Cultural Norms & Nobel Prize In Economics: Lessons For Viksit Bharat

Every October, the Nobel Prize in Economics draws attention for its profound influence on global ideas and policymaking.

This year was no exception. The Nobel Prize was given for research on “for having explained innovation-driven economic growth” with the first half given to Messrs. Joel Mokyr (Northwestern University) — “for having identified the prerequisites for sustained growth through technological progress”— and the second half jointly to Philippe Aghion (LSE) and Peter Howitt (Brown University) — “for the theory of sustained growth through creative destruction” respectively. While this has global implications, their relevance to India deserves special scrutiny — what are some of the salient lessons for India?

Many commentators have focused on the idea of innovation-driven economic growth and the importance of creative destruction to enable the same. This Schumpeterian worldview has been rightfully acknowledged, and one can’t underestimate the importance of this to the Indian context. Given our complex legacy governance systems and systemic constraints to economic progress, the importance of constant innovation and churn is the need of the hour. The dynamic startup ecosystem that has evolved in India over the last few years and the digital revolution — digital public infrastructure and the JAM trinity — have catalysed this focus on innovation. Furthermore, new institutional reforms such as the Insolvency and Bankruptcy Code (IBC) have provided incentives for risk-taking and the creative destruction process. Yet there is another foundational dimension that this Nobel signifies that could really turbocharge India’s economic growth prospects.

Professor Mokyr’s work has also significantly dealt with the notion of cultural norms and narratives and their impact on developmental outcomes. Though from a European perspective with certain nuances, which the author doesn’t necessarily always agree with, he lays out the case for the influence of these norms in historical development.

In a latest CEPR Vox EU column, along with his co-authors Avner Greif and Guido Tabellini, Mokyr argues on the role of these norms in contemporary development of countries such as China. He and his authors argue that ‘a key factor behind China’s remarkable economic resurgence has been its capacity to adapt traditional institutions and cultural practices to the needs of a modern economy’. In essence, the role of assimilation of cultural norms and practices are important enablers for development, especially in culture-driven societies.

This year’s Nobel Prize offers a strong counterpoint to the arguments made by the previous laureates, Acemoglu et al., who contended that institutions are the primary drivers of development across nations. Notably, a growing number of scholars, particularly from Asia, have increasingly voiced support for the perspectives advanced by Mokyr and colleagues, which foreground innovation and technology as key engines of progress.

I have often argued through my books in an Indian/Bharatiya context—Kautilyanomics for Modern Times and Dharmanomics — that cultural norms and narratives and their application to economic and public policy is an important trait in our quest for Viksit Bharat. The alignment of public policy to the way of life and cultural norms and narratives makes policymaking far more effective since there is a natural ownership from people in pursuing some of these initiatives. Several contemporary examples allude to this fact.

The success of the Swachh Bharat scheme in rural areas much more than urban areas is significantly due to the alignment of the Dharmic principle of ‘saucham’ (cleanliness) to the neighbourhood and society at large. This triggered a consciousness and responsibility among common people to not just keep their homes clean but also their societies. Results are visible: 12 crore toilets have been constructed thus far with more than 95% of villages categorised as ODF plus. This has resulted in saving 3 lakh children under the age of five from diseases linked to poor sanitation by 2025 among other major developmental milestones.

One of the key reasons for this success is the natural ownership shown by people backed by the machinery of the state along with the efforts of the Hon’ble Prime Minister of India Narendra Modiji. This ability to connect with the natural ethos of the people has ensured that this cleanliness drive has become a movement among common people resulting in transformational outcomes.

Similarly, at the institutional level, one notices that there is much greater effectiveness when institutions are aligned to these cultural norms and narratives. Examples include the successful tenure of the Finance Commission of India since 1952 — perhaps a unique body designed to align with the federal and linguistic diversity of Bharat — and also the more recent Capacity Building Commission (CBC) that has transformed capacity development among civil services and bureaucracy across India in recent years through schemes such as ‘Mission Karmayogi’ among others.

The first-hand evidence of their success is their growing influence in key socio-economic policies in the country. Do cultural norms and narratives also correlate to the broader message of innovation as shown in the Nobel? Of course, they do.

Countries such as China have mainly anchored their innovative and developmental strategies based on decentralised and localised solutions with best practices from the rest of the world. There is contemporary evidence to suggest that innovation emanating from cultural norms and practices is gaining significant traction. Uttar Pradesh government’s ‘One District One Product’ (ODOP) is a prime example of such a policy where products specialised to each district are promoted at scale. These have led to substantial increase in exports of district-identified products (and their innovative variations) like carpets (Bhadohi), perfumes (Kannauj), chikankari and zari zardozi (Lucknow), brassware (Moradabad), glassware (Firozabad) among others. The ODOP margin money scheme has been supporting over 120,000 units and 500,000+ artisans with an infusion of 4500 crores making it one of the models of localised developmental success stories driving innovation in the country.

In retrospect, in societies such as Bharat, the case of assimilating policy to cultural norms and narratives — the way of life of Bharatiyas — has improved efficacy of public policymaking, institutional excellence and innovative zeal at a much more sustainable pace than otherwise. The lessons from the Nobel Prize should serve as an important validation of some of these principles and augur for more in our pursuit of Viksit Bharat.