ARTICLES : Gandhian view on Economics

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Gandhian Economy and The Way to Realize It

By J. C. Kumarappa

If there is anything that characterizes Gandhiji’s life, it is his devotion to Truth and Non-violence. Any economy that is associated with his name should, therefore, answer to these fundamental principles. At the present time, the world is steeped in violence and false propaganda, and it is Gandhiji alone who stands beckoning the world, to these eternal principles and to the economy based on them which will be permanent and will lead to the peace and happiness of mankind.

The Natural Economy

The natural economy calls for the satisfaction of the demands made by the primary needs of our body and by the requirements to keep it in good working condition. As long as we satisfy our needs in this way without infringing on the rights of others, there is no occasion for violence.

The Artificial Economy

The ordinarily understood economic organization of the West believes in a multiplicity of wants. It creates the supply, and then creates a demand for it, and thus strives to dispose of its production. It therefore means cultivating a great many artificial desires. Such an economic organization produces goods without reference to the demand. A shoe factory, for instance, will work to its full capacity irrespective of the market it is intended for as it is working in competition with other similar units, and when it has produced its full quota of goods, then it seeks to dispose of these goods elsewhere. Italy may be producing, we may say for the sake of illustration, a million pairs of shoes and if these cannot be disposed of within the country itself, then she has got to find markets outside. She sees in Abyssinia, where people go bare-footed, an opportunity to “civilize” them and fit them with up-to-date shoes, and thus create a market for their own goods. To control other people’s lives in this manner, it requires political power; and to obtain such power, it is necessary to resort to violence.
In the same manner, Japan when she industrialized herself in the beginning of this century began to push her goods in various countries. But she found as days went on that it was not possible to control her markets satisfactorily without direct political power. That then is the reason for Japan desiring to control China. When we buy foreign goods – especially goods other than luxuries – it will call for violence at one stage or another. Japan also came to India and sold her flimsy articles at cheap prices and captured a big section of her market. Now, after nearly half a century, Japan feels the necessity of having direct control over all her markets.

Foreign Domination

Thus, buying of foreign goods is a definite invitation to or a bait for foreigners to occupy our country. Therefore we, who want to be left alone, should reduce the demand for foreign articles. We cannot, on the one hand, extend an invitation to these countries to come to us by demanding their goods, and on the other hand, try to drive them out with machine guns and atom bombs. Where the carcass is, there will the vultures be also. The best way to get rid of the vultures is to bury the carcass, and this carcass is our foreign trade in necessities. Such foreign trade as we might have should always be in surpluses. When foreign trade is restricted to the surplus, it need not lead ultimately to violence, because both the parties to the transactions are exchanging goods which they do not need for themselves; and this exchange leads to mutual profit; and where there is complete satisfaction on both sides there is no occasion for violence.

Untruth in Business

This creation of a demand to take up the existing supply is generally done by intensive propaganda in the form of advertisement advocating the use of such stock. Therefore, such advertisements often infringe the borders of Truth and lead to false advertisements and over-statements and propaganda being based on falsehoods is objectionable.

Development of Personality

Our life does not consist in the multitude of things we possess. Our life is something higher than material possessions, and our life is also to be looked at from the possibilities of development of our personality. The personality of an individual does not require for its development the satisfaction of a multiplicity of wants. In fact, the simpler the life the more conducive it is for exercising the higher faculties. The phrase “to plan for the future of our country” commonly used by people to denote the betterment of the life of the people, is often misleading. They also talk, constantly, of “raising the standard of living”. In a country like ours, where people live on the margin of subsistence, any such raising of the standard of living must refer to the satisfaction of the primary needs, and not the acquisition of new habits. The term “high standard of living” is often made use of to connote a life led with a desire to satisfy multiplicity of wants, and it has no reference to the qualitative condition of life. It refers to the quantitative aspect of one’s existence. Therefore, the more accurate way of describing this position would be to talk of a “complex life” and a “simple life” rather than a “high” and a “low” standard. Simply because a British Tommy requires a hundred and one things for his apparel, food, drinks, smokes, etc., it does not mean his standard of living is “high” as compared to the life of say a person like Gandhiji. We may say that Gandhiji is a “high” standard of living while referring to the quality of life he leads and a “simple” life referring to his material wants; while that of a British Tommy would be a “low” standard of life qualitatively and a “complex” standard quantitatively. Hence, what we want to give our people is a high standard of life which will be simple. A great many possessions of material wealth will choke human life with the cares and worries attached to them. With such possessions and encumbrances, man is not free to think his higher thoughts and to develop freely, and hence a complex standard is like shackles to a man. It cramps his higher self from free development.

The Purpose

What the Gandhian Economy aims at is to furnish all our people with their full requirement of food, clothing, hygiene, etc. These are our primary needs and it is not beyond our capacity to meet them if we will only concentrate our efforts in this direction. Over and above these, if we aspire for luxuries and indulgences, man’s life becomes wasted in the effort to acquire such things. Therefore, if any planning is to be done for our country, it should be with definite reference to an emphasis on our subsistence, such as food grains, vegetables, fruits, growing of cotton, and obtaining building materials for simple dwellings.

Distribution of Wealth

This must be done in a form in which it will distribute wealth, and will work in a satisfactory manner. Our problem is to give employment to 400 millions of people in such a way that everyone would get his own primary needs satisfied. That means, our method of work has to be such which will distribute wealth in the process of producing wealth. Distribution and production if they do not go together or take place simultaneously, often lead to accumulation of wealth on the one side, and poverty and misery on the other.

The Method

In our country there is a dearth of capital; while there is an inexhaustible source of human labour. Material wealth can be produced in two ways: One is by using capital instruments of production with very little labour, and the other is a minimum of capital instruments with the maximum labour. In the conditions that prevail in our country, therefore, the latter method is more suitable. People have not the capital to obtain instruments of production standardized and centralized industries. But we have unlimited labour power waiting to be used. In America and England, the methods of production that they have evolved, have a direct reference to the means of production that were available to them. There the labour force was meager, while capital was in plenty; while the opposite is true of our country at present. Hence to apply the methods that will fit into the set of conditions which obtained in the West to our country now, where another set of conditions prevails, would be a folly.

Real Values

The wealth of our country cannot be measured by the number of millionaires the country possesses. The country’s well being is dependent on the happiness of the largest number of people, which means on the capacity of the largest number to satisfy their needs. In our country, therefore, it is not the accumulation of wealth, but the distribution of wealth as evenly as possible, that is to be desired. Even without any production it is possible to increase wealth by merely adjusting the distribution of wealth. For instance, a rupee in the hands of a labourer may represent the means of satisfying his hunger and the wants of his family for a whole day; while the same amount in the hands of a rich man may represent the cost of a chhota-peg, a cigar or just a tip to a taxi-driver. Therefore, when we take a rupee from a poor man and pass it on to a rich man, we are reducing the human value of satisfaction that amount can give; whilst the reverse process where the value of a cigar is made to satisfy the hunger of a family for a whole day increases its human value. The satisfaction of human wants in this case has increased the value of the rupee. In the same manner, even our governmental expenses should be so planned that the taxes that are collected from the poor people should not be used to benefit the rich; but the wealth should flow from the rich to the poor. This, in itself, will enrich the national wealth of the country even though there may be no extra production.

Trade Cycles

When we take to centralized methods of production, we have to sink a great deal of capital in the instruments of production. This capital represents wealth restrained from freely circulating in the country. Just as we put a dam across a river to accumulate water in a reservoir, in the same way the current of wealth has to be restricted so that it may accumulate capital. In so far as capital is a result of restricted distribution, it is an evil in itself. Periodically we have economic depressions and booms. These are caused largely because of such restrictions in distribution. A mill-owner who produces Rs. 10,000 worth of goods would pay in the form of wages and salaries about Rs. 3,000. That is, in other words, he puts into circulation Rs. 3000 while the stock of goods available in the market is increased by Rs. 10,000 worth. Naturally, therefore, there is not sufficient purchasing power to enable the public to take up all the production. When this state of affairs becomes common, it leaves a residue of production from every mill which does not get into the hands of the consumers. When such unsold goods accumulate, we have a period of depression and to liquidate this depression it becomes necessary to have a war.

War as an Economic Factor

These periodical business cycles are relieved from time to time by wars between nations. Wars, therefore, have become a part and parcel of the Western economic organization based on centralized production. A producer should aim at setting in circulation as large a purchasing power as is required to absorb his production, if he desires his goods to be taken up by the consumers. This can only be done when production is mainly based on the cost of materials and the wages. But when a large proportion of the cost of production goes into interest on capital and replacement of heavy instruments of production, immediately it restricts the distribution of wealth. This is one of the main causes of the periodical upheavals in the form of global wars that we are becoming accustomed to.
From what has been said hitherto, it would be clear that, in our country at least, the methods of production ordinarily used in centralized industries and highly specialized instruments of production, will be out of place, and id resorted to, will lead to unrest and dissatisfaction. Hence, if we aim at obtaining peace and prosperity for the masses, we should eschew the use of such methods of production.

False Claims

It is wrong to argue that centralized industries are m ore likely to utilize our resources to the best advantage. Take, for instance, a centralized paper-making mill which uses bamboo pulp as raw material. To feed such a mill, you will have t get a forest of tender bamboos which can be cut down and brought to the mill regularly, to supply raw materials. We have to have this growth of bamboos regulated according to the needs of the mill. On the other hand, if paper is made by cottage process, the bamboo from the forest is not used directly as raw material. First of all, the bamboos may be used for making mats, baskets, roofing materials, etc. These will serve their purpose for some years during which time they will get rotten and when they become useless, this material will be reduced to pulp and made into paper. Which then is the more economic use of raw materials – the bamboo which is fed directly to the mill or by a process by which the bamboo serves to satisfy several other wants before it is reduced to pulp?
As regards to cheapness of production often attributed to large-scale industries, there is not much basis for such an argument. The cheapness is largely due to the legitimate expenses that should be borne by the mill-owners, being borne from other funds. It is on the same basis as the selling of stolen goods. A man who steals a gold watch worth Rs. 100 can sell it for Rs. 15 and yet make a profit of Rs. 15 on it; because he himself has not borne the cost of the watch. But a goldsmith who buys the gold and makes a necklace or some such ornaments out of it will have comparatively very little profit. That does not argue that stealing is a better method of acquiring wealth. Cotton that is grown in the backyard of a cottage by a half-starved old woman and woven into cloth by a village weaver may be worth a rupee per yard, while the mill-cloth from Manchester Mills may sell at 6 annas per yard. The owner of the mill may be leading a life of luxury in England. It naturally seems to be contradictory to commonsense that the cloth produced by our poor people out of their meager resources should be more expensive than the cloth produced by the mill-owner. Therefore, it puts us on our enquiry as to why the mill-cloth is cheap. Cotton that is needed for the mills is long-staple cotton. This long-staple cotton has been produced in India with great research and expenditure of money for this research, and such cost has not been borne by the mill-owner. They have been paid out of the taxes to maintain the so-called Agricultural Colleges. The cotton is transshipped by railways to the ports. These railways and ports have also been built at public cost. The actual freight that is charged does not compensate for the construction and maintenance of these means of transport. The freight rates themselves are fixed by the Government, not on a cost basis, but to make it cheaper to send out raw materials and to bring in manufactured goods from abroad. That being so, here also the cost of the Manchester Mill has been made less at the cost of the public expenditures. Towards all these, the mill-owner pays nothing comparatively. Then, is it a wonder that his cost is low? If he is made to pay the full cost that is incidental to the supply of his raw materials, it would not be possible for him to sell his cloth at all. From this point of view, Khadi can be said to be an honest product as it bears all its own expenditure, while in the case of mill-cloth only a part of its cost is represented in the price. Therefore, when we buy mill-cloth, we pay only a part of the cost, the balance is made up by expenditure out of public funds. Hence its apparent cheapness.

Social Inequalities

The poor people use little or nothing of this fine mill-cloth, while the expenditure for producing this has been partly paid out of the taxes paid by them. Comparatively, the richer man uses more cloth than the poor. Hence, their benefits from the public expenditure are much greater. As we have pointed out earlier, this mode of expenditure which enriches the rich man at the cost of the general public, which is the poorer section, leads to the lessening of national wealth; hence the mill production of cloth harms the economy of the country. It makes the rich richer and the poor poorer.


Apart from this cost of production, a centralized industry has to draw its raw materials from the four corners of the world. That means a centralized industry should be able to control politically those places from where it gets its raw materials. That again leads us to the use of violence, to subject a simple people to political domination and make them merely raw material producers, securing to the more violent nations the right and privilege of manufacturing the finished goods. This is the basis of all imperialism. If we feel that this form of political organization does not lead eventually towards a betterment of the masses of the people, then it becomes necessary for us to oppose these methods of production even from the point of view of equity. In India when we buy cheap foreign goods the lower price that we pay is in a measure made up by the loss of our independence. So that when we say a thing is cheap, it means we pay less for it in cash and make up the balance by our political bondage. Is this not too big a price to pay for what may be considered a transient and a passing advantage, if advantage it be?

The Duty of Buyers

If our better sense dictates to us that these methods are ruinous from the point of view of the welfare of the people, then what is the curse that we should adopt? Every one of us who buys or has a means of buying a certain article, has the power also to direct it s production in a particular channel. When we buy a Japanese article, we are directing production towards Japan. That is in other words, we are creating unemployment in India, and additional employment in Japan. When we consistently buy foreign articles, we are deliberately impoverising our own people, as we are driving employment away from the country. Therefore, everyone who buys, whether it be for one rupee or a thousand rupees, has a moral responsibility to see that the way he expends money does not impoverish our country, and bring ruin and desolation to the people.

Our Moral Responsibility

We ourselves become parties to the methods of production used in producing goods we buy. If a tin of cocoa is produced from nuts cultivated in West Africa, roasted and tinned in England, brought to India and sold her; if the cultivation takes place in Africa under the terms and forms of slavery or indentured labour, and the toasting and tinning take place I England under sweated labour, and favourable customs and tariffs are afforded for the sale of this tin of cocoa by the Government of India, because of the political power they hold here, then when we buy a simple, harmless looking tin of cocoa, we become parties directly for supporting the slave labour conditions in Africa, the exploited labour conditions of England and the political subjection of India, in the same manner, as if one were to buy an ornament that has been taken from a child which had been murdered for it, one would become guilty or a party to that murder. No one of us would want to buy such an article, however cheap it may be offered. Our moral vision is wide awake enough to recognize this. But when it comes to buying our everyday requirements, we often say: “How can I be a party to things done in other countries?” We cannot in this way repudiate our responsibilities and get clear of it morally.


The only way to clear oneself is not to buy goods, the conditions of production of which one is not aware. That is, we have to limit our circle from which we draw our requirements. If instead of buying cocoa, we find a neighbour who has a good cow which he looks after will, then buying the milk from such a neighbour will not make us parties to grave moral responsibilities. This argument or outlook is the basis for the advocacy of self-sufficiency under the Gandhian method of life. If we produce everything we want from within a limited area, we are in a position to supervise the methods of production; while if we draw our requirements, from the ends of the earth, it becomes impossible for us to guarantee the conditions of production in such places.

Need for Self-control and Discipline

These various considerations drive us to the conclusion that we have to restrict our consumption of goods produced locally, and by methods in which labour forms the major part. It may, therefore, mean that we cannot indulge our desires freely. It brings into effect a considerable amount of restraint on our pursuit of happiness. We have to develop self-control, and our discipline has to be formed within, if our organization is to be one based on non-violence and truth. This is comparatively a harder life to lead, a life in which values are not directed towards the satisfaction of our own desires but by a consideration of benefits to and welfare of others. It calls for a farsightedness and a standard of values in which the price of mechanism will not be the final deciding factor. There are values other than those indicated by prices. The large scale industries which have to find markets for their goods in remote parts of the world depend purely on money values. The one thing that would be necessary in an organization based on non-violence and truth would be the standard of values based on moral considerations rather than self-indulgence. All this will point towards the development of character of the individual. Unless an individual is highly trained and disciplined, he will find it irksome to live within such an economy. No life of indulgence can ever lead to progress and further development of the individual. Every man under training must be under restraint, if he has to develop in a line laid out for him. The modern methods of production and distribution have made indulgence their goal. This has naturally deteriorated the moral qualities of our people. It is necessary for us, therefore, to re-educate the people in a standard of values which will have a bearing on human life as a whole, and not merely on economic production and self-discipline and self-control. Everyone of us who desires to bring such economy into existence has to plan our lives so that we do not live ourselves, but be conscious of the fact that every act of ours affects our fellow beings one way or the other.

The Daily Drill

As a measure of developing this discipline, Gandhiji has introduced one technique, and that is Daily Spinning. Just as an army has to be disciplined by daily marching orders, drilling and maneuvering in the fields, in the same manner our non-violent army of consumers will have to control ourselves through this daily spinning hour. People may ask if they may not take to something else. Where a national programme is concerned, there is need for uniformity, and by conforming to that uniformity also we are under discipline; and such discipline helps in the building up of character. They very foundation of a national economy based on Non-violence and Truth is character, and character cannot be formed overnight. If cannot be subject to foreign domination. It is in this connection that Gandhiji says: “Spin and you will get Swaraj.” Spinning requires discipline, and a disciplined nation will be able to resist intrusion into its life by foreigners.

Foreign Trade

Often people wonder if it is possible at this stage to keep off the foreigner by non-violent means. We have already seen the foreigner is coming into our land not by himself. He comes at our invitation, and with our co-operation. We extend our invitation when we buy foreign made goods, and we co-operate with him when our consumption is based on his production. Therefore, when we keep away from foreign goods, we naturally give no room or cause for foreigners to come here. This does not mean that there should be no foreign trade at all; it only means that there should be no foreign trade in necessities. Foreign trade should be strictly limited to surplus articles that we do not need, and for obtaining surplus articles from other countries which they do not need. Such foreign trade based on surpluses will never lead to international warfare.

The Way

The only way to bring peace and happiness to mankind, and realizing the Economy that Gandhiji stands for, is to take up his programme of constructive work. Such an economy cannot be brought in by force from without. It needs co-operation and our willing submission to the conditions which will ultimately lead us to realize this Economy. Therefore, it demands our best, conscientious efforts. We cannot drift into it by merely floating easily down-stream. We have got to survive for it with all our strength of will, with a purposeful outlook on life and with a determination to achieve what we are after. If we do that we shall be contributing, not only to the welfare of our country, but towards the brotherhood of mankind as a whole.