Politician's Predicament

Karthik Muralidharan looks at the role of politicians in the poor state of India’s governance and delivery systems in his book, Accelerating India’s Development. Again, the situation is more complex than what most believe, which is why the title of that chapter is “The Politician’s Predicament”.

 

To reiterate the point from an earlier blog, India’s choice of “democracy before development” has created unique “political incentives and constraints”. Voters in India can demand welfare and subsidies when India is much weaker, both economically and in government capability. (Remember, the West progressively expanded democracy as it got richer, so by the time the poor started demanding more things via the ballot box, the state had more money and capability). Sadly:

“Weak state capacity contributes to vote bank politics.”

How? When the state can’t deliver to all, well, it can deliver only some things to some people. In a country where most people lack the most basic of amenities, everyone desperately tries to be in that small group who can get at least something. Is it then surprising that a politician who promises to deliver to a subset gets their votes, the very definition of vote bank politics?

 

Muralidharan then gives an example of a service that caters to all Indians. The railways. When the country is poor, it makes sense (both morally and politically) to keep railway fares low to keep it affordable to all. But the railways needs to make money somehow, so freight charges were made abnormally high. This results in the higher price of goods that were transported by rail. It also meant Indian goods were more expensive and thus uncompetitive in the global market. As the railways bled money, where would the government find money to invest in its improvement? This is a great example of the root cause of certain ailments not lying with the politician.

 

Our electoral system is First Past the Post (FPTP). Whoever gets the most votes wins – it doesn’t matter whether that figure is anywhere near 50%. This system, says Muralidharan, esp. in a multi-contestant setup, creates an incentive for a politician to cater to a small subgroup who are enough to win the election (FPTP) instead of trying to cater to everyone. This reinforces vote bank politics:

“Under FPTP, it is possible for politicians to win with intense support from smaller groups.”

He cites Laloo Prasad Yadav’s success as an example. While Bihar as a whole did poorly, his vote bank (Muslims + Yadavs) fared quite well during that period. And those two groups alone were enough to win elections in the FPTP setup. Sometimes, the electoral system creates a certain kind of politician. (Sadly, a second order consequence of such an FPTP setup is to aggravate polarization – no, not the left v/s right kind, but the kind where every small group looks at other groups as a rival for the few resources that the state can actually deliver).

 

Democracies, world over (not just India), create another problem. The asymmetry between who benefits and who bears the cost by policies. Take tariffs. If steel tariff (tax on foreign goods) is increased, it blocks foreign competitors to some extent. It also allows domestic producers to rake in profits. And it means customers pay more. The large benefit is to a small group of companies, while the cost is distributed among a large number of scattered folks (who can’t unify, since they are too distributed) and anyways. Bad for the overall economy, but good for some companies. And elections are very expensive everywhere, so parties can expect some “donations” from such beneficiary companies. The eternal need to fund more and more expensive election needs is universal and has a term – the “democratic tax”.

 

In India, since the state’s capability is limited, a politician can provide access to those services. This makes him important. Providing that access gets him both a “fee” and makes him popular as the man who got things done. This setup creates a perverse incentive for the politician to avoid improving service delivery – after all, it the service was easily and universally available, his role would be removed. It would be irrational for politicians to facilitate such a thing. This leads to a tragic outcome. Politicians, both the honest and dishonest ones, prefer a weak state since it keeps them relevant.

 

Voters don’t think long term e.g. an improvement in the education system would take decades (a generation?) to show up. Voters don’t have such long timeframes in how they vote, yet expect the politician to act on slow and long term policies!

 

Why do politicians hand out freebies like bicycles and TV’s? Why do people accept these knowing fully well that governance won’t improve if they accept such bribes? The sad answer – when the state can’t deliver most services, the poorest will take anything. Something is better than nothing. But this creates a chicken-and-egg problem. Such payouts add to the real election cost, which has to be recovered, via corruption.

 

This quote by a former President of the European Commission sums it perfectly:

“We all know what to do, we just don’t know how to get re-elected after we’ve done it.”