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Why Kerala is a development model and Uttar Pradesh a basket case

One of the most striking features of the Indian economy is its sheer diversity. Not only do income levels vary widely across states but other socioeconomic attributes such as fertility and literacy levels also vary dramatically across states. Such large intra-country variations in the world’s largest democracy have spurred several social scientists to try and locate the roots of the divergence.

Over the years, academics have come up with different answers to the puzzle. Some of the answers emphasize the role of social divisions, others point to geography and culture, and still others emphasize the historical evolution of economic institutions. Yet, the complete answer to the puzzle has been as elusive as the Holy Grail. A new research paper by US-based political scientist Prerna Singh points to a novel explanation for inter-state differences in social outcomes: the role of sub-nationalism.

Singh shows the level of group solidarity within states, or the spirit of sub-nationalism, has a significant influence on social welfare policies of state governments. Other things (such as the level of inequality and political competition) remaining the same, the greater the spirit of sub-nationalism, the higher will be the commitment to improve health and educational outcomes, writes Singh.

She argues that in states where the elites have strived to foster a strong spirit of sub-nationalism, they try to ensure that the resources of the state are used in an egalitarian manner, and the worst-off sections of the state receive state benefits. Consequently, social outcomes tend to be better in such states.

How social divisions affect the provision of public goods and welfare outcomes has been the subject of intense debates among political scientists and economists for many decades now. Following the influential work of American social scientist Mancur Olson, the consensus among social scientists has veered towards a view which holds that ethnic fragmentation impedes the provision of public goods.

Olson argued that complex societies see the rise of sectional interests who aim to grab public resources to their advantage. Later research by other economists showed that the provision of public goods tend to be lower in areas with high ethno-linguistic diversity or polarization because it is difficult for people to agree on the provision of public goods which benefit everyone.

An influential 2003 research paper by economists Alberto Alesina, Arnaud Devleeschauwer, William Easterly, Sergio Kurlat and Romain Wacziarg used a cross-country analysis to show that countries with higher levels of ethnic fragmentation (or divisions) tend to have worse economic outcomes. There have been similar studies on India as well. A research paper by Abhijit Banerjee of the Massachusetts Institute of Technology, Lakshmi Iyer of the Harvard Business School and Rohini Somanathan of the Delhi School of Economics showed that social divisions adversely affected the provision of public goods in India.

Singh’s thesis relates to this research but differs in a fundamental way. It is not Singh’s contention that the absence of fragmentation explains the successes among Indian states. Rather, states that have succeeded in improving social outcomes have often done so despite deep ethnic or religious divisions using sub-nationalism as a bridge to tide over their divisions, she argues. A sense of shared identity allowed elites to trump problems of collective action in the successful states.

Singh buttresses her point by pointing to the contrast between Kerala and Uttar Pradesh, two states at two different extremities of India: geographically, as well as in terms of development outcomes. Kerala is globally acclaimed as a model of social welfare while UP is widely considered a basket case, characterized by development outcomes that are worse than many countries in sub-Saharan Africa.

In the mid-19th century, both regions that correspond to the present-day states of Kerala and UP, Travancore and the North-Western Provinces, respectively, were poor and divided, writes Singh. Caste divisions were more pronounced, and fractionalization was higher in Travancore than in the North-Western Provinces. Both regions were characterized by similarly low levels of social development in the mid-to-late 19th century. Female literacy was near zero and mortality rates high in both provinces. Yet, the trajectories of the two provinces differed sharply over the course of the past century, leading Kerala to move miles ahead of UP in development outcomes.

In the mid-19th century, a small minority elite—non-Malayali Brahmins in Travancore and Muslims in the North-Western Provinces—ruled the roost in both regions. Owing to a combination of several factors, other social groups began gaining economically in both provinces. These upwardly mobile but politically weak groups—Nairs, Syrian Christians and Ezhavas in Travancore, and Hindu merchant castes in the North-Western Provinces—came to demand political power commensurate with their improved socioeconomic status.

But the strategies of the challengers were different in the two regions. In Travancore, the varied groups came together under the banner of Malayali sub-nationalism to clip the wings of the non-Malayali Brahmins. Common cultural symbols came to the aid of the challengers. In the North-Western Provinces, the Hindu elites undermined common cultural bonds such as the shared language of Hindustani, and the Hindi-Hindu trope gained prominence to emphasize distinctiveness vis-à-vis the Urdu-Muslim group.

This history influenced the course of state politics even after Independence, and widened the gap between Kerala and UP substantially. A strong sense of shared identity and a conception of a shared destiny ensured that elites paid attention to an egalitarian distribution of state resources. A veteran communist leader from Kerala, E.M.S. Namboodiripad, described his party as the national party of Kerala. Even the local wing of the Congress party was not untouched by this spirit of sub-nationalism, and functioned relatively more autonomously than in UP, contends Singh.

The provision for public goods and merit goods such as health and education remained high in Kerala, irrespective of the party in power. In contrast, politicians in UP, who had never worked to foster a spirit of nationalism, were more interested in national affairs in the years immediately following Independence, and in catering to narrow caste interests. The provision of public goods and spending on social welfare, therefore, suffered in the state, argues Singh.

Singh’s case study of the two states provides a rich account of the historical evolution of the stark difference in social outcomes between the two states. But Singh’s argument that sub-nationalism is an inherently positive force that drives states towards social welfare is overly deterministic. It was a peculiar set of circumstances that led different Malayali sub-groups to unite and demand common goods, and it is not possible to generalize about the virtues of sub-nationalism merely from this narrative. Singh’s state-level regression shows that sub-nationalism does play a significant and positive role in driving social outcomes, but such results are subject to the specifications of the regression model.

Extreme sub-nationalism can not only breed secessionism but it can also provoke ethno-linguistic conflicts, damaging a state’s economy and harming social outcomes. Perhaps the most vivid example of sub-nationalism turning into a destructive force is the state of Assam. Over the past three decades, questions of identity have come to dominate public and political discourse in Assam, with devastating consequences on Assamese society and economy.

The attempt to forge a sub-national identity in Assam began in a fashion similar to Kerala’s, with the initial campaign in the 1970s focused on evicting outsiders. But in Assam’s case, the flight of the outsiders also led to a flight of capital, bleeding the state’s economy. It also provoked many other variants of sub-nationalism within the state, leading to intense conflict and devastation.

Like nationalism, sub-nationalism too has its pitfalls. Nonetheless, quite like nationalism, sub-nationalism perhaps is an effective tool for development if it does not turn militant, and is harnessed to meet the common good. Singh provides a persuasive analysis of just how sub-nationalism can be employed to meet social welfare goals even in a fractured society.

Economics Express runs weekly, and features interesting reads from the world of economics and finance.

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