Inaugural lecture on India’s Development Challenge and Strategy Options
(India International Center, August 23rd2023)
I am honored to be invited by the IC Center for Governance to begin this series of discussions on India’s Development Challenge and Strategy Options.
There should be no doubt that India has development challenges and India needs new strategies. Even though some statisticians are trying to prove, with numbers, that we are doing well. It must be noted of course that other statisticians say they are wrong.
Not only India, but the world also needs new strategies to guide its progress. The world is facing challenges that the old strategies of progress are unable to resolve. In fact, these intractable problems have been created by the persistence of the old strategies. The problems include violent conflicts within countries and amongst them, run-away climate change, and increasing inequalities within countries and amongst countries. The range of systemic challenges is described in the 17 SDGs. All countries are facing these challenges, albeit in different forms and in different degrees.
The characteristics of these challenges is that they are systemic, and they are inter-related. You cannot solve one alone. For example, removing carbon from energy systems in haste can make livelihoods even more difficult for many people. Trying to solve the problem of sanitation on scale in India, before solving local problems of water, has affected the education of girls in many districts of the country, which is an imperative for all-round social progress.
Systems are interconnected. Fixes in one can back-fire and make others worse.
Albert Einstein said, “The significant problems we face cannot be solved at the same level of thinking we were at when we caused them.” Einstein led a revolution in the physical sciences in the twentieth century along with other Nobel laureates—Nils Bohr, Werner Heisenberg, and others. With radically new concepts of uncertainty and relativity, they over-turned the paradigm of Newtonian mechanics which had ruled science and technology for two centuries.
Similarly, we need new paradigms for development policy and for economic growth. We must not carry on with the strategies of economic growth we have been pursuing in the last fifty years.
Underlying all global economic, social, and political problems are two universal problems:
1. The sustainability of our Natural environment and climate change
2. Inequality in powers of governance at international, national, and local levels. People must be included in the decisions that affect their lives
In fact, the problem of climate change which affects everyone cannot be solved without addressing inequality in governance. We need new ideas in economics and new models of governance to stop the Tragedy of the Commons and to obtain the Promise of our Commons.
India’s challenges
How is India doing? I was invited by the Prime Minister of India in 2009 to serve on the Planning Commission as a Member. I was surprised by the invitation; but delighted of course. I was delighted because I had always wanted to serve the country. I was surprised because I was not an economist, or a former civil servant. Dr. Manmohan Singh explained that he had selected me precisely because I was not a trained economist or civil servant. He said we needed some out of box strategies because India’s economic policies and five-year plans were not solving the country’s basic problems. Economic growth was high no doubt. In fact, India had for some years been “shining”, as the NDA had claimed, and was “the world’s fastest growing free market democracy”, as the UPA had. However, the growth was not inclusive, nor environmentally sustainable. What India needed, he said, was a plan for faster, more inclusive, and more sustainable growth. And this was to be the theme of the 12thfive-year plan.
Dr. Singh gave me the challenge of thinking about economics, and about policymaking, from an outsider’s perspective. The Planning Commission also gave me a perch from which I could listen to many views and learn from diverse people. I learned from development economists in other countries, and from economists in my own country who the Establishment shunned. I listened to policymakers and planners in our government and to policymakers and planners in other countries. And, most of all, I listened to the people of my country in various forums, to their suggestions for how growth could become more inclusive and sustainable. When my five-year term with the Planning Commission was over, with the change of government from UPA to NDA, I wrote what I had learned in my book, An Upstart in Government: Journeys of Change and Learning.
I began my learning journey in the Planning Commission in 2009, at a very interesting time in the history of economics. A global financial crisis had caught economists and policymakers in the West unprepared. Queen Elizabeth felt compelled to ask a gathering of economists in London why governments should keep turning to economists for guidance when they don’t seem to know what is going on?
A scramble began to find a “new normal” for economies. A high level, international commission chaired by Noble Laureate economist Michael Spence brought together 22 policymakers, academics, and business leaders to examine various aspects of economic growth and development. Montek Ahluwalia, Deputy Chairman of India’s Planning Commission was a member. It published its Growth Report in 2009.
Spence, presenting the findings in New Delhi, said that prevalent liberal market economic theories explained how to make economic growth faster. But they don’t explain how to make growth inclusive at the same time. The models assumed that macro growth lifts all boats; and wealth will trickle down as it accumulates. However, trickle down does not happen automatically. In fact, as Thomas Piketty and Oxfam revealed, wealth had been flowing upwards since the 1990s with the ideology of “leave it to the market and get governments out of the way” that pervaded economic policies from the 1980s.
Assessments of the growth patterns of countries in 2011-12 revealed that the growth of the Indian economy, though amongst the fastest in the world then, was the least environmentally sustainable, and the least inclusive too. The growth of countries in South Asia, S.E. Asia, and BRICS, was compared using the international Sustainable Economic Development Assessment framework (SEDA). It measures growth along three tracks: economic growth, inclusion in growth, and environmental sustainability. The assessment revealed that, with every unit of GDP growth, India’s natural environment was being damaged more than in all other countries. Ground water levels were dropping fastest in India; soil quality was degrading; and Indian cities were the most polluted.
Every unit of India’s GDP growth was also producing the least number of additional jobs compared to all these countries. This was an ominous warning. With its vast population of young people, who were expected to provide a demographic dividend to India’s growth, the economy must generate jobs for them. Unless they are employed and earn sufficiently, they will not provide the required big boosts to consumption and savings.
Sadly, the warnings from SEDA were not heeded. The paradigm of first more economic growth, and then we will see how to redistribute its benefits, continued. India’s economists continued to follow the global economic paradigm. More capitalism, less socialism. GDP has grown but low growth of farmers’ incomes and overall under-employment have become the Achilles Heel of the Indian economy.
I will highlight three insights obtained from research into why economists and policymakers have been unable to find solutions for growth which is inclusive at the same time as well as environmentally sustainable.
Wrong models
The first insight is that economists are using wrong models.
A project was undertaken by the Planning Commission in 2009 to develop an up-to-date model of the Indian economy. Several research organizations in India, each of whom had a model of the economy, were invited to share their models, with the expectation that a combination of them could provide a more reliable guide to India’s policymakers and economic forecasters.
Economists aspire to model complex socio-economic phenomena in the way physicists model natural physical phenomena. Using mathematical equations derived from their models, physicists can make remarkably correct predictions. There were two physicists in the Planning Commission in 2009—Dr. Kasturi Rangan, former chairman of ISRO, and me. Montek Ahluwalia invited both of us to a meeting in which the economic research organizations presented their models. Montek wanted to know if we could help improve the modelling process.
Dr. Kasturi Rangan and I were surrounded by economists. Equations and numbers flashed across the projector screen. We wondered what the models were trying to represent. We whispered to each other that the economists were lost in the trees and had lost sight of the forest.
A similar meeting had been organized at the Santa Fe Institute in New Mexico in 1987. There Kenneth Arrow and Brian Arthur, Noble Laureates in economics, had invited Murray Gell-Mann and Phil Anderson, Nobel Laureates in physics, to compare notes about methods of modelling complex systems. An insight from the meeting was that economists are unable to get a handle on the behaviour of economies because their models are fundamentally flawed.
Let me explain this.
There are four types of complex systems.
1. Rigid complex systems
2. Complex adaptive systems
3. Complex self-adaptive systems
4. Complex chaotic systems
Engineers design very complex systems, like automobiles and aeroplanes, with hundreds of thousands of interacting parts. Yet, they can forecast the behaviour of the systems they design, and they can also design ways to control them. This is what economics policy makers also try to do.
However, there are two fundamental differences between engineered systems and economies. One is that machines do not have the ability to evolve themselves. Whereas systems in Nature, as well as social systems, have an ability to evolve by themselves without an external designer re-designing them. Systems in Nature and socio-economic systems are complex adaptive systems, not rigid systems, as machines are.
But there is a difference between complex adaptive systems in Nature and complex adaptive systems formed with human beings in them. Natural systems, like animal species, evolve themselves in response to their external environment. They do not have any ambition to redesign and exploit the natural systems around them. They are happy to live and let live.
Physicists make models of complex systems in which atoms and molecules and bits and bytes have no emotions. Economists also presume that the units of social systems, i.e., human beings, are purely rational. This makes it easier for them to make mathematical models. But Human beings have passions and ambitions. By excluding these messy realities, economists can make their equations compute. However, their equations can never predict what the future will be. American statistician Nate Silver points out that forecasts of GDP growth since 1968 by the Survey of Professional Forecasters have been rights only 50% of the time. No better than tossing a coin.
The mathematised models that economists apply cannot provide solutions for complex social problems. They are founded on the wrong model of complex systems. Economics needs a paradigm shift. It must be founded on a model of a complex self-adaptive system, in which power and politics are forces that change societies, and also change the structures of economies.
Systems Action
New paradigms may arise from new thinking. But new paradigms become reality by actions. The prevalent paradigm for acting on complex problems is to break them into parts and improve the parts separately. Governments are broken into silos, each dedicated to a complex problem, such as health, education, industry, labour, urban and rural systems. Corporations also break themselves into verticals to make management easier. Large NGOs do the same. Thus, the pervasive theory for action on scale in all sectors is to break complex systems apart. And then ministries and departments, each focused on only one part of the system, compete with others for budgets and recognition.
The health of any complex system can be improved only when all the parts work harmoniously together. Therefore, new models of organization are required to solve the complex problems spread in the 17 SDGs, and to turn the Tragedy of the Commons into the Promise of the Commons. These models must be founded on the principles of cooperation not competition, and integration not division.
In 2009, Elinor Ostrom, a woman, was awarded the Nobel Prize in economics. She was the first woman after sixty men had already won the Prize. Moreover, her work was unusual and not considered a part of mainstream economics. She was recognized for her research, most of it in less developed countries, into how communities govern themselves.
Ostrom was invited to the Planning Commission soon after she won the Prize. She said that her insights had been obtained from research with communities in India. In fact, she had come to India on that trip for meetings with local community organizations and NGOs.
Let me step back to the SDGs. The SDGs describe 17 sets of global problems, including several types of environmental, social, and economic problems. All 17 problems do not appear in every country, and when they do, they do not appear in the same form. For example, problems of the oceans are immediately life-threatening to island countries but not to land-locked countries yet. Problems of inadequate opportunities for decent work (SDG 8) are much more acute for countries in the Global South than in the rich North.
No country has only one of the SDGs problems. Every country has at least six or seven. Let me do a little mathematics. In how many different forms can a permutation of seven problems out of a possible seventeen appear in a global system? The answer is 98 million. Let’s focus and simplify a bit. Let’s say only four SDGs require simultaneous attention in any country, state, or city. This will reduce the number of possible configurations of the global problem to 57,000. Clearly one solution cannot apply everywhere. One size does not fit all.
The mathematics of complex systems proves that local systems solutions is the only way to solve the complex systemic problems we must urgently solve very urgently. The present theory-in-use of top-down problem solving is conceptually flawed. It does not matter how smart the expert or manager on top of the system is. Complex systemic problems that appear in many places require local systems solutions cooperatively found and implemented by communities.
Listening
So far, I have given two imperatives for meeting India’s development challenges. The first was a new paradigm of systems thinking. The second, a new paradigm for systems acting. Let me share the third now.
A child’s honest observation is often a sharp wake-up call, as was a child’s observation in the fable of the emperor’s new clothes that the emperor, strutting proudly before his people, was naked.
My grandson, Viren, who lives with his parents in the USA, visited us in India twice. Once in 2008, when he was five years old, and I had not yet joined the Planning Commission. The second time in 2010, when he was seven and I was in the Commission.
On his first visit he was troubled by some very visible indicators of poverty in India. He saw people sleeping, cooking, and eating on the roadsides in New Delhi, India’s capital city. His mother explained that there are lots of poor people in India, who do not have money to live in a house with bedrooms, a kitchen, and bathrooms which richer people like his family could in the US or his grandparents could in India.
Two years later, when he was seven, his family visited us again. I had been in the Planning Commission for a year then. We drove along the same parts of Delhi once again. Viren exploded. “What is the government doing? Counting daisies!’
His father asked him, ‘Counting daisies? What do you mean?’ Viren replied, ‘There are so many poor people. Does the government know? Why is the government not doing anything for them?’ It was a surprising observation because the Planning Commission was engaged in a public debate then about how many poor people there were in India and where the poverty line should be drawn. His father said, ‘Viren, pipe down! Dadaji, your grandfather, is in the government now. He is in the Planning Commission’.
When he returned to his school in the US after his holiday in India, Viren wrote a short book on the Planning Commission of India. He speculated on why the government was not doing enough to improve the lives of poor people in the country. His book was a subtle piece of advice to his grandfather and to the government of India.
He concluded his book with a description of what, in his mind, the Planning Commission should be, but was not. He wrote, “The Planning Community (he even referred to the Commission as a Community) is a place where all the poor people of India can come, and there will be someone there to listen to them, and then they will not be poor anymore.”
I have reflected deeply on Viren’s child-like, yet profound, advice. Poverty has material dimensions. But poverty has social dimensions too. When people are listened to, their dignity is restored. Their views are respected. They feel included in the governance of the system.
The world is being divided into fragments by narrow domestic walls, as Gurudev Tagore. Said. Knowledge has been broken into fragments of specialised silos. People are not listening to each other across the walls. Higher knowledge in any science means knowing more and more about less and less. Experts in economics don’t listen to experts in other social sciences. Policymakers don’t listen to the people. Social media, now de-humanised by artificial intelligence, has torn the social fabric apart. It is disconnecting human beings from themselves and from each other.
Economists, and other experts attempting to solve complex developmental problems are not listening to people. People have been converted into numbers in their models. The models are out of touch with human realities.
Our Prime Minister has coined a new alliteration for India’s destiny this Independence Day: It is Democracy, Demographics, and Diversity.
Our Diversity is a fact. Our Demographics is a fact too, not easily altered. Democracy is an aspiration. The essence of democracy is the willingness of all citizens to respect citizens who are not like themselves. To listen to them respectfully and to take care of their needs also, not only their own selfish desires.
Our Demography can be a dividend if all young people are engaged in dignified work with sufficient incomes. On the other hand, our Demography can be a disaster for the economy and also society if young people do not have dignified work with sufficient incomes. Their frustrations can drive them to violence. We are seeing many signs of this, in the increase in thefts and rapes and brutal murders of older persons in our cities. And in the ease with which youth are becoming fodder for campaigns of communal hatred.
Our rich Diversity, and our aspiration to remain a Democracy, will produce a demographic dividend only if development becomes more inclusive. Systems science says that devolution of governance to local levels in substance, not only in form, is the only way to make growth more inclusive and sustainable. Therefore, I would change the three Ds for India’s development strategy, to ensure that our Demography produces a dividend, and not a disaster, to Demography, Democracy, Diversity, and Devolution for Development. 4D for D. Demography, Diversity, Democracy, and Devolution for Development.
I conclude by restating the three imperatives for meeting India’s development challenges.
1. An application of the science of complex self-adaptive systems, and with it a reform of economics
2. Local systems solutions cooperatively developed by communities to solve global systemic problems
3. Listening to people not like ourselves
Listening may seem like a very simple thing. So is breathing. Yet we know that the practice of good breathing can tone up the very complex system of the human body and mind. Similarly good listening to people not like ourselves will tone up complex social systems.
It is a time to heal society. Each of us knows a truth, but not the whole truth. We must learn to listen to people who are not like ourselves. Listen to why they think differently to us. That way we will see the world in new perspectives and understand the system around us. To strengthen our democracy we must listen to what matters to people not like ourselves, and together create a world that is good for everyone.
Thank you for listening to me.
Arun Maira
23rd August 2023