The basic level: you, yourself - and the world outside. You could be self-reliant - produce all your needs, do all your little chores - or you could engage in economics. The latter course would see you in a market selling whatever you wish - maybe your labour, maybe the occasional newspaper article. It would also see you buying - what you need, which others sell. The principle that will guide you is comparative advantage. The question: do it yourself, or get it from others? The answer: look for your economic advantage.There are enormous social advantages in choosing the `be economic' instead of `be self-reliant. The entire process - going to the market, buying, selling - involves intelligent and pleasurable interactions with the world outside. Self-reliance is the way of the recluse. It is not `economic' life. Many would say it is not life at all - economic suicide!That these simple principles which guide individuals in economic life should not form the governing ideals of a great, thinking and intelligent nation is on account of three false arguments that hold widespread appeal. Every political party works to spread these untruths. The first is the notion that local manufacture constitutes local prosperity. The second is that, by holding out to local manufacturers, we will stimulate `industrialisation'. The third is that free trade will somehow strain the currency. False notions, all.First, trade is the primary basis of economics, not manufacture, A nation with hordes of `trading communities' would know this. Observe your nearby market: people buying and selling; both parties coming off the better - the economic gain from trade at work. And notice, no one cares a rotten fig as to where anything is manufactured. Apples from Kashmir, fish from Kerala, Amul cheese from Gujarat - it doesn't matter. Trade, by itself, ensures economic gain.Trade is basic economic activity. It built the riches of the ancient civilisations we so proudly remember. We have, instead, state trading and protected markets. These defy simple economics. Perhaps this deviation from common sense would be justified if some other policy objective is achieved - say, industrialisation. Fallacy No. 2.Manufacture follows trade. It is only when a sufficiently large local market has been built up through the activities of traders that local manufacture becomes economical. `Development' happens when we let this natural process proceed unhindered. For example: the Northeast. It is an `underdeveloped' part of the country. How can it industrialise? The answer seems fairly obvious: it is only when a sufficient market has been built up in the Northeast for any particular good that a manufacturer will locate there. That is `development'. That is `industrialisation'. All that needs to be done is let trade occur peacefully and open up interiors to the activities of traders by investing heavily in transport and communication.The only way to stimulate local manufacture is to nurture the expansion of the local market. We have never done this: no roads, no rail, no trade either. We are talking about the Northeast - the `development' of an underdeveloped part of India. The entire country is underdeveloped with respect to the world outside. How do you develop? How did India `industrialise' during British laissez-faire? How did the jute and textile mills come up? Remember TISCO? It used American, not British, technology.Lastly, the case of `precious foreign exchange' being a hindrance to free trade. Prime Ministers of India who address the nation from the ramparts of Red Fort fail to see the successful economics on which that prosperous empire was built - in the magnificent free market, Chandni Chowk, opposite. Economics is about real goods and services, not money. Certainly not paper currencies. As long as real goods are coming in for profitable trade, money can move out. All it needs is a workable currency. This has never been a priority in democratic India. Planners printed notes, called it deficit financing, and invested in industrialisation. Rubbish.
