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Third Shambhu Dutta Memorial Lecture, Organized by Transparency International India at IIC, September 9, 2019.

Preface to the Lecture

I am grateful to Transparency International India for asking me to deliver the Third Shambhu Dutta Memorial Lecture. It is held in the memory of Shri Shambhu Dutta (1918-2016), the founding father of Transparency International India. He was a well-known Gandhian and long-time social worker, who while in public service campaigned against corruption. He promoted Gandhian values and principals. He was active in Gandhian organizations like Servants of People Society. He actively participated in the drafting of the Right to Information Act, pursued the legislation for the Lokpal and raised a strong voice for the protection of the whistleblowers. So, it is apt that the talk I give today presents why Gandhian values are crucial in society.
The talk is in eight sections.

I. Introduction

In today’s world, Gandhi and his thoughts seem to be out of date to a majority and especially the young. It is often argued that Gandhi was relevant in a different era when the nation needed independence from foreign rule. It is also argued that technology has dramatically improved since Gandhi’s time making him and his thought irrelevant.

One of the key aspects of Gandhian thought was Swadeshi – implying self-reliance. This was used to fire the imagination of the colonized people to become self-reliant and overthrow the yoke of foreign rule. But in today’s world where trade is a driving force for growth and development, this idea appears to be irrational for increasing prosperity in society.

Since WWII, nations are focused on comparative advantage and extensive division of labour in production. Almost nothing is entirely produced in one nation. There are chains of supply that cut across nations under the control of the MNCs. In these times, rules for trade among nations are set by WTO withlittle place for protectionism or defence of the national markets from the onslaught of the MNCs. Thus, Indian small scale has suffered with the massive import of goods from China or high tech goods production in India is not viable due to availability of these goods from the advanced countries.

II. Contemporary Challenges Facing the World

Yet, I argue that Gandhian Thought and Values are the key to the major challenges facing society and the world today. What are these major challenges? I list some of them.

There are political, social and economic challenges. Democracy is weakening with the rise of authoritarianism and fascistic tendencies. Populist majoritarianism is on the rise and weakening consensus on policies arrived over long periods of political developments since the Second World War. An `other’ is being created in society which is being blamed for the problems faced by society. With crisis in Afghanistan and countries of West Asia and North Africa, many are forced to migrate to safety in advanced countries. There is a reaction to this in Germany, USA, UK and other advanced nations and the populist parties there are using the opportunity to blame migrants for both, unemployment being faced by many workers and terrorism in these countries. This is not entirely true. For instance, US currently has the lowest unemployment since the 1960s.

In the USA, President Trump has gone to the extent of building a wall at the border with Mexico and initiated campaigns against illegal’ migrants. He has blamed the Chinese with which USA has a large trade deficit for loss of jobs in USA. He has blamed India also for taking advantage of the USA and is forcing Indian IT companies to create jobs there rather than send workers from India. He has not only withdrawn concessions on certain Indian imports into the USA but levied tariff on Indian goods.These xenophobic/racist actions are designed to cater to his constituency even if they are based on false premises. Thus, there is a growing political polarization, rise of authoritarianism and fascistic tendencies. All this is happening in the name of challenge toestablishment’ and rise in `populist’ democratization.

Another component of this rise of populism is the challenge to international relations both political and economic. Mr. Trump projects Mr. Obama’s liberal establishment’ policies as being soft onothers’ to the detriment of the American people. Global trade has been disrupted by the USA under Mr. Trump with a full fledged trade war breaking out with China, EU and India. The rules based WTO which was anyway unfair to the developing world is being disrupted and that is further worsening the situation for the developing world.

Mr. Trump denies climate change and the need to protect the environment. He has withdrawn from the Paris deal on climate. In Brazil, the new President, Mr. J. Bolsonaro, has subtly and not so subtly allowed the Amazon forests to burn at a record rate. In India we have some of the most polluted rivers and city air in the world – in spite of a vast majority of the Indiansconsuming very little due to their poverty. The rise in consumerism is the bane of the environment.

Extreme weather phenomenon are increasing and creating havoc all around. It is disturbing agriculture and increasing the distress of poor farmers. Ice in the Arctic and the Antarctic is melting at a record rate with the threat of global sea level rise. There is large scale extinction and disappearance of species. There is growing global water stress and accumulation of plastic on a large scale as we generate waste at an ever increasing scale with growth of consumerism.

All these populist trends are supported by growing corporate control over media (including social media). There are exceptions with a part of the media still opposed to the populist right wing agenda and backing environmentalism or liberal democracy. But the character of media is fast changing with the rise of social media, fake news and trolling of opponents. Political parties and vested interests have taken to this on a large scale and this was visible in India in the last two general elections.

Most people do not have access to real news. The sense of history being weak, alternative history is being created to further one’s cause. It caters topopulist fears about migrants and events in the past. All this is resulting in political polarization and a decline of trust in society which makes dialogue difficult and establishing a consensus in society almost impossible. In turn, this weakens democracy further since the will of the brute majority is pushed through.

The world is characterized by growing inequality and rapidly rising concentration of income and wealth in few hands. This is creating a global crisis of demand, resulting in economic, social and political problems. The rise in the financialization of the world economy has led to this growing divide with those in the financial sectors earning huge pay packages while those producing real goods languish. This is the divide between the 99% and the 1% that got noticed during the 2007-08 global financial crisis. In fact, inclusion in the financial sector leads to further marginalization of the poor.

In India, there is a growing split across states and within them. Income and wealth disparities are growing across and within nations. In India, according to the last OXFAM report, 9 people have more wealth than 70 crore Indians. Similarly, in the USA, according to Krugman, disparities in the 2000s are greater than in the 1920s.

Rapid technological changehas led to not only unemployment and marginalization of labour but also to short termism. Globalization has resulted in massive movements of capital and to its strengthening and that has weakened labour and marginalized the weak in society.

There is rapid growth of illegality in the world with the proliferation of tax havens, of which the best known is Switzerland – there are 90 of them. They offer the rich low tax rates and secrecy. So, lot of illegal flow of funds are facilitated by this international financial architecture. The developing world has been suffering from flight of capital since the end of the colonial era. It has led to the promotion of illegal activities and black income generation in the developing world.

Nations that are poor and lack adequate capital for the development of their poor are exporting capital to the developed world via the tax havens. The rich countries have also suffered due to the phenomenon of BEPS (Base Erosion Profit Shifting) and `race to the bottom’. The former refers to the phenomenon of rich corporates locating their headquarters in countries with low tax rates like, Ireland. President Obama said that the USA loses $100 billion in taxes due to this phenomenon. The latter refers to the reduction in tax rates as countries compete to get capital. Both these phenomenon have led to shortage of resources with the government and deterioration of public services to the citizens which hurts the poor the most.

One of the public services that has seen a decline is the public education system. There has been massive commercialization and privatization of education globally. This has resulted in growing illegality in the system of education, low quality education for the poor and growing alienation. There is also a marginalization of teachers with automation and large size of the classes. Their role in citizenship has weakened with consequences for the youth and the country.

There is growing short termism among individuals and society. The solutions to society’s current problems are all long run but that perspective is increasingly weakening. This is the result of both rapid technological advancement and marketization which makes us focus on the immediate. Many of the problems mentioned above are a result of the short termism which now pervades society. This is where Gandhian Thought is important for providing an alternative vision for society.

III. Marginalization of Gandhian Thought

Gandhian thought suggested simple living, protection of the environment, shunning of consumerism, strengthening of democracy and an education system which would not be alienating and connect individuals to nature and society. He argued that work gives individuals dignity. So, technology which displaces labour and leads to unemployment or which leads to the destruction of the environment is not desirable. This made him appear to be anti-technology.

In his basic writing, Hind Swaraj, he argues against western modernity and calls it evil. So, in the post-independence period, when Indian elite wanted to copy western modernity and set `modernization’ of Indiaas its goal, Gandhi appeared irrelevant and backward.Yet, writing in 1938, thirty years after Hind Swaraj was written, he says, “I have seen nothing to make me alter the views expounded in it.” This, even though his critics had all along felt that if Gandhi was to rewrite the book later he would considerably alter it or even throw it out.

In Hind Swaraj, Gandhi criticized, railways, doctors, British parliamentary democracy, etc. He talked of the village republic while the modernizers thought of the Indian villages as `cesspool’ of backwardness from which nothing good could emerge. They wanted the villages to be urbanized/modernized. Again, from the perspective of the modernizers Gandhi appeared to be backward and it was argued that if his thought was to be the basis of India’s development, the country would remain perpetually backward.

Gandhians have not been able to take up the challenge posed to Gandhian Thought by the `modernizers’. They were overwhelmed by Gandhi’s stature and did not advance his ideas further. They could not establish a dialogue with the critics to show why Gandhi was still relevant for society, not just in India but also for the West. They needed to engage with the flaws in Western modernity. So, they became a fringe group which the mainstream largely ignored.

While it is important to maintain principles, it is also crucial to show how they apply in a rapidly changing situation that has been witnessed since Gandhi’s days. The kind of technological change that has taken place, consumerism and new products that have emerged, the transport and communication revolution witnessed and the dominance by the global institutions and finance capital are unprecedented.

Above all, there is a philosophical change that has come about in the thinking of people which must be addressed. Today, people have become short termists, looking for immediate gratification. Due to rapid technological change even society as a whole has become short-termist. In contrast, Gandhian thought is based on long term social well-being. It is this shift in the belief system that needs to be addressed by the Gandhians.

Life on this planet can survive another 2 billion years but we do not even plan for the next 200 years. Gandhi was thinking of how society and mankind would survive on this planet in the long run. Solutions that work in the short run do not work in the long run and create more problems as consumerism has shown.

IV. Marketization and its Principles

The philosophical change that has taken place in society all across the globe needs to be addressed since it underlies the major problems pointed to in Section I.

Why is the world not able to find the solutions in spite of a deteriorating situation?At times, it appears as if society has a death wish. It does not implement even the most obvious solutions to resolve many of the problems confronting it. This kind of short sightedness is a result of the philosophical blind spot we are in.

The present day philosophy is propelled by marketization. It has led to atomized individuals who behave as homoeconomicus and working for their self-interest by maximizing their gain. In contrast, the Gandhian Thought argues for the individual situated in the collective and not atomized but working for social gain and through that achieving her own betterment.

Markets have always existed but marketization is new. It implies the penetration of market philosophy into social institution. The first principle of marketization given in the basic text book by Samuelson is the dollar vote’ - one has as many votes in the market as the number of dollars one has. So, the rich determine the market outcome. It underminesone person one vote’ which is the basis of democracy. This is resulting in the `marginalization of the marginal’. The domination by the rich is at all levels – international, national and regional. No wonder disparities are rising dramatically due to policies based on marketization.

The next important principle is `more is better’. It suggests that when individuals consumes more, their welfare goes up. This is the underlying basis of consumerism – that is consumption for the sake of consumption. So, instead of drinking water we may drink soft drinks. Need is created where it does not exist. Sacrifice or even reducing one’s consumption is then stupidity because one is hurting one’s own self-interest.

An associated idea is that people are rational being, maximizing their welfare. Thus, it does not matter how one earns an income – right or wrong wayas long as it benefits the individual – no moral judgment need be made. So, greed is raised to a new high pedestal – not that greed did not exist earlier. Above all, to maximize profit, costs need to be minimized. Since feeling of guilt is a cost, one should not feel guilty about one’s actions and conscience should not be allowed to come in the way. Individuals get truly atomized.

In present day economics, based on neo-classical ideas, equity is only paid lip service. Since it is too difficult to achieve,society need only strive for allocative efficiency’ which is status quoist.Pareto Optimality’ needs to be achieved given the distribution of resources. So, no question of redistribution. Since there are no taxes and transfers that are non-distortionary,redistribution cannot be achieved except in theory. Further, markets fail and because of distortions, all markets fail, so one can only achieve second best’. This requires all pervasive government intervention to achieveoptimality’, but this idea is ignored.

V. Gandhian Thought: The Economic Aspects

How does Gandhian thought stand in relation to these principles of marketization? Clearly, the latter runs counter to the former which is not just an economic thought but a holistic one in which the social and the political are intertwined with the economic. It must be said that Gandhi changed his position as the situation demanded. This was the political aspect of Gandhi who was also a political leader. But at the philosophical level there were certain fixed points/ principles which can be used to assess what his vision for society was.

His most important principle was `last person first’. Nothing could be more democratic than this. Policy has to be aimed at the person at the bottom of the income ladder unlike in the market where those with the highest amount of purchasing power determine the market outcome. These are the people who also determine the political outcome via control over politics of the country. So, in the current milieu it is the organized sector which gets the concessions from the government even though the problem originates in the unorganized sector. The latter is always treated as a residual sector. So, they get the resources left after catering to the organized sectors.

Globally also the rich countries determine the shape of policies via their control over the IMF, World Bank and so on. So, India only enjoys relative policy independence to do what is needed for the poor.

The next principle is ‘there is enough for everyone’s needs but not for their greed’. This is contrary to the idea of more is better’ and consumerism. Gandhi suggestedvoluntary poverty’ – people have to voluntarily minimize their consumption. The idea is one cannot preach sacrifice but it has to be based on the individual’s own will. So, creation of needs via advertising has to be curtailed. This is an environmentally sound principle. It also minimizes greed.

Gandhi talked of a holistic person and not an atomized one who could resist the onslaught of the modernizers and the advertisers. The alienation created by the market was to be challenged by making the individual strong and conscious in a holistic manner. His education system was designed to create such strong individuals. He felt that the education system foisted by the colonial power was alienating since it was not relevant to the experiences of the Indian population. He suggested NaiTaleem which would end alienation of the individual.

Under Gandhi’s scheme of things individuals would become socially responsible for their actions rather than killing their conscience. They would work for the wider goodand not just for themselves. The focus would be different from that in the idea of the invisible hand’. That idea is crucial to the practice ofvoluntary poverty’.Voluntary poverty also implies equityin society. Whatever they may earn, people would live similar Spartan lives. This idea also leads to the notion of trusteeship’ for which Gandhi has been criticized since it is seen as a defence of capitalism. But this idea is also one of collective ownership of means of production with the capitalists only astrustees’ of social wealth.

VI. Gandhian Thought Contrast with Principles of Marketization

Gandhian Thought is in contrast to the principles of marketization. For instance, equity which is only paid lip service by the neo-classical economists is central to Gandhian thought. This is not to be achieved via government intervention through the non-existent non-distortionary `lump sum taxes’ but by highly conscious individuals automatically redistributing. Thus, the parameters of Gandhian economics are completely different from those of the neo-classical economics based on optimization under given constraints.

Gandhian thought is contrary to the idea of optimization whereas the entire neo-classical economics depends on this device. Under the latter, individual actions are determined by economic incentives and punishments. In contrast, Gandhi believed that individuals can be motivated by higher ideals to do the socially correct thing. So, in neo-classical literature, tax evasion is an exercise in optimization between gains of tax evasion and expected losses if caught. Smuggling is supposed to enhance social welfare by allowing that to happen which the state prohibits, so it is welfare enhancing and desirable. Under Gandhian thought the individuals would automatically desist from these activities so that they would be marginal occurrences. In contrast, for neo-classical theory this would be the norm since everyone would indulge in illegality to the optimum amount – so, illegality has to be tolerated rather than eliminated.

Under neo-classical economics people are a cog in a big machine optimizing their gains. They are mere statistic so that markets are amoral. If one has the purchasing power one can buy food, otherwise not – no value judgment need be attached to it. Society is supposed to be subjective and is in retreat while markets are taken to be objective and dominate present day thinking. Social judgments are a check on the individual and hence undesirable. Individuals as optimizers can act whichever way, depending on what benefits them. Social values are seen as paternalistic. Underlying marketization is consumer sovereignty’.So,the collective should not intervene in the choices of the individual. Government represents the collective so it should retreat from the markets. This is the theoretical idea of afree market’.

Marketization has led to a new international division of labour, with polluting production located in the developing world and clean one in the advanced countries. The argument is that if people die earlier in the developing world than in the advanced world that is optimum from the point of view of the markets. Gandhian thought would be entirely opposed to such a formulation since each person and nation is responsible for their own actions and cannot thrust the consequences of their actions on those who are weak.

Gandhian philosophy requires a different person than today’s `materialistically’ inclined citizen. Present day citizens,imbued with the philosophy of marketization, are homoeconomicus – to them only economics matters to the exclusion of history, sociology or politics. This philosophical change in society is visible in the dominance of economics in Social Sciences with the other disciplines relegated to the background. Immediate economic policy issues matter far more than other aspects of the citizen’s life.

Today’s economic models are ahistorical and hence status quoists. Optimization is also a largely ahistorical device. So, capitalism is the ultimate form of social organization and there is endism – no other possibilities exist. In the general equilibrium models, all other social formations are simply different cases of the same set of equations. This is the result of stripping all variables of their social, political and historical content.Even when time is introduced in the equations it is done in such a manner that its essential aspect, namely, uncertainty of the future, is eliminated. In doing so, real time, which distinguishes between the past, present and the future is eliminated.

VII. Tackling Black Economy and Illegality in Society

One of the key concerns of Shri Shambhu Dutt ji was growing corruption and illegality in society. As pointed out above, the neo-liberal theory allows this activity to continue at an optimum level since it is supposed to be welfare enhancing. However, it goes against Gandhian Thought because it is anti-social and based on individual gains at the expense of society.

I have been researching the black economy since 1979-80 when I first wrote a paper on the subject. I have shown that it leads to policy failure and massive inefficiency. Social goals like, education to all or health to all are undermined when only 15 paise reaches the ground out of every Rupee allotted. It is said that `allocations do not lead to outcomes’. It leads to failure of planning, monetary policy, employment policy and so on. It results in the harassment of the individual in society when public services are poor and accountability of the bureaucracy, judiciary and politics is undermined. Businesses become unaccountable to the public with the result that food is adulterated, capitation fees charged for education, poor quality products are supplied and so on.

India has been losing 5 rate of growth since the 1970s due to the inefficiency in the economy. If this black economy had not existed, today India would have been roughly the size of the US economy and we would have been in the ranks of the rich countries. Elections are impacted and crime increases as a result of the operation of the black economy.

So, what can be done to tackle the black economy and associated corruption? The black economy is a result of the political economy of the country. There have been dozens of committees and commissions that have looked at the problem and made thousands of suggestions and hundreds have been implemented. Demonetization which failed to tackle the black economy is not the first step taken by the government. Economic and technological steps have been taken repeatedly but the size of the black economy has continued to grow. Why the steps taken in the past have failed is because the problem is political and not just technological or economic.

What is required, I have discussed repeatedly, is to bring about accountability of business, politics and the executive. The solutions have to be long term and not just short or medium term. Shambhu Dutt ji’s push for Right to information, whistle blower and Lok pal need to be further strengthened. I have been making many suggestions like checking of Havala and curbing of banking secrecy in the short run. Above all, the adoption of Gandhian Values will make a dent on the problem.

VIII. Conclusion: Relevance of Gandhian Thought Today

This talk has focused on the Gandhian Thought and not Gandhi who was a practical politician also. As practice there were many changes in his position and his judgments changed but the core of his thought remained unchanged and that is the focus here. It was a long range vision and not the short term one that we are all subject to at present.

Gandhi was also for the withering away of the state as society evolved to become an agglomeration of highly conscious individuals. So, Swaraj meant self-rule at every level from the individual to the village and the larger entity. In this sense, Gandhi was for decentralized governance and a bottom up approach unlike the present structures which are based on a top down development model. Later he did lament that we are not yet prepared for what he was suggesting.

Gandhi was for non-violence against other individuals or animals or nature in general. That made him an environmentalist at heart and his life reflected that. Even though it was said that it was expensive to keep Gandhi in poverty, it was important that he set an example so that the world which has been going in the opposite direction to his belief system could see what was possible if everyone adopted what he was suggesting.

In brief, Gandhian thought provides an alternative to tackle the problems confronting present day society by talking of genuine democracy, non-alienated individuals, protection of the environment, equity among all and so on. It is a holistic vision rather than a piecemeal one, as is the case with the current phase of capitalism based on marketization.

Arun Kumar is Malcolm Adisesiah Chair Professor, Institute of Social Sciences. Author of `Indian Economy since Independence: Persisting Colonial Disruption’. 2013, Vision Books.


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