Governance is one issue I have been repeatedly focusing in my discussions on the issues plaguing the State of Manipur. I am yet to get tired of it; but rather I feel the governance cost and failures become more apparent by the day as the various issues get unfolded and attempts are made to address them.

In one of my recent inputs in this column I had roughly estimated that the inefficiency cost the State incurs annually due to non-performance of duties by the State and Central government officials to be about Rs. 20 million (not much, it is only Rupees two crores only per year!).

But the wastage and the long run damage it is inflicting to the society and economy of Manipur is much higher, and, in fact, Manipur is already much into anarchy. I owe an on explanation why I say so.

Formal and Informal Institutions

Without going into much of the technical definitions and keeping in mind the issue of governance, let me put it in plain terms that the government departments and functionaries constitute the formal institutions, and the non-governmental bodies are the informal institutions.

There is a lesson from global development experiences on the relative importance of these two. The informal institutions have low start-up costs (economists call it fixed costs) and are very efficient in performing low scale activities.

But as the scale of the activities expand the cost of performance (marginal cost in the parlance of the economists) rises prohibitively. The cohesion of such institutions is ensured by relationship – it is a relation-based institute. AMSU, DESAM, MSF, and ATSUM are bound by the family of studentships members of all belong to. AMADA is bound by the relationship of common interest to stop drug abuse.

Formal institutions are the departments of the government. They have huge start-up costs, but their marginal cost declines and performance effectiveness rises as the scale of activities expand.

It is their effectiveness which has attracted trade and investment to a region and thus fostering growth. Unlike the informal institutions, they are ruled-based organizations.

It is this rule-based effectiveness which would establish a sustainable framework for trade, investment and long run transformation of a society and its economy. Well this is what international development experience tells us.

The Performers

Having explained the difference between the formal and the informal institutions, we can now look at the daily happenings in the State and see who establishes governance. This examination would establish the very high cost the State now incurs to get anything done and the governance moving.

The near restoration of order in education in the valley by putting a halt to the use of unfair means is the result of endeavours by the informal institutions. I have no complaint against it; it is wonderful and good.

But the point is that these organisations spent time, effort and other costs (including anger in certain circumstances) in order to come to the present stage. Wish these costs incurred by the relation-based organisations were the only costs. Unfortunately it is not so.

There are other much higher fixed costs incurred by the non-performing formal rule-based (government) institutions. The society has been paying salary to the officials of the Education Department and the teachers who did not do anything to affect an improvement in the educational atmosphere.

So we have incurred a double cost – a cost by the performing informal organisations and another heavier cost by the non-performing formal institutions.

A shop or a restaurant is caught on a wrong foot by an informal organisation, and a punishment is meted out by the organisation. The cost incurred here by the informal organisation is in addition to the expenditure borne by the society to maintain the bureaucracy, police, municipality bodies and the judiciary.

A criminal is caught or identified by a relation-based institution and punishment is meted out again in the form of dismantling/burning down the house of the criminal and banning his further inhabitation in the concerned locality.

This cost incurred by the informal institution in trying to identify the criminal and burning down the house besides the cost of the lost property itself is in addition to the costs incurred by the society to maintain the law enforcing agencies in the State.

We can continue multiplying the examples. But the point I am driving at is that for everything that gets done in the State today, there are always double costs involved – one by the informal and another higher by the formal government departments.

In other words, Manipur has now become a very costly economy, spending double expenses on every function. This definitely must be eroding on the capability of the economy as a whole to perform and diversify.

Co-ordination or Anarchy

Global development history tells us that the two types of institutions have their own role, significance and also there is need for mutual coordination in functioning. It is also firmly established by this history that once the formal institutions have been created, it is paramount that they perform.

This is because when they fail to deliver and the relation-based institutions start overtaking all their functions, there arise
(a) a sure sign of looming anarchy,
(b) reduced attractiveness of the land for trade and investment purposes, and
(c) near long run impossibility of establishing a rule of law.

It is exactly with this fear that we would expect the State Government to capitalise on the positive results generated by the efforts of the informal institutions in various fields and carry the State forward towards rule-based governance.

This is where I am most afraid of for the speed with which the government has become extortionist itself is quite frightening. Earlier too the administration was corrupt, but it was to some extent tolerable for there was an element of quid pro qua.

But the way various bandhs are befalling the State recently pressing for announcement of selection interviews implies that even this quid pro qua is gone.

In fine, the situation in the State is now ripe for the insurgent organisations to capitalise on unless the government restores rule-based governance. Only future would tell who wins the battle of the wits.

It is a situation no amount of army can salvage; they can only add to the chaos as they have been successful so far.