Gorbachev, Macroeconomics and Gandhi – The Hindu


The concepts of free trade, financial freedom and privatization are not the right solutions for Indian citizens

The concepts of free trade, financial freedom and privatization are not the right solutions for Indian citizens

“You see, Sasha, that’s how it goes,” a weary Mikhail Gorbachev told his closest aide when he lay down to rest after handing over power to his successor, Boris Yeltsin. in 1991. Gorbachev, who died last week, was hailed for his role in ending the ideological conflict between communism and capitalism, as well as the fall of the Iron Curtain and the end of the Cold War between the United North Atlantic Treaty (NATO) and the Soviet Union.

Russia today

Sadly, Gorbachev lived to see history return with a vengeance. NATO expands eastward; Russia is threatened: the Ukraine is its battlefield. Economically, Russia has not recovered from the shock it received from the “big bang” capitalization of Boris Yeltsin imposed by American economists. Perversely, an unintended effect of the big bang is the return of authoritarianism under Vladimir Putin. Gorbachev had favored a slow transition to a “mixed economy” like the Indian model and had approached Rajiv Gandhi for advice. I was part of a small team of Indian business leaders who traveled to Moscow and Riga in 1989 to explain the “Indian model” to economists from the Academy of Sciences of the Soviet Union. However, the “Washington economy” model prevailed. Led by a triumphant United States and economists from American think tanks, the World Bank and the International Monetary Fund, the wave of opening up national economies to international trade and financial flows has overwhelmed Russia; it also reached Indian shores in 1991.

Overall life expectancy is a good measure of the well-being of a nation’s citizens. When all citizens are well nourished, when public health systems work well, and when violence in society is low, the average person lives longer. International comparisons show that GDP per capita does not contribute enough to longevity. Many countries with significantly lower incomes surpass the United States in terms of life expectancy. Cuba is a place above the United States in the longevity tables, even though its per capita income is only 14% of American income.

Between the big bang capitalist reforms of the Russian economy in 1991 and 1994, life expectancy rose from 64 to 57 years. Ten million Russian men (6.7% of the Russian population) have “disappeared”. Their deaths have been caused by suicides, alcohol poisonings, homicides and heart attacks brought on by despair, unemployment and hopelessness, created by the large-scale privatization of the economy and the disruption of the safety nets. social Security. “Disasters of this magnitude usually only occur during pandemics and wars,” says George DeMartino, author of The Tragic Science: How Economists Do Harm (Even Though They Aspire to Do Good). Yet losses of this magnitude had not occurred even during the American Civil War (2.1% of the American population) or the influenza pandemic of 1918-1920 (2.8% of the world’s population). The Russian deaths were caused by the imposition of an economic ideology that claimed everyone would be better off with the help of a mysterious hand when the state is pushed back, the economy is deregulated and capitalist minds are released.

ideological wars

The 20th century was a violent period in the history of mankind: with two bloody world wars, numerous wars for independence from colonialism and a long cold war that brought the world to the brink of a nuclear holocaust. Gorbachev helped lift the world from the nuclear precipice. The 20th century also witnessed ideological battles between economists: communism, socialism and capitalism; the role of the state vis à vis private enterprise; the rights of nations to resist the “Washington model” and shape their own economic models to suit their needs. While Russia was tragically overrun by global capitalism, China went its own way with remarkable results.

The capitalist model that spread around the world after the fall of the Berlin Wall is based on two fundamental ideas. One is the ideology of “property rights” overriding human rights. In capitalism, whoever owns something has the right to determine how it will be used; and whoever owns more shares in a property must have more votes. Thus, a dollar owned gives a voice in governance, and a million dollars, a million votes. Whereas the democratic principle of “human rights” demands that every human being, black or white, billionaire or poor, have an equal vote in governance.

The shift in balance from democracy to capitalism over the past 30 years is made evident by the creation of international tribunals that adjudicate disputes between foreign investors in countries and the governments of those countries. Country governments represent the interests of millions, if not billions, of people in their country. On the other side of the dispute are a few capital investors. Global trade rules, as well as national financial and trade regulations, have oriented themselves too much towards the needs of financial investors, making it easier for them to enter and leave countries whenever they want, while preventing human migrants from seeking better opportunities beyond national borders.

The ideologies of elected governments and free markets were joint victors in the ideological war between the West and the Soviet Union. The two winners now face each other even in the West. When devices designed to run on AC power are plugged into outlets that provide DC power, blowouts will occur. Likewise, when institutions of governance designed to operate on fundamentally different principles are connected to each other, something will explode.

Another central idea of ​​capitalism is Hardin’s “tragedy of the commons”. He says communities cannot manage shared resources; therefore, the common property must be privatized for its protection. With the operation of the mechanism of “cumulative causation”, rich people become richer. When a public resource is privatized, those who already have wealth can buy it; and in bidding wars, those with more wealth will win and become even richer. So when capitalism is unleashed, inequality will rise, as it has done in Russia and around the world since the 1990s.

Runaway climate change is an existential “tragedy of the commons” for all life on Earth. Twentieth-century capitalism has no solutions: in fact, that is the problem. The time has come to reform the economy. The principles of equity and ethics, and the equitable sharing of power and resources, must limit the unbridled efforts of efficiency and productivity to increase the size of the economy which have become the axes of economic policies in the global scale.

Gandhi’s ethical economics

New models of cooperative governance are needed to realize the promise of humanity’s shared commons. With his concepts of perestroika and glasnost, Gorbachev wanted to prevent ordinary citizens from being oppressed by powerful people. His successors, misguided by economists, delivered the Russian economy to unbridled capitalism. Oppression by the state has been replaced by exploitation by the capitalists. Ten million Russian men died prematurely. And Russians have lost pride in their identity and history. More and more men are losing their lives on the Ukrainian front in Putin’s attempt to protect Russia and regain Russian pride.

“That’s how it goes,” Gorbachev observed when he resigned. Indian policymakers should heed the lessons of history. The concepts of free trade, financial freedom and privatization, promoted by macroeconomists, are not good solutions for the one billion Indian citizens who are struggling for resilience in their lives. Indian policymakers seem obsessed with increasing the size of the economy. The shape of an economy matters more than its size for human well-being. India’s economic governance must be guided by Mahatma Gandhi’s calculus, with the principles of human rights and community management, to realize the promise of our commons and provide ‘poorna swaraj’ to all citizens.

Arun Maira is President of HelpAge International and a former member of the Planning Commission


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