India’s Italian Connections

Italy’s most obvious tie to India is through a fluke of personal histories intertwined with politics: an Italian-born woman is India’s most powerful politician. But there are other, deeper connections. Both countries have strong family traditions, and mothers who dote on their sons. (In Italy, these sons even have a label, “mammoni”, or “mama’s boys”.) Both countries have governments that are not particularly efficient – to put it mildly – and Italy has matched, and even outstripped India in the instability of its national politics. Yet, despite its political problems, Italy has grown strongly, and its post-war economic development has given its people a comfortable standard of living, comparable to countries such as Britain, France, Germany and Sweden, which were earlier far ahead of it. At the same time, southern Italy has continued to lag behind the north, posing a puzzle that goes beyond country-level explanations of economic success such as membership in the European Economic Community (now European Union) and Italy’s strong tourist industry. Understanding the causes of Italy’s strong economic performance as well as its persistent North-South regional disparities can provide important lessons for India.

The classic work on these issues remains Robert Putnam’s 1993 book, Making Democracy Work: Civic Traditions in Modern Italy. As the title indicates, Putnam (with two co-authors) focuses on civic traditions, including political engagement, but also networks of nonpolitical associations, that strengthen social structures of trust and cooperation, and build “social capital”. Putnam measures the level of civic community, or involvement, and presents empirical analysis that suggests that, over the course of the 20th century in Italy, “economics does not predict civics, but civics does predict economics.” This is a striking conclusion, even though it continues to be debated and analyzed. It must ring true to those familiar with India’s experience, where the civic traditions of Mumbai are markedly different from those of Delhi, and where the South and West, in general, have been doing better than the North and East. Changes in policy that came with economic reform found more fertile ground in those parts of the country where civic community was stronger. Arguably, factors such as the self-respect movement in southern India played a role in reshaping social relations and civic engagement, with positive consequences for growth once government policy no longer was a constraint.

Civic traditions can be extremely long lasting. In Italy, the North-South differences in civic traditions can be traced as far back as the 12th century. Similarly, Amartya Sen has traced the roots of Kerala’s superior performance in educating its citizens to policies of an enlightened ruler 200 years ago. In work exploring related ideas, Abhijit Banerjee and various co-authors have shown that the nature of Mughal/British-era land policies and social fragmentation continue to affect current spending on public goods in different regions of India. Nevertheless, modern technology and the realization of the importance of civic community can together hasten change in positive directions. One can explore the implications of this perspective for the role of India’s NGOs, in building institutional capacity at the local level (e.g., Participatory Research In Action, or PRIA) and highlighting the importance of civil society (e.g., the Centre for Civil Society). One can also begin to understand the consequences of an overly paternalistic state, which undermines civic institutions. Of course, economic policy is not unimportant in this view – but the context of its application, its unintended social consequences, and hence its proper focus, receive more importance.

There remains the important question of the nature of the causal link, from civic involvement to economic performance (as well as to governance, as an intermediate channel). As Putnam puts it, “Through what mechanisms might the norms and networks of the civic community contribute to economic prosperity?” For Italy, several analysts have emphasized the economic importance of decentralized but integrated industrial districts, combining cooperation in financing, research and infrastructural services with competitive innovation in quality, design and efficiency. This could be a description of Silicon Valley as well. The term “flexible specialization” has been applied to this kind of industrial structure. One can easily see how India’s policies towards industry – small and less small – have constrained the development of such regions. One can also see their recent emergence in Bangalore, the National Capital Region, Chennai and elsewhere, around IT and ITES. Much remains to be done, but at least economic policy has moved in the right direction to allow such development.

Underlying the formal and informal industry networks that support economic success are “norms of reciprocity and networks of civic engagement,” which promote information flows, trust and social cooperation. Putnam does not claim that the evidence for this connection is conclusive. Nevertheless, the Italian case provides some provocative evidence for this view, as does Silicon Valley in the US. In India, with higher social fragmentation (perhaps with some parallels in southern Italy), the lessons may be harder to draw and build upon. However, one possible implication of this perspective is that government, by making its economic role less intrusive, might instead allow India’s dynamic new firms to support the growth of new private associations, and of civic equality and engagement. This goes beyond attempts such as the Bangalore Agenda Task Force, which was initiated by industry to improve the city’s infrastructure, but eventually sabotaged by the state government. If the lessons of Italy are relevant, gram sabhas (village assemblies), sports clubs, residents’ welfare associations, rotating credit groups, and recreational and cultural organizations can all play a role in developing higher levels of civic community, building new social capital, and – ultimately – improving economic performance. This is just one of the factors that will influence India’s economic development, but it may be one that economists and even investment bankers should pay attention to.