[This article was originally published in The Objective Standard and is reprinted here by special permission. © 2011 The Objective Standard]
Over the past few years, the Indian government spent $8.5 billion to host the Commonwealth Games (CWG), a multisport event akin to the Olympics, which were held in New Delhi from October 3 through 14, 2010.1 The official purpose of the CWG was to generate “national prestige” for India.2 But the Games did no such thing. In fact, the CWG were a national disgrace. The games showcased a contradiction embraced by Indians that threatens to destroy the economic and political progress they have achieved over the past two decades.
For more than four decades after India gained independence from England in 1947, India’s economy languished under the weight of the socialist policies stemming from the collectivist mind-set of the Indian people. As the economy faltered, India borrowed heavily from other countries and, especially, from the International Monetary Fund (IMF). In 1991, due to decades of low productivity and mounting debt, India faced a massive economic crisis: The Indian currency was destabilizing and the government could not pay its debts.
To receive extensions on the debt payments due, the Indian government reluctantly agreed to certain “deregulations” of its economy. In one such allowance, the government loosened restrictions on foreign investments, enabling foreigners to purchase up to 51 percent ownership in certain state-owned enterprises.3 This and similar pragmatic steps resulted in an influx of capital, stabilized the currency, satisfied lenders’ concerns about India’s ability to eventually pay its debts, and led the IMF to temporarily defer India’s loan payments.4 This process of “deregulation” came to be known as “the economic liberalization of India.”
Over the next two decades, as entrepreneurial forces were unleashed, India’s economy grew by orders of magnitude. Today, it is growing at a rate of 6 to 8 percent annually, making it the second fastest-growing economy in the world (after China).5 India’s Gross Domestic Product (GDP) now stands at $1.235 trillion, making it the eleventh largest economy in the world.6 The country has become a favorite destination for businesses seeking to outsource marketing, research, development, and other business processes. The net effect is that many Indians have become, and are becoming, very rich.
But the collectivist mind-set has not abated, and Indians are not content with wealth and prosperity. They want “national prestige.” Thus, Indian policy makers have embarked on a succession of projects to show off the country’s wealth. The CWG are the biggest, most ostentatious of these projects to date. To see the contradiction inherent in the Games, let us consider what made them possible.
To begin with, who paid for the CWG? Certainly not the Indian government. Governments do not and cannot produce wealth. They can and often do confiscate and redistribute wealth—through taxation, inflation, and the like. And governments can spend wealth like drunken sailors. But governments cannot produce wealth, and the Indian government is no exception. Although the government spent $8.5 billion on the CWG, it did not produce a penny of that wealth. Rather, the government took it from the countless individuals and businesses that produced it.
How did these individuals and businesses produce sums of wealth so large that the government could take $8.5 billion from them and spend it on sporting events to achieve “national prestige”? They produced it by thinking rationally, making decisions based on their best judgment, working hard, and creating goods and services for trade in the marketplace.
Why were these individuals and businesses able to be so productive? Because, over the course of the past two decades, India substantially freed its economy—which means, it substantially freed the Indian people from government coercion.
Herein lies the shameful contradiction showcased by the Commonwealth Games: In the midst of their enjoyment of economic and political progress achieved by a reduction in government coercion, Indians have embraced government coercion to finance a display of “national pride.”
Many Indians are enraged by the government’s involvement in the CWG, but few are enraged for the right reason.7 Yes, government officials and bureaucrats engaged in fraud and other forms of corruption; yes, they lined their pockets with most of the $8.5 billion; yes, the percentage of the money that the government actually spent on the games was spent inefficiently; and yes, all of this is bad. But the CWG project was corrupt prior to all that, and for a more fundamental reason. The whole CWG project from the very beginning was morally wrong. It was morally wrong because for the government to coercively take the property or wealth of its citizens is morally wrong—especially when the wealth is used not to support a legitimate function of government (such as the courts, the police, or the military) but to achieve the neurotic, collectivist goal of “national prestige.”
Morally speaking, the wealth that the Indian government spent on the CWG did not belong to the government. Nor did it belong to “India” or the “nation” or the “public.” The wealth the government spent on the CWG morally belonged to the individuals and businesses that produced it. This is a matter of the law of cause and effect: He who produces wealth thereby morally owns it—and thus should be politically free to use it as he sees fit.
This moral truth is more fundamental than the economic truth that the government made poor, inefficient use of the $8.5 billion. In fact, the moral truth is what gives rise to the economic truth. Had the Indian government recognized the rights of the producers of this $8.5 billion to keep and use their money as they saw fit, the producers would have spent their money in much wiser and more efficient ways. When people are free to use their money as they choose, they tend to do so in an economically sensible manner. To see this principle at play, consider India’s cricket industry.
The sport of cricket enjoys near universal appeal in India. When an important cricket game is being played, hundreds of millions of Indians put everything on hold to watch it. Indians value cricket highly and thus will spend their time, effort, and money supporting and enjoying the sport. For decades, however, India’s cricket industry was controlled by a government-sanctioned monopoly called the Board of Cricket Control of India (BCCI). Unsurprisingly, given the monopoly, cricket games held under the auspices of BCCI were mired in corruption—including “match fixing” (players gambling on the outcome of games in which they were playing). But then, in 2007, the BCCI allowed the creation of the Indian Premier League (IPL), an organization based on a franchise model similar to the NBA and NFL in the United States. What happened? In just three years, the IPL has become a huge economic success.
The IPL began with individual entrepreneurs and businesses bidding for and buying the franchises at auction. The private ownership of these sports franchises resulted in several positive changes in the Indian cricket industry. Long-range thinking and profit-driven marketing dramatically increased ticket sales and revenues; top cricket talent from around the world sought to participate in the Indian cricket industry; players’ salaries skyrocketed; “match-fixing” virtually disappeared; and the games became increasingly more interesting, more exciting, more fun.8 In 2010, a mere three years after the start of the IPL, the UK-based brand consultancy group, Brand Finance, valued the IPL at $4.13 billion.9
Such is the nature of freer markets.
Political events of the 20th and 21st centuries make clear to anyone paying attention that people in freer societies produce more wealth than people in more coercive societies. Just compare the production in the United States to that in the USSR, or the production in West Berlin to that in East Berlin, or the production in India after 1991 to that in India prior to 1991. But more important than this relatively obvious economic truth is the nonobvious moral truth that underlies and gives rise to it. That moral truth is the principle of individual rights: the recognition of the fact that individuals are morally entitled to live their own lives as they see fit; to act in accordance with their own judgment; and to keep, use, and dispose of the product of their effort—including their money.
Unfortunately, India liberalized its economy not in order to uphold this moral principle but in order to get the nation out of financial trouble. This is where India went wrong, and this is what the Indian people need to learn if they want to achieve full, genuine, and permanent freedom—and the endless economic progress that comes with it.
The fact that freer markets cause a country to become wealthier is a good thing to know, and most people, on some level, do know it. But, freer markets permitted by a government for pragmatic purposes—rather than established by a society in recognition of the principle of individual rights—can just as readily be eliminated for pragmatic purposes.
If Indians want to retain and expand their freedoms, they need to grasp and uphold the principle of individual rights as the reason why the government should not interfere in the marketplace, or host events to boost “national prestige,” or coercively seize the property of Indians. If Indians grasp and uphold this principle, they will soon be the freest, wealthiest, most prosperous people on earth. And that would be something in which to take pride.
1 “Commonwealth Games at What Cost?” News X Delhi broadcast, September 23, 2010, http://www.youtube.com/watch?v=F_k44So-bX4. This is a conservative estimate based on the total amount spent on the games by all the governments in India—central, state, and local. See also http://www.hic-sarp.org/documents/Whose%20Wealth_Whose%20Commons.pdf.
2 Syeda Sana Rahman, “The 2010 Commonwealth Games: Will India Pull It Off?” Institute of South Asian Studies article Brief No. 168, August 25, 2010, http://www.isas.nus.edu.sg/Attachments/PublisherAttachment/ISAS_Brief_168_-_Email_-_The_2010_Commonwealth_Games_-_Will_India_Pull_It_Off_26082010185613.pdf.
3 Ajay Singh and Arjuna Ranawana, “Conflict of Interest: Local Industrialists Issue a Broadside against Multinationals,” Asiaweek.com, April 12, 1996, http://premium.edition.cnn.com/ASIANOW/asiaweek/96/0412/nat1.html.
4 Arvind Panagariya, “India’s Economic Reforms: What Has Been Accomplished? What Remains to Be Done?” Asian Development Bank policy brief, February 2002, http://www.adb.org/Documents/EDRC/Policy_Briefs/PB002.pdf.
5 Anjana Pasricha, “India Now Second Fastest Growing Economy,” Australian News.Net, June 1, 2008, http://www.australiannews.net/story/366072.
6 International Monetary Fund, World Economic Outlook Database, April 2010, http://www.imf.org/external/pubs/ft/weo/2010/01/weodata/weorept.aspx?sy=2007&ey=2010&scsm=1&ssd=1&sort=country&ds=.&br=1&c=534&s=NGDPD%2CNGDPDPC%2CPPPGDP%2CPPPPC%2CLP&grp=0&a=&pr.x=81&pr.y=8.
7 See “Whose Wealth? Whose Commons? 2010 Delhi Commonwealth Games” Facebook page for a sampling of the outrage, http://www.facebook.com/pages/Whose-Wealth-Whose-Commons-2010-Delhi-Commonwealth-Games/128106970575534.
8 “IPL 2nd Highest-Paid League, Edges out EPL,” The Times of India, March 29, 2010, http://timesofindia.indiatimes.com/iplarticleshow/5736736.cms. For a rough overview of developments related to the Indian Premier League, see http://en.wikipedia.org/wiki/Indian_Premier_League.
9 “IPL Brand Value Doubles to $4.13 Billion: Brand Finance,” The Economic Times, March 22, 2010, http://economictimes.indiatimes.com/news/news-by-industry/media/entertainment-/entertainment/IPL-brand-value-doubles-to-413-billion-Brand-Finance/articleshow/5713065.cms.