The Indian Economy Blog

May 26, 2006

Democracy and Infrastructure

Filed under: Basic Questions,Energy,Infrastructure,Politics — Nitin @ 12:46 pm

It is reasonable to suggest that new roads, power plants or water reservoirs must be built before existing ones — if they exist at all — run out of capacity. It is also reasonable to suggest that when new infrastructure is being built, it is both convenient and economical to build more than just attend to short-term forecasts.

Are democratic governments any good at building good infrastructure ahead of immediate demand (and thereby reaping the benefits arising of its effective utilisation)? When authoritarian governments decide to do it they often do so quite well. Is there something in the nature of democratic governments that constrains the building of good infrastructure?

Comments and opinions welcome.

26 Comments »

  1. Wasnt that our goal when we started off with the Mahalanobis model?? Then it was our inability to generate demand to use the capital goods and today it is our inability to generate the supply to meet the demand.

    Comment by Chandra — May 26, 2006 @ 1:05 pm

  2. Democracies are not incapable of supply side politics: in fact one of the biggest problems with democracies in countries like India is supply side politics.

    The problem is basically with the nature of supply side politics: with a depraved peoples, this will of necessity be a short term nature.
    Essentially, the political entrepreneurs can only reap short-term benefits: so they’ll not divert resources to long-term projects. To do so would require altruism and moral values and suchlike.

    People might then say, hey authoritarian regimes with their longer time horizon can engage in fruitful long-term projects, but as Chandra pointed out India did have a quasi-authoritarian regime till not long ago which did not exactly blaze the way in infrastructure development.

    The reason is that authoritarian regimes only need to ensure they retain their authority in the long term. They don’t have any need at all to make optimal progress either in the short or long term.

    The only way out is basically benevolent (and skilled) political entrepreneurs. This only seems possible with a society that has a certain set of moral values. India is not one of them.

    Comment by 7*6 — May 26, 2006 @ 6:16 pm

  3. I think here in the West, we are endlessly obsessed with the democratic political system. This obesssion will only work well in theory or in Western culture. In third world countries like India, Iraq, and China, it will not work. Each country would have to find its own economic and political model. In the case of China, despite widespread belief, it is not the authoritarian per se that delivers the goods in terms of infrastructure development (Except the infamous Three Gorge Dam which is a major disaster waiting to happen. Gee, I wonder why none of current leaders attended the closing ceremony recently given their fondness for extravagance public ceremony. Both the president and the premier were engineers by training. Do they know something that we don’t? ). China’s government model is to attract the best and the brightest to government jobs. Is it any wonder that they did an amazing jobs in infrastrcture development and city planning? Is it any wonder that the private sector in China is not doing as well as India’s private sector? Can you name any Chinese brand?

    Comment by Dennis Chan — May 26, 2006 @ 7:35 pm

  4. Aren’t USA, Japan, Germany, UK democratic? Or did your question pertain only to the democratic governments in developing countries?

    Comment by Kachru — May 26, 2006 @ 8:13 pm

  5. While we accept that democracy is least bad, not the best, for of government, it is apparent that for democracies to be successfull, in real sense, there has to be a basic minimum social-economical-political maturity in the public. Without which, curse of short-term gains and narrow outlook, befalls on all democracies, including in the West. I may be wrong, but unless supposed maturity happens, a altruistic selfless dictator or dynastic rule appears best. But then that is impossible utopian dream. So then what is best alternative till then, if any?

    Comment by Ashish Gupta — May 26, 2006 @ 11:07 pm

  6. Ashish, the question you ask is correct, but the premise it is based on is not.

    Democracies in the West have prospered not because the people have socio-politico-economic “maturity” but because they have the appropriate moral values. It is humongously utopian to expect the COMMON MAN to think deeply about long-term effects of various socio-political policies and arrive at a decision rationally.

    No: what protects, for example, the US from the vagaries of myopic and populist supply side politics is its constitution. Which does not derive its power from it being a piece of paper, but from it being a MORAL CONSENSUS of the nation.

    The operations of civilizational political structures are merely expressions of the peoples’ moral character.

    As in my earlier comment, we need benevolent socio-political entrepreneurs to formulate socio-political solutions that befit our moral character. Vanilla democracy is not one of them.

    Comment by 7*6 — May 26, 2006 @ 11:54 pm

  7. Dennis,

    I wouldn’t diss democracy so easily. Infrastructure and economic development are some aspects of national life, and those that are palpable and easily quantifiable. Not even necessarily the most important though. But your point about China being able to attract good people into government is interesting. Not many countries, even first world countries, are able to do that.

    Kachru,

    I meant democracies in general, including developed ones. I’m not sure they built the infrastructure during the most democratic of times.

    I tend to agree with 7*6 on some points and suggest leadership plays a big role. Then again, can democracies produce such leaders?

    Constitutional checks and balances may in fact work against infrastructure development; a small bunch of rice farmers were holding up the expansion of Tokyo’s Narita airport. Their political weight would not have been so strong without the rights they possess. This, of course, is all too familiar to Indians.

    Despite all the criticism of te Mahalanobis model, weren’t far more dams, roads and power projects built in those days prior to the era of mindless socialism beginning with the Indira Gandhi era?

    Comment by Nitin — May 27, 2006 @ 6:52 am

  8. Dennis says China’s government model is to attract the best and the brightest to government jobs.

    I don’t know much about this aspect — what lures the best and brightest to join the government in China? And even if they do join, there must be something in the institutional set-up – systems, checks and balances and incentives — that enables these “best and brightest” to perform.

    My impression of government in general is that it’s very good at turning star managers into mediocre performers.

    Comment by Prashant Kothari — May 27, 2006 @ 7:48 am

  9. Nitin, you ask if democracy can produce such leaders.
    The question you perhaps really want to ask is whether such leaders can have the sanction and approval of people under a democracy.

    The answer is they cannot.
    Saying that populist supply side politics is prevalent in India is just another way of saying people want and like and reward such populist supply side politics.

    The question then would be: how could benevolent socio-political entrepreneurs function? To function, they need sanction. And sanction in a vanilla democracy is seemingly requiring that they embrace depravity.

    The solution lies then in social systems: religion and nationalism. Both of these are the source of the moral values that a nation on the path to classical liberalism needs. And most importantly both of these have the power of indoctrination over the people that can be used for the two purposes discussed above: to improve the moral character of the peoples; and to give the benevolent socio-political entrepreneurs the required social sanction to function.

    India can only prosper by fusing these two elements into the political system.
    And to do so, it needs the support of the intellectuals: we need a philosophical narrative as well. This comment you are reading is just such a philosophical narrative.

    Comment by 7*6 — May 27, 2006 @ 10:18 am

  10. Parag : I perceive democracy itself is a cause of many worries. In democracy when you are incumbent ,you have to keep account of public sentiments and all sorts of demands they put. If you try to be a visionary like Mr. Chandrababu Naidu and neglect the mob (in their opinion ) and do not take any POPULIST STEPS (free rice, electricity, distribution of Cows in Chhattisgarh, stop the demolition drive in Delhi and above all RESVERVATIONS ) , the opposition is bound to run away with it,you are going to lose your office in the subsequent elections.

    There are a host of other factor including lack of awareness in public about what is correct and what is not. A simple example is the defeat of an able politician Mr. Ram Naik (B.J.P.) ,who was petroleum minister in the N.D.A. Government ,by the hands of a novice Govinda in the last Lok Sabha election. The minister was busy working in ministry and could not hold his constituency,along with this Govinda used his typical Bollywood skills to persuade people to his side. We have watched his campaign on news channels and can not deny that Ram Naik was the better of the two. This is an example of the bias hold by public. This example has a lot to do with infrastructure and development. If you do not send an experienced and able person to represent you ,don’t regret when results are not pleasing.

    Another factor is provincial and regional disputes. Powerful parties, forces and lobbies,drive away many projects from their proper sites to locations they find suitable. As is the case with Railways ,which runs additional trains from ,through and to Bihar, despite having no income and many losses.

    I have noticed an example in my native state Chhattisgarh. There is a co-operative sugar factory in Bhoramdeo ( a small town known for it’s historical temples, much like Khjuraho of Madhya Pradesh ), which we have visited last year. In the plant we came to know that the plant (outlay about 53- 55 crore Rs. ,Govt. money) was to be built on some other location not at Bhoramdeo,because there was lack of irrigation facilities and soil was not rich too ( both these factors are essential for a desirable crop of sugarcane), but local politicians pressurized Govt. to establish it there. Now this plant is facing certain problems including increased cost of operations and consequent rise in price of product.

    Tata steel co. had promised to construct a steel plant in Nagarnar in Baster(Chhattisgarh) ,it was to be a major project reaping many benefits, But some local leaders in the name of preserving Adivasi interests opposed it .Some people did not want to give land to Tata. Tata promised that they will give more jobs to local public and offered better compensations but the protesters denied all their arguments. Now I have not heard about this plant for a long while.

    Most of industries in Chhattisgarh have been haunted by scarcity of power, and do not rely on Govt. anymore. They have built captive power plants for fulfillment of their needs.

    You may feel these matters are of less consequence to infrastructure development,but in my opinion they represent internal flaws of democracy which demand attention.

    Comment by Parag — May 27, 2006 @ 1:00 pm

  11. Framing the question in terms of democracies vs. non-democracies misses the point. Democracies can be as tyrannical as dictatorships, often more, a fact that has been known since ancient Greek and which has been amply made clear by how market-dominant minorities have been repeatedly looted and discriminated against in recent times. Democracy is just a voting rule to select leaders. It does nothing to guarantee property and other basic rights that are necessary for sustained prosperity.

    Coming to infrastructure, the railrods, telegraph, telephone lines were built in the west entirely out of private enterprise. As were many dams, roads, bridges. The current highway system in the US was built only after WWII. The last time I checked, the US was pretty developed and the richest country in the world before that. It is a fallacy to think that the market wont build infrastructure. You juts need to ensure property rights and foster the belief that stable laws and rules will remain in place and wealth/income will not be expropriated by arbitrary whims.

    I am not so enamored of China’s infrastructure. Most of it is wasteful and designed to create Potemkin villages for observers. Yes, India faces an infrastructure bottleneck, but the soltuion lies not in follaing China’s model. The problem with inadeqaute infrastructure is entirely due to the lack of property rights, the need to bribe to get clearances, and the uncertainty that what has been guaranteed by the government will bnot be arbitrarily snatched by the next government in the name of social justice.

    In India, a large segment of the population and intellignetsia do not believe in the general efficacy of markets (I know, I know, market fail in many cases), do not believe that profits are the just reward for wealth creation, do not understand that wealth creation for the society as a whole can only be fostered by getting incentives right. It is this belief-structure that drives policy-making in Indian. As long as we have this, we will never reach our potential. And insofar as people at large hold this belief structure we are consistently going to get a political class that reinforces this belief.

    Comment by srinivas — May 27, 2006 @ 5:42 pm

  12. I am not dissing democracy at all. I live in the US and love democracy. All I am saying is that while democracy should be the ultimate goal of every nation, it may not be suitable for all non-western nations at this moment in time. One model that proves to work is what I call the Asian model. It was demonstrated by both South Korea and Taiwan. Both nations went through a transition from a benevolent dictatorship to a fully grown democracy. In other words, they developed their economies first by using western technology and capitalism and then when most of the population are at least middle class, their political systems opened up. I see China is following the same model. Although being a huge country with a huge population and coming from a much lower economic base, it will take a long time for it to develop into a fully grown democracy. But I believe it is on the right path, although it could be a two steps forward and one step backward kind of process.
    China is able to attract the best and brightest to the government because the government jobs pay well. I believe that is the Singapore model as well. Of course, some of them really strike it rich by corruption. I agree that lots of Chinese infrastructure developement are potemkin and wasteful but hey seven bridges are much better than no bridge at all.

    Comment by Dennis Chan — May 27, 2006 @ 6:21 pm

  13. Dennis,

    I frankly dont think China is ever going to get to Western style liberal democracy. These things cannot be “planned.” The very thinking of “planning” a phased transition reveals a mindset that is antithetical to markets and freedom (which go hand in hand). It also reveals a failure to understand the evolutionary nature of change and of markets (i dont mean only in a social Darwinian sense).

    BTW, I am not really sure how “market” oriented China is really. Any country that depends heavily on exports and needs to keep its currency controlled after having a trillion dollars in reserves has adeep flaw in its deomstic markets demand. The same holds true for Taiwan and Korea, although these being relatively small countries can rely on export led demand for a long, long time. I will believe in China, when its internal markets are big and robust (this important) enough that it does not care to keep its currency pegged or exports strong. Until then, China is a big question mark and certainly not a model to be followed. Besides, China, South korea and Taiwan are all for all practical reasons mono-ethnic (the monrities are insignifcant politically). The rights of the minorities are non-existent. Such is not what liberal democracies are made of.

    Comment by srinivas — May 27, 2006 @ 8:54 pm

  14. Dennis, I agree with you on most points.
    Except that dictatorship or authoritarianism, similar to democracy, requires a particular moral value set. In other words, people’s morals should ALLOW or sanction a dictatorship.
    That period in India’s history has passed — Nehru and his kin squandered that excellent opportunity.

    For any political system to have peoples’ sanction in India at the present, it HAS to be based on a democratic platform.

    This makes things more difficult and subtle, but not necessarily impossible [ref. my prev. comment]

    Comment by 7*6 — May 27, 2006 @ 8:56 pm

  15. Srinivas: you’re confusing the head and tail of the situation.

    Yes, classical liberalism is an eminently prosperity-inducing poltico-economic model, but what if the (majority in) society is not in favor of it?

    In other words, what if it is not a viable SOCIO-political model for the society under consideration?

    In Indian Society as of now: if I want to keep markets free, I’d have to be a dictator or suchlike. A populist politician cannot do that because the majority of people do not want that.

    Saying, as you are, that we should rely on free markets for the “transition” is a meaningless statement. You’re confusing goals and starting points.

    Comment by 7*6 — May 27, 2006 @ 9:07 pm

  16. 7*6

    I am not confusing anything. Please read carefully. I never argued for classical liberalism on the basis of instrumentality. It so happens that classical liberlism promotes prosperity in the modern world. But that has not always been the case. Even a few centuries back, UK and Switzerland were poorer than india and China.

    Classical liberalism is a goal in itself. Personal freedoms, limits on the power of the state should be basic, non-negotiable values. If a society does not accept this as a valid end in itself, then it is, I am sad to say, filled with ethically-challenged cretins. Now cretin-infested society may also turn out to be prosperous for a period of time thanks to some enlightened leadership. But would you like to live in one is the question. As long as we keep arguing on the basis of justifiable ends without regard to the means, we are bound for serfdom.

    I never said that you should depend on free markets from transition. I just challenged the notion that you can “plan” out transition as Dennis was suggesting. The very idea that you can get to a particular goal through well-planned out means in an evolutionary world is utterly preposterous. Now, you automatically assumed that because I ridicule such planned transition I am for some sort of shock therapy or free market transition. You are reading things that I have not written. I am not for any such thing because being for something implies that each alternative has a well-charted course with defined costs and benefits which can be compared. But insofar as anyone wants to plan such a thing, they reveal a mentality that will never get them to liberalism. Taking responsibility for one’s fate and one actions and accepting the fact that the world is uncertain is a tough thing. If the people in a society cannot cannot deal with it, then they will forever be an “inferior” society. It does not in the least interest me that some cretin societies are more prosperous than other cretin societies.

    Free markets as we know them and classical liberal anglo-saxon institutions have evolved over a number of centuries. Nobody planned them. But they all began with one important principle, limitations on the state, as enshrined in the Magna Carta.

    Comment by srinivas — May 27, 2006 @ 11:14 pm

  17. Srinivas, just so as to reduce confusion, let me summarize the various assertions:

    First off, there are two principals we’re dealing with here:
    Free-market (socio-political) structures/institutions and the classical liberal mentality or moral code.

    You’re saying that the classical liberal moral code should define the moral codes or the moral goals of the nation. I agree.

    India, you aver, does not have the classical liberal mentality. Again I agree.

    But then you make the statement that the transition from India’s moral code to a classical liberal moral code cannot happen in a planned manner.

    As a historical anecdote, you aver that this moral code and institutions “evolved” slowly for western nations.

    This is where I differ: your assumption that the moral codes of people can “evolve” organically betrays a lack of sociological sense.
    I see this mistaken assumption in many classical liberal theorists and intellectuals, which is reflection of their sociologically utopian and a historically-ignorant mindset.

    For a moral code to change organically, you have to assume that the common man can think about and assess the metaphysical validity of a moral code. Sorry to say, but he cannot.

    Moral Codes are almost always INSTITUTED, and in a top-down fashion. What’s more, they are almost always indoctrinated since early childhood. Most important of all, they are supra-rational: the common man does not and cannot “think” about its metaphysical validity and decide on it.

    Just because some educated Indians can undergo this metaphysical conversion does not mean you should presume that everybody can and has to. That is sociologically utopian. It is an inherently elitist enterprise. (By your token, all religions have to be organically developed, no?)

    The sociological question we’re looking at is how are moral codes instituted, and changed?

    You’re saying it can only be organically developed and wash your hands off the matter.
    I’m saying it can ONLY be changed “inorganically” and with the help of social institutions: religion, nationalism to take two possibilities.

    Comment by 7*6 — May 28, 2006 @ 1:53 am

  18. The model of democracy that China will eventually implement is still unknow at this point. But I have no doubt that after the turmoils of the last one hundred fifty years and especially the most recent TianAnMen square massacre, most Chinese would rather do it incrementally. Yes, that means evolution instead of revolution. My friends who have since moved to China from the US in early 2002 think highly of the Singaporean democracy model. That is, a one party, paternalistic model. The problem that I can see is that if China ever wants to reunite with Taiwan peacefully, it would have to implement multiparty elections similar to Taiwan’s which is based on the US model. Whatever path China takes, it will be a long and even torturous process.
    China’s economic model may not work at all in India. India would have to create its own economic model. But whatever model it chooses, it seems to me that the precondition for success is to attract the best and the brightest.

    Comment by Dennis Chan — May 28, 2006 @ 9:46 am

  19. Questions:

    Can classical liberal moral codes be installed through the creation of systems that encourage them and discourage forces that oppose them?

    For example if a constitutional ammendement were to change India’s “First Past The Post” electoral system to a “Proportionate Representation” type of electoral system, would it take away the incentive from politicians to share power, and instead give them an incentive to perform well by being politically rewarded for it?

    The quality of a nation’s constitution must surely affect the moral codes at play in that nation. So what exactly causes the difference between western democracies and eastern ones? Do western constitutions do a better job of nurturing moral codes? And if they do, couldn’t countries like India identify the elements in their constitution that affect the moral codes and make consitutional ammendments to implement those codes better? Of course anything that will dilute the government’s own power is unlikely to be pursued by any government, wherein lies the Catch-22. But perhaps there will come a government that will be mature enough to have a long term vision and, setting aside its short-term agenda, will pursue such constitutional ammendments.

    Unlike most people here, I am no scholar. Any comments from you experts will help me understand things better and I would greatly appreciate it.

    Comment by SacredCyborg — May 28, 2006 @ 1:23 pm

  20. SacredCyborg: a constitution is just an articulation of a nation’s moral code. It does not have the power to change a nation’s moral code. It can only “maintain” what is already a nation’s consensus as to what their moral code is.

    For e.g. US’s founding fathers had said that France (at that time) was too depraved to have the kind of republican democracy that they were instituting in the US and which they articulated in the US constitution.

    Perhaps your question stems from the situation in the US, where in addition to being indoctrinated that classical liberal values are good, they are also indoctrinated with respect for constitutional tradition itself. That is, liberty is good because it is moral, but also because it is enshrined in the constitution.

    But even such indoctrination of respect for the constitution can only be used to maintain the consensus, not to introduce new ones. Which is why the Founding Fathers of the US had shaken their heads at France.

    Comment by 7*6 — May 28, 2006 @ 7:16 pm

  21. How many people here believe that India’s moral code can be changed by making key constitutional ammendments such as the one described above (switching from FPTP to PR electoral system)?

    Comment by SacredCyborg — May 29, 2006 @ 3:42 am

  22. Its the kind of democractic government which has one of the major priority of making the government last for the tenure which fails to look after infrastructure. In the west and Europe you have a lot of democratic governments which have been successful at building good infrastructure whereas such problems arise mostly in the democratic government in the developing world. Where as authoritarian governments dont have the issue of survival at hand as much as it is for a democratic government and hence the difference.

    Comment by Kislay Thakur — May 29, 2006 @ 10:04 am

  23. There are governments at various levels. Lot of what we call basic infrastructure, in my opinion, should be the responsibility of the local government, if at all. (I will leave out the role of private sector debate for now). The reason being that they are the closest to people and can respond faster. They can be held accountable much more easily than a government far far away.

    Unfortunately, for all the democracy we talk about in India, there is no real democracy at the local level. We are very proud, and rightly so, that we directly or indirectly elect the PM and even the CM at the state level. At national and state levels, we wield our electoral stick very effectively, like what happended in the last state elections.

    But we cannot say the same when it comes to the government and political leaders who affect us the most – the local ones. Our Mayors are called ´one year wonders´and are very little responsibility. The people who really run the cities for example are appointed bureacrats. No matter how good or well meaning the commissionar may be, he is no substitute to an accountable and empowered elected representative.

    This is by design. Even the 73rd and 74th ammendments have done very little to rectify the situation since state governments have the power to define the implementation of these ammendments.

    Local mayors and city councils can be short term oriented too. Many mayors and city councilors in the US for example make a mockery of lot of things. But they are also under a lot of pressure and scrutiny from the public. Apply the same scrutiny to state and national govts is almost impossible for ordinary people.

    So I think before we discuss democracy versus authoritarianism, we need to discuss democracy at what level and how much really exists. Apples to Apples. A truely responsive local democracy with a responsive authoritarianism (Singapore). Political democracy like in India versus unresponsive authoritarianism (the choices are too many).

    Comment by Raj Cherubal — May 29, 2006 @ 3:38 pm

  24. Nitin, that is actually a good question. I am more worried about the political leadership responding inappropriately to demands like wasteful construction of flyovers. There are examples of it both in Bangalore and Kolkata that I witnessed.

    Infrastructural demand could be thought in terms of the signals that prices provide us. A political entity is not the best judge for it. Essentially entrepreneurs (or speculators) are the best judges or risk-takers of it. The less of public goods and the more private property out there, the more that entrepreneurs will have flexibility to respond to the demand. That is one reason why we see over-crowding in cities and sparse sub-urban areas. Essentially the infrastructural provision is entirely under public goods category. If I cannot privately provide electricity, schools, water obviously there is a supply constraint on infrastructure.

    Authoritarian govts can provide infrastructure but again can they respond appropriately and respect civil freedom. I heard a Toyota manager here saying that “All roads are constructed straight in China.” because all opposition is steam-rolled!

    More private property and stronger local governments is the way out!

    Comment by Naveen — May 30, 2006 @ 9:55 am

  25. I think the posts have pretty much exhausted every pro and con about democracy. Of course it’s an imperfect system, but the only one that has proven successful so far, and what success! It is a system that has not only spawned powerful economies providing ever-rising standards of living in many countries but also sweeping social reforms and humanistic ideals never before conceived by mankind.

    The good and bad of democracy are self-evident. What was not, at least to me, is the theory that Asia needs a different version of democracy. Why? Are the prerequisities of a successful western democracy, namely an independent judiciary, a free press, a decent level of education to ensure political insight and activism, and a number of dedicated social reformers to keep the free markets fair, somehow absent in the brown and yellow populations of the world?

    A suggestion of a downsized democracy for Asia, if made by a white person, is a racist remark. If made by a brown or yellow person, a self-deprecating one.

    Comment by Sarat — June 1, 2006 @ 4:55 am

  26. umm hello everybody, i suppose i don’t fit into the persona of a typical blogger on this website, but nevertheless i have a query pertaining to my studies. m a student of Mass media and am currently studying advertising in contemporary Indian society and am basically trying to track the influence of economic, social, cultural, political issues etc on advertising. interestingly enough, most of the key points discussed above referring to the infrastructural developments that India has seen over the past decade along with the liberalization policies that have been introduced, India seems to have become a major market for foreign investment. my query essentially is that what are the economic infrastructural facilities that India can provide as a nation to attract ever more foreign investors?? basically what are the prerequisites to developing a favourable environment for foreign investments and whether or not India is a favourable market. If it is in what ways is it better than a China or a Brazil??

    Comment by Manhar Garegrat — September 28, 2007 @ 2:09 am

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