Gross National Happiness: Towards Buddhist Economics

Gross National Happiness: Towards Buddhist Economics
Sander G. Tideman

Finding a way to connect economics and altruism is most difficult. However, these two field can - and should - meet on global and individual levels,
H.H. the Dalai Lama[1]

Introduction

In the last few decades, economic values are having an increasingly profound effect on our societies. Many of us are concerned that these effects erode communal and spiritual values, which have been upheld over many centuries and generations. So it is time to look again at what Buddhism has to offer to balance these effects. In particular, what does Buddhism say about economics?

Economist E.F. Schumacher was the first to introduce the concept of Buddhist economics in his landmark book Small is Beautiful[2]. This was followed by similar writings by P.A. Payutta of Thailand[3] and other Buddhist scholars. The leaders of Bhutan have introduced the concept Gross National Happiness (GNH), which can be regarded as the Buddhist equivalent to Gross National Product (GNP), the conventional indicator for a nation’s economic performance. All these attempts draw on two schools of thought, Buddhism and economics, which take rather different views on reality. So let us have a closer look at these two distinct traditions.

Buddhism is based on teachings of Gautama Buddha who lived 2500 years ago in ancient India. One of his key teachings is that suffering is caused by the way we perceive things and ourselves. Things appear to us as if they have the ability to provide us lasting happiness and comfort, so we become attached to them and we develop desire for them. But this craving is a result of ignorance about reality. The reality of things is that they are transient, impermanent, and therefore cannot produce the lasting happiness that we expect from them.

Buddhism does not reject matter and wealth as inherently evil, but considers them useful. First, material wealth prevents us from poverty and, second, it allows us to practice generosity; which causes ‘merit’ and a more happy society. Thus, “Right livelihood” is one of the eight main requirements of the Buddha’s path, which has been defined as follows:

“One should abstain from making one’s living through a profession that brings harm to others, such as trading in arms and lethal weapons, intoxicating drinks, poisons, killing animals, cheating etc., and one should live by a profession which is honorable, blameless and innocent of harm to others”.[4]

A true Buddhist person not only seeks wealth lawfully and spends it for the good, but also enjoys spiritual freedom. The Buddhist Pali canon states that such person acts as follows[5]:

Seeking wealth lawfully and unarbitrarily
Making oneself happy and cheerful
Sharing with others and doing meritorious deeds
Making use of one’s wealth without greed and longing, possess of the insight that sustains spiritual freedom

These principles provide the ground for attempts to define Buddhist economics. But Buddha himself made it very clear: real happiness does not come from acquiring or consuming material things. Happiness is essentially a state of mind, and mind is distinct from matter. Thus, Buddhism considers the path of mental or spiritual development superior to that of material development. What really matters is to psychologically detach oneself from matter, and strive for liberation and enlightenment, which is considered the ultimate state of happiness and fulfillment. This is achieved by the cultivation of values within one’s mind, such as insight, compassion, tolerance and detachment. Only this will bring true happiness, both for the individual and society[6].

In contrast, economics is focused only on material development. Values, which are the domain of the mind, are outside its scope. Many believe economic theory to be a science, free from subjective values. The only values which appear in classical economics models are those that can be quantified. This emphasis on quantification gives economics the appearance of an exact and neutral science. But is this so?[7] At the heart of economic theory and practice is the assumption that happiness is an experience that can be achieved from matter and in dependence of material resources. The state of mind is not relevant. Further, assuming that these resources are naturally limited and scarce, economic theory has invited a natural element of competition for these resources.

Hence, at least in the popular understanding, economics is associated with values which are very different from those of Buddhism, particularly competition, consumption and the maximization of profits and wealth.

How do we reconcile this with the teachings of Buddhism? How do we reconcile compassion with competition? How do we match detachment with consumption?

This paper will look at the values of Buddhism and economics in closer detail and see where these two worlds meet. We will first review the assumptions behind mainstream economics and the principal economic indicators measuring economic growth, particularly Gross National Product (GNP). We assume that these indicators point us in the direction of greater well-being, but is this really so? Then we will turn to principles of Buddhism and insights in modern science. We will find that new developments in economic thinking tend to converge with ancient Buddhist views. There is common ground emerging between the hitherto separate schools of thought.

It is beyond the scope of this paper to present a study of Buddhist economics, which would require more in depth research. This is merely a modest attempt to bridge seemingly contradictory beliefs and values, based on my personal exposure to them. My twenty years of study and practice of Buddhism and a same period of training and working in economic law and banking, which allowed me first hand work experience in Buddhist communities in Asia, may be worthwhile for others facing the same dilemma.




The world of economics

Economic textbooks talk of economic laws assuming man naturally competes for scarce and limited material resources. Happy is the man who is able to consume these resources, unhappy is the one who is not. Classical economics tell us that it makes no sense to exert time, effort or expense on maintaining values, if money can be made by ignoring them. Intangibles don't count.

One of the great economists of our time, Lord Keynes, wrote in 1930 that the time that everybody would be rich was not yet there: "For at least another hundred years we must pretend ourselves and to everyone else that fair is foul and foul is fair; for foul is useful and fair is not. Averice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight"[8]. In Keynesian thought, which had a large effect on economists for much of the last century, ethical considerations are not merely irrelevant, they are an actual hindrance.

The assumptions underlying the so-called "economic laws" were developed at a time when religion was being separated from science, the accepted worldview became secularized, the sacred was substituted by belief in matter. Economic theory was affected by great scientific discoveries in physics, biology and psychology, and economic laws were presented with the same authority as laws of nature[9]. Newton and Descartes described reality in terms of a more or less fixed number of “building blocks”, of “things”, subject to measurable laws such as gravity and, put together smartly, operating like a big machine. The world of matter was regarded as a mere machine, to be used by man, his reason and free will.

Darwin had described human beings as a relatively intelligent species evolved from primitive apes motivated by lusts and aggression (as Freud would confirm later in psychology). Our intelligence has taught us to behave socially, but fundamentally we are selfish beings subject to the law of "survival of the fittest".

When Adam Smith, in his famous work The Wealth of Nations, introduced the "invisible hand" of the market, by which the things and building blocks can be exchanged efficiently on the basis of each individual's self interest, we extended these laws into the realm of economics. The concept of the invisible hand made big impact because for the first time in history, economic exchange could be rightfully left to individuals without need from intervention from governments. 19th century economists such as Malthus and Ricardo, added the notion that economies are closed systems, bound by fixed quantities of material goods. No matter how large economies become, they remain closed, thus limited. This has led to an important premise underlying classical economics: scarcity is a natural state. Hence it is believed that competition for scarce resources, or even war, is natural too. We forgot that Adam Smith wrote in his earlier work The Theory of Moral Sentiments that markets could not function without ethics and morals. We have come to believe that greed and selfishness is what economies are all about.

As E.F. Schumacher observed:

"The idea of competition, natural selection and the survival of the fittest, which purports to explain the natural and automatic process of evolution and development, still dominates the minds of educated people today".[10]

In his book "Small is Beautiful", Schumacher convincingly showed that these ideas, combined with the belief in positivism, have wrongly been given universal validity. They simply do not stand up to factual verification. But since they conveniently relieved us from responsibility - we could blame our immoral behavior on "instincts" - these ideas have retained a prominent place in the consciousness of modern man.

In fact, over the last two centuries we have firmly enshrined these principles in our capitalist legal systems, domestically and internationally. For example, when a competitor achieves a monopoly, he is punished under anti-trust laws, for competition must go on. The judge in the antitrust case against Microsoft ruled that the firm's monopoly had done "violence to the competitive process"[11]. The international laws governing the main multilateral agency for international trade, the World Trade Organization (WTO), are based on Ricardo's concept of "comparative advantage", the idea that nations, by specializing, will benefit from unfettered competition. So, whether we like it or not, our modern society is organized on principles that favor and encourage competition.

At the same time we have developed indicators to measure the well-being of our society in terms of economic growth. Inspired by the mathematical approach of the natural sciences, we have chosen indicators which measure things that can be quantified by assigning monetary weightings. Thus, they exclude qualitative distinctions. Yet over the last decades it has appeared that it are exactly the qualitative factors that are crucial to our understanding the ecological, social and psychological dimensions of economic activity. For example, economic calculations ignore the value of things such as fresh water, green forests, clean air, traditional ways of life, to name but a few – simply because they cannot be easily quantified. This partial blindness of our current economic system is increasingly recognized as the most important force behind the accelerating destruction of the global environment.

Gross National Product: what do we measure? [12]

GNP, the most basic measure of a nation’s economic performance, is calculated as part of the System of National Accounts (SNA) on the basis of all quantifiable economic transactions recorded in a given period. Governments want to see this grow each year. Yet GNP statistics are inherently flawed. In calculating GNP, natural resources are not depreciated as they are being exploited. Buildings and factories are depreciated, as well as machinery, equipment, trucks and cars. Taking an example that is familiar for the Buddhist communities in South East Asia, why are forests not depreciated after irresponsible logging and farming methods turn them into barren slopes causing erosion and landslides? The money received from the sale of logs is counted as part of the country’s income for the year. Further, the national statistics would show that the country has gone richer for cleaning up landslides. The funds spent on the chain-saws and logging trucks will be entered on the expense side of the project’s accounts, but those to be spent on the supposed replanting will not. Nowhere in the calculations of this countries GNP will be an entry reflecting the distressing reality that millions of trees are gone forever.

Aside from the environment, traditional GNP calculations ignore the informal, unpaid economy of caring, sharing, nurturing of the young, volunteering and mutual aid. This informal “Compassionate Economy” is hidden from economist’s statistics and therefore public view, yet it represents some fifty percent of all productive work and exchange in all societies.[13] In developing countries, these traditional non-money sectors often predominate. Indeed, the United Nations Human Development Report in 1995 estimated such voluntary work and cooperative exchange at $16 trillion, which is simply missing from the world’s GNP statistics.

Classical economics holds that all participants in the market between supply and demand have ‘perfect information’ about the facts on which they base their choices. This is another assumption that has proven to be incorrect, especially in light of the buyer’s inability to ascertain to what extent a product has depleted natural resources or exploited labor. Our current economic system not only makes unrealistic assumptions about the information available to real people in the real world; it also assumes incorrectly that natural resources are limitless ‘free good’ failing to distinguish between renewable and non renewable goods and simply equating them on the basis of monetary values set by a supposedly ‘informed’ market.

Our system also fails to account for all the associated costs of what is called consumption. Every time we consume something, some sort of waste is created, but these costs are usually overlooked and externalized. For instance, for all the fuel we consume in a given day, we do not account for extra CO2 emission in the atmosphere. Since we equate an increase in consumption with an increase in ‘standard of living’, we encourage ourselves to produce more and more, and also more waste. This has led to the disturbing reality that those countries which are considered richest, produce the most waste.

Discounting the future

Our national accounting standards also contain questionable assumptions about what is valuable in the future as opposed to the present. In particular, the standard discount rate that assesses cash-flows resulting from the use or development of natural resources assumes that all resources belong totally to the present generation. As a result, any value that they may have to future generations is heavily discounted when compared to the value of using them up now. Likewise, by discounting the future value of money on the basis of interest rates, we have accepted that a dollar spent today is more valuable than a dollar spent tomorrow. This has not only caused a dangerous short-term mentality among fund managers who control increasing amounts of investment funds which can be moved from one country to another at the speed of online digital communication. It also provided a whirlpool-like force behind the expansion of our financial markets, which have come to grow to such an extent that national authorities can no longer control them.

The financial markets, in particular, with the daily turnover of more than US$ 1.5 trillion on foreign currency markets worldwide[14], are now setting the pace for continued growth and expansion. Money should be moved in order to make more money. Short term rewards are more important than long term, sustainable investments. An increase in stock prices are equated with economic success, and conversely, a drop is regarded as an economic failure with immediate divestment as a result. This has had already disastrous results, as the 1997-1998 crash in the Asian financial market showed. Many have blamed this entirely on weak and ineffective governance of local markets, while only few recognize that the global system itself is at fault.[15] It should, of course, be quite obvious that preoccupation with growth in an finite environment leads to disaster, but the supertanker of short term capitalism seems unstoppable.

By concentrating on the mere statistics of GNP and other conventional monetary indicators, we fail to distinguish between the qualitative aspects of growth; healthy or unhealthy growth, temporary or sustainable growth. We do not question what growth is actually needed, what is required to actually improve the quality of our life.

Recognizing this dilemma, and out of concern for the rapid depletion of natural resources caused by economic development, the concept of ‘sustainable development’ has emerged. The 1987 report by the World Commission on Environment and Development, Our Common Future, spread and popularized the term ‘sustainable development’, which it defined as “development which meets the needs of the present without compromising the ability of future generations to meet their own needs”[16]. This concept became a focus of national attention after the UN conference on Environment and Development (UNCED) in Rio de Janeiro, 1992. Rio’s Agenda 21 commits all 178 signatory countries to expand their national statistical accounts by including both environmental factors and unpaid work[17].

However, almost a decade later, only very few of these countries have been able to live up to their commitments. National Agenda 21 efforts have led to academic debates, heightened public awareness and minor adjustments in the SNA and taxation rules, but it has not fundamentally altered the way we manage and measure our national economy. National political agenda’s continue to be determined by interest groups dominated by commerce and industry who are locked on old paradigms, while in the meantime the power of national authorities has gradually eroded by the globalization of industry, finance, technology and information.

So it is not surprising that the functioning of our economies still leaves a lot to be desired. While substantial wealth is generated mostly by a minority elite in developed countries, the majority of the world population remains poor. The gap between rich and poor keeps growing in all societies, and also among countries in the world. Environmental degradation seems irreversible. Drugs and new forms of slave trade prosper. Corruption is widespread. Stock markets are turning into global casinos. War is increasingly 'economic', motivated by either the lack or the protection of wealth. Even if the global economy prospers, it seems to prosper at the expense of the air, earth, water, our health and our rights to employment.

So we have to revisit the assumptions that underlie all this. Are the economic laws really uncontrollable? Buddhism tells us that we - our minds and karma (which is defined as the consequences of our actions)[18] - make up reality, so likewise it must be us who make up the economy. For better or for worse, economies and business don't function separately from our decisions, since without us they wouldn't exist. So if we want a better economy we have to look deeply at who we are and how we live.

Buddhist views rediscovered

Buddhism and other spiritual traditions have long described reality in rather different terms than traditional economic theory. While the latter are primarily concerned with a fragment of human behavior, namely "economic" actions defined as those which can be quantified in terms of money, the former approach reality holistically, incorporating all actions - and even thoughts - that make up our being and society. While Newton and classical economics define the world in things, of separate building blocks, spiritual teachings point out there is really no independent "thing" there, and that the focus on "things" will miss the relations and the whole context that make the thing possible. In economic textbooks human beings are isolated consumers and producers interacting at markets driven by monetary gains. In spiritual traditions humans are viewed as being part of a larger whole with which they can communicate by opening up their hearts and minds.

This holistic viewpoint is lent credence by modern physics, which postulate that the universe consists of unified patterns of energy. According to one of Einstein's favorite epigrams, the field generates the object, not vice verse. That is, whole systems give rise to specific things, not the other way around. While in the Cartesian worldview we can only know reality by knowing specific parts, Einstein discovered that in order to know things, we need to know the whole from which they originate. In other words, we are not isolated hard and fast physical things but more like “light beings” or “energy-flows” continuously interrelating and changing. Thus, we are more like “intangibles” - exactly that which cannot be measured in classic economic models.

Most economic strategies are built around the possession of material things such as land, labor and capital. What counts is how much real estate we own, how much money we have and how many hours we work. The ideal for many people is to own enough land and capital, so we don't have to sell our time. This strategy, which no doubt will be recognized by many of us in developed countries, is based on the assumption that land, labor and capital is all there is, that the real world is a closed end system. Spiritual traditions claim the opposite. Buddhists recognize a Buddha nature in every sentient being - the potential to be whole and enlightened. Our minds create and pervade everything, hence physical reality is open for the spiritual.

The concept of scarcity has also been refuted by modern discoveries. Nuclear energy is based on breaking the seemingly closed-end system of the atom and the universe has been found to continuously expand. Like the expanding limits of outer space, the modern business of cyber space and Internet, has created unexpected opportunities and amounts of new wealth. Another example, while being rightfully concerned about the limited availability of the planet's fossil fuel deposits, there is no shortage of energy in our solar system. In fact, we are surrounded by abundant energy sources: sun and wind, as well as the earth's heat, motion and magnetism. But most renewable energy resources are not available to us, not because they don't exist, but because we don't have the know how to tap them.

The key in what we call the New Economy is that what counts here is not merely material possession, but know how and creativity, the domain of the mind. As many of the new Internet based, e-commerce companies know, a company cannot "own" the knowledge that resides in the heads of the employees. Research has shown that most successful business strategies focus less on things but more on how to manage them. It is commonly accepted that all technical and social innovation is based on what is now phrased as 'intellectual capital'. And unlike ordinary capital, intellectual capital is not subject to physical limits.

So what does all this tell us? First, that the traditional concept that we are simply competitive beings chasing scarce material resources is incorrect. Further, intangible values are equally important for our well being. These intangibles are stored in the mind, free from physical constraints and therefore potentially of unlimited supply. Finally, happiness is not merely determined by what we have, how much we consume, but also by what we know, how we can manage and how we can be creative, ultimately by who we are - so not by having, but by being, as Buddha discovered ages ago.

Human nature and motivation

But what kind of beings are we? Altruistic or selfish? Compassionate or competitive? Modest or greedy? These are important questions on which economic theory and Buddhist traditions hold different views.

Economists have accepted the principles of selfish individualism: the more the individual consumes, the better off he will be. Economic growth is achieved when individuals consume more and more so that demand and output are boosted. This leaves no room for altruism, where an individual may incur costs for no conceivable benefit to himself. This approach reduces the meaning of cooperation to a mere reciprocal arrangement among individuals: individual sacrifices on behalf of the community can only be seen as an insurance policy, for it will ensure the individual that the community will help him in the future.

We can understand the need for compassion because of mutual dependence in this increasingly smaller and interconnected world. But spiritual traditions point to another, more profound and personal dimension of compassion. They advise us to make altruism the core of our practice, not only because it is the cheapest and most effective insurance policy for our future, but specifically because the real benefit of compassion is that it will bring about a transformation in the mind of the practitioner. It will make us happy.

How can this be done if our real nature is selfish? Compassion can only work if our nature is receptive to having an altruistic attitude, if somehow compassion is in harmony with our essence, so that we can actually enjoy being compassionate. If we are inherently selfish, any attempt to develop a compassionate attitude would be self defeating.

Most religions state that humanity's nature is good. As we might say, our kind is kind. Buddhism explains that there is no real independently existing self that is either good or bad. Our selfish motives are based on an illusionary belief in an independent self, separating ourselves from others. We do have selfish traits, they may even dominate us, but they can be removed by practice. And since we are so connected to the world, since there is no disconnected self, the practice of compassion is most effective.

Several modern scientific disciplines, such as biology, psychology and medical science, have started to study the effects of empathy on the human mind, body, health and relationships. Not surprisingly, they have ascertained that compassion is of tremendous help to our well being. A compassionate frame of mind has a positive effect on our mental and physical health, as well as on our social life, while the lack of empathy has been found to cause or aggravate serious social, psychological and even physical disorders.[19] Altruism has also been found to be more efficient than market exchange in spheres such as health care and education.[20]

The classical economic model takes a similar shortsighted view that people are naturally motivated by maximizing profits and utility. As economist Stanislav Menchikov observes[21]:

The standard, neoclassical model is actually in conflict with human nature. It does not reflect prevailing patterns of human behavior. [..] If you look around carefully, you will see that most people are not really maximizers, but instead what you might call ‘satisfyers’: they want to satisfy their needs, and that means being in equilibrium with oneself, with other people, with society and with nature. This is reflected in families, where people spent most of their time, and where relations are mostly based on altruism and compassion. So most of our lifetime we are actually altruists and compassionate”.

So compassion is definitely something that we can and need to develop. But what does that mean for our economy? First, we should recognize that even though compassion is a desirable state of mind, there may well remain a role for competitive practices. As the Dalai Lama says, competition can be beneficial if it encourages us to be the best in order to serve others.[22] Tibetan Buddhist monks for whom compassion is the heart practice, know a variety of competitive events, including heated public debates, which help to sharpen the mind. So while compassion is the motivating factor, competition can be a means to achieve the goal.

Faith in the Market

While religion accepts the use of competition, in contemporary economic thought competition has become like a religion. Particularly since the 1980-ies, with the demise of socialism and the promising allure of globalization, we have come to see the competitive market process as sacred. The bodies that rule our global economy today, the G7 (the world’s industrialized countries), IMF and the World Bank (together known as the ‘Washington consensus’) prescribe the world a neoclassical recipe of privatization, decentralization and market reform, assuming that our common interests are best served by the invisible hand of the market.

Critics of this faith are generally silenced by powerful arguments. They are told that government interference in markets will only lead to inefficient wasteful government bureaucracies. They claim that history has shown that the libertarian or laissez faire approach will allow markets to increase wealth, promote innovation and optimize production - and to regulate itself flawlessly at the same time. The fact that humans persist in behaving "irrationally and uneconomically" according to the market model, far from invalidates the model, they say; we simply have not yet learned to appreciate the benefits of competition. Some economists, trying to account for "irrational" religious commitments, such as voluntary gifts or abstention from consumption, even introduced a new economic factor - "afterlife consumption"[23].

But the debate is not simply on government versus markets. As noted earlier, I believe it is about deeper, spiritual issues. Economic thinking is primarily focussed on creating systems of arranging matter for optimal intake of consumption. It assumes that the main human impulses are competition and consumption, and it has sidestepped spiritual and moral issues because it would involve a qualitative judgment on values and other intangibles that go beyond its initial premises. But by assuming that the more we consume, the happier we are, economists have overlooked the intricate working of the human mind.

As Robert Kuttner points out in "Everything for Sale":

"Trust in the unfettered market place, enshrined in politics by Ronald Reagan's 1980 victory and by the clarion call for less government interference in people's lives, is undiminished to this day. Dissenting voices have been drowned out by a stream of circular arguments and complex mathematical models that ignore the real-world conditions and disregard values and pursuits that can't easily be turned into commodities. These values and pursuits happen to be ones that most of us consider integral to our identity: justice, freedom, worship, leisure, family, charity and love".[24]

According to Buddhist logic, at the root of this belief in the market lies a very fundamental misconception[25]. That is, we have not really understood what makes us happy. Blind faith in economics has led us to believe that the market will bring us all the things that we want. We cling to the notion that contentment is obtained by the senses, by sensual experiences derived from consuming material goods. This feeds an emotion of sensual desire. At the same time, we are led to believe that others are our competitors who are longing after the same, limited resources as we are. Hence we experience fear, the fear of losing out, the fear that our desire will not be satisfied.

So we can observe that the whole machine of expanding capitalism is fuelled by two very strong emotions: desire and fear. They are so strong that they appear to be permanent features of our condition. Yet Buddha taught that since these emotions are based on ignorance, a misconception of reality, they can be removed by the understanding of reality, which is the prime object of Buddhist practice. According to Buddhism, happiness is an inner experience, available to anyone, regardless of wealth or poverty. Further, fundamentally there is nothing that we lack. By developing the mind, our inner qualities, we can experience perfect wholeness and contentment. Finally, if we share with others, we will find that we are not surrounded by competitors. Others depend on us as we depend on them.

If Buddha would be alive today, he would probably recreate economic theory based on a correct and complete understanding of what is a human being and what makes him happy. As long as economics is based on a partial or wrong image of man and his reality, it will not produce the results we need. It may continue to create wealth for some, but it will also continue to compromise the quality of our lives and many of us will be left behind.

Towards a new paradigm: humanized economics

But the tide seems to be changing. In order to explain the persistent tension between economic theory and practice, old assumptions should be reviewed. As a result, intangibles such as values and other more "noble" human impulses are gradually moving into the scope of leading thinkers, including economists, historians, social scientist, businessmen and bankers.

Nobel Price winner economist Douglass North says:

"The theory employed, based on the assumption of scarcity and hence competition, is not up to the task. To put it simply, what has been missing [in economic theory] is an understanding of the nature of human coordination and cooperation"[26]

The concept of cooperation, which can be regarded as a natural extension of religious concepts such as compassion, has become an area of growing economic research known as institutional economics. Similarly, the social and psychological research on Emotional Intelligence, pioneered by the Harvard psychologist Daniel Goleman, has shown that success in business is dependent on how well we cooperate with others[27]. Showing respect, sympathy and understanding towards others are needed for advancing in our careers. Many corporations have started to test and train their staff according to Emotional Intelligence indicators, known as EQ. From here it is only a small step to the practice of compassion.

The 1998 Nobel Prize in Economic Science went to Amartya Sen, who defines economic development in terms of freedom of basic necessities such as education and healthcare. He observed that as long as the contemporary world denies elementary freedoms to the majority of the world population, planning for economic development is of no use. In doing so, he has restored an ethical dimension to the discussion of development. Sen writes in “Development as Freedom”:

"Along with the working of markets, a variety of social institutions contribute to the process of development precisely through their effects on enhancing and sustaining individual freedoms. The formation of values and social ethics are also part of the process of development that needs attention[28].

David Landes, in his best-selling review of two millennia of economic history “the Wealth and Poverty of Nations”[29], concludes: ”If we learn anything from the history of economic development, it is that culture makes all the difference”. Just because markets give signals does not mean that people respond timely or well. Some people do this better than others, depending on their culture, and culture is nothing but the aggregation of values.

Even George Soros, the Hungarian born speculator who made fortunes from free market capitalism, now passionately campaigns for a more social face of capitalism. In his recent “Open Society; Reforming Global Capitalism”[30] he states:

“Economic theory presuppose that each participant is a profit center bent on maximizing profits to the exclusion of all other considerations. But there must remain other values at work to sustain society – indeed human life. I contend that at the present moment market values have assumed an importance that is way beyond anything that is appropriate and sustainable. Markets are not designed to take care of the common interest.”

Values are also making a (modest) revival in the business world. Some have started to emphasize values as part of creating a 'corporate identity'. This is mainly motivated by the need to distinguish the growing and increasingly lookalike firms from one another in the market, and to give its increasingly mobile and disloyal staff a sense of belonging. Social research has shown that the company's performance is for at least 30% attributable to the corporate culture, the climate at the workplace, which is a share too large to ignore[31]. The recognition that corporate culture matters has also led to the emergence of Buddhist inspired literature on more enlightened forms of management, focussing on creating a happy work environment instead of simply boosting profits and maintaining control structures.[32]

Further, in response to consumer lobbies, an increasing number of companies are taking steps to show social responsibility. Some companies now publish information on the basis of triple bottom line reporting, i.e. reporting not just on financial performance but also on compliance with environmental and social standards. A corporation which recently improved its environmental responsibility, is British Petroleum which decided to change its slogan to ‘Beyond Petroleum’, indicating its concern for the development of alternative, renewable forms of energy sources. These are all steps making a difference towards a more humane face of business.

We are moving towards a new economic paradigm, one that is not based on maximizing ownership and profits or boosting abstracts statistics such as GNP, but concerned with managing creativity and knowledge, and improving the quality of our lives and children's future. Economists are busy making models that account for the intangible factors that drives the information-based economy, such as know how and other human capital, as well as the environmental and social costs of development, such as the pollution and destruction of air, water, forests and other so called "free goods".[33]

The World Bank in 1995 issued a revolutionary "Wealth Index", which defines the wealth of nations to consist for 60% of 'human capital' (social organization, human skills and knowledge), 20% of environmental capital (nature's contribution) and only 20% of built capital (factories and capital). The United Nations have produced the UN Human Development Index (HDI), measuring factors such as education, life-expectancy, gender and human rights data, which is now commonly used in each of the UN's 187 member countries.

Hazel Henderson, a leading thinker on new economics who pointed us at the informal, unpaid “Compassionate Economy” which remains hidden from GNP statistics, pioneered by developing the Calvert-Henderson Quality of Life Indicator.[34] From all new economic indices this one comes closest to measuring values such as compassion by incorporating cultural values (for example as a means to measure safety) and activities of recreation, including practices of self-improvement and participating in social or religious groups.

Many outside the strictly economic sphere are speaking out as well. President Vaclav Havel of Chech Republic called for “a global minimum of shared human values” at the recent Forum 2000 conference in Prague. Christian theologist Hans Kung calls for such global ethical norms in his A Global Ethic For Global Politics and Economics[35], just like the Dalai Lama who expresses similar views in his many lectures and writings[36].

The role of Buddhist communities

These developments in economics and contemporary western thinking run parallel to the sentiment in developing countries where many believe that their indigenous culture, rather than been seen as a hindrance to development, in fact has a lot to offer to development in terms of improving the quality of life. Buddhist communities are a case in point, as we can see from Bhutan's call for Gross National Happiness and the movements in Siam and Ladakh.[37] They point us to the need to base development on spiritual values, transmitted through culture, rather than merely material values.

It is here that Buddhism, with its extensive research on the human condition, has much to offer. By offering a personal path to achieve lasting material and spiritual happiness, Buddhism can rightly claim that its path surpasses any solution offered to obtain happiness in traditional economic terms, which does not go beyond an optimal level of material consumption, wealth and economic stability. From a Buddhist viewpoint, the contribution of economics and material development is nothing more than providing an external condition allowing people to devote time and energy to embark on the more rewarding path of spiritual development. Mind over matter, so to speak. The ideal of Buddhist communities could be to become an example of how to put this path into reality.

But at the same time, Buddhists countries cannot ignore modern-day global economic realities which increasingly have powerful cross-border and cross-cultural impact. In many countries there is a growing sentiment opposing the spread of globalization and free trade, which are so evidently driven by the belief in competition ands consumption. Particularly in certain pre-industrialized societies, where community structures of mutual care have remained intact, there are strong sentiments against opening up to global markets. These communities not only feel physically inadequate to compete with "global" - yet distant - multinational firms and capital markets. Deeper down they fear that forces of globalization and consumerism may erode ancient community values based on mutual support systems. When this happens, they may lose more than cultural values, they may lose their sense of belonging[38]. They find expression in violent protests against the WTO and IMF - the symbols of free trade - or in religiously inspired fundamentalism, such as equating the West with Satan[39].

While these fears are understandable, it would be a mistake for Buddhist leaders to propagate the closure of borders and going back to inward oriented policies of the past, based on distrust of foreign powers. This strategy has failed to produce results elsewhere in the world and in fact has caused ancient cultures to collapse, among them Buddhist ones such as China, Tibet, Mongolia, Cambodia, Laos and Vietnam. The ideals of Buddhism preclude the option to close off from the larger world and prevent the free exchange of information, for liberation requires freedom[40]. Thus, Buddhist leaders have no choice but to take up the challenge of the global economy, to help shaping and steering these economic realities into improvements in quality, rather than merely quantity, so that more people benefit and fewer receive harm.

The key to opening up yet retaining cultural integrity lies in education. It is not simply a choice between western or traditional style education, but rather what is needed is a combination of the two. Buddha taught that we should not accept Buddhism on the basis of any authority, but only on close personal investigation: ”Like one would investigate a piece of gold on the market to see if it is real or not, so should one verify the validity of Buddha’s words”[41]. On this basis, Buddhist culture can be inclusive and absorb those parts of western culture which are of benefit, but reject those which are not. At the same time, this inclusive yet critical attitude will form a much needed contribution to the world at large. There are many societies which share a position on the edge of the global capitalist system, but only very few of them enjoy the Buddhist cultural self-esteem rooted in its traditional yet vibrant culture.

If Buddhist societies can show their values are relevant, then these should ultimately have a noticeable economic effect. They may not be counted as such by number-focussed economists, or even by any of the new economic indicators. Our own individual experience will tell us if our society is happy or not. We will feel the difference between working in a system that is based on competition from an environment that allows close cooperation. If we treat each other merely as competitors, distrust and isolation will be the result. While an environment of compassion and care will naturally foster free exchange and mutual well being.

Towards Buddhist economics: from ideals to practice

We can conclude by saying that while some of the views on what is Buddhist economics are emerging, it is too early to know what it means in practice. Much more research and debate is needed.

A key practical problem is that economics is based on quantifiable data, while Buddhism is based on and incorporates many non-quantifiable, intangible values for which there is no monetary measurement possible at present. The appeal of the conventional economic indicators has been that they are based on money, which can be subjected to mathematical logic and discipline. In contrast, Buddhism deals with the totality of life, which – as we also know from the modern sciences – is extremely complex to measure. Since much of life is non-quantifiable, in essence the dilemma is how to quantify the non-quantifiable.[42]

At this stage, Buddhist development concepts such as GNH are more like an ideal, a target, which will require extensive research and practice before it can be a guiding force for day-to-day economic and political decision making. This is in fact true for all sustainable development indicators.

We should realize that as long as we treasure the freedom and opportunities that the market economy provides, Buddhist economics will have to include principles of competition and market forces. Competition is so much valued in our capitalist economies because it has proven to be the most effective incentive for bringing out the best of our selves. That is why capitalism has 'defeated' communism. But competition without a moral dimension is like an elephant gone wild - it will destroy the very earth it depends on – so Buddhist economics should be based on ethics. At the same time, the failure of Marxism has shown us that values such as compassion or cooperation can never be more than guidelines for individuals or groups. Likewise, Buddhist economics cannot be translated into an ideological system and forced upon us.

Both the West and the East should define principles to reinvent what is known as a 'mixed economy', the idea that market forces could do many things well - but not everything. This will require government and all actors in the economy to reclaim responsibility for their lives and start defining economic objectives in more human terms. The neoclassical principle of ‘laissez-faire’ has wrongly created a mentality of taking things for granted and we have become enslaved by the market and its monetary values. The alternative is not a return to rigid central planning and closing one’s border, but rather the development of an alternative economic model tailor-made to suit the condition of our own society, yet aligned to the wider world.

The concept of Gross National Happiness, Bhutan's contribution to Buddhist economics, is both an excellent starting point and target for this discussion, but the concept will need to be refined, elaborated and tested in practice in order for it to make sense for mainstream economists and politicians. The ideals of Buddhist economics can be achieved if development is measured in terms of economic development, education, health, and the preservation of culture and nature, while based on principles of inclusiveness, ethics, freedom and competition. Here lies a noble task for Buddhist scholars and the new generation of more enlightened economists.


Note: This paper is adapted from a paper presented to a forum with leaders and scholars from Bhutan, in the Netherlands, January, 2001.

Selected Bibliography:

Akiner, Shirin; Tideman, Sander; Hay, Jon (eds.), Sustainable Development in Central Asia, Curzon Press, London, 1998

Barber, Benjamin, Jihad vs. McWorld, Times Books, New York, 1995

Breton, Denise & Largent, Christopher, The Soul of Economics, The Idea House, UK, 1991

Bubna-Litic, David, 'Buddhism Returns to the Market-place', in Contemporary Buddhist Ethics, edited by Damien Keown, Curzon, 2000

Capra, Fritjof, The Turning Point, Flamingo, 1985

Capra, Fritjof, The Web of Life, Anchor Books, 1996
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Clarke, Graham E., Development, Society and Environment in Tibet, Austrian Academy of Sciences, Vienna, 1998

Strategic Considerations on the Development of Central Asia, Proceedings of the second CODOCA Conference in Urumqi, China, 1998

Dalai Lama, the, and Fabien Ouaki, Imagine all the People; A Conversation With The Dalai Lama on Money, Politics and Life as It Could Be, Wisdom Publications, Boston, 1999

Dalai Lama, the, Ethics for the New Millenium, New York, 1999

Dalai Lama, the, with Howard C. Cutler, The Art of Happiness, Coronet Books, UK, 1999

Dieren, Wouter van (ed.), Taking Nature into Account – Towards a Sustainable National Income. A report of the Club of Rome, IMSA, the Netherlands, 1995.

Friedman, Thomas, The Lexus and the Olive Tree, Harper Collins, London, 1999

Goleman, Daniel (ed.), Healing Emotions, Shambhala Publications, USA, 1997

Goleman, Daniel, Emotional Intelligence; Emotions as Key to Success, New York, 1995 / Uitgevery Contact, Antwerp, 1996

Greider, William, One World, Ready Or Not: The Manic Logic of Global Capitalism, Simon & Schuster, New York, 1997

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Kuttner, Daniel, Everything for Sale; the Virtues and Limits of the Market, Alfred Knopf, New York, 1997

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Loy, Dr David, Buddhism and Money, paper presented at the Chung-Hwa International Conference on Buddhism, Taiwan, 1990

Norberg-Hodge, Helena, Ancient Futures; Learning from Ladakh, Rider Books, U.K. 1992.

Norberg-Hodge, Helena, Buddhist Engagement in the Global Economy, Tricycle, Winter edition, 2000

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Biography of the author:

Sander Tideman (LL.M.) holds law degrees from the University in Utrecht and the University in London, specializing in international economic law and Asian legal systems. He also studied Chinese language and culture at the Taiwan National Normal University.

In his professional career, he worked as a lawyer for Baker & McKenzie in Taiwan (1987-1989), as Chief Representative of ABN AMRO Bank in Beijing, China (1990-1994), as Vice President of Structured Export Finance for ABN AMRO Bank in Amsterdam, the Netherlands (1995-1997) and Regional Manager Asia for Triodos Bank, the Netherlands (1997-1999).

He is now an independent consultant specialized in micro-finance, enterprise development and sustainable development programs in developing countries in Asia. He also serves on the board of several not-for-profit institutions. These include the Inner Asia Center for Sustainable Development, which he co-founded, and the Bridge Fund, an investment fund for sustainable enterprises on the Tibetan plateau and Mongolia. He takes a special interest in the preservation of culture and nature in Inner Asia.

He is also a director of Maitreya Institute, a Tibetan Buddhist study center in the Netherlands. He has been a student of Buddhism since 1982, studying under teachers in India, Nepal and China. Since 1996 he has been an occasional teacher of Buddhist meditation and he has given lectures on applying principles of Buddhism in management and business.

He published and edited several articles and books, which includes Doing Business in China (in Dutch, Walburg Pers, Netherlands, 1996), Sustainable Development in Central Asia (co-editor with Dr Shirin Akiner / Curzon Press, London, 1998), Enterprise and Development in the 21st Century: Compassion or Competition?, based on a forum discussion with H.H. the Dalai Lama (Asoka, the Netherlands, 2000), and Towards Buddhist Economics (Mandala Magazine, California, 2000).



http://www.neweconomics.org/gen/uploads/doc_212200105346_Buddhist%20Economics%20-%20Sander%20(2).doc
[1] H.H. the Dalai Lama and F. Ouaki, Image all the People, A Conversation With The Dalai Lama on Money, Politics and Life as It Could Be, Wisdom Publications, Boston, 1999
[2] E. F. Schumacher used the term “Buddhist economics” as title of a far sighted essay, included in his Small is Beautiful; Economics as if People Mattered, Harper & Row, 1973, which became a landmark book for alternative economics (see also below).
[3] P.A. Payutto, Buddhist Economics; A Middle Way of the Market Place, Bangkok, 1992. For other similar work from Thailand, see Sulak Sivaraksa in Global Healing, Thai Inter-Religious Commission for Development, 1998.
[4] See Walpola Rahula, What The Buddha Taught, the Gordon Fraser Gallery, London, 1959
[5] Cited in Phra Rajavaramuni, “Foundation of Buddhist Social Ethics”, in Ethics, Wealth, and Salvation, ed. Russell F. Sizemore and Donal K. Swearer (Columbia: University of South Carolina Press, 1990).
[6] See for the Buddhist definition of happiness, e.g. the Dalai Lama and Howard C. Cutler, the Art of Happines, Coronet Books, UK, 1998
[7] Mahatma Gandhi observed that nothing in history has been so disgraceful to human intellect as the acceptance among us of the common doctrines of economics – as a science. A small group of economists including Barbara Ward, Kenneth Boulding, E.F. Schumacher, Gunnar Myrdal, always stressed, along with theologians from many faiths that economics is not a science. Interestingly, the Nobel Prize Committee acknowledges that the prize it gives for economics was, in fact, set up by the Central Bank of Sweden. Even the economist of London recently admitted that economics is not a science in spite of its pretensions.
[8] quoted in Small is Beautiful, Economics as if People Mattered – see note 2.
[9] See for an overview of the linkage between the natural and economic sciences, Fritjof Capra's The Turning Point, Flamingo, 1985.
[10] Small is Beautiful - see note 2
[11] The Economist, April 8, 2000
[12] For an excellent critique of conventional economic indicators see Taking Nature Into Account; Towards a Sustainable National Income. A Report of the Club of Rome, by Wouter van Dieren (ed.), IMSA, the Netherlands, 1995. Similar issues have been explored in the context of Central Asia by Sander Tideman in The Shortcomings of The Classical Economic Model, in Sustainable Development in Central Asia, Curzon Press, 1998.
[13] Quoted by Hazel Henderson in Beyond Globalization; Shaping a Sustainable Global Economy, New Economics Foundation, UK and Kumarion Press, USA, 1999.
[14] Hazel Henderson, Beyond Globalization, see note 13.
[15] For a view on the causes of the Asian financial crisis, see Walden Bello, The Asian Financial Crisis, The Ecologist, February, 1999.
[16] World Commission on Environment and Development, Our Common Future, also known as the Brundtland report, New York, 1987.
[17] United Nations, Agenda 21 UNCED Concluding Document, New York, 1991
[18] There are many (mis)interpretations of karma. In essence, it means ‘action’, but it is also commonly understood as the ‘law of cause and effect’. All actions produce results. Good karma is regarded as those actions that produce happiness, bad karma refers to actions that cause suffering. See e.g. Pabongka Rimpoche, Liberation in the Palm of Your Hand, Wisdom Publication, Boston, 1991
[19] See for example, the research of biologist Francisco Varela, in The embodied mind; Cognitive Science and Human Experiences, Cambridge, 1991. See also various exchanges with the Dalai Lama in Mind and Life conferences, such as laid down in Healing Emotions, Daniel Goleman, ed., Shambhala Publications 1997
See for an illuminating comparison between molecular genetics, the evolution of life forms and economics, David Korten, the Post Corporate World; Life After Capitalism, Kumarium Press, US, 1999.
[20] see, for example, an examination of the British and American blood banks in Richard Titmuss' classic The Gift Relationship, George, Allen & Unwin, London, 1970
[21] quoted in Enterprise and Development in the 21st Century: Compassion or Competition?, ed. Sander Tideman, Asoka, 2000.
[22] See, for example, Imagine all the People; see note 1
[23] Corri Azzi and Ronald Ehrenberg, quoted in Robert Kuttner, Everything for Sale; the Virtues and Limits of the Market, by Robert Kuttner, Alfred Knopf, New York, 1997
[24] See Everything for Sale, note 23
[25] See for a psycho-analytical study of these issues, Dr David Loy, Buddhism and Money, Paper presented at the Chung-Hwa International Conference on Buddhism, Taiwan, 1990
[26] Institutions, Institutional Change and Economic Performance, by Douglass C. North, Cambridge University Press, 1990
[27] Emotional Intelligence, by Daniel Goleman, New York, 1999.
[28] Development as Freedom, by Amartya Sen, Alfred Knopf, New York, 1999
[29] The Wealth and Poverty of Nations, by David Landes, Little Brown & Co, New York, 1998.
[30] Open Society; Reforming Global Capitalism, by George Soros, BBS Public Affairs, New York, 2000
[31] Emotional Intelligence, see note 27
[32] See for example, Lewis Richmond's Work as a Spiritual Practice; a Practical Buddhist Approach to Inner Growth and Satisfaction on the Job, Broadway Books, New York, 1999, or Geshe Michael Roach's The Diamond Cutter: The Buddha on Strategies for Managing Your Business and Your Life, Double Day, New York, 2000.
[33] See Taking Nature in Account, see note 12.
[34] Calvert-Henderson Quality of Life Indicators, by Hazel Henderson, Jon Lickerman and Patrice Flynn, Calvert Group, 1999.
[35] Hans Kung, A Global Ethic For Global Politics and Economics, Oxford Univ. Press, 1999
[36] See, for example, the Dalai Lama, Ethics for the New Millenium, New York, 1999 and Imagine All the People, see note 1.
[37] See, for example, Ancient Futures; Learning from Ladakh, by Helena Norberg-Hodge, Rider Books, U.K. 1992.
[38] See note 37.
[39] See for convincing case studies of these conflicting tendencies, Jihad vs. McWorld, Benjamin R. Barber, Times Books, U.S., 1995, and The Lexus and the Olive Tree, by Thomas Friedman, Harper Collins, London, 1999.
[40] Buddhism considers lasting happiness to be achieved by liberation, which is defined as freedom in all meanings of the word. See e.g. Liberation in the Palm of Your Hand, note 16.
[41] See Liberation in the Palm of Your Hand, note 16.
[42] Economists working on the new indicators assume this can be achieved within the quantitative framework of economics. By changing relative prices, qualitative indicators can be incorporated into the information on the basis of which we make our economic choices. For example, by taxing products made by wasteful technologies, we discourage the producer from continuing to produce in this way. But quantifying the value of natural and cultural resources is much more difficult. For example, if we value a national park by estimating the amount of money and time people are willing to spend visiting the park, can this estimate ever provide the full picture? How does one estimate the benefits of the park on the overall environment of the planet and in terms of bio-diversity? Or what if a wealthy oil firm is prepared to pay a higher price for the park than its estimated value?