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April 01


Beyond capitalism and socialism ?

A perspective on Auroville's Commercial Units


- by Jean-Yves

Jean-Yves came to Auroville six years ago, and has been teaching at Last School ever since. His main fields of research are history, economy, arts and literature. In France he was active as a management consultant and advised on the start-up of new businesses.


We often fail to take the time to observe our collective life, but if we do not evaluate our experiment, we don't know were we are. Sometimes we even forget where we want to go.
Historically, the commercial units have developed mainly as a response to the shortage of funds generated by the crisis between the Aurovilians and the Sri Aurobindo Society in the early years of Auroville. They have not developed as an organic response to internal needs. Some of them have succeeded. The advantage is that Auroville now has a stable source of financial support through donations; the disadvantage is that we have not created ways of responding to internal needs because we mainly export what we produce and mainly import what we consume, thus maintaining the need for using money. In other words, we have increased our monetary resources more than we have induced an internal economic development. An Auroville economy based on another movement than the exchange of money still has to manifest, and is only now beginning to be explored. Nevertheless, when we examine the performance of our commercial units, some interesting features appear. But we must first remind ourselves of the context of their activity.

Everywhere in the world, the economy is powerfully structured by two elements. Firstly, the right of private property, which is often presented as an essential condition for free enterprise, risk-taking, progress, wealth creation and competitive innovation. Secondly, the enlightened Welfare State taxing the economy in order to redistribute and re-allocate the wealth created. The first element is at the basis of capitalism, the second one at the basis of socialism. They generate two types of tax, one on capital, in the form of interest, the second on the collective, in the form of sales tax and income tax. These are the pillars of the world economy, and you will find no expert in the world ready to say that they are not essential for wealth creation and distribution.
Yet, these two pillars have been removed by the Mother at the outset of Auroville: no private property, no state, no tax. What will fulfill their social function?

What is happening is that in the financial year 1999-2000 the Auroville commercial units had a turnover of 254 million rupees (US$ 5.5 million), generating profits of around 20% of the turnover. Around 50% of the profits are allocated by the units as donations to Auroville, either to specific projects and needs (they are then called 'specified donations'), or to the Central Fund for collective use (the so-called unspecified donations). The tendency, as shown over the last six years, is that donations from the profits are on the increase and, equally, that there is an increase in donations given unspecified to the Central Fund. Looking at the balance sheets we note good solvency, an almost total financial independence (few loans), and a cash situation representing 3.5 months of turn-over. This cash, which is accumulated from net profits after donations, is the financial resource for future investments.

These figures tells us two things: firstly, that the absence of ownership and of profit-distribution to owners of capital does not seem to be an indispensable ingredient for commercial dynamism and profit-making. Secondly, that the absence of a tax system does not prevent the units contributing to Auroville's collective life, and at a rate superior to many income tax rates in the world. The sacred pillars of both capitalism and socialism have been remo-ved, yet still there is commercial and financial development that could satisfy, to a large extent, those who believe in free enterprise and those who believe in state regulation.

One could conclude that Aurovilians are really great! But some scientific prudence is needed here, for we know very well that we are not so great. Firstly, it should be noted that the majority of the commercial units are small and the profits can hardly do more than support the unit holder and his family. One unit is far ahead of the others, representing 30.5% of the income, 69.8% of the profits, and 44.5% of the donations. Small units tend to contribute more out of their profits (between 60% and 80% or more), but big units tend to contribute more through unspecified donations. Then there are some weak points: Auroville depends on a few units for its financial resources. It is true that we often have a high contribution rate but the specified contributions are not clearly known and cannot be studied and interpreted.

Also, cash reserves are kept as a security when they could circulate more if more transparency and mutual trust existed. I would rather credit the systemic effect for what is positive in our performance: when you remove private property, interest, dividend and state-tax from an economic system and replace them by a set of values centered around self-giving and service, something is bound to happen. If the units can allocate around 50% of their profits toward the collective without hampering their development, it is for macro and micro-economic reasons. On the macro-economic side, the absence of private property has a direct consequence on the capacity of the units to contribute, for when no dividends have to be paid to share holders and no loans taken (the assets do not belong to the unit and thus cannot be used to mortgage loans) then no interest has to be paid and you get more available profit to contribute to the collective. On the micro-economic side, the readiness of the unit holders to contribute is greater when their contributions are not fixed under a compulsory tax system. But these technical features do not work on their own. Their final outcome depends on the social system of which they are part, organized around a specific set of values, oriented to service and giving, which have been accepted by the community and thus arbitrate more or less the collective life and the individual decisions in a manner which tolerates even defects in its application. The creative role of values in economic mechanism has thus begun to be illustrated here in Auroville, and this is already a useful contribution in the present economic context of globalization.

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