Economic ideas of Dr.
B.R. Ambedkar
by Sanchita
Dr. B.R. Ambedkar was a towering figure with astounding
uncanny foresight, who waged a relentless struggle against the denial of social
justice, economic opportunities and human dignity to the submerged humanity
throughout India. He was a visionary statesman,
architect of Indian Constitution, a great parliamentarian, a champion social
reformer, educationist, economist and prolific writer.
Bhim Rao Ambedkar was born at Mhow in Central
India on 14 April 1891. He was a brilliant student of economics. He obtained
his MA degree in June 1915 for his Thesis entitled “Ancient Indian Commerce”.
In June 1916 he submitted his thesis for Doctorate of Philosophy entitled “National
Dividend for India: A Historic and Analytical
Study”. It was published eight years later under the title “The Evolution of
Provincial Finance in British India.”Ambedkar achieved his Doctorate in Economics
from Columbia University of USA in 1917. In June 1921, Ambedkar’s thesis
entitled “Provincial decentralisation of Imperial Finance in British India” was
accepted for MSc ( Economics) degree by the University of London. Again in
March 1923, he submitted the thesis “The Problem
of the Rupee: Its Origin and its Solution” for which he received the degree of
Dsc from London School of Economics.
Ambedkar’s economic philosophy is expressed in his
ideas on mixed economy socialism, state ownership of industries,
industrialisation, etc. He belongs to group of liberal thinkers but by and
large his orientation is that of a socialist. Strangely he does not agree with Karl
Marx as his ideas and methods appeared violent to Ambedkar. It would not be
wrong to describe him as a follower of Keynesian economic school. His economic
ideas reflected his concern for the downtrodden and his penchant for their
development and upliftment in the social ladder. In order to eradicate exploitation by
landlords and capitalist he advised mixed economy or state socialism.
Following are some of his economic ideas--
Land reform
Ambedkar’s main concern s were the nature of land
holdings, especially their fragmentation and division into unproductive and
economically in viable structure. According to him, consolidation may eliminate
the evils of scattered holdings but not the evils of small holdings unless the
consolidated holding was an economic holding. He criticised the existing
definition of economic holding which was defined from the point of view of
consumption rather than that of production. So he remarked, “any definition,
therefore, that leans on consumption mistakes the nature of an economic holding
which is essentially an enterprise in production. What is more important for
the purpose of production is the process of combining the factors of
production.”[1] According
to Ambedkar the basic problem of Indian agriculture was that it was unable
to generate surplus which
ultimately led to scarcity of capital. This resulted in the inefficient use of
resources, surplus labour and superfluous employment which by raising the cost of
production culminated in low agricultural productivity. Thus the process of
overall economic growth gets adversely affected. Ambedkar was of opinion that
the process of consolidation of holding could eradicate the ill effect of uneconomic
holding and usher in the progress of the cultivators. He favoured successful
growth of industrialization and described that how agriculture is improved by
the reflex effect of industrialization. He stated “Industrialization
facilitates consolidation. It is a barrier against future subdivision and
consolidation.”[2]
Ambedkar was the first person to raise his voice against
Khoti system. The Khoti system was one of the minor land revenue tenures in the
former Bombay presidency. It was found mostly in Ratnagiri district and in some
parts of Kolaba and Thane districts. In Khoti system unlike Ryotwari system,
the government employed the services of the Khot for the purpose of collection
of revenue. Under this system the khot was obliged to collect revenue from the
tenants and to pay a certain part of it to government. Once such a payment was
made the Khot enjoyed unrestricted freedom to do whatever he liked to the
tenants. On 17 September 1937 Ambedkar introduced in Bombay Legislative council
a Bill seeking the abolition of the Khoti system. By introducing this bill
Ambedkar sought to put an end to the exploitation of the actual tillers of the
land and established a direct relationship between them and the government.
Ambedkar was of the opinion that the state should
acquire all the agricultural land held by private individuals like the owners,
tenants or mortgages and pay them compensation equal to the value of land. The
state should provide the land required into farms of standard size and should
let out the farms for cultivation to the residents of the villages.
Currency problem
Ambedkar’s writings on currency problems
constituted in his book “The problem of the rupee” and his evidence before the
Hilton Commission in 1926. He brought a new perception on the monetary issue.
He was not in favour of linking the rupee with
gold and recommended establishment of a fully managed inconvertible currency
with fixed limit of issue. Ambedkar stated “ It is much better to introduce a currency system
which will do away with the exchange
standard and also the gold standard reserve”[3]According
to Ambedkar the pure gold standard comprises use of gold in some form
convertible standard, paper money is also issued in addition to gold coins and is pledged to be redeemable in gold. In contrast under the
gold exchanged standard the medium of exchange comprises only paper money which
is kept exchangeable at fixed rates with gold and authorities back it up with
foreign currency reserves of such countries as on the gold standard. Ambedkar
vehemently criticized Keynes and other supporters of the gold exchanged
standard and argued in favour of the gold standard of a modified form.[4]
Ambedkar argued that the gold exchange standard
does not have the stability of the gold standard. Under the gold standard, additions
to the supply of currency are so small that stability is not affected. On the
other hand under the gold exchange standard additions are dependent upon the
will of the issuer and can be augmented to such an extent that stability could
be jeopardized. Ambedkar provided statistical evidence to show that prices varied much less under the gold standard than under
the gold exchange standard in Indian context. Keynes an
economist, argued in favour of gold exchange standard. According to Keynes gold
standard is a hard standard and it ties mankind to the wheel of nature where as
gold exchange standard allows an escape from this frigidity. Ambedkar argued
that gold exchange standard economises on gold because economising of gold
raises its supply there by lowering its value and as a depreciating commodity,
it then becomes unfit to that extent to function as a standard of value.[5]
In his evidence before the royal commission on
Indian currency and finance 1925 Ambedkar proposed the following steps for the
reform of Indian currency:
1) Stop the coinage of rupees by
absolutely closing the mints to the government as they are to public
2) Open a gold mint for the coinage of a suitable gold coin
3) Fix a ratio between the gold coin and
the rupee
4) Rupee not to be convertible in gold and gold
not to be convertible in rupees, but both to circulate as unlimited legal
tender at the ratio fixed by law.[6]
Ambedkar
favoured Gold currency and wanted to close down the mint as this will eradicate
the money inflation and imbalances in internal payments. For the flexibility in
currency he was of the opinion that Gold is a suitable measure for the
flexibility of money.
Decentralisation of
Imperial Finance
Ambedkar’s thesis the evolution of provincial
finance in British India dealt with the history of public finance. He discussed
in detail about the centre province financial relationship during 1833-1921.
Ambedkar demonstrates how centralisation of government finances which prevailed in India during 1833 through 1871,was a failure on
account of faulty fiscal system marked
by injurious taxes and unproductive or extravagant expenditure. The system of
Imperial Finance was started in India in 1833. It became so elaborated not e in
1858 when the crown took over from the East India Company that no province had
any separate power for legislating any separate financial resources. The
imperial government was responsible in law but did not administer the country
whereas the provincial governments administered the country but had no responsibility
in law. Under this system budgets were prepared by the provincial government
but the responsibility for the
finding ways and means for
financing them rested on the government of India [7].
There was practically no power of creating or modifying any appointments in service.
The restriction involved provided the Government of India with an opportunity to
interfere with all the details of provincial administration.”[8]
These led to extravagant demands and
since the government of India did not possess the necessary machinery to
appraise the demands and to control the expenditure, it often had to yield.
Government finances came under severe strain and it was realised that the
provincial government must draw up their own revenue and expenditure budgets.
Accordingly the regime of provincial budgets came into force in 1871. Provincial
finance was introduced in the form of budget by assignment (as referred by
Ambedkar) during 1871-72 through 1876- 77. Under this scheme financial
responsibilities of certain departments of administration were delegated to the
provinces and the receipts accruing from the imperial from those services were
handed over to them with fixed lump sum assignment from the treasury.[9] According to Ambedkar this scheme led to high
taxes and made taxation more iniquitous.
The next phase in the evolution of povincial
finance was the budget by assigned revenue which was operational during the
period 1877-78 through 1881-82. It gave the provinces certain sources the yield
of which largely depends on good management for the growing needs of the
provincial services. The third phase in the process of evolution of provincial administration
was the scheme of budget by shared revenues. According to Ambedkar the earlier
schemes were deficient as the sources of revenues assigned to provinces had
little room for enlargement over the time. But the new scheme of shared
revenues specific revenues were collected either by the imperial government of provinces
and a portion of the proceeds was allotted to the other. The is scheme was most successful and lasted for 38 years
and in 1920-21 major fiscal reforms were introduced in 1921
which in the opinion of Ambedkar were not induced by any
inherent defects in the system.
Thus Ambedkar dealt in detail with the mechanism
of finance of the centre- provincial government under the old phase.
State management
Br Ambedkar emphasised on the nationalisation of
economy. He was of the view that state should manage the economy that the
production might reach the optimum level and the benefits must not be taken
away by the capitalist. The benefits must be distributed equally. He stood for
the progressive transformation of society, removing glaring social and economic
inequalities that were due to the capitalist system.[10]
BR Ambedkar was a firm believer of socialism. According to him, “state
socialism is essential; for India’s industrialisation. Private economy cannot
do so and if it makes an attempt it would give way to economic disparities, as
it can be visualised in the case of Europe. It is a warning bell for India....”
[11]
His view on nationalisation of industries and life
insurance showed his great concern for the economic problems faced by India.
The formation of the public sector and
the establishment of Life Insurance Corporation showed that he was in agreement
with other leading economists. He remarked that industrialisation of India was
a necessary thing. But side by side the principle of state management and state
ownership of industry must be adopted. Amenities like social insurance and
control over employment, dismissal were vital to the progress of industry. About
these measures the lower middle class must be protected.[12]
He firmly believed that by eliminating
exploitation, the industrial harmony can be established through labour welfare
and congenial industrial relation. He remarked “we have attained political
freedom and equality but without economic and social equality this is quite
insufficient”. Ambedkar emphasised more on economic and social freedom and
equality. his concept of society and
socialism aimed for the welfare of the
poor classes, ending inequality based on
birth eliminating discriminatory
practises in social behaviour patterns
reorganising the political economy for
the benefit of all maintaining full
employment and education,
providing social security for the weak
and the sick[13].
Labour problem
Ambedkar supported trade union movement and right
to strike against capitalism. He wanted
participation of labourers in industrial management. He paid attention
to joint councils employment exchanges and earned leave for permanent workers,
welfare activities, conciliation, trade disputes. According to him industrial
peace would prevail if it is based on social justice. He introduced 5% to 6%
reservation for Schedule castes in Central government. He helped the
untouchable students wishing to take technical education in foreign countries.
In his inaugural address to the conference of the regional
Labour Commission Ambedkar stated “three things are necessary to mitigate or
prevent industrial disorder – Machinery for Conciliation, amendment in the
Trade Disputes Act and Minimum Wage Legislation. According to him, the
industrial peace could be realised if it was based on social justice.”
Ambedkar, while discussing the labour problem, had
in his mind not only industrial labour but also agricultural labour. According
to him, similar condition of work provident fund employer’s liability,
workmen’s compensation, health insurance including invalidity pensions should
be open to all sorts of labour whether it was Industrial labour or agricultural
labour.[14]
Economics of Caste
System
According to Ambedkar the caste system in India
was a major obstracle to economic growth and development. The caste system
didn’t allow people to teach their professional skills to any person belonging
to other caste. Only the members of their own caste were allowed to learn the
profession. Thus if a person had the skill necessary for a particular job he
would not accept the profession of a caste lower than his own. In a dynamic
industrial set up the individual must be free to choose his occupation. But due
to social religious restriction on inter occupational mobility has following consequences: Firstly, by not permitting readjustment of occupation, caste become a
direct cause of much of the unemployment
in various groups, as a religious Hindu would prefer to be unemployed rather
than getting employed in profession not
assigned to his caste. Second, individual justice and economic efficiency
demand that competition exists in factor market. Due to the restriction on
inter-occupational mobility of labour, capital and entrepreneurship across caste
groups the caste system creates segregation in each of these markets. Labour and capital thus does not flow from one
occupation to another even if the wage rate or rates of return on investments
are higher in the alternative occupations. This brings about a high level of
inefficiency in resource allocation.[15]
The division of occupation is not based on
individual choice. Some of the occupations are socially degrading, and people
are forced in these occupations on account of their caste origin. Such people
cannot derive job satisfaction. As
economic organisation caste is therefore a harmful institution in as much as it
involves the subordination of man’s natural powers and inclination to the
exigencies of social rules. This also results in disassociation of intelligence
from work. The dignity of labour is
nearly absent in the general scheme of theory of caste.
The practise of untouchability has ruined the
nation and the economy as a whole. Those
belonged to the lower strata of society or the untouchables were not allowed to
mix with others and denied basic civil right. They had no access to sources of
income. They had no right to education. They had no right tom property and were
prohibited from acquiring wealth. They could not use their labour for their own
upliftment. The Caste system has crippled the untouchable as
it denied them economic security and independence.
In the opinion of Ambedkar the economics of the
caste system had six type s of consequences: 1) it divided labour ii) it disassociated work from
interest iii) it disconnected intelligence from the manual labourer iv) it
devitalized persons by denying them right to cultivate vital interest v) it prevented
mobilization vi) it deprived Sudras of all economic avenues of employment and
took them nearly to the position of a slave.[16]
Ambedkar and Gandhism
Ambedkar characterised Gandhism as
conservatism and purely imaginary. He remarked that Gandhism meant return to
village and making the village self sufficient and as such it made Gandhism a
mere matter of regionalism.[17]
Gandhiji vehemently opposed machinery. He idolised charkha (spinning wheel) and
called western civilisation as the creation of satan[18].
He even said “i would not weep over the disappearance of machinery or consider
it a calamity”[19]
Ambedkar
opposed Gandhism because, in his opinion, Gandhism was against democracy and
also against mechanisation and civilization which were vital for progress of a
country. According to Ambedkar, democratic society cannot be indifferent to
machinery. Gandhism might well be suited to a society which did not accept
democracy as its ideal. He maintained that the ills were not due to machinery
and modern civilisation they were wrong due to social organisation which has
made private property and pursuit of personal gain matters of absolute
sanctity.[20]
He remarked that “Gandhism is a paradox. It seeks
to maintain intact a social structure which permits the domination of one class
by another on a hereditary basis which means a perpetual domination of one
class by another.”[21]
Ambedkar didn’t have faith in laissez faire or
Trusteeship of Gandhiji. He believed in socialism and advocated state socialism
to ensure proper working of national economy. He favoured land acquisition by
the state for distribution among poor. In his view socialism will not come
without directive principle.
Ambedkar viewed, Gandhism, a philosophy of the
well to do and the leisured class. It deluded people into accepting misfortunes
by presenting them as best of good fortunes.
According to him Gandhi sought to perpetuate the system of scavenging by
praising scavenging as the noblest service to society. But these were the evils
that were deliberately imposed by one class over another.[22]
Ambedkar and Communism
Ambedkar’s views on communism are presented in his
essay “Buddhism and Communism”. Like Marx Ambedkar believed that there is
exploitation in the world, the poor are exploited by the rich; there is
enslavement of the masses by the privileged few which leads to perpetuation of
poverty and ultimately suffering. In
spite of his believe, Ambedkar didn’t sympathise with the Marxist paradigm of
development. Ambedkar was of the opinion that economic relationships are not
everything in human life nor the economic motive was the sole driving power
behind all human activity. He emphasised
that exploitation has many dimension well as social, religious or political. In
Indian context social religious exploitation is no less oppressive than
economic exploitation.[23]
In Ambedkar’s opinion, communism advocates
revolution, it recommends revolutionary methods for overcoming the opposition
of the capitalists for establishment of the dictatorship of the proletariat and
any action that serves the interest of the proletarian revolution is ethical
and there is no consideration for human life. Ambedkar being an ardent follower
of democracy and human right was against any form of dictatorship. He was not in favour of violent change
rather he believed that constitutional provision and democratic means could
bring desired reformation. The control of all means of production and the
abolition of private property as advocated by Marx were not accepted by
Ambedkar. Ambedkar was not in tune with Marxian convictions that abolition of
private property would bring an end to the poverty and suffering of the have
nots and that the state is a temporary institution which will wither away in
course of time.[24]
Ambedkar believed that state is fundamental to
human existence. It has many important roles to play. He maintained that state would
continue to exist as long as human society survived. He believed in classless
society but not in a stateless society. He sought active involvement of the
government in economic development. In his book, “States and Minorities”, he
stated, “an obligation on the state to plan
the economic life of the people
on line which I (will) lead to highest
point of productivity without closing
every avenue to private enterprise
and also provide for equitable distribution of wealth.”[25]Ambedkar’s
concept of state socialism is based on these tenets:
a) State ownership economy agricultural land and key industries
b) Maintenance of productive resources by
the states
c) A just distribution of the common produce
among different people without any discrimination of caste or creed.
Conclusion
Ambedkar was primarily an economist his
achievement in the field was primarily overshadowed by his achievement in his
fields of politics. His political ideas had moral purpose. He was more
concerned about the human welfare. He had unflinching faith in socialism and
believed that it would solve the problem of the under privileged. Mixed economy
was the cornerstone of his philosophy. He was concerned about the equitable
distribution of wealth among people, in
this respect he was in agreement with economists like Sismondi, Ricardo and
Malthus to whom the problem of
distribution were more important than
any other economic problems. He advocated the modernization of Indian society and
economy. He believed that it was the most satisfactory development known to
mankind and that it could be established in India. Ambedkar also linked
salvation and emancipation of untouchable people with the emergence of modern
urbanised and industrialised India with modern liberal ideology.
[1] Ambedkar, small holdings in India, pg-13
[2] ibid, pg-28
[3] The Royal Commission on Currency
and Finance(1926): Statement, vol-ii,pg-237
[4] Dr.krishan Gopal,Dr.Jagdish
Lal ,Sarabjeet S Sharma, “Thoughts
&Ideas of Gandhi Nehru, Tagore &Ambedkar”, Jawahar publishers and
distributors, New Delhi-16,1994, pg223
[5] Ibid 224
[6] B R Ambedkar, The Problem of
Rupee---- its origin and solution , PS King and Son Ltd, Westminister, Great
Britain, 1923, Pg-630
[7] Narendra Jadhav ,”Neglected Economic Thought of Babasaheb Ambedkar”
in the book, “ Political thinkers of modern India”,( ed) Verinder
Grover, Deep and Deep Publication, New Delhi, 1992 pg- 459
[8] B R Ambedkar, “The evolution
of provincial finance in British India”
with a forward by R A Selingam, London 1925
[9] Ibid, pg-459
[11] Shiv Bhusan Gupta , “Dr
Bhim Rao Ambedkar as an Economist” in book, “Bharat Ratna Dr.Ambedkar” ,(ed)
Dr. R.B Rao, Chugh Publication ,Allahabad 1993, pg-231
[13] The Times of India, 15August 1936 and SCF Manifesto 1952
[14]CA debates, Vol ix, pg-944-45
[15] Shyam Lal ,K S Saxena,(ed) “ Ambedkar and nation building”, Rawat Publication,
New Delhi- 1998, pg-94-95
[16] Ibid pg-93
[18] Ibid pg-272
[21] Ambedkar , “What Congress
and Gandhi have done to untouchables?” ,Dr B R Ambedkar Foundation, New
Delhi,1991, pg-280
[23] Narendra Jadhav,pg-463
[24] Ibid,pg-463, M L Ranga(ed)B R Ambedkar,pg-71
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