{"id":258153,"date":"2015-11-05T13:46:34","date_gmt":"2015-11-05T08:16:34","guid":{"rendered":"http:\/\/www.tehelka.com\/?p=258153"},"modified":"2015-11-05T13:46:34","modified_gmt":"2015-11-05T08:16:34","slug":"economics-of-intolerance","status":"publish","type":"post","link":"https:\/\/tehelka.com\/economics-of-intolerance\/","title":{"rendered":"Economics of Intolerance"},"content":{"rendered":"

\"Hopes
Hopes dashed<\/strong> The dream of development will sour for those looking forward to peace and prosperity. Photo: Pushkar Vyas<\/em><\/figcaption><\/figure>
\nAs winter sets in, a number of incidents of attacks along religious lines are sending a chill down the nation\u2019s spine. The rising intolerance is not going unchallenged. Prominent among the voices raised are those of President Pranab Mukherjee, writers and creative artistes who for good measure have returned their official awards. The ruling regime and its ideological allies, confronted the critics. Union Finance Minister Arun Jaitley said that the award-return drama was only a \u201cmanufactured paper rebellion\u201d and those who did it included \u201crabid anti-BJP elements\u201d.
\nThen came a voice from an unusual quarter: Reserve Bank of India Governor Raghuram Rajan. The governor, in fact, set the peace-loving pigeon among the cats when he claimed that intolerance, be it of any kind, can impede the country\u2019s economic growth. It can scare away foreign investors. In a public speech, he claimed, \u201cIndia\u2019s tradition of debate and an open spirit of enquiry is critical for its economic progress.\u201d He added diplomatically, \u201cShould ideas or behaviour that hurt a particular intellectual position or group be banned? Possibly, but a quick resort to bans will chill all debate as everyone will be anguished by ideas they dislike.\u201d He was obviously referring to a string of bans by the BJP-ruled states on beef and internet services (though temporary).
\nComments like these from a respected central banker raise an obvious question. Is there really a link between religious intolerance and economic growth? If yes, how does the former impact the latter? Does empirical evidence show the global business community shying away from nations that restrict or curb religious and other forms of freedoms? Most important, can Prime Minister Narendra Modi fulfill his grand promises of high growth and \u2018development for all\u2019 if he doesn\u2019t rein in the extremist elements?
\nIntolerance versus growth<\/span><\/strong>
\nEconomist Paul Donovan\u2019s recent research argued that \u201cthe issue of prejudice in society is not an abstract concept that investors can afford to ignore.\u201d He added that any form of discrimination, be it based on religion, nationality, race, gender or sexual orientation in any country is firmly linked to its economic development. He used the World Economic Forum\u2019s data to conclude that there was a \u201cclear relationship\u201d between the two. While nations that witnessed low growth rates had high prejudices in their societies, the opposite was true for the developed countries.
\nHis reasons for the above analysis were purely economic. \u201cThe basic reason prejudice damages an economy is that it encourages the uneconomic wastage of a critical resource (labour). If someone fails to reach their full potential as a worker in society because prejudice denies them equal opportunity, or restricts their career options, then the individual\u2019s full productive potential is denied to society at large,\u201d he claimed. He added that \u201cprejudice has been described as (an) anti-social capital and as behaving as the antithesis of growth enhancing social capital.\u201d
\nHowever, he made a distinction between the various kinds of discrimination. According to him, racism and homophobia were most prevalent in under- developed economies. In the case of immigrants, the feelings against them were more of a concern in mid-level economies. In fact, the least developed nations were quite tolerant of the people from other nationalities. Ironically, there was a \u201cloose relationship\u201d between religious tolerance and economic growth.
\nThe fact is that there are several examples of nations that exhibit religious discrimination, but have achieved high, consistent growth over long periods. A notable example is that of China, whose rulers have displayed disdain for religious communities like Buddhists and Muslims in certain regions.
\nA recent article in Foreign Policy said that in China, Muslim women \u201ceither enjoy unprecedented space for religious expression or face more restrictions on their faith than they would almost anywhere else in the world \u2014 all depending on who and where they are.\u201d
\nOne can also cite examples of countries that are multi-ethnic, but consider themselves as religious states and which grew at a frenetic pace for decades. Malaysia is one such nation, although its growth has slowed down in the recent past. Donald R Snodgrass\u2019 analysis showed that Malaysia was the world\u2019s tenth fastest growing economy between 1970 and 1990. This was the period when \u201cethnically heterogeneous countries were underrepresented among the fastest-growing economies and over-represented among the countries that were unable to raise per capital income…\u201d
\nThe question that arises is: are these notable exceptions that prove the rule that religious intolerance can impede growth or do they represent the so-called \u201cloose relationship\u201d between the two? Donovan\u2019s advice to the investors possibly provides the best answer. \u201cFor investors, we believe prejudice in an economy should be considered a sell signal. In our view, evidence of prejudice is evidence of a disregard for the maximisation of economic potential and financial returns,\u201d he said.
\n
\n
\"Oiling
Oiling development<\/strong> Baku, Azerbaijan, profits not only from its natural resources but because of its cosmopolitan character. Photo: AFP<\/em><\/figcaption><\/figure>
\nA kind of a consensus that has emerged among most economists is that while religious intolerance can lead to low growth, a high tolerance may not necessarily lead to high growth.
\nGrowth versus intolerance<\/span><\/strong>
\nSeveral economists interchange the horse and cart. They contend that it is not discrimination that lowers growth, but lower growth that increases prejudices. Therefore, if a country can achieve high growth rates through its policies and ensure \u2018development for all\u2019, it can automatically create a sense of peace and harmony amongst its various communities based on caste, class, ethnicity or religion. As Daniel Bell, the author of The Cultural Contradictions of Capitalism<\/em>, said, \u201cEconomic growth has become the secular religion of advancing industrial societies.\u201d
\nIn his paper (and book), The Moral Consequences of Economic Growth<\/em>, Benjamin M Friedman said this explicitly. \u201cEconomic growth \u2014 meaning a rising standard of living for the clear majority of citizens \u2014 more often than not fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness, and dedication to democracy.\u201d According to him, a better life for people \u201cshapes the social, political and, ultimately, the moral character of a people.\u201d Thus, economic growth should not be viewed merely in terms of \u201cmaterial considerations versus moral ones.\u201d
\nFriedman went a step further when he said that even the most advanced nations, like those in the western world, make moral progress only when their economies do well and benefit the majority. \u201cMany countries with highly developed economies, including the United States, have experienced alternating economic growth and stagnation in which their democratic values (and prejudices) have strengthened or weakened accordingly.\u201d In effect, the quality of democracy in a nation and moral character of its society are inevitably linked to its growth rates.
\nFor example, Friedman analysed the two decades between the mid-1970s and mid-1990s in the US. Despite low unemployment and modest growth during the period, most Americans, including the middle class, felt that they personally couldn\u2019t get ahead and feared for their children\u2019s future. In an American survey quoted by Friedman, more than half of the respondents agreed, \u201cThe American dream has become impossible for most people to achieve.\u201d
\n\u201cIt was no coincidence that during this (above) period popular antipathy to immigrants resurfaced to an extent not known in the United States since before World War II, and in some respects not since the 1880s when intense nativism spread in response to huge immigration at a time of protracted economic distress,\u201d said Friedman. It is again no coincidence that immigrants were targeted in the US after the Financial Crisis of 2008, which curtailed growth and employment. The recent anger against the Muslims in the US is largely due to 9\/11 and can\u2019t fit into the above assessment.
\nOne can easily argue that if the above contention is correct, then Modi is right to stay away from the current controversies. His overriding focus on growth and development will logically stymie such discriminations if he achieves his objectives. As long as he can guide India on to a high-growth path, the right-wing ideological groups will shut up in due course. But he needs to consider the flip side. What if growth is delayed because of reasons beyond his control?
\nFreedom versus freedom<\/strong><\/span>
\nA few economists measured the impacts of different kinds of freedoms \u2014 economic, religious, political, and civil liberties on growth and per capita GDP\u00a0(gross domestic product). One of them was a study, Religious Freedom and Economic Prosperity<\/em>, by Ilan Alon and Gregory Chase. They used several regression models \u201cto see how much of the cross-country variation in per capita GDP\u00a0can be \u2018explained\u2019 by religious freedom and other freedoms. Their broad findings were along the expected lines \u2014 \u201chigher levels of freedoms are correlated with higher levels of per capita income.\u201d
\nWhat was surprising was their conclusion on the variations in the impact of different kinds of freedoms on per capita GDP. \u201cEconomic freedom has the highest correlation with per capita GDP, followed by civil liberties, religious freedom and political freedom. Religious freedom is most highly correlated with civil liberties, followed by political freedom.\u201d In fact, civil liberties could explain 67 percent of the variation in extent of religious freedom in the various countries.
\nIn simple and non-jargon terms, \u201cThe more economically free countries also produce the richest individuals, on average. The impact of economic freedom on the level of individual income seems to trump that of religious and other social and political freedoms\u2026 Therefore, the second conclusion is that economic freedom remains one of the most influential variables affecting economic prosperity. The result, of course, is intuitive because it is likely that an economic-related independent variable will best explain variations in an economic-related dependent variable.\u201d
\nAlon and Chase added an important caveat. They found the correlation between religious freedom and per capita GDP as \u201cpromising\u201d. In other words, the figures suggested that \u201creligious freedom has a positive impact on a country\u2019s prosperity\u201d.
\nThe authors\u2019 overall emphasis was laid out in the last paragraph of their study. \u201cHistory has shown that religious tolerance goes hand-in-hand with other types of freedom, including economic freedom. Our study suggests that it is in a nation\u2019s long-run economic interest to expand not only economic freedom but also religious freedom. We must not forget, however, that ultimately those rights should not rest solely upon economic or utilitarian logic.\u201d
\nOne can easily argue from the above that Modi is probably wrong in keeping quiet on the growing intolerance in India. He needs to speak out and act in a tough manner. His focus on economic freedom may not yield the desired results, if he cannot curb religious and other forms of social prejudices. Asking his loyalists to counterattack the critics may encourage the violent elements. In practice, such aggression can curb economic freedom even if the policies encourage it.
\nAt the same time, Modi must remember that India has witnessed phases when high societal intolerance was combined with high economic growth, as was the case in the early years of the post-reforms period. Religious intolerance was at a high, even as the people saw a significant jump in the quality of their lives. Economic freedom, in fact, was intrinsically coupled with religious un-freedom in the early 1990s. Babri Masjid was razed to the ground, which led to the Mumbai riots, even as reforms kicked in. Clearly, Modi needs to ensure that all kinds of freedoms are encouraged in India.
\nThe Prime Minister must realise that the cycle of growing prejudices and lower-than-expected growth can easily snowball into a vicious circle of overall civil unrest, especially among the youth. This happened in the early 1970s, late 1980s and in the past few years. And that can be debilitating for the economic health of the nation given the existing demographics and huge material aspirations among the younger population.
\nThe youth excitedly voted for Modi in the 2014 general election; it expects expect the moon from him. It yearns for more, more and more.
\neditor@tehelka.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

RBI chief Raghuram Rajan has joined a chorus of voices against societal intolerance on the grounds that it can impede growth<\/p>\n","protected":false},"author":78,"featured_media":258161,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[56],"tags":[2879,9424,1277,3080,9425],"_links":{"self":[{"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/posts\/258153"}],"collection":[{"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/users\/78"}],"replies":[{"embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/comments?post=258153"}],"version-history":[{"count":0,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/posts\/258153\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/"}],"wp:attachment":[{"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/media?parent=258153"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/categories?post=258153"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/tags?post=258153"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}