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Can Vedanta address the problem of economic recession? || Acharya Prashant, at DU (2023)
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2 years ago
Recession
Greed
Ignorance
Vedanta
Economic Bubbles
Spirituality
Investment
Inquiry
Description

Acharya Prashant addresses the question of whether Vedanta can solve the problem of economic recession by first examining the root causes of recessions. He uses the examples of the 2001 dot-com bubble and the 2008 housing crisis to illustrate his point. During the dot-com bubble, people invested heavily in technology companies without any real knowledge of the technology or the companies' fundamentals. Many of these companies had no product or profits, yet received sky-high valuations simply because everyone was investing in them, driven by a herd mentality. This behavior, he explains, is a reflection of how people live their daily lives—following others without inquiry, whether in career choices or life's purpose. This collective, uninformed investment inflates asset prices, creating a bubble. The rising prices are mistakenly taken as proof of the asset's value, leading to even more investment. However, since the valuation is not backed by fundamentals, the bubble is fragile. When someone eventually scrutinizes the fundamentals and finds no substance, a small dip in price can trigger a panic, causing a mass sell-off and a subsequent market crash. The speaker identifies the two core human fallibilities behind this phenomenon as ignorance, which is a lack of inquiry, and greed. He points out that the 2008 mortgage crisis followed a similar pattern. After the 2001 crash, funds moved from technology to the housing market. Banks, driven by greed, offered lenient loans, like adjustable-rate mortgages, to people who were not creditworthy, creating another bubble that eventually burst when interest rates rose and borrowers defaulted. Acharya Prashant concludes that recessions are not complex economic phenomena but are rooted in human fallibilities. He asserts that even highly intelligent people can fall prey to this because greed can obfuscate intelligence. The fundamental cause of all recessions is ignorance and greed. Since economics as a field does not address these core human issues, it cannot provide a lasting solution. He posits that Vedanta and the Upanishads, which teach one to deal with ignorance and greed, are the true solution. He states that good spirituality is good economics, and without understanding spirituality, one is bound to fail even in economics. By living a life of inquiry and investing one's time, energy, and resources only where there is real value, one can avoid creating personal and economic bubbles. Therefore, the solution to recession lies in addressing the spiritual ignorance and greed that fuel it.