"Competition" In Scientific Socialism

DR. SHRIKANT JICHKAR
Minister of State for Information and Public Relations,
General Administration, Energy and Protocol.

The name of David Ricardo, the great economist of England, is known to all. He was himself a capitalist dealing in shares and stock in the English stock market. He was a prince among the economists, prince in both the senses of the term. Perhaps we have forgotten that he was a member of the English Parliament for a very brief period. His entry as a landlord into Parliament is itself an interesting story.

I would not go into these details of the constitutional reforms in England.
Ricardo's lectures in the parliament were heard with rapt attention. The economist representing industry was speaking to the members of the Parliament most of whom were landlords. The industrialist Ricardo seeking solution against the corn laws, was then the line of debate in England. His views were shared by the treasury benches.

Interest Of Marx

We should not misunderstand the parliamentary process, though it might not immediately be tasteful to us. Patience and Parliamentary form go together. The English industrialists started their struggle in 1795 and Lord Peel repealed the corn laws in 1846. Fifty long years in the parliamentary struggle, is a historical event in economics. It will be interesting to know that Karl Marx was infatuated with this struggle of the industrialists, against the landlords. It is here that he located the seeds of scientific socialism. 'The industrialists are fighting for equality in the economic policy of the State, and all demands' for equality lead to socialism, said Marx. The famous book, Economic and Philosophic Manuscript, contains valuable notes of Karl Marx on the industrialists' agitations against the policy of the State in England till 1846.

Fredrick Engels himself was an industrialist and he had been living in England to look after his business in partnership with his father. Robert Owen was an industrious young man in the manufacturing factory. He became the son-in-law of a factory owner. The richness in the factories did not satisfy him in his philosophical enquiries. He is the first socialist thinker and the practitioner of socialism. His line of work could be broadly compared with the line followed by Gandhiji in India.

Anti-Corn Law Movement

/ do not remember to have read an event comparable to the discussion between the Prime Minister, Robert Peel and the group of industrialists in 1846. The industrialists through their chambers of commerce were propagating the cause of free trade theory in English economy. This movement has precursed literature which has become the data and information for the theories in the science of economics. I am referring to the Anti-Corn law movement which continued for fifty years. And this was the most peaceful movement in a democratic country. Repeal of the Corn laws was also the most peaceful transformation of the fiscal policy of English economy.

What Marx Stated ?

I am also enthralled by proceedings of the German chambers of commerce, where Professor List was arguing exactly opposite of the free trade theory. Prof. List was in favour of protective fiscal policy. And it is interesting to know that Karl Marx and Engels attended the conference of the economists convened by the German chambers of commerce, What was then the opinion of Karl Marx in his essay submitted in this conference ? Karl Marx in his closing paragraph emphatically stated that he was in favour of free trade

There are lessons to be drawn from these historical events in the last century. People were expressing themselves freely. People from all walks of life were invited in the discussions. Otherwise we could not explain how Karl Marx could address the delegates assembled in the conference of the chambers of commerce. Further, exactly opposite views were freely argued in the chambers of commerce. In the meeting convened to support protective policies Karl Marx argued in favour of free trade.
Free thinking, free expression and free dialogue were the characteristic features of the chambers of commerce in Europe, specially in England. The democratic State is more amenable to logical arguments than to the force of money or mass power on the street. Polemics, acrimony and rancour are not the characteristic of the democratic dialogues in society, whether the dialogue is between the State and industrialists, or the discussions among the members of the chambers of commerce.

Commodities And Law Of Competition

This reference is to delineate these facts of the history of economics to drive a lesson in the functioning of the chambers of commerce. The parliamentary process, the structure of the State and the potential of the dialogues with the State should not be misunderstood. We have become iatrogenic in these processes now a days. The seriousness with which these great men in economics prepared the path of development needs to be imbibed, more so today when the claims of the different organised sections of the people are being spelled out in Parliament. More sections of the people would be organised soon. It need not be brought to notice that the organised peasantry in Maharashtra is demanding the prices based on the cost of production. The farmers in Maharashtra are going ahead with the demand that there should be economic equality in society devoted to the production of commodities. All commodities should be governed by the laws of competition in the market, they say.
Recently, they have sent a long essay-cum-memorandum to the jurist Shri N. A. Palhkiwala. The Government has also received a copy of the same. They have challenged patents law, brands legislation, and the law of joint stock companies as instances of restrictions on the principle of free trade theory. They have quoted Lord Lionel Robins, the great economist of England.

The Government therefore has to deal with many challenging questions in the changing paradigm of the management of the economy. This development of the farmers' organisations challenging the inequality of the industrialists is reminiscent of the Corn laws agitation of the industrialists in the last century. Exactly after two hundred years the farmers are agitating against the industrialists, the industrialists had agitated in 1795. The arguments are also the same. They want equality in economic affairs. They want industrialists to sell their goods to be governed by the cost of production. They want that the joint stock companies should publish their cost of production in their annual reports. Free information for all and all sectors is their demand.

Economic Census Of Maharashtra

I would like to produce here the spectrum of the manufacturing activities in Maharashtra which has been revealed in the recent economic census of 1980. There were about 12 lakh workers working in the factories covered under the Factories Act. As compared to this the manufacturing sectors as a whole in the economic census reported 46 lakh persons. This means that about 34 lakh workers are outside the factories and labour legislation.

These 34 lakh people outside the factories legislation are connoted as self-employed people in manufacturing. Categories like traders, transport, social services etc. that are also self-employed workers, are not included.

These self-employed people also add values in their manufacturing activities like the workers in the factories. The gross value added per establishment of these self-employed persons was estimated to be Rs. 12,346 per year and this gross value was shared by 2.07 persons who were on average the number of workers in an establishment.

In the same year the per capita consumption in the National Sample Survey in Maharashtra showed on the average Rs. 200 per month. For a family of five persons, the annual family expenditure would be around Rs. 10,000.

Study Of Self-employed Army

These data should be studied by the chambers of commerce because they form the members of the manufacturing people in society. Two families in the self-employed enterprise have to sustain their living on the gross value added i.e. Rs. 12,346, while one family needs Rs. 10,000 per year for the annual maintenance.

Could we theorise their living? How do they come into existence as self-employed enterprises? Karl Marx called this phenomenon as reserve army of workers. He could not explain their dialectics of living. For him they were numbers for statisticians, jails, and doctors etc. For us however, their living is a direct evidence as citizens of society. They decide the fate of the political party seeking votes in the elections. This is the perspective of the bank loans for the self-employed people.

Three Categories

The economists in the Government and those working in the universities and the chambers of commerce have to philosophise their living. We, should be able to formulate an economic theory that substantiates their economic activities and their incomes from self-employment. Marx predicted that in the development of capitalism only two antagonistic classes would be delineated in the history. However, we see three categories of people earning income in the political economy of capitalism. Firstly, the people who earn profit and live their living. Secondly, the workers who earn wages and salaries in the relationship with their employers. The third category is the people who earn their incomes as self-employed people in the economy.

Instead of two classes, there are three classes in the economy. The self-employed people are neither wage workers nor capitalists in the epistemology of the political economy. Those who neither exploit nor are exploited have come into existence in the economic history, not only in India but all over the capitalist world.

Self-employed: Harbingers Of New Society

I believe they are the harbingers of the new society. Those who depend upon the profit margins in the industry have a transient existence. They would disappear if the rate of profit disappears in the economy. This is a specific situation in the period of depression in the economy. It is the Keynesian therapy that is prescribed for their continuation in the economy. The Government has to follow a policy of unproductive expenditure to maintain the capitalist production of the workers and the capitalists. If the Government does not undertake these protective policies during the period of depression, the profit-oriented production forces would disappear in the economy.

Therefore the profit oriented production forces are transient in the political economy.
This is not the case with the self-employed enterprises. They produce to live. Their production activity is not motivated by margins of profit. Rather it is governed by the opportunity cost theorem. Their opportunity cost is zero. If they do not work they will have no income. If they work they will have some income. Some income is better than no income. This is their economic philosophy.

I would recast the spectrum of the economic activities of all the people in Maharashtra. Earlier I had disclosed the manufacturing activities only. Now let us see the global economic activities in Maharashtra including agriculture, trade, social services and manufacturing industries.

The economic classification of workers in Maharashtra according to 1981 Census discloses the spectrum. 243 lakh people are economically engaged, of them 85 lakhs are male and female farmers as owners and 65 lakhs are farm labourers. Thus ,150 lakh people, men and women, are directly engaged in farm production.

Employment Market Information

We have another data collected in the Employment Market Information Programme which covers all kinds of organised employments in different areas like the industry, trade and state and private social services. There are about 33 lakh people, men and women, in these organised employment who have some security of service, salaries, and other related facilities of social stability.

Of the 243 lakh people in the economic activities, only 33 lakh have the privileged place in the economic employment.

Most of these privileged people in employment have trade unions and had their bargaining force upon the policy of the Government. Lenin had openly declared that workers do not demand privileges. As against this the trade unions are poised for more and more privileges. Probably the trade unions are functioning under the influence of Lassalle and Sorel who taught them to fight for all privileges for the trade unions.
The management of the state's policy in relation to the commercial policies have been dovetailed in the chambers of commerce in England and also in France and Germany. The counselling on what is rational in the economy was coming from the businessmen themselves. The first chamber of commerce was recorded in Marseilles in the 14th century. In England the Glasgow chamber was formed in 1773, while the Manchester chamber was founded in 1820. The London chamber of commerce founded in 1881 became the most outstanding organisation due to its location in the centre of the world commerce.

The economic transactions in the European countries were governed by the Roman laws governing the transactions in the property. The Roman laws were thereafter transformed into statutory laws. One of the most useful and fundamental laws in the economy is the contract law. The governing principle of the contract law is the equality between the two parties. This principle of equality in the contract law becomes the principle of economic activity. The thesis of free trade policy is engendered in this principle of contract law. The Manchester chamber of commerce was its most vocal proponent in the English economy. If one reads the literature of Karl Marx one will learn that Marx himself drew most of the background data and principles from the opinions and literature flowing from the Manchester chamber of commerce.

It is interesting to record an event of great relevance in the resolution in the Manchester chamber of commerce. It was on 1st November 1886 that the Manchester chamber debated the resolution whether the free trade theory propounded by England had become a dead letter in the economic policies in world commerce. The resolution was rejected in the meeting of the Chamber, 22 against the resolution and 21 for the resolution. These were the years of the eclipse of the theory of competitive free trade in economic history.

Demand Of Competitive Economy

If we survey the literature now after hundred years after the above mentioned resolution, we are again in the midst of the demand of competitive economy. All over the world the knowledgeable opinion is in favour of free trade principles in the economy. Surprisingly, the communist economies are also moving towards the competitive economy of socialism. It was. Prof. W. Brus in Poland in 1955 who wrote his first essay on the competitive economy in socialism. He was a staunch Stalinist, and yet he was convinced that competitive form of economy alone could improve the socialist economy. Ota Silk from Chezchslowakia could be listed as another comrade in the party who argued in favour of competition in the socialism. These events in European communist countries compelled many other authorities in Russia and China to revise the thesis on competition in the socialist economy. Gorbachev's thesis in 27th Congress has cousinely resemblance with what Comrades Brus and Ota Sik had theorised in their political economy of socialism. The communist economies in Russia and China have been moving towards competitive life and living in the political economy of socialism.

Rajiv's Exploration Of Competitive Economy

These facts of the history should compel us in our domestic economy to reconsider the policies governing the Indian economy. Rajiv Gandhi is echoing what is becoming the ethos of the new world economy in capitalism and communism. Rajiv Gandhi wants that our private and public sectors should exist, and develop in the competitive market. He is exploring competitive market economy for the development of Indian Market at home and in international economy.

As said earlier, the wisdom of competition in the economy was initiated in the early period of the last century under the intellectual leadership of Adam Smith and Ricardo. But the economic behaviour of the industrialists soon departed from this principle of nature. Hence the resolution in the Manchester chamber of commerce in 1886. It is after hundred years that the wisdom has dawned everywhere in the world. If Rajiv Gandhi emphasises it he is obviously in the reverberations of all concerned authorities in the capitalist and socialist world.

The Manchester chamber of commerce was the source of the theory of equality, and its philosophy engendered the free trade theory in economics. Marx also was explaining that competition is the principle of Nature and therefore it is revolutionary in the realisation of the society based on equality, i.e. socialism. From the sacred principle we have reached a stage when all are engaged in demanding privileges. The business people in the self-employed population are without any privilege, while the members of the chambers of commerce are bargaining for privileges. The organised employed people in the Employment News Data are demanding for more privileges while the rest of the workers are living without any privileges.

Any Government in India will have to sort out this spectrum and weigh the arguments in favour of privileges in the developing economy of India. Our Prime Minister, Shri Rajiv Gandhi, is doing this exercise. It has become unwelcome to some. They are identifying these efforts as police state of Rajiv Gandhi. I believe, Rajiv Gandhi is the last man to encourage policing the business in India. If we fail to judge him, I am afraid that we have lost the faculty of judgment to distinguish between the bad and good.

Privileges And Competitive Economy

Privileges are against the principle of competitive economy. This was the essence of the industrialists who were fighting against Corn laws which endowed privileges. Marx and Engels had joined the industrialists then. In his essay on the Economic Censorship law in Germany, Marx had candidly recorded his philosophical note. "The law that punishes the tendency of the citizens towards equality is a reactionary law." "It is not a law, but a privilege." (Vol. 1 of collected works Pg. 120).

Lenin had also similarly declared. "The working class is opposed to all privileges." Lenin said in his essay on 'More About Nationalism' (collected works Vol. 20 Pg. 110).
Rousseau demanded an equality whereby all citizens would enjoy identical rights and identical obligations and accept duties on that conditions. (Ouvres completes. Vol. 3, 1964, Pg. 374).

These reverberations have been incorporated in the Universal Declaration of Human Rights, which proclaim : All human beings are born free and equal in dignity and rights (Article-1).

Removing Privileges

It is therefore an exploration of the management side of the Government how to restore equality. Rather the question is how to remove privileges in the economy. Some labour specially in farm economy anywhere in Europe and America is working on the daily contract or at the most annual contract basis. The industrial labour however, is a privileged labour measured from the stand-point of contract of service. The recent judgment of Justice Madan in relation to section 311 of Indian Constitution therefore became relevant in the Indian economy. If we carefully examine the report of Mr. Gorbachev to the 27th Congress of CPSU, he is exploring, I believe, to remove the privileges and security to the labour in order to increase the productivity of labour in the production activities in socialism.

Our fiscal policy is veering round competitive economy in the public and private sector industries. Our Prime Minister, Shri Rajiv Gandhi, would be remembered for this innovating changes in the fiscal policy of India. He has also been misunderstood in some circles of the industrialists. Shri Palkhiwala's recent remarks could be one such misunderstanding.

While reviewing the growth of the joint stock companies in India, I collected the relevant data and the reports of the earlier years. The Bhaba Committee report in the year 1951 contained the report of the Registrar of the Joint Stock companies in Maharashtra. I did not believe till then that joint stock companies play fraud on the money of the public and disregard the laws of the State. There is enough corroborative written evidence from other States of India.

I therefore went into the history of the legislation for joint stock companies in England. The Bill on the joint stock companies was introduced in the Parliament in 1855. The proceedings of the parliament should be read by all the captains of the modern industry in India. Some members warned the Parliament of England that these institutions by their very nature were speculative who would do business in unlimited amounts. Unlimited business with limited liability is a bad principle. This warning has relevance in the jurisprudence of the theories in economics.

The forecast of the English conservative members as regards their warning of the principle of limited liability in business had proved correct in the modern industrial society. We have become modern industrially, but our frauds in the corporate transactions have increased. The disregard for the laws of the State by the management of the corporations continues on wider scale. If the Prime Minister asks me the report on the working of the joint stock companies in Maharashtra, I do not know whether I could read a pleasant language and therefore urge upon him to be more pleasant with the management of the corporate sector.

The reverberations of this ethos were reflected in India also. Shri Ramkrishna Bajaj when he was the President of the Federation of Indian Chambers of Commerce and Industries, expressed on a number of occasions that the need had arisen to promote free trade in India. He had drawn attention to similar views being expressed in the communist economics.

I would quote Prof. E. Kanazava of Seikei University of Japan. The Professor observed that "Ultimately, the reason for this is the desire to prevent arteriosclerosis in the capitalist economy." This disease born out of privileges and protection to the capitalist economy makes it difficult for the blood to flow and is potentially fatal to the reproduction process. Many well known economists in the official positions of the State and in the Universities are expressing in favour of free trade in the economy. In India Shri Palkhiwala and many others in the Universities have been advising the policy makers since long to promote our economic policy consistent with the theory of free trade.

Competition Needed

Sickness in the economy has been correctly diagnosed by the Japanese economist. The words and phrases differ, but the world economy needs the touch of competitive forms of enterprises whether in the public sectors or the private sector, Shri Rajiv Gandhi has arrived on the scene at the most valuable moment of the economic history. His exploration of the competitive economy therefore needs scrutiny and support by the chambers of commerce in India.

The industrialists, as members of the chambers of commerce, would be surprised to know that the farmers organised for remunerative prices are arguing a case of free trade and competitive economy for industry as well as agriculture. They argue that farming is and would always be an economy governed by the forces of competition. They quote Prof. Theodore Shcultz., the Nobel Laureate in economics, who says that farming would always be a competitive economy. The farmers therefore argue a case of competitive economy in the industry also. This is how they philosophise equality in economics.

In 1983 the joint stock companies in Maharashtra State numbered 23019 which represented 24 per cent of the corporate sector in India. We have also the co-operative sector in Maharashtra. More than 70,000 co-operative societies are working in Maharashtra. Our administration prepares every year the comprehensive report of the working and progress of the co-operative societies in Maharashtra. This report is forwarded to the Reserve Bank of India. One is aware of the report of the Reserve Bank of India on the progress of the co-operative societies in India. The report is prepared every two years. It is in two big volumes.

Report On Companies

Similar report of the working of the joint stock companies in Maharashtra, I believe, should be prepared, so that our State Government could represent the case of more useful dialogue for the policy of the Government of India. I would prefer that this work of preparing the annual report on the working of the joint stock companies on the lines of the similar report for the co-operative societies should be free from the bureaucratic shadow. I feel that the chambers of commerce could undertake this responsibility. They could collect the balance sheets of the joint stock companies in Maharashtra and use the data for a comprehensive annual report. Recalcitrant management should be under discipline for submitting all the data needed for the report. If the Government of Maharashtra could compile the annual report for more than 70,000 small and big co-operative societies in the State, there is no reason why a similar report could not be compiled on the progress of the joint stock companies numbering about 25,000 in the State.

The chambers of commerce in the State could help the State in preparing the report and the State would help the .industries to represent its interests in the policies of the Union Government. Once we are convinced of the fiscal policy of the Prime Minister which would steadily move towards competitive economy, we should have no reservations in helping the Prime Minister in the studies of the working of the joint stock companies in Maharashtra.

In a famous book, edited by Hugh Corbet and Robert Jackson "In search of a new world economic order" the declaration of the British economists has been endorsed. (Pg.19). "Free trade could be the only realistic feature of the free enterprise world in the 1950's and 1960's. The 1970's should be the beginning, therefore of a new phase in the movement towards an open world economy in which free trade can be regarded as not only realistic but also a necessary objective."