Tuesday, August 16, 2005

Of rural welfare and simplistic living

Mohandas Karamchand Gandhi, or popularly Mahatma Gandhi, is known to the world as a renowned pacifist and a very effective politician. But, little does the world know what a remarkable economist he was, probably one of the most sensible economist of the 20th century.

In this world, where people look for alternatives and substitutes in the ways of the functioning of the economic systems, form the flaw-filled socialist and capitalist systems, Gandhian economic theory is a very welcome and suitable substitute. While Gandhi did not apply rigorous economic theory to give structure to his thought, he formulated very clearly the basic principles. Gandhi's basic advice was "don't rush into technologically oriented development; first make sure what impact it will have on employment and through this on the well-being of the poor people." This principle completely stands as a juxtaposition of the usual assumption of capitalist economics, namely that the primary aim is to maximize the efficiency of the production of goods, almost regardless of whether the goods produced are basic necessities for the poor or luxury goods for the rich.

The basic principle of Stalinist and the socialist economics was to maximize the production of capital goods, such as heavy machinery, so that future generations could enjoy a plenitude of consumer goods. Both capitalist and socialist economies were based on technology-intensive rather than labor-intensive production. Gandhian economics reverses this preference. (Incidentally, if looked into in a totalitarian manner, technology also tends to increase environmental damage.)

The basic aim of Gandhian economics is to provide full employment for the poor, and also for all potential members of the work force, so that these workers can provide for their own necessities by their own efforts, in dignity, without depending on charity. Gandhi was not opposed to technology, but advocated a proper mix (depending on prevailing conditions) of technology-intensive and labor-intensive production. According to him, the economist's task should be to determine what the proper mix is; econometric calculations based on existing facts can help determine this. In short, the amount of available resources for investment must keep pace with the population increase of employable workers. This is the basic principle, on which the economist must base his/her other recommendations, e.g. how much external trade the country should engage in.

Capitalist economics does not care about the fate of the unemployed. This is because they cannot buy the luxury goods being produced anyway. If there are not enough people buying the luxury goods, which could happen if too many are poor, like for example the case of developing countries which blindly follow the economic systems of the developed western countries, leaders of capitalist businesses mask their luxury goods with the help of expensive and wasteful advertising campaigns as goods of basic necessity and hence try and mislead the people. Many, especially in experienced young people, fall for this, and get themselves deeply into debt. This also applies to countries, which acquire debts so horrendous that they can never hope to repay them, and bankrupt themselves just keeping up with interest payments.

In the case of the socialist economy, there seems to be an underplaying of the production of the consumer goods, because there exists a very deep emphasis on the large-scale production of goods, rather than looking at the exact necessity of the consumers. Thus comes in mismanagement and inefficiency in the production of the goods in large-scale. This is very much visible in the public sector units of developing economies like India, where there seems to be a lapse between the estimate and the actual during the production.

While capitalism leads to very skewed distribution of goods and services (some get too much and most get too little), and real-existing socialism tends to under-produce consumer goods because of the inefficiency of large-scale planning and the postponement of consumer goods production, Gandhian economics would strive for income and wealth equalization by providing productive meaningful work for every one, even if the full use of the latest industrial technology is provisionally postponed. This leads one to rationally question when taking the entire population in mind, ‘after all, what is the benefit of being on the cutting edge of technology if it increases human misery?’

Under Gandhian economics, fewer luxury goods would be produced, because the emphasis here would lie primarily on producing enough basic necessities for everyone rather than looking ahead futuristically or looking at enhancement of the goods that one already has. This would simplify life styles, which could be of benefit in causing people to focus on the real values that produce happiness, such as family solidarity, devotion to the arts and sciences, and spiritual pursuits. Gandhi defined "happiness" as the ratio between want satisfaction and the number of wants. We only increase this ratio (and therefore lessen our happiness) by increasing want satisfaction (as we are doing under capitalism).

This kind of simplistic living was what Gandhi propounded in his simple theory of economics, which though being simple, proposes to bring in much more social mobility and justice than the most complex ones, say Gandhian economists who have been studying it closely.

They opine that if this kind of a theorizing is put into implementation to a predominantly rural economy like India, there definitely will be visible a greater rate of progress in the economy.


At 1:27 PM, Blogger @mit said...

nice article -- I kinda agree with your views on Gandhian economics.


At 2:02 PM, Blogger Vetty Max said...

Complete agreer. Gandhi's economics makes more sense especially for India which has such a huge population and the coming of any new technology just reduces the number of people required to do a job and hence increases unemployment.

At 10:25 PM, Blogger jhgasuhvkjahklnsdlksnlknmlwvlckn said...

Good one, well written. I have to say that inpsite of the fact that Gandhian economics sounds good, it really sounds too good to be true, given everything. Perhaps the idealism that "the people" or "the junta" were equally poor, drove him to think of such a system. In reality, there were various shades of distribution of wealth, from princes to paupers. There was dignity of labour, and despite the great struggle for independence, people still construed their religions and customs as being more important than their freedom.

I agree that there are many countries in the world which want to be judged by the western yardstick of success and development. Perhaps India should not have fallen into this mould.

Socialism and capitalism bring their own doom - one through signioficant threats outside the socialist system and another through the recursive application of principles within the system. Gandhian economics is hence realistic. Its a pity that we couldn't use this great idea because we were not in a position to.

At 11:31 AM, Blogger mcog2srfe04zgcj said...

This comment has been removed by a blog administrator.

At 9:55 PM, Blogger karthik/SK/wimpy/SKimpy said...

first of all, remove the spam comment above this... else people can't read this!

coming to the article, given that there are so many technological advances around, Gandhian economics is too tough to implement... i mean, gandhi was an idealist. he just gave ideas that looked good. he didn't tell us how to implement them...

as for capitalism, nowadays i believe there's a shift to addressing the proverbial bottom of the pyramid; and given that the "luxury goods" market is bound to dry up (at least growth will come down in a big way), manufacturers ARE going to address the essential goods segment. Market forces would take care to see that in the long run (now don't quote Keynes here) it'll all be evened out and every segment is addressed...

At 7:23 AM, Blogger sp said...

Well, I am no expert on Gandhian economics.

But I firmly believe that if any economic system has to be successful, there needs to be an incentive; incentive for an entrepreneur to run his enterprise, incentive for the other stakeholders who invest the capital -financial or otherwise.

You dont alleviate poverty by reining in enterprise. Not allowing someone to become rich doesnt make the poor any better.

It is human nature to dream and dream big, to try and achieve a better lifestyle for oneself. To stifle that is a folly. Even the poor dream of achieving a lifestyle that can afford them the 'luxuries'.

It isnt true that capitalism doesnt care for unemployment and is nothing but sweeping generalisation.

What is a luxury today becomes a normal thing tomorrow, and a necessity the next. This is what a good economic system creates. Celebrate this !

It is a bad system that seeks to keep everyone at the same level. To aspire to rise above the next guy and live a better lifestyle is but human nature. A good system is one that nurtures it and tries to ensure that everyone gets a chance to do so. Any system will have some people who succeed and some who fail. Thats inevitable. Imagining anything else is living in utopia.

Call such a system capitalism, socialism or whatever...what is in a name afterall.

At 2:42 AM, Blogger swar said...

read Gurcharan Das's Unbound India. He slams Gandhian economics left, right and center. and it is one of the few opinions in his book that I agree upon.


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