The economic theory of Prout

The Economic Theory of PROUT

It must be mentioned at the very outset that socialism in the real sense of the term is not merely confined to the abolition of private property and state control of economic activity. True socialism cannot be achieved by neglecting the human aspect.  So-called economic freedom is not an end in itself; it becomes a degenerative process if it fails to create an environment of security and justice. Economic progress should not remain dependent on selfishness.

        E. F. Shumacher writes: “If human vices such as greed and envy are systematically cultivated, the inevitable result is nothing but the collapse of intelligence.  A man driven by greed and envy loses the power of seeing things as they really are, of seeing things in their roundness and wholeness, and this very success becomes a failure. If the whole science becomes infected by their vices, they may achieve astonishing things but they become increasingly incapable of solving the most elementary problems of everyday existence.

       The gross national product may rise rapidly as measured by the statisticians, but not as experienced by the actual people, who find themselves oppressed by increasing frustration, alienation, insecurity and so forth. After a while the gross national product refuses to rise any further, not because of scientific or technological failure, but because of a creeping paralysis of non-cooperation, as expressed in various types of escapism in the past, not only of the oppressed and exploited, but even of highly privileged groups”.[1]

Human beings strive for higher values in life – such as mutual love and cooperation. A spirit of service and welfare toward all members of the society should be the guiding force of any economic system. Wealth should not be considered only in a material sense. There is subtler wealth like supra-mundane and spiritual wealth.  As material wealth lies hidden in different layers of the earth and atmosphere, similarly supra-mundane wealth of higher knowledge and wisdom are hidden in the different layers of the mind.  By psycho-spiritual research we can uncover this potential knowledge and power, and utilise it for the greater interests of human society.  As mentioned earlier, progress denotes physico-psycho-spiritual advancement or in other words to develope the quality of life.

Economic development is not an isolated process.  It is clearly dependent on the existing social psychology, culture, educational patterns, socio-political structures, natural environment and other infrastructure provided by the society. Human factors should play the dominant role in designing and controlling economic activities.

To quote E. F. Shumacher again, “The economics of permanence implies a profound reorientation of science and technology, which have to open their doors to wisdom, and in fact, have to incorporate wisdom into the very structure. Scientific and technological solutions which poison the environment and degrade the social structure and man himself are of no benefit, no matter how brilliantly conceived or how great the superficial attraction. Even bigger machines, entailing even bigger concentrations of economic power and exerting greater violence against the environment, do not represent progress: they are a denial of wisdom.

  The neglect, indeed the rejection of wisdom has gone so far that most of our intellectuals have not even the faintest idea what the term could mean.  As a result, they always tend to try to cure a disease by intensifying its causes. The disease having been caused by allowing cleverness to displace wisdom, no amount of clever research is likely to produce a cure. But what is wisdom?  Where is it?

Here we come to the crux of the matter: wisdom can be read about in numerous publications, but it can be found only inside oneself. To be able to find it, one has first to liberate oneself from such masters as greed and envy.  The stillness following liberation – even if only momentary – produces the insights of wisdom which are obtainable in no other way”. [2]       

As material wealth is limited, it cannot quench the unlimited thirst of the human mind. Both supporters of capitalist and state controlled economies have neglected this inevitable truth. This is the reason why the tremendous growth in science and technology has neither ensured peace nor strong social relations nor fulfilled the minimum requirements of all .  Rather, it has brought the world to the brink of devastation and has tended to disturb social relationships.

The spiritual orientation in collective life will revitalise the human aspect and inspire people to build a healthy society in a spirit of cooperation, free from the grip of greed and envy, and also beyond the reach of power-hungry dictators.  Wisdom in deeper sense of the term  must be the guiding factor in designing the economy.

Ownership in PROUT

The capitalist economic structure is based on the theory of unlimited private property and individual ownership. In order to sanctify this principle, Western economists based their economic principles on land, labour, capital and enterprise, followed by suitable doctrines of distribution, rent, wage interest and profit. In the Marxian doctrine of ownership, however, state control of property demolishes the idea of collective ownership of property.

What do we actually mean by “property” and “ownership”? The basic divisions of private property are:

  1. Moveable or immovable property essential for existence, such as food, shelter, clothes medicine and other consumer goods
  2. Property that helps in productive activities: machines, tools, land, etc.
  3. Idle property, for example, if the owner of the property is unable to directly use, guide or control it.

In the first case, the accumulation of such property as is essential for one’s minimum requirements has to be accepted. Physical wealth is limited, hence there is no justification in allowing uncontrolled accumulation.  In the second case, private property of a working proprietor is natural and healthy.  In the third case, it is natural that beyond a certain limit, property owners have to depend on others for its management.  In such cases they are passive owners and live parasitically on the labour of others.

Thus, there are basic distinctions between creative and passive property. Those who raise objections against property rights without distinguishing between these characteristics of property, deny basic rights for economic freedom and negate initiative, the lever of economic progress.

Private property or ownership in general is not harmful if it remains within certain limits.  It should not, however, be allowed to grow out of proportion, resulting in the concentration of economic power. Commenting on the idea of private ownership, E. F. Schumacher expressed similar ideas in his book Small is Beautiful.

  1. If an owner employs a salaried manager, then he cannot claim to be the proprietor.  If he appropriates more profit than his fair salary, he is exploiting. He can expect a return on his capital, but not beyond a limit fixed by the collective body.
  1. The owner is not responsible for the high return on profit, but the whole organisation.  It should be shared amongst the members of the organisation, and if it is used as capital for further expansion, it should be collectively owned.
  1. In the case of large-scale enterprises, the idea of private ownership is an absurd proposition.  To quote R. H. Tawney, “Such property may be called passive property, or property for acquisition, for exploitation or for power to distinguish it from the property which is actively used by its owner for the conduct of his profession or the upkeep of his household. It is questionable, however, whether economists should call it property at all, since it is not identical to the rights which secure the owner the produce of his toil, but is the opposite of them”.[3]

According to Prout, in reality no one owns anything permanently. An object or property is generally utilised by an individual or group for a certain period of time only, before it is passed on to some other person after the former has inherited it to others.  Everyone has the right to utilise any means of production according to one’s capacity, considering it as the collective property of the society.  So, neither a few individuals nor the state should have the absolute right of ownership to property (means of production).  All property is the joint property of the society as a whole in principle. But to facilitate proper utilisation, decentralised control over property ,as civic rights should be allowed in legal terms on a localised basis. The right to own and control the means of production will depend on individuals’ need for minimum requirements and their capacity to control and manage an enterprise directly.

What is the psychology behind accumulation?

  1. For individual security
  2. For the security of one’s family
  3. To control economic power
  4. Excessive greed.

Therefore, while restricting accumulation, the above psychological reasons must be taken into consideration.  To ensure security in the physical and psychic sense, the purpose to accumulate reasonably for the first two reasons will be considered as valid..  As far as the third cause is concerned, Prout does not support the centralisation of economic power either by a few individuals, or by the State. To restrict accumulation for the 4th cause, legal restriction need to be imposed till the psychology of greed is pacified.

Without creating a sense of security in the physical and psychological sense, as well as a spiritual environment conducive to harmony and satisfaction, it is futile to check the disproportionate accumulating tendencies of the human mind. In order to achieve this, it is essential to have job security, availability of consumer goods, abolition of profit motivation, removal of greed and envy, political stability, social justice and a basic level of morality amongst the people.

However in case of intellectual and spiritual wealth no restriction can be imposed. But those wealth should be utilised for human welfare.

Guaranteed Minimum Requirements (As proposed in U.N resolution adopted in 1950)

The foremost criterion of a sound economic system is that the minimum requirements for each individual must be guaranteed. This includes food, shelter, clothes, medicine and education. This is only possible in a society where:

  1. Each individual earns enough to have proper purchasing capacity. That means the society needs a condition of full employment. Many countries have introduced a minimum wage system, but this is not enough. People should have jobs and income to ensure sufficient purchasing power. Secondly, on principle the maximum wage and income need to be fixed in the long run.
  2. Consumer goods should be made available.  That means there must be a reorientation of the production and distribution machinery. Production according to consumption should be the motivation instead of profit by all means motive. In this way, the tendency to exploit, artificial scarcity and speculation can be eliminated.
  3. Social control over prices and wages should be introduced so that it follow the economic laws of the market, provided the exploiting machinery, artificial scarcity, and speculation are eliminated.

To achieve the above objectives, the following steps are essential:

  • Maximum utilisation of all crude, subtle and causal resources
  • Decentralising the ownership of property.  Concentration of wealth is the main cause of today’s economic crisis.
  • Certain means of production must be socialised (not nationalised). It will be elaborated  in the following pages.

Maximum Utilisation of Resources

There are three types of resources – crude, subtle and causal. “Crude” resources refer to the five fundamental factors of matter, which are solid (land), liquid (rivers, ponds, lakes, oceans), the luminous factor (sun rays), air and ether. This category also includes associated energies like heat, light, sound, electricity, magnetism, as well as other related energies such as mechanical energy and atomic energy.  “Subtle” resources are intellect, intuition, and other unexplored treasure of human mind. The maximum utilisation of resources is essential for providing the minimum essentials of life for each individual, and also for the qualitative progress in life.

The utilisation of crude resources is also dependent on the usage of subtle resources, because knowledge is an essential factor in proper utilisation. The existing cultural and educational standards of the people are essential factors for economic development.  The application of science and technology in an appropriate way will enhance the possibility of accelerating the utilisation. If farming, for example, is continued in the age-old way using horse and plough, (as it is practised in India and other Afro-Asian countries), then it won’t be possible to cope with society’s demands on the agricultural sector.

While defining the proper utilisation of resources as a policy the utility value (which changes according to need and availability of consumer goods) and the marginal utility value have to be considered.

The utilisation of subtle potentialities means the creation of opportunities for intellectual development through educational institutions, media, cultural institutions etc. The real purpose of education is to enlighten the mind about freedom, to create a consciousness about values in life, and enhance moral and spiritual values in the society in general. In society, many people are endowed with a high intellectual potentiality, and they should develop that potential to an optimum level.  Intellectual or spiritual knowledge should not remain the monopoly of a person, family or group.

Secrecy and restrictions in matters of knowledge must not be allowed; it should be available to all as freely as air, water, and sunlight. Viz: The knowledge to utilize atomic energy should not be the monopoly of Super Powers.

Stagnancy causes psychic degeneration. This is true in the case of intellectual and spiritual knowledge as well. When Buddha started to impart philosophical knowledge in Pali, the  language of the common people, rather than Sanskrit, he faced tremendous opposition. The Sanskrit scholars opposed him because they realised that their vehicle of power no longer held sway.

Care must be taken not to misutilise and misinterpret intellectual knowledge. Intellectual exploitation is more rigid and dangerous for human society than physical oppression. Economic exploitation can be recognized with little effort, but it is not easy to recognise the subtle strategy of intellectual exploitation. Religious superstitions, dogmas are generally created  by imposing fear complex centering around some god man and scriptural injunctions. The high-sounding words of existing political and social philosophies in support of free enterprise or communism, are direct examples of intellectual suppression and confusion.  In so-called liberal democratic societies, intellectual imposition is carried out through indirect means using mass media, educational, religious and cultural institutions, accompanied by high-sounding slogan of freedom of expression. In other words psychological manipulation leads to psycho-economic exploitation.

The same process was once carried out in communist countries by directly controlling the above institutions and by abolishing freedom of expression. Political leaders in those societies are made out to be the embodiment of perfect beings, immune from any degeneration similar to the religious leaders even today in some societies.

Today, everywhere in society we find not only wastage of workforce, but also wastage of intellectual potentiality. Either there is no scope for proper utilisation, or it is being used by the vested interests in order to exploit others. What is needed today is to free the intellect itself from bondage. This will be possible by the maximum utilisation of a spiritual approach and facilitating enhanced of knowledge. Every person must know the basic truths of life, and be conscious of their collective responsibility. Basic knowledge of socio-economic political system is essential to safeguard against cunning manipulation by vested interests. Freedom of thought is essential, to ensure freedom of expression. In the so-called developed societies, the scope to freedom of thought is so far ignored.

In most parts of the world, due to linguistic and cultural suppression, people do not get the full scope to develop their potentialities. This deprivation causes a defeatist mentality and inferiority complexes, both  are severely detrimental to human development. Only with the evolution of social consciousness such regressive attitudes can be eradicated.

Rational Distribution

World inequalities have been rising  steadily for nearly two centuries. An analysis of long-term trends in world income distribution shows:

  • “The richest 1 percent of people in the world receive as much as the bottom 57 percent, or in other words, less than 50 million richest people receive as much as 2.7 billion poor.” (Milanovic 2002,)
  • The three richest people possess more financial assets than the poorest 10% of the world’s population, combined
  • As of May 2005, the 125 richest people in the world have assets that exceed the combined gross domestic product of all the least developed countries( 48 LDC).
  •  “The worlds richest 500 individuals have a combined increase in income greater than that of the poorest 416 million. Beyond those extremes, 2.5 billion people living on less than $2 US a day.                                             –HDR 2005

In the past, the communist leaders and their ardent followers in capitalist countries always tried to emphasise the concept of a “wage equalisation theory” in order to manipulate votes and capture the sympathies of the have-nots. However, this kind of theory was never followed during Soviet domination in Russia.

Under communist regime, the conditions in Hungary, Czechoslovakia, Romania, East Germany and Poland  exposed the futility of the communist economic system.  Behind the workers’ revolt in Poland, which began with strikes in the summer of 1980 and grew to a revolution on the shoulders of the Solidarity union, ultimately liberating Eastern Europe, there lies the failure of the communist system to deliver its promises of a better economic life. Today, communist nations have surrendered to the capitalist system and embraced the globalisation of economy. Communism is about to become a forgotten chapter in human history.

According to Prout, the minimum requirements of life, that will change according to time, place, and person for each individual and must be ensured. To ensure sufficient purchasing power considering the qualitative contribution of each , it is essential to evolve a wage structure based on individuals’ knowledge, experience, skill and effort. The salary, for example, of a qualified technician must be more than that of an unskilled labourer; and the income of a doctor must be more than that of an artisan.  There are two principal criteria to remember – firstly the gap between maximum and minimum wages should not be wide enough to evoke discontentment, and secondly, although there should be constant effort to minimise the gap, it should never disappear completely, otherwise economic incentive will die, resulting in stagnancy.

The quantity of movable and immovable property such as houses and land and others should be fixed according to time, place and person. For example, a family needs a house, but there is no justification for a family owning ten houses.  A doctor may need a car, but the Secretary of State a may require a helicopter.  Once the minimum wage ensuring minimum requirement is fixed and maximum wage is not staggering enough to create discontentment , and periodically adjusting the income harmonising  with the cost of living, the scope for  concentration of wealth and accumulation of excessive property will be reduced.

Surplus Value

Karl Marx severely criticised the idea of social surplus in capitalist society, but this is a negation of economic growth. Social surplus is a natural phenomenon of all economic activities whether capitalist or socialist – it is the lever of all economic progress. There cannot be any industrial development without capital formation, so economic accumulation(capital formation) has to be allowed, otherwise it will lead to economic stagnancy.

Genuine capital has to be produced for economic growth.  Idle capital ( that is an individual earns without effort. i.e. rent, interest etc. has to be abolished (except in special cases when it contributes toward the maintenance of minors, widows and invalids). Genuine capital (surplus value) generated  by using means of production, should be for the economic growth of the society -not to build fortunes for a few individuals. In other words, excessive private capital, that which is controlled today by economic oligarchies, need to be converted into social capital.

To achieve this economic goal the following have to be ensured:

  1. Creating a stage of full employment
  2. Producing consumer goods according to demand (especially domestic demand)
  3. Producing consumer goods as needed for special amenities
  4. Introducing a rational wage policy to ensure sufficient purchasing power for all.
  5. Abolishing the speculative character of the economy.
  6. Introducing economic democracy or workers participation in industrial management instead of monopoly control of means of production by managing agents.

Special amenities may not always be seen in terms of wages only; they may be in the form of consumer or utility goods or social recognition.  For example, a doctor may need a dispensary or a car; an artist may need a studio, a research scholar may need a laboratory or a computer, etc. Special amenities may also be measured  in terms of social recognition. This may give psychic satisfaction and also provide a sense of security in society. With the increase of social capital and standard of living use of special amenities will reflect in the higher standard of living. Take for example in most of the rich countries, the use of car and other amenities is common today.

Social movement will never stop. Society will continue its progress, enabling human beings to march towards their true goal of liberation. The mode of transport in developed countries has moved from bicycles to cars, and even helicopters and personal aeroplanes for the privileged. The production and distribution machinery will continuously adjust keeping pace with the increase in standard of living.

At this point, a question may arise as to how employment potential can be balanced with automation, without causing unemployment. According to Prout policy, automation will not reduce the number of workers but will, however, gradually reduce working hours. The people can utilize rest of the time in the pursuit of higher knowledge, and engaging in in the pursuit of art, literature music, sports etc. In such enlightened society, the materialistic influence over the mind will then largely cease to exist.

Balanced Economy

Defective socio-economic systems around the world are the cause of economic degeneration and disparity.  Economic balance has been lost due to the following reasons:

  1. Harmony between environment and  industrial development was neglected .
  2. A balanced development between  cottage industries, small scale, medium and mega industries was not maintained.
  3. A defective educational and social system in which human values and ecological balance are neglected  and  profit motivated  materialistic mono culture has been promoted  paving the way for psycho economic exploitation.

A strong and balanced economic structure demands a proportionate representation of working force in all strata of economic activities –agriculture, industry, trade etc. In countries where there is abundance of agricultural land, farming should absorb 30 – 40% of the labour force only . More than 40% creates undue pressure and dependence on the agriculture sector. All over the third world, countries overtly dependent on agriculture have neglected the industrial and other sectors, and created imbalanced economic development.. When less than 30% of the labour force is employed in agriculture, farming may be neglected. Twenty percent of the labour force should be engaged in agro- and agrico-industries. (Post-agricultural industries such as oil mills, textile mills, flour mills, food processing industries etc., are  agro industries.  Pre-agricultural industries like the manufacturing of tractors, fertiliser, etc., are agrico-industries.) Ten percent of the population should be engaged in commercial activities. and ten percent in non-productive services like administration, education, transport and other public services. Other industries should absorb 20% to 30% of the labour force. This proportion is dependent on the availability of agricultural land in any particular economic zone. In case of shortage of agricultural  land other economic activities other than agriculture will find preference like in Arab countries where oil is the main revenue earning industry.

In developing countries, due to the destruction of cottage and other local industries, people flock towards farming.  Thus, in comparison to agriculture, industries do not develop in proper proportion. As a result, the number of educated unemployed increases. Only 20 – 30% of the labour force should be engaged in non-farming industries (steel, automobiles, house building ,manufacturing  etc.). In industrially underdeveloped countries and per capita income cannot increase; hence the standard of living will remain low.  Due to the low prices of their agricultural commodities, a trade deficit will remain, and these countries ultimately become the satellites of affluent countries.

For this reason highly developed industrial nations – communists as well as capitalists – build war machines to force their satellite nations to abide by their dictum.

Disproportionate industrial development also has its negative effect on social psychology. The impact of materialistic values escalates pseudo-culture, thus degenerating the mental health of the society. Highly developed industrial societies are facing psychic crises which will ultimately cause the destabilisation of the mental and social health of the society.

To eradicate such over-concentration, the following measures should be taken:

  1. The whole world should be divided into self-sufficient socio-economic zones.
  2. Each economic zone should be allowed and helped to produce the minimum necessities of life for each member.
  3. In a particular economic zone, decentralised economic development should be ensured for balanced development of economic activities all over the economic zone to facilitate employment that in turn will ensure guarantee of purchasing power to the entire community covering all the villages.


[1] Schumacher, E.F.  –  Small is Beautiful Harper & Row Publishers Inc., N.Y. 1973.
[2] Schumacher, E.F.  –  Small is Beautiful Harper & Row Publishers Inc., N.Y. 1973.
[3] Schumacher, E.F.  –  Small is Beautiful Harper & Row Publishers Inc., N.Y. 1973.

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