Making sense of society
Michael Spence, a Nobel laureate in economics, is Emeritus Professor of Economics and a former dean of the Graduate School of Business at Stanford University.
This article was received from Project Syndicate, an international not-for-profit association of newspapers dedicated to hosting a global debate on the key issues shaping our world.
MILAN – How to strike the right balance between the state and the market, and ensure the proper functioning of both, has been debated for centuries. But Indian author and philanthropist Rohini Nilekani offers an answer that focuses on neither. As the title of her 2022 book, Samaaj, Sarkaar, Bazaar (Society, State, Markets): A Citizen-First Approach, suggests, society comes first.
For Nilekani, a stable, well-functioning, and inclusive society is essential, first, as an end in itself. But it is also crucial for another reason: a healthy civil society is a prerequisite to effective governance and beneficial market outcomes. As she explains, the state and markets carry out important functions but are vulnerable to errors, imbalances, inefficiencies, and failures, such as capture by special interests. This can result in myriad problems, from rising inequality to shortfalls in the provision of public goods.
That is where society comes in. According to Nilekani, the only effective responses to government or market deficiencies come from civil society, including the values, relationships, and organizations that underpin it. When society is “malfunctioning” – for example, owing to deep polarization or fragmentation – that response mechanism is disrupted, and can even stop working altogether.
Nilekani’s argument evokes insights from two other thinkers: the economist Albert O. Hirschman and the political scientist Robert D. Putnam. Hirschman’s influential 1970 book Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States argued that actors express their dissatisfaction with underperformance in two main ways. They can “exit” (in favor of an alternative) or use their “voice” to apply pressure for change (such as by highlighting their concerns, proposing solutions, or even threatening to take action that would undermine performance further).
But while it is probably relatively easy to “exit” a firm that is not meeting one’s needs as a consumer – especially if alternatives are readily available – exiting a country is not always a realistic or attractive option, nor equally available to all. More affluent or educated citizens generally have an easier time leaving their country and entering another. People without such advantages might also try to exit a bad situation, but it is likely to be much more difficult; in certain cases, they might even have to risk their lives.
This might help to explain Nilekani’s focus on the fine detail of the institutions whereby civil society exercises its influence over the state and markets. In her view, one can assume, voice is a more powerful, effective, and broadly accessible response to organizational underperformance than exit.
Likewise, Putnam focuses on civil society and community in America. In Bowling Alone: The Collapse and Revival of American Community and The Upswing: How America Came Together a Century Ago and How We Can Do It Again, he analyzes the multidimensional decline of community in the United States, providing a detailed account of the deterioration of civil-society institutions in the Gilded Age (from the late 1800s to the early 1900s), their reconstruction in the interwar period, and their decline again 2-3 decades after World War II. These institutions, Putnam argues, must be built from the ground up yet again.
Despite their differences, Nilekani, Hirschman, and Putnam all seem to share the belief that a healthy and cohesive civil society, supported by effective institutions, is a prerequisite for effective governance, market regulation, and necessary reforms to the state and the economy. For this mechanism to produce truly effective governance, however, citizens must also understand their own civic responsibility, as well as what it takes for the state (or other organizations) to deliver on their priorities. And, as Nilekani’s work shows, this is far from guaranteed.
When Nilekani surveyed Indian voters about what