A Kindergarten for Great Economies

I just got thinking rather randomly while driving from work one evening in the curse-worthy Mumbai traffic. These are ideas and thoughts which, as you will discover, do not pre-suppose a great knowledge of either economics, or finance, or of nations and political systems. I will steer clear of these simply because I myself have no such storehouse of knowledge and whatever I put down here is a result of a thought-process heavily mutilated by the travails of negotiating traffic.

India needs investment, a lot of it and in as many sectors as you can think of. Infrastructure, governance, rural development, energy security, financial inclusion, environmental preservation & carbon control, food security, housing and so on. The list can be more exhaustive and one can keep adding. I don’t keep poverty alleviation in any such list for obvious reasons. Poverty is not a standalone disease; it’s a result and has to be treated by treating the causes. The reasons for India’s hunger for investment are stark and simple. Some are demanded by a growing economy, some are needed by its population, some are crucial for survival in a world that is becoming increasingly energy hungry while some simply must be done if the planet is to be saved. Since the defining moments of the Manmohan Singh Finance Ministry when India won its moth-eaten but prudent financial independence, the country has found a panacea in hawking itself in domestic as well as foreign markets with the hope of attracting and retaining serious capital. India is image conscious. India has been carefully building its personality. The story that’s been going around is that one day a huge pool of capital looking for better returns than the measly basis points being offered in the developed world will flock to India’s shores and heave us all off on a tide of development and prosperity. Admirable, and could actually be true one day. In fact that day seems very near. But something somewhere is not right.

I just can’t ignore the feeling that there is something more fundamental in the fabric of our country that is being missed by one and all. Or maybe there are many who feel the same way. I don’t know because nobody discusses it. Can our country achieve the levels of development, the quality of life witnessed in the US and Europe? They are certainly not perfect models but they are a thousand times better in all development and welfare indices than India.

Before a nation can get there, there is a crucial battle to be won and a lesson to be learnt. Politics and governance are great vessels of development. They are absolutely critical for they carry, allocate and distribute the effects of development and also do something the free market can never do for a country. They fashion inclusion. Social and political stability is of course a pre-condition for any kind of investment to be made in a country. However, a deeper look will reveal that social and political empowerment is equally vital and inclusive growth has no alternative.

A people that cannot govern themselves effectively, cannot tend to the interests of the masses and the classes effectively, can never hope to become economic superpowers. We just need to look around and we will find evidence that economic might is built on foundations of inclusion, equality and the rule of law. You just can’t beat it.

The great nations of the west bear testimony. The French got their magna carta, the Americans their declaration. But they went a step ahead and got good governance and inclusion into the picture. A society like India has been not only very diverse but has been so through a huge chunk of history. The past has been harsh on so many of those that make up India’s billions, that the future can wait for them. There are other priorities to be dealt with. India’s politics – and I must sadly acknowledge that this one institution that India can be proud of, it has got nearly right but not quite right– is increasingly fractured. I have never seen a development or economic plank winning votes, except cases like Gujarat. Stability in governance is critical for economic growth and that stability can come only when the entire process of social change and inclusion has run its full course. Any effort to short-circuit that is most likely to be a failure.

India has grown at a great pace and truth be told, the growth has been a result more of the right ingredients being in place than of any special efforts. But we are at a crossroad now. Growth needs a strong conscious push and the magic of the ingredients can no longer be relied upon. The question is this: do we continue the push and try to vault the country on a feverish growth path, or do we take a moment to observe where we have reached and recognize the gaping rich-poor divide that growth so far has brought? Should good governance, reduced government largesse, reduced corruption, increased sense of responsibility in citizens, duly enforced rule of law and strong faith of the people in that rule of law be the starting points now for any new inflection point strategy the country adopts?

I am not saying that the west is a model that should be idolised and accepted heartily. The point is that all great economies of the world have first set upon the task of achieving a revolution in governance and have then built on it to gain economic might and the welfare state. The democracy in fact, as championed in recent history by an infamous American president who managed to last 8 years, is not the only solution. The people of the world have evolved in their own ways. We need to acknowledge the diversity. We need to show maturity. China today is an icon of a semi-autocratic state-ordained form of governance and economics with a distinct communist flavour. The there are benevolent dictatorships & established monarchies, all doing a fine job of providing stable governance. So while north America has had distinct flair for democracy, Latin America has been rooted in autocracies, Europe has only barely shrugged off its baggage of monarchy while most of east Asia appears to follow some forms of the Chinese example. But the secret of their power has always lain in the deep rooted and well accepted forms of governance and social management that they have followed for ages.

India is a young nation, young to democracy as we practice now. Barely 60 years ago, we had a ruthless yet development friendly autocracy. And about a century before that, there was a hideous mix of monarchies, trader rulers, occupying forces and belligerent revolutionaries, all in a constant state of bloody war. Go back a further hundred years and there was absolute monarchy under a race then alien for most of India. The country has a chequered past. The only thing that probably remained unchanged through all of this was the systematised repression of many parts of the society as well as the geography. These imbalances cannot be overcome in sixty years. The folds in the fabric cannot be smoothened by anything less than the healing force of time and social evolution.

China struggled for a long period of its modern history trying to get this balance right. Latin America is still struggling and has no clue. Africa has just stepped out of the cradle, crawling on fours and is a hopeless case in the near future. The Middle East, including states like Pakistan and Afghanistan, is waging a full-fledged war with its own people with help from the constant Jewish irritant around Gaza. And so, is it really surprising that barring the blessings of the black diamond of the desert nations, none of these regions can show anything worthy of being called an economy. There is bound to be a reason. But if I am not wrong, it is stable & good governance. 

Governance can thrive on a fundamental force of trust and faith in it by the governed. Nothing short of that can be called governance. It is a farce and is fated to die, no matter how many painful years it might have persisted. And then, there can be many ways to reach the same God, as the nations of the world have shown. There is a lesson to be learnt by all who dream of economic might and the alphabet could be inclusion, equality and the rule of law. And if you are still unconvinced, consider this: can an athlete hope of winning the 100 m dash to glory when his body is not fit and healthy as a whole?