Can the Local Community Save Liberal Democracy?

by Pranab Bardhan

Anti-Amazon protesters in New York City

As the job-displacing effects of markets and global integration and the cultural shocks of large immigration have rattled workers, particularly the less skilled ones, their reactive turn to populism in different parts of the world has dismayed liberals. This has been reinforced by resentment against centralized bureaucracies (not just in Brussels or Washington but also in Mexico City or Delhi or Jakarta) run by professionals and technical experts whose dispensations often ignore local realities and sensibilities. The alliance between liberals and workers that used to form the backbone of centrist democratic parties is getting frayed, as in the minds of many blue-collar workers the liberals with their mobile professional skills come across as privileged meritocrats and rootless cosmopolitans (‘citizens of nowhere’).

Global markets and mobility of capital have required standardization and harmonization of local rules and regulations, which some communities feel are ironing out their local distinctiveness and proximity-based personalized networks. Increasing market concentration in large corporate firms, their blocking of small business, capturing of state power in democracies through strong lobbies and copious election funding, and weakening of labor organizations and depressing labor share have made many small people precarious in their livelihood and suspicious of markets.

State-provided public services which are supposed to relieve the harshness of the market are everywhere riddled with bureaucratic indifference, malfeasance, and resistance to reform, while the better-off liberals are increasingly seceding from them. In developing countries the public delivery of social services is often so dismal (with inept, corrupt or truant official providers) that in contrast the image of voluntary community organizations (including charitable religious institutions run by Muslim, Hindu or Christian evangelicals) trying to fill in the gap is often much better than that of the state. Even when the state delivery mechanisms work reasonably well, the projects often do not involve the people but simply treat them as passive objects of the development process. (In rich countries communities have sometimes rejected negotiations over their heads by corporate and city officials to help investment in the community—as in the recent case of the failed Amazon investment proposal for Queens in New York).

In general in the day-to-day democratic process political parties which used to be viable mediators between the state and society are now in some decay all over the world, and thus the regular political-organizational channels of demand articulation and conflict resolution are clogged. At the global level there is also a general feeling that in facing the environmental challenges both the state and the market have failed us. Even in the community management of local environmental resources (forestry, fishery, irrigation water, grazing lands, etc.) the rampant encroachments by market expansion of private business and by the over-reaching and collusive state officials have played havoc in many parts of the world. Thus there is widespread disillusionment with both the market and the state. In such a situation some liberals are turning to the local community to provide an anchor for democratic institutions and solidarity.


Communitarians and sociologists have argued for this over many decades, but economists have usually emphasized the resource allocation efficiency and productivity effects of mobility and footloose factors of production for which community loyalties can be a drag. The emphasis has been more on anonymous competition than on social cooperation. The only recipient of the Economics Nobel prize who had extensively worked on community institutions of cooperation, Elinor Ostrom, was a political scientist, not an economist. (When in the early 1990’s I linked up with her in connection with my work on community institutions in the local commons of developing countries, she expressed to me her bewilderment why so few of my fellow economists were interested in these issues at that time).

This is changing now. More economists, persuaded by the ubiquity of both market and state ‘failures’, are turning to the community as the ‘third pillar’ of society and economy—as a very sensible and balanced recent book by Raghuram Rajan has called it. Policy suggestions of devolution of power to local community associations, or to village councils and municipal administrations now abound in the economic governance literature for both rich and poor countries.

The main economic arguments in favor of such devolution involve: (a) a better utilization of local information, ingenuity and initiative, particularly in the targeting and implementation of local public projects, which distant technocrats cannot easily mobilize or sustain; (b) the procedures of trust, coordination and social sanctions of defaulters that undergird local social contracts become weaker as the domain expands beyond small local communities, exit becomes easier, and social norms get diluted; and (c) a desire to keep under control the inequalities that large-scale agglomeration and network externalities inevitably generate (when talented and skilled people gravitate to one another in a small area or entity, others suffer the consequences of the brain drain).

Examples are many, in both rich and poor countries, of devolution leading to better decisions, from the point of view of efficiency as well as equity. Technological changes have now made it administratively somewhat easier for lower levels of government to handle certain tasks. Politically, the arena of local democratic contestation and governance is also a good training ground for future democratic leaders at the national level. And, in a world of rampant ethnic conflicts and separatist movements, devolution of power can diffuse social and political tensions and ensure local cultural and political autonomy.

But liberals should also beware of communitarian romanticism. Compared to central entities where many rival groups contend, small local community institutions may be more susceptible to capture by local overlords, oligarchs and majoritarian tyrants—think of white supremacists in the localities of US South, the tyranny of dominant castes in Indian villages, or Mafia capture of local institutions in Sicily. In all these cases outside intervention has been necessary to relieve institutionalized systems of local oppression. In India, during the freedom struggle, important social thinkers like Gandhi and Tagore had emphasized the centrality of the village community, but Ambedkar, the leader of a marginalized oppressed group (who later as one of the founding fathers of the Indian constitution tried to do something about that oppression through liberal-constitutional means), used to call the Indian village community a ‘cesspool, …a den of ignorance, narrow-mindedness and communalism’. When there is such ‘community failure’ for the socially marginalized groups, the anonymity of the market or an intervention by the distant state with its impersonal legal procedures may be welcome.

At a somewhat less oppressive level of associational life, all of us are familiar with too much insider control in local bodies for zonal restrictions or professional licensing, not-in-my-backyard-type resistance to new projects (even liberal but expensive cities like San Francisco are, for example, divided on the issue of public housing projects), and local property tax based school financing, that work against the interests of the poor and disadvantaged. Decentralization can thus exacerbate inter-community inequality; under devolution of power and more autonomy communities with initial advantages build on them and advance faster. Then there are related issues like externalities and spillovers where local control mechanisms are inadequate, as in the case of upstream deforestation causing flooding and soil erosion in downstream communities. Intra-community economic inequality can also have an adverse impact on trust and cooperation. For instance, in my empirical work on south Indian irrigation communities, I have found statistical evidence that across villages when land is more unequally distributed farmers’ cooperation on resolution of water conflicts breaks down more easily.

The small scale of communities can also be a disadvantage when they face covariate risks (for example, natural disasters or local market mishaps affect most members of a local community simultaneously), so risk-pooling to keep insurance costs under control requires supra-local involvement and larger scale. Small scale is also a disadvantage when infrastructure investments require raising large amounts of external finance.

From the point of view of a liberal democracy there is also a dilemma in social insurance against risks and financial crunch at the community level. On the one hand, kinship groups in traditional communities often provide to their members scarce credit as well as emotional support at times of emergency need, and help in small loans for regular business or job referrals for migrating members and insure against idiosyncratic risks—these useful functions and reciprocal obligations make such group ties quite resilient (and help some ethnic business groups to succeed in conditions of scarcity of entrepreneurial opportunities and capital).

Such group obligations can serve even better than market or government contracts, since the latter ultimately depend for contract enforcement on costly third-party (legal-juridical) verification and arbitration, whereas in the case of within-group arrangements breaches are more easily observable and negotiable within the group. There are many stories of how Chinese lineage-based business families negotiate billions of dollars’ worth of real estate deals in Hong Kong (or how caste-based Gujarati migrant families have captured the motel business in large parts of the US) without any formal contracts for raising money from inside those groups and police any potential breaches mainly internally.

On the other hand, for the individual members of such groups the benefits of community bonds come with a palpable cost. The price of social help and insurance is the group’s authority over individual members’ freedoms. Traditional extended families or kinship groups can be quite authoritarian in their treatment particularly of younger and female members. The latter, for example, have to accept many restrictions on their choice of work associates and marriage partners, sanctions on departures from due deference to the aged leaders, and injunctions on sharing the benefits from individual efforts and innovations.

Take the case of old age support. In traditional communities children have the social obligation to look after their parents in their old age. The community keeps a watchful eye that as the children grow up they do not stray too far out of community controls. A liberal may actually prefer the state and market alternatives (social security plus financial market products like annuities) to the community-provided support system obligating children. More generally, in such societies even when democratic, group rights often take precedence over individual rights: your freedom of expression can be restricted if some group claims offense at your expression or speech. As liberalism emphasizes individual rights, these may sometimes violate community norms—in this sense ‘liberty’ and ‘fraternity’ may be in serious conflict. One can see this conflict in complex thinkers like Gandhi, who as an ardent champion of the local community was less warm to liberalism (particularly if it comes without serious limits on competition and on the individual’s autonomy of desire and needs) and egalitarianism.


Another such conflict arises in the context of two different aspects of liberal democracy—the “procedural” and the “participatory” aspects. The former has to do with due process and respect for minority rights which majoritarian communities often tend to ride roughshod over. The latter in their impatience with institutional rules and procedures are often complicit in their leaders’ illiberal undermining of the institutional insulation or independence of the judiciary, police and the civil service particularly in developing countries where these institutions are already weak. The emphasis is on winning elections through majoritarian mobilization.

Of course, the enthusiasts for participatory politics often complain about the failures of representative democracy, as the representatives tend to come to them only at election time and meanwhile delegate vital issues to the unelected elite experts or an insulated technocracy. If both the procedural and participatory aspects of liberal democracy are to be given their due weight, one clearly has to strike a balance between the need for evidence- and knowledge-based governance indispensable in many complex situations and the need for frequent and meaningful checks ensuring accountability to the people. In poor countries even when there are vigorous local governments, one financial problem for local accountability is that many local areas are too poor to have elastic sources of revenue. So even if they have some political power it is limited by their dependence on money coming from above. Accountability is thus separated from financial responsibility. In such a context the standard presumption of the economic literature on fiscal federalism that people can ‘vote with their feet’ in the face of different bundles of tax and public expenditure in different areas does not quite apply. In any case residents of rural communities of poor countries are often face-to-face, and social norms sharply distinguish ‘outsiders’ from ‘insiders’ especially with respect to entitlement to community services.

The recent experience of community participation in developing countries has also shown only limited gains in many areas, particularly in those with entrenched inequality. Lending institutions like the World Bank have long emphasized participatory programs like Community-Driven Development in public goods projects. While several such programs have delivered moderately successfully to the poor, it is not always clear that in the process the local institutional set-ups deficient in empowerment of the poor have measurably or durably changed. Yet there is now scattered evidence of local deliberative democracy sprouting in different parts of the world, and showing results, if not always in terms of policy outcome, at least in the process of claims to dignity and discursive demands for accountability—the evidence is not just from the town halls of rich countries or participatory budgeting in progressive Brazilian cities, but even from high-inequality low-literacy villages of India (as a recent book, Oral Democracy, by P. Sanyal and V. Rao shows for a fairly large sample of village assemblies in south India).

On expertise, while there are issues where local expertise or indigenous knowledge is enough, this is clearly not the case always. When someone in the village is seriously ill the community leaders may send for the traditional healers in the neighborhood, but you may be safer in the hands of experts in the hospital in the nearby town (provided by the market or the state). On an administrative level providing for street cleaning or garbage collection may be easy to organize for the municipal authority, but for power generation and transmission, bulk supply of clean water and public sanitation or developing school curriculum or digital connectivity it will often need outside help and expertise (from the upper levels of the state and the market).

Beyond administrative accountability to the grassroots the case for community, however, ultimately depends on the salience of common cultural bonds and norms for a healthy liberal society. The cultural gulf here between the blue-collar workers and the liberal professional elite has become particularly wide in recent years. Labor organizations, instead of serving only as narrow wage-bargaining platforms or lobbies, can play a special role here in bridging this gulf. They may take an active role in the local cultural life, involving the neighborhood community and religious organizations, as they used to do in some European and Latin American countries, and thus tamed and transcended some of the nativist passions.

A return to community norms and cultural visions, without encouraging exclusivity and barriers is, of course, an extremely delicate task. Success in this will vary from one area to another, often depending on organizations and leaders. It is often the case that dislocations due to market or technological disruptions and the consequent job-related despair and sense of insecurity for those who find it difficult to adapt and adjust to the changes make them turn to faith- or identity-based communities for solace or anchor and alternative sources of pride, which are sometimes not very inclusive. The populist demagogues in different parts of the world who have rallied communities for the cause of ‘taking back control’, apart from being rabidly exclusivist, have, however, rarely devolved power to the local communities. While fulminating against supra-national organizations and regulations, they have, if anything, centralized power at the national level. Paradoxically, in such attempts to strengthen the nation-state the rightwing populists are sometimes in the uncomfortable/unwitting company of state socialists and other anti-globalists on the left, and ideologically pitted against them are the motley bunch of anarcho-communitarians, small-is-beautiful Gandhian thinkers, and Hayekian libertarians, as well as pro-global separatists (like those in Catalonia or Scotland).

Take this larger imagined political community of the nation. Citizens may legitimately feel pride in their national autonomy and cultural history, but one has to be careful that such pride does not derive its oxygen from the majoritarian ethnicity, marginalizing minorities or demonizing immigrants.   One can try to advocate a kind of  “civic nationalism,” which combines pride in one’s cultural distinctiveness (and maybe local soccer teams) without giving up on some shared universal humanitarian values, including tolerance for diversity (as evident sometimes in the composition of those soccer teams).


The state, the market, and the community are all robust coordination mechanisms, each important in its own context in potentially fortifying liberal democracy and each in many ways complementary with the others, but one has to remain vigilant that their excesses or dysfunctionalities do not undermine the foundations of a liberal society.