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Capitalist Model
Gandhian Model
(i) Private Property: The institution of private property lies at the basis of modern capitalist model of
economic development. It is the guiding principle of capitalism. In capitalism every person has the right to
earn and maintain property. The right to property is considered as a basic human right. Private property
without state regulation is encouraged to motivate people for production and profit.
(ii) Large Scale Production: It is another important feature of capitalist model of development. Capitalism
arose as a result of industrial revolution which made large scale production possible. Under the capitalist
model of development, capital is the chief driver and deciding factor of change and development. It insists
upon mass scale machine based production to capture the market. The installation of gigantic plants and
division of labour are adopted as the foundational principle to increase production. More production means
wider use of capital which leads to more profits. Further, large scale production is expected to increase the
number of consumers and the prices will be lowered. This would generate more profit, the ultimate aim of
capitalist model of development.
(iii)Profit Motive: Capitalist model of development is tuned according to the philosophy of capitalism.
According to Marx, capitalism cannot exist in the absence of institution of profit. Property and profit are
the lubricating principles of the capitalist model of development. Without the individual’s freedom to own
private property and motive to earn profit, there cannot be the process of production. When the system of
production is driven by both property and profit, it generates a drive to amass them. This not only increases
the quantum, but also the quality of production and galvanizes the process of development. The capitalists
invest money and out of investments earn profit. Production under capitalist model of development is profit-
oriented. Sometimes under the capitalist model of development so much significance is attached to profit
that, growth becomes the end of development, but not people’s welfare.
(iv)Competition: Competition is one of the inevitable principles of a capitalist model of development. The
capitalist model of development intends to bring development by encouraging competition. Competition is
encouraged to maintain the quality, introduce innovations in production which ultimately contribute for
development. There is a sharp growth due to rising competition which subsequently increases production
quality and enriches the market by competitive prices, better alternatives and quality products.
(v) Price Mechanism: Under the capitalist model of development, price of products are in a fluctuating
situation. Demand and supply positions in the market determine the price. There is almost no regulation
from the state side. Thus, the people become the ultimate deciding authority for price determination. With
increasing demand, the price increases and this generates profit and leads to capital formation. Capital
formation is the foundation of economic growth and development.
(vi)Wage Distribution: In capitalist model of development, the wage distribution is not equal. Wages are
determined on the basis of the skill and productive capacity of the workers. There is heavy competition
among the labourers and they try to improve their skill, knowledge and capacity to deliver the best. Thus,
under this model of development, there is not only competition, but a requirement for the human factors of
production to improve their capital. Both human capital and knowledge capital flourish under capitalist
model of development which spearheads the process of economic development.
(vii) Money and Credit: Credit fuels the capitalist model of development. In the capitalist model of
development, the institution of credit plays an important role. The capitalist producers get money on loan
and develop their business. Thus, despite a lack of capital, the capitalist increases his property on the basis
of credit.
(viii) Business Organization: Capitalist model of development is marked by vast business structures. The
capital of numerous shareholders is pooled and an industrial house is set up. Business organizations are the
hall mark of modern day economic development. The role of the state is very limited under the capitalist
model of development. The business organizations become the development designers and drivers.
(ix) Market Economy: Under the capitalist model of development, there is no governmental control over
the forces of production, distribution and exchange. It is controlled by the forces operating in the market.
There is no price control or regulated distribution by the government. The economy operates freely under
the law of demand and supply. The capitalist economy is a liberalised or market economy. Fluctuations in
the market bring changes and stable market ensures development.
The Gandhian model of development was indigenous and unique to India. It was
propounded by the father of the nation Mohandas Karamchand Gandhi. It spells out the
socio economic vision of this great proponent who had his experience of the society by
working close with the social milieu. It is based on ethical and moral considerations. It was
human centered in nature. His stress on rural economy and emphasis on a simple life,
coupled with his concern for universal well-being formed the foundation of his unique
views on economics of development.
7. Trusteeship
Gandhiji criticised the capitalist system because it is based on ownership of the means of
production and other property. He argued that unlimited wants, greed, fear etc. arise from
capitalist property relations. Gandhiji advanced a theory of trusteeship as an organisational
structure under which production could be organised, instead of large industrial houses
where economic power was concentrated in the hands of a few and were inherently
exploitative. Gandhiji declared himself to be a socialist and repudiated the concept of
private ownership of property. He equated private property in excess of basic needs of
human existence with exploitation and held that private property was not a natural right
but a man-made privilege, so it could be modified and altered by social action. He asked
those who own money to behave like trustees holding their riches on behalf of the poor.
The fundamental objective underlying trusteeship is to create a non-violent and non-
exploitive property relationship. Gandhiji left a six-point programme containing his ideas
about trusteeship. These are:
1) Trusteeship provides a means of transforming the present capitalist order of society into
an egalitarian one.
2) It does not recognise any right of private ownership of property, except inasmuch as it
may be permitted by society for its own welfare.
3) It does not exclude legislative ownership and use of wealth.
4) Under state-regulated trustee-ship, an individual will not be free to hold or use his
wealth for selfish satisfaction or in disregard of the interest of the society.
5) Just as it is proposed to fix a decent minimum wage, even so a limit should be fixed for
the maximum income that could be allowed to any person in society.
6) The character of production will be determined by social necessity and not by personal
whim or greed.
Gandhian economist J.D. Sethi says that four underlying ethico-economic principles of
trusteeship are:
1) Non-possession;
2) Non-exploitation;
3) Bread labour;
4) Equality of rewards.
Thus trusteeship is a theory of need-based production, equitable distribution and social
justice. “Philosophically, trusteeship is an economic conscience by which an individual
when engaged in economic activity, takes into account not only his own interests but also
the interest of others.”
Under the Gandhian economic order, the character of production will be determined by
social necessity and not by personal greed. The path of socialism should only be through
non-violence and democratic method and any recourse to class-war and mutual hatred
would prove to be suicidal.
8. Swaraj
Gandhian concept of development was tied to his ideas on swaraj. To him swaraj implied
self rule and self restraint. It is related to people’s inner strength and capacity to
understand their social world. To Gandhiji, outer freedom is to be supplemented by
freedom from within. Freedom from within implies control over one’s own self. It is based
on the principles of Ahimsa or non- violence. Non- violence is the means to attain self
control. It is to be reflected in human thought, words and action. Swaraj is a basic need of
humanity. Irrespective of their caste, class, ethnicity, people need swaraj. When humanity
is guaranteed with swaraj, societal development becomes smooth and hasselfree.
Gandhiji’s concept of swaraj had its economic, social and political connotations. Economic
swaraj advocates for a descent life for all. It implies social justice to be achieved through
equality and welfare of all in a society. Social dimensions of swaraj implies the removal of
gross discrepancies in status distribution system particularly, to remove the traditional
hierarchy from the society which was the root of unequal treatment and limited the access,
availability and affordability for the social resources and opportunities. Political swaraj
stood for self rule, to share the responsibility of governance and it is a must for establishing
and sustaining democracy. Thus, swaraj by promoting social justice, percolating the
messages of equality and democracy can expedite the process of development.
Gandhiji believed in the decentralised development model as this helps the fruits of
development reach everyone and promotes equality and social harmony.
10. Environmentalism
Gandhian development vision contained within it strict observance of environmentalism.
Gandhi was against rapid industrialisation; mega dam projects which were not only to
displace people, labour, but were liable to affect the flora and fauna. Further, Gandhiji
encouraged people to prepare their own organic manure which was not only economical,
but was much better than the chemical manure to ensure health and safety to the people.