It would be no exaggeration to say that the world is passing through tough times. The picture today is vastly different from what we experienced as recently as a decade ago. Global economic growth is no longer guaranteed, with several economists talking of what they term as the “new normal”, referring of course to a reduced potential for growth of the world economy. Greater inequality has ensured that the benefits of growth over the last four decades are limited to a few and bypass the vast majority. Consequently, globalisation, which was considered as the one constant factor that would drive the global economy, is meeting a stiff challenge, as evidenced recently by Brexit (Britain withdrawing from the European Union- EU).
The world is no longer unipolar or even bipolar, as it was during the cold war, with many strong power centres trying to assert themselves in global affairs, thereby making geopolitics very uncertain to understand and deal with. Intolerance, especially religious intolerance, is flaming passions that are difficult to control. Terrorism, including state sponsored terrorism, is a scourge that afflicts all nations. New problems, such as migration, have cropped up for which we do not seem to have any solution.
The global governance structure that emerged post World War II is proving incapable of addressing these problems. The institutions established at that time including the United Nations Organizations (UNO), the World Bank, the International Monetary Fund (IMF), the World Trade Organisation (WTO) and the International Court of Justice (ICJ), amongst others, are being challenged by many countries that want a greater say in running these institutions, appropriate to their newfound economic clout. Significant increase in inequality and higher risks of unemployment are leading people to think more about the impact that various policies have on them as individuals rather than be satisfied with the perceived benefit to their country or the world at large. “What is in it for me” is a question being asked more often now than at any time in the recent past.
The main culprit leading to such a scenario has been poor governance, be it governance of companies, the government, international organisations, non-government organisations (NGOs), and, dare-I-say, even families. Human beings have proven incapable of managing organisations in a manner that matches what the corporate sector often terms best governance practices. Governance deficit leads to dissatisfaction amongst people especially amongst those who are adversely impacted and as is happening lately, provokes reactions that endanger the wellbeing of the entire community.
The corporate sector is familiar with the concept of ‘agency cost’. Organisations are established to serve the interest of its stakeholders. These stakeholders appoint professionals to manage organisations and achieve their objectives. More often than not, there is a divergence between the interest of the organisation and that of the managers, resulting in outcomes that are less than optimal, at times even contrary to the organisation’s objectives.
The UN receives maximum financial contribution from the US, which has a dominant say in its functioning. UN policies are often determined by what the US wants rather than what the UN’s own charter demands. Similarly, the heads of World Bank, IMF and Asian Development Bank (ADB) have traditionally been appointed by the US, Europe and Japan, respectively. These organisations usually serve the interests of these respective countries more than those of other stakeholders or the countries they lend to.
Religious organisations suffer similarly. There is no reason for instance, why Tirumala Tirupati temple (and of course, many other places of worship) should accumulate the kind of wealth they have. Such wealth can be put to better uses but the hoarding of wealth gives the trustees and pundits a sense of power they do not want to let go. Even in families, especially Indian families, nothing can be done to dilute the hold and power the head of the family exercises over others. Resistance to change is the norm and individual initiative is nipped in the bud.
Decision making amongst governments across the world is predicated on its impact first on the head of the state and the party and only then would the impact on the nation be taken into consideration. The interests of the nation and the people who have voted them to power and whose welfare they are entrusted with, is often a mere afterthought. This trend has got accentuated, in recent times, due to the emergence of powerful leaders at the top – China’s President Xi Jinping, India’s Prime Minister Narendra Modi, Germany’s Chancellor Dr Angela Merkel, Russia’s President Vladimir Putin, Turkey’s President Racep Tayyip Erdogans and many others.
Eventually, when the impact of agency cost breaches a certain threshold level, people react, as they seem to be doing lately. Their anger is manifesting across the globe in ways that was unthinkable earlier. The ‘Arab Spring’, the worldwide angst against bankers post 2008 financial crisis, the migrants’ crisis, anti-globalisation wave, anger against poor governance in India and even widespread terrorism; religion-based or otherwise, are in some ways an outcome of the governance deficit that characterises most institutions globally.
Various studies have been carried out on the sub optimality of decision making by legislatures and the executive wing of the government. According to these studies, while the benefits of the decisions taken are concentrated and are available to a few, the costs are diffused and are borne by a vast number of people. While the vast majority of people show little inclination towards the problem, the small number of beneficiaries spends significant money, time and effort to ensure decision making in their favour. The decision to pump funds periodically into loss making public sector units (PSUs) and banks is of vital interest to the employees who fear a loss of employment and of other benefits, should the company become a sick entity. In addition, while the sums involved are large for the nation as a whole, individually, people do not have a significant stake and therefore accept such decisions without significant opposition.
The future governance will be determined by our ability, or inability to design government and organisation structures such that the interest of the stakeholders and those managing organisations can be aligned. Can we ensure that the diffused costs for the majority are not sacrificed at the altar of concentrated benefits to a few? Can we take along the vast majority who have little say in decision making in organisations and the government? Can we show enough empathy towards the less privileged and ensure that we do not give primacy to the interests of the elite over the vast majority? As Mahatma Gandhi had said, the true test of a decision is in its impact on the poorest and whether it can help in wiping their tears.
Given the recent past, it is difficult to be optimistic of the future and despondency is a natural outcome. We must however take solace from the significant strides made for more than two hundred years since the industrial revolution that have vastly improved standards of living and otherwise made the world a better place to live in. The current period is a time of flux for all of us. Complex forces are at work, where the old established order is clashing with the demands of the new order. Such turmoil is normal during times of significant change.
Society is a complex entity, which is displaying its dynamism during this period of change. From complicated interplay of various forces at work will emerge a new dawn that would hopefully set new standards of governance. Reaching there will involve struggle. During the period of struggle, things may appear bleak and may tend to compromise our efforts towards change. Our success in this struggle will depend on our ability to hang on to our faith in a brighter future despite the gloom and despair. Changes in society do not happen overnight, especially in a world as diverse as ours.
, a financial consultant and teacher, has over three decades experience in the corporate sector, consultancy and academics.)