Very young children in Christian households (especially in the US) are led to believe that if they are good, Santa Claus will bring them gifts during Christmas. It is rather cute to see their eyes light up with eager anticipation of the stuff that Santa would deliver. By the time these kids are teenagers, most realize that it is a just a harmless story and Santa does not really exist. While it would be sad to see a grown up believing in Santa, what would be really pathetic is if a grown up starts believing he is Santa. That fellow would be in serious need of professional psychiatric help.
I sometimes wonder if a large number of Indians are sufficiently clueless that they think that the government is some sort of a Santa Claus. More worryingly, I wonder if Indian policymakers are suffering from the delusion that they are Santa. My fears are confirmed when I read that the government is giving something away for “free.” A news item of April 26th reports that the “Government Proposes To Offer Free, High-Speed Internet Connectivity To All Citizens Through BSNL & MTNL.”
Let me first address the commonly held misconception that there are “free” things in this world. The fact is that nothing is free, including lunches. While the universe may be the ultimate free lunch (arising out of a quantum fluctuation), nothing that is the product of human enterprise within it is really free. You may get handed something gratis to you but that something did not arise magically out of a quantum fluctuation in a false vacuum. Someone somewhere sometime actually paid for it even if you got it free. What you gained was to some measurable extent someone else’s loss.
Next, the government does not produce anything. That’s not its job. It’s job is to ensure the conditions necessary for people to produce goods and services (which I refer to by the sophisticated economics term ‘stuff’). People produce stuff and the government takes part of the stuff produced and consumes it to survive. Good governments strictly do what only the government is supposed to do, and therefore are small and don’t need to consume much of the stuff produced by the people.
Bad governments are greedy and want to expand their powers and grow. Therefore it takes huge amount of the stuff that people produce (leaving less for the people who did the actual production), part of which it consumes and part it gives away to some people it favors. It is stuff consumption and redistribution that the government does, not stuff production. It is easy to understand why the government steals from Peter to give stuff to Paul: because Paul is favorably inclined towards the government’s continued plunder of Peter’s stuff.
There are cases where one can justify the redistribution of some of Peter’s stuff to Paul. But these are very few. In general, robbing Peter to give “free” stuff to Paul has adverse effects. Peter feels unfairly treated and becomes unhappy. Disheartened, Peter refuses to produce as much stuff as he could because he realizes that it would be stolen from him. The group of Peters starts dwindling and the group of Pauls start increasing. Soon, there is sufficiently little produced that the economy becomes impoverished, all thanks to the government which wanted to do provide more “free” stuff.
Back to our “free” broadband for everyone in India by 2009. If you think that indeed there will be free broadband throughout India in 2009 or whenever, I would like to sell you a rust-colored bridge I own in the San Francisco Bay area, very low maintenance, high re-sale value, and very attractively located.
But you could see a new “Universal FREE Broadband Fund Cess” of 3 percent tacked on to everything that you buy or earn. This will be like the USOF (universal service obligation fund) which is now around Rs 9,000 crores (around US$2 billion) and basically just sits there.
[I actually know a bit about the USOF and what it does to the telecommunications sector in India. My UC Berkeley PhD thesis title was “The USO Induced Cross-subsidy: The effect on Telecommunciations Demand in India.”]
So why is this “free” broadband such a bad stupid insanely brain-dead idiotic silly moronic idea? I was coming to that. Next time.