Swaminathan Aiyar on Economic Freedom

Swaminathan Aiyar was at CCS on 14 March 2014 to discuss the importance of Economic Freedom. Check out what he had to say about the ‘invisible hand’.

….On the ‘Invisible Hand’

“I grew up at the time of Indira Gandhi and the gareebi hatao movement. I cheered the nationalisation of all the banks. I was naïve enough to believe that the reason exports were stagnant was because they were being left to the private sector, and if only they channelised it through the state corporations, exports would boom. The theology at the time was about how the entire private sector enterprise was supposedly for personal profit and could not therefore benefit society.

I became an editor and thought, with all the extra money I am going to make, I’m going to set up a trust for the betterment of people around me…I thought lots of people are doing charity but charity does not promote development. Charity means a person has enough for the day, but he’s dependent on you. There’s no way he can take off. He needs to be given some capital. My idea was to give them three-wheeler scooters, before I discovered how difficult it was to get the license for those scooters.

Then the question arose, if you’re going to give somebody some capital, what is the use of giving it to him if he doesn’t know how to operate them? You give them capital, but if they don’t have the expertise to operate them, they will surely fail.

The next question was, how do I provide the expertise to these people? I thought I could set up some training camps but then realised, these people will be competing with businessmen who have the biggest industries and the highest trained people. How will I compete with them?

It suddenly struck me then, like a flash of lightning – that Mr Birla who trains all those millions of people in his textile mills, he is doing exactly what I’m trying to do! So I did not discover the invisible hand. I was looking for the visible hand and suddenly discovered that the same business class which I looked down upon, they were doing exactly what I was attempting to do through a private process. My private process was supposed to be non-profit and theirs was pro-profit business, but the whole point was, because of the profit motive, Mr Birla had the scale and ability to do it all. He wasn’t trying necessarily to promote their lives, but the requirement of competing obliged him to do what I, with great difficulty, was hoping would be the outcome of my efforts as an NGO.

This is where I saw the demonstration of how Adam Smith once said most good is done by people who have no intentions of doing good”.

To hear his talk, click here.