The notion of dharma, as it emerges from the normative dharma texts,seems to provide the underlying values and norms of society. Because it is shared, dharma gives people the confidence to cooperate with strangers. It acts like invisible glue between transacting persons in the marketplace, allowing them to trust each other. The same glue also holds society together, bringing a degree of coherence and predictability to the uncertain lives of human beings.
Although the Sanskrit word ‘dharma’ sometimes appears to be synonymous with the English word ‘moral’—and up to a point, this is true—but dharma, in fact, carries a lot of rich connotations that go beyond the English word. It contains the notions of ‘trust’, ‘harmony’, ‘balance‘, restraint’, ‘justice’, 'sustain’—all of which can hopefully help in deepening our understanding of the moral aspects of the market.
For example, the idea of ‘glue’ above derives from the connotation of ‘trust’. Of course, dharma in Sanskrit goes beyond its moral connotations to mean other things, for example, the idea of ‘the unique property’: thus, ‘the dharma of fire is to burn’. But this is not relevant here and it should not detain us.
At the heart of the market system is the idea of exchange between ordinary, self-interested human beings, who seek to advance their interests peacefully in the marketplace. Dharma places restraints on buyers and sellers. Because you are a person of dharma, I readily accept a check from you. In the same way a taxi driver stops and takes me in as a passenger because he knows that the restraint of dharma will ensure that he will get paid at the journey’s end. Thus, millions of transactions in the global economy are conducted daily based on this shared belief.
I trust the woman who sells fruit to me regularly in the market near my house in Delhi. She claimed one day that she had received exceptionally good mangoes but they were expensive because of their higher quality. I reluctantly bought the mangoes but unfortunately they turned out to be bad. I promptly punished her by shifting my allegiance to her competitor.
Not only did she lose my custom but I also told half a dozen friends and neighbours. All of us shared similar stories of her behaviour. As word of mouth spread, she came to be known as a person of low dharma, and lost market share. Thus, the market corrected bad behaviour.
Every purchase manager has the temptation to squeeze his supplier. If he does not treat the supplier with dharma and gives him a fair price, his own company will suffer when the supplier delivers sub-standard components.
On the other hand, the market rewards good behaviour on the part of a company that treats its employees well. The best will want to join such a firm, and with the influx of talent it will be rewarded with high performance and market share. A person or a firm of high dharma will be rewarded with a good reputation. Smart businessmen know this and work incessantly to improve their reputation. Thus, markets are not only efficient but they also reinforce good behaviour.
The market system depends ultimately not on laws but on the self-restraint of individuals. Dharma provides that restraint in order for people to behave with tolerance and respect. However, there are limits. Bhishma instructs Yudhishthira in the Mahabharata about the importance of danda, the ‘rod’ of the state to punish those of low dharma. Even the most peaceful, dharmic ruler must then exercise force. The epic says that when dharma is low in a society, the dependence on danda or intrusive regulation rises. A society where dharma is weak suffers from pervasive corruption of public officials and ineffective public administration.
Such a situation is painfully obvious in contemporary India where public institutions of governance—the bureaucracy, the police and the judiciary—continue to fail to enforce the law. Why should it take fifteen years to get justice in the courts? This is because people of low dharma find ways to manipulate the courts and the police. The reform of these institutions is a key unfinished agenda of reform is contemporary India today.
Too many tend to blame the market for the pervasive corruption, especially in high places, calling it ‘crony capitalism’. The opposite, in fact, is the case. Corruption exists only in the unreformed sectors of the economy where public officials still have discretionary authority over economic decisions. This too is part of incomplete reform program.
