Last week our conversation involved my 3 questions to which he responded—see substack post of August 24, 2026 . Below you’ll find the rest of our conversation.

Pranab Bardhan (PB): 4. Let us now discuss Culture which I think is a major bone of contention between college-educated liberals and often the socially more conservative working class. This usually involves contentious issues like abortion rights, gay rights, trans rights, and in the peculiar case of US, gun rights. In your book you have, rightly, pointed to the usefulness of civic deliberation in public bodies like citizens’ assembly (this is how Ireland largely resolved the highly divisive issue of abortion in a Catholic country) or in my book I have briefly talked also about experiments in digital democracy at the community level (as in Taiwan, Iceland and Barcelona).

The cultural issue arising from Immigration (where immigrants sometimes bring alien cultural norms, particularly gender norms) may be a harder nut to crack through deliberative democracy. Here I largely agree with your acceptance of multiculturalism only to the extent it does not violate liberal values-- so wearing hijab is acceptable but not genital mutilation or stopping girls’ education. (The German philosopher Habermas has argued that immigrants to a liberal democratic state need not assimilate to the host culture but only accept the liberal principles of the country’s constitution). This may diffuse some of the usual complaints against immigrants (about their illiberal norms). But there are other complaints/resentments. Even in Scandinavia people sometimes have egalitarian attitudes only for the fellow natives but they do not feel as generous with respect to the immigrants.

Going back to the deliberative process, its basic rules may not be acceptable to many people-- think of the MAGA mob and their counterparts elsewhere, loudly and noisily dominating or disrupting any citizens’ assembly discussion, dismissing facts as fake news from the ‘woke’ left, or ruling out testimony by experts (which is important for the deliberative body, say in matters like climate change or vaccinations). Also, the illiberals may sometimes lack the ‘empathy’ that is crucial in a discussion of social issues (something Adam Smith emphasized in his 1759 book Theory of Moral Sentiments); Elon Musk has famously said that “the fundamental weakness of Western civilization is empathy”. How hopeful are you about resolving such culture wars through deliberation?

On the cultural front I have pointed in my book to a particular role that trade unions used to play, and it has diminished with the decline of unions. In the history of some European and Latin American countries trade unions were not just economic bargaining organizations, they sometimes played a role in taming and transcending parochial passions and prejudices and strengthened an individual worker’s sense of belonging to a shared institution that provided some identity and meaning in their life and pride and sense of solidarity in their work experience. In the cultural void left by the declining unions the demagogues filled in with their toxic culture wars. So, revival of unions is also important from the cultural point of view. Would you agree?

Daron Acemoglu (DA): I disagree with the belief that people who are critics of liberalism don’t have empathy. Of course there are some sociopaths who lack empathy completely. But most people have plenty of empathy. This is why they identify with their community or their group. We see this in the referendums on gay marriage in the United States or the public assemblies in Ireland on abortion, both of which I discuss in the book. People were much more willing to accept the other side’s perspective when this was presented to them in a non-confrontational way and appealing to shared moral principles.

That being said, in the same way that basic liberties have to be defended, I believe some amount of democratic participation has to be defended as well. Democracy is a very important part of legitimacy in modern complex societies, and as I tried to explain in the book, true liberalism is not possible without some amount of self-government. This doesn’t need to take the form of Western liberal democracy everywhere. Smaller-scale societies, including some at the community level in the developed world and many in the developing world, have various practices that create consensus, provide voice to people, and cultivate and build on shared moral values.

I have changed my mind a little bit on immigration over the years. Of course, I’m an immigrant myself, but you cannot maintain shared moral values and democracy if people do not identify with their society. This is why immigration has to be handled carefully. This is another one of those gray areas, and much more deliberation is needed. One huge mistake of Democrats in the United States and many politicians in Europe in the context of the Syrian war and the refugee crisis was that they imposed a particular immigration policy with no discussion whatsoever and proceeded to denigrate the views of those who opposed their policy. Overall, I am open to the possibility that the older American way, which was open to immigrants but encouraged assimilation, may be better than what we have today. My understanding is that immigrants in the 50s and 60s would sometimes even purposefully refrain from speaking their mother tongue at home so that their children would assimilate better. I would definitely not advocate something like that being imposed on immigrants, but that desire for integration is an important part of what made large immigrant flows still consistent with a sense of nationhood and shared moral values.

(PB): 5. Finally, your book is mainly concerned with USA and western Europe. But liberal democracy is collapsing all over the world. For example, in your country of origin, Türkiye, and my country of origin, India, despite all the pretensions, liberal democracy has essentially faded away. In these countries the problems in some ways are different. They are not yet in the post-industrial age. And in large parts of the patriarchal and hierarchical society liberalism has always been rather weak. One difference I have noticed, though, between Türkiye and India is that in the former the metropolitan cities (like Istanbul and Ankara) are more liberal in voting patterns, mainly anti-Erdoğan (just as in the US most metropolitan cities are anti-Trump, and Trump supporters are in general older, less educated and more rural or sub-urban). In India, on the other hand, the metropolitan cities (like Delhi, Mumbai or Bangalore) and the urban elite in general are largely pro-Modi.

Yet the need for an appropriate form of working class liberalism is imperative. The methods may have to be different. Do you have any thoughts in this matter?

In both Türkiye and India the demagogues, apart from giving some welfare handouts, mainly distract attention of workers and peasants from their dire economic conditions by keeping their focus on issues of cultural insecurity, manufacturing victimhood and thus the need for protection for the majority community from the minorities (the Kurds in one case and Muslims in the other). Ostentatious feats of religious nationalism and majoritarian aggrandizement keep the masses preoccupied while the leaders systematically hollow out the safeguards of basic freedoms and the institutions of checks and balances. It seems to be more of an uphill battle for these countries than for the ones your book is mainly about. Would you agree?

(DA): Yes, I have kept my focus to the more developed economies. But yes, I am very worried about political trends in the developing world, including in Türkiye (and to some extent in India, but I think you cannot put India in the same category as Türkiye, where democracy has completely collapsed. There is nothing like this in India so far as I understand; of course, Modi has many autocratic tendencies and tries to muzzle much of the media).

And yes, I do believe we need a version of working-class liberalism for the developing world. What its form should be is to be determined and I haven’t done enough research on this. But if you think of Erdoğan’s rhetoric in the early 2000s it had some elements of this. He stood up for workers, the poor and those who perceived themselves to be persecuted by state institutions in Türkiye (the more religious, the conservatives, those with rural roots etc.). In a famous speech he said there are “white Turks and black Turks” and he was firmly on the side of black Turks (the non-elite, the poor). He also promised he would be true to various liberal democratic values, especially in the context of the country’s bid to join the European Union. Many of these promises were empty, of course, as many people suspected then and we know for sure now. The question is whether there could be a coherent governing philosophy that applies to such societies with a conservative core of voters. I believe the answer is yes, but the details need to be thought through.

[For a chronological list of all my substack posts so far the link is: https://pranabbardhan.substack.com/archive ]

Below you’ll find a publisher’s description of the book, followed by our conversation in 2 parts. In this post I ask Daron 3 questions and he responds. In next week’s post you’ll find 2 more of my questions and his response.

The dissolution of the Soviet Union in 1991 raised hopes that we were one step closer to the triumph of liberalism. Soon, many predicted, we would all be living in functional liberal democracies. Sustained economic growth would benefit all segments of society and war would be a relic of the past. A generation later, one can only ask: What happened?

Nobel laureate Daron Acemoglu argues in this powerful book that liberal democracy flourished when it pursued its core promises of shared prosperity, democratic governance, and the free pursuit of knowledge. But liberalism, a philosophy built to challenge power, never fully adjusted to becoming the establishment. Nor was it able to deal with the economic and social disruptions that digital technologies wrought. Worse, in the post-industrial economy, liberalism turned its back on its core promises. As a segment of college-educated elites became politically dominant and separated from the rest of society, they sowed the seeds of widespread inequality while intensifying efforts to reshape mass culture and values.

Acemoglu, using the interdisciplinary lens that has won him acclaim, documents the extraordinary, unparalleled progress that liberalism created, and recounts how liberal democratic institutions plunged themselves into crisis over the last several decades. Looking at rapid advances in technology, shifts in regulatory environments, global political history, and economics, Acemoglu lucidly lays out the successes and failures of our most important political system. And he envisions a new way forward, which he calls working-class liberalism: a philosophy that prioritizes shared prosperity, empowers communities, and accommodates a range of values and views.

Pranab Bardhan (PB): 1. There are many weighty issues of liberal philosophy you raise in this book but let me confine myself to your goal of promoting what you call ‘working class liberalism’. In recent years of what you describe as the post-industrial age in US and western Europe college-educated people have come to dominate the political arena of liberalism, alienating and driving away large numbers of blue-collar and other members of the working class, who used to be regular supporters and voters of social democratic parties. Many of the illiberal and even extreme right-wing parties now draw their support from the working class. In this book you have made many suggestions about achieving your highly laudable goal of reviving the political coalition of the college-educated and the working class without giving up on the core values of liberal democracy.

First, let us look at where these 2 groups differ in what they want in policy terms. You’ve cited the 2023 working paper (now published) by Ilyana Kuziemko, Nicolas Longuet-Marx and Suresh Naidu, where they show that while the college-educated liberals in the US may prefer redistribution policies (through taxes and transfers), the less educated workers seem to prefer what these authors call ‘pre-distribution’ policies like minimum wages, unionization, active job programs and trade protection (policies that are prior to the market outcome in labor markets). The latter involve helping workers through direct market intervention, while the former involve the fiscal mechanism. In your book you seem to endorse both kinds of policies, both pre-distribution and redistribution. I happen to agree with you, but let me raise 3 issues here:

1(a). Direct market intervention for equity goals go against the standard liberal economists’ prescription. For example, the Diamond-Mirrlees theorem in public economics tells us that a government should achieve its equity goals through taxes rather than through distorting production plans. Are you going against this liberal prescription because the equity goal far outweighs the efficiency goal? Also because, in a world of large corporate concentration the countervailing power of unions is necessary and important? In any case the theorem implausibly presumes everyone has the same information and so there are few market ‘imperfections’.

Daron Acemoglu (DA): Yes, I also believe that the Diamond-Mirrlees theorem, a beautiful and important theorem, doesn’t apply in most real-world situations. I made this point already in the Narrow Corridor (the book I co-authored with James Robinson in 2019) and Power and Progress (my joint book with Simon Johnson, published in 2023). There are many imperfections in labor, capital and product markets, and various social influences on economic allocations that make that theorem not always a good starting point. Most importantly, my emphasis has been on endogeneity of technology (i.e. technology is shaped by socio-economic forces). When technology is endogenous, the theorem doesn’t apply. I’m an economist, and my default is to go to markets (and I do not believe in the feasibility and desirability of central planning). But I also believe that markets need to be “regulated” both in terms of the infrastructure of public goods and some countervailing powers from the government and other bodies against economically powerful actors, as you anticipate in your question.

When it comes to the direction of technological change, the US government has always played an important role. This was quite a positive role actually in the first two and half decades or so of the post-war era---think of JCR Licklider’s leadership of DARPA (in the US defense department). The labor movement is an important countervailing power. Moreover, people cannot participate in markets in any meaningful way when they are being dominated---using the term from Republican philosophy which I expand upon in the book. This is why the state does have an important role in balancing out the inequities that come pre-market. Of course this is a messy area. The state often introduces its own inefficiencies and over-regulates, especially when it is not backed up by a broad coalition or becomes ideologically extreme. That’s why I do emphasize the need for a broad coalition to support liberal ideas and liberal democratic institutions.

(PB): 1(b). I suppose you are not going with the frequent worker demand for trade protection, particularly as it messes up the integration with global value chains, which ultimately may hurt workers. But you may want to interfere with another aspect of globalization, that has to do with free international mobility of capital, as such mobility enables capital to weaken labor bargaining power by threatening to move elsewhere, right?

(DA): I think we should aspire for free trade in the long run, and especially free-trade in agricultural products (which is so important for many poor economies) and free trade in advanced machinery that is important for high-productivity production around the world. However, the experience with China’s exports and its integration into WTO (World Trade Organization) also show us that a sudden influx of cheap imports creates a lot of disruption and social costs. So, I would be in favor of gradual trade opening. Such gradualism would not create huge distortions in the medium term but would ameliorate some of those negative effects from the destruction of companies and jobs. In terms of supply chains, I think there is more room for part of these supply chains to be domestic than your question implies. The fragmentation and complexification of supply chains in the 1990s and 2000s created new and in some ways unnecessary risks for the financial system and for the economy as a whole.

(PB): 1(c). What about increasing labor voice in corporate governance as, for example, with the German works council? This kind of institutions of economic democracy inside the firm may strengthen labor support for liberal democracy, don’t you think? In fact, if labor has more voice in corporate governance, it may be able to implement your highly valuable suggestions of adopting more worker-friendly AI technology and influence the pattern of technological research and development of the firm in a more labor-complementary rather than labor-replacing direction.

(DA): Yes, there is need for worker voice in corporate governance, a point I also made in Power and Progress. However, this is again a question of balance. I believe that corporations should have some significant say on how they are going to organize production, but combining this with labor voice would be a good system. It takes two to tango. Management needs to be tolerant of labor demands, but labor also needs to be reasonable in its demand and in its stance. I believe that the cause of labor has been significantly damaged by communist and ideological unions, because they have stuck to the ultimately self-destructive policy of working for international aims rather than for the betterment of their members, and in the process they have alienated management. So, in my mind we need a new kind of business unionism. It has to be a new kind because the nature of work and negotiations has changed in the post-industrial age, and new unions cannot be like those that rely on blue-collar workers alone. More importantly, new unions need to be much more savvy on AI and find ways of using AI that is both good for firms and for their workers---which is the essence of my proposal for pro-worker AI.

(PB) 2. Am I right in thinking that your values of ‘non-interference’ (with basic freedoms), ‘non-domination’ (by anyone over others), and of community may involve some trade-offs in cases where there may be some conflicts, and you then suggest some balance and compromise between those goals, and there are some admitted ‘gray areas’ where we may have to play it by ear. Let me point out, somewhat self-servingly, that in my book A World of Insecurity: Democratic Disenchantment in Rich and Poor Countries (Harvard University Press, 2022) I have discussed similar trade-offs and the need for balancing the foundational goals of liberty (related to your ‘non-interference’), equality (somewhat related to your ‘non-domination’) and fraternity (related to community) in my project of attempting what I have called A Rejuvenation of Social Democracy. The conflict between liberty and equality is, of course, age-old, but let me raise here the issue of a conflict within liberty itself, between political and economic freedom. Old-style liberals like Friedrich Hayek and Milton Friedman openly gave economic freedom (particularly private property rights) primacy over political freedom--this was reflected also in their support of Pinochet in Chile, as in their judgment the latter restored economic freedom in that country. I suppose for working class liberalism you are prepared to compromise quite a bit on economic freedom, right?

(DA): Absolutely. I do emphasize this in the book. Liberalism cannot be a recipe that is readily applied in all situations. It’s a framework, and there are many issues that will inevitably generate trade-offs and these trade-offs can only be sorted out on the ground, by people who build on shared moral principles and navigate those gray areas. This is the philosophical basis of my criticism and opposition to social contract-like ideas whether they are from Rousseau or from Rawls.

I’m sorry that I missed coming back to this part of your book (which I read with great interest as you know). But yes, this is exactly the same balancing act that we are talking about.

(PB): 3. Let me now come to Community. Community life can help in restoring the sense of empowerment that the working classes often feel they have lost. (This has been emphasized by Michael Sandel in his books and also in some public discussion with you). In that context you seem to want community-level pluralism. But at the community level there can be a conflict between individual rights and group rights. A community even in a liberal democracy often demands that a book or a film or a piece of art that has offended its group sensibility has to be banned, even though that clearly violates some individual rights. What is your position on this?

You have also said that if a community gets to persecute a racial or religious minority within the community, that is not permissible. But in your description of working class liberalism you keep on saying what is permissible under liberalism and what is not. But history tells us that a local community is more likely to be captured by sectarian interests than at a larger, say federal, level. The persecuted blacks had to appeal to the federal level for protection and relief from the white majority community in the US South. In such cases top-down can be better than bottom-up, right?

By the way, this was a matter of intense political debate in India a little less than a hundred years back. Gandhi used to emphasize the centrality of local village community in his ideal of Indian social and political life. But Ambedkar, who came up from an oppressed low caste and went on to become one of the founding fathers of the Indian constitution, famously described the Indian village community as “a sink of localism, a den of ignorance, narrow-mindedness and communalism”.

There may also be a fundamental distinction between liberals and some communitarians or social conservatives that you and I may have a tendency to overlook. The conservative philosopher Roger Scruton in his book On Human Nature distinguishes between the liberal individual self-possessed in their autonomous decisions, consent, contract or trade, and the conservative individual who endows meaning to their life mainly through their identity in relation to a community with established traditions. Communitarian philosophers like Charles Taylor say that the moral commitments that define our identity and meaning may arise from the community in which we are located. We cannot ‘impose’ our liberal values of individual rights on them, and there are some societies where such conservatives and community-oriented people may be the majority. Is liberal democracy doomed in such societies?

(DA): I believe community is essential for liberalism, but beyond this broader philosophical stance, an emphasis on community will help restore the sense of empowerment that working-class needs. I agree with this wholeheartedly.

And yes, there will be huge conflicts between individual rights and community preferences. This is one of those gray areas that has to be worked out. And this is one other place where the state has an important role. It has to be vigilant to ensure that the most basic individual freedoms and the right to exit communities are not violated.

Liberal democracy needs to create room for diverse communities, with many different values and practices and true self-government. On the other hand, liberalism cannot and should not tolerate sharia law being enforced in some local communities, as many European governments acquiesced to. This is an illustration of top-down being better than bottom-up in some exceptional circumstances. Whether it can be construed as bottom-up or not, sharia law, extreme indoctrination of children, subjugation of women, threat of violence; all of these are inconsistent with liberal ideas.

These are the edge cases. There are many gray areas in between. I’m only highlighting the edge cases to provide more substance to the framework.

And yes, I am a huge admirer of Ambedkar, and I share many of his ideas and instincts, and this was something James Robinson and I emphasized in the Narrow Corridor in the context of our discussion of the caste system in India.

Believe it or not, I have actually read both Scruton and Taylor, precisely to get to a better understanding of these issues. But my conclusion is the same as what I have expressed above---and different from theirs. You need protection for some basic liberties, and the rest has to be more bottom-up. So, I allow for a somewhat greater role for the state than Michael Sandel or Taylor or Scruton.

[For a chronological list of all my substack posts so far the link is: https://pranabbardhan.substack.com/archive ]

Trump, of course, in his usual heavy-handed way had earlier intervened in compromising the integrity of the tournament by getting FIFA (Fédération Internationale de Football Association) to waive the red-card suspension of the striker of the US team, Folarin Balogun. The irony was that Balogun born of Nigerian parents who were on a visit to the US from UK was thus a citizen by birthright, a right of citizenship that Trump has been trying desperately to upend. But the offensive odor around this World Cup did not arise from Trump alone. The odor of money was pervasive. This was the most lucrative tournament for the so-called non-profit FIFA in its history, its exorbitant pricing of tickets depriving large numbers of fans and with commercial breaks on TV disguised as ‘hydration breaks’ for players. It was also the largest gambling event in history, with prediction market platforms raking in billions of dollars.

Yet, rising above all the odor and crassness, we all enjoyed what the legendary Brazilian soccer player Pelé had nicknamed o jogo bonito, ‘the beautiful game’, in all its splendor and drama, colorful splashes and feats of grace (though the game has over the years become more ‘physical’ for my taste).

In this substack piece I want to comment less on the games themselves, more, as is wont for a social scientist, on some generic and social issues around the tournament that came to my mind. I saw some of the games with my son Titash (a software engineer who lives in San Francisco), with whom I had the benefit of discussing some of these issues.

The first issue I want to bring up is a particular style of playing that differentiates some teams. This was remarkably evident in the final match between Spain and Argentina. I’d say the former team is organized in a more ‘collective’ style with no individual superstar, whereas the latter team is more individual-oriented—it seems as though the whole purpose of the other members in the Argentine team is to feed their main scorer, the great Messi. Spain won partly because they could frustrate this single-minded purpose of their opponents. And I think they did this not so much by heavily guarding Messi man to man, but by making sure they block or stop the other Argentinians from passing on to Messi by tightly controlling the space around him. So, much of the game Messi was hanging around lonesome in the center field without much of touching the ball--in the first 90 minutes he could not bring about a single attempt at the Spanish goal. With superior possession Spain kept control of the ball, and in a swift organic collective way they kept on attacking their opponent’s goal, wave after wave.

In general, this kind of Messi-centric soccer can have other effects too. We all have heard rumors, probably unfounded, that in order to keep Messi in the tournament until the final game so that ticket sales are maximized, the Argentine team has continuously received implicit favors from referees under FIFA instructions. When even in the final game I saw the referee not calling some ‘fouls’ (clear to many of us from the TV replays) when perpetrated by Argentine players, I thought the favoritism story is invalid as, once the final ticket sales are over, FIFA has no further incentive to have biased referee judgments. But there is still the possibility that some referees may have been consciously or subconsciously reticent in giving too many judgments against Messi’s team. This may have nothing to do with FIFA instruction. Who knows?

The second issue I want to talk about is much bigger, it has to do with nationalism, immigration and racism around international soccer in general. In these games for quite some time a visible sign of healthy cosmopolitanism or multiculturalism has been to see how ethnically diverse the major teams in rich and middle-income countries (with the possible exception of Argentina and Japan) are.

In my book A World of Insecurity, when discussing the narrow exclusivity of ethno-nationalism, I mentioned that there is much to learn from the soccer nationalism of the European working classes. The example I gave there is from a story I heard some years back: a popular chant among the mostly white working-class fans of the Liverpool Football Club in England, roaring from the stadium their admiration for the prolific goal-scoring, devoutly Muslim, Egyptian player Mohamed Salah, goes like this— “If he scores another few/ then I’ll be Muslim too”. When before the semi-final in this World Cup between France and Spain the conservative former Spanish Prime Minister Mariano Rajoy commented that the French team “had no French players”, this sparked an immediate backlash and was widely condemned in both France and Spain as a racist and xenophobic attack targeting the players’ immigrant backgrounds and ethnic origins.

There is some hard evidence, beyond anecdotal, on how soccer wins shape attitudes to immigration of the general population. In the journal Migration Studies, there is an article in 2021 by Ignacio Lago and Carlos Lago-Peñas, which shows with statistical analysis of European Social Survey data in Spain and aggregate data from the Spanish professional soccer league, La Liga, that the more foreign players in the team of the club winning the corresponding season of La Liga, the more favorable the views of immigrants in the club’s region in that year.

Of course, defeats may be a different story. Racism has a way of raising its ugly head at times of bitter defeat in an important soccer game. In the Euro 2020 final when 3 black members of the English team missed penalty shots against Italy and faced racist abuse, it was reportedly murmured among some of the minority players that “we are English when we win, Black when we lose”. A similar sentiment was expressed by a player of Turkish origin in the German team at the 2018 World Cup; after Germany’s early exit from the tournament and facing intense scapegoating, he said, “I am German when we win, but I am an immigrant when we lose.”

Even in Spain, which is now widely regarded as more pro-immigrants than other European countries, there is a difference made between Latin American immigrants (who have religious and linguistic affinity with the majority of Spaniards) and those from North Africa. Even Lamine Yamal, the now lionized teenage hero of the Spanish team, remembers early days when he was taunted as a ‘bloody Moor’—his father is from Morocco and his mother from Equatorial Guinea. He, of course, proudly features the flags of Morocco and Equatorial Guinea, and the postal code of his neighborhood outside Barcelona on his Adidas soccer cleats. (Incidentally, his 24-year-old teammate, the excellent Nico Williams, when after the final got his gold medal, he rushed to his mother and wrapped it around her neck and said, “I run very fast, but not as fast as my mother. She escaped death and crossed the Sahara from Ghana to Spain”. Nico’s elder brother now plays for Ghana’s national team).

It is indeed remarkable how African origin/descent players are prominent in some of the best teams in the world. I did not do an exact count, but I saw a rough estimate that 73 players of African descent played for 12 non-African countries at this World Cup, most conspicuously for France, England, the Netherlands, and Switzerland (out of a total of 48 countries participating, 36 had at least one player with African descent). Some people say that the World Cup may be called the African Cup. Pelé had once famously predicted that an African nation would win the World Cup by the year 2000. That did not happen or even so far—the nearest was Morocco reaching semi-finals in the 2022 World Cup—but the impressive role of Africa cannot be denied in World Cup soccer.

Finally, a word or two on the pathetic soccer status of the largest country in the world, India. The second largest country, China, did not qualify for the tournament either. But China in general has performed somewhat better—they qualified once in 2002 (their women’s team qualified 8 times since 1991). India has not qualified even once in the 75 years since 1950.

The standard argument you hear in explanation is that cricket so dominates the sports arena that it crowds out soccer. But cricket is quite prominent in England (yet 3^rd in FIFA soccer ranking now) or Australia (28^th in FIFA ranking). USA came to take soccer seriously only in recent years—with American football, baseball and basketball still dominating its sports world—and yet in 2026 its FIFA ranking is 16^th for men (and 2^nd for women).

Nor is it the lack of popular interest. In terms of the number of soccer fans India is not the largest country, but it is the fourth largest (after China, Brazil and Indonesia). Indian professional league soccer has hundreds of millions of viewers. In parts of the country (West Bengal, Kerala, Goa) soccer is extremely popular. In my childhood like much of the city of Kolkata I used to be avid followers of teams like East Bengal and their traditional rival Mohun Bagan (even now they are the top 2 teams in the Indian Super League). But now thanks to TV and internet people are more aware of the far superior quality of world soccer. Even in some of the narrowest bye-lanes of Kolkata you’ll see full wallscapes of Messi, Ronaldo or Neymar, depending on the furiously fought partisan loyalties of the local boys.

Very briefly, at least three factors seem important in understanding the sorry state of Indian soccer. One is the cesspool of corruption, mismanagement and associated legal entanglements that perpetually afflict the top soccer regulatory and governing body, the All-India Football Federation.

The second factor relates to youth development at the grassroots level. Much more than cricket, success in soccer depends crucially on teamwork, which needs a great deal of scouting and nurturing of talent in tandem, coaching and team practice from a very early stage for whole groups of young people, and in general a sustained framework of youth development from the grassroots community to the professional level. India operates on what is called a ‘pay-to-play’ model like in the US (where families must pay for their children to play on amateur teams, which are not usually connected to professional teams). This model has been heavily criticized even for the US.

For example, Alex Morgan, an ex-student of Berkeley who went on to be a star of the women’s soccer team for the US where she played for 14 years, considers the system in US to be pricey and often inaccessible for many, and says: “Unfortunately, the pay-to-play model, I believe, is getting worse in soccer than when I played competitive soccer (growing up)…It (soccer) is a very inexpensive sport, and the fact that we’ve made youth soccer in the U.S. more of a business than a grassroots sport is, I think, detrimental to the growth of the sport in the U.S.”

In several other countries, youth soccer is often subsidized by governments or professional soccer clubs.

The third factor is related to the second. All over the world soccer is a poor peoples’ sport. In Brazil soccer often provides a major escape route out of the favelas for young people. That India has largely failed to mobilize and develop the huge potential that is latent in its large poor youth population is part of a much larger socio-economic malaise of organizational failure in the context of Indian inequality, and the general upper-class (and hence largely the state’s) attitude of disdain and apathy for the task of meticulously building structures of youth development and intensive team training for the poor and the lowly born.

There is a line in an 18^th century Bengali folk song (composed by the poet-singer Ramprasad Sen) that roughly translates like this: “So much human land remains fallow, cultivating it would’ve yielded golden crops”. This massive wastage in India is as true in sports as in human development in general.

This was Kohei Saito, a Marxist philosopher teaching at University of Tokyo. He said he knew about me in connection with the small group of international scholars (philosophers, economists, sociologists, and others) that has studied Analytical Marxism he read about. Actually, a more informal name of this group denotes studying ‘non-bullshit Marxism’, i.e. Marxism without any dogmatic or obscurantist fog, a group that meets once every year, and of which I had been a member for more than four decades. (If anyone wants to know more about this group, you may find in my memoir Charaiveti: An Academic’s Global Journey a few pages describing this group).

I told Saito that I am not a Marxist, but like a few other members of the group I am immensely interested in the great (systemic and historical) questions Marx had asked, some of his answers may have been wrong, but the questions need to be studied using modern methods of analysis and with modern data. He then told me that he was going to be a fellow speaker in my session, and he’ll speak mainly on what he calls ‘degrowth communism’ based on his recent book, “Capital in the Anthropocene” (the English edition came to be titled “Slow Down: The Degrowth Manifesto”). At that point I did not know that his book was already a huge best-seller in Japan and a translated version was on its way to be a best-seller in Germany. After the session we exchanged our email addresses before departing.

On the flight back I formulated several questions that had come to my mind as I heard his talk, and on my return, I sent them to his email address. But I never heard back from him (maybe my email went straight to his spam folder). This substack piece is partly based on those generic questions I jotted down a few years back.

As I understand it the Degrowth movement, of which Saito is a major academic spokesman, is to challenge the relentless growth logic of capitalism supported by intense competition among profit-seeking producers and limitless mass consumerism through manufactured needs; among other things, this is responsible for environmental depredations and ultimately a catastrophic future for humanity. If we want to save the planet and humanity, the argument goes, we need to transform the system, diffuse the competition for profits and give power to workers, preferably in the form of worker cooperatives (rather than top-down state control), social ownership of the commons, and social welfare and care-giving policies.

The first point that comes to mind is that to restore the ecological health of the world, do we have to give up on growth? Some people in this movement recognize that for the vast majority of poor people in the world, economic growth providing for at least roads, schools, public health, irrigation, decent jobs, etc. is absolutely necessary. But when this is pointed out, the degrowth people suggest a major reduction of production and consumption mainly in rich countries.

There was a time when without substantial energy conservation growth was not sustainable. But for several decades the rich countries have been reducing their energy use intensity and their emissions, so that their growth is now much less resource-intensive than that of other countries—for example, Russia, China and Brazil have higher per capita emission than EU. It is likely that resource-intensity of growth in developing countries will decline over time significantly. Of course, the progress even in rich countries has been nowhere near enough. In recent years there is, however, some ray of hope arising from the increasing availability and affordability of renewable energy sources.

There has been remarkable progress in the development of solar and wind power, and battery technology, making some of these even cheaper than most fossil fuels (in some cases already, in others expected very soon). For example, according to International Renewable Energy Agency data, by 2024 the global average cost per unit of energy (generated across the lifetime of a new power plant) expressed in constant 2024 US$ per kilowatt-hour by solar photovoltaic or by onshore wind is already below even the lower end of the fossil fuel price range, and those by concentrated solar power, bioenergy, offshore wind, geothermal, or by hydropower are at most half the upper end of the fossil fuel price range. In most cases there are continuing cost reductions (both for generation and storage of energy) with larger scale, technical progress and competition (particular among producers in China).

So, it seems it is possible to reach zero-carbon goals for 2050, without significantly reducing overall production and consumption. As expected, there are large variations behind the global average figures mentioned above: for example, most African countries have better solar potential than land-scarce countries like Bangladesh or Indonesia; wind power potential is higher in northern Europe, and so on. There are also large differences between countries in policy initiatives and firm commitments. What is ‘possible’ may thus not be ‘probable’ for all countries in the immediate future. But in some countries (say in Scandinavia, Costa Rica, Uruguay, China or Australia) the transition to green energy is well under way, without necessarily sacrificing on growth.

Of course, the patterns of production and consumption, and thus of growth, have to change. This will involve large changes in the current energy use patterns, and not just in production but also in housing, transportation, land use and cultivation, and so on. There are many formidable challenges and new opportunities. But it is clear that with renewable energy and the large and continuing decline in its prices, one may not have to go to the extreme of degrowth. In fact, some of the green innovations and the large investments they’ll require are part of a desirable program of higher economic growth. Similarly, much needed innovations in agriculture and public health are or should be important parts of future economic growth programs. In any case without such restructured growth and rejigged work patterns for the young, simplistic programs of degrowth in rich countries will make it hard to finance the large pension bills of their greying population.

Nor is it the case that a full-scale transformation of the capitalist system is necessary for the changes. Even if you take Texas, the deeply conservative, ruggedly capitalist, the largest Republican state in the US, a major advance there in the use of renewable energy, taking advantage of their declining prices, has been quite impressive, already generating over one-third of its electricity from renewables.

On the opposite side, capitalism is not the only destroyer of the environment. One of the largest cases of environmental destruction in recent history was wreaked by a non-capitalist regime, the Soviet Union. In the 1960’s it turned the Aral Sea, one of the largest lakes of the world, into a toxic desert by diverting most of the water for the sake of an enormous growth in cotton production. Another arguably non-capitalist example may be the gigantic Three Gorges Dam in China that caused large damage to the local eco-system, apart from displacing 1.3 million people. So relentless and damaging growth is not just the outcome of capitalist profit-seeking.

Of course, Saito and others do not favor large top-down control by the state that Soviet Union (or China) represented. But the main point is that the goal of relentless industrial growth is sometimes pursued by non-capitalist regimes as well. Saito cites passages from Marx’s Capital vol I, where Marx shows how capitalism disrupts the natural cycle between human society and the earth, and from his writings and notebooks in the last decade of his life where Marx was increasingly fascinated by stories of egalitarian, communal ways of life lived in harmony with nature in the context of Russian peasant society, which the Russian populists, narodniks, narrated to him and referred him to Russian data and documents (which he started studying after learning Russian at an advanced age). Marx (and Engels) refer to this in a new preface for the Russian edition of The Communist Manifesto in 1882 (thus coming a long way from their reference to ‘the idiocy of rural life’ in The Communist Manifesto of 1848).

A major thinker who throughout his life has been much more consistently in support of environmental preservation and rural community life and against industrial growth, capitalist or non-capitalist, is Mahatma Gandhi. He, more than Marx, should be considered an early prophet of the Degrowth movement. While many of Gandhi’s environmental goals and those of decentralized ways of organizing community life are very much worth pursuing, technological advance has now made it possible to tackle some of the negative byproducts of economic growth. Also, Gandhian economists have not been able to resolve the dilemma for modern production posed by economies of large scale. They usually advocate small enterprises, but the Indian experience over many decades have shown that small enterprises are often neither viable nor equitable from the long-run point of view. India’s promotion of cottage industry and special reservation of hundreds of products for the small-scale sector (a policy that was given up only in the first decade of this century) kept costs high, products uncompetitive, and wages and employment low, as the economies of scale were foregone. On the other hand, large-scale production often has disruptive social and other non-economic effects on the local community life, which mainstream economists usually overlook in their cost-benefit analysis. One needs some kind of balance.

Finally, I am an enthusiastic supporter of worker cooperatives, as Seito apparently is. I have written on worker cooperatives or worker-controlled and managed enterprises in the sections on ‘rejuvenation of social democracy’ in my aforementioned book A World of Insecurity. But it is not always clear to me that the workers will necessarily be in favor of degrowth. While environmental damages are ultimately borne more by the poor communities and the working class than by the rich capitalists, there are many cases where for the sake of livelihood protection organized workers have supported policies that damage the environment—there are several examples in recent history of rich countries: from the lumber workers in the Pacific Northwest in the US in the 1990’s, more recently the construction workers and pipefitters on the Keystone XL project in the US and Canada, and currently workers in northern England and Scotland agitating for further exploration of North Sea oil and gas, and so on. But over time as the economy gets more heavily weighted toward the service sector, the conflict between livelihood protection and environmental protection is likely to be less salient, as services are usually less energy-intensive, compared to manufacturing.

Thus, the Degrowth movement may have good intentions, but their means of achieving them are not well thought out.

My conversation with him is in two parts. The first part came out last week—see substack of July 6, 2026—and the rest of the conversation is below.

Pranab Bardhan (PB): 3. Some people describe the Tagore-Gandhi-Nehru idea of India as essentially elitist, popular with the westernized liberal-humanist upper classes, not the masses of people. But to me the idea seems quite consistent with the syncretic, devotional (Bhakti-Sufi) folk culture which in different forms is widespread among common people in large parts of India. (In my childhood growing up in the small campus town of Santiniketan associated with Tagore, I used to be enchanted by the rural folksongs of the bauls and fakirs from that whole central region in Bengal, by their cadence of religious syncretism and warm humanism. Tagore had actually adopted the tunes and lyrics of that folk music in some of his own songs.)

Do you agree with me on this general idea of folk syncretism? If you do, we then have to consider why this mass-based pluralism is so fragile in the face of the onslaught of the Hindu-supremacist attempts at fomenting communal tensions? In my substack post where I had a conversation with Partha Chatterjee on his recent book—see substack of November 11, 2025-- I asked him a similar question, to which he responded: “The Bhakti-Sufi folk culture, even where it is popular and vibrant, is invariably local…. Confronted by the organized campaigns of Hindu nationalism, seeking to tie the emotional appeal of religion to the power of a gigantic state, the local folk cults retreat into less visible, subterranean, forms of survival.” Do you agree with Partha on this?

Sudipta Kaviraj (SK): I generally agree with your understanding and Partha’s. But when we designate an idea as elitist, it can have two different meanings. An idea can be called an elite idea when an elite initially conceives of it but persuades the rest of society to accept it as their own. European modernity was based on ideas that originated in scientific, literary and cultural elites which came to acquire directive power over the whole society. In colonial settings, modernist elites do not evince such directive power: our history is marked by the failure of the elite to shape society in its own image: here the designation elite or elitist means that it is held by a small group characterized by their economic and cultural privilege. The rest of society considers these ideas as alien.

Again, Hindu nationalists try to characterize this idea of India as elitist. But it is not for the reason you provide. Ashis Nandy, the social-psychologist, has said that what really works in Indian social life is a conception of tolerance drawn from religious thought, not moral ideals of rationalist secularism. But in my understanding, he views these two ideals as starkly opposed and exclusiveI think, it is the underlying structure of beliefs regarding religious tolerance and mutual respect which makes institutions of rationalist secularism work successfully. I don’t think these ideas are fragile: Hindu nationalists try to find ways to appropriate them and reinterpret them as Hindu tolerance. But they have a fallacious argument. If Hindu society practiced tolerance in the past, and it is a tradition to be proud of, then it should be followed in the present to demonstrate that Hindu society genuinely believes in the value of amity. It is illogical to praise a value as morally good, and not to follow it.

But I think Partha’s observation is very significant. There is a crucial difference in scale: indeed, the folk cultures are local, and Hindu nationalism is by definition a project of mass mobilization. Secondly, and crucially, the anti-pluralist project of Hindu supremacy is now supported by the power of the state. But it is possible to construct a morally and politically persuasive argument on the basis of a pluralist Hinduism, as Tagore, Gandhi and others did successfully. Using the philosopher Rajeev Bhargava’s distinction between political and ethical secularism might help us clarify this question – going back to the tradition of religious exchange of respect. Persuading Hindus to accept religious toleration – toleration and mutual respect between religious communities on religious grounds - should not be hard. But that cannot depend on persuading individuals to accept what he calls ethical secularism. That has been the mistake of ‘Nehruvian’ secularists, though this should not be attributed to Nehru.

(PB): 4. The most serious and original ideologue for the current ruling RSS/BJP dispensation is V. D. Savarkar (1883-1966). Apart from your initial comment about the Hindu-nationalist’s following the trajectory of an essentially Hindu Pakistan, do you have any other comments on Savarkar’s idea of India?

(SK): First, it is important to acquire an accurate and clear idea of Savarkar’s own beliefs. Just before independence, to an American journalist who asked him what the status of Muslims in a free India should be, he stated that their position should be like that of the American Blacks in the 1940s who did not have equal political rights. My reference to Pakistan contains two important features: Pakistan was based on the European idea of the nation-state – a state that was owned by or belonged to its ‘original’ people: everyone else is afforded the state’s protection at a secondary, truncated level. The history of Pakistan – but also the history of the West itself – shows the pitfalls of this state design. This immediately sets off a search for purity: who is a true Muslim or Hindu or Christian. The definition of identity becomes tighter – setting off an exclusionary process. Western democratic states – both in Europe and America – are in the throes of a definitional crisis.

Precisely because of the exclusionary definition of full citizenship sitting at the heart of the outdated model of the European nation-state, these societies are convulsed by an internal contestation about the identity of the state itself. Under modern conditions, where states either have historical diversity, or have experienced diversity because of recent migration, states should fashion institutions to move in the opposite direction. It is particularly important to remember that India has a complex form of diversity – i.e., diversity not only on the plane of religious identity, but on other highly significant planes as well – like region, culture, caste. The logic of exclusion pursued by the state is always defended by the specious argument that it would make the state stronger. Because of multiple planes of diversity, a homogenizing process can produce reactions on other, unexpected, levels – like exacerbating regional conflicts. Because plurality cannot be erased by force, exclusionary policies in fact make the states weak.

(PB): 5. RSS/BJP is now invoking what they interpret as Hindu cultural nationalism in the fiction of a pre-Tagore famous Bengali writer, Bankim Chandra Chattopadhyay (1838-1894), who is the composer of the song Vande Mataram. It is a patriotic song, but the Muslims feel uncomfortable with the Hindu image of a mother goddess in some stanzas. The Indian Home Ministry has now issued a directive mandating that all six stanzas of Vande Mataram must be played or sung before the national anthem at official state functions. (It’s a bit like if Trump were to mandate the singing of ‘Onward Christian Soldiers’ every time ‘The Star-spangled Banner’ is sung in the US). Incidentally, Tagore who had set the musical tune of Vande Mataram sang only the first two stanzas at the 1896 session of the Indian National Congress, skipping the other stanzas.

I know you are one of the major scholars on the writings of Bankim. What is your opinion on this use of Bankim in the RSS/BJP idea of India? In this context can you also briefly comment on the differences between the cultural nationalism of Bankim and that of his contemporary Bhudev Mukhopadhyay, whom you have cited before?

(SK): This is not the place for a long, complex argument about Bankim’s legacy. I found Bankim an astonishingly innovative, powerful, and deeply contradictory thinker. I think he was the first writer to suggest to Bengalis that colonialism was a catastrophe, not a gift of history. He asked modern Bengalis to feel the insult of colonialism: therefore, I think he played an essentially formative role in the rise of anti-imperialist consciousness in Bengal. Yet, though he offers sharp and insightful criticism of the imperial order, he is entirely blind to the ‘Europeanism’ of his own thinking about incipient nationalism.

It is a tragedy that a thinker of Bankim’s historical acuity did not see that his own thinking on this particular question constituted an utter surrender to European thinking on the problem of the state. Indeed, it simply naturalized as a universal form an argument that became influential and later dominant in the world precisely because of European colonization. This is the idea that states must be based on a single people. In Bankim, therefore, we find the simultaneous origins of two contradictory lines of thinking – of rejecting European sovereignty to want political independence. Yet, on the question of what a future independent state should look like, he simply acceded to the servile idea that only way of forming a political community was the European way – of creating a homogeneous state of a sovereign singularly defined people – the ultimate form of intellectual submission to European hegemony.

I don’t think it is a good idea to blame earlier thinkers for the sins of their successors; but there is a genealogical connection between Bankim’s wholesale acceptance of the idea of the European nation (his works are full of admiring references to great figures of European nationalism) and lines of thought developed by Hindu nationalist writers subsequently.

But it is also clear that admiration for European style nationalism and the conviction that it was the fate of humanity was contested by others. Bhudev Mukhopadhyay clearly found this line of reasoning unacceptable and developed a complex argument about religious and political identity; implicitly assuming that identities were complex and many-sided, Bhudev stressed that religious identity was essential in the moral fashioning of the self for all Indians – Hindus, Muslims and Christians. This was fundamental to their moral life. Yet, it was equally clear to him that Muslims and Christians were as much parts of this land as Hindus, and as a political community, Indian society must be based on the acceptance of all its ‘children’. They could all worship this land as their mother. The song Vande Mataram starts with a naturalistic picture of the land, then goes on to what can be read as divisive. Indian nationalists – including admirers of Bankim – were sensitive to this aspect and deliberately used a truncated version – which idolizes nature – as a national song. Compared to Bankim’s intermittent historical references which encouraged some to see seven hundred years of Indian history as a continuing war or a football match between two religions, Bhudev saw clearly the necessity of separating the religious and the political community and emphasized that a modern state must act as an inclusive political community for all.

(PB): 6. It seems to me there is a glaring historical irony in the way RSS/BJP formulates their idea of India. They usually accuse the English-speaking liberal Indians as too westernized, alien to the indigenous, authentic culture of India. But in some deep sense their idea of India is based, as you point out, on a European concept of homogenizing nation-state, contrary to the non-European idea of Indian state adopted by a westernized liberal Nehru, their bête noire.

Also, in looking at history they have blindly followed some narrow-minded westerners (like James Mill, a prominent official of the East India Company) in dividing Indian history based on the religion of the rulers, into Hindu period, Muslim period, etc. Most historians consider this to be a biased, colonial way of looking at Indian history. Yet RSS/BJP has swallowed this colonial approach to history, while all the time deprecating the ‘colonial mindset’ of liberals. Not to speak of some earlier RSS leaders’ (including Savarkar’s) open admiration in the 1930’s for a particular German way of organizing an ethno-nationalist state. Would you agree?

(SK): I agree with you entirely. There was something deeply ironical in the debates about the founding of the nation – in the Constituent Assembly and outside. Supporters of cultural nationalism – who necessarily had to focus on some defining themes and selected Hindu religion and a Sanskritized Hindi language – in their real political ideas totally embraced a European idea of the nation-state. Their critics, like Nehru (and Ambedkar), who may have seemed ‘culturally’ Westernized, in fact argued in favor of a non-homogenizing pluralist political community. Cultural indigenists supported a Eurocentric conception of the state, Westernized modernists a non-Europe-derived form.

As you point out, Hindu nationalists totally adopted the imperial periodization of Indian history into periods named after the religion of imperial rulers, though they did not designate their own empire as Christian. Admirers of the homogenizing conception of the nation-state understandably admire ethno-nationalist purity and, not surprisingly, would be attracted to its extreme forms, because in these instances they would see their own ideals most completely realized: a dark alarming vision of humanity’s future.

My conversation with him is in two parts. Below you’ll find the first part where I ask him 2 general questions on the idea of India and he responds elaborately and thoughtfully. The second part that will come out in next week’s substack contains 4 more questions by me and Sudipta’s response to them.

Pranab Bardhan (PB): 1. The ‘idea of India’ has long been discussed in the context of searching for a founding vision of modern India. But it has always been contested, particularly at the time of the discussion in the Constituent Assembly and the subsequent founding of the Indian Republic in 1950. In the last 3 decades or so, with the relentless advance of the Hindu nationalists, the founding ideas have been continuously and seriously challenged. In this context let me first ask you what is the essence of your thoughts on the idea of India?

Sudipta Kaviraj (SK): Politically, the idea of India must exist on two levels – at least. Here I should first clarify an elementary point. My old essay ‘the imaginary institution of India’ was misunderstood by several eminent historians as suggesting that no idea of India ever existed before the arrival of British colonial unification of the subcontinent into a single state. I was then actually thinking about India as a political idea: an idea related, crucially, to the questions of the state and its possibilities.

In premodern times, it seems there was a clear idea of India as a cultural space which was ‘united’ by recognizable circuits of practices and transactions – religious practice, arts, literature and crafts. It is important to emphasize the transactional side of these adjacent and overlapping social practices – because these practices were not identical, but each recognized the adjacent existence of the others. They did see that the others were different and distinct from themselves but did not see them as a violation of common rules of social existence. Religious diversity in India ought, in my view, to be seen in this way: not always as a moral practice of ‘high toleration’, but as a sociological adjacency that had to be simply presupposed in the texture of life. Internal differences within Hinduism – between Shaivas, Vaishnavas, Shaktas, and their differences with Jainas and Buddhists should be viewed this way, rather than through an unpractical high-minded philosophy of toleration. Attention to philosophical disputes among even Hindu theological paths show the sharpness of the disputations, which should not be anachronistically and casually emulsified as ‘toleration’.

But it is true that even serious religious differences did not ordinarily lead to civil wars. Though the early conflict with Buddhism seems to have been a much more intense philosophical and political competition in which each side wanted to ‘defeat’ the other. So, the singleness of the space of India did not spell ‘unity’ in the modern sense. Politically ‘India’ remained practically unfeasible simply because of the limitations of political power. Empires occasionally unified vast parts of the subcontinent into a transient, fragile dominion, but no pre-modern empire had the power or technology to keep it united for long enough to produce a common political experience among its subjects.

It is in that sense that a ‘political imaginary’ of a single potential state named India emerged only under conditions of British rule. This I called – controversially – the imaginary institution of India: in my use institution is more as a verb, than as a noun – a process attempted rather than a result securely achieved. But, emphatically, when this became a historical possibility it necessarily had to be ‘empty’. It was only its territorial outlines – I am advisedly staying away from using boundaries – that were clear, or stable.

Even then, there were at least three different strands of thinking about this possibility. I think always there was one strand of thought – favoring small-scale, close-to-the-people forms of political authority/power with the presumption that a state on such a vast scale would be distant, and therefore, oppressive. A distant center will not understand problems of regions and localities, and will necessarily try to impose arrogant, external solutions to their problems. If ‘India’ was divided between largescale regional formations, it would be better for both the rulers and their subjects.

There were clearly two other lines of thinking – which could be called, schematically, federal and unitary. The federal imagination conceded the principal political-sociological idea behind the earlier argument, but thought responsiveness to regional experience could be reconciled with a large, federated state – which could combine the advantages of scale and of local responsiveness. The third imaginary was in favor of a strong unitary highly centralized state – federal only in name – with the crucial power of enforcing social change.

I think eventually the Indian political leadership instituted a more sophisticated and complex state structure – they ran a new distinction through these earlier, pre-existing political imaginaries – which, in effect, combined the second and the third pictures of the possible state. The instinctive reaction to the chaos of the partition also favored a more centralized state-form. The state Nehru built was a complex, and highly sophisticated hybrid of these two arguments: it retained the federalist impulse of the political-cultural part of the state; but imposed a deliberate centralized planning apparatus in the economic and welfare functions of the state. We forget that the state is always a historically contingent assemblage of functions of various types. Institutions of the state – like Lego pieces -- can be taken apart and put together in quite different ways – depending on experience and circumstance. Leaders who collaboratively put together the Indian constitution were quite good at doing this.

But the idea of India can be broken down into two components: the nature of the state and the nature of the people who are conceived as the sovereign of which the state is an instrument. Between the two options of how the people could be conceived – on lines of the homogenous European nation-states, or more heterogenous imaginaries of the people, the constitution-makers broadly chose the second. In fact, it was not an option that pre-existed their choice: both European and non-European analysts accepted rather fatalistically that a modern state, to be successful, must be like the European states culturally and religiously uniform. Some accepted this as a universal human fate and thought the Indian state must try to replicate such uniformity – which could be done only through a process of partition.

But partition obviously was not a solution to the problem of plurality or diversity, at most it was a solution to plurality of only one type. Religious plurality was not the only feature of diversity in Indian society. One side believed that ‘solution’ of the religious plurality problem (if it was seen as a problem) will make other diversities go away; others thought that if religious plurality was suppressed/resolved through partition, that will simply foster other diversities to produce conflict. In a country like India, the search for purity was a tragic path to chaos. On these grounds, one part of the political elite decided to experiment with a model of a non-nation state. Against two centuries of European precedent, they decided that a heterogenous people could inhabit a single state.

It seems to me that the only historically viable idea of India is one which brings together a federal conception of the state with a pluralist, heterogenous conception of the people/nation. Unfortunately, both these connected ideas are coming under increasing pressure. Paradoxically, Hindu nationalists want to follow the trajectory of Pakistan – which seriously attempted to imitate the European nation-state model through partition.

But the lesson from that history is clear: partition brings forth further partition in the fatal search for the pure, undivided, people. Basing the state on the identity of the Muslim did not solve the problem: it simply set forth a process in which the identity of the Muslim itself began to be defined more tightly and exclusively –- disenfranchising the Ahmadis but later creeping toward the Shias. Partition on the basis of religion simply made more possible partition on the basis of language. Probably unbeknownst to themselves, the ideal for Hindu nationalists is Pakistan - which had as its ideal the European nation-states that were not homogeneous from antiquity but rendered homogeneous by religious civil wars. Attempts at forcible centralization of the state and homogenization of the people by subtracting citizenship from ‘others’ is to return to the logic of partition.

(PB): 2. Since the beginning of the last century Rabindranath Tagore in various essays and iconic poems wrote about his idea of India in its rich pluralistic cultural form. Gandhi added a moral dimension to this and emphasized mutual respect among diverse communities, social justice and individual integrity. As an intellectual disciple of both Gandhi and Tagore, Nehru came to describe the defining civilizational ethos as what he called ‘unity in diversity’ in his 1946 book “The Discovery of India”. About fifty years later, in 1997 our common friend, Sunil Khilnani, wrote a widely-noted book titled “The Idea of India”, which largely validates and reinterprets Nehru’s core political vision, though I think he differs from Nehru in considering pluralism as India’s timeless spiritual legacy. Would you agree to this broad description of the intellectual development of the idea of India among these thinkers? In particular, what will be your critical comment on the unity-in-diversity idea?

(SK): I think you are right about Sunil’s reading it as a legacy. But Nehru clearly regarded this as a line of reasoning coming from the Bengali tradition through Tagore which later becomes an Indian tradition. I believe it originally comes from Bhudev Mukhopadhyay (1827-1894) --a major 19^th century intellectual of Bengal but hardly known in the rest of India. Strictly speaking, Bhudev does not view it as a ‘legacy’. Bengali writers at that time responded seriously to an idea in the vastly influential work by François Guizot, The History of Civilization in Europe. Guizot thinks in every civilization there are experiments with its own history: that is, a kind of civilizational collective intelligence that reflects upon the challenges society faced in its long history, and that collective intelligence fashions a distinctive response. This logic is what makes that civilization successful. Guizot’s history suggested that the ‘genius’ of European civilization was to continue with the three main principles of governance – by a single monarch, by an aristocratic intellectual elite, and by the popular forces. The balance between these principles has produced the modern European civilization, and this is the reason for its triumphs.

Thinkers like Bhudev took this argument seriously and looked for a similar logic in their civilization’s long history. Does Indian history show an underlying logic of this kind? Which marks India’s long history, and which is the reason behind what it considers its great success? Bhudev answers that it is the logic of unity in diversity. Periodic influx of new elements into this civilization produces an initial disturbance, because the earlier equilibrium is inadequate to absorb the new demands. Eventually, the new elements – successive groups who enter India like the Sakas, Hunas, Pathans and Mughals, Christians - find a way of settling down into a new equilibrium of exchange and co-existence. Bhudev thought this was particularly remarkable about the longue durée relation between Hinduism and Islam. Interaction with Islam produced some of the most defining features of Indian culture.

So, this is a historical-sociological argument, not primarily a moral principle. This should not be viewed simply as an effect of the principle of religious toleration: Bhudev’s argument is sociological – the capacity of the collective social intelligence to find a solution to a distinctive social difficulty. What is interesting about this line of argument is that it overturns the colonial arguments about the disabling effect of India’s diversity. Colonial arguments generally – in this respect, it is remarkable to note that English Utilitarians presents this idea as much as Hegel, despite their great philosophic differences – saw India’s diversity as an obstacle to the most important task of a society - to construct a state.

Bhudev’s reflections on the idea of ‘unity in diversity’ argued three important propositions: Indian history was not a chaotic chronicle of meaningless, directionless events: it had a ‘logic’ of its own, like European civilization. The purpose of this civilization was to find techniques of harmony between peoples and groups of deep differences. This was an achievement of human civilization, and it was very different from the spirit of European civilization focused on the state and conquest. This idea, found in a preliminary state in Bhudev’s reflections, was given greater refinement and argumentative edge in the work of Tagore and others. Nehru certainly adopted this reading of Indian history; and, because he had access to political power at the moment of the state’s founding, he turned out to be the most historically consequential supporter of this idea of India.

I agree with this way of interpreting Indian history. In that sense I have no serious criticism of this line of thought. However, those who favor this idea of India, sometimes tend to think that it is something ‘objective’: i.e., it should be obvious to any reasonable person with general good will that this is the right way of thinking about the Indian past. This is a mistake. The history of every society is so diverse and complex, that inevitably it can be read in multiple ways – all of which can be plausible to people with disparate political and moral purposes. It is also important to recognize that disguised as ideas about the past, these are really ideas about the present and future.

At the time of Independence, for a conjuncture of circumstances, this ‘Nehruvian’ interpretation was dominant, and consequently, this idea of India, or ‘nationalism’ became the state’s interpretation of history. Due to the unanswerable power of the state, it appeared that this idea did not require constant argumentative defense in the face of historical change. It became a ‘banal’ form of nationalism which was so widely accepted that it required no defense. As this idea has now been challenged by the opposed idea of a Hindu nation, and that is indirectly supported by the power of the state now, it has become even more important to argue in its defense. Because the idea of a ‘pure’ singular people is a recipe for disaster in any diverse society. Nehruvians in the broad sense can be accused – not of an error, but of complacency.

My second criticism, or rather worry, is that the defense of this idea occurred very differently in the two public spheres where large political ideas and ideals are constantly debated – in English and the vernacular. The English public sphere extends through the whole country but is relatively thin; the vernacular spheres go deep but are restricted to linguistic regions with their variant histories. My sense is that the defense of this idea of India has happened sporadically and negligently after the Nehru period. Even after the rise of the BJP and its assumption of office, it has not been defended forcefully in the vernacular literary -political spheres. This may be linked to a larger political fault of this imagination: in its enthusiasm for the idea of India, it tends to neglect the deep histories of the regions.

India or Indian is always a second-order identity. It is unpractical to think that an Indian can be made to forget their regional selves in favor of their Indian one: neither of these two is unreal. It is a dangerous fallacy to believe that strong ideas of regional identity – based in their language cultures – are incompatible with this idea of India. Some followers of the Nehruvian idea of India, particularly among the English-speaking intelligentsia, scorn regional identities and view them as secessionist. But there are problems at the level of the vernaculars as well. Hindu nationalists generally favor a homogenization of culture on the basis of Hindi. That is not a truly vernacular position: it is simply a Hindi version of the homogenizing picture of India. Just as the largest number of Indians are excluded by the English version, using this version of nationhood a majority of Indians would remain excluded by its Hindi version.

In our conversation I have sought out his views on various issues of the international economic order. The first part of this conversation that came out last week—see substack of June 22, 2026-- was mainly on governance in multilateral institutions and on possible international agreements on the environment and on migration. Below you’ll find the rest of our conversation.

Pranab Bardhan (PB): The second international public good issue that I wanted to know if you have any view on, is related to public health and prevention of future pandemics. In the last one, we did see at some stages a lot of ‘vaccine nationalism’ in rich countries. There are, of course, problems on the developing country side too in terms of logistics of public health infrastructure. Do you have any view on this?

Raghuram Rajan (RR): I certainly can’t claim to be an expert. It does seem to me that the outcomes were less than desirable when we fought the last pandemic. Developing countries having worse facilities and their inability to get vaccines on time etc., makes it a very uneven world when these kinds of pandemics hit. We ought to try and do better next time. And that means, first, discovering the appropriate vaccine--comparative advantage would suggest that’s where the rich world should focus its attention, and here some developing countries like China and India can also play some role. But the second part is producing it and making it widely available; we really have to find ways to spread the production fast across the world. And that means easing the intellectual property constraints, etc., while keeping in mind that we shouldn’t deprive those who spend effort and money in finding the vaccine from getting a share of the rewards. But can that be done in a way that doesn’t hold up the poor countries from getting the vaccines quickly? We need to have some sort of game plan for what happens next time, because there will be a next time.

(PB): In fact, in some of the new vaccines brought to the market by private firms at the time of the pandemic, the money for the initial research and development came from the government in rich countries. The latter can always make it a part of the contract that once the vaccines are developed, a certain quantity of these vaccines has to be made available at low cost to poor countries.

(RR): Which is where the lack of international agreement starts showing up, right? And we need to find pre-planned ways of getting the vaccines fast across the world. As everybody knows, unless the whole world is healthy, no country can be healthy.

(PB): Let me now go to a third international public good issue which has become critical in the last few years. Social media and lately AI have been a great source of potential human benefit—but they can also do an enormous amount of harm, and in the case of AI there is potential for catastrophic consequences for humanity. Do you have a view on the issue of oversight and regulation of social media and of AI at the international level?

(RR): You know, I have seen far too many authoritarian governments use the argument that we need to regulate social media because it’s spreading child pornography and other bad things.

(PB): Then they use that regulatory authority for suppressing dissent. And what about hate speech in social media?

(RR): Well, the definition of hate speech is problematic. That’s what bothers me.

(PB): Yes, sometimes criticizing the government or its leaders is considered hate speech. On the other hand, hate speech and false rumors in social media have instigated violence and riots in several countries.

(RR): Yeah. I certainly think that there is room to prohibit actions which are tantamount to crying fire in a crowded theater. But when there are complaints about hurting the sentiments of this or that community, something often used against minorities in a majoritarian country, I want to be far more careful about that.

(PB): I was thinking more about international agreements, both on social media and AI.

(RR): I think we will need an international agreement on AI. It will have to be something about how much care you take in your AI models to prevent the worst kind of outcomes. I think right now, because countries are competing with each other, the incentive to limit AI is small. Which raises the danger that we get the race to the bottom, even to our destruction.

(PB): In that context I’m sure you are aware of some of the landmark EU initiatives taken for regulation in this general area—I have in mind three Acts passed by EU. One is the Digital Services Act, passed in 2022, designed to create a safer, more transparent, and accountable online environment; it enforces strict rules against illegal content, mandates strong user rights, and holds tech platforms legally liable for systemic risks. The second is the Digital Markets Act, passed the same year, which is to assure fair competition and openness in digital markets. And the third, passed in 2024, is the AI Act, which provides the world’s first comprehensive legal framework to ensure safety, transparency, and preservation of basic human rights. Do you have any view on these attempts at regulation? At the moment, I understand, the EU after passing those Acts is now trying to soft-pedal because there is a view that these Acts may affect business efforts at innovation, as Europeans are now worried about falling behind both the US and China in innovation.

(RR): I wrote a piece on some of this sometime back on Project Syndicate. My thought was that EU tends to be more risk-averse, partly because the buffers, in case things go wrong, are much more limited because it’s not one country, it’s many countries. So, they want to pre-regulate to some extent. On the other hand, the US tends to be more confident, maybe a little more risk-taking, maybe a little more positive on entrepreneurial innovation, and therefore tends to post-regulate.

Now, the problem with post-regulation is that by the time you gear up to regulate, the regulatee may be too powerful for you to regulate. That’s an old conundrum. My sense is that the right place is probably somewhere in between the US and Europe. Don’t wait too long, but don’t do it so early that you don’t really figure out what the problem is. People sometimes make fun of Europe, saying they’ve regulated AI, but they don’t have a single large worthwhile AI model. That’s not quite true. But I think the point is well taken. In general, there is an optimal point of regulation.

(PB): Let me now raise four other issues with you. These are not quite cases of public goods, but there are some spillover effects and some scope for coordination. One has to do with international trade, another with debt. The third is with a major problem all over the world, that of the scarcity of good jobs for young people. And the fourth is tax coordination and harmonization. Let’s start with trade.

On international trade one hopes in the medium term restoration of the currently broken trust will be the first priority among trading nations, that trade rules under the World Trade Organization (WTO) are suitably reformed with some adaptation to the changing needs of industrial policy, digital trade and e-commerce, with some international coordination in resilience against supply-chain disruption, and the restoration of the WTO Appellate Body for dispute settlement, and so on. What are your views in this area?

(RR): I have nothing useful to say on trade other than that we should have better systems to take care of those who are hurt by trade, as well as a system to assess subsidies (always very hard) so as to identify situations where they may be in excess. Everyone subsidizes, the key is measuring them on a level playing field. Until we do that, accusations of unfair trade will fly around, giving countries the license to do what they will.

(PB): Let me move on to debt. We have massive problems of debt, not just in developing countries, but also rich countries. But at least in some rich countries, it’s domestic-currency denominated, say in Japan or US. But in many developing countries, it’s foreign-currency denominated debt. And that’s an extra problem. Do you want to comment on what to do about this massive problem facing many of these countries, particularly the poor ones?

(RR): Of course, it is a problem. I do worry that in many industrial countries, the urge to pay down the debt has evaporated. There’s a sense that somehow the private markets will continue providing. I think in the not too distant future, some developed country will test that proposition. And with aging economies, with healthcare, social security needs not entirely funded, certainly in the US but in other countries as well, and the anti-immigration push, which prevents them from growing the labor force--all this will come together into a debt financing conundrum. That will create greater concern than what you see now about the size of the debt.

I think for developing countries, the reality is there is no Santa Claus out there. There is nobody who’s going to continue financing your debt. As for private capital flows we have to keep in mind that there is a huge need for capital in the world. If developed countries have big capital needs, especially with AI and so on, it’s going to be hard for developing countries to compete.

(PB): This reminds me of something about IMF, probably it came after you left that institution. There were some proposals about IMF issuing its special drawing rights (SDR’s)--giving funds in proportion to the quotas to the rich countries, and then the rich countries re-lending them to the regional development banks, which were then to go for debt relief in developing countries. Whatever happened to them? Do you know?

(RR): Well, truth be told, I think SDRs are a bit of smoke and mirrors. They’re a way of hiding where the true funding is coming from. SDR is basically a guaranteed line of credit to countries. Countries can borrow up to the SDR line, so to speak. And the IMF has to give it to them willy-nilly, regardless of programs, etc. Of course, the problem is, it’s not a whole lot of money. Even if you expand the SDR allotment by a huge amount, most of it will go to the developed countries. Then you turn around and say they will lend it to the multilateral banks. That’s another way of saying that their taxpayers are now funding the multilateral banks without being asked, because it comes from the smoke-and-mirrors, SDR. You don’t want to do it up front because you can’t get the legislatures of countries to agree, So you do this through the back door.

(PB): Let me go on to the potentially explosive issue of the scarcity of jobs all over the world for the young, and particularly in poor countries. The international dimension of this issue relates to trade and industrial policy for promoting jobs and maybe some international technical assistance and training programs. You’ve been writing for quite some time that maybe more than manufacturing, it’s in the service sector that you have to look for jobs. Some months back, I had a conversation in my substack with Dani Rodrik—see substack of September 16, 2025 --in his recent book he also came up with a similar kind of idea, that it’s the service sector we have to look into. Can you expand a bit on your ideas on the job front in the service sector? One question people bring up is that many of the service sector jobs, at least the good ones, require a lot of skills, which at the moment many young people in developing countries do not have. But as we are thinking of the medium term, do you see a prospect of developing training and vocational programs to provide the skills that will be necessary for such an expansion of service sector jobs?

(RR): Absolutely. There’s often this belief that somehow manufacturing will bring the jobs as it always has. That’s problematic from three perspectives. One, automation is taking hold of manufacturing in every country, including in developing countries. Second, industrial countries are getting much more protectionist. I make the argument to Indians, that the willingness of those countries to accept another China-sized country entering manufacturing is pretty bleak. The third point is that you have to still compete with China, the sense that somehow China is going to make way for you is unrealistic. The flying geese idea that as China moves up the formation it will give up some of the unskilled industries to the laggard countries is not really relevant. First, there aren’t so many unskilled industries anymore. And second, China’s now occupying every part, both the unskilled and the skilled. So, I don’t think manufacturing is an answer.

On the services, I think people immediately jump to things like computers and software. And of course, immediately the other point comes up, what about AI? Isn’t that going to decimate most jobs? Yes. AI will kill a lot of jobs that exist in some areas, but it will augment a lot of work also and make it more productive. Right now, everybody should be thinking about how they can use AI and become better at what they do within developed or developing countries. What has changed is the ability to access developed markets in services through various new communication tools.

I see the big job potential in moderate skills: the plumbers, the carpenters, the repair guys. And there I think some moderate skilling can go a long way. Take, for example, an idea that Abhijit Banerjee has suggested. Think of all the informal medical practitioners: the guy who used to be a compounder in a pharmacy, who now prescribes and is called doctor by a bunch of people he prescribes for. His skills may be iffy. He knows some things well. He knows how to treat or dress a wound, and so on. But he’s not that great at diagnosis. Now, if he could be connected to AI and he could ask the right questions and understand the answers after checking temperature, pulse, breathing, etc.; maybe he could be a half-decent medical practitioner, and then tie him up to a real doctor who could take the next step if this guy says this case is more complicated than he can handle. This way you could see much improvement in medical services. Maybe in various such ways we can get a lot more capability. We just have to think smart. That’s my point.

(PB): Let me go to my last issue on the international economic order, it’s about tax coordination (mainly for reducing tax evasion and declaration of corporate profits in tax havens). After a lot of effort on the part of many organizations and governments—my friend and ex-colleague in Berkeley, Janet Yellen, as Treasury Secretary in the Biden Administration worked hard for it—an international agreement on global minimum of 15% in corporate taxation was reached in 2021, which, of course, the US is now sabotaging. But do you have any view on this international tax coordination effort?

(RR): 15% is not excessive by any stretch of imagination. We don’t want a high minimum tax. But a low minimum tax agreement, I think, is sensible. I am disappointed that we haven’t enforced that, but I’m hopeful we will.

(PB): Do you have any view on the idea that’s brewing among some left French economists, about a minimum tax on the wealth of billionaires all over the world?

(RR): I can see the argument. But I’d rather not have society descending into a situation where somebody else will pay and the majority doesn’t pay, as in such situations people really don’t appreciate the cost of government services. The problem with taxing the very, very rich is that there are all kinds of loopholes they can find to get around it. I’m not against bringing the capital gains tax up to the dividend tax or to the income tax level. Try to cut out the loopholes, but don’t get overly fancy. And certainly, don’t say the rich are undeserving and therefore they need to be taxed much more. They are already paying a significant amount of tax.

(PB): The French economists are not saying the rich are undeserving, but they’re saying that with the extreme inequality today, 1% or 2% tax on the billionaires’ wealth, may not be that much. And if there is a global compact on minimum wealth tax the incentive to move their wealth elsewhere will be less.

(RR): I would say instead of focusing on wealth, focus on the loopholes. I think a broad-based tax and raising the rate across the board are better than trying to find some sugar daddy who’s going to foot most of the bill.

In our conversation I have sought out his views on various issues of the international economic order, and it’ll be in two parts. The part below is mainly on governance in multilateral institutions and on possible international agreements on the environment and on migration. The second part that’ll come out in next week’s substack is on international coordination on issues like global public health, regulation of social media and AI, international trade, the debt burden, scarcity of jobs for young people, and the need for a minimum level of global taxes.

Pranab Bardhan (PB): With geopolitical tensions rising in much of the world and both superpowers often behaving with irresponsibility and narrow tribalism, the international economic order is now in a great deal of disarray, and there’s a lot of erosion of the earlier multilateral system. In this context, of course, there are several immediate problems, but I would like you to focus mainly on the medium-term horizon, not so much on the immediate crisis but more on the medium-term problems and prospects. Let me first ask you to tell my readers about your recent Financial Times piece, where you made some very interesting and important governance suggestions for multilateral institutions. Not all my readers may have seen that piece.

Raghuram Rajan (RR): Since the end of the World War II the rules of international engagement were set by the United States, with some collaboration from the other western victors in the War. And they were set by a power which was supreme not just economically (it accounted for nearly half of world GDP at that time), but also supreme militarily. This most powerful entity, the hegemon, basically helped police the rules of the game. Of course, not always fairly, not always disinterestedly. But by and large, it was seen as being a relatively neutral party, which wanted to open up the world to US commerce, but also in the process enable other countries to grow. This economic growth was not zero-sum, it was positive-sum: your growth helps me because you increase your demand for my goods, and vice versa. And for a long time this actually worked, first in helping the European countries recover, as well as Japan, from the devastation of the war, but it also helped the emerging markets grow substantially, including China.

That’s the starting point. The problem to some extent was that the rest of the world was a little too successful, especially China, and especially in manufacturing. And while initially they were doing the low-skilled, labor-intensive parts, more recently they’ve occupied the higher-skilled more technically intensive parts, and thereby competing directly with developed country firms. An example is chip manufacturing, the most advanced chip manufacturing being in Taiwan. In electrical vehicle (EV) manufacturing, the best EVs now are no longer with Tesla, but some companies in China. And similarly with batteries, with solar cells, and so on.

I think that has caused enormous angst in the developed world, particularly in recent years in the United States. The China shock is much talked about as having killed a lot of decent manufacturing jobs. Of course, economists would say that many of those jobs left because of automation, not just because of foreign competition, but competition has been part of the story. And as a result, the support structure for adhering to the rules of the game has weakened substantially.

Again, the most problematic weakening has been in the United States because it was the one that was upholding the rules. So, the earlier system is breaking down. We need a new system, probably a system which is devised in a more system-agnostic way. I’m using “system” in two different contexts. What we need is an international framework which is agnostic about the kind of economic system countries have. That is, some countries are more capitalist; some countries are more state-directed. We need a system which accommodates whatever your chosen internal economic system is, but at the same time basically prohibits certain kinds of actions which would be collectively detrimental.

I don’t go into what those rules might be. But what I do say is, if we agree to those rules--and they better be lighter and less intrusive than the previous ones--we need entities that can police the rules, because you can no longer trust any country to police them.

Now, what might that entity be? I have in mind something which looks a little bit like a central bank, which gets its terms of reference from the political establishments of countries; then becomes a more professional, unbiased arbiter of the rules. Put differently, it is somewhat detached. It follows the broad rules set by the countries; its management is appointed by the countries. But its management doesn’t have to listen to the countries while making decisions.

(PB): How does it differ from what we have today?

(RR): Well, today, for example, take the IMF, an organization I know well. Every loan that is made requires country directors to pass that loan. The opinion of the IMF on whether a country is by and large doing the right things is important, it needs to be passed by the board. What this means is the political input is heavy and constant. And that means if the United States, which holds veto power, doesn’t like a particular country and wants to deny it funds, it can veto the funds going to that country, even though the United States basically contributes only 16 to 17% of the capital of the IMF. It’s basically a minority veto. And similarly, if the G7 gets together, they can, you know, prohibit certain things.

It was not just the US, but China also, when it came to lending to Sri Lanka in 2022. Sri Lanka essentially was hung out to dry for a while, despite a lot of pain and suffering for its people, simply because the IMF couldn’t get the votes to pass a program. Of course, programs take time to negotiate, but when there’s a will, there’s a way. It took a much longer time because Sri Lanka didn’t have powerful friends and the hegemons were fighting over it to some extent, partly because China also had a bunch of loans to Sri Lanka.

So, what I would like to see in the medium term is a more impartial sort of multilateral system which basically enforces the rules but without constant political input. The political input should be at the level of creating the rules; just like in a country the elected representatives of the people decide what the mandate of the central bank will be, and the elected people appoint its leaders. But then the leaders of the central bank essentially adhere to its constitution and its mandate, rather than the political wishes at that moment.

That may be a pipe dream at this point. But in a world where there’s no reliable hegemon, where there is a polarized world, I think it can function, if you have any rules that need to be implemented; it can function only when you distance the political authorities somewhat from the solutions.

(PB): One more question on this, then I’ll go on to other topics. Do you have any idea of the balance in the voting structure? Namely, do you think international institutions should have dollar-weighted voting versus population-weighted voting or some compromise? Do you have any view on that?

(RR): Well, I think we have to be pragmatic as well as somewhat democratic. Pragmatic in the sense that if you have each country having an equal voice, you’re not going to get anywhere. When 195+ countries are voting, nothing really gets done. If you have a few selected voices, based on some historic power structure, you may have a situation where you’re obeying some norms which are long gone. So, you have to be a little careful. I mean, the idea that Britain and France have veto power on the Security Council, when Japan, Germany, and India don’t, is a vestige of the past and is something that deserves to be looked at more closely again.

So, one, you need to eliminate all vetoes. Two, what you need is some sort of broad majorities. But it is reasonable to say, for example, in the IMF, the funders will have more say because they’re the ones whose money is at stake. Similarly, in the UN peacekeeping initiatives, perhaps the ones who contribute forces will have more say. Again, you can’t go against the major powers, and you’ll have to balance it against the fact that there’s a lot of free riding--a bunch of countries provide the resources while another set free-rides.

(PB): Let me now go to my second topic, which is on the essential role of multilateral institutions in providing what are called international public goods (i.e. the case of those services or resources where the benefit is available to many countries without diminishing its availability to others). There are many examples of such international public goods, but I’m going to concentrate on three of them. One is environment, where there are obvious spillover effects across borders. And so far on that front, there’s been a lot of talk, but actual progress has been rather slow on international agreements, both on reducing emissions, and on climate financing particularly for developing countries.

There has, of course, been some progress on the environmental front from a different angle because of the drastic cost reduction in renewable energy sources, largely due to large-scale production and intense competition among producers in China, in solar modules, wind turbines, batteries and electric vehicles. Would you say something about how to enhance the pace of the necessary international agreements?

(RR): Well, again, you need the big powers behind it. Certainly, Europe has been behind it. But to some extent, its difficulties in manufacturing that are starting to hold it back, because manufacturers in Europe are saying: we already got the problem of competing with China; on top of that you are adding the costs of greening, and these added costs make us uncompetitive. So, they come up with fixes like CBAM (Carbon Border Adjustment Mechanism), which is the border adjustment tax, on imports of goods from countries where the environment regulations are lax. A lot of countries dislike this tax, as they say this is a form of protectionism.

(PB): Developing countries, in particular, are objecting that it’s biased against them. Do you have a fix on that?

(RR): I’m sympathetic to that argument. I also understand that putting up a tariff which waxes and wanes depending on how green your production is, is a way of leveling the playing field for European manufacturing. But any kind of unilateral action will tend to be driven by where you’re more competitive. It is better that these are done by international agreement.

(PB): As you know, Europe has far more subsidies for green energy production.

(RR): Exactly. You’ve implemented those subsidies, so your manufacturing can be greener than some developing country which cannot afford those subsidies. And now you invoke level playing field to impose tariffs. This is hardly a level playing field. Going back to your earlier question, which is, what can we do? I think, for sure, it’s important that the hegemon, the United States, basically recover its faith, at least in the medium term, that global warming is because of emissions and so on. It is interesting that a bunch of Republican states, like Texas, are benefiting hugely from some of the renewable energy sources. So, I’m hopeful that over time, in the medium term, the United States will once again sort of lead here. You need the largest economy in the world to be supportive of this.

But I also think that we need to get the agreement that even if you say bygones are bygones, looking forward, we have to ask how the emissions budget of the world ought to be divided and who should pay the price for taking up big chunks of it. And this is already a source of controversy. Let’s say each individual country in the world has a share of that budget. Each one can emit, let’s say, the world average. I think the world average is five tons of carbon a year. Well, a simple way of financing climate action is to get everybody who emits more than five tons and who is eating into the carbon budget to contribute to a global fund.

(PB): I remember reading another piece by you, I think also in the Financial Times, some years back on that kind of proposal.

RR: Exactly. As you can imagine, it’s self-financing. Typically, it goes from the richer countries that consume more of the carbon budget to the poorer countries. And you can fix all the details. All that can be done. But there is no will.

(PB): I was going to ask you, after you made that proposal, what has been the reaction?

(RR): I have had some enthusiastic people sort of push it at many global meetings, and the reaction was: it is interesting, but...The “but” is always the killer. It is that this is going against powerful countries who don’t want to pay in, and there’s no agreement. I mean, you can nitpick all you want. And there are ways of nitpicking this, but it recognizes that it doesn’t go to that black hole of reparations for historical faults. It just says going forward, let us charge appropriately. Anyway, backing off from all that, I do think that global climate change is an area where hopefully we will get more cooperation as the climate changes and actually affects thinking.

But I also am quite hopeful about the other side of climate, which is migration, that we develop better institutions to make it more beneficial on both the sending and the receiving side of migration. As you know, this is one of the bigger political issues in country after country. And I sympathize with both sides, being a migrant myself. From a migrant’s perspective, clearly you’re looking for a better life. But from the receiving country’s perspective, you do want to make sure that your entire country’s culture and ethos are not upended, that you can socially absorb the pace of migration.

The scope for win-win is that rich countries are aging, and robots are really slow in replacing humans and may well be slow for some time to come. So, the Japanese dream of getting robots to take over did not quite work out. The Japanese finally are slightly relaxing on immigration, though the recent elections also had a bunch of anti-immigrant parties. But I think eventually economics will tell. The US will also someday recognize that its strength has been to be immigrant-friendly. You know, you can reel off the number of immigrants who have contributed hugely to the most advanced companies in the US. I think we have to make immigration more palatable in the public discussion. And that’s why I’m saying we need organizations to think about, for example, how do we train up immigrants before they enter a country so that they have the relevant skills and language?

(PB): Actually, in an earlier substack piece—see the substack post of March 9, 2026 -- I had a conversation with the LSE professor Alan Manning, who has a new book on immigration. In that context we talked not so much about immigration of the high-skilled people, but more about the low-skill immigrants. And then what kind of compromises we can think of. One of the proposals that I brought up, something that has been suggested by several people, is that the rich countries can think of funding the training centers in poor countries. Say, you train nurses there and then send some of them to the rich countries depending on their needs. And the rest of the nurses can serve the equally important needs in the poor countries themselves, but the cost of training all is borne by rich countries.

(RR): That makes a lot of sense. But basically, what we all are saying is we need more structure in this immigration process, which makes it more win-win. The uncontrolled immigration, especially in the face of climate change resulting in the droughts, the floods, is going to drive people from home, and then it’s going to create a reaction in the rich countries, in terms of building walls or deporting them to far-off places. I think there’s a better dialogue to be had. And there will be a lot of room for moderately skilled workers, but even those skills may be absent right now and can be created if there’s a will.

India, of course, has the historical deadweight of deep social inequalities in terms of caste, gender, etc. Even if you focus largely on economic inequality, inequality estimates on consumer expenditure or income or wealth leave aside other important aspects of inequality, like inter-generational inequality (how inequality changes across generations reflecting upward or downward mobility), an aspect of the dynamics of inequality, or like spatial inequality in the form of residential segregation, as what sociologists call the ‘neighborhood effect’ is often a factor in the persistence of inequality.

Paul Novosad, an economist at Dartmouth College, in collaboration with Sam Asher of Imperial College London and others, have recently done intensive studies of these two neglected aspects of inequality in India. They have some striking results. In my conversation with Paul, I asked him first to give us an idea of their findings in these studies, and then I asked him in all 8 questions to which he responded. This conversation has been in 2 parts; the first part came out last week—see substack of June 8, 2026—and it contained his statement on their research and a couple of my questions and his response. You’ll find the rest of our conversation below.

Pranab Bardhan (PB): 3. You focus on educational mobility rather than income mobility since, as you say, you do not have linked parent-child income data. This is even though, as far as I know, the IHDS did collect income data, and I suppose also if the household is multi-generational or not, right? In any case, as I have mentioned earlier, in a country where the informal sector is large income data can have problems. But, of course, the education data are also available only in crude categories. Nevertheless, I remember seeing an estimate of the usual Gini measure of inequality in education in terms of years of schooling of the adult population in the World Development Report for 2006--there, of all the countries in the world, India’s educational inequality was almost the worst, worse than even most Latin American countries. This I presume is because the large education category of ‘illiterate’ covers a significantly larger population in India. Comments?

Paul Novosad (PN): I never know how to think about Gini estimates for things other than income and wealth. It’s not like you can’t take a year of college from one person and turn it into a year of primary education for another. If a lot more people graduate college, it seems nonsensical to say, “oh educational inequality has gone up, those years of education should have been allocated to somebody else.”

But I’m partial to the evidence that India over-invested in tertiary and underinvested in primary education in the 20th century (see excellent work by Kumar Bharti and Yang 2025).

(PB): 4. You find that upward mobility among Muslims is declining, and performing much worse than that of low-caste (‘Scheduled Caste’) and indigenous people (‘Scheduled Tribe’) and that this could be due to the constitutional protection (by ‘reservation’ in education and public jobs) policy not applying to Muslims – this has important political implications, particularly in a country where some majoritarian politicians and their supporters may lack awareness or sensitivity to this. You say that your results in this are only ‘suggestive’. In view of the importance of this topic what kind of future studies would you suggest where such a finding can be more rigorously tested?

(PN): First of all, there has been a popular false narrative that past governments have been “appeasing” Muslims and allocating too many services to them. I think this article, along with our work on residential segregation (Asher et al. 2026) rejects this decisively.

We often hear anecdotes of discrimination against Muslims and lower caste groups at the micro level, e.g. in housing markets, in the workplace, and in job interviews (e.g. Shukla 2026). In general, it’s much easier to identify discrimination in micro settings and I think this is an area where more work in India would be useful, to generate high quality figures on a process that many people view as an everyday experience.

(PB): 5. Your findings of residential segregation at a granular neighborhood (of about 125 households) level show how closely India’s growing cities replicate the caste and religious disparities of the villages and how limited the presumed ‘emancipatory’ role urbanization plays in India’s structured society. A large part of the public discussion may not be aware of this degree of segregation. Even public policy people who look at the data at a more aggregative level (state, district or at most sub-district) do not get the picture at the neighborhood level, as you point out. I was wondering if your data will allow cross-cutting tabulation between social groups with economic classes (however crudely measured) --even if you do not have direct income or expenditure data, are data available for some proxy economic variable, say housing, at the neighborhood level?

(PN): First, we should point out that on average, cities are engines of upward mobility in India. In new work, we’re showing that this is particularly true for women, but all social groups can expect to move up in relative terms when they grow up in cities.

Your point about class heterogeneity within social groups is well-taken. We didn’t study income segregation, but it would be very interesting to see to what extent the social group segregation that we observe is related to class or independent of it. We are imminently releasing the full neighborhood-level dataset from this project, and we think this is a worthwhile direction for future work.

(PB): 6. Some of the access to public facilities may be linked to differential success of lobbying efforts by different economic classes, which could then be correlated with the economic tabulation, if that were possible. On a related point, I have heard of accounts that after the Ahmedabad killings in 2002 when Muslims, both rich and poor, fled to the fringes of the city, the classes formed their own separate ghettos; the richer Muslim ghetto largely arranged or paid for many of the services and facilities, which the poorer Muslim ghetto remained deprived of. Comments?

(PN): Unsuccessful lobbying for public services in Muslim neighborhoods is a common theme of Gayer and Jaffrelot’s Muslims in Indian Cities (2012). The story that you mentioned of rich Muslims financing their own public services also comes up. You’re suggesting that we should see something like a bimodal distribution of public services in concentrated Muslim neighborhoods, depending on the income class. This is exactly the thing that we will be able to characterize following our neighborhood data release, so I hope that people will explore it.

(PB): 7. You say that your work on residential segregation is mainly descriptive, you do not go into the underlying causes (like discrimination). Maybe for future research you should spell out the kind of data that people need to collect to throw light on the causes.

(PN): I personally am someone skeptical of attempts to classify some share of disadvantage as being based on discrimination vs. other mechanisms. It just seems extremely hard and highly subject to untestable assumptions.

I think a more useful approach is to see more microstudies on different mechanisms of discrimination, and then to push for awareness and policy change to resolve them. I think it’s easiest to push for policy change when you have unambiguous evidence, say, that housing brokers or firms or educational institutions are breaking the law or violating fairness norms in a major way.

For example, in the United States a lot of policy changes in police departments would have been very unlikely without high quality evidence of racial discrimination. (Whether those policy changes have been effective is another matter of course.)

(PB): 8. In some cases there are direct aggregative data on discrimination. For example, the Pew Research Center Study in 2021, “Religion in India: Tolerance and Segregation”, show that 40% of their Muslim respondents in North India (21% in India as a whole) say that they have personally faced discrimination in the last one year; 36% of their Hindu respondents for India as a whole say that they are not willing to accept a Muslim as a neighbor, and so on. Of course, it is difficult to distinguish between discrimination as such and what is called ‘homophily’ (the tendency for people to seek out people similar to themselves). Also, for persecuted minorities ‘safety in numbers’ is an important consideration for huddling together and forming ghettos. The political scientist, Christophe Jaffrelot has shown that the state of Gujarat has a 1991 Disturbed Areas Act, which was originally enacted to prevent distress sales of property in areas affected by riots. That Act is now widely abused in major cities of Gujarat to prevent Muslims from buying property in those areas. Do you know of other such direct evidence, even though you do not want to carry out a causal analysis of your residential segregation data?

(PN): I think this is a ripe area for applied researchers today. So much of the economy has gone digital that researchers can now access detailed transaction records in a range of domains where discrimination may be taking place. You can dive deep into a specific market where the digital data trail gives you incredible visibility into the causes of disparate outcomes between social groups. For example, for the US there is, Bartlett et al (2022) on racial gaps in mortgage pricing, Cook et al (2021) on gender wage gaps in the ride share economy, and Obermeier (2019) on racial bias in healthcare algorithms.

We are starting to see some of this kind of work in India, but I think it’s an area where much more can be done. There are so many domains where this kind of work could be fruitful: rental brokerage and apartment search platforms, landlord-tenant contracts, housing society bylaws, credit decisions, job platforms, gig-work, school admissions, matrimonial platforms, etc.

But it is well-known that consumer expenditure inequality understates income or wealth inequality, as the rich save and invest a large part of their income, which is not captured in consumer expenditure. Besides, the rich being in small numbers, the standard sampling designs of household surveys in India often do not quite capture them, at least not sufficiently. It is also becoming more difficult to survey rich households as they often live in gated communities or secluded mansions where the survey investigators are often shooed away by the gatekeepers. This ‘non-response error’ in estimates, as statisticians call it, seems to be increasing over time.

Indian inequality is particularly stark when you look at wealth data. India does officially collect wealth data periodically, which are somewhat under-used by analysts. Even here, apart from the non-response error, it is difficult to get the rich to respond or state candidly their wealth in the form of financial assets and jewelry. Even with these limitations that work toward understating the inequality, if you use this wealth data set, the estimate of the Gini index of wealth inequality reaches almost 0.7, which is quite high. The World Inequality Report does some projections based on this wealth data set plus the data on billionaires in the Forbes list; their 2026 Report estimates that the top 1 per cent of households in India hold about 40 per cent of total wealth. The top 1 per cent of households in Brazil hold about the same per cent of total wealth, and Brazil is supposed to be one of the most unequal countries in the world. One should also keep in mind that the wealth data here do not include human capital; for example, education inequality in India---over a distribution ranging from the significant number of illiterates all the way up to top scientists and scholars-- is extremely high.

India, of course, has the historical deadweight of deep social inequalities in terms of caste, gender, etc. Even if you focus largely on economic inequality, inequality estimates on consumer expenditure or income or wealth leave aside other important aspects of inequality, like inter-generational inequality (how inequality changes across generations reflecting upward or downward mobility), an aspect of the dynamics of inequality, or like spatial inequality in the form of residential segregation, as what sociologists call the ‘neighborhood effect’ is often a factor in the persistence of inequality.

Paul Novosad, an economist at Dartmouth College, in collaboration with Sam Asher of Imperial College London and others, have recently done intensive studies of these two neglected aspects of inequality in India. They have some striking results. In my conversation with Paul, I asked him first to give us an idea of their findings in these studies, and then I asked him in all 8 questions to which he responded. This conversation will be in 2 parts; the first part will contain his statement on their research and a couple of my questions and his response. The rest of our conversation will come out in my substack post of next week.

Paul Novosad’s statement:

Why we’re studying this

For a country of its size and income level, various features of India’s social and economic system are surprisingly under-studied. Two such features are: (i) how people move up the economic ladder across generations, and (ii) how they are sorted across neighborhoods within cities. Both matter enormously for what kind of society India becomes, and both are largely invisible in the usual statistics.

Mobility: growth without movement

In our article on upward mobility, we studied whether children born to fathers in the bottom half of the socioeconomic distribution were more likely to make it out of the bottom half in post-liberalization India. We proxied socioeconomic status with education; it isn’t a perfect proxy for living standards, but it’s the best one we have in the data.

We were surprised to find that across cohorts born from the 1950s to the 1980s --- a period with substantial transformation in the Indian economy --- upward mobility barely budged. A child born in 1990 to a father in the bottom half of the distribution is about as likely to stay at the bottom as a child born in 1950. This is notable and quite different from what happened in the United States during its own structural transformation, when economic change brought about substantial increases in churn across generations. India has had the growth without the churn.

It is important to be clear about what this does and doesn’t mean. Living standards have risen enormously for every social group in India. People at the bottom today are much better off than their parents were on average. What hasn’t changed is their ability to move up the relative social ladder. The ladder has risen, but people are standing on roughly the same rungs.

However, we did find substantial changes in upward mobility across social groups. Very low castes (‘Scheduled Castes’) and tribes (‘Scheduled Tribes’) saw substantial gains in upward mobility, while mobility for Muslims has fallen, enough to make them now the least upwardly mobile major group in India. A Muslim born at the 25th percentile in the socioeconomic distribution on average now only makes it to the 28th. This is alarmingly low --- including by global standards --- and suggests that Muslims are in danger of becoming a permanent underclass in India. More on this below.

Segregation: cities are reproducing rural disadvantages

In a separate article, we mapped the residential structure of 1.5 million Indian neighborhoods in high granularity --- in large cities like Delhi, we studied demographics across over 20,000 neighborhoods.

Residential segregation is understood to be a major driver of persistent inequality in the United States, where it has been most studied. It seems important to understand what role it plays in India as well but surprisingly has not been systematically documented until recently.

We found that the segregation of Scheduled Castes and Muslims in Indian cities is comparable in magnitude with Black/White segregation in U.S. cities today. Extreme segregation --- living in almost completely isolated neighborhoods --- is particularly notable for Muslims. 26% of India’s Muslims live in neighborhoods that are more than 80% Muslim. For Scheduled Castes the comparable figure is 17%.

We also found that access to public services --- secondary schools, clinics, hospitals, electricity, water, sewerage --- is notably lower in urban (and rural) neighborhoods with large Scheduled Caste and Muslim shares. Notably, these differences are much smaller when we compare across states, districts, or subdistricts, as most previous policy analysis and research have done. Indeed, some of India’s equalization policies have specifically targeted districts and subdistricts with high Scheduled Caste shares; our research suggests that many of those resources may not have actually made it to marginalized groups on the ground. Segregated neighborhoods are also islands of worse outcomes: children who grow up in segregated neighborhoods have fewer years of education, regardless of their own social groups.

Why this matters

When we write about segregation and upward mobility in India, we notice that many readers approach these problems with a zero-sum mindset. If someone else’s social group is doing better, then ours must be doing worse. We think that this is exactly backwards. Entrenched inequality across groups is corrosive for the whole society, not just for the groups at the bottom.

A hundred years ago, the United States had deep social divisions between Protestants and immigrants from elsewhere in Europe. Irish and Italian immigrants were perceived as outsiders who would never assimilate or make it out of the underclass. These ideas sound absurd today. It is hard to find anyone who believes that white Protestants today would be better off if Irish and Italian immigrants had stayed in segregated neighborhoods and formed a permanent underclass. Instead, their descendants are fully integrated, and society as a whole is much richer for it.

India is still at a pivot point where it can make high impact choices that shape its institutional and economic future. We hope that a better understanding of India’s current social and economic inequalities can help keep it from locking in the kind of entrenched group inequalities that other countries have spent a century trying to undo.

Pranab Bardhan (PB):1. In estimating educational mobility you use data from India Human Development Survey (IHDS) where parents’ education information was asked (which many other household surveys in India do not ask), so you get parent-child links even when parents and children happen to live in different households. Am I right in thinking that you thereby avoid an ‘attribution bias’ problem in usual mobility studies, i.e. a possible bias in estimates of mobility from household survey data arising from the fact that more high-achieving children may move out of the household, instead of co-residing with parents?

Paul Novosad (PN): Yes, the key data requirement is that we needed some link between parent socioeconomic status and child socioeconomic status. Ideally, we would want to measure something like lifetime income or consumption, but this is near impossible so education is the closest proxy we can get.

These two questions on the IHDS — what your mother and father’s level of education are — make the whole study possible. If you want to study parent-child education links using people who live in the same household, you can only do it for very young people, because the set of adults who still live with their parents is not representative of the full population.

(PB): 2. You do mention in your work that by averaging results in the bottom half of the distribution, bottom-half mobility may conceal changes within the bottom half, with the bottom decile, say, having a different pattern compared to the average. How serious do you think this limitation is in the Indian context?

(PN): In countries with rich tax data, we do find that the bottom tail does a little bit worse than you would predict from a pooled estimation. From Raj Chetty’s 2014 work we know from the cross-country data that, for example, in the U.S. and Denmark there is extra high persistence of poverty at the bottom. But it’s not huge.

It strikes me as an interesting and open question how much more persistence of poverty there is at the very bottom. I suspect that the disadvantage of being at the very bottom in India could be much worse and more persistent.

We found that Muslims born to families in the bottom 50% could on average expect to attain the 28th percentile; i.e. they made almost zero progress toward the median over the course of a generation. If things are worse at the very bottom, it would suggest an almost complete intergenerational persistence of extreme poverty.

As for the country itself, according to the Transparency International ranking on perceived corruption--a ranking which, though somewhat flawed, is one of the few comparable international rankings available—in 2025 USA already reached the lowest ranking ever of 29 for the country, i.e. 28 other countries are less corrupt than USA.

India, of course, has been generally a more corrupt country than USA. In 2025 its Transparency International rank was 91, i.e. 90 other countries are perceived to be less corrupt than India. But the Indian top political leadership is by no means as kleptocratic as the American one. In fact, the current regime in India came to power in 2014 after a major anti-corruption movement in the wake of exposure of the earlier government in some corruption scandals (though later it turned out that these scandals were somewhat over-blown by the media and by the loud efforts by the incoming ruling party, BJP, and by a government audit agency that had an exaggerated ‘notional’ estimate of the amount of money involved). The new regime in 2014 promised with a lot of fanfare to clean up the mess of corruption in India.

Then in 2016 the Prime Minister announcing the drastic step of Demonetization on national media asked the public for ‘just 50 days’ to endure the hardships of the policy and help him eliminate corruption, ‘black (i.e. tax evaded) money’, and illicit cash. He also famously stated that he was willing to accept any punishment if his intentions or results proved faulty. Demonetization by suddenly removing 86 per cent of the currency turned out to be a disastrous step for the poor in India, particularly those in the vast informal sector, cash-dependent small businesses and in daily wage labor. By most accounts this sector did not recover from the blow even 50 months after. Most independent observers today would say there was hardly any dent in corruption. In 2016 India’s Transparency International ranking was 79, i.e. 78 other countries were less corrupt than India, and 9 years since then, as we pointed out above, 90 countries are less corrupt than India, so by this (relative) measure corruption seems to be worse now. If you take an alternative international measure, the ‘control of corruption’ index in the World Bank’s Worldwide Governance Indicators, that also shows some worsening between the 2016 estimate and the latest one for 2024-25.

It is sometimes claimed, with some justification, that in a few administrative matters in India technology has now reduced the scope for corruption-- for example, Direct Transfer Schemes in welfare payments, with digital transfers reducing the number of intermediaries, or outsourcing the issuing of passports, drivers’ license, etc. under overall supervision through technology, and so on. On the other hand, some safeguards against administrative corruption have now been weakened—for example, the Prevention of Corruption Act of 1988 has now been diluted by increasing the burden of proof necessary for punishing the corrupt and making it difficult even to investigate an officer without prior approval of a political or administrative authority; the Right to Information Act of 2005 has been substantially enfeebled by compromising the structural independence of the Information Commissioners, their offices rendered ineffective through unfilled vacancies and the consequent massive backlog of cases, and by data privacy laws that have created new exemptions.

In the corruption literature a distinction is often made between petty or everyday corruption in public offices and ‘grand corruption’ at higher levels which usually involve the often-unholy nexus between top politicians and top business. In India you always see traffic constables taking money from passing overloaded trucks quite openly—this is the public face of petty corruption in India. But a single dubious closed-door defense contract by the Pentagon may involve much more money than what thousands of Indian traffic constables can collect in a year. Much of the international data, like that of Transparency International, are likely to refer more to the petty corruption in the streets, offices and the courts than the latter kind of grand corruption. For judging the level of grand corruption, at least two (inter-connected) factors are particularly important, one relates to the nature of monetized politics (through election funding and lobbying) and the other through ‘crony capitalism’.

In both the US and India the influence of corporate power in election funding, lobbying and media-capturing has been large for quite some time. But with corporate economic concentration rising in both countries, this influence is now phenomenally high. In the US the 2010 Supreme Court decision on the Citizens United case effectively removed most restrictions on political spending by the ultra-rich people and corporations. Since then their political donations have exploded: one estimate shows that between 2010 and 2023, while the number of billionaires in the US less than doubled, their political donations rose 17 times. A disproportionate amount of this money went to the Republican Party. Trump in return has given the billionaires huge tax cuts, lucrative government contracts, crypto currency deals and large regulatory favors (including the exemption from environmental regulations and allowing of unregulated AI, something that is potentially dangerous for the whole of humanity). Well-financed lobbying not just improves access to legislators, but in the US the lobbyists now actually develop and draft the legislation in some cases—for a vivid account you may see L. Drutman’s book The Business of America is Lobbying (Oxford University Press, 2015). For all practical purposes most laws in the US are for sale.

In India the lobbying process is murkier and less documented. The executive under the current regime often suddenly introduces important laws without any consultation with many of the stakeholders and rams them down the throat of the legislature with little scope for discussion. As for election funding for about 7 years the sleazy electoral bond scheme introduced in 2017 enabled mainly the ruling party access to undisclosed sources of funds, and also to some potential extortion schemes (there is now evidence that some companies raided by the government investigative agencies hurried to increase their buying of electoral bonds). Even after the Supreme Court’s much-delayed halting of the scheme in early 2024, the non-partisan Association for Democratic Reforms has estimated that in the year 2024-25 (a year of national elections) the ruling party BJP received in donations more than 10 times what 5 other national parties received altogether. Some part of this money is suspected to have been spent on luring opposition politicians in states where the election results have been close to ensure that BJP can form a government there.

Another election-related corruption matter in India is that the central investigative agencies vigorously pursue corruption charges against opposition politicians, but those charges are waived/dismissed if and when those politicians decide to switch and join the ruling party—this party is now widely described in India as a giant ‘washing machine’ for corrupt politicians.

As for crony capitalism there is little doubt that a dominant feature in economic system in both the US and India can be described as one of crony oligarchy. And these oligarchs do not hesitate to identify their financial interest with that of the nation. In 2023 when the New York investment firm Hindenburg Research accused the Indian conglomerate, the Adani Group, of fraud and stock manipulation, the officers of the Group described the allegations as “a calculated attack on India” (and made sure that there was a big Indian flag behind them when they said it). Of course, the government used its brute majority to resist all demands for parliamentary inquiries into the allegations. In the US recently Trump’s son, Donald Trump Jr. invited US investors to invest in his private equity firm named 1789 Capital and described that such investment will be an act of ‘patriotic capitalism’.

As the playing field is much narrower in India, the number of conglomerates for which favors and special regulatory dispensations are reserved is much smaller. Rules and goalposts are routinely changed midstream to help these small set of crony companies often to win bids or manipulate auctions or indulge in ‘predatory pricing’ to wipe out competition (while the so-called Competition Commission looks the other way) or violate environmental regulations and trample on tribal forest rights. The government, by strenuously disallowing investigation of major questionable business deals or financial scandals involving these crony business groups, makes them enjoy a kind of ‘sovereign guarantee’ of impunity.

Outside the government you’ll find very few serious investigations by journalists. Watchdog NGO voice has been largely muffled through intimidation. In view of the rampant capture of much of the media and repression of the rest the tradition of investigative journalism on possible corruption cases is almost dead in India now (except in the case of courageous but feeble attempts by some small-scale under-funded or crowd-funded organizations—among the latter I have often kept track of the accounts by a group called the Reporters’ Collective). In the US, despite the efforts of the Trump Administration to intimidate or get cronies to buy out, the media have kept the tradition of investigative journalism still, to a large extent, alive. But NGO’s accused of helping immigrants or ‘terrorists’ are having a hard time.

Crony capitalism is, of course, corrupt capitalism. It is likely that this is on the increase in India. The Economist magazine from time to time publishes its ‘crony capitalism index’ for some countries, mainly based on wealth data for billionaires. In 2023 it estimated that the part of India’s billionaire wealth derived from ‘rent-thick’ or crony sectors rose from the equivalent of 5 per cent of GDP to about 8 per cent over the previous decade. These rent-thick sectors include those involving mining of natural resources, building infrastructure, and wherever government permits or regulations are important. This kind of crony corruption has now started distorting and polluting the whole climate of private investment, and hence economic growth in India.

In the US by the same ‘crony capitalism index’ in 2023 the share of billionaire wealth from rent-thick sectors like oil, mining and casinos came to about 2 per cent of GDP, but if you were to include the tech industry (which has some ‘crony’ characteristics), the figure rises to 6 per cent. Over the last couple of years we have seen how not just Elon Musk and Peter Thiel but most of the tech titans, who are beneficiaries of government contracts, have openly cozied up to the Trump administration, contributing to his campaign funds and now to his White House ballroom project.

Finally, in what way is the corruption in India and US “joined at the hip” as the title of this piece suggests? This relates to a recent news story.

It involves the link between the corrupt Trump Administration and the Adani Group that is quite cozy with the current regime in India. According to an indictment by the earlier US Administration (Biden) Adani Green Energy company was charged with a big bribery case in Andhra Pradesh in India, where it allegedly paid a bribe of $265 million to Indian officials and politicians in the period between 2020 and 2024 to make a state-owned company accept a $6 billion contract in solar energy. The charge by the US was that in doing so the Adani company had misled the American investors in the project. One should keep in mind that the long-standing Foreign Corrupt Practices Act in the US which disallowed such bribes was still in operation. It is only later that Trump suspended this Act in one of his first set of executive orders immediately after coming to office in January 2025.

A day after Trump’s election victory in November 2024 Gautam Adani, the head of the Group, congratulated him in a social media post, calling him “an embodiment of unbreakable tenacity, unshakeable grit, relentless determination and the courage to stay true to his beliefs”. One week later, Adani promised $10 billion in investments in the US. He then proceeded to hire a new legal team led by one of Trump’s personal lawyers, Robert J. Giuffra. On May 18 this year US federal prosecutors asked a judge to drop the bribery-related charges against Adani and his co-defendants. This is not because they have suddenly found the charges baseless. In a brief letter prosecutors said that they had decided “not to devote further resources to these criminal charges” against Adani, who had offered to invest $10 billion in the US while proposing a settlement. Adani has shrewdly and correctly guessed the predominantly transactional attitude of the Trump Administration. Meanwhile at home in India he can be sure that there will be no official investigation into this alleged large corruption case. This is part of the ‘sovereign guarantee’ of impunity.

Srinivas probably did not know that just a few years before then I was very much in the ‘book view’ group. My Ph D dissertation was entirely theoretical (it can be said that I was focused then on learning the concepts and tools of non-linear differential equations and optimal control theory—slogging away on the work of the blind Russian mathematician, Lev Pontryagin—and applying them to problems of economic growth theory and international trade). I continued that kind of research when I went on to teach at MIT and published several papers on those topics in the top 5 journals. Then there was a big transition in my professional life. Much to the surprise of my colleagues, I decided to leave MIT and to go back to India to work with Indian data. However, I soon found out that the official data that I could procure there did not ask many of the questions on economic relations in rural land, labor and credit markets that I was interested in. So, I started collecting my own data from village surveys, which very few economists, even development economists, used to do those days. One economist told me that what I was doing was more like economic anthropology (this may have been his polite way of telling me that I was not a proper economist anymore).

Around this time, I also started reading up quite a bit on the work by Indian social anthropologists. At Delhi School of Economics, I interacted a great deal with my friend, the renowned social anthropologist André Beteille (who had a French father and a Bengali mother). I closely studied his ethnographic work on class and caste in Tamil Nadu. He also told me a lot about his teacher, the anthropologist Nirmal Bose (who may be known in the rest of India more as a close intellectual associate of Gandhi in his later days), and encouraged me to read his books. André even gave me a copy of an insightful book by Bose on the ‘The Structure of Hindu Society’ that he had translated from Bengali with an Introduction and critical notes. Later, I probably was the only economist who was asked to contribute to a book of essays in André’s honor edited by Ram Guha and Jonathan Parry.

As I was discussing with social anthropologists and reading up their work, I soon became aware of some large differences in the methods that economists and anthropologists follow. I also found out that these two groups hardly talked to one another on substantive issues even when they were working on related themes, say on the peasant society, and in the rare occasions when they tried to talk they often talked past one another. The thought came to me that maybe I should put them together in a conference where they’ll not be allowed to talk past each as far as possible. With the sponsorship of the Social Science Research Council of New York, I organized the first such conference at Bangalore in 1984, and following up on this conference I edited a book titled “Conversations between Economists and Anthropologists” in 1989. This book was about how economists and anthropologists look at the problems of measuring economic change or development in rural society.

Nearly two decades later my Berkeley colleague Isha Ray and I co-edited a sequel, a sort of Conversations II, following up on a conference in Goa that we had organized. This time the focus was on how economists and anthropologists look at issues of cooperation in the management of the local environmental commons (like forests, grazing lands, fisheries and irrigation). This volume is titled “The Contested Commons: Conversations between Economists and Anthropologists” (Blackwell, 2008). In the Introduction to this volume, we speculated about some methodological differences between the two disciplines. Here I’ll draw upon some of those speculations.

Reading the work of economists and anthropologists at least three differences in their general methodological approach strike one:

· Individual Autonomy versus Social Embeddedness

Much of Economics starts with the assumption of an autonomous individual with a given set of stable preferences and explains social phenomena in terms of individual choices and motives. Such individuals and explanatory devices are, however, quite alien to the anthropologist. To the latter, individuals are deeply embedded/situated in social and political relationships governed by norms and moral commitments, and so not all social phenomena are reducible simply to individual characteristics. Preferences often reflect the inner workings of culture and power in society. Autonomy in a social vacuum is not meaningful, as individuals are taken as relational creatures with multiple allegiances and overlapping identities.

In the context of the public use of common environmental resources, for the economist free riding in the form of littering or polluting or degrading is quite understandable, even ‘normal’, when the individual calculates the cost and benefits of a given individual action. But, as my friend the sociologist Erik Olin Wright pointed out in his contribution to our book, to the sociologist/anthropologist such action is ‘pathological’ -–sociologists in such contexts use a term, coined by Émile Durkheim, ‘anomie’ meaning normlessness-- as it violates the basic social understanding that some norms are part of the shared collective commitment and are not subject to individual cost-benefit calculation.

Recent advances in behavioral economics allows for the salience of some cases of departures from given preferences, with their being ‘endogenous’ or subject to influence by social forces, and similarly cases of departures from rational, self-regarding behavior allowing for cognitive failures and behavior influenced by, say, cultural norms of reciprocity and fairness. But economists will want these departures to have some patterns, so that economic propositions can have some predictive power. Also, while economists consider the constraints of norms and conventions that emerge from a social process (maybe even as the unintended consequences of thousands of uncoordinated decisions), they are usually reluctant to give up the agency that they believe resides in the individual, at least not to the extent that the anthropologist would. Even when preferences are taken as endogenous, economists’ models will find it difficult to grapple with cases where preferences are not fully known before action but develop through pragmatic social interaction, something anthropologists can easily live with.

· Outcomes versus Processes

Economists’ empirical investigations, including those using the most sophisticated econometric methods, are confined to studying outcomes, they’ll seldom give you any empirical clue about the process by which those outcomes have been reached, or the mechanisms and the relational dynamics that sustain them. Anthropologists, on the other hand, intensively study the people who are involved in these processes and relations, often live with them and ask them why they did what they did, and have insights from the field that are more grounded than the theoretical speculations behind economist’s models. In particular, the economists’ empirical exercises are insufficient to capture the power dynamics behind particular outcomes; beyond measurable inequalities they cannot easily capture the various material and symbolic dimensions of power that are articulated through social institutions or how the latter lead to people often internalizing the limits of what is permissible under a given power structure.

· Parsimony versus Complexity

As in physical sciences, economists often use the principle of parsimony in looking for the minimum assumptions under which something can be explained. This is primarily because economists are often looking for generalizability, and making the least assumptions allows them to bring a lot of things under the same tent, but this also gives their quest a bit of elegance. Sometimes this is called a ‘thin’ theory of human action, in contrast with the ‘thick description’ of the anthropologist. Also, with the economist’s interest in policy they want to change one variable at a time, keeping the others the same, so that they can zero in on the effect of a particular policy change. This kind of abstraction is often unacceptable to anthropologists immersed in the messy, grubby reality at the ground level. They think pursuit of parsimony makes one miss the multi-dimensional multi-layered nature of reality, the context-specificity or situational contingency of particular problems, and the path-dependence of history. If this makes generalizability or policy advice difficult that does not particularly bother the anthropologist in their frequent concern more with the particular and the unique.

In spite of these methodological differences there is a great deal of scope for coordinating and combining the respective strengths of the two disciplines. For example, as carrying out field surveys is now more common among economists than before, they can benefit if before launching large-scale surveys, they talk to anthropologists and sociologists (or even think of including the latter in their survey team) who usually have intimate knowledge of the area and the people. This may help in deciphering what are the important questions to ask and what is the appropriate local way of framing the same generic question. And after the survey, interaction with them may help the economist in understanding the mechanism or process through which the observed/measured data generate a particular finding.

Similarly, anthropologists may sometimes also be interested in generalizations, beyond local particularities, and may thus benefit from getting involved in issues like sampling design or statistical inference. Some anthropologists have become famous for generalizations about society, even though they garnered their original insight from studying a particular village or community. Take M.N. Srinivas, the social anthropologist I started this post with. He is most well known for his idea of the process of social change in India--his idea of what he called ‘sanskritization’, the process by which lower-caste or tribal groups attempt to raise their social status in the caste hierarchy by adopting the customs, rituals, beliefs, and lifestyles of upper-caste groups. Even though he may have got his idea from studying the village he called ‘Rampura’, he clearly meant this idea to be more widely applicable beyond that village.

One example of a creative way of combining the strengths of Economics and Anthropology was suggested by the economist Vijayendra Rao: what he called ‘participatory econometrics’ includes, apart from participant observation by the researchers, the participation by the respondents or the people who are being studied in the design of the large-scale survey itself, involving intensive focus group discussions, and also participatory appraisals by them of the researchers’ findings. This is one way of getting better insights than traditional econometric methods, and yet the findings can be more generalizable than the traditional case study of the anthropologist.

Even apart from field surveys, analytical thinking in both disciplines can gain from each other. I have seen in Berkeley how my brilliant friend and colleague George Akerlof (a recipient of the Nobel Memorial Prize in Economics), who for a time attended courses in the Sociology Department and used insights from sociological concepts of group norms and identities in writing path-breaking papers in labor economics and human decision-making in families, schools, organizations and workplaces.

West Bengal is among the more populous states of India with about 100 million people (larger than any country in Europe, except for Russia) and about 70 million voters. It was ruled for 34 years (1977-2011) by a communist-led Left Front government, then for 15 years by a somewhat populist but by and large secular government of the TMC party led by a feisty little ‘streetfighter’ woman (Mamata Banerjee) with the personalized style of a neighborhood petty tyrant. Defeating her the new BJP government, led by a TMC defector, has just been sworn in. (This defector had corruption charges against him --caught in video accepting illicit cash-- some years back, Modi had then mocked him about it, but after he joined BJP, those charges were forgotten).

At Independence West Bengal was one of the two most industrialized states in India. Since then, for various reasons it has been largely a story of economic decline. In the last part of an earlier substack piece I have briefly discussed some of those reasons—see substack post of January 19, 2026

For decades the tyranny of the local mafia, the burgeoning numbers of unemployed youths serving as their foot soldiers, has been a persistent feature of local politics under both the Left and TMC rule. (I remember half-jokingly telling the communist Chief Minister whom I knew well, Buddhadeb Bhattacharjee --a decent man, and a translator of Mayakovsky poems and plays-- that while he cites Mayakovsky and Brecht to others, in the local neighborhoods his party hoodlums are busy extorting protection money). These extortions, along with a series of corruption scams, became more rampant and undisciplined under TMC rule, with frequent turf wars among rival factions, all pledging loyalty to the leader, Mamata Banerjee. This kind of fractious mafia rule at the ground level may have been one of the reasons why TMC lost this time, although one should note that TMC won handsomely in the parliamentary elections of 2024, long after these extortions and scams were common knowledge.

For more than three years the central government had stopped the allocation of funds to West Bengal for rural employment and housing and drinking water schemes (on grounds of alleged irregularities, including that of renaming one of the schemes) which affected large numbers of poor people. From time to time BJP leaders have made it clear that the poor would get back full benefits of these schemes if TMC government is thrown out. The central government intervention was also brazen in the pre-election deployment of more than a quarter million paramilitary troops in West Bengal that had the effect of intimidating TMC voters. In the election campaigns the crucial difference, however, was made by the systematic attempts by BJP and its allied Hindu-militant thuggish youth organizations at fomenting Hindu-Muslim communal tensions—through aggressive religious processions, brandishing weapons and provoking Muslims in their neighborhoods and mosques, etc. – and rousing cross-border anxieties about Muslim-majority Bangladesh and persecution of Hindus there. These manufactured tensions drowned out in some areas the popularity of Mamata Banerjee’s welfare schemes for poor women.

As in much of the rest of north and west India BJP has been successful in stoking a sense of insecurity among the majority Hindu community and posing as the sole protector of Hindu security and of Hindu women against the ‘traitors’ and ‘infiltrators’ that Muslims are. Around the time of Partition of India in 1947 West Bengal (one of the two partitioned states in India) had undergone a great deal of communal tensions. But it is a major achievement of both Congress and particularly the Communist governments in the state to slowly exorcise this demon of communalism and put the issues of poverty, economic justice and land reform at the forefront. But after the fall of the Left, as BJP rose to prominence in the state, in the last 15 years it started spreading the poison of hate and suspicion with apparent success and scratched open old wounds. The evidence suggests that in the latest election 56 per cent of BJP’s net vote gain in West Bengal has been in 11 districts where the incidence of communal flashpoints and polarization have been the heaviest—see the report by Aparna Bhattacharya in the news blog The Wire of May 8, 2026.

On top of all this came the concerted and targeted attempt by the highly partisan Election Commission of India (ECI) to disenfranchise voters. First came the deletion of about 6 million names from the electoral rolls on what are called ASDD grounds (‘absentee, shifted, dead or duplicate’). This is routine in many states, but the numbers were particularly large in West Bengal and there was a lack of transparency about this by the ECI, and many people who are eligible voters complained about their names being deleted this way. The onus was now on them to prove their eligibility as voters. There were even stories about people declared ‘dead’ desperately trying to prove their existence. Many Bengalis will remember that Rabindranath Tagore has a famous short story in which a hapless village woman, Kadambari, was believed to be dead on some circumstantial reasons; she then found it very hard to convince her relatives and other villagers that she was not a ghost. The tragic last line of the story is: “Kadambari, by dying, proved she had not died before”.

In some sense more pathetic was the case of 2.7 million voters who seemed to have all the documents but had their names deleted as they got trapped by a ‘killer’ algorithm used by ECI, and their documents could not be verified in time. The Supreme Court wanted them to approach 18 appellate tribunals specially created for this purpose, but the elections took place before the appellate tribunals really got going. The Supreme Court should have instructed ECI not to hold the election until the documents of millions of people could get sorted out, but a complicit/supine Court let it go. In many areas it looked like the majority of these deleted voters were Muslims (who have an infernal propensity not to vote for BJP). In any case such voter suppression attempts, where you are guilty until proven innocent, are anti-democratic and certainly anti-poor, as the poor, marginalized, people often do not have all the documents demanded and cannot afford to get away from their daily wage work to stand in line for document verification.

How did this case of partly rigged votes affect the election outcome in West Bengal? Nobody knows for sure, particularly as we cannot know who these deleted voters, flailing with their documents until the last minute, would have really voted for. But we can make some crude and hypothetical guesses. Here I am going by the detailed constituency-wise study by Aparna Bhattacharya in another report for The Wire of May 6, 2026.

According to her estimates, if you take all the deletions-- on ASDD grounds plus the 2.7 million whose documents could not be verified in time—the total number of such deleted votes exceeded the final victory margins in 150 constituencies (a majority of the total of 294 constituencies in the West Bengal legislative assembly). Of these 150 constituencies in the previous election of 2021 TMC had won 131, and BJP won only 19; this time in 2026 BJP won 100 of them. By the way, in Mamata Banerjee’s own constituency in south Kolkata, where she lost by about 15,000 votes, the total number of voter deletions exceeded 50,000 (an unusually large proportion, nearly a quarter, of all voters there).

In case you want to leave out all the ASDD deletions, accepting them as genuinely dead, duplicate, etc., and focus only on the 2.7 million voters with documents not verified in time, the total number of such deleted voters exceeded the victory margins in 49 constituencies (Muslims are about 34 per cent of the population there, much above average in percentage for the state). In the previous election of 2021 TMC won 48 out of these 49 constituencies. This time in 2026 BJP won 26 of them.

In these constituencies not merely, the algorithm weaponized by ECI denied many eligible Muslim voters (possibly also put them in danger of deportation as illegals, which BJP leaders had been threatening for quite some time)—it also gained for BJP large numbers of Hindu voters. As the stories went around that ECI considers these Muslims as illegals, this confirmed BJP propaganda about Muslims being infiltrators, hardened Hindu group identities, and consolidated the support of many outraged/suspicious voters in surrounding areas. For every Muslim voter deleted from the rolls, BJP may have gained several Hindu votes from this announcement effect itself. So even in the case of the 2.7 million deletions, the ultimate result in favor of BJP may have depended on a lot more than just the deletions themselves; the usual discussion in the media on deletions has often failed to take account of the unknown after-effect of ECI-announced deletions on the other voters.

The ECI interventions in electoral rolls involved not just voter suppression but also some mysterious voter additions. Before the final list of voters was announced by ECI on February 28, 2026, it included the addition of about 0.2 million ‘new’ voters without explanation. Then, after the ‘final’ list was announced, ECI suddenly came up with another set of ‘new’ voters, numbering in half a million—no one knows how and where they came from but were added to the voter list. We have no idea how they may have voted (and, of course, how many of them were bogus voters).

In spite of this partly rigged voting pattern, in my judgment it is unlikely that this was the only major reason for the BJP win. The BJP sweep was much too wide across social groups and regions for that to be plausible. (The economist Debraj Ray in a detailed analysis of the voter roll deletions has come to the conclusion that it is highly unlikely that BJP win in the state as a whole would have been negated if the deletions were not there—see https://debrajray.com/wp-content/uploads/2026/05/SIR2026.pdf But he does find some suggestive evidence of strategic partisan deletions in the case of the excluded 2.7 million group).

As for other reasons of TMC defeat I have already referred to TMC extortions and scams, and the self-serving communal tensions created by BJP. (Also, in at least 6 constituencies, the Muslim votes were divided and non-TMC non-BJP Muslim candidates won). It is also important to note that in areas where there were substantial numbers of low-caste people (‘scheduled caste’ in Indian administrative parlance) and tribals (‘scheduled tribes’) the BJP wins were big. In 4 districts in the tribal belt in the south-western part of the state, TMC did not win a single seat. This, I think, is more a reflection of patient systematic ground-level work for decades by BJP’s parent cultural organization, RSS. The long-standing RSS attempt all over India to bring marginalized people into the Hindu tent—through educating their children and appropriating tribal gods and historical leaders in the Hindu pantheon, for example-- is indeed impressive. How an organization with basically Brahminic ideology brought this about with diligent dedicated work is a lesson for all parties that want to resist this ideology.

Of course, the promise by BJP of jobs, which neither the Left nor TMC have been able to provide to the large number of unemployed youths of West Bengal, is always alluring. But the record of job creation by BJP in north Indian states over the last decade or so has been dismal. At election time BJP leaders start with the glowing talk of ‘vikas’ (development), but toward the end when the going gets tough, they inevitably turn to poisonous talk of ‘invaders’ and ‘infiltrators’, and stoke communal tensions to garner the Hindu insecurity vote sweeping away everything else. Will this poison continue to work in West Bengal?

In the victory speech after West Bengal elections the Prime Minister quoted Tagore’s poem on “Where the mind is without fear” and pledged a ‘bhay-mukt’ (fear-free) time—to large numbers of persecuted Muslims and journalists in jail and much larger numbers of self-censoring thinking people and dissenters in the country at large apart from those in the cowed media, the irony must have been particularly stinging. The swearing in of the new BJP government was held in Kolkata ostentatiously on Tagore’s birthday. Their leaders may or may not be aware that throughout his life—in much of his fiction and poetry, essays and lectures-- Tagore has eloquently and repeatedly expressed his deep and fundamental opposition to the kind of toxic nationalism that RSS/BJP preaches.

Since my college days in Kolkata I have been an ardent admirer of the Nordic system which seemed to me to represent a labor-friendly and more humane form of capitalism without losing its dynamism, a judicious mixture of some of the positive aspects of both capitalism and socialism. But it soon dawned on me that these are small countries (I had found out that the population in, say, Norway was smaller than that of even one part of my city—north Kolkata, where I grew up). Small countries can do things that are difficult for large countries like India to carry out— but then there are many small countries which also have failed to do them! Only in recent years, particularly after meeting Kalle and reading his work and other related work, I started being aware of the special and complex mechanisms behind the Nordic countries’ superior performance. The first part of the conversation came out last week. Below are my subsequent questions to him, followed by his answers.

Pranab Bardhan (PB): 5. In large parts of the world trade unions are on decline and this has been associated with a large decline of labor share in national income in recent decades. What is the corresponding picture in Nordic countries?

Kalle Moene (KM): The unions are still doing fine. There is – as mentioned before – a gradual structural change in all modern economies toward sectors, especially service provisions, where unions historically have been weaker than in manufacturing industries. This explains the minor decline in unionization rates: From 1985 to 2015 unionization rates dropped by around 15 percentage points in Denmark and Sweden, while the decline is lower (from a lower level) in Norway. Unionization is still exceptionally high in all three countries. More than half of the workforce is organized.

It should be recalled, however, that Scandinavian unions are not identical to unions in the US -- or in India. While US unions have features like consultancy firms - approaching the workers from outside - Scandinavian unions are more bottom-up democratic institutions based on self-organization within the workplace. While Indian unions are like privileged middleclass institutions excluding the great majority of low-paid workers, Scandinavian unions organize most of their low-paid workers and are thus raising their pay via wage compression.

The labor share is nevertheless declining somewhat in Scandinavia like in the rest of the world. This suggests that the recent changes in the income distribution between labor and capital cannot be explained only by the decline of unions.

(PB): 6. Nordic countries are often characterized by confederate, rather than local, collective setting of wage patterns. Please give a bit of its history, its main consequences, and tell us if it is a continuing feature even today. Is confederate collective bargaining a feasible policy in countries like USA or India where wage-setting has historically been more decentralized?

(KM): The union movement in Scandinavia is more than 125 years old as a major force in the labor market. Scandinavian collective bargaining was first rather decentralized at the firm level. As mentioned before, it became rather coordinated during the 1930s and is still taking place almost at the level of the nation. It also involves horizontal coordination across types of occupations.

What is less noticed, however, is how central negotiations are followed by local adjustments. The central negotiations determine the basic (rather compressed) wage structure which must be implemented within the specific remuneration system in each enterprise. The union locals naturally demand a say in this implementation. The local negotiations often incorporate other issues in addition - such as work organization, choice of technology and so on. This involvement from below is an important democratic feature of the Scandinavian model of working life.

All this remind us how workers of the world are working under different rules: Surprisingly perhaps, the central wage negotiations in Scandinavia go together with an extended decentralization – with a high worker involvement from below. This involvement can also raise profits as firms can reduce the extensive hierarchy of foremen and bosses at the workplace. Union locals solve social problems better than HR departments. This is part of the reason why the involvement is likely to persist. It serves more than one purpose.

Whether unions in other parts of the world can imitate Scandinavian unions is an open question. In general, I think the answer is no, but they can learn from Scandinavia – for example that a high level of centralization and coordination can come together with a higher level of decentralization and involvement on other features than before. Decentralized wage setting makes employers more afraid of workers’ local involvement since the workers can use their involvement strategically in the fights for higher wages. When the wage structure is taken out of the local haggling, employers are not so afraid of involving workers in other workplace decisions.

(PB): 7. Today much of Europe is facing the rise of anti-immigration right-wing parties. In Sweden the nationalist and anti-immigration Sweden Democrats is the second largest party in the Swedish parliament and is influential in policymaking by the ruling government of the moderates. In Denmark the social democratic party seems to have internalized or absorbed the anti-immigration policy. Do you have a view on this trend from the point of view of Nordic countries?

(KM): Unfortunately, what you describe is a trend also in my country, Norway. It is a common Nordic and European trend. In an international situation dominated by a record-high number of wars, governments don’t become more generous, but rather stricter in allowing others to come -- even refugees. Such bad policies are unfortunately good politics: those who defend the policies are increasingly in majority; those who try to counter them are weak. Fortunately, unions are somewhat open to immigration if they can extend the union contracts to cover the newcomers.

(PB): 8. Finally, give us your speculations about the future of social democracy in general in Nordic countries and beyond.

(KM): There are more social conflicts today over the level of wage equality and over the system of wage bargaining than there used to be—among blue-collar, white-collar, and professional unions alike. These tensions undermine support for wage coordination. Blue-collar unions that back solidarity negotiations can lose members to other unions that do not support such negotiations to the same extent. In Sweden, solidarity bargaining was abandoned by the employers in 1983, and wage differentials began to rise immediately afterward, before the system was informally re-centralized. This experience scared both employers and employees.

Sustaining the system requires stable support from unions and employers that benefit from it, directly and indirectly. Here numbers matter. Export-led solidarity bargaining can be difficult to maintain when the share of the workforce employed in the sectors most exposed to international competition is declining. The reason for this decline is simply that employment in traded goods industries can more easily be replaced by machines, while employment in non-traded sectors is more often in services, which cannot so easily be mechanized. The composition of the workforce can thus lead to a situation in which a minority of workers must defend a system that indirectly benefits the majority. This is not easy.

These problems are small, however, compared to the threats from increasing inequality at the top of the income distribution in Scandinavia. Many outside admirers of the Scandinavian achievements, and some insiders, are not sufficiently aware of how the system can lead to a concentration of gains for the richest capital owners. Some may even think that Scandinavian-style equality is obtained mainly by redistributing income from the rich to the poor. It is not so. Scandinavian-style equality is not the same as overall equality. It is a distribution of income with small wage differentials which, together with policies for full employment, raise profits.

This profit-raising effect was initially intended to boost investment. Union leaders considered profits in enterprises as part of unions’ decisions for acquiring the most recent high-productive technology via the owners’ profit-maximizing investment choices. While the connection between union-induced profits and new technology used to be direct and easy to observe, it is now less clear and perhaps nonexistent in some cases. Ownership can now be more dispersed—but still only among the richest. Each owner can be less farsighted and more tempted by conspicuous consumption. All this makes wage moderation a less suitable way of undertaking the collective savings of union members. Wage compression that raises profits is therefore seen by some unions as an unfair redistribution in favor of capital owners.

In Norway, for instance, the share of income going to the top 1% of income earners has risen sharply in this century. If we include retained profits in enterprises and distribute them according to who owns the enterprises (as done by the research group of Rolf Aaberge), we see that the top 1% income share in Norway is as high as 25% of national income. This means that Norway has a Scandinavian-style compressed wage distribution but a US-style concentration of income at the top.

Who, then, would moderate their wage demands when the gains from wage moderation mostly go to the richest? The unfair distribution of these gains can block the future of the social democratic system. There are feasible ways out, however. One possibility for the union movement is to demand some kind of compensation in the form of ownership rights or future profit-sharing deals. Social democrats, however, seem unwilling to try out such alternative schemes, even though these alternatives would complement the workings of their preferred system.

As I have emphasized already, egalitarian policies require the support of more than just the direct beneficiaries to be sustained under democratic conditions. The adoption of redistributive wage policies that benefited low-income groups in Scandinavia depended on the self-interested support received from other groups in the middle or at the top of the income scale. The danger is that some of this support is now vanishing.

This is sad, since we are living in a world where some sort of social democracy, broadly defined, stand almost alone in its de facto defense of an efficient market-based world economy. Everywhere, right-wingers with political power support variants of authoritarian protectionism. They are also among the first to ’fix’ higher energy prices by fixing the price rather than altering the income distribution so people can afford higher prices. The hope is that more people again will see the benefits of ‘social protection without protectionism’—how one can, by social organization and welfare spending achieve egalitarian goals together with free trade and capitalist dynamics. This is the main innovation of social democracy. Today this insight seems more important than ever to defend feasible markets and egalitarian freedom – all over the world.

Since my college days in Kolkata I have been an ardent admirer of the Nordic system which seemed to me to represent a labor-friendly and more humane form of capitalism without losing its dynamism, a judicious mixture of some of the positive aspects of both capitalism and socialism. But it soon dawned on me that these are small countries (I had by then found out that the population in, say, Norway was smaller than that of even one part of my city—north Kolkata, where I grew up). Small countries can do things that are difficult for large countries like India to carry out— but then there are many small countries which also have failed to do them! Only in recent years, particularly after meeting Kalle and reading his work and other related work, I started being aware of the special and complex mechanisms behind the Nordic countries’ superior performance. I have noticed that many people particularly outside western Europe are not fully aware of these mechanisms and institutional practices.

This conversation is in two parts. Below are my first four questions to him, followed by his answers. Next week we’ll have the second part with four more questions and answers.

Pranab Bardhan (PB):1. It is well-known that in most global rankings by various socio-economic indicators the Nordic countries (Norway, Sweden, Denmark, Finland and Iceland) usually come up often at the very top. In order to understand the structural reasons behind this sustained good performance of Nordic countries I have found your articles over the years very useful. People associate the Nordic countries with high taxes funding a generous welfare state and relative equality in the capital-labor relation, but they do not pay enough attention to another feature of equality that you have emphasized, that of wage equality among different workers and firms. In fact you have referred to this compression in wage structure as an important factor in preserving the dynamism of capitalism in Nordic countries in terms of innovations. If I understand you correctly, the compression results in relatively low wages facing high-productivity firms and industries comparable to those faced by their low-productivity counterparts, and this brings high profitability for the former, and thus stimulates innovations and investments in new technology. Would you briefly explain for the general reader the history of this institutional practice in Nordic countries and its operation today? Also, how is it sustained in these countries, whereas in others, say US or UK, such compression of the salaries of high-skilled workers and managers would have induced large-scale emigration?

Kalle Moene (KM): In Scandinavia, wage equality arose as adjustments to fierce international competition in output markets, starting already when social democrats came to power in the 1930s. In Sweden and Norway coordinated wage bargaining emerged from a union vs. union dispute over the bargaining system. When foreign demand collapsed during the world crisis, workers in the export sectors, particularly the metal workers, had to take large wage cuts to keep their jobs. Construction workers did not come under similar pressure as their jobs were less directly exposed to foreign competition.

The exposed unions wanted to control the wages of the sheltered unions not only out a concern for relative wages. Construction workers produced some of the inputs going to export firms. To prevent sheltered unions from obtaining higher wages at the cost of the workers in the exporting industries, the metal workers tried to restrict wage increases for all unions to the level that the exporting industries could tolerate. They obtained support from the employers who always prefer wage moderation. Construction workers gave in and a pattern was established -- later institutionalized under the name of “solidarity bargaining’‘ in 1958 in Norway and in Sweden.

This is my somewhat controversial view on how export-led wage setting started in Scandinavia -- how negotiations over the entire pay structure by the national associations of unions and employers replaced firm and industry level bargaining. It was a special form of negotiation-- not to raise wages by letting the most productive enterprises go first, but to moderate wages and compress wage differentials in line with what the most exposed industries could bear.

In this way solidarity bargaining prevented sheltered unions from reaping monopoly gains. It still works in this way – and not only in Scandinavia. Comparing the experience from 13 European countries after China’s recent entrance into the world market, shows the same pattern. Regions exposed to competition from China experienced no fall in employment if the country, where they are located, had Scandinavian-like wage-coordination. Similar regions in countries with uncoordinated wage setting, experienced a clear fall in employment, mainly manufacturing employment. As argued in my joint work with Erling Barth, Henning Finseraas, and Anders Kjelsrud, the effects are strongest in Scandinavia, but also present in other countries with a similar bargaining system

Wage compression is also good for innovation. Less productive plants are pressed out of business as new highly productive plants enter, leading to productivity growth, benefiting the workers in the long run. Scandinavian style wage-bargaining under full employment speeds up this process of ‘creative destruction’. The lowest wages become higher, destroying bad jobs; the highest wages become lower creating more good jobs. Over time a more modern industry structure emerges with higher average productivity and thus higher average pay for all workers.

How wage compression moves resources from less productive to more productive firms was first emphasized by the Swedish trade union economists Gösta Rehn and Rudolf Meidner in the late 1940s and early 1950s but with a somewhat different argument. To explain how the specific negotiation system came in some countries and was sustained there – and not even fully tried out in others -- is not easy.

To explain the start, small differences in initial conditions may have led to different responses to the world crisis in the 1930s: how the working class was hit by the crisis and how the union members were composed of workers in traded and non-traded sectors seem important. In small open economies like the Scandinavian there were perhaps no other choice than taking the wages out of market competition, while in other countries the union movement considered how high wages could stimulate domestic demand to get out of the crisis.

In Scandinavia wage compression became a self-sustaining path. Even highly paid skilled workers, whose wages were held back in the name of solidarity, accepted the system over a long period after World War II. To understand their acceptance, we must recall that wage moderation in the short run led to real-wage growth for almost everybody via productivity increases in the long run. To migrate to other better-paying countries was not a very tempting option in this period. Even when the labor market in Europe was open, large pay differences were not eliminated by migration. High skilled workers did not move to high-paying jobs abroad – nor did low-skilled workers flood the labor markets with high minimum wages and low unemployment. At least applied to the period from 1945 to the mid-1980s, I insist that economists often simply exaggerate the willingness to migrate to obtain higher wages. Today this may have changed as younger workers travel more and can speak foreign languages, implying some constraints on wage compression.

As indicated by the different responses to the China-shock Scandinavian-style wage coordination still exists in some countries outside Scandinavia. In most countries, however, the union movement seems not strong enough to try out wage compression even at a moderate scale.

(PB): 2. It is also not well-known that in the global ranking of innovations the Nordic countries rank quite high. For example, take the Global Innovation Index published every year by WIPO (the World Intellectual Property Organization, an agency of the United Nations). In this ranking that of USA is, of course, quite high, but the rank of Sweden is often higher and that of Finland or Denmark is not far behind. Do you think even if this is generally true for aggregate innovations, this is less true for cutting-edge technology today? There is a general impression--emphasized, for example, in the widely-acclaimed Draghi Report of 2024 on European economic competitiveness--that in the technological race Europe is falling behind USA and China. Do you think that applies to the Nordic countries as well?

(KM): Productivity growth is not as high as it used to be in Scandinavia. The same is true all over Europe. Naturally, the Draghi Report is thus much discussed here. My understanding is that the decline is in the growth of productivity, not in the level. Furthermore, the decline is related more to a change in the composition of production -- more services and less manufacturing -- than to incentives, institutions, and systems.

To address whether the link between wage compression and innovation also holds for cutting-edge technology today, we must distinguish between invention and innovation, that is between creating new technology and implementing it. ‘Cutting edge’ is associated with inventing new technology. Scandinavia has always been best at implementing, not inventing.

Some critics say we therefore have a free ride on inventions undertaken elsewhere. This may be true to some extent, but the argument can easily be exaggerated by pointing to profitability where the size of the country is more important. Bigger countries simply invent more things and on an extended scale. Implementation, in contrast, depends on the scale or size of the economy relative to the extent of the market. Small open economies benefit from extended markets since they have, as the name suggests, access to huge international markets relative to their domestic economies. Both mechanisms suggest that Scandinavia, all else being the same, should rank high on implementation but not so high on inventions. The role of national institutions and social organizations is shaped by these differences. In Scandinavia comprehensive unions and employer associations induce more collective rationality in innovations as indicated above.

(PB): 3. In the context of innovations I have heard that the Swedish financial system is more advanced than that in much of Europe. Is this the case, and if so, do you think that plays a role in the Swedish high ranking in innovations?

(KM): Sweden has surely benefited from a good and well-regulated financial system, just like the other Nordic countries. I’m not sure whether the financial system is more advanced than in other countries. It is surely well regulated and highly trusted. Nordic countries are approaching a cashless economy, and everybody is dependent on banks.

The financial system has also passed serious tests with good results. One indication is how most of the Nordic countries quickly came out of the financial crisis in 2008. The reason might have been that they have institutions for routine consultation between the major interest organizations (of capital and labor) and representatives of the government. In this way the major players in the economy obtain shared information and understanding of the present problems and challenges. This facilitates consensus building around important crisis policies whenever needed.

(PB): 4. Denmark is always cited as exemplar in ‘active’ labor market policy characterized by energetic retraining and re-skilling of workers. I have heard that Denmark spends almost 2 per cent of GDP on retraining and on advising and monitoring the jobless and making them more employable in new activities--this percentage figure is many times the comparable spending in the US, and four times the average for OECD countries. Do you think this plays an important role in the constant restructuring of labor that technological innovations involve? Is this as important in other Nordic countries as in Denmark?

(KM): Yes, Demark has been good at this, and the Danes have inspired the rest of Scandinavia. In my view an active labor market policy is an important substitute for using relative wages to attract workers to expanding industries. So, active labor market policies are not only improving the efficiency of the labor market, but they are doing so without threatening the rather egalitarian wage structure.

But actually, the women’s reservation issue which has significant public support was only a ploy, a veritable red herring, to distract attention from the larger, somewhat sinister, issue of disturbing the federal balance of the polity without much discussion. The opposition parties saw through the deviousness behind the introduction of the bill and mobilized a rare, united front against it.

Already in September 2023 the Parliament had passed with near-unanimity a constitution amendment bill to assure reservation of one-third seats for women. At that time the ruling party had announced that the actual implementation of reservation was supposed to be after the subsequent Census (now scheduled for 2027) and after the long-deferred ‘delimitation’ exercise (involving resizing of constituencies and numbers of seats from different states). So, the general impression was that by the time women’s reservation in Parliament will happen it’ll probably be the end of this decade or the early part of the next, as both the Census and the ‘delimitation’ exercise in this vast country will take some time. But suddenly, early in April this year the ruling party BJP announced unilaterally, without any prior notice or discussion, that the implementation of reservation along with increase in the number of total seats in Lok Sabha and apportionment of seats for different states are now to be made on the basis of the old 2011 Census, that a new constitution amendment bill will be introduced in a special parliamentary session on April 16 and voted on the next day.

Already for many months a storm was brewing particularly in the southern states of India in anticipation of a ‘delimitation’ exercise in 2026 that will seriously reduce their representation in the Parliament. As these are better-off states with lower fertility rates compared to more populous northern states (which incidentally contain the large Hindi heartland where BJP has been electorally much more successful), the south had apprehension of domination by the BJP-ruled north—already they are aggrieved about what they see as attempts at undue imposition of the northern language, Hindi. So when this new constitution amendment bill was introduced, and estimates suggested that in using the 2011 Census there will be a significant relative loss in the number of representatives from southern states (and some loss in a few eastern states where also fertility decline has been notable), particularly in states where BJP electorally has been low-performing, opposition parties realized that the whole thing was a subterfuge to entrench the electoral domination of BJP from the next national election in 2029 onward, and it was cynically covered up by putting the more benign women’s reservation issue linked to it at the forefront.

After the constitution amendment bill failed to pass in Lok Sabha, the top BJP leadership cried hoarse about how anti-women the opposition parties are. The Prime Minister addressed the nation in prime time, and in righteous indignation compared the opposition parties’ vote with ‘female foeticide’; he specifically singled out 2 opposition parties, DMK (that now rules the southern state of Tamil Nadu) and TMC (that rules the eastern state of West Bengal). Incidentally those two states were going to polls within a week from the Prime Minister’s address (and he may thus have violated an electoral code of conduct that inhibits the use of official mass media for the “partisan coverage of political news” after elections have been announced). Of course, as expected a toadying Election Commission looked away from this possible code violation by the Prime Minister.

By the way, if you look at the gender composition of party members in Lok Sabha, the opposition parties like Congress and DMK have about the same (low) fraction of female representatives as BJP, and the TMC fraction is 3 times as large. If BJP wins West Bengal next week, it’ll be not because TMC is anti-women, but because the Election Commission has unprecedentedly disenfranchised large numbers of women and Muslim voters (who tend to vote more for TMC), and also because of TMC’s history of corruption scandals—not to speak of the central government’s pre-election gross misuse of investigation agencies (like the Enforcement Directorate) to disrupt TMC election arrangements, for example by raiding and incapacitating I-PAC (TMC’s main election campaign management agency), and deployment of 2,450 companies of paramilitary troops that has the effect of intimidating TMC voters.

BJP leaders have, of course, deliberately ignored that the opposition parties have already voted in favor of women’s reservation in September 2023, long before the recent ‘female foeticide’, and it is those BJP leaders who had proposed its delayed implementation, and now it was brought forward to get ‘delimitation’ by the backdoor in a tearing hurry. There is no logical connection between women’s reservation and ‘delimitation’. If the ruling party so wanted it could have brought it about, without ‘delimitation’ or any increase in the total number of seats in Lok Sabha. But one reason the ruling party (and for that matter probably some other parties too) wanted to expand the total number of seats is that this way the male members do not have to give up their prospective seats in order to accommodate more women representatives.

Whether having a seat quota for women in the Parliament is the best way to promote women’s interests and power is arguable, I’ll not go into this here. Nor shall I comment here on the best way to carry out ‘delimitation’—this involves weighing intricate issues of demographic trends, principles of equal representation, economic and cultural factors involved in inter-regional political equity and fairness, and the delicate issues of fiscal and federal balance, and thus requires a great deal of thoughtful deliberation on difficult trade-offs. (I intend to devote a future substack post to this issue).

By ignoring all this and resorting to trickery to hide their attempt to consolidate their electoral domination in a backhanded numbers game, the Indian ruling party leadership is insulting the intelligence of the people it rules over. In the defeat of their sly but clumsy attempt a party largely soaked in a kind of patriarchal and muscular brand of Hinduism is now crying their heart out for the cause of women.

Pranab Bardhan (PB): 4. In your framework the structure of the state (along with cultural conditions) play a more important role in understanding the adoption of new technology rather than vested interests. China at least in the last 4 decades provides a somewhat unique combination of political centralization in a tightly organized Leninist Party and economic and administrative decentralization allowing for local Party bureaucrats to compete among themselves (and given incentives for promotion on the basis of competing performance). Is there any historical example in the past imperial history of China of such a combination of political centralization of the empire-state and economic and administrative decentralization?

Debin Ma (DM): The combination of political centralization with economic, fiscal, and (to some extent) administrative decentralization has long been a defining feature of the Chinese empire and may help explain its durability. Despite the absolutist authority of emperors, both the Ming (1368–1644) and Qing (1644–1911) dynasties maintained relatively small bureaucracies, low levels of taxation, and limited regulatory reach—conditions that may have contributed to long periods of stability and population growth. Ming and Qing China are sometimes what historians referred to as “maintenance empires” characterized by a formalized imperial ruling structure at the top co-existing with a largely informal community and family based social structure controlled more through ideology and rituals.

Absolutism did, at times, produce excesses, as seen in the draconian policies of the Ming founder Zhu Yuanzhang, which pushed the economy toward command and barter systems. However, rulers after Zhu Yuanzhang retreated from these extremes, allowing markets to revive, aided by the influx of silver and the expansion of trade. Deng Xiaoping’s early reforms exhibited similar features: a partial retrenchment of the state and a revitalization of market forces. These reforms proved far more consequential in the 1980s partly because the global environment of the time had differed fundamentally from that of the sixteenth century.

(PB): 5. Let me now move to an issue that has some relevance to the “Great Divergence” (between the West and China) debate that you have mentioned earlier. China is credited with some of the greatest scientific inventions in history (paper and printing, compass, gunpowder and so on). And the question, sometimes called the Needham Puzzle, has been about why China did not get to utilize these inventions in terms of economic and military success--China knew about gunpowder, but mostly used it in fireworks, whereas the West much later used it to conquer and colonize much of the world, etc. (By the way, Joseph Needham was a great British biochemist and sinologist, and a Marxist, associated with the multi-volume monumental work, Science and Civilization in China. When I was a student in Cambridge, England, Needham was still teaching and I went and attended several of his lectures on China). I have read some of the attempted answers to the Needham puzzle, including the one by my friend Justin Yifu Lin of Peking University. But I am not fully satisfied. Do you have any answer to the puzzle that you recommend?

(DM): I have long taught a course titled Why Did the Industrial Revolution Not Occur in China? I begin by telling students not to expect a definitive answer. The question is inherently counterfactual and likely unanswerable, yet it provides a rich and stimulating research agenda for both economists and historians. The causal factors—if identifiable—are cumulative, interactive, and highly probabilistic.

As you know, the literature on this topic has expanded dramatically, particularly following Kenneth Pomeranz’s The Great Divergence: China, Europe, and the Making of the Modern World Economy (2000). This is not the place for a full review, but my current work focuses on two related dimensions: state capacity and ideology.

(PB): 6. You must be aware of the new book, Two Paths to Prosperity: Culture and Institutions in Europe and China, 1000-2000 (Princeton University Press, 2025) by Avner Greif, Joel Mokyr, and Guido Tabellini. They show how the culturally ordained social organizations, the kinship-based clan in China and the guilds and corporate entities in Europe (where kinship ties were weaker), shaped their divergent economic and political trajectories over the past millennium. Do you have a view on this? Did the clan play a different role in Japan compared to China?

(DM): The recent book by Greif, Mokyr, and Tabellini is an important contribution that has been long in the making. I greatly admire their work. While this is not the place for a full review, I broadly agree with their central insight regarding the role of cultural and institutional differences in shaping divergent development paths. Their main premise – at the risk of over-simplification here – posits a contrast between Western individualist culture that supports common-interest, formalized, rule-based governance structure (such as corporations, communes and free cities) and Chinese collectivist culture that supports blood-based, informal and relations-based governance (such as lineage or clans). The former led to the rise of much larger-scale impersonal exchange which characterized modernity.

Interestingly, it is worth noting that cultural explanations for East Asia’s relative backwardness were all in the rage among the Japanese and Chinese reformers of the late nineteenth- and early twentieth-century, themselves influenced by the European Enlightenment thought a century earlier. One of the most famous Chinese writers, Lu Xun, on whom I wrote a chapter in the edited volume, Economics and Literature, to which you also have contributed [see the Substack post of July 15, 2025], represented a towering figure on attacking the ills of traditional Chinese culture.

In this context, I see our work—focused on the diffusion of modernity—both as a word of caution and as a complement to theirs that focused on the invention of modernity and its origins. The cultural traits that may explain the emergence of modernity (e.g., individualism versus collectivism) are not necessarily the same as those that explain its diffusion. Our framework emphasizes the importance of selective adaptation: Japan and China succeeded when they absorbed western knowledge within their own contexts through processes of reverse engineering rather than slavish imitation. Indeed, if both Japan and later China could only succeed by learning from the West, they did so by creatively taking advantage of some of their “collectivist” cultural heritage through adaption and transformation. We try to explore the specific mechanism behind this process.

Regarding the role of clan or lineage in China and Japan in the pre-reform era —especially in comparison with Europe—my overall conjecture is that differences within (between) these two countries are far smaller than from Europe. Undoubtedly, as in China, blood-based family ties, along with family-centered business and social organization, formed a central pillar of society in Japan.

That said, important differences existed between the two countries in terms of family structure, marriage patterns, inheritance systems, and rules governing adoption, partly reflecting broader political and social distinctions between a centralized imperial Qing system versus a feudal Tokugawa regime. Religious institutions such as Buddhism may have played a somewhat larger role in Japan than in Qing China, whereas Christianity—especially Catholicism—was even more strictly prohibited in Tokugawa Japan.

Extended families or lineages were likely less pervasive in Japan than in China, though it is important to emphasize there were significant regional variations within China itself. Lineage organizations were far more prominent in the coastal, commercially oriented, southern provinces than in the north. For example, the well-known Shanxi bankers in northern China relied more on professional managers and regional networks given that blood or clan-based kinship ties were much weaker. For Japan, the work by Tetsuji Okazaki at University of Tokyo showed that merchant groups in Tokugawa Japan shared similar traits as the quintessentially “collectivist” Maghribi traders in medieval Mediterranean described in Avner Greif’s study that resorted to collective punishment and informal contract enforcement. Indeed, despite the prevalence of guilds and other business or social organizations in both countries, neither developed institutions equivalent to Europe’s formal corporate charters, autonomous free cities, nor the legal concept of corporate personhood. It is true that some scholars point to quasi-corporate bodies, village autonomy, and other informal organizations in China that shared certain features with European institutions. Nonetheless, I am inclined to agree with the Greif, Mokyr and Tabellini argument that the distinction between clan-based and corporate-based systems has meaningful and lasting consequences for understanding the origin of divergent trajectories. Again. I cannot stress enough that once Japan and China started borrowing from the West, their ultimate success was actually propelled by some of their traditional “collectivist” heritage such as respect for mass education, social networks, family ties etc.

(PB): 7. Finally, I understand that the inheritance pattern by and large has been historically different in Japan and China --that of primogeniture (inheritance by the eldest son or heir, so the estate is not divided up) in Japan, and partible or coparcenary inheritance (so the estate is divided among heirs) in China (as in much of India). Do you think this played any role in the contrasting developments in history of Japan and China?

(DM): Your question regarding primogeniture highlights the fluidity of cultural traits. In a seminal 1983 paper, the Japanese demographer Akira Hayami argued that primogeniture in Tokugawa Japan was partly a myth, later reinforced by the Meiji Civil Code of 1898. In practice, inheritance patterns in Tokugawa Japan were far more diverse, including partible inheritance and ultimogeniture (inheritance by the youngest child). Further, Fumio Hayashi and Edward Prescott in a 2008 article show that the legal enforcement of primogeniture may have slowed Japan’s structural transition from agriculture to industry before World War II. These findings underscore the need for caution when treating culture as a fixed explanatory variable. Greater attention should be paid to the evolving and context-dependent nature of institutions and practices, the spatial and temporal variation in family structures, lineage systems, and organizational forms across different societies and more importantly, to distill the fundamental causal influences from the ephemeral and superficial.

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