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Day Three: February 22, 2024

Session 5: 10:00 - 11:30

Peace and Economic Development

Session Moderator:

          - Dr. Ahmed Atiqah - Libya

Main Discussant:

          - Dr. Aadila Ragab - the Arab Republic of Egypt


A- Free-Market Economics

          1- Dr. Julius Sen - the United Kingdom

          2- Dr. Amer Al-Tamimi - Kuwait

B- Socialist Market Economics

          3- Dr. Anastas Angjeli - Albania

          4- Dr. Nevila Rama - Albania












A- Free-Market Economics

1- Julius Sen - the United Kingdom

1.    Introduction                                                                          

2.    Research Question and Methodology                               

3.    Culture and Heritage as a Unifying Force                         

4.    Culture and Heritage as a Divisive Force                         

5.    Culture and Heritage: on Balance                                      

6.    Internal and International Peace                                         

7.    Ideas for Economic Development                                      

8.    Conclusions                                                                          




This paper is dedicated to the memory of the Late Abdulaziz Saud Albabtain whose inspiration and example guides us all. May his Soul rest in Eternal Peace.



The topic assigned to me is: Free Market Economics, Peace and Development, to be understood of course within the overall framework of the Third World Forum for the Culture of Just Peace, and within the programme context of the Fifth Axis.

As everyone would appreciate, each of these three subjects is huge in itself and for which there have been and still are lively ongoing debates which continuously offer new insights and perspectives. None of these is a settled issue and can never be. This makes it impossible to apply a settled or established methodology.

It also means that I can attempt my own methodology and approach for the specific purpose of this research paper, which is what I propose to do. I would like to use the pathway offered by cultural studies understood in its broadest sense to look at how these three issues can be considered together, and their mutual relevance perhaps better understood when we explore how they can work to reinforce one another.

I propose to consider these issues in the specific context of India. Her cultural revival and renaissance during the 19th and 20th centuries, from well before and into the early years of independence, helped form and shape policies across the entire spectrum. Interestingly it is these underlying cultural dynamics that in my view provide a unifying explanatory framework that help us better understand the choices made when creating an identity and a governing system for the modern Indian state, and in choosing an economic model that prioritised the objective of equitable development.


Research Question and Methodology

The questions I would specifically like to address in this paper are the following:

‘How did India’s national leaders address the divisive effects of ethnic, religious, linguistic and cultural classification that were developed and used extensively by the British during the colonial period (1757-1947), and how did they restructure the system to address the challenges of economic development?’

The methodology I propose to use will draw on historical sources and narrative accounts from Indian, British and international scholars who were active during the period or who have analysed the period in question. The idea being to demonstrate that cultural perspectives on India’s past provided a pathway for national leaders to follow. To be sure, this approach can only really reflect a partial view of the vast amount of material available, so I have tried to relate my sources to the extent possible to the key issues generated by the research question. The fact that Pakistan was created as a Muslim majority state can be seen as a failure of the nationalist leadership to contest Britain’s divide-and-rule strategy. At the same time, the way in which independent India reshaped its political and constitutional order to reflect the views of nationalist leaders can be seen as a successful response to British policies.

My timeframe for this exercise is to look at issues leading up to India’s partition and independence in 1947, and for a short period thereafter. I have not put a concluding date on this exercise, but will attempt to briefly cover the period when Jawaharlal Nehru was prime minister (1947-1963). His death marked the end of an era where leaders of the independence movement shaped the constitutional order and initiated economic policies for development. To be sure, many changes of economic policy have taken place since 1963, and each of them is a story in itself. Indeed, I also refer to some of these. The role of free markets in this process fluctuated considerably but not as dramatically as some people would like to believe, and India has always had a mixed economy. Elements of continuity between then (1947) and now (2024) are stronger than people realise.

Culture and Heritage as a Unifying Force

The process for ‘re-discovering’ India’s heritage began essentially from the late 18th century onwards, mainly through the work of British Indologists and traditional Indian Brahmin scholars working to recover Sanskrit and other classical texts from ancient references. Their efforts were in turn confirmed by Buddhist scholars working in Sri Lanka, Myanmar, Tibet and elsewhere. The starting point was really the confirmation that a vast empire was governed by someone called Ashoka the Great (304-232 BC), and that he had actively applied Buddhist philosophy and precepts in his governance, both internal and external. That he existed at all was not confirmed until the mid-1830s.

This discovery also led to the realization that Buddha himself was a real person, and was a prince of the Shakya kingdom based in north India, bordering Nepal. These twin realizations, which were largely unknown to Indian scholars, but for which there were numerous mythical, religious and legendary references, provided a recognisable model for India’s emerging intellectual, cultural and political leadership to deploy in their wider battle with British precepts about India’s backwardness.

Through this research, a continuous and unbroken heritage could not only be established between the ancient past and the present, but many of the teachings of Buddha and the governing precepts of Ashoka the Great were found to be of contemporary relevance, and entirely compatible with modern governing systems. But they were also powerful in their relevance to internal policies relating to tolerance and harmony, and the essential unity of all humanity, and simultaneously to regulating international relations through mutual respect and non-violence.

To be sure, there were strong parallels with revival and independence movements in many other countries across the colonial spectrum but finding a connection with ancient Buddhist (and Jain) precepts somehow gave India a ready framework that seemed to fully suit the requirements of a post-colonial society trying to re-discover its identity while simultaneously entering the modern world.

In China’s case, for example, while the diagnosis of her ills was quite similar to India’s, the remedies suggested had only a limited connection to ancient traditions. Confucianism, Taoism, Buddhism and other ancient philosophies were like Brahminism with strong patriarchal and hierarchical traditions, and so China’s discourse tended to oscillate between western ideas of modernisation (liberal or Socialist), with reform ideas aimed at eliminating social abuses while retaining respect, from a cultural perspective, of these same traditions.

The idea of a strong, united China did of course draw on a long line of imperial examples that sought to unify and strengthen China while deterring others from interfering. Creating a vast tributary network of neighbouring and dependent states lay at the core of imperial strategies for preserving peace and stability within the region as companion policies to the internal traditions of Confucianism, Buddhism and Taoism. China as the Middle Kingdom was thus an essential feature of this arrangement, and the role of the emperor was to uphold the ‘Mandate of Heaven’.

A stronger parallel with ancient India can perhaps be made with the civilisations of ancient Egypt and ancient Persia. The history, culture, language and traditions of ancient Egypt and ancient Persian were similarly ‘re-discovered’ through the 17th to the 19th centuries, which contributed significantly to building a powerful sense of national identity and pride within both countries. But their relevance to contemporary thinking on governing systems or social problems was never fully understood or explored, and Egyptian and Persian perspectives tended to adopt the idea that a modernising approach that drew on the shared attributes of Arab Nationalism (In the case of Egypt), and an imperial Persian legacy (in the case of Iran) was the best way forward. This approach again - as with China and India - combined national, regional and international perspectives within a specific historical, cultural and social context.

As with India, Egypt and Persia’s pre-Islamic and pre-Hellenistic traditions were poorly understood even as magnificent archaeological remains were to be found everywhere. But perhaps the difference was that in India’s case the past was ‘re-discovered’ and connected directly through the various phases of Indian history to social structures, cultural values, religious practices and economic systems that prevailed at the time of the reform and independence movement.

There was another significant difference. While the past of Egypt, Persia and India were essentially ‘re-discovered’ by European scholars, India’s experience made far more use of contemporary Indian and Buddhist sources and extant religious doctrine, practice, legends, myths and culture, while also drawing on various Islamic accounts (written mainly in Persian and Urdu, the court and literary languages, respectively, of the Mughals), to confirm historical narratives about what actually happened to the Buddhist community in India. Translations of Hindu classics into Persian and Urdu also fed a deeper understanding of India’s heritage within Mughal India. The overall perspective that emerged was less like that of the ‘Orientalism’ of Edward M. Said, and more authentically Indian.

The chief proponent of India’s cultural renaissance during the period of India’s broader national renaissance is perhaps best represented by Sir William Jones (1746-1794), the founder of the Asiatic Society of Bengal. He coordinated much of the research, archaeology, philology and scholarship of the time, which came to be known and understood as Indology.

Jones and others came to consider Sanskrit as the founding language of the Indo-European group of languages that included Latin and Greek.

‘The Sanskrit language, whatever be its antiquity, is of a wonderful structure; more perfect than the Greek, more copious than the Latin, and more exquisitely refined than either, yet bearing to both of them a stronger affinity, both in the roots of verbs and the forms of grammar, than could possibly have been produced by accident…’

Recognition that ancient Buddhist and Hindu traditions continued into the present instantly connected India’s various discourses on the nature of an ideal state and an ideal ruler to a past that appeared both glorious and noble. These civilisational elements fully matched Enlightenment features of the European experience and seemed to validate the relevance of ancient precepts and philosophies to the requirements of the present.

In transforming the independence movement from a relatively narrow liberal agenda to a mass based social and political movement that wholly incorporated these perspectives, it was possible to alter the dynamics and direction of the movement altogether. This was in essence, and in the main, Gandhi’s contribution and occurred in the period following 1921 when he advocated mass civil disobedience (Satyagraha in Sanskrit). This re-connection with the past and reintegration of India’s cultural genealogy not only repudiated the imperial and civilising elements of colonial rule, but also helped represent the independence movement as a reconnection to accomplishments of the past that equalled those found within Europe.

From the mid-19th century onwards, ideas for social and religious reform within the traditional structures of Hinduism and Islam began to develop and deepen prompted in large measure at the shame of having succumbed to a crude trading culture able to use their technological advantage and political cunning to political effect. This was roughly equivalent to the modernising agenda occurring elsewhere in the world and was aimed at eliminating inequalities and practices that were feudal, discriminatory, cruel and unjust. A simultaneous adaptation of western education systems to Indian conditions helped support this overall process, and additionally provided an impetus to the use of enlightenment methods of scientific and dispassionate enquiry.

In time, this laid the foundation to a more broad-based form of modernisation within many communities. The model of course was the European Enlightenment with its emphasis on scientific enquiry and empirical method. Blending these perspectives into more traditional Indian practices and systems was often the objective of these movements, and radical and revolutionary movements found it difficult to gain social and political traction as a result.

From this cultural platform, which covered every aspect of the policy spectrum, it is then relatively easy to see how ideas drawn from these discoveries about India’s rich and vibrant heritage also fed specific policies relating to peace (internal and international), economics (the role of markets), and development. It is also relatively easy to understand how Gandhi (perhaps more than others) was again able to connect this process to an internal requirement for spiritual enlightenment and the renunciation of material ambitions.

India, it was often argued, was a rich country with unimaginable levels of poverty, injustice, and inequality, and further fragmented by ethnic, linguistic and cultural differences. While British economic models and policies and the cumulative and collective effects of feudalism, social abuses, and religious intolerance through history could be blamed for this happening over time, the challenge for the independence movement was to offer something better, and to suggest a system that would redress these inequities while prompting serious and comprehensive development.

Again debates, as in other countries similarly placed, oscillated between more extreme revolutionary restructuring as against incremental modernisation. And it was actually leaders like Gandhi who put it all together and created a vision that was both ancient and modern, reformist and traditional, and recognisable to ordinary people. It was also revolutionary, but not in the Marxist sense. His device of choice was philosophy, religion and culture and he was adept at conveying the idea that by drawing on India’s ancient culture and traditions, and by applying the philosophies of tolerance and non-violence (ahimsa), a pathway to a multi-ethnic and democratic polity and modern economic system, could be created.

Looking at the way in which events unfolded, there would appear to have been four phases to this overall approach. The first was to re-discover India’a past and connect it to the present (which began in the late 18th century); to then initiate a political discourse, which began in 1886, to consider governance and other reforms within the imperial structure. This gave way around the beginning of the 20th century to exploring ways to shift India’s internal governance to a more national model, with Indian perspectives and priorities dominating, which would enjoy widespread popular support. And finally to press for full sovereign independence.

The initial three phases, which are readily identifiable as products of an enlightenment agenda, combined with a liberal and constitutional processes, better understood as a modernizing agenda, consisted in the main of research into India’s heritage, social and reform debates, petitions, and efforts to mobilise enlightened opinion in both Britain and India. In reality they all ran in parallel and involved Indian and British scholars and thinkers.

In the fourth phase, beginning roughly in 1920/21, the quest for independence was transformed into a mass movement with Gandhi playing the dominant role in getting the wider population involved, mainly by making the cultural connections described above between ancient values, practices and precepts to the requirements of modern times.

The very idea of a mass movement was anathema to many leaders of the independence movement. Literacy rates were appallingly low, religious tensions (on occasion) high, the awareness of issues almost non-existent, and the use of mobs for criminal purposes widespread. The social threat posed by the mass mobilization of the common people was therefore frightening and posed a serious threat to social peace and internal stability. Ironically, this was a view shared with British administrators who gave themselves even more extraordinary powers to crush uprisings, mobs, riots or mass movements.

It also raised the very real prospect of uncontrolled violence. Any mass mobilization of people in support of a cause or against a ruling system was likely to lead to confrontation and violence, thus aggravating the fragile state of relations between social and ethnic groups. Serious incidents of violence and killing took place mainly over a number of land related issues between 1918 and the early 1920’s and Gandhi had to suspend his use of satyagraha in these situations, recognizing that it couldn’t be controlled when passions ran high and the animating moral force was missing. His method of expressing disapproval was usually to go on a prolonged hunger strike, which he would not break until the protagonists stopped their violence. Again, many in the independence movement questioned this approach and advocated more militaristic and confrontational methods.

Gandhi seems to have understood this, and many of his techniques for protesting injustice or mobilizing public campaigns, were rooted in moral principles. Thus satyagraha (or ‘truth force’, better understood as civil disobedience) was designed as a non-violent movement to contest unjust laws, and in 1930 he applied this idea to the collection of salt. This action violated an imperial monopoly over the production of salt - an essential item of food that the poor in particular found hard to buy. A corollary to this was that protestors had to willingly accept jail terms for their defiance of the law. Gandhi himself was sentenced to 3 years in prison, along with over 60,000 supporters from all over the country. Of all the gestures of the national movement, it was this single defiance of British law that had the most profound and widespread effect.

Widespread national and international press coverage of his Salt Satyagraha as it came to be known, brought his approach of non-violent resistance to a much wider audience across areas of the world that would not normally be interested in developments in India. Brazil, Mexico, Somalia, Burma, the Philippines, in addition to Europe and South Africa (where he had pioneered some of these ideas), all took an interest. The Satyagraha movement, and Gandhi’s methods, won significant support around the world with philosophers, writers, scientists, humanists, trade union leaders, and missionary figures all identifying with the universal moral and humanist principles that Gandhi was using. Combined with Gandhi’s acknowledgement that he had been heavily influenced by Henry Thoreau, Ralph Waldo Emerson and Leo Tolstoy, and was in communication with Einstein, this made him a universal figure who had developed a non-violent approach to dealing with repression and repressive regimes, at a time and in a world where fascism and communism were both growing in strength and support.

In this passage from Nehru’s book ‘Glimpses of World History’ we can see how Nehru saw Gandhi’s role and methods evolve:

“Early in 1919 he was very ill. He had barely recovered from it when the Rowlatt Bill agitation filled the country. He also joined his voice to the universal outcry. But this voice was somehow different from others. It was quiet and low, and yet it could be heard above the shouting of the multitude; it was soft and gentle, and yet there seemed to be steel hidden away somewhere in it; it was courteous and full of appeal, and yet there was something grim and frightening in it; every word used was full of meaning and seemed to carry a deadly earnestness. Behind the language of peace and friendship there was power and quivering shadow of action and a determination not to submit to a wrong...This was something very different from our daily politics of condemnation and nothing else, long speeches always ending in the same futile and ineffective resolutions of protest which nobody took very seriously. This was the politics of action, not of talk.”

By turning the independence movement into a quest for the return of cultural and moral values, Gandhi and others were able to redefine the entire confrontation with the British as a larger endeavour to rediscover and apply more profound and basic truths. Unjust and immoral acts were the target, and Britain was incidental to this reality.


Culture and Heritage as a Divisive Force

Curiously enough, the very process that Sir William Jones and others initiated in trying to re-discover India’s lost past also fed divisive forces within the reform movement and later during the independence movement. The source of the problem lay in the way in which European principles of scientific enquiry were applied. As used in social and physical anthropology, it initiated a process through which the variety of Indian ethnic features (physical characteristics) were then combined with social, cultural, linguistic and religious considerations to classify people of the sub-continent. Categorisation and classification developed into a hierarchy reflecting various forms of stratification and other complex relationships. Tribes and lower castes, for example, were not just socially disadvantaged but had some linguistic, physical or other characteristic that could define them as distinct, and further to depict them as primitive or backward or disadvantaged, depending on what colonial administrators were trying to do.

The process of classification or categorization gave factual substance to the number, size and variety of communities, highlighting their differences, and thus generated a renewed sense of distinct identity within many of these groups. The fact that the census was conducted by government officials with little or no knowledge of linguistics, anthropology or sociology, meant that known social and ethnic classifications became the basis for much that was done. At the same time - and a fact seldom acknowledged then or later - is that most people were unaware of their identity in the sense being sought through the census operation. Most people did not think of their religious identity as Hindu or Muslim, but rather as smaller communities within these broad categories. Caste was also a category much misunderstood and misinterpreted. All religions in India including Muslims, Christians and Sikhs have castes, but understood in terms of family lineage rather than social or functional categories. Caste was presented through these census operations as specific to Hinduism, which was later leveraged for political gain when the Communal Award was discussed and introduced.

Within Hinduism as well, one result was to identify, count and classify the different castes that were then clubbed together into what the British called ‘Depressed Classes’, which of course referred to the lowest castes in Hinduism. The basis for all this was the first Census of India of 1871-2 which was an extraordinary achievement of classificatory and statistical endeavour and was meant to replicate, in a social and physical context, the classificatory system that Carl Linnaeus had pioneered more than a century earlier to classify flora between 1735-38.

Similarly, 1859 saw Darwin’s Origin of Species published which established evolutionary biology as the engine of species’ development. It was thus only a question of time before all these processes were unified into a single idea: the human species is similarly diverse with some elements more advanced than others, and we have to organize government and policy around this reality. Primitive peoples have to be nurtured and supported in their evolution and development, implying of course a civilizing mission and imperial responsibility.

All of this can be seen as part of the European Enlightenment; the difference was of course that anthropology was not really a science at all, yet its impact on policy in India and throughout the world was enormous. Apartheid in South Africa, and belief in eugenics, for example, were a direct outcome of ideas generated through anthropological methods. So too were ideas about primitivism and evolutionary biology, which in turn justified the agenda of imperial powers.

It also happened to perfectly suit British efforts to prevent any unified opposition to its rule in India, and entrenched the idea that India was inherently ungovernable without a strong external force (Mughal or British) and left to itself would disintegrate. In this narrative, the only unifying force that would or could bind India’s multi-ethnic and multi-cultural society together were best provided by the modernizing and guiding influences of imperial power and Western systems of education and governance. India had no indigenous tradition or system that could do this, according to this narrative.

The contributions of James Hill and William Macaulay to this idea represented one strand of thinking. But within these debates there were equally strong voices that supported the nationalist narrative, with its universalist values, and these ran in parallel for decades. In fact, there were strong movements within these same imperial systems, often based in religious orders, that advocated a common human family. There were also philosophers and others who questioned the ‘scientificness’ of these classificatory systems as they applied to human society – an issue which divides academics even today.

Although Sir William Jones did indeed re-discover many aspects of ancient Buddhist and Hindu tradition that connected through to the present, he unwittingly perhaps fed the opposite camp by suggesting that Indian languages had a common ancestral root that lay somewhere in central Asia or Persia, and that Aryans were invaders and therefore alien to India’s indigenous culture.

His research into linguistic affinities had uncovered these patterns relating to Indo-European languages, and this became orthodox thinking within the community of philologists. Moreover, research and studies by scholars in Germany, France and elsewhere also seemed to confirm that Indo-European languages had a central Asian origin. What this meant of course for India was that Aryans were outsiders and conquerors and established themselves in superior social positions through the device of Brahminism. Indian society was thus not a unified structure with a common heritage but a layered system of conquerors and indigenous peoples. Integrating all these into a common heritage was therefore erroneous.

Gandhi’s approach was essentially to repudiate the way in which India’s cultural genealogy was structured during the imperial period. Building on what the Asiatic Society had done in the period up to 1818 or so Gandhi and others sought to reintegrate India’s history and cultural evolution as an integrative and continuous process to which every community and tradition in India was intimately connected.

Divisions were however deepened from 1818 onwards when James Mill and others reversed the narrative set out by William Jones and others and broke the study of India into periods representing Hindu, Muslim and British rule. These then became distinct phases, each with its own logic, features and characteristics. In time, this became the prism through which British administrators viewed India and became the basis on which they assumed irreconcilable differences between the communities.

From a nationalist perspective, however, the bigger threat came from a system referred to as the Communal Awards. From 1909 through to 1932 the British government introduced and expanded a system to ensure that every community was represented in roughly proportionate numbers in the various assemblies that were set up from time to time.

Each of India’s principal minority communities – Muslims, Sikhs, Christians, Anglo-Indians and Europeans – were constituted into separate electorates who voted for their own representatives. This was further expanded after 1932 to include ‘Depressed Classes’. To the British, this gave everyone a balanced representation in government, but to the nationalists this fragmented India into competing community groups with competing interests and thus aggravated the communal divide.

The Congress party represented the nationalist movement, which was predominantly but not wholly Hindu, while a host of community-based parties represented these other ethnic groups. By introducing the Communal Award, the British in effect repudiated the idea of a unified Indian heritage and helped promote the idea that other options existed to a unified and independent India. These were two very opposing visions of India.

Gandhi and the national movement understood immediately that census data together with the Communal Award increased the likelihood of political fragmentation. Fortunately for them, most communities – even Muslims – remained committed to the nationalist vision that Gandhi had laid out. His real contribution, from this perspective, was in creating this shared sentiment within every community, against the tide of British policy, and across a span of more than 30 years.

He was also helped considerably by worldwide support, within the UK and the US, and particularly within some political parties. Gandhi was very effective in evoking sympathy and support for his ideas of non-violence, religious tolerance and cultural accommodation in an era (the inter war years) where Europeans and Americans were themselves discovering a renewed interest in ancient philosophies. They too were re-discovering the richness of their own cultural traditions and connecting these to ancient religious and political philosophies. They were also, in some cases, questioning the relevance of material well-being and emphasising the spiritual and philosophical. Bearing in mind that imperialism, capitalism, fascism and communism were the competing paradigms of the time, a revival of spiritual and non-materialistic considerations resonated with their thinking.

Gandhi’s correspondence with Tolstoy, for example, demonstrates the reach of his ideas and the sympathy they evoked, and vice versa. The same was true of Nehru, when his book ‘My Discovery of India’ was published on his release from jail in 1946. This letter from Albert Einstein reflects his thinking:

Princeton, New JerseyFebruary 18, 1950

Dear Mr. Nehru,

 I have read with extreme interest your marvellous book The Discovery of India. The first half of it is not easy reading for a Westerner. But it gives an understanding of the glorious intellectual and spiritual tradition of your great country. The analysis you have given in the second part of the book of the tragic influence and forced economic, moral and intellectual decline by the British rule, and the vicious exploitation of the Indian people has deeply impressed me. My admiration for Gandhi’s and your work for liberation through non-violence and non-cooperation has become even greater than it was already before. The inner struggle to conserve objective understanding despite the pressure of tyranny from the outside, and the struggle against becoming inwardly a victim of resentment and hatred may well be unique in world history. I feel deeply grateful to you for having given me your admirable work.

With my best wishes for your important and beneficent work and with kind greetings.

Yours cordially,Albert Einstein.


Gandhi’s greatest concerns - beyond getting rid of the British and keeping India united - were caste inequalities and discrimination, religious intolerance, and rural poverty. Addressing these problems in a coherent form and from within recognisable social and cultural traditions, he felt, was the key to peace, prosperity and development. In this sense he saw the whole independence process as a unique form of personal, social, religious and cultural reform, which in turn could influence international state relations.

Through much of the same period that Gandhi was active, a parallel political movement developed within the Muslim community for self-government and (later) independence. In essence, this movement questioned how a revival of Buddhist and Hindu precepts could possibly embrace the reality that Muslims were a massive minority who had enjoyed significant political power across several centuries, and that their rights would not be safe within this revivalist context. Democratic structures, it was argued, could nullify their status and would leave them vulnerable to majoritarian prejudices.

The problem for both sides of this debate was of course the question of how on earth to disentangle these integrated social, economic and other structures that were embedded within the fabric of India and spread across India’s entire geography.  Gandhi’s advocacy of tolerance, reform, economic regeneration and peaceful coexistence was meant to assuage these fears, and much of his writing of the period talk about how the essence of all India’s religions were the same, and building on these common values would benefit everyone, but obviously this was not sufficient.

At the same time, once mass movements became an accepted form of political action, so too did the potential for confrontation and bloodshed. While precepts of tolerance and non-violence were increasingly espoused and accepted by all strands of the national movement, the reality was that violence occurred frequently and often took on a communal or inter-ethnic character. Efforts to calm things down did not enjoy much credibility, especially within the Muslim community who often questioned whether there could be any security for minority communities in a majoritarian system.

And within the Congress party itself there were strands of opinion that questioned whether a non-violent approach when dealing with a repressive regime would ever work. In the early 20th century, there had been a spate of terrorist attacks on senior British officials but these were mainly related to specific grievances or in response to acts of repression. This also continued through the period leading up to independence and were increasingly justified on the grounds that these attacks were to further the cause of national independence. These violent acts also attracted widespread support and sympathy.

But a real split in the approach advocated by Gandhi and others occurred after India was brought into the war against Japan and Germany without any consultation with national leaders. This led to a resolution of the Congress party in 1942 calling on the British to ‘Quit India’, which was quickly followed by the arrest and detention of most of the nationalist leadership. Most other parties disagreed with this approach, and thought to defer confronting British rule until after the war in the hope of getting better terms. The quest for independence was now fragmenting along communal lines.

In parallel however, a faction of the Congress party led by Subhash Chandra Bose started negotiations with the Japanese and Germans to create an army to liberate India. Indian prisoners of war captured by the Japanese in Singapore, and by the Germans in North Africa, were constituted into an Indian National Army (INA), and used mainly in attacks on India’s Northeastern states. Armed confrontation with the British and Indian armies enjoyed widespread public support and reflected just how fragile the consensus of a non-violent movement really was. It was another example of how Gandhi’s insistence on the use of just means to achieve just ends was dividing opinion. Many felt that any means justified the removal of the British, and this argument persisted until independence actually came.

After the war, the leadership of the INA was tried by the British for treason, with the accused being defended by Nehru and others from the national movement, in a renewed attempt to unify the national movement again. Bose himself had died in the last days of the war, and the INA as a political movement was absorbed into the congress party.

While these debates ebbed and flowed over the decades leading up to independence, developments within the Ottoman Empire and the dismantling of their imperial possessions also had a significant impact on national politics and the sentiment of Muslims within India, further aggravated by the subordination of Persia to British control and influence. Turkish and Persian influences within India had always been strong, particularly within the various Muslim kingdoms that formed part of the fabric of British and pre-British India, and their treatment at the hands of the British (and the allies) after the First World War created concerns regarding their future. Many Muslim princes anticipated a British betrayal and were trying to think ahead. Abandoning India’s Muslims to Hindu majorities resonated with these apprehensions.

While Gandhi and others may have been highlighting the syncretic nature of Indian culture, this was obviously not sufficient for many within the Muslim or other communities, particularly when incidents of communal strife revealed the depth of antagonistic sentiment. At the same time, the bulk of Muslim opinion still remained faithful to the Congress party of Gandhi and Nehru, and their visions for India’s future, but this was eroding steadily during the late 1930s and into the war years of the 1940s.

While the Muslim League argued initially for a separate electorate, which they got in stages between 1909 and 1932, their agenda was mainly political and social, and framed with reference to their concerns about preserving Muslim identity within a system dominated by Hindus. Education and identity, in this context, were their dominant concerns. But in substantive terms, ideas relating to economic development and governing principles were relatively shallow and drew heavily on the economic and political model of Turkey after Atatürk’s accession to power.

Although the context and situation differed substantially, this was an important reference point for many discussions within the Muslim League on how Pakistan should modernise and position itself on the world stage. Beyond this narrow horizon, the leadership of the League had no plans or perspectives that matched the Bombay Plan of the Congress party, and nor did they have an equivalent of Gandhi who could articulate the concerns of poorer Muslims. Little thought had been given to the elimination of social and religious abuses within Islam, or to issues like land reforms or the abolition of feudal and royal privileges.

India’s 522 princely states - some Hindu and some Muslim, but most with mixed populations - also played a role in these debates. In the Congress Party's view of how India should look post-independence, democratic systems would replace aristocratic and feudal privilege, so princes and their privileges would disappear. While this was a powerful political and social statement, it obviously concerned many of the princes who anticipated a total loss of power, status and income. Some of the princes had long argued that when the British left India, power should revert to them and not to an elected government. The British could not wholeheartedly endorse this view because it was profoundly illiberal and anti-democratic, but they often suggested an enhanced status within an independent India.

At the same time, some of these princes (Rajas, Maharajas, Nizams, and so on) were socially and economically progressive and had acted to stimulate economic activity, social reform, industrialisation and rural development. In reality, some of these ideas pioneered in these states were applied after independence on a broader scale, particularly as they related to women’s education and the rural economy.


Culture and Heritage: On Balance

The history of India’s movement towards independence thus combines many trends, the most obvious of which was the quest to rid the country of colonial rule. But to give it shape and form, it had to be combined with a tangible sense of what would replace an ‘imperial peace’. These ideas had in turn to connect to what the wider population thought about their own identities and heritage. In broad terms, this referred to the cultural underpinnings of all human societies.

In India’s case the various threads of India’s national narrative had to be identified and combined to offer a coherent and plausible account of what it was to be part of this civilisation and how each community was related to the whole. At the same time, many of these threads had to be revealed and discovered, as it were, because they had been lost over time, or subsumed within the classificatory system of the British. By applying the principles of scientific enquiry to issues of race, culture, caste and ethnicity, the British had helped solidify the sense of distinct and irreconcilable differences across India’s many communities.

In turn and in time, and with the use of distinct electoral representations for minorities, this did indeed give rise to movements that demanded protection from majoritarian populism. At the same time, nationalist leaders took the opposite line and, with reference specifically to Muslim concerns about their place in a composite culture, highlighted that Muslim then Mughal rule over much of the subcontinent, had created a rich mix of its own traditions and practices, many of which connected back through existing Indian social and cultural traditions. While this process also brought traditions and practices from central Asia and Persia, they went through a transformation on contact with the reality of India.

As a result, it was argued, the nature and traditions of Islam as practiced in India was distinctly Indian and part of the common heritage of the entire region. Not separate and distinct, as advocated by some, but an integral part of the fabric of Indian society and tradition. The same duality in arguments and approaches was to be found within other communities favoured by the Communal Award of the British. Sikhs, Christians, Anglo-Indians, and Europeans, and finally Depressed Classes. Ranged on one side therefore were those who anticipated the complete fragmentation of the sub-continent along ethnic, linguistic, religious and communal lines, and on the other those who argued for a unified and shared heritage.

Indeed, while the official language of the Mughal court was Persian, the language of Urdu was developed for use initially in the army was based on a blend of Sanskrit structures and Persian vocabulary. It then developed to such a high level that it became, over time, the literary language of the Mughal court and for much of Indian high society. Within this rich tradition, the renowned poet Sir Muhammad Iqbal (1877-1938) fostered a distinct consciousness for Muslims in India that also incorporated ideas for a broader religious renaissance. Like Tagore and others in the late 19th and early 20th centuries, he was part of an Indian renaissance and spiritual revival. How these ideas were used, was a different matter.


Internal and International Peace

While the debate about Indian independence incorporated ideas about how best to maintain internal peace, an international dimension to the impact of Indian independence on international peace developed only really from the period after 1918.

In the immediate aftermath of the First World War, Indian leaders expected Dominion status, and so to be able to determine their role in the wider world. When it became clear that this would not happen, Indian national leaders started to think about generating international support for self-rule and independence. It also meant deepening their understanding of international affairs, the roles of international institutions, and the implications of the various provisions of the Treaty of Versailles (1919) and the Treaty of Sèvres (1920), which together dismantled the German, Austro-Hungarian and Ottoman empires, and transferred their possessions to British, French, Italian and other allies.

This massive reordering of world affairs represented a re-affirmation of imperial power and a denial of self-determination, and represented the exact opposite of what the anti-colonial movements wanted or expected. In the Indian domestic political context the most significant of all these developments, as mentioned above, was the dismantling of the Ottoman Empire. As much of the national movement in India drew on support from India’s muslim population, their sentiment mattered enormously. At the same time, revolution in Russia and the emergence of the USSR offered another alternative to those trying to identify a role for India in a world of uncertainty. India’s national leadership rejected the imperial model, but had little else to relate to beyond the Soviet model. And in any case neither model represented a viable global system.

Against this backdrop, the League of Nations was established in 1920 to help preserve the post-war status quo as it was decided through the treaties of Versailles and Sèvres, and to resolve differences through arbitration. India was the only one of the 31 members that was not self-governing, which is one reason why the US refused to ratify joining.

The US never joined the League, severely compromising its effectiveness, particularly as from 1922 onwards the US became the dominant naval power in the world, with the British, French, Japanese and Italians placed in a clearly subordinate position. Later developments led Japan to leave the League in 1932, and Italy in 1935.

In effect the League was left without a role and without credibility, which was amply demonstrated during the Spanish Civil War (1936-39) which saw Fascist and Communist forces in direct confrontation. The world was being increasingly polarised between these two forces, with little or no thought being given to post-colonial concerns. Neither model appealed to Indian national leaders either with reference to their domestic priorities or to their international preferences. If anything, India was more naturally aligned to the US and Western perspectives, but they too were tainted by imperialism and colonial privileges. Any ideas relating to interstate relations based on Buddhist precepts of peaceful co-existence were meaningless in this context.

At the same time, these very ideas began to resonate within a number of countries, and especially the US, and to some extent within the UK itself. The surge in support for Indian independence from within the US, supported widely by congressmen, academics, journalists and church groups surprised national leaders in India. Gandhi’s emphatic use of non-violent and peaceful means to achieve what he considered just ends connected with many of their humanist, philosophical and religious traditions.

The decision by Gandhi and the Congress party to launch the Quit India movement in August 1942 shocked many of India’s well-wishers, particularly in the US. The Quit India Resolution of the Congress party called for the British to leave without negotiations and without preconditions, leaving India to resolve its own problems. But the idea can be better understood in the context of the time. India had been dragged into a global war without consultation; there was no guarantee that India would be given independence at the war’s conclusion; Russia and China were both experiencing attacks by Fascist regimes and were totally preoccupied with defending their homelands, and there was no world system or coalition that India could join that would address her needs. Hence Gandhi’s exhortation to the British to quit India. The implication was that a democratic India would know what choices to make in pursuit of non-violent solutions in a very unstable world.

As the war dragged on and as the US came to dominate the formulation of a post-war agenda, it looked increasingly certain that an era of rapid decolonisation would follow, and Indian independence would come in time. Again, this was not something India’s national leadership thought about as their efforts were focused on getting the British to leave through domestic pressure. And although the Japanese were defeated (and with them the Indian National Army), the prospects of severe domestic unrest continued to worry the British. The 1946 mutiny within the Indian navy in Bombay and Karachi confirmed that their hold on the loyalty of military formations was tentative at best.

Against this backdrop of fast-moving events, negotiations to create a United Nations Organisations (UNO) had taken place in San Francisco in late 1945. The resulting Preamble and Charter of the UN matched everything that the Congress party and Gandhi had stood for in terms of principles relating to peaceful co-existence, sovereignty and equality between nations. Moreover, the US had made it clear to all colonial powers that they had to de-colonise in the aftermath of the war.

Ideas relating to tolerance, mutual respect and non-interference, which flowed naturally from ancient Buddhist precepts, were considered entirely compatible with UN Charter provisions, and in turn formed the basis of the Non-Aligned Movement (NAM). These principles – initially spelt out in detail by China as the basis for peaceful coexistence – were known as Panchsheela or the Five Principles – and were included in the 1954 China-India Treaty. These founding principles were then adopted by the founders of the Non-Aligned Movement in 1955 and 1961, and by the General Assembly of the UN in 1957. Non-Alignment had another purpose: to enable countries to steer clear of the Cold War rivalry of the US-USSR which seemed to continuously threaten global peace.

India’s framework for peace thus incorporated internal features, of tolerance, secularism and universal rights, with International features described above. India’s internal constitutional system designed shortly after independence, specifically sought to use the unifying framework of a shared historical and cultural history as a platform for social reform and economic development. A harmonious and peaceful social order with inbuilt notions of what it was to be an inheritor of this noble and unified legacy lay at the centre of this constitutional design.

Beyond the itemization of human, social, political and civil rights, the constitution incorporated a section setting out a permanent reform agenda covering all the inequalities and abuses and all the reform measures that had been identified in the years prior to independence. Known as Part IV of the Constitution and has been given the title: Directive Principles of State Policy.

Though not justiciable (hence enforceable) it is supposed to guide state policy and is often considered an essential for long term social peace. Though covering general issues of social and economic empowerment, it also identifies inequalities across different communities and calls for a common Civil Code, which would impact inheritance, marriage, and other community-based practices. If fully implemented it would equalize and operationalise both rights and opportunities, and thus address concerns relating to caste inequalities, women’s rights, rural economic and welfare opportunities, health and education access, and the rights of the disabled. In the western context, these features of the policy landscape are generally taken for granted, but in India these each involve major budgetary commitments and major changes to legal statutes.

The important point for this essay is however that national leaders understood and recognized that domestic peace depended on social and religious reform and the elimination of inequalities and abuses (like child labour). But they lacked the resources to carry these ideas through and so embedded them in the constitutional obligations imposed on successive governments.

Ideas for Economic Development

Economic ideas for rural revival and economic regeneration initially drew heavily on the ideas of national leaders, often educated abroad, who looked at and understood alternative economic models in terms of liberal political systems. Gandhi was slightly different. At the heart of the process of post independence economic regeneration, he placed the revival of the rural economy. He shared broad ideas about reversing the impact of British colonial rule and the economic structures and systems that it had created in land ownership and management, and a return to home grown and homemade (swadeshi) products.

This analysis was important. While liberal political systems would typically embrace free market principles, Indian national leaders recognised that market structures as they existed would never deliver equitable development. These structures incorporated features that would sustain inequality, and would not support rural regeneration, self-sufficiency or poverty alleviation. Priority was thus placed on first rectifying deficiencies in how these markets operated before returning to make fuller use of free market structures.

This was a direct attempt to also reverse the policies of de-industrialisation that the British had introduced, where the value-added phase of manufacturing took place in Britain, which of course meant jobs and profits were retained by them. Furthermore, the widespread use of tea, sugar, tobacco, indigo, cotton, opium, coffee and other plantation estates not only dominated the rural economy but only served to enrich the owners, many of whom were British. Farm and plantation labour, whether on these estates or in agriculture, lived at subsistence levels, and it was no surprise that at independence in 1947 life expectancy for the sub-continent as a whole was only 29 years.

It was also no surprise that famine was a frequent occurrence during British rule. The 1943 Bengal famine, and the 1946 Madras famine, which together are thought to have killed over 4 million people, were emblematic of how British economic models were considered socially and economically inefficient, ineffective and destructive.

In Gandhi’s view, everything that was needed - food, clothing and daily necessities - were to be produced in India, but more importantly in the countryside. He gave this process a name - Swadeshi - and a symbol, the Chakra or spinning wheel. This would lead, in his thinking, to a revival in rural economic activity provided, additionally, that comprehensive social reform accompanied the process. Religious minorities, marginal communities, lower castes and women, for example, would need to be integrated fully into this rejuvenated social and economic system.

The philosophical foundation for this was mutual respect, tolerance and non-violence, with religious differences and caste abuses eliminated. In terms of what it meant for dealing with the British, it was Civil Disobedience (satyagraha): the wilful but peaceful refusal to obey some British laws that were considered onerous and cruel. Austerity and simplicity was also part of this - a very Buddhist philosophy, within a very Indian tradition - which in turn meant that imported luxuries and consumer goods should be avoided. His pursuit of these objectives beginning in mid-1921 put him at odds with many in the independence movement who thought that India should modernise along western lines, and become economically and militarily strong, like Japan following the Meiji restoration.

The idea of a spinning wheel as a symbol of national revival was mocked by many who saw this as the wrong way to channelise the energy of a restless society. Symbols of strength and emblems of power were more appropriate, in their thinking.

Alternative models were suggested, while many in the independence movement also looked to the Soviet system as a possible model, and the socialist tradition within India committed themselves to this approach. The Bombay Plan of 1944/45 however represented the thinking of India’s leading industrialists, and a more liberal model of modernisation on how an import substitution approach to economic development for major industries and infrastructure requirements could support India’s economic regeneration. Again the thinking was based on ideas for reversing the unequal trade, commercial and economic relations between Britain and India, while additionally dismantling British commercial and trading privileges. But the Bombay Plan also envisaged a major thrust for industrialisation by building on existing capacity and industrial infrastructure, and aligning this process with the objectives of self-sufficiency, which of course was an English rendering of swadeshi. So a gulf opened up between the modernisers approach to economic policy after independence, and those of Gandhi.

The problem was that the impetus behind many ideas related to rural economic regeneration perished with Gandhi following his assassination in January 1948, and were only seriously revived when land reforms were taken up a decade or so after independence, and in the period following the nationalization of banks in 1969. It was realized quite early on that land reforms and bank credit were critical inputs to stimulating economic revival in the countryside, but banks were privately owned and didn’t operate outside major urban centres, while land reforms were being held up by judicial challenges to the ‘confiscation’ of property.

This approach would have prioritised rural revival over all other development programmes but would have required strong systems of governance in rural areas to carry through. In fact, it took the government over 20 years to organise effective village level governance systems beyond those described above, and a further 30 years to create appropriate political structures to support this process.

In its essential principles, scale and approach, the Bombay Plan became the basis for the First Five Year Plan (1950-55). The broad global context determined the shape and content of this plan. In the first place, capital was scarce and so too were industrial goods and machinery, so the strategy adopted was to channelise whatever capital and other inputs were available into priority sectors of the economy. This aligned with thinking at the time about how structural changes were needed to stimulate development.

At the same time, problems in the rural and agricultural sector were to be addressed using a combination of Gandhian principles on village regeneration, major reductions in tax and other impositions on agricultural land, and the improvement (often through subsidisation) in irrigation, power, fertilisers and other inputs including for the small enterprise and commercial sector. In the first phase of planned development, Nehru committed to building dams for irrigation and electricity generation, and called them the ‘Temples of Modern India’. But the overall scale of this commitment to the rural economy fell far short of what was needed to achieve Gandhi’s aims.

As would be evident from the foregoing, free markets were to play only a supporting role and until such time as they could be re-structured to operate fairly and for the benefit of everyone. The state was to lead in pursuing social and structural reform, while leading further on infrastructure development. The private sector was free to operate in the main in the agricultural and small and medium enterprise sector, but in reality a complex system of rationing and licensing limited these horizons severely.

Development is and always has been elusive concept, and was addressed extensively in India’s constitution of 1950. Growth with equity and social justice was the model adopted as indeed was the case in most other newly independent countries. And in today’s world, growth has additionally to be sustainable and intergenerational.

In any case, post-independence plans for economic development were also seriously derailed by partition and war. It had been everyone’s expectation that military budgets would be radically cut after the Second World War and funds diverted for economic regeneration. But the huge costs of partition, and wars with Pakistan in 1947, 1965 and 1971, together with a catastrophic war with China in 1962, seriously and perhaps permanently derailed all these economic plans.

Of course there were lively discussions and controversies throughout the period leading up to partition and independence, which both occurred at the same time, and many of these debates were shaped by political ideology, economic thinking, cultural perspectives and religious ideas. As with all other countries that passed through the colonial experience and achieved independence, there were also debates about continuity versus revolution, and the importance of profound structural reform as against arguments in favour of stability. It was in fact precisely these debates that had such a profound impact on India’s constitutional arrangement and its independence-era policies.

To be sure, events in the region and across the world also significantly influenced these debates and discussions, with revolutionary alternatives (in the Soviet Union and later in China) offering one possible path, with the Turkish model offering another sort of model, and the democracies of Europe and North America offering still another. Blends and hybrids that combined ideas from a number of systems were also considered, with the economic models of Germany and Japan influencing thoughts on the role of the state in promoting growth and development. War time rationing also fed into many of these discussions as shortages were anticipated into the indefinite future. For India in particular, this was a major concern.

As part of this approach, a chapter was introduced that identified policy principles that governments were required to follow to create a just and equitable society, where everyone had access to health, education and economic opportunities. Several provisions addressed the challenges of caste and structural inequalities across society, and called for special measures to address these requirements. These provisions are collectively known as the Directive Principles of State Policy, and was an idea borrowed from the Irish constitution. Provisions were and remain non-justiciable but are supposed to form part of a sort of permanent policy agenda that any elected government has to follow.

It is remarkable that almost every single issue highlighted in the Directive Principles remains central to political debates across the spectrum and across India’s vast and complex geography even today. The current issue, for example, that is focussing minds is on creating a common civil code so that the rights and interests of individuals within every community are treated equally. If successful, this would replace the plethora of community-based civil law rules that recognise differing rights within different communities, and which generally accord primacy to patriarchal and traditional social structures.

The 20th Century also saw additional threads added to the idea of peace and development. economic growth through the operation of competitive markets in a free market context, within a broadly egalitarian social and economic model. In this contemplation, good governance and good infrastructure (physical and social) would provide the framework for development, while a dynamic economic system based on free and fair markets would ensure the spread of benefits.


This paper has tried to demonstrate how the recovery or re-discovery of India’s ancient cultural heritage in the late 18th and 19th centuries, were first used by the reform movements to identify abuses that needed urgent remedy and were then harnessed by nationalist leaders of the independence movement to create a new and unified national consciousness. This heritage was shaped to demonstrate that every community within India, regardless of its origins, actually had much more in common than anyone realised.

At one level it directly challenged the British view that social, linguistic and ethnic differences were irreconcilable, justifying an ‘imperial peace’ or anticipating violent fragmentation. But more importantly it provided the foundation for several parallel processes that essentially shaped both the independence and reform movements, simultaneously covering political, social, cultural and economic challenges.

That this was possible at all had everything to do with what exactly was discovered and how it connected with contemporary concerns. Unlike Egypt or Persia, where ancient hieroglyphs and Persian were deciphered at roughly the same time as Sanskrit in India, the relevance and application of what was ‘discovered’ differed substantially. The legacy of Buddhism was still prevalent in every aspect of Indian life even though Buddhism itself had more or less disappeared from India. In Egypt and Persia, very little of ancient Egyptian or Persian tradition seemed to resonate with the Egypt or Persia of the time, though there was naturally enormous pride at the accomplishments and achievements of their ancestors. In comparison with India, ancient history in Egypt and Persia was indeed a foreign country.

The contribution of India’s nationalist leaders to the process of using these discoveries to define a radical reform agenda reflected the power of insights identified mainly by Gandhi. He succeeded in spreading a deeper understanding of why independence was important by referring repeatedly to precepts and ideas found in Buddhism and Hinduism, and by then making theological and philosophical connections to the other great religions of India, namely Islam and Christianity. His contribution was in turning a largely intellectual debate into a mass movement. His use of the essential unity of all religious philosophies also went against how those religions sometimes presented themselves.

He had of course realised that most religious traditions and practices in India were syncretic and many people followed a mix of practices depending on many different factors. Gandhi and others had often railed against the endless classification of Indian society into categories that were then used politically to create distinct and even hostile identities. This was how divide-and-rule worked, and he effectively refuted its underlying premises by highlighting the various unifying characteristics of Indian society and philosophy to rebalance the colonial narrative of the British.

But it would overstate the roles of national political leaders, who for the most part were active only in the 20th century, if we ignore the formative inputs by the numerous reform and revival movements within Hinduism, Islam, Christianity and elsewhere across society, together with cultural developments in poetry, music and literature, and later, in film. In the stifling political environment of a colonial system, it was these cultural contributions that so powerfully shaped public sentiment and created elements of national consciousness that became deeply embedded over time.

Of course we also know that as events turned out, nationalist leaders couldn’t convince or persuade large segments of the Muslim population of this vision, and their political movement pressed for and were granted a separate state, which was further subdivided in 1971 as fresh ethnic and linguistic differences emerged.

Peace at home through a constitutional settlement that recognised the rights of everyone, and peace abroad through the principles of Panchsheela. Together they provided the space needed for policy makers to concentrate on the real challenge facing all newly independent states, which was of course equitable economic development.

Within this space, the economic model adopted by India was initially for a mixed economy, with self-sufficiency as its primary goal. The logic at the time was simple: India needed massive investment to transition from an inefficient rural economy where most food had to be imported, to a more balanced model with significant capacity in industry and services as well. But there was insufficient capital available in the world to fund these requirements so whatever money could be mobilised would be concentrated on developing domestic industrial capacity in essential areas. Beyond these priorities, the private sector could operate and take their own investment decisions. In this initial approach agriculture was relatively neglected even as investments in irrigation grew sharply.

The resulting rate of growth was relatively slow if compared to the tiger economies of east Asia, and many considered it to have fallen short of both potential and requirements. However, in the aftermath of independence there were no famines, and self-sufficiency in food was finally achieved in the mid to late 1980s through improved agricultural practices and productivity. Farm incomes were also helped through price support mechanisms and better access to credit. Through this same period (1950-1980) there were significant improvements in social indicators with the population doubling, reflecting better health and nutrition standards across the entire country.

To that extent, and the fact that the country survived several turbulent decades in the aftermath of Independence, can to a considerable extent be ascribed to the ability of nationalist leaders to challenge the British view that ethnic and communal differences were irreconcilable and thus incompatible with ideas of peace and economic development. The framework, structure and constitutional order and system developed after 1950 tended to foster an inclusive and reformist agenda that seemed to have in-built mechanisms to satisfy competing demands from communities across India.

Comparisons with how Pakistan has fared again tend to bring out some of the resilience and strength of the Indian system. The fault lines exposed during the trauma of partition in 1947, additionally seem to have played a part – on both sides – in re-setting their policy priorities with reference to their differing understanding of their own histories.





2- Dr. Amer Al-Tamimi - Kuwait

The Free-Market Economy and Development Challenges!

Theoretical Starting Points:

Adam Smith, the Scottish philosopher of the eighteenth century, was more significant in his contemplation of market economics. Smith claimed that the market determines economic performance, emphasizing that individual needs and human requirements lead to productive output. Furthermore, Adam Smith noted that profit maximization is the primary incentive for capital deployment, determining the beneficial and profitable economic projects and sectors. It is well-known that Smith's ideas accompanied the First Industrial Revolution, which began in England in 1760. This industrial revolution facilitated the transformation of production means and methods and the development of economic mechanisms and tools. When discussing the governing theory of free-market economics, one must delve into reading Smith's book "The Wealth of Nations," which he worked on from 1767 to 1776. The manufacturing that commenced in Europe during that period marginalized agricultural activity and encouraged migration from rural to urban areas, as cities became attractive industrial centers for labor. Undoubtedly, manufacturing enabled the creation of crafts and main and supporting jobs, replaced traditional professional interests, and hastened demographic transformations in various European countries, England, and the Americas.

The world has undergone numerous economic stages since the beginning of creation, but economic theories emerged prominently during the eighteenth and nineteenth centuries. Economics remained tied to free labor and capitalist applications until socialist economic theories emerged, most notably the Marxist theory. This theory spurred the Bolsheviks in Russia to overthrow the imperial rule in 1917 and transition to a command economy system. This system led to the restriction of private ownership and employed coercive methods in management, marketing, and production, encompassing all sectors including agriculture, manufacturing, and services. Additionally, it imposed price controls. Undoubtedly, this economic system reinforced political dictatorship by institutionalizing a single-party system. After World War II, the scope of the command economy system expanded to include China, North Korea, and Eastern European countries such as Bulgaria, Romania, Hungary, Poland, and Czechoslovakia, then extended to include Cuba. Naturally, Marxist theory emphasized the importance of transitioning from a capitalist system that promotes manufacturing and establishing a working class capable of providing the objective conditions to a genuine socialist system.

Impact on the Arab World:

It is certain that Arab economies, especially since the beginning of the eras of independence from colonialism or mandates, have been influenced by various intellectual propositions related to the design and management of the economy. Many Arabs have received education in sciences and humanities at prestigious Western universities, while others have acquired knowledge in Arab universities such as the University of Cairo, the University of Baghdad, or the University of Damascus, and have been influenced by known economic theories. Additionally, there are political parties and groups that have adopted liberal or socialist ideologies, while others have embraced religious thought or political Islam. These groups have formulated their economic visions and advocated for them. Several groups have managed to influence the governance system in economic life by either aligning with or influencing the ruling systems that assumed power, especially after the military coups in the early 1950s. It can be argued that until the late 1950s or perhaps the beginning of the 1960s, the economic systems in Arab countries operated based on the mechanisms and tools of free-market economics. There was a significant role for businessmen and workers within the framework of the private sector, and they played a crucial role in generating wealth, producing various sectors, creating job opportunities, and providing tax revenue to governments to finance their activities and core functions.

The role of the state has become significantly important in the economic sphere, as it has undertaken ownership and management of vital facilities such as education, healthcare, electricity, water production, communications, and public transportation in various forms and means. Many activities that were previously operated under private ownership and management have been acquired or nationalized by governments. In some cases, as seen in the Gulf countries, these activities were established by the state after benefiting from oil wealth. Naturally, there were financial investments by individuals and foreign or non-Arab institutions in countries such as Egypt, Algeria, and Libya, which were seized by governments, and their owners were deported. National private institutions also faced nationalization and confiscation in the early years of the 1960s in countries like Egypt, Syria, and Algeria. This included significant production institutions such as textile factories in Egypt and Syria, or grape farms in Algeria. In other countries like South Yemen, even the fishing boats owned by small fishermen were not spared from confiscation and nationalization. Consequently, free economic activity became stigmatized and condemned in the minds of many Arab citizens. The transitions towards a command economy have had varying impacts on production, development, job opportunities, and living conditions. These are valuable metrics for assessing the feasibility and effectiveness of economic orientations.

Economic Rentierism:Top of Form

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The command economic model in Arab countries has blended with rentierism model, where the state has taken responsibility for providing educational and healthcare services, as well as supporting vital facilities such as electricity, water, and infrastructure. Additionally, the state has worked to provide employment opportunities for those entering the labor market in government departments, public institutions, and state-owned companies. These policies have resulted in concerning inflation in government employment and the public sector, with significant funds allocated in annual government budgets through current expenditure mechanisms. These fiscal policies were followed in countries that adopted socialist ideologies, state capitalism, and oil-rich Gulf states, leading to a significant marginalization of the role of the private sector. For example, the Egyptian economy is one of the most important in the Arab world in terms of population size and political stature. Until the end of the 1950s, the social organization of production was characterized by agricultural dominance, limited industrialization, and an expanding services sector. The management of the July 23 Revolution was able to develop industry to some extent, but the industrialization relied heavily on consumer industries. The agricultural sector, which was dominated by large landholdings belonging to a few owners, was transformed after the revolution through various agrarian reform laws into small holdings distributed among small farmers. However, these small holdings did not lead to increased agricultural production; rather, many of these new smallholders converted agricultural land to different real estate uses, and many migrated to larger cities in search of jobs, crafts, and livelihoods.

Underdevelopment and Economics:

Before the July 1952 revolution, the population of Egypt, as stated in the Annual Statistics Book (1949-1951) issued by the Statistics and Census Authority under the Ministry of Finance and Economy, was approximately 16.8 million, with 76 percent of them suffering from illiteracy. At that time, agriculture relied on limited crops, including wheat, barley, and maize. Historically, the cultivation of cotton was introduced by Muhammad Ali Pasha, followed by the cultivation of sugarcane. The new regime worked on developing land ownership through agrarian reform laws and promoting education in rural and urban areas, with aiming to educate women and enhance their social status and role in the economy. Industrialization mechanisms were essential for improving living standards and providing employment opportunities. Naturally, the private sector, consisting of Egyptian entrepreneurs and others who migrated from the Levant, Greece, Italy, Turkey, and elsewhere, operated in Egypt. However, they were apprehensive about the measures the new regime would adopt regarding trade freedom, private ownership, and labor market regulation. Consequently, some of them suspended their activities and emigrated from Egypt. Additionally, government measures led to the confiscation of rights and nationalization of their businesses. This significantly weakened the performance of the private sector which was marginalized to a great extent, and the government resorted to establishing cooperatives and state-owned companies to undertake activities in which the private sector no longer played a vital role.

Domination of the Oil Economy:

The Arab economy, which has made attempts since the signing of the Joint Arab Market Agreement in 1964 to achieve integration, still suffers from structural difficulties and distortions(3). There are definite challenges, including the continued significance of the oil and gas sector as a primary source of income in key Arab countries such as Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Libya, Iraq, and Algeria, in addition to the relative importance of the sector in countries like Egypt, Bahrain, Oman, and Syria. It is well known that oil faces challenges due to fluctuations in energy economies and the efforts of major consumer countries to provide clean energy alternatives and implement agreements such as the Paris Agreement. Although oil and natural gas represent significant revenue for oil-producing countries in the Arab world, many other Arab countries indirectly rely on oil revenues through aid, soft loans, and remittances from their citizens working in Gulf and other oil-producing countries. The oil and gas sector has become state-owned in most oil-producing Arab countries since the mid-1970s. This includes not only crude oil production but also refining, petrochemical activities, natural gas production, liquefied natural gas, and sometimes the distribution of refined products or oil tankers. There are now Arab countries that have begun to consider the possibility of relying on international oil companies for oil production and refining, such as Iraq, Egypt, and Saudi Arabia, or entering into partnerships with them. Naturally, such companies have become necessary and beneficial, as the development of the oil industry and ownership of global partnerships with technical capabilities emphasize the importance of leveraging these developments, enhancing managerial capacities, and empowering national labor to gain experience and technical skills.

The Population and Labor Force:

A report from the Arab Monetary Fund, issued in May 2023, highlights one of the most significant challenges facing Arab economies: the high unemployment rates, especially among young people entering the labor market. Unemployment stems from fundamental economic factors, including weak investment in productive sectors and poor living conditions that hinder demand for goods and services. However, there is also a demographic crisis characterized by high population growth rates in many Arab countries. The population of Arab countries is estimated at around 468 million, with individuals aged between 10 and 24 years constituting 28% of this population. Many of these individuals are expected to enter the labor market. Population growth rates vary from 1% in Tunisia to 5% in Oman. However, fertility rates remain high compared to the global average, with 3.1 children per woman of childbearing age, despite a decline from the 1990 level of 6.2 children per woman. Due to the absence of effective development policies in various Arab countries, any increase in population numbers will represent an economic burden.

The Gross Domestic Product (GDP) and Debt:

The Gross Domestic Product (GDP) for all Arab countries in 2023 is estimated at around $3.5 trillion. Saudi Arabia's share is approximately $1.1 trillion, and the United Arab Emirates' GDP is $509 billion. Meanwhile, Egypt's GDP is $398 billion. The GDP varies across the rest of the Arab countries, ranging from $255 billion for Iraq to $25 billion for Sudan. Arab countries suffer from security challenges and internal conflicts that have disrupted economic life, pushing wide segments of their populations to the brink of poverty and exacerbating unemployment. Growth rates have declined rapidly over the past decade, especially in countries like Sudan, Iraq, Lebanon, Syria, and Libya. It is known that Arab countries still operate under command economies. Arab economies grappling with external and internal debts have engaged in lengthy and complex negotiations with the International Monetary Fund (IMF) and global financial institutions to secure new financing to meet their basic obligations. They have also been subject to directives from these institutions regarding financial and economic reforms, yet mechanisms for privatization and stimulating the private sector have not been fully implemented thus far.

Bitter Experiences:Top of Form

The experiences of Arab socialist economies are filled with valuable lessons that emphasize the importance of transitioning to free economies based on market mechanisms and private initiatives. Economies that underwent socialist experiments, such as Egypt, Syria, Algeria, and South Yemen, suffered from economic development setbacks, declining living standards, and poor resource allocation. These economies relied on coercive mechanisms to manage their economies, leading capital holders to emigrate. The economic management of resources and institutions relied on inefficient elements, including military personnel or unprofessional bureaucrats. The goals adopted by these regimes were not realistically linked to the requirements of economic development, or the efficient management of financial, economic, and human resources. Instead, they focused on liberating rural areas from feudalism without specifying how to enhance agricultural production and increase farmers' productivity rates. Similarly, they focused on industrial liberation from bourgeoisie ownership and domination without entailing a strategic plan to enhance and diversify industrial production, identifying viable areas in the industry, or utilizing modern technologies brought by successive industrial revolutions. Moreover, decolonization meant cutting ties with advanced industrial countries and not benefiting from their economic experiences or partnering with their companies to develop beneficial and profitable activities in Arab countries. Bureaucratic dominance hindered any initiatives from the business sector, while the prevailing political culture exacerbated hostility towards the private sector and business class. Thus, attempts to liberalize the economy and accomplish privatization processes in countries subjected to socialist regimes stalled due to this culture, which rendered economic conditions incompatible with the philosophy of a free market economy.

Reform attempts:

The Arab Development and Social Fund's report, "Development Challenges in the Arab World: Where Are We Going?" authored by the former Director-General and Chairman of the Board, Abdul Latif Youssef Al-Hamad, dated November 10, 2009, indicates that from the early 1960s to 1985, the public sector predominated and productivity declined. Arab labor productivity equaled 18% of American labor productivity, down from 32% at the beginning of the 1960s. Former President Anwar Sadat remains a pioneer in economic reform when he adopted Law 43 in 1974. This law was issued after the October 1973 War in an attempt to change economic systems and adopt a more effective development path. The law's provisions specified the potential for Egyptian businessmen to participate with Arab and foreign businessmen in owning projects and investing in various sectors. The law emphasized creating a conducive environment for establishing a financial and monetary center in Egypt, providing adequate guarantees against non-commercial risks, and offering suitable incentives to encourage investment.

There have been economic reform experiences in Morocco and other Arab countries, but their outcomes have varied. The International Monetary Fund (IMF) notes that Morocco entered a phase of economic reform at the beginning of the current century, following the accession of King Mohammed VI to the throne after the passing of his late father, King Hassan II. Moroccan authorities realized that improving living standards and enhancing quality of life require strengthening the role of the private sector and reducing reliance on government intervention in economic activities. The government worked on reforming fiscal policies and developing monetary policy to keep pace with international changes. Despite facing challenges over the past two decades due to international and regional crises such as the global financial crisis in 2008 and the repercussions of the Arab Spring movements in 2011, Morocco managed to undertake reforms and develop significant developmental projects relying on the private sector and foreign investment inflows. Morocco succeeded in raising the standard of living by about 30 years compared to 1960, attributed to spending on healthcare and improving the quality of education. Morocco suffered from the debt crisis in Europe, where demand for Moroccan exports declined, leading to an increase in the deficit in the balance of payments. However, this changed in 2019, and the current account deficit decreased to 3.7% of the gross domestic product. Undoubtedly, fluctuations in oil prices have had significant effects.

Arab Proposals:Top of Form

The amendments to economic systems have varied in degree over the past decades, with distinct progress in Morocco, satisfactory developments in Egypt, and slower pace in other Arab countries.

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Is there a governing economic philosophy in Arab countries, and what are its clear features? The Arab library is replete with significant publications on economic philosophy. The book "Philosophy of Economics: A Study of Economists' Biases and the Unscientific Foundations of Economics," authored by the late Dr. Jalal Amin, is considered one of the most important of these publications. Dr. Jalal Amin discusses the importance of understanding the differences in economic perspectives, upon which the economic system and laws governing various economic sectors and related activities are formulated. In his book, the late Dr. Jalal Amin adds that economic and social theories are not applicable for every time and place(8). It is evident that life, its developments, and the fluctuations in economic activities, where one activity dominates over another, such as the industrial dominance over agriculture after the first industrial revolution in Britain and then Europe, paved the way for economists to propose new philosophies and ideas. It is undeniable that significant thinkers over the past three centuries have enhanced economic thought and introduced socially relevant values to economics, as Marx, Adam Smith, Ricardo, and others have done. In the Arab world, several economists emerged in the twentieth century, among the most prominent of whom were Egyptians such as Ibrahim Shehata, Ibrahim Aweis, Ismail Sabri Abdullah, Jalal Amin, Ramzi Zaki, Sameer Amin, Fouad Morsi, Mohammed Saeed El-Naggar, Nader Firjani, and others. Additionally, Moroccan economists have enriched the economic intellectual arena, including Fathallah Walou, Osman El-Sulaimani, Abdelkader Ben Slimane, and others.

Many Arab economists believed that socialism and the inclusive economy “command economy” system would be the remedy to trigger economic development in Arab countries and liberate them from dependence on other countries, often described as colonial powers. However, the experiences in Arab countries, previously mentioned, have proven the need for a critical reevaluation of economic conditions in Arab states. This is especially true for countries that have adopted concepts of a leading state role in the economy or Gulf states that have relied on rentierism in managing their economies and reinforced dependence on the state. Free-market economics may result in problematics regarding wealth distribution or the fairness of that distribution, but mechanisms exist to overcome these issues, such as taxes on corporate net profits and individual incomes through a progressive tax system, as well as value-added tax or sales tax on luxury goods. A free-market economic system does not imply that the state abandons its essential role in providing education and healthcare. In advanced capitalist countries like the United States and Britain, education is available free of charge for all, and Britain extends universal healthcare coverage to everyone. Naturally, there are private schools and universities alongside government educational institutions in European countries and the United States. Private healthcare institutions compete with government healthcare facilities. It is crucial to emphasize that the aspiration for efficient economic performance that avoids wastefulness of public funds necessitates the involvement of the private sector, openness, and attracting investments for employment in various vital sectors.

Wise Management:Top of Form

The philosophy of free-market economics, as stated by Adam Smith, revolves around the importance of capital holders generating profits on their financial investment, the thing that necessitates wise management and cost control. Government bureaucracy, especially in Arab countries, has proven inefficient in managing facilities and economic institutions, leading to increased production costs. When Arab countries decided to nationalize and own utilities such as electricity, water, telecommunications, and transportation, they failed to achieve beneficial financial outcomes for the public treasury and relied on pricing the services under the subsidy system that cost the public treasury substantial funds. The private sector can own and manage these utilities, abolishing support systems for services and fuel to incentivize the private sector to control costs and improve product quality, provided an objective competitive environment is ensured to enhance efficiency. Saudi Arabia, Bahrain, the United Arab Emirates, and Oman have succeeded in improving performance and reducing costs in recent years after undergoing structural transformations while simultaneously implementing consumer-friendly pricing. Important factors in achieving these objectives include the use of new technological systems and leveraging partnerships with global companies and institutions specialized in various activities. This implies that breaking free from state dominance is linked to openness to foreign investment.

Are there obstacles to privatization and structural reform in Arab countries that hinder their transition to economic systems based on the philosophy of free-market economics? There are indeed numerous obstacles, with the most significant being the entrenched political culture that has developed over the past few decades, elevating the role of the state to a sacred status immune to criticism, rationalization, or reform. Additionally, the role of the state in countries that have adopted a state capitalism system or those that rely on rentier economics has made government employment, or what Egyptians refer to as "al-Meeri," one of the most important objectives for new entrants or those seeking employment. Naturally, when the role of the private sector is marginalized, job opportunities within it shrink or become less attractive, especially if wages and salaries are lower than those provided by the government for its employees.

Objective Problematics:Top of Form

Other obstacles lie in the pricing of goods and services. For many years, governments have relied on subsidy systems for basic food items, fuel, water, electricity, and transportation, making costs to consumers heavily subsidized and affordable to a large extent. When reforms are implemented, subsidy mechanisms and tools must be privatized or at least guided, resulting in price increases for consumers, especially those with limited incomes. The private sector must adopt pricing systems that take into account the actual costs of producing goods and services. Governments have borne the high costs of producing many goods and services and offered them to consumers at low prices. This issue must be addressed, and consumer acceptance of economic pricing systems may not be achieved until after a while, and not after a competitive environment is established across various activities and sectors, harnessing appropriate technological systems to reduce costs through competitiveness, which has proven to be the optimal means adopted in advanced economies, reinforcing the supply and demand system to activate suitable and acceptable pricing for consumers. Undoubtedly, some Arab countries, or a number of them, have modern markets where specialized stores, restaurants, hotels, and other service institutions thrive. However, most institutions and establishments still represent a limited contribution to the gross domestic product, as key activities remain owned and managed by the state.

There are cultural and political obstacles that hinder the process of reform and transformation and reject the philosophy of free-market economics. As previously mentioned, political orientations and the resulting social and cultural transformations have imposed mental restrictions on the majority of citizens, hindering their ability to initiate businesses or exert free efforts to generate income and wealth. With the absence of the owners of wealth that has been nationalized or marginalized during past decades, wealth creation by beneficiaries of rentier and authoritarian systems occurs in the absence of peaceful economic standards and efforts and perseverance in working through speculation or administrative and political corruption. Many of the newly wealthy have benefited from their proximity to political decision-makers or by reaching advanced administrative or political positions, enabling them to build their fortunes without significant effort. Undoubtedly, oil wealth has enabled many influential individuals to accumulate significant fortunes. These fortunes may have prompted some of them to establish companies and institutions that have become important in various Arab economies. When it comes to cultural obstacles, there is a long journey ahead to reaffirm the values and concepts of free-market economics, which focus on private initiative, risk assessment, and reliance on developing money or wealth through patient and long-term individual or collective activity.

How can the role of foreign investment be enhanced in building Arab economies? Arab countries have long been cautious in dealing with foreign investors despite amendments to laws and incentives to employ foreign capital in various activities and businesses. It is undeniable that capital flows to Arab countries have not been smooth, as business leaders have demanded significant amendments to the economic systems and legislation governing them. Additionally, the concerns raised by delegations from the International Monetary Fund and the World Bank regarding economic structures and the complexities outlined therein, as well as the hindrance of currency exchange rate liberalization, have not been conducive to the influx of foreign investments. However, efforts made by governments in Egypt, Morocco, Algeria, Syria, and the Gulf Arab states have bolstered investor confidence, making them more assured of the potential for economic openness in this region of the world. Challenges persist in creating attractive economies due to limited sovereign resources, low living standards, and declining proficiency among learners and professionals owing to the deterioration of the educational system in many Arab countries. Cultural barriers and value systems also contribute to an environment that discourages foreign investment. However, it is imperative to emphasize that openness and the establishment of free-market systems in Arab countries require the presence of foreign capital, enabling the utilization of modern technologies, necessary funds, and competent management.

Foreign Direct Investment (FDI):Top of Form

Foreign Direct Investment (FDI) can help bridge the financing gap faced by countries like Egypt, Algeria, and Morocco, where the capabilities of the local private sector remain limited, and the requirements of modern projects call for investors with both capital and technology. Therefore, accessing specialized giant companies, such as qualified petroleum companies capable of developing production fields, refineries, and petrochemical works, underscores the importance of cooperation and partnership with them. For example, Kuwait aimed to develop fields in the northern part of the country to increase production capacity and alleviate stress on traditional fields plagued by stress and technical issues. It became evident that these fields required advanced technologies and expertise. Therefore, negotiations were conducted with major oil companies for partnerships between the National Petroleum Corporation and these companies. However, progress was hindered by the insistence of the companies on revenue sharing while the government preferred to treat them as operators receiving fees. The government insisted that the companies' work in those fields be based on service contracts and invited companies including British Petroleum (BP), Total from France, Royal Dutch Shell, and Chevron. The discussions failed to find a mutually agreeable formula, leading to the cancellation of the project, which could have added 800,000 barrels per day to production capacity.

Egypt finds itself in a challenging position at present, with no alternative but to encourage foreign direct investment (FDI). Some may argue that Egypt began its journey of economic openness since 1974(9), and that there are foreign companies operating in Egypt, including major oil companies in the oil and gas sector. Recently, the Ministry of Petroleum summoned a number of foreign companies to invest in the sector, raising the total investments of foreign oil companies operating in Egypt to approximately $9.0 billion(10). This sector has become vital for Egypt, as it meets domestic consumption requirements and generates sovereign revenues through exports. During the year 2022-2023, Egyptian gas export revenues amounted to around $6.5 billion, with plans to increase it to $10 billion in the coming years. Egypt's petroleum production reaches 580,000 barrels per day and approximately 6.2 billion cubic feet of gas per day. However, increasing domestic consumption limits the benefits of exports. Nevertheless, the presence of foreign companies has enhanced capabilities and enabled meeting domestic consumption requirements, while also providing a significant portion for exports to generate income for the country. It is evident that the presence of these foreign companies has enhanced the professional skills of Egyptian workers and fostered vital partnerships between the Egyptian private sector and foreign companies in an important sector. Additionally, partnerships between the public sector and foreign companies have also been established.

Tourism:Top of Form

The tourism sector in Arab countries has traditionally been monopolized by the state, particularly in many Arab countries, especially in large hotels and resorts. However, the private sector has invested in small and medium-sized hotels and inns. Following the first oil shock, Egypt, Tunisia, Morocco, and Lebanon attracted many Arab and foreign investors who injected significant funds into the sector, perceiving it as promising. Reports indicate that foreign direct investment in the tourism sector in the Middle East and Africa reached $2.6 billion in 2021(11). It appears that Saudi Arabia has secured a significant share of these investments due to its remarkable economic openness and strategic prospects adopted by the state. The tourism sector in the Gulf region is poised to create significant employment opportunities, with expected investments in Saudi Arabia reaching approximately a trillion Dollars until 2030. A substantial portion of these investments is expected to come from foreign investors who have expressed confidence in the prospects of the Saudi economy and its ability to attract tourists from around the world, particularly after the development of religious sites and the encouragement of religious tourism, including Hajj and Umrah, as well as the development of areas along the Red Sea and the Arabian Gulf. The state plays a role in developing infrastructure, providing conducive institutional conditions, and enacting incentivizing legislation. However, the Saudi government relies on the private sector to invest funds and engage in beneficial partnerships with foreign investors to develop funds or wealth through patient and long-term individual or collective efforts. Tourism extends beyond hotels, resorts, and furnished apartment buildings to include transportation modes such as taxi companies, restaurants, and cafes. These are small or medium-sized businesses that many citizens with small capital can undertake. These businesses may thrive when there is a tourist influx into the country, in addition to the importance of regulatory laws that provide privileges and exemptions. Consequently, tourism revenues should include revenues from hotels, airlines, and all entities operating in the sector in one way or another. Global tourism revenues are estimated at around $1.4 trillion in 2023, equivalent to 90 percent of revenues in 2019 before the COVID-19 pandemic(12). However, how is the current state of Arab tourism? Tourism and transportation data indicate that the region witnessed a 46.9 percent improvement between 2021 and 2022, with visitor numbers increasing after overcoming the COVID-19 pandemic, and revenues reaching $107 billion. Gulf countries are increasingly interested in the sector, with attempts to enhance its contribution to the gross domestic product. The United Arab Emirates expects tourism to contribute 10 percent. Oman has also intensified efforts to support the sector, allocating $5.4 billion for investment and identifying 12 integrated tourist complexes, 24 local tourism projects, and 124 hotels and inns. These projects are expected to incentivize the private sector to invest in them or in related projects.

Saudi Arabia aims to attract 100 million tourists or visitors as part of its 2030 plan or vision. To achieve this, it is working on constructing hotel and resort projects with a new capacity of 315,000 hotel rooms. It also seeks to establish a new airline company. Saudi Arabia's vision focuses on a pivotal role for the private sector, while the state undertakes infrastructure projects and provides institutional and legal conditions that empower the private sector. The political administration has recognized the importance of work and the ability of its owners to study projects, ensure their viability, and identify commercial risks, while the state provides protection from political and non-commercial risks. When the population, as is the case in Saudi Arabia, the rest of the Gulf countries, and many Arab countries, is predominantly young, these activities enable job opportunities and professional skill development. As is known, all Arab countries suffer from limited employment opportunities for citizens in the private sector, with the majority of workers being concentrated in government departments, government-owned companies, or those affiliated with the public sector. Therefore, the challenge of establishing businesses remains significant.

Capitalist System’s Transformations:Top of Form

The capitalist system, or the free market economy, has experienced crises over the centuries and decades, yet it possessed mechanisms for self-reform and overcoming such crises. One of the most significant crises in the capitalist economy was the collapse of the stock market in New York in 1929, after stock prices inflated and then plummeted, leading to major bankruptcies for numerous companies and businessmen, affecting banks, creditor companies, and public finances. The Great Depression, from 1929 to 1939, was the most significant shock to the global economy, not only affecting the United States but also various countries worldwide. During the period from 1929 to 1932, global GDP declined by 15 percent. The crisis led to a decline in personal incomes, prices, tax revenues, and profits. Additionally, global trade declined by more than fifty percent, and unemployment reached record levels, reaching 23 percent in the United States and up to 33 percent in other countries. Lord John Maynurd Keynes played a pivotal role in proposing theories that contributed to saving the capitalist system in the 1930s. Keynes, a British economist (1883-1946), is considered the founder of Keynesian economics or modern macroeconomics. In his theory, he outlined how governments could influence economic performance through mechanisms of public spending to stimulate various activities and boost demand to counter recessions. In his famous book "The General Theory of Employment, Interest, and Money,(13)" Keynes emphasized the importance of government intervention in developing projects to reduce unemployment. He also argued that unchecked capitalism would have disastrous effects and required reform, not only for its protection but also to enable it to compete with other economic systems, including communism. During his presidency, which began in 1933 during the Great Depression, President Franklin Roosevelt developed financial policies to address unemployment, adopting The New Deal philosophy, which relied on state spending to create job opportunities while attempting not to significantly exceed expenditures over revenues. However, Keynesian proposals represented a significant shift in capitalist economic theory, which had previously excluded any role for the state in project execution or business establishment. Subsequently, they faced criticism from the Chicago School of Economics and its leader(14), Milton Friedman (1912-2006), who criticized Keynes's assertion that consumption was the primary element in economic recovery. Friedman argued that spending and accumulating public debt always lead to inflation, reducing the value of money. The Chicago School remains one of the most important economic institutes opposed to government intervention in economic activity to this day, emphasizing the importance of adopting appropriate monetary policies to stimulate economic activity.

It can be noted that one of the Arab economists contributed deeply to the study of capitalism. The late Dr. Fouad Morsi, who had a Marxist inclination, published a book titled "Capitalism Renews Itself" as part of the "World of Knowledge" series in Kuwait in March 1990. Dr. Fouad Morsi emphasized in his valuable book that capitalism "possesses more vitality than its adversaries imagined. It has overcome the most dangerous contradictions at the right moment.(15)" He affirmed that contemporary capitalism distinguished itself by its dynamic response to the demands and changes of the era. It also succeeded in developing productive mechanisms. The book raised the importance of technological advancements in enhancing the capitalist system. Thus, socialist theorists acknowledged the capabilities of the free-market economy to survive and evolve. Undoubtedly, since the 1930s, capitalism has strengthened social welfare systems, retirement schemes, and the protection of the impoverished, and has developed tax systems for greater equity. It incentivized corporations and entrepreneurs to adopt social responsibility to contribute to enhancing wealth distribution fairness. Capitalist system is no longer portrayed as savage, as some socialist theorists described it, but rather, there are mechanisms and tools to mitigate such savagery and emphasize the importance of investing in improving the quality of life and enhancing the living standards of those with limited and modest incomes, as well as providing healthcare and free education for all citizens.

Establishing a Free Economy:Top of Form

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How can a modern free-market system be established in Arab countries? As previously mentioned, Arab countries have transitioned over the past seventy years from simple or modest free-market economies to inclusive or rent-based economies, depending on levels of wealth and the availability of natural resources. These economies have not yet embraced knowledge and technology, as seen in countries like Singapore, Taiwan, South Korea, and Japan before that. Inclusive and rent-based economies have disrupted political life, hindered economic development, and impeded educational progress. Over the decades, we have observed a significant number of graduates from universities and higher education institutions entering the labor market, yet we have not witnessed distinguished initiatives from these graduates to develop distinct transformative industries with relative advantages. Natural resources have been exploited using traditional methods, initially relying on specialized foreign companies, such as global oil companies. However, after nationalization in the mid-1970s and the assumption of national management of these oil companies operating in Arab fields, the number of employees increased while productivity declined, except for Aramco, which maintained exceptional relationships with foreign companies and employed modern production and management methods. Other non-oil Arab countries have not sought to improve productivity in economic sectors such as textiles, iron and steel, and food industries. All these facts underscore the importance of embarking on economic projects that adopt free-market principles and invest funds in useful areas capable of achieving added value.

A comprehensive system of laws for economic life should be formulated, emphasizing the importance of free-market principles, providing protection for the rights of investors and businessmen, and encouraging the attraction of foreign capital and partnerships with specialized global companies engaged in diverse activities and possessing modern technologies. Free economic activity in our world today does not entail enslavement or exploitation of workers or illegitimate profiteering at the expense of consumers. Therefore, economic laws must take into account the rights of workers, ensuring healthcare provision, enhancing training and qualification during employment, and guaranteeing social security and comfortable retirement benefits. It is self-evident that state rights must be ensured through fair tax systems that do not deprive the state of its rights or create an economic structure that drives capital flight or leads to corporate bankruptcies. As previously emphasized, free-market economics entails competition among companies in the same sector and providing appropriate mechanisms to enhance competition, serving various objectives including enabling companies to develop their mechanisms, tools, and products qualitatively. This involves cost control, improving workers' qualifications, and developing marketing capabilities both domestically and internationally. More importantly, free-market economics means investing in research and studies that contribute to enhancing productivity, innovation, and creativity, as observed now in various fields and activities, notably in telecommunications and media.

Will Arab countries be ready to develop the capabilities for advancing a free-market economic system in the coming years, as seen in many emerging Asian countries like South Korea, Taiwan, and Thailand? There is a need for cultural and educational changes and structural reforms in each Arab economy. At the same time, the importance of privatization and transferring ownership from the public sector remains crucial and requires informed political will. Popular achievements, represented by rights to free education, adequate healthcare provision, social security guarantees, and retirement rights, must be protected and legally legitimized even if they are liberated from the state’s role in economic life. The state must transfer all activities that individual initiative and the private sector can undertake and bear their risks. These include commercial trade, distribution, manufacturing industries, and activities related to petroleum and gas, except for the state's monopoly over natural resources such as oil and gas, but not production, distribution, export, refining, and petrochemicals. Moreover, the private sector should take over all public transport activities by road, sea, and air and ensure high-quality standards comparable to the best transport systems globally and adapted to the latest technologies. Additionally, the management of public facilities related to infrastructure, such as ports, airports, electricity, water production and distribution, and wired and wireless communication systems, should be transferred. These activities may require significant capital, not available to the national private sector in any of the Arab countries, necessitating openness to foreign investment and encouraging global companies to enter into partnerships with national institutions.

Developing a free-market economic system in any Arab country requires important interventions in the mechanisms and tools governing economic activity. There is a significance in enhancing financial and banking systems, enabling them to adapt to international standard requirements such as Basel Capital Adequacy Frameworks and Transparency Systems. These financial institutions must have asset sizes and capital bases that allow them to be transparent and exposed to known risks to borrowers. Businesses and activities require continuous financing with varying terms depending on the nature of those activities. However, one of the most important variables required is empowering the banking system to be the engine of financing for all businesses and activities instead of relying on public expenditure mechanisms. This system can also finance government operations during different periods, especially when revenues decline and governments must rely on deficit financing. Financial systems’ management must provide necessary revenues through traditional activities such as lending operations or investing in priced financial instruments, both domestically and internationally. Additionally, the banking system must be led by vigilant central banks aware of the importance of monetary stability, following cautious monetary policies consistent with the monetary policy variables of major central banks worldwide, such as the Federal Reserve System, the European Central Bank, the Bank of England, and the Bank of Japan. Moreover, there is an importance in the ability of this system to maintain financial reserves in hard currencies sufficient to protect the exchange rate of the national currency.

On the other hand, economic activities that could become significant in Arab countries must capitalize on their relative advantages and its compatibility with the data of national economies. Investment should not be made in projects or businesses lacking minimum economic viability, as this could lead to the bankruptcy of their owners and the layoff of their employees. Governments can rely on programs to develop businesses and nurture small and medium-sized enterprises to enhance the capabilities of those involved in these projects. Programs are available to learn from the lessons and experiences of advanced and emerging countries, which elevate levels of management, financing, and dealing with distribution and export mechanisms. Economic activity is no longer a hobby or a simple experiment, as competition now transcends geographic boundaries and relies on cross-border relationships. Undoubtedly, prestigious universities have developed business management programs well, and these experiences can be leveraged if Arab governments decide to establish sustainable and productive free-market economies. The importance of linking business success to vocational training and educational qualification is also a key aspect of contemporary economic activity. As is known, labor in various Arab countries still lacks adequate qualification in many fields of work, including agriculture, manufacturing, oil, and services. Therefore, it is necessary to address these issues efficiently and take advantage of available programs in educational institutions and organizations, and to adopt distinguished vocational training programs so that businesses can become a good field for wealth creation.





B- Socialist Market Economics

3- Dr. Anastas Angjeli - Albania

Social Economy and its Pacifying Role in Market Development



The economy moves forward from the individual selfishness of man to maximize profit, or from the creation of conditions to ensure collective well-being? Putting aside the ecological elements that affect and are accepted by everyone as a collective need, the relationship between individual wealth and collective well-being is one of the most debated theoretical problems of economic thought. In this paper, we will try to answer the following questions: Is it true that only by maximizing profit can we ensure development? Is it true that by ensuring well-being, we guarantee happiness? Is it only the indicator of economic growth (GDP) that should be considered to evaluate the economic and social development of a society or a country? Or should we also analyze indicators and other elements of economic development and   social existence such as: level of well-being and happiness index, economic development of environmental economy, blue economy, circular economy, health, life expectancy, education, the level of technology development, political rights and freedoms, the development of digitalization, cultural and intellectual, etc.?

During the last twenty years, the interest of researchers, policymakers, and individuals with economic potential has been growing in organizations and businesses that do not have profit as their main objective, but respond to a group or community need. Since the last quarter of the 20th century, it has become increasingly clear that these organizations contributed to faster and above all, more sustainable growth in favor of employment, effectively addressing various social problems. They contributed to reducing the levels of inequality, unemployment, poverty, and social discrimination. This is how awareness has increased in the re-evaluation of their role, acknowledging that they represent a social institutional system and an efficient organization for sustainable development that reduces inequality.

Increasingly, humanity has come to believe that economic success should be judged by the happiness of people in a country. There is also a growing consensus about how happiness should be measured. This consensus means that national happiness can now become an operational objective for governments and materialize in an index that many call the "Happiness Index."

In this paper, we aim to highlight the economic and social policies that are being implemented, especially after the financial crisis of 2008, the pandemic, and ongoing military conflicts, such as Russia-Ukraine, Israel-Hamas, etc. These issues will be analyzed theoretically and analytically (with information on developments in Albania) in this paper, also in function of the economy of happiness, in market conditions and with an impact on a more peaceful life. This by analyzing and evaluating some of the main indicators, which have now started to be taken in consideration by many developed countries as : No Poverty.; Zero Hunger; Good Health and Wellbeing; Quality Education; Gender Equality; Clean Water and Sanitary Services; Affordable and Clean Energy; Decent Work and Economic Growth; Industry, Innovation and Infrastructure; Reduced Inequalities; Sustainable Cities and Communities; Responsible Consumption and Production; Climate Action; Life below Water ; Life on Land; Peace and Justice, Strong Institutions ;Partnerships for the Goals; etc. 


Keywords: Social economy, Collective welfare, Non-profit sector, Indicators of social development, Happiness Index, Profit maximization, Economic models, etc.



In contemporary times, the evaluation of a country's economic and social standing involves an expanding array of elements and novel economic indicators. Traditionally, metrics like GDP, inflation, and market coverage were the go-to measures for gauging economic development. Governments and international organizations have historically relied on these indicators, but the landscape is evolving. Complementary indicators are emerging to assess well-being, life satisfaction in cities, and other indirect measures of happiness. It is not only about the theoretical analysis of economic systems but also about the development of theoretical concepts and practical mechanisms for these elements. Welfare economics is one of the relatively new fields of Economic Sciences that exemplifies this trend. In this field of research, most of the authors build a new form of judging the operation of the economic system, far from the Marxist concepts of "Scientific Socialism" where welfare for all was the system's main goal. They are divided into two groups. The main group thinks that general well-being necessarily passes from the individualism of man and his freedom in the market and another group tries to argue that the deepening of inequalities contributes to the destruction of the social basis of the existence of society and is the main factor of the change of systems. While concentrating solely on economic facets - such as income growth and GDP - simplifies the analysis of development and international comparisons, it falls short of offering a comprehensive evaluation. It's becoming increasingly apparent that GDP and individual satisfaction in the free market often exist in apparent contradiction.

In the last 30 years, the level of inequality became a problem even in Eastern countries following the transformations that took place after the fall of the Berlin Wall, especially the inequality created at a very fast pace. Albania was not saved from these ills and the level of inequality continues to worry it, even though the Albanian economy has completed the long, difficult, and arduous period of transition. Here I also must highlight the misinterpretation that often occurs between the success or failure of the economic regime we have chosen and the model, programs, projects, and economic priorities that governments have implemented. This is because, during these 30 years, the Albanian economy overthrew the communist economic model and decided to apply the capitalist market economy (regardless of the quality or standards achieved). Undoubtedly, the level of development of this economy, its quantitative and qualitative standards and developments, and the (unsatisfactory) stage reached so far in the process of integration with the European economy still leave a lot to be done. Therefore, a new model of post-transition economic development becomes more than necessary. As noted by the eminent Nobel laureate Joseph STIGLITZ: "The transition from communism to the market economy represents one of the most important experiments of all time..."



During the last twenty years, the interest of researchers, policymakers, and individuals with economic potential has been growing in organizations and businesses that do not have profit as their main objective but also respond to a group or community need. Since the last quarter of the 20th century, it has become increasingly clear that these organizations contributed to faster and, above all, more sustainable growth in favor of employment, effectively addressing various social issues. They contributed to reducing the levels of inequality, unemployment, poverty, and social discrimination. This is how awareness has increased in the re-evaluation of their role, acknowledging that they represent a social institutional system and an efficient organization for sustainable development that reduces inequality.

The growing interest in "social economy organizations" is also confirmed by the attention that the European Commission has paid to the study of these organizations in terms of legal aspects, their size, and evolution. The limits of this concept vary depending on the legal contexts and social cultures of different countries. In many countries today they are comparable both in economic and legal terms. In some countries, this concept includes only organizations that, according to law or tradition, do not distribute profits to their owners, whereas in some others, cooperatives are also included. We must not forget that in some other cases, there is a tendency to include conventional forms of entrepreneurship that voluntarily undertake some social responsibilities (ILO, 2017). Therefore, both in the scientific literature and legislative provisions, the terms used to identify this sector, are: The non-profit sector, the third social sector, the social economy, the social economy and solidarity, etc. All these terms are used as synonyms for various organizational groups that aim at social growth and not only economic growth.

It is overly simplistic and limiting to equate industrialization with development, a perspective once prevalent in Lewis's economic model. Similarly, tying GDP growth solely to the savings rate and the capital-output relationship, as extensively analyzed in the Harrod-Domar economic model, is an incomplete portrayal. The notion of development as a series of stages that each country must traverse, as depicted by A.C. Pigou in his model, is equally confining. While these models serve as reference points for comparing economic growth between countries, they fall short when the goal is a comprehensive understanding of human development.

The philosophical contradiction between collective welfare and individual benefit, rooted in Platonic and Aristotelian principles, has personally aided in grasping the theories of social equality proposed by the Indian Nobel laureate Amartya Sen. In my view, Sen provides the most structured analysis of collective well-being based on the concepts of economic and social equality. In a meticulously presented argument, Sen contends that economic equality does not automatically translate into social equality. He illustrates this point with a straightforward example: two individuals with equal income, where one is in good health while the other is sick, possess economic equality but not social equality. This simple yet profound example, reminiscent of Plato's teachings, challenges the conventional understanding of equality in contemporary economic thought. It prompts a shift towards a more nuanced consideration of the multifaceted dimensions of equality within society.

Many think that economists see and analyze only numbers and indicators, but in fact, today more and more economic philosophers are being identified who focus on human well-being and not just indicators of economic growth. If we put "Homo Economicus" (Cohen Daniel 2012) at the center of an economic system, we would accept that competition is the basis of development, and that development would inevitably bring inequality. However, the maximization of profit in this economic system did not always help the social development of society and became a factor in a painful restructuring of it. Inequality often became more difficult to manage than poverty, and in many cases, people died not for lack of food but for lack of income. This very concept brings to the fore the concept of protected equality, explained very clearly by Amartya Sen. He builds the problem of inequality based on two concepts.

The first concept of equality is based on needs such as the need to be fed, to have a functional health system, to have the right to education, etc. which he calls "Functional Needs". The second and perhaps even more important concept is that of "Needs Capacity" which represents the ability that the state offers to the population to use functionalities (elements that meet functional needs). So if personal needs show us how we can live, capacities guarantee us the opportunity to choose to live well. Precisely the right of choice responds to different concepts of needs because equality is not something determined from above but is benefited from the ability to freely choose the capacities of needs. It gave the right to individuals to choose the capacities of the needs giving value to equality in their individual concept. It is precisely this right of choice that each individual has to use the capacities that the state offers, which makes it equal in society. For me, it is the most revolutionary and modern concept of equality.

This concept was accompanied by an important distinction and another concept, that of growth and development. While various entities, such as trees, animals, temperatures, and GDP, exhibit growth, it is argued that only individuals and societies truly undergo development. This shift prompts a reevaluation of the concept of economic growth, with increasing emphasis on economic development and societal welfare, as articulated by A.C. Pigou in "The Economics of Welfare." The focus shifts from mere growth to the well-being of individuals.

In continuation of the above ideas, it is necessary to present how contemporary economic institutions can intervene in favor of individuals within a social system. Through the basic theorems of welfare economics, many authors have tried to understand how the action of the market and the state make it possible to acceptably satisfy the individualism of capital and the a priori needs of the community where it operates. In fact, based on the hypotheses of Pareto's theorems, for the correct distribution of the resources of production and consumption factors, a functional connection between the results of a market mechanism and the necessary social desires becomes possible. In light of the above, it is clear that it is not possible to analyze the concept of efficiency and competitiveness separately from that of equality, and moreover, it is impossible to obtain a social order based solely on the driving force of competition. Social welfare refers to the welfare of the whole society. Vilfredo Pareto, in his works such as 'Fatti e teorie' and 'Trasformazione della democrazia,' proposed two methods for quantifying the welfare of a population. The ordinal method analyzes factorial influences on the distribution of resources, measuring efficiency based on economic outcomes. The cardinal method, on the other hand, measures value in monetary terms, incorporating a cost-benefit analysis that considers the effects of income distribution. The ordinal perspective, relying on efficiency, acknowledges the challenges in objectively measuring welfare in monetary terms. Therefore, the ordinal perspective considers the impossibility of an objective measurement in monetary terms, for this reason, it proposes the Pareto analysis in terms of efficiency. From a cardinal point of view, the analysis used is that of cost-benefit, which seeks to include the effects of income distribution. However, the latter is less used, since the problems the model presents for adding variables mean a high degree of inaccuracy in the calculation, creating doubts. Considering the digital transformation, Said Elias Dawlabani and Ashfaq Syed notice not only conceptual or lifestyle changes among the younger generation, but also a reevaluation of social positions within a new value system.



If we acknowledge that every economic phenomenon can be measured, irrespective of the cost-effectiveness ratio, it becomes imperative to utilize economic indicators for analyzing social welfare and phenomena of inequality. Numerous crucial indicators have been acknowledged by international institutions. Additionally, new indicators frequently emerge in various surveys assessing the quality of life in cities, gender equality, and the measurement of human rights concerning health, education, and more. Methodologically, this aspect is underpinned by existing indicators, which will continue to evolve over time.

All scientists agree on one thing: GDP is not a sufficient indicator to determine economic development. There is a growing consensus that alternative indicators are necessary. This is because economic growth, as a standalone measure, fails to capture all dimensions of progress. Consequently, we can no longer view GDP as the sole indicator of development. Another significant challenge is that GDP does not encompass factors essential to measuring "Economic Happiness" because these dimensions are not easily quantifiable in economic terms. Furthermore, it's crucial to note that GDP does not reflect the distribution of material goods within a society. Even GDP per capita falls short in providing this measure, as it simply divides GDP by population without offering a truly representative picture.

Finding that GDP is not a good measure of development, much less sustainable development, other alternative indicators should be sought. In recent years, several indicators have been developed that aim to improve the assessment of the well-being of society. The most famous of them is probably the HDI - Human Development Indicator, now accepted as a calculation protocol by many countries in the world. There are also indices for the ecological level such as the "Green Growth Index, ISEW - "Index of Sustainable Economic Welfare", GPI - "Genuine Progress Indicator," etc.

Today, I would like to dwell a little bit longer on an indicator that the ISTAT of Italy in 2010 included among the measurable indicators of sustainable development, the BES (Benessere Equo e Sostenibile) index, which can start to be applied in Albania by building joint programs with the Italian statistics directorate; the same goes for many other indicators. This index has 130 indicators at the national level that include 12 different dimensions (fields). More specifically, the areas are Health, Education and training, Work and the ratio of working time to free time, Economic well-being, Social relations, Policy of public institutions, Safety, Subjective welfare, Landscape and cultural heritage, Environment, Research and Innovation, and Quality of services.

The combination of indicators according to the relevant fields and the methods for each indicator have made this index very important not only for evaluating the current situation of the population's well-being but also for building social policies in support of specific segments of the population.



In Albania, even though there is an approximation of national legislation to the European one, there is no clear classification or division of social enterprises, making it almost impossible to accurately determine the number of social businesses that operate with these characteristics. Social businesses in Albania can take different legal forms, including NGOs, commercial companies, agricultural cooperation societies, or even savings-credit companies specialized in financial activities, etc.

According to local legislation and Albanian practice, social enterprises are related to the employment rehabilitation of marginalized groups or the provision of services to these groups. An NGO can develop an economic activity, as long as its income does not exceed 20% of the total income, which generally comes from donations. This allows NGOs to not be completely dependent on donors' money but to be able to provide income by themselves, through the provision of services or other forms of activities. If the income from economic activity exceeds the limit of 20%, then the NGO must be registered as a business.

Social businesses in Albania bear the limitations that a small market has in economic development. As a result, the fact that interventions through social businesses can be more focused and surgical is positive, but the possibility of financing and overcoming legislative barriers often hinders the development of this type of business. This also explains the fact why social business has difficulty developing, especially in the mountainous and peripheral areas of the country where it is most needed. In most cases, it operates in the capital to set an example for mountainous areas, but it never arrives there. We highlight here only a few successful cases realized by religious foundations of various religions in Albania.

One of the basic problems of social businesses in Albania is not only the process of their establishment but also the continuity of financing for a relatively long time.

According to a 2019 study by partners operating in Albania funded by the European Union, there were 319 non-profit organizations with a license to provide educational and social services. The study highlights that there is a growing number of NGOs that offer paid services to generate income to support their activity. The type of paid services includes social services, medical, training and consulting, sale of assets, etc.

The Albanian economy is mainly built with a focus on services and agriculture, which occupy around 60% of the workforce. Recently, tourism has also received great development, but employment in this sector is problematic both for its seasonal character and for the specialties required. Social business in our country is mainly limited to the field of services and agriculture, but there are also cases of the creation of craft cooperatives, artisan production unions, etc.

A form of social business for the agricultural sector is mutual cooperation societies, societies similar to agricultural cooperatives, but which in theory can also operate in other economic sectors. The study identifies 106 such societies, but only 67 had an active status.

A form of social business, specific to the financial sector, is savings and credit companies (SCC). They operate based on the voluntary organization of members, who deposit savings and receive loans from these societies. Currently, the Bank of Albania has licensed 14 SCCs and one Union of this type.

As far as social businesses that act as true commercial companies are concerned, their identification from the statistics is impossible, because there is no specific classification for them or even a special code of economic activity. In most cases, they are small businesses, but there are also examples of organizations in the form of limited liability companies. The study estimates that the main challenges for social businesses are the difficulties in accessing available financial schemes, creating networks, and penetrating markets. Being in the first steps of the business cycle, most of them have difficulties in absorbing funds.

In Albania, social business financing schemes are very few. The reality is not very different for the entire Balkans, where financing schemes for entrepreneurship have only been operating for a few years. However, we have sectors where financing and donors have been more available, especially for social entrepreneurship in the field of green economy or in other fields that relate to renewable energies.

Support schemes are very few and there are insufficient funds to support these activities in the long term.

Another problem that is added to that of financing is that of the expertise of social businesses. A social business can rely on a good idea, but the realization also requires a lot of specific knowledge in legal, and economic terms, etc. Even access to this expertise is limited and must be obtained through payment, as these businesses lack funds. Various programs of the European Union have tried to overcome these barriers, but the results have not been the expected ones and we have often encountered inconsistencies, especially in the field of agriculture.

An interesting sector where social business has developed in Albania is that of education, and especially university education. Although it has contributed to the qualitative development of human capital, the consolidation of this market still needs time to cover the demands of the labor market in general and social entrepreneurship in particular.

A characteristic of social business in Albania is the recent introduction of startups. One of the suggestions made by specialists in the field is the establishment of crowdfunding platforms (for the collection of funds) and their use by social enterprises, as an effective means of finding additional funds. Also, it is recommended to offer soft credit schemes that assess the social impact, as well as facilitate the entry into the market of social enterprises, which would help the development of these businesses. Experts also suggest that training programs should address needs such as market research, building a business plan, as well as reformulating ideas based on market needs, and targeting customers, as the biggest difficulties faced by social enterprises. As a small country with a not-yet-consolidated economy, social entrepreneurship in Albania is part of the market, but it is still in its initial stages. It will still take a sufficient amount of time for these initiatives to be more numerous, and to have more funding both from the Albanian Government and from Foreign Donors.



The COVID-19 pandemic, experienced two years ago, served as a catalyst for anticipated and transformative changes in business models, as acknowledged by many representatives in the field of economic science. It is evident that the traditional economic model has revealed vulnerabilities, prompting a reconsideration of conventional business practices. While startups held prominence a decade ago, the current focus has shifted towards Industry 4.0 elements, artificial intelligence technologies, digitization systems, and companies with swift recapitalization of economic assets. Anticipated changes are expected to usher in new business models, with social businesses playing a crucial role in this evolution.

Reflecting on the past decade, the introduction of the first World Happiness Report marked a significant milestone. Exactly ten years ago, the United Nations General Assembly designated March 20 as the International Day of Happiness through Resolution 66/281. Over this period, there has been a growing acknowledgement that economic success should be evaluated based on the happiness of a nation's populace. The consensus on measuring happiness has led to the development of indices like the "Happiness Index," signifying a shift towards considering national happiness as a tangible and operational objective for governments.

Examining the data from this index for some major European countries reveals consistent patterns. Norway consistently holds the top position, followed by Ireland, which has risen by seven places compared to a year ago. Switzerland maintains a steady third place. Notably, even during the peak of the pandemic in 2020, Germany ranked sixth, albeit dropping three places, Denmark secured the tenth position, losing six places, and England stood at 13th place. These rankings are intriguing when contrasted with the GDP of these countries, revealing substantial economic disparities.

If a specialist in the economic field thinks that only one indicator should define a phenomenon, then the economic analysis will be dry, soulless, and, above all, not human. Let's start thinking about society not only in economic terms because then we will understand that it is even more beautiful. In these conditions, we will all be more interested in measuring our happiness and above all the "Economic Happiness of Society." Currently, INSTAT produces 61 statistical indicators, which are updated on the platform for the Sustainable Development Guidelines, realized in cooperation and financing with the UNDP. This Dashboard contains the SDGs with the 17 objectives, where the definitions, direction, alignment with the UN, and the source of information for the production of the indicator are presented. For years, INSTAT has established the UN-INSTAT Joint Data Group, a group composed of members from all UN agencies with the aim of building data in these directions for the World Agenda in 2030. Among the most widespread economic models, today all admit that the system of sustainable growth is the key to all objectives for the year 2030. As the main indicators for evaluating the well-being and happiness of the people, the UN has built indicators for these main directions:

1.          No Poverty

2.          Zero Hunger

3.          Good Health and Wellbeing

4.          Quality Education

5.          Gender Equality

6.          Clean Water and Sanitary Services

7.          Affordable and Clean Energy

8.          Decent Work and Economic Growth

9.          Industry, Innovation and Infrastructure

10.        Reduced Inequalities

11.        Sustainable Cities and Communities

12.        Responsible Consumption and Production

13.        Climate Action

14.        Life below Water

15.        Life on Land

16.        Peace and Justice, Strong Institutions

17.        Partnerships for the Goals 

Without elaborating on all the points, I would focus only on some of them.

1. The fight against poverty. It is estimated that the global pandemic, the war in Ukraine, and events in the Middle East combined will lead to 75-95 million more people living in extreme poverty in 2024, compared to pre-pandemic projections.

2. Zero hunger is another very big challenge of Sustainable Development. In 2020, between 720 million and 811 million people worldwide suffered from hunger, approximately 161 million more than in 2019. Also in 2020, 2.4 billion people, or over 30 percent of the world's population, were on average without regular access to adequate nutrition. The figure increased by nearly 320 million people in just one year. Globally, 149.2 million children under 5, or 22.0 percent, suffered from stunting, stunting (short height for their age) in 2020, down from 24.4 percent in 2015. The number of hungry and food-insecure people gradually increased between 2014 and the start of the COVID-19 pandemic. The COVID-19 crisis has pushed those growth rates even higher and has also worsened all forms of malnutrition, especially among children. The war in Ukraine is further disrupting global food supply chains and creating the largest global food crisis since World War II.

3. Good Health and Wellbeing. The goal, as outlined by the United Nations, entails the cessation of preventable deaths among newborns and children under the age of five by 2030. All nations are encouraged to work towards reducing infant mortality to at least 12 per 1,000 live births and under-5 mortality to at least 25 per 1,000 live births. Additionally, the objective is to eradicate epidemics such as AIDS, tuberculosis, and neglected tropical diseases by 2030. Efforts should also be directed at combating hepatitis, vector-borne diseases, waterborne diseases, and other communicable diseases. The ultimate aim is to achieve universal health coverage, ensuring protection from financial risks, access to high-quality basic healthcare services, and providing safe, effective, and affordable access to basic medicines and vaccines for all.

4.  Quality Education. The goal of Quality Education, as per the UN, aims to achieve several milestones by 2030. This includes ensuring that all girls and boys complete a free, equitable, and high-quality basic education that leads to appropriate and effective learning outcomes. By the same year, the objective is to provide access to quality early childhood development, pre-school care, and education for all girls and boys to prepare them for basic education. The goal is for all students to acquire the knowledge and skills necessary to promote sustainable development, encompassing areas such as education for sustainable development, sustainable lifestyles, human rights, gender equality, the promotion of a culture of peace, non-use of violence, global citizenship, and the appreciation of cultural diversity, as well as recognizing the contribution of culture to sustainable development. Additionally, by 2020, there should be a significant global expansion of scholarships available to developing countries, especially for least developed countries, small island developing states, and African countries, to enroll in higher education. This includes vocational training, information and communication technologies, technical, engineering, and scientific programs, both in developed countries and other developing countries.

5.  Gender Equality. By the end of 2030, the UN aims to achieve these goals: End all forms of discrimination against women and girls everywhere in the world. Eliminate all forms of violence against all women and girls in the public and private spheres, including trafficking, exploitation, and other forms of abuse. Recognizing and valuing unpaid care and work at home through the provision of public services, infrastructure, and social protection policies, and promoting shared responsibilities at home according to national specifics.

6. Clean Water and Sanitary Services. By 2030, this goal aims at the universal achievement of fair, safe and affordable access to drinking water for all. The achievement of access to adequate and equitable sanitation and hygiene for all and the elimination of open defecation, with special attention being paid to the needs of women and girls and people in need. Improving water quality by reducing pollution, stopping littering, and minimizing the release of hazardous chemicals and materials, halving the proportion of untreated wastewater, and significantly increasing recycling and safe reuse globally.

7. Affordable and Clean Energy. By 2030, ensuring universal access to affordable, reliable and modern energy services. By 2030, doubling the global level of improving energy use efficiency and increasing international cooperation to enable access to research and technology for clean energy, including renewable energy, and promoting investment in energy infrastructure and technology for renewable energy production.

8. Decent Work and Economic Growth. Supporting economic growth per capita in accordance with national circumstances and, in particular, ensuring at least 7 percent annual growth of the gross domestic product in less developed countries. Achieving higher levels of economic productivity through diversification, technology modernization, and innovation, and through added attention to high value-added and labor-intensive sectors. Encouraging development-oriented policies that support productive activities, the creation of decent work, entrepreneurship, creativity and innovation, as well as promote the formalization and growth of SMEs, also through access to financial services. Progressively improving, by 2030, global resource efficiency for consumption and production, and striving to decouple economic growth from environmental degradation, in line with the 10-year Framework for Sustainable Consumption and Production Programs, led by developed countries.

9. Reducing inequalities and ensuring that no one is left behind are integral to achieving the Sustainable Development Goals. Inequality within and between countries is a constant cause for concern. The effects of the COVID-19 pandemic seem to be reversing any positive trend of narrowing income inequality. The pandemic has also intensified structural and systemic discrimination. Emerging markets and developing economies are experiencing slow recoveries and widening income disparities between countries. The death toll of refugees and migrants worldwide reached the highest absolute number on record in 2021. Meanwhile, the war in Ukraine continues, forcing even more people from their homes and creating one of the biggest refugee crises.

10. Promoting peaceful and inclusive societies for sustainable development, providing access to justice for all, and building effective, accountable, and inclusive institutions at all levels. Conflict, insecurity, weak institutions, and limited access to justice remain a major threat to sustainable development. The number of people fleeing war, persecution, and conflict exceeded 70 million in 2018, the highest level recorded by the UN refugee agency (UNHCR) in almost 70 years. In 2019, the United Nations recorded 357 murders and 30 enforced disappearances of human rights defenders, journalists, and trade unionists in 47 countries. The births of about 1 in 4 children under the age of 5 worldwide are never officially registered, depriving them of proof of legal identity, essential for protecting their rights and accessing justice and social services. A successful development agenda requires inclusive partnerships – at global, regional, national, and local levels – built on principles and values and on a shared vision and shared goals that put people and the planet at the center. Many countries require Official Development Assistance to encourage growth and trade. However, aid levels are decreasing and donor countries have not fulfilled their pledge to increase development financing. Due to the COVID-19 pandemic, the global economy is projected to contract sharply, by 3%, in 2020, experiencing its worst recession since the Great Depression. Strong international cooperation is needed now more than ever to ensure that countries have the tools to recover from the pandemic, come back stronger, and achieve the Sustainable Development Goals.

These are 10 of the 15 main directions of the UN development goals by the end of 2030.

Sustainable development is about meeting the human, environmental, social, and economic needs of the present without compromising the opportunities of future generations to meet their needs as well. If there is a legacy we can leave to future generations, it is to leave them a more social society than the one we are living in. With a growing population and increasing demands for solutions on the planet, sustainable development is one of the greatest challenges the world faces today and the subject of much debate by politicians and business leaders. Within this sustainable development, social business will be one of the main forms of business models in the future, and the concept of inequality will be managed by governments more easily than that of poverty.





4- Prof. Nevila RAMA / Dr. Jona Marashi- Albania

The Ideological Interaction

between Socialist Market Economic Principles


The Political Realism in International Relations – The Case of China



This research paper explores the intricate interplay between economic pragmatism and political realism in China's approach to international relations. Focusing on the evolution of China's economic policies and their impact on global geopolitics, the paper delves into how the nation's leadership has navigated the balance between socialist market economic principles and realpolitik considerations. Through an analysis of key economic reforms, global engagement strategies, and the Belt and Road Initiative, the research aims to provide insights into China's unique model of development and its implications for the broader field of international relations. The findings underscore the significance of understanding how nations reconcile different systems and approaches to development. Moreover, the paper emphasizes the paramount importance of global actors working collaboratively to foster and sustain a peaceful and sustainable world, regardless of ideological differences.


1.    Background

The rationale behind the socialist market economic model stems from the efforts to find hybrid solutions that combine advantages of both socialism and market economy. There is a broad range of blending government intervention and market orientation, resulting to different implementation of the model, with China as the most prominent one (Hansen et al., 2020).

"Socialist market economics" refers to an economic system that incorporates elements of both socialism and market principles (Hu, 2019). Traditional socialism advocates for collective or state ownership of the means of production, while market economics emphasizes the role of market forces in allocating resources. The concept of socialist market economics emerged as an attempt to blend these seemingly contradictory approaches. According to official definitions, it is not capitalism, but a more sustainable and socially just way of making a market economy work for national development and the improvement of living standards (Hansen et al., 2020).

In a socialist market economy, the government or the public sector may retain control or ownership of key industries and resources, such as utilities, transportation, and strategic sectors. At the same time, the economy allows for the existence of a market where goods and services are bought and sold, and prices are determined by supply and demand forces. This contrasts with a centrally planned socialist economy, where the government typically controls the entire economic planning process.

Key features of a socialist market economy may include:

Ø Public Ownership - Certain industries or sectors, particularly those deemed essential or strategic, may be publicly owned or controlled by the government. This can include sectors like healthcare, education, and utilities.

Ø Market Mechanisms - Despite public ownership in some areas, a significant portion of the economy operates through market mechanisms. Prices for goods and services are influenced by market forces, and competition may exist among privately owned businesses.

Ø Social Welfare - Socialist market economies often place a strong emphasis on social welfare and reducing income inequality. Government policies may include progressive taxation, social safety nets, and programs to address poverty.

Ø Regulation - The government typically plays a regulatory role in a socialist market economy to ensure fair competition, protect consumers, and prevent the concentration of wealth and power.

Ø Central Planning in Key Areas - While market forces are allowed to operate, the government may engage in central planning in certain key areas to achieve specific social or economic goals.


Historical roots of mixture between socialist and market economy features can be traced back to the ’60-s in the “socialist camp” of Soviet Union and Central European countries. Hungary was one of the countries that sparked with its initiatives, moving towards a policy of concessions and compromises (Szelenyi et al., 2001). The profound economic crisis at the beginning of the sixties pushed the government of that time to offer a “deal” to the working class, which became known as the New Economic Policies. This deal began in the countryside, with a highly flexible policy toward family production, although the agriculture was collectivized in the early 1960s in Hungary. Further on, by the early 1970s, Hungarians extended the model of agricultural family plots/ micro-farms (or the individual responsible system) in industry by permitting complex subcontracting arrangements to grow within state-owned firms (Adler-Lomnitz and Sheinbaum, 2011). These concessions constituted the fertile ground within the monolithic (socialist) system where private (free market) initiative began to grow. Therefore, the reforms promoted by the government made possible for workers to learn how to behave in a capitalist economy. Such coexistence of different systems characteristics was reinforced by recruiting educated professionals into positions of power and reinterpreting socialism as a “scientific project”. Hungary did apply this approach much more consistently than the other socialist countries.

Then, it was the stage of spontaneous privatization, since 1988, that was followed by the permission and realization of joint ventures with foreign investors. The research highlights that the strategies of Hungarian managers did not differ from the ones that take place in a capitalist country: “this is the same way as in capitalist countries where people with power change the rules, making all the changes legal.” (Adler-Lomnitz and Sheinbaum, 2011). 

The other countries of the socialist camp were more moderate in terms of mixing socialist and market / capitalist systems both up to the 1989 and after. They passed from a socialist economy to a free-market one, while this late one developed and improved in terms of getting advantage of the market experience from other countries, both in Europe and other continents. They went through “shock therapy” of market reforms, making radical economic changes. 

At the meantime, several countries coming up to recent days with an experience of decades of communist ideology and established “socialist type” economy, are implementing different combinations in the diapason between pure socialist and pure capitalist economy (Hansen et al., 2020). Typical of this category are Cuba, Vietnam, Laos. The introduction of market elements in these countries has been gradual, mostly using a trial-and-error approach.  Whatever their experience, China, due to many economic, geographic, political, and other reasons, remains the “model” of socialist country applying “socialism with Chinese characteristics”, as generally referred to (Hu, 2019). Its overall contribution to the world economy, policy, diplomacy, and consequently the role this country can play in preserving peace, deserves deeper exploration, which is modestly attempted in this paper.


2.    Economic Pragmatism vs. Political Realism

The ideological interaction between socialist market economic principles and political realism in the context of international relations, particularly in the case of China, is complex and multifaceted. China's unique approach to economic development and its engagement with the international community reflects a blend of socialist principles, market-oriented reforms, and pragmatic political realism.

2.1.                    Market Reforms

China is often cited as an example of a country that has adopted elements of socialist market economics, particularly since the economic reforms initiated in the late 20th century. They were driven by a pragmatic recognition of the inefficiencies of a centrally planned economy. According to the theoretical presentation of Chinese system proponents, the essence of socialist market economy (SMET) is that socialism as a social system and market economy as a resource allocation mechanism can be organically integrated to exert the advantages of both at the same time and generate new institutional and systematic edges (Hu, 2019).

Following research by Bekkevold (2020), it should be noted that although the economic and political domains cannot be separated in any meaningful way, economic structures and processes are mostly the result of political interactions. In its journey toward market economy, China is governed by one-party system with strong toolkits regulating the economy, including with regard to managing trade and foreign capital.

The paradigm of “socialist market economy” was introduced by Deng Xiaoping at the 12th Party Congress in 1982, within the larger framework of “building socialism with Chinese characteristics” and the purpose all along was to adopt elements of market economy to foster economic growth (Miller, 2018). This political orientation has gone through several economic actions and managerial constraints, displaying the fundamentals of the socialist market economy. Some of main interventions include:

Ø The system of plans, crucial, still nowadays allowing or even imposing many interventionist tools that are binding – something that goes against the very nature of a market economy. There are hundreds of sectoral and horizontal plans in addition to those at provincial and local levels (Pelkmans, 2018).

Ø Public ownership “plays a dominant role” and “is the foundation of the socialist market economy” - clearly imposed in the constitution. Even in the interesting reform strategy of November 2013 (3rd Plenum) with 60 reform proposals proclaimed by the slogan “let the market play the decisive role”, the role of public ownership is still affirmed. 

Ø Domination of the markets by local State-Owned Enterprises (SOEs). Moreover, there is a strict control that Chinese Communist Party (CCP) exercises over the top appointments in the larger SOEs. The Chinese elite already tend to have well-developed network connections which has the effect of blurring the distinctions between private and state-owned firms.

Ø “Reforms” in China typically refer to the rebalancing of the economy (e.g. towards services, away from heavy industry and from assembly to more value-added in value chains which implies a shift towards advanced sectors), rather than rebalancing the role of the state and that of markets.  

Ø Restrictions in terms of trade and investment. China has been quite restrictive in incoming FDI, even more than any other country in the OECD (Pelkmans, 2018). China did open up for foreign trade in the early 1980 in a gradual manner controlling the flows of both goods and money through a centrally controlled foreign trade monopoly and a rigid foreign exchange system. The situation hasn’t changed much, despite announcements of the actual government chief (Xi Jinping), that has been in power for more than a decade.

These and some more detailed characteristics mentioned below are schematically displayed in Figure 1.

- Despite the specificities of Chinese economic system, it became obvious for many countries that China was growing into a major economy and exporter, so affecting the cooperation/ trade negotiation process. It also brought fundamental changes in the world trading institutions in the 1990s with new requirements on trade in services and investments that were more challenging for China to accommodate (Hansen et al., 2020).

- As with its trading system, when China opened up for FDI it did so only step-by-step through inviting foreign companies to establish production into a gradually increasing number of designated special economic zones, and by limitations on foreign ownership (Hansen et al., 2020).  FDI are subject to an approval system, something that is undoubtedly conflicting with a market economy. The approval system is linked to foreign exchange controls and to explicit targets for FDI in acquiring foreign technology and IPRs like patents and trademarks (brands). From 1992 onward, when Deng Xiaoping confirmed China’s adherence to market reforms, FDIs into China boomed and only the United States has received more FDI than China (WB, 2022).  One long-standing complaint about the Chinese system for incoming FDI (if permitted at all) is the combination of compulsory joint ventures with Chinese companies and involuntary technology and/or IPRs transfer.

- The analysis by researchers show that Chinese authorities preferred FDI above loans, aid (the indicator known as net official development assistance – ODA), and portfolio investments because through direct investments, China could access technology and commercial expertise as well as capital and at the same time govern the flow. With an FDI inflow strategy and the proliferation of global value chains (GVCs), the ratio of foreign value added to a country’s total exports is an important indicator informing us about foreign influence and industrial upgrading in an economy (Xing, 2014).

Figure 1Socialist market economy with Chinese characteristics

Source: Pelkmans, 2018.

However, contrary to the assessments of foreign researchers and critics, the outcomes of China's economic reforms and the systematic implementation of five-year plans have yielded substantial surges in economic growth. Key indicators, including GDP per capita, absolute poverty rates, the Human Development Index, and literacy levels, have witnessed notable improvements since the initiation of these reforms in 1990 (World Bank Indicators, 2022). China's success narrative is further underscored by the remarkable achievement of lifting an estimated 800 million people out of absolute poverty since the commencement of market-oriented reforms (World Bank, 2022; Hansen et al., 2020). This transformative journey reflects the effectiveness of China's economic strategies and their tangible impact on enhancing living standards and reducing poverty on an unprecedented scale.


2.2.                    Political Realism

This part provides a theoretical lens through which to comprehend China's economic reforms within the context of political realism. By elucidating the intricate balance between national interests, economic pragmatism, and political stability, the chapter contributes to a nuanced understanding of China's distinctive approach on the global stage. The exploration of challenges in deep integration highlights the evolving nature of China's engagement with international institutions, offering valuable insights into the interplay between political realism and economic reforms.

While pursuing economic reforms, China's leaders have demonstrated a pragmatic and realist approach in international relations. This involves prioritizing national interests, seeking economic opportunities, and maintaining political stability. China has maintained state control over key strategic industries and sectors, such as telecommunications, energy, and finance aiming to safeguarding national security and interests.

China's ascent as a global economic powerhouse is intricately intertwined with its pragmatic and realist approach in international relations. This chapter delves into the theoretical framework of political realism as applied to China's economic reforms. Focusing on the interplay between national interests, economic opportunities, and political stability, this theoretical exploration navigates through China's distinctive model of state-led capitalism and authoritarian governance. Grounded in the works of Hu (2019) and other scholars, this chapter elucidates how China's leaders have strategically maintained state control over key industries, emphasizing the intertwining of socialist principles and realist strategies to safeguard national security and interests.

China's distinctive governance model, under the one-party rule of the Chinese Communist Party (CCP), stands as a paradigmatic embodiment of political realism. Despite embracing market principles, the one-party rule facilitates centralized decision-making and stability, attributes closely associated with political realism. China's political landscape, shaped by the unyielding dominance of the Chinese Communist Party (CCP) and its one-party rule, presents a captivating theoretical lens for understanding the interplay between authoritarian governance and political realism. Political realism, as a theoretical framework, posits that states primarily act in their own self-interest and are driven by the pursuit of power and security. In the context of China's political landscape, the one-party rule of the CCP emerges as a manifestation of political realism's emphasis on centralized authority for stability and efficiency. Scholars such as Morgenthau (1978) underscore the significance of power and stability in international relations, aligning with the attributes exemplified by China's one-party rule.

Nowadays, China is actively engaged with the global economy as a major player in international trade and investment. The juxtaposition of authoritarian governance with economic openness reveals a nuanced approach that aligns with the realist principles of maximizing national interests through economic growth, technology transfer, and geopolitical influence. China's one-party rule facilitates a centralized decision-making structure, is a crucial element underpinning the realist approach to governance. This centralized authority, as explored by Rose (1998), contributes significantly to national stability. Within the theoretical framework of political realism, stability is paramount for effective governance, and the one-party rule provides the necessary structure to ensure swift and decisive actions.

China's political landscape, shaped by the unyielding dominance of the Chinese Communist Party (CCP) and its one-party rule, presents a captivating theoretical lens for understanding the interplay between authoritarian governance and political realism. It provides a unique governance model that contributes to national stability and informs China's pragmatic stance in governance and international relations.

The theoretical exploration extends to China's pragmatic approach to international relations, shaped by its unique governance model. As articulated by Carr (2001), political realism emphasizes the need for pragmatic and realistic policies to ensure national survival. China's one-party rule allows for a pragmatic and efficient engagement with the global arena. This pragmatic governance is evident in China's assertive foreign policy and strategic initiatives, reflecting a realist approach to securing national interests on the international stage.

Central to China's realist approach is its strategic control over key industries, such as telecommunications, energy, and finance. The fusion of socialist principles emphasizing state ownership and realist strategies forms the bedrock of this approach. By maintaining control over vital sectors, China ensures the safeguarding of national security and interests, a theme explored through the lens of Hu's research (2019).

On the other side, China actively participates in international economic institutions like the World Trade Organization (WTO), International Monetary Fund (IMF), and World Bank. This participation aligns with realist principles of maximizing influence on the global stage to protect and advance its economic interests. While China has made substantial progress in addressing international standards, there are still persistent challenges in achieving what is called "deep integration." The examination of China's compliance with rules outlined by the World Bank and the IMF reveals instances of frustration due to a lack of implementation and transparency related and focused on intellectual property protection, subsidy regimes, and the imperative for opening its procurement market to foreign companies, etc., underscoring the complex dynamics involved in navigating global institutions within the realist framework.

It is acknowledged that China has since the early 1990s made notable progress on a number of the “behind the border” issues, but the distinction between shallow and deep integration is still valid (Hansen et al., 2020). Although China has largely complied with the rules working with the World Bank and the International Monetary Fund, there are evidence that both institutions have been frustrated by lack of implementation and transparency in China, in particular on financial policy issues (Kent, 2007). What remains a recent concern toward China in the context of the WTO is related to its lack of progress in protecting intellectual property, its use of subsidy regimes, and China is urged to open its procurement market to foreign companies, rather than simply give preference to domestic companies (World Trade Organization, 2018).


3.    Belt and Road Initiative (BRI) - The Unveiling of a Geopolitical Strategy

China's Belt and Road Initiative, a massive infrastructure and economic development project, is driven by economic motives but also has geopolitical implications. It reflects a realist strategy of expanding influence, securing resources, and enhancing connectivity to strengthen China's position in international affairs. On the other side, international relations, especially the trade ones but not only, are affected and deserve deeper exploration.

China's Belt and Road Initiative (BRI) has emerged as a transformative force on the global stage, transcending mere economic considerations to wield significant geopolitical influence. Launched in 2013, the BRI constitutes a colossal undertaking aimed at knitting together Asia, Africa, and Europe through an extensive network of infrastructure projects. The grandeur of this initiative lies not only in its tangible manifestations, such as roads, railways, ports, and pipelines, but also in its potential to reshape the geopolitical landscape. Beyond the evident economic motives of fostering trade, stimulating economic development, and securing resource access, the BRI unfolds as a geopolitical strategy with profound implications that reverberate across international relations (Hansen et al., 2020). From this viewpoint, it is worthwhile to delve into the multifaceted dimensions of the BRI, unraveling the complex interplay between economic aspirations and geopolitical consequences.

The Belt and Road Initiative represents more than a mere infrastructure development plan; it stands as a testament to China's strategic vision for reshaping the geopolitical dynamics of interconnected continents. As we navigate through the corridors of this initiative, the economic motives driving the colossal infrastructure projects become apparent – an earnest effort to stimulate global trade, foster economic growth, and secure access to vital resources. However, the scope of the BRI extends beyond economic realms, casting a geopolitical shadow that encompasses strategic considerations and influence. This introductory exploration seeks to unravel the layers of China's geopolitical intentions embedded within the BRI, shedding light on the intricate dance between economic pragmatism and geopolitical ambitions that defines this monumental initiative. While the economic motives behind the BRI are clear – fostering trade, economic development, and securing resource access – the geopolitical implications are equally substantial.


3.1. Economic Expansion and Resource Access

Ø In essence, economic expansion and resource access through the Belt and Road Initiative represent a multifaceted strategy that extends beyond immediate economic gains, encompassing long-term growth, market diversification, and strategic resource security. The BRI allows China to expand its economic influence by creating a vast network of infrastructure that facilitates trade and investment. By securing access to key resources and markets, China aims to ensure its long-term economic growth and energy security through:

Ø Economic Expansion through Infrastructure Development: The Belt and Road Initiative (BRI) serves as a cornerstone for China's economic expansion strategy, leveraging the construction of an extensive network of infrastructure projects. These projects, including roads, railways, ports, and pipelines, aim to enhance connectivity across Asia, Africa, and Europe. By fostering improved transportation and logistical capabilities, China seeks to streamline trade routes, reduce transaction costs, and stimulate economic activities. This ambitious infrastructure development not only accelerates the growth of participating nations but also opens up new markets for Chinese goods and services, ultimately expanding China's economic influence on a global scale.

Ø Facilitation of Trade and Investment: The BRI's emphasis on infrastructure is instrumental in creating efficient trade corridors that facilitate the movement of goods and services. This enhanced connectivity not only reduces transportation times and costs but also promotes increased trade volumes between participating countries. By providing a seamless platform for economic interactions, the BRI contributes to the deepening of economic ties and the establishment of new business opportunities. Furthermore, the initiative encourages foreign direct investment (FDI) as China invests in various sectors, ranging from manufacturing to technology, amplifying its economic influence beyond its borders.

Ø Strategic Access to Key Resources: One of the central objectives of the BRI is to secure access to critical resources. Through strategic investments in countries rich in natural resources, China aims to ensure a stable and diverse supply chain for its rapidly growing economy. This resource-focused approach extends to raw materials such as minerals, energy resources, and agricultural products. By developing infrastructure that facilitates the extraction, transportation, and trade of these resources, China not only meets its immediate economic needs but also establishes a long-term foundation for sustained growth.

Ø Market Expansion and Diversification: The BRI provides a platform for China to diversify its markets, reducing dependence on any single region. By fostering economic ties with a multitude of nations along the BRI routes, China hedges against economic uncertainties and fluctuations in specific markets. This diversification not only insulates China from potential economic shocks but also positions it as a key player in emerging and frontier markets, further solidifying its status as a global economic powerhouse.

Ø Ensuring Long-Term Economic Growth: Through the BRI, China is laying the groundwork for sustained and robust economic growth. The interconnected infrastructure projects create a framework for continuous economic activities, fostering innovation, entrepreneurship, and industrial development. This long-term perspective aligns with China's vision to transition from an export-driven economy to a more consumption-driven and innovation-oriented economic model, securing its position as a leader in the global economic landscape.

Ø Energy Security Through Strategic Investments: Given its escalating energy demands, China strategically invests in BRI countries possessing significant energy reserves. By securing access to diverse and abundant energy sources, including oil and natural gas, China mitigates the risks associated with dependence on specific suppliers. This not only bolsters China's energy security but also strengthens its resilience in the face of geopolitical uncertainties and disruptions in global energy markets.


3.2. Geopolitical Influence

The Belt and Road Initiative (BRI) emerges as a linchpin in China's strategic playbook, facilitating the extension of its geopolitical influence on a global scale, with a pronounced emphasis on regions characterized by substantial investments. This expansive influence aligns with the realist strategy, as underscored by Swaine (2019), positioning the BRI as a deliberate endeavor by China to fortify its international standing. The BRI, through its comprehensive infrastructure projects and economic engagements, provides China with a means to wield significant political influence, influencing the policy trajectories of partner nations. As articulated by Gill and Reilly (2018), economic leverage serves as the nexus through which China exerts its geopolitical sway. The immense financial scale of the BRI empowers China to shape the political decisions of partner countries, intertwining economic power with geopolitical influence. Furthermore, Mawdsley's insights (2019) illuminate the extension of China's influence beyond bilateral relations to the international arena, where economic prowess is wielded as a tool to garner support and determine decisions in international forums. Through the BRI, China not only cements its economic advantages but also strategically positions itself as a key player in shaping global political dynamics.


3.3. Connectivity as a Soft Power Tool

Connectivity, as a central tenet of China's global strategy, has become a pivotal instrument in its pursuit of soft power. China strategically leverages enhanced connectivity to cultivate goodwill and positive perceptions among participating nations. The focus is on understanding the mechanisms through which connectivity projects contribute to the augmentation of China's soft power on the global stage.

Ø Connectivity as a Soft Power Tool: China's emphasis on enhancing connectivity serves as a key driver in fortifying its soft power influence. According to Nye, soft power encompasses the ability to shape preferences through attraction and persuasion rather than coercion. By investing heavily in connectivity projects, China endeavors to create positive perceptions and foster goodwill among nations involved. As these projects contribute to the development of efficient transportation, communication, and trade links, they not only enhance economic cooperation but also serve as visible symbols of China's commitment to shared development goals. Through such endeavors, China positions itself as a facilitator of progress, leveraging connectivity as a means to attract and persuade nations to align with its values and objectives.

Ø Critical Infrastructure and Regional Influence: A crucial dimension of China's connectivity strategy is the construction and control of critical infrastructure projects. These endeavors allow China to shape regional connectivity patterns and exert influence over the flow of goods and information. According to Johnston, infrastructure projects, when strategically built and controlled, can serve as instruments of power projection. China's active involvement in the development of ports, railways, and communication networks positions it as a key player in regional connectivity. The strategic control of these infrastructures not only bolsters China's economic interests but also amplifies its influence over participating nations. This dual role, where connectivity projects simultaneously enhance economic cooperation and consolidate China's influence, showcases the interconnected nature of soft power and regional connectivity.

By enhancing connectivity, China seeks to strengthen its soft power by fostering goodwill and positive perceptions among participating nations in one hand as well as building and controlling critical infrastructure projects allow China to shape regional connectivity and influence the flow of goods and information.


3.4. Strategic Military Considerations

The Belt and Road Initiative (BRI) unfolds as a multifaceted strategy for China, extending beyond economic and geopolitical realms to encompass strategic military considerations. In specific aspects of BRI projects that bear strategic military importance lays certainty of how the BRI contributes to the expansion of China's maritime influence and enhances its military capabilities, ultimately reflecting the nuanced interplay between economic and military objectives.

Ø Strategic Military Significance of BRI Projects: Certain BRI projects, notably those involving the construction of ports and naval facilities, are underscored by their strategic military importance. The establishment of such infrastructures aligns seamlessly with China's broader military strategy, as emphasized by Fravel who elucidates that China's military modernization and expansion extend beyond territorial concerns, encompassing the development of capabilities for power projection and protection of maritime interests. Consequently, BRI projects featuring ports and naval facilities emerge as tangible expressions of China's intent to strengthen its maritime foothold, positioning itself strategically in key regions.

Ø Enhancement of Maritime Capabilities and Power Projection: An essential dimension of the BRI's impact on China's military strategy lies in its contribution to maritime capabilities. The initiative, through investments in ports and related infrastructure, contributes significantly to bolstering China's naval strength and power projection capabilities. This assertion aligns with the insights presented by Erickson and Strange (2014), who elaborate on China's evolving maritime strategy and its emphasis on acquiring the capacity for power projection in critical maritime zones. By strategically positioning ports and naval facilities along the BRI routes, China not only enhances its maritime capabilities but also secures crucial points for potential power projection, marking a pivotal aspect of the initiative's broader military implications.

We can assume that some BRI projects, such as ports and naval facilities, have strategic military importance and this expansion of maritime influence aligns with China's broader military strategy on one hand as well as it contributes to China's maritime capabilities, enhancing its ability to project power in key regions on the other.


3.5. Economic Dependency & Trade Dynamics

Partner countries that heavily rely on Chinese investments and infrastructure might become economically dependent on China. This dependency can be leveraged for political influence. This assertion aligns with scholarly discussions on the dual nature of economic dependence and its implications for political influence. As noted by Gallagher and Porzecanski (2010), economic dependence can create a power dynamic where the recipient country becomes susceptible to the influencing power. Gallagher and Porzecanski argue that this dynamic is especially relevant in the context of China's economic engagements, emphasizing the potential leverage that China can exert over dependent nations.

“Debts incurred by partner countries can be used strategically to gain concessions or control over key assets”. In her research on China's economic statecraft, Brautigam emphasizes the nature of Chinese loans is strategic, noting that they often involve collateral arrangements or concessionary terms that grant China leverage over the borrowing nations. This aligns with the notion that debts are not only financial obligations but also instruments of geopolitical influence.

The BRI has the potential to reshape global trade dynamics, influencing the flow of goods and services along the newly created infrastructure routes. It is a significant force in shaping the emerging structure of the global economy, creating new linkages and trade routes. This aligns with the idea that the BRI serves as a catalyst for redefining the pathways through which goods and services flow on the global stage. Partner countries that heavily rely on Chinese investments and infrastructure might become economically dependent on China. This dependency can be leveraged for political influence. Debts incurred by partner countries can be used strategically to gain concessions or control over key assets.

The BRI has the potential to reshape global trade dynamics, influencing the flow of goods and services along the newly created infrastructure routes, it can create new trade corridors and shift economic centers of gravity, impacting traditional trade routes.


3.6. International Relations and Diplomatic Challenges

Global powers have pursued their national interests in a complex global landscape by engaging in distinct cooperative efforts with China. These approaches involve a pragmatic recognition of shared challenges, economic opportunities, and the need for collaborative solutions to address pressing global issues while safeguarding the interests and security of each state. The BRI has generated diplomatic challenges as countries navigate the complex relationships involved in participating in or opposing the initiative. Diplomatic tensions may arise as competing powers vie for influence over countries engaged in BRI projects. Some countries view the BRI as a potential threat to their geopolitical interests, leading to strategic counter-responses. The United States, for example, has initiated its own infrastructure development initiatives to counterbalance China's influence. India strategically refrained from participating in the BRI, citing concerns over sovereignty and the China-Pakistan Economic Corridor's implications for the Kashmir dispute facing the challenge of maintaining a delicate balance between avoiding direct engagement with the BRI and preserving regional stability, as well as exploring alternative regional partnerships, emphasizing its "Act East" policy to counterbalance China's influence in South Asia.  In response to China's ambitious Belt and Road Initiative (BRI), Japan strategically formulated the Free and Open Indo-Pacific (FOIP) strategy, positioning it as a calculated countermeasure. Faced with a diplomatic challenge centered on navigating the competitive landscape for influence in the Indo-Pacific region, Japan chose a proactive approach by promoting its own infrastructure initiatives. The crux of Japan's response lay in collaboration with regional partners, prioritizing the development of quality infrastructure projects and emphasizing adherence to international norms. This counter-strategy not only aimed to mitigate China's influence but also sought to set a standard for responsible and transparent infrastructure development in the region as well as shaping Japan's strategic responses in the Indo-Pacific, offering valuable insights into the geopolitics of the region (Pempel, 2019).

But, various nations have adopted distinct approaches in their engagement with the Belt and Road Initiative (BRI), deftly navigating the delicate equilibrium between reaping economic advantages in their ties with China and safeguarding their political standing on the global stage. This nuanced pursuit involves a strategic orchestration, wherein countries endeavor to harness the economic benefits stemming from their association with China while astutely preserving their distinctive political identity within the international arena. The challenge lies in skillfully harmonizing the imperatives of economic collaboration with China without compromising the intricate tapestry of one's geopolitical stature.

These examples contribute to understanding the diverse ways nations respond to China's growing influence through the BRI.

Ø Malaysia - The East Coast Rail Link (ECRL) Reassessment: Malaysia's re-evaluation of the East Coast Rail Link (ECRL) project provides a nuanced case study in response to China's growing influence illustrating how a nation strategically navigates economic realities while seeking to maintain diplomatic ties with China. In the wake of China's ambitious Belt and Road Initiative (BRI), Malaysia, led by Prime Minister Mahathir Mohamad, found itself at a crossroads with the re-evaluation of the East Coast Rail Link (ECRL) project, a significant component of the BRI. The diplomatic challenge that emerged for Malaysia was a delicate balancing act, navigating the allure of economic benefits against the backdrop of concerns over debt sustainability and the potential overreliance on Chinese financing. In response to this complex predicament, Malaysia demonstrated strategic acumen by engaging in negotiations to recalibrate the terms of the ECRL project. This astute manoeuvre not only showcased Malaysia's agency in safeguarding its economic interests but also underscored its ability to preserve diplomatic ties with China, balancing economic development aspirations with diplomatic considerations (Gomez & Liew, 2019).

Ø EU Coordinated Responses and Fragmentation - The Italy Factor: The entry of Italy into the BRI marked the first endorsement by a G7 nation, caused both cohesion and fragmentation within the European Union (EU). Various EU member states responded to Italy's alignment with the BRI, highlighting the complexities of forming a unified response. The Union faced different diplomatic challenges in reconciling diverse national interests, showcasing the delicate balance between economic opportunities and concerns over China's geopolitical influence within the bloc shaping in the same time the Union’s path to maintaining a unified response to China's growing influence while respecting the diverse opinion and interests of its member states, endeavouring to engage them in dialogues to reconcile differences and formulate a common approach to China's expanding global influence (Benvenuti, 2019).

Ø Australia - Balancing Economic Ties with Strategic Alliances: Australia's response to the BRI involves a delicate balance between economic interests and concerns about China's growing influence in the Indo-Pacific region. Australia has chosen a strategy to engage with the economic opportunities presented by the BRI while concurrently strengthening alliances with like-minded nations to counterbalance China's geopolitical reach. This has led to regional dynamics and diplomatic challenges faced by Australia in maintaining a nuanced position in the evolving Indo-Pacific geopolitical landscape.


4.    Summary of key findings

In conclusion, the complex interaction between socialist market economic principles and political realism in China's engagement with international relations underscores the complexity of the contemporary global landscape. As recent international events highlight the interconnection between environmental challenges, economic instability, and violence, it becomes evident that addressing these issues requires a comprehensive and collaborative approach. The lessons drawn from the case of China emphasize the importance of strengthening international institutions and fostering cooperative structures. History demonstrates that when nations and organizations amplify their cooperation, viable and peaceful solutions emerge. In the face of the complex challenges that define our interconnected world, the findings of this research advocate for a continued commitment to global cooperation and the fortification of institutions to navigate the evolving dynamics of international relations successfully.

Nowadays, China is actively engaged with the global economy as a major player in international trade and investment. By examining the case of China, this research paper aims to contribute to a deeper understanding of the dynamic interplay between economic pragmatism and political realism in shaping a nation's approach to global affairs and consequently to a peaceful co-existence in a perplexed world. The research does an analysis of key economic reforms, global engagement strategies, and the Belt and Road Initiative, highlighting the outcomes and consequences in a local and international context. The detailed analysis presented herein seeks to shed light on the complexities of China's model of development and its broader implications for the evolving landscape of international relations.

In conclusion, the research highlights a crucial lesson: addressing contemporary challenges demands a collective multiplication of efforts from diverse actors and sectors, emphasizing the imperative of international cooperation to identify suitable and sustainable solutions.

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