ARTICLES : Gandhian view on Economics

Towards Understanding Gandhian Economics

By Ranjit Chaudhuri
Dean of Studies, Institute of Gandhian Studies, Wardha

Co-ordinated Activity

The Most important task before a student of Gandhian economics has been to define in a distinctive way Gandhian object of economics which separates Gandhian economics from the mainstream economic tradition of Adam Smith. It is a fashion to say that Gandhi has not been a professional economist. Whatever Gandhi has written about economics has not been written in the language of economics. So the mainstream economics, known as professional economists, tend to ignore Gandhian contributions. But Gandhian economics, whether it is called by that name or by any other name, is gradually occupying the imagination of thinking people. We should analyse the crisis that is tormenting the mainstream economics, and then we can understand why Gandhian way offers a viable alternative.
Economics as a discipline had a history of more than two hundred years. The appearance of Adam smith's book An Inquiry into the Nature and Causes of Wealth of Nations in 1776 is generally taken as the beginning of economics. Adam Smith defined the object of economics in the following words. He said, "The object of the political economy of every nation is to increase the riches and the power of that country". To Smithian economics wealth and power of a collective entity called nation or state is the most important. Nation's power increases with more and more production. That being the primary object of economics it ignored humankind completely. Production increases employment, employment increase income, income increases demand, demand increases and more productions. This is the chain of developmental logic. Basing on this logic there have been unchecked production. Production is not based on need. Demand is artificially created. Neither production nor demand is based on spontaneity. That is why production has seldom rationality. Gradually a pessismism has grown about the future of production-centric economy. There are a number of valid reasons for this. Firstly, growth rate is significantly coming down globally. The affluence of Western Europe and the United States has been decreasing. Secondly, growth means reduction of poverty. Today world-wide employment is falling and unemployment is increasing. So the misery of labourer is on the increase. Thirdly, inequality has been alarmingly increasing. It has been found that the top 1 percent gets 90 percent of total income gain in the USA and Europe. This trend is found prevalent in all the developing economics. Fourthly, wages have been falling. It was found that level of education has increased but the wage level has been falling. As the economic crisis deepens labour becomes flexible and labour market is becoming deregulated. Labour has further become dispensable due to technological innovation. Now technology is used almost blindly. Lastly, more important point is that with indiscriminate production the problem of scarcity of input in the form of raw material is increasing. Industrial Revolution began with abundance of mineral resources. They are being now exhausted. The resource-rich countries are fast becoming resource-poor.
During the latter part of the twentieth century global economy has been experiencing a new phenomenon. It is the phenomenon of unification and competitive globalizations of economy. This is a development which took place in the last two decades of twentieth century. Before that the majority of countries were following controlled economy. Following the model of soviet economy and so called welfare economy almost all countries ere practicing protectionism in different degrees. As a result capital and technology remained confined to a few developed countries. Initially the developed countries prevented them form exporting to less-developed counties of Asia and Africa. Today the developed countries are ready to transfer both capital and technology to the less-developed countries. This is a new phenomenon which has brought a new character to world economy.
Another development is the globalization. Globalization means easy entry of any country to another country to trade and to build industry, to invest and to have access to raw materials. This is a neo-colonial device by the developed countries to maintain their full control over the world market. Production needs expanding market. Rapidly investment opportunity is shrinking. By abolishing tariff barriers one can make the whole world open for investment.
The demand for globalization and liberalization came not from less-developed countries but from developed countries. All kinds of pressure tactics have been adopted by the developed countries to compel the less-developed countries to accept the globalization, liberalization and privatization. The industrial countries try to convince all other countries that globalization is the compulsive necessity for all. Their logic is that low growth economy gets capital and technology from the developed countries to build their economy on high growth rate and the developed countries get markets for their products. They try to conceal the fact that whole control of economy goes to the developed countries.
The ultimate goal of globalization is to sell more production. People today demand more goods, not because their real need have increased but because their psychological prosperity to consume has been increased through mass media. When we examine production analytically, we find that increasing production leads to waste of resources, both natural and mineral. The waste does not appear as waste because it comes in the form of industrial and consumer goods.
Commodity fetishism of technocratic society has created a superstitious psychology and erroneous notion regarding progress and development. It can be said that few people and few nations has become rich. But the world has definitely become poor. Apparently the world seems to be affluent. Wealth of a nation, as the summation of goods produced in the boundary of that nation, apparently shows the sign of progress. Whereas taking the total stock of global categories of global resources have perceptively decreased. Industrialization has made earth poor in respect or natural resources, fossil fuel, mineral resources, greenery, maritime resources, sanitation health and ecology.
Production has created its own problems. These is no organic relation between production and needs. Production does not grow out of needs. In industrial society production has its own dynamism. The dynamism arises out of scale of production. The large-scale establishment is the logical development of technology. Economics of scale become a myth if considered from human management. Technology has a totalitarian connotation which ushered in the role of technology. Giganticism is besieged with structural problems besides many more social and human problems.
The issue before the global economy today is the production verses employment. The important problem in the respect is the problem of constant conflict between production and employment. The goal before the industrial unit today is the maximization of employment. It is almost axiomatic that more production leads to more employment. But in the operative scale production is growing at a much faster rate leaving wide gap between the two. This has been possible due to increasing reliance on technology. Employment has become the first victim of technology. Unbridled production now marginally generated employment. Technology after a certain stag replaces employment. At the same time conceptually we cannot think production will ever go on increasing. Daniell Bell pointed out: "Any growth which is exponential must reach a point of absurdity". The crucial task is to find out criticality of production point at which technology does not replace employment.
Technology intoxicates the people. Technology and technocratic view of society ahs had a sweeping influence on the life of the people. Hedonistic concept of technology was never questioned. All efforts have been made to ensure freeplay of private enterprise. Competitive market economy has started replacing social well-being. Protectionist measures are rejected in favour of free trade. Subsidies as methods or protection are discouraged. Losing concerns are allowed to die. Profit-making has achieved inviolable sanctity in industrial theology. Government interaction in support of the weaker sections of society is not favoured. Labour is treated in a cruel manner. Gradually collective bargaining is not allowed. Job security is totally denied. To declare lock-out in an industry is the prerogative of management. Management has no responsibility to consult the workers lay off at any time is permitted but the strike is not justified. Disinvestment has become a new religion of industry giving farewell to public sector.
Market economy believes in capturing market by ruthless elimination of rivals and conquering their income. Market economy quickly converts this wealth in furthering inequality. Through mutual funds people are forced to become involuntary investors in business. By accumulating small savings, business houses collect huge funds from investment. This wealth further generated inequality. Capitalism grew through the classical accumulation process. It is acquired through a gambling house called stock exchange. Money market is a corrupt economy made more corrupt by gambling effect of stock exchanges. Stock exchange having wide linkages all over the world through similar stock exchanges makes the money market a closed system. So the small investors are helpless in relation to corporate bodies.
The functionality of the competitive market economy is argued in terms of its cost-efficiency and service-efficiency. The claim is based on doubtful evidence. There are literatures which are purposefully made to prove that market economy is better in terms of efficiency. The methodology used for measuring efficiency has its shortcomings. It failed to take into consideration the imperfection of market. It is silent on market failure. Studies of some companies in different parts of the world are now available. In these studies some selective indicators for the assessment of efficiency are taken. The selective indicators have been labour productivity, total factor productivity, enterprise profits and growth in value-added per employee. The criteria are chosen almost arbitrarily. In these categories welfare criteria are shrewdly avoided. Private companies operate only in the fields where profits are high and risks are low.
When we talk of efficiency, we need to be clear what we mean by efficiency. Efficiency may mean efficiency for earning profits for business houses. In that sense efficiency does not bring any benefit to public. It does not bring efficiency at social level or ecosystem. Efficiency is a highly loaded word. Nuclear source of energy may be a highly efficient source of energy, is it efficient for environment? In the name of efficiency when there is huge lay-off, we cannot take it as efficiency.
All the same time, enormous problems are developing in the agricultural field in India. Indian agriculture is a combination of capitalist agriculture and peasant agriculture. Myron Weiner has defined them in the following way in his book. The Indian Paradox: "Capitalist agriculture is considered as production for market and for profit, without regard to whether wage labour is employed or how much mechanization there is, and peasant agriculture is a form of production which does not go to market for profit." Gradually competitive market economy has entered into Indian agriculture with the system of patent rights. Through the system of patent rights a speculative element has entered into our peasant economy. There is a threat that controlling position in agriculture will go out of peasants' hands. Marx did not exaggerate when he said that capitalist agriculture was not only a move towards robbing the labour but also robbing the soil, because both farm products and non-farm products will gradually come under the control of the speculative elements. There may be difference and distinction between ownership and control of assets. The farmers may own the assets but for all practical purpose they may not fully control the assets.
It is therefore no more axiomatic to hold that industrialization will bring prosperity, efficiency and progress in the society. On the other hand, there are enough indications that industrialization an indiscriminate production rapidly impoverish the world. The present world will gradually find an unusual severity of economic crisis which according to Schumpter, is caused by vanishing investment opportunity. Gradually all big thing started appearing ugly and the small looked beautiful. The shadow of smallness is haunting the world.
Here comes the importance of Gandhian economy. If we look at global economy analytically, it becomes difficult to say that the people are engaged in economic activities only to increase wealth of their nations. Wealth of a nation in economics is estimated in terms of the Gross National Products (GNP). By exploiting more and more natural resources GNP is increased. What is development? Is it more and more production only? Development should have some relation with human values and human qualities. It is said that human quality does not improve as long as poverty and misery remain. Then the question can be raised, in terms of human quality are the developed countries in any way better? Are the rich countries going towards good society or sane society? We are more concerned about decline of profit of business houses. We are less concerned about degradation of human quality. As if profit is development, human quality is not. To Schumacher "Development does not start with goods, it starts with people....." We have been able to create prosperous countries, but we have failed to create better and better human beings. Prosperous countries are in no way good societies. Both poverty and prosperity degrade.
That is why Gandhi advocated neither an affluent nor a poor society. Gandhian paradigm of development is based on this principle. This can be called an economy of Swaraj-an economy of self-reliance. Economic activities cannot be abstracted from human life. Long ago this was systematically argued by Sismondi. He said the real object of economics should be man. To give importance to wealth and to ignore the human being is to distort the goal. He propounded a theory in which he said that distribution must combine with production. Gandhi's design moved in that line. Gandhi also wanted to ensure distributive justice and wanted to see that production and distribution were to be simultaneous. Sismondi realized the danger of over-production. That was why he wanted to employ the state in curbing production. Gandhi was attracted by the concept of a simple society of Tolstoy and Ruskin.
The basic hypothesis of the Gandhian system is "Earth provides enough to satisfy every man's need but not for every man's greed". Global system makes common people completely helpless in the matter of production and distribution. Gandhi visualized that it can be solved through the choice of technic of small scale production and through the system of Swaraj. Swaraj is necessary for the liberation of weaker economics from the commanding position of developed countries. Weaker countries were vainly struggling to achieve the level of growth of developed countries. The growth rate of the developed countries is a historical accident. It is doubtful that any of the developing countries will attain that level. It is equally doubtful whether the developed countries can sustain that impressive growth rate. It is to be realised that colonial foundation of the liberal economy is gradually coming to an end. Economic leadership of the west is being eroded. Comparative performance of the countries are only marginally meaningful.
The dangerous game of competitive affluence should be abandoned. It is becoming compulsive for the survival of the economy. Productivity is still based on overcapacity, which creates the crisis of survival. The concept of swaraj is not an idealistic design. There is need for new conceptual framework in which each country attains swaraj. In Gandhian system every country stands on its own strength.
The components of swaraj are based on two independent variables-psychology and ethics. Since resources are scarce, production cannot be increased indefinitely. Psychology of affluence is an irrational phenomenon. The basic principles of economic activity are based on needs and not on affluence. Affluence breeds inequality, as it is based on economic distortion. Greed grows out of desire to be affluent. Human desire can be expanded to unlimited scale. This is true. But human desire also can be reduced. This is also undeniable. The crucial role is played by psychology. Values which condition the mind can change human behaviour. The goal of swaraj brings limits to human wants, and it also limits monetary gains. In the present economic system even after a very impressive turn over, no one says he can stop now, that he has enough. Enough is a word not to be found in the dictionary of economics.
To Gandhi economic activities are not excluded from other activities. Economy is a part of of the way of life which is related to collective mind and collective values. Economic activities cannot be abstracted from human life. Gandhi wanted to ensure distributive justice and wanted to see that production and distribution were not separated. The danger of unchecked production has produced a number of complex problems rooted in economic , social and environmental life. Economics of swaraj is related to total life.
If economic swaraj is taken to be the goal it is necessary to determine the ingredients on which it is based. First Gandhi put adequate importance to traditional sector. Highest priority is given to agriculture and agro-centric industries. The balance between primary, secondary and tertiary sectors should be skillfully made on the basis of available human resources. Direction of development is also very important. Directionless development, in the present form, ends in crisis. Two, villages must get more importance than cities. It is a dogma to say that by shifting population from traditional sector to industrial sector the problem of unemployment can be solved in the less developed countries. This idea is based on colossal ignorance. For example, India has about 627 thousand villages and only four thousand urban centers. It is absurd to believe that the swelling population of 627 thousand villages will be employed in four thousand cities. It is equally absurd to believe that by transferring population from village to cities everybody will get factory employment.
Gandhi advocated wide use of technology of being self-reliant. To make village self-reliant Gandhi said, "There would be no objection to villages using even the modern machines and tools that they can make and can afford to use." In fact he was in favour of giving technology to everyone. His plan was to take technology to the grass-roots level. In his scheme human beings control technology and technology does not control the human beings. His policy of increasing human skill in the furthest corner of the country was visualized by bringing qualitative changes in socio-economic field. The method was Basic Education. Gandhi wanted to develop the foundation technology in every part of the country through Basic Education.
The enormous complexity of productive apparatus of present industrial society fails to develop inner capacity to sustain moral problems. It wrongly emphasises ethical neutrality of productive method. Social and moral consequences of economic activities are unreasonably and arbitrarilyexcluded from welfare concept. Welfare cannot always be determined in quantifiable terms. It should be conceived in totality, in terms of integrity of individuals.
Gandhi's position should be understood in this perspective. In the past agrarian economy declined under the transformation. Structural transformation is hailed by them for it has liberated economy from the bondage of feudalism. But still there are more than two million villages in the world and the number of cities is only few thousand. Few thousand cities cannot give employment to the people of two million villages.
In this regard it is interesting to quote Marx to find how Gandhi and Marx came close to each other. In German Ideology which Marx wrote jointly with Engels and published in 1845-46, they mentioned that in communism "(It is) possible for me to do one thing today and another tomorrow, to haunt in the morning, fish in the afternoon, rear cattle in the evening, criticize after dinner, just as I have a mind, without ever becoming hunter, fisherman, shepherd or critic." Such a simple society is close to Gandhian village system where division of labour does not exist. Marx's communist society can come if the society becomes simple idyllic in nature. So again in the The Critique of the Gotha Programme, Marx wrote:
The enslaving subjugation of individuals to the division of labour, and thereby the antithesis between intellectual and physical labour have disappeared........ when the all round development of individuals has also increased their productive powers and the springs of cooperative wealth flow more abundantly.......
Marx like Gandhi believed in need-based consumption. He announced his maxim, "from each according to his abilities, to each according to his needs."
Performance of Gandhi's system can be tested by the application of seven criteria. The seven criteria are:

1. eradication of poverty and minimization of affluence.
2. Self-sufficiency of every unit in basic needs
3. Identification of human needs and their fulfillment
4. agro-centric economy as the basis to create economy of permanence
5. Need-based production as far as possible through small-scale units
6. check on distortions through basic education and skill formation, and
7. curtailment of concentration of economic power

The value-judgement of Gandhian system is quite clear. Here the criteria of performance are different from mainstream criteria, In Gandhian criteria, what is produced is to be judged along with how it is produced. Its buoyancy depends upon restructuring the rural economy. Gandhi observed: "You cannot build non-violence on a factory civilization, but it can be built on self-contained villages... You have, therefore, to be rural minded. You can be non-violent, and to be rural-minded you have to have faith in the spinning-wheel."
Gandhi is one of the pioneers of interdisciplinary approach to economics. In his thought economics cannot be separated from health, and health cannot be separated from sanitation, and sanitation cannot be isolated from nutritious food, etc. In his thinking all these stand ins close relation with each other.
Those who call themselves pragmatic feel that there is an overtone of idealism is Gandhi. So, it is thought, that his system has a doubtful applicability. His hypothesis is never tested. There is a tendency to reject it without verification. The fact is the present system of economy is dominated by vested interests. Whether Gandhi's ideas will be accepted or rejected largely depends on availability of raw material. To call Gandhian economy an ideal system is to ignore what is real. Reality changes with the necessity of life. Without entering into a philosophical polemics, it can be said, reality is not always real. The system which cannot be sustained is not real. The permission of global competitive economy generates optimism of Gandhian economy.

Source: Essays on Gandhian Thought from Institute of Gandhian Studies, Wardha