- By Ranjit ChoudharyThe Present Economic SystemSuddenly a pessimism has grown about the future of the present economic system. Many challenges are looming large on the frontiers of global economy. The challenges come from the operative system as well as conceptual framework. At the threshold of a new century economic performances of mainstream economy have exposed some serious contradictions which never came to the surface before. The contradictions are found in the method of production and market mechanism. In the present market mechanism it is difficult to establish an analytically meaningful correlation between production and demand. Because here production is governed by technological precondition, whereas demand is created artificially, neither production nor demand is based on spontaneity. The casual relation between the two cannot be fully explained in the light of the behaviour of 'economic man'. Production is seldom based on rationality. The message of limits to growth is yet to reach the people. The concept of growth appears dangerously ambiguous when it puts emphasis on ever increasing production. Lack of rationality regarding production and blind market mechanism have combined to create an unprecedented depression in the world in our present time. Too much emphasis on production has created a crisis - crisis of overcapacity, unemployment, decline of profitability and shrinkage of market. The result is, the system has reached the verge of collapse.
A question is repeatedly asked - Is it a temporary phenomenon? Some economists think that like the depression of the thirties it is a temporary phase. Others think that the present crisis is the crisis of survival of the present system. There are a number of valid reasons for this thinking. First, the depression of the thirties got the support of the Second World War. Through the support of war economy there was a short time prosperity. Roughly speaking the prosperity continued till the end of the sixties. Since the developed countries have been experiencing a sharp decline of employment. Decline in employment is due to a combination of factors. The economy was boosted by military preparedness. As a result, over-capacities both in production and employment were running high. At the end of the cold war and the prospect of disarmament both production and employment began to decrease rapidly. Michael Renner described the situation in the following way. He wrote, "Even though the U. S. military budget has hardly been touched yet, some 140,000 defence industry jobs have been lost in 1986-89. The economic forecasting firm DRI/McGraw Hill predicts 600,000jobs will disappear by 1994, and 10-20 per cent of those laid off are expected to have skills not easily transferable to civilian uses."
About Western Europe, he observed "Perhaps as many as 100,000 jobs were lost in 1987-89, and an equally high number might be lost between 1990 and 1992, as cold war procurement plans are scuttled. If major arms control and disarmament treaties are concluded, as now seems a strong possibility, layoffs will hit both West European and US military economies like an avalanche."
Second, the whole system is based on the concept of growth, which is not clearly defined. Generally growth means aggregate increase of quantum of goods and income. It also means reduction of poverty. The idea is, with the increase of production employment increases together with income. So growth means more and more output. This is taken to be the primary index. The indicator of GNP is a little bit refined when "poverty weighted" index is added to it. The indicator is refined further to include employment and redistribution. But the underlying assumption is, production always remains increasing. That keeps employment high. In reality production cannot increase indefinitely.
Third, employment is also related to scale of operation and the technology used. There is no yardstick to measure rationality in the application of technology. Technology is used almost blindly. Herbert Marcuse's tirade against the irrationality of technology is not totally unjustified. The fact is, after a critical point technology tends to displace manpower. To determine the point of criticality of technology is very important. Because only then rationality of scale of operation can be known. Proper balance between the two is important. When technology predominates production tends to outpace employment. Employment lags behind production. And gradually a wide gap is created between the two. Finally it explodes into a big crisis.
Fourth, high technology creates a "disguised incapacity" among the people. People totally become dependent on technology. They lose the capacity to work independently and it also blocks mental faculties. Simultaneously people lose human quality, and a kind of mechanical relations grow among people.
There is another aspect which is not less important. The scale of output at a particular point of time is determined by technology and input applied. With indiscriminate production the problem of scarcity of input in the form of raw materials is increasing. The developed countries are becoming rapidly importing economies in the matter of raw materials. Developed countries never gave importance to self-sufficiency regarding raw-materials. Their dependency on other countries is fast rising. Lester Brown indicated that, "In 1950 the United States relied on imports for one-half or more of its supplies only of aluminums, manganese, nickel and tin. By 1970 zinc and chromium also belonged to that group. And the projections indicated that by the end of the century this country would be similarly dependent on imports of all of the basic raw materials except phosphate." Global depletion of natural resources in a short future is foreseeable. To sustain large scale production will ultimately become difficult. Production-centric objective of economy is fast losing its legitimacy. Growth cannot be taken as the objective of economics. The illusion of growth is widely prevalent. 'The forecast of the Club of Rome concerning global depletion of mineral resources is not yet taken seriously. There are signs in developed countries of declining per capita growth, sometimes it becomes negative. In the developing countries per capita growth is still rising though at a decreasing rate. The developing countries will, for some time, have a positive growth rate eventually their performances will turn negative.
One more problem is as affluence rises the percentage of expenditures on goods tends to decline. Demand for services rises. There is some validity to the notion of income-inelastic demand for primary' goods. Service sector tends to expand. Demand for goods relative to services decreases with the increase of income. So manufacturers face a difficult market condition. There is a tendency to diversify economy which worsens file situation. Depression is a symptomatic problem of mal-adjustment between production and market.
It appears that growth is becoming an obsolete concept. it should be replaced by more useful, meaningful and exact terminology. The policy makers need more meaningful terminology. In implementing economic policies it is necessary to have clear idea of the roles of variables both economic and social. The roles of social variables cannot be understood in quantifiable terms. Economic variables do not become effective because of non-functioning of social variables. Investment multipliers does not become operative in practice, and fails to generate an employment multiplier. Both structural and cultural bottlenecks are to be understood properly. The goals, strategies and hypotheses should be formulated being free from inherited prejudices. This means that a new theoretical and analytical approach is necessary to achieve a sustainable model. Economic system is built through the behaviour of human communities. Human behaviour is determined by their attitudes towards life. Economic system does not grow in one day. It can be explained in historical context in which human behaviour, and value-preference play a significant roles. The value-judgement which upholds the concept of growth is gradually losing its validity. Economics needs a new approach, new theory and new interpretations.
Gandhi's view
Here ideas of Gandhi are providing new intellectual stimulations. According to him the object of economics should be reformulated in terms of self-reliance or swaraj. Economic premises cannot be isolated from social premises. Economics of development became a separate discipline in the second half of this century. The newly freed colonial countries tried to explain the necessity of growth. And these 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. The father of economics Adam Smith was quite clear on this. He wrote, "The discovery of America, and that of a passage to the East Indies by the Cape of Good Hope, are the two greatest and most important events recorded in the history of mankind. Their consequences have already been very great." Then he added:
"At the particular time when these discoveries were made, the superiority of force happened to be so great on the side of the Europeans, that they were enabled to commit with impunity every sort of injustice in those remote countries. Hereafter, perhaps, the natives of those countries may grow stronger, or those of Europe may grow weaker, and the inhabitants of all the different quarters of the world may arrive at equality of courage and force which, by inspiring mutual fear, call alone overawe the injustice of independent nations into some sort of respect for the rights of one another."
It is to be realised that the colonial foundation of the liberal economy has come to an end. Gradually global economy is faced with new realities. Economic leadership of the West is also going to be over. Efforts to achieve the level of the West is not realistic. Every country's performance is to be judged from its own economic realities. Comparative performances of the countries are only marginally meaningful. Economic behaviour of a country is to be explained in terms of collective behaviour of human communities. Mankind's desire for affluence is predictably uniform. But their economic behaviour is not identical. Each country's achievement is to be judged from its self-reliance or swaraj.
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. The Report of the South Commission admitted that "A development strategy designed to imitate the life-styles and consumption patterns of affluent industrial societies is clearly inconsistent with our vision of development for the South. It would accentuate inequalities, for it would be possible to secure such high consumption levels for only a small minority of the population in each country. Because it leads to a high level of imports and energy use, it would also cripple the growth process and intensify economic and environmental strains." There is a 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 role is played by psychology. Values which condition the mind can change human behaviour. Conscious value preference influences economic 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, If economic progress is thought in terms of affluence, it means progress only for a few persons within a nation, and for a few nations in the family of nations. It means poverty for the majority.
Progress and affluence are not identical. Progress is to be defined in terms of self sufficiency. Every economy creates its corresponding culture in terms of specificity of values that society upholds. Swaraj is built on the basis of specificity of each culture. In that sense delinking every country's system from international order may not be undesirable. Delinking may ensure smooth working of self-reliance. Although the advocates of New International Economic Order (NIEO) try to justify the significance of linkage of different economies on the basis of market mechanisms, international capital flows mid direct private investment, the element of exploitation cannot be avoided. NIEO is not free from exploitation of weaker economies by the stronger ones. Swaraj is necessary for relinquishing every country's economy from the burden of proposed NIEO. Gandhi's critique of world economic order is to be judged in that light. Gandhi was clear in this respect. He wrote:
"I would categorically state my conviction that the craze for mass production is responsible for the world crisis. Granting for the moment that machinery may supply all the needs of humanity, still, it would concentrate production in particular areas, so that you would have to go about in a round about way to regulate distribution whereas, if there is production and distribution both in the respective areas where things are required, it is automatically regulated, and there is less chance for fraud, none for speculation."
Global system makes common people completely helpless in the matter of production and distribution. Gandhi visualised that it can be solved through the choice of technique for small scale production and through the system swaraj. Swaraj is necessary for the liberation of weaker economies from the commanding position of developed countries.
The basic hypothesis of the Gandhian system is "Earth provides enough to satisfy every man's need but not for every man's greed." This hypothesis is based on two assumptions - one, human greed can be curtailed, and two, human affluence can be removed. He advocated neither an affluent nor a poor society. In the terminology of Kumarappa it is based on the economy of permanence. The French Physiocrats claimed that economy of permanence cannot be built on industry. To them industry was sterile. According to them industry does not create any new thing, it only gives new shapes to matters. Their claim has acquired new meanings in the context of growth, Schumacher raised a vital question: "Is the land merely a means of production or is it something more, something that is an end in itself?. The subject of agriculture poses a deeper problem, a problem of way of life, a problem of values. It can be taken as a means in the form of a factor of production, but by doing that we do not understand it fully. Schumacher wanted to attribute to land a metaphysical character and a meta-economic value. With a system of economics a system of mind is to be created. . Distortion in selecting goals brings distortion in the fields of economy. This can be checked if the relation between agricultural way of life and the life-style of industry is restored. The balance between agriculture and industry is now lost. Schumacher pointed out, "...there can be no doubt that the fundamental 'principles' of agriculture and of industry, far from being compatible with each other, are in opposition."
The concept of industrialisation is based on the acceptance of separation between agriculture and industry. In the developed countries roughly five percent of population are engaged in agriculture. Lower percentage of population in agriculture is taken as the indicator of progress. This is arbitrarily accepted. Its acceptance is not based on rationality. For, it creates unprecedented flight of people from village to city which becomes increasingly uncontrollable. A feeling has been created that shift of population is good. It brings structural change. In the Gandhian system change of this idea is an important item which can be exercised in the form of creating new values. Gandhian system does not advocate structural change in the economy, in the form of transferring population from agriculture to industry. The structure of this system moves round the axis of agriculture. Here the concept of employment in the sense of counting of heads is to be changed by the concept of occupation. The concept of marginal productivity of labour becomes inoperative. The economic experiences of both developed and developing countries lead to new concepts with new frames of references. The search for a new meaning of development confirms the importance of self-reliance.
Economic activities are not exclusive from other activities. Economy is a part of the way of life which is elated to collective mind and collective values. Economic activities cannot be abstracted from human life. Long ago his 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 hat distribution must combine with production. His ideas influenced a host of writers. There is a strong ethical element in Sismondi. Gandhi's design moved in that line. Gandhi also wanted to ensure distributive justice and wanted to see that production and distribution were not separated. Sismondi realised the danger of overproduction, that was why he wanted to employ the state in curbing production. The danger of unchecked production has produced a number of complex problems rooted in economic, social and environmental life. Gandhi was attracted by the concept of a simple society of Tolstoy and Ruskin. They advocated that life should be built on annual labour in a communitarian order. Gandhi also preferred an egalitarian communal life. Source: Mine & Metal Worker, Gandhi Jayanti Number, 1998 | 
