Two economic models, diametrically opposite to each other, dominated the world over the last century: Capitalism and Communism. At the core, Capitalism relies on private enterprise with private ownership and operation of those enterprises. In this model, market forces and competition determine the winners.On the other hand, Communism depends on public enterprise, where the government owns and operates all property and the means of production. In this model, those in power decide the winners.
The United States of America (USA) symbolised Free Market Capitalism. In contrast, the erstwhile Union of Soviet Socialist Republics (USSR) and the People’s Republic of China (PRC) represented the Communist model. The rest of the world predominantly followed one or the other model while some nations, like India, went with a mixed or hybrid model wherein the government controlled the “commanding heights” of the economy and the rest was left to the private sector with heavy controls implemented via what was called ‘the Licence permit raj’.
Owners, consumers, and labour represent the main interests in every economic model. The maximisation of profits is the primary goal of the Capitalist model; hence, it pits the interests of the owners (shareholders) against those of labour and, in some cases, the consumers. Though competition, unionisation, and government as impartial regulator work to ensure that the balance of power does not tilt in favour of one group at the cost of the other two, competing interests are at the model’s core.
On the other hand, although a Communist/Socialist model is supposed to harmonise the interests of everyone in society via public ownership and collective decision-making through the people’s government, i.e., the public sector, in practice, it concentrates power in the hands of a few: the bureaucratic oligarchy that rules the country.
While every citizen supposedly owns the public sector, it is controlled by the rulers, making them the de facto owners or controllers, with the public having no meaningful say in their lifecycles. History shows that neither citizens (supposed owners) or labour, nor consumers have benefited from this system. For this reason, the erstwhile USSR, China and even India, which had practised a hybrid model, have liberalised their economies, inviting and expanding the role of markets and the private sector.
Simply put, the Capitalist and Communist/Socialist models tend to concentrate power and tilt the balance in favour of the ‘big guy’ to the disadvantage of the ‘small guy’. Additionally, both models exclude an overwhelming majority of society – the small guys – from ever gaining the upper hand in this power struggle, even with widespread shareholding through stock markets and government regulations.
In addition to these two Cs – Capitalist and Communist models, a third C – the Cooperative model provides a complementary model that can empower most ‘small guys’, be they producers or consumers.
The Cooperative model removes the distinction between producers (labour) and owners, provides the benefits of economies of scale when applied to production and enhances the bargaining power of the consumer when used on the consumption side. The second advantage of this model is its complementary nature. The Cooperative model co-exists with both private and public sectors. The third advantage is that it eliminates the power imbalance between the ‘small guy’ and the large private and public corporates, thus increasing the legitimacy of the other two sectors, especially in non-monopolistic, competitive environments.
The Cooperative model is not new to India. Professional Guilds and Shrenis thrived in ancient India. Grammarian Panini refers to Shrenis in the 4th Century BC. Later Hindu Shastras and Buddhist Jataka tales provide copious details on the structure and working of Shrenis. Ironworkers, woodworkers, potters, ivory workers, fabric dyers, weavers, oil pressers, and many other producers, traders and business professions were common.
Although the tradition of Cooperatives has withered over the centuries, especially under foreign and colonial rules, it has reinvented itself in modern, free India. For example, Anand Milk Union Limited – Amul, with thirty-six lakh dairy producers as members and more than fifty thousand crore rupees in revenue, has been a phenomenal success in post-independent India’s cooperative sector. Today cooperatives thrive in dairy, fisheries, weaving, agriculture – sugar cane, for example, banking and many other sectors in India.
The recent Budget introduced by Finance Minister Nirmala Sitharaman indicates the Modi government’s stress on the Cooperative model to build an inclusive and equitable India. This year’s Budget is the first prepared using the India@100 blueprint, which envisages India as a developed country by 2047. Apart from the private and public sectors, the Cooperative sector will play a significant role during and after the Amrit Kaal, evident from the ‘Sahakaar se Samriddhi’ philosophy that powered this Budget and the creation of a separate Ministry of Cooperation, with Amit Shah heading it. No doubt, if India makes its Cooperative sector succeed at scale, it can become a gift from India to the world: a world in which private and public sectors thrive.
