Wednesday, January 04, 2012

Transforming Capitalism

Book Review

There were two diametrically opposing theses about business. The first assumed that the prime interest of business was mercenary and intended only to fatten its owners at the cost of the general public. The theory originated in an era when business meant only the production and distribution of goods in brick and mortar factories. The theory held that it would be in the larger interest of society if the state controlled the means of production and distribution of goods. This was the principle behind the ‘second world’ governance. It held sway for over seventy years beginning with the proletarian revolution in Russia in 1917.

From each according to his ability to each according to his needs was (is) an indisputably lofty ideal but to quote an old cliché, ‘human nature being what it is’, simply did not work. This was because the first part of the dictum was immeasurable and the second part highly elastic! In the end, governance required mammoth bureaucracies which acquired dynamics (or inertia if you will) of their own. The state had to increasingly intrude into the private lives of citizens to make the system work, as Orwell so vividly depicted in his Nineteen Eighty Four. But still it did not work and the utopia of Marx’s dreams simply imploded.

Marx must be spinning in his grave in capitalist England but Maslow’s theory of the hierarchy of needs amply explains the reason for the implosion. A human being, unlike an animal, can not simply remain satisfied if his most basic needs are met. After the basic needs are satisfied, there is a craving for needs in a higher plane to be satisfied. It was this upward spiral of ‘need, satisfaction & higher need’ that helped human evolution and development.

The other thesis is based on the principle of free market economy, on the premise that ‘wants are the prime movers of all economic activity’. The production of goods is to satisfy consumer needs. Therefore the premise of demand determines the sustainability of businesses. The incentive for the producer is the profit. But to sustain in business the producer has to understand the continually evolving and ever changing needs of the consumer. The system has its own checks and balances but is essentially based on individual freedoms. Theoretically anyone can start a business or exit from a business. It is the consumer who determines whether a business is successful or not. Sustenance depends on individual creativity and enterprise. But even successful businessmen who grow rich by virtue of their creativity, enterprise and may be luck are also part of the society. Are they free to enjoy the fruits of their labour irrespective of the vicissitudes of the lives of the others surrounding them? If they did, wouldn’t they be accused of vulgarity of greed and indecent exhibitionism? Wasn’t this – the huge disparity between the haves and the have-nots - the root cause of the proletarian revolution?

That even in the utopia of Marx’s dreams ‘some animals’ felt that had a divine right to be more equal than others, was a different matter. The recent march on Wall Street is a form of societal disapproval of the concentration of wealth in some individuals. As long as the common people were able to lead their lives normally they did not grudge the one percent of Americans owning (cornering?) eighty percent of the nation’s wealth. But after the collapse of the economic system when savings of a life time vanished overnight, when they suddenly found the future holding no promise and life insufferable, they suddenly woke up to find the grim reality of huge disparities. However it did not lead to America witnessing à la Russian revolution of 1917 because people are only too aware of what happened in that nation between 1917 and 1990. A revolution of the type was no solution. The harsh reality is, wealth not created can not be shared, no matter what the left liberal chatterati might crib about the inequities of the capitalist system.

What should businesses do to mitigate the situation?  As a tentative solution, Maira puts forth the opinion that ‘values are not measured by the wealth produced but by the means considered acceptable’? (p. 192) And more importantly managers should operate in two ecosystems: the ‘professional system of the business governed by the financial markets’ and the ‘wider system of people outside the company’s core activities’. (p. 91)

While the main thesis of ‘Transforming CAPITALISM is all about what businesses like to call Corporate Social Responsibility (CSR) Maira devotes a chapter to NGOs. The term NGO is loosely applied to all organisations from the International Red Cross to those funded by self-serving business and religious interests. The (Hindi) movie, Corporate provides a good example of how business interests fund and make NGOs subserve their not-so-honest interests. It might be bad manners to look the gift horse in the mouth but certainly one should err on the side of caution when looking at NGOs. Gulam Nabi Fai’s ‘Kashmiri American Council’ (KAC) was a respectable NGO which attracted quite a few Indian intellectuals till it was unmasked as a front organisation of the Pakistani intelligence agency, ISI and Fai arrested by the FBI. Curiously while Indian intellectuals did not have any qualms about being wined and dined by an organisation like the KAC, which overtly seeks to promote secession of Kashmir from India, India’s largest and most patriotic NGO, the RSS is persona non grata!

Much of what Maira says in ‘Transforming CAPITALISM’ may not be entirely new but it is cogently argued and well-written. The book is certainly worth reading. Some of the chapters in the book appeared as newspaper columns earlier. 

Maira, Arun. 2011. Transforming CAPITALISM – Improving The World For Everyone. NIMBY Books. New Delhi. pp 210. Price Rs 295/-

This review is part of the Book Reviews programme at

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