fueling economic growth through democratic participation

8/14/2019 Fueling Economic Growth Through Democratic Participation

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Fueling Economic Growth Through DemocraticParticipation: Three Lessons from Kerala, India

Kerala - beautiful beaches, red sands, coconut trees and people full of love.

by Richard W. Franke: 10 August 2001Professor of Anthropology, Montclair State University

Fueling economic growth. Three little words with lots of conceptual, empirical,and ethical issues surrounding them. In this talk I propose to note a few of themost important issues, then to describe for you what I believe are threesignificant and thought-provoking experiments in fueling economic growth: 1) aset of quality of life achievements known as the Kerala Model of Development, 2)within that model, a democratic worker-owned industrial cooperative calledKerala Dinesh Beedi; and 3) a statewide campaign for decentralization that isusing democratic participation as a principle fuel for economic growth. We shallbriefly consider how much fuel these two experiments are providing and then

return to the conceptual and ethical issues I am about to note. Finally, I hope tosuggest some lessons we might learn from these unusual approaches togrowth lessons already in practice in a few communities in the developed world but with much potential for all of us.

First the conceptual issues. The expression "fueling economic growth" isprobably understood intuitively by everyone. Economic refers to the productionand distribution of goods and services. For fuel we can take the basic dictionary


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definitions of material that causes or assists in the release or utilization of energy.Growth of course refers to an increase in size or amount.

Some problems arise with the expression "economic growth." When we try todevelop a ways to measure it, we run into several difficulties, reflecting the

complex nature of modern economic systems. Are we interested in the growth ofthe Gross Domestic Product (GDP), for instance, the total value of all theproduction in a country in one year, or the Gross National Product (GNP), theGDP plus rents, interest, profits, and dividends flowing in from abroad minus thepayments out? Unpaid household work is not counted in either measure sincemoney does not change hands: both GDP and GNP ignore much of the fuelwomen supply to the economy. GNP figures tend to distort the measureaccording to ownership. Do more ownership and more inflow of rents and profitsmean more economic growth? And what about depreciation? Are we fuelingeconomic growth when companies replace machinery and office buildings? Oneway economists try to get around this problem is by computing the Net National

Product (NNP), the GNP minus capital depreciation. All these figures can bedivided by the number of people in an economy to produce a per capita version(Anderson 1991:19-20). Further problems develop when we consider theenvironmental aspects of economic growth. We can fuel growth literally bychopping and burning forests, or by drilling and burning oil. But neither GDP,GNP, or NNP takes account of the destruction of resources or the state of theresource base. Lester Brown and colleagues at the Worldwatch Institute (Brown1990:8) have been arguing for the past decade that a category of "natural capitaldepletion" needs to be added to economic growth balance sheets. Theenvironmental or "natural capital" aspect of growth measurements is part of alarger conceptual issue now generally referred to as sustainability. But

sustainability can include more than natural resources. We could ask what is thecommunity sustainability of a particular type of economic growth? Does itgenerate long-term, stable or expanding employment or is it part of a growthpattern that skips from place to place making some better off at the cost ofothers? I shall return to the issue of community sustainability later.

Despite the various conceptual problems noted here, most international studieson economic growth and development utilize the per capita GDP. The mainreason for this is that the level of the GDP correlates generally and positively withvirtually all measures of human welfare. Life expectancy, infant mortality, accessto food and to health care, amounts of consumer goods and material comforts,even political liberties and human rights as measured by almost any widely-accepted standards all these to be high when GDP is high and low when it is low. The correlations are consistent, powerful, and statistically significant and theimplication is clear: if you want to produce a higher standard of living and greaterhealth and happiness, but your GDP is low then you have to make your GDPgrow.


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Let me make an important qualification here. In claiming the positive relationshipbetween GDP and human welfare indicators, I am referring to the full range ofsocieties, from the poor to the rich. Within rich countries, and within the middleand upper classes of all countries, the relationship between income or wealthand various measures of happiness has shown itself to be problematical. In his

attack on the idea of growth, Richard Douthwaite (1999) summarizes andpresents a large number of studies showing that Americans, British, and WesternEuropeans appear no happier now than they were 40 years ago, despitesubstantial economic growth and rising incomes. For us, these findings areimportant, but for people in the poor countries and for poor communities in thericher nations, the data indicate that growth remains a necessity.

This brings us back to the problem of the fuel. Particularly since the end of WorldWar 2, economists have been searching for the right materials to inject into thelow-GDP economies to release their energy and jump-start economic growth.They have advocated massive foreign investment, entrepreneurship training,

technology transfers, changing the psychological make-up of the people towardsmore future orientation and greater need for achievement, giving people moreeducation, and targeting benefits to the poorest groups to solve the problems ofbasic needs. These proposals have led to scattered successes, but no approachhas shown itself consistently able to bring about high rates of growth. Today s free trade campaign shows few signs of improving on the situation. In anextended critique, economist Arthur MacEwan (1999:31-65) argues that theeconomics literature of recent years provides consistent refutations of theargument that free trade fuels economic growth. A recent empirical study thatseems to support his argument. Mark Weisbrot, Robert Naiman, and Joyce Kim(2000:9) found that worldwide per capita output grew by 83% during the pre-free

trade period of 1960-80, but declined to 33% in the 1980-2000 period. The 33%growth was accounted for mostly by China, other East Asian economies, andSouth Asia while Arab States and Subsaharan Africa registered economic declinewith the onset of free trade. Latin America and The Caribbean dropped from 75%growth to just above 6% (Weisbrot, Naiman and Kim 2001a:3). Of 116 countriesin the study, 89 experienced growth rate declines in the 1980-2000 period ofincreased free trade. And in a further paper co-authored with Dean Baker, EgorKraev, and Judy Chen, Weisbrot[http://www.cepr.net/globalization/scorecard_on_globalization.htm] found that thecorrelation between growth and welfare held up. The declines in the rates ofgrowth have been paralleled by declines in the rates of improvement in lifeexpectancy, infant mortality, and literacy rates in almost all cases except for therich countries where such rates are already the best. In the second poorestgroup, adult female mortality actually worsened (Weisbrot et al 2001:11).

If none of the mainstream approaches can identify a fuel for economic growthand improvements in human welfare, where do we look? Revolutionary societiessuch as Cuba, Vietnam, or North Korea offer alternatives, but many people wouldshrink from the heavy state domination they use to bring about growth. The non-


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communist authoritarian alternatives such as Singapore, Taiwan, and SouthKorea also leave much to be desired in terms of personal liberties anddemocracy, and they have shown only sporadic ability to generate economicgrowth.

So where is the fuel for economic growth going to come from? Here we face aknotty historical issue. The currently developed nations fashioned their growthfrom investment capital drawn heavily from conquered peoples. It cannot be anaccident that today s rich countries were yesterday s colonial powers, while today s "Third Word" is mostly their former colonies. England, France, and Holland come to mind along with India, Indochina, and Indonesia. Historianshave extensively documented the brutality of the colonial system. And here in theUS the exploitation of African-American slaves and the violent seizures of landand resources from Native Americans fueled the US economy in the 18th and19th centuries. Both as a practical and an ethical matter, such fuels are no longeravailable. Today s underdeveloped nations face the problem of catching up with

the former colonizers without access to any of the historical devices that providedthose colonizers their high GDPs.

So where will the fuel come from and what kind of growth will it fuel? In my view,the developing countries today need to achieve two breakthroughs:

First, they should squeeze as much quality of life improvement as possible out ofthe existing growth rates, no matter how apparently inadequate. In other words,they should try to break the correlation between GDP and quality of life to thegreatest extent possible. If the entire world requires a US level GDP to get a USinfant mortality rate, the strain on the earth s natural resources might be too

great. Instead, developing countries should increase the efficiency of their growthto the greatest possible levels in terms of the quality of life output. The Keralamodel of development comes in here.

Secondly, they should design growth strategies that are community-oriented andcommunity-sustainable. Community-sustainable growth means that the fuel andits by-products remain available to the community over long periods of time.Such strategies require a special kind of fuel. That is where the cooperative andthe decentralization campaign come in.

Lesson 1: Development With Limited Growth The Kerala ModelThe possibility of achieving high material quality of life indicators at low levels ofGDP and low levels of economic growth is demonstrated by the Indian state ofKerala. Now well known to development specialists, Kerala has an areaapproximately equal to Switzerland s and a population about the size of Canada s at 31 million. (Canada's population of 31 million on 9.97 million sq kms of land means a density of 3 persons per sq km. Switzerland's population of7 million on 41,000 sq kms gives 180 persons per sq km. Kerala's population of


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31 million on 39,000 sq km in 2000 means a density of 795 persons per sq km(Calculated from World Bank 2001:274-75).

The great interest in Kerala derives from its quality of life statistics. With a 1997per capita income of $324, Kerala had a literacy rate of 91% versus 65% for all-

India. Kerala's life expectancy was 67 for males and 72 for females, versus 62and 63 for all-India, and Kerala's infant mortality rate was 13 per thousand,compared with 65 for all-India. The Indian birth rate of 29 per thousand women ofchild-bearing age contrasts with 18 in Kerala. Similar figures to India s obtain for developing countries generally, but Kerala s statistics are closer to those of the US except for the income figure which for the US in 1997 was $28,740. I usethe year 1997 because it is the most recent year for which all the various figuresare available. Even when Kerala s figures are corrected with what economists call Purchasing Power Parity to reflect more accurately the buying power at localprices, the average Keralite lives on the equivalent of US$1,371, lower than theall-India PPP-adjusted figure of $1,650. (The Kerala figure also includes an

adjustment for the overseas remittances of workers in the Middle East GulfStates.) How did Kerala achieve such high quality of life indicators with such lowincome levels? Part of the answer is redistribution: in Kerala education, health,and access to food are all more evenly distributed than in the rest of India. Theexisting growth more efficiently distributes its rewards to the population. But howdid this happen? Part of the answer is in what Amartya Sen and Jean Dr ze call "public action," an economist s euphemism, perhaps, for the radical movements of peasants, workers, and students that have characterized the Kerala scenenow for about a century. These radical movements have generated a high levelof citizen activism and participation that shows up in all kinds of indicators. Voterturnout in Kerala averages 75%, 15% above the average for the 16 major states

of India. A 1996 survey showed that 45% of Keralites think elected officials carewhat ordinary people think, 41% think elections make a difference in governmentactions, 54% trust state government, 58% trust local government, and 20%express "a great deal of interest" in politics. These figures are all far above the16-state average and place Kerala in the first or second rank in all cases (Serra2001:695-96).

Community participation and community service are also highest in Kerala. Thestate ranks first in membership in credit associations per 1,000 persons, highestin the degree of political competition, and lowest on an index made up of rapeand murder rates. Kerala also displayed the lowest perceptions of corruption, farbelow other states (Mayer 2001:689). About one-third of Kerala s people belong to politically active organizations such as peasant leagues, trade unions, andstudent groups. Keralites read more books and more newspapers per capita thanpeople in any other state in India (Abraham 1996; Jeffrey 1993a and 1993b).They also write letters to the editor and letters to government agenciesdemanding better services, and they frequently gather at government offices inpublic protest if their letters are not acted on. Every one of Kerala s 990 villages


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has a library with hundreds of books; many villages have branch libraries calledreading rooms to which sports clubs, theater groups, and arts clubs are attached.

Volunteerism and participation characterize social and political life in Kerala to ahigh degree. It is this vibrant civil society and the sense of optimism and

community commitment that lie at the base of Kerala s high material quality of life indicators. One of the most significant voluntary associations is the KeralaPeople s Science Movement, or KSSP. Founded in 1957 by a group of scientists who wanted to translate major scientific texts into Malayalam, thelanguage of Kerala, the KSSP evolved into a mass movement with over 40,000activists who work to popularize scientific thinking in villages through streettheater and roving book fairs, and who have become Kerala s main environmental pressure group. In 1989 the KSSP mobilized 350,000 college andhigh school students for a highly successful "Total Literacy Campaign" thatbrought reading and math skills to many of the state s illiterates and that won UNESCO s literacy prize in 1991 (Thomas Isaac, Franke, and Parameswaran

1997). In 1996 KSSP received the "Right Livelihood Award" from the Swedishparliament, a prize often called the "alternative Nobel prize." Through politicalstruggle and continuing community activism, Kerala s people have built and sustained a system of public services and protections that parallel the welfareand workers rights gains in the developed world.

So how did Kerala become such a hotbed of activism? Why did its civil societythrive while in many parts of India and the rest of the developing world this crucialelement of development languishes? Little has yet been written that explains thehistorical roots of Kerala s unusual trajectory. Here is a great Ph. D. thesis waiting to be written.

For our purposes, what is more important is that Kerala offers lessons to otherstates of India and to other societies about the uses of public action to get thegreatest efficiency in quality of life out of the lowest growth. It amounts to a kindof fuel efficiency.

But efficiently using the current growth is still only one of the needs to produce ahigher quality of life. At least in the developing countries, additional growth itselfis needed and, as noted earlier, the fuels made available so far have not beenconsistently successful in providing it. Here Kerala has two more lessons to offer.

Lesson 2: Kerala Dinesh Beedi: A Successful CooperativeOn a quiet, tree-lined lane in a former princely palace in one of Kerala s northern cities, Kannur (sometimes called Cannanore), are found theheadquarters of Kerala Dinesh Beedi, one of India's largest corporations. Even atthe HQ, you sense something is different about this company. The CEO sits in arather small, unimpressive office and often answers his own phone. There is nocompany limo; he rides around in a company van shared by all the members ofthe Board of Directors and by much of the technical staff. Except for the


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Chairman and one government-appointed member, the Board members do notspeak English; the five elected Board members who control the votes to run thecompany are themselves former workers with 15-20 years experience, elected bytheir fellow workers to manage KDB. They sit at the top of possibly the world s largest and most successful worker-owned and managed company, yet their own

incomes from the company average only about 13% higher than those of theshop floor workers who elect them. Having risen out of the manual workforcethemselves, the director board members do not have the technical skillsnecessary for certain tasks. But even those they hire for special positions do notearn more than six times the salaries of those on the shop floor.

KDB is owned and managed by its 46,000 workers and retirees. To work at thecompany, the new hire must purchase at least one share and may not purchasemore than twenty. To purchase even one share you must become a worker. Onlyworkers can own this company and only they can decide who manages it.

KDB is organized in a way that provides a possible model for 3rd world industrialcooperatives. Twenty-two production cooperatives are semi-autonomous units,each with its own worker-elected director board. They run in membership ofactive workers from 340 to 3,116.The local cooperatives are further divided into326 small work centers in the towns and villages of northern Kerala wherebetween 70 and 123 workers are engaged. The average distance to work is 5.3km (3.3 miles). Only 2.2% of the work force is staff. The 22 production units arefederated into a central cooperative, also owned by the workers, that handles rawmaterials purchase, product marketing, and overall financial management. Eachlocal cooperative elects a representative to a board of the central cooperativeand this 22-member board has final say over the decisions of the five director

board members who manage the day-to-day operations of the company.

Why am I telling you about this unusual business setup? One reason is that itprovides the best pay and benefits to its workers for all comparable companies inIndia. KDB workers receive much higher salaries, but they also get pensions,paid holidays, death benefits, and maternity leave benefits unparalleled in India.In 1995 benefits added 34% to the value of the wages, a figure that comparesfavorably with advanced industrial countries such as the US where about 25% ofwages are added on as benefits in unionized workplaces. KDB's workers haveelected managers who represent their interests quite well. But there is anotherreason to tell you about KDB: this company with 736 billion rupees in sales in1995 (about $yyy) and a net profit of 4.1 billion rupees ($zzz) has been owned byits workers since 1969. The story of how the workers came to own it is quitedramatic and is told in detail in the book from which I am taking this informationand which I co-authored with two Kerala colleagues. Since 1969, KDB has madea profit every year except four. The accumulated assets of the company run intobillions of rupees and the pension fund is sound. KDB shows that it is possible fora business to be locally owned by its own workers, to stay in business for threedecades, to pay good wages and benefits, to make a profit, and to run itself


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democratically. And one more point: KDB sees its purpose as contributing to thelocal economy by generating employment and by its workers having money tospend to support local businesses. KDB does not look to move away seekingcheaper labor. Its directors have shown skill and resilience in balancing workerdemands for higher pay and benefits with the need to maintain investment funds,

and it survives in a highly competitive atmosphere. KDB does not exist primarilyto make a profit to distribute to its shareholders; it tries to make a profit in order toplay a beneficial role in the local community by generating employment to lowand medium skilled workers.

KDB has been a corporate engine of economic growth. From 1969 to 1995 KDBgrew from 3,000 to 32,000 active workers and sales increased by a factor of 700.Of course, the fuel for this engine consists in part of the raw materials of itsproducts. Worker skill makes up another part of the fuel and so does the efficientand opulence-avoiding management. But the democratic activism of KDB s workers is a form of fuel as well and the cooperative s role in the local economy

derives from the close association between its workers and the communities inwhich they live. KDB illustrates a way of fueling economic growth that sustainslocal economies and therefore keeps the fuel around for future growth. And yes,in case you are wondering, the workers do work really hard for 8 hours a day.

Now I must introduce a complication. Maybe you have been wondering whatthese workers make. The beedi in Kerala Dinesh Beedi refers to a kind ofcigarette, tobacco rolled in a special leaf rather than in paper and about half thesize of the cigarettes we know in the US. The manufacture of these beedis inKannur has to do with the historical development of tobacco production in India,a long and complex topic that deserves its own study. But what is important for

our purposes is that the workers who founded the cooperative in 1969 werehighly skilled in beedi production and their skills were essential in thecooperative s survival. But workers who produce a product harmful to other workers and to the public in general cannot ultimately be a positive model. KeralaDinesh Beedi needs to become a different kind of company and that is exactlywhat it is doing.

In 1996 KDB launched a program for diversification out of tobacco. The decisionwas made democratically by the workers after local meetings and seminars at allthe production centers. The diversification program includes a provision that noworker will be laid off and that retooling to new products would be voluntary. Agoal was set to transfer 25% of the workforce within 10 years from tobacco toother products. By January of 2000 substantial progress had been made. Thecorporate HQ had turned its second floor into a lab where chemists and foodsafety experts train workers to manufacture and package curry powder, jam,marmalades, Indian style pickles (achar), coconut sauce, and a cashew juice it tastes like a smooth and slightly smoky apple juice with a little less acidity. All theraw materials are available locally as is the market for the products; of 98company sales agents 30 now offer the food products to Kannur District


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consumers whose demand cannot yet be met by the new products. At a nearbyprimary cooperative the first 234 workers now produce processed foods full timewhile plans are to offer one food unit to each of the other 21 coops so all workerswill have roughly equal access to the new direction the company is taking.Wages for workers at Kerala Dinesh Foods, the company s first non-tobacco,

units equal those of the beedi workers. This occurs even though the food workersproduce less surplus value to the company, and thus the transition out of tobaccoeats into the coop s reserves. But they maintain a 5% profit margin, below the competition that pulls in 15-20%. Since they do not compete for investors in astock market their only investors are their employees they might be able to stay in business at that rate. The high quality of their products and the solidarityfrom union households and progressive sympathizers in the community giveKerala Dinesh Foods marketing advantages other companies cannot easilyundermine.

But where did KDB get its initial and continuing capital? If the workers own the

business and they elect boards of directors made up mostly of shop floorworkers, won t they pay themselves wages and benefits that will put them out of business? Several theorists of cooperatives have warned against this danger(see Thomas Isaac, Franke, and Raghavan 1998:86-88 and 205). In fact, KDBwas born with government support and the workers might have just paidthemselves out of their original capital, thereby destroying their own long-termhopes. Would it surprise us if poor people took what they could get right awayinstead of creating a grand structure for future academics to lecture about?

But KDB s worker-managers chose an altogether different path. True, they began paying out the high wages and benefits and attempted to hire as many

workers as quickly as possible. But they also innovated a device that helps keepthe cooperative afloat and has become an inspiration and a lesson for otherKerala cooperatives I am going to tell you about in a moment. This device is the"thrift fund." You will recall that each worker hired by KDB must purchase at leastone share at a price of Rs 20. This hardly puts any investment funds into thecoop. But in addition, 5% of each worker s wages are withheld and placed in the thrift fund. The thrift fund is separate from the pension fund and all otherfunds that eventually benefit the worker. It is available for no-interest loans to theworker at any time and is automatically repaid by further deductions spread overa fairly long period. The worker or his/her beneficiary also receives the entirevalue of the fund as a lump sum payment without interest on retirement or death. In effect the worker lends 5% of her/his wages to the company throughouthis/her working life. The overall benefits to the worker are highly favorable; thecompany receives an investment fund that undergirds its other sources of capitalsuch as the previous year s profits, interest on funds held in suspense accounts, and returns on other assets held. For KDB the thrift fund has been ableto supply about 25% of the working capital and on several occasions has savedthe coop from having to borrow from high-interest sources.


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The thrift fund is the worker s investment in her or his own democratically owned and managed company. And yes, the thrift fund is subject to revision bythe worker-elected board of directors at any time.

Lesson 3: Fueling Economic Growth Statewide The Kerala People s

Campaign for Democratic DecentralizationCan we go beyond the particular companies called Kerala Dinesh Beedi andKerala Dinesh Foods to create similar cooperatives in other sectors of theeconomy? Can we go beyond the earlier Kerala Model of public action togenerate a high material quality of life through redistribution by adding to thatmodel a mechanism for an egalitarian strategy for growth? And if we wanted todo that, what would be the fuel?

Younger activists in Kerala s numerous left movements had been thinking about this issue for several years. They recognized and valued the idealism andsacrifice of older activists who had fought for land reforms, higher wages and

benefits, and the establishment of a network of fair price shops to subsidize thecost of food for the poor. They themselves had sometimes been in jail or hadsuffered physical attack for their support for such movements. But by the 1980sthey had come to realize two important facts about the world. First, they saw thatnon-violent democratic political action offered greater possibilities for genuinechange than did armed insurrection. It was not Mao s long march of an army but rather Gramsci s long march through the institutions that came to inspire their thinking. And secondly, they came to believe that the traditional activism ofthe left could not remain limited to land reform, wages, working conditions, andovercoming caste discrimination even though much remained to be achieved inthese areas. But they began to see the importance of women s equality,

environmental protection, and the need for expanding democracy and buildingcommunity as goals for Kerala s historically developed activist movements. Along with their traditional admiration for the Soviet Union, China, and Cuba, theybegan to look to Italy, England, and the US women s and environmental movements for inspiration. And of course they continued to critically examinetheir own experiences. Along with the new orientation came a realization thattheir organizations of struggle would have to become less mechanical and moredemocratic and participatory. Why did they arrive at this historically significantbreakthrough? Here is another great dissertation waiting to be written. I can onlytell you at this time that the US movements of the 1960s had a profound effect ontheir thinking. And the evolution of the Italian Communists with their emphasis oncooperatives and local government accountability struck strong chords in Kerala.The collapse of the Soviet Union in turn weakened the position of the old line leftforces and created an opening for the younger activists who were reading greenand feminist literature. And looming behind all these intellectual developmentswas Mahatma Gandhi, whose teachings on village self-sufficiency, exemplarysimple life styles, and economic growth as a means to benefit the most needyhave continued to inspire each new generation of activists in Kerala.


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In Kerala in 1996 the Left Democratic Front, made up of several left parties, wonthe elections to the state assembly and formed a ministry that held power untilMay of 2001. This ministry, within which many of the new activists held middleand a few top positions, initiated a mass movement called the People s Campaign for Democratic Decentralization. The Campaign involved a wide range

of activities. It mobilized over 2 million of Kerala s 31 million people to attend meetings, argue about the problems in their communities, gather local data, electrepresentatives to draft development projects, and implement and monitor theprojects annually over 5 years. The state government allocated 35% of thedevelopment budget directly to the local communities with few restrictions tocreate and implement their own development plans. Both in terms of its scale ofdevolution, and in terms of the training and participation, Kerala s decentralization campaign of 1996-2001 has probably been the largest and mostdemocratic in the world. In terms of the evolution of political thinking amongactivists, it is a giant testimony to the power of human consciousness andreflection. In terms of its effects in the towns and villages, it is a testimony to the

creativity of ordinary people.

The five years of the People s Campaign achieved many breakthroughs and suffered many failures. I cannot detail them all here, but the book I have beenprivileged to assist in writing with a key activist and intellectual, Dr. T. M. ThomasIsaac, does cover this ground. For those of you who are interested, a US editionwill be published by the end of this year by Rowman Littlefield in their series onworld social change. I will only say here that the decentralization campaign led tovastly improved public services in areas such as roads, irrigation, drinking water,sanitary latrines, and school and hospital construction. It also managed togenerate mechanisms of popular involvement that reduced corruption, a fact that

helps explain the improved public services.

But I am telling you about this Campaign for another reason. You see, thedecentralization process was intended by its innovators those rehabilitated and reinvigorated leftists I mentioned earlier to promote the economic growth that had eluded Kerala for so many decades while they redistributed wealth andimproved equality. The decentralizing activists wanted to create this growth bysetting up cooperatives along the lines of Kerala Dinesh Beedi, the inspirationand structural model, but smaller and with some other differences I am about tomention. And they set out to combine these mini-KDBs with one other modelalthough it was not always named: the Grameen Bank which you may haveheard of. Founded by Muhammed Yunus in 1976 in Bangladesh, the GrameenBank has become one of the most fashionable models for fueling economicgrowth. The Bank lends small amounts to cells of 5 poor women who pledgetogether to repay their loans. Interest rates of 20-30% are still below the regularprivate lending rates and paybacks have been above 90%. The Ford Foundation,the UNDP, and finally in 1995, the World Bank, have all become supporters of theGrameen style micro-credit approach to fueling economic growth (McMichael2000:295-96; Rahman 2001).


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A major weakness of the Grameen Bank is that it depends on outside funds tostimulate the self-help process. No Mohammed Yunus, no effective self-helpgroups. Another weakness is that the lending agency can have an agenda of itsown so that self-help becomes a mechanism for outside interference. The WorldBank micro-credit programs, for example, usually require privatization of

cooperating lending agencies and rewriting of debt collection laws (McMichael2000:296). Finally, empowering any particular group of 5 women to engage inany particular kind of economic activity does not necessarily fit in with thedevelopment needs of the local community. In the end, it could just be randomgrowth benefiting a few individuals.

This is where the Kerala program differs. In the Campaign for DemocraticDecentralization, self-help groups (SHGs) are established at the localneighborhood level for 10 to 20 below poverty line individuals, usually women.The SHG puts forth a production project such as a cooperative to manufactureumbrellas, soap, sandals, incense, ready-made clothing, or electrical equipment;

or a service such as a cooperative store or teashop. The village councilconsiders the project within the local annual plan with the idea of distributing theinvestments to maximize interconnections and to avoid overinvestment in anyparticular activity. The council also encourages the production of goods andservices that can be consumed locally in order to insulate the jobs created fromthe effects of globalization. In many villages, the land and buildings for suchcooperatives have been donated by the government or by individuals and insome the facilities are on the grounds of a women s community center so that child care needs are immediately taken care of. Since Kerala has long hadnurseries in virtually every town and village, the SHGs can piggyback onto theachievements of previous Kerala activism.

Once the project is approved, financing sources are matched together: theparticipants raise about 25% of the funds themselves through a rotating creditassociation in which they place, say, 10 rupees per week for a period of one year.This money is matched by a low-interest loan from a state or national bankprivate banks have shown little enthusiasm for the process so far and the village council makes up the rest from its decentralization fund. The fuel for thisgrowth is thus a combination of finance capital and investment from the workersbut what fuels the fuel, so to speak, is the democratic participation of the worker-owners of the firm along with the local community that agrees the items wouldhave a reasonable market. One Chapparappadavu SHG set up a poultry unitwhile another began the manufacture of "hot boxes," a type of rice cookerinvented by Kerala scientists that uses 50% less fuel and takes less cook s time. In some cases, the connection with the local community is more elaborate.Pallichal village in southern Kerala, set up a women s weaving cooperative to manufacture school uniforms. Before deciding on the number of people whocould join, the council conducted a household survey to find out how manyparents would agree to purchase at least one school uniform from the local unit ifit were started up. The very act of conducting the survey led to substantial


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community interest and pledges of enough uniforms to open the SHG to 120members. In Madakkethara village in central Kerala 10 women set up a VanitaKarshika (Women Farmer) Nursery where they bring coconut, pepper, and spiceseeds to the sapling stage for sale to local growers. In nearby Panjal village, in1999-2000, eleven women took training as autorickshaw drivers and 10

completed the course and purchased the 3-wheeled pedicabs that take Keralavillagers within and outside the village for personal and business purposes. A fewmen jeered when the first women drivers appeared, and even today it is brothersor husbands who work the night shift; but during the day the women earn 80rupees on average after loan repayments and petrol costs, about what they couldget transplanting or harvesting rice. But driving a cab means having work all year,and the annual income is more than three times what a farm laborer can make.The women hope to pay off their autorick loans within two years. By the way,nobody is jeering now.

Can you build a globalization-proof economy on the production of umbrellas and

soap? Does it really matter if a few women get jobs as local cabbies? Willdemocratic decentralization build an alternative economy with better paying andmore secure jobs or will it just leave Kerala as an industrial backwater as the restof the world marches forward into a high-tech future?

The Kerala Campaign has three answers to these questions. First, they arguethat local planning can make more efficient use of existing local resources andthat should be done no matter what the long term strategy. Just as Keralaalready makes more efficient use of its existing growth through its redistributionprograms to produce high material quality of life indicators, so it can also makebetter use of its nature resources to fuel economic growth. The fuel that mixes

with the land and water resources is the democratic participation and activism ofthe local community. And some results are showing up in the statewide statistics.During the first 3 years of the Campaign, from 1996 to 1999, 315,881 new acresof land were brought into cultivation, an increase of 5.6%. Agricultural production,long stagnated or even in decline, went up in 1998-99 by 3.82% compared withan average of 1.3% in the previous 3 years. Industrial growth rose by 7.2.%, andmore than 100,000 new jobs were created, representing a possible 5% decreasein Kerala s exceptionally high unemployment rate. Thousands of people in hundreds of communities setting up SHGs and creating local plans when added together it has had an impact.

But surely there are limits to growth of this kind. And you might be wonderingwhether Kerala, with its high literacy and international outlook, has discovered ITand the Internet. Of course, they have. Of all the states of India, Kerala has themost ambitious IT program. Already the state has the most complete fiber opticcable network in India. Plans are underway to put a computer in every villageoffice and upgrade the staff to provide computer-based government servicessuch as instant birth certificates. But most importantly, IT is seen as a fuel foreconomic growth. This takes on many dimensions.


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Let us return to Kannur and Kerala Dinesh Beedi. You will recall that thecooperative is moving out of tobacco production and into food processing. Themanufacture and packaging of spices is designed to absorb the literate butotherwise only basically educated work force. But in a far-sighted decision,KDB s director board, after lengthy consideration and investigation of options,

decided to invest a large part of the coop s reserves into becoming a major IT provider for northern Kerala. A major center is being constructed that will functionas an office complex, internet service provider, and software production andtroubleshooting complex. And just to make sure it is financially sound, there willbe a large marriage hall as well. Already courses have begun to train local youth,better educated than their parents, in programming, repair, and software design.And who are these local youth? The KDB-sponsored courses are open to all, buta minimum of one-third of the seats are reserved for the children of beediworkers. In a visit to a classroom in January 2000, I had the moving experienceof meeting Ajesh, 17 years old, his classmate Usha, 19, and several other youngmen and women whose parents had worked all their lives rolling tobacco into

wrapper leaves. Now their children are programming in "C" and other computerlanguages, and preparing to design office-managing software for localgovernment and businesses, or to repair and maintain Kannur s rapidly expanding IT infrastructure.

Kannur is no Bangalore, and Kerala is unlikely to become a second Indianversion of Silicon Valley. But the decentralization campaign is tagging onto the ITexpansion and seeking to use it to create jobs. Unlike the local umbrellafactories, however, IT employment brings with it both the advantages anddangers of a direct connection to the global economy. The advantage is that thescope for employment is large; the danger is that the jobs depend a lot on

decisions over which the workers and the local communities have little control.One of the biggest potential job sources in Kerala for IT workers is data entry. Itworks like this. A physician in England or the US sees a patient. She/he dictatesnotes on the patient s condition into a tape recorder. That evening the audio is sent via satellite to a data entry center in India where a low-paid typist keys it intoa digital file that can be uploaded and sent back to the doctor s office next morning. I am sure you can see the promise of thousands of jobs here, but alsothe dangers: there will eventually be data entry workers somewhere else ready towork for less. And eventually, maybe soon, the entire process will be automatedso a machine immediately reads the doctor's voice and nothing has to be sentanywhere.

Are there alternatives to fueling economic growth with such a dangerous mix?Part of the IT market can be local: already in Kerala a substantial amount ofmedical prescription work is done with computers and it requires local-languagesoftware, digitalized fonts in Malayalam, and local data entry workers.Government record keeping is also being rapidly computerized. But the big jobnumbers come from national and international IT needs. And they are the mostvulnerable to sudden collapse. You can see why some people prefer to make


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umbrellas or drive pedicabs. But can the fuel of globalization be harnessed to theneeds of community sustainability? Can we globalize community sustainablegrowth? Let us return for a moment to the first world.

Globalizing Community Sustainable Growth

In Grand Pr , Nova Scotia, there are at least 3 major sites of interest. (The town name means "big meadow.") At Evangeline Beach you can watch the effects ofthe world's biggest tides as huge mudflats are alternately filled with water or leftto bake in the sun. At the National Commemorative site of the Deportation of theAcadians , you can learn about the forced relocation of 6,500 French-speakingsettlers in 1755 who were dispersed throughout the British colonies and createdone of the historical backdrops to the creation of Louisiana's Cajun culture. Theloss of home and field and the separation of families inspired Longfellow's poem,Evangeline. And you can stop along the highway just outside town and buy from a small selection of products at the local Fair Trade Shop.

Fair trade is a small but growing movement in Europe, Japan, and NorthAmerica, to guarantee third world producers a better share from the sale of theirgoods than in the open, or so-called "free trade" markets. Fair trade is mostdeveloped in Western Europe where in some countries even supermarket chainsnow carry coffee, tea, bananas, sugar, cocoa, honey, and orange juice that meetfair trade criteria. In some countries, as much as 10% of sales are now claimedby the fair trade organizations to be in their quarter. For 1998-99, the NewInternationalist magazine (322:19) reported 1,414 cooperatives and approvedplantations accounting for $138 million in fair trade sales.

Initiated by the Max Havelaar Foundation in The Netherlands, the fair trade

movement has evolved into an international Fairtrade Labelling Organization thathas established the following general criteria for its products:

a price that covers the cost of productionsocial premium for development purposespartial payment in advance to avoid small producer organisations falling into debt

contracts that allow long term production planninglong term trade relations that allow proper planning and sustainable productionpracticesFair production conditions include:

for small farmers co-operatives a democratic, participative structure

for plantations/factories the workers should have:

decent wages (at least the legal minimum)good housing, where appropriateminimum health and safety standards


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the right to join trade unionsno child or forced labor minimum environmental requirements

Certain specific conditions are added as appropriate for particular products. (The

name "Max Havelaar" comes from a 19th century Dutch novel by EduardDouwes Dekker called Max Havelaar, or the Coffee Auctions of the DutchTrading Company (1860), considered by many the greatest prose writing in theDutch language. Max Havelaar is the name of the hero, a promising young Dutchcolonial official who objects to the exploitation of the Indonesians and ends up onan Amsterdam street spattered with mud from the passing king's carriage. Thebook was inspired in part by Uncle Tom's Cabin and influenced D. H. Lawrence.)You can find out more about fair trade at http://www.fairtrade.net

Why does fair trade work? We first world consumers, it turns out, are a lot lessselfish than our self-stereotypes. A European Commission survey found that 75%

of respondents would buy fair trade bananas if they were available alongsideordinary ones, and 37% would pay 10% more for them (Lamb 2000:11). Thissounds a lot like the consumers of KDB products in Kerala who value not onlythe high quality of the products but also the ethical conditions under which theyare produced. US surveys produce similar results. Although the responses differaccording to what's in the news and how the questions are phrased, Americansfrequently support the idea of ethical purchasing. The National Labor Committeethat organizes against sweatshops reported a 1995 Marymount University poll inwhich 78% of respondents said they would avoid retailers selling sweatshop-made products. Seventy-five percent of families earning only $15,000 said theywould pay $1.00 more for a $20 garment if it was not made in a sweatshop. In

another poll, more than 2/3 of Canadian consumers stated they would go out oftheir way to purchase ethically made goods. These attitudes constitute a basisfor fueling a new kind of economic growth. If you want to read more about thesepolls, go to http://www.nlcnet.org/Haiti11.htm.

So far fair trade has involved mostly primary agricultural goods such as coffeeand tea. The Grand Pr shop sells hemp coffee filters reusable and more environmentally correct than paper ones and some outlets internationally carry basket goods, t-shirts, and a few other light industrial items. But why couldn't thefair trade movement go on to develop processed foods such as KDB is nowmanufacturing and even computer hardware manufacture, software design, anddata entry? And, thinking about the community sustainability aspect of fuelingeconomic growth what is the potential for the sister city movement in the United States to expand beyond educational events and rituals of friendship tosome type of connected community development. What if the computer trainingplans of Kannur could be integrated with the local medical association of anAmerican town or county in some way so that a fair trade guarantee of long-termcommunity-sustainable employment in Kannur was built into a design for lower-cost medical services in, say, Montclair, where I live? Is it utopian to imagine


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such a possibility? Can Americans even create institutions to fuel growth in acommunity-sustainable way? Christopher and Hazel Gunn think so. In their 1991survey of what they call Reclaiming Capital, the Gunn s found an array of local community initiatives to generate or manage economic growth. These includedworkers cooperatives, community and alternative credit unions, community

land trusts, and community self-help and development corporations in SantaCruz, California, Durham North Carolina, Tupelo Mississippi, Cleveland Ohio,and many other US communities. Michael Shuman's book Going Local: CreatingSelf-Reliant Communities in a Global Age, has additional and more recentexamples along with 67 pages of web links and mailing addresses fororganizations worldwide that promote community-sustainable growth in one formor another. The main difference with Kerala is that the US initiatives are fewer innumber and not connected with any overall development plan for a community orregion. In this regard Kerala offers lessons that could be of eventual interest tous.

Middle Level "Real" UtopiasThis leads me to a couple of final comments. In his 2000 presidential address tothe Society for the Study of Social Problems, Purdue University Professor RobertPerrucci decried what he called the growing trend among academics and opinionleaders to accept the idea that there is no alternative to the current world order.Perrucci recognizes that utopian dreams have mostly not been realized and thatthey have sometimes led to disasters and dictatorships rather than to the betterworld they originally meant. He proposes (2000:163) that in addition to traditionalutopian philosophizing, we scientifically study on-the-ground cases that he labels"middle range utopias." These utopias hold "a place between systemtransforming revolutionary change, and modest reforms." Studying them could

"raise public awareness of the possibilities of alternatives to the present to

stimulate public discussion about a range of alternative social arrangementswhose plausibility is grounded in social research." University of Wisconsinsociologist Erik Olin Wright has actually undertaken just such a project. He calls itthe "real utopias" project and you can read about it on the Real Utopias Web Siteweb site that contains case studies from Porto Alegre, Brazil, policing andschools in Chicago, job training in Wisconsin, environmental protection in the USSouthwest, and yes, Kerala's democratic decentralized planning campaign. Andyou can access lots of information about and links to Kerala on my web site.

So what lessons do we learn from Kerala? I think we learn first of all that anylevels of economic growth can be made more efficient and effective in theirconsequences for human welfare by maximizing public action for greaterequality. Second, the example of KDB shows that we can create institutions thatfuel economic growth in ways that maintain and expand upon the effects of publicaction for greater equality in the society in general. And third, the evidence fromthe Campaign for Democratic Decentralization shows that even poorcommunities can generate substantial amounts of fuel for growth and that suchfuel can be consumed locally in ways that are more effective and more


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community-sustaining than by waiting for outside large-scale investment to comein. The lessons from Kerala are most immediately relevant to other third worldcountries, but for us they create challenges. Can we use the lessons of this thirdworld middle range utopia to generate useful public discussion about how ourcommunities in the US could be more effectively generate community-sustaining

growth? And can we find ways such as the fair trade movement to connect ourmutual idealisms to real economic ties that benefit both worlds?

References and Links CitedAbraham, Nebu John. 1996. Book Publishing Industry in Kerala.Thiruvananthapuram: Centre for Development Studies. M. Phil. Dissertation.Jawaharlal Nehru University.Anderson, Victor. 1991. Alternative Economic Indicators. New York: Routledge.Brown, Lester. 1990. The Illusion of Progress. In State of the World 1990: AWorldwatch Institute Report on Progress Toward a Sustainable Society, edited byLester Brown, Christopher Flavin, and Sandra Postel. New York: W. W. Norton &

Company, pp. 3-16.Douthwaite, Richard. 1999. The Growth Illusion: How Economic Growth HasEnriched the Few, Impoverished the Many, and Endangered the Planet. GabriolaIsland, B. C.: New Society Publishers.Dr ze, Jean, and Amartya Sen. 1989. Hunger and Public Action. Oxford: Clarendon Press.

_____, eds. 1998. Indian Development: Selected Regional Perspectives. Delhi:Oxford University Press.Franke, Richard W. 2001. Kerala Web Site and Links:http://chss.montclair.edu/anthro/frankecurrentresearch.htmGovernment of Kerala. 2001. Economic Review 2000. Thiruvananthapuram:

State Planning Board.Gunn, Christopher, and Hazel Dayton Gunn. 1991. Reclaiming Capital:Democratic Initiatives and Community Development. Ithaca: Cornell UniversityPress.Jeffrey, Robin. 1993a. Politics, Women, and Well Being: How Kerala Became a'Model.' Delhi: Oxford University Press.

_____. 1993b. Indian Language Newspapers and Why They Grow. Economicand Political Weekly 28(38):2004-11.Krishnakumar, R. 2001. A Path-breaking experiment: The Kunnathukal LabourBank in southern Kerala shows the way to overcome the stagnation in theState s agrarian economy. Frontline 18(6):117-19. 30 March 2001.Lamb, Harriet. 2000. Going bananas. New Internationalist 322:11. April 2000.MacEwan, Arthur. 1999. Neoliberalism or Democracy? Economic Strategy,Markets, and Alternatives for the 21st Century. New York: Zed Books.McMichael, Philip. 2000. Development and Social Change: A Global Perspective.Thousand Oaks, CA: Pine Forge Press. Second Edition.Mayer, Peter. 2001. Human Development and Civic Community in India: MakingDemocracy Perform. Economic and Political Weekly 36(8):684-92.New Internationalist. 2000. Fair Trade or Free Trade The Facts. 322:19. April


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2000.Perrucci, Robert. 2000. Inventing Social Justice: SSSP and the Twenty-FirstCentury. Social Problems 48(2):159-67.Rahman, Aminur. 2001. Women and Microcredit in Rural Bangladesh: AnAnthropological Study of Grameen Bank Lending. Boulder, CO: Westview Press.

Shuman, Michael H. 1998. Going Local: Creating Self-Reliant Communities in aGlobal Age. New York: The Free Press.Sen, Amartya. 1999. Development as Freedom. New York: Alfred A. Knopf.Serra, Renata. 2001. Social Capital: Meaningful and Measurable at the StateLevel? Economic and Political Weekly 36(8):693-704.Thomas Isaac, T. M., with Richard W. Franke. 2000. Local Democracy andDevelopment: The Kerala People s Campaign for Decentralized Planning. Delhi: Leftword Books. [US edition in 2001 to be published by Rowman Littlefield,Boulder]

_____, Richard W. Franke, and M. P. Parameswaran. 1997. From antifeudalismto sustainable development: the Kerala People s Science Movement. Bulletin of

Concerned Asian Scholars 29(3):34-44._____, T. M., Richard W. Franke, and Pyaralal Raghavan. 1998. Democracy atWork in an Indian Industrial Cooperative: The Story of Kerala Dinesh Beedi.Ithaca: Cornell University Press.Weisbrot, Mark, Robert Naiman, and Joyce Kim. 2000. The Emperor Has NoGrowth: Declining Economic Growth Rates in the Era of Globalization.Washington D. C.: Center for Economic and Policy Research.

_____, Dean Baker, Robert Naiman, and Gila Neta. 2001a. Growth May BeGood for the Poor But are IMF and World Bank Policies Good for Growth? A Closer Look at the World Bank s Recent Defense of Its Policies. Washington D. C.: Center for Economic and Policy Research.Weisbrot, Mark, Dean Baker, Egor Kraev, and Judy Chen. 2001b. The Scorecardon Globalization 1980-2000: Twenty Years of Diminished Progress. WashingtonD. C.: Center for Economic and Policy Research.http://www.cepr.net/globalization/scorecard_on_globalization.htmWorld Bank. 2001. World Development Report 2000/2001: Attacking Poverty.New York: Oxford University Press.Wright, Erik Olin. 2001. The Real Utopias Project.http://www.ssc.wisc.edu/~wright/RealUtopias.htm

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