1. Onesizefitsallover199520051MF/WBFrenchReferendum20052008G20Meet2010April

2. Yugoexampleof19923. RecallingignoringEruleDurkheim

Marx(Labour1887) AdamSmith(Capital1776)

Darkheim(SocialCapital18931933)4. Relationvscontract(basedsocieties)

Relation Contract

Space Military IndustrialMaine Statues ConstructTonnies GamienSchaft GesellesSchaftDurkhein Mechanical OrganicGuru NaturallyEvolved ArtificiallyEvolved

5. AngloSaxon Asian

Individualistic IntegralAtomicIndividuals IntegrateindividualsfamilyinvolvementsDismemberfamilies StrengthenfamiliesConsummatesociety ValuesocietyNationalizefamilies Functionalizefamilies(199023%)PrivatizeState PartnertheState(201135%)

6. EffectsofV

Microeconomicbehavior

Asian AngloSaxon

Savings high lowDebts low highNatureofsavings Dynastic PersonalRisksavings low highConsumption moderate highConsumptiondrive Buyingpower Confluence

Macroeconomicresult

Asian AngloSaxon

Householdsavings high lowCorporatesavings low highRiskcapital low highBankdriven high low

Marketdriven low highInterestrates moderate/high lowEconomicdrive Balancedlifestyle consuptionSocialsecurity familymanaged statemanagedGovernmentdebts Domesticallyfinanced ExternallyfinancedNationaldebt low high

TheSpeechStarts:

I amactuallyentering themostdifficultpartofmypresentation.Youknow, so farwewere told thatthereisonly1modelintheworldandthatiseitherthesocialistmodelthatwefollowedforthe50yearsandthentheAngloSaxoncapitalistmodel,whichwasbroadlydefinedbywhattheexpertsusedtosayas theWashingtonConsensus,whichmeans freemovementof goods, capital. Everything freeexcepthumanbeings.

The rethinking started in the year 1997 in the Asian crisis. The date, which is very important is 16thOctober,2005whenatthemeetingofthefinanceministersandCentralBankgovernors,thewesternworldfinallydeclared,Werecognizethereisnouniformdevelopmentapproachthatfitsallcountries.Tillthen,theyweredrivingeverycountryintheworldonlyin1direction.Onemodel,onetunnel.

They first admitted nothing like that. Second they said, Each country should be able to choose thedevelopmentapproachesandpolicies thatbest suits its specific characteristicswhilebenefitting fromtheaccumulatedexperience inpolicymakingover the lastdecades including the*(17:29)*economicpolicies for sustained growth. Then, theWorld Bank, after the crisis in 2008 admitted, In ourworkacross the world, the World Bank has learnt the hard way that there is no one model that fits all.Developmentisallabouttransformation.Itmeantakingthebestideas,testingtheminnewsituationsand throwingaway that,whichdoesnotwork.Youmustunderstand, this isagreat realization from199293when,FrancisFukuyamasaidthatthewesthasfinallywon,thelifestyle,philosophy,economicandsocialmodelsofthewesthavefinallywonagainsttherest.Itisfortheresttofollowthewestasthebest.Itisasimple,Biblehegaveforglobalization,whichtheentireworldadopted.Itjustcollapsedin15years.ItisyettobedebatedinIndia.YoumustunderstandallIamsayingisnotadebateinthiscountry.Theintellectuals,economists,policymakers,mediaandhighereducationalinstitutionshavenotdaredtodebatethis.

Then,inG20meetingin2010,FranceandGermanythreatenedtowalkoutofthemeeting,iftheAngloSaxonfinancialcapitalism,whichtheycalledCasinocapitalismisnottobefoughtagainst.Ofcourse,thedetailsaredifferent,butthefactisevenin2005,intheFrenchReferendum,theissuewaswhethertojoinasa fullfledgedmemberof theEuropeanUnion.The important issue inFrancewaswhether theexpansionoftheEUwouldleadtoathreatfromtheAngloSaxoneconomicmodelandwhethertheFrenchwouldbeabletocontinuewiththeirsocietaleconomicmodel.ThecensussocietyiscompletelyabsentinAngloSaxonism.Infact,inmycompilation,IhavementionedthemotherandtheparentofAngloSaxonfinancialcapitalism,whichdominatedtheworldfrom1990wasMargaretThatcher.ItwasnotevenAmerica. It isnotAmericaneconomicthinkers. It isThatcherismthatsetthefoundationsfortheAngloSaxoncapitalismandshesaidthatthereisnothinglikesociety.Disregardthesociety.Theindividualsonlymatter.Thesocietydoesntmatter.But,whataretheconsequencesofit?Whatisthedebateintheworld,wewillgointoita little later.But,thefactremainstheonesidefitsalltheory isover. Every countryhas to find itswayand thatdebate is lacking in this country and it hasnoteven

started. It isbeingdonemyverymarginalplayersandthemainlandthinkers, intellectuals,economist,policymakershavenotdirectedtotreadthatfieldandthatisthemostimportantthing.

Evenearlier, I toldyou, in the1st or the2nd session thatYugoslavia showed theway in theyear1993whentherewasahugefinancialcrisisandYugoslavianpeoplewerentacceptingtheirowncurrency,theDinarandtheydemandedthedollarliketheRussiansdidimmediatelyafterthecollapseoftheRussianorder.TheyallwanteddollarandtheydidntwantRuble.

Running inflationratewas3millionpercentagepoints.Higher thanthe inflationrate,whichGermanyunderwentafterthe2ndWorldWar.TheIMFandtheWorldBanksuggestedabailoutformulaliketheydidforRussia.But,Milosovic,whowasbeingderided,buthewasagreatnationalist.HewastryingtosaveYugoslaviafromsplittingandhecalledhisfriendDraguslovAvrovamic,hewasperhaps90atthattime.So,Avrovamictold,Iamgoingtosuggestnothingnewtoyou.Intheyear1920Russiafellintothesamecrisis.RussiahadthesameproblemwithRuble.But,oneRussianeconomistsuggestedthatyouissueanotherRublebackedby your ForeignExchangeReservesandat ahigher rateof interest. Thatsucceeded inRussia. I am suggesting the same thing to you. So, anewcurrencywas issuedwithaninterestrateof6percentknownasSuperDinarbackedbytheForeignExchangeReservesofabout4or5billiondollarsofDeichmann,whichYugoslaviahad.Everybody thought thiswasgoing tobeadrainthroughwhichall theForeignExchangeReserveswillbeexhausted.But,whatactuallyhappenedwasstunning.

Theinflationcamedowntosingledigitinjust2weeks.Forestreservesroseby60percentwithinflowoffunds in 3 months. Within 5 months, the production rose by 100 percent. Employment began toincreaseslowerthanrealincreaseintaxes.YounotethisInternationalCommissiononpeaceandfood.Thewebsitehasall thedetails. InternationalCommissiononPeaceandFood,whichmadeadetailedstudy and report on the Yugoslavian program. It concluded, Possibly, the greatest strength of theYugoslav program is that it was of necessity conceived by people within the country rather than byforeignexpertsanddependedentirelyondomesticresourcesandcapabilitiesfor itsaccomplishmentsrather than plead for foreign assistance. Selfreliance released the creativity and generated thedeterminationandmobilizedallavailableresourcestomakethetransitionsuccessful.Draguslovdiedin2yearsandtheSuperDinarwasrenamedastheDragDinarasatributetohim.HesavedYugoslavia.Thisexamplewas completely suppressedandafter1 year, TheEconomistMagazine cameoutwithacoverpage story, TheMiracle inYugoslavia,because theyexpected it to failwithinoneyearand itdidnt.So,theypaidatributebyacoverpagestory.

Youknow,thisentirewesterndiscoursemissedoutaveryimportantthinkerbynameEmileDurkheim.KarlMarx,AdamSmithandEmileDurkheim,theypresented3differentperspectivestodevelopment.KarlMarxwaslaborcentric,AdamSmithwascapitalcentricandDurkheimwassocialcapitalcentric.Hegave a totally different orientation to development.Wemust understand these 3 people. This is thebook,TheDivisionofLaborandSociety,writtenbyEmilyDurkheim,heisaFrenchsociologist.

Now,Iwill justgiveyoubrieflybecausethissubjectdoesntadmitofahugediscourseonthis.Simply,whattheysaid.Iwillalsogiveyouthedates.Thedatesareverynewr.AdamSmithwas18231890,KarlMarx 18181883 andDurkheim18581917.Durkhiemwrote his theory on social capital in 1893. KarlMarx in 1867 and Adam Smith wrote in 1776. This was in French. This was translated in 1933 intoEnglish.ThatprobablywasoneofthereasonswhyDurkheimsideasdidnotpermeatetheworld.Iwillgiveyouthebackgroundtothisthinking.

WhenIndustrialRevolutionstrucktheworld,allthelocalsocietiesweredisturbed.YoumusthavereadthepoemofWordsworthAsToWhereIsMyShopkeeper,WhereIsMyVegetableVendor.Theyareallgone.Nowwearealienatedandwedonthaverelations.Inthat,theorieswerebeingdeveloped.ArelationbasedsocietyisbeingtransformedintoacontractbasedsocietybyIndustrialRevolution.Thereweremain thinkers. Spencer said, The relationbased society is amilitant society. Obeying parents,obeying elders, obeying religious people. It is a military society. That is now becoming an industrialsociety.Mainesaid,No,previouslyitwasbasedonstatus,nowitisgoingtobebasedonagreement.

Tonnies,whowastheGermanphilosopherandsociologist.GermanyGamienShaftandGeselleShaftaretwodifferentthoughtsalmostbasedStatusandContractsrespectively.So,thefirstoneisstatusbasedandthesecondoneiscontractbased.Durkhiemsaid,Theexistingsocietyismechanical.Itwillhavetobetransformedintoanorganicallybasedsociety.Hisconclusionswererightbuthissuggestionswerewrong. Even for European countries, his findings are correct that even for the new contractbasedsociety to flourish, there is a need for relationbased societal atmosphere. You know, this man wasburiedcompletely.Nobodytooknoticeofhim.

FrancisFukuyama,whowrotetheBibleofGlobalization,TheEndofHistoryandTheLastMan,in1992,he cameoutwithabook called Trust. Thisbook is very important. I have suggested toat least150businessmen to read thisbook.Thisbook is important for3 reasons:One,herehegoesbackonhistheory that thewesthaswonagainst therestor thatmarketcapitalism is finalor thateconomic lossdetermines everything. He goes back on all this and he tells in this book, In our understanding ofeconomics, there is amissing20percent and that is culture. That is 20percent in thewest and thatcouldbe80percentsomewhere.So,thefactremainsthatthemissingelementinculture,hedealswithit here. He divides societies into two categories familybased societies and individualistic societies.That iswhatwewill go into later.But, in thathe recallsEmileDurkheim.HequotesEmileDurkheim,becausethis issubstanceofwhatIamgoingtosaywithreferencetooneortwoparagraphstoEmileDurkheim.WhyFrancisFukuyamaisdrawinginspirationfromEmileDurkheim?

Asocietycomposedofaninfinitenumberofunorganizedindividualsthatahypertropicstateisforcedtosuppressandcontainconstitutesaveritableandsociologicalmonstrosity.Ahierarchy inwhich theindividualsatthebottomandstateatthetopisamonstrosity.Moreover,thestateistooremotefromindividuals. Its relationship with them is too external and intermittent to penetrate deeply into theindividualconsciousness,consensusandsocializewiththem.So,itcannotinfluenceanindividual.Itcanterrorizeandcontainanindividual.Thestatecanengageanindividual,itcannotrelatetoanindividual.That is the basis of Emile Durkheims understanding statesociety relationship. A nation can bemaintained,thisisveryimportant,onlyif,betweenthestateandtheindividualthereisinterpost.Thewholeseriesofsecondarygroupsnearenoughtotheindividualstoattractthemstronglytotheirspearofactionanddrag them inaway into thegeneral torrentof social life.Occupationalgroupsarebestsuitedtofillthisroleandthatistheirdestiny.

ThisisEmileDurkheimsviewandhefeelsthatifpeoplegetdisturbedfromvillagesandgototowns,allthe automobilemechanicswill get together and theywill relate to each other, all the clerkswill gettogether and theywill related to each other. So like that he said, a new kind of relationshipwill beformed.Itisnotthatitwillbebasedoncontract.Itwillbebasedonanotherkindofnewandsocialkindof relationship thatwasorganicallydeveloped. In fact, Ihave theobjectionofusing thewordorganicbecause,organicrelationshipsarenotformedartificially.Theyevolveandtheyevolveonvariousthings.

Itdoesnotevolveonlyonthefactthatbothofusaredoingthesameprofession.Theyevolveonvariouscounts like religion, socialnorms, family customs, cultureandmanyother things. So,EmileDurkheimmoreorless,limitedhimselftotheoccupationaldriveastheonlythingthatwillbuildanewsociety.AndIamsayingGURUand Iamnotequatingmyself to them. Iamdiffering fromthemto say, Relationbased societies naturally evolve. Contractbased societies are artificially contrived. This iswhat I amgoing to say in the future, What kind of impact it has on the economic model of India and whatdifferenceitmakestotheworldalso?

Now,IwilljustquotetwoparagraphsfromEmileDurkheim.Asocietymadeupofanextremelylargemass of unorganized individuals, which an over grown state limits to sustain constitutes a veritablemonstrosity.However,(ItisaverypithyparagraphthatIwanttoreadouttoyou)thecontractisnotbyitself sufficient but is possible only becauseof the regulationof contracts,which is a social origin. Inotherwords, contracts presupposes social order. They cannot service the foundation of the society.Therehas tobeasocialorderonwhichcontractswork.Thesocialorderhasprivacyover individuallymotivatedactions, the individualistic italiative solution to theproblemof socialordermodern societyleadstoanimpasse.So,heinsistsonasocialorder.

Andyouknow,intheentirewesterndiscourse,whichstartedsomewherewiththeriseofAmericaandintensificationofcolonialism.ThesuccessofthewestwithindividualismandtheircapacitytodominatetheworldmadethemcompletelyforgetEmileDurkheim.ItisonlyFrancisFukuyamawhofoundthatin1995, there isaneedtorecallEmileDurkheimbecausethesocietyhasbecometoodilapidated.Theyhave destroyed the society and they thought families can survivewithout society. 99 percent of thefamilies survive because of the society. They feel shy, my name will be spoilt in the family and myfamilys namewill be spoilt in the society. This is what disciplines a family. That is why in countrieswhere the societal norms are strong, the families remain integrated. So, you cannot divide and youcannotdrawalinebetweenthesocietyandthefamilyandwhereMargaretThatcherattemptedtodrawa line actually. She said, Society doesntmatter. If you keep the family together, it is alright. But,ultimatelyinEngland,Englandfamiliesarevirtuallycollapsedandyoucangetintothestatistics.

So,basicallythetransitionfromrelationbasedtocontractbasedwayof life isthefoundationofbothKarlMarxandAdams.Bothacceptedthis formulation. In fact,KarlMarxhatedrelationship.Hehatedneighborhoodrelationships,communityrelationshipandrelationshipthroughtheChurch.Hesaidthatitisonlytheindividualsandthestate.

Smith Marx

DurkheimState____________Market____________

Individual

State_____________(Individua)

State(contract)Market(contract)______________State(relation)Family_____________Individual

Contract Relation

When we say contract, it is dominant contract and when we say relationship, we mean dominantrelationship.

EmileDurkheimsaid,Youhavetokeepthisfoundationonwhichacontractbasedpolityandeconomycanfunction.Hewasright.But,asIsaidpossibly,histhoughtsgottranslatedin1933bywhichtimethewestmindhadsettledinthedirectioninwhichitspolitywasmoving,itseconomywasmoving,itsworldviewwassettledandsoitwasimpossiblefortheworldtopullback.

So, the above three elements, in India, there are more elements, this society, family and individualcombination,marketandstateplayingtheirowndesignatedrules,itisverydifficulttosayinwhicharea,which will dominate. But, the fact is an amalgam of all these factors is governed by a dominantlyrelationbasedsociety.Thisaspecthasbeencompletelymissinginthewesterndiscourse,whichFrancisFukuyamaagainbroughtinandinthisbook,hedealtwitheverycountryotherthanIndia.Because,Indiadidntmatter in1995. If ithadbeen in2005, itwouldhave foundaverydominantplace.HedidnothandleIndiaatallandsotherelationbasedsocietyinthemostquintessentialsenseofthetermwithouttherebeingadominantandenforcingphilosophy.Forexample,hehasdealtwithChina.Thereisasuperwinningconfusionphilosophythere.AndhedealtwithJapan.Itisasamuraimilitanttradition.Theywillall fit into this category. But, our relationship was not governed by any superwinning enforcingphilosophy. It differs from place to places. In fact, even in marriage, the prohibited marriagerelationshipsinNorthIndiadonotapplyinSouthIndia.Youknow,thatalsodiffersfromplacetoplace.Therewasnosuperwinningrule.Thisishowyouhavetolive.Theonlyrulewasyouliveaccordinglytowhatiscomfortabletothepeoplenearoraroundyou.Dontcreateadisturbanceinthesociety.ThisisthebroadunderstandingoftheIndianwayoflookingatthings.

Now, applying this, what is the social effect of this theory? The AngloSaxon individualistic model,IndianAsian Integral model. I will call it Integral model. There may be subsections in it. But, this isbroadlycorrect. Italsoautomizesthe individuals.Marxcalls italienation.Hedealswiththealienationmore as an economic issue because, for him society or community or religion do not matter. Andalienation,hetalksaboutistheautomizingoftheindividuals.Dismembershipofthefamily,ifyoulookatit,heretheintegralsocietyintegratestheindividualwiththefamilyandcommunity.Itisnotpossibleforustoignorethefamilyandthecommunity.Infact,99percentoftheeducationinIndia,particularlyhighereducationissupportedbyfamilies.IntheWest,itisbysomefundortheotherorbanks.Thereisnothing called family support in higher education. So, automize the individuals. There is no familybacking,nofamilysupport.

Integral society integrates the individual with the family and community. It has huge economicconsequences,whichwewillcometolater.Secondis,itdismembersfamilies.AsItold,divorces,singleparent families, unwed couples living together, this dismembers the family. In Integral society, theintegrationprocessstrengthensthefamilies.Individualisticunderminesthesocietybutweattachvaluetothesociety.Wecannever ignoresociety.That iswhatMahateMohammad,whenhetalkedof theAsianvalues,hetalkedofthis.Wearenotindividualsinthesensethatwehaveautomizationandwe

could do whatever we want. We have to be a part of the larger organic affair. That is where myobjection to theuseofword organicbyEmileDurkheimthat there isnothingorganic inwhatEmileDurkheimsaysintheorganicsociety,whichhedefines.Actually,theorganicsocietyiswhatisnaturallyevolved.Artificiallycontrivedsocietiescannotbe,isnotasocietyatall,inthatsense.Then,asaresultofallthis,theyhavetonationalizethefamilies.Inintegral,theeffortistofunctionalizethefamiliesandallyourlaws,youreconomicmodellingwillhavetokeepthefunctionofthefamilieson.

Inoneof thesessions, I referredtotheNationalEconomicBureauResearchofAmerica, I readouttoyouhow in1980, theNationEconomicBureau lamented inAmerica thatwearemaking the familiesdysfunctional.Whensomethingisbereftof itsfunctions, itwilldie.Theysaid,Corporateshavetakenovercertainfunctionsofthefamilies.Cookingisoneofthemostimportantfunctionsofafamily.Inthewest,onlyfewfamiliescook.Infact,Iwastravellinginaprivatejetalongwithmyfriend,hiswifeandmywife.Wedonttalkandthewomenalwaystalkalotandtheygathermoreinformationthatwedo.So,mywifewastalkingtotheairhostess.Shewassayingaboutthecookingmodels,howandwecook,howyoucookandallthat.Shesaid,Maam,wehardlycook.Because,cookingathomeiscostlierthanbuyingfoodfromoutside.Infact,theaveragecostoffoodwouldbe10dollars,ifweeatoutside,but,ifwecookathome, itwillbe15dollars.Wecantaffordit.So,thecorporateshavetakenoverbecauselargescale manufacture of food, packing, tetra packing and all these have made familys cookingirrelevant.Youremovecookingfromafamily,thenthereisnotfamily.ThisiswhatNationalEconomicBureau says.Now, these all are not economics. These all are foundations of economics. This doesntreflectthetheoryofeconomics,thisresultsintheoutputofeconomics.

Iwill just read out this paragraph. This is fantastic. The recent changes. In fact, you note this. TheAmericanEconomyinTransition.This isavailableontheGooglenetbooks.TheAmericanEconomyinTransition.Itis1980.Idontthinkitisinmypaper.UniversityofChicagopress,1980.MartinSFieldstein.NationalBureauofEconomicResearchatpage341/322.Therecentchangesinourextensionofalongtermcumulativereductioninthescopeandmagnitudeofthefunctionsperformed in the family.The firstactivitiesmoveoutside,productionof food, clothing, fueland other staples. They are taken over by business firms. To that extent the families were reducedfunctionless.Dysfunctional families.Morerecently,manyresponsibilitiessuchaseducation,childcareand social insurance have been assumed by the state.Within the next decade,wewill probably seeanothermajor role transferof the careof theyoung,which inmany respects isquintessential to thefamilyfunctions.

Youmusthaveheardabout thisdisputebetweenthe IndianparentsandtheNorwegiangovernment.Thegovernmentsays,Wecanlookafteryourchildbetter.Whatdidtheydo?Theyfedthechildwiththeirhand.Howcanyoufeedthechildwithyourhand?Hesaid,It isourculture.What isculture?Thisisnotourrule.Youcanttakecareofyouchild.Thegovernmentsaying,apoliceinspectorsaying,achildcareinspectorsayingthatwewilltakebettercareofthechild,thanyouparents.See,howfamilyfunctionshavebeentransferredandfamilieshavebeendisfunctionalized.TheAmericaneconomyandthewesterneconomyarenowtottering.Itisbecause,theyhavetakenoverthefundamentalfunctionofhumanlife.Anintegrallifestylemustkeepthefamiliesfunctioning.Functionalizingthefamilyisoneoftheimportantjobofaneconomistandnottorenderthemdisfunctionalized.

ThenextinIndividualisticisprivatizethestate.Intheend,theyendedupprivatizingeverything.Watersupply,municipalityandeverythingisbeingprivatized.Ourideaistopartnerthestate.Weshouldnot

make the state dominant. We should not make the state marginal. We should not make the stateirrelevant. So, if you find the character of the state, the statesociety relationship, the relationshipwithin the society right up to the individual, all these are dominantly relationship oriented andprivatizingisdominantlycontractoriented.Iexplainedtoyouaboutthesocialcontracttheory,whichisthe super winning national contract in which the right to life, liberty, your property and everythingbelongs to the government. The government can assume it any time. TheGrecoRomanAngloSaxoncoercive statemodel throughDemocracy, it hasbeen contained,but in anemergency, they can takeovereverything.JustasithappenedinIndiain1975,whentheAttorneygeneralarguedthatapersonslifeisinthehandsofthepolicemantoday.

So,ourideaisdifferent.Thenaturalrighttolivecanneverbetakenoverbyanybody.Eventhevillagelands cannot be acquired by the government or king. Because, we place so much emphasis on thesocietyanditisveryclear.ThatiswhythosewhothoughtverydifferentlyandKarlMarxwasthemanwho thought themaximumabout how to handle the society and he spoke about social engineering.Now, social engineeringhasbeengivenupbyeverybody.Youcannot fightagainst the society. If youfightagainstthesociety, thesocietyrevoltsand ifyoudestroythesociety, there isnosubstitute.Youdestroy the family, there is no substitute. Because, you cannot form it by theory or intellectualpropositions,youcannotreformitbygovernmentorlaws,youcannotmakehusbandandwife,fatherandmother,brotherandsisterlivetogetherbyanygovernmentorder.But,youcandisturballthisbyagovernment order. So, functionalizing the families, keeping the society going, it requires enormouswisdom.Revoltingminds,angryminds,contextualthinkersandtheywillbeverypowerful.

Atleast,100thousandbookswerewrittenonglobalization.In20years,thatonetermhaslostitsvalue.Andwewereallchantingthatmantrabecause,wewerelivinginacontext.Youknow,thetextoflifeisverymuchabove the context.Unless aperson risesabove the context,unlessheoccupiesa vantagepositionfromwherehecanlookatwhathappenedinthepastandwhatislikelytohappeninthefuture,hecannotbearrestedbythecontext.But,mostthinkerswhoinfluencetheworldtodayarecontextuallypowerfulthinkersbuttextuallyweak.Thatiswhy,eventoday,MahatmaGandhiisrelevant.Peoplearequoting Adi Shankara, some other great intellectualswhowere not valued in their own lifetime. So,thesedestructiveeffectswerecausedbycontextualthinkers.

Astablesocietylikeoursocietyshouldneverbecaughtinthiscontextualtsunami.WeshouldliveaboveitandthatiswhyIamappealingtoallofyou.Youknow,inthiswecouldnotrelyontextbook.Wedonthave one author. Because, we are talking about experiences. As a result of this, see what is thedifference, the effect of this? What is the microeconomic behavioral difference and the macroeconomicbehavior?

OneistheIndianAsianmodel,thesavingsishigh,theAngloSaxon,itisless.DebtsmeansIamtakingaboutprivatedebts. In IndianAsianmodel it is low, in theAngloSaxon, it is high.Motiveof savings,IndianAsian is dynastic and in AngloSaxon, it is personal. Here, I have to showwhat the BrookingsInstitutionhasdonea researchonthesavingsmodel.BarryBosworth,aneconomistat theBrookingsInstitutions,hetracedtheculturaldifferencesapartfromrebirthandKarmaeffect.Onemorethingweare studying, societies that believe in rebirth save more than the societies, which do not believe inrebirth.Andthatistheoriginofwhatisknownasdynasticsavings.

Bosworth noted that Asians have a dynastic view of savings, that is, accumulateworth beyond theirlifetimeandfamiliesandformultiplegenerationsinfuture.Thisisbasicallybecause,nobodythinksthatthewealthbelongtohim.Andthishasmadeanimpactonconsumption.Itmoderatesconsumption.SoBosworth,whileAmericansreadAngloSaxongenerallythinkoftheirretirement,thatis,theirownlifeand nothing beyond. Even that, they have stopped doing. They think the governmentwill do it. Thedynastic concept, which Bosworth speaks of touches upon only intergenerational linkages. Anotherstudy InvestigativeanalysisofSavingsBehaviorofPoorHouseholds inDevelopingCountriesbyMaryTeresaEngard,DepartmentofEconomics,UniversityofWesternCapedealswiththeintergenerationallinkage of savings in poor households. The study says, Intergenerational linkages were found to besignificant determinant of savings behavior, while the slings were particularly strong due to largefamilies.Getzovitch,in1988foundthatextendedfamilylinksmightstrengthentheeffectiveplanninghorizonoverwhichthehouseholdsmakesavingsdecisions.So,themotiveofsavingsisnotforoneself.Savingsisafunction,whichisamoralfunction.Infact,ourentireliterature,ifyoutake,youshouldnotwastethis.Inmyvillage,whenIwasachild,therewasplentyofwater,mymotheralwaysusedtosay,Dont waste water. I used to say, It is available in plenty. Why is my mother saying dont wastewater?Nothingshouldbewasted.Youshouldconserve,youshouldpreserve.Youknow, the ideaofeconomicsitself.Youtravelintheeconomyclassandtheexecutiveclass.Whatdoesthatmean?

Economicsmeanssomethingthatcostsyouless.Executiveclasseconomicsisnoteconomics.Thewordeconomic, is it economic? Can you economize? The word Economics itself indicates simplicity,reductionofexpenditure,cuttingofcosts,moderation.Ithasbeencompletelychangedoverthelast4050years.Thedefinition,meaning,content,impactandinfluenceofwhateconomicsconveyshasbeencompletelyalteredandwearelookingatthealteredeconomicsastherealeconomicsandgivenuptherealeconomics.Now,theWorldBanksays,Youhavetodiscardthat,whichdoesnotwork. It isthiseconomicsthatdoesntwork.So,accordingtotheWorldBank,thefirstthingtobediscarded,whattheWorldBankdidnotsay,whatwehavingbeensayingsofar,pleasediscardit.

Ifyousee,risksavingsishighinIndiaAsianandlowinAngloSaxon.ConsumptionismoderateinIndiaAsian and high in AngloSaxon. Consumption drive is based on buying power in IndiaAsian andconsumer confidence in AngloSaxon. So, you see there is a huge difference. In that same way,householdsavingsarehigh,corporatesavingsarelow,riskcapitalislowinallthefamilybasedsocietiesyoucanseethisquality.Youcanseethisdifference.Thisentirediscourseproducesthiseconomiceffect.

So, the economic model of India is based on the social structure, the cultural influence, familycommunity relationships, it produces economic effect, which is different from the economic effectproducedbytheindividualisticbasedsocieties.Unlessyouunderstandthisdifference,youwillneverbeabletofindouthoweconomiclawswilloperateinIndia.AsIsaidtheotherday,whentheinterestratesbecamelow,thesavingsroseupinIndia.Because,peopledonotbelievethatinterestrateislessmeansyourinflationisless.So,wecansavelesspeople.DontbelieveinIndiayourinflationfiguresandthenbeginsavingorreducingsavings.So,ourviewoflifeisnotentirelyinfluenced.Itisnotonlyourviewoflife. Take the Japanese.0.3percent intereston5yeardeposit. They still depositmoney inBank.Youcannot countenance this behavior, understand this behavior in the context of the economic modeldevisedbythewestandtheprimereasonforthisisthattheyignoredEmileDurkheim.

Inthiscountry,whenwearehavingadebate,wemustrecallwhatthewestfailedtodoandwhereitlanded.We should not fail to do that. Another thing,whenwe are discussing all this,we are talking

abouttheexistingIndia.ThisisthefunctioningIndia.Wearenotgoingtobringsomeeconomicmodelintoexistence.Wemustrecognizethiseconomicmodelintoexistence.Whatwearebeingtoldis,Thisisnotgoingtoexist.Thiswillnotexistforlong.Thisweweretoldin1950,weweretoldin1990.Itstillexists.Thesavingshaveactuallygoneupfrom23percentto35percenttoday..Ithasnotgonedown.Consumption ismoderated insteadofexpanding.Percapita incomehasgoneupproportionately, per capita consumption has not gone up, whichmeans what, this integralmodel isworking.Whenmore children are going to get higher education, people savemore. Not because ofsomemallhasopenedandtheywouldbuyandnoteducatetheirchildren.Seehowrelationshipswork.InAmerica,itworkstheotherway.Youopenamall,thechildlosesthepossibilityofhighereducation.Because,thechildisthecareofthegovernment.Because,youhavetransferredthefunctionmentallytothestate.AstheNationalEconomicBureauResearchsaid,itisnotyourchildanymore.Itisthesocietyschild.

ThatiswhyinSweden,inNorway,inScandinaviancountries,childrenarebeingnationalized.Youknow,themomentchildisborn,every10daystheinspectorwillcomeandlookatthechild.Whatisitsweighttoday?Whatis iteatingtoday?Youareover.See,thegreatestbondagebetweenthemotherandthechildisthatthechildishers.Youinterferewithitoneday,itisover.Yousay,thatisdevelopment.ThesecountriesoccupyaveryhighplaceinHumanDevelopmentIndex.YoulookattheUNDPindex.ItistheNorwayandSweden,whicharehigher thanAmericaandCanada.Theyarenumber1andnumber2.Because,theirfamilieshavebeencompletelydestroyedandthestatehastakenovereverything.Thatistobemoderneconomicdevelopment.Howfoolish?Youlookatthisandsay,Weare134inHDIindexandweareworried.Becausethenormsonwhichyouhavebeendecidedaresuchfaultynormsandyou believe it and from L. K. Advani to somebody keeps on saying that we are down in HumanDevelopmentIndex.Iusedtotellhim,Unlessyouthrowthisindex,youcannotunderstandeithertheworldoryourself.

See,howourentiredebateissodistortedandperverted.ItisonlybecausethehighintellectualsofIndiahavefailedtounderstandwhataretheimplicationsofdevelopment?Atleast,sustainabledevelopment.Youtalkaboutsustainabledevelopment.Canyoureplacethefamiliesandsaythatthedevelopmentissustainable? Andwhat is this country, Sweden you are talking about?Does anybody knowwhat thepopulationofSwedenis?8millionandyoucallitacountry?Mostofthesedevelopedcountries,youcancycleacrossin5hours.Andanother,youlookatthesecountries,whichhaveveryhighhonesty,whicharetopinthehonestyindex.ChannelIslands,CaymanIslands,Switzerland,mosthonestcountryanditdealswiththedirtiestmoneyoftheworld.Icannotunderstand.Youdonotquestionthis.Wejustgulpallthisanditissuchblatantlywrong,thisunderstandingoftheworld.So,ourentiremacroeconomic,microeconomic behavior,macroeconomic results of themicroeconomic behavior that is caused bythis integral way of life. That integral way of life is because of naturally evolved/artificially evolvedwhere,webecomeveryclosetoDurkheimainthinking.

It is far remote from the contract based way of life. I have shown you today the economicconsequences,behavioralaswellasthemacroeconomicconsequences.Because,itworkedactuallyandIhavetoldyouhowthestockmarketinIndiaattractsonly3percentofournationalsavings.How,eventoday it is bankled. Bank driven and a very high level of bank driving. Low level of market driving.Interest rates are moderate or high. There it is low. Economic drive balanced life style, there it isconsumption. And you know, American consumption is 72 percent of the GDP and most of theconsumption America has outsourced to the world. That was the only way America could have

containedinflation.Because,thedollaristhenationalcurrencyaswellastheforeigncurrency.Unlessthereisaninflationintheworld,Americawouldnotbeimportinginflation.ConsumptiondrivesnotonlytheAmericaneconomy,buttheworldeconomy.Actually,ChineseeconomywasbuiltbytheAmericaneconomy.TheForeignExchangeReservesofChinawerebuiltoutoftheconsumptionsofAmericaandyou call that development. China also calls this development.Whatwill happenwhenAmerica stopsbuying because, America cannot keep on buying like this? The American Presidents have promotedconsumptionand Moms forAmericamovementwas started in 2001after the terrorist attackwhenpeoplewent on to television and said, Theonlyway to saveAmerica is to go andbuy. Bill Clintonparticipated in it. George Bush and his father, in 1989 or 1988, he led the shopping movement inAmerica. Thesewere all considered to be sustainablemodels. The economic theories. Todaywe aretryingtobringintheseforeignmalls,whatistheidea?Theideaistomakeyoubuyandthethingsthatyoudontneed.HaveyougonetoanyNRIhousesinAmerica?Inthebasement,theygenerallyhavethepuja room and also the stores. Theywill keep things,which they dont need for the next 6months.Because,itischeapertobuy.

Consumption.Ireadouttoyouhowmodernityultimatelymeansconsumption.IthinkImustagainreadit out to you so that you understand it in this context. It is such a pithy research. Anthropology onModernity,inapapertitle,page19ofthepaperIhadcirculatedontheNewSchoolofEconomics.OntheanthropologyofmodernityorsometriumphsofcultureoverthedespondencytheorycarriedintheAustralian National University Press, Marshall Shallings, a prominent American anthropologist. Thewesternanthropologyisthebasisonwhichourpoliciesarebeingdriven,oursocietyisbeingmadetomove. He captures the essence of the theory of modernity as homogenizing the world througheconomicdevelopmentbasedonconsumerism.

Theworldwillneverbecomeuniversallyoneunlessconsumptionbecomesone.It isconsumptionthatwill unite theworld and truly so. Unless all have the same desire to consume, youwill notwork toproduce that kind of income. So, the desire for consumptionmakes you efficient. On that basis youbeginearning,on thatbasis theproductiongoesup.On thatbasiseverything results.Aclassicof thegenrewasWalterRustostagesofeconomicsgrowth,1857withitslinearconsequenceof5developmentstages.Fromthetraditionalsocietiestotheageofhighmassconsumption.Rustomusthavebeenthefirsttoperceivetheculminationofhumansocialevolutionwasshopping.Hewasthefirsttoseethattheultimate evolution of human beings is to do shopping. Explicitly argued as an alternative toMarxiststagesofprogress.Rustostheoryappearedasamirrorimagewiththeaddedadvantageofturningleftintorighttwiceover.Actually,heproveswhateverRustosaidasaboutcounteringMarxismisachievingwhatMarxhimselfsays.Commontoomanytheoriesofdevelopmentwasacheerfulsenseofculturaltragedy.Thenecessarydisintegrationof traditionalsocieties that functioned inRustosschemeas theprecondition for economic takeoff. I will read it again. The necessary disintegration of traditionalsocietiesthatfunctionedasthepreconditionforeconomictakeoff.

Solongasyouaretraditional,youwillhaverestraintandmoderation.So, ifyouhavetoeconomicallytakeoff,youhavetodestroythetraditionalsocieties.Foreigndominationwasneededtoaccomplishthissalutary destruction. Precisely that Marx had told. India can never be made to be prepared formodernization for which revolution is necessary unless India is destroyed. Foreign domination wasneeded to accomplish this salutary destruction. Since otherwise, the customary relationship oftraditionalproductionwouldsetasealontheeconomicgrowth.See,economicgrowthisimportantandforthatyouhavetodecideallthis.Whatforeconomicgrowthisnotasked.Statisticaleconomicgrowth

is important. Many people have asked that if liquor consumption goes up, GDP goes up. Ifpharmaceuticalcompaniesbeginproducingmoremedicine,GDPgoesup.But, is itdevelopment?Thisquestionisbeingdebatedandallofyouknowthat.

By its own providential history, Europe had been able to develop itself. But, according to Rusto, theother people would have to be shocked out of the backwardness by an intrusive alien force. Norevolutionaryhimself,Rusto couldagreewithMarx that inorder tomakeanOmlette,onemust firstcracktheeggs.Thatistheconsumptionbasedsociety.Marxisalsonotagainstconsumption.Heisonlyagainst production by capital. He said, The productionmust be by the state and the people shouldconsume.There isabsolutelynodifferencebetweenKarlMarxandAdamSmith inperceivinghumanbeingspurelyasaneconomicbeings.BothcapitalismandcommunismareGodless.Bothofthemdonotrecognizeculture.Bothofthemlackemotionalquotient.Absenceofspiritualquotient.Theymayhaveintellectual quotient. It really doesnt matter. But, you ignore 90 percent of human life to theorizesomething, to set theworld in thatdirection.Onehascollapsed, theother is collapsing.So,wemustescapeallthisandtrytounderstandthefunctioningeconomicmodel inIndia,whichisrelationbasedanditsmicroeconomicbehavior,whichleadstoitsmacroeconomicconsequences,wehavedealtwithtodayandtomorrow,thenextclass,wewilldealwiththe institutionalbasisofrelationship in India. Ifyouhaveanyquestions,wewilltryandsortthemout.

Risksavingsmeanssharemarket,derivativesandthatkindofthing.

After1960,thingsbeganchanginginAmerica.

Naturally.Ofcourse, itwillbemoredifficult in India. Itmaynothappenin40years, itmayhappenin200years.Thatisonlydifference.But,weshouldnoallowthistohappenandwehavetomakeawareandwehavetomakeothersaware. InAmerica,thestartingpoint ismoreor less196061.Till thenitwasnotlikethat.

Iwouldcreditthesocietywiththis.Itisnotthatthebanksdidnottrytodoconsumerlendinganyday.AsIsaid,theICICIbanksetouttobuildaconsumerlendingportfolioof100thousandcrores.Theyfailedandsoldofftheirconsumerlendingportfoliobecause,theIndiansocietydidnotoblige.Itisnotthatthebanksdidnottry,theyaretryingtosellcreditcards.Thepeoplearebuyingdebitcards.

Inmost of the Asian countries, the credit cards are less. Only debit cards aremore. Debit cards arenothingbutyoursavingsaccount.So,debitcardsareamethodofeffectingthepayment insteadofacheque and swipe it, but people are still afraid of carrying credit cards. I carry credit cards. I have 2creditcards.Ithinkinmyentire1012yearsofuseofthecreditcards,Imusthaveusedit2or3times.Wecarryitmoreassomekindofanemergency.Ifsomethinghappens,youhavesomething.

Ibegancarryingcreditcards,whyyouknow?OnceIlandedinKolkatain1996andthefellowwhohadtotakemehadntcome.Ididnthaveeven1rupee.Then,Iwentandaskedthe*birla(1:19:32)*Iwentand

toldme,Sir,willyoucarrymetothecity?Hegladlytookme.But,thefactis,thenIdecidedwemusthaveacreditcard.ThatishowIgotacreditcard.

Yousee,Indiawillfaceabigtussle.But,inthismyconfidenceisthetraditionalforcesinIndiaarealsoverystrong.Theyaretalkingmodernavatars.Thetraditionalforcesarenotremainingtraditional.YouseeShreeShreeRaviShankar,MataAmritanandamayi,SwamiRamdev,GayatriParivar,Bapsmovementand you can see that they are very powerful movements. They are countering this modernity andfightingfortraditioninamodernway.So,thiskindofjobwaslefttotheChurchinthewest.Because,itisarigidmechanism,ithadnoflexibility.So,itwaslikeaconventionalwarfarebetweentwoarmies.InIndia,modernityfacesaGuerillawarfare.Peoplearefighting,thousandsoforganizationsarefightingindifferentlocalities.

WeorganizedonespiritualfairinChennaijusttoknowhowmanyspiritualorganizationsaredoingtheirworkandwe found thatout.Wemade160spiritualorganizationsexhibit their servicesandactivitiesand Iwill try to get you the coffee table book,whichwehave brought about. They are running 100thousandschoolsandreaching19crorefamilies.19crorepeople.So,youcanunderstandthatcounterresponseisverypowerfulinIndia.Itisnotunified,soitisnotaggressive.So,thereisnoviolence.Ifitisbyoneverypowerfulforce,likesomeIslamicfundamentalisminmanycountries.IfLadiesgowiththemodernkindofdress,theyissueFatwalikethisthingshouldnotbedone.ThatwillnothappeninIndia.Whenithappens,youthinkmodernityisbeingfought.No!ModernityisbeingfoughtintheIndianway.

Yousee, thedemocracyof the individualistic typewillnevercome in India. Just likeeconomicsof theindividualisttypewontcome.Wewillhaveapanchayatkindofdemocracy.ThisiswhatAurobindosaid.ThewesternParliamentarydemocracywontwork in India. Indiawillbeanallianceofcommunities.Congresswasanallianceofcommunities.Incongress,youknowIwasveryclosetoKaamraj.In1971,heusedtosay,Inthisconstituency,thereissomuchNadar.PutoneNadarcandidate.HereinMylapur,therearelotsofBrahmins,putaBrahmincandidate.Whatdoesitmean?Yourecognizecaste.Ifyoudontrecognizecaste,castewillformitsownparty.Thisiswhatwillhappen.Everywherecaste,whereitisneglected,ithasformeditsownparty.So,from1950,therehasbeenaclashbetweencasteandtheconstitution of India. The Constitution of India said, Wewill produce a casteless society. Even thisreservationwillgoin30years,theysay.

Now,wehaverecognizedacastebasedpolity.Thiswillbethetopicforthenexttwoclasses.Youhavepreponedit.Intelligentpeople,thinkingpeople,unbiasedpeople,wehavetolookatthesocialstructureof India, not just dismiss caste as an irrelevant mechanism. Swaminathan Ankaleshwar Iyer, who isprobablythemostardentwesternthinker,hehaswritten3articlessayingcasteisthesocialcapitalofIndia.Howwehandleit,lookatit,disciplineit,regulateit,makeitfunctionalandeducatethepeopleismore important than sweeping it as anachronism because it is not an anachronism so long as it isfunctional.

Itisnothampered.Iwilltellyou,inSouthIndia,in1950.Now,Iamtalkingrawcaste.Youmustlookatitpurely from an intellectual perspective. In Tamil Nadu, Andhra, Karnataka and Kerela, all the chiefministerswerenonBrahmins.AllthattheMandalmovementdidin1989wasdoneintheSouthinthe

south in 1950 itself. Reservations for backward class came in Kaamraj led congress. 49 percentreservation in1967 itself.Andyou see thedevelopment.Even then, youblindlyoppose reservations.That isnotcorrect. Innorth India, tillmovement,mostchiefministerswereBrahmins.So, thesocietyrevoltedagainstit.Castebasedpartiescameafterwards.So,ifyouunderstandthesociety,youwillhavethese differences. You have to accommodate these differences and caste is an identity, which youcannotdismiss. If youhad leadershipof thatwisdom, consequences,which thenorth Indianpolity isfacingtodaycouldhavebeenavoided20yearsearlier.

See,theonlyproblemis, increasingdomesticconsumption isgoingtocausepoliticalturmoil inChina.Thatistheirbiggestproblem.

Youarecorrect.But,Iseethisasanecessarylessontobelearnt.Iamvisitingtheseagriculturalareas,atleast once a month I will be going to have some kind of dialogue with people who are carrying onagriculture.Lastweek,IwasinCoimbatore.Ihadcalledagroupofagriculturisttomeet.Allofthemfeel,in 10 years, agriculture is going to be the most prosperous avocation. Because, you have testedagriculturetosuchanextent,youhavedemeanedittosuchanextent,Iamtellingyou,inthenext56years,nobodycancontrolfoodinflationinthiscountryexceptthefarmers.So,manypeoplearetryingtogobacktofarming.Now,nobodybelowtheageof40is infarming.Inmostvillages,youdontfindany black haired person at all. Inmany villages, peoplewho are residing in some of the villages areabovetheageof50. IamtalkingaboutTamilNadu.This isaverydangeroussign.Because,there isaherdmentality inus.Andthatherdmentality isgoing toget reversedbecause, thecurrenteconomicmodelofthewest,whichmarginalizesagricultureandpromotesallothersectorsisnotworkingnow.InAmerica,theyaresuccessfulinit.Only2percentofthepopulationisrelyingonagricultureandvillages.ThemaximumisinFrance.11percentisfarmingandagricultureandtherestareresidentincities.

Ithink,inmypaper,Ihavedealtwiththis.By2061,Indiawillhavea50percentruralpopulation.Andeven this 50 percent urban population. Actually, our urban statistics is forged to the extent of 25percent. 20 percent of our towns, we dont have any avocation other than agriculture. We haveclassified it as towns because there is money flowing for infrastructure in the budget. So, if thepopulationismorethan50,000,itisdeclaredasanurbanagglomeration.So,oururbanstatisticsisnotcorrect.Ifyoulookatindustrialavocationonly,Indiawillhave,by2061about3540percent.Therest60percentwillberural.Andyourmarketeconomicscannotincludethem.Whateverinclusiveeconomicsyoutalkabout,youcanneverincluderuralareasinmarketeconomics.So,thereisahugepossibilityofareaction.Agricultureisgoingtohaveaverymajorreversepriorityinthenext10years.

We are only thinking that partnering the state is in the sense of economic partnering. Even socialpartneringforinstance.ThestateisnowsayingthatwewillnowcollectallthetaxesandwewillhanditovertoPanchayat.AsituationmaycomewhenthestatemayhavetotellPanchayattocollecttaxesandspendit.Thatkindofpartnering.Itisnotreallycorporategovernmentpartnership,whichisnowpublicprivatepartnership.Iamnotmeaningonlythat.

Because, Iwill tellyou.Urbanruraldivide, the InteriorChinaCoastalChinadivide is themostdifficultpoliticalproblemtheyhaveto face.Theyhavekeptthe interiorChinacompletelyoutof themodernways of life. In fact, they have the Visa system to come into the city. If they have to promoteconsumption,theyhavegottopromoteconsumptionthere,whichwillbetheendofthepoliticalsysteminChinaunlesstheygoinforveryhugeoppression.Forwhich,theworldmaynotexcusethemtoday.Ifthey kill some 500 thousand people, the world is not going leave. China cannot play its role as anemerging world power if it becomes such an oppressive power. For example, if it repeats theTiananman Square issue today, Chinawill be discarded by theworld. Because, theworld today hascomeout toa levelwhere itwillnotcountenancesuchbehavior.So,powerhastobehavetoday.So,theyhavethatproblemalso.

Ok.Ifyouhaveanyissue,youcansendmemail.Iwilltryandrespond.Because,inthenext2classesIhavetocoversome100miles.Letusseehowitworks.