Work Must Go On

Posted on August 23, 2011 in Business and Economy

By Shikhar Singh:

There is a certain inevitability with which institutions evolve in a democracy, being conditioned by the pulls and pressures of contemporary reality. In recent weeks the demand for a strong ombudsman against corruption (the Lokpal) is part of this process. The contemporary reality forcing this change has been the economic transformation of the country despite the system. There is no doubt that the growth story of India has largely been the achievement of its citizens. While the state rid individuals of the license raj and gave greater economic freedom in 1991, business in India has had to negotiate the system everyday and for almost everything. In this equation, corruption emerged as a major deterrent for economic expansion– not only did it compound the cost of business in India but also created an element of uncertainty. The institutional innovation of the Lokpal seeks to address precisely this malaise.

Importantly, economic growth faces another obstacle– the consensus-based decision making ethic in India. Recent months have illustrated how government strives to build unanimity on critical issues and only enacts policy when such a condition exists. This is an arduous process, for even the Lokpal Bill has been on the drawing-table for over three decades. But more than being a prolonged exercise it is perhaps an impossible end towards which public policy is organized, particularly when we consider big business and investment.

There should be no doubt that economic expansion sounds a discordant note everywhere. While in the long run it benefits nearly everyone, in the short term it can displace, undermine or ignore several interest groups in society. As a result there is a sobering effect of the democratic process on economic expansion. But as recent years have illustrated the search for a “consensus” can more than just slow growth, it can even paralyze it indefinitely.

At this inflexion point in the growth trajectory, India is faced with a unique dilemma– while it takes pride in its democracy it is increasingly feeling the constraints of its consensus based decision making ethic. We need to rework our approach here. Big business and capital investment will undoubtedly upset existing interests. The way to settle this conflict is to accommodate the new and old. This is made possible by the fact that a growing economy has the space to provide for both industrial expansion and small business.

Industrial expansion has run into rough weather on the singular question of the cost of displacement– occupational and in terms of access to local resources. To tackle this we need an independent authority that can impartially and comprehensively evaluate the negative externalities of industrial expansion. It must be a body that comprises all the stakeholders: the government, local community, experts and capitalist. It must determine the economic costs of large investments and fix adequate compensation for these. As an appellate body, it could be entrusted with the enforcement of the negotiated terms between the local community, capitalist and experts.

The idea is to institutionalize and depoliticize industrial expansion; a process that often entails conflict between different interest groups. This can only happen when we accept principally that temporary displacement is inevitable yet long term rehabilitation entirely possible. The only durable solution in that direction is one where all the major stakeholders negotiate but with the base line being work must go on.

The writer is a student of History and Politics from Balliol College, Oxford University. He blogs at Everything Politics.