In 1776 Adam Smith heralded the growth of discipline wherein the approach is examining the total picture, emphasise the approaches for aggregate transformation, and thereby nurture individual values and welfare. This wide-based approach for individual-level enhancement of quality of life did experience a period of decline during the nineteenth and early twentieth century. The aggregate approach did get resurgence after the First World War and till the onset of the next war. But this was not of the scale Adam Smith had initiated in terms of time frame, which was to be seen only after the World War II and new countries getting independence from colonialism.
However, even this post-World War II revival did not possess the globalised canvass in analysis and examining the dynamics of transformation. But in recent years, the original Adam Smith-like expositions are forthcoming from quite a few scholars. The recent problems associated with the new globalisation and the new awareness for ensuring wider and deeper inclusiveness must have compelled the economists to rise to the occasion. This year alone, we have had so far Why Nations Fail: The Origins of Power, Prosperity and Poverty by Acemoglu and Robinson (2006 authors of The Economic Origins of Democracy and Dictatorship), The World Until Yesterday By Jared Diamond (the celebrated author of Guns, Germs and Steel: The Fates of Human Civilisation), Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge and Change by the Nobel economist Edmund Phelps and Cooked: A Natural History of Transformation by Michael Pollan. All these books are terrific reading. We find a common message in all these books emphasising the values of functioning, the quality of institutions and necessity of continuously working on these. Even the significance of adequate understanding of the significance of what we consider to be just nothing more than a necessary routine – cooking – is emphasised by Pollan thus: “Cooking …transformed us, and not only by making us more sociable and civil. Once cooking allowed us to expand our cognitive capacity at the expense of our digestive capacity, there was no going back: Our big brains and tiny guts now depended on a diet of cooked food……..What this means is that cooking is now obligatory – it is, as it were, baked into our biology.” He concludes the book thus: “Hand taste…involves something greater than mere flavour. It is the infinitely more complex experience of a food that bears the unmistakable signature of the individual who made it – the care and thought and idiosyncrasy that that person has put into the work of preparing it. Hand taste cannot be faked.”
Paraphrasing this un-fakeability of hand taste and the rising emphasis on institutions and institutional quality in social functioning, we may have loads to ponder over what is happening around us. The recent performance of the Indian economy as the worst one among the BRIC (Brazil, Russia, China and India) countries and the heavy beating the country’s currency has got in the global currency market are issues related as to how the country has been cooking in the economic front. The cooking of the economic food is done in the political market and cooks are the politicians and policy makers; the economists might write the recipe book, but the actual cooking is done by the politicians. But the reality is that the quality of the economic food “cannot be faked”. The institutional quality in terms of governance has been absolutely poor and unthinkable in India in recent years; there are deep problems of identity and authority of the cooks. This scenario has certainly compromised the credibility of the capability of governance to deliver. When the governance lacks credibility, the economic scenario can never be good. This is what has happened to the Indian economy. This want of credibility of governance has unfortunately percolated from the superstructure of national government to the lower level components of the whole. In such a context, the components would lack coordination and each would try to pass the buck. Otherwise, we cannot explain the recent public exposure of opposing views by the Prime Minister and the out-going Governor of the Reserve Bank of India. This itself would have a telling effect on the quality of economic food ultimately available for eating.
The worst impact of this laxity of governance is the adverse impact on innovations and willingness to innovate by the population. It is evident from the poor productivity performance on all fronts in the Indian economy. The educational sector productivity is one of the poorest in the world as evident from the latest Jiao Tong university rankings. The manufacturing sector has refused to show signs of performance. The agricultural sector has been stagnant for years.
As economist Robert J. Shiller of Yale University has just written in the New York Times: “Capitalism is culture. To sustain it, laws and institutions are important, but the more fundamental role is played by the basic human spirit of independence and initiative.” This is where the necessity of addressing the issue of governance quality in India at every level and in every component of the polity and economy becomes paramount. When this is poor at the country level, many opportunities are created at lower levels, which make the possibility of improving the quality at the macro level even more difficult. We have to ensure conditions for nurturing “independence and initiative” for the welfare of the individuals comprising the country.