Dear Mr. Kejriwal,
I hope you remember my last email. My name is Shubhendu
Pathak. I graduated from IIT Delhi in 2006 and am currently working in the U.S.
In this email I will discuss the misdirection of your
movement in your stance against Ambani brothers and other industrialists in
India. I feel that your angst against the industrialists in India is
misdirected and will lead to unproductive results.
I will discuss a simple example as I feel that it is, in
this case, a more efficient way of describing how your stance against
industrialists in India will harm the economy and is principally misdirected.
The example centers on a small entrepreneur, say Ramu, who sells Samosas (Momos
for non Indian readers) in Rajnagar, Ghaziabad. Don’t yet start criticizing
that a Samosa wala cannot be compared with the billionaire Mukesh Ambani/Tata.
I will come to that point later. This Samosa wala has a small shop in
Ghaziabad. He buys potatoes, spices, LPG cylinder, oil, refined flour,
cauldron(s) etc. and rents a space. He incurs some cost to buy all of this.
Ramu has the recipe (Intellectual Property) and skills and invests his labor to
add value to the ingredients to prepare Samosas. Now remember he is taking a
risk when he makes this investment, because he is anticipating that his Samosas
will be bought by the residents of Raj Nagar. If he prepares the ingredients in
the morning, and nobody buys them during the day, he will have to throw away
some of the ingredients at night and incur losses.
How does he make profit? People buy his Samosas at a price
which is greater than the sum of the costs he incurred to prepare them. So the
price P is greater than the cost incurred C. Why do the customers pay a price
P>C? After all, the Samosa wala did not force them to buy his Samosas at
gun point. The customers with their own individual discretion decided to pay an
extra amount P-C, as that is what they believed was the value the Samosa wala
added to the ingredients. Profit P-C is the additional value he added, as
measured by the customer’s willingness to pay the extra amount. Profit is not
insidious, it is decided by YOU and I. So Ramu adds value to society, and
people with their own choice reward him for this value addition. This is true
power with the public; public decided who is adding value and who should be
rewarded. Now Ramu anticipates more demand from Kamla Nehru Nagar, a nearby
locality, and makes additional investment in a machine that can make more
Samosas in less time. His anticipation turns out to be correct. Kamla Nehru
Nagar residents are pleased with the taste of his Samosas and are willing to
travel to Raj Nagar to buy them. Remember here again, he is not forcing anybody
to buy his Samosas, neither he is forcing anyone to sell him the ingredients.
YOU and I, at every instance, are deciding how much value he is adding. Also
recognize the risk he took when he made that investment in the machine. Now YOU
and I are rewarding him for that risk.
Now, another Samosa wala in Kamla Nehru Nagar called Suresh
is also trying to expand his business. His Samosas are not that tasty and he
abuses (verbally) his customers every now and then. Slowly his business starts
shrinking due to competition from Ramu. Again, it is every individual’s
personal decision that Suresh loses his business. YOU and I decided that we
don’t want to be abused and that he deserves not to make any profit. This is
free market and it is one of the tenets of a Republic.
Now we come to the second part of the story, after which I
will transition to how your protests are misdirected. Suresh is now very angry
and tries something that is against free market principles. He reaches out to
the MLA of Ghaziabad to strike a deal. He tells him that he wants to see a
regulation that allows only one Samosa wala for the region of Kamla Nehru Nagar
and Rajnagar, and that the government will provide a license to sell Samosas in
the area. Of course Suresh will get the license in the 2-G spectrum type
“auction”. In return, the MLA will get 5% of shares in his Samosa shop. The MLA
agrees to the deal. Now Suresh knows that the MLA is in his pocket, so he
strikes another deal. Now he wants the government to pass a regulation that
will bar farmers to sell potatoes in the free market (welcome the insidious
APMC act). Then he collaborates with the MLA to acquire land (“auction” of
natural resources) to grow his own potatoes. After a few years, he becomes the
Samosa king of Ghaziabad. Ramu on the other hand is forced to work as a bonded
labor in Suresh’s shop, and after a while he commits suicide.
You are protesting against this Samosa king Suresh. Is he
wrong? I think it is an irrelevant question. Most of the humans will happily
take any undue favor they can get from the government. It is not an attitude
problem. It is human nature, it exists everywhere in the world, and you cannot
change it. The Samosa wala is not at fault. He is doing what he is expected to
do. He is not responsible to protect the Republic of India. YOU and I did not
elect him. We elected the MLA. And he is the one at fault. The regulatory
regime is at fault. Big unnecessary government is at fault.
There is more to it. There is one example that might help
you understand this concept better. You might know that in India when they have
to reduce the population of stray dogs in an area, the municipal authorities
have a choice to either castrate the dogs or the bitches in that area. Which
method do you think is more effective? Intuitively, everybody would say that
one should castrate the bitches, because if you castrate a dog, some other dog
will do the job (have sex and impregnate the bitch). Same is true with the
government. If you castrate Suresh, Samosa wala no. 1024 will do the job. The
impregnable government needs to be castrated. Also, people did not elect
Suresh, but they elected the MLA. Suresh is not responsible for their
well-being. The MLA is.
The industrialist you are targeting, although have taken
undue favors from the government to make their samosas, they have done so under
a reasonable presumption that if they don’t do it, somebody else will because
unfortunately the bitch is always on heat. Nevertheless, these industrialists
have added value to our economy and you cannot discredit that. YOU and I
willingly paid for the samosas (cars, cell phones etc.) they have made. They now
have the labor and capital that will allow India to excel in the next century.
Just castrate the government so that the Ramus don't commit suicide.
The big question is why in the hell would they help you, as
they seem to be the beneficiaries of this mess? Well not all of them are
beneficiaries. If Suresh gets undue favors, other industrialists suffer.
Collectively, all industrialists would want this system cleaned because now it
is a mess even for Suresh, because the bitch has gone berserk.
I would request you to reconsider your strategy of targeting
the industrialists in India.
Best Regards,
Shubhendu Pathak
