Friday, January 01, 2010

Support for free markets and globalisation in India

On 5 October 2007, I had written a blog post Does urban India favour liberal economics?, where I had used survey data released by the Pew Institute, which measures attitudes of roughly 45,000 people worldwide with roughly 2,000 in India. Their sampling mechanism has an urban bias.

Today, I saw current information, and cross-country comparisons, on their website.

Support for the free market

 

The wording of the question was: Please tell me whether you completely agree, mostly agree, mostly disagree or completely disagree with the following statements: Most people are better off in a free market economy, even though some people are rich and some are poor. `Agree' combines "completely agree" and "mostly agree" responses. `Disagree' combines "mostly disagree" and "completely disagree."

The results, showing the proportion of those polled who `Agree':


In 2002, India was halfway in the list with 62% support. In 2009, India is at the top of the list, with 81% support.

Support for international economic integration

 

The wording of the question was: What do you think about the growing trade and business ties between (survey country) and other countries - do you think it is a very good thing, somewhat good, somewhat bad or a very bad thing for our country?. `Good Thing' combines "very good thing" and "somewhat good thing" responses. `Bad Thing' combines "somewhat bad thing" and "very bad thing."

The results:



Here also, India is now at the top of the list in terms of support for plugging into globalisation.

Why is this happening?


I think there are three factors at work.

First, everyone in India instinctively knows that when we tried our hand at socialism, GDP growth crashed, and vice versa:

1950s
3.59
1960s
3.96
1970s
2.94
1980s
5.58
1990s
5.68
2000s
7.22



The worst of India's years -- 2.94% average GDP growth with a fast growing population -- were in the peak of Indira Gandhi's socialism of the 1970s. As India stepped away from that, things got better. This process began with the Janata Party in 1977, was carried forward by following governments, and yielded results from the early 1980s onwards.

These changes were big enough and rapid enough that they are as persuasive as a natural experiment. Comparing socialist India vs. unsocialist India is almost as persuasive as comparing East Germany vs. West Germany. So the ordinary citizen, who does not know the GDP data, knows in his bones that getting away from a big State made sense.

The second factor is that a random sample of India has a lot of young people in it, who are less influenced by our socialist baggage. When you look at the political leadership, bureaucracy, academics or media, the views of old people have a lot more importance in shaping positions and the external perception. Old people in India seem to have more socialism, autarky, and unconfidence. Opinion polls show an unfiltered picture of India as it is.

Here is some data, from the CMIE household survey database, about the age distribution of Left supporters:



The CMIE data, with a tiny share of the population which supports the Left, is consistent with data from election vote shares and the Pew data. All three information sources thus increase our confidence in the basic message.

In your mind's eye, you need to think that India is a young population, with a lot of people below 30, and declining cohort sizes beyond. So the early years in the graph are disproportionately important.

In the overall population, Left support stands at 5.36%. India's future is young and urban -- but these two regions are where the Left support is the weakest.

However, another hypothesis can be cited: Maybe it is the experiences of young people which convert some of them from being un-Left when young to being Left supporters in middle age. Maybe political attitudes are not stable through time; maybe the young of today will turn left when they reach their late 30s and early 40s. In coming years, as the data of this survey builds up, we'll be able to evaluate this hypothesis.

The third dimension is about the welfare state. India does not have a welfare state and is unlikely to build one.

Voters do not seem to want a large welfare state. Political scientists say that a homogeneous population is more likely to support population-wide welfare programs: Each voter intuitively feels that the benefits of the program go to people-like-him. In countries with heterogeneity along the lines of ethnicity, class, religion, etc., voters are less inclined to favour population-wide welfare programs, because the picture in their mind of a recipient of welfare is not a person-like-them.

The intellectuals are not pushing a welfare state. In Western Europe, in the 1930-1960 period, the best intellectuals pushed the welfare state as an antidote to the brutality of the communist or Nazi ideologies. That sort of problem has not been an issue in India, where support for communism seems to be ebbing away.

The implementation capability is weak. When politicians have tried to setup large systems -- SSA or NRHM or NREG come to mind -- the limited administrative capacity has come in the way.

The bottom line is that India has a small expenditure/GDP ratio, and there is no welfare state that is under stress. Elsewhere in the world, there is a conflict between retaining the welfare state vs. plugging into globalisation. The gains from international economic integration are weighed against the perpetuation of the welfare state. In India, that conflict of interest is absent: people only see the gains from globalisation.

3 comments:

  1. Ajay - do you think the average respondent to this survey understands free markets the same way across countries?

    These labels - liberal, socialist, free markets, right, left - only have meaning within a country's context. Most of the 81% Indians who say they like free markets probably don't even consider the low price of kerosene or LPG they are paying as a consequence of price controls and very non free market.

    I think the first survey question is largely a vote on the direction of the country.

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  2. Basab,

    I agree with you that there are big difficulties in measurement here.

    E.g. when I had blogged about this a long time ago, I put in the caveat "Urban India" given that their sampling scheme did not seem to cover the full country.

    But:

    - similar concerns would apply in many other places also.

    - what is really striking about India is the change from 2002 to 2009. If we could be really sure that nothing changed in the implementation of the survey, then it could suggest something changed in the country.

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  3. While this survey does not cover it, rural India too is seeing changes albeit at a slower rate. I don't recall seeing data but one hears of many instances of better access to capital, increased cell phone penetration, more availability of FMCGs and businesses actually following up on Prahalad's ideas in Bottom of the Pyramid. You will have pockets which have got worse and others getting stagnated but is does not seem like its widespread (else the media is reporting crap). Plus, one needs to keep in mind that schemes such as NREGS would not be affordable (despite deficit spending) if the Govt.'s revenues had not gone up. Lastly, states like Bihar exemplify the shift in focus towards Governance and opportunity creation observed in other states.

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