Caught between the heavy hand of the state and the unpredictable nature of markets, MRV highlights the lack of recognition and understanding of the family as the missing middle.

Karl Popper, one of the most influential philosophers of science of the 20th century said, “Knowledge advances not by repeating known facts, but by refuting false dogmas”. In this engaging and rooted book, Retaining Balance: The Eternal Way, the author, M.R. Venkatesh (MRV) explores the history and influence of western dominance on thought, culture and the institutions that define the modern economy. Exposing the roots of alienation that have led to an era of excess and a disequilibrium between the four fundamentals of economic activity—production, consumption, savings and investment.
Despite runaway debt, bloating welfare interventions, relentless consumption and sharpening inequalities—we look upon the same state and markets that perpetuate them to somehow find a resolution. Amidst this quagmire between faltering growth, excess liquidity, falling interest rates and high inflation, we observe a growing distance between the world we inhabit and see around us and the flow of money that reshapes and alters it. Like two parallel realities—one where we eat, work and sleep upon the unstoppable treadmill of survival and another disconnected realm where capital multiplies itself exponentially.

During the colonial period from 1789 to the 1940s, it was understood that “the fabric of society had to be kept intact, even at the expense of individual liberties and rights.” However, since then, the western financial system has evolved through what MRV calls the atomisation of the individual and the ascendance of capital. Turning the former into a monochromatic consumer, an eyeball, a category—and the latter from an intermediary that lubricated economic activity to an exotic end in itself.
As American corporations looked for markets beyond their borders, their economic systems, political structures and cultural values globalised to pave the way for the world to transform into one homogenised market. These spawned opportunities for supply chains in distant lands that delivered to fulfil the insatiable American dream. As the dollar income received in these nations swelled their reserves, they parked it in the “safe haven” of US treasury bonds, thereby providing the capital that enabled America to continue this endless cycle of consumption despite their bloating debt.

A fallout of this globalisation was the gradual atrophying of the American middle class. This coupled with the rise of individual rights without emphasis on concurrent responsibilities, spawned the expansion of the welfare state. Where the diligent few are taxed to provide for the disempowered many.
The 2008 crisis was an intermediate stalling, arising from the overlap between the unsustainable goals of a welfare state and the unmoored aspirations of a financial sector gone rogue. The inevitable culmination of this crisis into a far reaching worldwide currency implosion is something that still lies ahead of us. The stop gap remedy of quantitative easing appears to be reaching its limits. The failure of markets has seen a partial retreat into more Keynesian interventions, a hybrid no man’s land where a Universal Basic Income is now being toyed with as a way in which this raging bull can be kept running. There is no discussion on how it can ever be calmed.

It is instructive to recall that the fall of Roman civilization was triggered by big infrastructure, a huge bureaucracy and a large, well-paid army—that led to massive government spending far outstripping revenue. It was what we call today a deficit problem. The Nobel laureate Paul Krugman asserts that we are living through the dark age of macro-economics in which the hard-won wisdom of the ancients has been lost.
In MRV’s assessment of what ails the system, he addresses a few key issues. The premise in economics of the individual as a rational actor that oversimplifies the complexities of human behaviour. The bloating of the state into an omnipresent force that distorts markets and reconditions human expectations in unsustainable ways. And the transformation of markets themselves from intimate and self-balancing systems, as recognized by Adam Smith, into an anonymous and uncontrolled playground that is epitomized by the actions that led to the 2008 collapse.

Caught between the heavy hand of the state and the unpredictable nature of markets, he highlights the lack of recognition and understanding of the family as the missing middle—the core economic unit of society that has served human needs over time but been gradually eroded, disempowered and ignored by both the state and markets. In recognising the family as a source that transmits culture, preserves the learnings and values gleaned through time and provides the restraints on the individual that ensure balance—he locates within the framework of the state and market—an antidote that anchors societies to act in ways that are responsible and sustainable.
In 1992, as we debated the most appropriate way to navigate a newly liberalized economy, the noted economist Dr Jagdish Bhagwati gave a 72-page report that argued for a reorientation. One significant shift advocated was to provide a consumerist thrust as there were excessive savings that were slowing growth. The savings-GDP ratio in India was 17% then. It is 31% now, alongside three decades of growth. It is these savings that virtually fund domestic investments that go into production of goods and services. That insulate India to some extent from exogenous shocks and global gyrations of both financial markets and economies.

India managed to grow while breaking free from some of the conventional wisdom on what drives growth. MRV says a factor that could have contributed to this is the symbiotic relationship between practical and spiritual life in India. Since this cannot be reduced to a mathematical equation, it is excluded from any economic analysis. The four aims of human life that dominate the Indian psyche are Dharma (an intuitive as opposed to dogmatic righteousness), Artha (to live with purpose and material well-being), Kama (the aesthetic enjoyment of life) and Moksha (liberation).
The noted economist Hyman Minsky argued that extended periods of prosperity lead to reckless borrowing and lending that moves the capitalist system from stability to instability. As the world economy ails, nations have begun looking inward towards civilisational values for succour. The Bhagavad Gita emphasises the dynamic balance between duties and rights. These are values intrinsic to how the traditional family unit functions. Borne out of love and trust—they raise children, look after the old, allocate capital, share risk and provide the psychological anchor of belonging that enables restraint and resilience.
Despite the promise of “minimum government, maximum governance”, most leaders have found it impossible to reverse the pull of populist measures that mobilise votes. The axiom of individual self-interest unknowingly serving the cause of markets and societies held sway in more simple times. But the scale of growth and the evolution of technology have resulted in oligopolistic and monopolistic markets with their consequent distortions. The fallout of which is an erosion in the footprint of small, decentralized businesses and a rise in the need for populist interventions. A classic Catch-22 situation, where the nature and unintended consequences of growth, make it unsustainable.
Families impose restraints on reckless individual spending and promote saving for future exigencies. The regular celebration of festivals in India serves the economic purpose of redistribution that compensates for the impact of frugality on growth. These are self-balancing mechanisms developed through the wisdom of inherited experiences. They operate in a natural way, outside the pale of government fiat or market incentives. Dealing with imbalances in a manner that entrenches the values that enable the survival and prosperity of the family and community. These are qualities that are hard for states or markets to replicate, but important for them to recognise and leverage.

In his book, The Selfish Gene, the evolutionary biologist Richard Dawkins argues that the natural selection process in the evolution of human beings is for securing the individual. In The Cooperative Gene, in contrast, Mark Ridley explained how complex life systems in fact required the cooperative gene to flourish. MRV posits a third overarching “Balancing Gene”, that determines when to make the selfish and cooperative genes functional.
In Indic traditions, we strive for a balance between the ascetic and hedonistic aspects of our lives. Either one in excess leads to a disequilibrium that is remedied either by internal volition or external force. How do we enable the micro-economics of a family unit, that operates with restraint and balance, to cumulate into the macro-economics of a nation?
Even as we navigate through the uncertainties of this era of excess, a shift towards recognising the overarching role of culture, embedded in the family unit, is what will help us reclaim the wisdom of the ancients to guide our way forward. Economics can never be understood in isolation. It is but one aspect of an integrated existence.
Anand R. Raghavan is the Managing Director of Vijay Tanks & Vessels (P) Ltd.