Economies everywhere have been severely shaken by Covid19. The only ‘vaccine’ that medical experts could prescribe, until a vaccine safe for humans is developed, was enforced physical separation of people to prevent the virus spreading. Meanwhile, extensive trials of vaccines are underway to ensure they will not have harmful side-effects.
Tragically, the side-effects of the untested treatment already prescribed, i.e. lock downs and physical separation, have damaged many systems on which humans depend for their well-being. They revealed the fragility of public health systems of many countries. Supply chains to provide essential supplies, even for medical needs, were broken. Diversion of medical resources for Covid prevented treatment of patients with other ailments. Livelihoods were disrupted when people could not go out to work and business stopped. Many, living on the edge, slipped into starvation.
The damage is not over. Malnutrition of children will stunt their development. Schools have not been able to open properly. The disruption of education may affect the further development of well-off children too. Less well-off people have suffered the most. Inequalities within societies, which were already high, have been exacerbated.
Many pre-existing conditions, that GDP growth numbers did not reveal, required treatment before Covid. Realizing this, the UN’s 17 Sustainable Development Goals (SDGs) were adopted in September 2015. They cover a wide range of problems—inequalities in economies, persistent poverty, poor education and health services, as well as an environmental crisis. The goals describe the morbidities that societies and economies were suffering from before Covid struck them. They were too weak to tolerate the shock of the lock-down medicine.
Global institutions created after the Second World War to solve global problems cooperatively, such as the UN that has led the adoption of the SDGs, and WTO which morphed from GATT, have been struggling to keep the world united. When ‘globalization’ accelerated with larger flows of trade and finance across national borders since the 1990s, these institutions have been unable to keep the world united. The WTO is in limbo. The WHO, required now to coordinate responses to the Covid pandemic, is caught in a crossfire between the US and China. Mismatches between the capabilities of institutions and the global problems they must address in this century have been starkly revealed.
A new way must be found. Economists are searching for a ‘new normal’. Paraphrasing Albert Einstein, he said it is madness to try to solve intractable problems with the same approach that has caused them. Clearly ‘Covid time’ is the time to think why prevalent approaches for problem solving are inappropriate for solving complex global problems.
Humanity is facing two crises at the same time: a governance crisis and an epistemic crisis. The two are intertwined.
An epistemic crisis: the break-down of ‘systems thinking’
Before jumping to any solution, one must first understand the problem. The problem policymakers (and experts) have in the 21st century is that there are many problems, and all must be solved simultaneously. The problem cannot be simply broken up into easier to solve pieces. Solutions to environmental problems that aggravate problems of livelihoods cannot be good solutions. Or solutions to economic problems that aggravate environmental problems. Solutions to increase GDP which also increase inequity will not help to make the world better for everyone.
Scientific advances since the European Enlightenment have multiplied the numbers of specialists. An abundance of experts now available to solve diverse problems should be a blessing. However, their abundance has become a problem because experts are too narrowly focused on separate pieces of the system: they are not able to comprehend the whole system. Specialists in diseases of the heart do not understand sufficiently the effects of their interventions on other systems in the human body, and patients must turn to other specialists for treatment of the side-effects of the solution to their heart problems. Often, they end up with a mental health specialist to help them manage their confusion and depression, and their anxiety about the cumulative cost of their wonderful treatments.
The economy, society and ecology are integrated in a system. Changes in any one of these components will affect the others. Components of systems must be in harmony with each other for the system to remain healthy. Lock-downs to prevent Covid are an example of unintended consequences of a good solution which were not foreseen because the whole system was not kept in view. Two examples from India also illustrate the harms that can be caused to systems by policies designed by specialists.
Clean air
An unintended benefit of the economy’s wheels grinding to a halt, with the severe lockdown imposed in India, was that Delhi’s residents saw clear blue skies in the day and stars at night which they had not seen for years. The severe air pollution Delhi has been experiencing in the last decade is an example of good policies combining to produce bad effects. Ever since mechanization was introduced in the 1980s to improve farm productivity, farmers in Punjab have burned the paddy stubble the machines leave. Later, alarmed by the impact thirsty paddy growth was having on dwindling ground water resources, the government passed the Preservation of Subsoil Water Act in 2009. It stipulated that farmers postpone by one month the sowing and transplanting of paddy so that it was closer to the onset of the monsoon. This reduced the need for drawing water from underground for the transplanted paddy.
However, the burning of the stubble post-harvest also got postponed by one month. It now coincided with the onset of winter in the North when wind movement is low and atmospheric moisture content is also high. Thus, two good things together: the improvement of productivity of agriculture with mechanization, and management of water resources, has produced the unintended consequence of Delhi becoming the most polluted city in the world! Sadly, as the wheels of the economy have begun to turn again, pollution is back in Delhi’s air. The old normal may be returning.
Education of girls
The other example is from rural Rajasthan. Education of girls gives many benefits to society. Retention of girls in schools in Rajasthan’s poorer, water scarce districts has increased in the last ten years with concerted efforts by the government and NGOs to improve education. Also, water conservation programs reduced distances women have to carry water to their homes, thus pressures for adolescent girls to stay home to help their mothers reduced. Two good things together—better education and better water management—produced the desired outcome. However, it is noticed in the last two years that girls have begun to drop out of secondary school. Investigations reveal that the addition of another good program, Swatchh Bharat, to provide toilets in homes was the cause. The toilets required more water to be brought home, and so mothers needed their daughters at home again.
A property of complex systems is that many good things interacting with each together may unwittingly produce bad outcomes. The epistemic problem is, experts mentally break complex systems into parts and then try to improve them separately. Thus, economists worry about the economy, and sociologists about society, and ecologists about ecology. And they quarrel with each other. Economists think ecologists are coming in the way of growth. Sociologists say economists do not understand that humans are human beings and not commodities in labour markets.
In the prevalent paradigm of managing complex systems in governments and large corporations, each part of a complex system is managed by specialists reporting up to the top. There, they try to coordinate the whole system. All have their programmes and their budgets and each passes down instructions to its subordinates in the localities who are responsible for only a part of the system.
A crisis in governance: experts taking power away from the people
Recovery from COVID-19 is an opportunity to create economies that are more resilient and fair. Two architectural principles must apply.
The first principle is, economies of “scale” should be replaced by economies of “scope”. A complex global economy in which local producers obtain scale (and lower costs) by supplying products for global markets is vulnerable to shutdowns anywhere. Local economies that have a variety of capabilities within them, albeit on smaller scales, are more resilient. Therefore, local economic webs must be strengthened, in preference to global supply-chains.
COVID-19 has settled, for now, the debate between free-trade evangelists and advocates of industrial policy. The “Make in India” program of the Indian government, which was dismissed by free trade economists as a reversion to protectionism, has become a necessity — to maintain supplies of essentials and to create employment for the hundreds of millions of Indians with fragile incomes who have been badly shaken by the lock-down of the Indian economy.
The second principle is, local systems solutions are essential for global systemic problems. Garrett Hardin had coined the expression, “The Tragedy of the Commons”, in 1968, for the proposition that a resource that belongs to everybody will not be cared for by anybody. This supported policies to privatise public property, ostensibly for the benefit of everybody and became the dominant school of economics from the 1970s onwards. “Capitalists” often cite Hardin in their quarrel with “socialists”.
Elinor Ostrom, who was awarded the Nobel Prize for economics in 2008 (the first woman economics laureate, after 62 men), offered a different explanation for the tragedy of the commons. She argued that common resources are well-managed when those who benefit from such resources the most are in close proximity to them. For her, the tragedy occurred when external groups exerted their power (politically, economically or socially) to gain a personal advantage. She was greatly supportive of the “bottom-up” approach to issues: Government intervention could not be effective unless supported by individuals and communities, she asserted.
The ‘new normal’
The economics profession rules the shaping of public policies around the world. Since the financial crisis in 2008, which economists could not predict, and which was evidence that their models were incomplete, they been searching for a ‘new normal’ for the global economy. After Covid it is clear that, even if they could find a new model to sustain economic growth, their model would be incomplete.
Hardin’s ‘Tragedy of the Commons’ leads to the conclusion that human beings are incapable of managing something which does not belong to them personally. It is an extension of the belief that humans are purely rational and self-interested actors. Whereas it has been known to poets and politicians for ages that humans have passions and emotions too. Moreover, what the world needs now is humans who care about their global commons.
Economists explain that welfare is produced for everyone by ‘an invisible hand’ even when everyone is purely self-interested. Ostrom made visible some principles by which the invisible hand works. The rules by which humans agree to govern their affairs, and the powers they assign to institutions to implement the rules on their behalf, are systems of governance created by humans. Institutions of electoral democracy and concepts of limited liability corporations are creations of the human imagination made concrete. Now institutions must change rapidly now to improve the health of societies, economies, and the environment, to achieve the SDGs.
Changes must be made in the design of business institutions: their purpose must not be purely the business of making profits for investors; they must also account for their impacts on the environment and social conditions.
‘Government of the people, for the people, and by people’ is the essence of democratic governance. However, even where there is constitutional democracy with equal voting rights for everyone, rich and poor, men and women, and whatever their religion, as India has, governance is not by the people. People are managed by experts, who are supposed to know what is best for the people, and who must apply their expert knowledge to find solutions for the people. This is the common approach, whether the government is a totalitarian one as the Soviet Union was, or a democratic one like the US where the President’s councils of expert advisers design policies.
As explained before, this is the wrong approach for solving complex problems which manifest in different shapes in different places. For example, environmental problems combine with livelihood problems in different ways in the Himalayan mountains in the North of India, in the dry lands of Rajasthan in the middle, and in the lush coastal regions of Kerala in the South. Therefore, local systems solutions are necessary for such global systemic problems. The solution is, responsibility for the governance of complex systems must be devolved to communities in their localities. However, not only politicians, also experts at the top, are reluctant to let go of their power. They claim that the locals will not have the capability to manage, and so the centre must take on the burden of managing the locals.
Redesigning the architecture of global governance institutions
Resentment of elitist experts who look down on them as they govern them is a reason for the rise of populist movements in many countries. It caused Brexit in Britain and the election of Donald Trump in the US. In India, Prime Minister Modi declared, ‘We need hard work, not Harvard’.
The Indian Constitution requires power to be devolved to elected bodies in towns and villages. It has not happened in practice even in seventy years since the Constitution was adopted in January 1950. India’s economy has been growing quite well since the 1990s, after India joined the global economy which was also growing well. For many years India’s economy was the fastest growing large economy following China’s. However, India’s track record of improvement of social and environmental indicators has not been good. For India to achieve the SDGs, India’s approach to governance must change. Solutions must be found and implemented by communities, and not by experts in Delhi or in the state capitals.
India changed the charter and name of its central planning institution in 2014. The old Planning Commission was replaced by the National Institution for Transforming India (NITI Aayog). The top-down budget controlling powers of the Planning Commission were withdrawn. NITI was chartered to build capacities for governance in the states and in local bodies, and to promote cooperative federalism.
Names are easy to change, behaviours more difficult, and it is never easy to give up power. It has taken a while for transformations in NITI to show up. Its innovative ‘Aspirational Districts Program’ (ADP) gives great hope. Two years ago, NITI focussed on 112 of the country’s 640 districts. These are the furthest behind in terms of the SDGs, and economically poorest too. Partnerships were formed in each district between local government functionaries, NGOs, and corporate philanthropies. The districts were provided score-cards of where they stood with respect to conditions that mattered to the people—health and nutrition, education, agriculture and water resources, financial inclusion and skill development, and basic infrastructure. NITI is playing the role of cheer-leader and score keeper, and also provides a platform for sharing lessons learned.
An evaluation of progress so far by independent Indian and US think tanks has shown the efficacy of this approach of partnerships on the ground to solve complex systemic problems. The aspirational districts are improving much faster all round than they were with the previous top-down expert driven approach. The reasons for some amongst them improving even faster than others are found to be: the facilitative role played by the local government leaders; and the willingness of experts from the philanthropies to trust the people to find the best solutions rather than forcing best practices from elsewhere onto them.
This turns on its head the belief that when problems are large and global they need an expert-driven, central organization to solve them ‘on scale’. Governance within countries must devolve further down, not move up, to solve complex problems. And freedoms to govern must move down to countries from international bodies.
The role of central bodies within countries, and internationally too, must be to help locals build their own capacities for solving their problems. Central bodies can convene the locals to share learnings, and to deliberate on rules for governing their collective commons. They must resist the temptations of power—both political power as well as expert power.
The G-20 is in a special place amongst global institutions. It does not have a long history: it is young. It does not yet have a rigid structure nor a large body. It can shape itself to be a catalyst of change in global governance—even guiding changes in other global institutions like the WTO, the UN, and the Security Council. Because, as Einstein said, humanity will not be able to find a new, harmonious and sustainable normal with old mind-sets of governance.
(This paper was published in the Global Solutions Journal for G-20)
https://www.global-solutions-initiative.org/flipbook-210114_gs_journal_6/?fb3d-page=150