Tibet House Bulletin

I. Lecture

For the 14th Padmapani Lecture, organized by Tibet House, New Delhi, on 26 September 2002, Russian economist Professor Stanislav Menshikov came to New Delhi from Amsterdam to speak at India International Centre on the subject Compassionate Economy has a Future. The next day Tibet House brought together a seminar on Compassionate Economy. Eight scholarly economic professionals gave their enlightening views on the subject. Their lectures were commented in depth by Professor Menshikov, who can be considered the world expert economist on compassionate economy today.

It was His Holiness the 14th Dalai Lama, who asked Professor Stanislav Menshikov in public, at a panel dialogue on changing economics in 1990‚ if he could write a book or design a model for a compassionate economy. Professor Menshikov immediately said, yes, he could. In 1992 Professor Menshikov's first book on a Compassionate Economy came out in Russian. In 1993 Professor Stanislav Menshikov came to New Delhi for the first time, also at the invitation of Tibet House, and gave a lecture on Towards a Compassionate Economy for the Tibet House conference on ecology. Professor Menshikov has exchanged views with His Holiness the Dalai Lama on the subject. The now 75 year-old Russian Professor was this time accompanied by his wife, econometrist Dr. Larissa Klimenko-Menshikova, who also took part in the seminar on 27 September 2002.

The Dalai Lama offered his encouragement and support for the two economic meetings in a special message, stating:
For a long time I have advocated the need for ethics or spiritual values in the world of politics and economics. We live in a world in which most human beings have to engage in some kind of economic activity to ensure their survival. For all the innovation and creativity in our economic activity we have not succeeded in securing these essentials for all human beings everywhere. Every day we hear or read about breathtaking manifestations of affluence, while at the same time we read about deaths due to starvation, poverty, malnutrition and preventable or curable diseases. We have to ask ourselves whether something is wrong with our choice of goals or with our motivation, or with both.
On the global level, we must make efforts to create ethical codes in the worlds of business and finance. The growing gap between the 'haves' and 'have-nots' is going to create a lot of suffering for everyone, including the world of finance itself. Therefore, let us widen our perspective to include the well being of the whole world and its future generations in our vision of economics and business.
If you practice tolerance and compassion, you will immediately discover that these qualities are the causes of happiness. There are many methods that you can wemply to develop these qualities and become a better person. There is no machine that can produce inner peace. No matter how rich you are, there is no way you can buy inner peace. It is something that has to come from inside through mental practice.
An interdependent society has to be a compassionate society. The awesome power that economic institutions have acquired in our society and the distressing effects that we see should make all of us look for means of transforming our economy into one based on compassion. Therefore we should meet and discuss these issues more often and in this way we will gradually be able to create solutions. I look forward to hearing what practical steps you agree to take.

Signed, Dalai Lama, September 24, 2002.

Venerable Lama Doboom Tulku, director of Tibet House, opened the 14th Padmapani Lecture with:
The Padmapani Lectures have become one of the institutionalized annual activities in this capital. Since it was established in 1989, we have had thirteen lectures delivered by distinguished scholars and practitioners of various aspects and disciplines somehow related with Buddhist studies and Buddhist ideas.

A collection of five Padmapani Lectures, collected in a book, published by Tibet House, was released by Dr. Raja Ramanna saying:
I received a copy and started reading. If one reads the lectures one after the other, one gets a wonderful idea of the history of and the part played by Tibet in the sustenance of this great philosophy. I am grateful to Tibet House for having produced this book. We are going to benefit greatly, because the subject matter is such that you have to think a lot, before you fully understand.

It was well-known Indian economist, Dr Jairam Ramesh, chair of the evening, who introduced Professor Stanislav Menshikov with the words:
We have a very distinguished, mainstream economist. He has authored many books on economics of socialist countries and economics of transition. He has co-authored a book with the famous American economist Professor John Kenneth Galbraith with the title Capitalism, Communism, Coexistence. He has an academic career, which has taken him to universities across the world. Lately Professor Menshikov was associated with the Tinbergen Institute in The Netherlands, named after one of the early Nobel Prize winners in economics, Jan Tinbergen, the father of economic planning, who played an important role in setting the foundations of planning in India as well.

Professor Stanislav Menshikov introduced his lecture with:
>The person who inspired me to start this kind of study was His Holiness the Dalai Lama. We met in Amsterdam, in 1990, in a dialogue called 'From Competition to Compassion'. So it is in continuation of these ideas that I present this.

I quote from his lecture:

Compassion and altruism in economics is voluntary sacrificing to others part of one's personal material benefits that one could well use for one's own satisfaction.

The immediate pracical task for proponents of a compassionate economy is threefold:

  1. to work on correcting the inadequacies of welfare systems where they exist
  2. to prevent the elimination of welfare systems by liberal economics and political parties that support such views
  3. to create and develop welfare systems where they do not exist at all.

To put into effect the compassionate welfare systems, society needs adequate resources. These normally come from national savings, the remainder of gross domestic product (GDP) after deducting total consumption.

There are two ways of increasing resources for welfare:

  1. decreasing consumption, capital investment and growth in personal wealth
  2. increasing taxes, which helps decrease consumption, capital investmentand growth in personal wealth.

Government consumption can be decreased, for instance, by reducing military expenditure** and the government bureaucratic machine. These expenditures paid by taxes provide resources for compassionate welfare without increasing taxes.

In principle, compassionate economics is in favour of increasing the number of satisficers and reducing the number of maximizers, because this leads to an increase of resources for compassionate welfare.

Compassionate economics should limit speculative investments.

The idea that private business can do the job is false. Corporations are not organised for the purpose of compassion. They provide jobs.

Poor countries should look for ways of initiating their own compassionate welfare schemes. In Soviet Russia, for instance, free mass education and medical care were first introduced, in the 1920s, when the country was very poor. This led to the elimination of illiteracy very quickly, and also to the reduction of the death rate; even though expenditure for free medical care was very low at that point.

In democratic societies winning support for welfare schemes among the majority of voters implies changing their consciousness in favour of compassion. Any individual operating in a capitalistic system is in his economic behaviour guided by a mixture of compassionate and market motivations. Compassion and non-compassion in individual economic behaviour is an important part of meaningful economic research," Professor Menshikov underlined.

Then Professor Menshikov made it clear that both the structure of society and the way of thinking have to be changed to realize a compassionate economy. He suggested that first and foremost the principles of Buddhism, Christianity, Moslim faith and other religions should spread compassionate and altruistic behaviour. Second, the task is to involve educational institutions into bringing up young people in the principles of compassion, at elementary schools, high schools, colleges and universities. Third, there should be a strong effort to publicize the principles of compassion in the media."

Finally Professor Menshikov said, 'in the long run everybody will benefit from a compassionate economy'. He gave a set of simple rules of compassionate behaviour to be spread around the world, that should be remembered and followed:

"Following these rules is a step forward in compassionate behaviour, while not negating the market economy," Professor Meshikov said. He told the audience, he had been part of a seminar at the World Bank last June and knows that inequality has increased over the last fifteen years. "Real average incomes fell in more than 80 countries, nearly half of the total number of countries in the world," he said. "Mass poverty is still the main source of many global problems," he added.<

"After all economics serves the general benefit of the people. the Russian Professor stressed. "The concept of efficiency also includes providing all human beings decent excistence. Efficiency includes the best possible use of natural resources. By these measures the compassionate economy would be more efficient than the traditional market economy."

Dr. Jairam Ramesh thanked Professor Menshikov for a fascinating, philosophical and deeply empirical lecture, which I am sure is music to the ears of many Indians. Dr. Ramesh added:

It is a tragedy that issues of psychology and philosophy have given way to mathematics in economics. Today's economics is unrecognizable from what economics originally was, which was all about psychology, philosophy, political economy and values. Some of the most fascinating work now going on in many universities is on the psychological foundations of economics. At MIT, for instance, there are young economists, some of whom happen to be Indian, who are grappling with precisely this issue that Professor Menshikov has raised. Are human beings maximizers? Are human beings satisficers? Are human beings altruistic? The issues that you have raised, professor, are agitating a newer generation of economists, who are returning to the psychological foundations of economics.

Again Dr. Jairam Ramesh:

Secondly, I want to underscore the fact that Professor Menshikov says that compassion means living with the market economy, taming the market economy, not allowing it to be the master, but using it really in a manner that fulfils the needs of all sections in society. It seems to me that this is a very major and significant step forward. We are now talking, not just of a welfare state in its abstraction, or a compassionate economy is its abstraction, but we are talking of a compassionate economy that is also productive, efficient and creating resources to make it sustainable, and that is creating jobs and fulfilling consumer needs. I think this is a very significant transformation. The real challenge is to accept the principles of a market economy and use it to fulfil ends based on compassion.

Then Dr. Ramesh opened the meeting to questions:

Q: Is there any country in the world that is near to your concept of an Economy of Compassion?

Professor Menshikov: In some ways the Swedish economy does. In some ways also the Dutch economy is okay.

Q: Hearing the lecture, to my mind it appeared that the compassionate economy is all about fairness in distribution, but how do you ensure growth?

Professor Menshikov: There is a sense of not a complete satisfaction with the market economy. Take any textbook on the market economy and it will always say that it has its limitations. Now, of course, compassionate economy is not only about distribution. Market economies normally are growing economies, but they have to become economies in which distribution is better. Distribution has a direct connection to growth. If the distribution is done correctly, then an economy grows. Incomes have to fit production. Incomes constitute the purchasing power in an economy. I see social government expenditure as part of supporting the purchasing power. We'll discuss these things tomorrow.

Dr. Ramesh ended with: >Thank you Professor. I think the keypoint you have made is that compassionate economy rests on a foundation of growth. The insight that Professor Menshikov has been giving is that of an inbuilt distributive element into the production apparatus. That gives equity dimensions to production. I think it is a very profound insight, which we need to take note of. For growth to be sustainable it has to be equitable. We'll have a very interesting debate tomorrow. It only remains for me to thank Professor Menshikov for a lecture that has great contemporary relevance. I hope it will be published and given a wide circulation, because this deserves wider publicity and comment.

II. Seminar

The next day Venerable Lama Doboom Tulku, as director of Tibet House, welcomed his distinguished panelists and guests at the Seminar on Compassionate Economy, organized in collaboration with India International Centre. Moderator was Dr. L.C. Jain. Presentations were by Dr. Jairam Ramesh; Mrs. Dr. Larissa Klimenko-Meshikova; Shri Ravindra Varma, Professor Krishna Nath; Dr. B.B. Bhattacharya; Professor Naushad Ali Azad; Dr N. Chandra Mohan and Professor Stanislav Menshikov. Louwrien Wijers from Amsterdam, writer of this piece and initiator of the dialogues on 'a changing Economy' with the title From Competition to Compassion, to summarize the seminar.

Venerable Lama Doboom Tulku briefly explained that Tibet House was established by His Holiness the Dalai Lama in 1965, soon after the Tibetans arrived in India as refugees. It was to basically work on the preservation of Tibetan and Buddhist studies and culture. His Holiness recurring emphasis over the years on the need for and importance of a frank and meaningful dialogue between different disciplines have had a profound effect on the purpose and activities of Tibet House, Lama Doboom Tulku said. Therefore the current emphasis in Tibet House has been on intercultural and interdisciplinary activities and also on the promotion of human values. There must be messages for the betterment of all human beings. With this idea we coined this seminar's toppic as Compassionate Economy. Let us explore what relevant messages are there.

Of course the name of Mahatma Gandhi fell many times, as he has showed a way to a compassionate economy way back in 1928. Especially dr. L.C. Jain mentioned Mahatma Gandhi. Dr. Jain stated: In theory economics embodies compassion. He articulating that even though Gandhi was no economist, he suggested how the economic practice could be reordered to ensure food to every hungry person. Gandhi underlined in 1928: This ideal can be universally realized only if the means of production of the elementary necessaties of life remain in the control of the masses. The neglect of this simple principle is the cause of the destitution that we witness today. Gandhi envisaged local production of food for local consumption. He endorsed a village level grain bank to ensure immediate access of food so that no person had to go hungry even for a day. For Gandhi the starting point was universal dispersal of political power, hence his obsessive emphasis on self-governing villages. Dr. Jain emphasized that the challenge is to implement changes which enable economics to deliver its fruits, while retaining its integral relationship with ethics and compassion.

Dr. Jairam Ramesh started to say: My presence here is an effort really at trying to bridge the gap between the globalizers and the compassionate. It is not just the economy we are focussing on, we are looking at a much larger issue, the compassionate society, he said. There is only one law in economics, which results in efficiency or inefficiecy. A compassionate economy has to provide the maximum benefit for the maximum number. It has to 'wipe every tear from every eye', to quote Gandhi-ji.

Kerala, in our country, approximates very closely to the Scandinavian model, that Professor Menshikov said comes closest to being a compassionate economy. But the question is: Is Kerala able to sustain that achievement? In my view public expenditure becomes a very critical determinent of how far an economy is able to fulfil the goals of social and human development. How does a country like India increase the level of public expenditure? There has been a declining trend in the ratio of public expenditures. The fact is that India is at the national level, at the state level, as well as at the local level completely bankrupt. One way of getting out of this bankruptcy has been to prone social expenditure, which is the easiest and truly an emergency. The reason for this lies fairly and squarly in politics. Public expenditure meant for the public is now for the state, 94 per cent of Kerala's revenue today goes for salaries and pensions of its State Government employees. The state has been captured by the nomenclature. Public expenditure is now being spent on itself. That is unfortunately the great tragedy in this country. Fiscal restructuring is a very essential component of making public expenditures a tool for a compassionate economy. Fiscal restructuring is in my view the only way in which you are going to be able to meet the goals set out for us fifty years ago, articulated by leaders like Gandhi-ji.
Dr. Ramesh proceeds: I would argue that democracy is a very essential component of a compassionate economy. The second element would be diversity. If the basic institutions of governance and civil society, the media, the non-governmental organisations and the social action groups are not geared towards respecting social diversity, then you are not going to have a compassionate economy. A third essential component of a compassionate economy is dialogue. I happen to believe that globalisation is not incompatible with the goals of poverty reduction and with the objectives of balanced regional growth. There are enough examples to demonstrate that it is possible to marry the power of state-interventioin to the virtues that markets afford. Put into practice an integrated economic policy, which harnasses the power of the market economy, but builds into society institutions and policies that provide for compassion and humaneness in the process of economic growth.

Discussant Dr. Larissa Klimenko-Menshikova embraces the idea of Dr Jairam Ramesh of a need for pragmatic dialogue. She finds it very important and timely. She quotes: As His Holiness the Dalai Lama puts it: what is our responsibility before one another. She summons: Let us work together on ridding government policies and programs of inefficiency and corruption. In the name of compassion let us admit some mutual errors of judgement and work together towards an economy of compassion. The main rule is to change the behavioural motivation of each of us as human beings. We should publicise in the media the very notion of comp[assion that has come to us from ancient times. Dr. Larissa Menshikova suggests that special research programs be initiated. She finds it useful to make a comparative analysis of compassionate behaviour among various groups of populations in different countries. She mentions the good example in Thailand, where a new government program of sustainable development along compassionate lines has been initiated. In the United States the University of Minnesota has established a new course in economicsthat combines traditional economics, Buddhist economics and Marxist socialist economics.

Shri Ravindra Varma states: Economic activities depend on the paradigm of interdependence. The attitude of mind that conforms to interdependence is compassion. Economic activity is a social activity. We have to have concern for each other's legitimate interests. The forces of the market can ensure the efficiency of an economy. Therefore the economy should be allowed to be shaped by the free play of demand and supply. Interdependent activity depends on resources that belong to society, meant to serve the interests of society. But we see that the vast majority of people are deprived of the benefits of economic activity. They suffer poverty and all the sufferings, risks and uncertainties that poverty brings in its train. Although a little reflection will show that the pursuit of greed and efforts to maximize profit can only generate forces that undermine social cohesion. Mahatma Gandhi believed that a compassionate economy alone could lead to the cessation of exploitation and the fashioning of a peaceful society. A compassionate economy alone could be a sustainable economy in terms of the human being's relation to nature. Gandhi believed that freedom had to be sought and enjoyed within the paradigms of interdependence. In the extremely lucid and logical presentation that Professor Menshikov made yesterday, he outlined steps that can be taken to induct compassion into the market economy. While one agrees and admires the talent with which he dealt with each sector, one can also see the validity of Gandhi's emphasis on the fundamental changes in beliefs, mindsets, motivations and attitudes that are necessary if we are to succeed in transforming our economy. The picture of a compassionate economy has been very much before all those who think of a non-exploitative, non-violent social order as an imperative for an efficient, sustainable and just economy.

Discussant Professor Krishna Nath said: I am mostly one with Shri Ravindra Varma's concerns for the need for a compassionate economy. I was reminded of all those traditions of our past, listening to Gandhi-ji's needs for an economy of permanence, so to say. But, I don't know, how do we really proceed from here? How do we tackle the problem of marrying market economy with compassion, non-violence, loving kindness and so on? That is my problem. Professor Menshikov mentions that we should handle both, the resources and consciousness, to take care of compassion. Resources are scarce and they have alternative uses, and the means of loving kindness, compassion, non-violence, friendliness are unlimited. I have no answers. I have only questions to offer. What if we allow the economy to work for itself and let economy leave compassion alone? Because if it interferes with those realms, then the power of the ruthless machine of economics and market will rather just leave no space for karuna, compassion, and maitreya, love, and the rest of it. Taking karuna, maitreya, mudita, joyfulness, upeksha, equality, from one tradition and marrying it with economy, which has the cruel purpose of creating wealth. I would rather quote from His Holiness' message, where he says that 'there is no machine that can produce inner peace'. It is well said that there is an imperative need for it. But these are some of my questions.

Dr. B.B. Bhattacharya: Compassion is an ingredient in all human beings' feelings. We try to help each other. We are concerned about other people's welfare. Some of us may like to say that we want welfare for the whole mankind. How does one attain such welfare and integrate it in the management of the economic policy and institutions? One regulation of compassion is that there would be a benevolent team that will ensure that if someone is earning a little more the team will tax the person and redistribute the income as a charity. For this the basic premiss is: Everyone in a society who is not capable of taking care of the basic economic needs for herself or himself should receive money. The state would ensure a certain critical minimum for everybody and by taxing those who earn more and then redistributing it on the principle that everybody should have that critical minimum. The best of the Scandinavian models is the Netherlands model, the Polder Model. It is the Dutch concept of cooperating to satisfy certain critical minimums. The other thing we can learn from the Scandinavian model is the spread of basic education. Everyone, even the bottom person, is able to get the benefit of modern technology through skill formation and education. That enables a system in which even the poorest of the poor has the means of earning money. Trying to give a job to the beggar is a far more rational way of compassion, than giving some little alms. It is better to have work force given less wages, so that by the market system you give more to the underpriviledged persons. However we find that the presentday market of globalization, which swears by the name of Adam Smith, does not actually follow Adam Smith. All of us know that he is the author of the great book, 'An Inquiry into Poverty and Wealth of Nations'. He is also a very good scholar and the author of a book on morality, which is an equally good work. When Adam Smith writes about the basic principle on which the competition in the market economy is based, he actually also emphasizes: 'competition, yes, but within the moral laws, never violating the basic intents of morality'. There is a realization amongst the sober economists, that an extreme form of inequity is unsustainable. The principles of economics and compassion are not contradictory. The balancing of an economy is the one essential ingredient of compassion.

Professor Naushad Ali Azad: I was asked to speak on compassionate economy by Venerable Lama Doboom Tulku. He asked whether I think that the present system of economics is compassionate? My immediate reaction was: Yes, for sustainable development compassion is a necessary input. I wholeheartedly agree with Professor Bhattacharya that this approach requires balance. It is to begin with very necessary to distinguish between the material needs and the non-material needs, which has been a neglected area. If the contemporary world was not plagued by the crisis of unequal distribution of resources, causing the problems of poverty and hunger, we might not feel the need for a mechanism which can give us the non-material requirements necessary for the existence of society. The feeling of a compassionate economy is to take care of those members of society, who really cannot participate in the production process. I would not agree that making everybody participate in the system would be demanded. The need to take care of this compassion aspect of society can be done by a system of transfers, rather than production. The compassion aspect would emphasize on distribution, rather than production. The need of compassion exists because there is some problem with the distribution system. In my view distribution should be the vocal point of a compassionate economy, without of course sacrificing the merits of the market mechanism. In Islam 2.5 per cent of each income should be obligatory transferred to the community coffers for those who don't participate in production. We have heard a lot about the Scandinavian models of a compassionate economy. The essence of those models is also a built in mechanosm for compulsory transfers of income by having a good system of taxation, meant for the public expenditure to help the poorer sections. The Dalai Lama says very clearly that the religious connotations are not really necessary to be compassionate. Therefore, in order to go further in this direction, we can plead for a universal compassionate system, a universal brotherhood. The efficiency of the system should be defined also in terms of the efficiency in distribution.

Professor Stanislav Menshikov: My lecture yesterday was to give some kind of definitional structure to what should be understood as a compassionate economy, or what could be meant by compassion in the economic sense. It really is an attempt to give some kind of structure and definitions. As a rule GDP doesn't count most of household production. If you add all that is done inside the household to what is done outside the household, you'll find that in many communities the household production is nearly as large as the non-household economy. Most of non-household economy is the market economy. The market is the place where goods and services are exchanged on an equal basis. Our economy is not just a market economy. So, I am approaching this not from a moral point of view, but from an economic point of view; from the mode of exchange. Compassionate economy today is really serving to correct the inefficiencies of the market economy. That is what it is supposed to do.
Today we recalled Gandhi. Of course I fully sympathize with this idea of having basic needs become a public good; food, clothing, education, medical care. Ramesh says that in India the budget is wrongly distributed. The compassionate economy started after the deep crisis of the 1930s. It is an old Marxist idea saying that the economy can only grow if income is distributed in such a way that elements of these income distributions create enough purchasing power to buy all the products that are produced. Once these two are compatible, then the system is in equilibrium and it can grow.

“Professor Krishna Nath asked ‘how to proceed?’ Proceed by stopping the neo-liberals from eliminating the welfare state. In the countries where welfare systems don’t exist you have to create them. Professor Krishna Nath also said: ‘compassion is unlimited, but resources are scarce’. I disagree with that, because compassion is only unlimited when you don’t define compassion as basic needs. He says compassion is not compatible with market economy. There is no other way. Extreme inequity is not sustainable. We have to add compassion to the market economy to make it acceptable to the world community. Compassion is transference and distribution connected to growth. Correcting the inequities of distribution are directly providing more stimulus to growth.”

Dr. Ali Azad said: have compassion for the peolpe who cannot paticipate in the market system. Creative artists are not accepted by the market system. How many potentially invaluable resources of mankind are being lost, just because they are not accepted by the market economy today? The market economy cannot adequately give a value to that output. This is another example of inefficiency. Because what talented people produce is for the spiritual richness of the whole humanity.

Dr. N. Chandra Mohan, who wrote a column on the lecture and seminar in The Financial Express of October 3, 2002 with the title 'Search for a Compassionate Economy', said: What I find interesting about this entire program is that there is right now a tremendous forment going on in the world, regarding the ethical foundations of economics. What the anguished new liberals are trying to get to, is to make capitalism have a human face. Your view, Professor Menshikov, is the first time that I am hearing an extremely articulate presentation from the other side, of a person who has seen the power and glory of the socialist system and what a difference it really made to the society. Your presentation has the revolutionary transformations that capitalism needs. It comes ultimately to an appropriate mix between the government and the market. In 1993 you also said: ‘A compassionate economy needs a just and efficient system’. I think you have seen the light and that is the direction in which the world needs to go. Your ideas have triggered a search for this need for an ethical basis for economic behaviour.

Compiled by
Louwrien Wijers,
Amsterdam, November 2002

Professor Menshikov, actually helped Professor Tinbergen through the very last years of his life, when he had almost reached one hundred years. Partly due to his love for Professor Jan Tinbergen, Professor Menshikov still lives with wife and daughter in The Netherlands.
Professor Menshikov is co-chairman of the Russian Economists for Arms Reduction (ECAR). American economist James Kenneth Galbraith, son of John Kenneth Galbraith, is chairman of ECAR in the US.