In the developed world there is something called the political business cycle. The incumbent politicians resort to the manipulation of fiscal and monetary policies just prior to an election, hoping that it would stimulate the economy and thereby improve their electoral prospects. In India, our politicians follow a slightly different political business cycle.
As far as the Indian economy is concerned, there are two seasons – poll season and non-poll season. During the poll season, the politicians talk about poverty eradication and the schemes to facilitate it. In a way, they all become developmental economists during the election season and talk mostly on people’s welfare. Because in an election season the only people who can save them and keep their political careers afloat are the poor and the middle class.
The super-rich, who constitute only 1% of the population, become mostly powerless during this season, though they can still influence the election outcome through their money and PR machinery.
In a free market economy, it is the sheer wealth that rules the roost because the voting rights of the wealthy are proportionate to the number of shares they own. But in a democracy, it is the sheer numbers that decide the outcome. Therefore, there are many compatibility problems between democracy and free market, and their coexistence in the long run results in the free market pushing democracy into the doldrums. In a developing country like India, where poverty is rampant, the poor and the middle class have their numerical superiority and with that strength, they can change the fortunes of the country’s political leaders.
Thus, during election season, the focus remains strictly on welfare economics and its distribution aspect – how to distribute the wealth among the masses. Because the political discourse shifts from the elite spaces, where eggheads discuss how to promote growth through “ease of doing business”, to the village choupals, where the poor and the ordinary discuss who can give them “ease of living”. So, politicians come up with various schemes to alleviate poverty and to provide basic services such as health and education.
It is against this backdrop, Congress president Rahul Gandhi has come up with a scheme called Nyuntam Aay Yojana (NYAY), which involves transferring cash to the poor households. How the poor and the downtrodden, at whom this scheme is directed, will react will only be known when the people will deliver their “mann ki baat” in the form of election results. But the economists, who mostly subscribe to the trickle-down theory, have already started expressing doubts over its viability on the pretext that it would lead to fiscal imprudence.
The BJP leaders started questioning Rahul as to how he is going to mobilize funds for the scheme. To this Rahul answered by saying, “Modi has given Rs 3.5 lakh crore to corporate giants and we will give Rs 3.6 lakh to poor families”. Politics aside, Rahul has a point here. When the government has enough money to bail out big corporations in the name of bank recapitalization, why can’t it mobilize money for cash transfer scheme to the poor households?
Notwithstanding these right noises, post elections, the outlook of the leaders changes completely. In the Indian elections, which are increasingly becoming a battle of perceptions, the person who manages to promote himself as the messiah of the masses comes to power. Once in power, the leaders discard their seemingly welfare orientation and slowly turn to neo-liberal economics with a strong orientation on laissez-faire. With the threat of people’s mandate behind them, they can relax for full five years. Now their credibility will no longer be affected by the people’ mandate. Because the discourse shifts from the village choupals to the elite spaces where the discussion revolves around how to bring about more “reforms” to promote growth.
Post elections, governments derive their credibility from the World Bank’s ease of doing business index and Moody’s sovereign rating. Now how a leader can make his government get into the good books of the WB and the Moody’s? There is only one way: to follow their diktats. Reduce subsidies to the have-nots to maintain fiscal prudence, bailout the corporations that are too big to fail, introduce tax cuts to promote trickle down, alter the labor laws to make hire and fire easy, and so on. And all these measures go by the name of “reforms” to deceive the commoners.
It is time for Indian politicians to change tack and look into the problems faced by the common people instead of blindly emulating the neo-liberal policies followed by the developed world. Even in the US people are crying for a New Deal, more precisely a Green New Deal, which is meant for resolving the twin problem of inequality and climate change. After arduously pursuing the mirage called trickle down, the people of the US are endearingly recollecting the Keynesian ‘New Deal’ introduced by F.D. Roosevelt to pull the US out of the great depression, which created millions of jobs.
The widening inequality is increasingly becoming a concern all over the world. Therefore, Indian politicians, instead of complying with the political business cycles, should take a consistently pro-human development stand. They should prioritize bringing about improvement in the living conditions of the poor and the ordinary. For this purpose, the government must not hesitate to levy more taxes on the super-rich.
There is a notion peddled by the neo-liberals and the right-wing forces, who mostly go hand in hand, that when the super-rich are given tax cuts it results in trickle down in the form of more employment and more wages and bonuses. This notion, however, proved to be utterly wrong after Trump’s recent tax cut only made the corporates to indulge in share buybacks instead of creating more opportunities. So, the notion that more taxes on the rich prove to be anti-growth is only fictitious.
Depending completely on growth for poverty alleviation is not only a long and arduous process, but it also widens the gap between the haves and the have-nots that could lead to social strife. Government support to the economically and socially vulnerable sections through various means such as income and employment guarantee and the provision of free basic services such as health and education is essential to mitigate the suffering of the masses who are left out of growth.