(The map above is the from the website of Original Indian Table, the brand of Crop Connect, an Indian start-up which is an example of the kind of innovation India, indeed the world, needs more of as we contemplate a new model for globalisation.)

I grew up in a Communist state in eastern India. I am, therefore, an avowed free markets man. Always will be. But even I feel that today there is every reason to ask — what does the free market really mean?

In a lecture at Delhi’s Jawaharlal Nehru University recently, I argued that the free market started with all the right ideas — indeed, still has all the right ideas — but the trouble has been, for a few years now, the emphasis in that phrase. It is all wrong.

Free markets as mouthed by, say, a hedge fund manager rolls out as free MARKETS!

If you truly believe in liberty, though, if you have read your Hayek and your Friedman (especially Milton Friedman on India, read his essay Indian Economic Planning and A Memorandum to The Government of India 1955), if you have read the iconoclastic Indian economist B. R. Shenoy, then this is how you say free markets — FREE markets.

Like democracy, with all its flaws, the notion of freedom movement of goods, services and capital, is the best system because it is the only one that really works under the political system of choice in the modern world, democracy. Quite simply, no system has ever worked better to bring prosperity to the largest number of people which is not driven by increasing levels of freedom of those who handle capital and manage businesses.

But this works most effectively if the underlying guiding principle is the promotion of freedom, of liberty — it is not the market that is in the driving seat but the quest for greater freedom for the largest number of people.

The question is — how is this to be achieved? And why has this not happened in many places after several decades of so-called laissez faire economics? First, it is not that it hasn’t happened, it has, in fits and starts, and sometimes with blazing success, but seems to have floundered in recent years in many places, including in that home of capitalism, America.

You see the notion of free markets works best when there is an invisible hand — not just of the bazaar, but more importantly of community — that keeps it in check and balances its excess and waywardness.

It is not the state that can effectively keep markets in check but a sense of community. Many people today feel that globalisation has failed because they feel the prevailing notion of globalisation irons over, ruthlessly, every distinction, nuance, rites, totems and rituals that can be said to constitute the idea of individual culture. Corporations, often hiding in tax havens, run zero sum games where their profits seem to matter above all else — and governments seem unwilling or unable to push greater responsibility and equity. My argument is that communities succeed where governments fail.

In his viral lecture The Moral Limits of Markets, the Harvard political philosopher Michael Sandel gives the example of a time when he was growing up when everyone, no matter how rich or poor, sat in the same stands, ate the same soggy hot dogs and enjoyed baseball games. Today, he says, the problem is that the rich have entirely different facilities to watch the same game for which they pay vast sums of money compared to the ordinary ticket prices, and presumably still hard stands and soggy hot dogs, for poorer folks.

Sandel does not elaborate on the community point — his focus is on the morality of it all — but it is the idea of the community that I think is most interesting here. Let me give you an example from a country which I have had the opportunity to visit again and again, Sweden. Now Marxists will tell you that Sweden, indeed Scandinavia, is the best example of how socialism works. Bernie Sanders keeps making this point, and one hears that in India Rahul Gandhi is a fan of the Nordic model. You only have to turn to the work of Swedish economists Johan Norberg and Nima Sanandaji to know that they are wrong. Scandinavia, especially Sweden, is built on the money of successful enterprises — from H&M to IKEA, from Volvo to Ericsson.

So what keeps capitalism in, say, Sweden, more benign than in, say, America?

A sense of community.

In Sweden, for instance, the founder of IKEA Ingvar Kamprad is not liked much because he lived in Switzerland for four decades since the 1970s to avoid paying higher taxes at home. He returned to Sweden only a couple of years ago. Anyone you ask in Sweden will tell you that they don’t like him much because ‘he sent all his money outside Sweden and did not invest enough in our community’.

It is this sense of community that, suggests the iconic ancient Indian treatise Arthashastra or the Science of Wealth, which keeps kings just. As the American historian Thomas Trautmann has explained in his book on the Arthashastra, India, quite like ancient Greece, never had the classic ‘Oriental Despot’. The Oriental Despotism theory made the distinction between kingship in Greece and Persia. In Persia, as suggested by Aristotle, ‘the Great King owned all the land, and hence all Persians were his slaves’. In contrast, the Greeks had private property and therefore also were free men. In India, Trautmann notes, the Indian historian Lallanji Gopal ‘has assembled very convincing evidence against the Oriental Despotism interpretation of ancient India… The king (in ancient India) had wide-ranging powers, but by and large in ancient times, the king and the landowner were considered to have concurrent rights… they were co-sharers.’

(It is pertinent to note here that Karl Marx, who of course never came to India, and presumably never read the Arthashastra, was wrong when he wrote ‘idyllic village-communities, inoffensive though they may appear, had always been the solid foundation of Oriental despotism, that they restrained the human mind within the smallest possible compass, making it the unresisting tool of superstition, enslaving it beneath traditional rules, depriving it of all grandeur and historical energies’. The communities that he so despised had, through their enterprise, made India the richest and most prosperous nation in the world for centuries. Little wonder, then, that Marxist philosophy has failed miserably in India.)

In a definitive passage, the Arthashastra not only showcases the right to private property in ancient India but also details how a land sale is to be done:

‘Kinsmen, neighbours and creditors, in that order, shall have the right to buy land that is for sale. After that, others who are outsiders may buy. Owners shall proclaim a dwelling for sale in front of the house, in the presence of members of 40 neighbouring families, and a field, a park, an embankment, a tank or a reservoir at the boundaries, in the presence of village elders who are neighbours, according to the extent of the boundary, saying, ‘At this price who is willing to buy?’ When it has been proclaimed three times without objection, the buyer is entitled to buy. But if the price increases because of competition among the buyers, the excess together with the tax shall go to the treasury. The buyer at the sale shall pay the tax.’

This is not the unfettered laissez faire capitalism but this is definitely a free market. Only it is a free market that understands and appreciates its own context, its ecosystem, it gets the social milieu in which it operates. As Trautmann writes, by giving first place priority to a kinsman, neighbour and creditor, ‘it recognises the strong connection of farmland with the family among farmers in ancient India’. Also, there is a critical emphasis on transparency, which the architects of the global financial downturn — for instance the bankers sent to prison in Iceland — can learn from. The deal is made in the presence of ‘knowledgeable witnesses, that is, neighbours — as many as 40 of them’ and the price announced openly not once, but three times, ‘without objection’. ‘Most assuredly,’ writes Trautmann, ‘an objection from a witness would be about the commonly accepted value, and therefore the proper price, of the land… Arthashastra opposes, and even punishes deals made in secrecy as the very antithesis of its ideal for markets. It is because transactions hidden from public view can deviate from the true price… It is the just price, not (merely) a market price reached by the free interaction of the forces of supply and demand (that the) Arthashastra aims to achieve.’

The understanding that it is society, community, and not the state, that keeps the reign on the markets from turning exploitative and just working for the rich that is the biggest achievement of the Arthashastra. This is the fundamental logic that keeps Scandinavia wealthy and happy. Little wonder then that one of richest, and the most happy, places on earth, Denmark, has made its philosophy of hygge (which roughly translates to cosiness) hip around the world. There is, there cannot be, any hygge without the fundamental notion of a thriving, caring sense of community. Selfish isolation does not bring happiness or morality to the markets.

The one philosopher who understood this was the French sociologist Émile Durkheim. It was Durkheim who appreciated that, ‘Society is not, then, as has often been believed, a stranger to the moral world… it is, on the contrary, the necessary condition of its existence. Society is not a simple aggregate of individuals who, when they enter it, bring their own intrinsic morality with them; rather, man is a moral being only because he lives in society, since morality consists in being solidary with a group and varies with this solidarity. Let all social life disappear, and moral life would disappear with it, since it would no longer have any objective.’

This is also what the American economist and Nobel laureate Milton Friedman noted when he came to India in the 1950s. He was in Ludhiana in Punjab and wrote: ‘Here was the Industrial Revolution at its inception — I repeatedly felt that I was seeing in true life the descriptions of Manchester and Birmingham (at) the end of the 18th century… there is a self confident, strident, raw capitalism bursting at the seams… One reason why Westerners so often feel that enterprise and entrepreneurial capacity is lacking in India is because they look at India with expectations derived from the advanced countries of the West. They think in terms of the large, modern corporation, of General Motors, General Electric… But it was not firms like this that produced the Industrial Revolution; they are, if anything, its end products. The hope for India lies… precisely in the hole-in-wall firm, in the small and medium enterprises… in the millions of small entrepreneurs who line the streets of every city with their sometimes minuscule shops and workshops.’

Today data tells us that Friedman was right. In 2013, a Crédit Suisse report pointed out that, ‘The intuitive habit of drawing macroeconomic conclusions [about India] from the corporate feedback (and vice versa) is fraught with risk. After all, only half of India’s GDP and 10 percent of India’s employment are in the formal sector. Further, only a fraction of the formal sector is listed.’ Small and medium-sized companies, usually family-owned, a bit like the famed Mittelstand, These provide around 90 per cent of jobs in India, account for half the country’s GDP, and have been growing much faster than the large companies in the last 25 years since India opened its economy.

These small companies, most of them unregistered, get little formal access to finance and credit. Almost all their growth is fuelled by raising money from friends and family, from the community that gives out cash and also keeps the business honest so to speak by ensuring that debts do not turn bad. The role of communities to keep a check on debts have been noted in micro-finance too, for instance with the Grameen model in Bangladesh. It is the social bonds of the community that keeps transactions from becoming only transactional, it keeps the business humane.

The free markets are failing in many parts of the world because they are devoid of, torn away, cut aloof, from any sense of society or community. In India, for years, we have been told that as far as possible people ought to leave ‘unproductive’ agriculture and move to cities and into manufacturing jobs. Make no mistake — I am not against a move out of unproductive agricultural jobs on very small land holdings that trap people into poverty. The economist B. R. Ambedkar who wrote India’s Constitution warned against such traps.

But it is increasingly clear that the great manufacturing revolution creating millions of jobs is not coming any time soon in India. And anyone with even a cursory interest in India can see that Indians cities are already a disaster — terrible infrastructure, full of slums, with terrible sewage planning and fast running out of water. To suggest that millions more should pour into these cities is to invite civil war. What is happening in place of such ivory tower economist fantasies is that is a digital and internet-based technology facilitated services and specialised production and manufacturing boom which is creating jobs and fuelling an unprecedented domestic consumption explosion. In this agriculture, if cleaned up and streamlined connected to urban markets not just in India but around the world, can be a driver of, and not a laggard to, economic prosperity.

What technology is enabling, especially as issues of identification and verification get sorted using internet-based unique citizen identity number tools, is for communities, no matter how remote, build models that showcase their products to the world. The ubiquitous spread of e-commerce acts as the distributor of these goods and services.

I am using the Crop Connect model as an example because it shows what this focus on communities, unique products and then connecting to tech-enabled distribution can achieve. The founders of Crop Connect, Puneet Jhajharia and Ishira Mehta, travelled across India clocking 70,000 kilometres over two years to find rare products being made by small village communities.

For instance, in the Himalayan hills of Uttarakhand, they found communities making a different kind of rock salt which was very healthy and had a unique taste; they found chamomile tea that tasted better than anything these tea lovers had ever had. One of their now best-selling products, black rice brimming with anti-oxidants, had been forgotten in most of India even though the country once grew 100,000 varieties of rice.

Using their own website, WhatsApp groups, and putting their products on Amazon in India, Crop Connect has built a model that empowers village communities to grow unique farm products which organic starved urban customers are willing to buy at a premium. It works with 13 farmer groups in 9 Indian states and, by cutting out middle-men and corporate overheads, they have been able to pay the farmers they work with double of the usual market price. This also encourages the communities to ensure that the quality standards are maintained and the supply chain kept well-oiled and corruption free. Crop Connect now works with a host of top Indian restaurants too, encouraging chefs to experiment with authentic farm products which their customers are happy to pay more for — if Indian diners are willing to pay extra for salmon flown in from Scandinavia, they are also willing to shell out for black rice from Karnataka.

In a sense, Crop Connect is kick-starting the Slow Food movement in India at a time the country is going through a cultural renaissance (note the surge in demand for yoga and the traditional medicinal system, ayurveda) by helping Indian customers understand where their food comes from — and most importantly who grows that food. Crop Connect does not sell products from any farmer group that they don’t know personally, reversing the assembly line approach for a more rooted, community-oriented approach.

Crop Connect is a full-fledged, for-profit company. It is not a charity and does not claim any not-for-profit-ish PR spin. Its impact lies in the most critical need in agriculture in India (a highly distressed sector of the economy) — raising farm income.

For capitalism to survive and thrive in the future, companies would need to look much more like Crop Connect — and less like some vast, faceless corporation which is registered, perhaps, in a tax haven.

The future of capitalism lies in going closer to the earth, to communities, to real human beings and real lives. It does not lie in sly financial jugglery.

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