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Changes

Needed

in

Economic

Policies

BY

Firdos J. Mubaraki

Freedom Publishers

Freedom Farms

Dahanu - 401 602.

MAHARASHTRA.

All proceeds from the sales of this


book in India will be used for
Publishing, Advertising, and
Promoting the concepts till they
are implemented.

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Copyright ©1987 by Firdos


J. Mubaraki

Copyright © 2005 second


edition by Firdos J.
Mubaraki

ALL RIGHTS RESERVED.


No part of this book may be
reproduced in any form or
by any means, electronic,
mechanical, photocopying,
recording or otherwise,
including information

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storage and retrieval


systems without permission
in writing from the
publishers, except by a
reviewer who may quote
brief passages in a review.
For information write to:

FREEDOM PUBLISHERS

Freedom Farms

Dahanu 401602.

Library of Congress Catalog


Card No. 87-90702

ISBN 0-9618937-0-2

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ACKNOWLEDGEMENTS

Without God's blessings and


power we are nothing. I would like
to acknowledge God's guidance in
helping me write this book. I know
that without His blessings I would
not have been able to complete
this book and put it together so
clearly and concisely. I would also
like to thank all the people who
helped me.

God helped me choose a tree as


my symbol because it is the most
beautiful peaceful living thing in
this world; it has a longer life span
and is larger than any living thing;

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it nurtures life and does not harm


anybody. Most trees will keep
growing and sprout new shoots
until they die. Humans should
learn from nature to keep growing
in the right direction and live in
peace with each other.

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Foreword

Most of us are aware of the


corruption, mismanagement and
wastages in our system, so I will
not waste your time mentioning
the problems. Solutions are more
important.

The optional ideas in this book


are public ideas I have heard and
discussed over the years. I do not
endorse it or deny it. I am
mentioning it in here because
they are

interesting and make sense and


there should be public discussion
on it and finally the majority
public opinion should prevail as
should be in a democracy.

Some of the statements written in


the book may seem like they are
being repeated but it had to be
done to get the full impact of the
new thoughts.Wherever the word
he appears it automatically means
he/she.

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CONTENTS
Chapter

1 DO WE NEED CHANGES IN ECONOMIC ....... 1

POLICIES………………………………………... 2
INTRODUCTON TO CHANGES

NEEDED IN ECONOMIC POLICIES. ………..... 13

-SUPPLY-SIDE VS. DEMAND-SIDE............. 15

3 TAXES …………………………………………... 22

-SIMPLIFYING THE TAX LAWS .................. 22

-CONSUMER - SERVICE TAX (C-S) ............ 23

-ADVANTAGES OF C-S TAX OVER INCOME,


EXCISE, SALES, OCTROI, VAT AND OTHER
INTRUSIVE TAXES....................................... 25

-DISCUSSION OF C-S TAX ……. ................ 31

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-TURNOVER TAX (OPTIONAL) ................ 35

-BIRTH TAX (OPTIONAL) ........................... 37

-GUIDELINES FOR C-S TAX LAWS .......... 38

-PRODUCTION LICENSING LAWS …...... 42

-WHAT WILL THE MONEY COLLECTED

FROM C-S TAX BE USED FOR? ............... 44

-HOW WILL THE ROADS BE PROVIDED

AND MAINTAINED?..…............................. 50

-QUALITY AND MAINTENANCE

OF ROADS................................................ 53

-TRANSPORTATION ALTERNATIVES FOR

CROWDED CITIES.................................. 54

-STATE, DISTRICT, AND CITY

GOVERNMENTS ……………...............

4 PRIVATIZATION, ANOTHER SOURCE OF

REVENUE ..................................................... 57

-PRIVATIZING PRECIOUS AND

NON-PRECIOUS METALS, MINERALS, OIL

AND GAS FOUND ON PRIVATE PROPERTY..... 59

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-PRIVATIZATION OF OTHER NATIONAL

RESOURCES ................................................. 59

-RAILWAYS ..................................................... 60

-AIRPORTS AND SEAPORTS......................... 62

-PRECIOUS AND NON-PRECIOUS

METALS, MINERALS, OIL AND GAS FOUND

ON PUBLIC LANDS ....................................... 62

-FORESTS, MOUNTAINS, RIVERS................ 63

-DAMS............................................................... 65

-DEFENSE …………………………................ 67

-CENTRAL ECONOMIC PLANNING ……… 69

5. CORRUPTION AND CRIME ............................... 70

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-CORRUPTION .............................................. 70

- HOW DO WE ERADICATE CORRUPTION... 71

-HONOURARY COMMITTEE MEMBERS .... 72

6 WHO WILL MAKE THE GOVERNING


DECISIONS? ...... 76

-HOW DO YOU ELECT YOUR


REPRESENTATIVE ..... 77

7 THE IRON TRIANGLE ………...…………............


87

-HOW TO DISMANTLE THE IRON TRIANGLE.........


89

8 INTERNATIONAL TRADE AND

IMPORT-EXPORT POLICIES ………….……...... 92

-WHAT HAPPENS WHEN THERE IS A

TARIFF ON TRADE? …...…….…......................... 93

-FREE ECONOMIC TRADING ALLIANCE.......... 94

-SUBSIDIZING EXPORTS ………….….…........... 95

-HOW WILL INTERNATIONAL

-TRADE ACHIEVE TRUE PEACE? ……….......... 98

-HOW TO ENCOURAGE FOREIGN CAPITAL ……


101

-SPECIAL ECONOMIC ZONES (SEZ) ................. 101

9 UNIONS …………………………………………. 102

-GUIDELINES FOR UNION POLICIES………… 103

-MINIMUM WAGES ………………………......... 104

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-WHO PROVIDES FOR AND

PROTECTS THE WORKER? ………................. 105

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CONTENTS

-CREATED UNEQUAL ……………….…............ 105 -


WELFARE STATE ………………………........... 106
WHO WILL PROTECT THE CONSUMER? ..... 107

10 GOVERNMENT SPENDING ……………...…...


109

11 INFLATION ………………………………..……
112

EFFECTS OF INFLATION ………….…............. 113

WHY DO POLITICIANS CHOOSE

TO PERPETUATE INFLATION? ………............ 114

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HOW TO CURB INFLATION

PERMANENTLY ……………..………............... 117

12 PATENTS ………………………….………….... 118

13 DYING INDUSTRIES, UNEMPLOYMENT,

TARIFFS, AND SUBSIDIES ……......….………. 121

-PRODUCING JOBS IN DYING ...................

-INDUSTRIES BY TARIFFS

AND SUBSIDIES........................................... 121

14 EDUCATON …………………………………….
127

-HOW DO YOU SUBSIDIZE EDUCATION?.... 128 -


HANDICAPPED …………………………...... 133

-HOW TO YOU SUBSIDIZE THE

TEMPORARILY HANDICAPPED? ……........ 133

-HOW DO YOU SUBSIDIZE THE

PERMANENTLY HANDICAPPED? ……...... 134

-WHERE WILL THE SUBSIDY

MONEY COME FROM? …………................. 135

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CHAPTER I

Do we need changes in economic policies?

Let us first examine what most major economies of the


world are following. The government needs to raise
revenue to pay the salaries of the politicians,
bureaucrats, for the administration work that they are
supposed to do, plus all the other services that they are
supposed to provide such as defense, roads, water,
electricity etc. Most of which can be supplied by the
private sector. In order to raise revenues they have a tax
structure which taxes Income (personal and corporate)
and production in the form of Income, Excise, Sales and
Octroi. Recently some countries have replaced the sales
tax with a VAT (value added tax) or GST (goods and

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service tax) these are all intrusive taxes, (local municipal


taxes are not intrusive taxes).

All of the above are "Intrusive Taxes" meaning the tax


officers can intrude into your personal life by entering
your residence, businesses office or factory premises and
do a raid/search and seizure. They have the right to open
up your business transactions books and ask you any
questions on any transaction dating back 5 years and if
any of your answers are not to their satisfaction then
they have the right to seize your property, lock up your
business premises and they can make you pay the back
taxes with interest and penalty which could be 10 times
the original amount.

This puts every possible person under the scrutiny of the


tax officials. In India tax officials treat every taxpayer as
if we have cheated until you prove you are innocent.
This can take years in court. It creates lot of tension for
individuals as well as business owners. In most cases
people settle the issue with a bribe to the officers
concerned plus pay a nominal amount of actual taxes.
Most people would agree that the bribe amount is

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a lot more than the actual official amount collected.


Whenever you have an economy having various
intrusive taxes, each more complicated than the other
and to top it off these tax laws are changed every year,
this creates a lot of confusion, fear, anxiety and
frustration among the people and the economy does not
realize its full growth potential.

Lets take one step back in the past and analyze how and
why the concept of taxes came about. The simple answer
is that government need money to pay their own salaries,
provide administration, infrastructure, defense, hospitals,
schools, dams, power plants and a number of other
things. The question here is: does the government
need to collect taxes from the people to pay for the
above expenses or is there a better way?

There is a better way, without intruding and


threatening people's lives. Today's income tax system
not only charges an income tax to the higher income
people it also charges at a higher rate of taxation as their
income goes higher. This seems unfair and discouraging
to the person working harder. Why should a person who
works harder or smarter be taxed at an increasing rate on
his excess income? This will discourage them to earn
higher income or encourage them to hide their income or
send their money out of the country to avoid the higher
rate of taxes. This makes cheaters out of honest people
and creates an open door for bribes and corruption. It is
not a nice feeling for people to work hard/smart and
then to save their hard earned money, cheat on taxes.
This tax option does not look good either for the
taxpayer or the tax collector.

DOES THE GOVERNMENT NEED TO COLLECT


TAXES?

Let's ask the fundamental question. Does the government


need to collect taxes from the people to run the
government system and provide the infrastructure in the
country, the defense and all the other services that it

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provides in the economy?

The government needs some source of revenue to give


the above-mentioned infrastructure and services. So far
most

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governments all over the world have found taxing the


people the easiest way of raising revenue. It also seems a
fair way in the government's mind to do so - but not to
the taxpayer.

Besides taxing is there an alternative means of


raising revenue for the government? Can the
government not raise revenues just as any other
business organization does? Businesses provide some
kind of products or service to the economy whereby
their total revenues is greater than their total
expenses. This creates profit or surplus revenue.

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Why can't the government achieve this simple


business formula with all of the joint public assets,
which they are supposed to manage for us? From the
profits of the vast resources of our country and the
joint public assets the government should be able to
generate enough income to replace the concept of
taxation.

The fact today is that most economies, even after


charging several types of taxes, are not able to earn
higher revenues than their expenditure. Hence their
budgets are in a deficit every year after year.
(Explanation given later how this deficit is financed).

We will look at two examples and these will be used as


references throughout the book on how the same can be
applied in our government system.

WHO ARE THE OWNERS OF THE WEALTH OF


INDIA?

I have taken the example of a housing society and a


business organization to explain the above question.
Suppose you own a flat and live in a housing society
where there are one hundred houses. Therefore, you are
member of the society and you own one hundredth joint
ownership of all the open spaces and you have to pay for
one-hundredth share of the maintenance of the common
properties. Now suppose there is one-acre open space
allotted in your society for a clubhouse and restaurant.
By majority decision the hundred owners decide to take
a loan and build this clubhouse for themselves as well as
for non-members of the society so that there is
additional revenue to the clubhouse. Of course every
member of the society would pay for the usage

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of the clubhouse. Those who don't use the club facilities


would not pay the user fees. (user fee is an important
concept to do away with taxes)

Each homeowner would be responsible to pay one


hundred of the loan expenses. If you owned two homes
you would be responsible to pay for two hundredths of
the loan expenses. So also when the clubhouse starts
making a profit and you owned one house then you
would be entitled to one hundredth of the profits and if
you owned two houses you would be entitled to two
hundredths of the profits of the clubhouse.

It would not be possible for all hundred homeowners to


be part of the management team to build this clubhouse.
So the hundred homeowners would elect a team of
committee members from among the homeowner
members. This committee would be responsible for
implementing the will of the homeowners in building the
clubhouse and be answerable to the homeowners. These
committee members would then hire professionals to
build the clubhouse. The final plan and cost of the
clubhouse would have to be approved by a general body
meeting before the plan is implemented.

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Once the clubhouse is built it would not be possible for


all hundred homeowners to be running the day-to-day
affairs of the clubhouse. So the hundred owners through
the committee hire a professional manager and a team
under him to operate the clubhouse.

In the above case who are the owners of the clubhouse?


Not the committee members nor the manager nor the
staff. The hundred homeowners are the joint owners of
the clubhouse! The manager and his staff are not the
owners, nor are they entitled to any share of the profits.
In theory all the hundred homeowners are the owners of
the clubhouse even though they are not operating the
clubhouse on a day-to-day basis. The homeowners may
jointly decide to appoint a committee to look after the
management of the clubhouse. This could be an elected
committee by the hundred homeowners. This committee
is answerable to all the homeowners. They do not
become the owners of the clubhouse, nor are they
entitled to the income of the clubhouse. They may or
may not be paid a salary as per the will of all the
homeowners. They will be entitled only to one
hundredth or two hundredth of the profits

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of the club as per their ownership of homes in the


housing society.

From the above example it is clear who the owners are


and who the caretakers are. Comparing this to our joint
assets of our country; the committee are the same as our
politicians, the manager and his team are comparable to
our departmental secretaries and the staff that are under
them. This is a very important and powerful concept to
understand. The politicians and all government
employees are caretakers of our joint public assets.
They are answerable to us, the people of India.

Now let us take the case of a business organization.


Supposing an individual or a group of individuals decide
to start a business. They would each put in some of their
own cash, balance they would borrow loans and/or sell
shares of the company to raise funds to start the
business.

With that money they would buy or lease land, office


space, factory etc, whatever was needed to produce the
products or provide the service that they would have
decided in order to run their company at a profit.
Initially for a few months or few years depending on the
product or service they may not get any profits. But
eventually they would make some profit or the business
would have to be shut down because banks would not
keep on loaning them more money and the shareholders
who have invested to get a return on their investment
would not be willing to give the business more money if
they would not get any returns.

Many businesses do pay the interest and principle to the


banks and also give a percentage of their profits to the
shareholders and keep some profits for future expansion
of the business and on top of all this each year they pay
some money from their earnings to the government in
the form on Income, Excise, Sales and Octroi taxes
whatever is applicable to them.. Still many companies

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manage to do all of the above and increase their profits


and acquire more properties or factories or shares in
other companies. In other words they increase their
overall wealth..

Keeping these two examples of the housing society and


a business firm in mind let us compare and analyze it
with our country "INDIA."as our business and our
society

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Prior to August 15 1947, the British were


"GOVERNING" over India and upon independence they
left India completely to the citizens of India.

So millions of acres of land called "India" was given


back to the citizens of India. We did not have to pay the
British any large sums of money to leave India or since
then have to pay them any yearly tax for this property
called "India" from the income that would be derived by
India. We did not have any debts borrowed against India
that the people would be held responsible for (as would
be the case with a business firm which usually has to pay
some interest on borrowed debts plus pay dividends and
taxes).

Upon independence Indians owned or rented a flat or at


least a hut or land which was their personal property.
What about all the other properties, which was not
owned by individuals or business? For example who
would own all the forests, rivers, dams, beaches, coastal
waters for fishing and oil and gas all the mineral
resources on the land, the train system the roads the
schools, colleges, the public lands, offices that were left
behind by the British. Naturally as in the case of the
housing society, what was not individually owned was
jointly owned by all the homeowners. In the case of
India all Indian citizens jointly owned all of the above
wealth. Technically one citizen at time of
independence would be one shareholder of all the
joint assets of India.

Now suppose at independence the population of India


was 100 million. This means that upon Independence
each citizen would be 100 millionth shareholder of all
the joint assets and liabilities of India by default. Any
one Indian citizen could not say that this is 100 millionth
part of the joint assets of India and I want my share
separated and kept as my private individual asset. Same
as in a housing society one homeowner cannot claim a
one hundredth part of the joint property as his sole and
seperate property.

Since at that time we didn't want another form of


government to rule over us we chose to be a democratic
society based on similar lines as the United States of
America model which in principle was "of the people, by
the people and for the people". There are variances in the

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actual election process and

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government forming methods. Today you ask yourself


the question for the above statement. Our democracy
may be "of the people" 100%, by the people less than
100% because some percentage of the population does
not vote, but "Government for the people?" You answer
this question yourself.

So as per the society example it is clear that every


citizen young or old would be 100 millionth joint owner
of all the assets of India at independence. It would be
impossible to manage all the joint assets by 100 million
people throughout India. As in the case of a "housing
society" explained earlier, we the Indian society decided
to choose or vote a committee to take care of the
management of the joint assets of "India" society. These
elected committee members are our politicians. These
elected politicians are our caretakers of the assets

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jointly owned by the people of India. They are not


the sole owners of our joint assets, nor have we
elected them to GOVERN over us. They are basically
our area representatives and are there to serve us
since they are paid a salary from our taxes or from
the income of our joint resources. For our reference
the word committee and politicians would mean the
same. The committee=Politicians (C/P) would be
empowered to hire managers to run the day-to-day
business of our country. These managers would be
various secretaries commissioners, tehsildars, RTO's etc.

In effect we the people, the shareholders and owners


of our joint assets have elected the C/P to look after
our assets and generate a profit from it and give us a
dividend each year as would be the case in a business.
C/P that have a majority appoint their Chief minister
or Prime Minister depending on the level of
government. The chief would appoint the different
Ministers and secretaries of different departments to
look after our joint assets. They are all answerable
directly or indirectly to us, the owners of India, i.e.
the citizens of India. We have not elected the
politicians to "GOVERN" over us as the British did.
We have elected them to be caretakers of our joint
assets and be accountable to us. But now it is the
other way around we are accountable for all our
incomes and expenses to our public servants and they
on the other hand have almost no accountability

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and are having a party with our income from our


joint assets and taxes that they force us to pay. And
just as in the case of a business firm that can
efficiently pay its loan interest and principle (which
at independence India had none to pay) plus pay all
different taxes (which again India did not have to pay
any taxes to any other government i.e. the British or
Portuguese) and yet a business pays dividends year
after year which our politicians have never paid us. If
our joint assets were managed as a profit making
business organization we should also have been paid
dividends of our joint ownership of our country's
assets for over 50 years. So how have they managed
our joint assets? Very, very badly I would say so!
Wouldn't you agree with me?

In the last 50 years have our politicians paid any profits


to us, the shareholders? NONE. Neither have they had to
pay any taxes to any other entity as a business does, nor
did they have any loans to pay off at the time of
Independence. How would you rate our C/P for
managing our joint property compared to how a business
organization does? Lets look at a few more things.

Have they increased the size of our property by buying


any new property, as most businesses would do? No, the
C/P have not bought any property outside our land space
called "India" in the last 50 + years. They have not had
to pay off any old loans left behind by the previous
management i.e., the British. In fact, over the years the C/
P has amassed so much outstanding loans against our
joint resources that it is unbelievable (this topic is
discussed later). The C/P has not kept any surplus funds
for future expansion, as a business would do. Nor have
they given any dividends to the shareholders in the last
50 + years as most business would do. Should we be
happy with their managing of our joint assets? Do you

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think it is time we ask them to do the necessary changes


mentioned in this book or shall we wait and watch for
another 50 years?

On the other hand if you were to listen to the politicians


side of the story they would say: We have increased the
size of our infrastructure, Roads, railways, Airports,
schools, colleges, hospitals, dams, power plants, and a
whole lot of other things that the politicians have
accomplished. TRUE but that is a pittance

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for what they should actually have done over so many


years. Besides, most of the above have been done not
from the income of our joint assets but by taxing us and
borrowing loans against our joint public assets. Look at
the quality of our infrastructure and compare it with
Japan or Germany, which were completely destroyed at
that time by World War II.

Let us ask the C/P the question. Have all of the above
projects that the C/P claim to have provided to our
country been accomplished from the income from our
joint resources/assets or have they done it by just taxing
us, or by printing more money or by borrowing
incredible amounts of loans.

All of the above! They have asked the Indian people, the
shareholders, to shell out money year after year in the
form of income, sales, excise, and octroi taxes. The
Indian people have not paid these taxes happily and
willingly, as is the case everywhere in the world. They
have been forced to pay it under duress and threat from
rules made by our own C/P and implemented by our
bureaucrats, the secretaries and the different tax
collecting agencies, which they have created without our
direct consent.

Compare the above to a business firm. If you as a


shareholder were asked to pay money (by whatever
means) to the firm year after year because they would
tell you if you didn't pay them the money (taxes in case
of our government) they would not be able to run the
business and they would have to shut it down. You as a
share holder would say enough is enough and you would
stop paying the company money year after year and let
the business go bankrupt. The creditors would sell the
asssets to recover their money and your shares would
have almost zero value.

But as shareholders of India can we allow our


business empire called India to go bankrupt? No! So
we have kept paying our taxes to keep our joint
assets operating. But we have to wake up and say
enough is enough. We want the C/P to really change
the whole concept of managing our assets so that we
should not have to pay any more taxes and eventually
all expenses should be paid from the profits of our
joint resources. There should be a user fee system,

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which means you only pay for what you use


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The C/P have no right to give away part of the


citizen's joint property to certain privileged or
underprivileged citizens without the consent of the
rest of the citizens. The C/P will claim that they have
done this on the grounds of humanity or is it really
because they may be getting votes from them. The C/
P should have gotten Majority consent from the
citizens before approving these asset giveaways to
any individual or group of people.

Not only have we paid taxes each year to keep our India
operational. But each of us taxpayers has been looked
upon by the tax officials as dishonest tax evaders and as
a personal source of income. On top of that, they have
further burdened us by borrowing huge loans from
different organizations as the world Bank, IMF and
others to provide us these so called infrastructure

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projects. The interest alone on the above loans are so


huge that now each year the C/P borrow fresh loans just
to pay interest on the original loans. On top of this the
Politician/Bureaucrats continue to borrow brand new
loans for new infrastructure projects to make the original
loans even bigger so that they can improve and provide
more infrastructure to us. What kind of financial future
will these debts lead us to?

The result is a very big percentage of our budget goes


just to pay the interest on the debts. Some loans do get
paid off but that is very small percentage. Net result is
that our principle loans and interest payments keep
getting bigger and bigger each year.

By printing excess quantity of money to avoid heavy


taxes leads to inflation and devaluation of our currency,
which is not very acceptable to the citizens.

Comparing the above scenario to a business


organization, no bank or any other institution would loan
them money year after year if they had to keep
borrowing more funds just to pay the interest. Coming
back to our India business, is there an end to this ever-
increasing loans and interest payments? You decide.

Do you think its time to say good-bye to the present


form of intrusive taxation i.e., Income Excise, sales
octroi, VAT, CST, GST and whatever new tax C/P
come up with? Would like to see our economy move
away from the intrusive

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DO WE NEED CHANGES IN ECONOMIC


POLICIES?

tax system and go to a very simple easy to


understand and implement system of taxation? And
within 10-15 years reduces these taxes to only a user
fee form of structure?

With the right economic policy we should be having a


budget surplus each year to pay off the debts of our
country, this will automatically lead to lower revenue
collection requirement, hence a reduction in taxes can
follow. Also all the wastages and leakages due to
inefficiency and corruption in our economy should be
controlled. How corruption can be completely
controlled is explained later under title
"Corruption". If corruption is controlled more than
half our problems are solved. Corruption is a big drain
on our resources and this requires the need for higher tax
collection. By improving our efficiency and eradicating
corruption our expenses will be reduced. This will help
in further reducing the requirement of revenue collection
or this money saved can be used to pay off the loans
faster so we don't need to raise this extra revenue to pay
interest to foreign debtors.

And lastly but more important this book will show the

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necessary economic policies to be implemented to


actually earn a positive revenue inflow from our joint
resources, which will not only help in paying off all the
loans, but also do away with taxation (except for a user
fee system as explained later)

India has always been a wealthy country throughout


the ages. In the past people from all over the world
throughout history have come here to trade with us
and gained from trading with us. We have also
gained from the trade, but we would have been just
fine without the trading. We have not had to go out
of our country to look for trades to increase our
wealth. People from all over the world have come to
our country to trade with us to increase their wealth.
And so it can be again! Only in the last couple
centuries Indians have gone out for better business
opportunities But that trend can be reversed.

With the right economic policies and the will of the


people to get it implemented and executed, we will see
the above paragraph happening again.

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The question is would you like to see it happen?

If you do, then do the following few steps and you will
see the changes happening for the betterment of our
country and for each and every individual.

1. Read this book carefully and try to understand it. It


has been written in a simplified way so that most people
can understand it. Remember first an idea has to be
successful in your mind only then it can become a
reality.

2. Discuss the ideas in this book with all your friends


and relatives. Give them a copy of this book or ask them
to order one for themselves and read it.

3. Most important if you can afford, then send a copy of


it to your MP and ask him to read it and start discussing
and implementing the policies herein. Although the
policies explained are well thought out you may not
agree with each and every one of the policies mentioned
here and you may want to specify that to your politician.
You may also email your suggestion to freedom @ffit.in.
If others have similar suggestions then it will be
incorporated in this book later. After all, this book is "for
the people".

The easiest thing would be to send the sample letter on


the last page to your MP and ask him to start
implementing the policies of this book, if he does not
take you seriously, he will not get your vote the next
time around. Tell him you will vote for any candidate
who will be willing to implement the FFIT program.

ALL the policies in this book come under the "FFIT


PROGRAM" If you are aspiring to be an honest
politician then you can stand on the platform of " FFIT
PROGRAM" and this offer is open to any political party
or any independent person to follow. You can write to
me for any explanations or clarifications. Let's get our
country FFIT for all to enjoy not just the selected few.

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CHAPTER 2

INTRODUCTION TO CHANGES NEEDED

IN ECONOMIC POLICIES

This book addresses important economic policies that


almost any capitalist or semi-capitalist economy could
implement with minor alterations and achieve
unprecedented steady economic growth.

These policies are based on "supply-side economics".


Before discussing supply-side economics, let us take a
brief look at demand-side economics, which was
introduced by Keynes in the 1930's after the great
depression in the U.S.A. and Europe.

Demand-side policies have been implemented by nations


around the world for the past 70 + years. Today almost

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all the economies of the world have a constantly


increasing budget deficit and therefore an ever-
increasing national debt. Yet few of these nations have a
strategic plan to balance their budgets and to start paying
off the national debts.

As explained earlier let's compare a nation to a profit-


making business organization. Suppose a firm operates
at a loss year after year without any plans to make a
profit, and it finances these operating losses in the form
of long-term debts (i.e., long-term liabilities, which are
comparable to the national debt, most of which is also
long term). This type of firm would no longer be
attractive to investors or lenders. It would not be able to
raise money to finance its operating losses year after
year and, eventually, it would go bankrupt. This is the
same problem facing most nations today. They are either
virtually bankrupt or rapidly moving in that direction.
The only difference is that when a nation's loans become
due, they are either rolled over and added back to the
national debt, or taxes

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are increased, or more money is printed to pay off the


debts.

What happens when the government takes the above


steps? How is the economy affected? How are you
affected? All this is explained in the section "Why do
Politicians Choose to Perpetuate Inflation?" Essentially
borrowing more money and increasing taxes leaves
smaller amounts of money for the private sector to
spend, thereby slowing down the economy or what
economists call stagnation. Printing more money faster
than the growth of the economy causes inflation. In the
70's stagnation coupled with inflation was dubbed
"stagflation." Keynesian policies or demand-side policies
do not have a solution to this problem, since Keynes
never anticipated such a phenomenon to occur.

Keynes's solution to recovery from recession was to


artificially stimulate the economy. This would be done
by the government injecting money into the economy,
through government-sponsored projects. The objective
was that these projects would employ people and the
income earned by these employed people would be spent
to buy products and services, which in turn would create
more jobs in the private sector to provide for those
products and services. So by this process the economy
would be pulled out of recession. Sounds good! But this
is only a temporary solution and has a major flaw in it.

The money spent on the government-sponsored


projects has to atleast return enough income to pay
for the interest and pay off the principle otherwise it
is an economic loss to the nation. When a business
invests in a project it has to make a profit in order to
pay back for the investment and also to get some
return on the investment, to make it worthwhile for
the investors. If the project never makes a profit,
then investors will shy away from that business
organization. The business will not be able to get new
loans to keep on financing its losses and, eventually, it
will go bankrupt. Are we moving in that direction?

What happens when the debts on these government


projects come due? Most government projects almost

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never pays back the invested amounts (let alone making


a decent return on investment.) They simply disintegrate,
or money has

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INTRODUCTION TO CHANGES NEEDED IN


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to constantly be pumped into them to keep them alive.


The government uses its power to either borrow more
money, or raise taxes, or print more money to pay off
old debts. This puts the economy into a bigger recession
than the previous one, and the government does the
juggling act again to pull the economy out of the
recession. But each time the balls get bigger and harder
to juggle (i.e., the debt becomes larger) until it pulls the
whole economy down with it. Then we will have a
complete collapse in the economic system, which is
what most nations of the world are fast approaching.

SUPPLY-SIDE VS. DEMAND-SIDE

From the above explanation it is clear that demand-side

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policies do not have a permanent solution. They simply


give the economy temporary relief and postpone the
disaster. Each time it costs the private sector more and
more and it has a snowballing effect. The supply-side
policies recommended here have permanent solutions.

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PS = Price
when
supply is
increased

PD = Price

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when
demand is
increased

P = Price

Q = Quantity

S = Supply

D = Demand

E=
Equilibrium
or assume it
is the current
situation

QN = New
Quantity

SN = New
Supply

DN = New
Demand

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Let us examine the graphic implications of


demand-side and supply-side economics.
What happens to price and quantity?

Assume PE and QE are the current


equilibrium prices and quantities in an
economy. Q is also referred to as gross
national product (GNP) or total quantity of
products and services produced by a nation.

When you examine demand-side graph G1,


you find that as demand is increased from
the current equilibrium position DE to the
new position DN, the quantity or GNP or
total output increases from the current
quantity QE to the new quantity QN. But at
the same time there is an upward pressure on
price to increase from the current price of PE
to the new price of PD.

Now examine supply-side graph G2. When


the supply is increased from the current
equilibrium positions SE to the new position
SN, the quantity or GNP increases from the

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current QE to the new quantity QN——


roughly the same magnitude as in demand-
side graph G1.But examine what happens to
the price in supply-side graph G2. The price
has fallen from the current equilibrium PE to
the new price of 1PS.

Assuming that both the demand-and supply-


side economics have the same increment in
quantity, examine the comparison box on the
left-hand side. It shows PE as the current
equilibrium price. The demand-side graph
pulls the prices upward to PD while the
supply-side graph pushes the prices down to
PS. The net price difference between PD and
PS is vast.

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This price difference in an economy could mean an


immense inflation due to demand-side policies, as
opposed to steadily increasing quantity or GNP with
steadily falling prices. (Later, this book will address the
separate effects of inflation and deflation on an
economy.) It is quite simple to graphically explain what
happens to price and quantity when you increase the
demand or increase the supply. But in real life it takes
decades of testing economic policies to know the real
effects of a policy or a group of policies. Also, a group
of polices will have a slightly different effect depending
on the overall national economic policy and the world
economy.

Very few supply-side policies have been authentically


implemented and tested. In my opinion, true supply-side
policies should foster these goals:

(1) Encouraging steady growth in the private sector.

(2) Minimizing tax laws and abolish all intrusive taxes.

(3) Maintaining a balanced budget and keeping


government spending to a minimum. Government should
always spend less than what they have, to keep reserves
in case of emergencies.

(4) Not subsidizing any industry (except education and


the handicapped).

(5) Maintaining a steady growth of money supply (M.S.)


to accommodate the increase in GNP (i.e., an increase in
M.S. should be roughly equal to or less than the increase
in GNP). This policy would keep prices fairly stable.

Supply-side economists have different ways of achieving


the above-mentioned goals. Most of them want to take
the existing tax laws, production policies, import-export
policies and simply refine them to encourage growth.
This would surely have a positive effect on the economy.
But the basis of these existing policies has its flaws and
limitations. The supply-side policies proposed herein do
not encourage mere cosmetic changes but suggest a
complete overhaul in the structure of the existing
policies.

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What the present supply-side economists are suggesting


is to trim the fruit tree, fertilize it, and make it grow and
produce more. This will only produce more of the bad
fruit. What I am proposing

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is to uproot the old tree and plant new superior quality


fruit tree in its place. Looking at it another way, the
present supply-siders are trying to build a ten-story
structure on a foundation that was built to support no
more than two stories. Even if one uses the best paints
and plumbing and electrical systems, that does not mean
the foundation will support a 10-storey building.

The supply-side policies I am proposing would build an


economic foundation so strong that it would have no
foreseeable limits. Within five to ten years of its
implementation, most major capitalist countries would
want to learn about these policies and implement them
or they would be left far behind and their citizens would

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not be happy about it.

The beauty of these policies is that they are simple and


realistic, yet most effective. Some would even call these
policies idealistic. They are relatively easy to implement
and maintain. Once in operation, they will not call for
any major structural changes; if any, some minor
adjustments may be needed in the long run. As
compared to the taxation policies today that have so
many changes every year that businesses as well
individuals have to live in fear as to how these new tax
policies will affect them. Again they have to waste so
much time and resources planning to reduce their tax
burden.

All this adds to the cost of the end product or service


that the company provides and the consumer pays for it
all. This reduces our competitiveness in the global
economy. The concepts explained here are rock solid
and will stand the test of time. For these policies to work
effectively and have the desired results there should be
no concessions and it should be simultaneously
implemented in order to get quick , full and long-lasting
impact. Some of the policies in this book are optional
and will be mentioned as such in the following chapters.
These optional policies are common suggestions, which
I have heard over the years, I do not endorse or deny it
they are interesting thoughts floating among the people
and can be implemented after public debate and opinion
polls. I am not a doomsday economist. I have great
confidence in the human race and our Indian people. We
have proven ourselves all over the world in various
fields as

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to what we are capable of accomplishing. (Except for


sports we need a lot of improvement there). We need to
evaluate and be aware of the situation, realign our path
in the right direction and move forward. The changes in
economic policies proposed in this book will do exactly
that.

I believe the role of an economist should be one of a


thinker, a person who comes up with workable
solutions to economic problems. Most economists
today are heavily involved in statistics, using complex
mathematical formulas to estimate and forecast
economic figures, which are incorrect most of the
time. Yet what do these numbers mean to the rest of us?
Does it translate into a more stable, people-profiting
economy? Sound economic policies are worth much
more than the most accurate forecast figures. For
example, making the right management decision to
make a profit, rather than a loss, is more important than
forecasting the exact amount of sales or costs or profit or
loss or the exact time when the company will go
bankrupt. We need to focus our view and make the
necessary changes to head away from a disaster and be
on a steady path of progress.

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While reading the book lots of different thoughts will be


running through your mind, but be patient and keep on
reading and most of your questions will be answered and
you will realize how effectively everything fits together
so perfectly.

Lets look at this example. Supposing you were


overweight and you were not feeling healthy. Your
blood pressure is getting high, your cholesterol is high,
you have indigestion problem, joint pain etc. You take
opinions from two doctors. The first one has a lot of
computer gadgets and he attaches it to you and does the
input of your different reports and tells you this. You
will get a heart attack after 368 days, 16 hours and 24
minutes so you better go and check into a good hospital
a day in advance so that doctors can care for you. In the
meantime just continue with your lifestyle.

The second doctor takes one good look at you and


seeing you overweight tells you to control your eating
habits and puts you on an exercise program. This will
automatically reduce your weight and gradually all the
weight related problems start fading away

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and you will feel fine and healthy. Which of the two
doctors would you prefer? The exact amount of food and
exercise is unimportant a little more or less will not
make such a big difference. Doing the right thing is what
is important.

In theory everyone will say the second doctor has the


correct advice and you should do as he says. In reality
everyone will follow the first doctor's advice because
nobody wants to take the difficult task of controlling
their eating habits and exercising. So also in managing
our economy we need honest and hard working people
to get our economy into good shape.

In this book the changes needed in economic policies


suggested are that of the second doctor. It will be
difficult for the politicians and bureaucrats because they
will have to control their official spending to balance the
budget, that is comparable to controlling our diet, and
make all our joint assets profitable, that is comparable to
exercising. The more the politicians do the above the
faster the change in the economy and in your life.

Corruption will be controlled or done away with


(explained later) and C/P will have to work hard and
smart and with honesty to show the results to the people
of India or they will be made to resign their positions by
the honorary committee (explained later) of each ward.
Corruption is comparable to a virus. Once it enters the
body it keeps on spreading until it weakens the body
which is giving life to it . Ultimately it kills the body.
Lets stop this virus (corruption) before it kills our
country.

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CHAPTER 3

TAXES

SIMPLIFYING THE TAX LAWS

No matter how much you prune, fertilize and water a


low quality fruit tree it will not produce sweet high-
quality fruit. Similarly, reforming the present income tax
laws and other intrusive tax laws will not produce any
net advantage to the nation. It will merely compound an
existing problem because the concept of taxing income
and production has many adverse effects and results.
Why should we pay part of our hard earned income to
the government? Instead of the government being
thankful to us for parting with our hard earned income
they want to keep track of each and every Rupee we earn
and how we spend it. In the name of simplifying taxes
and reforming taxes they burden us with complication
beyond not only a common mans understanding, but also
beyond most college graduates and even most
professional accountants have to attend seminars to
understand and clarify what new changes are made in
the tax laws each year.

Income tax is an old concept, definitely dating as far


back as the Roman Empire and probably as far back as
the Egyptian Pharaohs and other Kings worldwide. Their
tax system may not have been the same as our income
taxes as we know it today, which requires so much
details and paper work and wastes so many man-hours
and resource. Theirs could have been a simple tax. Such
form of taxation has always led to a slow down in
economic growth, an underground economy and
eventually an economic disaster. The same things are
happening today. Man should learn from his past
mistakes and not repeat them.

In an economy, Income tax along with any of the other


intrusive taxes mentioned before and corruption are like
the

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clutch and brake in a vehicle. If the clutch and brakes are


not released the vehicle will not move forward. Even
with the clutch and brakes not released this vehicle
called India has moved forward especially since the mid
1990's. Just imagine what kind of power and speed this
country will unleash when the clutch and brakes are fully
released. The ideas in this book when implemented will
do exactly that.

In order to make people's lives easier, abolish all


intrusive taxes ie, income, excise, sales, octroi, VAT
or any new taxes that the Politicians can think of
next. All of these intrusive taxes can be replaced with
a simple 20% Tax on all products and services sold to
the final consumer. This would be the easiest way but
it would not be fair to the poor people. A better way
is explained below.

CONSUMER-SERVICE TAX

Let us make a real historical change for the world to


follow- let us not copy them. Once and for all abolish
all intrusive taxes and introduce a Consumption Tax

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or call it a consumer tax and a service tax (C-S Tax).


This would be collected once only at the time when
the retailer would sell the final product or service to
the end consumer/user of the product or service.
There would be no tax to the producer or the
supplier of products or services from one business to
another. Even today all the taxes that the
manufacturing companies, stockiest, wholesalers,
distributors and retailers are paying are eventually
added into price of the product/service and is being
paid by the final consumer. So why not reduce all the
headaches, harassment, cost of tax accounting,
wasted man hours in preparing and reporting taxes,
high cost of implementation and collecting all the
intrusive taxes. By abolishing all intrusive taxes the
basic prices of all products and services would come
down tremendously. The percentages mentioned
below may seem high initially but still the final price
to the consumer would be much lower than with the
present intrusive taxes (except for luxury and
imported products) and that can be reduced each
year. Lets have the following tax only.

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The C-S Tax should be a progressive tax, divided into


four categories:

i) Zero percent C-S tax on necessities of life, 1) Food,


this should include all farm produce as well as inputs
that go into growing farm products ie, tractors, water
pumps, all kinds of farm goods transportation,
fertilizers, spray pumps etc, 2) Education including
all text and note books for school and college
students, 3) Clothes with at least 50% Indian grown
cotton. 4) Indian grown Ayurvedic medicines 5)
Products that use renewable energy sources—Indian
made or imported machines, vehicles and electric
generator sets that would use renewable energy
sources i.e.; solar, wind, hydro, agricultural plant
energy source, gobar gas plants, etc.

ii) 20% C-S tax on normal products and services, this


would include almost everything except the
necessities mentioned above in the 0% tax bracket,
imported foods and restaurant foods could be kept in
20% bracket since it is not a necessity for the poor.

iii) 50% C-S tax on energy consuming products made


in India and 100% on imported energy consuming
products that use fossil fuel or electricity or batteries,
all fossil fuel consuming vehicles, generators engines
could be classified under this category.

iv) 100% C-S tax on Indian made luxury goods; and


200% C-S tax on imported luxury goods. All
unhealthy products and services should also be
included in this classification i.e., Alcohol, cigarettes,
pan, ghutka, gambling places, nightclubs etc.

So here in one page (full size) you have the whole


country's tax system which any ordinary person can read
in 3-5 minutes and understand the concept. Refrence
may be required for classification of luxury products or
other specific products and explanations of how and why
these items are classified. The whole concept of taxation
for raising revenue can be part of the constitution, not to
be manipulated by the Finance minister every year to

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make people's lives miserable. The majority of the


people are unaware of how different tax laws will affect
their lives or death.

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TAXES

Existing tax laws only discourage people's instinct to


progress and to make a better life for themselves.

ADVANTAGES OF C-S TAX OVER INCOME,


EXCISE, SALES, OCTROI, VAT AND OTHER
INTRUSIVE TAXES.

The C-S Tax is relatively easy to understand, implement


and enforce. Instead of keeping track so many income
earning individuals and companies, plus excise, sales
and octroi on so many businesses, with the C-S tax the
taxman has to just monitor the retailers which are much
fewer than the present taxable individuals and
businesses. Here are some of the advantages of C-S Tax
over Income Tax and other intrusive taxes.

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The best part of removing income tax is that not only


will it relieve a lot of tension from the people but the
concept of black money or what some people call an
underground economy or parallel economy would
disappear. Everything is usable money for anything a
person wishes to invest in or purchase. He will not be
cornered to invest in tax savings instruments just to save
on income taxes. He can invest in whatever investments
he likes which will give him the best returns. And the
better part of it is that all the black money sitting in
foreign banks would be transferred back to India since
our interest rates have been traditionally higher than
many other countries. No questions asked where the
money comes from.

Many estimates are that this black money in foreign


banks could be so large that we could use this money
to pay off the entire foreign debt. So instead of paying
interest to foreign banks we can pay the same interest
to our Indian citizens whose money has come from
abroad. And when these people have more un-taxable
income they will either invest in the Indian economy
or purchase more goods and services in our economy.
This will further give more employment for
production and services. Both of which would be
beneficial to the Indian economy as well as the Indian
people.

When this huge amounts of Indian peoples money sitting


in foreign banks in foreign currencies is transferred to
India they

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CHANGES NEEDED IN ECONOMIC POLICIES

would have to sell the foreign currency and buy Indian


currency in the open market or through the Reserve bank
of India. This would have a downward price pressure of
the foreign currencies and an upward pressure on Indian
Rupees. With the Indian rupee appreciating against the
foreign currencies we would have to spend lesser rupees
to pay off the IMF, World Bank and other banks that
have loaned us the money. This is also an advantage to
us because now we would have to raise lesser taxes to
pay the foreign banks.

As this process catches momentum the economy will


grow bigger, the C-S tax revenue will also grow bigger.
This excess tax revenue should not be for the
government to squander off but to further reduce the
national debt and interest payments. If all the policies in
this book are implemented, within 10-15 years we
should be able to be a debt free country and then we can
considerably reduce or do away with the C-S tax to
make peoples lives better and easier.

C-S tax would be fair and equitable. People in the


middle and higher income brackets would spend
proportionately more of their money on normal and
luxury products, thereby paying a greater percentage of

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their income on C-S Tax. Lower income people would


spend the majority of their income on necessities,
thereby paying very little or nothing in C-S Tax. The C-
S Tax would have no loopholes for the rich to get away
with paying very little or no taxes. It is fair because it
would charge the most to those who can afford to spend
the most (not necessarily who earn the most). It is
equitable because it would not penalize an individual for
earning a higher income.

Private individuals would not have to report their


income or expense to anybody. When they buy any
product or service that is taxable they pay and forget
about saving the receipts for tax officials. Since they
would not have to pay any income tax or capital gains
tax, people would invest their surplus money in banks,
stocks, bonds, real estate or other forms of investment.
People would not invest their money in foreign countries
or just hide it some place or buy gold and diamonds.
Cash stashed away in the ceiling or ground or foreign
bank accounts or gold does not do any good for India or
the Indian citizens.

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TAXES

Business that are in production or service industries


would not have to pay any of the intrusive taxes or C-S
Tax as long as the product or service they are providing
is to another business organization and not the consumer
of the final product or service. For example a call center
providing a service to a foreign company would not be
charged a service tax because this service is a contract
from one company to another company. This foreign or
local company can charge a service tax to the consumer.
If the consumer were in a foreign country we would not
charge them any service charge hence making our
services competitive. (Same applies to products). This
would substantially lower the cost of doing business in
all the service or production industries in India.
Therefore, it would encourage businesses from all over
the world to come to India and set up their production
plants and serving offices. This would lead to full
employment in the nation, raising the overall national
and individual income. People would have more money
to spend. Hence, overall C-S taxes collected would also
increase.

Since all of the taxes charged to the businesses are


passed on to the final consumer of the product or service,
there is a huge snowballing effect on the price. Plus the
consumer pays for the product or service through his tax
paid money.

Every individual or business would have to pay the local


municipal taxes and each municipality would decide
property taxes as per their norms.

Those who do not consume would either save or invest


for their future. This would make more money available
to businesses, which would reduce the cost of (interest)
money i.e., the same advantages as explained in the
above paragraph, more business, cheaper production,
more employment.

The government would not have to worry about setting


quotas and tariffs for businesses to import products.
When those imported finished products are sold in the
nation, the consumer would pay the same C-S Tax as per
the brackets specified, when he buys it from the retailer.

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The label would show which country the product was


made in and the retailer would charge the appropriate C-
S tax. When a private individual imports or buys luxury
or normal products from overseas for personal use, he
would be charged the

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same C-S Tax on those products at the port of entry as


would be applicable in India under the C-S Tax bracket.

This would discourage people from going overseas just


to buy foreign products, and it is fair that everybody pay
the same C-S Tax whether they buy the products in
India or from abroad. Of course each traveler would be
allowed a certain amount of products for himself
without worrying about customs duties.

If a business or an individual imports some raw


materials or production machinery he would not be
charged any tax at all. Reason being this raw material or
machinery will create more jobs and if this processed

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material is re- exported which is made with the help of


the imported machinery then without the tax factor on
the raw material or machinery our products would be
competitive in the global market. This would create
further jobs and growth in our economy.

As the cost of production drops, because of zero income


tax and no other intrusive taxes and lower cost of
capital, we would be able to export more than we
import. So there would be no need for any kind of trade
restrictions or check on individual travellers. This would
eliminate the need for customs and duties for business
(and save on custom officers salaries) a very inefficient
means of collecting taxes and also a major headache and
deterrent for international traders. Everybody would
gain from the free flow of products and resources. In
addition, it would keep the local businesses on their toes
and competitive with the rest of the world producers.

When a producer exports, he would not pay any Tax


(because the product would not be consumed within
India), hence making his product very competitive in the
world markets. No nation could criticize us for unfairly
subsidizing any industry since none of the businesses
would be taxed. If they felt they could not compete with
us because of our C-S Tax policies, then they would be
welcome to adopt the same tax policies.

The need for an underground economy would be


minimized because the retailer himself would not be
paying any income or C-S Tax, so there would really be
no incentive for him to cheat. All he would be doing is
serving as a revenue collector for the government at the
point of sale to the final consumer. If a retailer were
caught

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TAXES

not collecting the proper C-S Tax, or collecting the tax


and not paying the government then he could get a
warning and the second time around he would lose his
selling license forever and /or pay a hefty fine. He would
be blacklisted and he would never be able to get a
government job or government contract, plus there could
be a prison term for breaking the law. The C-S Tax agent
who apprehended such a retailer would be paid a
percentage of the fine collected by the C-S Tax agency.
This would encourage C-S Tax agents to work harder
and to deter retailers from cheating.

The C-S Tax would be a very efficient way of collecting


revenue. The tax-collecting agency would need a much
smaller staff and computer resources to oversee a few
million retailers with just one tax throughout the country,
versus hundreds of million of private individuals,traders,
retailers and businesses complying with several different
taxes . The retailer's job would also be very simple. He
would simply add up all the taxes collected each month
and send them off to the tax-collecting agency. There
would be no advance tax system. As it is the retailer is
doing the government's job by collecting tax for the
government on top of that it is not fair for the
government to ask him to estimate his next months

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collection and pay in advance. Advance tax should be


abolished in the constitution so in future some
Finance minister should not reintroduce this concept.
Nobody would feel threatened by the C-S Tax
policies.

With modern developments in computers and electronics


and satellite services it would be a very simple operation
to eventually give each retailer an electronic device
directly linked to a satellite. This link would keep adding
the total of everything that each retailer sold and at the
end of each transaction the machine would show exactly
how much C-S tax the retailer had collected. He could
send off the tax collected on a monthly basis or when it
reached a certain minimum level. With the present
income tax the whole country is tensed when it comes
close to income tax filing time and year ending closing
time. For them it is almost like appearing for a final
exam. All this waste of productive time, money and
tension would go away with the removal of the intrusive
taxes and replaced with the C-S tax.

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CHANGES NEEDED IN ECONOMIC POLICIES

Every time there are changes made in the income tax


laws, millions of man-hours are wasted in the economy
to understand and restructure financial positions in order
to take advantage of the new tax laws and minimize tax
liabilities. With the C-S Tax laws the only change that
would be needed would be to redefine the normal
products and luxury products, which would change their
tax bracket. This would be necessary because as the
economy prospers some of the luxury products would
become normal products. As the majority of the
population's need and affordability for a particular
product increases, it is only fair to rate it down from a
luxury product to a normal product. In this way the
products that are most needed in the economy would be
produced at a greater rate, which would make the
economy more efficient and minimize waste of
productive time and resources.

The system would yield a much more accurate way of


keeping track of the GNP. There would be no double
counting. For example, a resale of a used automobile or
any other used product would not be charged a C-S Tax
because the taxes would have already been paid on it
once. Those who wish to minimize their C-S Tax would
buy used products. But when they replace parts of their
automobile, those new parts and labor would involve the
20% C-S Tax. In the present accounting system the final
product sold is highly inflated with the cost of the
intrusive taxes in place today. By increasing the
intrusive taxes the price of goods and services would go
up and show a bigger GNP figure to make the politician
look good in the short run.

The GNP indicator is an important signal to large


corporations to make their decisions and also for the
Reserve bank to print new money as the economy
grows. With the present tax system since so many
different taxes are applied at each stage of the
production process the end result is that the final product
price add up to a lot more. For example if excise tax
were to be increased from 10 % to 15% then by the time
the product reaches the final consumer it could get
inflated by 20% or more. This would show a distorted
growth of the GNP. When government uses improper

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means of calculating GNP and provides distorted


figures, industries react in ways that may be detrimental
to the economy.

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The C-S Tax would encourage investors from all over


the world, since income would not be taxed. True, some
of the profits would be taken out of the country, but
overall a lot more would be coming in. Most of the profit
would stay within the nation because the interest earned
on the profit would not be taxed, but if they took it to
their own country, it would be taxed in most cases by
their own country. So most businesses would re-invest
their money here, until they absolutely needed the
money in their home country. The government could
have a simple 10% tax on all the funds taken out of the
country regardless of weather they make a profit or loss
on their original amount brought in. This could be an
additional source of revenue to the government.

The C-S Tax is so simple yet so effective that every

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individual and business would see a positive sum gain.


Any average person would be able to understand how
the C-S Tax system works within a few minutes,
although he/she would not be able to see all the
advantages and disadvantages immediately. By reading
this book anybody could start to understand the
advantages of C-S Tax.

. The only disadvantage of the C-S Tax would be that a


majority of the employees of the income-tax collecting
agency and the other intrusive tax agencies would not be
able to throw their weight around. Accountants will
always be needed by businesses but the "tax specialists"
would have a look for other jobs. They would easily be
absorbed by the growth in other industries. They would
have to work harder because they would not be able to
make money from people's fear of the mysterious
income tax and other intrusive tax laws.

DISCUSSION OF C-S TAX

When an individual, partnership, or corporation decides


to open a retail outlet, or provide a service to the end
user or beneficiary of the service. They would simply fill
out a one-page application form to be registered as a
retail outlet or service provider. They would have one ID
No. This C-S tax ID No can be used to sell goods or
provide a service. Each transaction would have a code

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that would decipher whether the amount collected was


for the sale of a product or for a service provided. This
will help to give a clear picture of growth in products
sold or services provided in the economy. These forms
could be made available through the post office,
libraries, and bookstores. This form would have simple
questions like: name of business, name of owner(s) or
corporation, location of retail store, if traveling type of
retail salesman then location of sales office or head
office, type of retail outlet, whether they will be selling
necessities, normal, energy consuming or luxury
products and services, or whether it will be a
combination of any two or all three.

The central government would send the retailer an


identification number, which would be used on every
sales transaction and service provided. An individual
who sells some products through his house or provides a
service from home can collect the C-S tax and send it off
to the tax office at the end of each month by just using
his present PAN number and name as his ID. If he is
doing this business on a regular basis then after 6
consecutive months he should apply for a C-S tax Id
number and regularize his home based business.

A retail outlet can be defined as a business that sells any


product or service to be used by the end consumer. Here
are some examples of services that would be considered
retail outlets: a taxi service, air travel, an attorney's legal
services, an electrician's or mechanic's repair service,
etc. A retail outlet that sells products to the consumer
would be very easily identifiable. Transportation
Company would be excluded from C-S Tax because
when the final product is sold it would include the cost
of transportation plus the fuel used by the trucks is
already taxed at 20 % C-S tax bracket.

A manufacturer or a service company providing a

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service to another manufacturer would not have to pay


service tax. For example a textile machine manufacturer
will need to provide maintenance and repair service to
the manufacturer using their textile machine to produce
cloth. The cloth manufacturer is not the user of the end
product i.e. cloth. He will sell the cloth to the wholesaler
hence neither he nor the wholesaler will pay any C-S
Tax. The cost of the service and spare parts for
maintenance to the cloth manufacturer would

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not fall under the C-S Tax since all these costs are added
into the price of the final cloth which the consumer will
pay money for and pay the C-S tax as is applicable or
not.

There could be some complications in defining whether


a service is being used by the consumer or by a business
in order to provide the final product or service to the
business. For example, if a business owner who
manufactures a product uses an airline to travel in order
to make a business transaction, then he should not have
to pay C-S Tax on the airfare since he is using it for his
business. If he does have to pay, it would be a kind of
double taxation because that airline service is needed by
the business in order to manufacture his product. He is
not the end user of his product but his traveling is part of
the business expense and not a pleasure trip. But suppose
he is doing both then how do you define how much C-S
tax should be charged or not. In the present intrusive tax
system there is so much double taxation that there is no
comparison between the two.

Let's assume for the sake of discussion that you exempt


all services used by business from the C-S Tax; then
business owners would have a big loophole. They could
classify other personal services as business services and
avoid paying C-S Tax on them. This would not be fair to
other C-S Taxpayers who do not own a business.

An alternative would be to have zero C-S Tax on all


services so as to be fair to business as well as non-
business owners. But this would create another problem.
For example, automobile retailers would overstate the
value of the service provided and understate the actual
value of the automobile, in order to save C-S Tax.

A modification of the above alternative would be to have


zero C-S Tax on all services, except for those services
sold in conjunction with a product. As shown in the
above example, the automobile retailer would charge C-
S Tax on the value of the car as well as on the service
warranty. If a different company sells the service
warranty, then the retailer should not be able to dictate
whom to buy the service warranty from, so that two
different companies with the same ownership may not
have price fixing and be able to avoid C-S Tax.

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What happens when a production firm buys a product


such as office furniture, supplies, automobiles, etc.?
These same products can be used by a consumer as well
as a business. If businesses are exempt from paying C-S
Tax on the above products, to avoid double taxation,
then we have the same dilemma as in services. Business
will buy these products as if they are bought for business
and then use them for personal purposes.

From the above discussion it is clear that there is bound


to be some overlapping of taxation or there are going to
be major loopholes for business owners to exploit the C-
S Tax for personal benefit.

Between the two choices, some overlapping of taxes is


better than having loopholes. At least in the C-S Tax
method there is a one-time tax and a small fractional tax
overlapping in some cases, especially when businesses
buy the same type of product or service that a consumer
would also use.

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In relative terms the C-S Tax is a very minor form of


double taxation compared to the current income tax
system in most countries and ours today. For example,
under the income tax system all of the following pay an
income tax on their profits: the company that mines the
metal ore; the company that makes steel from the metal
ore; the company that manufacturers automobile parts;
the company that puts the automobile together; the
wholesale distributor; the final retailer. Not only do the
businesses pay an income tax, the owner (stockholders)
of the business also pay income tax on the dividends
they receive. So income tax and other intrusive taxes are
paid throughout the production process by each of the
different companies that are in the production process,
unless the same company owns the whole production
process, which is very rare. In either case, the consumer
is the one who pays for all of their income taxes and
other intrusive taxes by paying a much higher price for
the car. To top it off, the consumer pays for the car from
his income, which has already been taxed! So there is no
comparison between the intrusive tax overlaps and C-S
tax.

Let's examine the above case under the C-S Tax system.
Only the retailer would collect 50% tax once at the point
of sale to the

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TAXES

consumer (the actual user of the car). No C-S Tax would


be paid throughout the production process, nor would the
owners (shareholders) pay any C-S Tax on the profits or
the dividends. In relative terms the C-S Tax is a much
lower form of double taxation than the income tax. The
overall price of products and services would be much
lower to the consumer under the C-S Tax than under
income tax and other intrusive taxes.

A user of a product, whether an individual or a business,


would have to buy the product from a retailer and not a
wholesaler. A wholesaler could sell the product only to
another wholesaler or to a retailer but not to an end user
or consumer because only a retailer would be allowed to
collect C-S Tax (the wholesaler would not). A
wholesaler could get a retail license also. If a business
buys a car from the dealer (retailer), then the business
should have technically not have to pay the C-S Tax on
the car, since the car is going to be used for the business.
He could also use this car for personal use. Here again
you have the dilemma to decipher whether to tax or not
to tax. Such products and services that can be used by an
individual as well as a business should be charged a C-S
tax in order to avoid the big loophole for businesses.

The words "consumer" and "user" of the product would


be one and the same for C-S Tax purposes in order to
avoid a loophole for businesses. So a business pays C-S
Tax whenever it buys an end product (or finished
product) such as furniture, office supplies etc. which
indirectly assists in the production of another product,
such as a car. But it would not pay C-S Tax on any of the
raw materials of the car, even if they were end products
of another firm, such as an engine, tires, glass, seats, etc.,
since it is not going to be consuming them (or using
them). It is merely going to use these raw materials to
produce an end product, i.e., a car.

Suppose a company is manufacturing just car tires. It

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sells the tires to a car manufacturer and also to the


consumer through a retailer. In this case the car
manufacturer would not pay any C-S Tax on the tires it
bought but the consumer would, because the consumer is
going to use those tires on his old car, while the car
manufacturer will install the tires on the new

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car and sell it to a wholesaler. When the car is finally


bought by the consumer the end user he will pay the C-S
tax on the whole car which includes the cost of the tyres.
The car manufacturer should have to pay C-S Tax on the
tires it uses on cars that are used by the employees.

A car manufacturer sells almost all of its cars, but it may


use some of them for the employees and management to
run the business. For this purpose it should not have to
pay a C-S Tax on using a product that it manufactures
and uses. But if this car manufacturer buys a car from
another manufacturing company or dealer (retailer), then
it should have to pay C-S Tax on it. Also if the

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manufacturer were to directly sell a car to its employees


they would have to collect C-S tax on that sale. Here the
manufacturer has himself become the retailer. Therefore
he would require a retailer outlet license No if he were
doing this on a regular basis of over 6 months.

TURNOVER TAX (OPTIONAL)

An additional optional tax to raise revenue if acceptable


to the majority public could be a one percent turnover
tax (TT). This can be implemented after taking a public
opinion poll. TT would be a voluntary tax. No Agency
would be set up to check on this tax. Consider it more of
a donation to the Government rather than a tax. Any
individual could send one percent of their turnover to the
government. For every Rs1,000 or Rs5,000 (or whatever
the amount that would be by public opinion poll) TT
paid the government would grant one extra vote to that
individual. (Refer to the new option of election system
in chapter) Since all the elections would be held once in
5 years within one or two months time span, all the TT
paid by an individual would be added up in the
governments computer system and accordingly the
number of votes would be allocated to that individual. If
someone decided not to pay the TT at all or if someone
wanted to pay more than or less than one percent of his
turnover in the TT tax then he is free to do so. No
questions asked. I'll let you decide on the pros and cons
of such a tax since it is optional.

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This TT money to be used to pay off the national debt.


After that the money could be kept aside for natural
calamities, or accidents. This surplus when created
would be invested in liquid funds. Within the scope of
this optional TT all companies listed on the stock
exchange could be asked to pay one or two percent of
their turnover in TT tax. TT could be made mandatory
for such companies. If so, there would be no need to
monitor such a tax because stock companies have their
own audits and have to disclose their figures to the
shareholders. This would make it hard for them to cheat.

BIRTH TAX (OPTIONAL)

Another optional tax suggested to me was a birth tax.


No tax for the first child. Till he/she is the only child full
preference to be given to the child as well as the parent
of the single child in every government as well as the
private sector school, college, jobs, contracts, etc. Of
course everything would be on merit basis only. This is
if there are two applicants selected for one position and
if everything else being equal the single child or the
single child's parent would be given preference. But
as soon as a second child is born to them all these
preferences would be taken away. Plus on the second

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child everyone would have to pay a birth tax of Rs ——


(whatever was decided by a public opinion poll. If a
couple could not pay the birth tax then the government
would sterilize them both. So at least they would not
produce more kids. The third child would have a birth
tax 10 times that of the second child's birth tax rate. This
amount would be paid in advance to the government by
the time the mother would be 2 months pregnant or latest
by the time the child was delivered. If they couldn't pay
then??? you decide. These optional ideas are public
ideas I have heard over the years. I do not endorse it
or deny it. I am mentioning it here because they are
interesting and make sense and there should be
public discussion on it because the fast growing
population in certain sectors is a concern to all of the
citizens who understand the implications of an
overcrowded and overburdened economy.

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GUIDELINES FOR C-S TAX LAWS

Only a retailer with a C-S license would be allowed to


sell a product or a service to the consumer and collect
the C-S Tax, depending on the classification of the
product or service. If a private individual did some
retailing from home initially for 6 months he would
collect and pay the C-S tax under his PAN number and
then apply for a regular C-S tax registration as explained
earlier.

v The retailer of a product or service would collect the C-


S tax from the buyer/actual user of the product or
service. The C-S tax would be added to the actual sales
price of the product or service as per the C-S tax
category. .

v If a business buys a finished product merely to


transform it into another product and sell it, then it does
not pay C-S Tax at the buying end.

v If a business buys a product to use it for business, then


it does not pay C-S Tax on it except if the same product
is classified under a final consumer product also. A
consumer would also pay the C-S tax on any product if
it is classified a final consumer product.

v A business would not pay C-S Tax on the actual


production equipment it buys.

v An individual consumer would pay C-S Tax on raw


materials that he buys for himself from a retailer to use
or consume.

v Business and individuals would pay C-S Tax on all


products and services that are sold to private individuals.

v Businesses would not pay C-S Tax on services that are


related to the actual production equipment i.e., business-
to-business sale of spare parts products or services
unless it is specified as a final user product or service.

v Retailers would be responsible for collecting the


appropriated amount of C-S Tax from the buyer and
giving the buyer a hand

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written/printed receipt for the every sale whether the


product or service is taxable or not. (For accurate GNP
total)

v If the retailer sells an item on credit, the retailer is


liable for that C-S Tax amount even if the buyer does not
pay up. (It would be in the best interest of the retailer to
at least collect the amount due on the C-S Tax , but he
would not be required to do so by law. He would then
have to pay the C-S tax from his own pocket).

v The C-S Tax collected each month would be paid by


the middle of the following month. If the C-S tax
collected would be below Rs1000- then he would wait
till it exceeds Rs 1000 and then file it. There would be
no advance tax and no minimum amount collected
exemptions. An exemption is where the cheating can
start. The retailer would simply fill out a form and send
in the C-S Tax money collected for that period. The form
would have all of the information that would be on his

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application form to identify him. The retailer would


enter the amount of products or services sold in each of
the four categories (necessities, normal, energy
consuming or luxury) and the amount of C-S Tax
collected for each category, add all of it, and send the
money in with the form. The new computerized satellite
units would reduce this form filling workload.

v For any private individual or business to sell a product


or service to be consumed or used by the consumer, he
would fill out an application form to be registered as a
retailer with the central C-S Tax agency.. (The actual
physical location and building structure would have to
comply with the local building codes and ordinances that
would apply to the retailer.)

v Only the central government would be in charge of and


collect C-S Tax. No other level of government (city,
district or state) would collect any other form of tax
except the municipality tax and property taxes. The city
municipality or village gram panchayat would be
allowed to collect a maximum of half percent as property
tax of the value of the property every year. They may
charge less than half percent if they choose to.

v For Road, train service or any public utility expansion


work the property owner will be given compensation on
the value on which he pays property tax. Normally the
government has valuation as

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per the area. But if a person feels his property is more


valuable than the government records show, then he is
free to pay at the higher rate within a certain specified
ratio gradually each year. He would not be allowed to
raise the value of his property by more than ten percent
each year. Otherwise property owners upon knowing
information that their property is going to be taken away
for road expansion would simply double or 10 fold the
tax paid and recover the higher amount from the
government. The 10% increase in his tax payment would
help him to get a higher compensation when his property
is taken over for public works expansion. No property
owner can go to court if his property is required for
public works but he would be paid just compensation
as per the taxes he has been paying. If no property
tax has been paid then no compensation would be
paid.

vThe identification number of each retailer would


identify him by the city, district, and state in which he
sells. The central government would keep track of where
the tax money came in from and disburse the C-S Tax
money collected in these proportions: i.e. of Rs 100
collect from any city or grampanchayat Rs 25 would go
back to the city or grampanchayat where it was collected
from, Rs 25 to the district in which the city came under,

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Rs 25 to the state in which the city came under and Rs


25 would be for the central governments use.

25% to the central government

25% to the state government

25% to the district government

25% to the city government or

gram panchayat

v If a company owns five retail stores in five different


locations, each retail store would have its own
identification number. This would assure that the right
cities, districts, states get their pro-rata share back from
the central government.

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v With the C-S Tax money received by the different


government levels, they would provide the essential
services, mainly of administrating. The actual services
would be contracted out to the private sector on
competitive bids. Eventually within ten to fifteen years
the C-S Tax would be reduced and completely done
away with (as explained in the section "What Will the
Money Collected from C-S Tax Be Used For?").

v When a retailer is caught by a C-S Tax agent for not


collecting the C-S Tax, the retailer should be made to
pay a penalty ten times the amount of what the C-S Tax
would have been. The C-S Tax penalty would be split
50% to the state where the penalty is collected and 50%
to the private C-S tax-enforcing agency, an incentive for
the C-S Tax agents to work harder. With the new
electronic devices that have direct satellite links the
retailer would directly punch in the transaction weather
the customer asks for the receipt or not. By not doing so
would mean a breach of law and the retailer would be
penalized as per the penalties mentioned earlier.

v Each state could have between 5-10 private companies


authorized to police as C-S Tax agents. The penalty
collected would be split between the state and the private
enforcing companies 50-50. The enforcing companies
would pay a percentage of their receipt to the agent who
catches the culprit, based on an incentive structure. The
reason for having each state police its own retailers is
that the more each state collects and sends to the C-S
Tax agency, the more it would get back in return from
the C-S Tax agency.

v If a C-S Tax agent is caught accepting a bribe from a


retailer, he would lose his job, be made to return the
bribe to the state, be made to pay a fine, be "blacklisted"
and never be accepted in any public service job. Public
flogging could be an added deterrent.. If the
management of the company is in on the bribe, then the
company would lose its agency and be shut down and
the above applicable to all the management and staff
involved.

v When a retailer starts a new retail outlet, he would get


a booklet along with his identification number. This
booklet would explain all the C-S Tax law, as to how

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much he would collect and what types of products or


services would be exempt from the C-S Tax.

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Even those products and services on which the retailer


collects zero C-S Tax should be totaled and reported to
the C-S Tax agency, or in case the retailer has the
electronic devices then it should be entered under the
code of zero tax. This way the government can keep
better track of the GNP on an online real time basis.

v The C-S Tax agency does not have the authority to


restrict anybody from getting a retailer's identification
number. In other words, it is not a licensing agency; it
merely gives out the next number in line as soon as an
application is received. This whole process should take

less than ten minutes to get an identification number


since the system would be computerized.

v Within 10-15 years, when the C-S Tax is no longer

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necessary, the retailer should still be made to send in the


total sales information to the C-S Tax agency. This
would be helpful in determining the growth rate of the
economy, which would dictate the increase in money
supply.

v When the retailer closes his operation, he would fill


out a simple form asking the C-S Tax agency put his
number in the non-active list. This would help the
government maintain a proper record of active and non-
active retail outlets in the country. The retailer can
reactivate his license by filling a simple application form
or even by a phone call.

PRODUCTION LICENSING LAWS

All manufacturing companies would have to register


with the state to set up each manufacturing plant. The
registration would be handled by the state government
based on guidelines set by the central Environmental
Protection Agency (E.P.A.). Every state would have to
comply with these same guidelines. The company would
fill out a simple form asking for general information,
such as the product it manufactures, what kinds of raw
material they use and what kinds of waste, by-products,
pollutants, etc. are created in the manufacturing process
and how these pollutants would be neutralized or safely
stored or disposed.

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If the whole manufacturing process is non-hazardous and


non-toxic, then the registration could be approved by the
state. Each state would have the choice of establishing
higher standards than those set by the E.P.A., but
minimum standards would have to be met by all the
states at all times.

If the product, by-product, or waste were hazardous to


human health, then special licensing would be required.
This licensing would have to be approved by the E.P.A.,
which would be in charge of protecting the environment
throughout the nation. They would have the power to
oversee the operation of the state registration
department; they could fine the state for not complying
and the official (s) who do not follow the guidelines of
the E.P.A. would be sacked from their jobs and their
names blacklisted. E.P.A. would have the power to
check up on any manufacturing plant throughout the
nation and if they discovered noncompliance, then they
could shut down the plant, plus make it pay fines and
make it pay for the damages and clean-up charges. The
officials (s) who approved the plant could also be held
responsible if they had been negligent in the registering
process.

The reason for licensing hazardous industries is that the


spillover created by these industries is not included in
the cost of the product. The people using these products
do not pay the true cost of the product. Society as a
whole pays for it indirectly. This is not fair. Why should
a person who does not use these hazardous products
directly or indirectly pay for it. Let the people who use it
directly pay the true higher cost of that product. This
higher pricing will automatically discourage them and
make them look for alternatives,. An example is
pollution or acid rain the direct producers and consumers
do not pay the true cost; society pays for it by
contracting different kinds of cancers and illnesses. It

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would be much cheaper to import these items from


nations where they have the facilities to take care of
these hazards, or find non-hazardous substitutes. For
example use jute bags instead of Plastic, HDPE bags.
Jute is a plant whereas HDPE is an oil byproduct.

Industries that can produce non-hazardous substitutes for


hazardous products should be encouraged by having zero
tax on their products at the final selling point, even if
they

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are luxury products. An example: if a company can


produce a car that runs on natural gas, alcohol, or any
fuel from which the exhaust is only CO2 and H2O
(Carbon dioxide and water, or any non-toxic, non-
hazardous exhaust), that product should have zero tax to
encourage consumers to use it. The reason is that, in the
long run, lesser pollution yields fewer medical bills,
better health and increased productivity. As society
produces more, generally prices fall and the nation can
be competitive in the world market.

WHAT WILL THE MONEY COLLECTED FROM

C-S TAX BE USED FOR?

The number one priority of all levels of government


(central, state, district, and city) should be to
preserve and protect human rights and private
property rights. These nations that do not respect and
protect private property are in effect violating human
rights because they are one of the same. In other words,
a person's property is a part of himself.

For example, a shop owner makes a living by selling


products and from the profits he buys food and other
things for his family. The government decides it is going
to charge the shop owner income tax so that it can
provide him with protection and other services. The
shop owner decides not to buy these services from the
government. The government does not give him a choice
and threatens to charge him a penalty and sell his shop
off to obtain the taxes from him. But if the government
sells his shop, they will have disposed off his means of
making a living. This could cause him great discomfort
or even starve him and his family. The government, by
threatening to take his property, has in essence
threatened his life.

In effect, the government is a legalized extortion


monopoly which says: "We the government have
given ourselves the legal right to collect taxes from

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you by whatever means, to protect and provide you


with certain services no matter what it costs you;
whether you want to buy it or not, we shall continue
to do so even if it costs you your life or livelihood.
"Therefore, taxes are a contradiction in itself;
therefore even the "C-S Tax" should be reduced and
completely done away with as government learns to
run itself like a profit-making business organization
and charge a user fee only. (This concept is discussed
in other sections of this book.)

Protecting human rights and private property rights


includes protection from internal as well as external
threats: Internal threats would be from immoral people
within the country, who steal, cheat, damage property,
commit physical violence, and take the law into their
own hands. These immoral people should be given a fair
and speedy trial and when found guilty, should be
severely dealt with to deter crimes in the future. The
police and the legal system should give protection from
internal threat. To reduce cost of imprisoning such
people their prison sentences should be substituted by
public flogging. The injured party should be allowed to

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flog the criminal. But if the person is wrongly accused


and later proves his innocence then the court can allow
him to give the accuser double flogging plus pay for
financial damages. This would deter people from giving
false testimonies and accusations. The Middle East
concept of dealing with criminals is the quickest and
cheapest way to deter crimes. And if people talk about
violation of human rights on behalf of the criminals then
they should first ask the question "what about the
violation of the human rights of the victim?"

External threats would be from aggressive, oppressive


governments who want to take over; these threats would
also include terrorists, hijackers, kidnappers, etc. The
national defense system should provide protection from
these external threats.

Politicians who resort to warfare to resolve disputes


between nations should understand that 1. It does not
settle the dispute. 2.It is the most expensive means of
settling a dispute. 3. Disputes can be settled only when
both parties sit down and talk to resolve the problem.
Might is not right. If they cannot agree, then

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they should allow three to five nations to act as neutral


arbitrators whose decision will hold. There is no
justification for war. Why should innocent people die
for politicians who disagree with each other. War
should be avoided by all means. Individual people
don't wage wars on other nations; it is the politicians
sitting in comfortable offices who make these
decisions. Let them go to the front lines and fight
their own wars.

In recent years improved ties with our neighbours


Pakistan, China and other smaller neighbouring
countries will go a long way is saving unnecessary
expenses toward our defense as well as theirs. The
amount of money we three countries have spent fighting
and defending the border disputes must be more the 10
times the value of the land we are protecting. If we
would have sat down and once and for all agreed on
permanent borders among all our neighbouring
countries, then with the money saved there could have
been so much developments in our own countries to
make the lives of people better and easier. We could
have bought large tracts of agricultural lands in other
foreign countries to increase our wealth and increase our
food production capacities.(optional idea, or if
environmentalists agreed we could do so much landfill
around our own country shores and increase the size of
our country as Singapore is doing now since a few
years)

The second most important function of the government


should be to run the judicial system: to see that law and
order is maintained, that contracts are honored, that
disputes are settled speedily according to proper legal
procedures, and that people respect and abide by the
laws of the land and not take matters into their own
hands to come up with legal solutions which may be
biased in their own favor. For any dispute both parties
can first approach the honourary committee of their area.
Honourary committee can give a quick and fair trial on
similar lines as "the peoples court". Naturally the person

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who does not get a fovourable decision can go to court,


but he will have an idea that he is wrong. Most disputes
can be resolved with guidance from the honourary
committee.

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The central and state governments should provide funds


for emergencies and natural disasters. The central
government should match the amount spent by the state
government for the emergency reliefs. This would
encourage state governments to invest some money in
liquid assets and not be on a spending binge.

The remaining functions are to be handled by the central


government in close conjunction with the private sector
and state, country, and city governments.

Government should help finance projects like power


plants, dams, hospitals, schools, etc. The actual
construction should be done by the private sector

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through competitive bids. Ownership of these projects


could be 50% or less by the government or 100% by the
private sector or any combination of the two, when
initially built.

Once a project is in operation and starts making a profit,


the government should sell its share to the highest bidder
within the private sector on the open market. The timing
for sale of government projects should be based on
maximizing profits or minimizing losses. However,
government should sell its share as early as possible,
within a few months to no more than three years of
project completion. Money from the sale of these
projects should be used for new projects.

Some of these projects would have to be sold at a loss in


order to make it profitable for the private sector to run
and maintain them (see "Privatization"). Losses would
be compensated by other profitable projects or by the C-
S Tax revenue.

Initially, money would have to be allocated from C-S


Tax to new projects, but as completed projects are sold
at a profit there should be money available for new
projects. The need to keep allocating new funds from the
C-S Tax source would decrease; hence, the C-S Tax
could be reduced to a minimum and later completely
done away with. Additionally, as the free-market
enterprise system grows and becomes healthier, the
market would be able to absorb and provide for the new
projects, so the government role as financier of new
projects would decrease.

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Until such time as government plays the role of financier


of new projects, the government should give priority to
projects based on the following criteria: the highest
return on investment, which would increase the amount
of money available for new projects so less money
would be needed from the C-S Tax source and
eventually none. Within a few years (less than ten) the
government should be able to sustain itself from the
growth and profits of the initial funds.

Projects that can be completed and sold at the earliest,


for a profit, upon completion should be given priority.
This would ensure that funds are not tied up for too long
and money is available for new projects.

Governments should give priority to those projects,


which have a higher percentage of money invested by
the private sector, because the private sector's main
motivation for investment is profit. Since they have to
invest their hard-earned money, people will do their best
to invest in projects that are relatively sure of making a
decent return on investment. Government funds would
be at less risk of sustaining a loss.

Another reason is that, since government would have to

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invest a smaller percentage, it would be able to spread


its money on a larger number of projects. This would
make society more productive and consumers would
benefit from the abundant products and services
produced by these projects, directly or indirectly.

All of the above-mentioned priorities should be given


equal importance in the decision-making process of
investing funds in different projects. However, no
priority should be given on a first-come, first-served
basis nor on the strength of the lobbying group. Strong
lobbying is part of the reason behind corruption in the
system (see "Iron Triangle") and the negative effects of
our economy.

As the government's role of an active investor/owner in


projects reduces, it should use the money left over from
not investing in new projects to be a passive investor
and earn interest on it by depositing it with different
banks. This would make more money available in the
private sector for easy growth and would

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enhance the whole positive cycle of production,


employment, consumption, and saving.

The private sector may be able to provide the financing


for most of the projects sooner than anyone could
anticipate once the tax structure is changed to the one
suggested in this book. This would convert the
government's role as an active investor to a passive one
much faster. Without unfair government intervention,
unfair regulations, and unfair subsidies, the private
sector would unleash its potential to provide for projects
that are profitable and needed most, at the right price.

Even today when the government says it will provide


money for certain projects, it is doing so by collecting
taxes from the private sector, or by giving tax incentives
in these investments and people invest not because of the
quality or importance of the projects. They invest blindly
because of the tax saving. This in a very inefficient
decision making process for an investment and money is
channeled in wrong projects. So why not let the private
sector provide for the projects that it chooses to. People
should be given specific investment choices, it should
not have a broad based investment choice such as
housing or agriculture or road. It should specify which
particular housing project or which particular road
project your money will be invested in. This way you
make the choice, which project your money goes into.
The projects that the people feel unnecessary or unsure
of will not be getting public funds.

Almost nothing is free when the government provides


you with it. You have paid for part or most of it through
taxes; if you have paid for none of it, somebody else has.
Why not be a responsible person and pay for your own
expenses by directly buying products and services from
the private sector, because when the government
provides them, either you or somebody else is paying a
much higher price for them because of government
inefficiencies and corrupt practices.

As the responsibility of providing these services is


shifted from the government to the private sector, the
private

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sector would provide it at a competitive price. The


consumers would gain from the lower prices. They
would be able to buy more products and services for the
same amount of money than when the government
provided them. This would create more jobs in the
private sector. So the sooner we get government out of
the picture to provide for these subsidies and services,
the better off all of us will be except for those who don't
pay a fair share of their taxes and receive large handouts
from the government and the government officials who
handle these large funds.

The above discussion ties in with "How to Reduce


Government Spending" and "How to Dismantle the Iron
Triangle." As the private sector gets stronger and
provides most of these government services, the C-S
Tax should be reduced and completely done away with.
The government should learn to provide the basic
administration and protection from the interest income

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earned from its passive investments.

HOW WILL THE ROADS BE

PROVIDED AND MAINTAINED?

Assume a society where there is minimum government


and all of the property within the nation is owned by
private individuals or businesses. In this case the roads
would be owned by private individuals who would
maintain and expand them as needed by society. Each
private owner would pay for this cost by charging a
certain amount to each individual who used his roads.
Those who did not use his roads would not pay him
anything. This is a fair way of paying for any products
or services that a consumer uses since nothing can be
provided for free, somebody has to pay the cost. Let the
ones using it pay for it.

To apply the above concept to the reality of today's


world is difficult since the road system is too vast and is
owned by the government. The government could
privatize the road system and let it be owned by
hundreds of individuals and businesses throughout the
country. Each company could collect a fee from each
motorist

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who used their roads. But it would be a nuisance to the


road user to pay a charge every time he drove from one
road owned by one company to the next. Also, this
would be an inefficient way of providing the roads
because the cost of collection would be too high in
relation to the total amount of money collected.

The most efficient means of providing the roads system


would be if it were handled by one entity, i.e., the
government at the present time. Part or most of the cost
of the road system could also be provided from the C-
S tax it collects from the sale of the vehicles and the C-
S tax on fuels it consumes.

All of the C-S Tax money collected from the sale of


automobiles, motorcycles, trucks, tractors, trailers, etc.
that use the road system should go toward providing for
new and maintaining the old road system. "Road system"
includes highways and bridges and all roads within the
nation and connecting to neighbouring countries.

Maintaining the existing road systems and expanding


them as neded by the economy is vital for growth. In
most nations the road system is among the top five most
expensive items on the budget. Some people use and
benefit from the road system more than others, so it is
only fair that those who use and benefit more pay their
fair share. When one travels by train or airline he pays
for it by buying a ticket. So also when one uses the road
system, he should have to pay for it.

Optional revenue source may not be necessary. There


could also be a "road tax" for all vehicles using the road
system on a yearly basis or the one time tax which most
states have switched over to. This tax should be based
proportionately to the weight of the vehicle when loaded.
A lighter vehicle would be charged lesser road tax than a
heavier vehicle, because a heavier vehicle puts more
wear and tear on the roads than lighter ones. Also
bridges and roads have to be built stronger for heavier

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vehicles so construction cost goes up because of the


heavy vehicle.

The reason that tax on vehicles would be based on


"when loaded" can be explained as follows: If an empty
one-ton

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pickup truck weighs 500 pounds and an empty two-ton


pickup truck weighs 600 pounds, there is a difference of
20 percent in weight. But when they are both fully
loaded to capacity, the two-ton truck weighs almost
twice as much as the one-ton truck or a difference of
almost over 80%.

The actual charges in taxes between a one-ton and two-


ton truck would not be twice as much. Engineers can
figure out how much the extra weight would wear out
the road and taxes could be based on these proportions.

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All of the road tax charges would be set and collected by


the central government and should be uniform
throughout the country. This would discourage people
from going to neighbouring states to save on taxes. The
money would be used for building and maintaining
interstate road systems. The city, district, and state road
systems would be paid from the revenues of C-S Tax.
Initially it would be paid from the C-S Tax. When the C-
S Tax is completely eradicated (within a decade), the
money for the road system could come from three
sources: 1.Part of the investment incomes received by
each level of government could be used to provide and
maintain the road system. 2. Some of the increase in
money supply could be used toward the cost of
providing the road system, as explained in the section
"Where Will the Subsidy Money Come From?" 3. Road
tax from each vehicle could still be collected and, if
necessary, so could the C-S Tax on sale of fossil fuels
that are used by the vehicles using the road system. This
is a fair alternative because those who drive more will
use more fuel and spare parts and end up paying a
greater share of expenses for the road. The money from
the C-S Tax could be redistributed as discussed under
"Guidelines for C-S Tax Laws."

The central government would also be responsible for


making driving laws, issuing drivers' licenses, and
issuing license numbers for automobiles. This would do
away with the nuisance for national trucking firms to
register with different states. Once registered in any state
they should be allowed to freely drive all over India.
Registration amount should be uniform all over the
country.

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The people could decide whether the government should


provide the road system or a private corporation. The
principle here is that there should be no mandatory
charge to the entire population; charges should be based
on usage. And, whether the road system is owned by the
government or a private corporation, the actual
construction work should be done by competitive
bidding from at least five to ten different companies, so
that the roads can be provided at the lowest cost to the
consumer.

QUALITY AND MAINTAINANCE

The company that gets the bid for constructing a new


road or reconstructing an old one will have to give a time
warranty as specified in the biding contract. At every
kilometer from the starting point to the end point the
construction company would have to keep signboards
stating the following information:

Name of Construction Company :

Date of construction started and completed :

Number of days mentioned in the tender for completing

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the project :

Number of days actually taken for completing the


project :

Date warranty of road expires :

Sign post number :

Phone Number of construction Co. :

Phone Number of city road department :

With this type of a signboard any motorist, or police


vehicle noticing a pothole would simply call the phone
number stated on the signboard and give them the sign
number and approximate distance and direction of the
pot hole from the sign. The complainer would be given
the time and number of complain. The city road
department would immediately call the construction
company and ask them to repair the pothole. The
company should

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repair the pothole within 24 hours of the complaint. If it


were not repaired the city road department would repair
the pothole and charge ten times the cost of the repair
work to the Construction Company. If such pot hole
complaints comes frequently (that means that the
construction company has not done a proper job in the
first place) and the pot holes are not fixed in time by the
construction company, they would be black listed and
not be granted any further government contracts in any
field.

TRANSPORTATION ALTERNATIVES FOR


CROWDED CITIES

Most of our cities have not kept in mind the ever-


increasing population and vehicles that use our road
systems. Even today in major congested cities in India
there are several buildings being built on exactly the
same spot where the old building stood. Law should be
passed immediately that all buildings should leave 20 to
40 feet for road expansion. They can have the same FSI
and go higher up. All new buildings should not only
have enough parking spaces for themselves but for
guests also. All ground floors should be for parking and
they can have a small general store in every housing
complex so people have to travel less to buy their daily
things.

The most important thing that all cities desperately need


is an overhead tram or monorail system. This would
eliminate the need for buses and most rickshaws/taxis to
run on the roads. More people would use the tram
system since on top there would be no signal light halts
or traffic to slow them. As more people travel on the
tram system, the need for rickshaws and taxis would
reduce, this would clear the roads for speedier cars and
also more people would opt for motorcycles since the
overhead tram tracks would provide some shelter from
sun and rain.

The tram tracks can be on single center pillars so they

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don't use space of the roads and at the tram stops it can
be on double pillars at the edges of the roads. There
could be tram stops on the crossroads. This would
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direction if needed. Also the complete area of the cross


roads could be covered from sun and rain, easier for
police to manage at signal lights. It can be a public
overhead crossing point also. The cross beams of the
tram system can be made wider to accommodate new
water, electric, phone lines so the constant digging of
roads where the tram is installed is eliminated.

How will the elevated tram tracks be financed? (See


under Railways) The government could make a master
plan and just authorize the tracks of each route to be
built by private companies through an auction system.
The government could get these elevated tracks built by
the private company that bids the highest. The track

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company would in turn rent the tracks to different coach


companies to run their trams on the tracks at specified
timings. The government could get their tracks built free
and the tram companies would collect the 20% service
charge from the passengers, which would be an
additional source of continuous revenue. By this process
a facility is provided to the public without any cost to the
general public, only the user of the tram pays the tram
fare and the service tax, and becomes a source of
revenue for the government. A win win situation for all.

Where there are no tram tracks, to eliminate the need for


digging roads, they should once and for make big
enough RCC channels underground for drainage and
along the sides of the channels there can be utility lines
along the walls. This would be a lot cheaper then
constantly digging up good roads (if any) and while
laying one utility after another. Every time a new
building comes up they dig up the roads. To lay one line
they damage another old line so the wastage is
unimaginable. This is because of lack of care among the
politicians and the bureaucrats to do public good. They
all love to point the finger at the others and nobody
wants to take the initiatives or responsibility. If someone
is bold enough he will be boycotted, because then the
rest may also have to work harder. Here again the main
fault lies in automatic promotion and job for life policy.

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STATE, DISTRICT, AND CITY GOVERNMENTS

All levels of governments would use the C-S Tax money


from the central government mainly to be administrators.
All of the essential services should be contracted to the
private sector by competitive bids. They should use
surplus funds to invest in projects that will give them the
best returns, as explained earlier in "What Will the
Money from C-S Tax Be Used For?" They should plan
on investing and spending in such a manner that they
will be able to survive without receiving any C-S Tax
money from the central government within ten years
from enacting the policies recommended in this book.

City, district, state governments would not have the right


to impose any new kind of taxes without a constitutional
amendment. This would make it a difficult proposition
for governments to think of any new creative means of
taxing as we have seen the finance minister do each year.
State governments would not be allowed to have any
interstate trading taxes, barriers, quotas, restriction, etc.
Any kind of resource flow barriers should be completely
removed. This would benefit everybody within the
nation.

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CHAPTER 4

PRIVATIZATION, ANOTHER SOURCE OF


REVENUE

"Privatization" means return to private ownership or, in


other words, selling off or leasing off properties and
organizations owned and run by the government. There
should be a method in disposing this wealth so that
maximum value is received for it. Loans may have been
borrowed to start these Public Sector units PSU's, so first
the money from the sale of these PSU's should be used to
pay off these loans and not be use for their on going
budget expenses. Purpose being that governments should
have no long-term outstanding debts. First the non-
strategic profit making industries should be sold in the
open market.

The non profit making public sector units should be


given three years time to make it into a profit making
center otherwise these organizations should be sold
off without guaranteeing the jobs of these employees
in other government sectors. Once such a step has been
taken most of these organizations would become profit-
making centers because PS's jobs would be terminated.
Right now with the job guarantee for life the PS don't
give their full effort, plus promotions are guaranteed on
seniority basis so why should they be bothered to give
their optimal performance. Once the loss making PSU's
start making a profit then it would fetch a higher price in
the open market. This should create enough wealth to
pay off most of the government debts.

Private individuals and businesses will take better care


of their properties and profit-making resources than the
government. The government is an entity that has
acquired all of the wealth within its national boundaries
almost free of

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charge. But then, who owns the government with all of


its wealth? All of the citizens of the nations, but in
reality the government officials treat it as their personal
wealth which it acquires free of cost. Hence, the
government does not appreciate and make good use of
our resources.

Each person within the government, whether it be an


employee or an elected official, cares only about getting
as much money as possible for himself and his friends.
So the government system consumes its freely acquired
wealth and then goes out and gets more from the private
sector through taxes. This process has got to be stopped
and reversed for the betterment of all Indians and
mankind. The answer is to sell or lease these freely
acquired resources (joint public assets) to the private
sector with certain conditions. (Explained later)

A constitutional amendment should be made that all


governments must balance their budgets and no deficit
spending should be allowed. Their expenditure should
always be 10% less than the previous years tax
collection and other sources of revenue. When selling off
a resource, the principle amount received should not

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qualify as a revenue source because it is a one-time


receipt. The income received by the investment from the
sale of a resource is a continuous revenue source. 90% of
this revenue source can be spent in the following years
budget.

An example, supposing the government sells off some


land, or a factory or a coal any asset or mine, the amount
received from this sale should be used to pay off debts.
After all debts are paid off they should invest the
principal balance if interest bearing banks or give loans
to the private sector for projects that are demanded by
the public through opinion polls.

Once the debts are paid off, then the governments would
not be allowed to borrow further. Their expenditure
would be limited to what they would receive from the C-
S Tax initially and later on it would be limited to their
passive or active investment earnings.

Also, no government level (state or central) would be


allowed to nationalize or take over any private property
or trust. Let the government buy their own properties
from the open market and create trusts from their own
revenue generations and not by taxing or making laws
and snatching from the private sector.

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PRIVATIZING PRECIOUS, NON-PRECIOUS


METALS,

MINERALS, OIL AND GAS FOUND

ON PRIVATE PROPERTY

If a very strategic metal, oil and gas, precious metal


or stone, coal etc were found on any private
property, then the property owner would become
owner of the materials found under the land. The
government does not own it. The government would
have the first right to buy it from the private
individual at the market price. The government
could not buy it cheaper by force or threat. If the
government did not want to buy it then the private
individual could sell it in the open market. The first
choice would be given to Indian buyers and the
excess if any to foreign buyers. This is the only way
the nation will benefit the most from the resources
and the maximum resources will be searched and
come into the open market. With today's laws
suppose if I knew that there would be oil or gas or
gold in my land I would keep quiet about it. Because
if the government would come to know they would
pay me a pittance and take over my land in the name
of national interest. I would have no say in the
matter. After that how they would squander and
siphon off the money from the resource for their
personal gains, nobody can question them.

PRIVATIZATION OF OTHER NATIONAL


RESOURCES

National resources are the same as joint public assets.


Therefore we should get the maximum price for it. The
money from the sale of these national resources should
be used to pay off the national debts. Industries should
be privatized in order of strategic importance, least

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strategic first (depending on each country, some have


more than the following industries under government
control, while others have just a few or none of them
owned and run by the government):

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1. Textile

2. Steel

3. Transportation, which includes railways, buses, and


airlines, ports.

4. Banking and Insurance

5. Utilities (electricity, water, and garbage collection)

6. Mining Industries: coal, oil and gas, metals and then


precious metals.

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7. Postal service.

8. Telecommunications: telephone, radio and television

9. Forests, rivers, mountains, etc., except for those areas


set aside for animals. All animals should have their share
of space on this planet.

10. National Defense (where possible to sub-contract)

RAILWAYS

Railways in India are a huge government monopoly and


are very vast and employ a lot of people. In the last fifty
years the railways have made a lot of progress. But this
progress is miniscule compared to what it should have
been considering the number of people traveling on it
and the quantity of goods being transported on it. With
this kind of ready market available to the railways the
service should have been world class instead people
have to travel in worse conditions than animals do even
in India.

We could privatize the railway system in the following


manner. Let the railways be integrated into one gauge
throughout the country. Break up each section of the
network and sell it off to the highest bidders. The money
received by this selling off would be used to build new
tracks to increase the connectivity to more cities and
towns within the country as well as to the neighbouring
countries. Private companies would build the new tracks
and the government upon completion would sell off the

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tracks to private companies for the highest bid. This


money would be used to make more tracks to increase
connectivity throughout the country and this process
would carry on till there is complete connectivity. The
company that buys each section of the network would be
responsible for maintaining their tracks. Their income
would come from renting out the railway track to
different companies who would like to run their trains
on the tracks. So one company would own the tracks and
several different companies would own the trains
running on them. The train owners would buy slots of
time to run their trains on these tracks at certain times
and they would pay a certain price to the track owners
for the allotted time slot.

The train companies would have to maintain their


engines and coaches in very good condition so that their
trains would not be delayed. Any delay due to the
negligence of the train company would attract heavy
penalties. It would also be in the interest of the train
companies to design their trains to run on more than one
engine in case of failure of one engine. To deter
negligence on the train owner's part towing charges by
the railway track owners would be very high. By this
method the train service would become world class.

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The government would get the service tax of 20% from


the commuter's ticket charges and 20% on the charges of
goods transported on the tracks. Today the government
hardly makes a profit on railways but by the above
method it would be guaranteed 20% as net profit on the
railways turnover. The railway track company would not
charge a service charge to the train service companies
since the train service is not the end user of the track, the
commuters are. The commuters and the transporters
using the trains are the end users and they are charged
the user fee plus 20% service tax. This could add to
thousands of crore.

Among all modes of transportation railways make the


most efficient use of energy hence the most cost
effective. Railways when privatized can come up with a
system where instead of driving long distances you
could drive your loaded truck on a flat bed of a goods
train and you sit in your truck till you reach your
destination and just drive away. This would be safer,
faster and lower cost than driving the truck yourself.
With oil prices shooting up efficiency and alternative
renewable energy will be the name of the game.

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AIRPORTS AND SEA PORTS

There is a severe need for increasing Airports and


Seaports in our country. With the population and trade
increasing and when the new policies of this book
implemented there will be so much growth that the
government will always be falling back in providing the
infrastructure. So here again the government should plan
the airports and seaports throughout the country and just
auction off the sites to the private companies. Even the
planning should be done through private consulting
firms. When the government takes on these huge
projects, it is almost always delayed, above cost, leaves a
lot to be desired and worst of all paid from our tax
money which we all have paid whether we get the
benefit of the ports or not.

When the private companies do it there is no cost to the


general taxpayer. The users who benefit from the ports
gets charged the user fee and the government gets their
20 % service tax as revenue for doing practically
nothing. But its better they do just nothing except for the
planning because when they do anything we know the
consequences.

PRECIOUS AND NON PRECIOUS METALS,


MINERALS, OIL, GAS AND OTHER RESOURCES
FOUND ON PUBLIC LANDS.

The government manages huge tracts of public land off


shore as well as inland, which may be rich in different
minerals, oil and gas and other precious and non
precious metals. The government may not have the time,
money or motivation to exploit these for the public
welfare. Instead of the government leasing these public
lands to different companies at a fraction of its real
value, the government should allot these public lands to
private companies to the highest bidder but with the
condition that the mining is done without damaging the
environment or the wild life.

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Further condition would be that whatever is mined, half


of it would be given to the government free of cost. The
government would then sell these half minerals or oil
and gas or whatever they

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receive of their 50% share to the private sector or


foreign buyers. The money derived from this would be
used first for paying off national debts, infrastructure
projects and pay their own administrative cost, thereby
reducing the taxation burden and eventually doing away
with it.

FORESTS, MOUNTAINS AND RIVERS

Forest, mountains and rivers have a great potential to be


developed into a great source of income, employment of
unskilled labour, as well as beautiful areas for healthy
living and tourism. It can also reverse the trend of
villagers migrating the cities looking for livelihood.

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Today instead of these resources being a great income


source it is actually a cost to the private citizen to
maintain. Today good forest wood is been stolen from
right under the noses of the forest department officials.
The forests, which belong to all the citizens of India
jointly, are an expense instead of income to the private
tax-paying citizen of India.

Here is a method by which the above forest resource can


be made into a huge profit-making center. Tracts of
forestland ranging from a minimum of ten acres to
hundred acres can be allotted on a 30-year lease to
individual farmers or group of farmers. The yearly lease
amount would be through biding tenders. Each plot of
land would be leased to the highest bidder.

The first five years of the lease would be free of cost to


the lessee. The lease amount of the bid would have to be
paid after five years. The bid amount should not be less
than Rs.5000/- per acre per year, which he would pay
the government for each year period on a yearly basis up
to the full term of the lease. This is because it would
take the farmer few years to develop the land and start
making a profit plus he would have to recover his
investments used for developing the forestland into
farmland.

Each lessee would have to keep a deposit of 5 years


lease amount in advance as a security deposit. At the
beginning of the 6th year he would pay for the yearly
amount of the lease of the 6th year in advance. This is
fair because he is not charged anything

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for the first 5 years. If he does not pay the lease amount
for two consecutive years then the land would be taken
away from him and the balance security deposit would
not be refunded. A fresh bidding process would take
place. The same farmer who could not pay the lease
amount would not be allowed to bid for the same land
again. The lessee will never become the owner of the
land even if he has leased the land for 30 years. Since he
and his family have taken the trouble to develop and
maintain the farm, he will have the option to extend the
lease for another 30 years. This second time around also
the leasing would be done by the same biding process of
tenders but the existing farmer would be allowed to bid
ten percent higher than the highest bid and extend the
lease by 30 years. If the highest bid were purposely bid
extremely above the other normal bids to remove the
original people from that land, then that bid would be
disallowed.

The forest land allotted would be on the outer periphery


of the forest tract and would not exceed ten percent of
the total area of that particular forest. By this process
there would be a compound to protect the ninety percent
of the forest inside the periphery. The condition for these
forest farms would be that on their boundaries they

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would plant two rows of forestry furniture wood plants i.


e teak, kheir, saal, sandal wood or whatever forestry
trees that grow naturally well in that area. There should
be a rough road between the rows of the outer
boundaries of these forest wood trees in each and every
farm. All access roads to the interior forest should be
planned while subdividing these forest lands. Within
their allotted land also they would be allowed to grow
only natural forest mixed fruit trees. Having a natural
mix of fruit trees of multi-culture is a better way
environmentally. Some of the useful forest trees, which
are good for humans as well as forest animals are black
jambu, mango, cashew, sitafal, dates, drum sticks,
tamrind (Emli), etc. These would require care for the
first year than it would grow on its own. A drip irrigation
system should be encouraged on such farms. This would
save water, electricity, and increase production.

If ten percent of such forestland would equal to crore of


acres of land. In the above method farmers would get the
land

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free of cost (except for the deposit) and they could use
their money for developing the land. If one crore acre of
forest land is leased then after five years the government
would get a revenue of at least Rs.5000/- crore or more
each year depending upon the bid amount. Plus the rural
productive employment that such a scheme would
create. This would eliminate the need for rural people to
go to cities in search of jobs. In fact a reverse trend may
occur whereby people from the slums in the cities who
live under in-human conditions would themselves want
to migrate back to the farms. These forestry farms could
be a long-term steady and cheap source of fruit supply
for India as well as for exports. This source of income to
the government would further reduce or eliminate the
need for taxing people.

These forest farms would employ a huge labour force


increasing their spending power; these in turn would buy
products from the economy, which they could not have
earlier. This would create more jobs in the other
industries and benefit the whole economy.

DAMS

Dams should be encouraged wherever possible. With


increasing populations all over the country the demand
for water and food is going to keep on increasing.
Wherever there is a good site to construct a dam it
should be done because; it provides water in the dry
season to the local people, the local farms, the animals
in the surrounding forests, provides fishes, keeps the
surrounding temperatures cooler, electricity could be
produced from large dams, and water could be supplied
to much larger areas for irrigation for which a fee can be
collected by the dam owners.

Small to medium size dams can be constructed under


these guidelines. The people whose land is going to be
submerged by building the dam would form a society
and they would get shares in proportion to their land that
they would loose. Homes would be built for the
displaced farmers from the dam projects funds Plus
there could be other farmers/ financers who would

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be interested in building the dam for profit or because


they would need the water for their agriculture land. So
some kind of society with shares as per the amount of
investment, and or land given into the dam project would
be allotted. The governments could give the engineering
guidelines and expertise for each dam construction. The
society people would be responsible for the proper
construction and management of the dam. Dams also
control floods in rainy season.

These dams would be run like a business and profits be


given to the shareholders as per the ownership of the
land. Income would be derrived from selling water to the
joint owners of the dam as well as non-owners. Share
holders would have the first right of purchase in case of
shortage of water. Additional income could be derrived
from fisheries and electricity generation. By
constitutional amendment no landowner could stop the
dam from being constructed because it would be for the

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larger public good. On an average one acre of submerged


land in the dam could easily supply enough water to
irrigate 30 to 50 acres of farmland depending on the
height and storage area of the dam. Also the whole area
below the dam would have a rise in the water table. The
landowner would get his share of profits which would be
more than what he could grow on his land. He could sell
off the land to the dam project or to the government and
be paid as per the valuation of the tax he has been
paying, whichever is higher, so he should have no
complaints. Sentimental values of one landowner should
not stop the progress and water requirements of many.

In certain parts of India we have excessive rains and


some parts there are drought conditions sometimes for
years on end. Also we have severe flood problems when
snow melts in the Himalayan Mountains. Instead of
spending billions of dollars on war planes and ships
and bombs and giving employment to other countries
why not spend the money to have an integrated river
canal system to take these excess water to avoid
flooding and either through natural gravity by canals
or even with pumps from excess rain areas to dry
areas to make all of India have sufficient water for
farming as well as for personal use. With our cheap
labour, soil and weather condition we can become the
biggest exporter of fruits, flower, other agriculture
and forest products.

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DEFENSE

National Defense is one of the big budget items. It is a


big drain on our economy. Do we need to spend such
huge amounts for defense? Who are we defending
against? We have fought two wars with Pakistan and
one war with China both for border disputes and the
disputes still continue. The quantity of money that we
have spent since independence to defend our disputed
borders, this amount would buy ten times or more than
the disputed land areas. Is it worth the cost to continue
spending lavishly to defend these disputed land areas?
Why not once and for all sit at the table and have a final
demarcation and jointly put up some kind of a barbed
wire fence.

From years our politicians / ambassadors have been


going back and forth to China and Pakistan and their
politician / ambassadors have been coming to India and
we are still negotiating. The cost of these negotiations
and back and forth VIP travels itself must have cost a
small fortune. When two businesses have a dispute both
would like to settle the dispute as early as possible and
get on with their business. Why does it take two
countries more than fifty years to settle a boundary
disputes? Do these politicians / ambassadors really want
to settle the dispute or are they only having a party in the
name of dialogue at taxpayers expense? Are there other
foreign powers who would not like to see the disputes
settled so that they can keep selling expensive arms to
both countries? Isn't it obvious by now to our
politicians? Or are they getting a cut on the sale of these
expensive weapons? You decide.

It is time for people of all three countries concerned to


tell their politicians to settle this boundary disputes and
end this huge military spending. The loss of life to all
the three countries over the last fifty years is invaluable.

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The people living near the borders of the three countries


have always lived under tension and fear of losing their
lives. Most of these people would not care under which
country their land and house comes under as long as
there is total peace and free movements across their
borders. They must also be wondering why their
governments are spending such huge amounts for their

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lands. I am sure both side the land owners would be very


happy if both governments stopped wasting money and
spend a fraction of it on their welfare. They would rather
see their government spend that money or making more
schools, hospitals, roads, dams, canals, etc to improve
the standard of living of the border people, which have
been neglected and destroyed in the name of national
pride, integrity, and security.

National defense would consist of two divisions, Navy


and Army. Both would have their own Air Force. Since
they would not have the right to charge a service tax and
make any revenue, the Central government would allot a
budget for the two divisions. War is the most expensive
way to settle any dispute and it does not settle the
dispute; therefore, war should be avoided at all cost.
(According to the explanation in "How Will
International Trade Achieve True Peace?" if this is
implemented then national defense will become
irrelevant within a few decades). All countries should
have a small national defense force but they should be
trained and geared toward defending their own people
from natural disasters such as earthquakes, fires, floods,
famines, and tsunamis and not fight wars.

The Utopian answer to defense is to produce only


consumer products and no guns. But since the world is
far from Utopia, it is more realistic to maximize
consumer products and minimize guns as is explained
above. Of the small amount spent on defense in future,
the majority of it should go for the above purpose,
Research and Development (R & D) and a small amount
of it for actual maintenance of an armed force, for two
reasons.

1. In today's world a nation uses a very small portion of


money to fight a war; the rest sits idle in the name of
back up and security. This great amount of investment in
back up and security does not produce anything, it sits
idle. So it is a waste and also leads to corruption, in
buying and maintaining huge quantities of arms each
year and is a big cost to the nation.

2. A better back up and security would be to have this


money invested in R & D. By this process the people
employed would be productive. The majority of the R &
D for defense could also be

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used by business, it would be a natural spill over. For


instance, instead of using satellites and rockets for
bombs, the same rocket technology could be further
developed and used for space shuttle. So not only is this
R & D beneficial from the consumer's point of view, but
we can also tell the world that we mean peace by having
such a small armed force. This would not mean that we
are weak; after all, we would have all these inventions
(like laser and rocket technology etc,) that we would
continue to develop for consumer benefit, but which
could very easily be converted for defense. Another
good point about this R & D is that it could be sold to
business (e.g., shuttle flights) to recover some cost of
defense spending.

CENTRAL ECONOMIC PLANNING

As far as economic planning what, and how much

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should be produced? This should not be planned by


governments. The market, through supply and demand,
plans the economy better than any government.

The only planning that should be done by central and


state governments is the infrastructure skeleton plan of
the freeways, railroads, and airports, water canals and
pipelines that will be needed in the future. The local city
governments should leave the right of way and spaces
for the future, so that resources are not wasted to tear
down structures or curve the railroad ten miles around
because they cannot afford to break down buildings and
buy the right of way later. Planning ahead for the future
saves a lot of money, time and headache. The future
becomes present faster than you realize.

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CHAPTER 5

CORRUPTION AND CRIME

Corruption is the main problem in almost all the


economies of the world toady. The root of the problem
lies in the greed of mankind to amass quick and easy
wealth. In India corruption seems to be the norm rather
than the exception. It has spread from the government
sector to the private sector as well. People in the private
sector dealing with the government sector see how easily
in a short duration of government service many
employee's of the government sector amass great wealth
not directly in their name but on other family members
name. This encourages people in the private sector to ask
for bribes or favours for work that they should be doing
in any case, for the salaries paid to them. Everybody
seems to know the problems created by corruption in any
society so we will go directly to the solution.

Corruption in itself is a crime but it also fosters other


crimes. Because of the corruption in the government
there are less resources left in the private sector. This
leads to lack of growth in the economy, which leads to
lack of jobs and money for a lot of people who stay poor.
Since these poor people have no jobs or opportunity to
earn a decent living they get tempted to resort to crime to
make a living. So corruption is the cause of crime.

People in general who have decent jobs and house and a


good future will not get involved in criminal activity. By
reducing corruption and improving the financial status of
the poor will automatically reduce crime. Everybody has
a right to make an honest income. But what about so
many politicians, bureaucrats and some businessmen
who may already be making a good honest income but
they still resort to corruption to make unbelievable
amounts of money which they could not spend in 10
lifetimes, yet they want for more. When does it end for
such people?

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How do we eradicate corruption?

We need to have an official website " blacklisted


Indians." This website would have subcategories for
public servants, politicians, government contractors,
people in private sector caught taking bribes, any
and all convicted criminals and other categories that
can be added later. Once a person is blacklisted even
from the private sector, he would be banned from all
government jobs, government contracts, and political
positions for the rest of his life or should we go easy
on them and make it 25 years.

First lets identify the two main areas where corruption


takes a toll on our pockets as well as our economy. The
main people who benefit from corruption are the
Politicians and the Bureaucrats ie, public servants and
people with vested interest that deal with them. All are
hand in glove in this act.

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It seems like an impossible task. But if majority of


the people want to eradicate corruption it can
happen. This is what needs to be done.

First we need to look at the laws made over the decades


and remove ones that don't apply in today's world. More
than half the laws would be outdated and unnecessary.
Also many new laws may need to be enacted because of
change in technology there much bigger financial crimes
committed from the offices, banks, stock market etc.
The legal profession can be consulted and committees
can be formed to scrap outdated laws. From an
economic point of view all these outdated laws are a
delay to the justice system hence an economic cost to
the whole nation. This delay in justice encourages
people to take the law into their own hands. Few simple
questions can be asked of each law:

Is this law protecting an individual's life, liberty, private


property and his right to succeed and better his standard
of living? If yes, then keep the law. Is this law protecting
the environment, public properties and peace of the
area? If yes, then keep the law. If both of them are
negative then scrap it.

As an economist it is out of my scope to discuss deeply


about legal matters, we are only concerned how the legal
system affects

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the economy. One thing is for certain that jail sentences


cost the taxpayer and does not have the deterrent effect
it is supposed to have. As suggested earlier the Middle
East concept of public flogging would be the best
deterrent and most economical choice. For the person
committing the same second offense the sentence of
flogging would be doubled. And same third offense the
flogging would be quadrupled. On face value this may
seem very harsh but crime will come down so fast in
India that actually very few flogging cases will actually
take place. There is no harm in trying it for one year and
seeing the result. Most people who have been harmed
would like to see flogging become a reality; I am sure
most victims would like to personally flog the culprits;
the ones who are the culprits would definitely oppose
such a law.

Corruption and any kind of bribe taking could also be


made into a crime, punishable by public flogging and
loss of job and getting black listed. This will definitely
not be very popular among the politicians and
bureaucrats who are corrupt. Majority of the public
would love to see this happen. A simple national
advertising campaign on this topic with an SMS reply
center could get the public opinion.

In fact all of the ideas mentioned in this book can be


put up for public opinion through an SMS type of
rating before any of them are enacted.

HONOURARY COMMITTEE MEMBERS (HCM's)

Once powers are given to the ordinary citizens to


remove any government employee, no matter what his
rank, from his job for corruption or not doing his job on
time or harassing the public with delays and excuses
then all government employees will fall in line and
respect the public and do their work in time without

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bribes. Here is how we can make it happen.

Once likeminded people are elected as members of


parliament then a constitutional amendment can be
passed empowering each and every ward in the county
to have a team of fifteen honorary committee members.
(HCM's). They would not be

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paid any salary. Every month five new HCM's over the
age of 21 would be inducted and five oldest ones would
leave. These 5 new members would comprise of 2
college graduates, 2-business men/women, and one from
any walk of life. If the 2 college graduates are not
available then there could be 4 from the business
category, and one from any walk of life. A black listed
person could never be on the committee. Any person
could put his name on the waiting list to become a
HCM. Every person in the ward would have the first
right to be on the committee once before the person who
has already been on the committee one time even if the

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once HCM's name comes up on the waiting list before


the new person.

These HCM's would meet every Sunday at a specified


time and place convenient to them and to the people of
the ward. Their two main functions would be; 1.They
would listen to complaints of their ward people
regarding any public servant or politician. 2. Try to
settle disputes between two parties.

If a person goes to any government office and applies


for any work that requires to be done by him, he would
be given a voucher stating the date on which his work
would be ready for pick up. This voucher would have
the name, date of application, date of work to be
completed (not more than seven working days) and
signature of the concerned public servant. If on the
specified date the public servant does not do the job then
he has to give a new voucher and a new date (not more
than seven working days from the first voucher date). If
on the second voucher date he still does not complete
the job then the applicant would simply call up and meet
one of the committee members and show him the two
vouchers on which dates his job was not done by the
concerned public servant.

The committee member would then ask the concerned


public servant to appear before the committee on the
following Sunday. He would have to give good reason
as to why the job was not done even after two dates. If
the PS completes the job and hand delivers the paper to
the applicant before the following Sunday then the
applicant should inform the committee member of his
work being done. This will go on record against the
public servant. Five such complaints of not completing
peoples jobs

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on time, after the two dates goes against his record and
could make him loose his job and all the benefits there
with.

If the PS does not do the work by the following Sunday


he should appear in front of the committee and convince
them about the cause of the delay. If he is unable to
convince them and he has even one earlier complaint
against him of not completing the job after two dates, he
could be fired from his job by the committee, no matter
what his ranking in his office. If the PS is able to
convince the committee about the cause of the delay then
by a majority vote the committee could give him one last
chance to complete the job and personally hand deliver
the paper work to the applicant at his residence with an
apology. If he does not do this then his job is
automatically terminated, all his benefits cancelled, his
name black listed, this PS would not be allowed to apply
for any government job or government contract in his
life time he is free to work in the private sector as an
ordinary citizen.

If this process is enforced throughout the country then


within a short time all the lazy PS will either be fired or
they themselves retire. The ones that stay back will be

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honest and genuine workers. This is what we need in all


government offices.

Slowly the name "government offices" should be


changed to be called "Public service offices" and all the
employees no matter what their ranking should be
addressed as "Public Servant" PS all over the country
because that's what they are. In short all public servants
should have a "PS" in front of their title. This will teach
them some modesty. Any Public Servant who does not
like the PS title can leave his job and work in the private
sector. (Then he will come to know what real work is
like, without being called a sahib all the time.) The
British had uplifted the then public servants into
"Sahibs" because they were ruling/governing over us.
They wanted the Indian public to look up to these
Sahib's. After Independence the story had changed but
our Sahibs still live in the memory of the past glory. Our
Sahib's now include even an ordinary clerk and peon.
All these PS have to be brought down to earth. They
have been appointed to serve the public and not
govern/rule over the public. It is our joint assets that
they are managing for us. We are their Sahib's and
not the other way around. It is about time

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we let them know "who's the boss".

A similar system can be followed to keep the politicians


on their toes. If the people of the ward have complaints
against their elected politician whether city, state, or
central then the people would put forward the complaint
to the committee. Once a month it would be the turn of
the politician to face the committee for complaints
against him/her. If the politician has enough complaints
against him/her from his ward or wards as the case may
be and if he is not able to satisfy the honourary
committee / s about his will to do the work of the people
then the committee /s after giving him a maximum of
five chances or less would ask him to step down from
his position. The committee could even black list the
politician if he had done something really drastic and he
acted arrogantly and does not apologize for his mistakes.
No new election would be held till it is due, after the
five years are up (Explained later). The person having
the second highest votes in the area would be made to
take charge of that position. After that the next person in
line would take charge, he would be the one with the
third highest votes. No wasting public time and money
on elections until the 5 years are up.

An ousted politician by a committee would not have a


very good chance of winning an election a second time.
So he would do his best to keep the people of his area
satisfied.

So by just making a constitutional amendment and


giving powers to the honourary committee of each ward
the politician as well as the bureaucrat will fall in line
faster than you can imagine. They only hold the powers
because of their position, which we the people put them
in, but if their position and powers can be taken away
from them directly by the very same people then they
would behave in a very responsible way throughout their
five-year term and not just before the elections. In fact
with a dishonorable discharge by the HCM's these
public servants and politician would be blacklisted and

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looked down upon by the ordinary citizens. No public


servant or politician would want to bring that shame
upon him.

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CHAPTER 6

WHO WILL MAKE THE GOVERNING


DECISIONS?

In a democracy the governing body should implement


the will of the people. Does this happen in reality? You
decide. With advances in technology the will of the
people can easily be implemented.

When a bill is introduced at any governing level an


opinion poll can be taken via the SMS service or some
kind of phone-in system. This will give the politician an
idea which way to vote. Today if contests like miss
world and others at a world wide level can be

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determined through an SMS then why shouldn't our


policy decisions be made by public opinion polls. When
a bill is introduced at any government level it should be
announced on local T.V news channels at a fixed timing
so anyone who is interested can see, as well as
newspapers and other media. A toll free number can be
assigned for this purpose there could be three to four
codes. These are suggestions; No.1 could mean a
complete yes, meaning go ahead with the bill the way it
is written. No.2 could mean a complete no, meaning
scrap the bill. No.3 could mean yes, but certain changes
need to be made before passing it. No.4 means the
concept of the bill is good but needs major changes
before being acceptable.

The system of election that's going on in India seems ok.


But if you are not pleased with it let's look at this
optional plan if it sounds good it can be discussed and
debated to come up with a business like approach to
running our country. The political election system is not
my field but since the elected politicians implement the
economic policies this optional plan of electing our
politicians seems like a better workable solution. This I
have done after discussing and taking opinions of several
people.

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WHO WILL MAKE THE GOVERNING


DECISIONS?

We have too many elected politicians and bureaucrats at


every level of government. We elect a herd of politicians
to many unneeded posts so that they may make life
comfortable for themselves. People have proposed that
we do away with these unneeded positions. Do we really
need so many politician and government officials to take
care of our joint assets? As explained in chapter one it is
clear that all these elected politicians and the
government officials have not made a profit in the last
fifty + years. Now it is time to reduce the number of
politicians as well as administration staff.

We have to come up with a business like approach so


that our nations joint assets give us our dividends. At
least if they cannot pay us the dividends they should not
be charging us taxes. So instead of the government
scrutinizing our income, expenses and taxes let us take
more interest and make them responsible and
accountable to us. It is our money that the government is
spending so they should be under our scrutiny. Where
they give us money to spend then let them scrutinize us.
These would be all government contractors. The rest of
us should be left alone to earn and spend as we wish.
Hence I strongly recommend the intrusive taxes be
abolished.

HOW DO YOU ELECT YOUR POLITICIAN?

To understand the proposed new way of electing our


politicians, you have to clear your mind of the present
election system or else you will mix them up in your
mind and confuse yourself. Let us directly elect a chief
politician at the city, district (district), state and national
level. This would eliminate the need to have a majority
party system who would then elect a chief. The people
would directly elect each of these politicians once every
five years. During the elections the citizens would vote
for a different politician at each level who would be in
charge of administrating the position he had won.

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Each politician could run for one position only. He could


not run for city as well as district level elections. The
elected politician who gets the highest number of votes
directly from the people would be considered the chief
of city, chief of district, chief

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of state, chief of country as per the category that he has


won in election. You may give him title as Chief or
President or whatever. The people would directly elect
him so no wasting time afterwards on who is going to be
the chief minister or mayor or governor or president etc.

By this method there will be no hung parliaments and no


majority business or opposition party. Every elected
politician works for the betterment of his area and
the country as a whole. No voting down a bill just
because they are in the opposition party. In this
system there is no opposition party. Everybody
should support a good bill and everybody should

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turn down a bad one. It shouldn't matter who has


introduced the bill. Any individual elected politician
can introduce a bill in the Parliament/State
legislature/District/City level business meetings. If it
is a good bill and public opinion is in favour of it,
then all or most of the other politicians will vote for
it, if it is not good it will be voted down after public
opinion poll is taken. How each politician votes will
be declared on TV Business news and papers so we
know how our elected politician is voting. Public can
take necessary action against him through the
Honourary Committe if he is not voting as per public
opinion.

At each level of the election process there will be


between 10 and 300 runners-ups to the chief depending
on the population of that area. The runner-ups would be
given the opportunity to serve on the different
Committee's, for the five-year term. Committees would
mean the same as ministries as is currently known and
Committee member would be same as minister/Mp, for
our purpose of discussion these two words mean the
same and are used interchangeably) The number of
people serving on the Committee would depend on the
size of the city, district or state. On the national level
there could be 200 to 300 runners-ups that would be
serving on the different Committee/ministries. The
balance would be on the waiting list of committee
members in case if any one is made to resign by public
opinion or in case of death or whatever, the first one on
the waiting list would be inducted in at the bottom of the
serving committees.

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WHO WILL MAKE THE GOVERNING


DECISIONS?

At each level the president/chief will have reserve voting


powers whereby he will alone have 50% extra votes to
pass or cancel a bill. For example at the national level
any one member of parliament can introduce a good bill
even though he may have won with the least amount of
votes. After public opinion to pass it 70 out 100 elected
members decide to vote against it. Therefore there will
only be 30 votes out of 100 voting for it. In the present
system such a good bill would have been struck down
but in this new system if the president feels it is good for
the economy and public opinion is also in support of it
then he can use his 50 reserve votes and vote for it to
make a total of 50+30=80 votes for and 70 against . This
way the president could override the 70 against and the
bill would be able to pass.

Reason for this extra 50% reserve voting power to the


president is because if anything is a failure or success
everyone points the finger at the person at the top so why
shouldn't he have more powers to have things done his
way. Since the people have given him the highest
number of votes and would expect him to perform for
every ones betterment, he should be given the powers to
get things implemented as he sees best.

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This same voting powers will be given to the president at


all levels of government, as well as to the chief of each
committee/ministry. A telecast of how each
representative votes for a bill would be shown. This way
people would know if the elected representative was
voting as per their wishes. If he is not then people could
complain to the honorary committee and give the
representative a warning about his voting. If he disobeys
the public opinion on voting a second time then upon the
publics second complaint to the honorary committee the
politician could be replaced by the second in charge.

The function of the Committee would be to assist the


chief in moving toward the goals and objectives outlined
in the manifesto or program that got him the majority
vote of the city, district, state, and nation. If the
Committee received too many complaints from the
people or if they felt the chief was not going according
to the plan that brought him into power and overstepping
his bounds or was incompetent in that position, then with
a two-thirds vote by the committee against him they
would have the power to ask

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for an opinion poll from the public whether he should


continue as the chief. If he is voted out by the public
opinion poll then in this situation the first runner-up
would automatically assume position as chief for the rest
of the term. If this runner up also is found incompetent
then the same procedure as above would be
implemented and the third runner up would become
chief and so on. No wasting money for re-election until
the 5 years are up. The chief who is voted out would not
be allowed on any of the working committee's. He
would have to resign or he would be dismissed. Since all
the remaining elected committee would move up the
ladder there would be one vacancy. The person with the
highest number of votes who is on the waiting list of the
elected members would fill this vacancy. By this process
we will do away with the concept of a mid term election.
An election is an expensive affair so it should be held
once in five years only.

With computerized election systems now in place in


India, the suggested new form of election would hold
the village gram panchayat / city, district, state, and
national level election all in one attempt. The
computerized election the screen would have four
columns. The candidate list would show the name, age,
and qualification. Also 5main points in short statement
that the candidate would like to accomplish and
photograph of each candidate. Each candidate's
information would be shown on the screen. Column 1
would have a list of candidates who are interested in
being elected at the gram panchayat / city level. Column
2 would have a list of candidates who are interested in
being elected at District level. Column 3 would have a
list of candidates who are interested in being elected at
state level. Column 4 would have a list of candidates
who are interested in being elected at the Central
government level.

The voter would just move the curser to the politician


whom he / she would like to elect and do a click against
his picture. The list of candidates appearing on the
computer screen could be given in the local newspaper a
few days before the election so that the voter can study
the list of politicians and decide whom they would want

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to vote for. This way less time would be wasted in the


election booths. At each level one candidate could stand
for election only in one category i.e city, district, state or
national. In each category the person with the highest
number of votes would become the chief in

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that category, the person with the second highest votes


would become the vice chief. Now suppose in a small
village/city only 5 committee's are needed then the third
to seventh level highest voted elected politician would
become the chief of each serving committee of the
village gram panchayat.

In the city level depending on the size and population of


the city they would have between 10 to a maximum of
50 serving committee members. They would be selected
in the same order as per their votes.

At the state level depending on size and population of

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state they could select 20 to 70 serving committee


members as per the number of voters in the state.

At the national level there can be 200 to 300 serving


committee members. The person with the highest votes
becomes the president 2nd highest votes becomes vice
president. Suppose there are 20 ministries in all at the
national level, the person with the 3rd highest votes
along with the president and vice president would select
which ministry/committee he would head. In this new
system a committee and not a single minister would head
each ministry. Each of these committees would have
their own chief. The president would have the final say
in who will head which ministry. The president along
with the vice president and 3rd person with highest votes
would select a 5-member committee from the 23rd
highest vote winner to the 28th highest vote winner.
They (23rd highest vote winner to the 28th highest vote
winner) would help the selected person with the 3rd
highest vote to accomplish the goals of that ministry
keeping in mind the presidents programs. The 4th highest
vote winner would get the second choice of ministry
with the president and vice presidents consent and he
would get 5 elected elected members to be his helping
committee members. So the 29th highest vote winner till
the 33rd highest vote winner would form the committee
of this group. This same system would be carried on for
all the 20 ministries at the national level. The 3rd , 4th ,
5th, till the 22nd head committee member would have
similar reserve voting power of 50 % voting to resolve
issues within his own group of committee members in
case if he did not agree with their ideas or if public
opinion was against the idea.

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This same system can be followed at the state, district,


city / gram panchayat level. At the state level there can
be just 3 committee members in each committee at the
District and City levels there can be just 2 (or even 1)
helping committee members depending on the size of
the state, district or city.

As later explained in the section "How to Dismantle the


Iron Triangle," all of the policies recommended in this
book should be made part of the Constitution. This
process would take away a lot of discretionary power
from the politicians to make decisions affecting people's
lives. The president would have to work within the
guidelines of the Constitution.

If any changes would be needed in the Constitution, then


the president or for that matter any elected member can
put up such a proposal in the form of a bill or he could
suggest his ideas to the people or through TV and
newspaper media and if enough people would like the
idea through an opinion poll. A formal bill would be
introduced, and then the parliament would have to
approve the change by a two-thirds vote. If the elected
members approved the changes by a two-thirds vote, the
president would get his 50% reserve vote in these

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matters also then only those changes could be made to


the Constitution.

If a good bill was being opposed by two-thirds majority,


the president could use his 50% reserve vote to overturn
the two third majority vote of the politicians, if he felt
that majority of the people wanted the change but the
politicians were opposing the bill so the president does
not get credit for a good bill and get even more popular
among the people. By this process the people would
directly approve or disapprove the changes that could
affect their lives and the president by using the 50%
voting power could implement the will of the people
even if other politicians oppose it. This would be
approaching a true democratic process. Also, if changes
were really needed then more than 51% of the
population should feel that way. This way the people
would be governing their lives, rather than a group of
politicians or bureaucrats or lobbying groups. Only if
80% or more of the elected members were against the
president's wishes then they could oppose the President.
His 50% and the supporting 20% would not be enough
to overturn the opposition vote of 80%.

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Here again if the people were for the presidents idea then
people would call their local elected politician and ask
them to fall in line with the president if not then the
people could take the elected member to task through the
honourary committee.

Under this system, who would be the chief secretary of


the various government agencies? The selected
committees managing each ministry would have the
right to appoint the head of each government department
or bureaucratic agency, This selected head would be
from the high ranking officers of the department and
would be answerable directly to the committee. The
committee would also have the right to terminate or
demote him to his original rank of their services if they
were not satisfied with any of the bureaucrats job
performance. The head of each department would also
have the right to hire and fire any employee based upon
job performance since the committee would expect
results from the head bureaucrat. This would place the
ultimate responsibility on the president's of each
committee's shoulders. If things did not work out, then
the people would know whose fault it was.

Today, the way most systems are run, every politician


and bureaucrat is ready to point the finger at others for
things that go wrong. But don't get the wrong idea, I am
not proposing any kind of dictatorship or oppressive
government; what I am proposing is that people should
take responsibility for their actions, take credit for good
results and improve on their mistakes. Of course, if their
mistake has hurt somebody, then they should be held
responsible for the damage and the injured party should
be paid for the damage.

How would the presidents/chiefs job performance be


rated? When the elected president took charge of his
office, all of the assets would be under his charge. The
accounts would show what assets he started with. He
would manage these assets on behalf of the people he

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represented. He would diversify his investments; no one


investment could involve more than two percent of the
total asset base. He would use the income from these
assets to run his administration. The surplus income he
would reinvest for growth of assets.

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Sixty days before the end of his term a private auditing


firm would be hired by the Committee to audit and
prepare a standardized report of the governor's financial
performance. This audit would be carried out throughout
the nation at all levels of government. Although each
Committee would use the auditing firm of their choice,
the auditing firms would follow the same procedures of
accounting. They would condense the reports into
percentages to put the governor's performance into
perspective with the other chiefs at their same levels.
The condensed report would include percentages of
asset growth or shrinkage, as well as actual figures
(because percentages can be deceiving), administrative

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spending, and salary increase or decrease, total work


accomplished and total wealth increased by him.

The Committee at the national level would choose an


accounting firm that would take these condensed reports
of all the chiefs at each level and figure out the average
percentages. These percentages would be reported to the
public through the news media. These percentages may
not be a fair way to judge the performance of each chief
because different areas may have different potentials and
problems. The people could then judge for themselves
how their elected official at each level performed
compared to the national averages, and also compare the
current politicians' performance to the past politicians' of
their area and then make their own judgments of whom
to vote for in the next election.

Also in today's election system even if you are an


honest, knowledgeable, and capable person you will find
it very hard to win an election. Reason being that great
amounts of money are required to advertise yourself and
to do this you may have to ask for help from
industrialists and government contractors. But they are
more likely to help a political party rather than an
independent. To join a political party means you have to
fit in their mould even if you agree with it or not so you
are not left with much choice.

The election commission can ban all advertising from all


politicians. Three months before elections the potential
candidates has to get at least one percent of his
constituency to nominate him to stand for elections.
With this proof he can file his election papers. He can
make a 10-point program and fit it in one page and the

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newspapers by law would have to print it free of charge.


This way all the people would be able to read their
potential candidates program and by an opinion poll take
up debates on important issues on TV shows (free of
charge to the politicians) to see how each politician
intends to solve these issues. This way even a poor new
candidate can get equal or more coverage if his ideas are
good and acceptable to the public.

This process of electing politicians would do away with


inefficient, corrupt, and incompetent politicians who did
not know what they were doing and what was going on
in their own backyard. Let the politicians move with the
normal people and see the problems they faced on a day-
to-day basis. This whole process would also do away
with corrupt politicians. Unscrupulous private
companies would not be able to get any benefits or
handouts from politicians and bureaucrats, since the
politicians and bureaucrats would not have the power to
return their favours without public consent. These
companies would no longer see the need to give huge
payoffs to government officials. This plan would also
eliminate the need for lobbying groups since they would
not be able to get anything from the politicians directly.

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One of the problems with the current system in elections


is that politicians need to spend huge amounts of money
for publicity and they go to lobbying groups and
industrialist and government contractors for financial
help. In return the politicians promise them certain
favours and paybacks to the people who have helped
them. After winning the elections the politicians are
bound to return the favours, but the politicians cannot do
this directly, they have to get the help of the bureaucrats
to release these funds to the contractors and
industrialist's. So a strong bond is formed between the
three groups.

This leads us to our next topic of the Iron Triangle. This


is basically the fruit of the current election and
management system of our country and most
democracy's. We all know it is happening but we feel it
has been going on for a very long time so who am I to
change it. Well, you alone cannot change it. But if all of
us are aware of better alternatives and we start spreading
and improving on the ideas of this book and demand it
by writing to our politicians,

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things will start happening. Think how with the


suggested idea of the government system it could be
made to work for the betterment of the majority of the
people rather than the select few. the present scenario
and see if you find it acceptable or would you like to see
the changes mentioned above.

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CHAPTER 7

THE IRON TRIANGLE

The bureaucrats, beneficiaries, and politicians combine


to form the Iron Triangle. A very strong bond is created
among the three groups. Their main priority is to look
out for themselves and help each other to further their
own cause.

THE BUREAUCRATS: The more planning,


regulations, and restrictions involved in an economy, the
more government controls, this makes them susceptible
to corruptions and bribes. The larger government is self-
perpetuating; once started, it does not want to stop
growing, does not want to give up power and control.

Who are the bureaucrats? They are the secretaries and


officials and all employees of the public service
agencies. (In reality today most of them are public dis-
service agencies.) In theory they are public servants, but
in reality they are public bosses. They include all kinds
of enforcement agencies and different kinds of revenue-
collecting agencies, sanctioned by the politicians.

Politicians may come and go; beneficiaries may come

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and go; but the bureaucratic agencies have been


constant. They are the base of the Iron Triangle. The
bureaucrats are so powerful that they interpret the laws
passed by the politicians in a way that benefits their
cause; laws that reduce the bureaucrats powers are acted
on in their own sweet time, because the present
politician may be gone after his term expires plus he
may not be given the authority to control these
bureaucrats. A new politician who gets voted in (by the
help of these bureaucrats) will give the bureaucrats more
power, on which they will act immediately. Today
Bureaucratic agencies have a will of their own and are
not really controlled even by the entity that brought them
into existence, because those politicians who voted them
into power have long been gone.

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Who governs the government? No one individual can.


Each arm of the government is like a leech, it keeps
sucking blood and growing. The final effect is that the
leech gets stronger and the animal gets weaker until the
animal dies. The bureaucrats suck upon the country's
resources until they drain it to such low levels that it is
about to collapse economically, and this creates social
unrest throughout the nation. Each of these government's
arms becomes so powerful that none of them can be
broken off (removed, scrapped) even if all the rest of the
arms got together. Then again, the rest of the arms won't
get together to scrap anyone because all of them realize
that the next one to go could be their own and they do
not want to set a trend of reducing the size of the
government. In fact, when one arm becomes too big and
strong, it will start its own offshoot that becomes
another individual powerful arm. This is the Tyranny of
the Bureaucracy, one side of the Iron Triangle. Among
the three sides of the triangle, I would say the
bureaucrats is the most stable and deep rooted and
therefore the hardest to amputate. But nothing is
impossible. Remember in a democracy it is the will of
the people that has to be implemented. The question
is do you have the will?

THE BENEFICIARIES: These are the different


organizations that benefit from licensing agencies,
tariffs, and all the agencies that restrict trade or put
barriers to entry to the newcomers. It is beneficial to
those who are in the industry to have maximum barriers
and difficulties to entry so that they can stop the
newcomers and the small businesses from really
growing unless you are exceptional. Existing large firms
do not want to share the pie; therefore, they make life
much easier for themselves by avoiding competition.
When there is very little room on the boat, people will
still want to come aboard; but once they are on, they
want to stop the rest from coming on. These groups have
concentrated interests and will form strong lobbies to
protect themselves. They will try to make their interests
sound like national issues to get the sympathy and
support of people. This is a very self-defeating process
for the whole economy. This type of thinking is food for
the corrupt politicians.

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THE POLITICIANS: The lobbyists (beneficiaries)


need politicians in parliament/legislature to speak for
them and support them. The beneficiaries choose a
politician who will support their lobby and the
beneficiaries help politicians win elections. The
politician has all to gain and nothing to lose, so he goes
along with it and supports their lobby as a return favour.
At the central level the politicians merge with the
bureaucracy. "You scrub my back and I'll scrub yours" is
the philosophy. The majority of the public loses; only
the few unscrupulous win.

HOW TO DISMANTLE THE IRON TRIANGLE

Although it seems impossible to dismantle the Iron


Triangle, it is not. In reality it is much easier to break or
dismantle something than it is to make or assemble
something. Then why do we feel that, although there are
so many wrong things happening within the Iron
Triangle, we are a majority, they are a minority yet they
have become so powerful that we as individuals cannot

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do anything to change the system for our good? We also


have to join together and show our strength of majority
to change the system.

Who is it that supports the Iron Triangle? We the


individual people who vote the politicians into power;
we the individual people who pay taxes to support the
different governmental dis-service agencies; we the
individual people who directly or indirectly support our
lobbying groups to pass legislation in our favor and to
hell with the rest of the people.

We are made to believe that we are doing ourselves good


by giving our money and support to them, because we
need the subsidies, jobs, favorable legislation, and
protection from the other lobbying groups that will take
away the whole pie and leave nothing for us. But in
reality only some of us are getting only a small portion
of our money and support back from the Iron Triangle.
The majority of the money and support is sucked within
the Iron Triangle to perpetuate its own cause, not ours.
After all, they can give us only part of what they take
away from us. The way most government systems are
run, they are not productive; they are very efficient
consumers and wasters of our money.

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From the above discussion it is clear that the Iron


Triangle needs our money and vote support much more
than we need them. So if we were to cut our support of
them, and support the right politician who will support
us and not the Iron Triangle then they would not be able
to sustain themselves and would fall apart.

How do you cut your support of the Iron Triangle? If


you stopped sending them your tax money, you would
end up paying a penalty and/or end up in jail. That's not
a viable solution. If you stopped voting, that would not
make any difference because there are enough people
involved in the Iron Triangle to vote themselves into
power.

Here is a package of solution, all of which are essential


to dismantling the Iron Triangle:

1) Ask your local MP to read this book and innitiate


and support the policy guidelines recommended
herein. Tell him you want these policies to be
incorporated in the national constitution, and if he
will not take you seriously, you will be voting for
another politician who will.

Any politician who cares for the people, who has


some understanding of economics and how the free-
market system works, will see how the policies
outlined in this book will cure most of the defects
existing in the system. He will also see how he, as a
powerful politician who passes bills to spend huge
amounts of money in favor of his beneficiaries and
bureaucratic organizations, can become instead an
efficient financial manager for the public. If he is not
effective enough in the position that he has been
voted into, he will not get your precious vote the next
time around.

The politician's role of spender of public money and


perpetuator of ever-increasing budget deficits,

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national debts, and tax increases would change to


preserver of public money, increasing the total assets
by investing, reducing and eventually doing away
with budget deficits, national debts, and the C-S Tax.
The politician will have to be well versed in financial
management as explained in this book.

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The politician's philosophy of "You scrub my back


and I'll scrub yours" will be over. If he does not
perform well financially and does below average,
then his chances of being re-elected will be slim. The
new role of the politician will be to keep the spending
of the few leftover bureaucratic organizations to a
minimum. The thought of creating a new
bureaucratic organization will be detrimental to his
political career, since that would increase spending
and make him look bad. In fact, the politician will be
tempted to reduce or completely close down
unneeded bureaucratic organizations to reduce
spending. This process would help to dismantle the

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tyranny of the bureaucrats, beneficiaries, and


politicians.

Now that you understand how we have been


unknowingly supporting the Iron Triangle to cause us
discomfort and make us feel helpless and unimportant,
you can very easily cut off that support by taking charge
of your life; by being aware; and by making the people
you know also aware of and motivated to work on the
solutions recommended in this book.

Timing is of the essence; this is a package of economic


policies that have to be implemented simultaneously in
order to have their full positive impact. Just as when you
need to blast a hole in a granite mountain to build a
tunnel, if you have set five explosive charges to blow the
hole as deep as possible, in order to accomplish that you
must release all five charges at the same split second. If,
due to some malfunction in the timing mechanism, the
explosive dont blow off together, you will still have a
hole from the blasts, but it won't have the depth you
originally intended. So also all of the policies
recommended should be implemented within the same
year. The shorter the implementation period, the greater
the impact.

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CHAPTER 8

INTERNATIONAL TRADE AND

IMPORT-EXPORT POLICIES

There are some people in India who feel that these


foreign businesses come to India only to make money
and they take away more than what they bring into the
country. Even if this is true, we do not loose. In business
there is a positive sum gain. Meaning both the foreigners
as well as us gain by the production, service, trading
activities that take place. So when foreign companies
take an active part in investing in a production plant, and
exporting those products or setting up an office to
provide a service to their or other foreign offices then we
as well as they gain. Where I have my reservation is
when foreign companies just invest in the stock market
and sells off when the share prices go up and take their
money home, this is where I feel our investors are put at
a disadvantage. With their huge money power they can
manipulate the market in their favour. Lets examine how
the foreign company and we can gain by free trade
policies.

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Following is an analysis of import-export at a personal


level and also at the national level. When an individual
buys something, he is essentially importing that product
or service from another person in exchange for currency.
So also when the individual sells his labor or talent; he is
exporting his labor or talent in exchange for currency.

Now let's take this import-export analysis from a


personal level one step further and see what happens
when people do not trade, and when they do trade, and
also when they trade with tariffs (or taxes).

Suppose that there were absolutely no trading at all


between individuals. In this case the individual could not
specialize

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in any one trade. He would have to spend a lot of time


learning to produce everything he needed, i.e., a variety
of food, clothing, shoes, pots and pans, and build his
own house. He would buy nothing from stores but
manufacture each and every item needed to suit his
lifestyle. This may sound ridiculous, but in this extreme
case of no trading, individuals would have a very low or
no standard of living. How much can one person do
individually? The simple necessities of life would be
beyond his reach.

Now let's look at the complete opposite case of absolute


free trading between individuals. Each person
specializes and works in a field that will maximize his
income, depending on his ability to learn a trade or skill,
with the resources available to him. He can sell his talent
in the open market (or in other words export it) and earn
enough currency to maintain a certain standard of living.
If he wants to improve his standard of living, he will
further specialize by educating himself in a growing
industry that is in demand. If he specializes in a dying
industry, he may actually reduce his standard of living
because they do not need any new people; in fact, they
would be laying off experienced people. So he should
steer away from such industries. (This concept ties into
the topic of "Dying Industries.")

In the natural case of free market with no government


intervention, regulation or subsidy, industry and
individuals would direct their resources towards
products and services that are needed by the local and
world economy. Individuals and society as a whole
would prosper form these new demands of products and
services. The whole cycle of investment, production,
employment, income and spending would take place.

WHAT HAPPENS WHEN THERE IS

A TARIFF ON TRADE

Whom and how does it affect? A tariff reduces the


overall benefit of trading. It takes money out of the
trading process. It affects the consumer the most because
the consumer has to pay a higher price for the product,
all of the taxes throughout the production and

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distribution process is rolled over and added into the


final higher price of the product, an undesirable effect.
Because of the increase in price, a certain number of
consumers may not be able to afford the product, which
reduces the total number of units the producer can
produce and sell. This, in turn, reduces the producer's
total revenue and his total profits. Because of this the
producer's employs fewer people than he normally
would. Lower employment means lower income to
society. So tariff is a net loss to both societies.

If the consumer and producer both lose from the tariff, it


seems that the only one to gain is the agency collecting
the tariffs, i.e., the government. Yes, the government
does make some gain by colleting tariffs in that revenues
collected from tariffs normally exceed the costs of
collecting the revenue. But there is a high cost of
collecting revenue in this manner. It is hard to police;
officials are susceptible to bribe; and tariffs are a very
inefficient means of collecting taxes.

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With tariffs there is an overall net loss to the society and


nation. When you add the losses to the consumer and to
the producer in lost jobs, lost profits, loss of consumer
satisfaction (utility), loss of production and employment,
all these losses add up to a lot more than the small gains
derived by the tariff-collecting agency.

It seems, then, only logical to have policies that allow


complete free trade within and with other nations of the
world. To accomplish this in reality, a nation would have
to have bi-lateral treaties with other nations to have a
free flow of all resources, including labor. Most of the
trading should be done through the private sector
without any kind of subsidy. All the nations would be
encouraged to join in on this free economic trading
alliance.

FREE ECONOMIC TRADING ALLIANCE (FETA)

Let us say that a nation decides to start a Free Economic


Trading Alliance (FETA). A major requirement for all
of the FETA members would be to allow complete free
flow of all resources among any and all members of
FETA. If they could get anywhere

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from five to ten nations to go ahead with FETA, they


would see such prosperity that in a short period of time
majority of the nations would want to join FETA. The
members of FETA would be allowed to trade with non-
FETA members also. They would be allowed to charge
a tariff to non-FETA members. This would encourage
non-FETA members to become FETA members, in
order to gain free trading access to these countries.

FETA members would not be allowed to charge either


import or export taxes to fellow members. Breaking this
part of the agreement could lead to a loss of
membership.. If any country decided it did not want to
be a part of FETA, all the other members would be
notified. Each member nation would have a committee
that would oversee the smooth flow of trade. Any
complaints would be made to this committee to settle
matters. All of the member nations could meet
periodically to discuss how they could improve on the
structure of FETA and increase membership and overall
world trade.

SUBSIDIZING EXPORTS

There is absolutely no way to police each member


nation, if it subsidizes its own exports. Most members
would get upset if some of the members subsidized their
exports, because they would have unfair price advantage
and would be able to be more competitive. On face
value, it seems true that if you subsidize and export
more, you are gaining. But let's see what happens when
you compare this to an individual selling his labor as
exporting and buying other products as importing.

Subsidizing his exports means that an individual would


charge less than market value for his labor so that he
could sell (export) more of his labor. In order for him to
sell more labor, he would have to sacrifice his leisure
hours and other activities he could have accomplished in
those hours (which is a cost to him, although it is hard to

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put a monetary value on leisure and personal activities).


Surely because of the extra hours, even with a lower
pay, his total take-home pay would be more (but his
income per hour of work has declined). This would give
him some extra

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money to save or to spend. Most people would not like


to work below their normal wages just to get a few hours
of overtime work. In fact, most people would want
above-normal wages for overtime work. So subsidizing
wages or charging less per hour of work you do, at an
individual level does not make sense.

In the case of a nation subsidizing one or more industries


to increase exports, either the citizens or other industries
would be taxed at a higher rate to pay for the subsidy.
(See how subsidies affect the industry under the section
"Dying Industries, Unemployment, Tariffs, and
Subsidies.") This means that the consumers of the

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subsidizing nation would pay higher tax so that the


importing nation's consumers could buy the products at a
lower-than-market price. This would not go too well
with the consumers of the subsidizing nation if they
realized that their hard-earned money was being taxed at
a higher rate so that foreigners could buy their products
for a cheaper cost. It would be the same as giving away
part of their income or part of their labour at a cheaper
salary. From this it can be seen that the subsidizing
nation would be clearly at a loss.

The other argument for subsidizing exports is that a


nation can have a surplus in its foreign exchange by
exporting more and importing less. Let's name the
exporting country EX and the importing country IM.
Now EX would eventually convert all of this surplus
foreign exchange it earns from exporting into its own
currency when it needs to consume it or use it for
investment within its country. EX could have held this
surplus either in the form of gold or in a strong stable
currency, usually the U.S. dollar, the British pound or
more recently the Euro. But when it sells these U.S. held
dollars into its own currency, it puts as upward pressure
on the price of its own currency. Meanwhile, the IM
countries also need the EX currency to buy EX's
products and services, putting a further upward pressure
on EX's currency price. This makes the products and
services of EX more expensive than those of other
countries. Hence, the exports of EX are priced out of the
selling market.

In the meantime, since EX's currency value has gone up


in relation to IM's, now EX can buy a greater amount of
products and services from other countries and therefore
a reverse

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trend occurs. This reverse trend will not be able to


totally cancel itself out but will stay within a certain
range and go back and forth since the supply and
demand of products are dynamic and change every
second because of the modern online internet service.

One could argue that some nations would always be at a


disadvantage because they may have a few natural
resources and a large population to feed. So they would
have large trade deficits if they had free trade policies.
But we know that this is not true because Japan,
Singapore, and Hong Kong have almost no natural
resources, they barely have enough land to build homes
on, yet they are very strong economies. On the other
hand, third-world nations with few natural resources that
have huge populations could provide cheap labor, to
produce labor-intensive products. So in simple words,
every country has some resource, whether natural or
human, that it could provide for the world economy at a
competitive price.

Of course not every nation in the world will ever reach


the same economic level, just as all human beings will
never be at the same economic level, no matter how
much they try to achieve equality. But as long as every

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nation progresses in the right direction, everybody


progresses. While achieving this progress there are
bound to be trade surpluses and deficits, as economies
adjust to the growth and needs for products and services
change. Without any government intervention,
subsidies, taxes, or quotas, economies will adjust to this
change in order to maximize their wealth.

The main purpose of free International trade is to


gain comparative and absolute economic advantages
from trading, technological advances and, most of
all, peace. When people, technology and materials
cross borders, soldiers don't have to. Only when we
have complete free international trade will we
achieve true peace.

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HOW WILL INTERNATIONAL TRADE HELP


ACHIEVE TRUE PEACE?

Definitely not by every nation increasing their military


spending each year. The answer is by allowing free flow
of people, products and resources. Imagine a world
where half the products and services produced by each
nation is exported all over the world and half the
products and services consumed by each nation is
imported from different countries around the globe. Also
imagine a world where every nation has about fifty
percent of its population living and working overseas in
different countries around the world and each country
has 50% native and 50% foreigners living in it.
Furthermore, suppose that an average family changes
their country of residence once a decade.

This world would be so homogenous that within a few


decades the concept of being nationalistic would start
fading away and people would start thinking along the
idea of being a citizen of the world or planet earth.
Eventually, the concept of national defense would die
away and a huge waste of resource would be stopped.
Guess how much lower every nations expenditure would
be. This would lead to further production and cheaper or
stable prices for products and services.

Some may argue that in the above scenario if everybody


can produce more then where will the consumers come
from. The answer is simple. Without the waste in
defense resources people all over the world will have to
work less in order to maintain the same standard of
living, or if they continued to work at the same pace they
would have a higher disposable income each month. If
this excess income were invested properly he could
retire at an early age, This means people all over the
world will have more time to spend with their families,
friends, and visit places.

Just imagine what could happen to the tourism industry


all over the world. So many new jobs would be created
in the tourism and related industries. I am sure that most
humans would like to see the whole world in their
lifetimes; this is how God has made us, to enjoy life.
(But with the wrong policies all over the world

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the P/C have made life miserable for most of us except


for the selected few who are in their team.) Imagine if
just 20% of the world population could visit a foreign
country each year. How much pleasure for mankind,
how many new jobs and how the world would flourish
with happiness, just the way God intended for humans to
live.

Lets take an example of two neighboring states within a


nation. They do not have to support an army to protect
themselves from each other, they don't have to patrol the
borders and have barbed wire fences or have visas to
travel from one state to another, a huge saving in cost
and resource not to mention the tension. Now suppose if
each and every state in India had to have an army and
weapons to defend itself against the bordering states.
What a huge cost and tension to each of us. None of us
would want to see such a stage happen so why cant we
apply this same philosophy all over the world. If people
told their politicians to stop wasting money in the name

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of defense and live without the threat of war between


countries as we don't have wars between our states.
Citizens all over the world should make it clear that they
will vote for a politician who will reduce military
spending, and it will start happening. So when mankind
moves in the direction of the above-mentioned concept,
armies won't be needed and the huge economic drain of
military spending will be greatly reduced and eventually
outdated and done away with.

The resources now spent on defense could be used to


make human life easier on earth, so people can spend
their leisure time enjoying themselves and learning more
about themselves instead of being slaves to their jobs
and businesses. By this process mankind will be headed
in the direction of everlasting peace national defense
function would be limited to help its country people
from natural disasters. Once God sees that mankind has
learned to live in harmony with himself and Gods
creation, which we have all around us then God may
decide to reduce the natural disasters.

Here are some guidelines for providing stability while


trying to create a homogenous world. Foreigners could
own their primary residences 100%, but all other
investments would have to be 51% owned by a local
investor, for two reasons, social and economical.

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Socially, people wouldn't feel that foreigners own


everything, which leads to animosity against foreigners.
Since a foreign government or individual could not own
more than 49% of any investment or business, any one
foreign nation would not be able to control or ever be an
economic threat to the host country, because of the fact
that this 49% foreign ownership would be diluted
between several different countries and companies.

Economically, there may be many small businesses that


a foreigner may want to invest in but may not have the
time or the resources to manage. They may just want to
invest and be a silent or investing partner (since the
country having C-S Tax would be considered a "tax
haven", many foreigners would want to invest here).
Local entrepreneurs who may have the management and
business skills but may not have the financial backing
could take advantage of such opportunities. By this
process both locals and foreigners would benefit.

Many countries have for a long time been involved in


joint ventures in both private and public sectors, which
worked out quite well. So I propose that the joint venture
system be greatly encouraged in, along these guidelines:

Foreign Company 49.5% of stock

Local Private sector 49.5% of stock

State or Central Government 1.0% of stock

Top management to be 50% local, 50% foreign or


whatever is mutually agreed upon by both parties;
percentage of other employees would be based on
whatever the labor market has to offer.

The one percent stock to be owned by the government in

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a joint venture would occur only if a dispute arises and if


the decision involves a strategic problem; then, the
government would have the right to decide on it.

Any nationality from anywhere in the world could come


for business or pleasure, without visa restriction. Only a
security check for terrorism would be done; terrorists
would be dealt with very seriously. When we allow
people from all over the world

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to move to any part of the world and stay as long as they


wish, for business or pleasure, without having any
immigration restrictions, we will be moving in the
direction of achieving world peace and stability.

HOW TO ENCOURAGE FOREIGN CAPITAL

Make a constitutional amendment to have complete


privacy of banking accounts. No local or foreign
governments would have the right to infringe on this
privacy except for the police department in cases of
suspected robbery or fraud or drug money. Of course,
this would require a special court order. Foreigners
opening accounts in the local banks would have this
same protection (another means of attracting foreign
money to the nation if needed).

With interest income, dividend income or capital gains


not being taxed, all the foreign funds would flow in very
freely along with the other policy changes mentioned in
this book. This would encourage business growth. More
businesses means greater production and higher
employment. Greater production means lower prices for
consumers; higher employment means more income for
employees to buy the products. So here you have a
business cycle that benefits everybody. When foreign
funds leave the country there should be a flat ten percent
tax. No questions asked.

(Notice under section on "Unions' how higher


employment rate makes unions an unneeded
phenomenon.)

SPECIAL ECONOMIC ZONES (SEZ)

This concept favours only the big businesses because


small businesses cannot afford to buy expensive plots
and setup new plants in far off places where the SEZ are
designated by the government Under the policies of this
book, the whole of India will be a SEZ.

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CHAPTER 9

UNIONS

By removing the intrusive taxes in India and by


implementing the new C-S Tax laws, international
trading policies, strict corruption control and other
policies recommended in this book, there would be so
many old and new businesses in our country creating
plenty of new jobs. In order for businesses to attract
good employees they would have to pay attractive wages
and benefits. Therefore, unions would become
superfluous. In fact once the policies in this book are
implemented there would be no need for unions; old
unions would be allowed to continue, but just for the
record from the day these policies are implemented, new
union formation should be banned in all old and new
businesses starting from a particular date. This will
encourage so many new businesses to start all over the
country that the old unions will automatically be
disbanded or fade away.

I have nothing against unions but lets read some


analysis. Here is how it works in reality: When you have

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discouraging policies toward businesses, you have fewer


businesses; fewer businesses mean fewer jobs; fewer
jobs means employees have to come up with a means of
saving their jobs; so the answer is unions. At face value,
this seems like the right answer to the employees. But in
the long run, new businesses do not want to come into
areas of strong unions and existing ones go out of
business, because they aren't able to compete. So in the
long run unions aggravate rather than cure the problem.

Unions do almost the opposite of what they are intended


to do. Instead of fostering more jobs, protecting and
raising salaries of existing employees, unions end up
diminishing jobs and driving businesses to move to
another area, sell off to another firm, or completely close
down. All of these eventualities are undesirable

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to the employees and the employer.

Employers are Entrepreneurs, they take a lot of risk on


capital, use their knowledge, and work hard to start a
business to earn a profit. Besides dealing with
competition, government taxes and rules and regulations
and harassment from them, who needs the harassment
from your own employees whom you are paying a salary
and providing them a livelihood.

Lets do a survey of union leaders and union members


and ask them a simple question. Suppose if they had the
money to start a new factory. Would they start it in an
area where he was guaranteed his employees would
form a union or would he start his factory in an area
where he was guaranteed no unions and he could hire
and fire, promote or demote any employee based on
work performance and requirement Let the answer from
this survey decide whether unions should be allowed or
banned.

Now look at the other side. When you have encouraging


business policies, you have more businesses coming into
the areas. More business leads to more jobs; more jobs
means greater demand for labour, which leads to better
negotiating power for the employees. When employees
earn more and more people are employed, they spend
more, which means more production of products and
more services are needed, which encourage new
business. So it is a beneficial spiral and everybody gains.

GUIDELINES FOR UNION POLICIES

In the initial stages, while there are unions, these are


guidelines of the policies that should be implemented:

v Allow only localized unions. "Localized" means that


only the people working within the firm could be part of
that union. An outside entity not employed by the firm
could not be part of or organize a union.

v No employee of any firm could be forced to join the


union. If

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any employee is threatened or forced to join the union,


the state and central government should disband the
union and press criminal charges against the union
leaders. If the union goes on strike, the non-union
members should be protected to work and, if the
employer and employees cannot come to an agreement
within ten working days, then the employer should have
the right to start hiring new employees.

v No salary would be paid to striking union workers,


while they are on strike.

v An incentive for a firm to stay non-unionized would


be to have some kind of profit-sharing bonus scheme.
This could be in the form of a central government
mandate, whereby all firms participating in the
following profit-sharing bonus scheme would not be
allowed to unionize. All employees and management
would share in this plan. A minimum of one percent of
gross sales by law should be allotted for this profit-

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sharing plan (only for non-unionized firms). The


maximum could be whatever the owners of the firm
decide. This would be competitive because if the owners
decide to be greedy and give out only the minimum each
year and other firms gave out more, then they would
lose workers to the ones that offered more. The amount
allocated for this profit-sharing plan would be shared
equally among all employees regardless of their
position. The only criteria for an employee to qualify for
the profit-sharing plan would be that he has to be
employed with the firm for one year; this would be fair
to employees who had worked hard in prior years.

MINIMUM WAGES

Slavery is illegal, so also force and threat should be


illegal either by employer or employee. Whatever the
employer and employee decide upon mutually would be
legal. In other words, there should be no mandatory
wage limits. Let the market dictate wages. Those who
want to earn more money will educate themselves for
industries that are in demand and pay a higher salary.
This concept ties in with the topic of "Dying Industries,
Unemployment, Tariffs and Subsidies."

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WHO PROVIDES FOR AND PROTECTS THE


WORKER?

The worker must use his own skill and ingenuity in


finding an employer who will pay the most for his skills.
Of course, laws would be there to protect him from
employer force or threat, but other than that, he must
rely upon his skill and his private contract. If he is not
satisfied with his wages, he should get higher education.
If his skills are becoming outdated, he should get
educated in areas of demand . That is part of his own
financial management. He could either save some
money while he is making a good wage (savings would
be higher since neither savings nor interest earned would
be taxed until it is consumed on a normal or luxury
product) or he could keep updating or learning different
skills, just as a firm would have to allocate some capital
for re-investing in new machinery. If he does neither,
then he can start at the bottom in some new industry as
an apprentice when his skills are outdated. Everybody
would have to work for himself. There would be no
direct redistribution of wealth, i.e., welfare,
unemployment, social security, or subsidies for strong
lobbies except for education and handicapped people.
This brings us to our next topic.

CREATED UNEQUAL

There is an old Indian proverb, "All fingers are not made


equal." Since you cant make all the fingers grow to the
same height, the only way to make them of equal height
would be to chop the longer ones off to make them all
into equal height. This would leave you with only a
thumb. Even though the thumb is one of the most useful
finger, it would be almost useless on its own. The
philosophy of the proverb is that God did not create or
meant everything in life to be equal. Everything and
everybody is different colour, height, size, looks,
strength, intelligence, personality differences, so no two
people on earth are the same. Even twins are different.
There are countless leaves on this planet but no two are

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exactly alike. Everybody may not have the motivation to

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become a millionaire. So government has no business to


make every body equal. P/C should create a level
playing field and give equal opportunity for everyone to
prosper in life.

Life would not be interesting if everybody on this planet


looked exactly alike. So also no government can bring
financial equality at any cost. Every person is not
willing to make the necessary sacrifices to achieve
higher financial levels. But there is also another proverb,
"Water seeks its own level," so if you leave the
individuals alone without government subsidies and
restrictions, they will do their best to come up in life or
to the level they are comfortable with. Some of them
may choose not to, and government should respect their
will. The policies in this book will give opportunities for
everyone who wants to succeed and come up in life.

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Let every individual have his own freedom of choice, of


what and where he wants to be. Government should
have no role in making everybody's life equal, or
planning and directing everyone's life. However, the
government should set up a program whereby the
physically or mentally handicapped who cannot make a
living on their own could get some kind of government
help and whereby those seeking education could attain it
more swiftly than they would if they had to finance
themselves. (explained under education).

WELFARE STATE

Within the scope of these policies, there would be no


government welfare program, except direct help to
handicapped people and to those seeking education (see
chapter on "Education").

Most developed nations have several welfare programs


like unemployment, medical benefits, social security,
retirement, etc. Here again people don't have a choice,
they are forced to pay into a system whether they like it
or not and whether they can afford it or not. As we know
that most services provided by the government cost
double or more. It would be much better if each
individual bought these same services directly from the
private sector. Also encourage every individual to invest
10% of his salary in his own

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retirement plan. It could be in the form of a life


insurance plan, or mutual fund or saving account or
whatever an individual chooses. It is not fair that the
government channels people's monies into their projects
by giving these projects tax benefits. Let these projects
attract their own funds on their own merits and not on
tax advantages. Let them compete with other private
investments, only then will we know the true cost of
each project that the government spends on.

The governments of nations that have welfare programs


should give people in the work force a choice of either
continuing to pay into these programs and receiving the
benefits or stopping their contributions and receiving no
benefits. Most people would stop paying into the welfare
system. Those who receive more than what they put into
it and those who are close to retiring would choose to
continue with the program.

Most people who have ten or more years left before


retiring would find that, they would still be better off
investing their money directly in the private sector. At
retirement they would get better returns than what the
government could have given them.

WHO WILL PROTECT THE CONSUMER?

The answer is: the consumer himself. Critics would say


that consumers do not have enough knowledge to know
all the products on the market. Yet life is a process of
trial and error. Also, a company, in an effort to protect
its own brand name, would try to keep the consumer
satisfied. Consumers should buy products that are
money-back guaranteed or with repair/replacement
warranty or that have a good name. Companies that
produce counterfeit products should face the strictest
penalties and also criminal charges, because in essence

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they are stealing a brand name, which the originator may


have spent a lot of money and time to develop. These
counterfeiters are cutting into the profits of the reputable
firm (see "Patents"). They are also stealing from the
consumer, because they are not giving the consumer the
product he thinks he is buying.Therefore, consumer
fraud should be a criminal offence and be punished by
monetary fines

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payable to the harmed as well as the culprits should be


publicly flogged,no jail sentense. If people buy a cheap
product, then that's the chance they are taking, to save
some money. If they are dissatisfied, they will report to
the news media, tell their friends and so on and the
company will not stay in business very long. When
buying a new product from a new company buy a small
quantity, once you like the quality then buy more.

What if a consumer gets physically hurt by a product? If


it is just one consumer, then it probably could be the
consumer's negligence and that can be decided by a
court. But if many people have been harmed by the same
product, then it could be the manufacturer's fault and he
should discontinue the product and pay for the damages.
(Penalty may include closing down business and
prosecution for criminal charges, if the deed has been
done maliciously.)

What if a manufacturer pollutes the environment, water,


etc.? Licensing laws would take care of the hazard
industries. If they are not abiding by the law, then there
should be stiff penalties; if it keeps recurring, the
government should shut down the plant. As far as
possible, it would be better to have those products
imported from countries that have the technology to take
care of the hazards. The licensing of those industries
should be very strict. However, nonhazard industries
would just need to register with the state; no license
would be required for them (see "Production Licensing
Laws").

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CHAPTER 10

GOVERNMENT SPENDING

I would like you to notice that this is the smallest chapter


in the book. Thats exactly how I would like our
Governments spending to be "as small as possible". The
government should have an overall development plan for
infrastructre and use the guideline in the chapter of
Privatization to get the infrastructure made to the
developed world standards. Our own companies should
be given preferential treatment in getting the contracts,
they can have foreign consultants.

Money spent by the government is the least effective use


of money because of the inherent inefficiencies and
corruption in most government systems. The officials
spending the money do not have respect or
accountability for the public money because it is not
their hard-earned money. Easy come, easy go; directly or
indirectly into the pockets of the bureaucrats, politicians
and beneficiaries.

There may be many bureaucrats, politicians and

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beneficiaries that may be honest and would like to stay


honest but the system has deteriorated to such levels that
even an honest person has to be corrrupt in order to
survive. With the right policies in place I am sure many
of these honest people will come out in the open and
show their true self. You may have heard the saying that
"one rotten apple spoils many", among the above three
groups you decide how many rotten apples there may be
for our country to be in this situation today.

Every government talks about reducing government


spending but in reality most of them seem to be doing
just the opposite. Every bureaucratic agency, lobbying
group, and politician feels that their cause is the most
important and needed in the system. In fact, each of
them feel they need to increase their own spending

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and cut the spending done by the other agencies. The


result is that most of them get an increase in their
spending and we have an ever-increasing budget deficit
and national debt.

In order to effectively cut government spending, the


following policies should be implemented:

v Freeze hiring new employees in all government


agencies, except essential services. If any of these
essential service agencies needs new employees, they
should give preference to the employees from the
government agencies that may have excess employees
and are on the lay-off list.

v Every elected politician should take a ten percent pay


cut in salary for the next five years. Furthermore their
salaries at that point should be frozen for five years i.e.
no salary increases.

v Freeze the budget of all government agencies to


existing levels and/or have a steady five percent
reduction in their budgets each year. Some of the semi-
essential services, like the Environmental Protection
Agency and the Food and Drug Administration, should
be able to raise 75% or more of their expenses by the
fines and fees they would collect. If they cannot collect
that much in fines and fees it should be a signal to the
bureaucratic agency to lay off some people, or to take
pay cuts, or to apprehend more culprits. If, after due
process, they don't catch enough people breaking the
laws that means there are lesser people breaking the law
then it is time to lay off some of the staff. It is not fair to
spend taxpayers' money on services when the demand
for them has decreased.

v Streamline the functions of the government agencies


and eliminate unnecessary paper work and red tape. A
cost-benefit analysis of all government agencies should
be done(except essential services). If the cost far exceeds
the benefit derived from that agency, then it should be
shut down and its employees should be given the chance
to be absorbed in the essential service agencies, if they
are needed. Again, they should be hired not on seniority
but on job performance and qualifications

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v Base all promotions and demotions and lay-offs in


government services on an individual's job performance.
The traditional way of promoting employees based on
seniority (number of years

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in service) is mainly the reason for the inefficiencies


cultivated in government agencies. Lazy employees with
below-standard production should be fired from their
jobs and the high producers promoted. Top management
should also be treated the same way. This would attract
hard-working, productive people to compete for
government jobs. Some of the agencies that have the
power to collect fines from people who don't comply
with the law (e.g., tax collecting agency, police,
Environmental Protection Agency) should credit a
certain percentage of the fine collected, after due
process, to the agent or officer who apprehended the
culprit.

Since incentive makes people work harder, there

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should be an incentive system set up for every


employee of the government. The traditional method
of a secure job for government employees, until they
retire, should be done away with. They should have
to work hard and smart to keep their jobs, just as
people in the private sector. It is not fair that hard-
earned taxpayers' money be used to pay for cushy
jobs of government employees that are secured until
they retire even though they hardly do any
productive work.

By implementing the above policies, we would at least


be able to hold government spending to a constant
amount, if not actually reduce spending. Even if we
could maintain a constant amount of spending, we
would in reality be reducing spending because as the rest
of the economy grows, the percentage of government
spending as a total of GNP will actually be smaller each
year. This is a step in the right direction. The faster these
steps are taken, the better off we will be as individuals
and as a nation.

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CHAPTER 11

INFLATION

Money is an essential commodity, since it is the cheapest


means of transacting business, especially in today's
world, where huge amounts of business are transacted
each day. In the foreign exchange market alone,
hundreds of billions of dollars are transacted each day,
and there are many other large markets such as
commodities, metals, oil, etc. The total amount of money
transacted on this planet each day runs into trillions of
dollars.

In the old days, before money came about, barter was


used for transacting business. This medium was replaced
by money since the cost of transacting business became
too high. Money took on many different forms before it
came to what is called today "paper currency" money.

Every kind of money is prone to inflation. Inflation


occurs mainly when the quantity of money supply is
increased without a similar increase in quantity of
products and services provided in the economy. So
inflation is not a new phenomenon. It has been with us
ever since the concept of money has come about.
Politicians have always found different excuses for
inflation in the economy. But the most important cause
of inflation is the sharp increase in the growth rate of the
money supply, which is much greater than the growth
rate of products and services produced by the economy.

If the money supply is increased roughly in proportion to


the increase in products and services in the economy,
then you will have fairly stable price overall. The new C-
S Tax system would be able to keep a fairly good
account of the increase in GNP in the economy (unlike
the present intrusive tax system, which has a high
percentage of extra cost built into all products and

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services). This would help to control the money supply


in the

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right proportions there by keeping inflation to a


minimum. Prices of certain products and services may
move up if there is a sudden and sustained increase in
demand or sudden and sustained shortage of supply.
Prices will fall if there is a sudden and sustained
decrease in demand or sustained increase in supply.
Price changes also depend on the availability of
substitutes for these products and services. If there are
no substitutes, then prices will react more dramatically
than if there are substitutes.

If the supply of money remains constant and the


economy keeps growing, then prices steadily fall and
"deflation" occurs. Deflation occurs even if the growth
rate of money supply is slower than the growth rate of
the products and services produced in an economy. In
the past 50 years most nations have had huge amounts of

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inflation and the money has lost purchasing power from


10- to over 100 fold. For example, in some countries a
loaf of bread now costs over a 100 times more than it
did 50 years ago. In order to give a reasonable value to
currency, the money supply must be kept constant or
increased at the same pace than the growth of the
economy.

Now than we know the primary reason for inflation, let


us analyze what effects it has on the general economy,
and on you and me. Why do politicians choose to
perpetuate inflation? How can inflation be curbed
permanently?

EFFECTS OF INFLATION

Inflation, if not checked in time (and at least slowed


down if not reversed), will have a snowball effect. It
keeps growing and leads into hyperinflation, which
spells disaster for the whole economy. There have been
many examples of Hyperinflation throughout history (e.
g., Germany, Russia, Chile, and Argentina), Today most
countries have realized the problem of high inflation and
are trying their best to control it. Imagine what the
people have to go through if, every year, prices are
doubled, tripled, or more:

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INFLATION

1. Inflation debases the whole economy.

2. Inflation drives people to make unwise investment


decisions. Inflation gives the illusion that you are
gaining 100% in an investment but within that same time
period, if the prices of everything have gone up 150%,
then you have actually incurred a loss of 50%. Since the
prices of everything do not go up evenly, it is difficult to
make sound business decisions. It gives some businesses
unfair advantage and disadvantages others.

3. Inflation raises your tax bracket without you voting


for it or without the politicians having to fight for it,
which may have cost them votes and financial support in
future. With high inflation prices of everything goes up
and so do peoples salaries and incomes. This pushes
them into a higher income tax slab.

4. Inflation redistributes income from creditors to


debtors. Debtors will pay creditors the same amount of
money plus the agreed interest. But this amount of
money will at a later date buy fewer products and
services, because the money has been devalued or lost
purchasing power. So in effect the creditors will have
received less money than what he originally loaned out.

5. It raises the interest rate and slows the growth of the


economy.

WHY DO POLITICIANS CHOOSE TO

PERPETUATE INFLATION?

Government are constantly in need of more money for


their ever increasing need to fulfill their own cause, as
will be explained in the section of "The Iron Triangle".
Since governments have constantly increasing budgets,
they need to increase their revenues. They can do this in
three ways: 1. Borrow a larger amount from the free

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market each year; 2. Increase taxes to businesses and


individuals; 3. Increase the quantity of money supply.
Let's analyze the implications of each of these
alternatives.

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1. Borrowing larger amounts from the free market leaves


smaller amounts available to the private sector.
Governments and businesses are competing for the same
funds, plus governments have the unfair advantage of
borrowing by giving the lenders a tax free incentive on
the interest on money loaned or not charging capital
gains tax on sale of property if you invest the total
amount in certain government funds for a certain period
of time ( with income tax abolished they would not be
able to avail of this unfair advantage) and since
government are not fiscally responsible, they will
continue borrowing more money and leaving smaller
amounts for the private sector. This lower quantity of
money supply puts an upward pressure on the price of
borrowing money, which is higher interest rate. This in

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turn increases the cost of doing business which leads to


a larger number of business failures, fewer new
businesses being started, and existing businesses
postponing expansion plans. At such times businesses
tend to cut labor costs and raise the prices of their
products in order to make a decent profit. This leads to
higher unemployment, inflation, and decreased
purchasing by consumers and businesses. The whole
negative growth cycle picks up momentum.

Private individuals will also borrow less money at the


higher interest rate and will spend less. Producers will
have to slow down production in response to reduced
buying by consumers. This will lead to more layoffs,
which leads to even less buying because people will
conserve whatever they can during bad times. This
whole process of the government borrowing greater
amounts of money leads to a recession. This makes the
politician look incompetent, not a very desirable image
for his career.

Some critics say that higher borrowing and spending by


government leads to higher employment and higher
spending by the employment people, which leads to a
higher consumption of products and services, which is
good for business and the economy. This may sound
good, but there is a fallacy in the reasoning. Government
does not produce products and services at competitive
prices that are demanded by the economy (now they
have slowly started moving in the right direction, but it
is still too little-too late in the game. What were they
doing all these years). So it wastes money (very
efficiently) on un-needed

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INFLATION

projects, which will almost never pay back for


themselves, let alone make a decent profit.

It spends money on the bureaucratic (dis) service


agencies, which are constantly growing in size. The
favorite is defense spending. Government spends huge
quantities of money to buy weapons and bombs. This
money is tied up for non-productive use for long periods.
The only productive purpose that bombs and weapons
can be used for is the destruction of life and property. So
the government uses borrowed money for all the wrong
reasons. The same money could be used by the private
sector to competitively provide products and services
needed by local and world economies. Competition of
projects where money is invested is a good check to
inflation. At east completed projects will benefit some
people so even if there is no return on investment, there
will be some satisfaction to the people using and
benefiting from the project.

2. Raising taxes has the same effect as borrowing larger


amounts from the private sector because in essence
higher taxes takes more money away from the private
sector and keeps more money in the hands of the
government to waste. In addition, higher taxes are a

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disincentive, they make people less productive. Why


would anybody want to work harder and earn more
money so that the government could take away a larger
portion of his income? Higher taxes make people want
to avoid taxes, even to the point of cheating. Higher
taxes have been proven to cause a slowdown in
economic growth every time, yet some politicians
choose to raise taxes so they can fulfill their promises to
the people who voted them into power, no matter what
the cost to the rest of the people. But increasing taxes to
raise greater amounts of money from businesses and
people is detrimental to the politician's career. Politicians
could lose a lot of votes from people who do not like to
give away their hard-earned money to the government.
This includes most of us. Businesses that do not like
higher taxes would not be too willing to support these
politicians financially in their next election campaign.
Smart politicians who are not ready to retire will avoid
this method.

3. The easiest alternative for promoting higher spending


is to increase the quantity of money, or in simple words
print more money. This is a highly desirable alternative
for the politicians, because it allows them to increase
government spending without borrowing and

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having the worry of repaying back, this method provides


money for their causes without having to vote for tax
increases or loose precious financial support and votes.

This looks like the best alternative since nobody is


having to give up anything in order to get something.
The only side effect of this method is inflation, which in
its own way is actually desirable to the government
because it raises the taxes without a fight and, since
government is the biggest debtor, it wins in that process
too. It gives devalued money to its creditors, the people.
In fact, the most prominent cause of inflation is the rapid
growth rate of money supply, far above the growth of
the economy.

HOW TO CURB INFLATION PERMANENTLY

Most of the policies outlined in this book are useful in


curbing inflation. Here are some important points:

1. Having a monetary policy with a steady growth rate


of money supply equal to or less than the previous years
average GNP. This alone would keep the inflation rate
fairly low. With the C-S tax system this will have very
small margin of error.

2. Reduce government spending to a minimum; let the


private sector take care of most or all of the products and
services needed in the economy.

3. Have an open market, local and international. Do not


have any kind of trade restraints, tariffs, or quotas, or
charge them only to the tune of what they are charging
us to export products to their country. With the FETA
countries the above should not be a problem at all.

4. Do not subsidize anything except education and


handicapped people. The higher prices would be a signal
to the producers to be more competitive or consumers
will find a substitute product, or use lesser quantities of

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higher-priced products.

In order to permanently curb inflation, the above four


points should be incorporated into the constitution so
that politicians would not have the power to create
problems for which somebody else has to pay.

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CHAPTER 12

PATENTS

Patent laws came about to protect the inventor's property


rights over his inventions. In other words, patent laws
(try to) guarantee that the inventor will be the only one
to have the legal right to either produce the invention or
sell the production of the invention in the form of a
license. Patent laws do not dictate that the invention has
to be produced by the inventor or if the inventor has sold
the patent to somebody else, even if it were for the
benefit of all mankind. Herein lies a big disadvantage in
the patent laws.

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There are many inventors that may not have the capital
to produce the product himself. The inventor may be too
proud to sell his invention, or if he sells it to some big
industrialist then he may be concerned that the
industrialist will buy his invention and never produce it,
because the new product may outdate all his existing
plants, equipment, and investment if this new product
came on the market. So even though the new product
may benefit the nation and mankind as a whole, it never
reaches the market.

Another characteristic of patent laws is that the inventor


can limit the supply of his product and make huge profit
margins for several years, because he has no competition
until his patent rights expire. Is that fair to the consumer?
No!

On the other hand, if there were no patent laws at all,


then many of the high-cost inventions (like satellites,
computers, and robotics) would probably not come about
easily, because big firms that have the capital resources
to develop these inventions would not undertake these
projects if they were not guaranteed property rights
under the patent laws. For example, would a farmer plant
and nourish fruit trees if anybody could come and pluck
the fruits away without compensating him for his time,
effort and investment? Naturally not!

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Unprotected property rights would lead to a drastic drop


in production, especially of new products. A much
smaller percentage of capital would be spent on
inventing new and expensive products because the
incentive would not be there.

So in one case, with the patent laws the consumer gets


stuck with the high cost of the product. In the other case
without patent laws the inventor may get stuck with the
high cost of research and development and not be able to
regain his investment and earn a decent rate of return,
because another firm can copy his product and produce
it for a fraction of the cost, not having spent the time and
money on the research. Here is the solution by which the
consumer as well as the inventor would benefit.

Patent laws should be made stricter to ensure the


property rights of the inventor. The patent office should
have the power to be the enforcer of the patent laws. The
revenue for enforcing patent laws would come from
three sources:

1. The fees collected for registering the patent.

2. Penalties collected from patent infringing firms. If a


firm infringes on the patent rights of another, there
should be a heavy penalty: (a) part of the penalty should
go to correcting the wrong that was done to the patent-
holding firm, and (b) the remainder should go to the
patent office as revenue. Think of it as a charge for
protecting the property rights of the patent holder. The
penalty to the infringing party should always be at least
enough to cover the above two expenses.

3. The Patent holder should be made to pay one percent


of his of his turnover on the sale of his patented product
to the patent office. Think of this as a license fee in
which the patent holder pays only if he is selling the
patented product.

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In order for the general public to benefit from the patent,


the patent holder can manufacture the product himself
but if any other firm wants to produce his patented
product then the patent holder must grant any and all
firms to produce the product under his patent license.
This would ensure that the product would come in the
market at a reasonable price. The patent holder should
get a fixed percentage of the gross sales from the
licensing of his

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patentholder (licensor) and the other firm wanting to


produce the product (licensee). The licensor could not
charge different percentages from different licensees for
the same product, as this would put the ones with the
higher licensing fee at a disadvantage to compete.
However, the licensor should have the right to reduce or
increase the fees to all of his licensees at the same time.
A maximum of 10% license fee on turnover of the
licensee sale of the patented product should be allowed.
The licensee would also pay one percent of his turnover
to the patent office since he is also benefiting from the
patent offices services.

This type of patent structure would encourage an


organization of government, with a potential of making
profits. It would provide a service to the small inventor
and to all patentholders, as well as a means of seeing that
the consumer gets the product at a competitive price.

The nation as a whole would also benefit, new, efficient


products would be allowed to come on the market easily.
It would also allow foreign inventors, who may not have
much opportunity in their own countries, to come here
and register the product, manufacture and market it.

Patent laws should be made stricter to ensure the


property rights of the inventor. The patent office should
have the power to be the enforcer of the patent laws.

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CHAPTER 13

DYING INDUSTRIES, UNEMPLOYMENT,

TARIFFS, AND SUBSIDIES

As mentioned earlier, nothing under this system should


be subsidized, except handicapped people and education.
So my answer to dying industries is to let them die a
natural death. It is just not fair to new growing industries
to be taxed heavier, so that a dying industry can be
subsidized to live longer. I believe industries have a life
cycle in an economy, just as a product has a life cycle in
an industry; when new products come, the older products
may lose their utility value to the consumer, so prices of
the less desirable product have to keep falling in order to
make it appealing. This can continue to the point where
consumers may not want to buy the product at any price
—the consumer may have to be paid in the form of a
bonus to get rid of the less desirable product. An
example, the producer of an undesirable product agrees
that he will give the purchaser a 25% discount if he buys
one of the old products for every new product he buys.
This he can do if he is manufacturing both the products,
but no manufacturer wants to subsidize another
manufacturer's products. So why should one industry be

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made to subsidize another industry's product?

PRODUCING JOBS IN DYING INDUSTRIES BY

TARIFFS AND SUBSIDIES

Taxing the new industry to subsidize an old one is


making the new industry grow at a slower pace, hence
creating new jobs at a slower pace at the cost of
maintaining the jobs of an old industry (or product),
which is losing its demand or is no longer competitive

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TARIFFS, AND SUBSIDIES

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with producers from other nations. This may sound


product. The exact percentage would be agreed upon by
the attractive to politicians interested in votes, in that
they look as if they are doing something humane.

The politicians would be doing a humane thing if the


following were true: 1. The consumer was not important
at all. 2. Jobs saved in the dying industry were far greater
than the jobs lost in the new industry. 3. We had a closed
economy to protect our jobs. Since none of these criteria
is true, the politician would be creating a much bigger
problem than the one he is trying to solve. Let's consider
the example of the horse-buggy industry since it is
completely dead in most countries and almost out in
most third-world nations too.

1. The consumer is the most important of all because he


represents all human beings, including the ones that may
be laid off from a dying industry. Is it fair that all
consumers be taxed at a higher rate so that the
government can use this money to keep a few hundred
people employed? In other words, would it be fair if
millions of consumers would have to send in some
money each month so that a few hundred or a few
thousand people could stay employed and produce
thousands of horse buggies that nobody wanted to buy?
Would it be fair that millions of consumers be taxed at a
higher rate so that the government could subsidize the
price of a horse buggy by half so that they could export
these horse buggies to some third-world nation that may
or may not need them?

Yes, the politicians have saved a few hundred jobs, but


at what cost? The same money that the consumers gave
up to employ people in the horse-buggy industry and
more money they gave up so that somebody else could
buy it for half of what it cost to produce could have been
used by the consumer to buy something that he could use
for himself, either to be more productive and earn a
higher income or something just for pleasure or as an
investment in his future. Spending money for products
and services one desires would create many more jobs
than the ones that were saved in the dying industry.

By taxing millions of consumers at a higher rate and


depriving them of their money, the politicians are
violating the consumers' property rights. It is the same as

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and giving it to somebody else. Suppose you lived in a


town with a population of 500 people and there were
only one government owned monopoly store that sold
everything to all the consumers of the town. On a typical
day 50 people go shopping. You buy products worth
Rs500, and some people buy products worth Rs10,000.
The store's policy is that, at the end of the day, they add
the total amount of products sold and send a bill to all
500 citizens depending on their income not on what they
have purchased. Do you think it is fair that you receive a
bill for Rs3000 for the Rs500 item you purchased while
another person receives a Rs 1000 bill for the Rs 10,000
worth of products he purchased, because his income is
lower?

The rationale here is that you are a hard-working citizen


and earn a higher income so you are forced to subsidize
the lower-income person. But the lower-income person

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now has no incentive to work harder and come up in life


because somebody else is paying his bill. On a much
larger scale this is how government subsidizes people
and industries: It takes money from a larger population
and gives to a few so they can lead easy lives thereby
reducing the incentive for them to work hard and come
up in life. And the person who is already working harder
will also feel cheated out of his income, he will also feel
why should I work hard if somebody else is going to
spend my money. So both parties loose and the
government also looses.

2. Are the jobs saved in the dying industry far greater


than the ones lost in the new industry because of the
subsidies? Going back to our example of horse buggies,
they can either be sold at half price to a third-world
nation or be stored in warehouses until they rot because
nobody wants to buy them at any price.

When they are sold at half price, it is like giving away


half of our taxpayers' money to the other nation. This
money could have been used by our consumers to buy
products or services provided by our own economy, or
foreign products and services. This in turn would have
employed more people in their economy. Even if our
consumers had bought products and services from
another economy, this would have had more people
employed in their economy. These employed people in
the foreign countrywould have money to buy products
and services from of their own economy or from us or

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DYING INDUSTRIES, UNEMPLOYMENT,


TARIFFS, AND SUBSIDIES

some other country and the employment cycle would


have remained stable in all the trading countries.

Since we undercut their market by supplying the horse


buggies at half price, the people in their horse-buggy
industries are unemployed. These unemployed now
spend less on buying products and services from their
economy as well as others and ours. This has triggered
the unemployment cycle in their economy as well as
ours and others. To sum it all up, by trying to save a few
jobs in a dying industry the politicians have lost a lot
more jobs in our economy as well as others.

Now let's see what happens if we decide not to spoil the


above explained employment cycle and instead just store
the buggies in the warehouse until they rot, because
nobody here wants to buy them and we don't want to
hurt the other economy by selling them the buggies at
half price. The people in their buggy industry will still be
employed and their money will still be spent to keep part
of our and other economies going. But this is even a
worse case than the previous ones because now our
consumers have paid taxes to keep a few of our people
employed in the buggy industry and the product they

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have produced will not even fetch half of its value!

The money for the whole cost of the buggy is lost


forever. Nobody in our economy or other economies will
ever get that money to spend again because it is locked
in the warehouse in the form of horse buggies to rot.
Since nobody has ever received the money from those
unsold horse buggies to spend, a lot of products and
services desired by the taxed consumers have remained
unsold. This creates a lot of unemployment in several
industries here and in other countries. The only small
positive gain is that money was used to employ a few
people to produce the horse buggy once and they would
buy some products and services, but that is only the
labour part of the value of the horse buggy that is being
recycled. The major part of the money is locked in the
warehouse to rot. (doesn't this sound similar to making
bombs, money wasted forever)

So here again, many more jobs have been lost than


saved. This same analogy can be applied to the modern
world when

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governments say they are creating a lot of jobs in the


defense industry when they make bombs, warplanes, and
ships. It is true they have created some jobs, and part of
the money that goes into the labour cost is re-circulated
in the economy but the major part which is the hardware
is become useless economically because the bombs are
stored away for a long time, or they can be used to
destroy life and property of other countries and they
would do the same to us. With bombs and weapon it is
money lost if you use it or not. Weapons cannot be used
for any productive purpose. This is the same as money
stashed away for nobody to use. No further employment
is created by spending money on bombs and weapons.

The warplanes and ships are even worse. They require


people, maintenance, and fuel until they are used. So
here we have the cost of people and fuel, in addition to
the money spent on the hardware, for unproductive
purposes. All the money and resources spent in the so-
called job-creating defense systems is money lost
forever.

This money could have been very easily used by the


consumers who worked hard in the first place to earn it,
to make life easier for themselves. Here again politicians
are wrong when they say they are creating jobs in the
defense system because with the same money a lot more
productive jobs could have been created in the private
sector. The politicians are not doing a humane deed by
saving a few jobs in the dying industries or creating new
jobs in the defense (destructive) industry, just so they
may look good to win votes in the future.

3. Let's analyze the "Protectionist Policies" that some


politicians like to use as a tool to protect jobs indying
industries in their nation. Protectionist policies call for a
closed economy but they would like to maximize
exports and minimize imports. Let's assume that you are
only exporting and not importing at all. Even under
these conditions you are losing by supporting dying
industries because you are producing products that are

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no longer in demand, or those products are being


produced by others at a cheaper cost.

With protectionist policies the politicians have taken


away

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TARIFFS, AND SUBSIDIES

from new, fast-growing industries whose products are in


demand by the rest of the world to produce something
that is not in demand or something we cannot be
competitive in. You cannot survive in business if you
continue to produce something that nobody wants or that
costs you twice as much. Eventually you'll have to stop
because you will be losing a lot more jobs in the new
industry than you are supporting in dying industries.
Here again politicians are not doing anything humane.

On the other hand, by letting the old industry die a


natural death, you would be giving that industry a signal

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not to hire any new workers. The layoffs that begin


would give a signal to the newer employees who are
younger and easier to train and change over to a growing
industry. And by the time the industry were completely
dead, most of the old employees would be ready to retire
and the younger ones would be trained in growing
industries. So the suffering from unemployment would
be reduced to a minimum.

In some cases it may be beneficial to kill a dying


industry so that resources may be directed to high-
growth industries faster, which could yield a much
higher return than dying ones. In such a case, the older
employees could retire early and be compensated
accordingly. The younger employees could also be
compensated and retrained to work in other growth
industries. This process would be less expensive than
trying to keep dying industries alive.

Tariffs or quotas on imports, to protect either an old or


new industry, have an effect on unemployment similar to
that of taxing or subsidizing. There are some additional
effects of tariffs:

1. If a country cannot export to you, it will not want to


import from you either. It would rather trade with
another country where there are no (or lesser) tariffs, to
keep the balance of payments straight.

2. By not trading freely, a country is not using its


comparative and absolute advantage to the fullest. This
in turn reduces its standard of living, compared to what it
could have achieved if it had complete free-trading
policies as explained under "International Trade and
Import-Export Policies."

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CHAPTER 14

EDUCATION

Should education be subsidized in one form or another


or not at all? To arrive at an answer, one must analyze
the concept of education and the relationship it has to an
individual and to the general economy.

Education helps an individual and a nation prosper


economically and socially. These two go hand in hand.
A better-educated person will be more productive and is
likely to prosper financially. A financially prosperous
person can have a better lifestyle for himself and his
family. This will keep them busy enjoying life, touring
places, purchasing better material things for family and
himself, this automatically translates to improvement in
the nations economy. A financially sound and satisfied
family is less likely to join in demonstration and riots to
demand more from the government. So as more families
are prosperous there is more social harmony. Studies
show that on an average a college graduate earns 50% or
more in his lifetime than a high school student who
doesn't study further. The other social benefit is that the

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individual can be a happier person if he feels he is useful


and productive to society's needs, which translates to the
larger population being productive and useful. This is the
best means of achieving social rest and peace in a nation.

The difficult part about education is that it is such a long-


term and expensive investment that, if not subsidized, it
would be out of reach of a majority of the population in
India. Or the same level of education would be achieved
over a much longer period of time. For example, if today
an average subsidized student gets a degree at the age of
25, without any subsidy it would be at age 35 to 40.
Because the student would have to pay a very high fee
for his education, he would have to work while going to
college and very slowly gain his education.

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Take the example of two students who are the same age,
studying in the same field, pursuing the same career, and
are paid according to the level of their education
throughout the first 40 years of their lives. Their incomes
will vary depending on their job performance and which
company they worked for. But generally it would start at
a higher level than the student without the college
degree. Suppose each went a difference route in life. One
of them, Student A, got a loan for the amount of money
it would take him to get a degree without working and
used all his time and resources to get his degree within 4
years. He then started working, perhaps, by the age of
20. Now he has 20 straight years to work and pay off the
loan. Student B decided to start a full time job and study
part time throughout his 24 years. He did not get a loan
and he worked straight after high school and earned an
income for 24 years. But since he was paid according to
his level of education, he was paid a lower salary than
student A throughout his 20 years. Suppose he graduates
after 10 years. Assuming a zero percent inflation,
Student A could be much further ahead financially, i.e.,
earn more money than Student B.

Student A has a higher income from the age of 20, and it


will now take him approximately five years to pay off
the loan, if he spends only on the necessities of life.
After that, he can either save a major part of his income
or consume it for necessities and luxuries. Higher
savings is a benefit for the economy; higher
consumption is also a benefit, as well as a source of tax
to further the economy. Therefore, some of this extra tax
that a higher educated and more productive individual
would give to the economy should be used to subsidized
schools. When the general population has a higher level
of education it will be more productive and stable.

HOW DO YOU SUBSIDIZE EDUCATION?

The best form of indirect subsidy that can be provided to


the consumer is to have a competitive free market in the

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education system. Let the schools and colleges be run


as profit-making business organizations and not be
taxed at all. This will encourage more businesses to
enter the education system. With competition among
the education providing businesses there will be
better facilities and better staff for the students.
Along with better education, competition will keep
the cost to the student lower.

The words "schools" and "education system" used here


mean the same thing; they include elementary,
intermediate, high, colleges, polytechnics, trade,
business, arts, and any other type of education that a
society offers. The words "teacher," "professor," and
"instructor" are used interchangeably.

When you have competition between schools, the cost of


providing education will be relatively lower, depending
on the supply of and demand for it. The quality will
improve, as schools will want to build a good reputation
in order to attract more students. Undesirable and
inefficient schools would either shut down or be bought
out by the better school companies.

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One form of subsidy would be for the government to


pay a bonus of 50% on the instructor's base salary if the
following conditions are met: Students should be
allowed to select their own teachers with whom they
would like to enroll with. There must be a certain
number of enrolled students who complete the course
with a certain standard of grade. The exams would be set
and evaluated by different instructors to avoid partiality.
The instructor should have the required qualifications
and teaching experience in order to get the 50% bonus.
The instructor should be current in his continuing
education so that his knowledge and teaching skills are
updated regularly.

All of the above standards and criteria would be set by


the Education Board which would consist of retired as
well as active professors who would have a minimum of
about 20 years of teaching experience. The members of
the Education Board would serve voluntarily (no salary)
for a maximum period of five years. This would ensure a
turnover of board members so that the decision-making
process would not be biased and would be constantly

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EDUCATION

rejuvenated. In order to maintain continuity in the


decision making process, 20% of the board members
who had served their five year term would be on their
way out and each year the board would have
approximately 20% new members. With this process you
would have a corruption-free Education Board that
would work in the true interest of the society.

By directly subsidizing the instructors' salaries through


the government bonus program, schools would be able to
attract good professional teachers who would otherwise
have worked in another industry to earn a higher salary.
Instructors who were not good enough to qualify for the
government bonus program would move on to other
professions. Schools would hire only the finest teachers
in order to keep up their reputations and to minimize
their costs (good instructors would get bonuses, so
schools would not have to pay them less out of their
pockets. This would bring their costs down and with
competition they would have to pass the lower cost to
the students). New, inexperienced teachers would have
to work harder to build their own reputations in order to
get enough students enrolled to qualify for the bonus.

Let the students decide which teachers class they want to


be in.Logic dictates that all students would want to sign
up for the better instructor's class. I recommend the
Education Board set a limit on the number of students
that a qualified instructor on bonus can enroll. Students
with higher grades should be given enrollment
preference. This would give students an incentive to
study harder and get better grades. This process would
ensure that the new teachers have some students
enrolling for their classes to build their experience and
reputation.

Professional teachers who have confidence in becoming


successful would take the trouble to go through the
initial hardships to qualify for the bonuses and make
decent futures for themselves, just as doctors have to
work hard through college and work long hours through

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their internship programs for very low or no pay, but


once all of that is completed their futures are bright, in
most cases, and brighter for some doctors who specialize
and reach the top.

In order to keep the really good instructors in the


education system, government should give them
incremental subsidies

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of 50%, 75% and 100% bonuses. For example, if an


instructor has qualified for five years on the 50% bonus
program, then he should be moved up to the 75% bonus
program. After five years at the 75% level, he should be
increased to the 100% bonus level. To safeguard the
bonus subsidy to the instructor, there should be a law
that that school cannot reduce the base salary of the
instructor once he starts qualifying for the bonus
program. The base salary may be kept the same or
increased, if market conditions demand it. For example,
if an instructor has a base salary of Rs20,000 per month
when he starts off, once he qualifies for the 50% bonus
program his salary would be Rs30,000 per month.
Eventually this instructor would have the opportunity of
making a total of Rs40,000 a month on the 100% bonus
scheme even if his base salary were never increased.

Since the school system would be run on a free-market


competitive basis, as demand for the instructors
increases, other schools would be willing to pay a higher
base salary to attract good instructors. Schools that have
good instructors would increase the base salary of these
instructors to make it attractive enough for them to stay.
When the supply of education catches up with the
demand and as the demand for instructors decreases, the
new instructors entering the system would be offered a
lower base salary; this would be a signal to the new
instructors and the not-so-good ones already in the
teaching system to look for jobs elsewhere in other
industries. By this process the best professional teachers
would remain in the education system and an abundant
supply of education would ensure lower cost and better
quality to the students.

Subsidizing the student directly by giving him grants or


vouchers so that he can use the grant money or vouchers
to pay for his fees is not very fair or equitable because
not every student has equal access to that money,
verification of income can be a problem and it leaves
scope for corruption with the officers who deliver these
grants. It's true that the lower-income people need such
grants more than other. But just providing money for the
lower-income people does not mean that the real needy
will get the maximum advantage of the funds made
available from the taxpayers money.

There will always be a lot more students than teachers.

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Subsidizing the students means a lot more paperwork, so


you need more people to run this kind of subsidy and it
becomes less cost effective because a lot of money is
drained for the administration and processing of a
student subsidy. Also, the students receiving the subsidy
do not really appreciate it since it is free of cost to them
therefore students will waste public money. They will
take classes, which are enjoyable and easy because
somebody else is paying for it. It is not fair that hard-
earned taxpayers' money be used to pay for students who
do not make the best use of it.

A better way of subsidizing the lower-income student is


to encourage the schools and colleges enroll 50% of
students on loan tuition fees basis to the promising lower-
income students. The student would never receive any
cash in hand; the loan from the school/college would be
used directly to pay his fees. Upon graduation these
students would be given a conditional degree of

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completion. When these students pay off their tuition


fees with interest, then they would be awarded the
degree. Since it would be a loan the schools would have
the right to attach the wages of the student until his loan
is paid off. With this process only those lower-income
students who are serious about getting an education
would qualify for and receive such loans from schools.

This method of subsidizing education would be fair and


equitable. Everybody would have equal access to it. It
would subsidize education for every individual,
regardless of his financial status. It would provide an
opportunity for lower-income people to educate
themselves and come up in life if they choose to do so.
Since it would not be just a handout to the lower-income
people, they would learn to appreciate it and feel proud
of their accomplishments.

Education is the basis for the advancement, economic


well-being, and stability of a society. The higher the
general level of education in a society, the better off
everybody will be. Considering all the advantages of
education, high school teachers and college professors
should be given the opportunity to earn incomes similar
to those of doctors, lawyers, and engineers, so that the
best teachers would have an incentive to enter and stay
in the educational system.

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HANDICAPPED

It is a moral issue whether we should subsidize the


handicapped. People do not choose to be handicapped. I
believe that the fortunate people should help the
handicapped because it could happen to anyone at any
time. We just have to be careful that only the truly poor
handicapped who are in need receive the help and that
the rich and not-so-handicapped do not take advantage
of this subsidy.

Let's first define a "truly handicapped person in need of


the subsidy". First he would have to prove he is poor and
needs the money for survival. A rich handicapped
person could not get this subsidy. 2. It would have to be
certified by a doctor that he cannot perform any kind of
work to make a living. 3.He would not have any kind of
insurance or family or savings that can pay for his food
and shelter and medical expense while he is unable to
work. The doctor would also certify whether the person
is temporarily or permanently handicapped and also
state the approximate duration the handicap will last. If
the handicapped person became able to work, his
subsidy would stop and he would go back to work and
support himself. (Optional) Maybe a temporary
handicapped person should be made to pay back the
money he received, after he goes back to a job.

HOW TO YOU SUBSIDIZE THE

TEMPORARILY HANDICAPPED?

Strictly from an economic point of view, subsidizing the


handicapped is not justifiable because money spent on
them would probably never be paid back. But some
things just need to be done for fellow human beings and
require no financial justification. Money should not just
be handed to the handicapped so they can live a better
lifestyle than the fortunate, hard-working people who

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are paying for it. Helping the handicapped is one thing;


supporting grand lifestyles at other people's expense is
not fair.

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Here is a method whereby we can get most of the money


spent on temporarily handicapped (T.H.) to be paid back.
The T.H. would be given a credit card which could be
used for medical purposes only, and he could withdraw a
certain amount of cash per day to pay for his food,
traveling, etc. All the money that the T.H. person spends
would be charged to his credit card. When the T.H.
person recovered and went back to any kind of work, he
should be made to pay back the full amount plus the
normal market interest rate on an affordable monthly
basis. This would deter T.H. people from overspending
on their credit cards since they would have to pay it all
back with interest. These credit cards would be taken
away once they start on a job.

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HOW DO YOU SUBSIDIZE THE

PERMANENTLY HANDICAPPED?

First each permanently handicapped (P.H.) person


should qualify for the subsidy on the financial need
basis. Since each P.H. person would require different
kinds of medical treatment, the cost would be different
for each person. The government would pay all the
medical bills, to the doctors, hospitals and drug stores
directly. Each P.H. person would be paid a certain
amount for clothing food and rent and other normal
living expenses. The government should encourage
private organizations to set up facilities to take care of P.
H. persons. The government would get three to five bids
from these organizations to set up facilities to take care
of P.H. persons. The government would then grant the
responsibility to the most attractive bid. The government
could check to make sure that certain standards were
kept by these organizations. If the handicapped person
were not satisfied with the care given, then he could ask
the government to pay him that amount directly. He
could then go and live anywhere he wanted.

The organizations should bid high enough to keep the P.


H. persons satisfied, yet if they bid too high, they could
lose the business to a lower bidder. If the lowest bidder
is also too high, then the P.H.

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person would be tempted to get paid directly and live in


a small private nursing center and still save money.
Since the organizations would have to meet certain
standards, they would not bid too low and lose money.
So by this competitive process the price and service for
the handicapped would be reasonably fair.

WHERE WILL THE SUBSIDY MONEY COME


FROM?

Since the temporarily handicapped would be made to


pay back the full amount with interest, this would help
to reduce the cost to the public. The interest payments
should be able to cover the administration cost and bad
debts. Small amounts of money would have to be
pumped in to keep the temporarily handicapped subsidy
afloat. The PH money could come in from the C-S tax .

The major expense of subsidizing education and the


permanently handicapped could come from several
sources:

1. When money is received by the C-S Tax agency, a


certain amount should be set aside for the subsidy before
reimbursing the city, country, state, and central
governments. But this would be a temporary solution,
because within a decade when the C-S Tax is eradicated,
this source would be cut off. An amendment could be
made at that time to continue to charge 25% C-S Tax on
imported items and all luxury items only. This money
could be used for the subsidy.

2. An alternative would be to charge a flat amount to


every individual between the ages of 30 to 60 (except
the handicapped). This would be like an insurance that
anyone, regardless of age, would be taken care of if they
were to become permanently handicapped. Also,
everyone would have access to subsidized education to

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further their goals. This alternative could work but it


wouldn't be very cost effective, because a very small
amount would have to be collected from a large
population on a frequent basis. Therefore, the
administration cost would be very high in relation to the
money collected.

3. The efficient and effective alternative would be to use


the increase in money supply each year directly for
subsidizing education and the handicapped. Part of the
increase in the money supply

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EDUCATION

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could go toward the cost of providing the road system.


As mentioned in the section "How to Curb Inflation
Permanently," the money supply would be equal to or
less than the previous year's GNP. This new money
printed each year would be spread over several interest-
bearing accounts and spent as needed for the subsidy. So
in this case nobody would be directly paying for the
subsidy. Indirectly, the expansion of the economy would
be absorbing the cost.

What better way to use the increase of money supply


than for subsidizing education and the handicapped? If
there were any excess money left over from the money
supply (after providing for handicapped, education the
road system), it should be reinvested so that there would
be enough money in the years when the economy grew
at a slower pace. The economy would grow at a rapid
but fairly stable pace if all of the policies recommended
herein were simultaneously implemented. If not all at
least the first 4 chapters should be implemented.

BRICKS

This topic I have included here because in most parts of


India bricks are made from the top soil. This is a big
waste of our precious resource which cannot be replaced
easily. We have to stop wasting this resource
immediately by banning bricks to made from the top
soil. Only sand, crushed stone, and cement bricks should
be allowed. These materials are naturally available all
over India and there is no big environmental damage by
using these materials. Infact big ponds can be created in
places where they are removing rocks from the ground.
Hills and mountains should not be allowed to be used for
this purpose. Sand is used from river beds or sea or from
the desert. This is a good effect because it will make the
rivers and sea a little deeper and big ponds can be
created in the desert for water storage. Some kind of
subsidy should be given to the manufacturers who make
bricks from sand and cement.

136

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SAMPLE LETTER

FOR YOUR CONVENIENCE, HERE IS A


LETTER

THAT YOU COULD USE AS A MODEL FOR


THE ONE YOU SEND TO THE MP WHO
REPRESENTS YOU.

Dear MP :

I have read Changes Needed in Economic Policies and I


agree with most [or] all of the policies recommended in
the book.

I am enclosing an Order Form for the book. Please take


the time to read the book. I would re-elect you if you
would start introducing the policies before the next
elections. If no action is taken by you I will consider
that you do not agree with my position on these
policies, in which case I will have to vote for someone
who does.

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Thank You,

Sincerely.

Citizen of India

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To order your copy of Changes Needed in Economic Policies, fill


out and mail this coupon to:

Freedom Publishers

Freedom Farms

Dahanu 401602

Please include a Demand Draft or ICICI or HDFC check for

Rs. 100 per book, payable to "Freedom Publishers" Mumbai

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clearing.

Please write clearly in bold letters.

Please send____ copies of Changes Needed in Economic Policies


to:

Name ___________________________________________

Adress________________________________________________

City __________________ State ____________________

Pin _____________

ICICI or HDFC Check or demand draft from any bank for

Rs ________________ is enclosed.

Please pass a copy of this page to your friends who would like
to order this book. or tell them to visit our websites at

www.ffit.in

or

www.freedompublishers.com

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Taxing people in the civilized world has been the oldest


and easiest way of operating the government system.
The Egyptian pharaohs did it, the Romans did it,
medieval kings did it, and today practically the whole
world is doing it. Throughout the centuries, taxes have
always been collected by force and threats; taxing
income or production has always led to slowdown in
economic growth, an underground economy, corruption,
and eventually a collapse in the whole system. Are we
moving in the same direction?

Changes Needed in Economic Policies, by Economist


Firdos J. Mubaraki, explains in very simple language
how and why the intrusive taxes such as Income, Excise,
Sales, Octroi, Vat should be abolished immidiately and
initially replaced with one simple non-intrusive
Consumer-Service Tax. By implementing all the other
policies explained in this book, the government can
within a decade raise enough revenues from our joint
public resources to be able to run our country by
collecting almost no taxes from us. The book also
explains how to eradicate corruption, balance the
budget, pay off the national debt, curb inflation
permanently, and best of all attain true and lasting
peace with all countries.

You can make a difference in the economic policies that

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govern and control our lives.After reading this book, all


you have to do is write the sample letter drafted in this
book to your MP and tell all your friends and relatives
to read this book and they should do the same and this
process should carry on till we get the policies in this
book implemented.

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