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Auroville Adventure

June '02


"Chart out
a new economic course"

An interview with Henk Thomas and Manuel Thomas

 - by Carel


AVToday: You mentioned during your presentation of the White Paper that there is insufficient motivation for Aurovilians to go into business. What are the reasons?


Manuel ThomasManuel: There is a feeling in Auroville, as shown in our case studies, that working in a commercial unit is something not very laudable. If you are working for a service unit, then you are doing something better. Even newcomers are stimulated to work in the service sector instead of in commercial units. But this is ridiculous as much of the work a service unit is doing is identical to what a commercial unit is doing. The distinction between commercial and service units has to be reviewed and the negative attitude towards business has to change.

Henk: The motivation for entrepreneurship in Auroville is different from elsewhere. There is no personal ownership, and there is no personal profit to be made from running your unit better. As that financial dimension doesn't exist, there is a need for some other kind of reward, social prestige or appreciation by the community. Henk Thomas But in Auroville, the contrary has happened. Till the mid-1990s, the atmosphere towards business was strongly negative. It has improved since, but by far not enough. The interviews with business executives reflect the same perception: 'there is a hostile attitude, there is no appreciation, we are just the milk-cow for the community.'

Added to that is the maintenance problem. If an executive draws say Rs 12,000/month from a unit, s/he is confronted with an increasing number of people working in service units who have to do it with only Rs 3,500. What to do and how to feel? The discrepancy is difficult to accept. Further lowering of one's own needs neither contributes much to the overall problem nor is felt to be fair. In their view the collective/public sector of Auroville lives beyond its means: there are too many service units, and the level of maintenance is mostly unacceptably low. All this poses fundamental dilemmas.

Manuel: Look at the change in the attitude of the Indian government towards business during the last 50 years. In the initial years after Independence, the attitude was that making profits was bad, that business was a necessary evil. They were taxed at 60-70%.With wealth tax included, the highest rate went up to 90%! This killed initiative. And there was a protective market, and only a few large groups thrived. After globalization, the whole thing has changed. Businessmen are rewarded and given importance, the finance ministers make a lot of noise about promoting business, especially after the IT boom started. Prime ministers and businessmen coming from abroad visit Bangalore, not Delhi. Things are changing. Businesses have to be recognized as providers of employment and economic value to the community.

So what are the ways to stimulate budding entrepreneurs?

Henk: Firstly, build up trust and change the negative attitude towards business. I don't believe that there are no entrepreneurs in Auroville. In Slovenia, 10 months after the Berlin Wall had fallen, 87,000 people had started new businesses. These were the same people who refused to do any such thing before. Auroville can also do this, but it will have to pull down its own 'Berlin Wall'. Secondly, actively support and stimulate people to start businesses.

Manuel: You'll have to do a lot of creative thinking about how to stimulate promote commerce and industry. For example, how can access to capital be made easy? You could consider approaching the State Bank of India (SBI) for a loan facility of say Rs 50 crores, against a guarantee for repayment of interest and capital by the Auroville Foundation. Loans could then be extended to a unit with the approval of the relevant Auroville body, say the FAMC. In view of the special nature of Auroville, the SBI may even be willing to negotiate a lower rate.

Another way would be to create an Auroville Investment Fund, as part of the Auroville Foundation. This Fund could even draw grants and donations from outside to make up its core capital. But it would have to be absolutely professionally managed; the people cannot allow themselves to be softhearted, which is a common difficulty in small communities.

Henk: In respect of financing, the role of the Auroville Foundation should be looked at. So far, the Auroville Foundation has not done anything more than to allow new business units to get established as part of one of its trusts. But it is up to the unit executive to bring his or her own money into the unit by way of donation or loan, or borrow from friends, and take the full risk for any losses, while the Auroville Foundation is in fact the ultimate beneficiary of what the commercial unit brings in. But so far the Foundation has been sitting on the fence, while it could stimulate business by standing guarantee for loans.

Manuel: Another question to study is how venture capital can come into the Auroville business scheme. At present, there is no possibility for joint ventures. An outsider who would like to support an Auroville business can only give loans directly, for which the unit would need the permission of the Foundation. He cannot participate in share capital as would be normal outside Auroville. But it is through joint ventures with outsiders that the required capital can be supplied. The Trust system doesn't allow for this. You would need a corporate entity in which the Foundation owns 50% or more and the outside entity the balance.

Henk: Auroville is not the first or only institution that struggles with this type of problem. I have experience with the Mondragon Cooperative system in Spain. They too reached a point where they had to solve the question of how to interact with the outside world, and draw the outside world in. It is always possible with lawyers to find solutions that are not blurring the ideology.

During your presentation, someone observed that there are three pillars of Auroville's economy - commercial, grants and individual monies - so that a defect in the commercial pillar is not so serious after all.

Henk: I take a different view. The presentation has shown that the commercial sector is a cause for worry. It is not a healthy proposition to depend on grants and donations or on individual money.

Take the Centre for Urban Research, for instance. This 1.5 crore (US $ 300,000) building is created from grants and donations. But 80% goes into building materials and local labour, which is a cash flow into the surrounding economy. But for how many Aurovilians does such a project provide maintenance? Only a few, so the net impact of this donation is very limited for that aspect of Auroville's economy. Or take the recent Asia-Urbs conference that Auroville organized. How much money flows back into Auroville itself, how much into hotels in Pondicherry etc.? Grants and donations are all very well and necessary, but they generate only a limited so-called "value added" that contributes to building an economic base for the expanding township. In contrast, if you look at the commercial units, the estimate is that they employ about 150 and 225 Aurovilians directly, who benefit their families and a far larger number of employees from the surroundings on a permanent basis. (By the way, as we do not know the exact figures, it would be good if Auroville would keep statistics about how many employees and Aurovilians work in a unit at the beginning and the end of each financial year.)

When we talk about individual monies, we have also to be careful. What we mean is that an individual doesn't depend on the community (so doesn't take money from the community in the form of maintenance or salary or so) and provides voluntary work. That, by itself, is great. But it also shows that some units, particularly service units, could not function without this free work. And that is another cause for worry.

So one can't really speak of three pillars of strength. The commercial pillar is weak. The pillar of grants and donations may undermine an economic structure of self-sustainability because one gets used to a culture of fostering grants and donations. And the pillar of individual monies, though impressive, indicates the failing of the community to sustain itself - services that depend on this source should realize that they might become bankrupt as soon as this source drops away.

You have argued that 'Auroville' is an excellent brand name. Could you explain this?

Manuel: The brand name 'Auroville' stands in India for high quality - the positive aspect - and for above average price - the negative aspect. Consequently, Auroville's market is the niche market in the upper Indian middle class. If prices are slightly lowered, the turnover might increase drastically.

Henk: But you need to monitor the use of the brand name. At present it enjoys goodwill. But it is not a guarantee for tomorrow. If there is a scandal in a newspaper about one of your products, it would damage the brand name beyond quick repair, and there have been cases where Auroville products were rejected. So this brings in the need for standardization of product quality, and once again, the need for a body to help small units to meet the minimum levels of standards in product quality, packaging etc.

Manuel: In this respect we should mention that Auroville businesses have an excellent social policy, probably because of Auroville's ideology. Employees can attain higher standards of living, there is interest in providing them with training, and the motivation of people and the working conditions are good. Here Auroville leads the way. It is not hire and fire, and some unit-executives even experience a personal trauma when they have to lay-off workers, as happened recently.

You mentioned that there are quite a few units that are actually loss- making.

Manuel: Yes, there are. But before passing judgment, one should investigate why a unit makes losses. Is it because of lack of access to capital, or because its products have become obsolete, a lack of marketing, a deficient pricing policy? Auroville needs a group authorized to identify loss-making units as the negative signals emerge, and assist them. If you can't find a solution, close the unit. That may be hard, but probably it will be half as hard as a postponement and having to close the unit later at far higher costs.

Henk: Our main point is that there is not a single commercial unit in Auroville, except for Maroma, where one can speak of a strong economic and commercial position. Also, no group exists that does strategic planning of business, studies sectors and comes forward with proposals.

Looking from outside, do you feel that Auroville is hampered by its high ideals?

Manuel: No. It is the ideology that made you come here in the first place. I admire the fact that Auroville has been able to be together for this length of time. I do not have a negative outlook, but see negative tendencies perhaps more clearly than those who are part of the community. But the ideology should allow you to do things better - not hamper you.

Henk: I have been coming to Auroville almost yearly since 1990. I have noticed that the relative isolated and introverted position of Auroville, which I observed in 1990, has changed enormously. Today you talk about the bio-region instead of Auroville; there is the international seed-saving program; there is the world interaction with Asia Urbs; you are trying to create a new internal organization learning from what the outside has to offer you, while there are not that many models in the world that can serve as a mirror for Auroville.

But the economic area is not in a good shape, and there you have to concentrate on bringing it up to standard. This requires rational thinking.

Also, you have to have a close look at the motivations of the people who join Auroville at present. It is normal in movements such as Auroville that the first and second generation are very motivated, but that the third generation has different expectations - in the sense that they take for granted what Auroville offers to them, not realizing sufficiently what efforts were needed in the past and what is required of them to sustain and expand Auroville as a growing township. Then there is an influx of retired people who may not be planning to put in the work that is necessary.

You stated that Auroville cannot allow itself the luxury to experiment with 'no-money economy' models.

Henk: At present Auroville lacks the basis to form its own internal money economy. I guess that only a township of say 30-40,000 people can provide the base to experiment with internal exchange models. At present, in view of the economic uncertainties, Mother's "no-exchange of money" economy is definitely a bridge too far.

The best book I have read on alternative money systems is by Bernard Lietaer. He recommends introducing complementary systems, systems in addition to existing ones, not substituting them. But I cannot see how that could work in Auroville.

Is this White Paper the final word on the commercial units' performance?

Manuel: No. The White Paper is only an interim document, which mainly concentrates on the performance of the commercial units. In about six months we hope to present the full research study, which will include other material and also some fresh recommendations on the basis of the observations that we received during our presentations. Also, we would like to incorporate the financial results of the year 2001-2002. We have seen a downward trend in the last few years. If there is an upswing, that would be a relief.

Henk: But we are rather afraid we will see that the down-swing has continued, also in view of the September 11 after-effects, as it has done everywhere in India. If this is the case, it will mean a severe reduction in the level of the contributions the units will be able to make to the Central Fund - also in view of their previous losses - and that may mean that the Economy Group will have to cut expenses in the service sector instead of providing the increases which many consider absolutely necessary.
That is a sobering observation since a sustainable township is not possible without a sound and sizeable commercial sector.

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