Tuesday, April 21, 2009

The Dharma of Capitalisam, Wall Street Journal

The most damaging fallout from this economic crisis may well be a loss of trust in the democratic capitalist system, especially if those who are unemployed and suffering begin to believe that "anything goes" in an unfair world. In the rush to rewrite the rules of the game, policy makers might consider the message of dharma from Indian philosophy and literature, which offers a more nuanced answer to moral failure and the ethics of capitalism.

Dharma can mean virtue, duty or law, but is mainly concerned with doing the right thing. It is the moral law that gives order and balance to each human being and the cosmos. The concept is uniquely suited to guiding us through our present economic and regulatory quagmires because it is concerned with the achievable rather than the ideal. It recognizes that happiness comes from upholding a certain balance, by living according to a system of beliefs that restrains and gives coherence to our desires. Dharma does not seek moral perfection as Christianity or Islam does. Hence, pragmatic Indian statesmen throughout history have turned to it to address issues of public policy.

Dharma is probably best exemplified by the story of Queen Draupadi in the 2,000-year-old Indian epic, the "Mahabharata." In it, the queen asks her husband, Yudhishthira, about unmerited suffering: "When everything was going so well for us, why was our kingdom stolen in a rigged game of dice?" she complains. She exhorts her husband, who gambled away the kingdom, to raise an army and get their possessions back. But he reminds her that he has given his word to his enemies to remain in exile for 13 years as punishment for losing the game.
"What is the point of being good?" she persists. "Isn't it better to be powerful and rich than to be good in an unfair world where those who steal and cheat sleep on sheets of silk and pillows of down while those who are good have to settle for the hard earth? Why be good?" To this he replies in the only way that he knows: "I act because I must."

The King's answer represents the uncompromising, compelling voice of dharma. For him, good acts produce good karma, and these acts eventually change the balance of dharma in the universe. If people did not keep their commitments, the social order and the rule of law would collapse. Dharma is needed by everyone to live a happy, flourishing life.
There were many dharma failures in the run-up to today's economic crisis, in which all actors seemed to behave rationally. When U.S. house prices were rising and interest rates were low, even the poor got a chance to get a mortgage and a home. Banks securitized these mortgages and sold these complex financial products to other financial institutions, who also gained through better returns. When the housing market turned down, these financial products turned toxic. Whom do you fault?

Dharma draws a fine line between rational self-interest and selfishness. It would judge all actors in today's crisis guilty for tipping the balance of dharma in the wrong way. The undeserving recipient of the loan may have misjudged his or her ability to repay. The banker, motivated by short-term reward, pushed subprime mortgages to shaky borrowers without doing sufficient due diligence. Rating agencies underestimated the riskiness of the assets. The institution that bought the risky financial products failed to protect its shareholders. Regulators were captured by interests -- and when they acted, it was from domestic compulsions, forgetting the global consequences.

President Barack Obama's reaction to the crisis, among other things, was to seek to claw back bank bonuses. Congressional Democrats suggested an extortionate tax on bonus recipients at banks that received federal bailout money. To want to punish someone in this crisis is understandable but it is a dangerous path. What the world needs instead is the calm and principled voice of King Yudhishthira. He would have appealed for a voluntary return of bonuses while explaining to the public that Wall Street had been bailed out to save Main Street's pain. Furthermore, honoring bonus contracts is necessary to support the rule of law.
If envy is the sin of socialism, greed is the sin of capitalism. As capitalist nations grow, the resulting wealth creates enervating influences. Generations of savers are replaced by spenders. Ferocious competition is a feature of the free market and it can be corrosive. But it is also an economic stimulant that promotes human welfare. The subtle art of dharma tries to strike the right balance between healthy and unhealthy competition.

The choice for policy makers today is not between free markets and central planning but in getting the mix of regulation right. No one wants state ownership of production where the absence of competition corrodes the character even more. Dharma's approach is not to seek moral perfection, which leads inevitably to theocracy or dictatorship. It recognizes that it is in man's nature to want more and it seeks to give coherence to our desires by containing them within the discipline of an ordered existence.
only catches crooks but also rewards dharma-like behavior and nobility of character.
Mr. Das is the author of the forthcoming book, "The Difficulty of Being Good: On the Subtle Art of Dharma" (Penguin).

Sunday, April 12, 2009

Young India, old politicians

Not a single politician has explained to us during this election campaign why India has risen to become the world’s second fastest growing economy. It did not happen because our leaders gave cheap rice, reservations, employment guarantee schemes, loan waivers, or anything else on the mind of our political class. Hence, a suspicion has grown that our country may be rising despite its politicians and the economy grows at night when the government is asleep. The best that our leaders have done since 1991 is to gradually get out of the people’s way.

If one did manage to find a stray neta who understood the reasons behind India’s success, it would probably be a younger one. For it is young, self-assured Indians, whose minds are decolonized, and who are confidently scripting India’s success story via the private sector. This is unlike China, whose success is being orchestrated by a purposeful state. This too makes sense for three fourths of China’s politburo consists of young technocrats. In comparison, almost one fourth of India’s greying legislators have a criminal record.

If India can rise despite the state, it would seem to matter less and less who wins this election and which coalition comes to power. The ability of politicians to do real harm (as they could during the ‘licence raj’) has diminished. What is remarkable about India’s history is not what happened in 1991, but that every government after that has continued to reform, albeit in a slow, halting manner. Even slow reforms have added up to make India a high growth economy. That it has happened in a chaotic democracy in which Mayawati aspires to be PM is the real triumph.

The political reason for our success is that every government had a few young reformers, who understood that a nation prospers not by giving people fish but by teaching them to fish. In 1997, Chidambaram delivered a ‘dream budget’ when no one was looking; Arun Shourie had the determination to push through the privatization of loss making state companies against opposition within his coalition; BC Khanduri had the will and the skill to push forward an ambitious highways program; Lalu Prasad had the good sense to leave it to young Sudhir Kumar to stage the greatest turnaround in the Indian Railways; Suresh Prabhu did wonders in electric power until his envious, ageing boss cut him down. These were young men in a hurry. Compare them to the sad, elderly Arjun Singh, who fell asleep during meetings and cussedly refused to reform our education system.

The Sanskrit epic, the Mahabharata, is unique in engaging with the world of politics and it has a lesson for our rulers--learn to behave your age. The classical Indian life is lived in stages. The first is brahmacharya—the period of adolescence when one is a celibate student; in the worldly second stage, grihasthya, the householder produces, procreates, provides security for the family and enjoys the world. At the third, vanaprasthya stage, one begins to disengage from worldly pursuits to have time for rest and reflection; and in the final stage, sanyasa, one renounces the world in quest of spiritual release from human bondage. This is how to live a flourishing and balanced life. The Mahabharata reminds us that the second stage is the indispensable material basis of civilization, and this is the time for politicians to become statesmen. Our weary, old politicians have got it all wrong—they are trying to hold on to power at the wrong stage of life. The epic would approve of Rahul Gandhi’s efforts to bring the young into our political life.
Because of high growth, prosperity will now spread in India but happiness will not unless we fix governance. Every political party has promised cheap rice, more schools, more hospitals and more everything in its manifesto. But 80% of the rice will not reach the poor, 25% of the teachers will be absent from schools and 40% of the doctors will not show up at primary health centres. A few, younger MPs have understood the Indian voter’s deep despair over corruption in the delivery of public services. Hence, they have rightly concluded that our first priority must now be not economic reform but governance reform.

The Mahabharata also had a problem with the self-destructive, kshatriya institutions of its time, and it had to wage a war to cleanse them. We too, I fear, will have to wage a Kurukshetra-like battle against our corrupt government institutions in order to bring accountability into public life. Like Yudhishthira in the epic, we shall have to struggle in order to recover dharma and a meaningful ideal of civic virtue. Fortunately, a few younger netas understand this and it is they who will write our future and not the tired old men who are trying desperately to hold on to power while pretending to rule us.
The writer’s forthcoming book, The Difficulty of Being Good: On the Subtle Art of Dharma, interrogates the Mahabharata in order to answer the question ‘why be good?’