succession. Millions died with the good guys thinking they were fighting for freedom and civilization and all the great ideals.

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It needs to be emphasized that the character of politics had completely changed in the West by then. Protectionism, nationalism and welfarism were all means of winning elections. The goal was State power a power that had been enlarged considerably. The old idea of liberty was lost. The dreams of Cobden, Bright and Bastiat that free trade could end all wars forever were destroyed. Economic nationalism is the root cause of international conflict. Free trade is the pathway to world peace. After WW2, John Maynard Keynes took center stage, setting up the IMF and the World Bank. More nationalism and socialism followed, with every nation-state retreating behind tariff walls, each with its own central bank and its paper currency, with only the US dollar tied to gold. Of course, this could not last, as Keynes knew only too well for, as he famously said: In the long run we are all dead. In 1971, by which time Lord Keynes was well and truly dead, Nixon broke all ties between the US dollar and gold. From then on the entire world has been on fiat paper money something unprecedented in history. Inflationism, welfarism, protectionism, nationalism all these are connected, and all are practiced, to a lesser or greater degree, in every nation-state of the world today. In 1971, an ounce of gold was worth US$35. Today, it is worth over US$1500. This is the legacy of welfarism funded by inflationism. Mass democracy is the cause, and Keynes, the self-confessed immoralist, was the theorist. His great book is titled A General Theory of Employment, Interest and Money. This entire book is in error and we only need History to prove that.

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It is these errors that have brought the world to the brink of disaster. Money is no longer money it is mere government paper. Welfarism funded by inflationism has made competitive democratic politics into a race to the bottom, as each candidate tries to woo voters with freebies: bribing the electorate, in other words. Then, instead of capital accumulation, which is the only way civilization can progress, we have capital consumption and this is the highway to de-civilisation. It is de-civilisation that is currently underway. Worldwide. All welfare is capital consumption because nothing is invested. Further, instead of encouraging enterprise, hard work, and self-help1 as was the norm during Globalisation 1.0 welfarism has led to a culture of dependence. And every freebie has created a vested interest demanding the continuation of that freebie. The character of the voters has changed as has the character of politics itself. And funny money has funded it all. Keynes ideas were essentially corrupt. He wanted to cheat the working classes: what they would gain through trade unionism they would lose even more through inflationism. Frederic Bastiat rightly called socialism false philanthropy but this was before Keynes, so his words are truly prophetic. If this was not bad enough, industrial relations also became acrimonious to the extreme. In the end, labour lost even more as all industries closed down or moved abroad. This is how the ordinary British people have been impoverished. This is how the city of Detroit is now a dead city.
1

Samuel Smiles Self-Help was an international bestseller in the 1860s, placed next to the Bible in every English home. The Japanese, the Egyptians, The Turks as also the ordinary folk of Victorian England, were all motivated by this book, penned by the greatest moralist of that time. An Indian edition of this book is available from Liberty Institute, with my foreword.

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The works of WH Hutt and the politics of Margaret Thatcher were the only attempts to stem the rot. History refutes Keynes general theory. If increasing money supply made nations rich, then Spain and Portugal would have prospered with all the gold and silver they brought home from the New World. But they did not. The price of gold and silver fell and inflation spread throughout Europe. Britain prospered, on the other hand, by exporting its gold and importing spices, tobacco, sugar, cotton and what not. In other words, leave aside paper money, even by increasing the supply of precious metals a nation cannot prosper. South Africa has a lot of gold but is not rich. Indeed, the continent of Africa is rich in diamonds as well. And we call it the resource curse. Orissa and Jharkhand in India are also mineral-rich but this is a curse for their poor people. Hong Kong and Taiwan have no resources at all and are rich beyond belief. What the Keynesians call macroeconomics, with all its complicated graphs and mathematical equations, its tradeoff between employment and inflation, is palmed off to students and the lay public as knowledge being used by the State for it is no longer government to manage the national economy. Today, all the economic analyses we hear from governments, and from the press, consists of nothing but such numbers: the poverty rate, unemployment rate, inflation rate and so on. All this is part and parcel of nationalist socialism. What they call macroeconomics. All these numbers give the citizen the impression that there is something called the national economy; that this national economy is like a potted plant on a central planner or central bankers window sill; and that this State functionary is

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required to tend to this potted plant. This is the greatest delusion, ever. In the old days, each shepherd tended to his own flock private properties, private economies. The idea that a king or a chieftain would look after the flocks and herds of all his subjects would have been dismissed as absurd and nonsensical then. Kings, then, were judges at best and warlords, of course. Even the law came from the past, or from God. To make matters even worse for both business as well as political morality, widespread interventionism was resorted to all over the democratic world. Its tool is legislation. There were two evil ideas behind this social engineering, and regulation. Bureaucrats multiplied empowered by all this legislation. Lawyers prospered. The State and its agents controlled everyone and everything. Liberty died. This is how the politicization of economic life occurred worldwide. Democracy was done for. It was exactly as Mises had warned in his two critiques of interventionism, the second of which was written soon after his arrival in the US, but which was published only posthumously. The US did not want to alter its path. Mises wrote that with interventionism powered by legislation, those who are democratically elected would no longer represent the people, or even represent their constituencies; rather, they would all become representatives of special interest groups. Some would represent steel, others would represent farmers, yet others would represent steel, or fertilizers, and so on. Erroneous economics, and wrong ideas in law this is how everything went wrong. Capitalism and democracy both died

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in the USA, and in Britain. What would happen to socialist India? The erroneous idea in Law is to mistake it for Legislation. We now turn to this important subject. Good laws make for a peaceful and secure society. Bad laws mean injustice, corruption and tyranny. In the case of money, too, the US Federal Reserve was established by legislative fiat. And it was Peels Banking Act of 1842 that destroyed the pound sterling. I will argue against legislation below. The idea that 500 or more wise men, whose only creditworthy achievement is that they have won more votes than others, can make new law that is binding on the entire populace is absurd.

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4. Law and Civilisation:

Evil men do not understand justice, But those who seek the Lord understand it fully. If anyone turns a deaf ear to the law, Even his prayers are detestable. From the Book of Proverbs The Old Testament
We do not want any changes in the laws of the Anglo-Saxons.
Petition by the English to William, the Norman Conqueror, in 1066 AD

Law is as old as civilization for society cannot exist without law. The word property occurs in the Book of Genesis, as does the precise expression deeded property the latter with reference to a cave and a field that were bought as a burial site. Similarly, the word covenant is found in the Book of Exodus when God makes a covenant with Noah not to cause another great flood. In other words, the Jews began their history with the laws of property and contract. This is why they prospered. The Anglo-Saxons had Torts as well and these referred to all crimes against the individual. So, if you hurt the body of any individual, or damaged his property, you had to pay compensation. Thus, the victim received justice. There was no criminal law. There were no crimes against the king.

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English kings were warlords and nothing more. After the Norman Conquest, things slowly changed. Greedy Norman kings decreed many acts as violative of the kings peace so that they could collect fines from those found guilty of committing these acts. Their purpose was to increase their revenues. From this beginning, the English have come to where they now are, with so much democratic legislation decreeing so many actions that have no victims as crimes. Another gem from the Book of Proverbs says: Do not accuse a man for no reason When he has done you no wrong. Now, tell you me, what crime has someone who smokes a joint committed? Or the farmer who grew the stuff he smokes? We return to this subject later. Furthermore, today the criminal is punished with a jail term if convicted but the victim gets nothing. The taxpayer loses, too. Since we are discussing civilization and its absence a question that has dogged scholars for centuries is: Why do some nations prosper while others dont? What are the causes of the wealth of some nations, and the poverty of others? Why does capitalism occur in some areas and not in others? Today, the unanimous view is it all depends on law. In particular, deeded property. Wherever property rights are protected by law, and wherever property titles are clear and well-defined, it is only these nations that solve the mystery of capital: the title of the Peruvian economist Hernando de Sotos path-breaking book. De Soto looked at many poor Third World nations, including socialist Egypt and

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Bangladesh, and found that the poor own valuable property but do not possess marketable titles to them which would enable them to raise capital from commercial banks. They do not get loans because they cannot produce collateral security. I have studied the English case, and my essay on how England moved from feudalism to capitalism long before the so-called industrial revolution reveals the prominent role played by their property laws and titles. As I stated earlier, it was precisely these that the civil servants of the EIC tried to replicate in India. Independent India has gone the other way and land records are a huge mess today. This is another cause of de-civilisation and land disputes are a major cause of violence in rural India. There is no peace which is the first purpose of civil government. Now, democracy in India is supposedly based on the Westminster model so let us look at this mother of all parliaments. In the first place, the City of Westminster lies outside the boundaries of the Olde City of London and it is the Kings City. Today, visitors to metropolitan London cannot distinguish the boundaries between the two cities, but in the old days the two were separate. The Old City of London dates back to pre-Roman times, and it had its Lord Mayor before the Magna Carta was signed. This institution is over 800 years old. The City of Westminster where Parliament sits is comparatively new. The current Palace that houses Parliament dates back to the 16th century. The older one that burnt down was built in the 11th. A great description of how legislation is passed in the House of Commons can be found in Anthony Sampsons The Anatomy of Britain and it is as follows: all the MPs are in the many bars of the House enjoying their drinks and chatting when the division bell rings. They leave their drinks and rush to the House and, as they enter, their respective

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party whips instruct them as to which way they should vote. When the time comes to vote, they do so accordingly and immediately troop out, back to the bar where they had left their drinks. Cheers! The Anglo-Saxon tribes of old loved their laws as the quote above from the petition they presented to William the Conqueror indicates. This is why, till today, the kings of England do not make law. During the centuries before parliament came about, the English lived in a private law world based on property, contracts and torts. In case of disputes, lawyers were hired by both sides, and these lawyers scoured the law books to search for past decisions in similar cases. These, they presented before an impartial judge. Usually, the judge passed a decision based on an earlier one. In exceptional cases, he set a precedent and the law moved forward by a small step. There was no new law and the English detested royal statutes, which they saw as intrusions on their rights and liberties. This was the old world of the common law. If at all kings called parliaments the other three estates the only purpose was to vote on his taxes. Nothing else. There was absolutely no legislation till modern times. Now, it is parliament that is sovereign but the English seem to have forgotten their history, for when their kings were sovereign, they did not make law. This is the difference between law as always understood and democratic legislation something fairly recent, and which masquerades as law, what with most opinion makers referring to MPs as lawmakers. In the old days, the law operated quite like the market-place, with two disputants and their two lawyers settling matters just as a buyer and a seller do in a market setting. As in the market, so in the

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court-room, all knowledge is decentralized. In sharp contrast, in democratic assemblies, law-making is centralized. This is exactly like a central planning commission. And it does not work for the simple reason that the knowledge required for the purpose cannot ever be centralized. Justice is minute and each separate case must be judged on its own merits. There are precepts and principles, there is a sense of justice, but never ever has there been so much new written law binding on all the citizenry. Never have lawyers been required to memorise so much written law, clause by clause, article by article: the film Paper Chase captures this and it is set in Harvard Law School. Statistical numbers in Economics, and memorization of written law (by numbers once again) both of these are called positivism. These two kinds of positivism are great evils, not just errors. They lie at the root of all the problems humanity faces today: nationalism, socialism and interventionism. Legal positivism lies at the root of our mistaking legislation for law and legislation is the tool of interventionism. It is interventionism, as we just discussed, that has destroyed democracy and liberty. It has caused widespread corruption within all the organs of the State. And it has also destroyed the peace which it has always been the duty of the Civic Sword to preserve. Thus, in 1829, when prime minister Sir Robert Peel created the London Metropolitan Police, the Bobby named after him was unarmed, and his principal duty was to maintain public order. Today, police forces worldwide are engaged in law enforcement and by law they mean legislation. And there is no law enforcement without guns. There are thus all kinds of small civil wars underway throughout the world more so in the

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USA. Gangsta rap is American street music. America has some 6 million of its citizens in jail most of them for drug law violations. Indeed, 80 per cent of these are in jail for mere possession. These so-called laws are all mere legislation. For further reading, I strongly recommend Bruno Leonis Freedom and the Law as well as Friedrich Hayeks Law, Legislation & Liberty, Volume I: Rules and Order. Legislation and paper money these have caused our suffering. They have destroyed civilization. They have destroyed the peace. They have divided the world and caused wars between nations. The capital of the poor has been steadily eroded, while bankers have enriched themselves. And the errors that lie behind them have propped up centralized states. The all-important Civic Sword has been discarded by the wayside. Civilisation cannot happen without peace. Without peace, there can be no trade. Shops cannot remain open while there are shootings and bombings going on outside on the streets. International peace requires free trade between nations. And internal peace requires nothing more than that the people love their laws just as the Anglo-Saxons once did, because they knew that these laws protected them; that these were not instruments of coercion. They knew that these laws gave them liberty and property as well. Torts protected them even from accidental harm. Where the people love their laws, peace prevails. As does liberty, and this is how civilization grows. I conclude this section with a few excerpts from the Book of Psalms in the Old Testament, which show that the Hebrews of old loved their laws as well. These are all from various parts of Psalm 119:

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Oh, how I love your law! I meditate on it all day long. I hate double-minded men, But I love your law. All your words are true, All your righteous laws are eternal. We can contrast these sentiments to the Bob Marley song I Shot the Sheriff. It then becomes obvious where we have gone wrong and why so many today hate the laws they are forced to live under.

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5. Knowledge and Civilisation:

Do you see a man skilled in his work? He will serve before kings; He will not serve before obscure men. From the Book of Proverbs The Old Testament

By Appointment to the Royal Danish Court these words can be found inscribed on every bottle of Carlsberg beer. Such royal appointments are found in Britain too on anything that deserves to called excellent, from Scotch whiskeys to just about everything else. And these royal appointments indicate the truth of the ancient proverb above that knowledge came from the people, and from the market, and most certainly not from the king, who was always a warlord and nothing more. The guilds had knowledge not the king. This is nothing new. Never have monarchs created any knowledge. Euclid and Pythagoras, Socrates and Aristotle they were all private scholars. Thus, in the 16th century, we find Machiavelli advising his prince to have no thought, nor acquire skill in anything, but war. The art of war is that that is expected of a ruler. How far we have come from these truths today to believe that the people are stupid, and that governments must inject

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knowledge into them! Frederic Bastiat ridiculed this idea in his native France as late as the mid 19th century and he did so most forcefully: If you want to have theories, systems, methods, principles, textbooks and teachers forced on you by the government, that is up to you; but do not expect me to sign, in your name, such a shameful abdication of your rights. It is precisely because theories, systems, methods, principles, textbooks and teachers have been forced on us by our governments that we have all accepted paper money as the real thing. We are all guilty of a shameful abdication of our rights; and, what is worse, we are guilty of worshipping the State as the fount of all wisdom and knowledge. To Bastiat, to Thomas Paine, to Mises the government was just the punisher: it comprised tax collectors, magistrates, judges, policemen, jailors and hangmen and such personnel are unsuitable for either educating the people or running economic affairs. It is only State propaganda masquerading as education that has confounded our reason. Whether in the USA or Britain, or France or Germany government schools as well as government grants to universities are to blame. It is this miseducation that lies at the root of nationalism and socialism, of protectionism and war. Herein lie the roots of de-civilisation the welfare-warfare state funded by paper money, which causes capital consumption on such an enormous scale. The errors of this New Economics that the Keyensians forced into school and university curricula worldwide are errors that had long been weeded out of Economics. In Adam Smiths time, mercantilists who believed that the wealth of

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a nation lay in its stock of gold and silver dominated opinion on such matters. Thus, they indulged in both nationalism as well as interventionism in order to promote national wealth for example, by encouraging exports, which bring in gold, while discouraging imports, which send gold overseas. The East India Company was much criticized for exporting gold and importing fripperies like spices. Of course, all this interventionism led to corruption as well as politics. It led to the politicization of economic life. It is these ideas that Adam Smith demolished way back in 1776. This is how Globalisation 1.0 happened in the 19th century. Cobden and Bright led a working class movement demanding free trade. Further, the very Keynesian idea that increasing the supply of money raises demand goes against Jean-Baptiste Says very old Law of Markets and Say was known as the Adam Smith of France. Keynesians mistaught this law deliberately in order to confuse. They said supply creates its own demand is Says Law. In fact, Says Law indicates that the source of all demand is production of goods and services for, when these goods and services are finally sold, there comes about the demand for all non-competing goods. Thus, each individual in the division of labour produces and sells his own product or service and then, with the proceeds, he obtains the ability to demand all else available on the market. The butcher will not buy meat from another butcher supply does not create its own demand but he will buy everything else from everyone else, other than butchers.2 Keynesian textbooks like the Nobel laureate Paul Samuelsons Economics spread economic illiteracy all over
2

There are many posts explaining all the implications of Says Law of Markets that can be found on my blog by clicking on the label Says Law on the right-hand bar.

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the world. To know the truth, many have had to study the old classics all over again. It must also be borne in mind that Keynes was a selfconfessed immoralist while Adam Smith was a Professor of Moral Philosophy. Keynesian paper money has corrupted governments and academia all over the world. And public opinion, too. The minds of students have been entirely corrupted. With printing presses producing as much paper money as corrupt politicians need, anyone and everyone could be bribed from the electorate, with welfare, to entire parliaments, even, to academics, to journalists, to whatever. This immorality is the real reason for the decline of the modern West. Its chief agent has been State education. In India, committing the same grave error that has destroyed the advanced West is nothing short of insanity. Here, in each and every aspect of State functioning, the government displays rank ignorance. The management of road traffic is the best example: there isnt a functioning zebra crossing anywhere in India; 1000 people die on our roads every day, equivalent to three fully-loaded Jumbo jets crashing; and, if we want to fix things, we will have to import this knowledge from abroad. Yet, public opinion, backed by the entire corporate media, has willingly agreed to pay an education tax so that this ignorant socialist State can provide free and compulsory education to all the children. Government schools and government teachers are rejected even by the poor in India who prefer private schools, where teachers actually come to class and teach, in English, that too. Anyway, how much can schools teach? How much knowledge is contained in books? And what about all the new knowledge that is always emerging? Further, what about freedom?

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Let us begin with music and dance neither of which is taught in schools. Television talent shows in India in every regional language reveal how good our youth are at these. But where do they perform? Whereas nautch girls have always thrived in India, they are all banned today. The mujra is banned in Lucknow. In Mumbai, movie stars get rich doing their raunchy item numbers on screen and these are watched by the entire nation every single day on television. Yet, in Mumbai itself, live dance performances by less talented girls are banned just as they are throughout the country. In Bangalore, rock concerts by foreign bands are regularly held but local bands can scarcely perform because of all kinds of restrictions. The poorest and most underdeveloped part of India, the North-East, boasts of hundreds of local rock bands but they remain poor and unheard of, languishing in their neglected portion of this sub-continent. While in the US, hundreds of poor blacks became superstars only because of New Orleans and Liberty. The entertainment industry has been raising poor blacks to superstardom for decades now music, dance, movies, and sports. Do our people need education or freedom? Were The Beatles educated? Actually, the Fab Four got their first break in Hamburgs St. Paulis playing live in a bar. Jimmy Page put it best when he famously said: The best thing about the guitar is that they dont teach it at school. But then, what do they teach in schools anyway? Even the best schools can only teach old knowledge reading, writing, arithmetic, history, classical literature and languages, geography, and science. No institution of learning can teach you today what the next model of the mobile phone will be like? No innovation or any other kind of new knowledge ever comes from any educational institution. The

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pioneers of thought have always been those who defied what the schools taught them. If you look around any of the informal markets in any of our cities, you will surely observe that almost each and every single entrepreneur there possesses knowledge that has nothing to with formal education: schools. Like the vendors of street-food, barbers and theirs is quite an art florists, and so on, including almost every single shopkeeper, apart from the chemist. And if you hang around there long enough, you will surely see these poor entrepreneurs being preyed upon by corrupt police and municipal functionaries: the cutting edge personnel of the predatory state. And this same State is spending mammoth amounts on employment generation in the rural areas while the rural poor, with all this hard knowledge, have migrated to cities and towns. The State is not being able to rein in its own employees, is incapable of issuing right commands to them, and they want to employ the entire populace and we let them! Further, if you find anyone educated working in the market, and you ask him something related to what he must have studied in school, I bet that person will reply, I have forgotten. School and college learning is rote learning quickly forgotten after the examinations. So, let us understand where our real error lies: and we find it to be the same one that has confounded law and politics as well and that is centralization. Law cannot be centralized, politics cannot be centralized and, in exactly the same way, neither can knowledge. This is why central economic planning is bound to fail. Centralised education cannot work for precisely the same reason, because in the real world of division of labour and specialization, each and every individual operates with a fragment of knowledge all his

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own. When a rock band performs, the drummer, the lead guitar, the bass guitar, and the keyboard player each operates with his own fragment of knowledge. The real world of the market economy and society works like that: butcher, baker, brewer, tailor and so on, ad infinitum. Our masses are desperately poor only because of predatory State policies from laws that violate property to paper money inflationism to protectionism. The population is not the problem rather, they are the ultimate resource, as Julian Simon put it. It is this State that is the real problem. Forced mass miseducation is the most horrible and bizarre idea, ever. It is a shameful abdication of our rights. It is based on the idea that the State is God Almighty allknowing, all-seeing, and all-powerful, capable of solving all our problems. To godless socialists and communists, it is this State that is God. This is precisely the religion of our age, what Mises called Statolatry. Frederic Bastiat thought very differently. He wrote: To believe in Liberty is to believe in God and have faith in His creation, Man. Allah ho Akbar means God is Great which implies that no prime minister or president is great. Islam means submission to the will of God, and not to the will of any man. The Prophet Muhammad, peace be upon him, could neither read nor write, yet it is he who commanded his followers thus: The search for knowledge is the sacred duty of every Muslim. Go in search of knowledge even to China. The early Muslims responded brilliantly to his command: in Bukhara, Ibn Sina wrote Canons of Medicine, the one book that taught this subject to the West; the Muslims invented

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Algebra an Arabic word; in astronomy they showed great progress and the name of the star Aldebaran is also Arabic; they invented Chemistry the word alchemy is Arabic, too; as is the word alcohol. In philosophy, it was Muslim scholars in Spain who first discovered and translated all the Greek classics after which these reached the West, leading to their Enlightenment. The Muslim scholar Averroes challenge to the teachings of the Church, based on his study of the ancient Greeks, led Thomas Aquinas to the baptism of Aristotle. Freedom leads to the discovery and spread of knowledge, and to civilization, just as orthodoxy and rigidity leads to its petrification. This is how civilizations have waxed and waned throughout history. As I said at the outset, almost all the vital knowledge in this book has been gleaned from the works of Ludwig von Mises and, so far, my approach has been influenced by his Theory and History. We have been going through History till now including the history of ideas. It is time we move to Theory and thereby understand the trading mind of Man. It is this trading mind that lies at the root of the true Science of Economics. This science was fully developed by Ludwig von Mises. There is nothing in the world more important than Economics. It concerns our very mode of survival. Thus, everyone must be conversant with the Science of Economics. As Mises stressed, in the penultimate chapter of Human Action, a chapter titled The Place of Economics in Learning: Economics must not be relegated to classrooms and statistical offices and must not be left to esoteric circles.

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It is the philosophy of human life and action and concerns everybody and everything. It is the pith of civilisation and of mans human existence. 3 If it is a false and corrupt Economics that has caused decivilisation, only a true science of this vital subject can save humanity the vast majority of whom are miserably poor, especially in my country. Socialists, communists and welfarists have always claimed to have the best interests of these poor people in mind. Indira Gandhis famous slogan Garibi Hatao remained just another empty slogan. She won the elections and the poor remain with us, many decades later. It is not a socialist State that can ever make mass poverty a thing of the past or Indira Gandhi would have accomplished this task, what with her widespread nationalization of banks, insurance, coal mines, Air India, etc. Welfarism reached its peak under her 20-point Programme. Yet, nothing much happened except for tyranny, and corruption, of course. Even tyrannical State power could not make a dent on mass poverty. So let us now turn to the greatest enemy of these socialists Ludwig von Mises, and to the abstract theory that underlies the Science of Economics he founded.

Human Action p. 878

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6. The Categories Within The Trading Mind: The righteous detest the dishonest; The wicked detest the upright. Do not move an ancient boundary stone, Or encroach on the fields of the fatherless. From the Book of Proverbs The Old Testament

Ludwig von Mises was the first to look within the human mind in order to discover why we all possess that famous natural propensity to truck, barter and exchange that Adam Smith wrote of and he found his answer in what he called the logical structure of the human mind. Mises took a very different view of this mind, a view that distinguished him from John Locke as well as David Hume, who believed that the mind was a tabula rasa upon which experience wrote its own story anew. No, said Mises, preferring to cite Leibniz, who said there is nothing in the intellect that has not been previously in the senses except the intellect itself. In other words, the logical structure of the human mind comes as a given to us given, that is, before any experience. Indeed, without it, we would not know how to

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categorise experiences. There would be no difference between the animals and us had it not been for our very human reason. So, instead of looking outwards, Mises looked within our unique trading minds, at what he called mental categories the first of which is Property. Many animals are territorial, but they are not able to go beyond that to trade properties. The weaverbird does not make nests for the early bird in exchange for the worms the latter is so adept at getting. If we look at little children at play, we often find them trading food and toys amongst each other like give me some of your chips and Ill give you a sip of my cola, or give me your ball and Ill give you my doll. Now, notice the use of two different possessive pronouns in each sentence in particular, to the fact that the little child can distinguish between what is mine and what is thine. This ought to be called our innate sense of justice and it is this sense, based on a mental category, that makes trade possible. It is Property that led to trade and it is Property that led to Law as well. Both Property and Trade existed long before the Law so, when the commandment Thou shalt not steal was issued, it was accepted by all the faithful as the Word of God, as Just, as Good. This commandment occurs in the Book of Exodus, shortly before a section titled Protection of Property, yet we find the precise expression deeded property in the Book of Genesis, which precedes it. Precise words indicating property are found innumerable times in the Book of Genesis, like my, your, his and belongings. Language is much older than the written word.

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It is this sense of justice, based on the mental category of Property that all human minds are blessed with, that led us to trade and the division of labour, to specialization and wealth creation and, thus, to civilization itself, because we were led by our sense of gain to the building of cities. Frederic Bastiat was absolutely right when he said socialists and communists, who despise the institution of private property and nationalize these, engage in legal plunder. All the legislation that has been passed in their democratic assemblies in order to nationalize private entities, Bastiat wrote, make the Law guilty of committing the very crimes it is supposed to punish. Indira Gandhi and her cohorts stole Air India period. With the passing of the Air India Nationalization Act, the law, and parliament itself, became guilty of theft. The Book of Ecclesiastes says: The quiet words of the wise, Are more to be heeded Than the shouts of a ruler of fools. This sense of justice based on a recognition of what is mine, what is thine, and what is not mine this very human sense is the foundation of Civic Order. In the teeming bazaars of India, where the numberless, unlettered masses jostle to engage in trade and exchange perfect order prevails amidst all the noise and bustle. Trades worth millions or even billions occur in such bazaars every day in India without lawyers, without judges, and even without documents. Man is a rule-following animal, wrote Friedrich Hayek, in The Fatal Conceit: The Errors of Socialism, his last book, wherein he put forward the proposition that this rule-

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following falls between instinct and reason. In other words, man has overcome his instinct to snatch and grab to plunder and has chosen to trade instead, but he has not reasoned why. Actually, man trades because his sense of gain prompts him to because he knows that by producing one thing and serving it to his customers, he immediately gains from the produce of everyone else. But trading itself comes from the mental category of Property. The Civic Sword is only required to maintain order to keep the peace, to bring outlaws to justice. There is a natural order in the market society because of this mental category of Property. This, indeed, is what the English call nine-tenths of the Law: which is Possession. The goods arrayed before a street vendor are assumed by all to be his Property and it is only this recognition of what is thine that makes civic order a natural phenomenon. As natural, indeed, as our propensity to trade. It was Mises who wrote: To read Adam Smith today is like reading Euclid in order to learn Geometry. Mises took the subject far beyond the observations of Smith. He inaugurated a true Science of Economics by looking inside our minds, into what cannot be observed. As we proceed to understand this unique, vitally important and very new Science, we will see how every error of the communists, socialists, welfarists and Keynesians are quickly weeded out. This weeding out of errors is essential for the prospects of the poor, and for the preservation of civilization itself. The second category of the human mind that naturally engages in trade that Ludwig von Mises identified is Arithmetic. All trades are based on calculation. We find numbers in all languages and there is even a Book of Numbers in the Old Testament. In the Book of Genesis, and

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also in the Book of Exodus that follows it the first two books of the Old Testament we find umpteen instances of the counting of herds and flocks, and of the weighing of money, as also of different units of weight, like shekels and talents. In the bazaars of India, unlettered traders can count accurately inside their minds. This is true throughout the Third World and this was true of Olde England as well, where little children were told to count sheep while going to sleep. Olde England was a nation of shepherds and wool was Englands staple export right up to Adam Smiths time. This counting of numbers this calculation is essential for evaluating success and failure in trade, to know what is cost, what is profit, what is loss and, most importantly, what is Capital as distinct from Income. The shepherd who accurately counts his sheep knows whether the size of his flock is increasing or not and thus, whether he is accumulating capital or consuming capital. The good shepherd will accumulate capital the size of his herd will keep growing and he will prosper, taking civilization along with him. Jacobs flock in the Book of Genesis is a perfect example of this. Thus, as Mises explained: Economics is essentially a theory of that scope of action in which calculation is applied or can be applied if certain conditions are realised. No other distinction is of greater significance, both for human life and for the study of human action, than that between calculable action and noncalculable action. Modern civilisation is above all characterised by the fact that it has elaborated a method which makes the use of arithmetic possible in a broad field of activities. This is what people have in

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mind when attributing to it the not very expedient and often misleading epithet of rationality.4 Thus, the business magnate reads nothing other than his companys balance sheet which is but Arithmetic, arranged in the form of double-entry book-keeping. His eye is only on profit and loss. Or, on whether he is accumulating capital or consuming it. He is doing this quite well as a private individual tending to private property nothing very different from what the solitary shepherd has always done. In a different context, Mises explained it this way: Monetary calculation and cost accounting constitute the most important intellectual tool of the capitalist entrepreneur, and it was no one less than Goethe who pronounced the system of double-entry bookkeeping one of the finest inventions of the human mind.5 Socialists engage in something they call social accounting which pertains to their entirely fictitious national economy: aggregates like Gross Domestic Product (GDP), its growth rate and so on. Well, if double-entry bookkeeping is one of the finest inventions of the human mind, then this social accounting is surely one of the most devilish inventions of the human mind. I will discuss the horrendous consequences of this social accounting later in this section. There is a second aspect to economic calculation and that is Time. All human action is governed by this factor. We cannot labour all day and need rest. Labour is thus sold by
4 5

Human Action p. 199 Liberalism

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the hour, or day. Interest on capital is paid by the year. Rent by the month. Time is thus a factor of production something textbooks worldwide ignore. Productivity is measured according to time how much do you produce in an hour or day? We Indians are poor for this reason as well our capacity to produce is limited by our rotten infrastructure. We waste time on a colossal scale. The calculation of Time is very old in history the seasons, the solstices, the equinoxes, these were known to the wandering nomads of old, because these were important in their lives. Settled farmers also needed to know them. There is a time for everything as the Old Testament says. There was no measurement of time then. But the rooster crowed at the break of dawn. Further, time is essential to music and drums are the oldest musical instrument. In his last book, The Ultimate Foundation of Economic Science, published when he was well past the age of eighty, Mises wrote: The human mind generates both human thinking and human action. Human action and human thinking stem from the same source and are in this sense homogeneous. There is nothing in the structure of action that the human mind cannot fully explain. In this sense Praxeology6 supplies certain knowledge.7
6

Praxeology which means the science of human action is the word Mises was forced to use for his science, because social engineers had misappropriated the word he preferred, which is sociology. Misesians worldwide call themselves praxeologists today. However, in this book, I have returned to the word sociology that Mises originally used. See his Epistemological Problems of Economics, published in the 1920s. Another good read is Friedrich Hayeks The CounterRevolution of Science: Studies on the Abuse of Reason, in which the lunacy of sociologists like August Comte is fully revealed. 7 UFES p. 64

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This shows that what we call capitalism is the only way the human mind is structured to work. It cannot work in any other economic system imaginable. Property, capital, income, valuing, profit and loss, costs, time these are all mental categories of man. That is, man the capitalist. Man with the natural propensity to truck, barter and exchange. As Mises explains: All the praxeological categories are eternal and unchangeable as they are uniquely determined by the logical structure of the human mind and by the natural conditions of mans existence. Both in acting and in theorizing about acting, man can neither free himself from these categories, nor go beyond them. A kind of acting categorically different from that determined by these categories is nether possible nor conceivable for man. Man can never comprehend something which would be neither action nor inaction. There is no history of acting; there is no evolution that would lead from nonaction to action; there are no transitory stages between action and nonaction. There is only acting and nonacting. And for every concrete action all that is rigorously valid which is categorically established with regard to action in general.8 Since we are all blessed with capitalistic minds and capitalism as well as civilization are all about individualistic risk-taking and private property it follows that if each and every individual is left free, and if most of them succeed in accumulating capital, all will go well with civilization, and it
8

HA p. 198

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will progress by leaps and bounds. It must be emphasized, of course, that all individuals will not be able to do so, that many will fail because profits for all cannot ever be guaranteed. The future is uncertain and all businesses aim at satisfying potential customers in the uncertain future. Business failures can and do happen quite often, in fact. But if bankruptcy is quickly declared and assets transferred to other uses, losses are minimized. A relevant Proverb of Solomon in this context is: Even in laughter the heart may ache, And joy may end in grief. Everything in the market is in a permanent state of flux. There is never anything called equilibrium a concept that exists in mechanics, but has no place in Economics. Almost anything unexpected can happen at any time and change all the data. Businessmen never make rigid plans into the long-term future because they need the flexibility to deal with the unforeseen. The above proverb says just that it is another piece of ancient wisdom. Now, under socialist control, the entire economy proceeds at a loss and we have commonloss instead of commonwealth. There is never any joy of profit; there is only grief of loss. Look at how Air India is bleeding the nation, for example. And also look at how our politicians bled the nation over their hosting of the Commonwealth Games. What about coalgate? And all the accumulated losses of State-owned companies like those that monopolise electricity production, transmission, and distribution. India needs Big Bang Privatisation. No more collective property; instead, everything as private property. Then, and only then, would each individual

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proprietor rationally manage his business, and attempt to accumulate capital. It was Ludwig von Mises who, way back when, alerted humanity to the fact that there could be no rational economic calculation in a socialist country. All the numbers that they measure and produce for public opinion are meaningless from the statistics used by the central planning commission to the money supply data, to other kinds of nonsense like the inflation rate, the unemployment rate, and even the trade balance. And, that greatest horror of horrors the growth rate, which is just another of their meaningless averages. Think: If the growth rate is 10 per cent, does it mean your business will grow at that rate? Or anybody elses? Similarly, if the unemployment rate is 7 per cent, does this mean that unemployment in you city or town will equal that rate or the poorer areas of your city and the richer areas will have the same percentage of unemployed? If the inflation rate is 10 per cent, does it mean that all prices will rise at that rate? All these are just meaningless averages. They are designed to delude you, to confuse. All these numbers give us the false impression that there is something called a national economy. This delusion is reinforced by the fact that this national economy has a paper currency of its own. Then, the central banker and the politicians and bureaucrats are viewed as managers of this national economy. They manage this national economy with all the knowledge provided by these numbers. Yet, they cannot even manage their own accounts! They are forever in deficit and in debt.

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If gold were money, as it has always been in History, it would be private money: we would each have our private hoards of gold. National currencies would only refer to different units of weight. No government and no politician would be able to create money. There would be no national economy to manage. The government would have to balance its budget and that is all. While we would run our own private economies our businesses. This measurment of data from the world outside is called empiricism and is the method of Physics. It is not applicable to Economics, which is rooted inside the trading mind as we have just seen. Physicists make observations and measure them, and thereby come up with their laws. They can do so because they find mathematical constants and, further, they can conduct laboratory experiments repeatedly to test the validity of their laws, as also these constants. In Economics, there are no constants except for the human mind, with its logical structure that contains all these mental categories. In the world outside, there are only variables and everything we observe is in a flux. Complex mathematics, econometrics, statistics these yield no laws. They are not Science; on the contrary, they are but scientism, which is nonsense pretending to be science by aping the methods of the physicists. What is worse, as I have just discussed, these numbers are all the intellectual cover of nationalism, socialism, and central banking the great evils of our time. Hans-Hermann Hoppe once wrote: If we want to attack socialism, we must also attack the absurd intellectual error of empiricism. And if we want

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to defeat socialism, we must make a principled Misesian case based on the logic of human action and the irrefutable laws of Economics. Not just socialism all these other great evils, nationalism as well as Keynesianism, which finances welfarism and thereby causes de-civilisation all these evils can only be destroyed if the true Science of Economics that Ludwig von Mises firmly established is universally understood and appreciated. Economic nationalism the idea that politicians should command a national economy is as absurd as the idea that all property should be collectively owned, which is socialism. The real world that works, and which has always worked before these ridiculous ideas emerged in the early 19th century, is based on each individual minding his own business, each tending his own flock, each looking after his fields and harvesting his own crops, each fisherman in his own boat casting his own net, and so on. The battle of ideas in our times is one between individualism and collectivism. Property is individually owned and even husbands and wives have their own separate properties. Women conduct their own businesses, separate from their husbands and this is particularly true among the poor in India. Husbands are often lazy or drunk. Unlettered women traders are a common sight in all our bazaars, selling vegetables, fish and other stuff. And I daresay they manage their businesses better than any man. Prudence is, after all, a feminine virtue and quality the Holy Bible says so, repeatedly. Girls are often named Prudence, not boys. In India today, poor farmers throughout this vast subcontinent have woken up to the idea of Private Property

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that they must own their fields, and possess clear titles to them as well. The socialist State has made this realization happen by trying to acquire these fields of theirs for various public purposes even though the real purpose is usually to benefit private companies. The political backlash in West Bengal, for example, unseated the communists who had been (mis)ruling that province for some thirty years. Without Property there is no Justice, wrote John Locke way back in the 1690s. Those who do not believe in Property are what civilised people of old called barbarians. What is unjust cannot establish order. Riots have occurred wherever land acquisition by this State has been attempted. Socialists destroy the natural order and create chaos. This is why socialism is actually anti-social the reason why so many criminals are inside all our democratic assemblies today. The predation on poor street vendors and hawkers in all our cities and towns by petty functionaries of this socialist State is more visible. If the State despises private property, and the market as well, this is but inevitable. And this cannot be called civil government. The word civil means civilization and, therefore, the market. Socialism means bureaucratic administration and party government. It is uncivil and hence anti-social. Let me close this section with the opening words of Thomas Paines Common Sense, the little pamphlet that fired the American Revolution of 1776 and what a great year that was. Paine writes: SOME writers have so confounded society with government, as to leave little or no distinction between them; whereas they are not only different, but have different origins. Society is produced by our wants, and

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government by our wickedness; the former promotes our happiness POSITIVELY by uniting our affections, the latter NEGATIVELY by restraining our vices. The one encourages intercourse, the other creates distinctions. The first is a patron, the last a punisher. Paine put this across more clearly and more forcefully in another essay, written around the same time: A great part of that order which reigns among mankind is not the effect of government. It had its origin in the principles of society, and the natural constitution of man. It existed prior to government, and would exist if the formality of government were abolished. The mutual dependence and reciprocal interest which man has in man and all the parts of a civilized community upon each other create that great chain of connection which holds it together. The landholder, the farmer, the manufacturer, the merchant, the tradesman, and every occupation prospers by the aid which each receives from the other, and from the whole. Common interest regulates their concerns, and forms their laws; and the laws which common usage ordains, have a greater influence than the laws of government. In fine, society performs for itself almost everything that is ascribed to government.9 We proceed to a deeper understanding of this Market Society, this patron, for it is the very basis of civilization. It is also the foundation of natural civic order. It is to this we need to turn when we see that our governments have all gone very wrong, punishing the good while the evil go laughing all the way to the bank. Welfarists want to turn government
9

From Thomas Paine, Society Is a Blessing, but Government Is Evil, excerpted from Chapter 3 of Liberty and the Great Libertarians, edited by Charles T. Sprading. The article can be accessed online at http://www.mises.org/story/2897.

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into The Patron but it is time the entire world realized theirs is but false philanthropy.

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7. The True Science of Economics: Each heart knows its own bitterness; And no one else can share its joy. From the Book of Proverbs The Old Testament The proverb I have just quoted above is only intended to show that even the ancients realized there is much that is individualistic and also that there is much that is subjective. Thus, the pursuit of happiness is a private matter of the individual doing the pursuing and each of us pursues different goals. Not everyone pursues wealth, not everyone pursues knowledge, and not everyone pursues pleasure. In the market, some love vanilla ice cream; others hate it. Some love detective stories, some read trash, and many today dont read at all they just watch television. Some love wine, others love beer, and yet others abhor and detest alcohol. It takes all kinds to make the world and that is an old saying, too. Civilisation and the market economy are all about Private Property as we have discussed. It follows that they are also about individualism. The entrepreneur who wagers his capital on what the public might demand in the future does not take permission from anyone else in order to do so; indeed, in almost all cases, he will keep his decision secret, so as to not alert his competitors. And the market economy is competitive.

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This competition is the hallmark of liberty while the absence of competition is what the worst tyrannies are all about. And market competition is not survival of the fittest: rather, it is just a grading of competitors, and the worst plonk sells as freely as does the finest wine. The great musicians are seen on television or live in stadium concerts; lesser ones play in small bars. It also follows that we can never be equal in terms of economic worth. Free people are not equal, and equal people are not free this is a lesson that all socialist and communist nations have learnt the hard way. Further, we do not work, we do not produce, and we do not compete just for the sheer pleasure of doing so. All our hard work is aimed at just one thing to purchase our own need-satisfactions from other traders in the market. Our work is just the means; while consumption is the end. This is another great error of the communists and socialists who dreamed up a workers paradise armed with a labour theory of value but if anyone recalls the paradise they created, whether in the USSR, in Communist China, in Cuba or in India, the fact remains that workers in these nations had nothing much to consume. They worked hard, they laboured, even but for nothing! Labour is disutility and not a source of value. Value lies in what is consumed with the fruits of labour and this is again an area where individualism and subjectivism come in. So, when communists and socialists and all other enemies of freedom disparage the market on the grounds of consumerism and a consumer culture, they are talking nonsense, as usual. Tell them to go to North Korea not for a holiday, but forever.

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The true Science of Economics enables the student to look out from within the consciousness. He becomes aware of the uniqueness of his own mind and its mental categories of Property and Arithmetic. Since property is as private as his mind, he then becomes aware of his individualism that he must take his own risks, whether as an entrepreneur or as a consumer. And since consumption is the goal of all his efforts, he becomes aware why freedom matters so much, because where there is freedom, even the rarest of pleasures find satisfaction in The Olde Curiosity Shoppe, for example. This is where the subjective element comes in, for value is subjective, and lies in the valuing mind. Why does someone pay a fortune for a rare Scotch, or a Cuban cigar, or a piece of jewelry? The answer lies in the valuing mind. The intersecting curves of demand-and-supply in school and college textbooks are nonsensical, to say the least. The true Science of Economics tells us how we think within our trading minds. Just as the Laws of Physics are about the external world, the Laws of Economics are laws of thought within our minds. It is these laws of thought that guide our actions in the market and so their predictions are logically valid. The Law of Demand and the Law of Supply are precisely such laws of thought and they are valid in the sense that to think otherwise would seem absurd to our minds. These laws do not need to be validated by any measurements or observations as with the laws of Physics. We may compare them with the theorems of Geometry that do not require us to measure real triangles, squares or rectangles and are proved by logic itself, beginning with a hypothesis, and ending with a QED. The only difference is that the Science of Economics deals with human action while Geometry deals with the observation of space which is non-action.

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The title of Ludwig von Mises great treatise on Economics, his magnum opus of over 1000 pages, is Human Action. We humans must act in order to survive we must trade, barter and exchange. This itself needs no outside observation or measurement to prove. It is logically valid. We know we are not trees; that we do not draw our sustenance from the ground beneath us. Like all the animals, the birds, and the insects, we must act to survive. But our actions are trades. The tiger hunts to feed himself; the human being opens a restaurant to feed others for his own gain lies in that. With trades, each of us attempts to alter a situation that suits us less into one that we think will suit us better. We feel thirsty, we buy a beer. And so on. Anyone who is possessed of a trading human mind will know within his own mind that this proposition is true. He will feel its truth within his consciousness. This is precisely the case with the Law of Exchange: that when a voluntary trade occurs, both parties gain, because both value the good traded unequally. When a beer is bought, the buyer values the beer more than the money he hands out; and the bar owner obviously values the money more than the beer. This is obvious because both thank each other at the end of the deal. But it is not observable nor measurable as to what the respective valuations of the beer that was traded are. Value is subjective; it lies within the valuing mind. It could well be that this bar is located at the end of a desert highway and the customer might value that beer five times higher than the price asked. But this cannot be measured, nor observed. To appreciate the Law of Exchange requires inner, reflective understanding. Once this is done, the law

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is true a priori. Its predictions are valid with apodictic certainty, which means absolutely certain and necessarily true. It also means to show by argument that is, no reference to experience is required. A priori truths are affirmed in our minds in the same manner in which the theorems of geometry, of mathematics and of logic are found valid by logic itself. We do not need to measure anything to prove 2 + 2 = 4. If someone said 2 + 2 = 5 we would simply say this is absurd and untrue. Mises himself put it this way: If we qualify a concept or a proposition as a priori, we want to say: first, that the negation of what it asserts is unthinkable for the human mind and appears to it as nonsense; secondly, that this a priori concept or proposition is necessarily implied in our mental approach to all the problems concerned, i.e., in our thinking and acting concerning these problems.10 Mises goes on to explain further: The a priori categories are the mental equipment by dint of which man is able to think and to experience and thus to acquire knowledge. Their truth or validity cannot be proved or refuted as can those of a posteriori propositions, because they are precisely the instrument that enables us to distinguish what is true or valid from what is not.11 And then come all the laws of thought. The Law of Demand says that, other things remaining the same, if prices rise, demand will fall. Any trading mind will accept this to be true. Indeed, if the opposite were stated, the same mind would
10 11

Ultimate Foundation of Economic Science p. 18 Ultimate Foundation of Economic Science p. 18

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dub it absurd and nonsensical. Thus, the predictions of this law are scientifically valid but with a caveat: and that is, these predictions are qualitative and not quantitative, unlike Physics. We can predict that if prices rise then demand will fall but not by how much. Measurements are useless. And there are no statistical laws. Indeed, the bestseller of recent times titled Freakonomics proves that statistical laws do not exist, because the authors use the same data to arrive at all their freaky conclusions. This is why when central bankers predict inflation or growth they are just babbling nonsense. While civilisation and the urban market economy that built it are based on individualism or even rugged individualism socialism and communism, which are all about groups, have politics in mind: what they call the class war. Of course, this politics has nothing to with the city the polis or with civilization; on the contrary, it is but a means of winning votes by fracturing the electorate in order to capture State power. It is better called factionalism than politics. It is entirely a pack of dirty lies masquerading as knowledge. It is an enemy of property, and an enemy of the market as well. The result of all this has only been misery and impoverishment even tyranny. Trade unions have been armed with legislation that enables them to use force to press their claims as, for example, when they use naked violence to bar free workers from being employed during a strike. They break the peace and this is surely not civilization. Nor is it Law. In the market economy, the motto is each man to himself, each man by himself or, to put it better still, each individual is the architect of his own fortune. It is most certainly not all for one and one for all. Workers compete for promotions just as managers do. There is nothing valid

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in collective bargaining. The motive of the trade unionist is political, not economic. And his real design is exploitation of the working class. Modern capitalism, wherever it has been allowed to operate freely, has literally poured the proverbial horn of plenty on the working class as consumers. Without inflationism, of course, they would prosper even more, because all prices would steadily fall. Modern capitalism is not like the guilds of medieval Europe, which produced luxuries for the wealthy few the rich merchants and the aristocracy. Modern capitalism is mass production for mass consumption. When Henry Ford mass manufactured cars with his assembly lines, all Americans had a car of their own within a decade or two. Today, all poor Indians have a mobile phone. You see colour TVs in the slums today. Why should we not believe that if the market is free, every Indian should own a modern car tomorrow? The iron law of wages is obviously untrue. Thus, we see that the Gandhian obsession with small scale industry is actually harmful to the poor. Gandhians wanted to help poor workers as producers by giving them employment. They forgot them as consumers, of course. And anyway, if labour is employed without modern machinery, all that is maximized is sweat. Sweat labour. The wages of labour rise only when capital is employed in increasing quantities, thereby raising productivity. This is why the watchman outside the gates of a modern spinning mill earns far more than a villager spinning his own yarn on a Gandhian hand-operated charkha. Machines are capital goods and even the hammer and sickle on the communist flag are capital goods. All these

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capital goods are private property. And it does not matter whether the capital goods are owned by workers or by shareholders. The worker in a modern car factory using advanced robotics owned by the company is better off because of them, as his productivity is raised along with his wages. His physical work is also considerably reduced. Workers in a poor country like India must see where their right interests lie as workers, as consumers, and as citizens. Extremely evil people who seek nothing but State power are duping them. These evil politicians do not intend to ever produce wealth. They only intend to be huge tax parasites. The poor are being told that businessmen, traders and big capitalists are their enemy; that they must fight a class war. Poor workers must think and then decide whether they want capitalism or this evil Maoist civil war that is continuing to spread in India, this time among poor tribals in our jungles. Maoists have spread to Nepal as well. It is rather interesting that the chief ideologue of the Nepal Maoists is a PhD in Economics from Delhis Jawaharlal Nehru University. If our universities produce Maoists, how can our soldiers ever combat them? Ideas must be fought with ideas. What every poor worker must know is how he personally benefits from the division of labour and specialization. Adam Smiths own example of a pin-factory is terrible. Below is what the great Frederic Bastiat wrote especially for the poor worker: Let us take a man belonging to a modest class in society, a village carpenter, for example, and let us observe the services he renders to society and receives in return. This man spends his day planning boards, making tables and cabinets; he complains of his status in

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society, and yet what, in fact, does he receive from this society in exchange for his labor? The disproportion between the two is tremendous. Every day, when he gets up, he dresses; and he has not himself made any of the numerous articles he puts on. Now, for all these articles of clothing, simple as they are, to be available to him, an enormous amount of labor, industry, transportation, and ingenious invention has been necessary. Americans have had to produce the cotton; Indians, the dye; Frenchmen, the wool and the flax; Brazilians, the leather; and all these materials have had to be shipped to various cities to be processed, spun, woven, dyed, etc. Next, he breakfasts. For his bread to arrive every morning, farm lands have had to be cleared, fenced in, ploughed, fertilized, planted; the crops have had to be protected from theft; a certain degree of law and order has had to reign over a vast multitude of people; wheat has had to be harvested, ground, kneaded, and prepared; iron, steel, wood, stone have had to be converted by industry into tools of production; certain men have had to exploit the strength of animals, others the power of a waterfall, etc.all things of which each one by itself alone presupposes an incalculable output of labor. In the course of the day this man consumes a little sugar and a little olive oil, and uses a few utensils. He sends his son to school to receive instruction, which, though limited, still presupposes on the part of his teachers research, previous study, and a store of knowledge that startles ones imagination.

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He leaves his house: he finds his street paved and lighted. His ownership of a piece of property is contested: he finds lawyers to plead his rights, judges to reaffirm them, officers of the law to execute the judgment. These men, too, have had to acquire extensive and costly knowledge in order to defend and protect him. He goes to church: it is a prodigious monument, and the book that he brings with him is perhaps an even more prodigious monument of human intelligence. He is taught morals, his mind is enlightened, his soul is elevated; and for all this to be done, still another man has had to have professional training, to have frequented libraries and seminaries, to have drawn knowledge from all the sources of human tradition, and to have lived the while without concerning himself directly with his bodily needs. If our artisan takes a trip, he finds that, to save him time and lessen his discomfort, other men have smoothed and leveled the ground, filled in the valleys, lowered the mountains, spanned the rivers, and, to reduce their friction, placed wheeled cars on blocks of sandstone or iron rails, tamed horses or steam, etc. It is impossible not to be struck by the disproportion, truly incommensurable, that exists between the satisfactions this man derives from society and the satisfactions that he could provide for himself if he were reduced to his own resources. I make bold to say that in one day he consumes more things than he could produce himself in ten centuries.

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What makes the phenomenon stranger still is that the same thing holds true for all other men. Every one of the members of society has consumed a million times more than he could have produced; yet no one has robbed anyone else. If we examine matters closely, we perceive that our carpenter has paid in services for all the services he has received. He has, in fact, received nothing that he did not pay for out of his modest industry; all those ever employed in serving him, at any time or in any place, have received or will receive their remuneration. This is the miracle of the market economy and society and of the division of labour that makes it all possible. Mises went even further he said that this division of labour is the principle of cosmic change and becoming. This is how you become what you want to become: actor, dancer, writer, or whatever. For each, there is a separate fragment of knowledge. And, this market society is orderly, since we all know the difference between mine and thine. Further, this society is even inclusive. Every peaceable stranger is welcome. This is the pathway to peace and prosperity, to the greatest creative flowering of the human race and to civilization. Democratic politics is always divisive. All political parties are but factions aiming for the capture of State power for

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their own, selfish ends. If one divides workers and capitalists, another divides along religious lines. And yet another employs caste. On the ground, there are violent street wars every day. There is no peace. This is because the economy is not free and politics determines economic outcomes, for both the rich as well as the poor. There is no civilization. There is no justice. There is only corruption economic, moral, and intellectual. With 6o years of this socialism behind us, it is fairly obvious to all Indians that this ideology is actually anti-social in its effects. In other words, they have a false Economics, a false Law and a false Sociology as well. Their Science of Society is wrong. We proceed to how the Market Society that is the basis of civlisation is correctly conceived from its roots, which lie in the true Science of Economics we have just discussed, and which is itself based on the unique trading mind we humans all possess.

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7. How the True Science of Economics Leads Us to a Correct Sociology:

Do not oppress an alien; You yourselves know how it feels to be aliens, Because you were aliens in Egypt. From the Book of Exodus The Old Testament

The proverb above originated at a time when the hospitality industry did not exist. We are fortunate to be living in this modern world and that too, in a nation where every city is a melting pot. In our country, foreign tourists are always welcomed and this includes hordes of poor Israelis. The Hindustani word for foreigner is pardesi and it does not imply any hatred at all, unlike alien or its German equivalent, aslander. Innumerable love songs have been sung for the pardesi. When I translated one for a German visitor, he exclaimed, Every neo-Nazi ought to hear this! We Indians want more foreign tourists. We are extremely unhappy when tourist arrivals drop, which is the case these days. Who wants to visit a country with such horrible cities and towns, such horrible roads and trains, and so little liberty? Tourists come for holidays. They come to have fun. Fun is absolutely illegal throughout India. Tyranny!

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But the hospitality industry is not that new really, and there were inns and taverns in ancient times as well. While in Switzerland, a country that attracts tourists in droves, I stayed at a hotel in Interlaken that was over 500 years old. Opposite it was a souvenir shop equally old. In that souvenir shop, I saw carved wooden figurines of Swiss women carrying firewood on their heads which was their condition not so long ago. Switzerland is famous also for institutes that teach hotel management. My hotel in Interlaken had plaques on the wall commemorating great foreigners who had stayed there centuries ago from Lord Byron to Mendelssohn. In Geneva, the tallest statues are of John Calvin, a Frenchman, and John Knox, who was a Scot. There is no Swiss language. The Swiss speak German, French and Italian depending on the region. Yet, they possess a strong Swiss identity. Further, they believe in peace and stayed out of both World Wars. In Geneva, an equestrian statue honours the Swiss citizen who founded the International Red Cross. In the walled part of this old city, where the World Trade Organisation is headquartered, I found a mural depicting the famous markets held here during the centuries before Christ when Geneva was, as it remains now, the biggest market town in this mountainous region. I was there to attend the Geneva Motor Show the biggest and most important automobile exhibition in Europe and the Swiss do not make cars. They make watches, cheese, chocolates and other stuff. Says something about swadeshi. The Swiss are famous also for their direct democracy which is also called a consociational democracy and

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every little town votes for every local decision. I had heard that the Swiss are famous for not knowing the name of their President and I tried it out over the two weeks I spent there, asking innumerable Swiss citizens this question, and every single one replied: I do not know. There is very little politics in Switzerland: we never hear of Swiss elections, or of any Swiss political party. This is very unlike the USA and every little child throughout the world knows who Obama is. The US presidential elections hog the international media for a full year! Swiss democracy has diffused power, and not centralized it, as the Americans have. Rousseaus statue sits proudly on the corner of a Geneva street. Geneva was famous for its republicanism long before America became independent. Note that Rousseau was in very grave error in his Social Contract for all contracts are but private law, as between worker and employer and so on. It is Rousseau above all who elevated the legislator to a position above all mankind he had to remake man, said Rousseau and Bastiat tears him apart in The Law. Bastiat was a legislator himself and he took a very dim view of this tribe. Rousseau was the hero of the French revolutionists and his bust with a laurel leaf upon it was paraded through the streets of Paris during the glory days of their revolution. Yet, many republics later, the French are yet to discover liberty. But Rousseau came from Geneva famous for its republicanism. Even he would not consider the centralized democracies of nations such as India or, indeed, the USSA to be anything near what he had contemplated. Anyway, the most important social contract is on the promise to

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pay printed and signed upon every government paper note and it is this contract that is never honoured, anywhere! Besides, Hans-Hermann Hoppes Democracy: The God That Failed says it all. All I would like to add is that this democracy is fatally linked to all the bad things: nation, state, welfare, warfare, education, healthcare and, of course, taxation and inflationism. Returning to the Swiss they have created a very prosperous civilization, with peace, trade, and without too much politics. But things have changed quite a bit here as well and the Swiss now deal big-time in international politics. The WTO and the World Economic Forum are but two examples the latter set up by a socialist. These talking shops where international political deals are concluded are precisely what poor nations must avoid. Centralisation has also steadily increased in Switzerland something Mises noted when he taught there in the 1940s. The Swiss franc is mere paper today. And as for Swiss banking, it is not what it used to be. It therefore becomes all the more important to totally separate economic activity from all kinds of politics. Unilateral free trade and unilateral free immigration are the answer particularly for this immense, and poor, subcontinent. The more the merrier, as they say of goods, services, capital and people. Free trade means that all shops are duty free shops. Switzerland is also a great example for land-locked mountainous nations like Nepal especially for their fantastic transportation system. It is only because of this that they are 90 percent urban and Swiss property is highly valued. The mountains of Switzerland are real estate. One

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Swiss-Italian told me that he lived in a small town with a population of 15,000 adding that a place with such a small population would not even feature on the map in my country. It would be another poverty-stricken village and on my treks in the northern Himalayas I have seen so many of these. For example: I took a trip from Interlaken to a revolving restaurant atop a snowy peak by private cable car, one that could carry 40 passengers plus a cargo container. It stopped at three stations en route to the restaurant and in each of these stops there were plenty wooden cottages to be seen, which were very expensive and highly valued, because these areas are free of road traffic, and children can play safely in the snow. In India, I could give the example of Loharkhet in the Upper Kumaon, en route to the Pindari Glacier. It took a three hours to reach this huge village of over 200 homes. No real estate at all. One chai shop. One PWD bungalow dating back to 1905 British times. Similarly, Nepal is poor because there is no peace, little trade, and too much politics. And no cities, either. Transportation sucks. No tourists visit Nepal anymore. Armed Maoists roam the streets of Kathmandu looking for jobs. Need I say more? Except to say that the evidence presented above illustrates the need for a correct Science of Society or Sociology. Socialists look upon society as a whole and that too, usually as a homogenous whole. Their science then consists of ways by which their State can engineer this society towards ends that these benevolent and enlightened engineers deem fit. Of course, all this social

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engineering will be accomplished through legislation backed by State force. Politics! The market society upon which civilization is based most certainly does not work like that, and is based on individual liberty and property on individualism. The collective is but a figment of the imagination of the socialists and communists, which is why Karl Marxs gravestone has the words Workers of the world Unite! emblazoned upon it. A market society must be an open society open to foreigners, to foreign trade, to foreign workers, and tourists as well. Such a society is competitive and we all compete both as buyers as well as sellers. The unity Marx sought was for a political purpose the class war. This is what destroyed West Bengal all industry fled, and workers were left destitute. Therefore, to arrive at the correct Sociology, we must begin once again with the Individual and his unique trading mind. We have noted how this mind prompts the individual into specializing in the division of labour. We now have to ask how such individuals associate with each other, and thereby form a Market Society. We must then look for the characteristics of such a society. To find the answer to this question, it is best to look at how we humans spontaneously specialize in non-market situations. For example, I shared a house for many years with a friend, and we preferred to live without servants, so we divided all the work in the kitchen between ourselves. Now, my friend was much better than me at everything. She could cook better, chop faster, and even wash up quicker and cleaner. However, it turned out, quite spontaneously, that she specialized in what she was far better at, while I

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specialized in what I was least bad at. She cooked, while I did the chopping and the washing up. The lesson: Even if one person is far worse than the other in everything, there are mutual gains in specialization and association if the former specializes in what he least bad at. So, in this case, she saved a lot of labour as well as time, while I got splendid meals which I would never have been able to produce for myself. Now, if we transfer this example to a market situation, we can find innumerable gainful associations of this type like the surgeon who hires an immigrant to clean his instruments. The surgeon could do the job better and faster, for sure. But by paying the immigrant to do it for him, he saves time time that he can devote to surgery, which pays him more. Thus, by hiring the immigrant he saves money and his income rises as well. Hiring the immigrant is good economics to him. His work is reduced, too. The immigrant, of course, is extremely glad to have found this work. In his own country, he would surely have earned much less for the same work which is why he has migrated. Note that this Law of Human Association, which Ludwig von Mises called the First Law of Sociology, has nothing to do with community or class. Or even nation. It is a law that applies through the whole of humanity. And it has nothing to do with politics. It is entirely based on economic considerations. It is valid entirely in the market society, throughout its length and breadth. I have deliberately used the example of an immigrant because I wanted to show how closing ones borders to cheap alien labour impoverishes those who practice it. They pay for immigration bureaucrats; they pay for border guards;

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they pay for labour inspectors who check for illegal aliens and then they end up washing their own cars, watering their own lawns, sweeping their own floors, and so on. They waste money and then, they waste time. This time would have been better spent doing what they are best at they could have specialized and thereby increased their incomes. Or, they could even have afforded themselves more leisure. Politics is about groups who fight each other while Economics is about individuals who gainfully associate with each other. This is what this First Law of Sociology teaches. What applies to immigration applies equally to open trade in goods because this is also how we associate with the outside world, through exporters and importers, shippers and transporters, and so on. This, too, has nothing to do with politics. It is driven by economic considerations alone. When I prefer a foreign good to a local product, it is a subjective decision of my own but rooted in Economics. The imported product could be superior or cheaper. Again, we have to ask those who place armed customs guards to block the entry of foreign goods whether we the taxpayers benefit from this expense. In the modern world, the advanced nations practice immigration restriction while we Indians practice trade restrictions. If we think things through to their logical conclusion, we will find that in both cases, the whole world loses. And the reason for both these errors is the same: we are deluded to think in terms of a national economy and of a whole society. If we thought as individuals we would quickly see through the guile that politicians employ.

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In both cases, the armed might of the State is being used to benefit a few at the expense of the many. Immigration restrictions in the West benefit the few with secure union jobs. Everyone else loses especially as consumers of labour services. Costs rise across the board and the nation becomes uncompetitive in the world market. Ultimately, capital, factories and jobs all move overseas. Immigration restrictions are also employed for preserving what is called community. More often than not, there is an element of racism in this communitarianism. Religious fundamentalism often features as well. These tribalistic emotions are completely unsuited for our times. Do read William Dalrymples travelogue From the Holy Mountain in which he tells the horrors of sectarian and religious strife that has engulfed each and every nation in this cradle of civilization that has always been known as a Holy Land. If nothing else, it will warn you against the dangers of the BJPShiv Sena kind of politics. Yet, there is definitely something called a body politic and it applies to a city. Such a body of individuals is best understood as something that emerges out of a common recognition of the same rules. In earlier times, most of the important rules that people followed came from religious sources and this was the old idea of community. Today, we live in a world of secular law and religion is deemed a private affair, with nothing to do with either State or government. Towards that end, a body politic can always be based on a common recognition of the rules of private law: Property, Contract and Torts. Thus, there can be private discrimination: as with rights of admission reserved. But the costs of such discrimination are private as well.

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In India, there are many great cities where many religions co-exist in complete harmony. I particularly enjoyed my time in Mangalore for this reason, where Hindu vegetarian restaurants, Muslim restaurants, and Christian restaurants co-exist. Of course, there are Hindu non-vegetarian restaurants as well. No riots have ever broken out because of what meat the other community eats. The Christian butcher, thus, sells both beef as well as pork in peace. The world is moving towards such multi-culturalism but only slowly. Europe, in particular, has always been a region of nation-states with different languages and religious beliefs hence, a natural breeding ground for chauvinism, militarism, nationalism and war. There are but a few truly cosmopolitan European cities, like London. But these are very rare. In India, I do believe, cosmopolitanism should occur quite naturally but only if the majority of public opinion is strongly in favour of it. Let us be welcoming toward all outsiders for they bring with them knowledge we do not possess, and they fertilise our society with these new seeds. Let us therefore internationalise every Indian city and town or would you prefer Mumbai for the Marathi Manoos? Similarly, there is a lot of dangerous and violent antioutsider politics is North-East India as well. This is fatal for the economic prospects of this region a region whose future can only be secured by internationlisation. The English language, for example, is widely spoken in the North-East and this is a skill that is a great asset for internationalization. Sub-nationalism and narrow tribalism will only take this gifted region backwards. Restrictions on foreign trade are even worse than immigration control for poor nations like India because we

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could gain as consumers and, even more importantly, we could use knowledge developed overseas. No IIT could produce a modern car for us, or a mobile phone. MNCs have benefited us so much even the very poor have succeeded because of them: as consumers. The indirect use of force in the case of customs guards blocking foreign trade is also very corrupt. The local manufacturer pays off the politician and profits. Indirectly, the customs guard has his gun on the head of the consumer. Force is being used in the market and this is unjust. Frederic Bastiat was a great free trader. My The Essential Frederic Bastiat contains a section with his most important writings for free trade. I recommend the entire book to all for it is written in language that anyone can not only understand, but also delight in. Therefore, what the First Law of Sociology, which is the Law of Association, teaches is that poor countries whose people have very few skills have even more to gain by freely associating with the outside world. It is we Indians who should be the first to open up our borders to both immigration as well as trade. If poor workers from neighbouring countries move here, we benefit from cheap labour, and our factories become more competitive. If people from the advanced nations come here, we benefit from their knowledge. In the same way, we benefit from the importation of capital. If foreigners invested in highways, power plants, supermarkets, airlines and factories of all kinds our workers would benefit from higher wages. It might help to look around the Third World and see which countries are better off than the rest like Hong Kong and Singapore. What we see especially if we turn our gaze to

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the African continent is that the better off nations are those with commercial contacts with the West, while the worst off are those that continue to remain isolated from the winds of overseas trade. There is theory, and there is history and there is nothing else. The market society is based on the division of labour and open borders means international division of labour. This requires only Peace and Liberty. Then, each of us sells to the whole world, and each of us buys from the whole world. The world is the market; and the world is also the factory. The Customer is the King. Not the producer. Not the government. Do remember that all production is the means, while consumption is the end. Labour is the disutility suffered in order to consume. Open borders mean a better world for all human beings an international market society. Ludwig von Mises also wrote an important book titled Nation, State and Economy in which he examined these concepts from the viewpoint of the classical liberals. The following extract from this books sums up the essence of that belief-system the one that led to Globalisation 1.0: Liberalism, which demands full freedom of the economy, seeks to dissolve the difficulties that the diversity of political arrangements pits against the development of trade by separating the economy from the state. It strives for the greatest possible unification of law, in the last analysis for world unity of law. But it does not believe that to reach this goal, great empires or even a world empire must be created. We have already seen how socialism leads to anti-social behaviour that is political. We have seen how this socialism destroys the peace and also the liberty that a market society

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requires in order to flourish. Yet, if anything, the false Sociology of these socialists the whole or the aggregate that comprises a nation-state is always presented to us as one people, united. The symbols are sometimes militaristic as when the Indian Army battles the Pakistan Army; or, more often, this is sublimated into sporting contests, as when the Indian cricket team battles foreign teams. In both cases, we the people feel as if India, the nation-state, has won, or lost. The market society is most certainly not like this, based as it is on individualism. We do not open our shops for the custom of our friends and relatives, or for members of our community. On the contrary. We all open our shops for complete strangers the only condition being that they be civilized strangers, and hence peaceable. That is, they need not even be particularly friendly. We do not mind struggling hard trying to serve a tough customer. Indeed, the hospitality industry is all about this. Guests at hotels and restaurants more often than not test the patience of the staff. It is politicians who need to perpetuate the illusion of groups and the ethic of group solidarity who use the word society in the political sense; and they use it only to divide people and stir up strife. This is how the Partition of India occurred and millions perished. This is the Hindutva of the BJP. This is also the Marathi Manoos ideology of the Shiv Sena. In the bustling markets of our cities and towns, all these identities are completely meaningless. A Marathi vada-pau wallah in Mumbai is happy to serve a Gujarati, a Bengali, or whatever even a foreigner, a gora. A Muslim shopkeeper will be happy to serve a Hindu customer and vice versa.

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Indeed, the vada-pau vendor or the shopkeeper, whatever his faith, will in all probability not even inquire after the identity of his customer. In the market society, we interact as buyers and sellers but we always do so impersonally. There is politeness, of course which is a blessing of civilization and its markets, and is essential for business success but there is nothing deeper than that. So, we rarely if ever ask the chaiwallah his name, or how many children he has, or anything personal. And this, indeed, is the most important benefit of the urban market society it enables complete strangers to interact peacefully as well as gainfully. This is the natural order of an open society. It is the basis of civilization, peace and prosperity. This is what the Civic Sword is supposed to protect and defend. The most important aspect of this market society is that it is individualistic. There are no groups as politics requires. On the contrary, each individual is quite like a star in the cosmos which is also a natural order. The only difference is that we do associate unlike stars, which have fixed orbits, and are lifeless, so they do not act. All human actions are purposive. They have an end in mind. This is how we form the only real society we can ever have which is the market society. It arises because of the division of labour. Its basis is economics not politics. It is based on Private Property and Individual Liberty. As Mises explained, freedom means capitalism and not socialism. The quote below tells us why Indias freedom struggle was in vain, a false dawn: This, then, is freedom in the external life of man that he is independent of the arbitrary power of his fellows. Such freedom is no natural right. It did not exist under

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primitive conditions. It arose in the process of social development and its final completion is the work of mature Capitalism.12 We in socialist India continue to look towards politics for the solution to all our problems and all these problems are really imaginary. The real problem we face, I believe, is politics itself. It is time we looked towards the urban market society as the only solution especially for the poor who work so hard in it, providing us with so many useful goods and services, thereby displaying the wealth of knowledge they possess. We also ought to look at all the empty land in our country, on which many, many new cities and towns could easily erupt and flourish, even especially along our long coastline. There is no population problem either. There is also no unemployment problem in our country rather, the problem is that legislation has banned most trades. A real problem we all face is inflationism and, once again, it is politics that is behind it. In the international arena, the story is much the same, for everything is dominated by international politics and I really see no reason whatsoever for a WTO. Any nation, if it so chooses, in its own interest, in the interest if its poor consumers, can unilaterally open up its borders to free international trade. And to free immigration as well. Will tourists not come in greater numbers if visas were not required? The money, and the time they save, would surely be spent on our hospitality industry rather than on our bureaucracy. We the taxpayers would save our money with which we can then demand real goods and services, thereby stimulating real economic activity. Win-win-win-win all around the world.
12

Socialism

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It is either this, a correct Science of Society based on a true Science of Economics, or more and more politics both national as well as international. The future of civilization hangs on the balance.

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8. The Socialist Conception of An Intellectual-Moral Elite: Wise men store up knowledge, But the mouth of a fool13 invites ruin. From the Book of Proverbs The Old Testament Ludwig von Mises died in 1973. The very next year, Friedrich Hayek, who was a student at Mises Vienna seminars before the war, won the Nobel prize in Economics but he had to share this prize with a Swedish socialist and trade unionist: Gunnar Myrdal. Myrdal was a vintage socialist and Mises had pointed many of his errors out in some of his earliest writings, dating back to the 1920s. Myrdal is important for Third World countries like India because of his influential book Asian Drama. In this, Myrdal put forward the bizarre proposition that the unlettered poor of Asian nations like India cannot make rational economic decisions in the free market; thus, they need an intellectual-moral elite to take these decisions on their behalf: Central Economic Planners. The Government of India honoured Myrdal with the Jawaharlal Nehru Award. Hayek, of course, was ignored. Not surprisingly, because it was Hayek who had pointed out the
13

A footnote in my Bible says that the word fool above, which occurs frequently in the Book of Proverbs, is an unsatisfactory substitute for the original Hebrew word, which meant one who is morally deficient.

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phenomenon of fragmentation of knowledge in the real world a phenomenon that proved central economic planning could never work, because knowledge could never be centralized. In this little book, we have taken these arguments further to show how centralized law-making which is democratic legislation as well as centralized education are just as disastrous. One development economist stood against Myrdals mocking of the poor and that was Peter Bauer. The very idea that unlettered people are stupid in the economic sense is nothing but a denial of the economic principle, retorted Bauer. As a development economist, Bauer had to see the Third World for himself and he certainly did so, traveling all over India, Pakistan, Malaya, and Africa as well. His writings reveal observations, observations and more observations of the trading skills of the very poor in these impoverished nations. It is thanks to Bauer that we now have many studying the economics of the informal sector in Third World countries the hawkers and vendors on our city streets. Peter Bauer ridiculed every bit of nonsense about the Third World that was paraded around as knowledge in Economics classrooms like the Theory of the Vicious Circle of Poverty, which stated that poor countries are doomed to eternal poverty and need outside help to get out of it. This means foreign aid. It also means State welfare. Bauer scathingly wrote, If this proposition were true, the entire world would still be in the Old Stone Age. Bauer pointed out that the possession of capital is a result of economic achievement, not its precondition.

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Bauer wrote, Poverty means only one thing the absence of economic achievement. He then added these crucial words: Economic achievements are made in markets. Bauer was elevated to the peerage during the Thatcher era. But he never won the Nobel prize which he richly deserved. Instead, this prize went to Amartya Sen who is nothing but Gunnar Myrdal in thin disguise, saying over and over again: The poor need education from the State. To Amartya Sen, the bureaucrats of the ministry of education are the intellectual-moral elite. And the unlettered poor are stupid. Do not mock the poor, For then you show contempt for their Maker. This is also from the Book of Proverbs in the Old Testament. I trust that this little book will enable you to clearly see whos who, and whats what. My first book Antidote: Essays Against the Socialist Indian State published in the year 2000, contained an essay arguing that ours is a Predatory State. Today, over a decade later, our leading opinion-makers want education from this State for the poor! Beware of them. Educate yourself. And teach your children well. Trust only in yourself and your own mind, as well as your conscience. For further reading, I recommend Thomas Sowells A Conflict of Visions: The Ideological Origins of Political Struggles, which contains much on the Myrdal-Bauer conflict. There is also Peter Bauer and the Economics of Prosperity.

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My tribute to Peter Bauer can be found on my blog. He was, as I put it, a true friend of the worlds poor. As for Amartya Sen, do read my review of his 2002 book titled Rationality and Freedom, published in the New York Sun. As the title of this book indicates, Sen argues that the poor are not rational, and hence cannot be allowed to be free. My review is titled, How Amartya Sen is an Enemy of the Poor. Note that Amartya Sen will always insist that he is a democrat. In which case, he must believe in the wisdom of the voter. Is it not then a great contradiction that the same man thinks the average voter is irrational and, what is worse, that he must be denied liberty by the very people for whom he has voted? Hypocrisy that is what socialist-democracy is all about. Legal plunder and false philanthropy. They forever insist that something is wrong with the people like the population problem. Can any genuine representative of the people argue that his constituents, and their children, are a problem? Compare this with what Mises wrote: that the great error of the classical liberals was to believe in the wisdom of the voter for the voter can always be misled by demagogues, and socialists are but demagogues. Public choice theory has clearly established that voters have their own, narrow selfinterest in mind when they vote, which is why they typically vote for welfarists who promise them freebies. Democracy has been destroyed by all these false ideas funded by false money.

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What is far more important than the vote is The Market the Liberty to engage in voluntary trades. If no agent of the government interferes in business activity, everyone can earn honestly. Order will prevail. You cannot eat the vote nor feed it to your wife and kids. But if you can open a beer bar, or a ganja-charas caf, you can survive. Honestly. Cry Freedom!

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9. The Intellectual-Moral Revolution:

Not only was the Teacher wise, but also he imparted knowledge to the people. He pondered and searched out and set in order many proverbs. The Teacher searched to find just the right words, and what he wrote was upright and true.

From the Book of Ecclesiastes The Old Testament

Governments spend lavishly on the rocket science of space research, and scientists say that outer space is the final frontier. But, as this book proves, we are yet to understand how our own minds work. And what remarkable minds we are blessed with! The mental category of Property gives us a sense of justice; while that of Arithmetic a sense of gain. Thus, we trade peacefully and we prosper. We flourish. We develop new kinds of knowledge. And we preserve old ones, too. Yet, there is much more to Man that this. We all have a conscience something that lets us differentiate between Good and Evil. It is this, and nothing else, that the Freudians call superego. It gives us psychic rewards and punishments according to our deeds. The story of Adam and Eve and their expulsion from the Garden of Eden is also revealing for the Book of Genesis says that the forbidden fruit they consumed gave them

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knowledge of good and evil, and therefore made them like God himself. To quote: And the Lord God said, The man has now become like one of us, knowing good and evil. He must not be allowed to reach out his hand and take also from the tree of life and eat, and live forever. So the Lord God banished him from the Garden of Eden to work the ground from which he had been taken. Similarly, the Bhagavad Gita of the Hindus begins by saying that what differentiates humans from animals is that we know the difference between right and wrong. The book begins thus: Dasarath says: In the field of righteousness, the field of the Kurus [ie, Dharmaksetre, kuruksetre], when my people and the sons of Pandu had gathered together, eager of battle, what did they do, O Samjay? The editor, S. Radkhakrishnan, then explains in a footnote: Dharmaksetre: is the field of righteousness. The quality of deciding what is right or dharma is special to man. Hunger, sleep, fear and sex are common to men and animals. What distinguishes men from animals is the knowledge of right and wrong. When great philosophers of the past have taught their pupils to differentiate between Right and Wrong their chosen method has always been argumentation between the two opposing views. This is the basis of the Socratic Dialogue the chosen method of the Greek philosophers of old by which to reveal the truth to their students. Socrates himself never

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wrote anything but, it is said, he was in the habit of accosting complete strangers on the street and posing questions to them like What is virtue? or What is courage and, by revealing the errors in their answers, correcting them. The Bhagavad Gita is also a dialogue between Arjuna and Krishna by which all that is Dharma is revealed. One of the greatest philosophical dialogues I have ever read is the following from Giordano Bruno, who was martyred at the stake, poor fellow. Pupil: Why must Truth be placed upon the highest seat? Bruno: Because if anything else was placed upon the highest seat, it would be a Lie, and a Lie cannot be placed upon the highest seat. Such argumentation, indeed, is how the human mind discovers truth and is thereby able to reject falsehood. We are able to do this because of the very same logical structure of our minds. Such dialogues are precisely the method of the courts of law as well where two contesting lawyers present their arguments before an impartial judge. Or, sometimes, an impartial jury as well. Ordinary members of juries throughout recorded history have been assumed to be possessed of a sense of justice, an ability to differentiate between Right and Wrong by weighing contesting arguments, and also an innate ability to distinguish between Good and Evil as well. Good lawyers always appeal to the conscience of the jury.

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The entire Science I have presented to my reader is based on just these two axioms: first, that humans act; and second, that they argue, and thereby differentiate between right and wrong. Neither of these axioms needs anything more than inner reflective understanding for their validation. They are true a priori. The first comes from Ludwig von Mises; and the second, from Hans-Hermann Hoppe.14 This science is not Physics. Economics is the youngest of all sciences it is with these words that Ludwig von Mises begins Human Action: A Treatise on Economics. This very first paragraph concludes as follows: The discovery of a regularity in the sequence and interdependence of market phenomena went beyond the limits of the traditional system of learning. It conveyed knowledge which could be regarded neither as logic, mathematics, psychology, physics, nor biology. My effort has been to link this very new theoretical science with the wisdom of the ancients contained in their proverbs. Thus, I have combined History with Theory in order to reveal to my reader what civilization depends on. And so it is that I leave everything now to the conscience of my reader. In this little book I have attempted to reveal the essence of the moral sciences of Economics and Law, and of the Science of Society as well.
14

ESAM

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As far as politics is concerned, I have revealed to my reader what this word meant to the ancient Greeks and contrasted this to what it has come to mean now. As some wise man once said, When words change their meaning, the people will lose their freedom. When people lose their freedoms, tyrants rule and when tyranny flourishes, so does corruption, which is evil. All this has happened in the past. And, who knows, all this may happen again. I have endeavoured, for almost thirty long years now, to discover the truth. This is a distillation of all that I have found, in a nutshell that is easy to understand. The Book of Ecclesiastes says, most profoundly: The more the words, The less the meaning, And how does that profit anyone? Oftentimes, little books have done the trick as in the case of Thomas Paines Common Sense. It fired the people of America with the idea of Liberty and the American Revolution therefore succeeded for these freedom-loving people, who flourished. The French had other ideas and they have had five republics already, yet France remains the sick man of Europe. Frederic Bastiats little book The Law went unheeded and all his little essays went unread. He is still unknown in France. It is nothing but public opinion that governs society. All governments rest on public opinion a truth that David

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Hume, Adam Smiths good friend, informed both rulers and ruled of. It is only because The Wealth of Nations captured public opinion that the 19th century was an Age of Liberty. My hope is to cause a revolution in public opinion. There are intellectual arguments here and the intellect is in the mind, whose workings I have explained fully well. Then, there are moral arguments as well and these are aimed at the readers conscience. To Hindus, as explained in the Bhagavad Gita, it is this conscience that is the battleground, where right battles wrong, and good fights evil. I am more inclined to believe that this conscience is like a house and we must guard it constantly against evil. In which case, this proverb from the Old Testament is most apt: By wisdom a house is built, And through understanding it is established, Through knowledge its rooms are filled With rare and beautiful treasures. This house is not brick-and-mortar. It is not a roof above ones head. It is, rather, our minds, in which we live. All pleasure, all pain, all joy, all sorrow these are all in the mind. And there, too, are all our thoughts. Think! After you have done all the thinking, and your intellect has been charged with the power of truth, you will then need moral resolve. Only then will your intellectual force be combined with moral force and the battle will be well and

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truly won. I close with this last proverb, from the same Holy Book as all the rest: Like a muddied spring, Or a polluted well, Is a righteous man Who gives way to the wicked.

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Acknowledgements: With many thanks to SAHYOG and to Dr. Gautam Bhatia who runs it where this little book was conceived and also written, and where I had time to study the Holy Bible. It is here that I, in a state of complete hopelessness, fasted on Mahashivratri the day dedicated to the Lord Shiva. But no hope arrived for days, even weeks. Silently, I cursed my god for failing me. Immediately, I felt great remorse, and vowed never to do this again. Then, as if by serendipity, I found the Bible and quickly read the old story of Job. I felt much better after that. I kept on reading the proverbs first, many times over. In time, I mentally composed this book which began as a scientific paper for a conference of scholars, and was completely unsuited for a mass audience. So, I thank Shiva the Destroyer, the Hindu god of Cannabliss, for answering my old chillum-prayer: Alakh! Khol de teesri palak! Lastly, I must thank a very old, dear friend who supplied be with a long list of points to keep in mind while I was struggling with this book. I must have read this long list over a dozen times when, finally, the whole thing clicked, as they say. So, thank you, dear Varuna.