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12th July, 2014 (KM wrote)
The budget for this fiscal year was announced on Thursday. There are a lot of follow up articles, a line in an editorial in Business Standard, one of the better business dailies, caught my attention today:
"You can blame the last government for having engineered this massive shift in spending priorities, in the name of inclusiveness --- except that it is more inclusive to create jobs than to give handouts."
In the run upto this argument, the editorial notes that over 15 rupees budgeted to be spent, only 1 will be on physical expenditure while double of that will be what the editorial calls "subsidy". It follows this argument up with the usual rhetoric that subsidy is a waste because it is a) misdirected, b) corrupted on its way and c) does not reach its target.
For us these arguments are exactly the same in the debate on so-called impact capital versus erstwhile grant-funding. If in the above narrative, we substitute the word "capital expenditure" by "impact investment" and "subsidy" by "grant-funding" it would aptly apply at an organizational level.
Nothing absolutely changes in the structure of the argument. It is interesting to ask why. How can attitude to building an organization be almost similar to building a country? One because both attitudes being expressed in mainstream are too simplistic to begin with. But leaving that aside, the reason it appears so similar is that both (social impact and nation building) today are looked at purely from the perspective of capital seeking returns.
Of course, given the way things have been for the last 500+ years, one cannot escape the over-arching thought of reducing day to day life in terms of "capital seeking returns". All of us were born into that system, make our living in that system, and would probably exhaust ourselves within this same system. The over-arching thought leaves little room for the finer aspects of human potential to think: arts, literature, philosophy and religion.
So we must accept this over-arching thought if at least for the sake of leading our day to day material lives. However, an over-arching thought is still a thought at the end of the day and composed of basic verbs and nouns, that is categories of language and perception. Like all categories of language and perception, these basic constitutents are amenable to rational re-definition.
So to the thought "capital seeking returns" one cannot do much with the verb "seeking". The typical mind today is in a mode of constant seeking after something. So that question is best left to more learned philosophers. Instead, let us seek to re-define the terms "capital" and "returns".
The reason why the editorial says what it says is because of a fundamental confusion. The confusion related to thinking that "investment" is different from "subsidy". In both cases an action is done of giving an input resource to generate an output resource. So how can they be different? Because in case of investment, input=output=cash & cash-like securities while in so-called subsidy, input=cash and output=generation of non-financial assets like health, education, mental and pyschological development, etc.
The naked admission of the fact that investment is different from subsidy and better than it is also a naked admission of the fact that what matters at the end is that capital must yield capital in exactly the same form and any other is so-called "social" and "good" but really not relevant to the larger public good.
I am sure no one actually thinks like this because most do not look at the situation this way. Those who do, either resign to the fact of status-quo or choose to willingly ignore it. But the moment even a very feeble attempt is made at examining base categories of perceptions, terms, and their meanings, it (the feeble attempt) would lead to a strong sense of shame at the structure of thinking at a collective, macro level.
For us, this is critical and ties back to an earlier email I sent on importance of grant-funding. There is a necessity to build assets which today would not be classified as "commercial or sustainable assets". This division of assets into financial yield-bearing and financial non-yield bearing is a categorisation that all of the rich and educated classes seems to have created to protect their own interests. Nowhere in the field of development, social impact investment, organization development, and more fundamentally responding to the question of social inequity is there felt a genuine need for such categorisation. That is, the domain does not demand this categorisation. If this was a scientific experiment, then the first junior scientist who comes in and look at this problem would simply discard this categorisation as not being material to the question at hand and endeavour to dedicate his energies to the right categories of terms and hypothesis which would better fit the "mould of the question".
And this opens up the final charge against all of us: on one hand, the entire economic development community professes the significance of the question of "removal of poverty and inequity", and on the other hand, the fundamental terms they use fit nowhere within their own chosen "profession". And those who do [use these terms], are discarded under the new stigma of being "left-intellectuals and communists". The charge of hypocricy is actually far greater than any other moral charge. Committing a crime in ignorance is pardonable, committing a crime in full knowledge of committing a crime is less-pardonable but committing a crime knowing it is a crime but ignoring it to be a crime is not pardonable under any scheme of things, human or natural.
This reminds me of a quote found in the book "The Annihilation of the Caste" by Dr. B.R. Ambedkar before the preface: "He that will not reason is a bigot. He that cannot reason is a fool. He that dare not reason is a slave --- H. Drummond". It sums up the state of generating genuine and real social impact today.
14th July, 2014 (Martin wrote)
Thanks a lot for your really interesting analysis of the new budget that India's government has announced. I think your line of argumentation is very much corresponding with a new trend in modern economics - which gained a lot of recognition after the sovereign debt criss in 2008 hit the Western economies - where authors are among other questioning the traditional thinking on how to remove poverty and inequity. First it was David Graeber's "Debt - The first 5000 Years". I am sure you know that one. Graeber suggests that economic life originally related to social currencies. These were closely related to routine non-market interactions within a community. This created an "everyday communism" based on mutual expectations and responsibilities among individuals. This type of economy is contrasted with exchange based on formal equality and reciprocity (but not necessarily leading to market relations) and hierarchy. The hierarchies in turn tended to institutionalize inequalities in customs and castes and so on...
Currently, it's all about the French economist Piketty who wrote "Capital in the 21st Century". Probably you know that one as well. He is asking: What are the grand dynamics that drive the accumulation and distribution of capital? Questions about the long-term evolution of inequality, the concentration of wealth, and the prospects for economic growth lie at the heart of political economy. But satisfactory answers have been hard to find for lack of adequate data and clear guiding theories. Thomas Piketty analyzses a large collection of data from twenty countries, ranging as far as back as the eighteenth century, to uncover key economic and social patterns. Some experts think his findings could change thinking about wealth and inequality.
Piketty shows that modern economic growth and the diffusion of knowledge have allowed us to avoid inequalities on the apocalyptic scale predicted by Karl Marx. But we have not modified the deep structures of capital and inequality as much as we thought in the optimistic decades following World War II. The main driver of inequality---the tendency of returns on capital to exceed the rate of economic growth---today threatens to create extreme inequalities that stir discontent and undermine democractic values. But economic trends are not acts of God. Political action has curbed dangerous inequalities in the past, Piketty says, and may do so again.
As mentioned above: I think here are similarities in line with your thinking. Here is a link from the "New York Times" article on the book: http://www.nytimes.com/2014/01/29/opinion/capitalism-vs-democracy.html?_r=0
See also this and this.
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