New Freedom Struggle:
How Markets Will Win Hands Down
Times of India, August 5 2003
Both sides gain in trade. This is easily observable when we, say, buy
a book. We say 'thank you' to the shopkeeper when he hands over the book; and he too says
'thank you' when he receives the money. The very fact that both parties thank each other
shows both gained.
Trade is thus a 'positive sum game': win-win. It is the basis of wealth creation. When we
buy a book we add to our property and we contribute to the earnings of a long line of
people ranging from the shopkeeper to the printer to the publisher to finally the author.
There are no losers in trade.
Contrast this with democratic politics. Since the state does not create wealth it
only taxes and spends democratic politics is always a 'zero sum game': some gain;
others lose. It is also usually the case that the gainers are small, organised, vocal
groups like, say, the US steel lobby; while the losers are the large, unorganised
masses. Thus, politics is usually a 'negative sum game': There are a few gainers, but the
majority loses. With trade, everyone gains; with politics, most people lose.
Now, democrats always claim to represent the majority, so let us look at the issue of
majority representation more closely. If there is 60 per cent voter turnout and four
parties share the vote equally, the winner is the chap who gets 15.1 per cent of the total
vote. Even when Rajiv Gandhi won his landslide victory, the Congress barely received 40
per cent of the vote.
Now look at markets: In the market, there is complete and total unanimity. Since no one
used force, both sides of every deal agreed to it. In a free market, not a single buyer or
seller can complain that the decision to buy or sell was one to which he was not in
complete agreement. In politics, we see millions unhappy with decisions taken.
In the market, each decision we take is in complete sovereignty. We are always free to
pick and choose between various players. I buy a toothpaste of Brand X, a toothbrush of
Brand Y and soap of Brand Z and equip my bathroom. None of these firms can force me to
take all three of the same brand. Now contrast this with politics: In politics, we get a
We may like one party's stand on religion, but its economics may appall us. We like
another party's economics, but its position on war may be frightening. We cannot pick and
choose as we can in the market.
This is because, in the market, there is 'continuous competition': Every time we visit the
market, the vendors fight for our custom. In democratic politics, however, the competition
is only periodic. Once every five years we get the vote. Once we have voted, we are
saddled with that party, for better or for worse. We may have liked something about the
party at election time, but then we may be woefully unhappy with what that party does
Finally, it must be understood that voters in a democracy do not vote with the same amount
of care and attention that they pay to market transactions. When I go to buy a television
set, I make sure I get a good one because if I do not I will directly suffer. I check out
various makes and prices, read reviews, consult friends and so on before making my
When I go to vote I do not have the incentive to take the same pains, go through every
manifesto, hear all the candidates' spiel, check their criminal records etc. Voters
display what is called 'rational ignorance': They find it rational not to know about
politics. Informed voting is a 'public good'. Smart editors have found this out and now
politics no longer monopolises the front page.
Voters may also display 'rational absence' and stay away from voting because they know
that their one silly vote is not going to affect anything. I have never voted in my life.
The lesson to learn is that we Indians must use democracy much less and give full room to
markets. Democratically elected politicians and their democratic state should both be cut
down to size. The principle of 'subsidiarity' should be invoked and cities and towns given
full freedom to conduct their own affairs. In such a scenario, the state will be but a
common police force, controlled at the local level. The government of India will be but an
association of free trading cities and towns and it will look after only those issues that
the towns cannot look after themselves like national defence.
My ideal is Switzerland. The Swiss flag is surrounded by the flags of its 26 cantons. And
Swiss citizens are proud to say that they do not know the name of their president. There
is free trade, sound money, property rights, rule of law, good policing and excellent
roads. They are prosperous, peaceful, heterogeneous, landlocked, mountainous country.
"Democracy", Winston Churchill said, "is the worst form of government
except for all the others". The point is, democracy or no democracy, it is
still the government. It is still the state. It should be restricted to its proper role,
and confined to that role by law, so that citizens are secure and free. We Indians made a
horrible mistake when we installed this socialist democracy at the commanding heights. We
must now fight to liberate ourselves from this democratic state. A second freedom struggle