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Ideas that hinder inclusive growth

Ideas that hinder inclusive growth
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First Published: Tue, Jun 01 2010. 12 21 AM IST
Updated: Tue, Jun 01 2010. 12 21 AM IST
Poverty numbers are being debated in the country. Demands for rights, education, food and health are in the air. And the call for affirmative action in the private sector has risen again. India’s gross domestic product growth will grow, no doubt, hopefully even at double-digit rates. The question is how to make it more inclusive. Mainstream “market” economics does not provide answers, as the Commission on Growth and Development headed by Nobel laureate economist Michael Spence admitted in its 2008 report.
New theories of economics and development are required to accelerate inclusion along with growth. This requires an examination of some nostrums that are often heard whenever the needs for affirmative action and inclusive growth are discussed. These nostrums reveal underlying mindsets, the implications of which must be examined. Propounded often, they are blocking new ideas and retarding inclusive growth. Here are three such:
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. People should work harder and not ask for handouts
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 an access as the rich have 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—such as the physical wall being built across the US-Mexico border, and 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 draw-bridges across them from their side, so that those struggling behind can come across.
3. Human beings act rationally in their self-interest
This is a bedrock principle of economics underlying the free market model. In this model, by the interaction of selfish agents seeking to gain more for themselves an economy becomes richer. 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 fairness in their organizations and in society.
The only way to reconcile this bedrock 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 the Mahatma 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 the 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.
An inclusive India requires a shared vision of what we want India to be. The more passion there is for this vision, the more power there will be in the process of change. The more this is a shared vision, the more we will align our efforts to make the changes necessary. Shared visions cannot be created merely by presentations of numbers and intellectual debates. They require deeper dialogues: for a meeting of minds and hearts.
Arun Maira is a member of the Planning Commission
This is the first article in a two-part series. Comments are welcome at theirview@livemint.com
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First Published: Tue, Jun 01 2010. 12 21 AM IST