The following three conditions are must for equitable growth. Successful and sustained growth requires learning societies. Open and democratic societies are more conducive for cultivation of learning society. Successful and sustained democratic society must be inclusive.
There are few beliefs which in recent times have collapsed. Failure of Washington consensus, exposure of flawed belief that markets are efficient by themselves and can regulate themselves and thirdly wealth and welfare trickles down to lower classes after initial progress of few elites. One thing is clear that Washington Consensus was not about ‘Development’.
In the current political economy which has brought us to this condition has served special interests. Some players have gained from privatization and others have gained from liberalization. It has to be asserted that what originally projected by Adam Smith ‘an invisible hand’ does not exists. We need ‘visible hand’ to understand all these developments. Things do not happen by themselves. Today`s status of global economy is express of excess of deregulation, flawed governance structure of financial system and systematic information asymmetry and huge conflicts of interests.
Today it seems that rule of law has been maintained to generate inequalities and maintain segregation. In this situation we need balanced role of government and market. Government has three major roles: Innovation, Catalytic and Development. So, here single minded approach will not work. The concept of growth is much beyond GDP. It must be inclusive, democratic and should ensure well being of its citizens.
In today`s contexts, development is all about closing knowledge gap to meet the contemporary challenges of contemporary world. So it is not only about enhancing individual knowledge but also institutional, societal and organizational knowledge that contributes massively to the processes of the learning of society as a whole.
Here one thing must be made clear that markets are not efficient system which contributes to innovation. As Sollow has shown that technological change and not the capital accumulation was one of the major reason behind the massive economic transformation in the 20th century. Thus diffusion of knowledge from developed to developing societies also paves the way towards absorption of knowledge, diffusion of knowledge, learning and innovation. Considering that knowledge as a public good, spillover and externalities help to change the situation enormously.
As Arrow showed us that markets do not yield efficiency on their own in production and dissemination of knowledge, it is very important to invest in non-market institutions which are capable of producing and disseminating the knowledge. As Thomas Jefferson said, “He who receives an idea from me receives [it] without lessening [me], as he who lights his [candle] at mine receives light without darkening me.”
Challenge for us is to promote growth through technological progress by focusing on efficiency, restricting intellectual property and designing development oriented IP policy. As IP attached marginal cost to public good thus also creates inefficiencies in the market. Understanding structure of learning in the economy across the sectors like labor, inventory control processes, computerization and financial services is very significant. Industrial or service sector can exhibit larger externalities. Innovation in advanced countries is actually directed at saving labor but abundance of labor in developing countries makes innovation efforts even more challenging. So, in these conditions innovation must be directed at preserving natural resources and developing successful technologies which can help us in sustainable development. Also, key fact is that innovation cannot be simply imported from north. We must have our own new model of innovation.
These innovation outcomes can only come if democracy is nurtured to cultivate the spirit of questioning authority. Sense of equality is essential in creating learning economy and society. Democratic processes help to build open and transparent societies. Non-inclusive growth wastes human talent. The political economy of inclusiveness and openness will certainly help to correct pervasive market failure and will prioritize the collective good.
