CC-14 Unit 6

Meaning of Ins tu ons:

Man is a social animal. Being social creature, he has some wants and assigned aims to comply them.

Ins tu on is a way of thought or ac on of some prevalence and permanence, which is embedded in the habits of
a group or the customs of the people.

To put in the words of E.S. Bogardus, “A social ins tu on is a structure of society that is organised to meet the
needs of people mainly, through well established procedures”.

According to C.H. Cooley, “An ins tu on is a complex integrated organisa on of collec ve behaviour established in
the social heritage and mee ng some persistent need or want.”

Characteris cs of Ins tu on:

On the basis of above defini ons, main characteris cs are as under:

(a) Ins tu ons are purposive in the sense that each has its objec ves or goals to sa sfy social needs.

(b) They are rela vely permanent in their structure.

(c) They tend to become tradi onal and enduring.

(d) Each ins tu on is a unified structure and func ons as a unit.

(e) The ins tu on is necessarily value laden and tends to become a code of conduct.

(f) Each ins tu on is affiliated and derive rights from some or other society.

A country’s social and economic ins tu on dominate the process of economic development. They determine
a tudes, mo va ons and condi ons for development. If ins tu ons are elas c and encourage people to avail
economic opportuni es and further to lead higher standard of living and inspire them to work hard, then
economic development will occur.

On the other hand, if they discourage all this, the economic development will be hampered and adversely
affected. This has been rightly observed by UNO that economic development is impossible in the absence of
appropriate atmosphere. So economic progress will not take place unless atmosphere is favourable to it.

The people of the country must desire progress and their social, economic, legal and poli cal ins tu ons must be
favourable to it.

Emphasizing the significance of these ins tu ons in economic development, Prof. A.K. Cairn-cross says,
“Development is not governed in any country by economic forces alone and the more backward the country, the
more this is true. The key to development lies in men’s mind, in the ins tu ons in which their thinking finds
expression and the play of opportunity on ideas and ins tu ons.”

Therefore, right king of ins tu ons or growth promo ng ins tu ons are a pre-requisite for the rapid economic
development of a country. These ins tu ons may be called growth promo ng which permit or s mulate, rather
than impede, the adop on of new techniques and the forma on of produc ve capital.

If ins tu ons are favourable, will to a empt economic development is intensified and it increases.

If this willingness is strong, ins tu ons will be re-modeled to accommodate it. Growth promo ng ins tu ons may
so structure the environment in which factors of produc on meet that the rate at which combina ons occur, 1s
accelerated. This accelera on might involve the discovery of new types of factor combina ons or an increase in
those already known.
According to Prof. W.W. Rostow, “For economic progress, a country must have mely changes in people’s
tendencies and needful improvement in social ins tu ons and appropriate changes in poli cal and social
condi ons.” Thus, it becomes important to recognise that the socio-poli cal environment may or may not be
conducive to economic progress.

Certain religious and social a tudes are more favourable to development than are others.

Things to Know # 4. Impact of Ins tu ons on the Growth of Economic Development:

1. General A tude to Economic Effort: Ins tu ons have greatly influenced people’s a tude towards work, will
and efficiency for economic development. They will be growth oriented if they inspire people to work hard to
undertake risks. If they do not do so, they will be growth retarding. This mean that ins tu ons promote or restrict
growth to the extent, they accord protec on to effort.

For this, nobody should be allowed to share the earnings of others and suitable differen a on in remunera on
must be maintained according to effort. The ins tu on of private property, economic freedom and laws of
inheritance boost economic development as they ensure reward for effort and provide freedom of ac on.

While, on the other hand, exploita on of labour, defec ve land tenures, absentee landlordism, feudal system,
slavery, joint family system and casteism all subdue the incen ve to make economic development.

2. Technological Knowledge: As there is lack of technical knowledge in under-developed countries, resources are
lying unu lized and strict ins tu onal structure is not in a posi on to accept technological change.

In this way, there is ample chance to u lize abundant capital and special emphasis on research are other requisite
condi ons for development and use of new techniques. In fact, ins tu onal structure must be favourable to the
commercializa on of high entrepreneurial class. Hence, it is clear evidence that social ins tu ons have been much
influenced by technological changes for economic progress.

3. Entrepreneurship: The growth of entrepreneurship of a country depends on its ins tu onal structure and value
system. They are necessary for the automa c increase in supply of entrepreneurs. Therefore, high suitable
pres ge and suitable reward is the foremost condi on for the success of entrepreneurship. Less restric on be
imposed and excessive taxa on may be avoided.

An effec ve supply of entrepreneurship will only occur in a society if accumula on of material wealth well up in its
hierarchy of social values and confers sufficient monetary rewards to the successful entrepreneurs. It is called
‘pecuniary culture’ which helps to smooth the path of the entrepreneur, channelizing his energy and mo va on in
commercial, financial and industrial direc ons.

To put in the words of Prof. D. Bright Singh, “For self-development in enterprise and risk, social and ins tu onal
terms must be fulfilled.”

4. Labour Produc vity: The social set up of a country affects the produc vity of labour to a considerable extent.
Meritorious development of labourers is not possible due to unfavourable change in social ins tu ons. This
means that the size and quality of labour force are greatly influenced by social ins tu ons and value system in a
society.

5. Saving and Capital: The ins tu onal structure of a country exercises a great influence on the will and power to
save and capital forma on. To promote capital forma on, proper legisla on protec ng the right to property
should be made. In other words, suitable ins tu ons must provide legal security to protect private property
against misuse by the government and of government property by individual.
If ins tu ons pay due honour to material capital, then investors are encouraged to invest their money.

Consequently, society will also save and rate of capital forma on will be s mulated accordingly. Hence, people’s
sense of conducts, behaviour, customs gets appropriate changes in accordance with ins tu onal structure of the
society, thereby social ins tu ons have impera ve influence on saving and capital forma on.

A study of UNO reveals that for a aining economic development, social value and ins tu onal structure need
mely change.

In the same manner, Prof. Rostow favoured changing a tude of the society in order to promote investment.
Emphasizing this aspect, he stated, “The rise in the rate of investment requires a radical shi in society’s effec ve
a tude towards fundamental and applied science; towards the ini a on of change in produc ve techniques;
towards the taking of risks and towards the condi ons and methods of work.”

Things to Know # 5. Some Ins tu ons and Economic Growth:

1. Private Property: The ins tu on of private property possesses a significant influence on people’s desire to work
hard, to save and invest. It is a legal right to have private property by which people have full independence to use
and acquire the property and are restricted to use of other’s property. The right of property may rest in a private
person or in a group or in a public authority.

According to Prof. Lewis, property is a recognised ins tu on in the world; without it the human race would have
made no progress whatsoever, since there would have been no incen ve to improve the environment in which
one lived. Ins tu on of private property ini ates people to work hard, to accumulate wealth and invest their
savings.

Prof. Meier and Baldwin also stressed the need of change in the ins tu onal structure. They opined that,
“Economic development of sufficient rapidity has not taken place within the present cultural framework. New
wants, new mo va ons, new ways of produc on, new ins tu ons need to be created if na onal income is to raise
more rapidly.”

The transi on from a tradi onal agricultural sector to a modern industrial economy must necessarily involve
tremendous radical changes in the exis ng set up of the society, social a tudes and mo va ons of the common
masses.

To bring change in social structure is an extremely difficult and long term process as any such effort is bound to be
resisted by some reac on in the society. Any abrupt change in the socio-economic structure is fraught with
dangerous consequences. It is always resisted by those whose social status is adversely affected by it.

Regarding this, Prof. Gunner Myrdal has aptly remarked, “Economic policies are undoubtedly easier to carry out
than are social policies that challenge vested interests, violate deep seated inhibi ons, offend cherished tradi ons
and beliefs and work against the heavy weight of social iner a.” Therefore, any change in socio-economic
structure needs a slow pace of process.

It does not imply a rapid overthrow of the exis ng pa ern but the process must be evolu onary otherwise it will
result either in apathy or revolt.

This does not mean that there should be no social change in a society. In fact, ins tu onal change is a pre-
requisite for rapid economic growth. In a sense, all resistance and sacrifices involved should be considered as a
cost of the development process.

Prof. Okum and Richardson have studied that there are values and ins tu ons, many of which prevail in less
developed countries, that offer resistance to economic growth; their alterna on or elimina on, a er a painful
process, cons tutes a ‘social cost’ which a country must bear as part of the price for development.

In the same fashion, Second Five Year Plan of India was convinced of this fact and made it clear that the task
before an under-developed country is not merely to get be er results within the exis ng framework of economic
and social ins tu ons but to mould and refashion, so that they may contribute effec vely to the realiza on of
wider and deeper social values.

In India, various social ins tu ons such as joint family system, caste system, law of inheritance, religious
tendencies, child marriage and veil system had influenced country’s economic development considerably. This has
obstructed the rapid speed of development of modern technical knowledge.

As a ma er of fact, modern technology, developed agricultural machines, qualita ve seeds and chemical manures
are used s ll in a limited quan ty. Caste system and joint family system have restricted the movement and
efficiency of labourers. The law of inheritance has misappropriated the property and land produc vity is
influenced by fragmenta on and sub-division.

Thus, need for social change cannot be denied. But at the same me, it is the need of the hour that human
discontentment should be avoided at all costs and these changes should be introduced in such a manner that may
disrupt the exis ng culture as li le as possible.

So cultural change must be selec ve and rapid progress will occur by making the maximum u liza on of exis ng
system rather than by a emp ng a frontal breakdown of the culture and ins tu onal set up.