External growth is Passe, We now Need Internal Growth
Questioner: Acharya Ji, if we talk about the subject matter of economics, it was said by the father of economics, Adam Smith, that economics is a science of wealth where he puts money over men. So over the years as time passed and the scope was broadened, the economist Alfred Marshall told that economics is a science of material welfare where he puts man over money. But his definition has been a lot criticized in the academic world because he divided welfare between material and non-material. So my question is what is the meaning of welfare and should it be divided between material and non-material?
Acharya Prashant: Ultimately, welfare or wellness is an experience within the experienced. Irrespective of where the object of that experience lies, the experience is always within. You might be experiencing pleasure from a great building in front of your eyes. But the building outside is in itself not the pleasure. The pleasure that you are experiencing is a subjective thing happening obviously within the subject. So, whether it is as tangible as a building or something less tangible like a thought or a memory is always internal. The object might be external or apparently not so external. But the feeling of wellness is always internal.
So when we talk of human welfare, we are essentially talking of something within the human being. The human being might say that the cause of that wellness or lack of wellness lies outside of himself. But still, the effect is always experienced within, right? Now this experience within has been observed to be only partially a function of the conditions outside. There is ample proof.
Japan is one of the wealthiest countries in the world and the Japanese have been known, empirically known, to be one of the unhappiest people on the planet. That by no means establishes that material welfare is inversely correlated with internal welfare. We also have examples of highly impoverished nations where the people are internally unwell because of the poverty outside. Material poverty, therefore, is a known reason for lack of internal wellness.
At the same time, material abundance is not a known reason for internal wellness. So till some point, human welfare is indeed material welfare. We cannot deny that.
Till a particular point of prosperity, internal wellness is indeed directly proportional to external tangibles. It is a little inconceivable to have a situation where a person does not have food to eat, shelter to live under and basic decent conditions to abide in and yet, is peaceful and satisfied. Rather inconceivable. So we do need basic material prosperity. No doubt. Hence economics, to a point, must be about material prosperity.
The catch is, in most of the developed world, the point has long since been exceeded. The basic minimum prosperity that is needed, the basic threshold of material availability has been breached. No, achieved is a rather lenient word. It has been many times overachieved. And beyond that point, there is no incremental return in terms of internal wellness with the increase in external abundance. After that point, the curve becomes rather flat. You may even have an inverted U-shape curve. Where, with the increase in material prosperity beyond a point, you actually start finding that internal wellness is diminishing.
The world in general, on average, has come to a point where external growth is no longer going to help. External growth is largely saturated. Though there are deep regional variations. What is true for the United States is not quite true for, let’s say a Bangladesh. But if I talk of a broad average, further wellness on this planet now cannot come through external growth.
We have come to a very special point in the history of mankind. Till this point, all history was about material growth, external prosperity. That is what dictated the course of history. That is what dictated the rise and fall of empires. And so much else as well. But now that factor, external prosperity is as we said, saturated. It will not help anymore to have more money. Now what we need is internal growth, not external growth. Further internal wellness, I am asserting, will not come through external growth but only internal growth. In fact, if we insist on more external growth, we are going to have catastrophic results for the planet as we are already witnessing. Some parts of the planet still need external growth. India is one of those parts. We still have large chunks of the population where we still need more external prosperity.
We still have people who don’t have even very small houses or even basic sustainable incomes, as you said(to a listener) or means to decently educate their children. So in their case, still more growth is needed. But only for them. Not the planet in general. Please get this distinction clear. The developed world, for example. And the developed world accounts for three-fourths of the planet’s total production and GDP. Though it amounts for only a sixth of the total population of the world. The developed world, especially, cannot target any more external growth. The developed world cannot talk the language of the GDP anymore. It would be suicidal. They do not need GDP growth. If they want to have GDP growth, it would only help have some type of shallow psychological satisfaction.
But it would not contribute to internal wellness. Their internal wellness, I am repeating, does not depend anymore on external growth.
And the planet has no more to offer to accommodate external growth. How will you get external growth? The planet has already given you as much as it could. You cannot draw anymore from it. Sooner than later, in the next few decades, even the developing world would reach the threshold after which external prosperity does not help. So we can very safely and very confidently say that for the world in general, the future is internal growth. If economics is about welfare, then further welfare of this planet and of mankind is not going to come from GDPs. It is going to come from an internal ascension. And if that internal ascension is not being targeted and is instead being sought to be compensated by more and more external goods, then it is very unwise.
Economics, now onwards, would be spirituality. If economics is human welfare, then further human welfare is not going to come from more goods, more lavish markets. Further wellness of welfare is going to come from an internal center. So economics which dealt with only numbers and production and such things will have no option but to turn inwards and maybe develop some kind of an indicator of the coefficient of internal growth, CIG. Nations will need to be ranked on their respective CIG's, coefficients of internal growth. It’s another matter that if a country rises sufficiently high on its CIG index, it will cease to have a great interest in remaining a country in the conventional sense of the word. If there is real internal growth, the concept of parochial boundaries as history has known will cease to be relevant.
And a lot more things would happen. With internal growth, you would not need to rank nations in terms of the number of nuclear warheads that they possess. The P5 in the United Nations Security Council would need not be relics of the World War II era. You would not say that the Security Council would be decided on the basis of the winner of the World War. You would not say that only those people who have nuclear weapons deserve to have a permanent chair. In fact, if the CIG manages to do well, instead of a Security Council, you would have a Spirituality Council. Hopefully, India would be the chairperson. But then, that’s not quite a spiritual statement, is it? (Laughter) When I say India, I don’t really mean a political formation. Are you getting it?
So the concept of wellness, welfare, growth, prosperity the very idea of progress, has to go a fundamental transformation if we have any sanity. You can not just keep talking the language of endless numbers. You cannot say that now we have reached X trillions and what is ahead? What is next? X+2 trillions. X+4 trillions. An endless movement. Amounting to what? Certainly not internal wellness.
The economic idea that human welfare is to be measured through material availability is now getting outdated. Maybe Adam Smith and Keynes were right but only topically right. Right only as per the situations of their times. How right is the old definition of economics today needs to be re-ascertained? But rest assured, the time for growth is over. And when I say growth, I mean external growth. People feel that because human intelligence knows no limits and human desire knows no limits, therefore human race is going to expand endlessly. They are taking inspiration from history. They say that if you look at history, man has kept ceaselessly inventing. If you look at history, man has kept endlessly progressing. If you look at the industry, if you look at history, man has never stopped at one particular level of development. So from this historical trend, they want to extrapolate that the future will be the same as the past. What they forget to factor in is a simple variable called the carrying capacity of the earth.
Yes, till now we have kept materially expanding both in terms of consumption and in terms of population because the earth could afford that. But now we have come to a very special point in history. We cannot do it any further. And it is irrespective of the kind of efficient technologies we bring about. When it comes to technology and efficiency, the more efficient a technology becomes, the more widespread its use becomes. Hence the net material consumption instead of declining actually increases. So if you say a particular resource or raw material, is in scarcity and hence we need better technology to enable its more efficient consumption, then the new technology would indeed make the consumption of the resource more efficient and hence more affordable and hence more widespread. And hence the net result would not be a decrease in consumption but an increase in consumption.
So let’s get over the idea that with better technologies we will able to continue expanding materially forever. People give the example of Europe. They say, see in the middle of the century Europe was as polluted as India and China currently are. Look at the Ganga today and look at the condition of Thanes in the 1950’s. They say not much difference. They say look at the Delhi sky today and look at the London sky in the ’50s. Not much difference. But Europe, that’s what they say, progressed more materially and more material growth was the answer to pollution. That’s their line of reasoning. They say if you want to overcome the problems facing the earth today, the solution is not less consumption but more consumption.
Because today the Thames is quite clean. And Europe is quite green. And the air quality in Europe is just fine. And how did this come about? This came about by more growth. More consumption. So their logic is to let there be more technology. And that will lead to a solution to our problems. But what they forget is the difference between a local optimum and a global optimum. Europe is clean today, yes. But at what cost to the rest of the world? It’s almost like saying that a five-star hotel has a pretty pleasant ambiance. But at what cost to the overall environment? Quite clean, comfortable. What is it doing to the environment in general? Are you getting it?
So that kind of logic is misplaced. Further, let’s not forget that Europe in global terms is just around 30-35 crore people. Less than Up and Bihar combined. Europe can indulge in the material extravaganza. If the rest of the world starts following the standards of America or Canada, Europe or Japan, then we will have the unremitting scale of the disaster. The mind of the economist now has to stop thinking in the language of consumption. You are an aspiring economist. That’s my advice to you. Unfortunately, many economists are still very old school. All they talk of is demand and supply, production, and consumption. Consumption is not the way ahead. Economics and spirituality have to now converge. You cannot keep measuring human wellness by human consumption anymore. Not possible. You have to train yourself to think in different terms. Your internal model of human wellness must be different now. It has to be an internal model. What does an internal model mean? You will have to ask how peaceful the person really is. And now, remember, you cannot ask whether the fellow has basic means of survival. The developed world already has those means and in a few decades, almost all of the developing world will also have those means. So that question has become very irrelevant. Does the fellow have food to eat? Does the fellow have clothes to wear? Does the fellow have basic security, physical security? Those things will become irrelevant soon. Then you will have to train yourself as an economist to ask does the fellow really understands life? Does the fellow really know love? Does the fellow really have it in him to be stable in face of psychological turbulence? These are the things that will now define and determine your wellness. Are you getting it? So be ready for the new world of wellness.
