The Hindu Business Line : Can democracy ensure economic discipline?

Freedom is an important component of development. But if it can deliver economic advancement for a vast majority depends squarely on whether or not the policy environment is conducive, says BHANOJI RAO. Clearly the Indian democracy faces a key challenge: How to ensure necessary discipline while eschewing unwanted authoritarianism.

Freedom in the World 2006, the annual global survey by Freedom House, ranks political rights (PR) and civil liberties (CL) on a scale of 1 (free) to 7 (not free). The following PR and CL scores, for example, are noteworthy: China (7, 6), Ghana (1, 2), India (2, 3), Myanmar (7, 7), Pakistan (6, 5), Senegal (1, 2), Singapore (5, 4), Taiwan (1, 1) and the US (1, 1).

If someone were to extol the virtues of discipline despite lack of freedom by looking at the economic performance of China and Singapore, then one should not forget Myanmar and Pakistan for `discipline' without development. Similarly, if it is the enviable freedom score of Taiwan and the US, the land of `milk and honey', then there are nations like Ghana and Senegal with the good freedom scores but low incomes.

Freedom is an important component of development. But if it can deliver economic advancement for a vast majority depends squarely on whether or not the policy environment is conducive. The policy environment is reflected in the index of economic freedom, compiled by the Heritage Foundation (see Table). The best score is 1 and the worst 5.

Similar scores

India and China have equally bad (around 4) or not good (around 3) scores on fiscal burden, government intervention, banking, wages and prices and regulation. India's scores are worse than China's on trade, monetary policy and informal market. On foreign investment and property rights, India scores better than China.

On eight of 10 components, the scores of Singapore are better than those of the US or as good. Singapore's worst score is on government intervention, while the score on banking is not the best, but not too bad. Most of the components of economic freedom are reflections of the presence or absence of essential disciplines such as playing by the rules of market and non-market systems and institutions.

Flouting the rules and regulations to gain personal or group advantage, or simply to gain more votes in an election will do incalculable harm to efficiency and integrity. They create perceptions of lack of economic freedom.

Singapore's first Prime Minister and one of East Asia's best regarded senior statesmen, Mr Lee Kuan Yew, once remarked, "I do not believe that democracy necessarily leads to development. I believe that what a country needs to develop is discipline more than democracy" (The Economist, August 27, 1994).

While this view may be debatable, one should not trivialise the key role played by discipline and economic freedom in improving competitiveness and economic performance at the macro and micro levels. General and political freedom, encompassing freedoms of expression, association, political participation, dissent, debate and so on, are certainly very important aspects of civilised living.

It is important, however, to emphasise that all these do not automatically lead to discipline and economic freedom. A vibrant multi-party democracy like that of India is no watchdog of discipline and is not quite aimed at maintaining discipline.

A Bollywood movie shows a politically powerful person not allowing the police to take action when traffic is brought to a standstill in the heart of a megapolis. The movie shows a patient dying in an ambulance that is immobilised. Here is the case of the freedom of some to stall traffic coming in the way of the freedom of a patient to get treated and survive.

Now, the real life

Well, that was just reel life. But what about real life? The following are just a few of the many hurdles Indians routinely face and live with.

In an approved residential locality in a city, along a major highway, in the parallel space reserved for a service road, a slum develops and soon becomes `recognised'.

Water and electricity are provided by the compassionate and kind senior politicians, who are ably assisted by the ward leader, whose political fortune was closely intertwined with the population size of the slum, assuring its growth.

That very growth meant lack of free passage to owners of homes on plots approved by the local government. It was only after two decades after the establishment of the slum that a couple of enlightened politicians and a highly acclaimed and dynamic civil servant worked hard to re-locate the slum to a specially assigned locality.

As the `poor' slum dwellers were loading their stuff on the state provided trucks, it was found that some had TV sets and one even a telephone.

Local governments have the power to say where one can build a home; it is just that they are powerless when it comes to unauthorised occupancies. This type of indiscipline is not quite seen elsewhere as much in a democracy as ours.

There are more day-to-day instances of indiscipline and the havoc they could and do cause. Few motorists care for lane-discipline. The best efforts of the police have not wrought a change in attitude.

Practically any government or public employee can go on strike. They need not quite care that a section of people will suffer.

Shops, including medical shops and eateries, down shutters when a city bandh is called; advance notice alone is the saving grace for the people.

Not the king

Despite the liberalisation since 1991, the consumer is not yet the king. What is sold in metros may not be available elsewhere.

Rarely does a shop assistant think that his or her salary is indirectly paid by the shoppers. One still looks at the way one dresses before deciding to serve with politeness or indifference.

The worst transgression to a customer's freedom occurs, when at workplace or home, power is cut suddenly and without any warning. None seem to care; not even those who keep telling us that India is about to shine if not already shining.

Here is another case of loss of freedom to one from the seemingly unlimited freedom of some.

A passenger paying the stiff fare for A/C First Class travel from Visakhapatnam to Hyderabad has to put up with the sonic boom of a cinema hero and friends. The latter seem totally oblivious to the other passengers and their comfort.

Clearly the Indian democracy faces a key challenge: How to ensure necessary discipline while eschewing unwanted authoritarianism. This ought to be the most crucial of national debates.

(The author, formerly with the National University of Singapore and the World Bank, is Professor Emeritus, GITAM Institute of Foreign Trade, Visakhapatnam. He can be reached at bhanoji@gmail.com.)