We should examine our underlying ‘theories-in-use’ if we want sustainable and inclusive growth in India and in the world.
The challenge of inclusive growth evokes a picture of four men in a boat. Two men at one end of the boat which is sinking into the water are bailing furiously. At the other end, rising into the air, two men are gloating, one saying to the other, “Thank goodness, the hole is not at our end!” In September 2000, at the UN Millennium Summit, 147 heads of states, rich and poor, signed a declaration to make poverty history. They established the Millennium Development Goals (MDGs) that specified the results required in eight areas by 2015. A mid-term review shows that the goals are unlikely to be achieved.
One part of the world is poor, yet to develop. The other is rich, and developed. The MDGs, as they should be, are aimed at improvement of conditions in the developing world, which is affected by poverty, inadequate education and health facilities, and environmental degradation. They broadly reflect the goals of inclusive growth that India is also pursuing. The richer parts of the world, at the other end of the boat, are expected to help the poor on compassionate grounds, and it is not surprising that their support is not as forthcoming as may be necessary. The alarms about climate change that began to ring loudly in 2007 with Al Gore’s ‘An Inconvenient Truth’, the Stern report, and the IPCC’s report, have made people realize that everyone, whether in developed or developing countries, is in one and the same boat. Climate change will affect everyone, even the rich at their comfortable end of the world.
Climate change has moved centre stage at all international gatherings that discuss the state of the world. Clearly, humanity cannot stay on its present path to economic growth—a path that has overused resources and created inequities. Now, more sustainable and equitable solutions have to be found. But they are difficult to conceive. Even perceptions of the pain caused by climate change and environmental degradation are not the same. The rich are worried about the melting ice-caps and the fate of the polar bears. They talk of carbon in the atmosphere. The poor have more down-to-earth problems. They have already run out of clean water sources to support human lives. Thirty litres a day is a good benchmark of need: five litres for consumption, 25 for hygiene. The average citizen in the US uses 500 litres a day, while many African countries have less than ten.
When the developing countries, in particular China and India, are told that they dare not follow the path that brought the West its comforts because it will aggravate the climate problem for everyone, there is a reaction, particularly from the Chinese. “You created the problem, so do not lecture us now,” they say. And they ask those who lecture them: “Are you willing to change your lifestyles to drastically reduce the amount of the earth’s resources you are using so that the developing countries can have a fair share of the depleting resources of the earth?”
There is no easy way out. At a conference in Sweden, an American remarked that nature itself would solve the problem which had been caused by more people living on the earth than it could support. The earth’s resources can support a billion people having the quality of life that people in rich countries have, he suggested. The other billions will die, he said facetiously. And, he added jestingly, “I intend to be one of the billion that remain.” He illustrated a point Mahatma Gandhi had made: The earth may have enough for everyone’s needs, but not enough for everyone’s greed.
His remark also illustrated a troubling mindset that makes inclusive development impossible: If the boat is sinking because there are too many in it, throw the others out, or at least stop them from coming on board! Pause a moment and consider. Is this not the same mindset which suggests that immigrants hungry for work should be prevented from coming to richer countries? That slum-dwellers should be evicted because they mess up cities? That people from poorer parts of the country should be stopped from coming into the metros? And that the developing world must be stopped now from enjoying the rich world’s way of life because it will ruin the climate that affects everybody?
By all reckonings, those who ‘have not’ have too little even to sustain their lives, whereas those who ‘have’ have much more than they need.
Changing Mindsets
We must change our mindsets if we want sustainable and inclusive growth in India and the world. For this, we should examine the validity and implications of nine underlying ‘theories-in-use’ driving prevalent approaches to economic progress. Propounded often, these nine nostrums could be retarding inclusive growth.
1. ‘First grow the pie before you share it’
This implies that the poor are asking the rich to give their wealth to the poor and that, therefore, the rich must be allowed to increase their wealth even more so that there is enough to go around. What the poor are actually asking is for a chance to participate equitably in the process of wealth creation. They want to get a share of the pie while it is growing. Not trickle down, but growing together. They point to the reality of cumulative causation in economies—that those who already have wealth, education, or power have the means to create even more for themselves. The poor want opportunities to create wealth for themselves, through access to capital, education, and income-generating opportunities, thereby helping to grow an even bigger pie.
2. ‘It is up to them: They should try harder’
This is a tricky one. The poor want to stand on their own feet. Therefore, it is up to them to make the effort. However, there are two assumptions in this statement that are not often questioned. The first is that the rich have obtained their wealth by hard work only. The second, that the poor are not trying hard enough. When those ahead, walking higher up the mountain, look back and see the poor behind them on the mountain’s lower reaches, struggling to make progress, they may fail to see the deep moats that the poor have to cross before they can come up to the slopes the rich are on.
These moats are the structural disadvantages built into economies and societies that prevent the poor (and others disadvantaged by history or geography) to have as easy access as the rich to capital, education, etc., to improve themselves. Some of these moats are deliberately built by those ahead to protect their advantages against the hordes behind—think of the physical wall being built across the US-Mexico border, or of criteria for employment that exclude ‘people not like us’! Often, these barriers develop over time as social prejudices: of whites about blacks, upper castes about lower castes, etc. Those behind have to cross these moats and it is not easy. The purpose of affirmative action is to acknowledge these moats exist and for those ahead to drop the drawbridges across them from their side so that those struggling behind can come across.
3. ‘Leave it to the private sector if you want public services to improve’
Citizens everywhere need basic services such as water, sanitation, elementary education, public transportation, etc. Fairly widespread experience in poor countries is that the government machinery which is enjoined to do so, does not deliver the required services: It is bureaucratic, insensitive to its customers, wasteful, and corrupt. Handing over such services to the private sector seems an attractive way out. There are many examples of improvement of services by the private sector. Very frequently, the story of telecom in India is cited as one such example of a huge success.
However, experience with privatization of public services has not been always good. Nor can it be. Because there is a conceptual problem in making private what is public. In 1989, primarily for ideological reasons, Margaret Thatcher privatized water utilities in Britain. The way it was done led to fantastic profits for the companies and huge performance-related payments for their directors. Between 1989 and 1995, customer charges jumped 106 per cent, and in 1994, water supply to 12,500 households was disconnected because they could not pay their bills. Meanwhile, profit margins for the companies increased by 692 per cent. The public was shocked because water, a public resource, had been privatized to line the shareholders’ pockets. In Manila, Buenos Aires, and other cities across the world also, experience with privatization of water services has been disastrous. Very often, the poor cannot afford to pay the price the private companies ask to cover their costs and make a profit.
By definition, a business enterprise is not a social service. Managers of businesses are required to run them in a way that improves profits. They have no obligation to give their products and services to those who cannot pay for them. They make money by serving those who pay more and shunning those who cannot pay enough. Unfortunately, the latter are those who may need the services the most. While a human being can live without a telephone perhaps, she or he cannot survive long without basic necessities such as water, sanitation, elementary education, and public transport to get to work. Therefore, the state, funded by taxes, must ensure that even the poor have access to these services to give them a chance to stand on their own feet. Even if it engages the private sector to assist in improving the efficiency of public service delivery, the state, which is accountable to its citizens, must play a strong role in regulating the delivery to temper the private profit motive with public service responsibilities.
4. ‘The business of business must be only business’
The triumph of capitalism over communism was marked by the defeat of communist government in Russia and other countries behind the Iron Curtain after the fall of the Berlin Wall in 1989. Thereafter the power of business corporations in societies everywhere, including India, has risen with the ascent of capitalism. Simultaneously, governments are being pushed back. Thus, an institutional gap is widening between the needs of societies that need to be met, such as those expressed in the MDGs, and institutions required to fulfil those needs. It may be ideologically correct to say that the business of business must be only business, but it is neither morally nor practically tenable any longer. Therefore, businesses must strengthen and support governments to fill those needs or take responsibility themselves.
The role of business corporations in society must evolve. Their performance must be gauged against a wider set of measures that reflect broader social needs, and not merely those of their investors. They must develop new models and install new processes to fulfil these broader societal requirements.
5. ‘Human beings act purely in their rational self-interest’
This is a bedrock principle of economics underlying most free market models. The interaction of selfish agents seeking to gain more, each for themselves, creates richer economies. Therefore, the theory seems to work. However, an excessive reliance on selfishness to motivate change does not produce compassionate societies nor, as innumerable studies have revealed, even happy individuals. Because the truth is that the theory is flawed. Human beings do care for others. They value the qualities of equity and justice in the organizations in which they work and in society. (In fact, recent experiments with monkeys and even rats have shown that they too appreciate equity and justice!)
The only way to reconcile this basic principle of modern economics with reality is to acknowledge that human beings may include concern for others as part of their own rational self-interest. As Mahatma Gandhi retorted when someone said that he was a totally unselfish person, “That is not true. I am very selfish because I work hard to get something that matters a lot to me even if others do not seem to want it.” What mattered to him was that the weak are justly treated and are helped to stand up on their own. Lyndon Johnson knew that he could not have passed civil rights legislation in the US if he presented it as something that would benefit the blacks alone. He sold it to the whites as a vision of a just society that they would be proud of—in other words, something that they would desire for themselves.
6. ‘Just do it’
The Nike slogan, ‘Just do it’, reflects the strong bias for action in economies that move ahead. There is a bias against reflection and against posing questions for which there are no easy answers because they waste time and time is scarce.
The problem with this is that the right actions to address the major problems the world is confronting today are not obvious. George Bush and his advisors thought they knew how to eliminate terrorism—‘We will get them wherever they are’, as Donald Rumsfeld said shortly after 9/11. Or how to democratize Iraq—eliminate Saddam Hussein and a grateful people will accept the American way of life.
Bold fixes often backfire because the systemic connections amongst the variety of interacting forces is not understood. The US Corps of Engineers drained the Everglades in Northern California by straightening the meandering natural water channels to run into the sea to make place for large farms. Man had improved nature—it was an engineering marvel. Now, decades later, changes in soil and water conditions and weather patterns have emerged that were not anticipated. And the engineers are back, trying to restore nature’s circular ways to save the environment!
7. ‘Uneducated people cannot make good decisions’
No doubt, those who have more information and insights into why things work the way they do will make better decisions about how to make improvements when desired. Thus, a mechanic, who knows how a car’s engine works and uses instruments to sense what is going on in it, can tune up the engine, whereas a layman will not know what to do.
The expansion of human knowledge with the Enlightenment since the 17th century has produced tremendous advances in various fields that have benefited humanity—in medicine, engineering, etc. As the amount of knowledge has increased, it has become more difficult for anyone to know everything. Therefore, science continues to split into many specializations and educated experts know more and more about less and less. Often, they do not understand how the larger system, into which their narrow discipline fits, works. Economists do not understand the minds of social and emotional human beings. That is left to sociologists, who do not understand the intricacies of economics. The ‘inconvenient truth’ about climate change is that it is the result of an accumulation of decisions by educated people mostly in the developed world.
Often, we experience the perils of specialization in our personal lives. When we feel a vague unease in our bodies, which specialist shall we turn to? Highly potent specialists can produce remarkable results provided they are working on the right problem—and in ways that do not cause problems elsewhere in the body! We miss the old-time general physician who could assess the situation and suggest which specialist, if any, we should go to, and also keep an eye on our overall progress. As specialization proceeds, holistic medicine is becoming more attractive because specialization may have gone too far.
Compartmentalized thinking is hazardous. It often results in fixes that backfire. Therefore, education must be redesigned to encourage more systemic thinking and intuitive insights. This must begin right at the beginning, in primary education. And experts at the top must learn to listen to those who have other perspectives so that together, they can understand the whole system before (overconfidently) advocating solutions.
8. ‘When everyone is in charge, no one is in charge’
Whenever there is need to make things happen faster, or need to scale up good work, we think of putting someone in charge. We feel this person should have full authority to cut through any opposition and to take decisions quickly. Thus, we conceive of ‘anti-poverty tsars’, ‘anti-terrorism tsars’, and ‘homeland security tsars’. Stop and consider for a moment. Tsars were considered to be tyrannical and mankind may be well rid of the idea. Must we resurrect the concept of a supreme, all-powerful authority whenever we want coordinated action on a large scale? Isn’t there another way to coordinate many actors than to impose an authority over them?
We need a new model of governance that is built upon the participation of many and not based on the need for one to dominate many. Inclusive growth requires that all can take charge of their own lives, and every nation of itself, while also taking responsibility for the consequences of their actions on the world around. The model of the tsar or the monarch with divine rights in its many variants, some more benign than others, like the all powerful chief executive officer and the commander-in-chief, are not solutions for an interdependent world in which none should (nor can perhaps) dominate others. However, the theory-in-use continues, past its sell-by date, affirming that the only way to get big results is to hand over authority to one powerful person. Hence, ‘tsars’ rule even in the US! And institutions of international governance like the UN and the World Bank are dominated by powerful nations.
It is a human right, enshrined in the concept of democracy, that those who are affected by any decision must be included equitably in the process by which the decision is taken. They must be satisfied that their interests will be fairly considered even if they do not participate in every step of the process. This is a fundamental requirement for inclusive growth.
9. ‘Either you are with us or you are against us’
This is an overly simplistic view of the world, in which the opposite of a wrong is presumed to be right. It is the world in black and white—a world of good guys and bad guys, a world of Left versus Right—whereas the real world is composed of many colours.
None of the theories-in-use mentioned above is always wrong. Nor are any of them always right. If ‘Just do it’ is not always right, neither is ‘Don’t just do it’. It is neither this nor that. Even opposites can co-exist. Therefore, one must respect other perspectives. This is the eternal truth of inclusion handed down by the sages over the ages.
Each of us has ‘theories-in-use’ inside our minds with which we make sense of the world. These theories sub-consciously guide our behaviors too. Whereas we cannot easily observe these subconscious filters at the back of our own heads, others can. And we can see the filters at the back of others’ heads! Thus we know what ‘sort of people’ others are, and which camps they belong to. And thereby we divide ourselves into ideological parties: capitalist and socialist; Left and Right; and so on.
Thus the world is ‘broken into fragments by narrow domestic walls’, as Rabindranath Tagore lamented. In the ‘heaven of freedom’ he prayed for, people would transcend these walls, and come together. We can: if we open our minds and try and understand where others are ‘coming from’. And why they believe what they believe. If we respect them, they may respect us. Together then, by combining our perspectives, we can understand the complexities of the world more completely. And together then we can shape the world towards what we all would want.