Special muhurat trading session on the occasion of Diwali, at the Bombay Stock Exchange (BSE), on October 19, 2017 in Mumbai (Pratik Chorge/Hindustan Times via Getty Images)

Guided by the most profound ideas of Hindu philosophy, and rooted in today’s reality, Hindu economics is an approach and not a destination.

Is there, or can there be, anything called Hindu economics? The answer is a qualified “yes” for the simple reason that even economists are not united in how they define their subject.

Adam Smith defined economics as a field of “inquiry into the nature and causes of the wealth of nations”, and included a political economy component to the definition, where politicians made choices on how to maximise revenues and the well-being of their public.

J B Say called economics the “science of production, distribution and consumption of wealth”, while John Stuart Mill claimed that it was a “science which traces the laws of such of the phenomena of society as arise from the combined operations of mankind for the production of wealth, in so far as those phenomena are not modified by the pursuit of any other object.”

Less verbose modern economists define the subject in multiple ways, depending on the end-purpose of economics, whether it is about allocating resources between competing needs by policy-makers, household budgeting, or research on human behaviour, especially in response to material incentives and penalties in a given cultural and social context.

The real mistake Western economists made was to assume economics was some kind of “science”, like physics, which can be exactly predicted or carefully managed. No field which involves human responses can ever be that precise and specific. Since human beings respond to economic phenomena in a cultural and social context, enunciating a fuzzy idea of Hindu economics is as valid a pursuit as behind any Western idea about the subject.

From the Mauryan era, where we had a genius like Chanakya (or Kautilya) defining the scope and purpose of a political economy, to Gandhian ideas of individual self-reliance, self-sufficient village economies, and voluntary redistribution of wealth by the rich and powerful to benefit society as a whole, India has had many indigenous approaches to economics and related statecraft. In India, we never thought of economics as a study separate from that of politics and society.

If you are devoted to dharma, implied in it is an approach to wealth creation that is balanced, for dharma is not about extremes. Dharmic economics, or Hindu economics, is not a binary choice of the kind which the West revels in. It is not an ideological quarrel between market economics and state-led growth; sometimes it can be both, sometimes neither, and most often, a mix of both approaches. In fact, even Jawaharlal Nehru intuitively got the approach right when he opted for a mixed economy after Independence, abjuring both extremes of laissez faire and command economics.

By doing this, he hoped to marry the benefits of capitalism with that of socialism, but, unfortunately, he got the balance wrong, and we ended up with the negatives of both systems. We got cronyism combined with the deadening hand of the licence-permit raj. Economic liberalisation in 1991 reduced some of this nonsense, but we ended up with cronyism raised to the power of ‘n’, with the licence raj being replaced by regulator raj and inspector raj in the name of compliance with the law.

It is only now that some of these stupidities are being corrected, but we have simply not gone far enough in freeing our productive forces from the yoke of mindless statism. Hindu economics must start from where we are, from reality, and not be built on the sands of imaginary ideals. It must define its approach and the path will emerge. It must embrace a life larger than just materialist goals — which has been the bane of both capitalism and communism, resulting in the downfall of both.

The first principle to guide Hindu economics must be the idea of a strong but limited state, which focusses largely on providing public goods like law and order, enforcement of contracts, good basic education and health services, stout defence of the realm and internal security, and sound economic management. It is not about welfarism gone rogue, which is the norm in present-day India.

Author Sanjeev Sanyal says that India is a paternalistic “Ashokan state” rather than a “Kautilyan state” as defined above, where individual responsibility is as important as state responsibility. The first corrective Hindu economics must apply to set this imbalance right, where the state focusses on the wrong duties and the individual is absolved of all responsibility for his own well-being.

Example: you can have the priciest hospitals available for free, but if an individual does not exercise, practice yoga or eat healthy food, he cannot expect the state to step in and pick up the bills if he falls seriously ill. Policies must connect individual responsibility with state responsibility. It would be good if Ayushman Bharat, the Narendra Modi government’s plan to provide Rs 5 lakh of medical insurance for 50 crore households, is not just about entitlement, but education and investment in healthy habits. The two must go hand in hand.

Another example: the Right to Education Act starts with the presumption that the state cannot provide good enough basic education, and thus shifts this responsibility on to private schools, especially majority-run schools, thus making them even more expensive and over-burdened.

The right balance should be between reasonable quality public schools, where anyone can obtain an enabling education, with private schools that focus on higher quality education for those who can afford them. In today’s gig economy, it is the ability to learn, and not acquisition of initial high knowledge, that will separate the winners from the losers. So, good quality state-funded or state-imparted primary and secondary education is vital.

The second element of dharmic balance should be about pursuing economic policies that maximise individual potential and mitigate extreme inequalities of wealth. Long before Karl Marx gave us the wholesome slogan (“From each according to his ability, to each according to his need”), and its more modern rendition through writers like Marcus Buckingham and Curt Coffman, who wanted natural talent to be placed at the centre of organisational and human development (read First, Break All The Rules), we had Shri Krishna extolling the virtues of Swadharma in The Bhagavad Gita. According to Sri Sri Ravi Shankar, “Swadharma is that action which is in accordance with your nature. It is acting in accordance with your skills and talents, your own nature (swabhava), and that which you are responsible for (karma).”

Put simply, Hindu economics must focus on policies that maximise individual potential (which mean promotions and career growth based on merit, not automatic elevation and higher salaries based on years at work).

But the wealth created by pursuing such a policy of “maximising one’s potential” will damage the principle of equity on which dharma rests, if it is not put to the right use. Extreme wealth needs appropriate balancing policies to enable redistribution. Concepts of daana, charity and redistribution, are as old as Hindu history, having found their way into the oldest of our shrutis, the Rig Veda.

In chapter 10, the Rig Veda explicitly exhorts individuals to share their wealth, with the relevant verse (Book 10, Hymn 117) having this to say: “The Gods have not ordained hunger to be our death: even to the well-fed man comes death in varied shape; The riches of the liberal never waste away, while he who will not give finds none to comfort him”.

Later on, the verse says: “Bounteous is he who gives unto the beggar who comes to him in want of food, and the feeble; Success attends him in the shout of battle; He makes a friend of him in future troubles. No friend is he who, to his friend and comrade who comes imploring food, will offer nothing.” (Both the above quotes are Ralph Griffith translations)

The Brihadaranyaka Upanishad (verse 5.2.3) says the evolved human being is one who encompasses three characteristics: self-restraint, charity, and compassion for all life. This approach to both maximising individual potential and emphasising on redistribution implies that the dharmic state must have policies that promote both. It could imply removing impediments in the creation of wealth and prosperity, which could mean lower income taxes, and channelling resources to the needy through policies that encourage charity and investment in social capital, including possibly an inheritance tax and/or taxes that encourage using personal wealth for charitable uses.

Karma theory postulated the cyclical nature of life long before Western economic theorists discovered business cycles, including long-term economic cycles spanning 40-60 years (Kondratieff). Apart from predicting cyclicity, karma theory also emphasises that actions have consequences. A third element in a Hindu theory of economics must thus take cyclicity into account for economic policies, whether at the individual or state level.

This means promoting individual thrift (and spending) depending on where we are in the boom-bust cycle, with state finances following the same logic — or spending more when the economic cycle is down, and tightening the belt when there is a boom. It implies not a constant and fixed approach to budgetary deficits, but a flexible re-evaluation of how the state must act based on the stage of the economic cycle we are in.

Accepting karmic cycles also implies promoting right actions by individuals. If you are poor, your duty is to skill yourself and get richer; if you are rich, it is your duty to invest in ideas that promote social wealth rather than just your own well-being. State policies must thus promote voluntary wealth redistribution and skilling, and use the stick of taxation only when this does not happen naturally.

On the other hand, Hindu economics must not take the narrow path of defining only material wealth, including ways to create and distribute it. A minimum economic standard of living is vital for any purposeful living, but wealth is not all material, as even today’s economic prophets are discovering. Thus, we have human development indices to complement the calculation of per capita GDP, with Bhutan even attempting to calculate gross national happiness.

The Chanakya sutras give us a perfect start to understanding end-goals as being the sum-total of many different parts, and not just pure material economics. In its first three segments, the sutra tells us:

Sukhasya moolam Dharmah; Dharmasya moolam Artha, and Arthasya moolam Rajyam….

Translated, these sentences mean: “Happiness comes from upholding Dharma; Dharma is based on Wealth; and Wealth itself results from the State.”

The Chanakya sutras leave no one in any doubt that Western libertarianism, which would love to wish away the state, and Marxist prophecies of the state withering away in the ultimate stage of communism, are all unworkable and unrealistic fantasies.

Hindu economics has to be rooted in today’s reality, including the reality of this soil on which dharma itself finds its roots. Hindu economics is “Sanatan”, which means it is eternal and constantly evolving, not static. It changes shape and emphasis depending on circumstances and challenges. It is an approach and a journey rather than a destination.

A definite smriti on Hindu economics is yet to be written; it is time we started writing it using the basic principles given to us by the Rig Veda, the Gita, the Upanishads, karma theory, and the Chanakya sutras, among other things. A Hindu economic smriti will always be a work-in-progress.

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