Economic Challenger - - CONTENTS - * Dr. Trilok Ku­mar Jain ** Mr. Sun­deep Ku­mar *** Dr. Ruchi Goyal **** Mr. Ram Garg

− Trilok Ku­mar Jain, − Mr. Sun­deep Ku­mar − Dr. Ruchi Goyal & Prof. Ram Garg


This is a con­cep­tual pa­per. The au­thors con­tend that busi­ness model evolves out of eco­nomic and po­lit­i­cal phi­los­o­phy pre­vail­ing in the con­tem­po­rary times. This pa­per presents a sum­mery of evo­lu­tion of the present busi­ness model based on the eco­nomic and po­lit­i­cal ide­olo­gies, iden­ti­fies the cur­rent chal­lenges and al­ter­na­tives to the present busi­ness models. This pa­per analy­ses the al­ter­na­tives and presents a propo­si­tion re­gard­ing what should be the ideal busi­ness model.


Busi­ness model refers to over­all con­cept re­lat­ing to busi­ness, en­trepreneur­ship. It gives fun­da­men­tal as­sump­tions re­lat­ing to how a firm / com­pany is go­ing to add value to the so­ci­ety at large and how is it go­ing to sur­vive in the so­ci­ety. Busi­ness model refers to the way the or­ga­ni­za­tions see them­selves within the so­ci­etal frame­work. Busi­ness has al­ways been run with a profit mo­tive. How­ever, there have been mul­ti­ple ad­di­tional di­men­sions be­sides profit. Many of th­ese di­men­sions have tremen­dously ben­e­fit­ted the so­ci­ety at large. For ex­am­ple, CSR prac­tices of present com­pa­nies help our so­ci­ety di­rectly and in­di­rectly. A cen­tury ago, we didn’t have the con­cept of the mod­ern CSR sys­tem, how­ever, firms used to spend some money on so­ci­etal devel­op­ment. Devel­op­ment of Gand­hian Ed­u­ca­tional In­sti­tuitons, Schools and Col­leges took place un­der this con­cept only (from 1910 to 1949). We had the con­cept of giv­ing back to the so­ci­ety for ages and we do find in­stances where en­trepreneurs and busi­ness com­mu­nity have come for­ward for the cause of the so­ci­ety at large.

Busi­ness model has been given more at­ten­tion af­ter 1975. There are more than 166 ar­ti­cles in ABI In­form Data­base on busi­ness model in the pe­riod be­tween 1975 to 1994. Schum­peter (1942) talked about cre­ative de­struc­tion. Amit and Shoe­maker (1993) talked about re­sources of the firm. Gu­lati (1998) in­tro­duced strate­gic net­work­ing the­ory and Wil­liamson (1975) in­tro­duced the con­cept of economies in trans­ac­tion costs. Bran­den­burger and Stu­art (1996) sug­gested that firms should in­no­vate meth­ods of value ad­di­tion. Thus dif­fer­ent schol­ars are ad­vo­cat­ing dif­fer­ent features which can help a busi­ness to sur­vive and grow in the so­ci­ety. Thus busi­ness model has been looked more from the per­spec­tive of the sur­vival of firms. How­ever, busi­ness model de­pends on the eco­nomic and po­lit­i­cal phi­los­o­phy pre­vail­ing at that par­tic­u­lar time. The pre­vail­ing be­lief sys­tem plays an im­por­tant role in busi­ness model de­sign and devel­op­ment.


Over 70% of the Earth’s sur­face is cov­ered by water, but only 1% of this is fresh water, which can be used by hu­man be­ings. The

quantum of drink­ing water is re­duc­ing ev­ery­day due to our present day tech­nolo­gies. About 5− 10% of used colour in in­dus­trial process goes un­al­tered to resid­ual waste­water, which spoils the wa­ters of rivers, oceans, lakes and other open water reser­voirs. This dam­ages our water re­sources. The decade of 1990 has been the hottest decade so far in the last 2000 years. This rise in tem­per­a­ture is sub­stan­tially due to hu­man ac­tiv­i­ties. We have in­volved our­selves in ex­ploita­tion of na­ture. Th­ese and sim­i­lar is­sues force us to think over the is­sues of present busi­ness model. We have to again an­a­lyse the busi­ness model of to­day in or­der to be able to jus­tify our de­ci­sions. The present busi­ness model is based on the evo­lu­tion of eco­nomic and po­lit­i­cal thoughts and there­fore it is hav­ing its roots in the eco­nomic and po­lit­i­cal evo­lu­tion. We shall look into the evo­lu­tion of the busi­ness model in the ori­gin and growth of eco­nomic and po­lit­i­cal ideas.


Po­lit­i­cal philoso­phies and Busi­ness di­men­sions have worked to­gether. Cap­i­tal­ism spread and reached its lim­its. The op­po­site forces started and we had the emer­gence of Com­mu­nism which com­pletely wiped out busi­ness en­trepreneur­ship. How­ever, it didn’t sus­tain for a long time. It was re­placed again by cap­i­tal­ism. Cap­i­tal­ism as it im­plies, cre­ate a hunger for cap­i­tal / money. Ul­ti­mately, the im­pacts are vis­i­ble. The gap be­tween haves and have−nots in­creases due to cap­i­tal­ism.

Mer­can­til­ism and nationalism

The "mer­can­tile sys­tem" ad­vo­cated greater and greater ex­ports. It be­lieved that the coun­try ben­e­fits by in­creas­ing ex­ports and col­lect­ing pay­ments against the same. It ad­vo­cated the use of tar­iff to en­cour­age ex­ports (bring­ing more money into the coun­try) and dis­cour­age im­ports (which send wealth abroad). In other words, the goal was to main­tain a pos­i­tive bal­ance of trade, with a sur­plus of ex­ports. This the­ory ad­vo­cated the use of the state’s power to en­sure lo­cal mar­kets and sup­ply sources were pro­tected. This sys­tem was re­spon­si­ble for rise of great busi­ness pow­ers like East In­dia Com­pany. Nationalism evolved as a re­sult of this ide­ol­ogy, which en­cour­aged use of prod­ucts made in the home coun­try and was in a way op­po­site to Mer­can­til­ism.

The Phys­iocrats

The Ques­nay ar­gued that agri­cul­tural sur­pluses, by flow­ing through the econ­omy in the form of rent, wages, and pur­chases were the real eco­nomic movers. In­comes flowed from sec­tor to sec­tor, and thus class to class.They ar­gued that a "nat­u­ral state" of the econ­omy emerged when th­ese in­come flows were in a state of "bal­ance," that is, where no sec­tor ex­panded and none con­tracted. The Phys­iocrats ar­gued that government should leave the econ­omy alone and al­low in­di­vid­u­als to do as they please and that this would nat­u­rally re­sult in eco­nomic growth; they called this doc­trine lais­sez faire, or "let them do."

Clas­si­cal po­lit­i­cal econ­omy

Clas­si­cal eco­nom­ics is widely re­garded as the first mod­ern school of eco­nomic thought. Its ma­jor de­vel­op­ers in­cluded Adam Smith, David Ri­cardo, and John Stu­art Mill. The clas­si­cal school fo­cused on the­ory of wealth, the­ory of labour and on distri­bu­tion of re­sources. This school di­vides so­ci­ety in three cat­e­gories : work­ers, cap­i­tal­ists and land own­ers with three types of in­come: wages, profit and rent re­spec­tively. This the­ory ad­vo­cates ac­cu­mu­la­tion of cap­i­tal as the main source of wealth of the na­tion. Thus the busi­ness model evoloved in that pe­riod fo­cused on cap­i­tal­ism. This ex­treme em­pha­sis on cap­i­tal ac­cu­mu­la­tion re­sulted in a big gap be­tween haves and have− nots, which ul­ti­mately cre­ated dis­con­tent among work­ing class and re­sulted in rise of com­mu­nism, which cre­ated its own busi­ness model.

Com­mu­nism and So­cial­ist eco­nom­ics

The in­creased fo­cus on scarcity led Karl Marx to de­clare that the means of pro­duc­tion were the most im­por­tant com­po­nents in any econ­omy. Marx took his ideas fur­ther and be­came con­vinced that a class war was go­ing

to be ini­ti­ated by the in­her­ent in­sta­bil­i­ties he saw in cap­i­tal­ism. How­ever, Marx un­der­es­ti­mated the flex­i­bil­ity of cap­i­tal­ism. In­stead of cre­at­ing a clear owner and worker class, in­vest­ing cre­ated a mixed class where own­ers and work­ers held the in­ter­ests of both classes, in bal­ance. De­spite his overly rigid the­ory, Marx did ac­cu­rately pre­dicted one trend: busi­nesses grew larger and more pow­er­ful. The busi­ness model in the so­cial­ist eco­nomic sys­tem was based on cen­trally con­trolled eco­nomic plan­ning, which had ev­ery­thing planned out by the government. How­ever, lack of ini­tia­tive and lack of in­di­vid­ual mo­ti­va­tion forced this busi­ness model to fail and give way to cap­i­tal­ism.

Jevons and the Cam­bridge school

Coming af­ter the mar­ginal rev­o­lu­tion, Mar­shall con­cen­trated on rec­on­cil­ing the clas­si­cal la­bor the­ory of value, which had con­cen­trated on the sup­ply side of the mar­ket, with the new marginal­ist the­ory that con­cen­trated on the con­sumer de­mand side. He in­sisted that it is the in­ter­sec­tion of both sup­ply and de­mand that pro­duces an equi­lib­rium of price in a com­pet­i­tive mar­ket. Over the long run, ar­gued Mar­shall, the costs of pro­duc­tion and the price of goods and ser­vices tend to­wards the low­est point con­sis­tent with con­tin­ued pro­duc­tion.

Key­ne­sian rev­o­lu­tion

In ad­di­tion to the sup­ply of money, Keynes iden­ti­fied the propen­sity to con­sume, in­duce­ment to in­vest, the mar­ginal ef­fi­ciency of cap­i­tal, liq­uid­ity pref­er­ence, and the mul­ti­plier ef­fect as vari­ables which de­ter­mine the level of the econ­omy’s out­put, em­ploy­ment, and level of prices. Keynes there­fore ad­vo­cated low in­ter­est rates and easy ac­cess to credit to raise the over­all econ­omy.

But Keynes be­lieved that in the 1930s, con­di­tions ne­ces­si­tated pub­lic sec­tor ac­tion. Deficit spend­ing, he said, would kick−start eco­nomic ac­tiv­ity. Keynes there­fore ad­vo­cated both mon­e­tary man­age­ment and an ac­tive fis­cal pol­icy. Keynes helped for­mu­late the plans for the In­ter­na­tional Mon­e­tary Fund, the World Bank, and an In­ter­na­tional Trade Or­ga­ni­za­tion at the Bret­ton Woods Con­fer­ence, a package de­signed to sta­bi­lize world eco­nomic fluc­tu­a­tions that had oc­curred in the 1920s and cre­ate a level trad­ing field across the globe..

Neo­clas­si­cal syn­the­sis

This the­ory was devel­oped by John Hicks, and pop­u­lar­ized by the math­e­mat­i­cal econ­o­mist Paul Sa­muel­son, who seems to have coined the term, and helped dis­sem­i­nate the "syn­the­sis," partly through his tech­ni­cal writ­ing and in his in­flu­en­tial text­book, Eco­nom­ics (1948).

Main­stream eco­nom­ics in the lat­ter part of the twen­ti­eth cen­tury was largely dom­i­nated by the syn­the­sis, be­ing largely Key­ne­sian on macro­eco­nomics and neo­clas­si­cal on micro­eco­nomics (Clark 1998). In­tro­duc­tory univer­sity eco­nom­ics cour­ses be­gan with the same ap­proach that pulled the di­ver­gent strands of eco­nomic thought to­gether, pre­sent­ing eco­nomic the­ory as a uni­fied whole.

Chicago’s con­ser­va­tion­ists

Mil­ton Fried­man (1912−2006) ad­vo­cated that lais­sez−faire government pol­icy was more de­sir­able than government in­ter­ven­tion in the econ­omy. Gov­ern­ments should aim for a neu­tral mon­e­tary pol­icy ori­ented to­wards long−run eco­nomic growth, by grad­ual ex­pan­sion of the money sup­ply. He ad­vo­cated the quan­tity the­ory of money, that gen­eral prices are de­ter­mined by quantum of money. There is likely to be a lag be­tween the need for ac­tion and government recog­ni­tion of the need; a fur­ther lag be­tween recog­ni­tion of the need for ac­tion and the tak­ing of ac­tion; and a still fur­ther lag be­tween the ac­tion and its ef­fects (Fried­man 1962).

Glob­al­i­sa­tion and Re­cent De­bates

In the con­text of glob­al­iza­tion, econ­o­mists have been drawn to de­velop fields such as devel­op­ment eco­nom­ics which deals with eco­nomic as­pects of the devel­op­ment process in low−in­come coun­tries. Its fo­cus is not only on meth­ods of pro­mot­ing eco­nomic growth and struc­tural change but also on im­prov­ing the po­ten­tial for the mass of the pop­u­la­tion, for ex­am­ple, through health, ed­u­ca­tion, and work­place con­di­tions. Amartya Sen (b.1933) be­came well known for his con­tri­bu­tions to

wel­fare eco­nom­ics and his work on famine, the un­der­ly­ing mech­a­nisms of poverty, and gen­der in­equal­ity. Ex­press­ing con­sid­er­able skep­ti­cism on the va­lid­ity of neo−clas­si­cal as­sump­tions, he chal­lenged the ideas of self−in­ter­est as the prime mo­ti­vat­ing fac­tor of hu­man ac­tiv­ity


We are fac­ing chal­lenges in the present busi­ness model. We find the fol­low­ing is­sues : a. In­ap­pro­pri­ate mar­ket­ing prac­tices : we find the present mar­ket­ing to be short term ori­ented. b. In­ap­pro­pri­ate pack­ag­ing prac­tices : the out­come of the present day pack­ag­ing so­lu­tions are vis­i­ble ev­ery­where − as we find a heap of use­less and non−recyclable plas­tic pack­ets spread out ev­ery where. This ris­ing use of plas­tics and other such ma­te­rial will even­tu­ally cre­ate a prob­lem be­yond so­lu­tion. c. In­ap­pro­pri­ate fi­nan­cial prac­tices : En­ron, Satyam and many other cases cre­ate a les­son for us. Com­pa­nies pile up num­bers, be­neath which they cre­ate all types of mal­prac­tices. d. In­ap­pro­pri­ate ad­ver­tis­ing prac­tices: we have seen a se­ries of ad­ver­tis­ing prac­tices, which have ex­ces­sively used in­ap­pro­pri­ate ap­peals, which ul­ti­mately threaten our wholis­tic ex­is­tence. Peo­ple find it dif­fi­cult to with­stand th­ese ad­ver­tise­ments in fam­ily and so­cial gath­er­ing. Th­ese ad­ver­tis­ing prac­tices are es­pe­cially tar­get­ing younger gen­er­a­tion and fo­cus­ing on their li­bido. e. Ris­ing dis­con­tent among em­ploy­ees and pub­lic at large: In­spite of ris­ing pay − pack­ages, em­ploy­ees are ex­hibit­ing greater dis­con­tent. We can ob­serve ris­ing un­rest among em­ploy­ees. f. No care and con­cern to en­vi­ron­ment, ecol­ogy and sys­tems : a rough es­ti­mate points out that we have lost quar­ter of bio­di­ver­sity in the last 35 years and we are loos­ing 1% of our species ev­ery year. This all is due to mod­ern form of devel­op­ment, which is the root of in­creas­ing pol­lu­tion, shrink­ing forests, ris­ing tem­per­a­ture and in­ten­sive agri­cul­ture. g. Ne­glect of other liv­ing be­ings : ev­ery year large num­ber of species are be­com­ing ex­tinct. Our mad race of eco­nomic pros­per­ity has blurred our vi­sion for other crea­tures liv­ing on our planet. Count­less num­ber of an­i­mals, birds, sea crea­tures etc are butchered ev­ery year for the cause of our never sat­is­fy­ing lust. Agri­cul­ture farm­ing, trees and veg­e­ta­tions have enough food for us if we want to live a rea­son­able life. Now cor­po­rate play­ers are also coming in this sec­tor and see to it as a prof­itable busi­ness ven­ture. They are set­ting up high tech­nol­ogy slaugh­ter−houses and other such cen­tres, which will ul­ti­mately de­prive us of our other fel­low­be­ings from this planet. h. Lack of con­cern to fu­ture : we know it that the con­tin­ued over ex­ploita­tion of na­ture will lead to nat­u­ral dis­as­ters and im­bal­ances in the nat­u­ral sys­tems. We know it that the mother Earth has lim­ited re­sources and can­not with­stand our over−ex­ploita­tion. We know it that tem­per­ing with the nat­u­ral sys­tems will even­tu­ally dis­turb our eco­nomic sys­tem. But we are still ca­sual about our fu­ture and con­tinue to adopt poli­cies which are not ap­pro­pri­ate for long term devel­op­men­tal ob­jec­tives.


Our at­tach­ment to large or­ga­ni­za­tional sys­tems have cre­ated tech­nolo­gies which are ap­pro­pri­ate for large scale pro­duc­tions. Th­ese tech­nolo­gies are also not ap­pro­pri­ate for en­vi­ron­ment. Th­ese tech­nolo­gies have cre­ated huge gaps for the present time. Th­ese tech­nolo­gies wipe out small scale op­er­a­tions. They are cost ef­fec­tive and there­fore they re­duce cost of pro­duc­tion, which make it dif­fi­cult for cot­tage in­dus­try to com­pete. Thus, present day tech­nolo­gies have wiped out small scale and cot­tage in­dus­tries.

There is a need of alternative tech­nolo­gies, which are ap­pro­pri­ate at small scale also. Th­ese tech­nolo­gies can help us in our sur­vival in the long run.


There is al­ways a search for bet­ter busi­ness model. We are still wait­ing for an alternative to the present busi­ness model. The present day busi­ness model has its own flaws as doc­u­mented above and th­ese flaws are get­ting ac­cen­tu­ated ev­ery day. We need a bet­ter busi­ness model, but there is yet no alternative. A few ideas and ide­olo­gies are evolv­ing, which may help us in ex­plor­ing the way out. Th­ese ideas are as given be­low : − a. Rel­a­tive Eco­nom­ics : this busi­ness model has been given by Acharya Ma­hapragya. This model fo­cuses on en­vi­ron­men­tal is­sues and is also fo­cused on sus­tain­able devel­op­ment. b. Gand­hian Devel­op­men­tal Model based on Gram Swara­jya: this model is based on the idea of de­vel­op­ing ru­ral eco­nomic sys­tem us­ing home based small scale pro­duc­tions and cot­tage in­dus­tries. c. Chin­maya Vi­sion: Chin­maya Mis­sion has given this model. this model vi­su­al­izes devel­op­ment based on in­te­grated devel­op­ment with uni­ver­sal out­look. This model em­pha­sizes on spir­i­tual, and emo­tional devel­op­ment. d. Green Econ­omy : a num­ber of thinkers are think­ing on the pos­si­bil­ity of cre­at­ing an econ­omy which they call as green econ­omy. The idea of green econ­omy may be based on any ide­ol­ogy, but it fo­cuses on en­vi­ron­ment, ecol­ogy, na­ture and our liv­ing sys­tem. It stresses that we should re­turn to the na­ture more than what we are ex­tract­ing from the na­ture. This eco­nomic sys­tem will have the fol­low­ing thrust ar­eas: It pro­tects the planet and re­sults in so­cial equal­ity for peo­ple as well Cre­ates jobs that con­trib­ute di­rectly to re­duc­ing en­vi­ron­men­tal risks and pro­vide lower−skilled and lower−in­come work­ers with path­ways out of poverty "Green­ing" of the econ­omy i.e. wealth cre­ation and em­ploy­ment op­por­tu­ni­ties

Why a Green Econ­omy is eco­nom­i­cally Sound?

It in­vests in "nat­u­ral cap­i­tal," mean­ing that it uses the nat­u­ral as­sets of ecosys­tems ( e. g. forests, lakes, wet­lands) as a source of cap­i­tal (e.g., the abil­ity to pro­duce goods and ser­vices) The sta­bil­ity of th­ese nat­u­ral as­sets is vi­tal to pub­lic ser­vices such as recre­ation, food, and medicine In this way, the fu­ture of eco­nomic thought may fi­nally be able to un­cover and un­der­stand the com­plex pro­cesses and mech­a­nisms which guide eco­nomic trans­ac­tions in hu­man so­ci­ety. The world has moved from an­cient times when philoso­phers and re­li­gious lead­ers were the author­ity on all things, eco­nomic is­sues in­cluded, through the di­vi­sion of dis­ci­plines into more spe­cific fields, into an era of glob­al­iza­tion and the emer­gence of a global econ­omy.


Based on the con­cep­tual dis­cus­sions, we present the fol­low­ing propo­si­tions for fur­ther stud­ies and dis­cus­sions :−

There is a need for de­bate and dis­cus­sion on the present eco­nomic and po­lit­i­cal ide­olo­gies of the na­tions and we need to evolve eco­nomic and po­lit­i­cal ideas for bet­ter eco­nomic and po­lit­i­cal sys­tems. This will help us in devel­op­ment of a new busi­ness model. There is a need of a re­search into the present sys­tem of busi­ness model. The present ig­no­rance of en­vi­ron­men­tal is­sues and so­ci­etal is­sues may prove fa­tal in the long run. There is a need of a more sym­bi­otic re­la­tion be­tween busi­ness, so­ci­ety and en­vi­ron­ment. Ini­tia­tive has to come from busi­ness, whereby it as­sures that the busi­ness will give to the na­ture more than what it gets. A busi­ness model has to evolve based on an ide­ol­ogy of giv­ing back more to the na­ture.


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