From Financial Express, September 12, 2012

Virtuous growth for India

India’s ruling coalition has promoted the idea of inclusive growth. What this means operationally is something that can be debated. One idea is that a broad cross-section of society should enjoy the fruits of growth. For example, Kaushik Basu has suggested measuring the income gains of the bottom quintile of the population as a concrete, specific indicator of growth. One can also interpret inclusiveness to mean going beyond income. Amartya Sen has emphasised that there are other measures of development and well-being—literacy rates and life expectancy can also grow, for example. For others of Sen’s suggested dimensions of development, such as rights and capabilities, quantitative measures of growth may be difficult, but one can still speak of more inclusive development in a qualitative sense.

Material welfare and rights are reasonably well understood, though agreeing on how to measure gains, or manage tradeoffs between them, still can be a challenge. But there is a third dimension that has been stressed by philosopher Michael Sandel, who discusses the importance of virtue, in his books, Justice: What’s the Right Thing to Do? and What Money Can’t Buy: The Moral Limits of Markets. Sandel’s examples are mostly from the US, and are germane to the current political debate in that country’s presidential race. But they also have relevance for India.

Basically, Sandel argues that welfare and rights (especially freedom of choice) are insufficient to guide us to just social outcomes. There has to be a consideration of morality that goes beyond these. He favours “cultivating virtue and reasoning about the common good”. What this means in practice is hard to generalise, but he argues through examples, and he gets at the heart of some of the issues that trouble ordinary people when they consider the role of market forces. In particular, a key idea that he advances is that market exchange based on commoditisation can crowd out moral considerations and make us worse off as a society. For example, market exchange can destroy the good itself—friendship cannot be bought and sold. But even if the good is tradeable without being degraded (babies are an example he discusses), there is a loss to us individually and socially from such marketisation: the participants in the exchange are corrupted or degraded, rather than the object of exchange. A complementary possibility is that pure market-based allocation is undesirable because it is unfair, pricing all but the rich out of some goods (such as a visitor’s seat to watch Parliament in session)—this relates to more conventional notions of equity or egalitarianism, and the basic idea of inclusiveness.

Sandel uses his framework to discuss more concrete notions of citizenship, sacrifice, honour and responsibility. If markets intrude too much on social norms, then there is a loss of virtue. On the other hand, virtue is strengthened by its application—we learn to be good citizens through how we go about our civic duties. In particular, allowing the market to dominate the government will be problematic. Note that this does not constitute an argument against economic reform in India. In fact, the problem with the old system was precisely that it created opportunities for buying and selling government favours, in situations where open and transparent market allocation could have been more effective. My guess is that Sandel would have concerns about Kaushik Basu’s suggestion to decriminalise bribe-giving where the bribe is demanded for a service to which the recipient of the service is entitled. This can increase efficiency and material welfare, but can have a corrupting or degrading effect on individuals and society.

Sandel’s idea of virtue as important for individual and social good is not new. There are conceptual links to Gandhianism or even Nehruvian socialism. But like Nehru and unlike Gandhi, there is not a broad-based suspicion of material progress. And unlike Nehru, there is not a broad suspicion of markets. So I do not think that paying attention to virtue means neglecting traditional economic growth. Virtuous growth is not an oxymoron. If fairness is a virtue, then virtuous growth subsumes inclusive growth. But if inclusive growth means that rich and poor alike progress materially while becoming socially less engaged, or more corrupt, or materialistic in ways that are degrading, then even inclusive growth lacks something. It is possible that the sustainability of growth may require inclusion in the medium term, but virtue in the longer run. Virtuousness can align with intrinsic motivation, so that people do their jobs well, not only because they are paid for it, but because it is the right thing to do. It also focuses attention on how those jobs are experienced, so that dignity matters in itself, not just for the bottom line. There are implications for how the private sector chooses to conduct itself, aside from government regulation. The sharpest implications, however, are for the government itself, which in India, often fails to promote virtue or to practice it, while pretending otherwise.