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Two years ago, the chief executive officers of nearly 200 top companies in the US issued a statement with a new definition of the “purpose of a corporation". These CEOs, who form the Business Roundtable and include the who’s who of America Inc, said that it was not enough for corporations to be solely focused on maximizing shareholder value. We must ensure the wellbeing of all stakeholders, they said. That includes not just employees, suppliers and customers, but entire communities within which we operate. Moreover, “..companies must demonstrate the commitment to... issues that are central to the world’s future prosperity". So stakeholders also include unborn generations. This is a great shift from shareholder to stakeholder capitalism. Milton Friedman’s famous dictum that the only social responsibility of a corporation is to maximize profits now practically lies buried. Corporations must act with empathy and earn the trust of communities. They must act as if they are the custodians of that trust. This comes closest to the trusteeship model advocated by Mohandas Gandhi more than 100 years ago. The word ‘trust’ precedes the words ‘trustee’ and ‘trusteeship’ and is at the very heart of economic and social life. This recognition may have come late to the economics profession. The term ‘trust deficit’ is something we hear a lot in the context of bad governance. Gandhi anticipated that trust is an axiomatic prerequisite of economic life. The work of Economics Nobel laureate Elinor Ostrom on rational management of the commons through cooperative trusts in some ways echoes that Gandhian insight. Communities act as if they are custodians of natural resources like lakes and forests for future generations. This and many more fundamental insights, such as on the economics of identity and the centrality of human capital in economic prosperity, are covered in a delightful and well-researched new book called Economist Gandhi, by Jaitirth Rao. In its foreword, the great scholar and Gandhi’s grandson and biographer Rajmohan Gandhi writes that Rao has captured “aspects of Gandhi’s thinking usually missed by those who are sure they know their Gandhi". For a writer who has mainly straddled the world of business and entrepreneurship, this book displays painstaking scholarship and well-researched arguments. It is almost like a labour of love. The author aims to establish Gandhi as an original thinker in the domain of economics, an intellectual colossus on par with the great moral philosopher of the Scottish Enlightenment, Adam Smith, considered the father of modern economics. Indeed, Smith’s greater work is his Theory of Moral Sentiments, which preceded his more famous The Wealth of Nations by 17 years. Rao finds the similarity between Smith’s “impartial spectator" and Gandhi’s “still, small voice within" oneself uncanny. Smith’s rather agnostic approach is that the moral worth of our actions is judged by the impersonal spectator, whereas for Gandhi it is closely connected to his religion, ethics and identity as a Hindu. For Gandhi, all economic actions have to be judged on the basis of how they improve the welfare of all beings, not merely one’s own. And this approach links naturally to the concept of trusteeship. It is not to be seen as a narrow concept of fiduciary duty (which can be abused), but rather as an ethical imperative for behaving unselfishly. As Rao points out, Gandhi was not only focused on the illegality of neglected fiduciary responsibilities, which can be fixed imperfectly with penalties and regulation, but on the immorality of it. And what is the source of Gandhi’s ideas of trusteeship and ownership of wealth? It is the Isavasya Upanishad. Everything is pervaded, enveloped and owned by the Lord (Isa), and our bidding is to enjoy the universe without “coveting anyone’s wealth". An interesting restatement is “do not covet, for whose is wealth?". If you do not own the wealth but merely hold it in trust (for others or for future generations), it offers an almost scientific basis for the trusteeship model as a foundation of market capitalism. This is a big leap, and probably complicated if not inconsistent, but Rao makes a rather persuasive case for the assertion that this is Gandhi’s unique and fundamental contribution. It is certainly an alternate hypothesis to conventional economic theory, which treats each human (Homo economicus) as a purely selfish utility-maximizer. The recent work of George Akerlof and Rachel Kranton on identity economics also echoes Gandhi’s thoughts on identity. That human beings are innately empathetic and not selfish brutes is indicated in the results of neuroscience experiments by scientists such as V.S. Ramachandran. They posit the existence of empathy neurons, aptly named the “Gandhi neurons", which are triggered to make humans empathize with others. Such a validation of the basis of a trusteeship model of capitalism would be remarkable. Rao’s book also has a chapter on Gandhi’s views on development of human capital and his “Nai Taleem" approach to education. Here too, Rao argues that Gandhi’s contributions are foundational.

Gandhi’s ideas on economics were encapsulated in a speech he made at the University of Allahabad in 1916. He made frequent reference to the Gospels and this line is telling: “If God gives us power and wealth... [it is] so that we may use it for the benefit of mankind". In sum, the pursuit of wealth for its own sake is meaningless. Rao’s book is a must-read for students and scholars alike, be they market fundamentalists or hardline socialists. They may be surprised by the glimmer of synthesis in Gandhi’s thoughts as an original economist thinker.

Ajit Ranade is chief economist at Aditya Birla Group.

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