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Gandhian Economics : The need of the times
By Dr. Sameer G. Thakur
Siddharth College of Commerce and Economics, Mumbai
Mahatma Gandhi's views on Economics have been largely ignored by mainstream economists and leaders, even in India. This paper tries to show that the neglect of Gandhian Economics has led to the major problems facing the global economy today.
Many of the problems facing India would be reduced, if not resolved if ethics was considered as an inseparable part of Economics. This is what Gandhi believed and events seem to be proving him right.

The concept of Gandhian Economics
At the outset one must realise that Gandhi was not an economist, but a thinker. His views on economics arise out of a desire that society must be improved. Due to this he has been ignored by the mainstream economists, who discuss specific problems such as unemployment, inflation or development separately. On the other hand Gandhi clubbed together, not only all of economics, but also subjects like ethics and politics. This holistic approach enables a much wider view than mere economics can encompass. Therefore Gandhian Economics is more general than the general theory of Keynes (1936)1.
Since the economic thoughts of Mahatma Gandhi are not very well known in economic literature, some of them are briefly discussed below.
  1. Limitation of Wants: Dasgupta (1996)2 has explained the concept very well. Economics is based on the fundamental principle that means are limited and wants are unlimited. By definition, the economic problem can never be solved. No maximisation technique can ensure the satisfaction of unlimited wants. Gandhi suggested that the problem can be solved if everyone limits their wants since there is enough for everybody’s need, but not enough for anybody’s greed.
  2. Morality: Standard economic thought assumes self-interest as the driving force behind all economic behaviour. Gandhi said that social interest must be paramount, but it must come from within. According to him, “That economics is untrue which ignores or disregards moral values”3 and economics that hurt the moral well-being is sinful4. In reality people work, not merely for their own benefit, but also for their near and dear ones. Once we start truly accepting all of society as part of our family, morality will inevitably become a part of economics.
  3. Swadeshi: Gandhi’s concept of Swadeshi was not merely a form of economic warfare against British rule. Swadeshi was a programme for long-term survival. It would reduce the problem of contagion effect, where a recession in the U.S. may affect the rest of the world. Countries would be more insulated from global economic shocks.
  4. Decentralisation: Gandhi believed that, “The true India is to be found not in its few cities, but in its seven hundred thousand villages. If the villages perish, India will perish too.”5 Due to this, he believed that only a decentralised approach with emphasis on small and cottage industry would lead to develop throughout the length and breadth of India. Such an approach would also reduce income disparities. In fact, decentralisation was the extension of Swadeshi at the micro level. The village would be a self-sufficient unit, just as Swadeshi envisaged a self-sufficient country. Gandhi was of the firm belief that, “Urbanisation in India is a slow but sure death for her villages and villagers.”6
  5. Khadi: Khadi became a symbol of resistance to British rule. However, Mahatma Gandhi’s advocacy of Khadi was partly related to his desire for decentralisation and economic equality. Having travelled throughout the country and seen the problems of the people, he knew that Khadi would enable the marginal farmer to break out of the shackles of seasonal and disguised unemployment. According to Gandhi, “Khadi was conceived with a much more ambitious object, that is to make our villages starvation-proof.”7
  6. Trusteeship Principle: Trusteeship is a socio-economic philosophy that was propounded by Mahatma Gandhi. Trusteeship is based on the faith that human nature is never beyond redemption. The right of private property is allowed, only to the extent permitted by society for its own welfare. The ownership and use of wealth may be regulated by the State if necessary. Ideally there should be minimum and maximum wage limits.
  7. Sarvodaya: The term is derived from the two words, sarva and uday (upliftment of all). Sarvodaya encompassed concepts such as, the dignity of labor, an equitable distribution of wealth, communal self-sufficiency and individual freedom. The ashrams started by Gandhi were based on these principles.

The need for Gandhian Economics
There are four major economy related problems in the world today. The most evident one is economic crises. Financial crises and the resulting recessionary trends are part and parcel of the modern economy. Such problems may arise because of various inter-related reasons. Outsourcing led to higher profits for firms in the U.S. and developed economies. These profits led to excess funds with the banking and financial sector, which led to sub-prime loans. At the same time, the outsourcing led to domestic unemployment and consequently massive defaults on loans. Such defaults caused further problems. Due to extreme economic inter-dependence between different countries, the crisis spread from economy to economy, like a contagious disease. Countries heavily dependent on exports suffered the most. India and China did not suffer as much because of high levels of domestic demand and the fact that they were not as integrated into the global economy.
The second problem is environmental degradation. Pollution and global warming are likely to create an unprecedented crisis in the next few decades. The third crisis is about to arise due to excessive use of resources. If crude oil disappears, it will destroy much more than merely our transport facilities. The output of foodgrains depends on modern chemical fertilisers today. These require the use of various carbon chain compounds found in crude oil derivatives. The food output could fall by upto 60% which would be a tragedy. Similar problems will be caused if any other crucial resource runs out.
The fourth crisis is conflict. The outward causes of such conflict may be communal hatred, racial differences and many other apparent causes. We observe terrorism, wars, riots between groups, violence against the authorities et cetera. The underlying cause of all such conflicts is inequality.
The economic crisis arose out of the selfishness of profits. Concepts like limitation of wants, the trusteeship principle and swadeshi would have prevented this crisis from arising. If countries in the world tried to keep minimum dependence on international trade, national output would not be high. However, it would have sufficed a populace which limited its wants. The desire for higher profits would not have been the overriding factor driving economic changes like outsourcing, use of labour-saving innovations et cetera. Limitation of wants would also have prevented sub-prime lending since no one would want to borrow money beyond one’s means to repay. Business strategy would focus on social welfare rather than profits alone. So downsizing to increase profits would not be standard business policy. All this would have prevented the current economic problems.
The problems of environmental degradation and over-utilisation and wastage of resources are linked. They arise out of selfishness. When an individual owns and controls the means of production, resources are used for earning maximum profits. Under the trusteeship principle, policy would consider social welfare of current and future generations as well. So firms would not over-use resources or unnecessarily pollute the atmosphere. At an individual level also, people would not be too rich to care about wasting resources. Recycling and reusing would make economic sense to everyone. Besides this, a sense of social responsibility would also lead to less wastage and more careful use of resources.
At the same time, decentralisation and swadeshi would lead to lesser transport costs and automatically reduce usage of fuel. The focus on villages would also lead to lesser pollution than the current emphasis on developing large cities. Cottage industries like khadi are far less polluting than large industries.
Conflict and violence in today’s world arises out of a sense of injustice. Inequality creates injustice, in fact inequality is injustice. Leaders in India have ignored Gandhi to focus on large projects which are the, “temples of a modern India.” This is because leaders want to leave behind a legacy which can be physically seen, in some sort of Ozymandias8 complex. The objections against government or government-backed projects have been seen from the Tehri dam to Sethusamudram and from Nandigram to the banks of the Narmada. According to Gandhi even the very process of living is impossible without a certain amount of violence. What we have to do is to minimize it to the greatest extent possible. Large projects are very violent by nature, since they cause massive disruption of people, plants and animals. Consequently, the backlash is also very severe. The decentralisation advocated by Gandhi would prevent such conflicts. Similarly, separatist tendencies arise when it is perceived, rightly or wrongly, that a particular region has been left behind in the race for development. Decentralisation would prevent such feelings.   Reducing economic inequalities would eliminate many other types of conflicts in society. If the trusteeship principle had been part of global economics, the Occupy Wall Street protests wouldn’t have taken place. Many of the Wall Street protestors have been inspired to oppose inequality from the thoughts of the Mahatma.9

This paper has presented the basic concepts which form the core of Gandhian economicthought. A case has been made to show that Gandhian economics would possiblyhave prevented some of the major global problems from arising. Though it islate, even now Gandhian economics can lead the world out of the quagmire of theproblems discussed above. Adoption of the concepts given in part II can help usreduce the severity of problems like economic crises, environmentaldegradation, over use of resources and violent conflicts in society.

  1. J. M. Keynes (1936), ‘The General Theory of Employment, Interest and Money’, Macmillan Cambridge University Press.
  2. A. K. Dasgupta (1996), ‘Gandhi’s Economic Thought’ Routledge, London.
  3. Prabhu & Rao (Eds) (1968),  ‘Mind of Mahatma Gandhi’ pp. 263, Navjivan Publishing House, Ahmedabad.
  4. The Collected Works of Mahatma Gandhi, Vol. XXV, pp. 475, Publications Division, Govt. of India.
  5. D. G. Tendulkar (1960), Mahatma : Life of Mohandas Karamchand Gandhi (2nd Edn), Vol. 3, pp. 299, Publications Division, Govt. of India.
  6. D. G. Tendulkar (1960), Mahatma : Life of Mohandas Karamchand Gandhi (2nd Edn), Vol. 3, pp. 291, Publications Division, Govt. of India.
  7. D. G. Tendulkar (1960), Mahatma: Life of Mohandas Karamchand Gandhi (2nd Edn), Vol. 3, pp. 292, Publications Division, Govt. of India.
  8. P. B. Shelley (1826), Miscellaneous and Posthumous Poems of Percy Bysshe Shelley, pp. 100, William-Benbow, London.
  9. Ian Desai (Nov 29, 2011) What would Gandhi Do?, The New York Times, The Opinion Pages. /what-would-gandhi-do.html
Courtesy: This article has been reproduced from the ISBN Publication - Gandhi in the New Millennium - Issues and Challenges' published by Khandwala Publishing House.