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Mainstream, Vol XLVIII, No 31, July 24, 2010

Institution Matters

Sunday 25 July 2010, by Sunil Roy


Before I argue how institution matters at the local level for sustainable development of the poor, I may begin by questioning the rationale of the ‘target oriented development approach’ of the government. As I understand, it may not be anything more than an attempt to see that the poor never stay poor. We invested in eleven Plans and continued to hope that this would happen over the years. However, it never happened. With worsening HDI (in the lowest rank) and the highest incidence of malnutrition in the world today, such an approach has lost its meaning. Now, the NREGA has been discovered as a route to supply some purchasing power into the pockets of the poor through wage employment. Well, it may bring some respite to the growing pain of being vulnerable to starvation deaths. While saying this, I do not belittle the efforts made by the state. My concern, however, lies somewhere else. The insurance against poverty provided by the state through the NREGA is important, but I may argue that it is sufficiently incapable to create conditions for stopping reproduction of poverty. No doubt, it fits well within the framework of market reforms with safety nets.

We have had two poverty-related scenarios, definitely not exclusive to each other. The first one corresponds to the ‘softer market economy’ of the pre-globalisation period, and the second one to the ‘harder market economy’ of the post-globalisation period. In neither situation could we achieve any worthwhile breakthrough in the poverty syndrome. Contrary to all propaganda of the free market protagonists, the harder market economy post-globalisation brought less relief to the poor as compared to what the softer market economy did during the pre-globalisation period. In other words, higher economic growth rate in the harder market economy became less relevant to the poor. Here, however, I do not intend to enter into this debate that hardly appeals me. What perhaps appeals to me more is to take up the useful exercise on how the poor could create space for them to generate a transformational process that stops reproduction of poverty.

Institutional Development

I may like to argue that unless institutions of deprivation (or institutions of inequality) are made ineffectual, no transformational process could ever be antithetical to reproduction of poverty. In other words, reproduction of poverty can be stopped only if the transformational process being initiated is geared to turn the institutions of deprivation ineffectual. It means that the strategy must begin with development of institutions of the poor, being powerful enough to marginalise the institutions of deprivation. They must produce conditions that never allow poverty to reproduce. In other words, what I am arguing is that unless any strategic intervention, either though the NREGA or any target oriented development intervention for the poor, is conceived and implemented in collaboration with the poor in an institutional framework, no favourable conditions can ever be created to stop reproduction of poverty. This is what seems to be missing in the development approach as followed by the state.

What I mean by the institutional approach is designing a new set of rules or new development practices based on the principles of equity to be followed by all stakeholders in order to achieve the development goals as defined by the poor. Rules that govern the development process must bring solidarity among the poor. New values of development and change need institutionalisation in that the poor must not be reduced to discrete individual entity as is being practised now. Reducing the poor to having discrete entity is tantamount to undermining their ability of being together and generating positive externalities and taking development actions jointly which, otherwise, could not have been possible individually. When individual survival is difficult, it is the mutual insurance that gives rise to the emergence of solidarity as a mechanism of the poor to ensure the survival of all. It means that the approach towards unifying the poor must be followed in that, first, it brings solidarity among them and, second, they together become a social force to be able to generate the development momentum. The momentum may be modest to begin with but one has no reason to discount its potential strength to gradually bring about socio-economic transformation for themselves. However, such a unified approach must be flexible enough to evolve depending upon the existing concrete conditions that vary across localities. It means that institutionalisation of new values must be specific to local conditions. New development values must centre on creating space by the deprived themselves. It may provide alternative choice to them for their survival and growth with dignity.

What are these new values? They are convictions of a different order at a higher level of consciousness that only they themselves can stop reproduction of poverty by introducing new development practices. The external sources are not more than being supplementary to the transformational process they initiate. Their relationship with the external sources must not be stretched too far to colonise them only to reproduce poverty again. The poor now decide independently the type of new development practices appropriate for them and begin to reinforce them through their positive externalities to turn them into institutions over time. While no development practice is conceived at the cost of the autonomy of the poor, group rationality of the poor allows new values to provide a new institutional framework outside the patron-client relationship. I will argue that absence of such a process of institution-making is the key to understand why development initiatives of the poor never sustain and why the poor stay poor. I do not discern alternatives to these values that have grown out of deeper realisation of failed ‘battle’ against poverty in India during the post-independence period.

PRI is yet to prove its potential strength to create such a space for the poor for it has hardly succeeded in marginalising institutions of deprivation. Exceptions to this, even if some claim do exist, can never be the rule. How does one expect PRIs to create such space if they breathe through the politics of compromise with the traditional power relations? Needless to mention, it is the traditional power relations, which are harbingers of institutions of deprivation at the local level, that continuously push the poor to the periphery. Not to talk about rent-seeking behaviour that completely reduces the relevance of panchayati raj as an institution especially to the poor for their sustainable development.

One must see, for example, who decides terms of development in the panchyat and how, say, in any local context where the community is heterogeneous, both socially and economically. It is again the traditional institutions that perpetuate deprivation through the power relations and never allow village panchyat to transform itself into an institution in real sense. Political clouts, outside influence, funds etc.—all these in some combination or the other work in tune with the dictates of the institutions of deprivation. The village panchyat presents a classic case of its subsumption to the latter. This apart, ownership claim of any development process initiated by PRI turns out to be a great source for consumption of the dominant political party(ies). The people, the poor, as it were, have no right to claim their ownership. This is another form of alienation that insidiously subsides the perpetual existence of two worlds—the powerful and the powerless.

The less we talk about the formation of the SHG or CIG under the auspices of the DPIP sponsored by the World Bank, the better it is. While they have proved useful wherever they have succeeded in group saving and credit mobilisation or gaining some financial autonomy, success lies only if they are transformed into institutions. One must not be carried away with a few short-run success stories and stretch them too far.

New values and, hence, new development practices are definitely not caricatures of ‘Self-Help’. The essence of self-help seems to have been lost in the ‘so-called sustainable development project’ being tried again and again by the government and non-government organisations. Neither are the poor capable of helping themselves to develop in a sustainable manner, nor can they afford to ignore it for their short-term gains. These efforts, eventually, as I under-stand, give birth to another form of dependency of the poor on the government and non-government organisations. I have reasons to say this. While I never reduce the significance of intervention of these agencies, they necessarily have a time-frame for their intervention and withdrawal. The assumption is that the poor must be capable enough to be on their own before the stage of withdrawal sets in. Once the withdrawal of the intervening agencies from the scene takes place, the poor are very much supposed to be on the development trajectory however modest the latter may be. In such a situation, two things must happen. First, whatever they do, do it together on their own and second, they are no longer poverty stricken. Do these happen?

Economics of Solidarity

The new development practices through collective action may be varied. The first one could be access of the poor to the available natural resources. Whether it is land, water, pasture land, forest land etc. While it falls within the purview of the right approaches, its conservation is a must by all. In the institutional context, it suggests that new practices related to the ownership claims need to be introduced, nurtured and eventually rooted in the local domain. I have studied how the villagers (rich and poor together) institutionalised new practices in some places in Rajasthan for growth and conservation of the pasture land and how the poor are benefiting from it even after the withdrawal of the intervening agency quite some time ago.

However, the same study shows that it is not always possible in some other cases where the favourable objective conditions are absent. What are those conditions? There must be no uncertainty about sustainable livelihood. It means that new institutional practices must be introduced in the agricultural labour market in that no amount of distortion of the market contract could deprive the agricultural labour from its due share in wages and availability of employment. It also means that new institutional practices need to be in existence in the commodity market (for farm and non-farm products both) that provides competitive prices for the produce. This equally holds true for the credit market. Several service-oriented activities that have significant development implications for the poor can be conceived as new practices that the poor can initiate jointly. If the formal institutions are found to be subsumed to the exploitative forces of the informal institutions, which may not be exceptions but the rule, the poor need to be capacitated enough to replace them by new institutional practices. Is the intervening agency including panchyat as a local level institution prepared to do it and create space for the poor? The answer is yet to be in the affirmative.

The new institutional practices in the social sector are equally important. They are comple-mentary to the above. Hence, new practices for claiming the right to health and education by the poor are equally important to be rooted in the local cultural context. One must bear in mind that the ability to make legitimate claim by the poor is also a part of their capability development. This is a cultural practice that must be institutionalised in order to replace the culture of silence. Several such new practices need to be institutionalised so that the poor can get out of what I call the ‘Great Dependency Trap’.

To institutionalise new development practices, organisations must be formed. Organisations are required for new practices to turn into institutions. Institutions continue to exist and may evolve on their own even if organisations wither away after some time. The state must assume its role as a facilitator in forming organisations at the local level and leave it to the poor to institutionalise new development practices through them. It is their group solidarity that may reinforce the process. Solidarity that continuously refurbishes emotional and spiritual integration of the minds of the poor towards achieving sustainable development is another form of social capital. The networking between them as a means to complement and supplement each other lends incredible support to the institution to gain stability.

The experiment by DESMI AC, a Mexican NGO based in the southern State of Chiapas in Mexico, is a unique example in this regard. They had around 200 communities of the poor throughout Chiapas engaged in several income generating activities managed by them. The challenge these communities faced was “how to become protagonists of their development,…how to ensure their efforts are collective, how to bring about effective communication and solidarity between the communities, how to help them administer their economic and technical resources and their own labour; how to see small enterprise management as a jumping-off point for social organisation—and not to fall into the trap of seeing economic development as the ‘be all and end all’ rather than serving their own organisational needs”. (Santiago, Jorge S., ‘Generating Income for Social Change: A Mexican Experiment in Solidarity’, 1995, Development in Practice, Vol 5, No 2, May) They aim to promote collective solution to personal or family problems based on mutual support. “..if someone’s sick, we do not make unfair demands on them; if someone dies, we’ll take care of his widow; or, let’s set aside this money to do this or that for everyone’s benefit.” (Santiago, ibid.) The central question for them was how to handle resources for common good. This implies collective management of what they produce, not necessarily mean collective ownership of basic resources such as land, tools etc.

 The institution that creates conditions for a solidarity-based economy to emerge is, what I may say, ‘new economics’ or economics of the poor. The positive externalities of the powerless will then have autonomy to create space for themselves in the economy and society and use the same to develop on their own. It never matters even if their beginning is modest. However, it may have a tendency to gradually proliferate based on the principles of solidarity. The country needs institutions that bring the poor together than institutions that instantaneously yield differentiation among them and weaken them to undermine their ability to stop reproduction of poverty. 

The author is a Professor, Institute of Development Studies, Jaipur. He can be contacted by e-mail at


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