Second coming of Jawaharlal Nehru

For decades, I have been among the most scathing critics of Nehruvian socialism, which  deformed our intellectual and economic development for four decades after independence. Initially, this criticism was regarded as blasphemy. Today, it has become close to conventional wisdom. There remain old socialist soldiers who never die but only fade away. But for most people November 14th, Nehru’s birthday, has ceased to a landmark worth remembering, save with amusement or resentment.

However, a revaluation is now called for. Economic thinking has progressed far beyond the socialism vs. markets debate. Ever since Douglas North won the Nobel Prize for his work on institutional economics, we increasingly emphasize the importance of good institutions in economic performance. Africa’s failures are in due mainly to weak institutions, which have overwhelmed the impact of policy reforms. India, on the other hand, has withstood the ravages of poor policy because of its strong institutions.

We need to re-assess  Nehru in this light. We need to view him not simply as the creator of a debilitating brand of socialism, but as the architect of key institutions that stood firm even as they crumbled in other developing countries. In this new avatar, Nehru the Institutionalist could re-occupy the heights from Nehru the Socialist was earlier toppled.

The economic concept of institutions encompasses a wide range of things. It includes political institutions like democracy, accountability, transparency and free speech;  socio-political norms such as minority rights and inclusiveness in policy; rule of law,  respect for property rights, and enforcement of rules and regulations; and strong institutions that deal with everything from public order and justice to education and the environment. Institutions include mechanisms go resolve conflict, and create unity in diversity. They  include good regulatory frameworks that meet both market and non-market needs.

Dani Rodrik of Harvard University has made seminal contributions to the literature on institutions. He argues that the ability of a society to resolve internal conflicts is directly proportional to its economic resilience in overcoming problems. Africa has failed badly to resolve internal conflicts, and so suffered in economic performance. India, on the other hand, has created a society  based on democracy and inclusion that has managed to resolve severe tensions that pit caste against caste, religion against religion and region against region. This institutional strength has given India the resilience to meet and overcome several economic crises.

While many actors deserve credit for India’s institutional strength, Nehru surely deserves it above all others. At a time when other ex-colonies speedily degenerated into one-party autocracies, he built and nurtured democracy and press freedom. He institutionalized the idea that dissent was honourable, not a form of treason. He built centres of excellence in all fields, including the Indian Institutes of Technology. He helped create a political culture that was conciliatory and inclusive, that stressed secularism and the rights of minorities.

Nehru must also be faulted for not doing enough to forestall the erosion of many institutions created by him, and by the British Raj before him. The neta-babu raj he created is responsible for much of the poverty, bureaucratic callousness, and lack of accountability today. Most Indians are disillusioned with the omnipresence of corruption, the criminalization of politics, endless judicial delays, the breakdown  of law and order in many areas, and communal tensions. This is a long and sobering list of institutional deterioration.

Yet, a recent IMF working paper by Rodrik and Subramanian (Why India can grow at 7% a Year) agues that, warts and all, India’s institutional strength is high by global standards. India ranks in the fourth decile in a global sample, and in the second decile among developing countries. In terms of political institutions (excluding economic ones), India ranks 51st in a sample of 173 countries and 14th in a sample of developing countries.

Although some factors are eroding institutional strength, others are improving it. E-governance is helping check corruption and bureaucratic delay, and increasing transparency and accountability. The Election Commission has taken firm steps to check booth-capturing and other ways of fixing elections. An activist judiciary has rectified several administrative and legislative shortcomings (the Best Bakery case, smog in Delhi). The Indian media do an outstanding job, and the rapid growth of private TV channels has contributed greatly to this. Economic liberalization has created a culture of industries seeking global certification for high standards. The IITs and IIMs have won international recognition as centres of excellence.

On the ground of institutional quality, Rodrik and Subramanian’s regressions suggest that India’s per capita income should be four to five higher than it is today. A key reason why this did not happen has been poor economic policy. For a long time, the ill-effects of Nehru the Socialist offset the positive effects of Nehru the Institutional-builder. But now that economic reform has loosened socialist shackles, the underlying institutional strength of India could help accelerate GDP growth to 7% per year, argue Rodrik and Subramanian.

I am not so gung-ho. To me, the deterioration of governance seems so steep that I am wonder if we can achieve 7% growth. When I hear that 150 districts are now afflicted with Maoist insurgencies, I wonder if Nehru’s institutions are cracking under the strain. Bihar’s poor infrastructure and torpid bureaucracy were once regarded as the main stumbling blocks to progress. But mafia rule has now increased to such an extent that even government doctors get death threats and ransom notes, and they have gone on strike. Rodirk and Subramanian say that spillovers from IT could help develop backward areas. Very true. But basic public order and rule of law need more than IT. We need radical reforms of the administration, courts and police. None are in sight: Manmohan Singh talks only of setting up committees.

It would be churlish to blame Nehru for this mess. He deserves the lion’s share of credit for India’s good institutions. His successors deserve the lion’s share of discredit for the subsequent deterioration. On his 115th birth anniversary, let us hail Nehru as the architect of India’s greatest institutions.


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