The Economist's Blind Eye
issue 232 - June 1992
The economist's blind eye
The vital argument between Gandhi and Nehru... The invention of the market...
Challenging the economic way of looking at life.
'Should India ever resolve to imitate England, it will be the ruin of the nation.' In 1909, while still in South Africa, Mohandas Gandhi formulated the conviction upon which he then, over a period of 40 years, fought for the independence of India. Although he won the fight, the cause was lost; no sooner was independence achieved than his principle fell into oblivion.
Gandhi wanted to drive the British out of the country in order to allow India to become more Indian; Nehru, on the other hand, saw independence as the opportunity to make India more Westem. An assassin's bullet prevented the controversy between the two heroes of the nation from coming into the open, but the decade-long correspondence between them clearly demonstrates the issues.
Gandhi was not won over to technical civilization with its machines, engines and factories, because he saw in it a culture which knew no more sublime end than that of minimizing bodily effort and maximizing physical well-being. He could only shrug his shoulders at such an obsession with gaining comfort; as if a good life could be built on that! Didn't India's tradition, undisturbed for thousands of years, have more substantial things to offer?
Although far from being a traditionalist on many issues, Gandhi insisted on a society which, in accordance with Hindu tradition, gave priority to a spiritual way of life. An English style of industrialism is out of place wherever swaraj, the calm freedom to follow personal truth, is to rule; Gandhi pleaded for a renewal of the countless villages of India and for a form of progress to be judged accordingly. In his eyes, India was committed to an idea of the good and proper life that contradicted the ideals prevalent in England during the age of automation. For this reason, a wholesale imitation of the West was simply out of the question. Individual elements should, in his mind, be adopted only insofar as they could help give better expression to India's aspirations.
Nehru disagreed. He saw no alternative but to introduce the young nation to the achievements of the West as soon as possible and take the road towards an economic civilization. Even in the early days, and in spite of his great admiration for the man, he found Gandhi 'completely unreal' in his vision. Though he intended to avoid the excesses of capitalism, he still viewed Indian society primarily as an economy, that is, as a society defining itself in terms of its performance in providing goods.
From an economic viewpoint, however, the nature of humanity, the function of politics and the character of social reform all assume a particular meaning. People are seen as living in a permanent situation of scarcity, since they always have less than they desire. The most noble task of politics is therefore to create the conditions for material wealth; and this in turn requires the reorganization of society from a host of locally-based subsistence communities into a nationwide economy.
Nehru thus fostered precisely that Western self-delusion which was also at the core of the development idea: that the essential reality of a society consists in nothing else than its functional achievements; the rest is just folklore or private affairs. From this viewpoint the economy overshadows every other reality; the laws of economy dominate society and not the rules of society the economy. This is why, whenever development strategists set their sights on a country, they do not see a society that has an economy, but a society that is an economy.
When production is not god
Observing a group of Maya Indians who work their fields in the mountains around Quiche in Guatemala, and seeing the barren ground, the primitive tools and the scanty yield, one might easily come to the conclusion that nothing in the world is more important to them than increasing productivity. Remedies could swiftly be found: better crop rotation, improved seeds, small machines, privatization, and anything else the cookbook of business management might recommend.
All this is not necessarily wrong but the economic viewpoint is notoriously colour blind: it recognises the cost-yield relation with extreme clarity, but is hardly able to perceive other dimensions of reality. For example, economists have difficulty in recognizing that the land bestows identity upon the Indios since it represents the bridge to their ancestors. Likewise economists often fail to note the central importance of collective forms of labour, in which the village community finds visible expression. The outlook of the Maya is incompatible with that of the economists.
To put this in the form of a paradox: not everything that looks like an economic activity is necessarily a part of economics. Indeed, economics offers only one of many ways of looking at goods-oriented activities and putting them in a larger context. In every society things are produced, distributed and consumed; but only in modern Westernized societies are prices and products, conditions of ownership and work, predominantly shaped by the laws of economic efficiency. Elsewhere different rules are valid, other models prevail.
The Bemba in Zambia, for example, see a good harvest or a successful hunting expedition as a gift from their ancestors - they court the ancestors' favour in the hope of higher production. Then there are the cycles of cultivation practised by farmers in Maharashtra, which neatly fit into the yearly round of weddings, festivals and pilgrimages. New methods of cultivation can soon disrupt this social calendar.
In societies that are not built on the compulsion to amass material wealth, economic activity is also not geared to slick, zippy output. Rather, economic activities like choosing an occupation, cultivating the land, or exchanging goods, are understood as ways of enacting that particular social drama in which the members of the community happen to see themselves as the actors. That drama's story largely defines what belongs to whom, who produces what and how it is exchanged. The 'economy' is closely bound up with life but it does not stamp its rules and rhythms on the rest of society. Only in the West does the economy dictate the drama and everyone's role in it.
An Invention of the West
As late as 1744, Zedler's Universal Encyclopaedia unwittingly gave a naive definition of the term 'market': '...that spacious public place, surrounded by ornate buildings or enclosed by stands, where, at certain times, all kinds of victuals and other wares are offered for sale; hence the same place is also called market-place'.
The market, heralded both as blessing and as bane over the last two centuries, this powerful idea - nothing more than a location! The author of the encyclopaedia seemed only to be thinking of crowds, stands and baskets; there is no mention of 'market shares', 'price fluctuations' or 'equilibrium'. Between his time and ours a far-reaching change has taken place in the self-image of society.
Adam Smith was the first thinker who, when using the term 'market', no longer envisaged a locally determinable outlet for goods, but that society-wide space throughout which all prices intercommunicate. This innovation was no accident, but mirrored a new social reality: an economy of national scope. Before then, a domestic market was not something to be taken for granted; even in Europe at the end of the seventeenth century, one could hardly find trade between different regions of the same country!
Of course from time immemorial there has been trade - one need only think of the North German Hanseatic League or the splendour of Venice - but this was trade with distant countries, which remained limited to a few cities as bridgeheads. History knows markets in all shapes and sizes, but they were local and temporary places of exchange between towns and the surrounding countryside.
In Adam Smith's century, however, the nation-state drew a web of trade relations over the whole of society and established the domestic market. Like today's developing countries, the young states of that time pushed hard to make economic principles prevail everywhere, be it only to finance their own existence. That was the birth of the national economy, even on a lexical level: while the term 'economy' had formerly been applied to the 'domestic economy of the prince, now the whole nation was transformed into a 'political economy'. And Smith became the theoretician of a society governed by the rules of the market.
Alternatives to the economy?
The transformation of society into a political economy was, of course, only achieved after a prolonged struggle demanding many sacrifices. After all, people were not shaped by a commercial ethos - it did not influence how they regarded work or property, their idea of good conduct or their sense of time. The merchant was not yet an entrepreneur, land was not saleable, competition was frowned upon, usury disreputable, and those who worked for wages lived on the fringes of society. As a result, the progress of capitalism was punctuated by bitter disputes about whether and to what extent land and forest, grain and money, and workers themselves, could be treated as commodities.
In the last decades, similar radical changes have taken place in large parts of the Third World as economic ideology has tightened its grip. Traditions of sufficiency have been pushed aside, local exchange relations dissolved, collective forms of ownership broken up, and subsistence economies wiped out. For a long time the guiding light of international development policy was to create societies of paid workers and consumers everywhere. Experts scrutinized countries to identify 'obstacles to development' which were hampering the free mobility of 'production factors'. No cost was too high and few sacrifices were too great in the quest to turn societies into smoothly-running political economies.
Without any doubt, miracles were thus wrought, and a great tide swept through the countries of the Southern hemisphere; history had taken an enormous leap. However, it is becoming ever clearer that a disaster is in the offing. At the very moment the economy has finally achieved worldwide dominion, social disruptions and environmental destruction have become rampant.
The domination of the economy is showing its menacing side. Societies find themselves cornered: they cannot afford to surrender to this monster, but they cannot escape from it either. In fact the economy, during its rise to the top, has stamped out alternatives to itself which are not so hazardous for both humans and nature.
How is it possible to reinvent economic institutions that allow people to live gracefully without making them prisoners of the pernicious drive to accumulate? Maybe there will be more creative power in the Third World to meet this historical challenge. Simply because, in spite of everything, many people there still remember a way of life in which economic performance was not paramount.