Free Markets - The Indian Way

Gurcharan Das
The Man: Gurcharan Das's second career as a writer and public intellectual is more noticed and in some ways far more influential than his first as a professional manager. It spanned 30 years, and across six countries and included a term as CEO of Procter & Gamble India. His writings drew from his experience and also from his wide reading. He tells us that individuals could be immoral but the institution of the market itself is deeply moral.

The Oeuvre: His first book India Unbound captured the country in economic transition and became an instant best seller. In Difficulty of Being Good, his most recent book, he turned to Mahabharata to find answers for some of the pressing ethical questions.

X-Factor: A beautiful writer—wise and pragmatic.

The Message: There is a purpose to economic activity, and the pursuit of money is justified so long as it leads to the good life.

The Hypothesis
Human beings may be immoral and will behave badly whether in a socialist or a capitalist society or under a democracy or autocracy. But the institution of the market itself is deeply moral and has its underpinnings in the Indian notion of dharma.

So What?
Dharma is a frustrating word and not easy to translate. Duty, goodness, justice, law and custom have something to do with it, but it is chiefly concerned with doing the right thing, both in the private and the public life. The market system depends ultimately not on laws but on the self-restraint of individuals. A sense of dharma provides that restraint for the vast majority of people who tend to behave with mutual respect in most societies.

Although two decades have passed since the reforms of 1991, when Indians began their love affair with free markets, capitalism is still trying to find a comfortable home in India. Like most people, Indians believe that the market is efficient but not moral. I have come to believe, the opposite. Human beings may be immoral and will behave badly whether in a socialist or a capitalist society or under a democracy or autocracy. The institution of the market itself is deeply moral and what has convinced me about its ethical nature is the classical Indian notion of dharma. At the heart of the market system is the idea of exchange between ordinary, self-interested human beings, who seek to advance their interests peacefully in the marketplace. The reason that strangers are able to trust each other in the market is, in part, due to dharma, which is like an invisible glue that is based on underlying shared norms and which gives people a sense of safety when they cooperate and transact.

Supplier, customer, and employee—all business relationships depend on a certain behaviour which one could call the behaviour of Dharma. When people behave according to that, the business runs well. Very often companies cut corners, squeeze their suppliers. They will be the ones that will lose their employees, their suppliers. If they are not honest to their customers then the repeat purchase of their products will not happen. The whole market system depends on this shared belief that we will all do the right thing. There are companies who default on their debt obligations and it would seem they can do it repeatedly. But ultimately they pay the price. Their multiples [of stock price] are low and investors are wary of putting their money into the company’s equity.

The idea that an ancient Indian idea might offer insight into capitalism’s nature is, on the face of it, bizarre. I was exposed to Western ideas when I was in college, and I assumed unthinkingly that ‘capitalism’ came from the West. I read Adam Smith, Marx, John Locke and others, who introduced me to the liberal tradition. But I realised my mistake later in life when I happened to read the two thousand year old Sanskrit epic, Mahabharata. The epic is obsessed with the notion of dharma, and as I tried to come to grips with it I realised that there might also be non-Western roots for the ideas of liberty and market capitalism, and the liberal tradition might, in fact, be universal.

Dharma is a frustrating word (even for Indians) and not easy to translate. Duty, goodness, justice, law and custom have something to do with it, but it is chiefly concerned with doing the right thing, both in the private and the public life. It derives from the Sanskrit root dh, meaning to ‘sustain’ and ‘hold up’ like a foundation. It is the moral law that sustains an individual, society and the cosmos. From its root ‘to sustain’ dharma carries the connotation of ‘balance’—it is the balance within each human being, which is reflected in the balance and order of the cosmos. When individuals behave in accordance with dharma there is order, balance and trust within society.

Dharma is especially suited for understanding the dynamics of the market place in particular and of public policy in general, because it does not seek moral perfection. It is based on a pragmatic view of human beings—it views men to be sociable but imperfect, with strong desires and passions that need to be restrained by dharma. For example, the king’s dharma is to nurture the productive forces in society: ‘The king, O Bharata, should always act in such a way towards vaishyas, ‘merchants’ and ‘commoners’, so that their productive powers may be enhanced. Vaishyas increase the strength of a kingdom, improve its agriculture, and develop its trade. A wise king levies mild taxes upon them.’ [Mahabharata XII.87] Practical advice indeed, for otherwise, the epic adds, they will shift to the neighbouring kingdom.