India’s $35 Tablet Computer

Source: AP

So now you can get a $35 tablet computer? At first glance, this sounds awesome. But could this be awesome like government wifi, where the government subsidizes costs and makes it so cheap (or free) that the “free market” can’t help but get it, and the government attaches conditions and controls with the item?

$35 for a tablet seems a little bit too cheap. It’s like buying manufactured Cola for $.88 per 2-liter bottle when real, natural, unadulterated orange juice is $4.99 for the same amount. How can they make it so cheap? The answer is this – government subsidizing.

Why Subsidize?

Why does a government subsidize? To control markets. Market control can be for multiple reasons but mainly it’s because they have some vested interest in the outcome. For example, maybe you are a manufacturer with a corn syrup manufacturing plant. You know that you will have a tough time overcoming the population’s habit of using sugar. So rather than spending tens of millions of dollars in marketing to fight the tide, you donate $3 million to some government official’s campaign or their party, give some sales pitches pertaining to how your product is healthier than the other one, and then they make laws to channel money back to you to offset the high cost of your product. With this money they give you, you lower your selling cost, thus creating a “no-brainer” for the consumer. They see that your corn-syrup product is one-third the cost of the sugar product and so they buy your product. Your sales increase, you gladly pay more taxes to continue the profits, the political candidates keep their power, the consumer thinks they got a deal, and everyone is happy… for today.

In the long run the consumer loses because they realize that the whole thing was paid for by their tax dollars. So in the end, the manufacturer has secretly stolen your money through bribery and politician’s abuse of power. The politician has taken some of the manufacture’s money as payment to facilitate lying to you to take your money. Basically, you have 2 giants against 1 grasshopper.

What a tricky cycle.

Real Cost

So here we have the Indian government creating products. These products are so cheap that even a child could afford one with their weekly allowance. You have to wonder how they can do something so cheap that someone in the free market can’t compete with. Could it be subsidized by tax dollars (or rupees)? Could it be an artificially low price for some secret reason? Who gains when the government launches a cheap product? What is in it for the Indian government?

Remember, cost is not just money. Cost is what you give up to get something. Are buyers giving up rights to privacy? Are they just paying more tax to achieve this? I’d like to hear the whole story on this one. What are the real costs?