Mahatma Gandhi's economic philosophy centred on principles like decentralization, Gram Swaraj (self-sufficient village communities) and Sarvodaya (the welfare of all). He envisioned an economic system where power and resources were decentralized, empowering local communities to manage their own affairs and promote self-sufficiency. Gandhi advocated for a sustainable and just economy that prioritized the welfare and upliftment of every individual, with a strong emphasis on moral and ethical values. His ideas aimed to foster economic equity, social justice and the well-being of all, rather than the pursuit of profit at the expense of others, reflecting his vision of a harmonious and equitable society.
In India, a significant wealth gap exists, where the top 10% control 77% of the nation's wealth. In 2017, 73% of new wealth went to the top 1%. Meanwhile, the bottom half of the population saw only a 1% increase in their wealth. This extreme economic inequality reveals the failure of trickle-down economics and underscores the need for policies addressing this issue. Sustainable economic growth seems unlikely with such disparities. Gandhi, although not a formal economist, raised moral and ethical concerns about economic models.
While Gandhi's concepts introduced in the early 1900s remain relevant today due to ongoing challenges like unemployment, poverty, limited access to education and healthcare, and exploitation of marginalized populations, it's essential to acknowledge that the nature of these issues has evolved. Economics, centered on the concept of scarcity, often seeks to address these disparities through increased production. Adam Smith's idea of self-interest driving market efficiency is well-known, but efficiency doesn't necessarily guarantee fairness or equity.
Gandhi advocated for simplifying one's desires as a means to alleviate scarcity. He aptly asserted that our resources are adequate to meet our needs rather than our insatiable wants. From an economic standpoint, this perspective entails utilizing scarce resources to produce essential necessities rather than focusing on luxury commodities or aesthetic enhancement projects. For example, BMC has planned to spend Rs 500 crore and the Gujarat government has planned to spend Rs 150 crore on Shivrajpur beach beautification projects while 38% of Gujarat’s population is undernourished as per the National Multidimensional Poverty Index.
Gandhi voiced concerns about the profit-driven market structure of modern civilization. Capitalism, which gained prominence during the industrial revolution, contributed to economic inequality by concentrating wealth in the hands of a small group of capitalists, while often exploiting the labour of the working class. This issue remains relevant in contemporary times, where large corporations, often with government support, continue to exploit natural and human resources under the pretext of economic development.
Promoting a localized and necessity-driven economy, often referred to as Gram Swaraj, as an alternative to market expansion driven by excessive greed, could potentially offer a solution to the aforementioned challenges. Encouraging the development of micro and small enterprises in both rural and urban regions through incentivization measures can serve multiple purposes. It not only fosters economic growth but also assists policymakers in addressing migration and unemployment concerns. Furthermore, the presence of a local market has the added advantage of streamlining supply chains, thereby reducing production costs and prices. This, in turn, enhances accessibility to essential goods for economically disadvantaged populations.
Centralized policies are inadequate to address localized economic challenges. Embracing Gandhi's decentralization principle can tackle these issues while also reducing income and wealth inequality. The 73rd and 74th amendments to the Indian constitution established local self-governance through Panchayati Raj Institutions (PRIs) and Urban Local Bodies (ULBs), offering institutional frameworks for this purpose. However, most PRIs rely on grants from central and state governments, lacking financial autonomy. Although the amendments include state finance commissions that provide recommendations to state governments, there is no binding obligation for the states to follow these recommendations and devolve funds accordingly.
The Standing Committee report on rural development and Panchayati Raj Institutions, presented in the Lok Sabha on March 14, 2023, highlights the widespread failure of nearly all states in establishing State Finance Commissions (SFCs). States were supposed to establish their sixth finance commission to function from 2021-22 to 2026-27. Nevertheless, a number of states, including Gujarat, Jharkhand and Goa, have yet to establish their fourth state finance commission. Additionally, Arunachal Pradesh has only formed two SFCs.
Achieving fair wages for all labour was seen as a path to self-sufficiency and a reduction in economic injustices. Burning foreign-made clothing symbolized resistance against the exploitation of Indian workers, while the charkha represented self-rule and economic independence by enabling self-sufficiency in clothing production. Gandhi's stance on machinery was not against it in general but against machines that displaced human labour; the charkha, in contrast, complemented human effort. His 'Sarvodaya' philosophy, inspired by John Ruskin, emphasized equality and justice over utilitarianism, advocating for a production model driven by the masses to promote the well-being of all.
Gandhi posited that economic violence, largely a consequence of market dynamics, could be mitigated through the promotion of harmony across all economic activities. One method to achieve this harmony involved ensuring that workers received wages enabling them to maintain a decent standard of living. Conversely, he cautioned against the business practices of major corporations that wield substantial control over overall wealth and income, underscoring the need for vigilance in regulating such entities.
According to one estimate, during the 2009-10 period, approximately 15 percent of employees on fixed salaries and 41 percent of those in casual employment received earnings lower than the suggested national minimum wage. In total, 33 percent of wage-earning individuals, which accounts for 62 million workers, were compensated below the recommended national minimum wage during that time frame. As per the data from the Periodic Labour Force Survey 2017-18, 45% of employees classified as regular workers (those engaged in relatively stable, formal employment) receive income below the minimum wage.
Gandhi's concept of non-violence encompasses more than just an avoidance of physical violence and includes addressing economic inequality and worker exploitation. He advocated for capitalists to act as trustees, utilizing their wealth for the common good rather than personal gain. In essence, he strongly opposed certain fundamental economic principles and emphasized the significance of moral values in economics. While economists may not universally endorse Gandhian ideas, they can still draw inspiration to frame welfare policies with a similar moral focus.
(Atman Shah is Assistant Professor, Department of Economics, St Xavier’s College, Ahmedabad)