Democracy’s Discontent- Arun Maira Economic Times 13-12-2007

The Indian economy has begun to move at last, reaching growth rates of over 9%.
Faster economic growth, some say, will solve all the nation’s problems. Therefore,
they have been urging the government to press on the accelerator with further
economic reforms.

However, the challenge for the government is to pursue high economic growth while
wedded to two ideas that often conflict with each other: free markets, and electoral
democracy. Reforms are necessary, no doubt. But the politically tough question is:
reforms of what and for the benefit of whom. In India, it seems ‘it is not just the
economy, stupid’.

Democracy and electoral politics are stalling India’s growth, many argue. The Right
foot in the coalition wants to press on the accelerator of economic reform, but the Left
foot simultaneously presses on the brake. Has the Left not learned anything from the
collapse of the Soviet Union (and the example of China), the Right complains.

But the Right should note that the raising of the Iron Curtain has accelerated the
spread of not one, but two forces across the world. One is the ideology of free markets
and capitalism, and the other, which China has avoided so far, is the idea of
democracy and universal franchise. Elected governments everywhere, not only in
India, are being squeezed between these often conflicting forces.

Therefore, to understand the complications in India’s governance, we must shift our

analysis from Left or Right economics ideologies to more fundamental forces.

With the collapse of the Soviet Union, the idea that the role of governments in the
lives of people must be curtailed received a boost, even within capitalist societies. The
way to go, to improve economic efficiency, is to privatise. This is the argument
against ‘socialism’ in the economy.

However, with reduction in the role of governments, and with business corporations
advancing further into the lives of people across the globe, a ‘democratic deficit’ has
begun to arise. Governments are elected by all citizens whereas corporations are
accountable to their shareholders (who are a small set of the citizens of a country and
who also may be spread across the jurisdictions of many elected governments).

Governments and the regulations they impose often appear as nuisances to corporate
chiefs. Indeed, the chairman of one of the world’s largest multinational firms stated
publicly that he dreamed ‘of buying an island owned by no nation and of establishing
the world headquarters of the company on the truly neutral ground of such an island,
beholden to no nation or society.’

Governments are pressed from above by the demands of global capitalism for more
freedom. And from within the nation, elected governments are pressed by many
demands from citizens, such as demands for social justice, fair economic opportunity,
and fulfilment of basic human needs — health, education, etc. Therefore, free
marketers who call on an elected government to have the ‘political will’ to take tough
decisions and give capital the freedom it wants may be asking the government to
commit political suicide.
Rather than blame the Left or the Right, let us understand the deeper forces that are
affecting our nation’s governance.

Indeed, the contention between these forces, of democracy and free markets, is
reshaping governance in other nations too — including the United States, as Robert
Reich, former labour secretary in the Clinton administration, points out in his book,
Supercapitalism: The Transformation of Business, Democracy, and Everyday Life.
Reich, who is not a ‘lost-in-the-past’ communist, but a respected professor of public
policy at UC Berkeley, provides an insightful analysis of the changes in US society
since the 1950s.

The institutions of capitalism that enable masses to participate in the economy as

customers and investors — business corporations, investment funds, etc — have
progressively gained power. Whereas institutions that aggregate their interests as
citizens — labour unions, neighbourhood associations, etc — have withered.

Therefore voices of customers and investors are heard more loudly, and voices of
citizens are drowned out. Thus, ‘capitalism has invaded democracy’, he says, and the
calculus of economic efficiency has replaced judgements of social harmony.

Almost everyone in the US is a customer of many corporate products and services

and, by 2005, the majority of US households also owned company stocks. Therefore,
even if their voices as citizens are not heard, almost all Americans participate in the
economy as customers and investors.

On the other hand, less than 5% of India’s population participates in the stock market,
and many millions are not even customers of large corporations. Therefore, what is
good for corporations and stock markets in India cannot be presumed to be good for
the majority of people. For more economic progress with less friction, and more
social harmony, the voices of the citizen within all Indians must be heard, not just the
demands of customers and investors.

Even the Chinese Communist Party, whose decisiveness businessmen admire, is

pausing to consider the many left behind by economic reforms. Because China must
be a ‘harmonious society’, the Party says. In vast, poor, and democratic India,
policymakers cannot listen only to the advice of businessmen and economists.

They must also listen to those who represent the masses within. And, to understand
the needs of the majority, there must be strong institutions that represent them. Even if
the demands these institutions make appear ‘anti-reform’ to large corporations and
stock markets, they must be on the reform agenda of the nation.

Elections to throw up representatives are the vertical threads in democracy’s fabric.

Whereas institutions to produce consensus are the lateral threads that strengthen it.
The range of organisations, all the way from Left to Right, representing the diverse
interests of stakeholders in India’s development gives strength to Indian democracy.

Its weakness is the inadequacy of processes for producing consensus amongst them.
Parliamentary discussions have deteriorated into shouting and thumping. Media
debates are more entertaining than enlightening. Frustration with the failure to obtain
consensus is spilling into obstructive movements on the streets and in jungles.

Thus the inadequacy of institutions that should produce consensus is harming both
economic efficiency and societal harmony. Therefore, Indian democracy must evolve
beyond the efficient conduct of elections, which it has mastered on a scale no other
nation has, and develop the ability to harmonise the energy of its discordant
democrats.