Hinduism and economic crises.

Ramrattan, Lall

Introduction

Hindu philosophy has evolved in a direction that is consistent with Adam Smith's moral philosophy that selfish people have an interest in the affairs of other people (Smith, 1976, 9). This ethical belief is grounded in belief in God or the Deity: "That our regard to the will of the Deity ought to be the supreme rule of our conduct, can be doubted of by nobody who believes his existence" (Ibid, 1976, 170). Even when we get down to Alfred Marshall, a major classical economists, we read that Carlyle and Ruskin were mistaken in believing that economics had "... no concern with any motive except the selfish desire for wealth, or even that it inculcated a policy of sordid selfishness ... even the most purely business relations of life assume honesty and good faith ... the absence of meanness, and the pride which ever honest man takes in acquitting himself well" (Marshall 1982, 19). Marshall, however, sided with individualism as initiated by Thomas Hobbes and

John Lock, and his sociological outlook is circumscribed around the "... independent actions and properties of individuals pursuing ends in the last analysis private to themselves, so that the "social" is conceived as a resultant of the various forces of individual activity" (Parson, 1932, 322).

Social economists such as Max Weber, who wrote about Hindu religion, opposed such Marshallian individual activities concepts, and would rather pivot economic activities on Protestant Ethics. In this view, the dominant idea is "... a "calling," a task to which every man felt himself to be assigned by divine Providence, economic activities came to be pursued not as means to other worldly ends, but from the mundane point of view as ends in themselves--justified to the individual by their relation to his eternal salvation" (Parson, 1932, 318). For example, the Watergate crisis was rationalized on the basis that the end justifies the means. The Hindu doctrine shifts the focus more towards the means. About this Swami Vivekananda wrote: "One of the greatest lessons I have learnt in my life is to pay as much attention to the means of work as to its end ... Let us perfect the means; the end will take care of itself (Swami, 1976, V2, 1-9). Gandhi "... would say "means are after all everything" ... the Creator has given us control (and that too very limited) over means, none over the end" (Gandhi, 1957, 36). His metaphor for the relationship between them is that the means is like the seed; the end, the tree.

A bad end, a crisis, is the result of inattention to the means. In answer to the question as to whether "... the growth in securitization has been a result of more efficient transactions technologies, or an unfounded reduction in concern about the importance of screening loan applications" Joseph Stiglitz argued that we should "... entertain the possibility that it is the latter rather than the former" (Stiglitz, 2008, 2). The "means" is the cause of the "end," as the bad management of the country's money supply had been sourced as the cause of the Great Depression by the economist Milton Friedman. In general, John Maynard Keynes has proposed that "... a shortage of cash has nearly always played a significant part in turning the boom into a slump," (Keynes, The Times, Jan 12-14, 1937) and his solution will be to "... preserve as much stability of aggregate investment ... at the right and appropriate level" (Ibid).

Besides means and ends consideration, one has to decide what is the proper weight to assign to "this worldly" and "other worldly" elements to religious influences on economic matters (Nijhawan, 1975, 30). To cope with the Hindu view, one has to appreciate the unification of the sacred and the secular aspects of its philosophy. The division of this paper includes first a background of the relevant information on Hinduism to be discussed, then some discussions on the difficulties with the subject matter, and application with exemplars of the Hindu doctrine to crises situations.

Background

Hinduism is an old religious tradition of India of the inhabitants living in the Indus river valley. A renowned interpreter of Indian culture wrote that "... it would be hardly an exaggeration to say that a faithful account of Hinduism might well be given in the form of a categorical denial of most of the statements that have been made about it" (Coomaraswamy, 1957, 3). The sources of the problem rest on speculation that the indigenous people had their tradition usurp and replaced by the tradition of the Aryan, who either invaded or migrated to the Indus region. Current thinking does not support that "either or" proposition, but evidence a blend of the two cultures.

A leading textbook on the history of India carries the old paradigm of Hinduism this way: "1. An urban culture ... emerged suddenly in the middle of the third millennium BCE, rather late in comparison with other areas of the Old World and therefore thought to be a plantation of colonists from Mesopotamia or elsewhere in Western Asia. 2. This urban culture remained static and uniform over much of the Indus River basin. 3. It then collapsed suddenly and uniformly. 4. The collapse came in the face of the onslaught of Indo-Aryan from the central Asia steppe" (Stein 1998, 46). Similarly, a leading geography book has it that "Hinduism emerged from the beliefs and practices that the Indo-Europeans brought to India, and soon a new way of life, based on this faith, evolved (Blij an Muller, 2000, 387).

We can throw up several possibilities here to explain this old paradigm. Being in a river valley suggests fertile soil and therefore an agricultural stage of society. Adam Smith emphasized the fertility of the soil supported employment in agricultural products with surpluses exported to neighboring countries, and the tradition for dictating the occupation of the people in this society he called Indostan (Smith, 1776, 645-646). Marx described the early Hindu society as traditionally a village, likened to a town. This form of a simple municipal government extended for time immemorial in India (Marx, 1972, 30). J. S. Mill advanced more relevant possibilities: "... a country will seldom have a productive agriculture, unless it has a large town population, or the only available substitute, a large export trade in agricultural produce to supply a population elsewhere" (Mill, 1909, 120). Because the residents of the Indus valley traded with other places, it's plausible to assume the transplantation of a foreign culture. But new evidence supports a self-sustaining economic base where major cities existed in the Indus river basin to support the agricultural society of the Hindus. While it is possible for those cities to be in a state of decline, it is not necessary to postulate that invasion was the cause of the decline. In the incident of the Mogul Empire, Sir John Hicks noted decline prior to invasion: "In the great days, under Akbar and Jahangir, [the Mogul Empire in India] could pass as a "classical bureaucracy," like those of Egypt and China; but long before the British came on the scene, it had slipped" (Hicks 1969, 20-30).

The new paradigms that gain foothold in the 1950s suggest among other things that the Indus civilization built around the sites of Harappa and Mohenjo-Daro started to decline before the Aryan invasion (Blij and Mueller 2000, 386). "What persuaded many to give up the older view was the growing evidence of farming communities in the northwest long before the emergence of cities in about 2500 BCE, and the evidence of continuous evolution of these agricultural communities into urban configurations" (Stein, 1998, 46). On the sacred side, a seal from the Mahenjo-daro site suggests that before the Aryan invasion the god Shiva may have been worshipped, and a female terracotta figurine suggests the image of the Goddess. The Hindu culture today reflect both of these deities, among Vedic ones that are thought to be purely of Aryan origins, suggesting the two paradigms may have coexisted down to the present state of the Hindu religion.

Hinduism then developed through phases identified by the formative period (2500-800 B.C.), the speculative period (800400 B.C.), the epic and classical periods (400 B.C. to A.D. 600), the medieval period (A.D. 600-1800), and the modern period (1800 to present) (Kinsley, 1982, 10-23). The broad picture that characterize these periods was daubed by the literary Nobel Laureate, V. S. Naipaul in "A Wounded Civilization" with the characteristic that, "No civilization was so little equipped to cope with the outside world; no country was so easily raided and plundered, and learned so little for its disasters. Five hundred years after the Arab conquest of Sind, Moslem rule was established in Delhi as the rule of foreigners, people apart; and foreign rule--Moslem for the first five hundred year, British for the last 150--ended in Delhi only in 1947" (Naipaul, 1978, viii).

Difficulty of the Subject matter

One difficulty with the subject is that the line between religion and philosophy is blurred in Hinduism, so that to explain Hinduism is trying to explain everything in the Indian's universe. For G. E. Moore, a philosophical approach would be nothing short of, "Giving a general description of the whole Universe" (Moore, 1955, 27). [Italics original]. For Bertrand Russell, however, philosophy feeds into science, it being a halfway house between belief and knowledge (Russell, 1960, 11). A compromise way was offered by M. Gandhi who interpreted Hinduism as a practical tool for solving day-to-day conflict. Gandhi is considered a reformer of Hinduism in the sense of reformers, such as Vivekananda, Saraswatii, Aurobindo, Tilak, and subsequently Radhakrishnan.

Another problem in the interpretation of Hinduism is that it has fundamental and practical sides. The fundamental side seems to have done more bad than good in history. According to Russell, religion "... discourages honest thinking, in the main, and gives importance to things that are not very important ... When the Roman Empire was falling, the Fathers of the Church didn't bother much with the tall of the Roman Empire ... They exhorted people and did not bother about seeing that the armies held the frontiers, or that the taxation system was reformed" (Russell, 1960, 27-28). On the practical side we find reformation such as Gandi's non-violence, Ahimsa, and pursuit of practical truth, Satyagraha. "In its positive form, ahimsa means the largest love, greatest charity" (Gandhi, 1957, 157). In times of crises, the Hindu doctrine prescribes charity from both the points of view of compassion, and the rights of a person to receive gifts. Gifts through compassion is exemplified by a story in Chapter One of the Hindu scripture Sat Narine Katha. The disciple Narad Muni, who was a favorite of Lord Vishnu, one of the Hindu's trinity, once travelled around Earth and observed that the people were in great distress for lack of material objects and care. He asked Lord Vishnu not for something for himself, but for something small to help the poor. The answer was, of course, to teach the poor the art of true worship. In another chapter of the same text, the story is told of a merchant who lied about the value of his merchandise to God, who appeared in disguised as a beggar. He said that his merchandise were of no value, being of the nature of dried leaves and cow droppings. The lesson for him was that his merchandise was turned into those useless things. The last chapter was about a ruler who disregards religion and consequently loses his kingdom. Gandhi's charity is of the greatest kind because he extended it to wrong-doers, enemies, and strangers (Gandhi, 1957, 158).

In Hinduism, we also find division in the interpretation of how work is to be done. The Isha Upanishad states "... a law of right action which is an action undertaken to perform the duty allowing you to enjoy what is yours but not to aspire for what is not yours" (Waslekar, 1998, 42). On the other hand, the Bhagvad Gita advocate renouncing the fruits of ones action (Gita 4.14; 4.18; 4.41; 5.11). One can add other diminutions to the problem. For instance, the statement that, "One's own duty, though defective, is superior to another's duty well-performed" (Gita 3.34) exposes an economy that is run purely by tradition rather than the market, and it has been argued that, "The philosophy of renunciation ... militates against economic growth" (Nijhawan, 1929). There is one diminution of Hindu thought that agrees with the Austrian school's Action Axiom, namely, that it allows "... inaction in action, and action in inaction" (Gita, 4, 18).

Gandhi's Reconciliation of Difficulties

Gandhi attempted a reconciliation of some of these problems when he wrote that, "The true source of rights is duty ... Action is duty: fruit is the right" (Gandhi 1957, 37). His notion of Satya (truth) and Agraha (firmness) together is especially good for crises management. For instance, "It is never the intention of the satvagrahi to embarrass the wrongdoer ... The satvagrahi's object is to convert, not to coerce, the wrongdoer ... Even if the opponent plays him false twenty time, the satyagrahi is ready to trust him the twenty-first time, for an implicit trust in human nature is the very essence of his creed" (Gandhi, 1957, 221-222). Gandhi's method, rather, is to move the focus of the crises away from persons and toward principles. (Juergensmeyer, 1984, 3) The amount of effort and tactics needed for the crises are "... determined according to the exigencies of the situation" (Gandhi, 1957, 235). For Gandhi, "Spirituality is not a matter of knowing scriptures and engaging in philosophical discussion. It is a matter of heart culture, of unmeasurable strength" (Ibid. 243). And, Gandhi does not think that something is good because it is ancient. He would get rid of untouchability, child widowhood, and child marriage that have ancient roots (Ibid. 260-261).

Gandhi thinks that Hinduism changes like the seasons and, like the Ganges River, it is pure at its source but picks up impurities in its course (Ibid. 261). He does not advocate following a teacher (guru), who "knows not that he knows not" (Ibid., 262). Caste for him is dictated by natural tendencies. The cast system: brahmanas, kshatrias, vaishvas and sudras, he considered legitimate, but, "The existing innumerable divisions with the attendant artificial restrictions and elaborate ceremonials are harmful." He would rather reduce all of them to one common denominator: shudras (Ibid. 265).

On matters of financial crises, Gandhi is specific: "The public should be the bank for public institutions, which should not last a day longer than the public wish" (Ibid. 300). In other words, "The institution that fails to win public support has no right to exist as such," and on the individual side, "If we do not account for ever single pie we receive and do not make a judicious use of the funds, we shall deserve to be blotted out of public life" (Ibid. 301). Moral position should dominate financial position, and when "... financial stability is assured, spiritual bankruptcy is also assured" (Ibid. 300).

Consensus View of Hindusim

What, then, is the consensus about the Hindu religion and culture? "The religion and culture of the Hindus are rooted in the Vedas which no specialist, either Eastern or Western, has placed much later than 1500 B.C." (Bose, 1970, 1), and the famous Bhagavad Gita is a "... compendium of the whole Vedic doctrine" (Coomaraswamy, 1957, 5). "The True India is the one that remains always faithful to the teachings that its elite hands down to itself through the centuries ... It is the India of Manu [first man] and the Rishis [sages], the India of Shri Rama and Shri Krishna ... Through the uninterrupted chain of its Sages, its Gurus [teacher] and its Yogis, it survives through all the vicissitudes of the exterior world, unshakable as Meru [a mountain]. It will last as long as Sanatana Dharma [the eternal religion]" (Guenon, 1985, 14). [Bracket items not original]

For Hindus, "... there is no dividing line between sacred and secular, on area of belief or custom that is alien to religious influence" (Embree, 1972, x). Swami Vivekananda of the Ramakrishna order "... recognized that modern scientific culture, while associated with the West, was not in itself an attack upon the traditional Hindu religious-cultural values but was, rather, a neutral element" (Ashby, 1974, 39). He advocated that "It is wrong to believe blindly" (Swami, Vol. 1., 134), that "... there is a basis of universal belief in religion ... Going to their basis we find that they also are based on universal experiences" (Ibid, 126), and that "the Hindu is only glad that what he has been cherishing in his bosom for ages is going to be taught in a more forcible language, and with further light from the latest conclusion of science (Ibid, 13).

A good example where the sacred and secular seem to clash and reconciled was narrated by President Nehru regarding Gandhi's religious outlook. When Ghandhi was "... collecting funds for the Kadi work ... he would say frequently that he wanted money for Daridranarayan, the "Lord of the Poor," ... Behind that word there seemed to be a glorification of poverty; God was especially the Lord of the poor ... I could not appreciate it, for poverty seemed to me a hateful thing to be fought and rooted out and not to be encouraged in any way ... Much that Moulvies and Maulanas and Swamis and the like said in their public addresses seemed to me most unfortunate. Their history and sociology and economics appeared to me all wrong ... Gandhiji's phrases sometimes jarred upon me ... I consoled myself with the thought that Gandhiji used the words because they were well-known and understood by the masses ... The outward ways of religion did not appeal to me ... What I admired was the moral and ethical side of our movement and of Satyagraha" (Nehru, 1965, 85-87).

The advent of Gandhi and Nehru has put Hindus democracy on a moral compass (Lal, 2006, 68). Beginning with the rule of Rajiv Gandhi, India accepted its Hindu tradition along with new technology. The initiative of President Nehru in creating the IIT schools paid off big-time in the harnessing of the new wave of high-technology in India. Subsequent government polices to deregulate and liberalize trade, starting with Prime Minister Narasimha Rao in 1991, put India on a modern cumulative growth path. But the current crisis is a setback, slowing down but not U-turning growth. How to deal with the current crises within the Hindu culture is a challenge not only for the Hindus, but for all traditions. What the Hindus have to offer are not specific economic plans.

Staying with the fusion of sacred and secular discussed above, the Hindus' definition of economics could be aligned with Irving Fisher, the famous classical economist, definition, namely that "... economics itself may be defined as the science of wealth, and wealth may be defined as material objects owned by human beings" (Fisher, 1912, l). Fisher's definition has all the elements of a modern Vedic scholar definition of economics "... economics means that people of a state, engaged in their ordinary vocation, business or industry living and working together as a community, work for some material gain or reward, viz., acquisition of wealth" (Khosla, 1993, 255). Where the Hindus' definition diverges from the classics however, is in the significant role that it gives to the ruler or king to intervene in the growth and distribution of wealth. We turn to Hindu foundational economic concepts that would especially spotlight dealings with economic crises.

Hindus' Doctrine of Crises

The Hindu mind-set anticipates crises situation, and therefore are not shocked when crises occur. The covering law of this anticipation is the Hindu doctrine of cosmic cycles, Kalpa, which can have two types of subdivisions: 14 Manvantara of 64,800 years each, or 1000 Mahayugas of 12,000 years each according to Vedic astrologers (Waterfield, 1987, 105). The concept of Kalpa parallels the Western concept of the Golden, Silver, Bronze, and Iron ages. These are respectively called Satya or Krita-Yuga, Treta-Yuga, Dvarpara-Yuga, and Kali-Yuga. The present age for the Hindus is the Iron Age, Kali-Yuga, towards the end of its seventh Manvantara, where the truth becomes more obscure, intelligence becomes dimmer, faith is weak, and economic dealing has a tendency towards dishonesty. According to Yukteshwar Giri, an Indian Guru and Astrologer par excellent, in the age of Kali-Yuga, "Dharma, the mental virtue, is then in its first stage and is only a quarter developed; the human intellect cannot comprehend anything beyond the gross material of this ever-changing creation, the external world" (Giri, 1977, xiii). But hope is at the end of the tunnel, for the cycle repeats itself, giving hope that the golden ages will come again. As a great Indian philosopher put it, "Even in the tragic moments of life, when we feel ourselves to be poor and orphaned, the majesty of the God in us makes us feel that the wrong and the sorrow of the world are but incidents in a greater drama, which will end in power, glory and love" (Radhakrishnan, 1945, 2). When the cycle ends for the individual, then liberation, or Moksha, is attained.

Dharma

Hindus adopt the operational mechanisms of Dharma, Artha, Kama and Moksha as goal for proper living (Campbell, 1962, 21). Dharma means to do the things that "... hold together all living beings in a harmonious order" (Radhakrishnan, 1945, 15). It reminds us of the Keynesian view of people's expectation where a person is trying to guess what other people guess what other people think will happen before they take action (Keynes, 1936, 258). It is common knowledge that Keynes advocated government intervention in times of crises, which was his idea of saving capitalism. With Adam Smith, however, the interest in others is built into each of us, and is regulated by sympathy on the moral plane, or competition on the economic plain, calling for a limited role of government intervention.

In the current crises situation, speculation causes the market to transfer gains between lucky and unlucky people, which do not seem to follow Dharma. Even the classical economists were quick to point out behavior of that kind. Alfred Marshall found the Hindu culture thrifty and yet wasteful: "... we find people who do indeed abstain from immediate enjoyment and save up considerable sums with great self-sacrifice, but spend all their savings in lavish festivities at funerals and marriages." (Marshall, 187). Dharma is not a code of belief, but a code of conduct that supports the conscience of all people. Dharma engulfs six principles: truth (Satyam), eternal order (Ritam), consecration (Diksha), austerity (Tapas), prayer (Brahman), and rituals (Yajna) (Bose, 1970, 41).

The Bhagavad Gita has it that the ruler comes to the rescue when the Dharma breaks down (Gita, 4.7). The ruler's role is to reestablish harmony among people, and there is no restriction as to how much effort or resources must be used up for that outcome. It reminds us of what the British Economist, Walter Baghot, has prescribed for a crises situation. He wrote, "In truth, the Bank do not lend from the motives which should make a bank lend. The holders of the Bank reserve ought to lend at once and most freely in an incipient panic, because they fear destruction in the panic. They ought not to do it to serve others; they ought to do it to serve themselves. They ought to know that this bold policy is the only safe one, and for that reason they ought to choose it. But the Bank directors are not afraid. Even at the last moment they say that 'whatever happens to the community, they can preserve themselves'" (Baghot, 1873, CH 2). This historic approach to crises reaches us in the form of three axiom-looking methods for handling crises situations: The central bank is the lender of last resort, the central bank should lend on any collateral that is marketable in the ordinary course of business, and loans should be made in large amounts with an appropriate rate of interest to discourage borrowers who can find better terms in the market (Fischer, 2004, 9).

The sociologist Max Weber makes Dharma an individual concern: "We learn that dharma differs according to social position and, since it is subject to "evolution," which is not absolutely closed and completed, dharma depends upon the caste into which the individual is born. With the split of old into new caste dharma, is specialized. Through the advance of knowledge dharma can be further developed" (Weber, 1958, 24-25).

Artha

Artha deals with the accumulation of wealth. The Vedas say that one should use one's knowledge of all sciences, and then turn to the acquisition of wealth for life purposes. (Rig 1.130.6) Since wealth cycles like the wheels of a chariot, a person should put it to best use before it goes, including giving to others in need (Rig 10.107.8; 10.117.5). The Hindu ruler has a major hand in economics in the growth of wealth (Rig 1.22.7), in the distribution of wealth (Rig. 3.4.2), and in the alleviation of poverty (Rig 1.81.6). In monetary policy matters, the ruler will give money or wealth to help others, but to not those who will hoard it or, in modern terminology, the rule does not channel wealth to those who have strong liquidity preference, or to misers (Rig 8.95.9). The consequence of this will not be inflationary because the ruler will supply only the right and reasonable amount of money.

The Vedas also speaks of fiscal policies. "The Vedas do not envisage any deficit budget. The king or the head of State is to encourage his subjects to earn by rightful means as much wealth as possible by various means and in return collect reasonable taxes from the public ... He is to provide all necessities of life, make arrangements for proper education, provide hospitals, roads, and other means of communications ... The crux of Vedic economy is that state collects reasonable taxes from its subjects" (Khosla, 1993, 267).

Max Weber found that from "... the point of view of capitalistic development, the acquisitiveness of Indians of all strata left little to be desired and nowhere is it to be found so little antichrematism and such high evaluation of wealth" (Weber, 1958 4). [Emphasis added]. His discussion of wealth is base on the Hindu book the Arthashastra. Besides the acquisition of wealth, the Arthashastra emphasized the repayment of debts. We read, "Just men repay their debts in 8th and 16tb installments" (Khosla, 1993, 267). Debt is as important to dharma as a negative number is important to the numerical system. According to Weber, the negative is referred to as debts (Ksaya) (Weber 1958, 4).

In modern Western economics, the distribution of wealth is handled through the market mechanism. Jean-Baptiste Say wrote that "I prefer to say that the aim of political economy is to show the ways in which wealth is produced, distributed and consumed." Leon Walras found inconsistency with this definition and that of Adam Smith, but both of them emphasized the importance of wealth. Whereas Smith emphasized the provision of such wealth for themselves and for the subsistence for the state, Say's definition emphasizes distribution as well (Walras, 1969, 52-57).

Hinduism puts the responsibility of distribution into the visible hands. The Arthashastra says that the leaders are responsible to distribute wealth to establish perfect equanimity (Khosla, 1993, 267). The emphasis on distribution is very pronounced in the verse "... earn like the one who has hundred hands and distribute the earned wealth like the one who has thousands of hands" (Ibid 256). In Gandhi's interpretation, "... economic equality... did not mean that everyone would literally have the same amount. It simply meant that everybody should have enough for his or her needs" (Gandhi, 1968, 79). Again, "... while we are born equal, meaning that we have a right to equal opportunity, all have not the same capacity ... some will have ability to earn more and others less. People with talents will have more, and they will utilize their talents for this purpose. If they utilize their talents kindly, they will be performing the work of the State ... I would allow a man of intellect to earn more, I would not cramp his talent" (Gandhi, 1968, 85).

On reading this Hindu prescription for economics, we get a picture of a big role for government-if not for normal times, then certainly for crises situations. Because of the big role for government, classical economist will not share this view. In a crisis situation, the classical economist, J. S. Mill, prescribed the following cure: "... slumps are times of low prices relative to some norm; if the norm is firm, that means that low prices themselves hold out a prospect of recover, which, sooner or later, must become actual ... slumps will cure itself" (Hicks, 1983, 64). As we know, waiting for the cure to come can sometime present a high alternative cost. Even Milton Friedman, a person who we expect would share Mill's self-cure methodology, admitted that the Great Depression took a long time in recovery. Friedman wrote "... the basic source of the [Keynesian] revolution and the reaction against the quantity theory of money was a historical event, namely the great contraction or depression. In the United Kingdom the contraction started in 1925, when Britain went back on gold at the pre-war parity, and ended in 1931 when Britain went off gold. In the United States, the contraction started in 1929 and ended when the USA went off gold in early 1933. In both countries, economic conditions were depressed for years after the contraction itself had ended and an expansion had begun" (Friedman, 1970, 11). [Italics added]

Kama

The word Kama is translated variously as desire, love, pleasure, delight. Before there was anything, "That one Thing" existed. The Rig Veda says that "Thereafter rose Desire in the beginning, Desire, the primal seed and germ of spirit" (Rig 10.129.4). Hinduism defends welfare optimum for happiness rather than individual utility maximization: "... that yogi (seeker of truth) is considered the best who judges what is happiness and sorrow in all beings, by the same standard as he would apply to himself" (Gita, 6.32). However, Smith would underscore that "... we love ourselves surely for our own sake, and not merely because we are commanded to do so" (Smith, 1976, 171).

The Nobel Laureate economist. Daniel Kahneman, has been researching the well-being of people and found that "... the economic view presupposes that individuals will choose the greatest amount of utility for themselves; yet a great deal of evidence now contradicts this proposition" (Kahneman, et al., 1991, xii). To the extent that utility is pleasure or bliss, it is one of the essential expressions of the Hindus values as embodied in the trilogy of truth or being (sat), consciousness (cit), and bliss (anand), which is compounded as Sachchidananda. To this trio, the concepts of Name (Nama), and form (Rupa) are added to comprise "the universe of Experience" (Woodroffe and Mukhyopadhyaya, 1964, 1). What the cognitive psychologists have found is that people are not happy pursuing Namarupa.

In the universe of experience, neoclassical economics has it that joy comes from work so long as the marginal compensation exceeds the marginal disutility of labor. A balance is stroked between desires and effort: "When a boy picks blackberries for his own eating, the action of picking is probably itself pleasurable for a while ... But after he has eaten a good deal, the desire for more diminishes; while the task of picking begins to cause weariness ... Equilibrium is reached when at last his eagerness to play and his disinclination for work of picking counterbalance the desire for eating" (Marshall, 1982, 277). Part of the dissatisfaction of this model is that people benefits are decided on a residual principle, which is derived from the Euler equation that output is exhausted by the marginal productivity of inputs times the respective lectors of production. The Hindu doctrine has no such limitation. "No sacrifice is worth the name unless it is a joy. Sacrifice and a long lace go ill together. Sacrifice is 'making sacred'" (Gandhi, 1957, 252).

According to the Hindus, bubbles can occur in this universe of experience where "... attention is, for pragmatic reasons, focused at a particular point which happens to be of interest for the time being; around this point of clearest attention or emphasis, spread tracts of comparative inattention till they merge into the outlying realm of the unfelt or unknown (Woodroffe and Mukhyopadhyaya, 1964, 41). The unknown is a fertile ground for crises like the current financial crises. There is much in this view that corresponds to a modern definition of crises, where economic agents take on risk, insured or not, focused on paying for an asset a price greater that they are willing to hold the asset over a long run. Agents tread the unknown securitization process where non-tradable assets can be converted into tradable assets by tranches, a process of ranking mortgage backed securities (MSB), asset backed securities (ABS), and collateralized debt obligation (CDR) that allows financial institution to buy them. Bigger pools, such as structural investment vehicles (SIVs) and special purpose vehicles (SPVs) have the advantage that they do not have to show up on balance sheets, and policies such as mark-to-market allowing assets to be sold can be created, which are considered off-balance sheet items.

The Hindu doctrine prescribed that all these activities are subject to the law of the three gunas: illumined consciousness (sattva), energetic activity (rajas), and inertia (tamas). Adam Smith energizes economic activities by building into his capitalistic framework the psychological propensities "of bettering our condition" (Smith, 1937, 324), which allows the individual to stop accumulating only if he/she can be saturated with wealth. Wanting to save capitalism in times of crises, John Maynard Keynes arm the economic agent with the psychological law that "... men are disposed, as a rule and on the average to increase their consumption as their income increases, but not by as much as the increase in their income" (Keynes, 1936, 94), which enables a multiplication of income whenever autonomous investment changes, either through the private or the public sector. Keynes described the formation of bubbles by writing of speculation that they are like bubbles on a steady stream of enterprise. In that state they can do no harm, unless the enterprise becomes the bubbles on a whirlpool of speculation (Keynes 1936, 159). The Hindu perspective of crises is that the zeal for Nama and Rupa has gone overboard. It does not allow owners of capital, banks and institutions, and consumers and households to promulgate crises because they are not happy with their lot. The pursuit of happiness has its limit, for it was not right for Ravana, the ruler of Lanka, to sacrifice his kingdom to defend his lust for Sita, the wife of Rama and ruler of India. The consequence of Ravana's abduction of Sita was war in which Dharma was reestablished.

Moksha

About Moksha, we read that the Hindus make it the ultimate goal of life. Moksha takes on the process of liberation for coping with material nature to attain freedom from the universe that is characterized by cyclical things such as birth and death. Concerns with liberation is part of the "other worldly," but Hindu are not different in the ways other religions embraces the "the worldly." The "... Mahabarata denounces poverty as a sin ... the Panchantra attributes most evils and vices to lack of money ... the Bhagvat Gita and other Hindu scriptures is invoked to substantiate the sanction of the typical "character traits" of Protestant ethic in Hindu philosophy" (Nijhawan, 1075, 30).

The problem to be solved was stated by Swami Vivekanand in a way that is inclusive of reason and science. "This Absolute (a) has become the universe (b) by coming through time, space and causation (c)" (Swami, Volume 2, 130). The answer lies in perfecting the subjective through the Yoga process. In his system, the absolute is liken to the truth (Brahman). Schematically below, the absolute (Purusha), which is put on the same level with truth (Bramhan), has taken the form of material nature in the universe (Prakriti). The diagram suggests that, through Yoga or other means, it has to realize its true nature, suggested by the dots which lifts it up.

[ILLUSTRATION OMITTED]

In this diagram, "... science is the greatest which makes us know Him who never changes?" (Swami, 2006, 313) The science of Yoga enables one to focus the mind (Raja Yoga), discriminate between the stable and unstable (Jnana Yoga), worship the good (Bhakti Yoga), and to perform one's work with perfection (Karma Yoga). For example, the teacher of Bhagavad Gita makes the point that he is not dependent on anything in the world but he still engages in action (Karma Yoga), because if he does not act, then the world will fall apart. Hindu thought therefore involves a set of three things: Man, Deity, and World, (Embree, 1972, 312) where "... to fulfil one's own vocation, determined by one's own nature ... without self-referent motives, is the way of perfection" (Coomaraswami, 1957, 24).

On the knowledge front, "The Upanishads say that the cause of all misery is ignorance" (Swami, 2006, 160). More and more, international solidarity in economics affairs comes to the rescue of this ignorance. The aftermath of the Great Depression and WWII saw the establishment of international organizations: the IMF, the World Bank and Gatt/ WTO, which have been using their knowledge to solve crises. In the current crises, the meeting of President Bush with other heads of state is an exemplar in this international direction. An interpretation of the Hindu doctrine urges "rebuilding" and "reconstruction" using knowledge and science to light up the darks spots of the crises (Ibid., 309-310). In those activities, people will manifest behavior based on their primordial attributes (Gunas). Human behavior is either progressive (Sattva guna), degenerating (Tamas guna), or a combination of the two (Rajas guna), the coordinates for contemplation and action.

Economics Implication of Hinduism

Broadly speaking, the Hindus advocate that in times of crises, we should discern between what is eternal and the non-eternal (Viveka), we should follow a middle path between pleasure and distractions and control the desire for the results of our activities (vairagya), practice calmness of mind (satsampat), and have the right desire to perfect our life (mumuksatva). (Brahma-Sutra-Bhasya. 1977, 9) S. Radhakrishnan advocated that the goal is achieved through "... the result of enquiry ... through reasoned processes rather than by revelations from external authorities." (Radhakrishnan, 1971, 230)

In the Hindu process of problem solution a relationship between the adviser (Purohita) and the ruler is pivotal. The Veda speaks of a marriage of these two, but giving the precedence of ideas to that of the ruler (Coomaraswamy, 1978, 3). The implication for that distinction for crises management is that the ruler provides the action (karmamarga) while the contemplation (Jannamarga) for the solution is the domain of the advisers (Ibid, 5). In the U.S., for instance, this latter role is assigned to the Council of Economic Advisors.

In general, it is possible to use the Dharma, Artha, Kama and Moksha model for policy implication. We do so with Figure I below, which is in the spirit of Western economics where the monetary, fiscal, and exchange rate policies are undertaken to target economic goals such as normal or realistic GDP growth, inflation rates, and interest rates. The ideal state of the economy is when Dharma activities are a line with eternal order (Ritam), one of its eight elements. The line segment tip to "D" indicates this state is achieved, but afterwards, crises step in and the state begins to degenerate. The arrow from the origin indicates that a country can be managed initially to reach the state of Rita from, say, the end of an Iron Age. The adviser and the ruler will then take policy measures to manage wealth (Artha) and happiness (Kama) in order to effect a recovery, which would follow a dynamic path such as the bowl shape curve, or a piecewise linear approximation to it, which in the extreme can be a V-shape recovery. The bowl shape or linear approximation completes a short-term cycle, and many of them would make a Manvantara.

In policy management, recovery takes time. The path to recovery deepens, slows down, and turns up at rates depending upon how the mixture of policies for wealth and happiness targets their goals. Goals in the Western thought can mean GDP growth for NAIRU level of the economy. But in Western thought, the NAIRU level of equilibrium does not take full consideration of externalities, and therefore may differ from the Rita level, planting the seed for future crises.

[FIGURE 1 OMITTED]

Hindus believe that in time of crises, the wise people should show strength. Remember, the Bhagavad Gita was discussed at the opening of the Mahabarata War. The hero, Arjuna, who was overwhelmed, was in the field of battle being urged to perform his duty that was ready at hand. We are reminded of Swami Vevekananda saying that in time of crises, faith in man is of the paramount importance: "We must have faith in ourselves first before having faith in God" (Ranganathananda, 1970, 46). This may appear "... to deal with a man who is largely influenced by egoistic motives in his business life" (Marshall 1972, 20). But, as Marshall argued, "... there is no real necessity, and therefore no moral justification for extreme poverty side-by-side with great wealth. The inequalities of wealth, though less than they are often represented to be, are a serious flaw in our economic organization. Any diminution of them which can be attained by means that would not sap the springs of free initiative and strength of character, and would not therefore materially check the growth of the national dividend, would seem to be a clear social gain" (Marshall, 1972, 594).

We may without much impunity, source one reason for the deviation from Dharma to overzealous speculation. "It is true that many of the largest fortunes are made by speculation rather than by truly constructive work: and much of this speculation is associated with anti-social strategy, and even with evil manipulation of the sources from which ordinary investors derive their guidance. A remedy is not easy, and may never be perfect" (Marshall, 1972, 598). He suggested that the remedy should not come from hasty control of speculation, but serious study of the matter. He suggested, also, "economic chivalry" in using the resources of the rich "in the service of the poor," in providing "public aid and control in medical and sanitary matters ... to lessen the weight ... of the poorer classes," for the "State ... to contribute generously and lavishly to that side of the well-being of the poor working class which they cannot easily provide for themselves," and in matters of education, "public money must flow freely" (Marshall 1972, 597-599). These statements will make Marshall the greatest humanist among the classical economists, and only in some matters contrary to the doctrine of the Hindu Dharma.

At the root of the crises problem is the willingness of economic agents to take on risk, insured or not, to an extent that allowed the bubble to initialize, and to show readiness to pay for an asset a price greater that they are willing to hold the asset over a long run. (Tirole, 1982, 1163). Based on their traditional values, the Hindus have the reputation as being a sink for intrinsic values measured in precious metal. According to John Maynard Keynes, "It is interesting to reflect that India's love of the precious metals, ruinous though it has been to her own economic development, has flourished in the past to the great advantage of Western nations. Everyone knows Jevons's description of India as the sink of the precious metals, always ready to absorb the redundant bullions of the West" (Keynes, 1913, 70).

Especially in the time of crises, people are called upon to perform their duty. The unique characteristics in the case of Hindus, is that the duty should be selfless. The duty is preformed without desires for the fruits of action (Nishkarma Karma Yoga). Adam Smith has considered a similar principle of the sense of duty, namely, that "The sole principle and motive of our conduct in the performance of all those different duties, ought to be a sense that God has commanded us to perform them ... That the sense of duty should be the sole principle of our conduct, is no where the precept of Christianity; but that it should be the ruling and governing one, as philosophy, and as, indeed, common sense directs" (Smith, 1976, 171). For instance, the Austrians build their economics on the Action Axiom on philosophy and logic, and not religion. In Hinduism we find ethical actions base on feelings in the Vedas, knowledge in the Upanishads, and activity in the Gita (Wadekar, 1970, 58). "The Gita does not appeal to a person not to be result-oriented. It is rather concerned about the legitimacy of the results" (Ibid, 1970, 43).

As we have mentioned, Hinduism has strong views about the "mean" to an "end" approach in decision-making. Earlier we mentioned that wealth is not excluded from the end goal of effort in human life, and we demarcated how this is to be done. The elimination of inequality and poverty are to be overcome in any society and religion. A system of division of labor is prescribed for this goal, but the suppression of particular classes was never the goal. "The Hindu caste system provided for a division of labor in society between the scholars-priest, the warrior-ruler, the business man, and the common worker. In theory, at least, the intellectual and the administrator were not directly concerned with economic enterprise, though indirectly they did have vital roles, especially in public policy. Trade and production were the provinces of the Vassya cast. But with the coming of factory and store and bank, caste duties were forgotten in the scrambling of Brahman, warrior, and merchant alike to obtain the fruits of trade and industry" (Brown, 1961, 4-5). When the goal of division of labor does not elevate people from their poverty and inequality circumstances, it is a mark of crises as well (Marx and Engels, 1972, 41).

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by Lall Ramrattan, University of California, Berkeley Extension, lallram@netscape.net Thanks to Swami Balgopal of Am. Hindu RCO for comments, balgopal108@hotmail.com.