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Mainstream, VOL XLIX, No 41, October 1, 2011

Gandhian Alternative to Economic Development — Relevance for India Today

Wednesday 5 October 2011, by B P Mathur


“India’s destiny lies not along the bloody way of the West, of which she shows signs of tiredness, but along the bloodless way of peace that comes from a simple and godly life. India is in danger of losing her soul. She cannot lose it and live. She must not, therefore, lazily and helplessly say, ‘I cannot escape the onrush from the West.’ She must be strong enough to resist it for its own sake and that of the world.”

—Mahatma Gandhi

“Agriculture is more revolutionary than industry. In twentyfive years, Israel increased its agriculture yields seventeen times. This is amazing. People don’t realise this. Agriculture is ninetyfive per cent science, five per cent work.”

—Shimon Peres, President of Israel

Mahatma Gandhi’s philosophy of truth, non-violence and satyagraha helped India get liberation from British rule and is considered a perennial philosophy to fight injustice, oppression and suppression of human rights. Martin Luther King effectively used non-violence as a weapon to secure rights and justice for the Blacks in America. While Gandhiji’s philosophy had wide acceptance to deal with political and social issues, it had not many followers in the arena of economics. He was aware of it. “Pandit Nehru wants industrialisation because he thinks that, if it is socialised, it would be free from the evils of capitalism. My own view is that evils are inherent in industrialism, and no amount of socialisation can eradicate it.”1 Gandhiji was not impressed by the two prevailing dominant systems of the management of the economy, the capitalist free-market economy and the state-bureaucratic socialism of the communist countries. Post-independence, India abandoned Gandhiji’s economic philosophy and adopted a mixed economy model with the state commanding the heights of the economy. As we know, this nowhere helped solving our gigantic problems of poverty and backwardness and the economy stagnated. Post-liberalisation in 1991, we have adopted a free-market economic model, but genuine progress and development has been eluding us.

Today the global economy with the free market as its mantra is in a state of severe crisis. The political leadership, thinkers and intellectuals are all searching for the ‘right model’ of economic development but it is nowhere in sight. Does Gandhian philosophy provide an insight into how to manage the economic system?

It should be remembered that Gandhiji propounded a total philosophy of life, from which economics cannot be divorced. Gandhi’s philo-sophy was based on truth, ahimsa, and service to society, particularly the poor and down-trodden. He derived inspiration from the ancient Indian philosophy of Ramayan, Upanishad and Gita, expounded the highest ethical standards, and felt that religion and morality are the same thing. Gandhiji did not draw distinction between economics and ethics. “Economics that hurt the moral well-being of an individual or a nation are immoral and, therefore, sinful.”2 He was not enamoured of the Western civilisation based on materialism, exploitation, competition and domination which, in his view, was responsible for India’s enslavement by the British.

Gandhian Economic Philosophy

THE basis of Gandhiji’s economic philosophy was individual dignity and the welfare of the poorest of the poor. He felt that a man earns his dignity by working and earning his bread and livelihood. Therefore the economic system should be organised to provide employment for every- one. “According to me, the economic constitution of India, and for that matter of the world, should be such that no one under it should suffer from want of food and clothing. In other words, everybody should be able to get sufficient work to enable him to make two ends meet. And this ideal can be universally realised only if the means of production of the elementary necessities of life remain in control of the masses.”3 He was against mass production and industrialisation which destroyed local industry, impoverished villages and reduced man to a cog in the machine. “What I object to is the craze for machinery, not machinery as such. Men go on saving labour till thousands are without work and thrown on the open streets to die of starvation.”4 Gandhiji did not oppose all machinery, he praised the invention of Singer Sewing Machine which ended the drudgery of the housewife. His opposition to machine was particularly in the context of India as it has a huge population and unemployment. “Mechani-sation is good when the hands are too few for the work intended to be accomplished. It is an evil when there are more hands than required for work as in the case of India.”5

He was against India copying the West and its urban-centric civilisation and pleaded for gram-swarajya. “I have believed and repeated times without number that India is to be found not in its cities but in its 7,00,000 villages. But we town-dwellers have believed that India is to be found in its town and the villages were created to minister our needs. The cities with their insolent tort are a constant menace to the life and liberty of the villages.”6 Gandhiji believed in Village Swaraj, ‘independent of its neighbours for its vital needs, and yet inter-dependent for many others in which dependence is a necessity’.7

Gandhiji rejected a pure economic man. The modern economic theory is based on wants and not on needs and this is the source of the rat race that debases human beings by keeping them subject to their animal spirit. Want-oriented economies create a psychology of scarcity and poverty, as all wants can never be satisfied. Prof J.K. Mehta, a revered philosopher-economist of Allahabad University, took a Gandhian view of the science of economics which he defined ‘as the science of human activities considered as an endeavour to reach the state of wantlessness’.8 He said that a man wants to maintain mental equilibrium for which he satisfies wants, but all wants can never be satisfied. “The science of economics sets for itself the goal of removal of all wants. It is not realised, however, that the way we proceed to reach the goal is self-defeating… Economic theory developed to explain human behaviour on the fundamental postulate that man wants to satisfy his wants with least expenditure of the resources at his command. And that meant that it was assumed that in satisfying one want care must be taken that the fewest possible other wants were created.”9 The karmayoga philosophy pleads for not wanting results of one’s actions—the wider discipline of economics should pull down barriers between economics and religion. “Where the desire to satisfy wants is encouraged and efforts to raise the standard of people eulogised, man is robbed of mental peace and nations of peaceful existence.” The pampering of wants is not our final desideratum, observed Prof Mehta.


GANDHIJI criticised the capitalist system because it is based on ownership of the means of production and other property. He argued that unlimited wants, greed, fear etc. arise from capitalist property relations. Gandhiji advanced a theory of trusteeship as an organisational structure under which production could be organised, instead of large industrial houses where economic power was concentrated in the hands of a few and were inherently exploitative. Socialist thinkers have for a long time been arguing that private property is at the root of the exploitative process of production and distribution and called for its abolition. Proudhon termed property as theft and Karl Marx called for a revolt by the property-less proletariat, capture of state power by the working class to be followed by a classless society. Gandhiji declared himself to be a socialist and repudiated the concept of private ownership of property. But he was opposed to the use of violence or hatred to bring about social change. He wanted to do it by moral force and persuasion. The objective is to create a non-violent non-exploitative property relationship. He equated private property in excess of basic needs of human existence with exploitation and held that private property was not a natural right but a man-made privilege, so it could be modified and altered by social action. Gandhiji simultaneously proclaimed his profound belief in the rightness of economic equality. He did not visualise a world where there will be no property but he would restrict the right of private property to what was necessary to yield an honourable livelihood, while for the excess he prescribed the principle of trusteeship. He asked those who own money to behave like trustees holding their riches on behalf of the poor.

The fundamental objective underlying trusteeship is to create a non-violent and non-exploitive property relationship. Gandhiji left a six-point programme containing his ideas about trusteeship on the basis of a draft prepared by the distinguished economist Prof M.L. Dantewala.10 Its salient features are: 1) Trusteeship provides a means of transforming the present capitalist order of society into an egalitarian one. 2) It does not recognise any right of private ownership of property, except inasmuch as it may be permitted by society for its own welfare. 3) It does not exclude legislative ownership and use of wealth. 4) Under state-regulated trustee-ship, an individual will not be free to hold or use his wealth for selfish satisfaction or in disregard of the interest of the society. 5) Just as it is proposed to fix a decent minimum wage, even so a limit should be fixed for the maximum income that could be allowed to any person in society. 6) The character of production will be determined by social necessity and not by personal whim or greed.

Elaborating on the concept of trusteeship, economist V.K.R.V. Rao11 summarises it as follows: “acceptance of the principle of private ownership of property, the limit imposed upon its use for sustaining minimum living standards, the major constraints it imposes by prohibiting its use merely for selfish satisfaction or in disregard of the social interest and the inclusion of legislative regulation for determining its ownership and use in the desired direction for non-exploitive purposes”. Gandhian economist J.D. Sethi 12 says that four underlying ethico-economic principles of trusteeship are: 1) non-possession; 2) non-exploitation; 3) bread labour; 4) equality of rewards. Thus trusteeship is a theory of need-based production, equitable distribution and social justice. “Philosophically, trusteeship is an economic conscience by which an individual when engaged in economic activity takes into account not only his own interests but also the interest of others.”

Intermediate Technology

E.F. Schumacher,13 the author of Small is Beautiful, draws inspiration from the Gandhian ideology of ‘resisting the temptation of letting our luxuries become needs’, and ‘recognition of existence of the soul apart from the body’. He argues that man’s current pursuit of profit and progress which promotes giant organisations and increased specialisation has resulted in gross economic inefficiency, environmental pollution and inhuman working conditions. He proposes a system of Intermediate Technology, based on smaller working units, communal ownership and regional workplaces utilising local labour and resources. “The technology of mass production is inherently violent, ecologically damaging, self-defeating in terms of non-renewable resources and stultifying for the human person. The technology of production by the masses, making use of the best modern knowledge and experience, is conducive to decentralisation, compatible with the laws of ecology, gentle in its use of scarce resources, and designed to serve the human person instead of making him servant of machines.”14 Intermediate technology is a technology with a human face, one that is viable and integrates the human being with his skilful hands and creative brains, into a productive process.

From the point of modern economic theory, ‘labour’ or ‘worker’ is an item of cost, to be reduced to the minimum and ensure output without employees. This approach is demeaning as work provides individual growth and fulfilment according to the Buddhist as well Vedanta (Gita) philosophy. However, there is need to make a distinction between mechanisation that enhances man’s skill and power and one that that turns the work of a man to a mechanical slave leaving man to serve the machine. “To organise work in such a manner that it becomes meaningless, boring, stultifying, or nerve racking for the worker would be little short of criminal; it would indicate a greater concern with goods than with people, an evil lack of compassion and a soul-destroying degree of attachment to the most primitive side of this worldly existence.”15 An economics which considers goods more important than people and consumption more important than creative activity, is a surrender to the forces of evil.

Schumacher faults the current philosophy of materialism under which the development of production and acquisition of wealth have become the highest goal of the modern world, to which all other goals should be subordinated. “It is of little use trying to suppress terrorism if the production of deadly devices continues to be a legitimate employment of man’s creative powers. Nor can the fight against pollution be successful if the pattern of production and consumption continue to be of a scale, a complexity, and a degree of violence which, as is becoming more and more apparent, do not fit into the laws of universe, to which man is as much subject as the rest of creation.”16 Schumacher calls for guiding our actions according to the time-tested, four cardinal virtues of Christianity—prudence, justice, good-ness, and beauty, if civilisation is to survive.

Building Social Business

NOBEL PRIZE winner Muhammad Yunus has pioneered micro-credit in Bangladesh, the innovative banking programme that provides poor people—mostly women—with small loans they use to launch business and lift their families out of poverty. He has advanced the concept of social business to deal with the problems of capitalism. The existing economic theory portrays human beings in business as one-dimensional whose sole mission is maximisation of profit. As a matter of fact, human beings are multi-dimensional, their happiness comes from many sources, including selfless service to fellow human beings. This spirit of human beings combined with the powerful technology available today, offers huge opportunity to do social business. Social business has seven principles:17 1. The business objective is to overcome poverty, or similar problems relating to education, health etc., not to maximise profit. 2. The company will attain financial and economic sustainability. 3. Investors will get back only their investment amount. No dividend is given beyond the original investment. 4. When the investment is paid back, profit stays with the company for expansion and improve-ment. 5. The company will be environmentally conscious. 6. The workforce gets market wages with better than standard working conditions. 7. Work is done with joy.

The concept of social business has been successfully experimented in Bangladesh in diverse areas such as provision of mobile phone company in rural areas, solar homes, affordable health care and modernisation of the handloom industry. Yunus, in partnership with some of the world’s large business houses, such as Danone, has been producing affordable nutritious yoghart for malnourished children. Yunus says that if social business is developed and integrated into the mainstream of economic theory, it can solve many of the world’s problems of poverty, hunger and ill health and ‘can address the problems left behind by profit-making businesses’.

The Relevance of Gandhian Ideology Today

THE Gandhian ideology, whose main focus is on welfare and dignity of the individual, provides us a broad framework into the new philosophy of economic development that we need today. We may first summarise the Gandhian principles:

The economic system should be so organised that every individual has an opportunity of getting gainful employment, so that he can buy his own bread and essential means of living. Gandhi did not believe in the poor living on the charity or mercy of others and wanted eradication of poverty which is possible only through everyone getting employment.

Gandhiji was opposed to mindless industrialisation as it displaces labour and causes unemployment and is the main reason for rural poverty.

Gandhiji supported rural-centric development with agriculture and small scale industries getting pride of place, as this is the only way the unemployment problem can be solved in a labour abundant country like India.

Gandhiji believed in the decentralised development model as this helps the fruits of development reach everyone and promotes equality and social harmony.

Gandhiji was opposed to conspicuous consumption and luxurious living. He wanted people to have minimum needs and lead a simple life.

While Gandhiji was not opposed to private ownership of industries and business, he advocated social control of business so that the profits generated are equitably distributed so as to prevent concentration of wealth in the hands of a few people, which leads to exploitation.

We should not look towards Gandhian economics as a rigid doctrinaire framework and view with scepticism Gandhi opposing all ‘machines and industrialisation’ alongside the impracticability of the idea of ‘rich business- men voluntarily surrendering their wealth for social good’. Gandhiji was pragmatic and expressed views in the context of India’s conditions at the time prevailing during the British Raj. If we properly understand Gandhian philosophy, we will find that it is very much relevant today, when the world is facing a severe crisis due to mass poverty and unemployment, side by side with conspicuous consumption and exploitation of natural resources. Schumacher has shown how use of simple and intermediate technology can help micro- and small-scale industries as a rewarding and profitable occupation, in which millions of people could be employed. Muhammad Yunus, with his social business model, has demonstrated how successful businesses can be run without the profit as the motive, and can lift people out of poverty.

Post-Second World War the pursuit of growth has been the ruling economic ideology amongst all the nations of the world, imposing a great cost on society. An economic model based on unbridled production and consumption is fundamentally flawed and responsible for the current global economic crisis, as well as the ecological and social problems that we are facing. Huge consumption fuelled by credit and corporate greed has been behind the economic crisis which the USA and West European countries are facing since 2008, and this has resulted in huge unemployment and suffering of the people.

Intellectuals, think-tanks and environmentalists all over the world are propounding a philosophy of reducing consumption and ostentatious living, to save planet Earth from destruction. The British Sustainable Development Commission finds an inverse relationship between growth and social well-being and ecological sustainability. In the last quarter of a century, while the global economy has doubled, the increase in resource consumption has degraded an estimated 60 per cent of the world’s ecosystems. The benefits of growth have been distributed very unequally, with a fifth of the world’s population sharing just two per cent of the global income. The Commission observes that prosperity has to go beyond material pleasure. Two other objectives—growth-sustainability and well-being—have to move up the agenda for creating a prosperous society. A commission chaired by Nobel-Prize winner economist Joseph Stiglitz has expressed severe dissatisfaction with GDP as an indicator of economic and social progress and recommended a shift from measuring economic production to measuring people’s well-being. Expressing similar views, the World Watch Institute opines that we need to measure progress by improvement in well-being rather than expansion in market based economic activity and how quickly we can build a renewable energy platform, meet basic human needs, discourage wasteful consumption, and invest rather than deplete natural and cultural capital. The Club of Rome has been, for a long time, pointing out that there are ecological constraints in the existing development pattern, and has focused on the planet’s physical limit in the form of depleteable natural resources and the need to cut consumption. Speaking a similar language, the UNDP has been articulating the idea that GDP growth is meaningless, if it does not improve the quality of people’s lives in terms of security of livelihood, freedom, empowerment and social cohesion.

Failure of the Existing Economic Model

POLICY-MAKERS all over the world are groping in the dark, trying to find a solution to the best economic model to build a stable and sustainable economy. It needs to be remembered that there is nothing like a pure capitalist or socialist path of economic development. Socialism, in its practical operation, implies control over means of production and distribution by the state, though the philosophy of socialism, when originally postulated, had its roots in the doctrine of equality and liberalism. The economists for a long time suffered from the illusion that the state acts as a platonic guardian of the people. They forgot that it is the politician and the bureaucrat who control the machinery of the state and their main aim is to exercise power and authority with scant regard to people’s welfare. Due to its inherent contradiction, the socialist model, practised by the Soviet Union and its satellite East European countries, collapsed in the late 1980s.

Capitalism with its philosophy of free and unregulated markets, leads to concentration of wealth in the hands of a few causing widespread social disparity. It also encourages individual greed and avarice. For the last three decades
the USA and Western countries have been unaba-shedly pursuing a neo-liberal economic model with liberalisation, globalisation and free play of the market forces as its mantra. The single most objective here is economic growth, without any thought given to its cost. This model, based on relentless consumerism, is fundamentally flawed and responsible for the current global economic crisis, mass unemployment and environmental degradation. It is time we abandon a model whose foundations rest on materialism, consumption and greed.

Eminent historian Eric Hobsbawm18 observes that the experience of the last thirty years shows that both the socialist and free market economic systems have failed. “The twentieth-century attempts to treat world-history as an economic zero-sum game between private and public, pure individualism and pure collectivism, have not survived the manifest bankruptcy of the Soviet Union and the ‘economy of market fundamentalism’ between 1980 and 2008. Nor is a return to the one more possible than a return to the other. Since the 1980s it has been evident that the socialists, Marxist or otherwise, were left without their traditional alternative to capitalism, at least unless or until they rethought what they meant by ‘socialism’ and abandoned the presumption that the (manual) working class would necessarily be the chief agent of social transformation. But the believers in the 1973-2008 reductio ad absurdum of market society were also left helpless. A systematic alternative system may not be on the horizon, but the possibility of a disintegration, even a collapse, of the existing system is no longer to be ruled out. Neither side knows what would or could happen in that case.”

The Future Direction

WHAT we need today is to devise a new model of economic development based on the Gandhian ideology. This in practice would mean that public policy should give massive support to agriculture on which more than half the population of the country depends for their livelihood and make it a remunerative occupation on par with industry and the service sector. The state policy should also support, in a big way, thousands of micro- and small-scale industries through investment in R&D and upgradation of the capability of people working there, in terms of education, knowledge and skill, with provision of credit and other facilities. To create an egalitarian society, Big Business should be strictly regulated and converted into Social Business, so that they plough their profits back into the business for socially productive activities and are not allowed to extract surplus by way of salary, dividend, bonus and other means except what they need for a reasonable standard of living.

Mahatma Gandhi said there is enough in the world for ‘everyone’s need but not for his greed’. He propounded a philosophy of simple living and reducing consumption. Through his call of swadeshi and gram-swaraj, Gandhiji delivered a strong message for not only political independence but also economic self-reliance and inclusive growth. We should therefore design policy initiatives which take care of the welfare of the poorest members of the society, fulfil their basic wants and gives them a dignified and respectable living. We need a new matrix of economic development, in which progress is measured in terms of development of human capability, dignified employment for everyone, equitable distribution of income and wealth, ecological sustainability and social well-being of the community. Gandhian philosophy, properly understood, provides the solution.


1. U.S. Mohan Rao, The Message of Mahatma Gandhi, Publications Divison, Government of India, 1968 (reprinted 1994), p. 54; Harijan, 19.9.1940.

2. Ibid., p. 47; Young India, 13.10.1921.

3. Ibid., p. 47, Young India, 15.12.1928.

4. Ibid., p. 51.

5. Ibid., p. 51, Harijan, 16.11.1934.

6. Ibid., p. 73, Young India, 6.4.1921; 2.4.1925.

7. Ibid., pp. 78, Harijan, 26.7. 1942.

8. J.K. Mehta, Studies in Advanced Economic Theory, Premier Publishing Co, Delhi, 1950, p. 22.

9. J.K. Mehta, Rhyme, Rhythm, and Truth in Economics, Asia Publishing House, London, 1967, pp. 27-35.

10. M.L. Dantewala, ‘Trusteeship: Its Value Implications’ in J.D. Sethi (ed.), Trusteeship—The Gandhian Alternative, Gandhi Peace Foundation, New Delhi, 1986.

11. V.K.R.V. Rao, ‘Trusteeship as Gandhian Instrument for Socialist Change’, pp. 27-2; 8 in JD Sethi (ed.), Ibid.,

12. J.D. Sethi, ‘Trusteeship and the Crisis in Economic Theory’, pp. 76-94; in J.D. Sethi (ed.), Ibid.

13. E.F. Schumakar, Small is Beautiful-a study of economics as if people mattered, Vintage, Random House, London, 1993.

14. Ibid., p. 121.

15. Ibid., pp. 39-40.

16. Ibid., pp. 249-250.

17. Muhammad Yunus, ‘Building Social Business—The New Kind of Capitalism that Serves Humanity’s Most Pressing Needs’, Public Affairs, New York, 2010,
p. 2; also see Muhammad Yunus, ‘Creating a World Without Poverty—Social Business and the Future of Capitalism’, Public Affairs, New York, 2007.

18. Eric Hobsbawm, How to Change the World, Little Brown, London, 2011, Tales of Marx and Marxism, p. 418.

Dr B.P. Mathur is a former Deputy Comptroller and Auditor General and Director, National Institute of Financial Management. He has authored books on Economics, Finance and Governance-related issues. He can be contacted at e-mail:

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