Retaining Balance – The Eternal Way

| 6 MINUTE READ | A reconsideration of restraint in an era of excess

Between State & Markets

Karl Popper, one of the most influential philosophers of science of the 20th century said, “Knowledge advances not by repeating known facts, but by refuting false dogmas”. In this engaging and rooted book, the author MR Venkatesh (MRV) explores the history and influence of western dominance on thought, culture and the institutions that define the modern economy. Exposing the roots of alienation that have led to an era of excess and a disequilibrium between the four fundamentals of economic activity – production, consumption, savings and investment.

Despite runaway debt, bloating welfare interventions, relentless consumption and sharpening inequalities – we look upon the same state and markets that perpetuate them to somehow find a resolution. Amidst this quagmire between faltering growth, excess liquidity, falling interest rates and high inflation, we observe a growing distance between the world we inhabit and see around us and the flow of money that reshapes and alters it. Like two parallel realities – one where we eat, work and sleep upon the unstoppable treadmill of survival and another disconnected realm where capital multiplies itself exponentially.

The Americanisation of markets

During the colonial period from 1789 to the 1940s, it was understood that “the fabric of society had to be kept intact, even at the expense of individual liberties and rights.” However, since then, the western financial system has evolved through what MRV calls the atomisation of the individual and the ascendance of capital. Turning the former into a monochromatic consumer, an eyeball, a category – and the latter from an intermediary that lubricated economic activity to an exotic end in itself.

As American Corporations looked for markets beyond their borders, their economic systems, political structures and cultural values globalised to pave the way for the world to transform into one homogenised market. These spawned opportunities for supply chains in distant lands that delivered to fulfil the insatiable American dream. As the dollar income received in these nations swelled their reserves, they parked it in the ‘safe haven’ of US treasury bonds, thereby providing the capital that enabled America to continue this endless cycle of consumption despite their bloating debt.

Post 2008 Chakravyuh

A fallout of this globalisation was the gradual atrophying of the American middle class. This coupled with the rise of individual rights without emphasis on concurrent responsibilities, spawned the expansion of the welfare state. Where the diligent few are taxed to provide for the disempowered many.             

The 2008 crisis was an intermediate stalling, arising from the overlap between the unsustainable goals of a welfare state and the unmoored aspirations of a financial sector gone rogue. The inevitable culmination of this crisis into a far reaching worldwide currency implosion is something that still lies ahead of us. The stop gap remedy of quantitative easing appears to be reaching its limits. The failure of markets has seen a partial retreat into more Keynesian interventions, a hybrid no man’s land where a Universal Basic Income is now being toyed with as a way in which this raging bull can be kept running. There is no discussion on how it can ever be calmed.

The dark age of macroeconomics

It is instructive to recall that the fall of Roman civilization was triggered by big infrastructure, a huge bureaucracy and a large, well-paid army – that led to massive government spending far outstripping revenue. It was what we call today a deficit problem. The Nobel laureate Paul Krugman asserts that we are living through the dark age of macro-economics in which the hard-won wisdom of the ancients has been lost.

In MRV’s assessment of what ails the system, he addresses a few key issues. The premise in economics of the individual as a rational actor that oversimplifies the complexities of human behavior. The bloating of the state into an omnipresent force that distorts markets and reconditions human expectations in unsustainable ways. And the transformation of markets themselves from intimate and self-balancing systems, as recognized by Adam Smith, into an anonymous and uncontrolled playground that is epitomized by the actions that led to the 2008 collapse.

The missing middle

Caught between the heavy hand of the state and the unpredictable nature of markets, he highlights the lack of recognition and understanding of the family as the missing middle – the core economic unit of society that has served human needs over time but been gradually eroded, disempowered and ignored by both the state and markets. In recognizing the family as a source that transmits culture, preserves the learnings and values gleaned through time and provides the restraints on the individual that ensure balance – he locates within the framework of the state and market – an antidote that anchors societies to act in ways that are responsible and sustainable.

In 1992, as we debated the most appropriate way to navigate a newly liberalized economy, the noted economist Dr. Jagdish Bhagwati gave a 72-page report that argued for a reorientation. One significant shift advocated was to provide a consumerist thrust as there were excessive savings that were slowing growth. The savings-GDP ratio in India was 17% then. It is 31% now, alongside three decades of growth. It is these savings that virtually fund domestic investments that go into production of goods and services. That insulate India to some extent from exogenous shocks and global gyrations of both financial markets and economies.

Dharma, Artha, Kama & Moksha

India managed to grow while breaking free from some of the conventional wisdom on what drives growth. MRV says a factor that could have contributed to this is the symbiotic relationship between practical and spiritual life in India. Since this cannot be reduced to a mathematical equation, it is excluded from any economic analysis. The four aims of human life that dominate the Indian psyche are Dharma (an intuitive as opposed to dogmatic righteousness), Artha (to live with purpose and material well-being), Kama (the aesthetic enjoyment of life) and Moksha (liberation).

The noted economist Hyman Minsky argued that extended periods of prosperity lead to reckless borrowing and lending that moves the capitalist system from stability to instability. As the world economy ails, nations have begun looking inward towards civilizational values for succor. The Bhagavad Gita emphasizes the dynamic balance between duties and rights. These are values intrinsic to how the traditional family unit functions. Borne out of love and trust – they raise children, look after the old, allocate capital, share risk and provide the psychological anchor of belonging that enables restraint and resilience.  

The limitations of democracy

Despite the promise of ‘minimum government, maximum governance’, most leaders have found it impossible to reverse the pull of populist measures that mobilize votes. The axiom of individual self-interest unknowingly serving the cause of markets and societies held sway in more simple times. But the scale of growth and the evolution of technology have resulted in oligopolistic and monopolistic markets with their consequent distortions. The fallout of which is an erosion in the footprint of small, decentralized businesses and a rise in the need for populist interventions. A classic Catch-22 situation, where the nature and unintended consequences of growth, make it unsustainable.

Families impose restraints on reckless individual spending and promote saving for future exigencies. The regular celebration of festivals in India serves the economic purpose of redistribution that compensates for the impact of frugality on growth. These are self-balancing mechanisms developed through the wisdom of inherited experiences. They operate in a natural way, outside the pale of government fiat or market incentives. Dealing with imbalances in a manner that entrenches the values that enable the survival and prosperity of the family and community. These are qualities that are hard for states or markets to replicate, but important for them to recognize and leverage.  

Selfishness, Cooperation & Balance

In his book ‘The Selfish Gene’, the evolutionary biologist Richard Dawkins argues that the natural selection process in the evolution of human beings is for securing the individual. In ‘The Cooperative Gene’ in contrast, Mark Ridley explained how complex life systems in fact required the cooperative gene to flourish. MRV posits a third overarching ‘Balancing Gene’, that determines when to make the selfish and cooperative genes functional.  

In Indic traditions, we strive for a balance between the ascetic and hedonistic aspects of our lives. Either one in excess leads to a disequilibrium that is remedied either by internal volition or external force. How do we enable the micro-economics of a family unit, that operates with restraint and balance, to cumulate into the macro-economics of a nation?

Even as we navigate through the uncertainties of this era of excess, a shift towards recognizing the overarching role of culture, embedded in the family unit, is what will help us reclaim the wisdom of the ancients to guide our way forward. Economics can never be understood in isolation. It is but one aspect of an integrated existence.   

-x-

(This post was published in ‘The Sunday Guardian’)

23 thoughts on “Retaining Balance – The Eternal Way

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  1. Anand…very insightful article. “Ethics” have gone out of Economics. “Morals” have gone out of administration & management. Needs which are pro-survival, are being sacrificed in pursuit of contra-survival wants. Want inherently has the tendency to expand towards becoming greed. In the ponds of confusion, fishing is free for the wicked. So, those who can, are driving the innocent societies from clarity to confusion – to perpetually sustain it so. It is no more the survival of the fittest – but growth of the wickedest 😦

    Liked by 2 people

  2. Excellent research and a comprehensive, thought-provoking post. I read it a few times because you bring forward so many insights and I enjoyed your balanced view. I love the concept of the “insatiable American dream.” In addition, the following is so interesting: “the capital that enabled America to continue this endless cycle of consumption despite their bloating debt.”

    Great work from a brilliant mind!

    Liked by 2 people

  3. Problem is that we are worshipping science and logic which are impersonal and more often irrelevant to the individual.This is based on the hope ‘ I can manage based on this impersonal science and logic’- which is being demolished.By calling BG using badword called’ religion’ it can been set aside as irrelevant whereas it is the science that everyone should be using
    Why BG is science ( I can only be cryptic in this space)
    Krishna is the essence of everything is the meaning of vishwarupan scene.
    Krishna says He is the father of every living entity
    Krishna creates phenomenological world for every living entity every moment
    Krishna completes everyone of us every moment
    Anything not connected to Krishna is simply what it is not
    As long as festivities are around Krishna they are ok
    Reset and centre around Krishna for balance of values prosperity

    Liked by 1 person

  4. Thanks for an engaging review. I have heard of this writer but more as a commentator who shows up on right wing channels. I don’t watch them so was not able to form an opinion of the writer.

    There is recognition that formal economics ignores individual decision making, which is quite often irrational and is the very opposite of the “rational decision making” paradigm that underlies most modern economics. With the huge amount of quantitative and qualitative data being churned up by social media and statistics engines, all of which can be massaged by big tech, economics is being transformed from a formal mathematical discipline into an experimental science where the feedback loop between stimulus and response is a matter of days – not years as was the case fifty years ago.

    The recent Nobel Prizes (to Banerjee and Duflo for instance) or the fact that young experimental economists like Raj Chetty set the agenda is indicative of this fact.

    This recognition takes into account that there is more to economics than markets and the state. There is also the community. This thesis that family and community are the balancing forces between markets and and the state was explored by Raghuram Rajan, former RBI Governor, in his book “The Third Pillar”. Rajan being an economist of the Chicago school believes that interventions need to take into account how communities should be rewarded for behaviours. He also supports the fact that Big Tech needs supervision.

    That has already started to happen. The recent appointment of young Ms Lina Khan as the Federal Competition Commissioner is illustrative of where the thinking lies at least in the US. She was the author of a remarkable paper in the Yale Law Journal, while still a grad student, that argued that current monopoly law, which assumes that monopolies raise prices, do not account for the new monopolies which have the opposite effect but exhibit monopolistic behaviour nonetheless. She picked Amazon as an example.

    I find his warnings of an imminent explosion a little far fetched. We make the mistake of assuming economies should be like families. They don’t have to be so.

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  5. Impersonal Science/ logic eliminates authority at its foundationsand consequences it brings are to eliminate authority of institutions you use to govern

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  6. You ain’t seen anything yet as they say
    As long as foundational systems ignore differences between life and nonlife ,like AI,Robotics to make human irrelevant, will have its consequences in the overall society attitudes

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  7. .MRV book,” Retaining the balance – THE ETERNAL WAY -as the title suggests is a positive trend that highlights the relevance of ancient Indian wisdom in contemporary economics
    . Books such as these should be included in academic curriculum of universities and the thought processes therein further examined and developed.

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  8. Congratulations on the publishing of this excellent article. A penetrating analysis, and I really appreciate the Indic tradition lens.

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  9. Well balanced and thought through article, Ananda – certainly in the West there’s a need to return to family values and sustainability. Our atomisation has gone too far, bringing serious problems which COVID has only highlighted. Thank you for this.

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  10. When numbers of demons elinating authority and making no distinction between life and nonlife,Krishna has to do Mahabharat or something equivalent to do mass elimination

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  11. Excellent. I notice that much of consumerism remains alive because of the very conditioning that markets use to create wants disguised as needs. Conditioning that’s in place and convincing people they “must have and in fact” need to buy something. Philosophy will point ways to process our life, but what mechanism is going to change the marketplace mentality that all greedy people possess and are conditioned to fulfill? Thanks for this my friend.

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  12. A very well presented article.It is true .today our ancient traditions are no longer relevant.The whole business ethos and the values have changed so drastically___ ‘The end justifies the means.’
    We definitely should retain a balance._ in everything that we do.

    Excellent Analysis., Anand.
    Mina

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