Home / Opinion / Views /  Opinion | The case for a holistic approach to policy formulation

The unintended consequences of good policies cannot be foreseen without systems thinking. Each policy operates in its own domain, unconscious of its effects on other parts of the system. Delhi’s severe air pollution over the past decade is an example of good policies combining to produce bad effects. Ever since mechanization was introduced in the 1980s to improve farm productivity, farmers in Punjab have burned the paddy stubble left by machines. Later, alarmed by the impact thirsty paddy growth was having on dwindling ground water resources, the government passed the Preservation of Subsoil Water Act in 2009. It stipulated that farmers postpone by one month the sowing and transplanting of paddy so that it was closer to the onset of the monsoon. This reduced the need for drawing underground water for the transplanted paddy. However, the post-harvest burning of the stubble also got postponed by a month. It now coincided with the onset of winter in the North, when wind movement is low and atmospheric moisture content is high. Thus, two good things together: The improvement of productivity of agriculture with mechanization, and the management of water resources, has produced the unintended consequence of Delhi becoming the most polluted city in the world.

Now consider the education of girls, which has vast social benefits. The retention of girls in schools in Rajasthan’s poorer, water-scarce districts has increased in the last 10 years with concerted efforts by the government and non-governmental organizations to improve education. Also, water conservation programmes reduced the distances women have to carry water to their homes, reducing the pressure on adolescent girls to stay home and help their mothers. Two good things together—better education and better water management—produced the desired outcome. In the last two years, however, it has been noticed that girls have started dropping out of secondary school. Investigations reveal that the addition of another good scheme, Swachh Bharat, to provide toilets in homes was the cause. The toilets required more water to be brought home, and so mothers needed their daughters at home once again.

A property of complex systems is that many good things, when they interact, may unwittingly produce bad outcomes.

India has to progress much faster than it has been on many fronts. It ranks very low in international comparisons of human development (education and health), even below its poorer neighbours. It is the most water-stressed large economy in the world; its cities, the most polluted. India’s economic growth is not generating enough jobs for its burgeoning population of youth: The employment elasticity of India’s growth (jobs created by it) is among the worst in the world. India’s complex socio-economic-environmental system is under stress. India must improve on many fronts.

The increasing number of youth who are educated and skilled, yet unemployed, is a tragic outcome of the absence of systems thinking in government policies. Fifteen years ago, industries claimed that a principal constraint on their growth was the unavailability of skilled people. The government responded with a massive programme to train 500 million people. A separate skills ministry was also set up with high targets to be achieved. A recent assessment reveals that unemployment of people with vocational education has gone up between 2011-12 and 2017-18, from 18.5% to 33.0%; of youth with technical degrees, from 18.8% to 37.3%; and of graduates, from 19.2% to 35.8%. Education and skills are only one part of a complex system that produces jobs. The growth of job-offering enterprises lags far behind. Thus, a bold fix of one part of the system has backfired, creating larger numbers of frustrated youth.

Bold actions without understanding the whole system can cause great harm. The 2016 demonetization is an egregious example. Now, the government seems to have grown enamoured with the idea of “nudging" change, propagated by economists who have discovered that human beings are not purely rational. “Nudge" economics provides tools for making citizens do what policymakers want them to. The last Economic Survey was devoted to the idea’s promotion. Nudge units are reportedly being set up in all ministries. But nudges to speed up policy implementation within silos could beget unintended results, as the examples from Rajasthan and Punjab illustrate.

The Indian government has withstood the pressure from a rump of Washington Consensus economists who continue to advocate more free trade as a solution to India’s economic problems, even against the evidence of past agreements delivering little. They say the problem is not with their ideology of free trade, but India’s inability to turn its own industries globally competitive.

India’s challenge is to build an ecosystem in which competitive enterprises will grow to create more opportunities for jobs and for raising incomes. This will make India more attractive to investors. A stronger Indian industrial system will give India more headroom in trade negotiations, too. India’s industrial and entrepreneurial ecosystem’s growth must be accompanied by an improvement in its environment. Policies must be managed with a whole systems view. While the Ease of Doing Business gauges the country’s health from a business perspective, the Ease of Living should become a measure of the whole system’s health.

Arun Maira is author of ‘Transforming Systems: Why The World Needs A New Ethical Toolkit’

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