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Indian Libertarians

SEZs are an insult to Free Markets

smehra Monday August 18, 2014

A controlled economy is not an economy where there is no trade, it is an economy where people with stylish hats and special posts decide who gets the ‘freedom’ to produce certain goods and how to trade them. SEZs are nothing different.

Special Economic Zones (or SEZs) seem to be part of a growing list of ‘reforms’ which are passed in the name of ‘liberalization’. But a closer inspection shows that these reforms (along with the rest of them) are in fact corporatist reforms.

What is an SEZ? SEZs are zones, mostly near ports and borders, where many economic restrictions are not applied. These zones are places where “free trade” and “tax cuts” are applicable. The official need for these zones is to “attract” foreign investment and  promote “free trade” with other countries.

However let us not forget why SEZs thrive in the first place. The secret lies in the state’s tariff monopoly. Indian state, like every other state, has tried to control what gets imported and exported. Not everyone is allowed to import and export goods. We have complex procedures to get approvals and only a small group of individuals get that approval. It is also true that customs office is extremely strict in enforcing these rules and has the power to shut down operations. Not to mention that approved people have to themselves pay taxes in order to continue operations, which creates more barriers to entry.

And this is not even a secret. The administration knows very well that it is their rules that restrict people from attaining prosperity and restrict wealth. It is not surprising that they think SEZs promote “free” trade. These rules might be damaging to the economy but they are also excellent avenues for corruption. But no matter how transparently the traders are chosen, the fact still remains that the traders are chosen not by the free market but by the state - this is inequality in its most basic form.

Now obviously not everyone in the world can export goods to India through these channels and not everyone in India can export to the world through these channels. This means that government will have to show partiality and pick who gets to import and export goods. On paper they say that any private/public/foreign company can open an SEZ, but that can hardly be true and sure enough we can see that only the very privileged corporations and plutocrats are given this opportunity. Sure enough the government plays a very ‘vital’ role in setting up SEZs. In theory anyone can apply to open an SEZ (just like how anyone can become the Prime Minister) but in reality if they were committed to equality the concept of SEZ wouldn’t even exist because the entire country would have been an ‘SEZ’ with nothing ‘special’ about it.

The most disgusting part about SEZ is how the state considers setting them up. Most of the SEZs are created by stealing land from its previous occupiers. The total land acquired for SEZs is 150,000 hectares (the area of National Capital Region):

 

Estimates show that close to 114,000 farming households(each household on an average comprising five members)and an additional 82,000 farm worker families who are dependent upon these farms for their livelihoods, will bedisplaced. In other words,at least 10 lakh (1,000,000)people who primarily depend upon agriculture for theirsurvival will face eviction. Source: http://www.sacw.net/Nation/sezland_eng.pdf (Except for its section on loss of public revenue, it is otherwise a good write up)

The instructions for land acquisition (for all public, private and foreign bodies) can be found here: http://sezindia.nic.in/writereaddata/Instructions/Instruction%20No.65.pdf

Libertarian stance against land acquisition is pretty clear: Land grabs are against individual property rights. Land titles granted by the state are a theft of property.

SEZ, far from being liberal reform, is a corporatist reform that cares mostly for the well connected and should not be confused with free trade and free market in anyway. Free trade is the freedom of all individuals to trade freely, SEZs are a travesty.