Fragile Democracies

Pranab Bardhan is Professor Emeritus of Economics at University of California, Berkeley. Among the foremost global scholars of development, distribution, and trade, his twelve books and more than one hundred fifty journal articles cross disciplinary boundaries in an effort to critically grapple with the conditions needed for a more equitable society. In Land, Labor, and Rural Poverty, he considers the relationship between land tenure, agricultural employment, and rural poverty. The groundbreaking Political Economy of Development in India integrated Marxian class analysis with a rational-choice methodology and a Weberian institutional lens to reflect on the structural impediments that have slowed India’s industrial growth. His new book, A World of Insecurity, re-examines the conditions underlying democratic disenchantment. 

In what follows, King’s College Lecturer in Comparative Political Economy Poornima Paidipaty interviews Bardhan on the rise of the global right, the nuances of decentralization, and the role of the state in pursuing paths forward.

An interview with Pranab Bardhan

POORNIMA PAIDIPATY: A World of Insecurity (Havard, 2022) covers a wide range of topics, from current economic inequality to the rise of populism and the importance of renewing institutions of social democracy across the globe. Maybe you can start by telling us about the inspiration behind the book—as a writer, what motivated you to piece all of this material together?

Pranab bardhan: As a political economist, I’ve noticed that politics in many countries I’m interested in, both rich and poor, has been moving rightward (the major exception being in Latin America, but even there, leftwing victories have been fragile). I was interested in understanding this global shift. Everyone talks about the rich countries—Trump, Johnson, LePen, Meloni, the Sweden Democrats, among many others. Developing countries get less attention. In my study, I look at three developing countries: India, Turkey, and Brazil. 

Existing work on the rise of the right revolves around the question of inequality—even in countries where it’s not rising, it is already very high. But again, much of this work is focused on Western Europe and the US, and I was interested in broadening this scope. Despite having worked quite a lot on inequality as an economist, I had a sense that this was not the full story. In particular, I felt that it doesn’t answer an essential question: Why are working people rallying under the banner of multi-millionaires? This is particularly confounding given that these billionaires, once they come to power, almost inevitably reduce taxes on the rich and weaken restrictions on the financial and corporate sector. 

Another motivation for writing the book is that existing discussions tend to exclude any reflection on the Chinese model as an alternative. I discuss the advantages of the Chinese model of economic development, but also emphasize that many of the ugly features of Chinese development are the result of the underlying authoritarianism. After a lengthy discussion of these benefits and downsides, I suggest that authoritarianism is neither necessary nor sufficient for promoting the beneficial aspects of Chinese policy making and governance. 

Finally, I took the book as an opportunity to reflect on what comes next—what do we do about this global trend? I devote the second half of the book to this question, trying to conceptualize what I call the rejuvenation of social democracy. How do we cultivate new thinking about social democratic transformations?

Pp: In the last decade, many scholars have highlighted the impact of rising economic inequality on political polarization and social stratification. One of the things that distinguishes your book is the distinction you draw between inequality and insecurity. Can you talk about the importance of those terms?

Pb: I argue for a shift in emphasis from inequality to insecurity. I question the explanatory value of inequality on the basis that on the whole, workers are far more concerned with their living standards relative to others in their community than they are with the top one percent. They don’t know or care about the lifestyle of the global elite. However, workers are acutely aware of the sources of insecurity in their life. Among these, economic insecurity is obvious: job loss, rising cost of living, and so on. This is especially true in rich countries, since China’s entry into the WTO in 2001.

But in the book, I also discuss other sources of insecurity. One of these I call cultural insecurity. Culture is an ambiguous term, but this sort of insecurity takes specific forms—in rich countries, it often manifests as fears over immigration. In my view, the economic side of these fears are not really what is at play, especially since immigration has been repeatedly proven to bring net economic benefits. The fears are I think primarily about threats to a perceived “traditional” form of life. The role of perception is important here; firstly, because second and third generation immigrants tend to assimilate into local traditions, and secondly, because surveys have found that people tend to grossly overestimate numbers. They have an exaggerated perception of insecurity.

Developing countries tend to attract far less immigration, and as a result, the cultural issue often takes a different form—religious majoritarianism or ethnic nationalism. This is the case in both Turkey and India, as well as in Poland and Hungary. These movements are tied together by what I refer to as “manufactured victimhood”: when the majority population somehow has a contrived fear of victimization by a minority. This is often the result of historical resentment. For example, in India there is a resentment among Hindus that Muslims ruled six hundred years ago. During the Bosnian War of the 1990s, I remember seeing a cartoon in which a Bosnian Serb and a Bosnian Muslim were stabbing each other, with one saying, “This is for 1432” and the other saying “this is for 1521.” This stoking of historical memory is something right wing demagogues are very good at. 

Pp: I share your skepticism regarding the explanatory power of rising inequality, in terms of explaining the global shift towards rightwing populism. On the face of it, much of this rightwing support is not coming from those people hardest hit by unequal economic distribution. For instance, Modi supporters in India often come from groups that have seen quite a few economic benefits in recent years and whose prospects have not shrunk in absolute terms. Many of them are part of the rising lower middle classes.

The fact that insecurity is a question of perception is also a great point. But just as there isn’t a direct correspondence between economic deprivation and support for rightwing populism, the people who feel insecure over rising numbers of migrants, for instance, are often located in areas with fewer immigrants (relative to large metropolitan areas). What is the relationship between this perception of insecurity and our changing global political economy?

Pb: There is as you say a huge difference in the support base for these parties between rich economies and poorer ones. In the US and Western Europe, the right is popular among older, rural, less educated voters. By contrast, much of Modi’s support comes from aspiring urban youth. Major metropolitan areas like New Delhi, Mumbai, and Bangalore voted for Modi—this is a sharp contrast to cities like New York, Los Angeles, and Chicago. These rising groups are mobilized by resentment for what they perceive to be a Western liberal elite. 

Pp: Can you talk us through some of the emerging alternatives to liberal capitalism?

Pb: I think one of the tensions that we see emerging very clearly now is that between the local and the and the federal or international. Political mobilization around this issue doesn’t fall neatly onto our inherited political axes—the notion of community is often leveraged by the left, but equally one of Brexit’s key slogans as “back to the community,” i.e. back to the local community and away from Europe. 

There is a lot to be said for communitarian ideas, given that big bureaucracies often trample upon local initiatives and local ingenuity. Much of my work has been focused on structuring decentralization in India—I’ve written theoretical papers and also collected data on village surveys carried out especially in West Bengal. But having grown up in India, I’ve seen how oppressive local communities can be. We should not have an idealized notion of how a small village operates with respect to caste, gender, and so on. 

This debate dates back decades; it was one of the key differences between Mahatma Gandhi and one of the founders of the Indian constitution, B. R. Ambedkar. Gandhi mobilized around the notion of the village republic, while Ambedkar described the Indian village as “a sink of localism, a den of ignorance, narrow-mindedness, and communalism” during the constitutional debates of 1948. We are all familiar with the issues that arise from insiders seizing local political space—zoning restrictions, professional licensing, school financing, and so on. Decentralization thus has the capacity to worsen and entrench local inequalities.

Government intervention can help catalyze changes of oppressive practices within communities. It can also help smooth out intra-community inequalities—in earlier research, I’ve examined how land distribution impacts political cooperation. Small communities are at a disadvantage in dealing with natural disasters, market mishaps, infrastructure investments, and the like. But there are also things local governments do very well; I try to find the balance between the two in my chapter on communities. 

Pp: This ties back to your argument about state capacity. There is an emerging dialogue in India regarding the importance of federalist structures, with some scholars and activists arguing for more decentralization of power. This strand of thinking argues that Modi and the BJP (through their brand of populism) are not turning away from India’s foundations; instead they are building upon the historical institutions of a Nehruvian state, which used centralized power in order to expand state capacity. The solution to rightwing populism, according to this view, is more decentralization and less power in the hands of the central government. This conversation is gaining ground in light of southern states’ rejection of the BJP in recent elections. In the US, it’s exactly the reverse: the federal government is seen as a protector of civil liberties while states are seen as sites for the erosion of those liberties. 

Pb: In the book, I argue that one advantage of the Chinese model is its unique blend of political centralization combined with economic and administrative decentralization. India exemplifies just the opposite: a decentralized political system with strong regional power groupings, combined with economic centralization whereby regions depend on finance from the government. As I mentioned earlier, this discussion dates back to the writing of the Indian constitution. At the time, Ambedkar advocated for more central power in order to combat the oppression of lower castes, like his Mahar community, a Dalit group in Maharashtra. That’s why he advocated a partial centralization. Nehru was also concerned with keeping the country together in the aftermath of Partition. As a result of these two elements, I think they gave the central government an unfair amount of power. 

Few governments can do what the federal government has done in India—if we think, for example, of Nehru’s handling of the communist control of Kerala in 1959. As per the advice of Indira Gandhi, who was president of the Congress Party at the time, Nehru imposed President’s Rule in Kerala, whereby the central government dismissed the elected state government. That’s an example of a central government openly violating the wishes of an electorate. This has been repeated in several states over the decades.

This happened in an even more extreme form recently, with the state of Jammu and Kashmir. Without consulting the population, the state was broken into three centrally administered territories. Can you imagine if the federal government in the US broke up California? It’s inconceivable. American federalism gives more power to local states. In the 1940s, when they considered what form an independent India should take, one idea put forward was that of a Confederation. This was proposed in order to stop Partition, but the notion was eventually dropped. 

In China, provincial and sub-provincial governments have a lot more power. This also means that they have a far better system for managing infrastructure financing and construction at the local level. Urban infrastructure is governed by companies organized by the city government. Out of the total government expenditure for the whole country, the amount that is spent at the sub provincial level, not even at the state provincial level, is more than half of the total government expenditure. In India it is about three percent.

Indian municipal governments lack taxation power and are therefore financially strapped. Much of social expenditure takes place at the level of states, but money is controlled by the central government. I refer to this as India’s vertical fiscal imbalance, and I think the weak performance of local bodies in India in the delivery of services and facilities is in part tied to it. By contrast, Chinese local governments are active in business development and not just in service delivery. 

Pp: Let’s turn to some of the solutions that the book puts forward. Your recommitment to social democracy seems to resist widespread proclamations about the failure of democratic institutions. What exactly do you have in mind?

Pb: My main focus is on universal basic income (UBI) and job creation. For developing countries with fairly weak social safety nets, UBI can be very effective–particularly in mitigating gender disparities. In countries like India, the overwhelming majority of women are not earning any income, despite performing back-breaking domestic work. But roughly 80 percent of Indians have a bank account today. A government transfer would hugely empower women who currently depend on their partners for survival. UBI becomes very appealing from the starting point of insecurity: offering an exit option for those who have been forced into work like manual scavenging for centuries due to their caste. Minimizing sources of insecurity is, I think, a more powerful justification than that of anti-poverty—it avoids the discussion of substituting income transfers for other social safety programs which may in fact be more effective at reducing poverty levels. 

I also suggest that UBI can be effective at strengthening labor movements by unifying the interests of informal and formal, unionized and nonunionized, service and manufacturing workers. In India as in many developing countries, we see a small island of unionized workers surrounded by a vast ocean of informal workers. That small group gets access to benefits like pensions which the others do not have. Policies like UBI, which benefit both formal and informal workers, help bridge this gulf, softening labor market divisions. 

I also stress the importance of wage subsidies for the employment of young people, who are largely unemployed or underemployed in much of the developing world. And I reiterate the power of job creation via the green energy transition, as well as the importance of giving labor a voice in corporate governance. 

Pp: Maybe we can end by considering a few questions which are related to the issues you take on but are outside the direct scope of your book. You mention Branko Milanović’s book, Capitalism Alone (2019), which argues that whatever criticisms we may have of capitalism, it has been responsible for transformative economic mobility over the past two centuries. 

That defense of capitalism presents crucial questions regarding sustainability: both ecological sustainability and distributional sustainability. For example, Milanović focuses on the period since the 1970s, when low inflation enabled large scale, debt-financed consumption, and subsequently a manufacturing boom, which raised commodity prices in places like Sub-Saharan Africa. This is more equitable than what we had before, but is it sustainable? 

Pb: The challenge, I think, is to harness technological innovation towards social ends. We ought to make sure that the advances we make prioritize the interests of workers and give them a voice in decision-making. Democratizing the decision making structures in large corporations can allow us to determine the rate and pattern of innovations more collectively. We also need to democratize our politics—the largest democracies in the world (India and the US) both have elections funded by private donors. Under the anonymous electoral bond system, businessmen and companies are able to secure party favors. If we’re going to reform our politics in the interest of the public, we ought to look at the sort of public funding models used by Belgium, Spain, Germany, Sweden, and Canada.