The Dilemma In Industrialization

It has become an accepted theory in circles interested in what is called ‘developmental economics’ to attribute failure to attain the objectives planned with foreign aid in underdeveloped countries, to the incompatibility of the local cultural and social structures and complexes with twentieth century economic patterns. Typical is the following from the story of an American economist about the Burmese failure of the American-aided project of development:

     “Burma’s economic development programme was aimed essentially at utilizing Western technology to increase output and to enhance living standards and welfare. A reasonably effective implementation of this programme required not only the utilization of Western techniques but also some accommodation of Burmese culture to Western values and practices.”

     “The implementation of economic development did impinge on Burmese culture in many significant ways, and the accommodation could not be a ready one. Long-established cultural traits do not quickly yield when confronted with challenge. Where implementation of the development effort encountered obstacles of this sort, it was the implementation, not the culture, which yielded to the pressure.”

     It is unrealistic, the American critics conclude, to expect success from “injections of twentieth century economics into cultures that are not ready for it,” and the lesson is drawn that aid programmes are bound to fail if a well-conceived socio-cultural approach does not accompany the economic plan.

     Plausible theories are quickly developed out of scholarship in Eastern philosophies plus some pre-conceived notions in order to explain disappointments. One writer makes, for instance, very readable literature out of it:

“When he casts a foreigner’s horoscope, the Burmese astrologer must take down the actual time of his client’s birth—to the hour and the minute—and then convert this into the time it was at that moment in Amarapura, a town near Mandalay. Amarapura, as everyone knows, is the centre of the universe. Those who consider London, New York, or Washington to be the centre of the universe may smile at the astrologer’s fancy. He smiles at theirs, too.

“East-West communication, under such circumstances, cannot be easy. East-West discussion of economics is made doubly difficult if, in addition to a heritage of cultural isolationism, there is also to be reckoned with, the doctrine of samsara, the Buddhist belief that material things and human wants are illusory, traps for the irreligious.”

     This is interesting but not true. It is not Vedanta or Maya or Samsaara that causes the failure. It is something much simpler, much more worldly: the failure of the governments in charge to recognize the truth that industrialization, where and when it happened in Western countries, had the incentive of material gain which governments did not interfere with or obstruct. Individual interests had the fullest play in Western industrialization whereas in the present attempts in under-developed countries through foreign aid—whatever the causes or the justifications may be—such freedom is not given by the concerned governments through which American aid is operated. Where the government of any under­developed State desires rapid industrialization of the country, it should see to the same incentive being in operation as what brought about successful industrialization in the West, viz., the profit motive. Individuals, companies and corporations in the West had more than an adequate incentive to urge them to work intelligently, laboriously and efficiently, and wealth was produced for private profit and, in consequence, automatically for the nation also. No attempts were ever made directly or indirectly, as is now systematically done in aided countries, to place a ceiling on profit or outturn as if industry were a kind of money lending which required a curb on usurious interest.

     Wealth depends on human activity and it can be produced by the State either under a system of physical coercion or slavery in some form or other, or by operating on the citizens’ self-interest and the profit motive—not otherwise. If we do not like coercion, or have learnt the lesson from the failures of the Chinese ‘great leap’ that coercion is no good, we must follow the latter way, operate on self-interest and the motive of profit. Attempts to build up economy, eliminating the profit-incentive, either by crushing taxation carried beyond the limit where self-interest can survive with effect, or by the State taking over the enterprise, relying on taxation or public debt for capital and the bureaucratic machine for the administration of the enterprise, are bound to result in disappointment and failure.

     If a government wants its people to produce wealth for the State with little or very inadequate personal profit, or takes the business of wealth-production as a State enterprise and seeks to do it through bureaucratic agencies, the result is incompetence, inefficiency, waste and failure. The only alternative for a State, if private incentive must be avoided on account of its political-economic creed, is compulsory labour and a totalitarian regime to extort it. A successful programme of industrialization of under-developed countries is possible only if care is taken to employ the instrument of profit motive, and incentives are created and maintained without imposing over-heavy State levies which would cancel the incentives. Otherwise the State must convert itself into a totalitarian regime and extort compulsory labour and full regimentation with all its evils. State socialism can never work without compulsion such as would make up for the incentives associated with free enterprise.

     Under-developed countries receiving aid from America do not wish to go really totalitarian, but struggle under forms of democracy and hope to achieve success without giving proper and adequate incentives to bring into being what is wanted for successful industrial production and honest and efficient distribution.

     The widespread prevalence of corruption is recognized and treated as a malady, whereas it is the result of trying to bring into being something that calls for an honest profit incentive but without furnishing that condition. A philosophy of love of money is deliberately preached but no room is given for making money in an honest way and the philosophy or psychology, whatever we call it, finds the way of corrupt practices. Production of wealth demands its toll, viz., the profit motive, if we dislike the way of slave-driving. Provided free enterprise is not only tolerated but encouraged and accepted as a decent and legitimate way of rapid and efficient industrialization, and individual business is recognized and respected as national service and released from the numerous curbs and impediments now imposed, and if foreign aid is channelled through non-State free enterprises, instead of through government, India and other under­developed countries can be made to produce much more satisfactory results in marvelously quick time. Instead, we seek to reach the goal through State socialism, cutting out the profit motive, which is essential for sustained human activity. Stale socialism is not compatible with free life. It must be accompanied by the compulsions of communism or fascism. Our friends abroad who give lavish aid, and are disappointed with results, blame Sankara and Buddha and the Rshis. I plead not guilty on their behalf; the failures are due to wrong policy, not due to our culture or the Rshis.