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TOWARDS AN ECONOMY OF COMPASSION
Dr. Stanislav Mensikov
Compassion is as a feeling for the suffering or difficulties of others, causing a wish to help. It is a psychological and religious concept that may be seen as relevant to the field of economics and other humanitarian sciences that study human behaviour and its effect on human welfare and relations between human beings.
Compassion is, of course, very different from egotism and mutual rivalry that also seem to be inherent in human beings. Though elements of compassion can be found in practically everybody's behaviour though out the history of civilization, it has been largely claimed by the eaconomics profession that in the area of obtaining access to material and even spiritual goods (which is what economics is about), the prevailing human bahaviour is determined by what are called "rational" motives, and these, in the final resort are selfishness, greed, to beat one's rivals and if possible, dominate. Compassion was largely thought to be a concept totally or largely foreign to economics.
Recently some prominent economics have given thought to exploring altruism in human behaviour Much of this interest is centred on the relation between biology and economics and looks the laws of natural selection and inheritance as they may relate to the economy (2).
My own interest in the economics of compassion was inspired by religion rather that biology and emerged as I listened to The Dalai Lama speaking in a panel discussion in which we both participated among others, in September 1990 in Amsterdam. The choice of the Word "compassion" rather than " altruism" was also inspired by His Holiness. Since then I have been working on a book called The Economy of Compassion. Tonight I would like to share with you some thoughts on this subject.
My purpose is to demonstrate that "rational" and selfish approach is too slanted and one-sided. I wish to show that elements of compassion have been on the rise in the economic and philosophical ideas and practices. Particularly in recent decades. In the future compassion (and altruism) as determinants of human behaviour will have to increase even more if civilization wants to preserve its right to existence.
Compassion can be promoted in different ways. Being ways. Beings an economist, I am naturally looking into such possible ways of changing the prevailing economic mechanisms in society as to make the compassionate approach part of the "rational" behaviour and to bring it as close as possible to the self-interest of individuals and their institutions. Scholars in other fields may be interested in tracing other non-economic mechanisms that could be practical in bringing about this change in human behaviour It would be a major contribution to out knowledge about the laws of societal transformation and how they may affect the fate of out civilization in the next century.
Throughout most of the current century the debate around economic transformation and development has been centered around the dichotomy of Capitalism versus Communism, the Market versus Central planing. With the demise of the particular type of communism that prevailed in the former Soviet Union and Eastern Europe this controversy has seemingly been resolved. Claims of a total and unconditional victory by proponents of capitalism and the market are loud, omnipresent and seemingly prevailing. but listening to these claims one has second thoughts. Did it happen because the capitalism was better? Is capitalism the best system possible?
The answer depends on the criterion used. How does one measure "the best system"? Two main criteria have been traditionally used:
-the most efficient, i.e producing more goods and services per capita or per unit of total input of capital and labour;
-the most fair and just, i.e one in which income and wealth are distributed in such a way as to minimize poverty and assure all members of the society to at least a minimal standard of living accepted by society.
Long historical experience has shown that these two criteria are not necessarily mutually compatible. The most efficient system may not be very fair or just. The most fair and just may not be very efficient.
Noe, it is important to remember that communism and socialism first emerged as an idea (some call it a utopia) based on the second criterion, The traditional capitalist system as it developed in 18th and 19th centuries was anything but just and fair. In spite of the unprecedented rise in productivity, poverty was widespread, economic instability and 'mass unemployment increasing scope. So socialism and communism could be rightly seen as a system that emerged as the negation of traditional capitalism. It was thought that the elimination of private ownership of means of production would put an end to the unfair distribution of income and wealth, and that the substitution of central planing for the market would discontinue economic instability and guarantee growth and superior efficiency.
AS it turned to, this was nto so, The initial successes of communism in industrialization and fast economic growth eventually gave way to stagnation and decay. The reasons are numerous, and we needn't go into them at this point (3). I, for one, believe that wrong model of socialism was chosen which led to the perversion of society and to the discrediting of the socialist ides. But history unlike grammar, has no place for the subjunctive mood, "If everything just happened to go the right way and not wrong, then everything would have been wonderful". Statements like this are proper for fairy tales with happy endings, not for pitiless history.
For the moment communism may look dead. But in the course of this course of this century it has deeply and irreversibly affected out whole civilization. Its influence has transcended far beyond its immediate formal borders. Capitalism has been forced to accept and incorporate certain forms of human organization and behaviour that had little or nothing to do with its past performance but are rather typical of socialism. Government intervention into the economy, the welfare state, fiscal redistribution of wealth and income in favour of the least fortunate layers of society, and some other aspects of the modern capitalistic society have been in fact borrowed from the arsenal of collectivism.
It is now generally accepted even by the extreme proponents of free market capitalism that there are basic human needs that he market is not able to satisfy at all or in the best way But while conceding this important point, they also claim that elements of collectivism should be kept to a bare minimum,. One of their "general truths" which aspires to eliminate the need for collectivism, seems to be that "everybody gets richer as the rich do". However, this "truth" has not been born out by the statistical records of any country, whether rich or poor, developed or developing. These records prove that in capitalistic lands the rich get richer in both cases: if everybody else gets richer or if they get poorer there is no proven correlation just for on of these two cases. It is true that in periods when everybody gets richer the case for remains because the cyclical nature of the economy dictates the inevitable interchange of good times and bad. There are serious thinkers in the West who, for from being socialist minded, are concerned that the absence of the communistic pressure in the future may induce capitalims to revert to its more traditional less humane form.
So, in the course of the current century history has, in fact, rejected "free market capitalism" as well as it has turned its back on "communistic socialism" All modern societies that call themselves capitalistic, have become, infact, mixed economies where private ownership co-exists with the collective and state forms, while the market lives side by side with non-market forms and mechanisms. The "mix" differs from country to country, but it is still there. There is no way of avoiding some kind of mix. A certain merger of capitalism and socialism has occurred practically everywhere in the "Capitalist world" And whatever is claimed about the former socialist and now post-communist societies, they too are developing along mixed economy lines.
But5 is it an adequate mix that we are now observing? And is there such a thing as an adequate mix? Obviously, different countries have their own preferences. But on the whole, it is true that the "efficiency criterion" working private initiative, the profit motive and market competition largely takes precedence over the "fairness" or "justice" criterion.
In addition, modern capitalistic markets are not necessarily or predominantly free and fully competitive. Too many industries and markets are dominated by oligopolistic firms that prevent free entry reduce competition, set higher prices than a freely competitive market would, ad lead to less equitable distribution. Pockets of poverty still exist in the richest countries, and living standards of the majority in most developing countries are way below any reasonable minimum that is acceptable in the industrially developed nations. It is therefore clear that modern "free market capitalism", or rather mixed economies with a definite slant towards capitalism, have a long way to go before they can hope to qualify as societies that satisfy both criteria described above. They will have to develop and transform in a direction that puts more accent on fairness and justice is in better balance with economic efficiency. In the course of such transformation their mix of private and collective, market and non-market may have to undergo some change which in some cases may not be insignificant. It is sure to become a hot political issue subject to a lot of controversy.
It could sem strange to some that such an issue is so controversial. After all, is it not compassion for the less fortunate and poorer strata of society that is the moving force behind the changes indicated above? Is it not an economy of compassion that is being suggested as a principal goal for transformation from the mixed economies of today? What can be wrong in the very nature of compassion? Isn't compassion in the very nature of humankind?
There are those who argue that competition and rivalry are as essential, as compassion, if not more so, to the human nature and that society becomes stronger by "weeding out" the weak and unfortunate. I do not agree with that approach. One doesn't necessarily have to eliminate the weak by some iron ride to general behavioiur. The weak are to be helped in any way possible to become as strong as those who claim strength by birth and inheritance. If the principle of compassion, as a rule, dominates and is recognized as normal within a family, why not apply it to society and the economy? Because, some say wealth and income are divided and distributed according to very different rules. And those who suggest that it be done otherwise are breaking these rules and taking away part of the income and wealth that people consider to rightly be their own. At this point the issue of compassion becomes the source of controversy, sometimes too hot to be resolved in a peaceful and civilized way.
One would think that improving wealth and income distribution the industrially developed nations should be relatively easy. After all, Equitable distribution at low levels of economic efficiency will formally satisfy the "fairness" criterion but it will leave most members of society extremely poor One finds that even in the industrially developed world the aversion towards fairness is quite strong but in many cases it had been at least partly overcome by the practices of the modern welfare state.
The most difficult task is to implement the fairness, or compassion criteria, duly balanced with economic efficiency, on a global basis. This means redistributing wealth and income from the richer to the poorer nations and also helping the latter to become more economically efficient in their own right. IT is easier for a citizen in a rich country to agree with helping his less fortunate compatriot, that to do so in favour of people living abroad. The very fact that many compatriots are still in need of urgent help is used as a valid argument against providing more help to other countries. Consider, for instance, the effect of the "inner cities" crisis in the US on the discussion about foreign aid in the US Congress.
Two years ago, in September 1990, when I first publicly mentioned the term "economy compassion" at the Amsterdam conference of Art Meets Science and Spirituality in a Changing Economy little did I Realize that global redistribution would very soon become a major issue related to my own country the former Soviet Union, and other nations of Eastern Europe. Transformation in the post-communist societies has not proceeded smoothly. For reasons that I will not go into, all of these countries are experiencing major economic crises, high inflation, unemployment, impoverishment of a large part of the population, In some post-communist countries ethnic controversies have flared up into shooting wars with people being killed daily by the hundreds, if not more, Obviously, compassion has given way to mutual rivalry, hatred and the inhuman urge to kill for no rational reason. The people of these countries are in dire need of stability, security, economic recovery, resumption of economic and social progress.
Some of their problems will have to be solved by political means. We have to admit that th4ere is still very scare hard knowledge about the nature of human conflicts. It would by a major oversimplification to reduce their causes to economic factors. The issue should be seen as a complex interaction of material and non-material (psychological, educational, religious and other factors). But a large part of these conflicts are caused by human dissatisfaction with the economic and social environment in which people have to lead their daily lives. Therefore part of the cost of the painful post-communist transformation will also have to be provided by global redistribution of income and wealth. We are again confronted here by issues directly related to introducing compassion into the set of determinants guiding human behaviour.
Global redistribution can only be achieved by effectively changing the prevailing mood of the majority in the richer lands. The mood has to change from on eof seeking self-interest to that of human compassion. Art, science, spirituality will have a major role to play in effecting this dramatic and revolutionary change, Human minds and practices would change under the benevolent influence of artistic, spiritual and scientific education. But the sphere of material existence, particularly the economy will also have to contribute. The bebnabioral pattern of human beings will change to compassionate only if the economic they face will induce them to exercise compassion The crucial question is: can the prevailing mechanisms in the modern mixed economies in such a way as to put a premium on compassion at the expense of self-interest? And if this is possible, how should it be done?
Jan Tinbergen has suggested that people in the richer countries should be made to clearly understand the dangers to their living standards and security arising from mass immigration from poorer lands(4). Once this danger is understood, they will be prepared to agree to a larger share of their incomes being taxed away in favour of more external aid. This approach may be contested on various grounds. Peoples may say: "We are already paying taxes that are much too high" or: "Immigrant about is necessary to do the jobs that are the least paid and most unpleasant". Others may also reason in the following way "We are willing to pay a higher price to keep most immigrants out of out country. But we are afraid that effect of out additional payments will be too small and too uncertain".
Some of these points need serious research in other to see what can be done about them. And there are; many other aspects that have to be taken into account apart from the attitude towards aid to foreign countries. This discussion shows how far modern mixed economics still are from satisfactorily approaching the global redistribution problem, let alone solving it. And this is just one set of issue related to the economy of compassion.
Another important aspect is how different countries view the issue of preserving the natural environment, nature. Humankind is part of nature, but has, guided by selfishness, acted as if it was above nature, as if modern world seems to be changing, but ever too slowly. Though the International Green Cross has been created to promote global effort to save the environment, some of the richer countries are reluctant to spend more of their resources for environmental protection while the poorer countries see the issue as another basis for demanding more aid from the industrially developed nations. Both approaches show that there is, as yet very little awareness in the minds of decision-makers, and probably the population at large, of the environmental danger to civilisation, People do not relatively low compared with what it could become in a decade or two. And it is still possible to pay it. But soon, if nothing much is done, the price may become too high and then infinite which means that it may simply be too late.
I am afraid that the present "mix" in modern societies is not of the kind to permit the solution of these issues, a fast enough change in the prevailing public moods and a definite choice to follow the road of compassion I suspect that in other to achieve that result the "mix" will have to change more in favour of collective and centralized decisions and actions without detriment to democracy while private initiative and the market will have to adjust to the needs of social justice on a global scale and the need to preserve and save civilization.
It is not easy to prepare the blueprint of a society in which compassion and justice coexist with economic efficiency. Apart from the problems cited above, there is also the following contradiction. The goal of producing more and more per capita is one of the mainstays of the modern mixed economies whether they are capitalistic-slanted or socialistic-slanted. Both production for profit and according to plan are invariably oriented towards producing more every year This goal is incompatible with the limited natural resources of the planet particularly if accompanied by the continued growth in population. At some point further expansion of out put and population will become impossible without a reduction in overall living standards. It is the well-known problem of "limit to growth" (5).There fore, on of the principal tasks of the compassionate economy to resolve this contradiction.
The problem could be solved or, at least, the usable natural resources of this planet could be spread out for a sufficiently long time, if the economies became those of stable, of steady state" i.e. ones where there is growth in neither output per capita or population (6). This could done immediately in the industrially developed part of the world. There is no physical, non-pecuniary need to produce more in these countries that is produced for the time beings. Population growth there is already close to zero. These countries are there fore physically prepared for the "stable state" existence though they may actually not be willing to go that way due to other reasons (growth is considered "normal", no-growth is bad for business, employment, stock exchange values, etc.)
But in most of the developing and post-communist countries per capita growth remains a physical necessity if they want to wee their living standards rising to levels which would be considered adequate and approaching those in the richer lands. Unless this happens population will be also growing. The global goal of reaching the "stable state" will be reached only if and when the poorer lands "catch up" suficiently in incomes. This is a goal for all countries. The rich countries are, in principle, materially interested in helping the poorer ones reach the "stable state" as soon as possible, It may take a few decades if it is tackled jointly. If not, it will spread for centuries and will hit the overall resource limits faster than is really necessary.
The limited natural resources also need common control and management which is now available at the most on the national level. But natural resources are unequally distributed around the globe and the access to them is now controlled exclusively by governments and markets that are mostly oligopolistically controlled by transnational corporations. This creates addi5tional inequities in the world and it is doubtful that such a system passes the test of the efficiency criterion. Quite a few authors have suggested substituting international government control for the currently exis6ting system. This is another issue that deserves discussion in the context of the compassionate economy. I am sure that it is impossible to imagine any modern economy, market or non-market, to be prepared for the "stable state" or striving to eventually achieve it or willing to cede its rights of control of the natural resources to supra-national bodies. That means that the future economy of compassion will have to be substantially not simply marginally, different from the economies of today.
There are those who consider such views "radical" "leftist" or "utopian". I would not agree. I the coming decades civilization will need more security in the very wide sense of the world. Security from war, from violence, from poverty, from want, from environmental disaster, from resource exhaustion, from collapse of civilisaion. Asking for more security is neither radical, leftist or utopian. It is very conservative in the good meaning of the word, realistic (in fact, it is the only non disaster realism possible), and very main stream (neither leftist, nor right). It has therefore a good chance of becoming the choice of an overwhelming majority.
As I address tonight this audience of holy people, I realize that there is little need of convincing them in what already believe in, i.e. in the primary importance of compassion as the determinant of human behaviour. My humble purpose was to show that the very mundane, down to earth and seemingly selfish-dominated science of economics is, at least, starting to catch up with the common concern for4 the future of humnakind. Out thinking is not yet perfect, and will probably never be perfect. But let us all work together for a closer alliance of science of science and economics, and spirituality for a better humankind.
Notes and References
1. Currently Visiting Professor at the Tinbergen Institute, Erasmus University Rotterdam. He is writing a book on the Economy of Compassion. This paper was delivered art the Conference: Ecological Responsibility: A Dialogue with Buddhism, sp0-onsored by Tibet House, New Delhi. 2-4, October, 1993.
2. See, for instance, two recent papers by Nobel prize winners in economics: Paul Samuelson, Altruism as a problem Involving Group versus Individual Selection in Economics and Biology; Herbert Simon, altruism in Economics, both in American Economic Review vols. 88no. 2,May 1993
3. Readers wishing to know more on this matter are refered to my recent book: Menshikov S, (1991), Catastrophe or Catharsis, The Soviet Economy Today, Inter-verso, Moscow & London. For another view see Ellman, M & Kontorovitch V. (eds) (1991) The Disintegration of the Soviet Economic system, Routledge, London & New York.
4. For a discussion of this and other approaches to global re-distribution see Tinbergen, J & Fisher D.,(1987), Warfare and welfare, Integrating Security Policy into Socio-Economy policy Wheatsheaf Books, Sussex and St. Martin's press, New York.
5. For recent views on this issue see: Scanning the future (1992), a report of Central Planing Bureau, The Hague; and Meadows, D.,Meadows, D.Randers, J (1991), Beyond the Limits, Earthscan Publications, Chelsea Green, London.
6. P. Samuelson (1993) has recently show, in mathematical terms, the existence of a law according to which, given the environmental constraint, ultimate population growth rates tend to converge to zero (for source see note no. 2).