Four More Years of Economics #7
On Mobility
May 20, 2007
Dear Abhay,
Last February, while writing about the philosopher Henri Bergson’s theories of movement, I found myself, in the following passage, posing a problem in economic terms.
§
I recently traveled to Antwerp. I wrote an email to my host. “I am leaving Chicago, and will arrive in Antwerp tomorrow.” The next day, I emailed her again. “I am in Antwerp now.” She replied.
How wonderful that you can reach me as easily from nearby as from far away!
Yet it was only information that traveled so easily; a series of digitized encoded thoughts, and as such, certainly, a part of me, but only a part, shall we say, not an element. My physical body had to move through a series of segments of intermodal transportation, the financial cost of which had increased in recent years, as well as a series of security checkpoints, the psychic cost of which had also escalated. Nabil El-Aid El-Othmani of Morocco summed up my point when he wrote:
What is the future of globalization when there is an increasingly greater disproportion between the movements of capital and goods and that of people?
He submitted this question to Nobel economist Joseph Stiglitz in an online discussion, a conversation that instances the disparity, at least if one tries to imagine the difficulties of a face to face conversation, and considers information technology in the category of capital and goods. Stiglitz replied.
This disparity in the liberalization of capital and labor is a major problem. Enormous energy has been focused on facilitating the flows of investment and capital, while movements of labor remain highly restricted. This is so even though the gains to global economic efficiency from liberalizing labor flows are an order of magnitude greater than the gains from liberalizing capital flows.
We can understand this response by way of Chicago’s recent big-box ordinance, through which the city government attempted to force an increase in the wages of workers at Wal-Mart and similar stores. The effort failed because of the Mayor’s aggressive efforts to defeat it, heeding Wal-Mart’s threat to leave the city if it passed. Clearly it is easier for Wal-Mart than for a person who works at Wal-Mart to move to the suburbs. The disparity in mobility allowed the store to leverage the government into keeping wages low. Had the mayor called the bluff of Wal-Mart with the argument that an increase in wages increases labor mobility, and contributes more to community economic growth than an increase in profits, which will further increase the mobility of capital and goods, which, Stiglitz goes on to argue, increases economic instability, we can expect that Wal-Mart would have lost the fight and begun to transform from its current state as a cavernous dungeon into that of a store one can shop at with a relatively clear conscience.
§
Since we gave our collaborative lecture on Gandhi in London last June, Mohammad Yunus has won the Nobel Peace Prize for his micro-lending work at the Grameen Bank, which makes your comments on him at that time all the more prescient. The award and some of the public dialogue that has followed, as well as local Chicago developments, have prompted me to revisit the passage above from my Bergson lecture, and, on reaching the limits of my understanding, to pose a question to you.
Since I wrote the passage, we have had an election here in Chicago, the results of which demonstrated that organized labor made good on its threats. The Mayor now has to contend with several new aldermanic public servants who ran almost solely on the issue of passing legislation to force a living wage at big box stores. The union efforts, as I see them, seek not only to redress Wal-Mart’s pressure to lower wages, but also to address this disparity in mobility. It seems to me that Stiglitz’s formulation of the question is primary, and dissatisfaction with wages and benefits results from the instabilities and tensions produced by labor immobility, or the radical discrepancy between capabilities of labor and capital flow. Recent tensions around immigration laws and the policing of borders strikes me as a product of these same tensions, since immigration is foremost a question of labor mobility. Chicago’s big box ordinance addresses the instability incrementally on a local level. Perhaps we can liken this approach to Yunus’s Grameen Bank work – addressing a large problem in a small way, not only to improve local conditions, but also to provide an example, a direction.
On Wednesday, October 18th 2006, one week after Yunus won the Nobel, John Tierney wrote a column in the New York Times arguing that Wal-Mart founder Sam Walton deserved the same prize for doing even more to combat poverty than Yunus. Tierney, who has since left the Times as a columnist, argued that poor laborers make more in a sweatshop job than through Grameen microlending, and that furthermore, Wal-Mart saves Americans money through purchasing goods produced by low-wage labor and selling them at very low prices, passing savings on to the consumer.
Let’s leave aside the self-serving nature of this argument for the Wal-Mart corporation, which in today’s NY Times is described as practicing “vehement anti-unionism.” The argument seems strange to me in purely economic terms, because of its emphasis on the benefits of low-cost goods and its de-emphasis of the negative effects of wage reduction. Tierney suggests that wage reduction in the United States is a necessary price to pay for wage increases in Asia. This appears to negate his previous point about US consumer savings. In respect to the US economy, the only person who saves money buying low-cost goods at Wal-Mart is the person whose wages remain unchanged in relation to the cost of those goods. If I have access to low-cost goods only because I have taken a reduced wage, I am not saving anything. So consumers whose wages Wal-Mart has driven down don’t benefit, while those in management positions, or with wages uninfluenced by Wal-Mart pressure, could benefit a great deal. Maybe that’s a simplification, but I have repeatedly heard this argument for the value of cheap goods as if prices exist independent of other economic factors.
In the end I think all discourse on this subject leads us back to Stiglitz’s observations about mobility. I tried to make the point in my Bergson talk that Wal-Mart’s pressure to reduce wages in America contributes to the discrepancy between labor mobility and capital mobility, which in turn contributes to economic instability. Now I will go a bit further and say that even Wal-Mart’s purchasing products produced by cheap labor abroad increases labor immobility on a global scale. In response to Tierney’s argument that sweatshop jobs lift workers above the poverty level, I would simply introduce the complicating factor of mobility, and perhaps in a broader sense of agency. Is it not true that part of Grameen’s radical approach is how it allows self-defined labor? How it proposes that poverty results from more factors than income? If workforces sacrifice mobility, agency, and self-defined labor, in exchange for a stable wage, then on a global level we begin to see the stresses that Stiglitz brings to our attention.
Is not the very idea of credit a method for taking advantage of capital mobility on an individual level? The Grameen approach shares this benefit with the lower economic strata of the population. The denial of credit to the poor seems an artificial construction designed to deny class mobility, or to keep poverty entrenched, since as Yunus says, the poor have an even greater incentive to pay off their loans than the wealthy.
Tierney’s column suggests to me that we in America continue to think that economic discourse concerns only wages and the costs. Otherwise, how could he make such an absurd argument that a radically retrograde institution like Wal-Mart somehow parallels a radically progressive one like Grameen? Is it so simple to distract people from the underlying issues? Even with the examples of Stiglitz, Yunus, and Amartya Sen, we so easily regress to reductive notions of economics.
All of this is a preamble for my question to you. If I were a real economist, I would be able to back up my thoughts with formulas, statistics, charts, and diagrams. However, since you tolerate my imaginative approach, I will ask you a question where my imagination fails. Stiglitz says “the gains to global economic efficiency from liberalizing labor flows are an order of magnitude greater than the gains from liberalizing capital flows.” My question to you is, what forms do those gains to efficiency take? Why are they an order of magnitude greater? And most important perhaps, what would a social structure look like that has attained a balance between the mobility of labor and that of capital and goods? What model do we have for the cessation of the disparity?
As always, I look forward to your response,
Matthew
Four More Years #8
Berkeley
June 3, 2007
My dear Matthew,
1.
We don’t eat mangoes in India. We suckle on them.
Every summer millions of Indians carefully remove mango from stem and using a quick squeezing action of the fingers suckle their mangoes as they did their mothers’ breasts, mangoes placed tightly between the lips.
The recent mangoes for Harleys trade deal will bring thousands of Indian mangoes into the United States for the first time in eighteen years but without a corresponding allowance for people to immigrate, mangoes will be eaten, not suckled on. That, my dear Matthew, breaks my heart.
2.
Karl Marx predicted that while in the early stages of capitalism labor would be mobile, in the later stages capital would be mobile with labor mobility turning into an epiphenomenon.
3.
In 1982 I started my studies in economics at Bombay University. I would often walk down to the American library to read the Sunday comics in the unfamiliar thick newspapers.
One day in the American library I found a book by John Kenneth Galbraith that changed my life. In The Nature of Mass Poverty Galbraith argued that the cause of poverty was what he termed accommodation. People get used to their circumstances and tend to settle into a poverty equilibrium. His solution, which came as a surprise to me then, was emigration.
Galbraith completely changed my view of my own options. I had been brought up to believe that you could travel abroad for an education but you had to go back home. That’s what my father had done after three years in England. It was the right thing to do for oneself and the country.
I was thrown from my comfortable equilibrium. Galbraith was, after all a former Ambassador to India, an economics professor at Harvard, and the first economist in the world to teach a class on development economics. His theoretical construct was followed by historical case studies showing how emigration from poor regions had helped not only the emigrants but also the people left behind. As people left the immobility of the poverty equilibrium the changing ratio of people to resources and new linkages with prosperous regions created wealth in what was once a poor land.
That was when I decided I’d leave home one day. Six years later I did.
4.
Much of the disparity between the mobility of goods and people can be explained with the concepts of average and marginal costs. Gandhian economist Fritz Schumacher liked to tell the story of driving on the motorway from London to Glasgow and noticing a large lorry carrying biscuits from London to Glasgow for sale. Later, on the same motorway but on the other side he noticed another large lorry carrying biscuits from Glasgow to London for sale. Schumacher would end his story by remarking that an alien from outer space would be forgiven for assuming that on earth biscuits needed to be transported 600 miles before they could be eaten.
The London biscuit-maker being a large scale producer finds his overheads to be extremely high but the price of producing a marginal or one more biscuit to be absurdly low. Even though average costs are fairly high, marginal costs are a few pennies per extra biscuit produced. So the London biscuit-maker upon saturating the London market finds it cheap to exploit the Glasgow market. As long as biscuits sold in Glasgow can fetch a price that covers transportation costs and the negligible marginal costs, it is profitable for biscuits to be shipped to Glasgow.
It follows from the same kind of reasoning that the Glasgow biscuit-maker finds it profitable to make and ship biscuits to London. We may summarize this common situation as:
MC < AC where MC is marginal cost and AC is average cost.
5.
Opponents of minimum wage laws and living wage ordinances generally warn that jobs will be lost if such laws are put into place. Proponents of these measures respond by attempting to minimize the job losses. The simple truth of the matter is that jobs will be lost as a result of these laws but this is a matter to rejoice not mourn.
We must go back to the institution of the minimum wage law in 1938 to understand this issue better. The framers of this law intended to throw out of business those employers who were blatantly exploiting workers including children. Low paying, low-worth jobs that degraded humans needed to be eradicated.
No residents of a wealthy country such as ours must be subjected to the humiliation of working a full-time job and still not having enough to eat for themselves and their children. Walmart is exactly the kind of unsavory business that the framers of the minimum-wage laws were wanting to put out of business. At present, a significant number of full-time Walmart employees are unable to earn a living wage and are below the poverty-line, living on subsidies by the state.
Matthew, the reason I think most classical economists are obtuse on this point is that they see labor as simply a numeraire that allows for the computation of production costs. For Marx, on the other hand, labor is value. While exploiting labor is seen as a means of increasing value by the classical economist, it is seen as a loss of aggregate value for society by the Marxist economist.
6.
Krista and I enjoy living in Berkeley where most people support local organic farming, are in favor of living-wage ordinances and rent-control. However, even in Berkeley, most people are against free and open immigration, something I strongly support since my Galbraithian awakening. Having been schooled in elementary classical economics, they reach the incorrect, but common fear-based conclusion that open immigration means lower wages.
What most people, even in a radical enclave such as Berkeley, don’t know is that their fear of immigration is based on an economic model that assumes that each country produces just one product! When that assumption is relaxed the simplistic conclusion that equates open immigration with lower wages falls apart.
7.
What exactly is efficiency? In economics we define efficiency as the absence of waste. But there are two different kinds of waste: private and social. The businessman in London sending biscuits to Glasgow is acting efficiently. After all, he has excess capacity due to his high overheads. By exploiting new markets for his products he is utilizing his capacity to the full extent, avoiding waste. The businessman in Glasgow is doing the same.
The extreme mobility of biscuits as well as all other goods is an efficient decision on an individual level but a social inefficiency bordering on absurdity.
8.
Gandhi presented an alternative economic vision of small-scale producers selling in local markets. Small enterprises require only small overheads ensuring that marginal costs are close to average costs. There are no incentives for producers to ship their products far away. This is the only internally consistent and sustainable economic system. We may summarize such a system as:
MC = AC where MC is marginal cost and AC is average cost.
9.
The obscure but important Rybczynski Theorem states that when each country produces two or more products, an increase in a factor of production will not cause the price of the factor to decrease but will instead change the composition of the output. What that means in practical terms is that an increase in the mobility of labor caused by higher living wages and open immigration will not cause wages to drop but will instead change the kinds of things we produce and how we produce them.
We will produce fewer machine-produced, capital- and overhead-heavy products such as the typical product sold at Walmart, and produce more hand-crafted products that people really need and want. We will move from the perpetual imbalance and disharmony of MC < AC to the harmony of MC=AC.
10.
People, even when mobile, do not behave like biscuits being shuttled between London and Glasgow or like mangoes and Harleys being traded back and forth from India to America for the simple reason that they can not be mass produced. Birthing is to this day a cottage industry with marginal and average costs being very close together. In fact when it comes to migrating, the marginal cost (MC) of emigrating is always higher than the average cost (AC). The community of immigrants in America where I arrived in 1988 was on average much better off, settled, and adapted than I, the marginal immigrant, was. In my first few months of Chicago winter I got deathly ill. Having grown up in the hot, humid, coastal climate of Bombay it had simply not occurred to me to close the windows of my dorm room.
Looking forward, as always, to your next letter,
Abhay
Showing posts with label Yunus. Show all posts
Showing posts with label Yunus. Show all posts
20060610
Four More Years of Economics #5 and #6 Gandhi
Presented at Performance Studies International Conference (PSI #12), London, June 16, 2006.
Dear Abhay,
What debt do we owe Mohandas K. Gandhi?
My question to you has many faces. What is the debt with which Gandhi has left us? Or: What forces did colonialism deploy that Gandhi rethought as debt? Or: What did rethinking colonial force as debt allow to unleash as a force of liberation?
Each version of the question contains, circulates around, this word: debt. I have revealed the end of my essay at the start. After all, I am attempting a brief venture into economics, not a mystery story. But this approach requires that I backtrack and explain myself.
Already, I have presumed the value of naivete. Nothing qualifies me to venture, however briefly, into the field of economics, or into the historical discourse bequeathed us by this figure of monumental significance, Mohandas K. Gandhi. Nevertheless, my proposed question is simple enough, if one understands its foundations. Its first foundation, a further presumption, is the proposal that economic thought might elucidate Gandhi’s actions. Its second foundation would then be this, another question: what is debt? What do I mean by debt, and why do I mean it? I owe you an explanation. Or shall we say at this point in my essay I am in debt to you in the amount of one explanation. In the debt economy, this is the debt incurred with nothing borrowed. I owe you an explanation, but not because you have loaned me an explanation first. I am not repaying you an explanation. I owe you an explanation simply because I have started talking, and you as listener can expect an explanation as your right. In the pecuniary parlay of outgoing and returning accounts, something must be returning in order for a debt to have accrued, even though nothing has been loaned. What might that something be when the exchange has not been entirely material, but conceptual and linguistic? Maybe we have entered into an arena of ethical debt, a balance of equivalences. If I own the house, and you occupy a room in it, you owe me rent, even though I have not first loaned you that rent. I have loaned you the place to live, and we have agreed that the rent is the equivalent of the shelter. Is that a fair assessment? So in terms of me owing you an explanation, shall we say the explanation is the equivalent of the attention you have given in listening thus far? Here I will give away another version of my ending in asking the question about Gandhi and debt. India lived in a house, which it found suddenly to be owned by the British Empire, which then told the people of India they needed to pay rent to continue to live there. Gandhi claimed that the British Empire had thus constructed a debt, which India was in no position to reject, but was in a position to pay. Thus his noncooperation was in fact, at least in the economic sense, its opposite: absolute cooperation, meta-cooperation, holding the British Empire to the promise implicit in its social structure, that such debt, once having been constructed, cannot be refuted. So the debtors can pay it off through manual labor, and buy their house back from the creditors. In such an undertaking, Gandhi invoked a notion of debt with its roots in the religion of the land. Here I am again venturing into a field foreign to me. So before I attempt that concluding venture, I will backtrack once again. It is only in backtracking that I do not trespass.
You are the economist, Abhay; I the self-taught and interested amateur. You were born in Bombay, and studied at Bombay University. I was born in Flint, Michigan and studied at Kalamazoo. I have trespassed into your territory in more ways than one with my question, but before I turn it over to you for an answer, let me complicate it. At least I can say I knew of Gandhi before Richard Attenborough’s movie starring Ben Kingsley. In high school I read the book that Thomas Merton edited of Gandhi’s writings on nonviolence. I wrote a history paper comparing Gandhi to Martin Luther King Jr. I got a B+. The teacher preferred my earlier work on the musical 1776. It was, after all, 1976, the bicentennial year. But I knew in my heart he was wrong, and I repeated to myself my newfound mental mantra: First they ignore you, then they ridicule you, then they fight you, then you win, or some high school rewrite version that I will spare you. Be that as it may, I was soon thereafter cast as Fagin in the school production of Oliver! It was to be the role my parents still consider the apex of my career. Recently, in Roman Polanski’s film of Dickens’ Oliver Twist, the Fagin part was played by Ben Kingsley, an actor some have told me I resemble. This digression proves the extent of my trespass: you come from the very land of Gandhi; I come from a place where I was thought to resemble the actor who played the part of Gandhi, an actor, incidentally, from Yorkshire. Now, a subdigression. It happened ten years later, when in my mid-twenties I delivered pizzas in Chicago, one in a small army of deliverymen who congregated nightly awaiting our orders in the backroom of a thriving northside restaurant. Another driver, named Patel, the butt of many jokes, spoke with a thick Indian accent. The other drivers in their diverse ethnicities – Polish, German, Italian, Spanish, Mexican, Puerto Rican, Ukranian – made him their unwitting clown, since his limited English gave him only the vaguest sense of his own ridicule. I befriended a driver from Spain, Luis, older than the others, and not given to joking. I sometimes asked Luis about vocabulary, as I sat on the long drivers’ bench reading Faulkner or Carlo Levi, or whatever I read in those days. Once I asked him the meaning of dotage, and he explained it to me patiently as the happy old age of patriarchy. I don’t remember why, but in some conversation with Luis I mentioned something about Ben Kingsley. Suddenly I felt a vice grip on my bicep, and turned to find Patel, who had been standing next to me, clutching my arm and peering at me with a look of ferocious intensity. It seemed Patel had suddenly transformed into a kind of demon, and I had no idea what I had said to inflame him. He shouted at me: Exactly! Exactly! Exactly what, Patel? I asked. Exactly like Gandhi! Patel said. Walk like Gandhi! Talk like Gandhi! Look like Gandhi! Exactly! At that moment I realized he was speaking of Ben Kingsley. I looked to Luis for help. And Luis, with infinite wisdom, simply said, We understand you: Ben Kingsley was exactly like Gandhi. Exactly, said Patel, his passion calming. I noticed then that he had tears standing in his eyes. Ben Kingsley. The actor quoted the words exactly. Now I quote the actor’s quotations. Witness the extent of my echolalia. What debt do we owe Mohandas K. Gandhi? It is a question complicated with simplicity. Today I am the foreigner. And the journey of the question has been a 1,800 word walk to the sea, trespassing through your discipline and your country. Anyone who cares to join me on that walk may come along now to its end, where your answer will produce something useful as salt.
He defeated colonialism by accepting it, his acceptance as radical as it was mundane. We have been colonized, he said, and that has put us in debt. To escape the colonization, we must pay off the debt. Once we work our way out of it, through manual labor, we will arrive at a zero point. We will owe nothing, and no one will owe us. That point will be our independence.
I told you it was a simple idea.
But complexity lies in the radical acceptance, for after all, what had Gandhi accepted but the ownership consequences of criminal acts? Such was the culture of colonialism: making India pay for something that was India’s by right; taking it from them first by force, and withholding it to demand payment returns. The rejection of colonialism’s criminality, one could argue, lay in the acceptance of its code of ethics – of ownership through labor, as if the house had been built on foundations of illusion, and the criminality dispelled by the strict adherence to the illusion’s laws. We have locked you in a debtors prison by virtue of our strength, says Empire, and your only recourse is to work your way out for the next 1,000 years, to which the prisoner responds, I will begin my work today, and in the purity of the task I will enact my perfect escape.
Furthermore, in the method of the payment, the perfect act of purified labor, was a profound refusal – a refusal to accrue more debt, not just economic, but ethical, which is to say, and this is the point about religion where I left off: karmic – a debt not of, or not only of, material and labor. The debt economy is the symptom; the cause lies in an economy of deeds and actions. Because man, according to Brahmanism, is born “as debt.” Debt marks his mortal condition. This does not mean that an original sin determines human nature. Debt is neither the sign nor the consequence of a fall, nor does it result from a contract. It simply and directly places man in the condition of debtor. This status is made concrete and diversified in a series of duties, invoked, in the Hindu laws, to justify the rules which organize material administration. It is a karmic approach to debt, as a connection and drawing together of heaven and earth, into which we humans buy our destiny by pouring into the celestial treasury the bad money of sacrifice.
Thus the action of working off colonialism entwines with the action of working off one’s human condition, and such working must be nonviolent, that is, with violence turned only inward on the self, since externalized violence would produce more debt, would multiply that debt we have been born as, under heaven or under empire. Nonviolence does not spend currency it does not have.
Dear Abhay, forgive me my intervening into this subject, my presumption mediated only by my role as interlocutor. What debt do we owe Mohandas K. Gandhi? What debt has Gandhi left us with? What forces did colonialism deploy that Gandhi rethought as debt? What did rethinking colonial force as debt allow to unleash as a force of liberation? And finally: What forces of liberation does such thought – shall we call it our Gandhiology? – allow us to unleash now?
I look forward as always to your response.
Matthew
Sources:
Gandhi on Non-Violence ed. Thomas Merton, New Directions, New York, 1964.
On the Name by Jacques Derrida, “Passions: ‘An Oblique Suffering’”, note 3, pages 132 – 137, with extensive quotations from Benveniste and Malamoud, Stanford University Press, Stanford, CA, 1993.
My dear Matthew,
1.
A young female disciple in the Ashram has a dream which she describes to Gandhi the next day:
I was lying in your lap, Bapu, and you were breast-feeding me. I said I had had enough milk but you kept saying, have more have more have more. Milk squirted into my mouth continuously.
2.
In the language of economics, debts are a function of deficits and credits. A fresh deficit increases the debt. A fresh credit decreases the debt.
We were allotted 30 minutes to read our latest letters of which you, my dear Matthew, took 14 to ask your question, leaving me with the possibility of one answer 16 minutes long. Or 16 answers each a minute long. An answer that takes less than a minute creates a credit, one that takes over a minute, a deficit. I have 16 minutes to repay my debt to you.
3.
I am supposed to start speaking. I am standing in front of 300 students and teachers of Jamnabai Narsee School. The headmistress who is secretly known as Dolly by the teachers is motioning to me to start. Speak, she now whispers. But I simply stand there silently. I have been unable to memorize the speech written for me by Divya Shah’s father. It is 1976 and it is Gandhi’s birthday and I stand silent in front of the assembly. I can not even get to the opening sentence: He was known as the naked fakir.
Later, my father spends days talking to me about Gandhi. Having studied at a school started by freedom fighters, he has read every word Gandhi has written in his native Gujerati. Thus begins a dialogue on Gandhi between father and son that lasts seven years, until father dies, unexpectedly. The opportunity to say more about Gandhi does not arrive for another thirty years. Until today.
1976 is also the year my family does not move to Bangladesh. My father turns down an offer from a United Nations agency to serve as Chief Economist there. I remember him saying, the Bangladeshi question must be answered by a Bangladeshi.
4.
Leading classical economist Robert J. Barro can not understand why countries want political freedom when their material conditions are poor. “It sounds nice to try to install democracy in Haiti or Somalia, but does it make any sense?” He obviously does not think so. According to him democracy should come later, as a sort of reward for materialist development.
5.
I am 13 years old. I have just joined the original Aurobindo Ashram founded by the Maharaja of Baroda. I am here to learn yoga but my teacher likes to talk about bicycles and economics and rna or debt as he sips goat’s milk from a tall glass.
Like Newton’s laws of motion, the laws of karma are about actions and reactions. People and nations come together to repay past rna. If I steal from you, Matthew, I only complete an action that you once started. My act does not create a fresh karmic debt for me.
It is only by my ego-identification with the act that I create rnanubandhana or debt bondage.
6.
The old physics professor is with us. We are on the last train to Virar, the end of the line at the foot of the mountain we will climb early in the morning.
The old physics professor is slow and mild mannered. From time to time he tries to get me and Bento, my fellow economics student, into a discussion of the contradictions of classical economics. “You must read the works of the great radical economist A. G. Frank. He distinguishes between underdevelopment and undevelopment. Undevelopment is the natural state of a country that has not harnessed its economic resources. Underdevelopment on the other hand is a state of economic distortion created by colonialism.” Frankly, we are not interested in any of this.
It is so dark that I can not see more than a shadow when I hold my hand out in front of me. Little circles of light crisscross the wet ground. We are moving in one uniform group when a lone figure separates itself from us. Would any of you join me? It asks. Join me in teaching people in Taragoan village to read and write.
Bento and I mumble something about literacy being an itemized entry in the 6th Five Year Plan and ignore the old Gandhian.
7.
Indian psychoanalyst Sudhir Kakar defines fantasy as the gap between the many desires, formulated as demands on the environment and the environment’s inability or unwillingness to fulfill them.
What strikes me about this definition is its exact correspondence to classical economics: the gap between unlimited demands and limited resources.
We may say,
classical economics = fantasy
8.
The Indian economist Amartya Sen has demonstrated that famines are not a problem of underproduction. In fact during the worst year of a famine, food availability is often at an all time high. The problem is not lack of food but rather what he calls entitlements and capabilities. The poor, now unemployed as a result of the famine are unable to purchase food.
Sen has shown beyond a shadow of doubt that political freedom is a precondition to the elimination of mass starvation. No democracy with a relatively free press in history has ever suffered a famine.
9.
The economics of colonialism starts with the logic of competition which ensures that any producer who lags behind in investment is run to the ground. If we accept the notion that dominant values in society are always the values of the ruling class, then thrift, which is for the producer a necessity for survival, becomes the value of the great middle class. Production and savings begin to outweigh the capacity of the economy to absorb them and must be directed abroad.
How well does this model fit the data? Consider this: From the time India became a colony to the outbreak of the Great War, one half of British savings were invested abroad. Flow of dividends and interest alone provided 10% of British national income.
10.
Classical economics views debt with the same mixture of pleasure, guilt, disgust, and feeling of power that a young child exhibits towards its feces.
We may say,
Debt = feces
11.
The young disciple asked Gandhi to explain her dream. Gandhi said, it means that you can trust me.
Sudhir Kakar has called Gandhi a brilliant amateur analyst.
12.
In classical colonial economics, credit is first directed towards the richest segment of society, then on to inhuman extensions of the capitalist’s ego: machinery, and finally abroad, to the colonies.
Gandhi’s radical rethinking was to apply credit to the poorest strata of society, then to machines that were small, powered by human effort and requiring mental and physical dexterity and alertness. Finally, credit would flow to one’s neighbors.
13.
In 1976 while I wrestled with the idiotic Gandhi speech, Bangladesh was under severe famine. Muhammad Yunus, a young economics professor at the University of Chittagong put together his life’s savings and made credit available to 42 hard-working but severely impoverished neighbors in Jobra village. The total credit was dispersed by him personally, using all his own resources, which amounted to a total of $27.
In doing so he started a bloodless revolution. Yunus, in that act, repositioned his country from a state of underdevelopment to a state of undevelopment.
Thirty years later Grameen Bank has dispersed over $5 billion in credit to 4 million borrowers, 96% of them women.
Consider two of his most recent ventures:
1. Extending credit to women to buy cell phones, not for personal use, but effectively creating a public call office in even the remotest of the poor communities, linking them to neighbors, and the rest of the world.
2. Credit is being extended to 26,000 beggars in rural Bangladesh who now on their daily begging rounds from house to house carry with them sweetmeats and toys for sale. Where once the beggars faced irate householders throwing money and food at them from small windows, they now have families who have set up stools for them to sit on during their daily visit. Children come running out of the houses to see the latest candy and toys that the beggar has brought. Yunus has turned social deficits into social credits.
A remarkable study of rural money lending in Pakistan by Irfan Aleem has found that default rates amongst the very poorest who have been extended credit are amongst the lowest in the world at around 2%.
14.
“Dear Prime Minister,
You are reported to have the desire to crush the ‘naked fakir’, as you are said to have described me. I have been long trying to be a fakir and that, naked – a more difficult task. I therefore regard the expression as a compliment though unintended. I approach you then as such and ask you to trust and use me for the sake of your people and mine and through them those of the world.
Your sincere friend,
M. K. Gandhi”
15.
Muhammad Yunus has one more dream. He wants to make credit a human right. “We all consider it normal that banks exclude 80% of the world’s population,” he says, anger brimming just below the surface. “I want the United Nations to include the right to credit in its Universal Declaration of Human Rights.”
The ability to accept a debt is the next frontier of human rights.
16.
When the child comes to realize that the passing of resources through its bottom is related to the further taking in of nourishment from its mouth, it has learned the economics of Mahatma Gandhi.
We must reword our equation to say,
debt = milk
And in deference to Gandhi’s dietary choices we may modify the equation one last time and say,
debt = goat’s milk
Your friend,
Abhay
Sources:
Aleem, Irfan. “Imperfect Information, Screening, and the Costs of Informal Lending: A Study of Rural Credit Market in Pakistan,” The World Bank Economic Review 4(3) 329-349 (1990).
Barro, Robert J. Getting It Right: Markets and Choices in a Free Society (Cambridge: MIT Press, 1997).
Fenichel, Otto. “The Drive to Amass Wealth,” The Psychoanalytic Quarterly 7:69-95 (1938).
Gandhi, M. K. The Selected Works of Mahatma Gandhi vols. 1-6. (Bombay: Navajivan Trust, 1968).
Heilbroner, Robert. The Worldly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers. (New York: Touchstone: 1999).
Kakar, Sudhir. Intimate Relations: Exploring Indian Sexuality (Chicago: University of Chicago Press, 1989).
Kanth, Rajani. Paradigms in Economic Development: Classic Perspectives, Critiques, and Reflections. (New York: M. E. Sharpe, 1994).
O’Bryon, Linda. “Muhammad Yunus, Banker to the World’s Poorest Citizens Makes His Case,” O’Bryon interviews Muhammad Yunus, Nightly Business Report, March 9 (2005).
Schumacher, E.F. Gandhi Memorial Lecture, Institute of Gandhian Studies, Varanasi, 1973.
Schumacher, E.F. Small is Beautiful: Economics as if People Mattered. (New York: Harper Perennial, 1989).
Sen, Amartya. “The Economics of Life and Death,” Scientific American 268(5) 40-7 (1993).
Svoboda, Robert E. Aghora: At the Left Hand of God (Albuquerque: Brotherhood of Life, 1986).
Visscher, Marco. “The World Champ of Poverty Fighters,” Ode 3(6) 26-31 (2005).
Weber, Thomas. “Gandhi, Deep Ecology, Peace Research, and Buddhist Economics,” Journal of Peace Research 36(3) 349-362 (1999).
Dear Abhay,
What debt do we owe Mohandas K. Gandhi?
My question to you has many faces. What is the debt with which Gandhi has left us? Or: What forces did colonialism deploy that Gandhi rethought as debt? Or: What did rethinking colonial force as debt allow to unleash as a force of liberation?
Each version of the question contains, circulates around, this word: debt. I have revealed the end of my essay at the start. After all, I am attempting a brief venture into economics, not a mystery story. But this approach requires that I backtrack and explain myself.
Already, I have presumed the value of naivete. Nothing qualifies me to venture, however briefly, into the field of economics, or into the historical discourse bequeathed us by this figure of monumental significance, Mohandas K. Gandhi. Nevertheless, my proposed question is simple enough, if one understands its foundations. Its first foundation, a further presumption, is the proposal that economic thought might elucidate Gandhi’s actions. Its second foundation would then be this, another question: what is debt? What do I mean by debt, and why do I mean it? I owe you an explanation. Or shall we say at this point in my essay I am in debt to you in the amount of one explanation. In the debt economy, this is the debt incurred with nothing borrowed. I owe you an explanation, but not because you have loaned me an explanation first. I am not repaying you an explanation. I owe you an explanation simply because I have started talking, and you as listener can expect an explanation as your right. In the pecuniary parlay of outgoing and returning accounts, something must be returning in order for a debt to have accrued, even though nothing has been loaned. What might that something be when the exchange has not been entirely material, but conceptual and linguistic? Maybe we have entered into an arena of ethical debt, a balance of equivalences. If I own the house, and you occupy a room in it, you owe me rent, even though I have not first loaned you that rent. I have loaned you the place to live, and we have agreed that the rent is the equivalent of the shelter. Is that a fair assessment? So in terms of me owing you an explanation, shall we say the explanation is the equivalent of the attention you have given in listening thus far? Here I will give away another version of my ending in asking the question about Gandhi and debt. India lived in a house, which it found suddenly to be owned by the British Empire, which then told the people of India they needed to pay rent to continue to live there. Gandhi claimed that the British Empire had thus constructed a debt, which India was in no position to reject, but was in a position to pay. Thus his noncooperation was in fact, at least in the economic sense, its opposite: absolute cooperation, meta-cooperation, holding the British Empire to the promise implicit in its social structure, that such debt, once having been constructed, cannot be refuted. So the debtors can pay it off through manual labor, and buy their house back from the creditors. In such an undertaking, Gandhi invoked a notion of debt with its roots in the religion of the land. Here I am again venturing into a field foreign to me. So before I attempt that concluding venture, I will backtrack once again. It is only in backtracking that I do not trespass.
You are the economist, Abhay; I the self-taught and interested amateur. You were born in Bombay, and studied at Bombay University. I was born in Flint, Michigan and studied at Kalamazoo. I have trespassed into your territory in more ways than one with my question, but before I turn it over to you for an answer, let me complicate it. At least I can say I knew of Gandhi before Richard Attenborough’s movie starring Ben Kingsley. In high school I read the book that Thomas Merton edited of Gandhi’s writings on nonviolence. I wrote a history paper comparing Gandhi to Martin Luther King Jr. I got a B+. The teacher preferred my earlier work on the musical 1776. It was, after all, 1976, the bicentennial year. But I knew in my heart he was wrong, and I repeated to myself my newfound mental mantra: First they ignore you, then they ridicule you, then they fight you, then you win, or some high school rewrite version that I will spare you. Be that as it may, I was soon thereafter cast as Fagin in the school production of Oliver! It was to be the role my parents still consider the apex of my career. Recently, in Roman Polanski’s film of Dickens’ Oliver Twist, the Fagin part was played by Ben Kingsley, an actor some have told me I resemble. This digression proves the extent of my trespass: you come from the very land of Gandhi; I come from a place where I was thought to resemble the actor who played the part of Gandhi, an actor, incidentally, from Yorkshire. Now, a subdigression. It happened ten years later, when in my mid-twenties I delivered pizzas in Chicago, one in a small army of deliverymen who congregated nightly awaiting our orders in the backroom of a thriving northside restaurant. Another driver, named Patel, the butt of many jokes, spoke with a thick Indian accent. The other drivers in their diverse ethnicities – Polish, German, Italian, Spanish, Mexican, Puerto Rican, Ukranian – made him their unwitting clown, since his limited English gave him only the vaguest sense of his own ridicule. I befriended a driver from Spain, Luis, older than the others, and not given to joking. I sometimes asked Luis about vocabulary, as I sat on the long drivers’ bench reading Faulkner or Carlo Levi, or whatever I read in those days. Once I asked him the meaning of dotage, and he explained it to me patiently as the happy old age of patriarchy. I don’t remember why, but in some conversation with Luis I mentioned something about Ben Kingsley. Suddenly I felt a vice grip on my bicep, and turned to find Patel, who had been standing next to me, clutching my arm and peering at me with a look of ferocious intensity. It seemed Patel had suddenly transformed into a kind of demon, and I had no idea what I had said to inflame him. He shouted at me: Exactly! Exactly! Exactly what, Patel? I asked. Exactly like Gandhi! Patel said. Walk like Gandhi! Talk like Gandhi! Look like Gandhi! Exactly! At that moment I realized he was speaking of Ben Kingsley. I looked to Luis for help. And Luis, with infinite wisdom, simply said, We understand you: Ben Kingsley was exactly like Gandhi. Exactly, said Patel, his passion calming. I noticed then that he had tears standing in his eyes. Ben Kingsley. The actor quoted the words exactly. Now I quote the actor’s quotations. Witness the extent of my echolalia. What debt do we owe Mohandas K. Gandhi? It is a question complicated with simplicity. Today I am the foreigner. And the journey of the question has been a 1,800 word walk to the sea, trespassing through your discipline and your country. Anyone who cares to join me on that walk may come along now to its end, where your answer will produce something useful as salt.
He defeated colonialism by accepting it, his acceptance as radical as it was mundane. We have been colonized, he said, and that has put us in debt. To escape the colonization, we must pay off the debt. Once we work our way out of it, through manual labor, we will arrive at a zero point. We will owe nothing, and no one will owe us. That point will be our independence.
I told you it was a simple idea.
But complexity lies in the radical acceptance, for after all, what had Gandhi accepted but the ownership consequences of criminal acts? Such was the culture of colonialism: making India pay for something that was India’s by right; taking it from them first by force, and withholding it to demand payment returns. The rejection of colonialism’s criminality, one could argue, lay in the acceptance of its code of ethics – of ownership through labor, as if the house had been built on foundations of illusion, and the criminality dispelled by the strict adherence to the illusion’s laws. We have locked you in a debtors prison by virtue of our strength, says Empire, and your only recourse is to work your way out for the next 1,000 years, to which the prisoner responds, I will begin my work today, and in the purity of the task I will enact my perfect escape.
Furthermore, in the method of the payment, the perfect act of purified labor, was a profound refusal – a refusal to accrue more debt, not just economic, but ethical, which is to say, and this is the point about religion where I left off: karmic – a debt not of, or not only of, material and labor. The debt economy is the symptom; the cause lies in an economy of deeds and actions. Because man, according to Brahmanism, is born “as debt.” Debt marks his mortal condition. This does not mean that an original sin determines human nature. Debt is neither the sign nor the consequence of a fall, nor does it result from a contract. It simply and directly places man in the condition of debtor. This status is made concrete and diversified in a series of duties, invoked, in the Hindu laws, to justify the rules which organize material administration. It is a karmic approach to debt, as a connection and drawing together of heaven and earth, into which we humans buy our destiny by pouring into the celestial treasury the bad money of sacrifice.
Thus the action of working off colonialism entwines with the action of working off one’s human condition, and such working must be nonviolent, that is, with violence turned only inward on the self, since externalized violence would produce more debt, would multiply that debt we have been born as, under heaven or under empire. Nonviolence does not spend currency it does not have.
Dear Abhay, forgive me my intervening into this subject, my presumption mediated only by my role as interlocutor. What debt do we owe Mohandas K. Gandhi? What debt has Gandhi left us with? What forces did colonialism deploy that Gandhi rethought as debt? What did rethinking colonial force as debt allow to unleash as a force of liberation? And finally: What forces of liberation does such thought – shall we call it our Gandhiology? – allow us to unleash now?
I look forward as always to your response.
Matthew
Sources:
Gandhi on Non-Violence ed. Thomas Merton, New Directions, New York, 1964.
On the Name by Jacques Derrida, “Passions: ‘An Oblique Suffering’”, note 3, pages 132 – 137, with extensive quotations from Benveniste and Malamoud, Stanford University Press, Stanford, CA, 1993.
My dear Matthew,
1.
A young female disciple in the Ashram has a dream which she describes to Gandhi the next day:
I was lying in your lap, Bapu, and you were breast-feeding me. I said I had had enough milk but you kept saying, have more have more have more. Milk squirted into my mouth continuously.
2.
In the language of economics, debts are a function of deficits and credits. A fresh deficit increases the debt. A fresh credit decreases the debt.
We were allotted 30 minutes to read our latest letters of which you, my dear Matthew, took 14 to ask your question, leaving me with the possibility of one answer 16 minutes long. Or 16 answers each a minute long. An answer that takes less than a minute creates a credit, one that takes over a minute, a deficit. I have 16 minutes to repay my debt to you.
3.
I am supposed to start speaking. I am standing in front of 300 students and teachers of Jamnabai Narsee School. The headmistress who is secretly known as Dolly by the teachers is motioning to me to start. Speak, she now whispers. But I simply stand there silently. I have been unable to memorize the speech written for me by Divya Shah’s father. It is 1976 and it is Gandhi’s birthday and I stand silent in front of the assembly. I can not even get to the opening sentence: He was known as the naked fakir.
Later, my father spends days talking to me about Gandhi. Having studied at a school started by freedom fighters, he has read every word Gandhi has written in his native Gujerati. Thus begins a dialogue on Gandhi between father and son that lasts seven years, until father dies, unexpectedly. The opportunity to say more about Gandhi does not arrive for another thirty years. Until today.
1976 is also the year my family does not move to Bangladesh. My father turns down an offer from a United Nations agency to serve as Chief Economist there. I remember him saying, the Bangladeshi question must be answered by a Bangladeshi.
4.
Leading classical economist Robert J. Barro can not understand why countries want political freedom when their material conditions are poor. “It sounds nice to try to install democracy in Haiti or Somalia, but does it make any sense?” He obviously does not think so. According to him democracy should come later, as a sort of reward for materialist development.
5.
I am 13 years old. I have just joined the original Aurobindo Ashram founded by the Maharaja of Baroda. I am here to learn yoga but my teacher likes to talk about bicycles and economics and rna or debt as he sips goat’s milk from a tall glass.
Like Newton’s laws of motion, the laws of karma are about actions and reactions. People and nations come together to repay past rna. If I steal from you, Matthew, I only complete an action that you once started. My act does not create a fresh karmic debt for me.
It is only by my ego-identification with the act that I create rnanubandhana or debt bondage.
6.
The old physics professor is with us. We are on the last train to Virar, the end of the line at the foot of the mountain we will climb early in the morning.
The old physics professor is slow and mild mannered. From time to time he tries to get me and Bento, my fellow economics student, into a discussion of the contradictions of classical economics. “You must read the works of the great radical economist A. G. Frank. He distinguishes between underdevelopment and undevelopment. Undevelopment is the natural state of a country that has not harnessed its economic resources. Underdevelopment on the other hand is a state of economic distortion created by colonialism.” Frankly, we are not interested in any of this.
It is so dark that I can not see more than a shadow when I hold my hand out in front of me. Little circles of light crisscross the wet ground. We are moving in one uniform group when a lone figure separates itself from us. Would any of you join me? It asks. Join me in teaching people in Taragoan village to read and write.
Bento and I mumble something about literacy being an itemized entry in the 6th Five Year Plan and ignore the old Gandhian.
7.
Indian psychoanalyst Sudhir Kakar defines fantasy as the gap between the many desires, formulated as demands on the environment and the environment’s inability or unwillingness to fulfill them.
What strikes me about this definition is its exact correspondence to classical economics: the gap between unlimited demands and limited resources.
We may say,
classical economics = fantasy
8.
The Indian economist Amartya Sen has demonstrated that famines are not a problem of underproduction. In fact during the worst year of a famine, food availability is often at an all time high. The problem is not lack of food but rather what he calls entitlements and capabilities. The poor, now unemployed as a result of the famine are unable to purchase food.
Sen has shown beyond a shadow of doubt that political freedom is a precondition to the elimination of mass starvation. No democracy with a relatively free press in history has ever suffered a famine.
9.
The economics of colonialism starts with the logic of competition which ensures that any producer who lags behind in investment is run to the ground. If we accept the notion that dominant values in society are always the values of the ruling class, then thrift, which is for the producer a necessity for survival, becomes the value of the great middle class. Production and savings begin to outweigh the capacity of the economy to absorb them and must be directed abroad.
How well does this model fit the data? Consider this: From the time India became a colony to the outbreak of the Great War, one half of British savings were invested abroad. Flow of dividends and interest alone provided 10% of British national income.
10.
Classical economics views debt with the same mixture of pleasure, guilt, disgust, and feeling of power that a young child exhibits towards its feces.
We may say,
Debt = feces
11.
The young disciple asked Gandhi to explain her dream. Gandhi said, it means that you can trust me.
Sudhir Kakar has called Gandhi a brilliant amateur analyst.
12.
In classical colonial economics, credit is first directed towards the richest segment of society, then on to inhuman extensions of the capitalist’s ego: machinery, and finally abroad, to the colonies.
Gandhi’s radical rethinking was to apply credit to the poorest strata of society, then to machines that were small, powered by human effort and requiring mental and physical dexterity and alertness. Finally, credit would flow to one’s neighbors.
13.
In 1976 while I wrestled with the idiotic Gandhi speech, Bangladesh was under severe famine. Muhammad Yunus, a young economics professor at the University of Chittagong put together his life’s savings and made credit available to 42 hard-working but severely impoverished neighbors in Jobra village. The total credit was dispersed by him personally, using all his own resources, which amounted to a total of $27.
In doing so he started a bloodless revolution. Yunus, in that act, repositioned his country from a state of underdevelopment to a state of undevelopment.
Thirty years later Grameen Bank has dispersed over $5 billion in credit to 4 million borrowers, 96% of them women.
Consider two of his most recent ventures:
1. Extending credit to women to buy cell phones, not for personal use, but effectively creating a public call office in even the remotest of the poor communities, linking them to neighbors, and the rest of the world.
2. Credit is being extended to 26,000 beggars in rural Bangladesh who now on their daily begging rounds from house to house carry with them sweetmeats and toys for sale. Where once the beggars faced irate householders throwing money and food at them from small windows, they now have families who have set up stools for them to sit on during their daily visit. Children come running out of the houses to see the latest candy and toys that the beggar has brought. Yunus has turned social deficits into social credits.
A remarkable study of rural money lending in Pakistan by Irfan Aleem has found that default rates amongst the very poorest who have been extended credit are amongst the lowest in the world at around 2%.
14.
“Dear Prime Minister,
You are reported to have the desire to crush the ‘naked fakir’, as you are said to have described me. I have been long trying to be a fakir and that, naked – a more difficult task. I therefore regard the expression as a compliment though unintended. I approach you then as such and ask you to trust and use me for the sake of your people and mine and through them those of the world.
Your sincere friend,
M. K. Gandhi”
15.
Muhammad Yunus has one more dream. He wants to make credit a human right. “We all consider it normal that banks exclude 80% of the world’s population,” he says, anger brimming just below the surface. “I want the United Nations to include the right to credit in its Universal Declaration of Human Rights.”
The ability to accept a debt is the next frontier of human rights.
16.
When the child comes to realize that the passing of resources through its bottom is related to the further taking in of nourishment from its mouth, it has learned the economics of Mahatma Gandhi.
We must reword our equation to say,
debt = milk
And in deference to Gandhi’s dietary choices we may modify the equation one last time and say,
debt = goat’s milk
Your friend,
Abhay
Sources:
Aleem, Irfan. “Imperfect Information, Screening, and the Costs of Informal Lending: A Study of Rural Credit Market in Pakistan,” The World Bank Economic Review 4(3) 329-349 (1990).
Barro, Robert J. Getting It Right: Markets and Choices in a Free Society (Cambridge: MIT Press, 1997).
Fenichel, Otto. “The Drive to Amass Wealth,” The Psychoanalytic Quarterly 7:69-95 (1938).
Gandhi, M. K. The Selected Works of Mahatma Gandhi vols. 1-6. (Bombay: Navajivan Trust, 1968).
Heilbroner, Robert. The Worldly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers. (New York: Touchstone: 1999).
Kakar, Sudhir. Intimate Relations: Exploring Indian Sexuality (Chicago: University of Chicago Press, 1989).
Kanth, Rajani. Paradigms in Economic Development: Classic Perspectives, Critiques, and Reflections. (New York: M. E. Sharpe, 1994).
O’Bryon, Linda. “Muhammad Yunus, Banker to the World’s Poorest Citizens Makes His Case,” O’Bryon interviews Muhammad Yunus, Nightly Business Report, March 9 (2005).
Schumacher, E.F. Gandhi Memorial Lecture, Institute of Gandhian Studies, Varanasi, 1973.
Schumacher, E.F. Small is Beautiful: Economics as if People Mattered. (New York: Harper Perennial, 1989).
Sen, Amartya. “The Economics of Life and Death,” Scientific American 268(5) 40-7 (1993).
Svoboda, Robert E. Aghora: At the Left Hand of God (Albuquerque: Brotherhood of Life, 1986).
Visscher, Marco. “The World Champ of Poverty Fighters,” Ode 3(6) 26-31 (2005).
Weber, Thomas. “Gandhi, Deep Ecology, Peace Research, and Buddhist Economics,” Journal of Peace Research 36(3) 349-362 (1999).
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