A quote from Gandhi

This photograph is from our local VSPCA animal shelter. A friend of mine called me up a few days back and said he’s going there. I joined him. One of the boys over there took us on a short guided tour of the shelter, and then we spent about an hour talking to Sharada (the person incharge there), who kindly gave us an account of her experiences being there for the last decade or so. One of the factors, as usual, is the money needed to fund the operations. These are the kinds of services that we as a society should spend our capital on. They provide a valuable socio-environmental service and provide employment too (they employ some 40 people). It reminded me of my previous post on voting with money, and how powerful and important capital reallocation is. The services are useful and already there. The people are there willing to do more. We just need to divert the capital to increase the scale of these services.

Closer home, i had an opportunity to work on a situation. For about an year now, a street dog has been living in our apartment complex parking lot. Some of us in the complex used to give some food occasionally, and he used to forage on the streets also. He seemed to be pretty happy and made our complex his home. I personally did not have a problem with the situation as Blacky seemed pretty harmless, but some residents felt threatened and i have to respect their wish if they wanted to drive him away. Recently, a new watchman was appointed and some of the residents apparently told him not to allow the dog in the complex. He took their words rather seriously, and started giving the dog a big whack with a stick whenever it entered the complex. Dogs are quite attached to a place though, and they don’t leave comfortable places so easily. When i approached the watchman and told him that beating was not a good idea, he said he actually did not want to beat the dog either, but felt compelled to do so as some residents insisted on keeping the dog out. But when i talked to couple of folks who apparently ordered the dog out, they seemed to be unaware of the situation, and also agreed that beating was no solution. So, no body wanted to actually beat, but still the dog got beaten !! communication errrrrors could indeed be costly ! Anyway, instructions went out not to apply force, and thats where the story stands now. Who knows where it ends. I suspect Blacky will continue to just hang-out around the complex, and enjoy the occasional snack from kind residents.

vote with your money – part 2

(continuation from part 1)

Apparently, the trend now-a-days is to look at things from the perspective of the “whole” , and the representative mantra of this wisdom seems to be “The whole is more than sum of the parts”.

So why not we look at economic systems from this point of view ?

The message of this diagram is quite simple. The individual is part of a larger whole — a social community and a wider natural environment. Both are important realities. The whole cannot exist without a collection of individuals. The individual cannot survive when the whole is chronically unhealthy. A healthy economic system is one that recognizes and nurtures both the part and the whole.

So how do the popular economic systems fare in this aspect ? The communists ignored individual freedoms and rights, and were too tilted towards the “community” aspect. It was due to over-zealous altruism and in most cases, it was really for dictatorial control over economies, under the guise of altruism. Individuals had very limited property rights. Decision making was all centralized. It was a deadly combination — individual freedom and creativity were not nurtured and at the same time community sense was forced involuntarily onto the people. Under the weight of this serious mistake, economic communism collapsed.

On the other side of the spectrum, we have capitalism where individual rights are sacrosanct and any community wellbeing is an after-thought. Infact, it is based on an express principle that when individual rights are perfectly taken care of, community automatically gets all-right. Take care of the part, and whole will be all-right. It has proven to be only partly right. The economic pie definitely got bigger, but how is that pie shared within the social community ? There is certainly some trickle-down of wealth, but there is much stronger force of trickle-up that naturally seems to operate in a capitalist economy. This is evident from the frequent news bits we see about “top-x percent of people having y percent of wealth”. ‘x’ generally being much less than ‘y’. Thats the social aspect. On the environmental community aspect, capitalism as-we-practice today has been disastrous. The chief reason being that we simply failed to recognize and assign an intrinsic value to the natural environments. When little or no value is assigned, our economies simply converted the natural capital into goods that are valued. Conversion of natural capital to consumer goods and man-made capital. (I’ve discussed this aspect more here).

Anyway, coming back to our point, a healthy economic system is one which nurtures both the individual and community aspects .. because one could not survive without the other. Communism failed because it failed to recognize the individual and forced community responsibility onto the people. Capitalism does recognize individual rights, but has failed to formally recognize the community responsibility .. and so the social community is weak with massive inequities and environmental community is extremely unhealthy.

The whole problem with capitalism as-we-practice today is that it doesn’t directly address glaring economic inequities and is also leading to a serious deficit of natural capital. My solution is pretty simple. Lets preserve capitalism with its protection of individual rights, but let there be a voluntary trickle-down of capital into building social and environmental capital. As i’ve discussed in part-1, this would be achieved by cutting unnecessary personal consumption, and consciously investing in programs which build social and environmental capital. Ala, sage of Omaha Warren Buffet, who donated significant wealth to charity. Buffet says he was “wired at birth to allocate capital”. Precisely what we need. Voluntary reallocation of capital. I just gave the most glaring example, but as i said in part-1, this principle applies to everyone of us and not just Buffet’s of the world.

I must admit that all the fifteen hundred word discourse above is a fancy way of saying that people should spend wise and give more . All this is fairly obvious and makes sense without invoking any mysticism and philosophy. But whenever there is talk about individual vs universal, i can’t resist putting up a plug from Yoga. So, here’s a relevant and weighty quote from Sri Aurobindo’s work “Synthesis of Yoga”:

“The acceptance of the law of sacrifice is a practical recognition by the ego that it is neither alone in the world nor chief in the world. It is its admission that, even in this much fragmented existence, there is beyond itself and behind that which is not its own egoistic person, something greater and completer, a diviner All which demands from it subordination and service. Indeed, sacrifice is imposed and, where need be, compelled by the universal World-Force; it takes it even from those who do not consciously recognize the law, — inevitably, because this is the intrinsic nature of things. Our ignorance or our false egoistic view of life can make no difference to this eternal bedrock truth of Nature. For this is the truth in Nature, that this ego which thinks itself a seperate independent being and claims to live for itself, is not and cannot be independent nor separate, nor can it live to itself even if it would, but rather all are linked together by a secret Oneness. Each existence is continually giving out perforce from its stock; out of its mental receipts from Nature or its vital and physical assets and acquisitions and belongings, a stream goes to all that is around it. And always again it receives something from its environment gratis or in return for its voluntary or involuntary tribute. For it is only by this giving and receiving that it can effect its own growth while at the same time it helps the sum of things”.

Pretty strong words from the sage of Bengal. To my mind, the massive reallocation of capital away from needless consumption, into social programs and towards environmental sustainability, may be considered as an aspect of Yoga itself. Whether individually and societally we engage in this Yoga, is going to be important in the next few decades, as scientists warn us that we are fast approaching limits to mindless consumption.

vote with your money – part 1

I wanted to do a post on economics of spending for a while now, and i’ve finally found the catalyst in this discussion at Atanu’s blog on Mukesh Ambani’s home. So brace yourself for a crash course on chaitanya’s economic philosophy.

Start with a question. Whats the surest and easiest way to get your voice heard … your opinion really counted. Voting in a public election ? well, you may be on the losing side, in which case, your opinion isn’t really implemented. Camp at a busy intersection with a loud speaker and make your voice heard directly to janta ? well, who knows, for most people, your sermons might be going in through one ear and coming out through the next, with the three pound gray matter busy processing more mundane concerns. Whats to rescue ? Is there no universal justice to afford an individual with the right to be heard ? There is. Remember the good old detective line .. “follow the money” ?

Yes, me thinks, your money is the surest and easiest way to get your voice heard. Courtesy, an invisible super computer known as the “Market”. No matter how small or how large the amount you spend, the market faithfully includes this choice in the supply-demand equation, and spreads the signal ever so silently through the market-o-sphere. The signal is never lost. And surely, the message gets to all the right places, and depending on the strength of the signal, will affect future production, pricing and demand.

Our spending signals are a reflection of our values and priorities, and our signals collectively taken, have a major impact on our economy, society and environment. With his billion dollar home Mr.Ambani is sending a signal into the market-o-sphere, that the best way he can think of to spend this money is on such things as hanging hydroponic plants, crystal chandeliers, man-made snow flurries and LCD monitors. Oh well, its his money, right ? But for arguments sake, lets note the “opportunity cost” here. By choosing to spend money on trivia, we are implicitly letting go of the opportunity to spend it on useful social programs, say an education program. What an opportunity lost !

My way of thinking about this is rather simple. At any point of time there’s limited amount of monetary capital in the world. We can either spend it on personal consumption or invest in programs for collective benefit which build up long term social and environmental capital. Its a question of consumption vs infrastructure spending on a societal level. The more we use for personal consumption above and beyond necessities, the lesser we allocate to programs that are good for long term health of society.

Some would argue that any consumption is good, as it generates jobs for people and keeps the economy going. Sure. But again, one has to look at the opportunity cost. The choice is not between employment of LCD makers versus un-employment. The choice is between employment of LCD makers versus (say) employment of teachers and fountain pen makers. Over the long term, sending the proper signals will simply shift employment and production patterns, reflecting our priorities.

What does this all mean to us personally ? My personal spending logic is pretty simple. Before i buy something, the question i ask is not just “can i afford it” ? . But also,

(1) Do i really need it ? If i don’t really need it and still buy it, i am wasting precious capital and sending a wrong signal into the market place that there is someone who values the product.

(2) Is there an alternative option that can provide me similar service, but at the same time is environmentally and socially responsible. Lets say i need to travel from Vizag to Mumbai. Why wouldn’t i reject air travel for train, and at the same time (a) spare the air of some co2 (b) contribute my share towards delaying peak oil (c) avoid sending a part of my money to the Saudi’s and so keep the money circulating within India where its definitely more needed. (oh.. i hear you. And my answer is that i doubt 90% of air travellers are really that “time constrained”).

But what about people who choose to spend on such things as man-made snow flurries , and personal jets ? Its their money, right ? Or should the big brother tax away the money and spend on social programs for collective benefit ? This brings us to broader questions about right to private property, right to spend, taxation etc. All these questions have been debated to death in the last few centuries, but i will try my level best to bring out a slightly unique perspective. Over to the next part.