Five Fundamental Principles of PROUT

(Excerpted and edited from the book Growing a New Economy, 2017)

The economic system Sarkar proposes has been crystallized into Five Fundamental Principles. These principles are both simple and profound. They may even appear self-evident to many readers; yet not a single principle is presently applied in the world of economics. The following section is a short overview of these principles. For people interested in a more comprehensive study, please refer to the book Principles of a Balanced Economy [1].

Principle 1: There should be no accumulation of wealth without the approval of society.

Since one of the fundamental objectives of the new economy will be to guarantee everyone with the minimum necessities of life, this first principle is a logical necessity. If a few people are allowed to accumulate unlimited wealth, then the rest of society will be deprived and the primary objective of the good society—contentment and plenty for all—will be halted.

There are two aspects regarding the limitations of wealth. One is to set an upper ceiling on income, and the other is to have a ceiling on the amount of wealth a person may accumulate. While these concepts are related, they are not necessarily the same. Likewise, when we consider an upper ceiling on income, there are again two distinct categories: income from work and passive income from various forms of capital. This first principle concerns all of these forms of wealth.

Apart from the truism that if one person accumulates all the wealth in the world there won’t be enough wealth to go around for the rest of us, there are other problems associated with inequality. Over-accumulated wealth is rarely used productively; it most often ends up in economic ventures involving economic speculation or financial gambling. If the majority of a country’s population is poor and illiterate, their potentials will be wasted and the whole of humanity becomes poorer for it. Spreading the wealth more equitably is thus the best way to make society prosperous and people happy, and this can only be accomplished if the accumulation of wealth is managed in a more balanced manner.

It should be noted that wealth, in this context, is not necessarily limited to physical wealth. For example, what we now call “intellectual property rights” is another type of wealth that needs to be controlled. If someone accumulates patents and other intellectual properties (IP) and prevents other people from using it, it can have the same negative effects as if a person accumulates physical wealth. The basic guideline must be that any hoarded wealth affecting other people’s ability to use it, should be controlled.

In addition, there may be legitimate reasons for society to limit certain types of information to be spread. For example, teaching everyone how to make bombs from items one can buy in a grocery store, is a type of intellectual wealth society has an interest in restricting. Another example is the non-material wealth invested in symbols, which when representing negative sentiments—such as the Confederate flag, which to many in the US represents racism and slavery—may have to be restricted and reserved for museums and private homes rather than public places. Due to its tattered and unflattering history, the Confederate flag was recently removed from the state capital in South Carolina, thus a restriction of intellectual and symbolic value was put in place by state law. The necessity of controlling the accumulation of wealth is a principle, but the way to control this accumulation is a matter of policy and legislation. Possible ways to institute this principle is through caps on wealth; a maximum wage; and other policies related to various forms of non-material wealth.

Limiting the accumulation of wealth is vital to ensuring that everyone can be guaranteed the minimum requirements of life. But unless sufficient wealth is created to satisfy everyone’s needs, limiting accumulation will not be sufficient. The second principle addresses this issue. First, it establishes the necessity of maximum utilization of all resources, and then it states that these resources have to be rationally distributed.

Presently, economists claim that economic growth is the best way to solve poverty. But, if inequality rises as the economy grows, the rich are actually receiving the largest portion of the economic benefits. Economist Thomas Piketty demonstrates in his book Capital in the 21st Century with comprehensive historical data that for the past two hundred years the return on capital has been much higher than the growth of the economy, something he expresses in the formula r > g; which means return on capital has been higher than economic growth. The only exception to this rule, according to Piketty’s research, was seen during the first and second world war, a time which effectively reduced inequality due to the destruction of the assets of the rich. This means that even when the economy is growing, inequality is rising, and the poor ends up with only a small part of the total growth.

Due to this reason, the second principle does not only discuss maximum utilization, but also rational distribution of resources. As high concentration of wealth is associated with speculation and unproductive investments, as well as many other social ills discussed earlier, rational distribution implies a drive towards equality. We could thus consider the first principle to be encompassed and fulfilled by the second, but the importance of limitations to wealth accumulation is so central to a healthy economy that it has been made into a separate principle.

Maximum utilization, however, goes beyond the issue of economic growth. In the concept of modern economics, rebuilding houses destroyed by a natural disaster contribute to economic growth, ignoring the fact that we are only replacing something that was already there. Similarly, any activity designed to clean up environmental pollution is also considered economic growth. Somehow economists seem to fail to account for destruction and disaster as a minus to economic activity, but readily add it as plus when it is rebuilt.
The new economy is not concerned merely with GDP figures, but with the maximum utilization of resources in this world. Looking at the GDP of a country is not sufficient to establish how efficiently resources are being utilized, so to measure utilization of the type considered here, new indices will have to be developed.

Subtle or intellectual resources are ideas, knowledge and know-how. It also includes artistic expressions, such as music, poetry, literature and film. In fact, the human mind itself is a subtle resource. Software could also be considered a subtle or intellectual resource. Without intellectual resources, it is impossible to utilize material resources, as the very process of utilization is an intellectual concept. Intellectual resources are different than physical resources in that they do not diminish when they are used, and the more intellectual resources are distributed the more value they give. The more educated people a society has, the greater social, cultural and economic prosperity is possible. We will return to this issue in a moment.

Finally, this principle also recognizes spiritual resources. All cultures and religions recognize a spiritual reality as a source of strength, inspiration and solace to individuals. Spiritual resources would include uplifting scriptures, moral education, spiritual practices of various kinds; contact with saintly people and attendance at spiritual functions, as well as learning from the holy and saintly persons themselves.

Although this second principle may seem self-evident to many, in contemporary society, this principle is being systematically violated due to the profit motive, capitalism’s principle of self-interest, as being the main driver of economic growth.

Principle 2: There should be maximum utilization and rational distribution of the crude, subtle and causal resources.

Principle 3: There should be maximum utilization of the physical, mental and spiritual potentialities of the individual and collective beings.

While the second principle recognizes the need for the maximum utilization of all resources, the third principle acknowledges that it is individuals who make these utilizations possible.
The third principle is concerned with the utilization of human resources without which any other utilizations would be impossible. There are two aspects to this principle. The first is that the physical, mental and spiritual resources of both individuals and groups should be maximally utilized, and the second is the interconnectivity between the individual and the group, that individual welfare is an integral part of collective welfare, and that collective welfare is an integral part of individual welfare. To sacrifice individual welfare for the sake of an impersonal “collective” benefit, such as was done in communist countries, does not properly promote the economic or social benefits of anyone.

Development of the maximum potentials of individuals requires an adequate economic base, good education, and opportunities to develop in all spheres of life. Countries such as Sweden and Singapore keep up their international competiveness by investing in education. It is a policy that pays off, both in terms of individual prosperity as well as for society as a whole. Unfortunately, most countries in the world take a much shorter view of the problem. Considering free education and decent living conditions as “costs” and “subsidies,” they try to cut costs to reduce deficits by curtailing public health care, education and housing, while they cut taxes on the rich to “stimulate growth.” This is indeed very shortsighted.

This principle pertains to all physical, mental and spiritual potentialities. Increasing the physical potentialities of a person can either be done by physical training, so the person is stronger and healthier and more physically able, but also by providing mechanical tools such as tractors, trucks, bulldozers, computers, etc., which extend the physical capabilities of an individual.
In the mental sphere, education develops the innate potentialities of each individual and job opportunities allow them to use the knowledge they have gained to creatively serve their families and communities. Without such development, individuals will be little more than cogs in the machine.
Finally, we have spiritual development. Far from being something mystical or alien to human beings, spirituality is the inner core of everyone, what author and psychologist Mihaly Csikszentmihalyi calls the “happiness of flow” and what popular philosopher Eckhart Tolle simply calls “being.” This inner experience of spiritual peace, is an important dimension of human beings, and the only permanent asset we have. True peace and happiness can never be realized if we neglect this inner part of ourselves.

It is not only competition that sets us apart and drives society forward, but more often our ability to cooperate and be creative and efficient by working together. Both the development of individual and collective potentials is therefore an integral requisite for the optimum functioning of the second principle.

Principle two and three discussed the necessity of maximally utilizing resources and potentialities. These principles of maximum utilization of all potentials contain several inherent contradictions. It is not possible to maximally utilize everything in all possible ways, for example as the choice to utilize a certain resource often makes it impossible to utilize other resources. If we choose to cut down a forest for timber, and we still want to maximally utilize the green foliage of the forest to reduce carbon dioxide and support wildlife, it is simply not possible. As the proverbial saying goes: we cannot have our cake and eat it, too!
From an ecological perspective, this conundrum is addressed by this fourth principle, which advocates a well-balanced adjustment between the various utilizations. Yes, we can harvest timber, but in a sustainable manner, so that the forest can continue to grow, thus help reduce carbon dioxide, provide shelter for numerous plant and animal species, and serve us with medicinal plants, water, and as a sanctuary for recreation. To achieve such a well-balanced adjustment requires analysis, prioritizing and clear decision making, which is the function of political management and leadership. The fourth principle, by extension, thus also concerns itself with ecological management and the role of political legislation to safeguard the environment from overfishing, overharvesting of herbs, clear-cutting and pollution, in short, from the environment being one-sidedly over-utilized.

From another perspective, a well-balanced adjustment between utilizations means to prioritize rarity and subtlety. If we have an abundance of a certain resource, say energy, and shortage of another, say food, further development of resources will be directed toward increasing food production rather than energy production. In this situation, it will be strategically wise to utilize the abundant energy to produce more food, such as building heated greenhouses to grow food in the off-season. This could be a viable option for Iceland and Norway, both countries who are exactly in this predicament: high on energy but short on domestic food production. If the situation is reverse—an abundance of food but shortage of energy—bio-fuel production could be a viable option.

Causal or spiritual resources are even more subtle than intellectual ones. While these resources are less obvious than intellectual resources, they are vital for our existence and sense of spiritual identity. By developing this inner resource—not to be mistaken with a particular religious doctrine, but rather with the perennial wisdom at the heart of all religions—great spiritual teachers throughout time have found and taught humanity about social harmony, inner strength and peace.

Principle 4: There should be a well-balanced adjustment among the crude, subtle and causal utilizations.

Principle 5: Utilizations vary in accordance with changes in time space and form; the utilizations should be progressive.

The final principle recognizes change as inevitable in this world. Hence, the utilizations of resources and potentials will likewise change. This is an inevitable law of nature.
Some changes are caused by the environment, such as weather patterns and the long range patterns of global warming and cooling. Sometimes natural disasters, such as an earthquake can wipe out a whole city. Some changes, such as global warming, may be long term and lasting. These will require adaptations in other ways, since inaction will be catastrophic for the environment and all of humanity.

Some changes are due to demographic shifts. As populations grow, the ability to live off the land changes and an area that once was prosperous can become inadequate to support a growing population unless changes are made in the means of production of food and essential commodities.
Other changes are due to the increased scientific knowledge and new technological developments humanity has acquired. Technological advancements will continue to bring us progress as well as challenges. It is the nature of human beings to try to understand, utilize and mitigate this progress. Hence, technology will continue to advance as long as the human race is alive, it is up to us to use it appropriately.

As time and place are always changing, we will have to adjust to these historical changes. The basic principles of the new economy may not change, but the timely application of the new economy will have to adjust with the changing circumstances. Human beings must move forward by recognizing and adjusting with changes in time and place. Adjustment and flexibility are essential for human progress.”

While change is inevitable, progressive change is not. In response to environmental pressures, for example, people often try to resist them than to adapt to them. Such resistance will result in a static society relying on systems and policies ill adapted to handle inevitable problems. This is not progressive change. Progressive change implies changes made in the utilization of resources and potentialities in harmony with existing conditions. If populations increase, production methods will have to adapt and become more efficient; food will then be grown in greenhouses, urban areas, or on previously non-fertile land. If the climate changes, adjustments have to be made in the way we live. When technology changes, we need to both utilize this new technology for everybody’s welfare, while simultaneously ensuring that the side effects of the technology does not destroy our environment and quality of life.

True progress is development in all spheres of existence, culminating in the spiritual realization and peace. This Eastern concept, which differs radically from the Western notion of progress as material growth, reflects this new economy’s roots in the non-material notion that human happiness is relative to our state of mind and not to how much wealth we have. To achieve this inner state, however, each citizen needs the basic necessities of life and opportunities for optimum growth on all levels—physically, mentally and spiritually. This will require a gradual increase in the standard of living of all people while also maintaining ecological balance. Progress then becomes a quality of life indicator rather than solely a material progress indicator. Over the long term, people can gradually reduce their dependency on material products—they can opt to work less and let tourism, sports, art and other cultural developments become more important. The more these subtle cultural and spiritual resources are developed, the more increased opportunity there will be for sustainable balance between all of society’s resource utilizations.

1 Roar Bjonnes, Principles for a Balanced Economy: An Introduction to the Progressive Utilization Theory (Prout) Research Institute, Copenhagen, 2012)
2 Thomas Piketty, Capital in the 21st Century (London: Harvard University Press, 2014)
3 Eckhart Tolle, The Power of Now: A Guide to Spiritual Enlightenment (Vancouver: Namaste Publishing, 1999)
4 P. R. Sarkar, “The Specialty of the Fifth Fundamental Principle of Prout,” discourse given on 16 March 1988 and published in A Few Problems Solved Part 9 (Ananda Marga Publications).

Five Fundamental Principles of PROUT