The rule of law, for a healthy democracy and a strong economy

Whose rights is the law designed to protect? And what are the values on which institutions are founded? There’s a contest between what sort of economy and what sort of democracy India will be in 2047, a 100 years after its independence on August 15 1947 when Jawaharlal Nehru declared that India had a tryst with destiny

Arun Maira

[From Unsplash]

“Be careful what you ask for, because you may get it”, is sage advice. Liberals say the rule of law is essential for democracy. Economists say the rule of law attracts more investments. Both want judicial processes speeded up because justice delayed is justice denied. They differ about whose needs the laws must primarily serve. For investors, laws should improve the ease of doing business. For democrats, laws should improve ease of living of all citizens and protect their rights.  

China attracted five or six times more FDI than India even after India opened up its economy in 1991, though both were large, underserved markets with a billion citizens. When Dr. Manmohan Singh, an architect of the 1991 reforms, became Prime Minister in 2004, he appealed to Indians who were CEOs of large US banks and corporations to rally more FDI to India. At a closed-door meeting amongst themselves in New York, these patriotic business leaders wondered why their own companies invested more in authoritarian China than democratic India. Business people don’t like delay and uncertainty. Decisions were swifter in China, they said. When a decision is made in China at the top, it is swiftly implemented. In India, any leader’s bold decisions can be appealed in the judicial system. They admitted it was easier to make money in China than the US where activists take companies to court and decisions of courts have to be appealed several times by corporate lawyers adding to delays and costs. 

The rule of law

Justice delayed is justice denied. Therefore, speeding up judicial processes by applying technology (and/or increasing numbers of judges) should benefit investors as well as citizens. The core issue is whose rights is the law designed to protect? Therefore, the essential difference between a democracy and an authoritarian regime is not the speed of judicial processes but the process of framing the laws. Theoretically, in democracies, “We the People” frame the Constitution which states the principles with which elected assemblies may make laws, and which courts will use to judge cases before them.

President Biden declared in Tokyo, where the QUAD nations’ leaders met to contain threats from China’s and Russia’s authoritarian governments, that the USA and India must lead the spread of democracy around the world. Both are having problems with their own democracies which they must fix first. Both are democracies founded on written Constitutions, the US in 1787, India in 1950, which state the democratic principles adopted by “We, the People” living within the geographical boundaries of their country. Their constitutions define the institutions required to maintain democracy—principally, elected assemblies and independent courts. 

Trust in institutions

Pew Research Center surveys and the Global State of Democracy Report, 2021, reveal that two-thirds of citizens in democratic countries, including the US, do not trust institutions such as elected assemblies and courts to represent their will. Another horrific assassination of school children in the US has caused the US President to throw up his hands. The US Senate is divided, and the Supreme Court continues to refer to the Second Amendment of the Constitution in 1791, to disallow any dilution of a fundamental right of citizens to bear arms. The looming possibility of the US Supreme Court denying women their rights to reproductive health is dividing the US further. In India, even fundamental rights to be treated as citizens with equal rights as others in the land, are being contested in the Supreme Court, in laws regarding citizenship and sedition, seventy-two years after India’s Constitution was framed.

Both India and the US need to put their own democracies in order. A leaked draft of a judgement by US Supreme Court Justice Samuel Alito regarding women’s rights to abortion for reproductive health, highlights fundamental problems of democratic governance in all constitutional democracies, including India.  

The draft raises questions about conceptions of human rights. How are concepts of human rights formed? And which institutions have the constitutional rights to enforce them? Alito says the fundamental question before the Court must be answered systematically in steps:

  1. Whether the reference to “liberty” in the Fourteenth Amendment of the US Constitution protects a particular right
  2. Whether the right at issue in this case is rooted in our Nation’s history and tradition
  3. Whether it is an essential component of what we have described as “ordered liberty”
  4. Whether a right to obtain an abortion is supported by other precedents

Conceptions of “freedom”, “liberty”, and “human rights” are not cast in stone. They are always works-in-progress. All citizens were not granted equal rights in the US Constitution in 1787: women and coloured people obtained these rights later; and differently sexed people have begun to be treated equally only in this century. These new rights, not explicitly mentioned in the US Constitution, have emerged with struggles and from an ongoing civilizational dialogue.

The Alito draft explains why courts and elected assemblies find it difficult to determine the will of the people. “We all declare for liberty; but in using the same word, we do not mean the same thing”, Abraham Lincoln had said in 1864. Moreover, written constitutions, which courts must follow, state what the will of the people was at some prior time in history. The will of the people changes as ideas of human rights and liberties evolve. Therefore, good democratic governance requires a robust process for those who govern the people to continuously listen to the people. Also, the people must listen to each other; and people “like us” must listen to “people not like us” for consensus on what “We, the People” want, which is the foundation of all democracies and the stated foundation of the US Constitution.

Democratic deliberation

Citizens want many things and may not agree about everything. The Arrow Impossibility Theorem, propounded by Kenneth Arrow who won the Nobel Prize in economics in 1972, is a fundamental dilemma in social choice theory, a discipline within economics in which Nobel Laureates Douglass North and Amartya Sen worked extensively too. The Impossibility Theorem proves there is no voting method in which voters, by merely expressing their votes as ‘yes or no’, can produce a unanimous outcome, no matter how many rounds of votes there are. The mathematical problem here is that individual voters’ preferences cannot be sliced and diced; nor can the choices before them be made too simply as ‘this or that’ to enable easy voting and counting (as done in referendums, Brexit for example.)  

Human beings’ preferences are formed by combinations of many factors in their histories and their present circumstances; also, by what they value most, which may not be the same as other citizens. Therefore, their preference for a candidate in an election to represent them cannot reveal their consensus about fundamental needs. Outcomes of elections in first-past-the-post systems make the reading of the tea leaves even harder, when candidates, who do not even represent an electoral majority, win. 

Democracy is a process of “ordered liberty”. It requires institutions to enable the will of the people to be implemented with checks and balances amongst them. Elected assemblies and independent courts are institutions for governance of the people. Constitutions lay down their powers. Neither must usurp the other’s powers. Alito fears that the US Supreme Court has transgressed the role of elected state assemblies, which is also a criticism of the Indian Supreme Court when it is spurred to act by public interest litigations.

Institutions are the means with which societies realize their aspirations. Constitutions, courts, elections, and assemblies are not all that a democracy needs to function. Institutions, Nobel Laureate Douglas North explained, are not merely constitutionally designed organizations: social norms are the fundamental drivers of institutions. Genuine democracy is government of the people by the people. People, not courts, shape the norms. 

Democracies live outside courts and elected assemblies. People who belong to different political factions, practice different religions, and have different histories within the history of their nation, must listen to each other, and learn to live democratically together every day of their lives. Therefore, what healthy democracies need most of all are ongoing processes of democratic deliberations amongst citizens themselves. 

The right to freedom of speech is cited as a fundamental right in a democracy. Therefore, no one, not even the government, should curb the right of anyone else to say what they wish to. Technology and social media were expected to provide solutions by enabling everyone to participate in debates about what matters to all. However, social media has resulted in a cacophony of voices and even more divisions. Governments and courts in democracies are struggling to rein in social media democratically.

The tenuous connection between liberal economics and liberal democracy

China’s remarkable economic development in the last thirty years is sometimes described as an economic miracle. The country with the largest mass of humanity on Earth, and one of the world’s poorest countries in the 1970s, lifted hundreds of millions of people out of poverty. China and India are the only two countries with populations over one billion. (The next largest, the US, has 400 million). China’s economy, comparable to India’s in the 1980s, grew five times larger in 25 years. Defenders of free market economics attribute China’s success to Deng Xiaoping’s adoption of open market principles.

China’s unprecedented economic growth would prove that an authoritarian government is better for economic growth than a democratic one. The US is worried by China’s economic might. The US crusade against China and Russia for which Biden assembled QUAD leaders, while couched as a defence of democracy, is essentially another effort to maintain its own geopolitical hegemony.

Economists ideologically wedded to the “Washington Consensus” version of free trade capitalism must rethink their models to make growth equitable. Millions were lifted out of poverty in Russia after the Second World War by the Communist regime when the benefits of rapid economic growth flowed down fast. Because this was proof that liberal democracy is not the only way for fast and equitable growth, it was an ideological threat to proponents of capitalist economics, which led to the formation of NATO by the US to counter the Soviet Union. On the other side of the world, Augusto Pinochet’s transformation of the Chilean economy was claimed as an exemplar of the success of capitalist economics. Pinochet was not a liberal democrat; he was a brutal dictator. So much for the connection between liberal economics and liberal democracy.

The Russian and Chinese examples of economic growth under authoritarian regimes were explained away by reformulating the relationship between the economy and democracy as follows: while dictatorial regimes may be better at marshalling scarce resources for growth, beyond a certain level of economic prosperity democracy is inevitable. A corollary of this is, development must precede democracy. Which explained why China’s economy had grown much faster than India’s so far.

The hypothetical question of whether India should have postponed democracy until its economy had grown became a subject of several debates in the early years of the new millennium. I was invited by an international economics journal to debate this with a Chinese policy-maker. To answer the question, the Chinese scholar used Deng Xiaoping’s description of the political process of economic policy-making as a process of crossing a turbulent stream by feeling the stones under one’s feet. He said that both China and India were crossing the same turbulent stream of economic growth amidst political churn. Both had the same vision of what was at the other side: a country in which all citizens were well-off.

However, their histories were different. The two large poor countries had entered the same stream from different places, though their destination on the other side was the same. China’s government was formed after a violent revolution (led by Mao Zedong who said that ‘power springs from the barrel of a gun’). India, led by the apostle of non-violence, Gandhi obtained its independence with a non-violent mass movement. Independent India’s Constitution embodies democratic principles. It could not have been otherwise. History cannot be turned back he said. India was a democracy at birth. Changing course mid-stream to follow China’s way could result in an internal revolution which would disturb India’s development, he cautioned. India must continue to be a path-finder of democratic development. This was India’s tryst with destiny.

An iceberg, two-thirds of whose mass is invisible under water, is a useful metaphor for the process of systems reform. Data trends about the pace of economic growth, poverty reduction, citizens’ confidence in governments, etc. are indications, like waves on the water’s surface, of structural forces beneath. Institutions of governance of the economy and society are straining and need reform. The causes of turbulence are often even deeper. They lie in the beliefs and values on which the institutions are founded. Therefore, fundamental reforms require an examination of the values and beliefs which have formed the institutions.

India’s beauty is its incredible diversity. Democracy’s essence is the right of diverse people to live as equals. Citizens have rights in democracies. They have responsibilities too. While democracies must give every citizen the right to speak, democratic citizens have responsibilities to listen to others’ views too.

The design of democratic institutions has so far concentrated on its vertical structures, for upward representation and downward governance through elected assemblies and courts. To preserve democracy in this century and increase equity in economic growth, reformers should focus on designing lateral processes for democratic deliberation amongst citizens, founded on the discipline of listening to “People not Like Us”.

Reforms of India’s economic policies as well as democratic institutions are necessary. We must not carry on the way we are. Reforms must flow from a broad and inclusive national conversation on the values that “We the People of India” hold dear and will strive for to achieve our tryst with destiny in India@100.

More in this series

  • Watch a conversation between Arun Maira, Ravi Venkatesan and Naushad Forbes on why the shape of economics, governance and business must change to fulfil our tryst with destiny
  • Listen to young and diverse voices, explore scenarios and more on the India@100 Notions page.
  • Read a context setting essay by Arun Maira
  • Follow this series here 

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About the author

Arun Maira
Arun Maira

Former Chairman, BCG India &

Member, Planning Commission

Former Member, Planning Commission of India
Former Chairman, Boston Consulting Group, India
Chairman, HelpAge International

Any discussion on policy, the future of India, and indeed the world, is enriched with Arun Maira’s views, and not just because he was a member of the Planning Commission of India for five years till June 2014. Arun is one of those rare people who have held leadership positions in both, the private as well as the public sector, bringing a unique perspective on how civil society, the government, and the private sector can work more closely to improve the world for everyone. He has led three rounds of participative and comprehensive scenario building for the future of India: in 1999 (with the Confederation of Indian Industry), 2005 (with the World Economic Forum), and 2011 (with the Planning Commission).

In his career spanning five decades, Arun has led several organisations, including the Boston Consulting Group in India, where he was chairman for eight years till 2008. He was also the chairman of Axis Bank Foundation and Save the Children, India. He was a board member of the India Brand Equity Foundation, the Indian Institute of Corporate Affairs, and the UN Global Compact, and WWF India.

In the early part of his career, he spent 25 years in the Tata group at various important positions. He was also a member of the Board of Tata Motors (then called TELCO). After leaving the Tatas, Arun joined Arthur D Little Inc (ADL), the international management consultancy, in the US, where he advised companies across sectors and geographies on their growth strategies and handling transformational change.

Recognising his astute understanding of both macro as well as micro policy issues, Arun has been involved in several government committees and organisations, including the National Innovation Council. He has been on the board of several companies as well as educational institutions and has chaired several national committees of the Confederation of Indian Industries.

In 2009, Arun was appointed as a member of the Planning Commission (now replaced by the NITI Aayog), which is led by the Prime Minister of India. At this minister-level position, he led the development of strategies for the country on issues relating to industrialisation and urbanisation. He also advised the Commission on its future role.

With his vast experience and expertise, Arun is indeed a thought leader. He is invited to speak at various forums and has written several books that capture his insights.

His most recent book, A Billion Fireflies: Critical Conversations to Shape a New Post-Pandemic World and Transforming Systems: Why the World Needs a New Ethical Toolkit before that, talk about how systemic problems of social inequality and environmental unsustainability are becoming intolerable. Prevalent precepts of good business management and best practices in government as well as civil society organisations are failing the needs of humanity. This calls for a whole new toolkit founded on systems thinking, ethical reasoning and deep listening. And that civil society, government and private companies need to work together to encourage a variety of local systems solutions for deep-rooted issues that impact different communities differently.

His previous books include An Upstart in Government: Journeys of Change and Learning (2016); Redesigning the Aeroplane While Flying: Reforming Institutions (2014)Remaking India: One Country, One DestinyTransforming Capitalism: Improving the World for EveryoneShaping the Future: Aspirational Leadership in India and Beyond; and Listening for Well-Being: Conversations with People Not Like Us (2017).

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