In a previous post (click), I had proposed that think tanks for the Hindu right should work on a Hindu field of economics. The reasoning behind the proposal was that if it is anybody in the Hindu fold that doesn't take for granted what the West designs for its society, it would be the Hindu right. To build on this, the book on Hindu Economics by M.G. Bokare might be useful. Mr. Bokare has done a yeoman's service to the Hindu cause by giving some basic principles on economics after delving into the Vedas, the epics, Shukraniti, Viduraniti and the Arthashastra by Kautilya.
So let's start with the basic definitions. We will use a not yet outdated and at the same time easily understandable and less controversial definition for economics as was given by Alfred Marshall:
"Economics is a study of man in the ordinary business of life. It enquires how he gets his income and how he uses it. Thus it is on the one side, the study of wealth and on the other and more important side, a part of the study of man."
Quoting this paper (ref), Hindu economics in the past has been proposed to have a similar definition:
"The objective of Hindu economics is to guide individuals to lead a meaningful satisfying life complete with all resources in abundance."
(Barring the focus on money, this is similar to how economics is being defined in that it seeks to find a perfect distribution of resources to needs, and maybe it was apt for its time because money was not the centre of all activity in earlier times.)
Now let's talk about money making. There are three major ways, (not including a zeroth way) which in the order of outcomes in terms of income security are as follows:
0) The zeroth way of money making is soaking up government welfare. A brilliant indictment of one such scheme can be found here (click). I have numbered this type as zero because of the outcome, which is that such schemes lead to no productivity and this method of earning money ends as soon as the government runs out of other people's money. Besides, productivity lost due to badly prepared schemes make government tax revenues fall and thus "other people's money" runs out faster.
1) The first important method of money making is based on skill development. Suppose a person X is to get vocational training for a certain skill, and labor endlessly at a set wage till kingdom come, live within his means and be satisfied with it. The risk is that some Y who can do the same thing as X might come up in the same job who is willing to work for less. Or let's say that Y belongs to a country that doesn't even have a minimum wage law like X's country and it is easier to set up shop there. Then, the risk is that X will lose his job to Y. We thus see that basing wealth generation on mere skills is a risky proposition and sooner or later, we'll be left dry.
2) The second is resource extraction and sales. Suppose a country X has a large population of salmon in its water bodies, a large reserve of oil below its soil and so on. A simple way is to exploit these resources to the hilt and build the economy on that. However, sooner or later these resources will run out and so basing the country on resource generation as a wealth source might be more secure than basing it on skills, but in the long run it is also not a good proposal.
3) A more secure way of money making is that the person X in case 1 mentioned above gets genuinely interested to make a change in his living conditions, reads up more in his field, trains more in his spare time and comes up with a brilliant idea/invention that can make him more productive and can give his employer huge profits. That is how he eventually turns out to be different than Y and his employer would be pleased with him even though Y provides cheap labour. This is the way of success that rich countries promote. An economist who wants to design a good economic system must recognize this importance of innovations and bring out concepts in economic policies that promote or make a case for innovativeness.
It is upto future Hindu economists and associated think tanks to decide what path of the above 3 (or a combination of two or more paths) they wish to take but my earnest desire would be that they take path 3. It is impossible that India had the biggest economy in the world until the British arrived without a model for innovation and Hindu economics must be geared towards finding remnant pieces of this innovation model along with incorporating some western practices (credit for this idea goes to Rajeev Malhotra's yahoo discussion forum on breaking india). Taking M.G. Bokare's tome on Hindu economics and other papers by prominent current Hindu historians, we will now see what concepts of his Hindu economics promote innovation. The ultimate efficacy of Hindu economics will be in how it manages to outperform the western capitalist systems in the race of developing new science and technology.
The basic principles that Bokareji sets out with are:
1) Doctrine of Abundance (proposed in the Vedas)
2) Doctrine of self employment (proposed by Vidura)
3) Principle of competition (proposed by Shukracharya and Kautilya)
4) Principle of pricing (proposed by Shukracharya and Kautilya)
5) Principle of taxation. (proposed in Shanti Parva)
Much of this is similar to the free market system promoted by libertarians*. The doctrine of abundance is similar to the argument made in the west for more efficiency (i.e. a larger output from the same input). A more efficient system would have a higher production and hence provide for abundance. Self employment provides for an argument for capital intensive investments in R & D to promote production, reduce labor requirements, have higher wages and ultimately provide for laborers to go it alone in their economic life. Competition too provides for scientific progress when one company is trying to beat another at a certain activity, thus resulting in either better quality goods or services. It also requires a deregulated* system with minimum interference of the state to allow participation in a certain activity by smaller players. The principle of pricing suggests that with abundance and competition, it will always tend towards going lower. Taxation in the Vedic era was low (at max, the Manu Smriti mentions it as 1/6th of income), thus allowing for significant accumulation of capital in the hands of entrepreneurs and giving them room for investing in research and development. We might thus have answered a question raised in an earlier post: that the Indian economic system was similar to a capitalist system but of the austrian school of economics. A break in the education system as proposed earlier could have caused a bend in the development of Indian economics and caused it to veer off onto a socialist trajectory. The utility of a study in the Hindu economics will lie in convincing at least the Hindu right to get off socialist or even Keynesian economics.
Somewhere along the lines of increasing tech development, Bokare has a problem with people going unemployed due to tech improvements in companies and the resultant reduction in requirement of manual labor. But this affection for getting people employed contradicts with his preference for self employment. If people don't get unemployed from existing jobs, how do they make out alone? Hindu economics will need an answer to this in the future. Another weakness of Bokare's economics lies in his opposition to large companies and an appetite for 'small is beautiful', but justification for this* is not provided in his work. There is a contradiction here as well, if large companies are hated, one means of establishing abundance, low costs and a source of tech development will be quenched. Hindu economics of the future should support a model where both large and small companies can exist mutually in a certain field.
In addition, some new practices to Hindu economics might be added. Previous iterations of Hindu economics have asked for interest free banking (ref) and so does Bokare. The necessities of interests in banking have been elucidated by Bastiat before in one his books (ref). While this debate might continue, we clearly see that there is a need for low cost capital. A compromise solution can be proposed here to allow community banks with low interest to operate. One such example is the foundation of sakhi mandals in Gujarat where women folk of families are prompted to save money and lend to anybody they know at low interests. Alternatively, this power can also be trusted to caste based orgs for loaning money out to their members. With local generation of capital, local problems in the trade might also be solved with local innovations, and this will give the Indian penchant of Jugaad some institutional support along with supporting research projects for local needs.
Another recurring theme that keeps featuring in Bokare's book is that Hindu culture promotes not the rape of nature as the west does but milking it. While the veracity of this claim against the west can be questioned, there is something that we should not miss. The traditional way of protecting mother nature for some time has been to simply block the consumption of some natural resources through use of force by building sanctuaries, national parks, etc. This results in displacement of people from the vicinity of such natural resources while needing a massive drain of resources to allow protection. At the same time, the need for the resource is not quenched, encourages illegal poaching and if the people displaced are not absorbable into the local economy, it leads to unemployment and poverty. This might be resolved by local management of natural resources. Adoption of these principles are already yielding success. Hindu economics can very well absorb this practice into its fold. Kautilya's Arthashastra has hints of a similar practice when he writes about maintaining special elephant forests to supply large numbers of elephants for the elephantry in the Mauryan army.
A more complete reading of Bokare's book is still needed and probably I might discover more contradictions in Bokare's thoughts, propose solutions for them and review the book in the future. As for the field of Hindu economics, a new book by Subramanian Swamy is set for publishing this year, which seems to be promising for the field considering his expertise in both Hindu history and economics.
* = edited later to improve the flow of logic.
* = edited later to improve the flow of logic.