Poverty has been the natural state of mankind for tens of thousands of years. It is prosperity that is abnormal. In fact, the elimination of poverty requires mastery of a rather challenging science that is more counter-intuitive than quantum mechanics. It is called economics. It officially began with Adam Smith’s 1776 tome, The Wealth of Nations, in which he studied in great detail the reasons why some nations become wealthy. Most of his findings have been confirmed over the past 250 years.

Only those nations whose leaders have a deep understanding of economics, governance, trade, incentives and prices can become prosperous. All others nations, such as India today, are destined to remain in a primitive state of nature.

Good economic policy makes a huge difference. In many ways, the poorest Americans and Australians live far better lives than the richest Indians. Morarji Desai was stunned when he first visited abroad, in 1958. He found that capitalist societies were not only much more prosperous than socialist India, they were also socially equitable. He remarked to Welles Hangen, an American journalist, after his trip, that “In your country the manager and the worker sit together without any embarrassment. Many times the worker’s clothes are as good as his boss’s and the car he drives to work is also as good”. Thus, in Australia, a plumber or technician often earns more than a senior manager in the private sector.

Wealth is, at its core, about productivity. The plumber in the West makes use of extraordinarily sophisticated machines to work far more productively than his socialist Indian counterpart. It is these machines (and the skill to use these machines) which explain the productivity of labour in the West, and it is the free market that explains the existence of such machines and the constant flow of innovation. Sadly, socialist India doesn’t have a single company that can make a decent knife, leave alone sophisticated machines for plumbers.

The trends of the past 300 years since the industrial revolution are clear: it was the advancement of liberty and capitalism – in the West first, then in Japan and the Asian Tigers (Hong Kong, Singapore, South Korea and Taiwan) – that explains the creation of wealth. That some of these nations were imperial powers for a while was actually detrimental to their progress. In any case, the plight of India today is definitely not due to British “exploitation”. It is entirely self-made.

Economics shows us that prosperity requires a highly skilled and well-educated workforce, efficient and non-corrupt governance institutions that provide public goods, independent non-corrupt judiciary, impartial world-class legal system, strict rule of law, secure property rights, low taxes, sound money, free markets, free trade and limited government.

The only reason India’s poverty has reduced somewhat in the recent decades is because the 1991 liberalisation released some sectors from bondage to Minsters and bureaucrats. The success of liberalisation (such as mobile phones) confirms that India’s poverty is entirely self-made.

Liberalism succeeds because it allows the free flow of critical information. A freely moving price system allows intense competition and specialisation to develop based on comparative advantage. Crucially, free trade allows relevant technologies to be imported so that labour can be upskilled and made more productive.

The story of the garment production industry is a case in point. It has moved over the past 60 years from the West to the Asian Tigers, to China, India, Bangladesh and Vietnam. In each case, investors brought the best available machines and hired local labour which was then upskilled and made more productive. As the labour became more productive, its wages rose and investors then moved to another lower-cost labour country. It was this ability to invest freely that led to the creation of jobs for the poor and then led to the elimination of poverty. Once wages rise in Bangladesh and Vietnam, the garment industry will move to even poorer countries.

India’s passion for the socialist ideology has badly one sector in particular: the farm sector. Farmers are continuously held back by a regime that restricts their freedom of action through restrictions on access to technology, bans on exports and through restrictions on the movement, storage and processing of agricultural commodities. Coercively low agricultural prices (often irrationally volatile) have impoverished farmers, resulting in rural poverty, indebtedness and unemployment. While food security is a major issue for India, shackling farmers – that socialists specialise in – is not the solution.

Education is another major area ripe for reform in India – by the government getting out of the sector (except for funding the poor). In particular, we need to imbibe key elements of the Swiss Dual VET model which yields significant leadership to the private sector. Without massive upskilling of the poor, led by the private sector, there is simply no hope of increasing job prospects in the unorganised sector.

Sadly, the socialist governments of India, such as the Modi government, insist on acting as a barrier, not promoter of enterprise and education. Liberal policies will eliminate all such barriers and also ensure an effective governance system where timely justice is a key focus and commercial contracts are efficiently enforced.

It is the combination of strong but limited government and a massive increase in free enterprise, that will create opportunities for the poor in the unorganised sector of India. As Gandhi said, ‘All the help that the poor need is that the world get off their backs’. Let’s do that.

There will necessarily remain a few who suffer from infirmities, physical, psychological or cultural, and require support – despite the best efforts to create opportunity. For such people we don’t need cosmetic “programmes” that merely divert taxpayer money to bureaucrats and politicians, or create useless assets like the toilets under Swachh Bharat programme that no one uses. We need to directly eliminate dire poverty. The liberal policy of Swarna Bharat Party will directly provide a top-up income transfer to those below the poverty line to ensure that no one starves.

Socialism always exacerbates poverty and creates injustice. It is not at all surprising that hundreds of millions of people in India continue to be desperately poor. It is time for India to uproot socialism and adopt liberalism, the only system that is proven to dramatically improve opportunities for the poor.