Naruto Shippuden's Pain Arc is one of the coolest but philosophically heavier arcs of the series. Directly following the death of Naruto's mentor and father-figure Jiraiya, Pain invades and attempts to destroy all of Konoha Village.
Devastated by the news of Jiraiya's death, Naruto loses direction. But then he meets the Great Toad Sage Fukasaku - Jiraiya's mentor - who offers to teach him Sage Mode at Mt. Myoboku for the express purpose of becoming strong enough to defeat Pain. While it initially gives Naruto the upper hand, Pain soon overpowers him, pinning him down with Rinnegan-powered chakra rods and monologuing.
Pain's understanding of justice and peace
After revealing that he had once been Jiraiya's disciple as well, Pain confronts Naruto about his intentions to bring peace and justice to the shinobi world. When Naruto vows to kill him to restore peace, Pain suggests that Naruto is not very different from, using 'justice' as an excuse to take revenge.
Pain's philosophy is both fatalistic and cynical, and he believes that the only future awaiting the shinobi world is a never-ending cycle of hatred. On asking Naruto how he plans to go about bringing peace to such a world, Naruto admits to not knowing.
Naruto rebels one last time, reiterating Jiraiya's teachings and his hope that people will live together in peace and harmony. But when Pain hurts Hinata for trying to save Naruto, he loses his bearings and goes berserk.
The fallacy in Pain's argument
The biggest flaw in Pain's argument is that he knows he's wrong. Similar to how Madara manipulated Obito to succumb to a vicious cycle of hatred and revenge, Obito does the same to Nagato. Nagato's declaration of his pain being greater than anyone else's becomes a desperate attempt at keeping Yahiko alive in some form, since without the need to take revenge, the need for Yahiko's Pain to exist would also cease.
But while poetic, it is also contradictory and juvenile in a way. Death is definite and emotions cannot be measured and compared that easily. In fact, if such were the case, Naruto, Sasuke, Itachi, or even Kakashi's pain would be much much greater than Nagato's.
Peace never had a chance of survival in Pain's philosophy, especially because his idea of justice was twisted. By equating justice with hatred and revenge, Nagato upholds the "an eye for an eye" argument, which is what gives rise to the cycle of hatred.
The politics of Konoha village and the other nations at war were all responsible for the chaos and misery that Nagato, Yahiko and Konan witnessed as children. But destroying every single person in the shinobi world for it seems overkill, especially when it was a shinobi of Konoha (Jiraiya) who took the orphaned children in and looked after them during the war.
Why Naruto's talk-no-jutsu works
When Naruto reverts from his kyuubi form and finds Nagato's real body using Sage Mode, Nagato asks for his answer again. It becomes more of a war between idealism and reality.
Naruto's habit of recounting his own trauma is a long-standing joke, but it is relevant here, as he doesn't quantify his pain to measure it against Nagato's, but instead tries to understand it and strive for a future that the world Jiraiya wished for. While Nagato is right and reality is what we have to live with, without ideals, that reality would never change: the world would keep knowing pain.
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