Thoughts on economics and liberty

Adam Smith would turn in his grave at Gandhi’s gross misrepresentation of his work

Gandhi had not read Adam Smith (and had no intention of reading Smith or any of the moral philosophers, as he proudly confirmed in his speech in 1916). But he did have opinions about Smith. Drastically incorrect opinionsLet me cite, then briefly discuss.

In The Harijan

You know how Adam Smith in his Wealth of Nations, after laying down certain principles according to which economic phenomena are governed, went on to describe certain other things which constituted the ‘disturbing factor’ and prevented economic laws from having free play. Chief among these was the ‘human element’. [Sanjeev: what is this!] Now it is this ‘human element’ on which the entire economics of Khadi rests; and human selfishness, Adam Smith’s ‘pure economic motive’, constitutes the ‘disturbing factor’ that has got to be overcome. – Harijan, 21-9-34, p. 253 [Source]

A discussion in 1934

263. NEW LIFE FOR KHADI [summary of a discussion with some khadi workers about the need to reorganize khadi work.Before October 21, 1934]

While thinking about the reorganization of khadi production you should not forget that in certain matters the economics of khadi and the commonly prevalent economics are poles asunder. I am always reminded of one thing which the well-known British economist Adam Smith has said in his famous treatise The Wealth of Nations. In it he has described some economic laws as universal and absolute. Then he has described certain situations which may be an obstacle to the operation of these laws. These disturbing factors are the human nature, the human temperament or altruism inherent in it. [Sanjeev: surely a most amazing misrepresenatation!]

Now, the economics of khadi is just the opposite of it. Benevolence which is inherent in human nature is the very foundation of the economics of khadi. What Adam Smith has described as pure economic activity based merely on the calculations of profit and loss is a selfish attitude and it is an obstacle to the development of khadi; and it is the function of a champion of khadi to counteract this tendency. Hence, the tactics normally adopted in a profiteering business have no place in khadi activity. For instance, cheating, fraud, falsehood, adulteration, exploiting people’s addictions or their baser feelings things practised in mill industries and ordinary trade—are to be completely shunned in khadi activity. [Sanjeev: Gandhi is smearing the entire manufacturing and trading sector. Adam Smith shows how markets will weed out bad apples, unless sheltered by government; that remains true till today.]

The policy of paying minimum wages to the weaver or spinner with a view to increasing profits can have no place in khadi activity. [Sanjeev: who would EVER pay a minimum wage to "increase profits!" – but I'm glad Gandhi opposed minimum wage, nevertheless].
 At the same time, khadi activity cannot be carried on by incurring losses as a result of unpractical attitudes. The reason why our khadi organizations incur losses today is the inefficiency of our workers. In khadi activity spinners and other workers get full reward of their labour but the middlemen and organizers get nothing more than their due share. [Sanjeev: Gandhi was clearly smitten by the – false – labour theory of value] [Source]

SAME INTERVIEW TO KHADI WORKERS [On or before August 24, 1934] [1 This appeared under the title “Khadi—A New Orientation” as a “gist of Gandhiji’s remarks” to prominent khadi workers of Andhra, including Pattabhi  SitaramayyaSitarama Sastri and Narayana Raju, The discussion continued for two days.]

“In reorganizing your khadi production, you should not forget that the science of khadi, in some respects, works on diametrically opposite lines to that of ordinary business. You know how Adam Smith in his Wealth of Nations, after laying down certain principles according to which economic phenomena are governed, went on to describe certain other things which constituted the “disturbing factor” and prevented economic laws from having free play. Chief among these was the ‘human element’. Now, it is this ‘human element’ on which the entire economics of khadi rests; and human selfishness, Adam Smith’s “pure economic motive”, constitutes the “disturbing factor” that has got to be overcome. What applies to the production of mill-cltoh, therefore, does not apply to khaddar. Debasing of quality, adulteration, pandering to the baser tastes of humanity, are current staple in commercialized production; they have no place in khadi, nor has the principle of highest profit and lowest wages any place in khadi. On the contrary, there is no such thing as pure profit in khadi. And there should be no loss. Loss there is, because we, the workers, are still incompetent novices. In khadi, the prices realized return to the prime producers, the spinners, the others getting no more than their hire. [Source]

MY COMMENTS

Gandhi was a good man, with strong convictions, but a very poor student. He didn't read widely nor care to understand the foundations of the liberty (he did get a glimpse through Thoreau, which gave him a libertarian streak).

This smearing of Adam Smith is atrocious! His grievous mistakes in understanding Adam Smith (and classical moral philosophers) was made worse with Nehru's mindless acceptance of Laski and other socialists.

The lack of diligent study by these two leaders has cost India dearly.

If Gandhi had understood Smith and the price system, imagine what we'd have become long ago! – A FREE country. But that was not to be.

Till today there are not more than a handful of people in India who understand Smith. Such has been the TERRIBLE influence of Gandhi on India – as far as economic policy is concerned.

[See also this: http://adamsmithslostlegacy.blogspot.com.au/2013/12/libels-of-adam-smith.html]

Source: Adam Smith: A Moral Philosopher and His Political Economy, by Gavin Kennedy

Sanjeev Sabhlok

View more posts from this author

Leave a Reply

Your email address will not be published. Required fields are marked *