Rediff.com  » Business » Between democracy and growth

Between democracy and growth

By R Jagannathan
July 01, 2003 16:40 IST
Get Rediff News in your Inbox:

The Prime Minister's successful trip to China has brought forth inevitable comparisons between the two countries. Most of the comparisons have been unfavourable to India.

Whether it is per capita income, social indicators, infrastructure, manufacturing competitiveness or FDI, China seems to have achieved more than India. Underlying these comparisons is the question: does democracy inhibit growth?

The Economist magazine, in a condescending and vacuous analysis, dismisses excuses about democracy slowing down growth. It is corruption and bureaucracy that are holding India back.

Former finance minister P Chidambaram, a strong votary of reforms, seems to buy this line. According to him, there is no growth penalty in being a democracy. Rather, if  we had better democracy, we would grow faster.

I think it is commonsense to accept the reality that democracy does indeed slow down moves towards economic efficiency. True democrats have a problem accepting this. If freedom is seen as an impediment to faster growth, arguments favouring autocracy get strengthened. Maybe they do, but denying the truth is not going to make totalitarianism vanish.

Democracy is not a system designed for fast progress. At least not all the time. Its institutions are intended to check the excessive concentration of power in a few hands.

When it comes to making painful economic choices, democracies take longer to decide precisely because so many people need convincing and vested interests need neutralisation.

The history of the Asian tigers tells us that higher growth and reforms were always more easily pushed through in autocratic environments -- South Korea, Singapore, Philippines, Hong Kong, Taiwan, Malaysia and China. When these countries were on the road to tigerhood, they were all autocracies. Some still are.

On the plus side, democracies are less likely to make gigantic mistakes -- of the Great Leap Forward kind. As Amartya Sen has observed, democracy has ensured fewer famines. We need democracy for its pluses, but cannot wish away the minuses.

India is perhaps one country, which is now on its way to proving that democracy need not be a permanent handicap when it comes to economic growth. But you cannot avoid the mis-steps and apparent rudderlessness of the interim.

The right way to analyse the last few years of bumbling coalition governments is to see them as an unavoidable prelude to a broader consensus on reforms. It would have helped if we had had a strong, widely accepted leader who also had strong, persuasive powers. He could have helped forge a quicker consensus.

Perhaps, that is what Vajpayee may still become if he can get the Ayodhya issue out of the way. He may be nudging 80, as The Economist derisively points out, but nothing in Indian history suggests that age cannot achieve what youth can.

In the flush of youth, Rajiv Gandhi made an absolute hash of reforms even with a steamroller majority. Which again proves the point that getting people committed to a course of action will take time, effort and ceaseless communication.

Only extreme adversity helps push change faster, as it did in 1992 when Manmohan Singh launched big-bang reforms. In happier times, traditional dissenters emerge from the woodwork to slow things down.

If one were to ignore the discordant cacophony in Indian politics, the forward movement in the last five to 10 years is actually considerable. Oil has been substantially deregulated. Power, after false starts, is now  at least heading in the right direction.

Telecom is already a huge success from the consumer point of view, though there are still blips on the horizon. The highway development programmes are panning out. Many Indian businesses -- from autos to pharma to infotech to even manufacturing -- are transitioning to a global level.

Corporate transparency is increasing, and corruption is reducing, if not disappearing altogether, in all the areas where there is competition. The only area where corruption is not reducing is in politics.

The pressure for that change will come from a combination of business interests that get threatened by political indiscipline, and widespread public outrage. But the latter is not happening because arguments favouring the downsizing of government have got confused with empowerment issues.

For example, the move to cut government jobs is unlikely to be accepted easily by historically disadvantaged groups like the Dalits who see the capture of political power as critical to their economic interests.

There is a lot of hard convincing to do here, and it can be done only if the private sector can show that Dalit interests can be served better elsewhere.

In sum, India need not be apologetic about its democracy or its slower rate of change. One is a part and parcel of the other. This does not mean that we cannot grow faster; but it does mean that we cannot do so without convincing a whole lot of people about its importance. That's a important goal in itself. Otherwise, why bother being a democracy?

Powered by

Get Rediff News in your Inbox:
R Jagannathan
 

Moneywiz Live!