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Indian Libertarians

Central Planning | A defense from a central planner

srinivas.chakravarti Wednesday August 20, 2014

Humpty Dumpty sat on a wall, Humpty Dumpty had a great fall.

The 18th century nursery rhyme, its original probably a riddle, is loved for the one image it invokes — a great fall. The picture of a dumpy egg, of a being crashing to his well-deserved and irreparable end provokes mirth among children. It also provides to short-of-ideas parents and teachers the relief of a successful attempt at distraction.

The Union Planning Commission has been toppled off in a progressively untenable balancing act. Reconciling projection with implementation, performance with evaluation, discussion with allocation has taken its toll.

And applause greets its fall.

I regard this as not just unfair and unfortunate but positively dangerous for with all its Humpty Dumptyness, the Planning Commission represents a crucial strand of our post-Independence self-definition. It represents a people whose leaders very consciously integrated India’s political goals with its social and economic aspirations and made planned economic progress a tool not just for progress per se, but for balanced well-being.

Mr. Gopalkrishna Gandhi wrote today in the Hindu newspaper in defense of keeping the Planning Commission, instead of abolishing it, and the quote above is from his article.

Before I continue with the criticism of central planning itself, here are a few quotes to lay the foundation for 'public policy'.

 

Each individual is the only and final arbiter in matters concerning his own satisfaction and happiness. 

Economics does not allow any breaking up into special branches. It invariably deals with the interconnectedness of all phenomena of acting and economizing. All economic facts mutually condition one another. Each of the various economic problems must be dealt with in the frame of a comprehensive system assigning its due place and weight to every aspect of human wants and desires. All monographs remain fragmentary if not integrated into a systematic treatment of the whole body of social and economic relations.

 

It is only the passionate pro-socialist zeal of mathematical pseudo-economists that transforms a purely analytical tool of logical economics into an utopian image of the good and most desirable state of affairs.

The first problem with the statist view of the economy, and economics itself lies in the error of treating the economy as a system. The systems theory which sees the country's economy as a neat little box, and the State as its director has caused far more damage to life, liberty and property of individuals than one can imagine and quantify.

Instead of seeing the economy for what it is, the defender of the Planning Commission, wishes to impose an "idealistic" view of what the economy should be. To clarify further, the statist view of economics is essentially a mixture of normative and positivist theory of society, with the normative worldview dominating the "holistic" view.

 

It is important that this link in our planning chain be remembered for thus reason: If an institution’s or a tradition’s calibre is best judged by the state of its performance, its purpose is best gleaned by the stature of its provenance

The author here seems to be implying that the central planning body should be judged more by it's historical authority and purpose, rather than its performance. Is this not a logical fallacy called 'appeal to authority'?

What follows essentially in the article is an illogical defense of central planning, and intervention. The same old spiel of elimination of poverty, protection of democracy, and implementation of social justice is repeated, when in fact, almost no government anywhere in the world in the last hundred years has managed to "improve" conditions of individuals.

It must be accepted that the politicians, media, academic experts, and even the so called free market economists are clueless as to how economic prosperity can be achieved. They continue to repeat the same failed ideology of socialist-interventionism to protect their positions of power and privilege wherever they may hold it.

While Indians may have begun to abandon the view of socialism as 'good' in the last twenty years, the support for broad and deep State intervention in the market is accepted with little scrutiny. Almost all voters accept new intervention when shown fancy graphs and charts, which have little connection to the real economy.

The quote below explains interventionism -

It is necessary to point out this fact to prevent a confusion of socialism and interventionism. The system of the hampered market economy, or interventionism, differs from socialism by the very fact that it is still market economy. The authority seeks to influence the market by the intervention of its coercive power, but it does not want to eliminate the market altogether. It desires that production and consumption should develop along lines different from those prescribed by the unhindered market, and it wants to achieve its aim by injecting into the working of the market orders, commands and prohibitions for whose enforcement the police power and its apparatus of coercion and compulsion stand ready. But these are isolated interventions; their authors assert that they do not plan to combine these measures into a completely integrated system which regulates all prices, wages and interest rates, and which thus places full control of production and consumption in the hands of the authorities.

 

However, all the methods of interventionism are doomed to failure. This means: the interventionist measures must needs result in conditions which from the point of view of their own advocates are more unsatisfactory than the previous state of affairs they were designed to alter. These policies are therefore contrary to purpose.

Does the question of failed plans even occur in the minds of voters? Do they even consider the fact that the bureaucrats, politicians and their crony friends have their own self interests? Do voters think even for a moment that the individuals vested with so much power will ever think about individuals besides themselves?

Of course, the magic of democracy and good governance will fix all ills that ail the Indian economy. The almost religious fervor with which voters worship democracy, and the politicians are a sign, that any possibility of real change seems even more distant by the day.

The arguments against central planning and intervention even in moderation is so obvious, that it is sorely missed before and after elections. With every new government in place, there are new promises, bold reforms and freebies that almost no voter can resist in supporting them.

The fundamental truth about human nature is clouded by a blind belief in scientism. It is a dangerous belief that society can be improved from the top down using scientific methods.

So then where do we start from? What are those universal truths which help us understand the world better? The quotes below lay the foundation of true and real economics -

"Human action is purposeful behavior. Or we may say: Action is will put into operation and transformed into an agency, is aiming at ends and goals, is the ego's meaningful response to stimuli and to the conditions of its environment, is a person's conscious adjustment to the state of the universe that determines his life. Such paraphrases may clarify the definition given and prevent possible misinterpretations. But the definition itself is adequate and does not need complement of commentary."

What these people fail to realize is that the various measures they suggest are not capable of bringing about the beneficial results aimed at. On the contrary they produce a state of affairs which from the point of view of their advocates is worse than the previous state which they were designed to alter. If the government, faced with this failure of its first intervention, is not prepared to undo its interference with the market and to return to a free economy, it must add to its first measure more and more regulations and restrictions. Proceeding step by step on this way it finally reaches a point in which all economic freedom of individuals has disappeared.

The author who defends the Planning Commission ends his article with the following paragraphs -

 

Abolishing the Planning Commission turns the clock’s hands back. It distances the Indian state from India’s federal spirit. It makes self-analysis and self-criticism alien to government. It makes bridge-building between the weak and the strong, the centre and the peripheries, seem irrelevant.

More, it portrays planning and conceptualizing as a luxury. “We are doers, not thinkers,” is the abolition’s subtext.

The Planning Commission needed to be returned to its first purposes, to its transparent and audacious planning for an India progressing without old enervations and new injustices to prosperity. It needed to be returned to its founding documents, its defining mandates. There are steps that could have been taken to make its plan-fund transfers more consultative, less conditional, more participative, less prescriptive. These changes could not have been carried out by UPA-I or -II, mid-course or end-stream. The new government could have done so with reason and credence, on its “first page.”

The Planning Commission needed mending, not ending.

It did not call for capital punishment.

While idea of central planning may be equal to intellectual exhilaration, and bring euphoria to the planners, it does severe and long term damage to individuals well being. The defenders of central planning are not just the outright socialists, but also, the self proclaimed "free market economists" who regularly appear in print and visual media; touting their latest books as solutions to economic and social problems.

The social sciences that is taught from high school to post graduate college seems to be in favor of a normative-positivist worldview, one where the world is a giant system with each society as smaller systems, which need to controlled, commanded and planned, without which society will become disorderly and ultimately collapse.

This systems theory view has been perpetuated for the last hundred years worldwide through the education system, academia and the press, which leaves very little room for a realist view of society.

What we have witnessed worldwide for the last two hundred years with State intervention is planned chaos. This chaos created by the State is almost always blamed on the free market.

With such grandeur delusions, the opponents of central planning will be always seen as extremists, intellectual pariahs or simply insane, thereby effectively silenced from the mainstream, leaving only the loud, and ignorant opinions for the voters to consume; which is in itself a vicious cycle.

To understand the failure of interventionism -

 

Why Intervention Persists

Planned Chaos