Misc & "Social Engneering" topics

02-13-2008, 02:37 PM

A potential concern is that property ownership is falling. Also known as capitalization rates, yields have dropped over the past three years to near-historic lows. While this is the natural outcome of higher prices capital rates are the ratio of a propertyâs yearly income to purchase it can also indicate that operating income hasnât kept pace with the higher prices. This can make real estate less attractive to investors primarily interested in the cash stream.

There was huge overbuilding in the late 1980s which really hurt the market when we had a recession. But for the most part Real Estate in Kerala did not get overbuilt before the last downturn. Nor do developersâ plans seem excessive. One reason is that banks have become more conservative in their lending, requiring developers to show that their buildings will be fully leased. Another is that the soaring price for concrete and steel has made new construction costly. While higher rates can dampen the real estate market by raising borrowing costs, rates remain at historic lows. Relative to historic pricing, real estate is pretty expensive, and thatâs something that should make everyone think hard. The Federal Reserve has signaled its intention to increase rates gradually; about a quarter points per quarter, but this may not be enough to ward off buyers.

Largely because of this comparatively attractive income stream, the institutional investors are unlikely to abandon the market. This may be true even if cap rates fall farther. Because institutional investors often pay with cash, they can accept lower cap rates without interest payments, their effective yields are higher that those of more leveraged buyers. Professor says that TIAA-CREF has no plans to reduce its exposure to real estate. âWe donât play the short game. For us, the question is, âWhat makes sense for our participants?â And the answer is to stay well diversified and active in all markets.â

Thereâs always the risk of some broader meltdown that would bring down the real estate market along with stocks and bonds. In this case, an investor would be wise to be in the asset thatâs the least overvalued to begin with i.e., commercial real estate.

02-13-2008, 03:06 PM

There is no federal reserve in india mr.spammer.

Capt M Kumar · 06-17-2008, 05:59 PM

Decline in the groundwater level meant the space under the surface was now occupied by gases, which often could not support the weight of the layers above. Different layers of earth tend to move as a result, leading to cracks on the surface, reasoned Ansari.
http://timesofindia.indiatimes.com/Cities/...how/3137212.cms

06-23-2008, 08:29 PM

not sure where to post.

first they made this documentary
Blood, Sweat and T-Shirts
where six young fashion addicts experience life as factory workers in India, making clothes for the British high street. In this four-part series, the six work in the mills of Indiaâs cotton belt and stitch clothes in cramped back rooms, sleeping next to their sewing machine. See how it changes their attitudes to cut-price clothing.
details

and now this
Embroidered T-shirt. Price: Â£4. Cost: Misery

there is a panorama programme to accompany the above article
panorama

and there is this news story
Vodafone fights $2bn tax claim
--------
Indian authorities say the British firm is liable for capital gains tax on the $11.1bn deal as Hutchison Essar's assets are based in India.
But Vodafone maintains the deal was done between two non-Indian companies.
It is seeking an injunction against a request from the Indian tax authority for information about the deal.
-------------

Capt M Kumar · 06-25-2008, 11:25 PM

**acharya** · (This post was last modified: 06-26-2008, 06:37 AM by acharya.)

QUOTE(Rambhai @ Feb 12 2008, 09:07 PM)A potential concern is that property ownership is falling. Also known as capitalization rates, yields have dropped over the past three years to near-historic lows. While this is the natural outcome of higher prices capital rates are the ratio of a propertyâs yearly income to purchase it can also indicate that operating income hasnât kept pace with the higher prices. This can make real estate less attractive to investors primarily interested in the cash stream.

There was huge overbuilding in the late 1980s which really hurt the market when we had a recession. But for the most part Real Estate in KeralaÂ did not get overbuilt before the last downturn. Nor do developersâ plans seem excessive. One reason is that banks have become more conservative in their lending, requiring developers to show that their buildings will be fully leased. Another is that the soaring price for concrete and steel has made new construction costly. While higher rates can dampen the real estate market by raising borrowing costs, rates remain at historic lows. Relative to historic pricing, real estate is pretty expensive, and thatâs something that should make everyone think hard. The Federal Reserve has signaled its intention to increase rates gradually; about a quarter points per quarter, but this may not be enough to ward off buyers.

Largely because of this comparatively attractive income stream, the institutional investors are unlikely to abandon the market. This may be true even if cap rates fall farther. Because institutional investors often pay with cash, they can accept lower cap rates without interest payments, their effective yields are higher that those of more leveraged buyers. Professor says that TIAA-CREF has no plans to reduce its exposure to real estate. âWe donât play the short game. For us, the question is, âWhat makes sense for our participants?â And the answer is to stay well diversified and active in all markets.â

Thereâs always the risk of some broader meltdown that would bring down the real estate market along with stocks and bonds. In this case, an investor would be wise to be in the asset thatâs the least overvalued to begin with i.e., commercial real estate.
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http://www.fatpitch.biz/cgi-bin/f.cgi/psp/...03838.1026.html
http://www.secinfo.com/dGSc.v6t.htm

http://www.economist.com/displayStory.cfm?...788936&fsrc=RSS
http://www.j3sg.com/Reports/Stock-Insider/...=1&sortBy=value

ICICI holding

Abu Dhabi recently picked up an 8.1% stake in US chip giant Advanced Micro Devices, while Dubai International Capital, which is owned by the ruler of that booming city-state, said yesterday that it had bought into electronics giant Sony. It has also taken stakes in HSBC Daimler, US hedge fund manager Och-Ziff Capital Managementthe Indian bank Icici and Airbus parent Eads.

2007 was the year sovereign wealth funds put themselves on the map. In order to understand the evolution of SWFs, itâs obligatory to take a critical look at some of the landmark events of that important year. Expect to see more 2007 reviews, commentaries, and analytical pieces in the comings weeks. To kick things off, a review of the most newsworthy SWF deals of 2007:

* Dec. 24, 2007: Merrill Lynch says it will sell a stake in itself of at least $4.4 billion, and up to $5 billion, to Singaporeâs state-run Temasek Holdings. Temasek will hold less than 10 percent of Merrill and have no voting control. Merrill also agreed to sell a $1.2 billion stake to domestic investors

* Dec. 10, 2007: UBS AG announces that the Government of Singapore Investment Corp., a sovereign-wealth fund, is investing $9.75 billion for a 9 percent stake in the Swiss banking giant, while an undisclosed strategic investor in the Middle East is contributing $1.77 billion in UBS AG.

* Nov. 26, 2007: Abu Dhabi Investment Authority, the sovereign investment fund of the Gulf Arab state, acquires a 4.9 percent stake in Citigroup Inc., the largest U.S. bank, for $7.5 billion.

* Nov. 7, 2007: Central Huijin Investment Co., Chinaâs largest state-owned investment arm, acquires 71 percent of Chinaâs joint-stock China Everbright Bank for $2.7 billion.

* Oct. 29, 2007: Dubai International Capital, owned by Dubai-ruler Sheikh Mohammed bin Rashid Al Maktoum, acquires 9.9 percent outstanding equity stake in Och-Ziff Capital Management Group, a U.S.-based hedge fund, for more than $1.1 billion. Och-Ziff goes public in November on the New York Stock Exchange.

* Oct. 22, 2007: Chinaâs government-controlled Citic Securities Co. and U.S. investment bank Bear Stearns Cos. agree to invest $1 billion in each other for minority stakes that could be expanded. They will also operate a 50-50 joint venture in Hong Kong to offer capital markets services across Asia.

* Sept. 20, 2007: The Qatar Investment Authority, Qatarâs sovereign investment fund, acquires a 20 percent stake in the London Stock Exchange and nearly 10 percent of Nordic bourse operator OMX AB.

* Sept. 20, 2007: Abu Dhabi-based Mubadala Development Co., an investment arm of the Abu Dhabi government, buys a 7.5 percent stake of the management operations of one of the worldâs largest private-equity firms, Carlyle Group, for $1.35 billion

* July 23, 2007: China Development Bank, a Chinese state agency, agrees to pay $3 billion for a 3.1 percent stake in British bank Barclays PLC, and Temasek Holdings, a sovereign wealth fund in Singapore, agrees to pay $2 billion for a 1.77 percent stake in Barclays.

* July 13, 2007: Dubai International Capital purchases a 2.87 percent stake in one of Indiaâs largest banks, ICICI Bank Ltd., for $750 million.

* May 20, 2007: Chinaâs state investment company agrees to pay $3 billion for a 10 percent stake in U.S. private equity firm Blackstone Group LP. The Chinese investment company agreed to buy nonvoting shares in Blackstone concurrent with Blackstoneâs initial public offering.

* May 2, 2007: Dubai International Capital buys a undisclosed stake in British bank HSBC Holdings PLC.

http://sovereignwealthfunds.wordpress.com/...tional-capital/

Capt M Kumar · 07-06-2008, 02:17 PM

<img src='style_emoticons/<#EMO_DIR#>/specool.gif' border='0' style='vertical-align:middle' alt='specool.gif' /> It pays to go in an Indian public toilet
6 Jul, 2008, 1259 hrs IST, PTI
NEW DELHI: It pays to use a toilet in southern India, as residents are earning close to a dollar a month by using public urinals, a scheme launched by authorities to promote hygiene and research in rural areas.
Dozens of people are queuing up to use toilets in Musiri, a remote town in Tamil Nadu state, where authorities have succeeded in keeping street corners clean with the new scheme, The Times of India newspaper said on Sunday.
"In fact, many of us started using toilets for urination only after the ecosan (ecological sanitation) toilets were constructed in the area," said S. Rajasekaran, a truck cleaner.
The urine was also being collected and tested for its efficacy as a crop fertiliser, an official of the state's agricultural university added. People relieving themselves in the open is a common sight in India's rural towns and villages, as basic sanitation still eludes millions.

ramana · 12-17-2008, 08:13 PM

Hindu reports:

Dartmouth researchers develop computational tool to untangle complex data

QUOTEDartmouth researchers develop computational tool to untangle complex data
HANOVER (EurekAlert): A group of Dartmouth researchers have developed a mathematical tool that can be used to unscramble the underlying structure of time-dependent, interrelated, complex data, like the votes of legislators over their careers, second-by-second activity of the stock market, or levels of oxygenated blood flow in the brain.

The researchers named their tool the Partition Decoupling Method, and their study is published in this week's online issue of the Proceedings of the National Academy of Sciences. The authors are Gregory Leibon, Scott Pauls, and Daniel Rockmore with Dartmouth's Department of Mathematics, and Robert Savell from Dartmouth's Thayer School of Engineering.

"With respect to the equities market we created a map that illustrated a generalized notion of sector and industry, as well as the interactions between them, reflecting the different levels of capital flow, among and between companies, industries, sectors, and so forth," says Rockmore, the John G. Kemeny Parents Professor of Mathematics and a professor of computer science. "In fact, it is this idea of flow, be it capital, oxygenated blood, or political orientation, that we are capturing."

Capturing patterns in this so-called 'flow' is important to understand the subtle interdependencies among the different components of a complex system. The researchers use the mathematics of a subject called spectral analysis, which is often used to model heat flow on different kinds of geometric surfaces, to analyze the network of correlations. This is combined with statistical learning tools to produce the Partition Decoupling Method (PDM). 

The PDM discovers regions where the flow circulates more than would be expected at random, collapsing these regions and then creating new networks of sectors as well as residual networks. The result effectively zooms in to obtain detailed analysis of the interrelations as well as zooms out to view the coarse-scale flow at a distance.

Rockmore explains that the Partition Decoupling Method takes a different approach that other tools designed to tease out how complex systems behave. "The PDM is not strictly hierarchical," says Rockmore. "It instead details the interaction between a number of different elements of the system. PDM places no constraint on interconnectivity."

The researchers applied the PDM to the equities market, a system rich in numerical data, as well a complex web of interdependent markets, industries, and currencies. The PDM proved robust, revealing both known structures and patterns and new structures that came to light with the new analysis.

"We think this tool can be useful, when applied in the financial realm, to portfolio and risk management," says Rockmore. "We expect similar results as it is applied to different complex systems like the brain, or even the collections of brains that are societies."



So they use spectral analysis and statistics to study systems. My only complaint is both need tons of numerical data.

01-19-2009, 06:05 AM

A curious tale of troubled oilmen
QUOTENew Delhi: The recent oil officerâs strike that brought the nation to a near halt as petrol pumps went dry has now snowballed into a larger controversy.
After nailing the governmentâs contention that oil officers in India earn salaries in the range of Rs 100,000 to Rs 300,000, the officers are now narrating harrowing tales of intimidation by their employers that ranged from instant sacking to threats to family members.
âIt is a sad story of how the officers were sacked lock, stock and barrel. In many cases, their family members were called up and threatened with dire consequences,â a senior official of the Ministry of Petroleum and Natural Gas told TEHELKA. The officer, who spoke on conditions of anonymity, said several officers â a large number of them from the state-owned Oil and Natural Gas Corporation â are batting their termination order by writing pledges that they will not participate in any strike whatsoever.
---

Bharatvarsh · 03-16-2009, 06:59 PM

I remember someone suggesting the nanny state welfarism of the Scandinavian countries as the right way to go, well here is one effect of such policies:
QUOTEThe Welfare State's Attack on the Family

Mises Daily by Vedran Vuk | Posted on 7/12/2006 12:00:00 AM

Most people listening to libertarian ideas are thrown off by the thought that private charity, in absence of government programs, will handle problems involving truly helpless people. Charitable organizations are active but no one knows for sure how much donations would increase in a tax-free society.
When a person becomes old without savings, what is he or she supposed to do without socialist programs such as Social Security? The forgotten institution ofÂ charity here is the family. When libertarians talk of charity, we don't just mean the Salvation Army, but taking care of your relatives as well.

When my brother and I were babies, my grandparents stepped in to take care of us while my mother and father worked. My parents in turn provided for the whole household living under one roof to save money. When my father moved to the United States and made more money, he made sure that my grandparents would be taken care of.

During the Balkan War, members of my family were forcefully removed and became refugees due to the conflict. When they lost everything, guess who took care of them? The whole family together sent money and whatever supplies that they could.

So was the rule everywhere before the welfare state: your parents who took care of you financially as a child â you may need to help them in the future. This basic element of family life seems to be mind-boggling to supporters of the welfare state. Proponents of the welfare state constantly speak about our responsibility to society through redistributionist taxes.

I have no responsibility to society as a whole, to some stranger I've never met. I personally feel that I do have a responsibility toward my immediate family. Programs like TANF ("Temporary Assistance for Needy Families"), Social Security, and unemployment insurance take away our responsibility to the family and place it in the hands of the state. They crowd out our sense of moral responsibility.

Family was an integral way of caring for individuals as a whole for centuries. Supporters of the welfare state forget the past.

Before the advent of Social Security, what happened to people who lived past 65 years? Did these people just starve to death from hunger by the tens of thousands? No. Did a huge wave of charitable organizations come to their rescue? Not always. So, how did they survive? Everyone can agree that there were no mass deaths of 65-year-old people recorded in the Great Depression before Social Security took effect.

These people survived under a basic principle in life. You take care of your kids, and one day, they will take care of you. In the past, having children was an investment in your future. You knew that one day your children would take care of your needs as you took care of theirs.

This created many incentives that produced a healthy family. For one thing, you had to be somewhat nicer to your children and make sure that you instilled good values. Children without a good work ethic or good values are not likely to perform well in the job market. A parent would have to teach these values to children to insure his or her own needs at a later time. Responsibility to the family ranked highly. Without this ingrained in a child, he or she might grow up one day and never return the nurturing given by parents early in life.

With government attempting to smooth over every mistake in life, we get very different incentives. If your parents are entirely subsidized on welfare, how much do they really care about your future? Parents usually care for their children and want the best for them. But parents who know that they either raise their child right or don't eat in the future will try much times harder to make sure their child stays away from drugs, crime, and other bad decisions.

The standard abortion excuses also play a major role in the issue. The welfare state has destroyed the culture of hard work and family. I cringe every time I hear someone talk about poverty as an excuse for abortion.

I don't want to discuss here the rights and wrongs of abortion, but how can you make an excuse that you are too poor to have a child and you have to abort? During much harder economic times, families were having ten or twelve children. Huge families were not uncommon. Today, these abortionists want me to believe that with economic conditions a hundred times better than before, they can't afford to have a child. They're going to have to do better than that.

It's not easy to have a child whether you are rich or poor. At any point in life a baby is difficult to raise and deal with. Even with a college degree, a young mother will have just as much difficulty as a teenager. These are facts of life. Raising children is hard work! The welfare state has reinforced the idea that if anything is hard, it must be wrong.

Doing the right thing is not easy. Difficulty does not justify immoral actions. Sure, taking care of your elderly parents is harder on you than having the state do it. But is it your moral responsibility? Yes. It is not the responsibility of some other taxpayer who does not even know your parents. Anyone who would leave it to strangers to care for their elderly parents should be ashamed.

Before the welfare state, there existed incentives to have children and insure your own future. Now, we have incentives to break the family apart. TANF actually gives more money to single moms. This may seem like a great program to help single mothers in need, but in reality, the program makes it easier for the man in the family to leave. It reduces the man's practical responsibility to stay and raise the child. The program creates more single mothers!

And some day, it will be the government, not his offspring, who will provide for the man who left. This brings even fewer incentives to raise kids properly.

Unemployment insurance has also undermined society. During the Great Depression, there were great movements of people to find jobs. If there was a job somewhere, people went. Now, with unemployment and welfare people stay in the same city watching everything around them rot and decay. Government housing keeps them complacent as they beg for yet more assistance. When times get tough, people will move to get jobs. The Great Depression has already proved this. Did millions die without welfare or unemployment insurance? No. Does it improve people's lives to subsidize their staying in one place? No.

I can speak from experience. I've seen charity and love within my own family overcoming all obstacles in our times. Being born in former Yugoslavia, my family was accustomed to scarcity and socialist poverty. But I saw the family working together to achieve the greater ends of each member. This was not a socialist kind of responsibility. A family member cared for you at a point in time; later you cared for them.

My father's mother spent all her savings of thirty years to send my father to medical school. There was no government help there. When, years down the road, she had to retire because of breast cancer, guess who paid her bills and medical treatments. My aunt and uncle also assisted by living with her and taking care of her on a daily basis. There was no dependable national healthcare. There was no subsidized retirement home or social security. The children she gave birth to and raised responsibly made sure that she was well taken care off until her final days. Each was fulfilling his responsibility of a child to his mother.Â

The agenda of the state is to break up the family. The more you depend on the state, the more you justify its existence, and the larger it grows. The idea that people can provide things for themselves either individually or through the family frightens the state. It delegitimizes its role. The role of the family is dangerous to its survival.

Movement away from the welfare state is movement toward better family values and better family cohesiveness.

The death of the family is the life of the state.

http://mises.org/story/2218
QUOTEThe Silent Partner in Family Decline
Mises Daily by Per Henrik Hansen | Posted on 6/9/2004 12:00:00 AM

http://mises.org/story/1524

Bharatvarsh · (This post was last modified: 03-16-2009, 07:16 PM by Bharatvarsh.)

QUOTEWhat Has Government Done to Our Families?

Mises Daily by Allan Carlson | Posted on 1/5/2003 12:00:00 AM

[From a paper that was first written and printed in 1991]

The fate of families and children in Sweden shows the truth of Ludwig von Mises's observation that "no compromise" is possible between capitalism and socialism. Here I show how the welfare state's growth can be viewed as the transfer of the "dependency" function from families to state employees. The process began in 19th-century Sweden, through the socialization of children's economic time via school attendance, child labor, and state old-age pension laws. These changes, in turn, created incentives to have only a few, or no children. In the 1930s, social democrats Gunnar and Alva Myrdal used the resulting "depopulation crisis" to argue for the full socialization of child rearing. Their "family policy," implemented over the next forty years, virtually destroyed the autonomous family in Sweden, substituting a "client society" where citizens are clients of public employees. While Sweden is now trying to break out of the welfare state trap, the old arguments for the socialization of children have come to the United States.

* * * * *

In his short volume Bureaucracy, Ludwig von Mises notes that modern socialism "holds the individual in tight rein from the womb to the tomb," while "the children and the adolescents are firmly integrated into the all-embracing apparatus of state control." In another context, he contrasts "capitalism" with "socialism," and concludes: "There is no compromise possible between these two systems. Contrary to a popular fallacy there is no middle way, no third system possible as a pattern of a permanent social order." My remarks focus on the validity of the latter statement, seen through the fate of family and children in the quintessential "middle way" state of modern Sweden.

In turning to Sweden, we find a classic case of bureaucratic manipulation to destroy the state's principal rival as a focus of loyalty: the family. Viewing this rivalry between state and family, it is important to understand that a basic level of "dependency" is a constant in all societies. In every human community, there are infants and children, persons who are very old, individuals who have severe handicaps, and others who are seriously ill. These people cannot take care of themselves. Without help from others, they will die. Every society must have a way of giving care to these dependents. Under the domain of liberty, the natural institution of the family (supplemented and supported by local communities and voluntary organizations) provides the protection and care which these "dependent" people need. Indeed, it is in the autonomous familyâand only in the familyâwhere the pure socialist principle actually works: from each according to his ability, to each according to his needs.

The rise of the welfare state can be written as the steady transfer of the "dependency" function from the family to the state; from persons tied together by blood, marriage or adoption to persons tied to public employees. The process began in Sweden in the mid-19th century, through bureaucratic projects that began dismantling the bonds between parents and their children. In classic pattern, the first assertion of state control over children came in the 1840s, with the passage of a mandatory school attendance law. While justified as a measure to improve the knowledge and welfare of the people, the deeper dynamic was the socialization of children's time, through the assumptions that state functionariesâthe Swedish kingdom's bureaucratsâknew better than parents how children's time should be spent, and that parents could not be expected or trusted to protect their children from exploitation.

The next step came in 1912, with legislation that effectively banned child labor in factories, and to some degree on farms. Again, the implicit assumption was that state welfare officials were better judges of the use of children's time, and more compassionate toward children than parents were or could be.

The final step came at about the same time, when the Swedish government implemented a program of old-age or retirement pensions that quickly became universal. The underlying act here was the socializing of another dependency function, this time, the dependency of the "very old" and the "weak" on mature adults. For eons, the care of the elderly had been a family matter. Henceforward, it would be the state's concern. Taking all of these reforms together, the net effect was to socialize the economic value of children. The natural economy of the household, and the value that children had brought their parentsâbe it as workers in the family enterprise or as an 'insurance policy' for old ageâwas stripped away. Parents were still left with the costs of raising the children, but the economic gain they would eventually represent had been seized by "society," meaning the bureaucratic state.

The predictable result of this change, as an economist of the "Gary Becker School" would tell you, would be a diminished demand for children, and this is exactly what occurred in Sweden. Starting in the late 1800s, Swedish fertility went into free-fall and by 1935, Sweden had the lowest birthrate in the world, below the zero-growth level where a generation just managed to replace itself.

The standard theory of demographic transition has long been that this fall in the birthrate was the necessary, inevitable consequence of modern industrialization: that the incentives of a capitalist economy disrupt traditional family relations. While it is true that the traditional family structure faces a new kind of stress in industrial society, more recent work suggests that the greater challengeâin factâderives from the growth of the state.

Looking at the experience of many nations, Princeton University demographer Norman Ryder traces the central common cause of fertility decline to the introduction of mass public education. "Education of the junior generation is a subversive influence," he says. "Political organizations, like economic organizations, demand loyalty and attempt to neutralize family particularism. There is a struggle between the family and the state for the minds of the young," where the mandatory state school serves as "the chief instrument for teaching citizenship, in a direct appeal to the children over the heads of their parents." Confirming the universal validity of the Swedish example, Ryder adds that while mandatory education raises the cost to parents of children, bans on child labor further reduce their economic value. Moreover, a state system of social security cuts the natural bonds between generations of a family in still another way, leaving the state as the new locus of first loyalty.

While a nation's family system may reorganize, for a time, around the nuclear "husband-wife" unit of reproduction, even that basis of independence eventually dissolves. The end result of state intervention, Ryder says, is progressively diminished fertility, with living individuals left standing alone in a dependent relationship with the government.

The contradictions inherent in this method of social organization welled up in Sweden in the early 1930s. With the birth rate having fallen below the zero-growth level, Swedish conservatives grew frantic over the "depopulation threat," and the disappearance of Swedish children. These voices argued that the root problem was spiritual dislocation, or the decline of Christianity, or the rise of materialism, or personal selfishness. No oneânot a single soul on the political rightâfocused on problems to be found in the educational and social legislation of the past 90 years. So as the "population crisis" reached high boil in Sweden, the opportunity was ripe for demagoguery and exploitation.

Into this situation walked two young Swedish social scientists, Gunnar Myrdal and his wife, Alva Myrdal. Before turning to their use and abuse of the population issue, allow me to say a few things about their background, and the influences brought to bear on their work.

Bureaucratic paternalism had a long history in Sweden, rooted in the state apparatus constructed by the Vasa Kings in the early 16th century, and advanced through the crushing of regional autonomy in wake of the unsuccessful Nils Dacke revolt of the 1540s. Yet the Myrdals represented something new, and "very 20th century." They were social scientistsâintellectuals from the academyâdedicated to a new kind of state activism. As Alva Myrdal herself explained: "Politics has [now]...been brought under the control of logic and technical knowledge and so has been forced to become in essence constructive social engineering."

Second, even though we Americans have been hounded by repeated comments on the wisdom of "the Swedish model," it is important to note how much of the new Swedish welfare state rested on American experimentation. Both Myrdals spent the 1929â30 academic year, the waning months of "The Progressive Era," traveling in the United States, on fellowships provided by the Laura Spelman Rockefeller Foundation. During this time, Alva Myrdal fell under the influence of the so-called "Chicago school of sociology." William Ogburn, in particular, impressed on her his view that the state and the school had inevitably grown at the family's expense; and that the family faced a progressive "loss of function" as it retreated out of historical necessity to an exclusive concern with personality. Alva Myrdal also spent considerable time at the Child Development Institute of Columbia University and visiting experimental preschools and day care centers operating on Rockefeller Foundation grants, examples of social parenting that deeply impressed her.

For his part, Gunnar Myrdal's work at Columbia and at the University of Chicago made him aware of the tremendous political potential to be found in Sweden's emerging "population crisis" debate.

In an important 1932 article, "Social Policy's Dilemma," for the avant garde Swedish journal, Spektrum, Gunnar Myrdal put his finger on the necessary policy lever. He began by tracing the compromise in Europe before 1914 of a "liberal-infused socialism" with a "socialist-infused liberalism." Under this arrangement, he said, 19th century liberalism had abandoned its Malthusian pessimism and free-market dogmatism and instead embraced the necessity of reforms to protect workers; while the socialists had given up the goals of revolution and massive property redistribution, expressing contentment with incremental steps to aid the working class.

The World War, though, had shattered this compromise. Myrdal declared that classical liberalism was now dead, its partisans scattered. He also argued that the workers movement needed to be re-radicalized, and seek a new kind of social policy. Under the old compromise, Myrdal stated, social policy had been symptom-oriented, giving help to the poor, or the sick. The new social policy, he declared, must be preventive in nature. Social scientists, using modern research techniques, now had it in their power to use the state to prevent social pathologies from emerging. When based on human-oriented value premises and a rational science, he said, this preventive social policy led to a "natural marriage" of the correct technical with the politically radical solution. Myrdal specifically pointed to Sweden's population crisis, as an opportunity for rational sociological analysis to produce effective and radical ideas for state-enforced change.

The Myrdals fleshed out this program in their best selling 1934 book, Crisis in the Population Question, a brilliantly argued volume which substantially transformed Sweden. While Swedish conservatives continued to fret over sexual immorality, the Myrdals pointed directly at the contradictions created by an incomplete welfare state. Prior government actions such as mandatory school attendance, the ban on child labor, and state old age pensions, they admitted, had stripped away the value of children to parents. But the costs of children remained at home. In consequence, children had now become the chief cause of poverty. Given the incentives set up by the state, the very persons who contributed the most to the nation's survival by having children were dragged down into poverty, shoddy housing, poor nutrition, and limited recreational opportunities. A voluntary choice between poverty with children or a higher living standard without them was what young couples now faced. Young adults were forced to support the retired and the needy through the state's welfare system, and also the children to which they gave life. Under this multiple burden, they had chosen to reduce their number of children as the only factor over which they had control. The result, for Sweden, was depopula- tion and the specter of national extinction.

According to the Myrdals, there were only two alternatives. The firstâthe dismantling of state schooling, child labor laws, and state old-age pensions in order to restore family autonomyâwas "not even worthy of being discussed." The other, and only practical alternative, was to complete the welfare state, and remove the existing disincentives to children by socializing virtually all of the direct costs involved in their birth and rearing. The real argument went something like this: in order to solve the problems caused, in large part, by prior state interventions, the government now needed to intervene completely.

This meant a commitment to a new kind of welfarism: "It concerns a preventive social policy, closely guided by the goal of raising the quality of human material, and at the same time carrying into effect radical redistribution policies making a significant portion of the child-support burden the concern of all society." The State bureaucracy had never before enjoyed such a mandate. By the very nature of the word, a "preventive" policy opened all Swedish families up to supports, scrutiny, and control. One could never know where a problem might occur: therefore, universal measures of bureaucratic intervention must be implemented to make prevention a reality.

Stressing this imperative, the Myrdals concluded: "the population question is hereby transformed into the most effective argument for a thorough and radical socialist remodeling of society." The alternative, they said simply, was national extinction.

Their program embraced universal state allowances for children's clothing, a universal health insurance plan, a universal entitlement to day care, state- operated summer camps for children, free school breakfasts and lunches, state-funded family housing, birth bonuses to cover the indirect costs of having babies, marriage loans, the expansion of state maternity and midwife services, centralized economic planning, and so on. Their goal was, in effect, the socialization of consumption, providing all families with a rationally determined, fairly uniform set of state services, managed by public employees, and funded through taxes imposed on the rich and the childless.

Criticisms that their program, in fact, threatened the family brought a characteristically blunt response: "the little modern family is almost...pathological," the Myrdals said. "The old ideals must die out with the generations which supported them."

Appeals to liberty and family autonomy evoked equally biting responses. The Myrdals charged that the "false individualistic desire" by parents for the "freedom" to raise their own children had an unhealthy origin: "...much of the tiresome pathos which defends 'individual freedom' and 'responsibility for one's own family,' is based on a sadistic disposition to extend this 'freedom' to an unbound and uncontrolled right to dominate others."

In order to raise children fit for a socially cooperative world, "we must free children more from ourselves," turning them over to state certified experts for care and training. The collective day nursery run by state-controlled experts, rather than the pathological little family, was more in line with the proper goals of eliminating social classes and building a society based on economic democracy.

Between 1935 and 1975, the Myrdals' domestic agenda guided, by fits and starts, the evolution of the Swedish welfare state. Periods of political and bureaucratic activismâ1935 to 1938, 1944 to 1948, and 1965 to 1973âwere punctuated by evidence of stubborn resistance among the Swedish populace, or by budgetary restraints that delayed full implementation. Yet by the end of the process, most elements of the Myrdals' family agenda were in place.

What were the specific results? With the family stripped, by state fiat, of all productive functions, of all insurance and welfare functions, and of most consumption functions, it should cause little surprise that ever fewer Swedes chose to live in families. The marriage rate fell to a record low among modern nations, while the proportion of adults living alone soared. In central Stockholm, for example, fully two-thirds of the population lived in single-person households by the mid-1980s. With the costs and benefits of children fully socialized, and with the natural economic gains from marriage intentionally eliminated by law, the bearing of children was also severed from marriage: by 1990, well over half of Swedish births were outside of marriage.

Children, too, enjoyed as 'rights' a great parcel of benefits provided by the state: free medical and dental care; abundant and cheap public transport; free meals; free education; and even state "child advocates" available to intervene when parents overstepped their bounds. Children, too, no longer needed "family": the state now served as their real parent.

Indeed, Rutgers University sociologist David Poponoe suggests that the term 'welfare state' no longer does justice to this form of total personal dependence on the government. Instead, he uses the label, "client society," to describe a nation "in which citizens are for the most part clients of a large group of public employees who take care of them throughout their lives."

In Sweden, the elderly are "free" of potential dependence on their grown children; infants, small children, and teenagers are "free" of reliance on their parents for protection and basic support; grown adults are "free" of meaningful obligations either to their biological parents, or to their children; and men and women are "free" of any of the mutual promises once embodied in marriage. This "freedom" has come in exchange for a universal, common dependence on the state, and the nearly complete bureaucratization of what had once been family living. Von Mises was right: there proved to be no "middle way" here; rather, Sweden represents a more complete and therefore more oppressive version of the socialist domestic order, one surpassing in its comprehensiveness even that of the Soviet Union. But the modern Swedish welfare state contains its own contradictions, problems now coming to the fore.

To begin with, the "demographic contradiction" of the welfare state is not so easily banished. In a rent-seeking democratic order, those who control the greater number of votes enjoy a greater gain. And even in Sweden, it remains true that the old vote; while children do not. While Swedish "family policy" has been effective enough to destroy the family as an independent entity, it has not been successful in ending the net flow of state programs and income from the relatively young to the relatively old.

Second, the client state can never provide all the needed care in a society, simply because to do so would be too expensive. Yet at the same time, families in the welfare state are penalized when they do provide care to their own, because they thereby give up the benefits of public care; and they are rewarded with public care only when they stop giving family-based care. Danish welfare official Bent Andersen has explained the problem this way:

The rationally founded welfare state has a built-in contradiction: if it is to fulfill its intended functions, its citizens must refrain from exploiting to the fullest its services and provisionsâthat is, they must behave irrationally, motivated by informal social controls, which, however, tend to disappear as the welfare state grows.

This contradiction has been the driving force behind the recent rebellion against the modern client state, a rebellion which started (among the Scandinavian countries) in Denmark and Norway through the electoral success of the anti-state Progress parties, and which has now spread to Sweden. Just last month, the Swedish Social Democrats suffered a major political defeat, losing power in national elections to a Center-Right coalition, bound together by a common pledge to cut back the welfare state. Particularly startling was the emergence of two new parties, which won blocks of seats in Sweden's Riksdag (or Parliament) for the first time.

The first of theseâthe Christian Democratsâmade the sorry state of Swedish family life their central platform issue. They called for a reduction in bureaucratic interference in family relations, and an end to state incentives that encourage births out-of-wedlock and discourage the parental care of children. The other novel party, called New Democracy, combines libertarian themes of sharp tax reductions, sharp benefit reductions, and an end to foreign aid with measures to curb immigration. Together, these new groups hold the balance of parliamentary power. Eliminating welfare benefits has rarely been successful, in any modern country; but for the first time since the 1930s, the Swedes have an opportunity to recover some measure of family autonomy and personal liberty.

By all the signs, then, it would appear that the Swedish model, "the middle way," the third option, has been discredited, at the same time as Communism, the second way, has collapsed into a heap. Unfortunately, however, the Swedish model livesâand may soon thriveâhere in the United States, where the very logic and arguments used by the Myrdals in the 1930s are on the verge of political success.

In a 1991 volume entitled When the Bough Breaks, issued by Basic Books (the pre-eminent neo-conservative publishing house), economist Sylvia Ann Hewlett writes: "In the [modern] world, not only are children 'worthless' to their parents, they involve major expenditures of money. Estimates of the cost of raising a child range from $171,000 to $265,000. In return for such expenditures, 'a child is expected to provide love, smiles, and emotional satisfaction,' but no money or labor."

She continues: "Which brings us to a critical American dilemma. We expect parents to expend extraordinary amounts of money and energy on raising their children, when it is society at large that reaps the material rewards. The costs are private; the benefits are increasingly public. . . . In the modern age, relying on irrational parental attachment to underwrite the child-rearing enterprise is a risky, foolhardy, and cruel business. It is time we learned to share the costs and burdens of raising our children. It is time to take some collective responsibility for the next generation."

Hewlett goes on to lay out a new policy agenda for America, including mandated parental leave, guaranteed free access to maternal and child health care, the state provision of quality child care, more "educational investment," substantial housing subsidies for families with children, and so on.

Does this sound familiar? It should: these are the very arguments and the basic agenda proposed for Swedes by Alva and Gunnar Myrdal, back in 1934, albeit shorn of their more radical, openly socialist rhetoric. Nonetheless, this is a book which led the Chairman (retired) of Proctor and Gamble, Owen Butler, to state: "The conclusion is inescapable. Unless we invest more wisely in our children today, the nation's economic and social future are in jeopardy." These are also the arguments that are dominating the so-called new politics of children, in Washington.

At the same time, "preventive social policy" has become the rallying cry for other American proponents of change. The arguments ring familiar: help by state officials early in life is more economical and more effective than help later on; the longer we wait before discovering symptoms of stress, the more costly it will be; "early interventions present the problem of all investments in growth- the dividends come later," etc., etc. It all sounds reasonable, in a way, but the end product would be a nightmare of bureaucratic rule, and the virtual destruction of the family in America.

In the September report of the U.S. Advisory Board on Child Abuse and Neglect, we catch the flavor of this looming, new American order. This panel, appointed exclusively by the Reagan and Bush administrations, called child abuse a "national emergency," adding: "No other problem may equal its power to cause or exacerbate a range of social ills." The key finding of the report is that the Federal and state governments have spent too much time investigating suspected cases of abuse; instead, the Federal government should focus on preventing abuse and neglect before it happens. The Board recommends that the Federal government immediately develop a national program of "home visits" to all new parents and their babies by government health workers and social investigators, who would identify potential abusers and help them.

In addition to this "welfare bureaucrat in every home" approach, the Board calls for a "national child protection policy" where the Federal government would guarantee the right of all children to live in a safe environment, with appropriate vehicles of enforcement.

Hewlett is right, of course, about the flaws in the existing American welfare state: we have socialized the economic value of children here; but we have left the costs with individual parents. The United States in 1991, as Sweden in 1934, has an incomplete version of the pure welfare state model. She's correct, too, that this exacts a price: the number of American children born annually inside of marriage has been stagnant through the 1980s, at a level 30 percent below the zero-growth rate. Americans are simply not investing their own time and money in more than one or two children, largely because its not worth their while. (The overall birthrate, it is true, has climbed somewhat, but this is due entirely to the sharp rise in the number of out-of-wedlock births from 665,000 in 1980 to over 1,000,000 in 1990; these births, it appears, our welfare system subsidizes well.)

But there is an alternative to the "Swedish solution." It's one that Dr. Hewlett declines to mention; and it's the one that the Myrdals dismissed as "beyond reasonable debate" sixty years ago. This option is called a "free society," where instead of completing the client/welfare state by extending bureaucratic tentacles completely around children, we instead dismantle what we already have done. The agenda here is simple, radical and pragmatically anti-bureaucratic:

end state-mandated and state-controlled education, leaving the training and rearing of children up to their own parents or legal guardians;
abolish child-labor laws, again reasoning that parents or guardians are the best judges of their children's interests and welfare, vastly better than any combination of state bureaucrats;
and dismantle the Social Security system, leaving protection or security in old age to be provided, once again, by individuals and their families.
These acts would restore the economic benefits of children to parents, and so end the anti-child contradiction that lies at the center of the incomplete welfare state.

Most commentators would respond that these would be impossible, inconceivable actions in a modern, industrial society. Given the realities or complexities of the modern world, they would say chaos would be the sure result, if we engaged in such reactionary efforts.

My response would be to point to scattered groups in America which, through some amazing historical quirk or some political miracle, still inhabit one of our few remaining "zones of liberty" and which survive under such an "impossible" regime.

One unexpected but interesting example would be the Amish, who beat off government challenges to their special limited educational practices (namely, schooling only by Amish teachers and only through the eighth grade), who make heavy use of child labor, and who avoid Social Security (as well as government farm welfare) out of principle. Not only have the Amish managed to survive in an industrial, market milieu; they have thrived. Their families are three times the size of the American average. When facing fair competition, their farms turn profits in "good times and bad."

Their savings rate is extraordinarily high. Their farming practices, from any environmental standard, are exemplary, marked by a committed stewardship of the soil and avoidance of chemicals and artificial fertilizers. During a time when the number of American farmers has fallen sharply, Amish farm colonies have spread widely, from a base in southeastern Pennsylvania to Ohio, Indiana, Iowa, Tennessee, Wisconsin, and Minnesota.

It is probably true that relatively few contemporary Americans would choose to live like the Amish, given a true freedom of choice. Then again, no one can be quite sure what America would look like, if citizens were actually freed from the bureaucratic rule over families that began to be imposed here, over one hundred years ago, starting with the rise of the mandated public school.

I have absolutely no doubt, though, that under a true regime of liberty, families would be stronger, children more plentiful, and men and women happier and more content. For me, that's enough.

------

Allan Carlson, author of The Swedish Experiment in Family Politics and Family Questions: Reflections on the American Social Crisis, is president of the Howard Center in Rockford, Illinois. He wrote this paper for the Mises Institute's Williamsburg conference on "The Political Economy of Bureaucracy." Allan@profam.org

http://mises.org/article.aspx?Id=1406
QUOTEMaking Kids Worthless: Social Security's Contribution to the Fertility Crisis

http://mises.org/story/2451
QUOTEThe Black Family: 40 Years of Lies
Kay S. Hymowitz

http://www.city-journal.org/html/15_3_black_family.html

Husky · 03-16-2009, 07:27 PM

Thanks BV, it gives a lot of food for thought (state intervention replacing the society/community/family raising children).

Hmmm. But what to do about the situation in Bharatam, where the same is happening. The psecular anti-Hindu state (mis)educates the youth via school and media, and society/family's influence on their upbringing is curbed.

Bharatvarsh · (This post was last modified: 03-16-2009, 08:13 PM by Bharatvarsh.)

Husky I said this before, unless the BJP has a clear agenda on social issues we are headed for destruction of the family through feminist inspired garbage laws such as maternity leave, and so on which the commies & congress will pass eagerly. In Europe the family has already been destroyed, increasingly Islamic influence is spreading, even without the Islamic threat the welfare states would collapse eventually because the model is based on inherent contradictions, remember USSR took nearly 70 years to collapse while going commie at full blast but collapse it did.

I think concerned Hindu parents should never send their kids to public schools or private schools (unless its a Hindu school) for a start. If they do have to in dire circumstances they have to check what the kids are learning everyday and tell them truth by giving them other resources.

The more degenerate behavior the gov't subsidizes the more that behavior takes hold (eg: single moms). The first to be destroyed will be the extended family ties, after that comes the nuclear family.

Things can be halted right now if the BJP takes a stand against garbage like compulsory maternity leave, but they are clueless, so I am not too optimistic.

By the way the destruction of the family has been a communist project from the start, they were public about it & even tried it in early USSR with bad consequences which is why they halted it. You can check the second wave feminist literature to see their statements about the family & the response of Von Mises to such nonsense.

In traditional Hindu society it is the responsibility of the parents & the extended family to raise children, the children in turn are expected to care for the parents in their old age not the state, the more the state gets involved the worse the family will become. Also note that while kids attended Hindu schools before British destroyed them they did so voluntarily & were not forced by the king/gov't like today. The idea of state sponsored compulsory schooling (or indoctrination as I like to call it) is a very recent phenomenon with some exceptions like the Spartans who enrolled every male child in state run agoge at 7 to be trained in combat. Before this for most of human life things were voluntary, some never stepped into formal school & just learnt trade skills under their father (eg: pottery, carpentry etc).

Bharatvarsh · 03-16-2009, 09:31 PM

QUOTEMises on the Family

G.K. Chesterton called the family an anarchistic institution. He meant that it requires no act of the state to bring it about. Its existence flows from fixed realities in the nature of man, with its form refined by the development of sexual norms and the advance of civilization.

This observation is consistent with a brilliant discussion of the family in Ludwig von Mises's masterwork Socialism, first published in 1922. Why did Mises address family and marriage in an economics book refuting socialism? He understood-unlike many economists today-that the opponents of the free society have a broad agenda that usually begins with an attack on this most crucial bourgeois institution.

"Proposals to transform the relations between the sexes have long gone hand in hand with plans for the socialization of the means of production," Mises observes. "Marriage is to disappear along with private property.... Socialism promises not only welfare â wealth for all â but universal happiness in love as well."

Mises noted that August Bebel's Woman Under Socialism, a paean to free love published in 1892, was the most widely read left-wing tract of its time. This linkage of socialism and promiscuity had a tactical purpose. If you don't buy the never-never land of magically appearing prosperity, then you can focus on the hope for liberation from sexual responsibility and maturity.

The socialists proposed a world in which there would be no social impediments to unlimited personal pleasure, with the family and monogamy being the first impediments to go. Would this plan work? No chance, said Mises: the socialist program for free love is as impossible as its economic one. They are both contrary to the restraints inherent in the real world.

The family, like the structure of the market economy, is a product not of policy but of voluntary association, made necessary by biological and social realities. Capitalism reinforced marriage and family because it insisted on consent in all social relations.

The family and capitalism thus share a common institutional and ethical foundation. By attempting to abolish them, the socialists would replace a society based on contract with one based on violence. The result would be total societal collapse.

When the democratic socialists Sidney and Beatrice Webb traveled to the Soviet Union, a decade after Mises's book, they reported a different reality. They found women, liberated from the yoke of family and marriage, living happy and fulfilled lives. It was as much a fantasy â actually a bloody lie-as their claim that Soviet society was becoming the most prosperous in history.

No sane intellectual embraces full-blown social economics anymore, but a watered-down version of the socialist agenda for the family is the driving force behind much of U.S. social policy. This agenda goes hand in hand with the hobbling of the market economy in other areas.

It is no accident that the rise of free love in the U.S. accompanied the rise of the fully developed welfare state. The goals of liberation from work (and saving and investment) and liberation from our sexual natures stem from a similar ideological impulse: to overcome fixed realities in nature. The family has suffered as a result, just as Mises predicted it would.

While the advocates of the family and the proponents of capitalism should be united in a single political agenda of smashing the interventionist state, they typically are not. Family advocates, even conservative ones, often decry finance capitalism as an alienating force, and advocate ill-advised policies like tariffs, union monopolies, and wage floors for married people.

At the same time, free enterprisers show little interest in the genuine concerns of family advocates. And neither seems interested in the radical attack on both freedom and family life that government policies like child labor laws, public schooling, Social Security, high taxes, and socialized medicine represent. In Mises's view, this breech is unnecessary.

"It is no accident that the proposal to treat men and women as radically equal, to regulate sexual intercourse by the State, to put infants into public nursing homes at birth and to ensure that children and parents remain quite unknown to each other should have originated with Plato," who cared nothing for freedom.

Neither is it an accident that the same proposals these days are pushed by people who have little to no regard for family or economic law.

http://www.lewrockwell.com/archives/fm/6-98.html

Capt M Kumar · 08-07-2009, 06:08 AM

Only one Murdoch newspaper currently charges for access to its website: The Wall Street Journal, which he bought two years ago. At the time of the acquisition, the mogul planned to scrap the charges, but changed his mind on realising that he would not recoup the lost revenue by charging more for adverts.

Executives are still to decide how much the UK's online newspaper readers will be billed and for what sorts of content, but Mr Murdoch said he was not scared about losing readers if he is the first to start charging. "If we are successful, we will be followed by all," he predicted. Fees will be introduced by the end of News Corp's financial year, which runs until next June.

http://www.hotklix.com/link/news/business/...ebsites-by-2010

HareKrishna · 08-12-2009, 11:34 PM

7 pages nicely written about India and China politic and economy.
http://www.foreignpolicy.com/story/cms.php..._id=4345&page=3

Many foreign investors think that infrastructure explains the different pace of growth between China and India. No such evidence exists. In the 1980s, India started with some infrastructural advantages over China. It had a longer system of railways, for example. Although we can debate today which country is performing better, there is no doubt that China outperformed India in the 1980s. It was reforms and social investments that propelled Chinese growth, not fancy airports and skyscrapers.

One justification for building those massive infrastructure networks is to attract FDI. For years, Western economists and business analysts have chided India for not following Chinaâs lead in this area. But that criticism puts the cart before the horse. Like infrastructure, FDI follows GDP growth rather than precedes it. In the 1980s, China received very little FDI, and yet the country grew faster and more virtuously than its later growth. FDI is a result of growth, and the first order of the policy business is how to grow the economyânot how to attract FDI. As long as India can grow in the 8 to 9 percent range, even without superior infrastructure, it can easily triple or even quadruple its FDI inflows from its current level of $7 billion a year. Growth can self-finance the infrastructure truly needed for business and economic development.

China has built critical networks, such as power stations and transportation links, but since the mid-1990s, unconstrained by public voice, media scrutiny, and private land rights, Chinese leaders have wasted massive resources on urban skyscrapers that have no economic benefits. Many of them are government buildings and are extraordinarily expensive, costing more than $100 million in some cases. And the financial costs of these projects do not even begin to approach their opportunity costsâthose investments in education and health China has failed to make. That a country constructed nearly 3,000 skyscrapers in Shanghai and added 30 million illiterate Chinese during the same decade is truly remarkable.

The economic dividends of political reform donât appear overnight, which skews the timeline and confuses the cause. But by using nearly every metric, political liberalization has spurred rather than stunted growth in both China and India.

HareKrishna · 08-12-2009, 11:49 PM

http://www.foreignpolicy.com/articles/2009...s_rise?page=0,0

HareKrishna · 08-16-2009, 09:02 PM

Think Again: A Marshall Plan for Africa
http://www.foreignpolicy.com/articles/2009...0%24Version%3D0

HareKrishna · 08-17-2009, 11:41 AM

Democracies are peaceful, representativeâand terrible at boosting an economy. Or at least thatâs the conventional wisdom in Asia, where for years growth in Indiaâs sprawling democracy has been humbled by Chinaâs efficient, state-led boom. But Indiaâs newfound economic success flips that notion on its head. Could it be that democracy is good for growth after all? If so, China better watch its back.

Consider the experiences of the following two Asian countries. In 1990, Country A had a per capita GDP of $317; Country Bâs stood at $461. By 2006, Country A, though 31 percent poorer than Country B only 16 years earlier, had caught up: It enjoyed a per capita GDP of $634, compared with Country Bâs $635. So, if you had to guess, which of these two Asian countries would you assume is a democracy?

You might be tempted to conclude that the better-performing country is authoritarian China and the laggard is democratic India. In reality, the faster-growing country is India, and the laggard is the occasionally autocratic Pakistan. This fact certainly belies the commonly held notion thatâespecially among Asian countriesâauthoritarian states have an advantage in growing an economy compared with their democratic counterparts, who are forced to reckon with such pesky trappings as labor standards and political compromises.

But surely, the familiar China-India comparison would support an authoritarian edge, right? The conclusion seems so obvious: China is authoritarian, and it has grown faster; India is democratic, and it has grown more slowly. For years, Indians have defended their democracy with a sheepish apologyââYes, our growth rate is terrible, but low growth rates are an acceptable price to pay to govern a democracy as large and as diverse as India.â

There is no need to apologize now. India has ended the infamous 2 to 3 percent annual âHindu rateâ of growth and begun its own economic takeoff. Recent Indian success is not only impressive in terms of its speedâgrowing at the âEast Asian rateâ of 8 to 9 percent a yearâbut also in terms of its depth and breadth. The Indian miracle is no longer confined to the much vaunted information-technology sector; its manufacturing is taking off. Even the historically lackluster agricultural sector is beginning to grow.

So where does this leave the âauthoritarian edgeâ that Chinaâs economy has supposedly enjoyed for years? The emerging Indian miracle should debunkâhopefully permanentlyâthe entirely specious notion that democracy is bad for growth. And the emerging Indian miracle holds substantial implications for Chinaâs political future. As Chinese political elites mark the 30th anniversary of economic reforms this year, they should reflect on the Indian experience deeply and absorb the real reason behind their own miracle.

The idea that there is a trade-off between economics and politics is ingrained in the minds of many policymakers and business executives in Asia, as well as the West. But that idea has never been systematically proven. If India, with its noisy, chaotic, and lumbering political arrangements, can grow, then no other poor country must face a Faustian choice between growth and democracy. A deeper look at the two countries shows that they have succeeded and failed at different times for remarkably similar reasons. Their economies performed when their politics turned liberal; their performances faltered when their politics slid backward. Now, as many poor countries grapple with similar political and economic choices, we must understand this dynamic. It is high time to get the China-India story right.

INDIAâS UNTOLD HISTORY

That story doesnât begin in 2008. Itâs a horse race that goes back decades, and one that tells us much about the relationship between democracy and growth, governance and prosperity. From an economic perspective, it is not the static state of a political system that matters, but how it has evolved. The growth India enjoys today sped up in the 1990s as the country privatized TV stations, introduced political decentralization, and improved governance. And contrary to the conventional wisdom, India stagnated historically not because it was a democracy, but because, in the 1970s and 1980s, it was less democratic than it appeared. To understand just what is happening in Indiaâs economy todayâand how it relates to the countryâs political systemâwe must travel as far back as the 1950s.

Many scholars blame Indiaâs first prime minister, Jawaharlal Nehru, for adopting a development strategy that caused India to stagnate from 1950 to 1990. But this view is unfair to Nehru, and it shifts the blame from the real culpritâIndira Gandhi, Nehruâs daughter and prime minister during much of the period from 1966 to 1984. Nehruâs commanding-heights approach was the reigning ideology in many developing countries, some of which, like South Korea, were quite successful. The issue is not how harmful Nehruâs economic policies were, but why India intensified and persisted in this model when it was clearly not working. To answer this question we have to understand the lasting damage that Indira Gandhi inflicted on Indian democracy.

Patronage became her electoral strategy as she undermined a vital institution in a functioning democracyâthe party system. Gandhi weakened the Congress Party, once a proud catalyst of the independence movement, by sidestepping many of its well-established procedures, reducing its grass-roots reach in the states, and appointing party officials rather than allowing rank-and-file members to elect them. The shriveling of the Congress Party meant that Gandhi had to use other means to get reelected: crushing political opposition, pandering to special interests, or offering political handouts.

Or cancellations of elections altogether. Indira Gandhi imposed emergency rule in June 1975 and cancelled the general election scheduled for the following year. It was no isolated event. As early as 1970, she postponed or cancelled Congress Party elections. In addition, she moved very far to replace federalism with her own centralized rule. One telling statistic, as shown by political scientists Amal Ray and John Kincaid, is that between 1966 and 1976 the Gandhi government invoked Article 356 of the constitutionâwhich empowers the federal government to take over the functions of state governments in emergency situationsâ36 times. The government of Nehru and his successor (1950â65) resorted to this measure only nine times. From 1980 to 1984, she invoked this power an additional 13 times. The misuse of the extraordinary power vested in the executive damaged an important institution of Indian democracy.

The cumulative effect of Gandhiâs actions is that the Indian political system, though still retaining some essential features of a democracy, became unaccountable, corrupt, and unhinged from the normal bench marks voters use to assess their leaders. In a functioning democracy, voters punish those politicians who fail to deliver at the ballot box. Not in India. Both the 1967 and 1971 reelections of the Congress Party followed a decline of per capita GDP the year before. It was not democracy that failed India; it was India that failed democracy.

The economic consequences of this period of illiberalism were long lasting. Because Gandhiâs political fortunes depended on patronage, she felt no compulsion to invest in real drivers of economic growthâeducation and health. The ratio of teachers to primary-school students throughout the long Gandhi years stubbornly hovered around 2 percent. After her rule, in 1985, only 18 percent of Indian children were immunized against diphtheria, pertussis, and tetanus (DPT), and only 1 percent were immunized against measles. Even today, India is still paying for her neglect. The low level of human capital remains the single largest obstacle to that countryâs developmental prospects.

The good news is that India is shedding this harmful legacy. As Indian politics became more open and accountable, the post-Gandhi governments began to put welfare of the people at the top of the policy agenda. For example, the adult literacy rate increased from 49 percent in 1990 to 61 percent in 2006. In due time, these social investments will translate into real dividends.

CHINAâS GREAT REVERSAL

The story of Chinaâs rise seems, on the surface, quite different. A communist and closed regime undertakes an efficient, massive, and rapid embrace of the global economyâand sends its country into overdrive. It appears to be a far cry from the common understanding that democracy promotes growth because it imposes constraints on rulers and reassures private entrepreneurs of the safety of their assets and fruits of their labor. The idea that China grew because of its one-party rule stems from a mistaken focus on a single snapshot in time at the expense of an understanding of shifting trends. China did not take off because it was authoritarian. Rather, it took off because the liberal political reforms of the 1980s made the country less authoritarian. Like India, when China reversed its political reforms and saw governance worsen in the 1990s, citizensâ well-being declined. Household income growth slowed, especially in the rural areas; inequality rose to an alarming level; and the gains of economic growth accruing to ordinary people fell sharply. China even underperformed in its traditional areas of strength: education and health. Adult illiteracy rose. Immunizations fell. The countryâs GDP might have been booming, but it was also hazardous to your health.

The real Chinese miracle began back in the 1980sâwhen Chinese politics was most liberal. Personal income growth outpaced GDP growth; the labor share of GDP was rising; and income distribution initially improved. China accomplished far more in poverty reduction in the 1980s without any of the factors (such as foreign direct investment) now viewed as essential elements of the China model. In four short years (1980â84), China lifted more of its rural population out of poverty than in the 15 years from 1990 to 2005 combined. If India became less democratic under Indira Gandhi, China became less authoritarian under the troika rule of Deng Xiaoping, Hu Yaobang, and Zhao Ziyang in the 1980s. Therein lies the key insight into Chinaâs economic takeoff.

HareKrishna · 08-17-2009, 11:42 AM

One of the first acts by the reformist leaders was to signal an improving environment for private property. In marked contrast to todayâs massive land grabs, the Chinese government in 1979 returned confiscated bank deposits, bonds, gold, and private homes to those former âcapitalistsâ the regime had persecuted. The number of people affected by this policy was not large, around 700,000. But symbolism mattered for a country still reeling from the Cultural Revolution. There were also other symbolic acts designed to elicit the confidence of private entrepreneurs in the new political environment of a post-Mao era. In 1979, two vice premiers visited and personally congratulated an entrepreneur who was granted the first license to operate a private restaurant in Beijing. As early as 1981, a Communist Party document signaled a willingness to recruit its members from the private sector, a well-publicized gesture. The widely held view that the party only began to recruit capitalists late in the Jiang Zemin era is simply incorrect.

The reformist leaders also began to embark on meaningful political changes. As scholar Minxin Pei has noted, every single important political reformâsuch as the mandatory retirement of government officials, the strengthening of the National Peopleâs Congress, legal reforms, experiments in rural self-government, and loosening control of civil society groupsâwas instituted in the 1980s. The Chinese media became freer in the early reform era. The timing here is critical. This âdirectional liberalismâ of Chinaâs politics either preceded or accompanied Chinaâs economic growth. It was not a result of economic success.

This liberalism mattered the most for growth in rural China, where the majority of Chinese citizens live. Private access to capital eased in the 1980s. Private entrepreneurship and even some privatization became widespread, especially in poorer parts of the country that needed them most. Of 12 million rural businesses classified as township and village enterprises, 10 million were completely private. The change in direction of Chinaâs politics was sufficiently credible to encourage millions of entrepreneurs to go into business for themselves.

But in the 1990s, the Chinese state completely reversed the gradualist political reforms that the leadership began in the 1980s. This assessment comes from a well-placed insider, Wu Min, a professor at the Party School under the Shanxi Provincial Party Committee. In a 2007 article, Wu revealed that the political reform program adopted at the 13th Party Congress in 1987 implemented some substantial changes. The congress abolished the party committees in many government agencies and explicitly delineated the functions of the party and the state. After 1989, there was no progress on the political reform front, especially in reducing and streamlining the power of the Communist Party.

The political reforms of the 1980s were designed to enhance the accountability of the government by creating some checks and balances over the power of the party and by fostering intraparty democracy. Wu cites one specific measure in the 1990s to derail the reforms of the 1980s. According to Wu, in the 1990s China instituted explicit provisions prohibiting the National Peopleâs Congress (NPC) from conducting evaluations of officials in the executive branch and the courts. Wu comments, âThis is obviously a step backward.â

Just how far did this step set back China? How about nearly 30 years? Consider Chinaâs track record when it comes to industrial fatalities. In 1979, in the aftermath of the capsizing of an oil rig that resulted in 72 deaths, the NPC held hearings at which officials in the Ministry of Petroleum Industry were called to testify. The minister was determined to have been negligent and was sacked. But since the mid-1990s, there have been hundreds of explosions and industrial accidents in Chinaâs coal mines. Thousands of people have lost their lives. No hearings have been held, and not a single official at the rank of minister or provincial governor has ever been held explicitly responsible.

Like Indira Gandhi in the 1970s and 1980s, the Chinese state greatly centralized its economic management in the 1990s. It was another reversal from the promising reforms of a decade earlier, the gist of which was delegating decision-making to those best informed about local situations. In 1994, the central government increased substantially the shares of tax revenues going to the central coffers and abolished one of the most innovative Chinese reformsâfiscal federalism. A less well-known development in the 1990s was that the Chinese state centralized the budgetary and other functions of villages. So, even though people were voting in village elections, the officials elected exercised very little power.

The economic consequences of these reversals were substantial. The 1990s saw depressed growth in household incomes relative to GDP, which means that the average Chinese person was losing ground. The employee share of GDP âthe income going to the general populationâpeaked in 1990, at 53.5 percent. By 2002, it had declined to 45 percent of GDP. At 45 percent, the Chinese economy in 2002 was benefiting its people less than it was in 1978, when its employee share of GDP stood at 48 percent. Similarly threatening for the poorest Chinese is a development that has garnered almost no attention: The country is backsliding on literacy. On April 2, 2007, the state-run China Daily published an article with an unusually frank title, âThe ghost of illiteracy returns to haunt the country.â It reported that the number of illiterate Chinese adults increased by 30 million between 2000 and 2005. In 2005, there were 115.7 million illiterate Chinese adults, compared with 85 million in 2000. The roots of the problem began in the 1990s. Consider how literacy is definedâthe ability to identify 1,500 Chinese characters by the age of 7 to 9. An adult reaching into the illiterate group by 2005 received all his or her primary education in the mid-1990s. In addition, immunization rates against DPT and measlesârising throughout the 1980sâbegan to decline in the 1990s. In time, China will pay dearly for these colossal failures.

In the 1990s, the nature of Chinaâs growth was fundamentally altered. In the 1980s, growth was broad-based and positive for the poor; since then, the percentage of people benefiting from growth has narrowed, and social performance has deteriorated. The impact of this great reversal is strongest in the silent and less visible rural areas of China.

THE WAY TO REFORM

Of course, understanding the origins of Indiaâs and Chinaâs separate paths to development is just half the story. Whatâs more telling is how these two countries enacted and reacted to reformsâand what that says about the relationship between political liberalization and economic growth.

After the Soviet collapse, Chinese political elites converged on the view that China avoided the same fate because China had not reformed its politics. The truth is precisely the opposite. The single most important reason why China survived the 1989 Tiananmen crisis is because its rural population was content. In the 1980s, rural China experienced the most radical economic and political reforms. It was reform that saved the Chinese Communist Party.

Political reforms contributed to Indian growth as well. Take the media. During the long Gandhi era, though the print media were free, the government controlled the TV stationsâa more important source of information for a country with high illiteracy. The privatization of the stations in the 1990s not only enriched the quality of entertainment for the average Indian but also added transparency to Indian politics. Many corruption and bribery scandals were first exposed on TV, the effects of the exposures being magnified by the vivid images of politicians receiving cash in shady hotel rooms. That is the right way to fight corruption.

As China tightened its political grip on rural affairs in the wake of the Soviet collapse, India moved in the opposite direction. In 1992, India amended its constitution to strengthen a reform with long and deep implicationsâvillage self-government. This panchayati raj phenomenon promises to transform an urban-centered, elitist system to one that is Tocquevillian in character and is empowering women along the way. The auxiliary institutions of Indian democracy, so atrophied under Indira Gandhi, have been renewed. World Bank indicators show a notable improvement in key areas of Indian governance during the period of high growth since the mid-1990s.

In fact, India leads China in a number of important areas of reform. Throughout the 1990s, India reduced state controls on the banking sector, allowed the entry of private domestic and foreign banks, and abolished government interference in setting the equity pricing of initial public offerings on the stock exchange. China is nowhere near India in terms of pace and depth of financial reforms.

Would democracy galvanize opposition to reforms? Many progressive reformers in China hold this view, but this is a hypothesis long on fear and short on facts. Consider the following fact about Indian politics: All the reforms have been carried out by a coalition of multiple parties rather than by a single-majority ruling party. This is true of the Congress Party in the early 1990s, the Bharatiya Janata Party between 1998 and 2004, and the Congress Party today.

What about building infrastructure? Even liberals in India sometimes wish for a dose of authoritarianism here. A powerful government in China is able to sidestep all the political and legal complications and build world-class railroads, highways, water systems, and other networks overnight. Surely, authoritarianism has an edge when it comes to public works projects. But no. Building infrastructure has followedânot precededâChinese growth. In 1988, China had roughly 91 miles of expressway. That did not begin to change until the late 1990s, when the country poured massive resources into infrastructure. Only in the past eight to 10 years could the country claim to have infrastructure rivaling that of developed countries.

Many foreign investors think that infrastructure explains the different pace of growth between China and India. No such evidence exists. In the 1980s, India started with some infrastructural advantages over China. It had a longer system of railways, for example. Although we can debate today which country is performing better, there is no doubt that China outperformed India in the 1980s. It was reforms and social investments that propelled Chinese growth, not fancy airports and skyscrapers.

One justification for building those massive infrastructure networks is to attract FDI. For years, Western economists and business analysts have chided India for not following Chinaâs lead in this area. But that criticism puts the cart before the horse. Like infrastructure, FDI follows GDP growth rather than precedes it. In the 1980s, China received very little FDI, and yet the country grew faster and more virtuously than its later growth. FDI is a result of growth, and the first order of the policy business is how to grow the economyânot how to attract FDI. As long as India can grow in the 8 to 9 percent range, even without superior infrastructure, it can easily triple or even quadruple its FDI inflows from its current level of $7 billion a year. Growth can self-finance the infrastructure truly needed for business and economic development.

China has built critical networks, such as power stations and transportation links, but since the mid-1990s, unconstrained by public voice, media scrutiny, and private land rights, Chinese leaders have wasted massive resources on urban skyscrapers that have no economic benefits. Many of them are government buildings and are extraordinarily expensive, costing more than $100 million in some cases. And the financial costs of these projects do not even begin to approach their opportunity costsâthose investments in education and health China has failed to make. That a country constructed nearly 3,000 skyscrapers in Shanghai and added 30 million illiterate Chinese during the same decade is truly remarkable.

The economic dividends of political reform donât appear overnight, which skews the timeline and confuses the cause. But by using nearly every metric, political liberalization has spurred rather than stunted growth in both China and India.

After a long hiatus, Chinaâs leadership has rhetorically returned to a vision of the 1980sâthat political reforms should be a priority. Rural China has begun to recover from the neglect of the 1990s, and rural income has grown the fastest since 1989. All this is good news. But consolidating these achievements will require a more substantial undoing of the illiberal policies of the 1990s. How India managed to emerge from its own long shadow of illiberalism offers some valuable lessons. In the past, China taught India the importance of social investments and economic opening. It is time for todayâs China to take a page from Indiaâand from the China of the 1980sâthat political reforms are not antithetical to growth. They are the keys to a healthier and more sustainable foundation for the future.

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