View | Bridging India’s social capital deficit
6 min read 02 Aug 2012, 10:50 AM ISTIndia's massive social capital deficit is the wellspring of our social and economic problems
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Fellow citizens who don’t help victims of a heinous crime or accident, and move on as if nothing even happened. Billionaire philanthropists who donate tens of millions of dollars to institutions abroad, but wouldn’t give a fraction of that to institutions with similar aims in their home country. Landlords who only rent to a certain kind of tenant, typically selected by identity, and have no qualms about wearing their bias on their sleeve. Rampant dynastic succession, be it in politics, business, arts or cinema —to the extent that is considered perfectly natural, and those who don’t follow the “family tradition" are exceptions rather than the norm. Such perpetuation of dynasties perniciously results in networks and institutions becoming closed to “outsiders".
India has several instances of each of the above, where Indians tend to only trust, collaborate and empathize with people who share their religious, ethnic or class identity. For a diverse nation that has millions of minorities, this paucity of social capital is debilitating. British writer and scientist Matt Ridley has propounded the idea that human society progresses when “ideas have sex"—the free exchange of ideas between different communities is vital to the advancement of a society. Given India’s insulated fragmentation along various fault-lines, this becomes particularly challenging for our society.
Mumbai witnessed a major terrorist attack on 11 July 2006 when its local trains were bombed. About 206 Indians lost their lives—but the business and media elite, who never use local trains, were disconnected from what happened. The political elite in the government, similarly ensconced in their bubble in Lutyens Delhi, couldn’t be bothered to react and take substantive action. When terrorists struck some of the iconic areas in South Bombay frequented by this elite on 26 November 2008, only then were they somewhat shaken out of their stupor. The deaths in the train bombings of 2006 were mere statistics for this elite, whereas the 26/11 attacks were felt by those who matter in India’s power structure—it was in their face.
A similar dynamic plays out in the context of communal rioting, where the divides have deep historical roots, and regional identity clashes. At the risk of generalizing, many Indians react to lawless arson and rioting that causes deaths based more upon who was affected rather than the staid fact that lives were lost and property was destroyed - as long as it was not “one of us", it is easy to switch off. So what if there was a blockade in Manipur last year and the state was cut off from medical, fuel and food supplies for 121 days. Let alone the average citizen, most of the power elites who direct India’s political and media discourse would be at pains to accurately locate Manipur on India’s map.
This bias and disconnect also works in reverse, where a group that is perceived to be dominant or privileged subjugates itself to the group which self-identifies as the “victim". When the HR manager at Maruti’s Manesar plant was murdered by violent factory workers, the media and intellectual elite maintained a stupefying quiet relative to the outrage that would have been manufactured had a worker been killed in cold blood by senior management. It is somehow improper for the better-off to speak out and ask that justice be done given that the perpetrators are in some material way worse off than them.
The tragedy at Maruti’s factory was the economic equivalent of what has been termed “pseudo-secularism", where India’s “minorities" have been kept economically and socially backward by Left-liberals who exploit India’s social capital deficit to grab political power. It perhaps doesn’t occur to these statists that they are reinforcing those group identities at the cost of individual identity and dividing society into balkanized groups. These liberals then try to make up for the balkanization by using government handouts in sectors that have government-manufactured shortages to appease each group, inevitably playing one against the other and further destroying social capital.
Let us take the example of the education sector. The explosive episodes surrounding the creation of the caste-based reservation system by V.P Singh in 1989, expansion of reservations in higher educational institutions by then human resources development minister Arjun Singh during the first United Progressive Alliance government, and even the forcing of privately-funded schools (with “minority" institutions exempted) to reserve 25% seats for the economically underprivileged by the Right to Education (RTE) Act by the current government are all illustrative of this grotesque and corrosive mentality. In particular, the RTE provision as upheld by the Supreme Court has been lauded by the usual suspects —who have increasingly started sending their own children abroad not just for college but also for schooling— as a legislation that will break down class and other barriers.
All such government actions have destroyed intra-society trust and goodwill by trying to legislate equality of outcomes. Several political parties in India’s states as well as in Delhi have captured the State by projecting themselves as peacekeepers among balkanized social groups, and in the process they have become invested in perpetuating such balkanization to maintain political power. How can India break this vicious cycle of mistrust and balkanization, be it between religious and ethnic groups or economically-disparate classes? Part of the solution lies in government action. Besides improving accessibility to India’s remotest corners via road and air connectivity, catalyzing digital connectivity should be a top policy priority. At the minimum, the widely dispersed citizens making up our diverse society need to have the tools and infrastructure to connect so that they have a chance to collaborate and empathize with each other.
India’s policy needs to move from the vicious cycle of promoting balkanization and shortages to promoting mutual cooperation derived from market competition that increases opportunities for all Indians. Patrick Francois and Thomas Fujiwara of the University of British Columbia have shown how market competition creates trust in a society. Conversely, state control of the economy creates and perpetuates a balkanized society—and vast swathes of India’s economy remain in the clutch of the state.
Moreover, market and administrative reforms in sectors such as education that curtail the government’s ability to manipulate institutions, prevent government from creating artificial shortages and set the stage for rapid capacity expansion, would go a long way in helping the formation of social capital and intra-society trust.
Nobel laureate Kenneth Arrow had written in 1972 that “much of economic backwardness can be explained by the lack of mutual confidence." On the metric of enforceability of legal contracts, the World Bank’s Doing Business ranking rates India second last at 182 out of 183 countries. India’s economic backwardness has a lot to do with poor judicial effectiveness combined with the deficit of social capital. Policy measures that improve judicial effectiveness will increase individual confidence in society and in each other, paving the way for deeper engagement even outside one’s immediate social network.
If channelized properly, India’s diversity can be a big competitive advantage relative to other economies. A boost in social capital that contains and reverses the balkanization of Indian society will allow this diversity to be harnessed for innovation and creative collaboration. India needs market liberalization not just for economic growth but also for social integration.
Rajeev Mantri is director of GPSK Investment Group and Harsh Gupta is a Hong Kong-based co-author of an upcoming book on financial derivatives.
