Gorbachev, macro-economics, and Gandhi

Source: The post is based on the article “Gorbachev, macro-economics, and Gandhi” published in The Hindu on 6^th September 2022.

Syllabus: GS 3 – Indian Economy – Growth and development.

Relevance: About the capitalist model and its alternative.

News: Recently, Mikhail Gorbachev passed away. He has been for his role in ending the ideological conflict between communism and capitalism.

About Mikhail Gorbachev’s political and economic decisions

Economic policy: Gorbachev favoured a slow transition to a “mixed economy” like the Indian model and had even approached Rajiv Gandhi for advice.

With his concepts of perestroika and glasnost, Gorbachev wanted to save common citizens from being oppressed by powerful people.

Political decisions: He also brought down the Iron Curtain and ended the Cold War between the North Atlantic Treaty Organization (NATO) and the Soviet Union.

Gorbachev also helped to bring the world back from the nuclear precipice.

How did Russia evolve after Mikhail Gorbachev’s Presidency?

Boris Yeltsin: He took power after Gorbachev. During his regime, “big bang” capitalisation was imposed on Russia by U.S. economists. Instead of the Indian model, the “Washington economics” model prevailed.

Note: After 1991, India itself opened up its economy to the US model.

Vladimir Putin: Under him, Russia again moves towards authoritarianism.

Is the capitalist model the best?

No, overall life expectancy is a good measure of the well-being of a nation’s citizens. This is because, when all citizens are well-nourished when public health systems function well, and when violence in society is low, an average person lives longer.

International comparisons reveal that GDP per capita is an insufficient contributor to longevity. Many countries with substantially lower incomes outperform the U.S. in life expectancy.

For example, Cuba is one place above the U.S. in longevity tables even though its income per capita is just 14% of U.S. incomes.

What is the impact on Russia due to the capitalist model?

The big bang capitalist reforms of the Russian economy in 1991 and 1994, life expectancy fell from 64 to 57 years. Many Russian deaths were caused by suicides, alcohol poisoning, homicides, and heart attacks brought upon by despair with joblessness and hopelessness, created by wholesale privatisation of the economy and disruption of social safety nets.

What are the basis of the capitalist model, and what are the challenges?

It is founded on two fundamental ideas.

The ideology of “property rights” outdoing human rights

In this, whosoever owns more shares in a property must have a greater say. Thus, one dollar owned gives one vote in governance, and a million dollars, one million votes.

This is visible by the a) Creation of international tribunals which adjudicate disputes between foreign investors in countries and the governments (representing the interests of millions and billions of people) of those countries, b) Global trade rules, and national financial and trade regulations also favour the needs of financial investors, making it easier for them to enter and exit. But the governments stopping human migrants from searching for better opportunities across national borders.

On the other hand, the democratic principle of “human rights” requires that every human being, black or white, or whether billionaire or pauper, has an equal vote in governance.

Hardin’s “Tragedy of the Commons”

It says that communities cannot manage shared resources; therefore, a common property must be privatised for its protection. When a public resource is privatised, those who already have wealth can buy it. Those with more wealth will win and become even wealthier. Thus, inequalities will increase.

What is an alternative to the capitalist model India should follow?

Follow Gandhi’s ethical economics: Concepts of free trade, financial freedom, and privatisation, promoted by macroeconomists, are not good solutions for India’s billion citizens struggling for resilience in their lives.

India’s economic governance must be guided by Mahatma Gandhi’s calculus, with principles of human rights and community management, to realise the promise of our commons, and provide “poorna swaraj” to all citizens.