Wednesday, October 29, 2008

Buddhist Economics – Part IV

This is a continuation of our discussion on Buddhist Economics based on
E. F. Schumacher’s book, ‘Small is Beautiful’. Part I discussed about Labor, Part II on Mechanization and Part III on Unemployment. In this post, we shall investigate the aims of Traditional Economics and contrast this to Buddhist Economics.

Aims of Orthodox Economics
Under traditional economics, the scope of economics is defined as the study of the allocation of scarce resources. The three main allocation issues that it seeks to solve are:

1. Which goods and services should be produced and in what quantities?
2. How should these goods and services be produced?
3. Who should consume the goods and services that have been produced?

With the fall of socialism, our economies are largely governed by the free market with minimal government intervention. The interaction of demand and supply, driven by individuals acting in their own self interests solves all the allocation questions.

Aims of Buddhist Economics
While the materialist is mainly interested in goods, the Buddhist is mainly interested in liberation. But Buddhism is "The Middle Way" and therefore in no way antagonistic to physical well-being. It is not wealth that stands in the way of liberation but the attachment to wealth; not the enjoyment of pleasurable things but the craving for them. The keynote of Buddhist economics, therefore, is simplicity and non-violence. From an economist’s point of view, the marvel of the Buddhist way of life is the utter rationality of its pattern—amazingly small means leading to extraordinarily satisfactory results.

For the modern economist this is very difficult to understand. He is used to measuring the "standard of living" by the amount of annual consumption, assuming all the time that a man who consumes more is "better off" than a man who consumes less.

A Buddhist economist would consider this approach excessively irrational: since consumption is merely a means to human well-being, the aim should be to obtain the maximum of well-being with the minimum of consumption.

An Enlightening Example
Thus, if the purpose of clothing is a certain amount of temperature comfort and an attractive appearance, the task is to attain this purpose with the smallest possible effort, that is, with the smallest annual destruction of cloth and with the help of designs that involve the smallest possible input of toil. The less toil there is, the more time and strength is left for artistic creativity.

It would be highly uneconomic, for instance, to go in for complicated tailoring, like the modern West, when a much more beautiful effect can be achieved by the skillful draping of uncut material. It would be the height of folly to make material so that it should wear out quickly and the height of barbarity to make anything ugly, shabby, or mean.

What has just been said about clothing applies equally to all other human requirements.

Contrasting Aims
The ownership and the consumption of goods is a means to an end, and Buddhist economics is the systematic study of how to attain given ends with the minimum means.

Modern economics, on the other hand, considers consumption to be the sole end and purpose of all economic activity, taking the factors of production—and, labor, and capital—as the means.

The former, in short, tries to maximize human satisfactions by the optimal pattern of consumption, while the latter tries to maximize consumption by the optimal pattern of productive effort. It is easy to see that the effort needed to sustain a way of life which seeks to attain the optimal pattern of consumption is likely to be much smaller than the effort needed to sustain a drive for maximum consumption.

Are you happy with the current economic system? When consumption is the sole end and all factors of productions are merely costs to be minimized, Corporations are only a step away from abandoning all morals and ethics in the pursuit of profits. The
2008 Baby Milk Scandal are mere symptoms of a systemic disease in our current free market system. Treating the symptoms alone will not cure the disease. Does anybody have any questions or comments?


Damien Tan

That's an interesting perspective - Buddhist economics as minimalist economics. Did you come up with it yourself?

"It would be the height of folly to make material so that it should wear out quickly..."

Isn't that what the auto industry is doing. Car parts are made to last only 5 years to keep you coming back for components. After-sales service is a whole new business in itself.

Most economic policies today stress on job creation. These jobs produce materials and services needed for industrial production. From the job creation standpoint, more is better. Less means joblessness. Human craving and consumption, even wastefulness, is the gasoline that drives the entire supply chain forward. The more craving, the better. That's just how markets have been conditioned.

So, given this, I'm wondering in which scenario would you think minimalist economics can survive? I am trying to imagine a situation where this system would not lead to massive unemployment and destabilization.

I can think of one but would like to hear your thoughts first.


Dear Damien,

This series of posts is an edited extract from Schumacher's book 'Small is Beautiful'. The other notable discussion on Buddhist based economics is by Ven. A Payutto. I'm interested in Buddhist based economics since I can't make sense of this crazy world.

Intriguing question. Thanks for bringing it up. Here's my opinion:

1. The current global economy is no longer based on fundamentals. The largest economy and sole superpower, US has overspent its' reserves. The only thing that is propping up the USD is that no other country is willing to call US to pay up knowing that this would trigger a domino effect.

2. The current capitalist system has restructured society such that a vast number human endeavors that are largely non beneficial are given prominence whereas those that are critical are largely ignored. Most capitalists are merely paying lip service to increasing the use sustainable energy resources whilst continuing to deplete the remaining and increasingly scarce fossil fuels.

3. A minimalist economy can only survive if it's stakeholders have a mindset that they and the earth are one. Was the rural agriculture based economy in the past so undesirable compared to today?

4. Now, to answer your question directly. Given the current scenario and mindset of people nowadays, a minimalist economy will not work nor will it be accepted. A large no. of the populace has been indoctrinated with the orthodox holy grail of consumption

As you have mentioned above, we have products designed specifically to fail, usually just after the end of the warranty period, under the pretext that it's good for the economy. Perhaps those involved in the Chinese Milk Scandal could also use the excuse that they are also assisting the economy by giving more business to Chinese hospitals? Instead of outrage, people no longer question such business practices. There is a muted acceptance that this is a necessary evil of our capitalist system.

5. Perhaps an analogy would be apt. If humanity were a person, I see that this person is a insular and inward looking person content on gorging and recklessly consuming the food on the table provided by his host, planet Earth. This person does not have any ultimate aim in life, whether be it spiritual enlightenment or physical development [e.g. space exploration].

Having said all that, what is the best way forward? I only wish I knew.


Damien Tan

Thanks. So I think we agree that anything that threatens consumption will hurt the economy and its dependents the way its modeled today. Consumption (and by extension, greed) is key to its success. By that alone, Buddhism's ideal of mindfulness and moderation seems to contradict the whole idea of a modern economic enterprise.

I've seen minimalist economics work well in an agronomy (I don't mean pre-industrial era because strong post-industrial agronomies do exist). In that model, farming is the main economic activity. Farming is probably the only thing that enables self sustenance. You can live on a farm and have all your needs met without going to a supermarket. I should know, I spent many summers living with my "adopted" family in the American midwest on 100 acres of farmland.

By growing your own basic needs, you stand to cut off 60-70% of commercial supply-chain consumption. When you have food on the table, jobs aren't all that urgent any more. The other 30-40% of manufactured goods - clothes, pharmaceuticals, housing that you need - can be made by local craftsmen.

This is the reality the Amish people of Indiana and Pennsylvania. They grow their own food, make their own clothes, and live in remote farmland communities away from technology. The Amish are staunch Christians but from a lifestyle perspective, they fit into that agronomy model perfectly - growing what they need, having little need for commercially made things, and cultivating their minds in between their activities. Minimalist action right in the middle of America.

Of course seperating themselves from "progress" and "modernity" have made them the butt of jokes but I guess that's what conditioning is about. If I were to define a Buddhist economy, it would be one that serves 2 purposes.

1) To provide basic sustenance to enable mental cultivation, which is a form of compassion of self and others. The sangha survives by accepting alms but the householder - he needs a way to obtain it himself and to donate alms to the sangha.

2) To provide sustenance in such a way that does not give give rise to negative karma to both the maker and the receiver of the sustenance. Dependent origination (Paticca Samupada) plus the 8-fold Path becomes the key guiding principle in providing clean sustenance.

So rather than economics as a system that serves to satisfy craving and subsequently become an end in inself, I see it as a system that removes obstacles that clutter the path to mental purification. One drums up desire and clinging, the other assists in letting go.

I don't know if such an economy would fit into today's predatory capitalist system though. I suspect not and if the Buddha had a lesson to teach, it is how he got enlightened in samsara amidst the wars, bandits and conflict. So I think the message was self reliance. Its what system we as individuals choose to create for ourselves rather than what any external ecosystem could provide us.

Sorry for the length of this response. You can tell I've been thinking about Right Livelihood for a long time. ^_^


Dear Damien,

Thanks for sharing your thoughts. It's encouraging to see someone else thinking along the same lines.

I agree with you what you have said. However, we need to distinguish between monks and lay people. Whilst a monk is determined to seek enlightenment, the lay person seeks to pursue a lesser kind of happiness.

The current capitalist economic system has achieved great success by allowing people to co-operate and work together. So, there has to be a compromise between Buddhist principles weighed against the desire for advancement and progress.

Unfortunately, I feel we are not concentrating our efforts in the right direction such as *true* sustainable development and the restoration of our environment. Instead, vast amounts of resources are wasted on entertainment (e.g. EPL) and harmful industries.

For instance, let's look at the cigarette industry. Are they bad for health? It's already been proven and cigarettes should be banned. Yet, large MNCs with vested interests are able to prevent this from happening with their lobbying.

A democratic Government would be unable to do anything drastic to intervene since they are dependent on the views of the majority.

Conversely, a dictatorial system would be susceptible to corruption and cronyism.

The problem lies with the populace at large. When the schooling system and society start indoctrinating us that being wealth, fame and power are desirable, no matter what the cost... undesirable things are bound to occur.

Sigh! This reminds me of the old quote "In a democracy, people get the government they deserve". Karma at work, perhaps?

In the end, I am reminded that of the 'Tale of the Four Wives' by the Buddha. We cannot hope to change the system nor others. Trying to reform oneself is a life time struggle, so one should not be too troubled by the actions of others.

Still, I'm hopeful that one fine day, we will have an economy based on common sense rather than one based on lunacy and greed.




Damien Tan

Yeah, householder economics will go for a moderate balance. That's why lay Buddhists have 5 precepts while the monks have 10 precepts (or is it 32?)

I would be interested in your opinion on whether the 5 precepts can become a practical basis for economic principle. Like is it practical to apply the 4th precept (refrain from incorrect speech) when reporting earnings and losses and disclosing business plans. Or the 1st precept, refraining from taking a life, when when it comes to "killing off" your rivals. Not physically killing but killing the hopes and dreams of everyone who depended on that business, which some might argue has the same traumatic effect as killing someone pysically.

Would the 5 precepts reduce harmful industries that strip natural resources or the success of companies that push harmful goods like cigarettes and tainted foodstuffs.

If that is possible to do, then the next question would be would an economic system modeled on the 5 precepts be able to compete against Wall Street.


Dear Damien,

This discussion is getting more interesting [to me] by the minute. Extending the 5 precepts to the modern economy is a very intriguing concept. Obviously you must have given it some thought. So, have I.

However, I think I'll save it for another post :) My answer would be too long to do it justice here.


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