Yes, blame the state

From sanitation and transport to industrial innovation, the state shapes the systems and incentives that determine public behaviour and business performance.

When something goes wrong in a country, the usual instinct is to blame the people involved. If streets are filthy, citizens “have no civic sense”. If companies spend too little on research, businessmen are “short-sighted”. If drivers kill pedestrians, motorists are “reckless”. “What can the government do” goes the refrain these days. There is usually some truth in these accusations. But the deeper truth is that behaviour does not exist independent of the environment in which people make decisions. Citizens operate within systems of incentives, infrastructure, rules, enforcement, and expectations. Note that these are shaped by the state. An individual behavioural problem is the final manifestation of an institutional failure much further upstream.

 Modern economies are not spontaneous collections of virtuous citizens and entrepreneurial firms. They are organised systems. The role of a capable state is to create conditions in which millions of private decisions produce useful outcomes. Singapore’s extraordinary cleanliness is often attributed to a culture of discipline, but that reverses cause and effect. Singapore’s government spent decades building drainage, sewerage, waste collection, and disposal systems while combining public education with strict enforcement. Repeated enforcement and reliable public services created expectations about what public behaviour should look like, and those expectations eventually became part of the culture. No country simply discovered a population with an unusually large supply of civic virtue. Institutions helped produce the behaviour that outsiders later described as culture.

 The Swachh Bharat Mission demonstrated that government spending can accelerate toilet construction on a huge scale, but without water, maintenance, sewage treatment, waste collection, and municipal systems, the citizen is asked to complete a chain that begins and ends with government infrastructure. South Korea, Singapore, Malaysia, and Thailand made rapid progress in sanitation not merely by persuading individuals to change their habits but by treating sanitation as a public-health and infrastructure problem.

 Under Singapore’s public-housing system, the government assembled land, planned towns, built millions of homes, and integrated transport, schools, and amenities. The state effectively created an urban ecosystem in which the private economy could operate. Yet Singapore is hardly a socialist economy. It is one of the world’s most business-friendly places. India made exactly the opposite choices, which is why we are paying exorbitant prices for property while businesses remain tied up in red tape. Singaporeans did not possess a special genetic preference for public transport. The government built a reliable, integrated system, and used land-use planning and policies affecting car ownership and usage to make public transport an attractive choice.

 It is easy to say that India’s roads are dangerous because Indian drivers are undisciplined. Sweden’s Vision Zero approach starts from a more useful assumption: Human beings everywhere make mistakes, so the transport system must be designed to ensure that mistakes do not automatically become deaths. This means road engineering, speed management, pedestrian protection, vehicle standards, licensing, and enforcement matter alongside driver behaviour. Think of standards, an invisible foundation of modern societies. Citizens rely on standards for food safety, vehicle safety, accounting, buildings, medicines, and financial institutions. The state creates this trust infrastructure, allowing strangers to transact at scale.

 Governments and commentators routinely complain that Indian businesses spend too little on research & development (R&D). R&D is expensive, uncertain, and slow to pay off; knowledge spills over to competitors. Skilled researchers may be scarce; universities may be poorly connected to industry; and an established technology can often be bought more cheaply than a new one can be developed. Telling companies to become more innovative does nothing to change those incentives. The United States is celebrated for private-sector innovation, but hidden from the public view are decades of public investment in basic science, defence research, universities, and procurement. From this emerged the internet, the Global Positioning System (GPS), semiconductors, and many technologies subsequently commercialised by private firms.

 After the Meiji Restoration in the 19th century, Japan recognised that a country starting far behind the industrial powers could not simply wait for private capital and entrepreneurial culture to catch up. It imported technology, built infrastructure, established technical education, and created institutions capable of absorbing foreign knowledge. After the Second World War, the relationship between government and industry became more sophisticated. The government coordinated with companies on technology, finance, standards, and exports, while Japanese firms competed fiercely in international markets.

 In South Korea, the government did not simply exhort Samsung, Hyundai, and other companies to become world-class. It built infrastructure, expanded technical education, directed finance, encouraged exports, and linked industrial policy to national development. State support was used to force them to become globally competitive. The bureaucracy had to be close enough to business to understand its problems while retaining enough autonomy to withdraw support from failed activities. The combination — sometimes described as embedded autonomy — is more important than the simple presence of industrial policy. China represents the largest experiment ever in embedded autonomy. Its electric-vehicle industry emerged from a directed process in which public policy supported battery technology, charging infrastructure, procurement, and manufacturing, while local governments competed fiercely to attract investment.

 So, if something persistently goes wrong in a country, we should stop looking at the bottom to blame and look upwards instead. When self-serving, incompetent, or corrupt netas and babus run the country, blaming citizens and companies is not just bad analysis. It is a free pass to the very people who should be held responsible for making things better.  The writer is cofounder of www.moneylife.in and a trustee of the Moneylife Foundation; @Moneylifers