Saturday, April 28, 2007

Greed, Control, the Government and the Black Market

I am reading a great book by Gregory David Roberts - Shantaram. As the story unfolds, I am stricken by a thought that involves economics and governments. There is one established fact about human nature - we are all greedy. Even the saintly ones want to be recognized for their sainthood, and reap the benefits that their exalted status affords. Humanitarians, charities, every institution erected by man suffers from some need for recognition, and therein lies its greed factor.

I digress; I wanted to address the related concepts of greed, regulations and control. Governments, like the one established in India, have made a science out of imposing ridiculous regulations on the market. The British invented many of these regulations and took these along to their colonies. It's sad to see that India continues to adopt such regulatory practices almost 60 years after independence. Contrast this with America, where everything British is reviled. Therefore, there are almost no regulations, translating into unrestricted flow of anything (goods, people, cash) from one part of the country to another. This free flow is what stymies the growth of the Black Market in the US. Everything you need can be easily obtained locally or from the Internet. Free enterprise and easy access to goods for the entire population are the anathema for smugglers, and the death knell for the black market.

Going back to India - everything in the country is regulated. I remember the first time I was to leave Bombay for New York to get my graduate degree. A limit was imposed on how many dollars I could legally purchase for my fees and travel. An entry was made in my passport with the details, and I couldn't be caught traveling with any more US currency than stated in my passport. Now, what if I needed more to kick-start my life in this foreign land? I would have to go through unofficial channels; fortunately that wasn't the case, but if I was in such a situation, I'd have no recourse except the Black Market.

What I have not yet grasped is why the Indian government (and for that matter, any government that stipulates unnecessary regulation) would knowingly force my hand, and make me resort to an illegal activity. Come to think of it, the government should be most concerned with getting more of my money when I am willing to part with it. I'll go further in saying that the government should encourage me to use its services over the aforementioned private concerns. Instead, it focuses its attention on increasing taxes to buoy its revenue, taxes that businesses do their darndest to evade. Sometimes I wonder if governments secretly want illegitimate businesses to thrive; that way the politicians (and government employees) have multiple revenue streams - one official and another unofficial...

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