Collective action promotes economic development in Kerala

Public participation in social and political decision-making is considered to be an essential condition for successful economic development. Through collective action and participation, people (particularly poor people) get a valuable opportunity to voice their needs and demands. But what type and what level of collective action will help rather than harm economic development?

Research from the Institute of Development Studies, UK, analyses the impact of collective action and public participation on economic development. It looks at data from the South Indian state of Kerala between 1973 and 1999. It compares two types of collective action: industrial strikes and politically motivated riots. The research asks whether and how collective actions affect the development of poor economies, taking account of immediate and longer-term impacts as well as direct and indirect effects.

Collective action is both influenced by, and influences, the type of development strategy followed by a given society. Kerala’s unique development strategy has resulted in the coexistence of poor economic performance with high living standards and reduced poverty. The positive social developments are usually accredited to the actions of collective movements which have advocated public demands. But collective movements are also held responsible for unsustainable levels of public spending and social and economic instability (which discourages investment).

Kerala has a high number of trade unions, and a relatively high level of strikes and politically motivated riots compared with other Indian states. Strikes have decreased in Kerala since the late 1970s whereas the level of rioting has remained fairly constant.

Key findings on the impact of these forms of collective action on economic development include:

• Riots have negatively affected Kerala’s economic performance: each one unit increase in the level of rioting decreases state income by 16.5 percent.
• Increases in strikes have been associated with increases in state income.
• The high number of unions has damaged economic performance in Kerala.
• Increases in public spending on social services have had a positive impact on Kerala’s economic performance.
• Riots are associated with increases in rural poverty whereas strikes are associated with decreases in rural poverty.
• In the other major India states both riots and strikes result in positive economic benefits.

Excessive activism can harm economic performance. But some forms of collective action have an important role to play in the promotion of economic growth. This effect may be strongest where political activism results in pro-poor redistributive policies (which have been shown to stimulate economic growth).

The researcher concludes that:

• The impact of collective action on economic development depends on the type and level of collective action.
• It also depends on the motivations behind different types of collective action.
• Strong institutions are needed to mediate the interests and needs of all groups.
• Effective bargaining processes (between state, industry and civil organisations) will enhance the impact of collective action on economic development.
• In Kerala there is no trade-off between redistributive policies (public spending on social services) and economic growth.

Source(s):
‘The Impact of Collective Action on Economic Development: Empirical Evidence from Kerala, India’, World Development 34 (7), pages 1254-1270, by Patricia Justino, 2006

Funded by: British Academy

id21 Research Highlight: 24 January 2007

Further Information:
Patricia Justino
Institute of Development Studies
University of Sussex
Brighton BN1 9RE
UK

Tel: + 44 (0)1273 877231
Fax: + 44 (0)1273 621202
Contact the contributor: P.justino@ids.ac.uk

Institute of Development Studies

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