Wednesday, August 31, 2011

Chinese building falls over

A friend sent me an email with pictures of a building in China that has keeled over and fallen. For a moment I thought it was joke until further research revealed that it was indeed true.


Given that the Chinese are constructing a highway, a harbour, a coal fired power plant and much else lets hope that they do a better job here than they do in China.

Hang on, hang on a minute. Didn't a bridge of the highway collapse already? That too with no traffic on it, it just collapsed under its own weight. There were also the mysterious fires in the coal power plant. The power plant seems to be operating below capacity and have a few other problems as well. It almost looks like the Chinese are trying to get a rather hot potato off their hands.

The harbour, although opened is not yet operational due to a few small technical hitches.

The collapsed building in China is a good illustration of the impact of corruption. Basic safety, building and planning regulations are not enforced because either

(a) the builders have paid off the officials who are supposed to do their job or;
(b) they have sufficient influence to bypass the regulations. ie The authorities are too afraid to enforce the rules because the officials concerned will be penalised if they do.

Corruption is not therefore just a matter of money; undue influence over public officials has (from the point of view of the ordinary citizen) exactly the same impact. What matters is that rules, principles and policies are bypassed; it is not how they are circumvented that matters.

The second important lesson is that corruption is not about someone making a little money on the side, it is also that it can pose a danger to the public. The controversy over substandard cement is a case in point.

Interestingly enough, poor policy preceded the import of the substandard cement. The Government imposed price controls on cement, which lead to a shortage. The Government then triumphantly rode to the rescue with the import of cheap cement, which turned out to be substandard. Leave aside the question that someone made a buck dumping cement; who will answer if a building collapses and kills someone?

We now learn that there is also a danger from X-Ray machines that have obviously been imported bypassing standard regulations? The patients must now decide which hospitals are likely to be safe, as far as X-Rays are concerned. Hopefully someone in the private hospitals will take the responsibility to check that their equipment is in order, many may actually market their services on this basis. But what of the average man who has to visit the state run hospitals?

I know for a fact that the vast majority of the Chinese tableware in the market is lead contaminated. How do I know this? Because a friend who works in one of these companies was looking for cheap products to stock their showrooms with.

They imported some from China but is was rejected due to lead contamination. Desperate for stocks, they bought some stuff wholesale from Pettah, all from China and all of which turned out to be lead contaminated. They tried samples from many different vendors, all were bad. I think they are now sourcing from local manufacturers, all of who meet the standards.

The question is how did this get into the country? The customs performs tests for lead contamination at the harbour and rejects anything unsafe. Presumably they do the same with X-ray equipment.

No compensation has yet been paid, although many hundreds of motorists faced expensive repairs due to substandard fuel.

The bottom line is corruption is a menace and the public will ultimately pay its price; in terms of shoddy service, high costs or unsafe products.

The cure?

Restoring the independence of the public service (so that its officials can act without fear or favour), something that the 17th amendment to the constitution attempted to do but which was reversed by the 18th amendment. Improving transparency in public affairs is another measure. A lot can take place in murky backroom deals, shining daylight on these will make this a lot harder.

Naturally, like vampires, they hate bright sunshine which is why the Freedom of Information bill was defeated . The less people know the better. The less the media report, the better. These recent controversies should have been headline news, instead we get little bits and pieces, mostly new flashes or a few things on the internet. No one wants to investigate much or ask too many hard questions.

The public, as ever, wrapped up in their daily lives, pay little attention to seemingly minor items of news. Only when it affects them directly do they understand its gravity and by then the rot has gone too deep.

Wednesday, August 24, 2011

Corruption and the Lokpal bill

Those who have been following the news in India would have heard of the Lokpal bill, an anti-corruption measure.

The bill proposes the setting up of an ombudsmen which will look into issues of corruption, a measure while welcome, only deals with the problem once manifest. Why wait this long? Far better to prevent than to cure, and the surest means to a cure is to eliminate the cause.

Corruption in public office, the type of corruption that is the most serious since it perverts public policy, becomes possible when an official enjoys the power to issue vital documents. The citizen needs these documents in order to go about his business, hence its importance, which creates for its issuer the ability to charge a rent. The more important the document, the higher the rent.

If the need for such documents were reduced, the ability to charge would disappear, therefore simplifying regulations, eliminating the need for pointless permits, would be the first step to rooting out the problem at source.

What the Government needs to do is revisit its laws and regulations and identify which ones are essential. India is notorious for being over regulated. All manner of antiquated rules dating from the time of the Raj are still in force, to which have been added a raft of others in the decades under socialism. Regulations are necessary, this is why we need to tolerate governments, but over regulation creates circumstances in which corruption thrives. India has been ranked as the most over regulated nation in Asia.

Improving transparency in public affairs and moving to electronic or web based means of issuing documents will also help. If officials are holding back, say building permits, publishing on a weekly basis, the number of permits received and the number approved will immediately highlight potential problem areas. Is the official concerned simply inefficient (a problem in itself), or is something else going on? The mere knowledge that the public at-large have a visible performance indicator will have a salutatory effect on both corruption and inefficiency.

Naturally, deregulation and transparency are not popular, vested interests will always rail against them, so what the Indian Government needs to do is quietly deregulate. It took an economic crisis in 1990 for the first wave of deregulation to take place, further deregulation, which will cut the ground from under the bureaucrats.

This will save administrative costs, reduce the hassle people have to through and also give India's economy a much needed boost.

Wednesday, August 10, 2011

Frederic Bastiat and the Petition From the Manufacturers of Candles, Tapers, Lanterns, sticks, Street Lamps etc

We have had a few visitors from overseas recently, who arrived carrying a number of books as presents. They know that I like reading but invariably bring books that I find uninteresting.

The current collection looked particularly unpromising, a fairly large number to start with (which presents a problem of disposal) and some which were rather old. A new book, freshly printed is always enticing. Aging books, even if they are in good condition lack the aroma of fresh ink and paper; add to that the dulled, unfashionable cover designs and the lack of excitement is palpable.

They have turned out to be extremely interesting. While working my way through The Worldly Philosophers, a very well written book on the lives and thoughts of economists, major and minor I encountered Frédéric Bastiat's sharp and witty observations which deserve a wide audience.

His candlestick makers petition is particularly brilliant and is reproduced in an edited form below:

A PETITION From the Manufacturers of Candles, Tapers, Lanterns, sticks, Street Lamps, Snuffers, and Extinguishers, and from Producers of Tallow, Oil, Resin, Alcohol, and Generally of Everything Connected with Lighting.

To the Honourable Members of the Chamber of Deputies.


You are on the right track. You reject abstract theories and have little regard for abundance and low prices. You concern yourselves mainly with the fate of the producer. You wish to free him from foreign competition, that is, to reserve the domestic market for domestic industry.

.....We are suffering from the ruinous competition of a rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price; for the moment he appears, our sales cease, all the consumers turn to him, and a branch of French industry whose ramifications are innumerable is all at once reduced to complete stagnation. This rival, which is none other than the sun, is waging war on us so mercilessly we suspect he is being stirred up against us by perfidious Albion (excellent diplomacy nowadays!), particularly because he has for that haughty island a respect that he does not show for us.

We ask you to be so good as to pass a law requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull's-eyes, deadlights, and blinds — in short, all openings, holes, chinks, and fissures through which the light of the sun is wont to enter houses, to the detriment of the fair industries with which, we are proud to say, we have endowed the country, a country that cannot, without betraying ingratitude, abandon us today to so unequal a combat.

Be good enough, honourable deputies, to take our request seriously, and do not reject it without at least hearing the reasons that we have to advance in its support.

First, if you shut off as much as possible all access to natural light, and thereby create a need for artificial light, what industry in France will not ultimately be encouraged?

If France consumes more tallow, there will have to be more cattle and sheep, and, consequently, we shall see an increase in cleared fields, meat, wool, leather, and especially manure, the basis of all agricultural wealth.

If France consumes more oil, we shall see an expansion in the cultivation of the poppy, the olive, and rapeseed. These rich yet soil-exhausting plants will come at just the right time to enable us to put to profitable use the increased fertility that the breeding of cattle will impart to the land.

Our moors will be covered with resinous trees. Numerous swarms of bees will gather from our mountains the perfumed treasures that today waste their fragrance, like the flowers from which they emanate. Thus, there is not one branch of agriculture that would not undergo a great expansion.

The same holds true of shipping. Thousands of vessels will engage in whaling, and in a short time we shall have a fleet capable of upholding the honour of France and of gratifying the patriotic aspirations of the undersigned petitioners, chandlers, etc.

But what shall we say of the specialities of Parisian manufacture? Henceforth you will behold gilding, bronze, and crystal in candlesticks, in lamps, in chandeliers, in candelabra sparkling in spacious emporia compared with which those of today are but stalls.

......Will you tell us that, though we may gain by this protection, France will not gain at all, because the consumer will bear the expense?

We have our answer ready:

You no longer have the right to invoke the interests of the consumer. You have sacrificed him whenever you have found his interests opposed to those of the producer. You have done so in order to encourage industry and to increase employment. For the same reason you ought to do so this time too.

....The question, and we pose it formally, is whether what you desire for France is the benefit of consumption free of charge or the alleged advantages of onerous production. Make your choice, but be logical; for as long as you ban, as you do, foreign coal, iron, wheat, and textiles, in proportion as their price approaches zero, how inconsistent it would be to admit the light of the sun, whose price is zero all day long!

Read the petition in full here.

Bastiat also had a number of memorable quotes on the predatory nature of the state. Restricting the powers of the state is foundation of liberty, an overpowerful state will invariably prey on its citizens.

To quote him again:

"Everyone wants to live at the expense of the state. They forget that the state wants to live at the expense of everyone."


"If the natural tendencies of mankind are so bad that it is not safe to permit people to be free, how is it that the tendencies of these organizers are always good? Do not the legislators and their appointed agents also belong to the human race? Or do they believe that they themselves are made of a finer clay than the rest of mankind?"

Tuesday, August 02, 2011

Growing lawlessness

A friend of mine told me what he witnessed at Union Place yesterday.

They were driving along Union Place and following a small Maruti car, a taxi. Without warning an old Peugeot 406, a government car, pulled out and rammed the Maruti on the side, denting the door.

What happened next was truly shocking.

Two thugs jumped out of the Peugeot and started beating up the driver of the Maruti. The Maruti was being driven by a young boy, a small made fellow who must have been a few years out of school, he stood no chance against the heavies. They slapped him and beat him around for a few minutes and then jumped into their car and drove off.

Mind you, the fault was entirely with the Peugeot, which pulled out without signalling or warning to the main road, so there was no justification whatsoever for finding fault with, let alone assaulting, the hapless taxi driver.

A friend of mine witnessed a similar incident a couple of years back when a Landrover without number plates ran a red light and crashed into a van coming from the opposite side. Again four heavies jumped out out, assaulted the van driver and drove off.

I had a less dangerous experience, again a couple of years back, with a police pickup truck which was overtaking a line of cars stopped at a red light and almost crashed into me (I was turning in on the left lane, but managed to stop in time). The policemen were glaring and mouthing inanities at me while they ran the red light. They were on the wrong side and running a red light, yet the fault was mine.

What does this tell us? No laws apply to the rulers, their families, henchmen or hangers-on and woe betide anyone who crosses their path, even by accident. In other words a breakdown of law and order.

The unfortunate taxi driver in the incident yesterday was trying to call the police but I'm willing to bet good money that the police will never take the entry. It has happened many times before when powerful people are involved.

Sri Lanka, paradise? More like Gangsters Paradise, where the rulers are all-powerful and the citizenry cowed and afraid.