Gorbachev, Macro-economics, and Gandhi

An exhausted Mikhail Gorbachev told his closest aide while lying down to rest after the transfer of power to his successor Boris Yeltsin in 1991, “You see, Sasha, this is how it happens.” Gorbachev, who died last week, praised his role in ending the ideological conflict between communism and capitalism, and in bringing down the Iron Curtain and ending the Cold War between the North Atlantic Treaty Organization (NATO) and the Soviet Union. He was commended for it.

Russia Today

Sadly, Gorbachev lived to look back on history with a vengeance. NATO is expanding to the east; Threat to Russia: Ukraine is its battleground. On the economic front, Russia has not recovered from the setback from Boris Yeltsin’s “Big Bang” capitalization imposed by American economists. Conversely, an unintended effect of the Big Bang is a return to authoritarianism under Vladimir Putin. Gorbachev had favored a slow transition to a “mixed economy” like the Indian model and approached Rajiv Gandhi for advice. I was part of a small team of Indian business leaders who traveled to Moscow and Riga in 1989 to explain the “Indian model” to economists at the Soviet Academy of Sciences. However, the “Washington economics” model prevailed. A victorious United States, and led by economists at American think tanks, the World Bank and the International Monetary Fund, swept Russia by a wave of opening up domestic economies to international flows of trade and finance; It also reached the shores of India in 1991.

Overall life expectancy is a good measure of the well being of the citizens of a nation. When all citizens are well-nourished, when public health systems work well, and when violence in society is low, an average person lives longer. International comparisons show that GDP per capita is an insufficient contributor to longevity. Many countries with significantly lower incomes outperform the US in life expectancy. Cuba ranks above the US on the longevity table, although its per capita income is just 14% of US income.

Between the big bang capitalist reforms of the Russian economy in 1991 and 1994, life expectancy dropped from 64 to 57 years. One million Russian men (6.7% of the Russian population) ‘disappeared’. They died of suicides, alcohol poisoning, homicides and heart attacks, caused by unemployment and despair with hopelessness, which led to the wholesale privatization of the economy and the dismantling of social safety nets. “Destruction of this magnitude usually only occurs during pandemics and wars,” says Jorge Demartino, author of The Tragic Science: How Economists Cause Loss (Even If They Aspire to Do Well), Nevertheless, losses of this magnitude were not even in the American Civil War (2.1% of the US population) or the flu pandemic of 1918–1920 (2.8% of the world population). The Russian deaths were caused by the imposition of an economic ideology, which claimed that when the state is pushed back, the economy is controlled, and capitalist spirits are let loose, everyone is under some mysterious hand. Better help.

ideological war

The 20th century was a violent period in human history: with two terrifying world wars, several wars for independence from colonialism, and a protracted Cold War that brought the world to the edge of a nuclear holocaust. Gorbachev helped bring the world back from nuclear precipice. The 20th century also saw ideological battles between economists: communism, socialism and capitalism; role of state face to face Private Enterprise; Rights of nations to oppose the “Washington Model” and to shape their own economic models to meet their own needs. While Russia was badly overtaken by global capitalism, China followed its path with remarkable results.

After the fall of the Berlin Wall, the capitalist model that spread around the world was founded on two basic ideas. The ideology of a “right to property” is trampling human rights. In capitalism, whoever has something has the right to determine how it will be used; And whoever has more shares in a property, his right should be more. Thus, a dollar owned gives one vote in governance, and a million dollars, a million votes. Whereas the democratic principle of “human rights” requires that every human being, whether black or white, or billionaire or pauper, have an equal vote in governance.

The shift in balance from democracy to capitalism over the past 30 years has been illustrated by the creation of international tribunals that adjudicate disputes between foreign investors in countries and the governments of those countries. The governments of countries represent the interests of millions, even billions, of people in their countries. On the other side of the dispute are some investors of capital. Global trade regulations, and also national financial and trade regulations, are geared heavily toward the needs of financial investors, making it easier for them to enter and exit countries, while allowing human migrants to better opportunities across national borders. To stop searching.

Elected governments and free markets ideologies were the joint winners of the ideological war between the West and the Soviet Union. The two winners are now clashing in the West as well. When devices designed to run on AC power are plugged into a socket that provides DC power, shock will occur. Similarly, when institutions of governance designed to run on fundamentally different principles are intertwined, something will blow up.

Another basic idea of ​​capitalism is Hardin’s “Tragedy of the Commons”. It says that communities cannot manage shared resources; Therefore, common property should be privatized to protect it. By operating the mechanism of ‘cumulative causation’, rich people become richer. When a public resource is privatized, those who already have the money can buy it; And in wars, those who have more money will win and become richer. Thus, when capitalism is liberated, inequalities will increase, as has been the case in Russia and around the world since the 1990s.

Uncontrolled climate change is an existential “tragedy of the common people” for all life on Earth. Twentieth century capitalism does not have a solution: it is, in fact, the problem. The time has come to reform the economy. The principles of equality and morality, and the fair distribution of power and resources, should inhibit the unbridled drive for efficiency and productivity to increase the size of the economy which has become the thrust of economic policies globally.

Gandhi’s Moral Economics

Realizing the shared promise of humanity requires a new model of cooperative governance. With his concepts of perestroika and glasnost, Gorbachev wanted to protect ordinary citizens from being oppressed by the powerful. His successors, without the advice of economists, handed over the Russian economy to unbridled capitalism. Instead of repression by the state, capitalists exploited. One million Russian men died prematurely. And the Russians lost pride in their identity and history. More men are now losing their lives on the battlefield in Ukraine in Putin’s bid to defend Russia and reclaim Russian pride.

“That’s how it goes,” observed Gorbachev as he resigned. India’s policy makers should heed the lessons of history. The concepts of free trade, financial freedom and privatization promoted by macroeconomists are not good solutions for India’s billions of citizens struggling for resilience in their lives. India’s policy makers seem obsessed with increasing the size of the economy. The size of an economy matters more than its size for human welfare. The economic governance of India should be guided by Mahatma Gandhi’s reckoning with the principles of human rights and community management, to fulfill the promise of our common people and provide “Purna Swaraj” to all citizens.

Arun Mara is the chairman of HelpAge International and a former member of the Planning Commission