Friday, August 21, 2009

Adam Smith's Dharma

In January this year, President Sarkozy of France, former Prime Minister Tony Blair of England, and the German Chancellor, Angela Merkel, kicked off a debate in Paris on the nature and the future of capitalism. It was in response to the global economic crisis. This article--my inaugural column for the Times on Saturday--is a contribution to this debate.

The idea that an ancient Indian epic might offer insight into capitalism’s nature, on the face of it, appears bizarre. The truth is that the Mahabharata’s world of moral haziness is far closer to our experience as ordinary human beings than the narrow and rigid positions that define debate in these fundamentalist times. Capitalism is also about ordinary persons--buying and selling goods in the market place.

The Mahabharata believes that human beings are flawed and these flaws make our world ‘uneven’, vishama--making us vulnerable to nasty surprises. Duryodhana is one of the chief causes of ‘uneveness’ in the epic. Others too have their flaws--Yudhishthira’s weakness for gambling, Karna’s status anxiety, Ashwatthama’s revengeful nature, Dhritarashtra’s excessive love for his eldest son, and so on. These defects are dangerous and they drive the epic towards calamity. Investment bankers on Wall Street and rating agencies suffered from similar infirmities. And they have brought the global capitalist system to its knees.

John Maynard Keynes, the great economist, had a comparable insight about our ‘uneven’ world. He lived during the Great Depression when there were also many calls to end capitalism. The unevenness of the world is caused by what Keynes called, ‘animal spirits’, which drive businessmen to take risks, often in the face of insufficient knowledge. John Nash, the Nobel Prize winning hero of the movie, A Beautiful Mind, traced this to ‘asymmetries of information’. And this leads to crises--such as the dotcom bubble, in which many sensible persons quit their jobs in order to make a fortune. It burst in 2000 but was soon replaced by another mania of the ‘smart flippers of securitized mortgages of sub-prime properties’, which sent the world into a recession in 2007. Keynes believed that a capitalist economy left to itself is unstable, and needs state regulation.

Standard economic theory makes the mistake in ignoring the role of human passions and animal spirits. Ever since Adam Smith, classical economics has assumed that capitalism is inherently stable. People buy and sell rationally, and this results in equilibrium. Classical economics ignores vishama--that people get into manias and even paan-wallas start buying shares on the basis of rumours. When manias take over there are bubbles and when bubbles are pricked confidence falls sharply and the whole economy collapses. Hence, we need regulation to ensure people are not falsely lured into buy bad assets. This regulation, however, must not kill the ‘animal spirits’ of entrepreneurs, which is what happened in India during the ugly days of the License Raj…and we almost lost two generations.

If Keynes thinks the answer lies in regulation, the Mahabharata seeks to ‘even’ out the world through dharma. Dharma is a complex word—it means virtue, duty, law, religion depending on the context, but it is chiefly concerned with doing the right thing. The Mahabharata recognizes that it is in man's nature to want more. Dharma seeks to give coherence to our desires by containing them within an ethical life. No amount of regulation will catch all the Duryodhanas and the Ramalingam Rajus of the world. What is needed is self-restraint on the part of each actor in the market place in order to build trust within society. The sunny world of Adam Smith may have been a tad optimistic, but Smith understood the importance of trust which underlies each transaction in the marketplace. This trust is the ‘dharma of capitalism’.

Regulators and central bankers around the world are wrestling with how to reform their financial systems. They are expending huge energy in debates between the political Left and the Right when the greater divide is between conduct in accordance with dharma and adharma. It is not enough to punish Ramalingam Raju. Institutions must also develop a culture of self-restraint and reward an act of goodness--one of the very few things of genuine worth in this world.
The writer is the author of the book, ‘The Difficulty of Being Good: On the Subtle Art of Dharma’, which examines the ambiguous moral life of India under the lens of the Mahabharata. It is being launched next week.


Unknown said...

gurcharanjee, isn't it strange that so much science goes into discussions about human behaviour? our inherent nature is unpredictable and volatile. our actions seldom based on logic and balanced thought. capitalism lives in impersonal words like markets, shares, economy. when will we include the human factor in deciding the paths successful economies must take? have we evolved so much that we bear no resemblance to those who existed in the times of mahabharata?

Sunil Yasa said...

How come u r not on twitter. It would be great to see u there.

bored with junior ministers' mundane tweets. you would be a welcome addition.

Anil's Reflections said...

Looking forward to reading the book

Anil Malhotra

Unknown said...

gurcharanjee, what are your views about the current problems faced by our nation - looming threat of a cross-border clash, domestic political fiascos and general malaise of the economy

rashmi dickinson said...

I am normally so frustrated by the simplistic knee jerk thinking and 'management by soundbite' of officers and politicians and indeed of the "morally good" in India that your book is such a welcome change. We need to question certainties, understanding the nuances and subtleties and complexities of trade-offs that one must necessarily make in order to achieve progress and happiness. So rare here. Can't wait to pass it onto my children.

Benedict said...

Sir, Its important to have our epics taught in schools.. we need more thought leaders have enough infrasturcture for code developers...
I was inspired by your article in the STOI and written a blog post on that

Sajeev said...

Gurucharanjee. I too think an independent regulator is necessary.
Because true markets allows free growth. This will lead to the growth of people who are working hard. So far its ok. But the problem lies in the fact that once some 2-5 companies effectively consolidated thir position in market the chances are high to bend and twist rules. This will not only result in more difficulties to new people coming to the market with new aspirations but also high - risk high gain formulals may lead to unwise business bets and may lead to selfdestruction. So it is better to have a regulator and tribunals - but they should not alter the laws of capitalism nor they provide unecessary regulations


ivak99 said...
This comment has been removed by the author.
Anonymous said...

I am a regular reader of your column in TOI and find it inspiring. Have started a blog (Scatterbrained Scribblings) which takes a tongue-in-cheek look at organisational dynamics and career (mis)management drawing from Indian tales/wisdom (Upanishaths, Mahabharata, Panchatantra, Jataka tales et al). Would be much obliged and honored if you can take some time off to read atleast one entry and give me your valuable inputs.

Hope you will indeed oblige.

Arun Vemuri

K.R.Srivarahan said...

The scope of dharma has been extended beyond trust,oddly enough, by Arthasastra which focusses on economic welfare to include genuine concern for counter-parties. According to Arthasastra, "The fundamental principle of economic activity is that no man you transact with will lose; then you shall not." Can there be a better first principle for enlightened self-interest which is what capitalism is supposed to be ? It is also an assurance that life is a win-win game.

Anonymous said...

Hi, Im from Australia.

Hi, Im from Australia. Please check out these references which point out that in 2009 and beyond we really have no choice but to be good.

Unknown said...

This book " difficulty of being good" reminds me of a tamil filim enacted by madavan( original in bengali) "evano oruvan". He is struck between two extremes, his inner conscious of being good(because of his upbringing) to the opposite that is happening in the world. He concludes something like this:
1. If you teach me to be good from childhood, make sure everyone in the world is good
2. or legalize injustice, so that i will not have odd feelings towards injustice in my society.

Your thoughts would be appreciated!

Deepak S

Vijay Todi said...

Deabate on Gurcharan Das’s book at AMA:
My views on some of your points are as follows:
(1)Swa Dharma: Dharma is universal by all means. It can not be different for different people. Dharma is much more than and beyond “Duty, virtue, religion”. Duty of a Kshatriya is to save his kingdom and people from enemies in the larger interests of the citizens. Duty of a shudra is to serve people by cleaning up etc.

Dharma is winning over his personal vices like anger, frustration, ego, greed etc and maintain his mind in its purest original form. If some strong actions are necessary in the larger interests, Dharma does not restrict the king, but while doing so, his mental state should not be in anger etc, but full of compassion for people from both sides.

(2) Envy: Duryodhan tried to take over Indraprastha and all belongings of Pandavs, not because he was an intruder, or because of envy. It was because he had won it all from Pandavs in a game (business) which was publicly played by mutual will, in presence of all elders. Pandavs were at a bigger fault by putting Draupadi at stake and then losing her.

(3) Dharma: Dharma is universal geographically, applicable and available equally to each human being at all the times. If applicability and benefits are restricted to some countries, languages, a religion, a gender, it is not Dharma. It may be a group or a sect following some sorts of beliefs or celebrating some common events.
“Dharma” is Law of Nature. Dharma of fire is to burn itself and also things and persons getting in contact. Dharma of ice is to remain cool and keep the ambience cool; and so on. There is no Hinduism or any other ism in this phenomenon, the law of nature.

In order to do some evil, one has to first arouse anger and hatred within and only then he can do evil. Thus, Dharma is in mind and then the thoughts manifests in body, and then transmitted outside through the evil action. Dharma, the law of nature, first punishes the person doing the evil.

(5) Even in isolation: Dharma prevails even in a lonely desert. There may not be any other human being around, but your own mind, the thought process and manifestation of thoughts on the body and then bodily actions are always there. You can not do harm to others in absence of anyone else, but you can do good or harm to yourself. Dharma is to good to yourself, purify yourself to your pure origin.

(4) Buddha: Had he been in place of Krishna, the Mahabharat would not have taken place. Buddha never said- let Adharma prevail. He said, do whatever is necessary in the best welfare of people; but while doing so, remain compassionate and maintain equanimity in mind- not anger, hatred, greed, envy. Buddha would have perhaps said the same thing to Arjuna, may be, differently. While fighting the war, do not generate ill will, anger, hatred and also not emotional attachment with the enemies even if they are relatives or the beloved ones. But if cause of the war was personal ego or wrong emotions and not larger welfare of people or to protect self, he might have advised not to fight the war, but to settle the issue by communication or sacrifice.

(5) Justification: Over population, destiny, Krishna-lila etc are no good justification for a bloody war.

(7) Stripping Draupadi: Reducing a human being just to a bare body, can not be justified by any argument. Even allowing this kind of sin by the elders can not be justified in any way. Just supplying large quantity of clothes too is not enough; it was a bigger mockery in fact.

Vijay Todi said...

Dharma is not just virtue, duty, the right thing and so on; yes, these are morality.

Why do we blame Duryodhan alone for creating Visham (uneven) and spare others- Yudhisthir for gambling all his belongings and wife too, Karna for status anxiety, Ashwathama for revange oriented, Dhritrarashtra for infatuation/moha for his son, Bhishma for ignoring the evils and a long such list.

Vishama is first created in mind and then it menifests at physical level. Strong attachments to likes and dislikes and also to one's own thoughts, prejudices, perceptions; and insisting that everyone should behave accordingly.

Cause of all problems is searched outside in a person or a situation as suits us. In fact, the cause is within. External factors are just the stimulus, our response is voluntary and hence our choice. Therefore, our thinking pattern is the cause of our problem.

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