Work ethos is crucial to achieving high growth rates. The market always rewards hard and intelligent work. But it doesnt necessarily promote a better work ethos. For instance, market environments in Punjab and West Bengal are quite similar. But the work ethos in Punjab is far better than that in West Bengal. No wonder then that Punjabs economic performance is much better than that of West Bengal.
Well-known sociologist Max Weber has proved that ethics of hard work and frugality pre-existed the growth of capitalism in countries where the Protestant religion won over the Catholics. As a result, countries practising the Protestant religion grew much faster than the Catholic ones in the first wave of the breakthrough of capitalism. Though over a period, ethics associated with the Protestant religion developed in Catholic countries too. But, by and large, Catholic countries were late-comer capitalists. However, it is a separate matter altogether that over a long period Protestant ethics became weak in some Protestant countries like in the case of present-day Britain. Perhaps, the flow of easy money from its colonies encouraged a parasitic ethos in imperial Britain.
There is a general consensus among sociologists that the cultural factor, more precisely Confucianism, played an important part in the earlier high growth rate of Japan, South Korea, Taiwan and now the Asian Tigers. But as the experience of economically successful Catholic countries show, culture is not something frozen. It changes. But changes are hastened if there are conscious efforts towards that end than if these are left to themselves.
In fact, the missing link of our reforms is that there is no adequate appreciation of the fact that unless work ethics change and capabilities are built up, mainly through education, opportunities offered by the market would be wasted.
These growth-inhibiting factors are further compounded by two other characteristics of societal nature. First, we are prematurely becoming a consumer society. Television is a powerful media for advertisers. It is capable of transforming wants into needs very fast. The spread of consumer culture is the root cause of the recent declining trend in the financial savings of households. Positive high interest rates should normally have led to a boom in household financial savings. But this was not to be. Unlike Confucianism, Indian culture doesnt give precedence to savings over consumption. Our tax-GDP ratio is declining, household financial savings are going down and public savings have not been increasing. How much of the decline in domestic savings can foreign flows offset? Even in a market-led system, savings-investment-growth constitute the virtuous circle. If savings are low and high investment rate is sought to be maintained by printing money, it will lead to inflation which sooner or later would abort growth.
Second, the hierarchical system is entrenched in Indian society. Most of the existing productive assets in the private sector are locked in family-controlled companies. After the second or third generation, even dynastic Mughal princes tend to lose steam. If you chance upon meeting some of them, you will find them an embodiment of contentment, complacency, laziness, lacking in vigour and business virility. For them time is not money.
Taking all these issues together, though they are strictly not of economic nature but are entrenched in our values and society, one cannot be very optimistic about Indias prospects of joining the club of Asian Tigers in the near future.
In fact, it appears that the nineties will be a lost decade for India, measured in terms of the expectation aroused by the systemic revolution that took place in 1991 the state-led growth strategy was dumped in favour of the market-led strategy. It appears that the average growth rate of the nineties may not be very materially different from the one achieved in the eighties i.e about 5.5 per cent.
