Asking what an economy is for

Mahatma Gandhi.

Throughout his long public life, Gandhi reflected deeply on questions of individual freedom and welfare. Therefore, while much of conventional economics concerns itself with material production and efficient resource allocation, Gandhi’s intuitive focus was on the well-being of the individual and the health of society. This approach was systematically developed
by Gandhi’s associate, the economic philosopher and constructive worker JC Kumarappa(1892–1960), who came to be recognised as a champion of the village and its agrarian economy as well as an early environmental thinker.

It is Kumarappa who coined the term ‘Gandhian Economics’. Kumarappa opposed the widespread belief that development and progress were only possible through rapid large scale industrialisation. While industrialisation led to the efficient production of goods, Kumarappa showed that it had many negative consequences. The need for large investments inevitably led to production being controlled by a powerful entity, either the State or a capitalist. The resultant asymmetry of economic power allowed the industrialist to control workers and corner profits. This is visible today in the fate of the precariat who accept piecework under highly exploitative terms.

Centralised industries are also resource-intensive, leading to raw materials either being controlled or grabbed through manipulating state policy or other illegitimate means. It is for these reasons that Kumarappa argued that “centralisation of industries is inimical to the development of democracy in politics”. Kumarappa also examined the harmful environmental consequences of large scale industries. In contrast to viewing economics in material terms alone, for Gandhi and Kumarappa the primary challenge was to provide meaningful, non-exploitative employment to the masses who did not possess assets such as land, had limited skills and education. These objectives could not be met by either a capitalist or socialist economy both of which were predicated on large-scale industrialisation. The answer lay in a decentralised economy with production based on affordable technologies and built around labour as a means of distributing wealth.

This was the objective of khadi and village industries. Instead of exporting raw materials produced in the agrarian economy, Kumarappa and co-workers sought to
develop simple, affordable technologies that scientifically rationalised and improved the processing of agrarian commodities, such as methods for oil pressing, manufacture of handmade
paper, jaggery, etc. Thereby, they sought to enable the village to retain the economic value of its produce. Apart from providing meaningful work, Kumarappa argued that our
economy should also promote the egalitarian ideal. If we seek a more equitable distribution of wealth, Kumarappa argued, both buyers and sellers needed to be on an equal footing which would lead to fairer prices.

Such conditions are infeasible under long-distance trade or between unequal economic actors, but only possible when production is not delinked from consumption in the economy. We may characterise this as local production for local consumption, a view entirely missing from the current debates on how to generate rural demand.

In the ultimate analysis, Gandhian Economics is a moral argument. It asks how we should organise our economy so as to promote equity, justice and dignity for all. The Gandhian answer is not an advocacy of poverty as is often claimed. It recognises the fundamental need for a basic level of material welfare required for a dignified life. But it also argues that if we are to promote equity, while mindful of ecological constraints, the rewards for individuals will have to be moderate. Gandhian Economics never had its day under the sun. But in a world riven by inequality, the questions posed by Gandhi and Kumarappa are very much alive today. Like truth and nonviolence, justice and equity are as old as the hills.

(The author is a biographer of J C Kumarappa and is writing a thematic history of Gandhi in the 1930s)

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