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In my previous blog "The Wealth of Families" I tried to use capitalism to support the notion of charitable family trusts. That was a misguided adventure. Many thanks to Dipak Dholakia for making several excellent points regarding that blog. Adam Smith wrote "The Wealth of Nations" long ago. In todays world, Adam Smith offers nothing for either nations or families. In America, all colleges and universities still teach sudents that there are only two kinds of economic systems: the "free" enterprise system (capitalism), and "command" economic systems (communism and socialism.) Students think the only choice is between being "free" or being "commanded." Economic thought in America has been reduced to a choice between Adam Smith and Karl Marx. Living in India, a person might believe Americans are free to think and form their own opinions. The real truth is that the conditioning in America runs very deep. We Americans have become very comfortable in our material wealth. We have become so comfortable that we don't even feel like what we are - endentured servants. Of course, there are many alternatives to capitalism, socialism, and communism. One of the best is Binary Economics. However, American social conditioning requires that responsible people support capitalism. We don't call it capitalism - we call it free enterprise. Sounds better. Just like we call debt cards "credit" cards - sounds better.

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Comment by Dipak Dholakia on February 1, 2010 at 18:10
I have invited 8 or 9 friends. Let's see..
Comment by Christopher Wroth on February 1, 2010 at 18:04
Thank you, Dipak, for your invitation to friends to join this discussion. Just now I discovered the trusteeship blog of Bal Patil posted last year. I invited him to join with us. As I move forward with my own attempt to establish a charitable trust in line with these discussioins (Cloversweet Trust), I am finding that the self-help aspect of an organized Trust may be the most critical component. Many of us are not in the habit of making plans and setting goals for ourselves. Trust members are required to do this as part of the economic "life plan" they offer for ongoing review by the Board of Trustees. These plans, along with the ongoing encouragement offered by the Board and other Trust members, are the blueprint for each member's future economic improvement. These life plans are the glue that makes each Trust a family self-help support group as well as a legal vehicle for preserving the wealth that is gained through implementation of the life plans. These plans take a lot of time and thought.
Comment by Dipak Dholakia on February 1, 2010 at 9:07
Dear Chris, Our discussion has led to more clarity on the issue:
1. 'Labour' is the basic ingredient of the material well-being as well as spiritual progress;
2. 'Labour' is a force, the only faculty human being is naturally endowed with;
3. Worker is not 'labour'; he is the owner of 'labour' who plays a very important role in the material well-being of the society;
4. Gandhi indicated some directions for progress and his talisman is the core mantra of the real advancement of all;
5. Trusteeship is to be further explored as a viable idea for its application in the present day economies of the world;
6. Family Trusts could be one of the responses but they too have too to bear the brunt of what goes on, on the larger scale because building up the wealth of a family depends on macro level economic policies;
7. We, therefore, need to address the issues from people's point of view, since societies are made of individuals;
8. Marxism is right in attacking the individual, as against the social, control of means of production but it does not change the capitalistic concept of monopolised large scale production;
9. Capitalism, on the other hand, does not even care to address the issue of distribution of wealth;
10. Decentralised control over means of production may lead to greater well-being
11. Trusteeship depends on ‘change of heart’ i.e. voluntary loosening of control over means of production but the poor cannot be asked to wait till that ideal condition is met;
12. Government’s role, therefore, cannot be ignored in making suitable laws to push Trusteeship forward as the real issue is to put a ceiling on profit-making capabilities of capitalist class;
13. Means of production must be deployed in a manner as to serve those who are on the margins of the society i.e. 'unto this last'.
14. Governments must build up funds from the excess profits of the companies for distribution in the form of micro-finances or any other employment guarantee scheme;

Obviously, this is not all. Nor is it an exhaustive list. Only a summary of our discussion. If other members too contribute to the debate an alternative agenda of ‘Gandhiconomics’ can be placed before the people. This site, Gandhitopia is the best vehicle to propagate such ideas.
Comment by Christopher Wroth on January 31, 2010 at 22:27
Thank you, Dipak, for always making helpful comments to Ghanditopia. As you say, "most of the people have nothing to inherit except poverty and debt." It is so true all over this world. I wish all could see that your statement is actually the crux of the problem. Or, perhaps I should say that our conditioed thinking is the crux of the problem. You see, Dipak, we are conditioned almost completely by the materialistic "maya" that surrounds us - indeed, we swim in it. This materialist illusion leads us to accept poverty as if it were a natural part of life. Poverty is unnatural. It exists only because of the division of labor to enrich the capitalist class. As you point out, the history is that capital grew out of accumulated savings from labor. But, back then, that labor resulted in either a handcraft that was a complete product, or work that could not be done by a machine. Today, automated machines have eliminated an uncountable number of jobs once done by human labor. To make it worse, the same machines produce products that people favor over handcrafted products - eliminating the craftsman. The first cars were built by small shops employing skilled craftsmen. Henry Ford realized he could make cars cheaper by replacing one skilled craftsman with several low-paid assembly line workers - each doing only a part of what the craftsman did. Ford's new manufacturing method (assembly line mass-production) soon became the norm for all production. The craftsman went away, replaced by workers who are really only replacable cogs and gears. His personal humility led Gandhi to declare that he had not invented anything, and that nonviolence was "as old as the hills." He was wrong. The Mahatma did invent nonviolent resistance. Imagine the conditioning he had to overcome to believe that peaceful resistence could defeat the British Empire! Let us be as brave as we search for a way to defeat poverty! Well, he also showed us a way to achieve prosperity without capitalism. If all Indian homes today had a spinning wheel in regular use, then the Indian people would be offering the world the finest garments available anywhere; and every household would be a cottage industry. With incredible foresight, Gandhi realized that the division of labor would eventually lead to a world of endentured servants. However, the world will not go backwards to another day. Division of labor is now the norm, and we must focus on the present and future. Everywhere governments are in the pockets of big business. The poor can not wait for governments or charitable capitalists to save them. It will never happen. The poor must find a way to save the poor! Microfinace is a fantastic tool for this, and I have long been an admirer of Muhammed Yunus. However, we must find a way for the gains of microfinanced enterprise to be sustained and passed on to the next generation(s). Inhertiance tax should be levied only on the wealthy, never on the poor and middle class. And we must continue to work to economically empower individual families, family groups, and villages. Some members of Gandhitopia are community activists working to empower their village or neighborhood. May we all applaud them!
Comment by Dipak Dholakia on January 31, 2010 at 17:14
Dear Chris,
Thank you for new ideas. I have not read Kelso but I am tempted to say somethign basee on your note. As you have put it, there are two components to industrial production, labor and capital. Capital includes land, machines, cash, stocks, credit, etc. A person makes a living either from labor or by using accumulated capital. . I do not know how others would view this, but somehow I get the impression that when we talk about 'labor' we think of a humanbeing but when we talk about 'capital' we imagine it to be something impersonal thing. In reality, 'labor' comes before 'capital' as a force of production. This is history. Our ancestors worked with their own hands and this LABOR led to generation of CAPITAL.labor belonged to humanbeing, capital was only the outcome of that labor. Other natural resources belong to all, but 'CASH belongs to only a few and the mother of capital i.e. is left high and dry in the shape of physical performance of a class.
What Kelso says, reminds me of Islamic concept of economy. There is absence of interest on loans and there are banks that give loans without interest. These banks face some problems, financial as well as philosophical one. Financial in th sense that a borrower is considered a partner and the profits of his business and the business of banks would be shared by two partners. Because, prohibits usury but not profit, they thought they have found a solution. Tell me, why a bank should dictate your decisions as a partner? And it is not enough. Bank would be a partner of a big industrialist too! He too would get loan without interest from an Islamic bank or Kelso's bank. Who will win? Of course, bank and the industrialist.
In this situation, I do not think it is advisable to completely abolish interest. But, it may be possible to develop the concept of microfinance successfully implemented in Bangladesh by Prof. Muhammed Yunus who launched Grameen Bank (Rural Bank) in 1983. Two years back he was given Nobel prize for his achievement. This bank network worked for the poor, especially, women gave them loans at nominal rates involved them in management of banks and this has brought a lot many people above poverty line. This is transfer of wealth. And that to transfer to a vast majority. Making them not only productive but safe and secure too.
Question of inheritance tax comes later. Most of the people have nothing to inherit except poverty and debt. Grameen Bank concept also recognises the honourable place of labour. Here, capital plays only a supportive role.
The question is who should control means of production. Can we put a ceiling on profits? Can we say 50% of profit has to be transfered to a Trust which will provide microfinance to the needy? How are we going to 'free' means of production from the existing owners? Can it not be called a 'free' economy?
Kelso thinks on co-operative line when he suggests the ownership of workers.
Comment by Christopher Wroth on January 30, 2010 at 10:48
Again, many thanks to Dipak for several excellent points regarding economics and trusteeship. My reference to binary economics in the last blog was too brief. So, here is a summary. Binary economics was developed by Louis Kelso, who published the basics of his economic theories in a book entitled "The Capitalist Manifesto". Kelso believed in market economies, but also believed market excesses should be controlled. From his perspective there are two components to industrial production, labor and capital. Capital includes land, machines, cash, stocks, credit, etc. A person makes a living either from labor or by using accumulated capital. Since the time of Adam Smith, capital has become by far the dominant part of the industrial production process, while labor has become worth less and less. Ordinary people can no longer make a living by selling labor. Capital, concentrated in the hands of a few, needs to be accessible to everyone. To achieve this, Kelso called for laws that would disallow interest on loans, disallow inheritance taxes, and foster transition from corporate-owned industry to industry owned by employees. Kelso argued that a market economy could be a just economy if the workers were owners (Employee Stock Ownership Programs), if workers could pass accumulated capital to their children (no inheritance tax), and if the banking system was nationalized (to enable zero interest lending). The goal of binary economics is to give every family an accumulated capital base that can be used to help the family earn a living - a perpetual family bank. A perpetual family bank is also the goal of family-centered trusteership. Unwilling to wait for the wealthy few to become voluntary trustees, I believe in exploring other avenues to trusteeship. The family is a more sustainable unit than government. As governments fall and wars are fought, families find that love and family traditions allow them to find ways to stick together through thick and thin. Everyone is more interested in knowing about the grandparent's history than about who ran the government back then. We must find a way to establish a sustainable capital base under individual families. Nehru wanted to do that through land redistribution and local village industry. Good ideas that depended on implementing legislation and, for that reason, perhaps did not go so well. (Perhaps he would have succeeded if he had been able to provide people with simple spinning wheels, and also banned textile factories.) Gandhi appealed to the wealthy to become willing trustees for the poor, as Ralph Nader has been doing in America. So far, not many have heeded their pleas. As Dipak points out, trusteeship is an undeveloped idea. Hopefully, we can continue to attempt to develope it further here at Gandhitopia.
Comment by Dipak Dholakia on January 29, 2010 at 14:01
Dear Chris, after you non-violently killed my comment on your blog ‘the Wealth of Families’ I find this blog with a changed outlook. In response to your first blog I had made some points that may not be valid here but I repeat them for academic interest.
Adam Smith envisaged only one group i.e. Nation made of those who owned means of production and those who used their labour to produce goods. He allowed only one group within that group – that of capitalists. Family does not fit into his scheme. His nation was a large mass of individuals who were useful only in one sense: maximisation of production. He required a skilful labour force subject to evaluation by the only group that could emerge within the nation. They defined not only who is skilled, but also what the skill was. The first empowerment gave them control over the lives of labour and the second, to develop new skills to maximise profits. Calligraphy, skill to write books developed by Muslim artists is now only an art form. It has no commercial use except for specific purpose.
This empowerment of capitalist class adversely affects individuals who also are members a family. Each of the family members has different earning capacity which may lead to dependence on one or grave disparities within a family.
So, the family is not functioning within the confines of four walls. It is a sub-unit of a nation run by the production seekers supported by governments. When the banks failed triggering the recession it was governments led by USA that bailed them out in the name of common good. Could a family trust bail a bank out which has gobbled up its incomes? So, wealth has many friends and it has a tendency to gravitate towards one point where already a bulk of wealth is concentrated. The question, therefore, is more of political in nature than an economic one. Without a share in means of production (not through share markets) families cannot protect their wealth, Trusr or not. Because members of a family are constrained to serve those who do not belong to the same family.
This blog has some new ideas. Your lament on the concept of ‘free’ and ‘commanded’ economies being taught in America is very valid. They must be teaching them virtues of ‘free’ and vices of the ‘commanded’ too. People, however, need to be told that there is no free economy. This ‘free’ is free only from government intervention ( this ‘free’ sent SOS to the same governments whom it despises is a moot point)! ‘Free’ is when an individual controls means of production and ‘commanded’ is when government controls means of production. Communism– as in Soviet Union – converted the economy of the country into an economy of a single company through its centralised control. Micro-economics on a macro scale! It failed because it could not transform the old practices into new ones with new ethos. Capitalism we know has failed. One thing, soviet experiment completely abolished individual’s role but American capitalists could not do so with government.
Perhaps you think we can combine the best elements in binary economy. We in India know it as ‘mixed economy’. The model was thought out by Jawaharlal Nehru. Government controlled ‘commanding heights’ of economy i.e. infrastructure, banks, heavy industry, armaments and core sectors of production. Steel would be produced by public sector unit and private sector would be its consumer.for it, the government produced steel would be raw material to manufecture consumer goods for common people.
This laid a firm foundation of industrial growth. But this economy had critics on both sides, the left as well as the right. The left said government factories ran for the benefit of the capitalists who benefitted the most; it helped the rich to grow richer because they controlled the means of production. They were not wrong. The right said it was not even socialism; it was ‘statism’ to waste people’s money on unprofitable projects running in heavy losses – a drain on economy. They were not wrong. Crucial aspect is moral standards. Bureaucrats controlling public sector possessed neither professional outlook nor high moral values.
Now, the Indian economy is tilted in favour of big people. Government is reducing its ‘fat’, job contractors enjoy government patronage, but at what cost? Education and Health are being given away to private hands. What about the poor? more than three-fourths of the population is earning less than half a dollar per day but there are four billionaires in top ten of the world! Newspapers are all praise for this free market policy. Huge middle class too is happy.
Gandhian principle of Trusteeship? See, it is just an idea rellying upon the good will or change of heart of the capitalist. Gandhi does not say that he should not own means of production. He puts a check on its use for personal purpose. Gandhi no doubt enhances the stakes of the labour but does not let him control the means of production. This, if not fully understood, and proper framework not created may be understood to be philanthro-capitalism. A capitalist having piled up huge profits coming out with pious statement of social responsibilities of the corporate sector. Trusteeship is not philanthropy. It is yet an undeveloped idea. Nobody has worked on it.
In the circumstances, the question is: what is the way for the people to exercise the control over means of production? Is there any social audit? (And in American context, is there any lobby that speaks for the people?)

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