India’s Socialist Mortmain

Why would we want the government to take over our health care system?

By Jeff Harding

[Kameswara Rao, head of the power and utilities practice at PricewaterhouseCoopers India,] said Indian policy makers didn’t anticipate how quickly electricity demand would rise in the past few years as economic growth has expanded the ranks of the middle class and created more consumers of power-hungry modern appliances like air-conditioners. He said state transmission utilities badly need investment and skilled manpower to cope with grid problems and provide protections against massive outages.

The above statement is the key to India’s energy problems.

One may ask why that is.

It is clear that India is still hobbled by the dead hand of Nehru and Gandhi, the socialist leaders of the one-party state that dominated India for more than 50 years. They took the model developed by the Soviets and embarked on years of 5-year plans that kept India in the economic dark age.

While the country’s new leaders profess a dedication to free market-based reforms, they are far, far away from releasing the potential of its people. India’s vast bureaucracy still exists, frustrating development or, at times conniving with crony capitalists. The reason that India’s policy makers didn’t anticipate demand is because bureaucrats never do. The reason that there isn’t sufficient capital is because there is not enough capital in India to tax away and built infrastructure. Those who have capital would be loathe to waste it by investing in a government run enterprise.

The obvious answer to their problem is to privatize the entire utility grid, free them from rate controls, and allow competition between energy providers. If they did, capital would flow into these industries because everyone needs power. Even if they adopted the cartel model as in the U.S., with rate controls that allow a return on capital attractive to investors, they could solve their problems. 

That won’t happen of course because their system is denominated by politics, not economics, and the satraps have much to lose in a liberalization of the economy. So, as we say, the socialist mortmain(dead hand) is still choking India’s citizens.

Which brings me to the U.S. I guess we can be thankful for our utility cartels, for even with rate controls, they have reliably provided p0wer to us for the last 100+ years. 

But then there is the post office. The USPS is defaulting on $5.5 billion of debt, the first such event in its history.

The agency, which has lost $25 billion since 2007, faces a cash shortage of $100 million this October, and possibly $1.2 billion next year, the New York Times reports. Total mail volume fell by 20 percent between 2006 and 2010, with the most profitable mail, first-class mail, experiencing the biggest drop-off. With such declines, the USPS is struggling with cutting costs — and getting congressional approval to do so.

I am guessing that the overlords of the system, like their counterparts in India, didn’t anticipate the problems they now face. And, as a politically run business, they were put in an impossible situation.

The solution to the postal crisis is pretty obvious. UPS and Fedex don’t seem to have those problems. The U.S. Constitution only says that the government shall “establish Post Offices and Post Roads”. Now this well-intentioned fragment of Eighteenth Century imitation of the British postal system is outdated and has been overtaken by progress. There is nothing that the USPS does that private companies can’t do better.

Which leads me to my real point. Why would we want the government to take over our health care system? Mortmain.