In a democracy, it takes three to tango

State, Market, Society

Let’s say you want to participate in a triathlon. It involves three different tests of endurance and skill. First, you have to be able to run a fair distance, and do it quickly. Second, you need to be able to swim, typically in a natural water body, not in a serene swimming pool. And third, you need to be able to cycle at pace, a lot of it over up-and-down terrain.

Now, suppose that you don’t have a bicycle, and you have never previously entered a swimming pool. What would your chances of completing the triathlon be? Zero.

Development is like a triathlon. It too has three parts -- the state, the market and society. Each of these three parts matters, and they all matter equally, just as in a triathlon. And most importantly, being good at one doesn’t guarantee any competence in the other two.

Developed countries are typically those that have got this balance right. They have competent governments capable of delivering a wide range of public services to a reasonably good standard, they have innovative companies that compete and succeed in global markets, and their citizens enjoy personal liberties and can therefore make a wide range of choices for themselves. And most importantly, none of the three is overrun by any of the others.

A few countries have tried to progress with just one or two of these. The Saudis, the Qataris, the Chinese, the Russians and many others all have their models, but the sense of incompleteness about all of them is instant, and along with that the sense that at least a few of them will never turn the corner into full development. The South Koreans realised this and pared down the overarching state; it was only then that they climbed the last few rungs to the ranks of developed nations.

In India, we have avoided the extremes, and the door seems only half shut. To open it fully, however, we’ll have to discard a lot of baggage.

Since Independence, we have struggled to find the right balance between the state, market and society. The freedom struggle itself was not very well anchored -- very few people articulated what freedoms we were fighting for. In the end we got self-rule, and decided that was as good as freedom. The state remained strong and has even continued to use for decades many of the laws the British left us.

Jawaharlal Nehru decided that the government would have to lead the development of India. Major investments in industry were needed, and only the government could do this, he was told by the eight leading industrialists of the time who authored the Bombay Plan. Rather than pushing the private sector to grow up faster, in time, the central and state governments set up an assortment of businesses to do things that had nothing to do with governing a country. Plus, with some in his government adamant that the private industry and society could not be trusted to protect the welfare of the masses, very quickly the state decided to shoulder this, too.

No cycle, can’t swim. But the nation entered the triathlon anyway. All delays in development were justified by pointing out that Rome wasn’t built in a day. But as the years passed, it became clear our Rome wouldn’t be built even in decades. We had simply got it wrong. The state had weakened society and the markets, but it had also spent itself trying to fill their shoes, and in that quest it had become unable to do its own job right.

We could backtrack, and try a more balanced route to development, giving markets and society their due space. But that’s not what’s happening. Instead, we are now in the middle of a second spin of the roulette. We tell ourselves that the imbalance between state, market and society itself is not the problem; we just didn’t unbalance ourselves enough. With a strong enough leader, and even greater powers in the hands of government, we’ll get it right this time.

It’s not new, but it’s also not going to make a difference. Asymmetrical power in the hands of government knocks the stuffing out of markets. Result: we can only follow the world, not lead it. We still have voltage stabilizers and inverters, and our 4G penetration will parallel the 5G penetration of the leading economies. Sarkari dominance also smothers society; the state wants to tell us what we can eat, though it’s not able to ensure that everyone eats.

Is there a way out of this trap we’ve set ourselves? Yes, but not without a rethink. There’s no doubt that governance matters a lot, but when it comes to nation-building, it takes three to tango. The informed participation of problem-solving citizens also matters, as does a market that is friendly to innovation and open to globally competitive firms.