Transcript This new regime led to…

Decrypting Development
A perspective via Economic History
For Sambhaavnaa, 2016
Prepared by
Praveen Singh
[email protected]
What is an Economy?
An economy is how a society organises
itself to cater to the needs and
betterment of its members.
 In other words, the economy is how any
society implements its notion of human
well-being, or ‘a better life for all’, i.e.
‘Development’
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It is more a set of relationships between people than
a relationship between people and things – as we
often tend to assume
A framework for looking at an Economy
Six questions, a principle and a report card !
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Who owns what?
Who does what?
Who gets what?
What is produced?
What drives technological evolution, and how does it
impact different groups in society?
How is Nature seen and treated?
and
 Can we discern some ‘organising principle’ or the ‘core
motivation/purpose’ driving economic decisions?
And finally
 What is the outcome in terms of human well being?
Structure of the presentation
1.
2.
3.
4.
5.
6.
7.
Rudimentary Economy
Village Economy
Exchange, as an economic activity
Capitalist Economy
Socialist Experiments
From Capitalism to Development
Imagining a Post Capitalist Economy
1. Rudimentary Economy
Rudimentary Economy
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Definition: A community that has
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access to some resources
and deploys the labour available within it to
procure goods for its sustenance
the economic decisions are solely based on
internal factors and considerations
Rudimentary Economy
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Gatherers, and not really producers
Workers less than total population
Activity and goods sharing economy
Beginning of division of labour
Economy deeply ‘embedded in’ or a
‘derivative of’, a sense of community
1. Who owns what?
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No ‘other’
No need to own – because its mostly
gathering rather than production
Hence, issue of ownership does not
really arise
2. Who does what?
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Most able bodied work
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There could be presence of a privileged subset
of members
Beginnings of division of labour
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Male v/s Female tasks
Not completely devoid of issues of less dignified
v/s more dignified work
3. Who gets what?
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Decided by Custom
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A subset of people become the custodians of
custom
Rudimentary economies need not be paradises
of ‘sharing and caring’: The worldview of the
group impacts these decisions
However, generally found to be very
egalitarian societies
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Not much reason to maintain elaborate
distinctions / hierarchies?
4. What is produced?
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Food/Clothing/Shelter : basic necessities
Generation of ‘use value’
Gathering / assembling of natural produce
for use
Q: How is it decided as to ‘how much to produce?’
Put another way, Is this a scarcity economy or an
abundance economy?
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Demand drives production
Cultural norms drive demand
5. How does production technology evolve?
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Very slow / gradual
Need based. Serendipity. Cumulative knowledge
growth.
No ‘us’ v/s ‘them’, not much hierarchy and
distinctions in society, no ownership – hence
impact of technological change unlikely to benefit
some at the cost of others
6. How is Nature treated?
Sacred / Revered / Feared
 Living very close to nature hence limits
of nature understood, and respected
 Low level of technological knowledge –
hence ability to ‘damage’ nature also very
low
 Norms evolved – and generally adhered
to
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Small groups – easy to monitor / check / punish
Faith based societies – more adherence?
7. The Organizing / Driving Principle
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Production for use
Production largely based on capability,
distribution largely based on need !
8. The Report Card / Wellbeing Status
(speculative)
Standard of Living
Equity, Justice, Solidarity
Safety-Security (from fellow humans)
Health
Education (Inter-generational transfer of Wisdom, Skills)
Sense of Community, Meaningful Participation
Harmony/Balance with Nature
Participatory Governance
Time Availability / Time Use
Psychological Wellbeing
Rudimentary Economy
Points to Ponder
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Material abundance v/s Wellbeing (stability,
safety, community, leisure, health…)?
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Smaller scale, face to face interactions: so
were they
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More in harmony with nature?
More just / fair societies? What about relations with
other tribes?
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Can we do economics without getting into human
nature/ human needs?
2. Village Economy
Village economy
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Settled stage of existence: a food-producing
economy
Ownership, especially of land emerges as a
key feature
Ownership => Settlement of Claims becomes
a key issue
Use of tools, specialized professions: increases
productivity and production: surplus
Ownership and specialization leads to
exchange as an important economic activity
Emergence of state, urban centers
Village economy
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Why does ownership evolve?
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Control over resources required to engage in
production
Time lag between deployment of labour and
harvest: Control over resources enables claims
on produce
The owner though is not always the producer
Scarcity of valuable resource?
Sense of social power/esteem?
Point to ponder: Is ownership always an effect of
scarcity, or can it also become a cause of scarcity?
1. Who owns what?
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Control over land is the central factor in a village
economy
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Generally found to be unequally owned
An important consequence therefore:
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Need for a third party guarantee to settle claims -
birth of the State
2. Who does what?
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Owners and non-owners: Two (or more) classes
emerge
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And controllers of resources, and those engaged in
production, are often different groups
Defined duties and obligations to ensure
fulfillment of different tasks deemed required by
that society: reciprocity of unequal
obligations
An economic hierarchy arises in society for the
first time – which mostly coincides with the
social hierarchy
3. Who gets what?
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Who gets what is decided by who owns what
rather than by who does what!
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To each according to his status, as ordained by custom
A ‘rentier class’ emerges: however, the
appropriation of surplus by some classes is
open and evident
State extracted wealth from rural areas as most
production still based in villages
4. What is produced?
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Primarily basic necessities - food / clothing /
shelter : Generation of ‘use value’
But specialization, and use of technology
enables increase and variety in production:
production of surplus
Production of some non-essentials, durables
also
5. How does ‘Technology’ evolve?
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Serendipity, human ingenuity, need/circumstance
Adoption of new technology and its impacts likely
to be determined by prevailing power and
hierarchical relationships, norms
Customs regulated production, distribution,
consumption norms; Low interaction with, and
limited trade possibilities with far away societies
 Thus drivers for ‘innovation’ in the modern sense
absent
6. How is Nature treated?
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Feared - Revered
A good understanding of natural cycles, natural
limits and the criticality of natural resources for
human survival
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Production techniques incorporate and evolve
around the above understanding
Customs, rituals etc to conserve nature; faith,
command based societies therefore fair
adherence to such norms
State of technology such that large scale
exploitation (destruction) not even possible
Key transformation from a Rudimentary to
a Village economy
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Private property – unequal ownership of
natural resources
Classes
Surplus production
Exchange of goods
Surplus appropriation via exchange,
custom
Emergence of a ‘Rentier class’, i.e. people
who live on unearned incomes
New developments:
1. Rise of the state, intra-unit domination
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Emergence of ‘urban’ settlements (possibly as
seats of the ‘state’) – mostly parasitic on the
villages
Intra-unit domination
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Domination now not only within the village, but also
between village and an outside entity
Transfer of wealth within village regulated by
custom, but State could extract arbitrarily
New developments:
2. Exchange & Trade become important activities
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Within the village unit, two kinds of exchange
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C-C’: exchange of goods – often between two
owners –over time, some norms of exchange get
set
L-C: Labour in exchange for goods: not always
between equal parties; a source of appropriating
surplus
Across village units, beginning of trade
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Initially, only between far away locations
Trade largely in non-essentials, luxury and
precious items
Village Economy: Roundup
‘Economy’ more distinct compared to a
rudimentary economy, though still
circumscribed in an overall societal /
customs framework
 Element of domination/subordination
becomes more pronounced: Classes
 Reciprocity of unequal obligations
 Rise of state: intra unit domination
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Village Economy:
Issues to ponder
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Claim to produce based on ownership rather than
work
Ownership of natural endowments ?
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Classes emerge, especially ‘rentier’ class :
Cumulative impact on differential resource
ownership, roles in society on trajectories of
different classes over generations
Emergence of the ‘State’ - an ‘outside and
remote’ higher authority
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Genesis of corruption?
Scope for excessive exploitation?
Decision making distanced from impact of decisions?
Village Economy:
Issues to ponder
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Stayed at low production and productivity for
ages: Why?
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Role of tradition / command?
No driver for innovation / productivity increase
Non availability of ‘concentrated’ energy sources like
fossil fuels – hence bound by nature’s cycles,
human/animal labour potential?
Is this ‘low productivity’ really a ‘problem’, or it is a
projection by us ‘super-consumers’ of the 20th/21st
century?
Extremely critical question, especially for people
working in the domain of social change
“Why has settled society always had
classes?”
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Small communities: and yet not equal / just??
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Is it because of unequal ownership?
Is it the impact of ‘higher authority’ under which they
existed?
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Are the above effects, and not causes?
Is it about human needs: Greed? Power ?
Status/Recognition/Esteem?
Can economics be studied independent of an
understanding of human nature, our
psychological needs?
Village Economy
The Report Card / Wellbeing Status (speculative)
Standard of Living
?
Equity, Justice, Solidarity
Safety-Security (from fellow humans)
Health
Education (Inter-generational transfer of Wisdom, Skills)
Sense of Community, Meaningful Participation
Harmony/Balance with Nature
Participatory Governance
?
Time Availability / Time Use
Psychological Wellbeing
GOOD
MIXED
POOR
One of the key drivers of change from village
economies to market/capitalist economies
was the increase in Trade…
Since Trade involves Exchange,
It is imporant for us to
understand ‘exchange’
Exchange: the beginnings…
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Begins as Barter
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C-C’: quest for use value
Between two owners – both buyer as well as seller
Theory might say they are entering into the exchange
willingly – hence cannot engage unless benefiting from
the transaction: reality, however, can be different
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The owners need not have the same bargaining power / be
‘equals’
Limitation: double coincidence of needs, terms
of exchange : thus need for a medium of
exchange arises
Exchange, mediated through money
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C-C’ to C-M-C’: from an exchange between two users to
buyers and sellers
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C-M-C’ changes to M-C-M’ : Facilitators of Exchange i.e.
‘Traders’ emerge as a new group in society
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Exchange activity bursts: more goods, and more people get
drawn into it: Commoditization
Quest for exchange value, as opposed to a quest for use value
– this happens because money is also a ‘store of value’
Can M-C-M’ thus ever be gain-loss free?
Information asymmetry starts playing a key role: trader has high
incentive to maintain that
Transition from ‘Money as a facilitator of exchange’ to
‘Money to make more money’
(Today we have moved to M-M’: Financial Capitalism)
Exchange, mediated through money
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All forms of exchange may co-exist at any point in
an economy – however, the difference in the
motivation of the trader to engage in M-C-M’
transactions significantly alters the dynamics
of the economy
Wealth prior to emergence of money was in the
form of physical categories – now money
becomes a store of wealth: potentially limitless
From ‘quest of a different use value’ to a ‘quest of
accumulating exchange value’ : the organising
principle of the economy begins to change
Exchange: Impact on the Economy, Society
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Increase in production
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Increased specialization of producers
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Possibility of accumulation leads to utilization of slack to cater to
demand in neighboring economies
Thus increase in productivity, and consequently in production:
however, this also pulls everyone into the ‘Market Economy’
Availability of goods via the market frees people from customary
roles and obligations
Enterprising people could make a fortune, ‘success freed from
societal bonds, accident of birth’
Increase in consumption: quantity and variety
Newer, larger variety of Goods
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‘Produce to sell’: ground for innovation, experimentation
Exchange, due to above reasons, has also been
seen as facilitating liberation
Exchange: Impact on the Economy, Society
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Makes the production process ‘Exchange Value’
conscious
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‘What to produce’ – earlier governed by nature
and custom – now increasingly responsive to
calculus of costs and prices
New range of choices and, compulsions open
up for everyone
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Not everyone gains or can adjust easily
Production becomes an activity that requires risk
taking: not everyone might be equipped to deal
with that
Add slide of Adam Smith’s conception of ‘gentle
commerce’ and reality
Exchange: Impact on settlement of claims
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Earlier societies: social / ethical considerations played an important
role in determining settlement of claims
In the regime of prices, everything including labor power gets
commodified, and all claims increasingly get determined through
the ‘voluntary and free’ exchange process
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From a purely ‘logical perspective’, this appears far less ‘arbitrary’
compared to previous methods: however, in reality the prices of
various commodities are influenced by the prevailing distribution of
ownership of resources
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The doctrine of ‘individual responsibility’ /’equal opportunity’ takes
birth
Customs are replaced with contracts
We move from a world of philosophical/ethical debates on critical
economic matters to a world of ‘logic’ and ‘numbers’
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As they say, “we now know the price of everything but the value of
nothing”
Impacts of Exchange:
Emergence of the nation state
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Concept of ownership becomes sharper: strengthens
individualizing tendencies and breaks down community
ownerships / relationships
While communities and families beak down, ownership
requires a guaranteeing social authority – of a ‘higher’
nature
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the ‘State’ for instance, instead of the tribe or village
this authority also required for ensuring contracts are
carried out
need for credible ‘money’, and other institutions also
builds the ground for a more centralised, and often more
distant and higher power
Impacts of Exchange: Concentration of Economic
Power, and its nexus with political power
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Traders of two kinds emerge
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Those who engage in trade to make a living – they provide
a service of use value – and are paid for that
Those who engage in this activity to increase their surplus
wealth
The latter is the first category of people who
specialize in accumulation of exchange value (money)
Trade becomes the first ‘legitimate’ source of money
accumulation in history
The merchants and rulers develop an alliance:
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The rulers are always in need of money, and the traders are
the ones who have plenty at their disposal
These traders ask for ‘favours’ in return, to enable their
businesses to flourish
With increasing trade, and
‘merchants-money-markets’
assuming a more significant role in
day to day life, there is a shift from
‘traditional / command economies’
to ‘market / capitalist’ economy
Reasons…
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Trade led to accumulation of money in a few hands
These traders used this money to buy up means of
production
Technological developments in production and
transportation, fossil fuel discoveries led to new
techniques of production and ability to reach far away
lands
Market for domestic goods abroad led to changes in
organization of production (enclosure movements):
consequently, the rise of the ‘free laborer’
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“The free worker, who is no man’s property, is also no man’s
obligation”
Rise of the Cash economy
Market of ‘Land, Labor, Capital’ developed
The Age of Reason – and correspondingly the
acceptance of change as the ‘normal’ thing in society?
The Protestant Ethic ?
VERY IMPORTANT: Capitalism was not some
‘natural progression’ as many histories claim…
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The change to a market economy did not happen
without extinction of customary rights, large scale
dispossession, intense exploitation, the imposition of
market imperatives and environmental destruction
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These processes extended their reach from the
relations between exploited and exploiting classes to the
relations between imperialist and subordinate countries
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These processes are repeating themselves even today
wherever capitalism is making its inroads (e.g.
Chattisgarh, Orissa or most of the rural hinterland in
India)
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Put a slide of examples first – concrete to abstract
(enclosure mvmt, early british factories, india,
colonialism, etc)
Capitalist production: How it works
Capitalist starts with a fixed amount of money capital (M1)
Buys machinery, raw material, and labour
Uses a certain technology and organisational form to make
production activity happen
New commodity is produced; The Capitalist has the ownership of
the produce because of having owned the means of production.
The commodity produced needs to be sold in the market at a price
M2 such that, M2 > M1.
The process has yielded a profit of M2-M1 to the capitalist. This
was the sole reason for his endeavour.
Surplus value has automatically accrued to the capitalist. No need
for coercive or overt means of appropriation!
Start again at step with money capital M1’ where M1’ > M1; The
augmented capital comes from the profit made in step 6.
1.
2.
3.
4.
5.
6.
7.
8.
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This augmentation of capital is not a matter of choice or individual
greed of the capitalist: It is a survival compulsion in a system based
on competition
Depiction of a Capitalist Economy in mainstream
economics theory: As a harmonious system of voluntary
exchange between free individuals
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Society comprises Resource Holders, Producers, Consumers
Consumers express their preferences for the goods they desire; this
translates to demand and corresponding price signals for these
preferred objects
Producers decide on this basis as to what is to be produced; but it is
important to see that producers do this for their own self interest
This decision signals to resource holders where they should be
deploying their resources for highest returns – again this segment also
does it for its own self interest
Thus, not only does a market economy treat the ‘consumer as king’,
but it also ensures best outcomes for all players, and optimal allocation
of all resources!
Prices: A ‘rational and objective’ guiding principle as opposed to the
‘arbitrary or subjective’ guiding principles of past systems
This is Adam Smith’s invisible hand: that individuals acting
in their self-interest also end up producing socially optimal
outcomes
What is wrong/missing in this depiction?
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Production for all consumers, or production only
for those with purchasing power?
What underlying factors and historical
circumstances drive the determination of prices?
How come the ownership of ‘produce’
automatically rests with the capitalist ?
•Thus this depiction mutes the question of ownership and
control of resources in the economy – which is the most
important issue in any economy
•It also mutes the historical nature of circumstance
What is wrong/missing in this depiction?
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Producers respond not to ‘consumers’ needs’, but to ‘purchasers’
needs and desires’ i.e. only to those with purchasing power
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Is trying to capture the purchasing power of the consumer and
responding to their needs the same thing?
Purchasing power depends on the how resources are owned and
controlled in the system: the depiction is silent on this aspect
All societies started their transition to capitalism with a highly iniquitous
distribution of resources
It is an economy of ‘owners’: only those who possess some resource
are included
Prices that get established reflect the initial endowment of resources;
and the ‘optimal’ configuration that results is strongly dependent on this
initial endowment of resources
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Devastating ramifications in the Indian context where large
masses have nothing but ‘unskilled’ labour as their only
resource
Special ‘ownership’ right of the capitalist over the produce by virtue of
ownership of means of production hidden in this depiction
The market is thus not a neutral institution: it is a close ally of those
with resource power
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Alternative Depiction of a Capitalist Economy: Is it more a
system based on different kinds of ownership?
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Traders accumulate money, and in their desire to further
accumulate money, buy up resources deemed valuable
in production (lands, tools etc)
In the process, customary rights of many groups of
people who worked the land denied; they are left with
nothing but their labour power to sell
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The rise of the ‘free’ worker: society had no claims on him,
neither does it have any obligations towards him
Thus a capitalist society comprises ‘capitalists’ and
‘workers’ who seem to have a reciprocal, but very
unequal, need for each other
Is it a harmonious system as depicted in the exchange
depiction or is there an inherent conflict of interest,
imbalance of power in the system?
Capitalist Economy:
Key Features
(or fault lines?)
1. Production is for profit, and not for use
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All production decisions governed by quest for profit
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The multi-dimensional nature of human
needs/wellbeing goes for a toss
Economic system decouples from real social needs
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What to produce, how much to produce, how to
produce, where to produce: all decisions respond
solely to the metric of profit
All capitalists essentially compete for the limited
buying power pool in the population
Production (GDP) was in itself an incomplete measure
of wellbeing; now it has several sub-fractures
1. Capitalism and profit (contd.)
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Surplus accumulation has always existed in society.
However, earlier the utilisation of the surplus was
elsewhere
In a Capitalist economy: Accumulation is the sole
purpose of the system - and the utilization of the
surplus is only to further more accumulation!
Limitless potential to accumulate wealth as money –
as opposed to physical limits earlier when wealth
accumulated as physical wealth
2. Competition: an inherent and
inescapable compulsion in the system
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No assurance of sale, thus all producers compete for
survival
Most innovation is to ensure one’s survival rather than a
response to actual customer needs
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Everyone (not just the capitalists) is directly or
indirectly, subject to the demands of competition
thereby pushed to increase productivity, accumulate,
and exploit labor
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However, this is projected as a virtue of the system
For a certain class, it does end up being beneficial as new
products and conveniences enter their lives everyday
Pushes people into becoming the ‘selfish, utility maximising
individuals’ the theory conceptualises human as!
The uncertainty brings in insecurity and instability
Builds in speculation opportunities
2. Competition (contd.)
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Competition is said to be always good for
the consumer
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Is that really so, or does it lead to concentration
and centralization of capital (ownership)
Do the resulting monopolies or oligopolies
always work for the consumer’s good?
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More importantly, are we just consumers or also
employees, parents, people?
Scale is one way to ensure survival – and this
leads to related issues of urbanisation, distance
between producer and consumer, town-country
divide, ecological impact
3. A Capitalist Economy needs to
perpetually change
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Pressure of competition manifests as need to
perpetually change
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This constant change too is projected as a virtue :
Dynamism / ‘Creative Destruction’
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Products
Methods of production / locations of production
Forced redundancy of capital equipment, producers,
and workers, regions (cities-states), resources, and
often leaves regions ecologically devastated
Is it dynamic or unstable with built in insecurity?
Planned, perceived obsolescence becomes an
imperative
 ‘Efficient’ or abetting waste, irrational?
4. A Capitalist Economy needs to
perpetually grow
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Deploy part of profit to retain profitability of
previously deployed capital
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Forays into pre-capitalist economies for raw
materials, markets – Conquest, slave trade,
Imperialism, War, Neo-colonialism, internal
colonisation, using fronts like the ‘white man’s
burden’ and now ‘Remove Poverty via
Development’!
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Also due to insatiable need for money/power,
shareholder pressure, systemic insecurity etc.
Capitalism can sell everything; but it can’t sell ‘less’
Obliterates possibility of ‘socialism in one country’
Propels Consumerism: More and more goods; More
new goods
5. Need to perpetually grow leads to
rampage of Nature
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Nature reduced to an object of utility for mankind
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None of the predecessor economies had this feature
It is a systemic feature: not solvable by individuals
becoming ‘green’
In the short run, this catastrophe is also milked by the
system: leading to more types of needs and products to
be produced - Techno optimism, and ‘Green’ Solutions!
Demand-Supply based price regime very poor at
signaling problems that have deferred, distant
impacts
Leads to Externalization of Costs
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Long production chains – benefit and costs to different,
distant parties
Collusion with governments to get favourable regulation
Polities compete to get investment: ‘Race to the bottom’
6. Need to perpetually grow deploys
advertising and debt as the chief tools!
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Advertising starts affecting every aspect of our life
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Buy now, pay later
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Creation of a ‘cultured’ being who needs more things
Self image driven by the products we use
No one ever has enough
An indebted society
Alienation of the individual, because no communal
purpose to life, production etc – man reduced to a being
who should fend for one’s bodily needs
•Our
worldview, our values have been held to ransom by
the internal laws of an economic system!!!
•Is the economy a means to our ends, or are we existing
for the economy?
7. Hailed as ‘efficient’, but the system is a far
from it in many ways
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Production is based on expectations, in an environment of competition
for survival
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Quest for a limited buying power pool by all capitalists
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Immense scope for mismatch between production and demand
Periodic crisis: booms and busts
Speculation opportunities – which too are touted as opportunities that
enhance efficiency/stability
Possibility of potential loss factored into prices
Capitalists often ‘destroy’ produce to maintain profitable prices in markets
These aspects sometimes combine with monetary and financial
aspects to magnify crisis
Capitalists v/s Wage Labour: conflicting system or a harmonious
system
 Reciprocal, but unequal relationship between the two
 Technological Innovations and the quest for profit in capitalism
work towards making labour redundant: for those who ‘own’ only
labour power, this is a fatal consequence
8. Money, Credit, and intermediaries like
Banks become essential

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Credit is essential for capitalism to flourish
Lending to ensure buying
Individuals over time give way to institutions like banks
Money, and money substitutes come about – which become
a means for unearned/extractive incomes for bankers (credit
creators)
Financial Innovations to ‘stabilise the uncertainties’ – in
reality end up making the system even more complex and
unstable
Money creation and maintaining its integrity becomes a
key requirement
All this leads up to ‘Financial Capitalism’ – Capitalism in
its most extractive and unstable form!
9. Capitalism talks of laissez faire, but
couldn’t survive a day without State support

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Property rights need to backed by state – often by force
and other extreme measures
Legislative measures to define and defend contracts;
Judicial interventions
Money creation, maintaining integrity of money
Some public goods would always need to be provided by
state
Regulating externalities, actions that have future
consequences
The freedom and choices of the market do not come
for free (all costs – social, ecological, resource etc are
paid by someone) – thus a society that is conscious of
its priorities would do well to regulate the scope of
markets in order to ensure its priorities being met
9. Capitalism and the State (contd.)

It is because the State has an essential and
crucial role in a capitalist economy that there is
an attempt by corporations to capture state
power

A market economy (unlike the pre-market economies) has
two distinct loci of authority: the economy and the state


In pre-market economies, the ‘political’ authority dominated /
controlled / superseded the economic realm
In a capitalist economy, the economic authority tries to
become the sole authority by a capture of the state!
 State in a capitalist economy has lost direct access to the
surplus

‘Can capitalism be anything but crony?’
becomes an important question to ask
10. Do all ‘factors’ get rewarded appropriately
for their contribution in capitalism, or…

…or does the process of accumulation of
surplus become covert, and get legitimised?



Capitalist appears to be a ‘partner’ in production
Transfer of value in value form as opposed to physical
form
Ownership of ‘produce’ automatically goes to owner of
means of production; thus the surplus that got
generated appropriated by the capitalist in a very
‘smooth, unnoticed’ manner: no need for coercive
methods of the pre-capitalist economies
Some other points worth pondering…

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There is a belief that ‘Capitalists those who have worked
hard in the past and saved money’ : how true is this?
Why do we have such high military expenditure in the
world?
The slogan of ‘individual freedom’: is it a necessary
propaganda of the capitalist economy or does this slogan
have any real content / basis?
Democracy misused via Capitalism?
 ‘One man one vote’ mutated to ‘one dollar one vote’?
 Accumulation by dispossession, internal colonies
Is self interest really transmuting into social good? Or do
we need a ‘visible hand’ ?
Capitalist Economy
The reader can try and answer these questions now


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Who owns what?
Who does what?
What is produced? (Why?)
Who gets what?
What determines the choice of technology in
production processes?
How is Nature viewed/treated?
What is the organising principle governing a
capitalist economy?
What is a Capitalist Economy?


Most countries of the world today have systems
that are essentially capitalist economies
India too has a predominantly capitalistic economy




Private ownership of means of production: private property
rights protected by the state
Markets and the prices determined in markets are the
mechanism for economic transactions/decision making
All production is for profit
Most workers are wage/salary labourers [ i.e. in order to gain
access to means of production - without which no one can work they have to contact with owners of means of production]

It is imperative for any socio-political activist to
understand capitalism, esp. in its current global form
Q1: Who owns what?



Wealth ownership in a society is a good proxy
for the ownership of means of production
Top decile owns nearly 3/4th of all wealth
 This concentration only increases with time in
any capitalist economy
Implication: Ownership over means of
livelihood is the foundational source of
power and inequality in society
Q2: Who does what?




It depends on factors of production (land, capital,
labour) you bring to the market
Once there is an extremely skewed ownership of the
means of production (i.e., land and capital), most others
have nothing but their labor (often ‘unskilled’) to offer in
the market
No wonder in India, we have 92% jobs in the
unorganised sector!
 1%, 7%, 93%: Owners, Organised, Unorganised
As we saw earlier, unorganised sector job are mostly
 Very low paying
 Often seasonal and non-permanent
 With minimal facilities / benefits
 Tough jobs, and with no dignity either!
Q3: Who gets what?


India: 93% jobs in the unorganized sector – low paying
and normally manually strenuous
India: income distribution corroborates the inequality



80% of Indian households (avg size 5-6) live on less than Rs
12500 per month
The NCEUS report in 2007 said that 77% Indians live on less
than Rs 20 per day (2004-05 data)
When means of production are owned by a few, there is
a huge workforce with very little bargaining power, and
nothing but its labour to sell


The power equation is clear: the outcomes foregone
Further, the dynamics of a capitalist system are such that over
time, the rich get richer, and the poor poorer
 So this exploitation and rising inequality has an intergenerational persistence – as opposed to the ideology of
‘equal opportunities’ and ‘self made men’
Q3: Who gets what: fault lines



The market claims to reward each ‘factor’ of production, i.e., land,
labour, capital according to its contribution
 Once capital is accumulated, it yields perpetuities: labour however
has to work every time
 Big difference in ‘desperation’ of labour v/s that of machinery owner
to get into a contact – hence huge difference in bargaining power
 Also, element of relative numbers of the two parties
Question of where did the additional value in the finished product –
greater than the value of the inputs – come from, and how should it be
distributed
Possibilities for ‘Undeserved’ Income


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Uncertainty in system leads to opportunities for speculation, and income
via those: how deserved are those incomes and does this activity
necessarily have a positive social contribution
‘Ownership’ of common heritage like natural resources by a few
Information asymmetries exploited by intermediaries
Q4: What is produced?


In a capitalist system, what is produced depends on
what will get sold
Or in other words, production is governed not by the
needs of the citizens but by the desires of those citizens
who have ‘purchasing power’


Yes, the market confers ‘freedom of choice’ – but only to a
chosen few
This is evident if one looks at ads today


In a country that lacks toilets in nearly half its households, we
are selling 2.5 lakh cars a month
Most of our big cities have about 50% people living in slum-like
housing – and we only have high end housing being constructed
and sold
Q5: How is Nature treated?



Land degraded, Water tables receding – water crisis
and disputes across cities, states, people…, Air:
amongst the most polluted in the world
New and incurable diseases – from fevers to cancer…
Capitalism needs to expand for survival; it needs
cheaper raw material, new markets, cheaper
manpower: all this is cannibalistic on humans as well as
nature


It is also predatory on other kinds of economies: colonialism
and internal colonies
Prices are a very poor signaling mechanism for anything
whose consequences are far away into the future or
geographically far
Q6: What drives all economic decisions:
human well-being or profit?



In a capitalistic system, each producer is competing
with all others to sell his/her goods
While this competition is touted to be good for the
consumer, it builds an inherent uncertainty,
insecurity and instability in the system
This uncertainty/insecurity compels all participants to
look out for their interests only



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
Selfish and unethical behavior becomes a necessity, thus
ubiquitous
Growth is a survival compulsion of the system – which leads to
search for cheaper raw materials and labour, new markets
Conquest, colonialism, imperialism
Rampage of Nature
It builds in opportunities for speculation
Q6: What drives all economic decisions:
human well-being or profit?

Cost cutting, seeking ‘better bargains’ is another
compulsion to survive, This leads to



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Exploitation of labour, redundancy of labour
Alienating and monotonous work
Advertising and debt to sell products
Government and policy capture by corporates to
ensure profitability/survival, at the cost of people’s
well-being
All this is further compounded in a global capitalist
system
The system, on the whole, brings out the
worst in human nature
Question that naturally ought to be asked:
Can Capitalism and human well-being co-exist?


Can production be governed solely by profit
Competition – more ills than good

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Touted to be good for ‘consumer’ : but ‘consumer’ is also a
citizen, a family member, needs a job, fresh air and water,
equality, justice, dignity, self-fulfillment…
Forced Innovation: Planned Obsolescence and Perceived
obsolescence, and many such irrationalities
Is infinite growth possible on a finite planet?
Can we put a price to everything? Can natural
resources be unequally privately owned?
Exploitation of labour, redundancy of labour
Can it avoid having alienating and monotonous work
Driving humaneness out of humans?
Pre-market v/s Capitalist Economies
Pre-Market Economies

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
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Stability of organisational
pattern
Stability of Performance
Fairly steady production of a
few standard goods
Production processes remain
invariant for long periods of time
Thrust is on production for use
Customs and other extraeconomic considerations govern
functioning: depicted by
opponents as ‘subjective and
arbitrary’
Low to no environmental
damage
Inequality and injustice
Capitalist Economy








Very dynamic
Prone to instability, crisis,
uncertainty
Increase in quantity and
variety of goods produced
Production processes
change frequently
Production for sale/profit
Exchange, Markets and
Prices have a key role to
play in its functioning:
depicted by proponents as
‘rational and objective’
Severe environmental
damage
Inequality and injustice
Capitalism: An assessment
POSITIVES
 More production
 Variety of products
 Increase in physical
capital
 Increasing technological
innovation, increasing
productivity
 Promise of enlarging its
circle of beneficiaries
 Promise of ‘individual
can shape his/her
destiny’
NEGATIVES
 Works only for a few
 Over time, increasing
inequality: Crime, War
 Ecological Catastrophe:
externalises costs
 Unstable, adds to insecurity
in various ways
 Meaningless and alienating
work
 The end of Community
 Manufactures consent,
opinions, and worldviews
that are life-degrading
Why is the market ‘ideology’ so prevalent?




Market ‘ideology’: the view that an economy in which decisions
made on basis of signals provided by unhindered functioning of
markets is the most superior form of economic organization
Roots in the rise of merchant class in Europe - nouveau riche trying
to get social prestige: sought legitimacy via a doctrine of trade
being good for making a nation wealthy (the mercantilist view)
Adam Smith pointed the fallacies in this view – but legitimized
exchange, markets and self-interest as being powerful motors for
human good – by establishing that production and productivity
would grow if markets were permitted a full play. This was later
strengthened by ‘rational / mathematical’ models in economics in
the late 19th century, and further in mid-20th century [Leon Walras,
Arrow and Debreau)
Most economists today accept the conclusions based on the chain
of reasoning in the above treatments without examining the basic
premises
Capitalism is seen as equivalent of a market
economy, hence virtues of market are transplanted
on capitalism



It is not being said that exchange, money, markets do not have their
positives : they certainly do
But these positives manifest only if all of the above are regulated
and subordinated to larger societal values and goals – and those
instruments/institutions be designed to keep their potential maleffects in check
The other important point is that assumptions of mainstream theory
do not take into account many factors, thereby not bringing out the
real causes of the problems today
The lacuna is that the models that show their
efficacy in mainstream economics today have builtin assumptions that do not match reality; and most
proponents of these models are consciously or
unconsciously overlooking this catastrophic error
Some insightful excerpts
about Capitalism…
Market Society and the Profit Motive
1.
Did the market society invent the ‘profit
motive’?

2.
Did it intensity it?

3.
Certainly not.
Maybe. Maybe not.
What did it do then?

It made a certain form of behaviour necessary
and ubiquitous throughout society – the
drive to maximize income, to maximize profit
Capitalism and Greed
“…Although men may have felt acquisitive during the middle ages and antiquity, they did
not enter into market transactions for the basic economic activities of their
livelihoods.
When for instance a peasant sold a few eggs at the town market, rarely was the
transaction a matter of overriding importance for his continuing existence. Market
Transactions in a fundamentally non-market society were a subsidiary activity, a
means of supplementing a livelihood that, however sparse, was largely independent
of buying and selling.
With the monetisation of land, labour, and capital, however, transactions became
universal and critical activities. Now everything was for sale, and transactions were
anything but subsidiary to existence itself.
To a man that sold his labor on a market, in a society that assumed no responsibility
for his upkeep, the price at which he concluded the bargain was all important. So it
was for the landlord and the budding capitalist. For each of these, a good bargain
could spell riches, and a bad one, ruin.
The pattern of economic maximization was generalized throughout society and given
an inherent urgency that made it a powerful force shaping human behaviour. The
drive to maximise income became a new mode of social coordination and control.
As part of this process of change, we find the emergence of the profit motive at all
levels of society, not as an acquisitive drive (which may have existed for centuries),
but as the pervasive necessity for all people in a monetized society to strive for
higher incomes for economic survival.” ”
Quoted from Robert Heilbroner, The Making of Economic Society
‘On Capitalism…’

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
It is important to realise that a capitalism is not a natural
and inevitable consequence of human nature. It is a
recent and localised product of very specific historical
circumstances. (England 14th – 17th century)
Its universal presence today is also not due to some
conformity to human nature but due to its specific
internal laws of motion.
The change to a market economy did not happen
without large scale dispossession, extinction of
customary rights, intense exploitation, the imposition of
market imperatives and environmental destruction.
These processes extended their reach from the
relations between exploited and exploiting classes to the
relations between imperialist and subordinate countries.
The Origin of Capitalism, Ellen Meiksins Wood
‘On Capitalism…’

Once market imperatives set the terms for social
reproduction, all economic actors – both appropriators
and producers, even if they remain in outright ownership
of means of production – are subject to the demands of
competition, increasing productivity, capital
accumulation, and the intense exploitation of labor.

There is, in general, great disparity between the
productive capacities of capitalism, and the quality of life
it delivers.
The Origin of Capitalism, Ellen Meiksins Wood,
5. Socialist Economy
Socialism emerged due to the barbaric
impacts of Capitalism



Capitalist Economy offered large increases in
production and productivity, but worked primarily for
those who own the non-human resources of production
 Systemic tendency to exploit labour, make labour
redundant
Socialist experiments sought to inherit the high
productivity of industrial means, but also sought to bring
it under social control, so as to provide for all
Starting from the Russian revolution in 1917, by the late
70’s, almost 1/3rd of humanity was under socialist
regimes of different kinds


USSR, Eastern Europe, China, N Korea, Vietnam, Cuba etc
And by end of 1980’s almost all of them collapsed/changed
course significantly!
Socialism


Pre-dates Marx, but most actual experiments
inspired by works of Marx
However, in most places it was established in
absence of the pre-requisites stated by Marx



Developed Capitalist Economy – i.e. fully realized
production potential
Socialization opportunities to workers thru working in large
factories
Spread of democratic spirit, participatory structures in
society
Key features of the socialist experiments



Inclusive: took responsibility for the material provisioning for
ALL
Social control of means of production (abolition of private
ownership) in different formulations
Production and distribution under social direction: ‘What to
produce’ question answered differently from the metric of
profit



Capitalism in theory would say: ‘whatever the consumer desires’
– but we know what all is hidden in that answer
Production genuinely responded to social needs – the proof
of this was most of the socialist countries delivered very well
on education, health, housing etc.
Not just social control of non-human resources but also
tremendous mobilisation of human potential including women
Key features of the socialist experiments
(contd.)




Substantial increase in production and productive capacities
in almost all socialist countries in initial years – disproving
capitalist hypothesis of ‘poor economies cannot step up
production’
Interpretation of basic needs not just as food, clothing, shelter
but also education and health: with high achievement on all
these counts
 Good record on Capital augmentation as well
Reduced inequalities by eliminating property incomes and
established greater sense of equality amongst its members
Encountered problems in operationalising the above too –
many of which were not easy to overcome
Key features of the socialist experiments
(contd.)

Nature of consumption




Absence of variety and abundance of consumer goods as seen
in capitalist economies
Denying abundance-variety to free resources to provide for
more important social needs of all
Also because Socialist experiments were tried in countries at
early stages of capitalism, need to balance consumption and
capital development until production constraints overcome
Not a military barrack kind of existence: consumer goods
commoditized and purchased through incomes earned by work

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
Earning on basis of work, but provisions by state for those who
can’t work – old, infirm, children
Egalitarian not in the sense of equal distribution of income as much
as equal opportunity for all
Queues were a phenomena: but no queues in capitalist
economies more because of lack of buying power
The Socialist Paradigm


Initially: From each according to his
capacity, to each according to his work
Finally: From each according to his
capacity, to each according to his needs
Socialist Economy: Very significant role of
Planning

Its orchestration is thus a very difficult and
complex task





What and how much to produce
Involves political, technological, geographical, social and
economic considerations
Distribution needs to be inclusive, and yet fairness and
incentives have to be present
High degree of coordination required between various
administrative levels and production units as market
clearing is based more on quantity adjustment rather than
price adjustment (as in a capitalist economy)
Need to constantly evaluate and sometimes evolve new
ways/institutions
A comparison


In a capitalist economy, it’s the price
signals in the market (and the related profit
calculus) that offer a single deciding
principle
There is no such single compass in a
socialist economy – nor would searching
for it be the best way of understanding a
socialist economy
The Socialist Experiments: A few
examples

Each experiment was different, responding
to its own circumstances and times, and
changing its procedures and processes
over time
USSR

The first experiment – born during the WWI in a largely agrarian,
autocratic country





Circumstance of civil war came alongside
Very early phase – 1918-1921 – State used compulsory procurement
esp of food-grains to feed cities, army, govt employees
NEP 1921-28: restored market relationship between agriculture and
industry; only a portion of surplus was taken as levy from farmers,
incentivizing them to produce more; denationalization of small
industrial enterprises (except fuel and metals) into autonomous
cooperatives and encouraged to operate along commercial lines;
banks revived; private trade too was permitted and picked up rapidly
Agricultural production did well, industry did not
It was deemed that rapid growth of industry is critical for a socialist
economy
USSR






1928 onwards – Five Year Plans – and all agri land taken over
and by state and organised as large cooperatives – much
force and coercion used causing significant human suffering
and loss of lives
Giant mechanised ‘grain factories’ replaced wiped out
centuries old social structure of independent peasants in the
rural areas
Industry also grew rapidly, esp heavy industry
The whole economy became one giant factory completely
under the control of the State – to be managed under one
unified plan
Drawing up such a plan is in the realm of the possible – but
coordinating and managing the implementation became
difficult and complex
The reconciliation of centralized planning and decentralized
implementation became the key vexing that was never fully
resolved – this is not to say there were no answers at all
Yugoslavia





Social ownership does not necessarily mean state
ownership: as that becomes state exploitation instead of
private exploitation – hence broke from the USSR model in
early 50’s
Encouraged worker owned enterprises cooperatives which
would take al decisions of investment, production, distribution
De-collectivised farms and encouraged independent peasant
farming
Thus a far more decentralised model that used the market
and price formation in markets as the mode – also called
‘market socialism’
However, the challenge was how to coordinate the multiple
independent decisions towards a social plan for the economy
as a whole: State intervened via directives and guidance, and
decisions were not solely in response to ‘market signals’
Yugoslavia

However, market socialism had its own problems






Agriculture did not do well, and large amount of rural labour
migrated to cities creating its concomitant problems
Unlike other socialist countries, Yugoslavia did not offer assured
employment to all - Unemployment became one of the big
worries –favourable migration possibilities to other parts of
Europe helped prevent an explosive situation
Price fluctuations, inflation were common, affecting those with
low earnings and trade with other countries (BoP crisis)
Larger labour associations initiated to solve some issues but
inter-enterprise solidarity was difficult to build
However, Yugoslavia did not resort to a centralised
model/state capitalism; tried various measures with some
successes and some failures
Its contribution has been to provide an experiment of
workers’ participative economy which had significant
achievements in terms of material provisioning for its people
China

1st non-European country to adopt socialism in ‘49



Unlike Lenin (who came to power somewhat unexpectedly),
Mao came to power after a protracted civil war, and hence
had much more popular support than Lenin




the first to try it mainly with the support of the peasantry
in one of the poorest countries in the world at that time
The civil war drove out many landlords and industrial capitalists to
Taiwan and HongKong
Before the war, the Chinese had well developed commerce and a
sophisticated monetary system
They also had a relatively high degree of literacy and considerable
experience of complex social organisation
However, some disadvantages too



World war and civil war had led to severe strains on economy
Cold War was on internationally – US was out to curb communism
Thus initially China struck to the USSR and its model
China


However, Mao soon realised that the capital intensive models of
USSR, and bureaucratic procedures would not work for China –
whose central problem was utilisation of labour
New strategy in 1956 (The Great Leap)






Avoid centralisation and harsh bureaucracy
Use the Market principle
Aim at local self-sufficiency
Peasants organised as cooperatives. A collective of 200 odd
households comprised brigades of about 20-30 households each.
These brigades were the decisions making units on production, and
distribution based on work points. The collective had the rihg to
redistribute some shares to less productive brigades
By 1957, some 76,000 collectives. These were re-grouped into
26,000 ‘people’s communes’ – which assumed administrative
responsibilities also (and included townships)
Commune had small scale industry, education, health under its
domain. The Commune thus became the basic unit of decentralized
administration and self sufficiency – although not all communes
achieved it
China




Communes were successful in mobilising immense
labour power and also built up a lot of capital esp in
rural areas like irrigation projects etc.
Communes brought together agriculture-industryeducation-commerce to eliminate distinction between
manual and mental labour, town and country – to be the
tool of China’s great socialist transformation
The expectation was that social mobilisation along with
the correct ideological values would ensure desirable
production, effective incentives, appropriate distribution,
the right use of local resources and powers, and
adequate overall control: this was to be China’s
decentralised and democratic socialist setup!
Model carried at times to extremes – backyard iron and
steel manufacturing – complete disregard of technical
considerations!! But largely only small and traditional
industries were localised
China



The Commune system threw up its problems too:
 Work point principle worked well with agriculture, but not easy to
work with industry, admin, capital works
 Free provisions to members who could not fend for themselves
– along with team work – created problems of free-riding; linking
work to remuneration and incentives became a vexing issue
 Inter-commune disparities due to geo-physical differences also
became a critical issue – esp in the agri famine of 1959-61, this
issue hit in cruelly as in absence of proper arrangements for
transferring surplus, almost 15mn lives were lost!
Thus rethinking on all this intiated in the early 60’s – communes
were asked to focus only on agri; households were returned
their small private plots to produce something for themselves
But major changes only came after Mao’s death in 1976
China (Reforms after Mao Zedong)


Deng felt that the major task before the Chinese
economy was to increase productivity all round and
modernise the economy
While having an overall socialist orientation
 material incentives to be substantially encouraged
 market relationships to be re-established
 Inequalities in income to be tolerated
 Chinese economy to be opened up to international
influence and interaction
 ‘To become rich is great’ was the new slogan
China (Reforms after Mao Zedong)



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Agri encouraged to diversify into piggery-poultry etc.;
households permitted to buy own machinery – all this led to
enormous increase and diversification in rural output
Small industries located in rural areas with huge
encouragement to employ rural women
Foreign investment encouraged; so was tourism and
hospitality
Consequently, the Chinese economy truly boomed by the mid
80’s, not to mention its constant move ahead over the next two
decades!
But new problems emerged too: inflation, and instability of
prices; inequality increased; unemployment, corruption and
social unrest; environmental havoc and health deterioration
However, problem always crop up in socialist economies.
China’s record in delivering the five guarantees of food,
clothing, fuel, education, health care to over a billion people
has been creditable
The Socialist Experiments
Challenges / Shortcomings / Lessons

Centralisation: Often required due to
circumstance of birth but proves fatal in the long
run

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Opposition from within, and threat from foreign regimes
Need to achive quick economic results, esp in precapitalist kind of conditions – so a centralised command
structure very effective in beginning
To link different regions of such economies
Theoretical understanding (biases?) of socialist thinking:
anti market, anti exchange?
One giant economic factory with top down line of control

Economic centralisation leads to a corresponding
view of polity too: one centralised communist
party controls everything



Party comes with a mission – it starts getting interpreted
as a ‘right to rule’
Difficult to differentiate between economy and polity
Nationalisation of enterprises matched with bureaucratic
administration



Such a structure has a tendency to perpetuate and intensify
itself
Rule based system: once rules codified, they are difficult to
delete; only get added to
System become rigid over time; and further, secrecy gets
added to inflexiblity

In a centralised system, planning at ‘top’,
which is implemented by those at the
‘bottom’



A sense of ‘us’ v/s ‘them’ emerges with time:
state exploitation?
Attempt to mitigate via material incentives and
differential payments: but no matching consumer
goods to be bought with higher wages; and
comparisons with neighbouring capialist
economies of the ‘west’ begins in people
It precludes any participatory form of economy,
polity

While Socialist economies allowed significant worker
participation on the work-floor, they were also told that
socialism is not just an economic program but an attempt to
reconstruct society as a whole

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

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

However, there were no effective channels for such a
participation
In fact, the institutions actively hindered participation: Party –
secrecy – centralisation
All dissent seen as opposition and systematically suppressed
All organisations outside political realm also kept under close
surveillance
Environmental hostilities (cold war) as much as internal failings
contributed to this
Organised uprising were a common feature of the regimes
Many inhabitants had the view that ‘ socialism stands before us
not as a free community, but as a totalitarian state’

Abolition of private means of production regime:
but how is this to be done?



Role of State is extremely critical and important –
but how much, what institutions etc.


Simple state ownership is not the answer
Its not the legal ownership that matters as much as the
entire organisation of work, distribution, participation etc
How to prevent it from being opressive, dictatorial and
suppresive of all dissent?
International Conditions and their impact

Procurement and allocation of goods led to
economic activities coming largely under an
administrative bureaucracy


This was more a result of historical circumstance
rather than a ‘canonical’ feature
However, the inability to replace these over time
led to large, inflexible and often corrupt
bureaucracies which were one of the key
reasons for the downfall of these regimes
The Socialist Experiments
Key Takeaway

The significance of the socialist
experiments is not that they have displaced
capitalism, but the fact that they
demonstrated the possibility of a postcapitalist economic reality
From Capitalism
to…
Development
The term itself: ‘development’

This term ‘development’, and the new
formulation, arose after World War II, but the
essential idea was older




Roots in European enlightenment’s ideas of
progress, of evolution of societies, of industrial
modernity being the state for all nations to attain
In action via Colonialism, ‘white man’s burden’
This was also the time when colonization was
coming to an end across the world
The term is traced to Point 4 of US President
Truman’s inaugural address in 1949
The term itself: ‘development’


The term gives an impression of something very
‘natural’, very ‘desirable’, ‘positive’, and
consequently very difficult to speak against
…a biological metaphor which implies




…there are well accepted ‘laws’ according to which all
societies would and should transform
…what is true for one society must necessarily be true
of another – it ‘naturalises’ history
…depicts ‘development’ a positive, necessary and
inevitable phenomenon
…each future stage is a better stage than the previous;
there is one final stage towards which all must
aim/proceed
The term itself: ‘development’

The term also embodies sufficient ambiguity
such that a wide range of activities can be
undertaken in its name

E.g., it can be used to defend free trade or a selfreliance strategy; loans and aid, and also investment
for profit; It can be used to build a dam, or call it antipeople; can be used to defend public provision of
education and health, or private provisioning of the
same!
Ruse to continue/ legitimise empire as
colonialism collapsed in the 1930s-40s?
The manifest reality…






‘Development’, as it has manifested over the last 60 years is not a
neutral or natural process, not a universal path to progress. It is a
specific and highly unequal relationship between countries, based
on the power of certain countries to define problems and articulate
solutions
It has yielded a highly technocratic approach adopted by the World
Bank-IMF, US/Developed nations post the 2ndWW
It has taken a very ahistorical view of the causes of ‘development’
and ‘underdevelopment’ (i.e. as if the ‘underdeveloped’ nations are
so because of some inadequacy/lag of their own making) – and the
ecological fallacy that all nations can live and consume like the
‘developed’ nations – and in that sense is also
Economic growth is seen as key to ‘development’
The nation-state is assumed to be the unit of policy-making and of
observable outcome
Rests on a linear progressivist view of social change: all societies
will become like the advanced capitalist countries.
Why formulation in President Truman’s
Point 4 was crucial?

The term underdeveloped was used almost for
the first time in an important address/document. It
implied




Idea of change in the direction of a final state
The possibility of bringing about such change
It took a transitive meaning, i.e., an action performed by
one agent upon another, which affected the other, and
this also implied a principle of social organisation,
‘Underdevelopment’ became a ‘naturally’ occurring, i.e.,
seemingly causeless state of things
Why formulation in President Truman’s
Point 4 was crucial? (contd.)

It was not just an insignificant terminological
change – a whole new meaning and context was
implied




Earlier coloniser and colonised were in a relation of
opposition, in a relation of power and hierarchy
Now every state was equal (de jure if not de facto)
Underdeveloped and Developed were members of one
family - and differed only relatively: they were not
opposites
It was only a matter of time, and the gap could be
bridged - as long as the underdeveloped country played
the same game
Why formulation in President Truman’s
Point 4 was crucial? (contd.)


In this comparison, each nation was considered for itself:
its development was very largely an internal, selfgenerated, self dynamising phenomenon, even if it could
be assisted from ‘outside’
The historical conditions that would explain the lead of
some countries over others could not enter into the
argument, since ‘laws’ of development are the same for
all, and win over with ‘iron necessity’


Whatever happened in Europe in the 18th, 19th century must
therefore be reproduced elsewhere, and everywhere
In one shot, it swept away the effects of conquest,
colonisation, slave trade, de-industrialisation of crafts (esp
in India), the breaking of social structures, and so on…
Why formulation in President Truman’s
Point 4 was crucial? (contd.)


It also presents things as if the presence of already
developed countries and their associated context and
moves do not pose any problems for the ‘developing’
countries to operate
And most importantly, the world was not conceived as
a structure in which each element depends upon the
others, but as a collection of formally ‘independent’
nations
Notice here the ideology of ‘equal opportunities’,
and the ‘self made man’.
“Through hard work and perseverance, a worker can
become the boss, the lift boy the director, and the movie
actor the head of state!”
The beginnings of US hegemony…

USA emerged from the war a much more powerful
country




Its GDP doubled between 1941-45; real wages rose;
There was a cornucopia of consumer goods
Nearly 50% of the world’s production capacity in 1945
This new way of dividing the world was remarkably
attuned to USA’s interests


The whole of mankind was now included in the
development paradigm, its legitimacy was ‘naturalised’,
and thus made much less open the question of political
intrigues of some countries/international organizations
A new model of non-colonial imperialism could now be
deployed
The beginnings of US hegemony…

Countries now split as ‘developed and
underdeveloped’
This justified the possibility, rather, necessity of,
interventions on grounds that one cannot remain
passive when one is confronted with extreme hunger,
despair, and disease
Underdevelopment existed without a cause, and all one
needed to do for development was to mobilize resources:
 And not as in colonialism by oppressive means, but by
an ‘international collective effort’
 And in this ‘making available of resources’ as an added
bonus, almost everyone emerged richer and more
prosperous!


Enter GDP: An uncontestable marker!
The US proposal also claimed to be beyond the
ideologies of capitalism and communism. The key to
prosperity was increased production – not endless
debates about the organisation of society, ownership of
the means of production, role of state etc.
 Values of democracy were touted – which sounded good
to newly independent nations
 And it imposed a new objective standard (by which the
US stood at the top) – that of GDP
 Notions of civilisations being higher or lower were
contentious, and placed West in confrontation with
others
 ‘Objective’ national statistics was the perfect remedy
The proposed solution was truly hegemonic – because
it appeared to be not only the best, but the only
possible one!

The power of discourse…

Power does not necessarily involve changing reality
(that anyway happens only slowly) – but inserting it into
a different problematic, proposing a new interpretation
to kindle the illusion of change
‘Power always belongs to the one who can
make himself the master of words’

Although it primarily served the interests of the world’s
most powerful nations, it made out that it had only the
‘common good’ at heart, and presented ‘development’
as a set of technical measures outside the realm of
political debate
 Utilisation of scientific knowledge, growth of
productivity, expansion of international trade: what is
there to question in all this!
What followed therefore…

By defining ‘underdevelopment’ as a lack, rather
than the result of historical circumstances, and
by treating the ‘underdeveloped’ simply as poor,
without seeking the reasons for their destitution,
‘developmental policy’ made growth and aid
(conceived in technological, quantitative terms)
as the only possible answer
What followed therefore…

From 1949 onwards, 2 bn inhabitants - of a total
of 2.5 bn on the planet - found themselves
changing their ‘name’, being ‘officially’ regarded
as they appeared in the eyes of some others,
and were called upon to deepen their
Westernisation by repudiating their own values


No longer African, Asian, Latin American (let
alone Mongol, Mexican, Indian or Bambara,
Tamilian, Berber) – they were simply called
‘underdeveloped’
This new definition was accepted by those
who headed these newly independent states!
What followed therefore…
Thus apart from the interests of the
rich countries, this juncture of
history was also marked by a failure
of imagination on part of the newly
independent countries.
Sadly, this failure of imagination
continues till date.
What followed therefore…
In getting political independence, these
2bn people across over a hundred
nations, forfeited their identity and their
economic autonomy, and were now
pushed to travel a ‘developmental path’
mapped out for them by others.
Raising GDP became the number
one imperative!
The Journey of ‘Development’
…over the last 70 odd years
(1945 – 2015)
The journey of ‘Development’



To address critiques and dissent,
To continue to uphold the front of ‘common good’,
To adapt to changing economic circumstances and
needs of the industrialized nations,
‘Development’ has had to continuously alter its
key formulations, ingredients and methods…

One way to look at its 70 year history (1945-2015) is to
classify it across three ‘eras’ (classification by Karen Coelho)
1. Orthodox era (1940s, 50s)
2. Heterodox era (1950s – 70s)
3. Neoliberal Era (1980 onwards)
The Orthodox era (1940s, 50s)
Named so because countries (esp. the Latin American countries)
followed the ‘prescribed’ approach to ‘developing’ i.e. trying to integrate
themselves with the world system by exporting primary products,
importing industrial products, accepting aid and expertise etc

Key theoretical underpinning of this era was the
Modernization theory (i.e. economic growth leads to
social progress and structural change in society,
economy)


Emphasized international trade based on
comparative advantage, aid and technical
assistance
Policy climate: Central role of the nation-state in
development planning

Dominated by USA, Bretton Woods institutions
The shift from Orthodox to Heterodox era



In practice, poverty persisted, and newer problems arose
for the ‘developing’ countries
Practitioners realized that economic growth does not
automatically lead to social change or social welfare, and
thus could not be the only target
It became evident that a nation-state could not be seen in
isolation but exists within a global context of evolving
capitalism



Realised that the conditions under which the ‘developed’ countries
developed do not exist anymore for the ‘developing’ countries
Saw that within a country, different social groups have
different and conflicting interests
Exposed mainstream development economics, for being
individual-oriented, reductionist, ahistorical, and static
The shift from Orthodox to Heterodox era
The Dependency and World-System critiques


Unmasking of the idea that North-South interaction was
naturally beneficial or that development was an act of
generosity of the rich towards poor
Latin American “structuralist” critique of Ricardian trade
theory: outlined the notion of a world capitalist system





World is structured as a “center” and a “periphery”, and trade
relations systematically disadvantage the latter over time
The center produced manufactured goods and the periphery
primary goods: over time, the terms of trade, i.e. relative prices
decline for primary goods
Thus this system essentially ‘transfers value’ from the
underdeveloped to the developed – it cannot be seen as just a
capitalist mode of production in ‘independent’ nations
Inability of the periphery to develop a capital goods sector
Mooted conception of ‘Import Substituting Industrialisation’ (ISI)
The shift from Orthodox to Heterodox era
The Dependency and World-System critiques
In a similar vein, the neo-Marxist Dependency school
critique showed that

Dependency (definition, Theotonio Dos Santos, "The Structure of Dependence," )

a historical condition which shapes a certain structure of the world economy such
that it favors some countries to the detriment of others and limits the development
possibilities of the subordinate economies

a situation in which the economy of a certain group of countries is conditioned by the
development and expansion of another economy, to which their own is subjected.”

Underdevelopment cannot be explained by stage theory, ie.
underdeveloped countries are not like developed countries at an earlier
stage, and will not simply catch up with advanced capitalist countries
through following their example or through “big push” measures.

Underdevelopment is an integral part of the operation of the world
system, and is the result of historical processes of integration of
colonized economies into the world capitalist system on unequal terms.
It was the flip side of the development of advanced countries.
The shift from Orthodox to Heterodox era
The Dependency and World-System critiques
Dependency school critique contd.

Problems of internal social structure seen as responsible for problems
of underdevelopment. Unequal land distribution, lack of credit for
peasants, and poor health care services limited possibilities for
improvement of productivity. Imperialism had a vested interest in
keeping large sectors of the population marginalized, to create a
“reserve army of the unemployed" in the periphery, which guaranteed
super-profits.

Interests of upper classes of developing countries also aligned with
interests of developed countries

Solutions to underdevelopment had to be political rather than simply
economic, technological or behavioral. The distribution of power and
resources had to be changed
The shift from Orthodox to Heterodox era
The Dependency and World-System critiques
Dependency school critique contd.

Dependency theorists believed a clear "national" economic interest
should be articulated for each country. This national interest can
only be satisfied by addressing the needs of the poor within a
society, rather than through the satisfaction of corporate or
governmental needs.

The diversion of resources over time is maintained not only by the
power of dominant states, but also through the power of elites in the
dependent states, whose private interests coincided with the
interests of the dominant states. These elites are typically trained in
the dominant states and share similar values and culture with the
elites in dominant states.
Relations between dominant and dependent states are dynamic,
wherein unequal patterns were only intensified over time.
Dependency is an ongoing process.

The Heterodox era (1950s – 70s)

A modified approach to development centering around





Import based substitution to industrial imports (ISI) - involves
focus on internal markets, protection for domestic industries,
especially for infant industries, and restrictions on imports
rd world solidarity
 Efforts towards greater ‘self reliance’, III
Stronger economic planning, and social spending by the state
to direct the development process
African leaders, entering somewhat later on the scene, pushed
distinct views of economic development, oriented more toward
the communitarian roots of African economies
 Tanzania’s Ujaamaa experiment
Did not, however, pay much attention to poverty or distribution
within countries, assuming that these issues would be
addressed automatically in the new framework
Also, ISI implemented in an unbalanced way - this led to an
exaggerated export pessimism and thus complete neglect of
the primary export sector
Jason Hickel (Professor, LSE) on ‘The root of inequality’
and ‘the shift from heterodox to neoliberal’
Western intervention is at the root of inequality: There was a brief
period after the end of colonialism when countries in the global south used
trade tariffs, subsidies, import substitution, and social spending to build
their economies and reduce poverty with remarkable success. But in many
cases these programmes were actively dismantled by western intervention,
often with coups that deposed democratically elected leaders to install
dictators friendlier to foreign corporations. And then, beginning in the
1980s, the IMF and World Bank leveraged their power as global creditors
to require poor countries to adopt crushing structural adjustment
programmes that privatised public assets, cut social spending, and pried
markets open to foreign companies. They promised that these reforms
would improve development outcomes, but instead they turned out to be
the greatest single cause of poverty in the 20th century. Per-capita income
growth in developing countries plunged to half its previous levels, and in
sub-Saharan Africa the GNP of the average country shrank by around 10%
during the 1980s and 1990s. All told, developing countries lost roughly
$480 billion per year in potential GDP during the period of structural
adjustment.
The Neoliberal Era (1980s – Present)
Backdrop of the 70s






Stagflation in the key western economies esp, US, UK: capital
looking for new avenues
Oil Price Hikes in ‘71, ’73 led to huge deposits of Petro dollars in
US Banks by OPEC nations: Recycled as loans to developing
countries
Loans offered, taken and spent without due diligence – led to debt
crisis and foreign exchange crises in Latin America, and state
economic mismanagement in Africa by the 80’s
Alongside, the ISI model proved unable to sustain economic
growth in the face of forex and macroeconomic constraints
This was contrasted against the success of the East Asian Tigers Taiwan, South Korea, HongKong, Singapore, which were said to
be instances of a liberal, laissez-faire model.
Alongside,
 New political regimes in US and UK. “Thatcherism”, “Reaganism”
 1989 - Fall of the Soviet Union
The Neoliberal Era (1980s – Present)
Inauguration of a new regime
Known variously as Neo-liberal revolution, Globalisation,
Reform regime, SAP, ‘opening up’, the core principles of this
new liberal development policy are:








A rejection of state intervention and planning
Minimization of state’s role in the economy
A call to free markets – remove policy “distortions” and “get prices right”
Open up to international trade: promote exports, lift barriers on imports
Revaluing of currency and balanced state budgets
Open up to global financial capital, esp. via MNCs
Privatization of state-owned enterprises – corporatization and
commercialization of all state operations
 Elimination of all non-commercial considerations; focus on revenue
generation
Increased influence of IMF-WB-WTO and G7 governments in domestic
policy, even though official aid has declined over the last 2 decades
This new regime linked the first, second and third worlds
with a in a new conception of ‘universal economics’
The Neoliberal Era (1980s – Present)
This new regime led to…

Growth and expansion of MNCs and TNCs


Emphasis on balanced budgets: not just reduced fiscal
deficits, but also fiscal austerity




Internationalization of production: global assembly lines
Reduced government spending on various social services
such as health and education
Retreat from transfer-based and relief-oriented welfarism,
cuts in subsidies, imposition of user-fees, emphasis on
revenue-collection
Formation of regional free trade zones and common
markets such AFTA, NAFTA, etc.; Formation of
transnational entities such as EU, ASEAN, Mercosur, etc
The Bank moved from project lending to structural
adjustment loans, following IMF approval and its
stabilization program
The Neoliberal Era (1980s – Present)
This new regime led to…

Increased influence of IMF-WB-WTO in developing
countries


These institutions have a remarkably unrepresentative
structure – all their lending is to developing countries, and
all decision makers from industrialized nations
This shift has not been fully forced: the western
model of consumer economy has been willingly
adopted by many governments and populations
The Neoliberal Era (1980s – Present)
This new regime led to…


The western model of development always had its takers
in the ‘developing’ countries
In the new regime, there has been a growth of a global
middle class which is across nations – which compares
itself to its ‘peers’ in other nations and aspires for equality



Thus the neo-liberal shift has not been fully by force : the western
model of consumer economy has been willingly adopted by (this
middle class) many (this middle class) populations and
governments
This desire for equality rests on ‘Development as Growth’
This ‘equality’ often comes at the cost of ‘justice’ (basic
human rights of the most poor and powerless – because it
seeks out the land, living spaces and cultural traditions of
the rural and indigenous people
The Neoliberal Era (1980s – Present)
This new regime led to…


The shiny side of development is thus often
accompanied by a dark side of displacement and
dispossession
But more importantly, this model of western
consumer economy threatens the entire planet
with an already underway ecocide
The Neoliberal Era (1980s – Present)
This new regime led to…
Development now results in the formation of a global
middle class alongside the transnational economic
complex, rather than a national middle class alongside
an integrated national economy





Thus the age of globalisation has resulted in a
transnational class of winners. Though in different
densities, they are to be found in every country.
Roughly speaking, half of the transnational consuming
class resides in the South, and half in the North
They shop in similar malls, buy the same hi-tech
equipment, see the same films and TV series, and roam
the globe as tourists
They are part of a transnational economic complex which
is now developing its markets on a global scale
The Neoliberal Era (1980s – Present)
This new regime led to…

Earlier, development thinking was about nation states’
transition from agrarian to industrial societies; state was
the main actor and the national society the main target




This thinking was engulfed by the times
Both the actor, and the target withered away under the impact of
transnational corporations
The old development concept looks out of place in this era
of globalization: we now have development without nation
states and national populations!
Globalization has now superseded nation states


Nation states cannot contain economic or cultural forces anymore
Goods, money, information, images and people flow freely across
the globe as if national spaces do not exist
The Neoliberal Era (1980s – Present)
This new regime led to…




What might have once been an imposition has more often
than not turned into a basis of identity
The right to cultural self-identity has been compromised by
accepting the development world-view
Despite decolonization in the political sense – which has
led to independent states, and decolonization in the
economic sense – which has made some countries into
economic powers – a decolonization of the imagination
has not occurred
Quite the reverse: across the world, hopes for the future
are fixed on the rich man’s pattern of production and
consumption
The Neoliberal Era (1980s – Present)
This new regime led to…



The longing for ‘equality’ on part of the South is
one reason for the persistence of the
development creed…
…even if, in this century, neither the people,
nor the planet can afford its predominance!
Economic growth is thus cannibalistic of both
people and nature!! And shifts unpaid costs
onto them as well.
The Neoliberal Era (1980s – Present)
This new regime led to…



At the core of this cover up is the semantic
confusion brought about by the concept of
‘development’
After all development can mean just about
everything , from putting up skyscrapers to putting in
latrines, from drilling for oil to drilling for water, from
setting up software industries to setting up tree
nurseries, from farmers cooperatives to mega-malls
It is a concept of monumental emptiness, carrying a
vaguely positive connotation! For this reason it can
be easily filled with conflicting perspectives
The Neoliberal Era (1980s – Present)
This new regime led to…



On the one hand are those who implicitly identify
development with economic growth, calling for more
relative equity in GDP. Their use of the word
‘development’ reinforces the hegemony of the
economic worldview
On the other hand are those who identify
development with more rights and resources for the
poor and powerless. Their use of the word calls for
de-emphasising growth in favor of greater autonomy
of communities
Putting both recipes in one conceptual shell is a sure
recipe for confusion, if not a political cover-up
The Neoliberal Era (1980s – Present)
Summing-up
An ‘interlude’ in world history




It is a legacy of the 20th century that the desires of nations for a
better tomorrow are predominantly directed towards
‘development-as-growth’
An idea of social evolution where all people on the globe would
move along a single road, with the ‘developed’ countries at the
forefront has taken hold… and the confusing diversity of nations
across the globe has been turned into a clear ranking order with
the GDP rich countries at the top of the pack
This way of constructing a world order has not only revealed
itself to be obsolete, but also mortally dangerous
Assigning the Euro-Atlantic model as the vanguard either along
the course of history, or across the social ranking order has by
now lost all legitimacy: it has proven to be incompatible with the
planet
The Neoliberal Era (1980s – Present)
Summing-up
It has been shown that Europe was able to leap
ahead of the rest of the world in the 19th century by
tapping into two new resources: massive import of
agricultural goods from the colonies, and coal for its
industrial processes. Thus there would have been
no industrial revolution without resources from both
the expanse of geographical space and the depths
of geological time.
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The Neoliberal Era (1980s – Present)
Summing-up
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As fossil fuels dwindle, plant bio-diversity
disappears, and colonies no longer feasible, it
becomes evident that the conditions required for
the Euro-Atlantic model cannot be generalized for
the world at large
In other words, this model requires social
exclusion by its very structure; it is unfit to
underpin equity on a world scale
Thus ‘development as growth’ cannot continue to
be a guiding concept of politics and economics
unless we take global apartheid for granted
The Neoliberal Era (1980s – Present)
Summing-up
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If we aspire for some kind of prosperity for all of
the world’s citizen’s, this euro-atlantic model
would need to be superseded with modes of wellbeing that leave only a light footprint on the earth
Production and consumption pattern will not be fit
for justice, unless they are resource light and
compatible with ecosystems
For that reason, there will be no equity without
ecology in the 21st century
“Yes, the planet got destroyed. But for a beautiful moment
in time, we created a lot of value for shareholders.”
Imagining alternate
futures
…so where do we go from here
Recap: key fault lines of existing system

A very materialistic notion of wellbeing,
increasingly held by everyone
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And that economic growth will help us get there
Predominance therefore, of a narrow
‘economistic’ bias in key concepts of today’s
worldview
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Low material consumption = ‘poverty’
‘Happiness’ = standard of living, which can be
compared across geographies, cultures
‘Equality’ = sameness
‘Efficiency’ = narrow cost/price calculus
Recap: key fault lines of existing system
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An economics based on flawed assumptions,
including ‘free-market’ based prices as being
the best regulator of economic decisions [ADD]
A Capitalist economy – in which all decisions
determined by a the profit calculus [ADD]
Ecological constraints overlooked: imagination
of unlimited growth on a finite planet
Fossil fuel based production: value comes with
disvalue
Rethinking Development
or Contours of a post-capitalist economy

Define human wellbeing more holistically

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Economy thus to be embedded in these larger goals/objectives
of society
Economy has to be inclusive, i.e., it has to work for all
Environmental limits, and ecological cycles have to be
adhered to in all production, consumption, disposal
decisions
All this implies the need for visible hand – in other
words, more planning
 Planning does not mean centralised, bureaucratised
state planning only, nor does it imply all means of
production owned by the state
Planning means…

Concrete decisions, to be taken by the community, based on
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Assessment of resources
Assessment of needs, and thus how resources are to be used
How much for now, how much for future
Increasing production is a good thing: but how much? Eco-limits
Settlement of claims: what degree of ‘inequality’ is permissible
Participatory decision making
Division of labour desirable as it increases productivity: consequently
exchange will exist as an activity, however organising principle would
be generation of use values and not profit

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In many erstwhile socialist experiments, the ‘mistrust’ of exchange as an
activity led to bureaucratic control structures for coordination, which made both
the economy and polity non-participatory
Conscious transition strategy
In a capitalist economy, all these questions got subordinated
to one principle – the profit principle
None of this is going to be easy, because

Despite problems, the dominant conception of development
(or human well being) is around increase in material
production…

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Systems are becoming increasingly inter-dependent,
enmeshed and difficult to extricate out of, even if some
countries think of alternate systems…?
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System benefits elites in exploited regions?
Interests, aspirations and worldviews of different groups of
people within all countries are also very different: difficult to
build consensus on an alternative (if at all one can think of one)
International organisations are toothless, captured by elite
nations
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While the interconnectivity in the world makes the power of
national governments very limited, and thus the need for
internationally coordinated and enforced action becomes more
necessary…
…these forums are inherently limited because we hope to
invoke the general interest in a place where everyone is on the
lookout for their particular interest!
None of this is going to be easy, because
(contd.)
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Even though some persons/people/countries see merits of
‘delinking’/autonomous development, it is perhaps not easy given
that certain critical resources like fossil fuels are very unevenly
distributed across the earth
A fossil free economy seems to be an pre-requisite for resolving
many of the issues being encountered : no easy options
Governance cycle is 4-6 years in most countries; Time period for
real reform to show results is at least two to three times that…
 No possibility of any government risking such a move in today’s
era of competititve politics
 Political leadership often captured by some of the worst in
society
 Political domain captured by corporates
 Move would call for sacrifices, patience and possibly trial-and –
error kind of movement: with people within a country having
different interests/aspirations/worldviews, can such a thing
happen without the push of a crisis?
 The ‘urgent’ is increasingly overwhelming the ‘important’
None of this is going to be easy, because
(contd.)

Individual transformation, or call it a shift in our
worldview, is an imperative for this change
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i.e., of people having a conception of the ‘good life’ that does
not rely on material abundance
This is hardly part of the discourse anywhere; stress continues
on reforming ‘external systems’ to address the issues of today
We must bring out that justice towards the fellow human being,
harmony with nature are imperative for my own security,
fulfillment and sense of meaning
Need to re-invoke the ‘psycho-political’ change of Gandhi,
Nyerere, and many such sane thinkers
Growth within ecological limits, and no need for endless growth
are tenets that have to be internalised in any conception of
‘development’
Linking the desire for equity to economic growth has
been the cornerstone of the development age.
Delinking the desire for equity from economic
growth and re-linking it to community and culture
based notions of well-being will be the cornerstone
of the post development age.

In the development age, the rich world was able to sidestep the
hard issues of justice – because economic growth was supposed to
bring greater equality to the world

Growth was a substitute for justice – as inequality was not deemed
a problem as long as the have-nots moved up the ladder

For decades, development experts defined equity primarily as a
problem of the poor: and highlighted lack of income, lack of
technologies, lack of market access for the poor – advocating all
kinds of remedies for raising their living standard: they worked at
raising the floor

With bio-physical limits to growth, we need to change the rich also,
and not just the poor; work at lowering the ceiling : Poverty
alleviation cannot be separated from wealth alleviation anymore

Gandhi could not have been any more
prescient, or relevant today

“God forbid that India should take to
industrialisation after the manner of the West. The
economic imperialism of a single tiny island
kingdom (England) is today keeping the world in
chains. If an entire nation of 300 mn took to similar
economic exploitation, it would strip the world bare
like locusts.”
The journey of a thousand miles
begins with a single step…
… in fact, it has already begun
Across the world now, there is a surge of initiatives
that aim to transcend the conventional development
idea – affirming that resilience, beauty and meaning
can be found outside the logic of growth and
expansion.
What can we as individuals and small
groups do for a start?
1.
Understand that the roots of our problem are deep –
and share this understanding – so that the focus on
symptoms, on pseudo fixes, on false hopes of
‘managerial’ / ‘techno’ / ‘market’ solutions are exposed
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2.
Understand and expose the inherent flaws in mainstream economics
Introspect, and try to live a less materialistic notion of happiness
Introspect, and try to live a life that is just to the fellow human being,
and is consonant with natural cycles
Both of the above can only be practiced in a very limited way in the
warped world we live in – but starts are important to help building of a
new worldview…and a new economics within that
Search, publicise and become part of ‘people’s
alternatives’ to the mainstream – however small and
partial they might be
What can we as individuals and small
groups do for a start? (contd.)
3.
4.
Conceptualise and fight for measures beyond GDP so
that the current paradigm moves towards a more
humane path
Support or if possible, become part of people’s
movements against disposession, injustice, internal
colonisation
The transition involves two main themes:
One,

A shift in our worldview which emphasizes…
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Human well being comprises two kinds of needs: material and
psychological – and the sources of fulfillment of the
psychological needs do not lie in money
Justice to the fellow human being and living in harmony with
nature are imperatives for my own happiness/self-interest
Economic systems cannot be governed by narrow values of
‘cost based efficiency’ – an economy is a means to human
wellbeing – and not an end in itself. It must therefore necessarily
emphasise equity, justice, true democracy alongside self
reliance, fair trade, eco-limits
The planet is a very diverse place – and thus small, local
communities are best equipped to manage their natural
resources, govern themselves, and there is significant merit to
indigenous ways of knowing and acting
The transition involves two main themes:
The second being…

A transition from fossil fuel based resources to
local economies based on local resources –
consequently diverse

A recognition of limits, as opposed to ever expanding
nature of development, and an attempt to re-embed the
economy in the biosphere
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Examples abound in agriculture, architecture, energy
production, forestry and even industry
Deglobalisation & localisation: fit and adaptation with
local land, habitat, seasons
Decentralisation and diversity
Acknowledgements
This presentation draws significantly from
1.
3.
The Economy – An Interpretative Introduction
by C.T. Kurien
2. History of Development by Gilbert Rist
Development Dictionary foreword by W. Sachs
Backup slides
Potential elements of a holistic well-being
index)
1
Material Standard of Living (defined more
specifically)
2
Equity, Justice, Solidarity
3
Safety-Security (from fellow humans)
4
Health
5
Education (Inter-generational transfer of Wisdom,
Skills)
6
Sense of Community, Meaningful Participation
7
Harmony/Balance with Nature
8
Participatory Governance
9
Time Availability / Time Use
10
Psychological Wellbeing
Mainstream Economic theory’s
assumptions about a capitalist economy
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Human being are rational individuals who pursue the
maximization of their self interest (utility / satisfaction).
They have endowments in excess of their needs –
which they voluntarily seek to exchange in the market,
in return for other goods they might not have enough of.
Market Prices, based on demand and supply, are the
best indicators of the value of any commodity – and thus
the best signals to shape and direct an economy.
Mainstream Economic theory’s
assumptions about ‘perfect competition’
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Infinite buyers and sellers: everybody is a ‘price taker’
Zero entry and exit barriers
Perfect factor mobility
Perfect information - All consumers and producers are assumed to
have perfect knowledge of price, utility, quality and production
methods of products.
Zero transaction costs
Profit maximization - Firms are assumed to sell where marginal
costs meet marginal revenue, where the most profit is generated.
Homogenous products - The qualities and characteristics of a
market good or service do not vary between different suppliers.
Non-increasing returns to scale - The lack of increasing returns to
scale (or economies of scale) ensures that there will always be a
sufficient number of firms in the industry.
Property rights - Well defined property rights determine what may
be sold, as well as what rights are conferred on the buyer.
Neoliberalism – defined
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A theory of political economic practices which proposes that human
wellbeing can best be advanced by liberating individual
entrepreneurial freedoms and skills within an institutional framework
characterized by strong private property rights, free markets and free
trade.
The role of the state is to create and preserve an institutional
framework appropriate to such practices. For e.g.,
 State should guarantee quality and integrity of money
 Set up military, defence, police and legal structures reqd to secure
pvt property rights, and guarantee (by force, if reqd) proper
functioning of markets
 Set up markets in areas like land, water, education, health, social
security, infrastructure, if they do not exist: and once created, the
state should keep out of these markets as much as possible – for the
reason that state can never posses enough information to second
guess the signals (prices) determined by the markets, and that
vested interests can always capture state power (esp in
democracies) in their favour
Adapted from ‘A brief History of Neoliberalisation’ by David Harvey
“Reform”, Washington consensus (potential
defns)
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The notion of reform has now, across the board, come
to mean the application of neoliberal principles to any
organization, sector, or process.
From welfare reform, to macroeconomic reforms, to
sectoral reforms, to organizational reforms, the
principles are the same: commercialization, attention to
the bottom-line and to revenue-collection, reduction in
subsidies, more stringent audit and output-orientation,
cuts in staffing and the application of management
principles such as performance appraisal and
incentives.
The Washington Consensus: the shift in thinking of the
IMF, World Bank and the US Treasury, toward the free
market, from the early Keynesian orientation of the first
two.
Q: How does one explain the high standard of living in
most developed capitalist countries then?

Transfer via Taxation
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Democratic Imperatives – and pressure of a competing
worldview of communism led to Legislations like
minimum wages

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Welfare state post the great depression
Cold war and the battle of ideas
Trade Unions and their struggles could not be fully
suppressed in that environment
Rising Productivity due to technology: share of labor
could be increased without lowering share of capital
Exploitation of the colonies, third world
The Market Economy:
An interesting definition 

The market system is a complex mode of
organizing society in which order and
efficiency spontaneously emerge from a
seemingly uncontrolled society.
(From ‘The Making of Economic Society, Robert Heilbroner
Italics: mine)