An Italian connection of a different kind

Italy?s most obvious tie to India is through a fluke of personal histories intertwined with politics. Yet when one compares the two countries, deeper connections come to light. 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 well behind the north, posing a puzzle that goes beyond country-level explanations, 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 non-political 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 suggesting 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, which continues to be debated and further analysed.

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. Argu-ably, 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 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 identified the origins of Kerala?s superior performance in educating its citizens in 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 realisation 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. 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 decentralised 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 specialisation? has been applied to this kind of industrial structure. One can easily see how India?s policies towards industry?small and less small?have constra- ined 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 the evidence for this connection is conclusive. Still, the Italian case provides some provocative evidence for this view, as does Silicon Valley in the US. In the Indian case, with higher social fragmentation, the lessons may be harder to draw and build upon. However, one possible implication 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 sabotaged by government. If the lessons of Italy are relevant, gram sabhas, sports clubs, residents? welfare associations, rotating credit groups and recreational and cultural organisations can all play a role in developing higher levels of civic community, building new social capital and, ultimately, improving economic performance.

The writer is professor of economics at the University of California, Santa Cruz