[alpha1]

Originally Posted by alpha1

Is capitalism long sighted?
What kind of economic value is placed important and taken into account by the participants in a "market economy" while taking decisions?

Looks like my question got buried under already running arguments.

Can someone answer it?

[Samurai]

Originally Posted by alpha1

Is capitalism long sighted?
What kind of economic value is placed important and taken into account by the participants in a "market economy" while taking decisions?

Profits, shareholder value, market share, etc. But you obviously know this... what is your real question?

[sudev]

Is there any paper or research on ineffectiveness of higher taxes as government spending in non core governance activities is inefficient?

I have heard of such idea but do not know the exact resource.

[Samurai]

Originally Posted by sudev

Is there any paper or research on ineffectiveness of higher taxes as government spending in non core governance activities is inefficient?

It depends on the definition of inefficient. If the government gives pension to all senior citizens, will that be considered efficient?

Ten years ago I thought that was very inefficient. For example, my dad was getting pension until he passed away at almost 83. So he got pension for 23 years after retiring, and now my mother gets family pension until her lifetime. I thought why.... I could have easily supported them in the absence of such pension.

However, when my dad passed away in 2015 I started reflected on his life. Then it struck me... he had not borrowed a single penny from us kids, ever since he started getting pension. Not even for any medical issues. In fact, once he even offered me money when I was going through a rough patch. I learned not to complain about my problems then. He lived with dignity in our village, in his own home, managing the household with ₹20K he received every month. Now my mother gets ₹8K pension every month, and she hasn't borrowed any funds from me since. Is living with dignity at your old age worth paying high taxes in your youth? If you are young, you may not think so. But my thought process has changed as I am getting closer to old age.

On the other hand you are referring to fund leakage in government programs due to corruption, that is something that can be corrected in the long term via laws and enforcement and technology. Keep in mind that PSUs are a kind of social program. Cancelling social programs due to leakage would be like cutting off the nose as cure for cold.

[ksameer1234]

Originally Posted by Samurai

Keep in mind that PSUs are a kind of social program. Cancelling social programs due to leakage would be like cutting off the nose as cure for cold.

Precisely. Having lived all my life in and around the township of Steel Authority of India (SAIL), the core purpose of PSUs clearly stands out. PSUs at their inception were created for social welfare and manufacturing goods was, in a sense, by-product. PSUs and their manufacturing units came up in remotest of the places and better standard of living and social prosperity followed these industrial setups. One cannot expect private players to invest their capital for uplifting the marginalised and unconnected. Benchmarking PSU performance against private sector competitors isn't apple to apple comparison.

[am1m]

Originally Posted by Samurai

Keep in mind that PSUs are a kind of social program. Cancelling social programs due to leakage would be like cutting off the nose as cure for cold.

I am so happy to hear that there are still a lot of people who think this way! May your tribe increase!

These days everyone I hear/read seems to think we as a country should be aiming at an absolutely ruthless, completely free market capitalism-oriented (I'm sure I'm mixing all definitions here, but just making a point) and bottom-line focused, survival of the fittest type environment.

I was traveling by bus in Bangalore a few years ago. An elderly man and his wife got on the bus and asked the conductor for two tickets. Diesel prices had been hiked earlier and BMTC had implemented a much-delayed fare hike. So he was really surprised when the conductor quoted a higher rate than he was probably used to. All of us could see the conflict in his mind, he thought about it for a while and then quietly asked his wife to get off and they both exited the bus. It was a matter of a few rupees. Any one of us would have happily offered to pay that, but we knew he would probably be insulted.

I really don't understand economics. And I'm sure harder and more practical heads than mine are needed to keep this whole mess afloat. But heck man, if some of my taxes can go towards helping people like that, I'm more than happy to pay.

[mallumowgli]

Originally Posted by Samurai

Keep in mind that PSUs are a kind of social program. Cancelling social programs due to leakage would be like cutting off the nose as cure for cold.

Slightly OT : The PSUs in India are not that inefficient. Their capex approval takes lot of time. But in terms of regular operations - the navratna and mini-ratna PSUs, like the Oils companies, SAIL, NALCO etc, are as efficient as their private sector counterparts

[alpha1]

Originally Posted by Samurai

what is your real question?

I don't know if the posts following are the effect of my question, but they are based on the same theme.

Originally Posted by sudev

government spending in non core governance activities is inefficient?

What is inefficient?
Are we talking short term or long term?
What importance are we placing on currently non-tangible benefits?

Originally Posted by Samurai

It depends on the definition of inefficient.
... Is living with dignity at your old age worth paying high taxes in your youth? If you are young, you may not think so.

Correct, most of us humans don't have the ability to see far in future.
And therefore mot of our decisions (so called rational decisions) are based on short term returns.
But are they really beneficial to us?

Originally Posted by ksameer1234

One cannot expect private players to invest their capital for uplifting the marginalised and unconnected.

Exactly.

Originally Posted by am1m

These days everyone I hear/read seems to think we as a country should be aiming at an absolutely ruthless, completely free market capitalism-oriented (I'm sure I'm mixing all definitions here, but just making a point) and bottom-line focused, survival of the fittest type environment.

But heck man, if some of my taxes can go towards helping people like that, I'm more than happy to pay

The problem is that most humans don't have the intellect / compassion / understanding to think that far.

[Chetan_Rao]

“Society grows great when old men plant trees whose shade they know they shall never sit in”.

[ashokrajagopal]

This thread is treading on the taboo realm of the "S" word and economics that has been ethnically(figure of speech) cleansed for decades now.
Interesting.

I guess the contributors must know that such economics is not fashionable and trendy now.

[Samurai]

Originally Posted by ashokrajagopal

This thread is treading on the taboo realm of the "S" word and economics that has been ethnically(figure of speech) cleansed for decades now.

This happened because of the ignorance of the history of capitalism. Until 20th century, most countries practiced unfettered capitalism, irrespective of their political ideology. There were no regulations to stop businesses from causing harm to the society, as long as they paid taxes to the ruling authorities.

Let's go back 200 years and consider how unregulated free market capitalism treated ordinary folks. And what kind of inequality existed between the lifestyle of rich and the poor. This is from People's History of United States.



The situation of garment workers is still far from perfect. But the current governments have stepped in to protect the workers using various labour regulations. In the absence of labour regulations, it would not be any different than 19th century.

Another thing pure capitalism is famous for is pushing most wealth into the hands of few. So this is how rich women lived at the same time.

[DigitalOne]

Originally Posted by Samurai

If the government gives pension to all senior citizens, will that be considered efficient?

....
Keep in mind that PSUs are a kind of social program. Cancelling social programs due to leakage would be like cutting off the nose as cure for cold.

Giving pension to all senior citizens is completely different from running PSUs. Running PSUs benefit a very small subset of a population. And that relatively small population becomes privileged enjoying a good lifestyle, schools, pensions etc at the cost of the general populace.

To give a top of mind example, the government supports Air India by giving 8000 crores every year as budgetary support. Can this 8000cr every year be spent elsewhere, possibly opening new schools?

Originally Posted by ksameer1234

PSUs at their inception were created for social welfare and manufacturing goods was, in a sense, by-product.

Some of the PSUs made sense at that time when they were established. Now most of them don't make sense to keep it in government hands. A lot of PSUs hold prime property in the cities (example, ITL, BEML, HMT in Bengaluru). All PSUs have prime residential houses in every city (especially Delhi) for their employees. It is high time government privatizes all unnecessary PSUs, auction all the real estate, and uses the money to fund an Universal Basic Income.

Originally Posted by am1m

These days everyone I hear/read seems to think we as a country should be aiming at an absolutely ruthless, completely free market capitalism-oriented (I'm sure I'm mixing all definitions here, but just making a point) and bottom-line focused, survival of the fittest type environment.

I really don't understand economics. And I'm sure harder and more practical heads than mine are needed to keep this whole mess afloat. But heck man, if some of my taxes can go towards helping people like that, I'm more than happy to pay.

Nope. Very few think like that. Otherwise you wouldn't have charities, NGOs, thousands of people from the corporate world volunteering outside of work;

It is not a ruthless world. The only difference of opinion is whether the government is the best judge to implement. In my opinion, no.

1. Recently TN increased bus fares for govt buses and private buses. Why? So that private players who may be more efficient should not undercut govt bus. Karnataka government has been trying to increase taxi fares for a couple of years because Ola/Uber were undercutting their "licensed" (read, cronies) cabs. So the government does not always work for public benefit.

2. How do you make sure that the tax you pay gets spent only for the right causes? What if the government decides to spend on a bullet-train and not on pensions?

3. Who decides what has to get subsidized? Please remember that the resources/money are limited. Any subsidy on one sector takes away the money from another sector. The only way to subsidize all sectors is to keep printing money. This just increases inflation which is a tax on everybody, and a big burden on the poor.

Originally Posted by Samurai

This happened because of the ignorance of the history of capitalism.

I am not advocating unfettered, free-markets capitalism. I don't think there are any such countries who have been successful.

To be really specific, imho this is how it should be:
1. No Government owned businesses (no Air-India, no HMT, no Ashok hotels etc).
2. No subsidies.
3. Government spends only on primary health care, and primary education.
4. Constitutionally guaranteed Universal Basic Income, which goes up for all senior citizens as they age.


If this is capitalism or socialism, I don't know. But I think this is the most practical.

[SmartCat]

Originally Posted by DigitalOne

1. No Government owned businesses (no Air-India, no HMT, no Ashok hotels etc).

In an ideal world -> mining of resources like iron ore, coal, oil & gas etc should be done by PSUs. It is nation's wealth after all. Prospecting can be done by private players and a handsome fee paid for it, perhaps even a royalty (percentage of revenues)

[Samurai]

Originally Posted by DigitalOne

3. Government spends only on primary health care, and primary education.

So... police will be run by Ambanis and Military will be run by Tatas, etc. Will there be competing police companies we can choose from? How does jurisdiction work, will they overlap?

[DigitalOne]

Originally Posted by Samurai

So... police will be run by Ambanis and Military will be run by Tatas, etc. Will there be competing police companies we can choose from? How does jurisdiction work, will they overlap?

Missed that. Goverment does have to spend on police/internal security, delivery of justice, and national security. Thanks for pointing it out.