Reforming Global Finance

Planning for the Future of Democracy: The Four L’s

In the battle between governments and markets, can global problems be solved by localization, lateralization, learning and listening?

The Four L's: localization, lateralization, learning and listening


  • The ideological debates that have raged across the world in recent decades are about whether we should have more or less government — or more or less free markets.
  • We live in a world of conceptually gated communities. Experts know a lot about a little, and understand little about the whole.
  • Addressing the "listening gap" is not just India's challenge of governance. It is Europe's, the two Americas' (North and South), Japan's, China's, and Africa's.

Our 21st-century world is so advanced — and yet so rudimentary. For all the complex global problems we are called upon to solve, we are quite archaic in the way we address these problems.

While today’s global problems — from climate change and terrorism to the financial crisis and the spread of nuclear materials — do not know boundaries, all too often we try to localize the solutions by beggaring our neighbors.

This happens, for example, by grabbing resources for ourselves, usually in the name of energy security, food security and water security. But this practice won’t change the fact that these are inherently global problems.

Fortunately, most of us recognize the need for a power that will make us work together to solve our global problems for the common good. So far, we have mostly considered only two plans (or paradigms) for this.

Plan A is to have a strong government. We see it as located above us and charged with laying down the rules and making sure everyone follows them. This is governance based on a power hierarchy. The problem with this model is that the “powers that be” can get it wrong.

Plan B is to leave it to the market. This plan is rooted in the belief that the interacting atoms (or individuals) will figure out the world’s problems somehow. This, too, is not satisfactory. In reality, some “atoms” know more than others. They are stronger than others. Despite the charmingly democratic pretense of the marketplace, it is they who set the rules and manage the system largely to serve their ends.

Whereas Plan A is based on an overbearing hierarchy and can lead to standstill or stagnation, Plan B has the potential for chaos or undesirable outcomes, such as undemocratic power structures taking charge.

Little wonder then that the ideological debates that have raged across the world in recent decades are about whether we should have more or less government — or more or less free markets. There is a third way, however — a Plan C for governance.

It is high time that both the pro-government types and the pro-market types came together to explore Plan C. Plan C suits a world in which problems do not know boundaries. Plan C is better suited to learning, and adapting to complex phenomena that experts cannot fully understand.

For good reason was the 2009 Nobel Prize in Economics awarded to Oliver Williamson and Elinor Ostrom. The prize that year implicitly acknowledged that there were three models for organizing economies and societies.

Williamson described two of these — hierarchies and markets. These are the paradigms underlying Plans A and B. Ostrom, on the other hand, described self-governing communities — the idea behind Plan C.

The key question, of course, is how to make Plan C work in the real world, especially on a large-scale level. That is precisely the question my colleagues and I — all full-time members of the Indian Planning Commission — have been thinking about a lot.

The Four L’s

Now, I realize that most people consider the idea of a “planning commission” in the 21st century to be a dinosaur. To prove that we are not, the Indian Planning Commission is applying itself to the 21st-century questions about institutional structures and processes required to govern in a 21st-century world.

We start with two assumptions: First, many things are interconnected, and second, people know their rights and want a say in the way they are governed.

To address both these facts of life, we realize that we have to construct new processes and institutions of governance based on the four principles of Plan C. These are the “Four L’s” — localization, lateralization, learning and listening.

The principle of localization is based on the realization that “one size does not fit all” — and that, whereas there could be universal principles, there are not likely to be packages of these principles that are universally applicable.

The principle of lateralization requires that lateral links be “deliberately designed” across boundaries. The aim here is to put people in a position to coordinate laterally, rather than expecting a power above them to compel them to coordinate — which is an underlying principle of design of hierarchical organizations. Leaving it to the “invisible hand” of the market isn’t a viable approach either.

Ways to achieve this lateral coordination are communities of shared interests, processes for collaborative decision-making, and voluntary self-governance. Elinor Ostrom’s research describes ways to achieve lateral coordination without an overbearing coordinator above.

Incidentally, such ideas can even be seen in the organizational structures of some international consulting companies, which are managed as partnerships, and through “practices” of shared interests.

The third principle is learning based on systems thinking. Systems thinking is an orientation that has been killed by overspecialization. We live in a world of conceptually gated communities. Experts know a lot about a little, and understand little about the whole. Processes for understanding systems must be taught and applied to enable us to solve the global problems that have been created by our fragmented views of reality.

The fourth principle is listening. Experts must listen to each other. But most of all, experts must listen to real people. They must understand the language of real people. A line from Woody Allen’s “Midnight in Paris” explains the problem very well. Amelia, the French woman, says to Pinder, the American writer, “That’s the problem with you writers. You are full of words. But I am more emotional.”

Not surprisingly, addressing this “listening gap” is not just India’s challenge of governance. It is Europe’s, the two Americas’ (North and South), Japan’s, China’s, and Africa’s. Everywhere, people are saying: “That’s the problem with you economists. You are full of numbers. You don’t understand our emotions – our hopes and fears. How can we trust you to create a better world for us?”

Therefore, we must build processes for listening. I can tell from our experience in India that this is not easy in a vast country in which people have varied perceptions and interests, people who may not want to listen to each other.

Sound familiar? Yes, indeed. A dislike of listening to each other seems to have become a global malady. But only by listening to many perspectives can we understand the whole system together.

Overcoming this hurdle is India’s 21st-century challenge (as it is Africa’s, Latin America’s and Asia’s). We have unleashed the force of political democracy in our constitutions, deepened it with an appreciation of human rights that go beyond political rights to vote, and we have established economic and social rights to livelihoods, food, education, health, respect and dignity.

As if that weren’t enough, we have turbocharged it with the power of information, enabled by 21st-century technologies. Whether in India or elsewhere, the task ahead is to shape plans “of the people, by the people, for the people.” This must be the essence of 21st-century planning and governance.

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About Arun Maira

Arun Maira is a thought leader on social and economic development and transformational change and leadership.

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