This is a loss that a desperately poor country like India can ill afford. Air India, the public sector airline lost close to Rs 5600 crores (nearly US$ 1.2 billion) in the fiscal year 2008-9. It incurred that loss while serving 10.8 million passengers during that period. That translates into around $100 per ticket. Assuming that on average an Air India (AI) traveler took two flights on AI over the year, AI lost $200 per unique traveler.

Let’s put $200 in perspective. An estimated 500 million Indians live on less than $1 a day, or $365 a year. So roughly 300 million live on less than $200 a year – which is the amount the government subsidized the airline for each of the 5 million or so unique passenger it carried. I do this exercise to note that $200 is not a trivial amount in the Indian context.

It makes absolutely no sense for a government of a desperately poor country to run an airline in the first place. There are more urgent and higher priority tasks that the government should be addressing  –  which it is unable to competently do. Yet the government needlessly takes on a task that the private sector in India is capable of doing quite well. Then it botches it up so badly that it cost the Indian taxpayer $1.2 billion in 2008-9. The losses have doubled each year for the last three years, giving a cumulative loss of over $2 billion. The airline is managed so poorly – what else is new—that it has to depend on nearly $4 billion in high interest loans for operating.

It is a grotesquely absurd situation – the government of India runs an airline that does not add a penny to the public purse but instead costs the country billions of dollars. Why it does so is not too hard to understand: the politicians and bureaucrats have their own private airline but they don’t have to pay for it. Ownership for free, no accountability for mismanagement of the airlines, and total control over its operations leads predictably to the dismal situation.

Perhaps this is in keeping with the pathological dread of profits that socialism is founded on. Socialism leads to immense waste of human and other resources, which carried out over decades, leads to extreme dehumanizing poverty of the people. That dehumanizing poverty of the population is good for the leaders of socialistic economies. Poverty makes the population malleable and the leaders can then milk the system to enrich themselves by the billions.

It is easy for any reasonably informed lay person of average intelligence to be persuaded that the government should not be in the business of running businesses, or that loss making public sector enterprises should either but shut down or sold off to the private sector. It makes sense to do so because the drain on the economy cripples it. This argument does not pose the barrier to comprehension as say would the theory of quantum electrodynamics. So why don’t the leaders of third world countries understand it?

They say that a person cannot understand an argument if his livelihood depends on his not comprehending it. All arguments about why the government should not be in business is futile because the people in the government depend on the government being in business for them to rake in the billions. The prosperity of the leaders is bought at the cost of the dehumanizing poverty of the people.

It would not be worth being a leader of desperately poor country otherwise. One rules over an impoverished people to make the billions – and this leads to more poverty. The poor masses then are easily manipulated and the leaders make even more money. Check the news on any day of the week and you will be informed of yet another minister making a billion or so during his or her tenure in the government of a poor state.

I am reminded of what Lee Kuan Yew said the other day. He was talking about his government and said, “Singapore became rich; we did not become rich.” The equivalent statement by an Indian politician would be, “We became obscenely rich; India sank deeper into dire poverty.”

Which brings me to the old story: If your leaders because obscenely rich and do so by sucking the lifeblood of its people, you might be a third world country.

[A previous post related to Air India is Thundering Airlines. There I note the stupidity of changing the name “Indian Airlines” to “Indian” and then changing the name once again. Also see Air Indian, a post about the number of seats on Air India (22,000) and the number of employees (35,000.)