Fueling Economic Growth Through Democratic

Participation: Three Lessons from Kerala, India

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

by Richard W. Franke: 10 August 2001

Professor 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 the
most important issues, then to describe for you what I believe are three
significant and thought-provoking experiments in fueling economic growth: 1) a
set of quality of life achievements known as the Kerala Model of Development, 2)
within that model, a democratic worker-owned industrial cooperative called
Kerala Dinesh Beedi; and 3) a statewide campaign for decentralization that is
using democratic participation as a principle fuel for economic growth. We shall
briefly 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 to
suggest some lessons we might learn from these unusual approaches to
growth� 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" is

probably understood intuitively by everyone. Economic refers to the production
and distribution of goods and services. For fuel we can take the basic dictionary
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 to
develop a ways to measure it, we run into several difficulties, reflecting the
complex nature of modern economic systems. Are we interested in the growth of
the Gross Domestic Product (GDP), for instance, the total value of all the
production in a country in one year, or the Gross National Product (GNP), the
GDP plus rents, interest, profits, and dividends flowing in from abroad minus the
payments out? Unpaid household work is not counted in either measure since
money does not change hands: both GDP and GNP ignore much of the fuel
women supply to the economy. GNP figures tend to distort the measure
according to ownership. Do more ownership and more inflow of rents and profits
mean more economic growth? And what about depreciation? Are we fueling
economic growth when companies replace machinery and office buildings? One
way economists try to get around this problem is by computing the Net National
Product (NNP), the GNP minus capital depreciation. All these figures can be
divided by the number of people in an economy to produce a per capita version
(Anderson 1991:19-20). Further problems develop when we consider the
environmental aspects of economic growth. We can fuel growth literally by
chopping 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 the
resource base. Lester Brown and colleagues at the Worldwatch Institute (Brown
1990:8) have been arguing for the past decade that a category of "natural capital
depletion" needs to be added to economic growth balance sheets. The
environmental or "natural capital" aspect of growth measurements is part of a
larger conceptual issue now generally referred to as sustainability. But
sustainability can include more than natural resources. We could ask what is the
community sustainability of a particular type of economic growth? Does it
generate long-term, stable or expanding employment or is it part of a growth
pattern that skips from place to place making some better off at the cost of
others? I shall return to the issue of community sustainability later.

Despite the various conceptual problems noted here, most international studies
on economic growth and development utilize the per capita GDP. The main
reason for this is that the level of the GDP correlates generally and positively with
virtually all measures of human welfare. Life expectancy, infant mortality, access
to 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 the
implication is clear: if you want to produce a higher standard of living and greater
health and happiness, but your GDP is low then you have to make your GDP
grow.
Let me make an important qualification here. In claiming the positive relationship
between GDP and human welfare indicators, I am referring to the full range of
societies, from the poor to the rich. Within rich countries, and within the middle
and upper classes of all countries, the relationship between income or wealth
and various measures of happiness has shown itself to be problematical. In his
attack on the idea of growth, Richard Douthwaite (1999) summarizes and
presents a large number of studies showing that Americans, British, and Western
Europeans appear no happier now than they were 40 years ago, despite
substantial economic growth and rising incomes. For us, these findings are
important, but for people in the poor countries and for poor communities in the
richer nations, the data indicate that growth remains a necessity.

This brings us back to the problem of the fuel. Particularly since the end of World
War 2, economists have been searching for the right materials to inject into the
low-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 towards
more future orientation and greater need for achievement, giving people more
education, and targeting benefits to the poorest groups to solve the problems of
basic needs. These proposals have led to scattered successes, but no approach
has 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 an
extended critique, economist Arthur MacEwan (1999:31-65) argues that the
economics literature of recent years provides consistent refutations of the
argument that free trade fuels economic growth. A recent empirical study that
seems 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, and
South Asia while Arab States and Subsaharan Africa registered economic decline
with 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 countries
in the study, 89 experienced growth rate declines in the 1980-2000 period of
increased free trade. And in a further paper co-authored with Dean Baker, Egor
Kraev, and Judy Chen, Weisbrot
[http://www.cepr.net/globalization/scorecard_on_globalization.htm] found that the
correlation between growth and welfare held up. The declines in the rates of
growth have been paralleled by declines in the rates of improvement in life
expectancy, infant mortality, and literacy rates in almost all cases except for the
rich countries where such rates are already the best. In the second poorest
group, adult female mortality actually worsened (Weisbrot et al 2001:11).

If none of the mainstream approaches can identify a fuel for economic growth
and improvements in human welfare, where do we look? Revolutionary societies
such as Cuba, Vietnam, or North Korea offer alternatives, but many people would
shrink from the heavy state domination they use to bring about growth. The non-
communist authoritarian alternatives such as Singapore, Taiwan, and South
Korea also leave much to be desired in terms of personal liberties and
democracy, and they have shown only sporadic ability to generate economic
growth.

So where is the fuel for economic growth going to come from? Here we face a
knotty historical issue. The currently developed nations fashioned their growth
from investment capital drawn heavily from conquered peoples. It cannot be an
accident 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. Historians
have extensively documented the brutality of the colonial system. And here in the
US the exploitation of African-American slaves and the violent seizures of land
and resources from Native Americans fueled the US economy in the 18th and
19th centuries. Both as a practical and an ethical matter, such fuels are no longer
available. Today�s underdeveloped nations face the problem of catching up with
the former colonizers without access to any of the historical devices that provided
those 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 of
the 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 the
greatest extent possible. If the entire world requires a US level GDP to get a US
infant mortality rate, the strain on the earth�s natural resources might be too
great. Instead, developing countries should increase the efficiency of their growth
to the greatest possible levels in terms of the quality of life output. The Kerala
model of development comes in here.

Secondly, they should design growth strategies that are community-oriented and
community-sustainable. Community-sustainable growth means that the fuel and
its 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 and
the decentralization campaign come in.

Lesson 1: Development With Limited Growth�The Kerala Model

The possibility of achieving high material quality of life indicators at low levels of
GDP and low levels of economic growth is demonstrated by the Indian state of
Kerala. Now well known to development specialists, Kerala has an area
approximately 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 of
7 million on 41,000 sq kms gives 180 persons per sq km. Kerala's population of
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 1997
per 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 62
and 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 of
child-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 use
the year 1997 because it is the most recent year for which all the various figures
are available. Even when Kerala�s figures are corrected with what economists
call Purchasing Power Parity to reflect more accurately the buying power at local
prices, the average Keralite lives on the equivalent of US$1,371, lower than the
all-India PPP-adjusted figure of $1,650. (The Kerala figure also includes an
adjustment for the overseas remittances of workers in the Middle East Gulf
States.) How did Kerala achieve such high quality of life indicators with such low
income 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. The
existing growth more efficiently distributes its rewards to the population. But how
did 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 scene
now for about a century. These radical movements have generated a high level
of citizen activism and participation that shows up in all kinds of indicators. Voter
turnout 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 care
what ordinary people think, 41% think elections make a difference in government
actions, 54% trust state government, 58% trust local government, and 20%
express "a great deal of interest" in politics. These figures are all far above the
16-state average and place Kerala in the first or second rank in all cases (Serra
2001:695-96).

Community participation and community service are also highest in Kerala. The
state ranks first in membership in credit associations per 1,000 persons, highest
in the degree of political competition, and lowest on an index made up of rape
and murder rates. Kerala also displayed the lowest perceptions of corruption, far
below other states (Mayer 2001:689). About one-third of Kerala�s people belong
to politically active organizations such as peasant leagues, trade unions, and
student groups. Keralites read more books and more newspapers per capita than
people in any other state in India (Abraham 1996; Jeffrey 1993a and 1993b).
They also write letters to the editor and letters to government agencies
demanding better services, and they frequently gather at government offices in
public protest if their letters are not acted on. Every one of Kerala�s 990 villages
has a library with hundreds of books; many villages have branch libraries called
reading rooms to which sports clubs, theater groups, and arts clubs are attached.

Volunteerism and participation characterize social and political life in Kerala to a

high 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 Kerala
People�s Science Movement, or KSSP. Founded in 1957 by a group of
scientists who wanted to translate major scientific texts into Malayalam, the
language of Kerala, the KSSP evolved into a mass movement with over 40,000
activists who work to popularize scientific thinking in villages through street
theater and roving book fairs, and who have become Kerala�s main
environmental pressure group. In 1989 the KSSP mobilized 350,000 college and
high school students for a highly successful "Total Literacy Campaign" that
brought 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 Swedish
parliament, a prize often called the "alternative Nobel prize." Through political
struggle and continuing community activism, Kerala�s people have built and
sustained a system of public services and protections that parallel the welfare
and workers� rights gains in the developed world.

So how did Kerala become such a hotbed of activism? Why did its civil society
thrive while in many parts of India and the rest of the developing world this crucial
element of development languishes? Little has yet been written that explains the
historical 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 other
states of India and to other societies about the uses of public action to get the
greatest efficiency in quality of life out of the lowest growth. It amounts to a kind
of fuel efficiency.

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

Lesson 2: Kerala Dinesh Beedi: A Successful Cooperative

On a quiet, tree-lined lane in a former princely palace in one of Kerala�s
northern cities, Kannur (sometimes called Cannanore), are found the
headquarters of Kerala Dinesh Beedi, one of India's largest corporations. Even at
the HQ, you sense something is different about this company. The CEO sits in a
rather small, unimpressive office and often answers his own phone. There is no
company limo; he rides around in a company van shared by all the members of
the Board of Directors and by much of the technical staff. Except for the
Chairman and one government-appointed member, the Board members do not
speak English; the five elected Board members who control the votes to run the
company are themselves former workers with 15-20 years experience, elected by
their 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 the
shop floor workers who elect them. Having risen out of the manual workforce
themselves, the director board members do not have the technical skills
necessary for certain tasks. But even those they hire for special positions do not
earn 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 the
company, the new hire must purchase at least one share and may not purchase
more than twenty. To purchase even one share you must become a worker. Only
workers 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 industrial
cooperatives. Twenty-two production cooperatives are semi-autonomous units,
each with its own worker-elected director board. They run in membership of
active workers from 340 to 3,116.The local cooperatives are further divided into
326 small work centers in the towns and villages of northern Kerala where
between 70 and 123 workers are engaged. The average distance to work is 5.3
km (3.3 miles). Only 2.2% of the work force is staff. The 22 production units are
federated into a central cooperative, also owned by the workers, that handles raw
materials purchase, product marketing, and overall financial management. Each
local cooperative elects a representative to a board of the central cooperative
and 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 it
provides the best pay and benefits to its workers for all comparable companies in
India. 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 compares
favorably with advanced industrial countries such as the US where about 25% of
wages are added on as benefits in unionized workplaces. KDB's workers have
elected managers who represent their interests quite well. But there is another
reason to tell you about KDB: this company with 736 billion rupees in sales in
1995 (about $yyy) and a net profit of 4.1 billion rupees ($zzz) has been owned by
its workers since 1969. The story of how the workers came to own it is quite
dramatic and is told in detail in the book from which I am taking this information
and which I co-authored with two Kerala colleagues. Since 1969, KDB has made
a profit every year except four. The accumulated assets of the company run into
billions of rupees and the pension fund is sound. KDB shows that it is possible for
a business to be locally owned by its own workers, to stay in business for three
decades, to pay good wages and benefits, to make a profit, and to run itself
democratically. And one more point: KDB sees its purpose as contributing to the
local economy by generating employment and by its workers having money to
spend to support local businesses. KDB does not look to move away seeking
cheaper labor. Its directors have shown skill and resilience in balancing worker
demands for higher pay and benefits with the need to maintain investment funds,
and it survives in a highly competitive atmosphere. KDB does not exist primarily
to make a profit to distribute to its shareholders; it tries to make a profit in order to
play a beneficial role in the local community by generating employment to low
and medium skilled workers.

KDB has been a corporate engine of economic growth. From 1969 to 1995 KDB
grew 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 its
products. Worker skill makes up another part of the fuel and so does the efficient
and 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 in
which they live. KDB illustrates a way of fueling economic growth that sustains
local 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 what
these workers make. The beedi in Kerala Dinesh Beedi refers to a kind of
cigarette, tobacco rolled in a special leaf rather than in paper and about half the
size of the cigarettes we know in the US. The manufacture of these beedis in
Kannur 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 were
highly skilled in beedi production and their skills were essential in the
cooperative�s survival. But workers who produce a product harmful to other
workers and to the public in general cannot ultimately be a positive model. Kerala
Dinesh Beedi needs to become a different kind of company and that is exactly
what it is doing.

In 1996 KDB launched a program for diversification out of tobacco. The decision
was made democratically by the workers after local meetings and seminars at all
the production centers. The diversification program includes a provision that no
worker will be laid off and that retooling to new products would be voluntary. A
goal was set to transfer 25% of the workforce within 10 years from tobacco to
other products. By January of 2000 substantial progress had been made. The
corporate HQ had turned its second floor into a lab where chemists and food
safety 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 the
raw materials are available locally as is the market for the products; of 98
company sales agents 30 now offer the food products to Kannur District
consumers whose demand cannot yet be met by the new products. At a nearby
primary cooperative the first 234 workers now produce processed foods full time
while plans are to offer one food unit to each of the other 21 coops so all workers
will 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 workers
produce less surplus value to the company, and thus the transition out of tobacco
eats 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 a
stock 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 solidarity
from union households and progressive sympathizers in the community give
Kerala Dinesh Foods marketing advantages other companies cannot easily
undermine.

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 floor
workers, 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, KDB
was born with government support and the workers might have just paid
themselves out of their original capital, thereby destroying their own long-term
hopes. Would it surprise us if poor people took what they could get right away
instead 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 keep
the cooperative afloat and has become an inspiration and a lesson for other
Kerala 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 least
one share at a price of Rs 20. This hardly puts any investment funds into the
coop. 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 other
funds that eventually benefit the worker. It is available for no-interest loans to the
worker at any time and is automatically repaid by further deductions spread over
a fairly long period. The worker or his/her beneficiary also receives the entire
value 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 throughout
his/her working life. The overall benefits to the worker are highly favorable; the
company receives an investment fund that undergirds its other sources of capital
such 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 able
to supply about 25% of the working capital and on several occasions has saved
the coop from having to borrow from high-interest sources.
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 by
the worker-elected board of directors at any time.

Lesson 3: Fueling Economic Growth Statewide� The Kerala People�s

Campaign for Democratic Decentralization
Can we go beyond the particular companies called Kerala Dinesh Beedi and
Kerala Dinesh Foods to create similar cooperatives in other sectors of the
economy? Can we go beyond the earlier Kerala Model of public action to
generate a high material quality of life through redistribution by adding to that
model a mechanism for an egalitarian strategy for growth? And if we wanted to
do 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 and
sacrifice 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 the
cost of food for the poor. They themselves had sometimes been in jail or had
suffered physical attack for their support for such movements. But by the 1980s
they had come to realize two important facts about the world. First, they saw that
non-violent democratic political action offered greater possibilities for genuine
change 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 of
the left could not remain limited to land reform, wages, working conditions, and
overcoming caste discrimination even though much remained to be achieved in
these areas. But they began to see the importance of women�s equality,
environmental protection, and the need for expanding democracy and building
community as goals for Kerala�s historically developed activist movements.
Along with their traditional admiration for the Soviet Union, China, and Cuba, they
began to look to Italy, England, and the US women�s and environmental
movements for inspiration. And of course they continued to critically examine
their own experiences. Along with the new orientation came a realization that
their organizations of struggle would have to become less mechanical and more
democratic and participatory. Why did they arrive at this historically significant
breakthrough? Here is another great dissertation waiting to be written. I can only
tell you at this time that the US movements of the 1960s had a profound effect on
their thinking. And the evolution of the Italian Communists with their emphasis on
cooperatives and local government accountability struck strong chords in Kerala.
The collapse of the Soviet Union in turn weakened the position of the old line left
forces and created an opening for the younger activists who were reading green
and feminist literature. And looming behind all these intellectual developments
was Mahatma Gandhi, whose teachings on village self-sufficiency, exemplary
simple life styles, and economic growth as a means to benefit the most needy
have continued to inspire each new generation of activists in Kerala.
In Kerala in 1996 the Left Democratic Front, made up of several left parties, won
the elections to the state assembly and formed a ministry that held power until
May of 2001. This ministry, within which many of the new activists held middle
and 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, elect
representatives to draft development projects, and implement and monitor the
projects annually over 5 years. The state government allocated 35% of the
development budget directly to the local communities with few restrictions to
create and implement their own development plans. Both in terms of its scale of
devolution, and in terms of the training and participation, Kerala�s
decentralization campaign of 1996-2001 has probably been the largest and most
democratic in the world. In terms of the evolution of political thinking among
activists, it is a giant testimony to the power of human consciousness and
reflection. 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 been
privileged to assist in writing with a key activist and intellectual, Dr. T. M. Thomas
Isaac, does cover this ground. For those of you who are interested, a US edition
will be published by the end of this year by Rowman Littlefield in their series on
world social change. I will only say here that the decentralization campaign led to
vastly improved public services in areas such as roads, irrigation, drinking water,
sanitary latrines, and school and hospital construction. It also managed to
generate 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, the
decentralization 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 and
improved equality. The decentralizing activists wanted to create this growth by
setting up cooperatives along the lines of Kerala Dinesh Beedi, the inspiration
and structural model, but smaller and with some other differences I am about to
mention. And they set out to combine these mini-KDBs with one other model
although it was not always named: the Grameen Bank which you may have
heard of. Founded by Muhammed Yunus in 1976 in Bangladesh, the Grameen
Bank has become one of the most fashionable models for fueling economic
growth. The Bank lends small amounts to cells of 5 poor women who pledge
together to repay their loans. Interest rates of 20-30% are still below the regular
private 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 the
Grameen style micro-credit approach to fueling economic growth (McMichael
2000:295-96; Rahman 2001).
A major weakness of the Grameen Bank is that it depends on outside funds to
stimulate the self-help process. No Mohammed Yunus, no effective self-help
groups. Another weakness is that the lending agency can have an agenda of its
own so that self-help becomes a mechanism for outside interference. The World
Bank micro-credit programs, for example, usually require privatization of
cooperating lending agencies and rewriting of debt collection laws (McMichael
2000:296). Finally, empowering any particular group of 5 women to engage in
any particular kind of economic activity does not necessarily fit in with the
development needs of the local community. In the end, it could just be random
growth benefiting a few individuals.

This is where the Kerala program differs. In the Campaign for Democratic
Decentralization, self-help groups (SHGs) are established at the local
neighborhood level for 10 to 20 below poverty line individuals, usually women.
The SHG puts forth a production project such as a cooperative to manufacture
umbrellas, soap, sandals, incense, ready-made clothing, or electrical equipment;
or a service such as a cooperative store or teashop. The village council
considers the project within the local annual plan with the idea of distributing the
investments to maximize interconnections and to avoid overinvestment in any
particular activity. The council also encourages the production of goods and
services that can be consumed locally in order to insulate the jobs created from
the effects of globalization. In many villages, the land and buildings for such
cooperatives have been donated by the government or by individuals and in
some 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 had
nurseries in virtually every town and village, the SHGs can piggyback onto the
achievements of previous Kerala activism.

Once the project is approved, financing sources are matched together: the
participants raise about 25% of the funds themselves through a rotating credit
association 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 bank�
private 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 this
growth is thus a combination of finance capital and investment from the workers
but 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 would
have a reasonable market. One Chapparappadavu SHG set up a poultry unit
while another began the manufacture of "hot boxes," a type of rice cooker
invented 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 who
could join, the council conducted a household survey to find out how many
parents would agree to purchase at least one school uniform from the local unit if
it were started up. The very act of conducting the survey led to substantial
community interest and pledges of enough uniforms to open the SHG to 120
members. In Madakkethara village in central Kerala 10 women set up a Vanita
Karshika (Women Farmer) Nursery where they bring coconut, pepper, and spice
seeds to the sapling stage for sale to local growers. In nearby Panjal village, in
1999-2000, eleven women took training as autorickshaw drivers and 10
completed the course and purchased the 3-wheeled pedicabs that take Kerala
villagers within and outside the village for personal and business purposes. A few
men jeered when the first women drivers appeared, and even today it is brothers
or husbands who work the night shift; but during the day the women earn 80
rupees on average after loan repayments and petrol costs, about what they could
get 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? Will
democratic decentralization build an alternative economy with better paying and
more secure jobs or will it just leave Kerala as an industrial backwater as the rest
of the world marches forward into a high-tech future?

The Kerala Campaign has three answers to these questions. First, they argue
that local planning can make more efficient use of existing local resources and
that should be done no matter what the long term strategy. Just as Kerala
already makes more efficient use of its existing growth through its redistribution
programs to produce high material quality of life indicators, so it can also make
better 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 of
the 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 acres
of 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 with
an average of 1.3% in the previous 3 years. Industrial growth rose by 7.2.%, and
more than 100,000 new jobs were created, representing a possible 5% decrease
in 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 wondering
whether Kerala, with its high literacy and international outlook, has discovered IT
and the Internet. Of course, they have. Of all the states of India, Kerala has the
most ambitious IT program. Already the state has the most complete fiber optic
cable network in India. Plans are underway to put a computer in every village
office and upgrade the staff to provide computer-based government services
such as instant birth certificates. But most importantly, IT is seen as a fuel for
economic growth. This takes on many dimensions.
Let us return to Kannur and Kerala Dinesh Beedi. You will recall that the
cooperative is moving out of tobacco production and into food processing. The
manufacture and packaging of spices is designed to absorb the literate but
otherwise 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 function
as an office complex, internet service provider, and software production and
troubleshooting complex. And just to make sure it is financially sound, there will
be 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, but
a minimum of one-third of the seats are reserved for the children of beedi
workers. In a visit to a classroom in January 2000, I had the moving experience
of meeting Ajesh, 17 years old, his classmate Usha, 19, and several other young
men and women whose parents had worked all their lives rolling tobacco into
wrapper leaves. Now their children are programming in "C" and other computer
languages, and preparing to design office-managing software for local
government 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 Indian

version of Silicon Valley. But the decentralization campaign is tagging onto the IT
expansion and seeking to use it to create jobs. Unlike the local umbrella
factories, however, IT employment brings with it both the advantages and
dangers of a direct connection to the global economy. The advantage is that the
scope 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. It
works like this. A physician in England or the US sees a patient. She/he dictates
notes 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 into
a 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 also
the dangers: there will eventually be data entry workers somewhere else ready to
work for less. And eventually, maybe soon, the entire process will be automated
so a machine immediately reads the doctor's voice and nothing has to be sent
anywhere.

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 of
medical prescription work is done with computers and it requires local-language
software, digitalized fonts in Malayalam, and local data entry workers.
Government record keeping is also being rapidly computerized. But the big job
numbers come from national and international IT needs. And they are the most
vulnerable to sudden collapse. You can see why some people prefer to make
umbrellas or drive pedicabs. But can the fuel of globalization be harnessed to the
needs of community sustainability? Can we globalize community sustainable
growth? 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 of
the world's biggest tides as huge mudflats are alternately filled with water or left
to bake in the sun. At the National Commemorative site of the Deportation of the
Acadians , you can learn about the forced relocation of 6,500 French-speaking
settlers in 1755 who were dispersed throughout the British colonies and created
one of the historical backdrops to the creation of Louisiana's Cajun culture. The
loss 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 North
America, to guarantee third world producers a better share from the sale of their
goods than in the open, or so-called "free trade" markets. Fair trade is most
developed in Western Europe where in some countries even supermarket chains
now carry coffee, tea, bananas, sugar, cocoa, honey, and orange juice that meet
fair trade criteria. In some countries, as much as 10% of sales are now claimed
by the fair trade organizations to be in their quarter. For 1998-99, the New
Internationalist magazine (322:19) reported 1,414 cooperatives and approved
plantations 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 that
has established the following general criteria for its products:

a price that covers the cost of production

social premium for development purposes
partial payment in advance to avoid small producer organisations falling into debt

contracts that allow long term production planning

long term trade relations that allow proper planning and sustainable production
practices
Fair 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 appropriate
minimum health and safety standards
the right to join trade unions
no 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 Eduard
Douwes Dekker called Max Havelaar, or the Coffee Auctions of the Dutch
Trading Company (1860), considered by many the greatest prose writing in the
Dutch language. Max Havelaar is the name of the hero, a promising young Dutch
colonial official who objects to the exploitation of the Indonesians and ends up on
an Amsterdam street spattered with mud from the passing king's carriage. The
book 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 less
selfish than our self-stereotypes. A European Commission survey found that 75%
of respondents would buy fair trade bananas if they were available alongside
ordinary ones, and 37% would pay 10% more for them (Lamb 2000:11). This
sounds a lot like the consumers of KDB products in Kerala who value not only
the high quality of the products but also the ethical conditions under which they
are produced. US surveys produce similar results. Although the responses differ
according to what's in the news and how the questions are phrased, Americans
frequently support the idea of ethical purchasing. The National Labor Committee
that organizes against sweatshops reported a 1995 Marymount University poll in
which 78% of respondents said they would avoid retailers selling sweatshop-
made products. Seventy-five percent of families earning only $15,000 said they
would 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 of
their way to purchase ethically made goods. These attitudes constitute a basis
for fueling a new kind of economic growth. If you want to read more about these
polls, go to http://www.nlcnet.org/Haiti11.htm.

So far fair trade has involved mostly primary agricultural goods such as coffee
and 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 the
fair trade movement go on to develop processed foods such as KDB is now
manufacturing and even computer hardware manufacture, software design, and
data entry? And, thinking about the community sustainability aspect of fueling
economic growth� what is the potential for the sister city movement in the
United States to expand beyond educational events and rituals of friendship to
some type of connected community development. What if the computer training
plans of Kannur could be integrated with the local medical association of an
American town or county in some way so that a fair trade guarantee of long-term
community-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
such a possibility? Can Americans even create institutions to fuel growth in a
community-sustainable way? Christopher and Hazel Gunn think so. In their 1991
survey of what they call Reclaiming Capital, the Gunn�s found an array of local
community initiatives to generate or manage economic growth. These included
workers� cooperatives, community and alternative credit unions, community
land trusts, and community self-help and development corporations in Santa
Cruz, California, Durham North Carolina, Tupelo Mississippi, Cleveland Ohio,
and many other US communities. Michael Shuman's book Going Local: Creating
Self-Reliant Communities in a Global Age, has additional and more recent
examples along with 67 pages of web links and mailing addresses for
organizations worldwide that promote community-sustainable growth in one form
or another. The main difference with Kerala is that the US initiatives are fewer in
number and not connected with any overall development plan for a community or
region. In this regard Kerala offers lessons that could be of eventual interest to
us.

Middle Level "Real" Utopias

This leads me to a couple of final comments. In his 2000 presidential address to
the Society for the Study of Social Problems, Purdue University Professor Robert
Perrucci decried what he called the growing trend among academics and opinion
leaders 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 that
they have sometimes led to disasters and dictatorships rather than to the better
world they originally meant. He proposes (2000:163) that in addition to traditional
utopian philosophizing, we scientifically study on-the-ground cases that he labels
"middle range utopias." These utopias hold "a place between system
transforming 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 arrangements
whose plausibility is grounded in social research." University of Wisconsin
sociologist Erik Olin Wright has actually undertaken just such a project. He calls it
the "real utopias" project and you can read about it on the Real Utopias Web Site
web site that contains case studies from Porto Alegre, Brazil, policing and
schools in Chicago, job training in Wisconsin, environmental protection in the US
Southwest, and yes, Kerala's democratic decentralized planning campaign. And
you 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 any
levels of economic growth can be made more efficient and effective in their
consequences for human welfare by maximizing public action for greater
equality. Second, the example of KDB shows that we can create institutions that
fuel economic growth in ways that maintain and expand upon the effects of public
action for greater equality in the society in general. And third, the evidence from
the Campaign for Democratic Decentralization shows that even poor
communities can generate substantial amounts of fuel for growth and that such
fuel can be consumed locally in ways that are more effective and more
community-sustaining than by waiting for outside large-scale investment to come
in. The lessons from Kerala are most immediately relevant to other third world
countries, but for us they create challenges. Can we use the lessons of this third
world middle range utopia to generate useful public discussion about how our
communities in the US could be more effectively generate community-sustaining
growth? And can we find ways such as the fair trade movement to connect our
mutual idealisms to real economic ties that benefit both worlds?

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