Vantage point

Thursday, November 03, 2005

Highway Robbery by the Government

"Don't steal, the government hates competition"

The first time I read this one-liner, I nodded heartily in agreement and approval. Of course, the first time I read it, I was 17, and the one-liner was on a sticker pasted on the bike belonging to a girl I used to have a crush on. So her bike sticker could have summarised Hitler's Final Solution, and I would still have agreed and approved. But that doesn't take away from the pithiness of the one-liner.

Readers might think I am referring to the cases of Natwar Singh's oil kickbacks, or the Sub-inspector caught accepting bribes on camera. Those cases are foul, and represent how deep corruption has penetrated in the Indian system. But I am talking about an example where the government, officially and legally, is stealing from the people. And in what is a real tragic irony, the victims of this theft are the same farmers whose suicides are used by several parties and "thinkers" to oppose free market policies. Read the following article and you realise that this theft would have been extremely unlikely and difficult under a free market regime. But under this socialist regime, it is literally as easy as signing a piece of paper.

Govt adds to farmer woes in Vidarbha

Here's the story in a nutshell. Farmers in Vidarbha, are being forced to sell their land to the government at a price way below its market value. The Indians laws, which show scant respect for property rights of an individual, permit the government to appropriate privately owned land, and also permit the government itself to set the price. The sellers victims can't negotiate. They can't even refuse to sell the land. The government will grab it anyway. Legally. In Vidarbha, the government is grabbing farm land and paying farmers only 1.2 lakh rupees an acre. The current market price, even within 100 km of the area, is around 70 lakhs. If an airport is being built nearby, I am sure the price would grow many times more.

Now, the very existence of such a tyrranical law is justified by its supporters saying that since the government will use the land for public good(roads, etc), it should be empowered to grab land from recalcitrant land owners. Well-being-of-many-is-more-important-than-well-being-of-few and all that jazz. Personally I find even this justification tenuous. But even if we do accept it for the sake of the argument, note what the Vidarbha land will be used for. It will be sold to private developers and companies. Buildings, industries, and an airport will come up on that land. Who will be doing this selling? The government of course. Already, it has auctioned off several chunks of the grabbed land at over 60 times the price they paid the farmers for it. The land is adjoining a highway, and has a great deal of commercial potential. Ideally, the farmers should benefit from the economic windfall. But the government is playing the part of a very canny middleman, and pocketing the profit.

If this isn't highway robbery, I don't know what is.

Imagine how things would be in a free-market scenario. Such a land-grabbing law would not exist. Neither would there exist laws which forbid farmers from selling their farms for non-farming purposes. Instead, a farmer would be free to negotiate the price of his land. Developers and private industries would come, negotiate a price, and buy the land from the farmers. Would robbery be possible even then? Yes, maybe. But only in the worst case scenario, and only if extreme force or threats were used. If the mafia decided to be the middlemen, and threatened the farmers to sell the land at below-par prices, and then sold it to the private developers, pocketing the profit. Even this would be possible only if the police/state were incapable of responding to the farmers' complaints about the mafia. Without threats of physical harm, the farmers are not stupid enough to sell the land below its real value.

Here, however, we have a situation much worse. If the mafia or even the private developers intimidate them, the farmers can go to the government, i.e. police and ask for protection. Maybe even hire private security agencies. Here, the government itself is intimidating and forcing the farmers to sell their land dirt cheap. Where do the farmers go?

A lot of people think that the biggest cause of the failures in our system is "corruption". I hope this example shows them, corruption is a symptom and not the cause. The biggest cause is the flawed system itself. In the Vidarbha case, let us assume no kickbacks have been paid to the government officials by private developers. Let us assume the deal is completely "clean" and free of coruption. Even then, with a process allowed, sanctioned, and enforced by the constitution of socialist India, hundreds of farmers are being fleeced out of a lot of money. Money that could improve their lot, enable them to start a new life in a profession much more productive, efficient, and profitable than monsoon-dependent farming. Money that could potentially stop a lot of suicides. Money which should rightly be in the bank accounts of farmers. But the money instead, is lying, not in the Swiss bank accounts of a few corrupt people.

It is lying in the coffers of the Government.

This will be cross-posted on The Indian Economy Blog later today, marking my debut as a guest contributor on that fine blog.