Populism
populism (n) : the political doctrine that supports the rights and powers of the common people in their struggle with the privileged elite
This is the formal definition of the word populism, but in politics it goes slightly beyond that. Today populism is often connoted with policies which support the common man and are popular, but not always rational (in the economic sense) or in the best interest of the country or state. It is a highly debated topic today since many politicians fall into the tempting trap of following populist policies simply to garner the votes. Another point of controversy that comes up is whether economic reform should follow such policies since the aim of good reforms is to better the economic situation while building political support. Such a debate is nowhere more important than in a country like India where the Byzantine nature of politics and vastness of the country make it difficult for politicians to maintain popular support while taking hard decisions. In terms of economic theory, the J-Curve, or Phillips Curve is the perfect model for this. It shows how certain economic policy decisions can make the people worse off initially but then eventually be much better off. At the same time, it also shows the tempting nature of politicians to follow policies that might end up looking like an upside-down J-Curve.
Politics and democracy in India are almost one-sided with a particular group of voters being the most powerful group during elections. Also, while the voters of India are generally considered to be an intelligent group making smart decisions, they have been known to vote on the basis of the situation directly preceding the elections. The political parties and politicians of India have recognized this and now make a lot of their decisions with this factor in mind. Naidu too faces a similar situation in his state of Andhra Pradesh, and recognizing that he will have to go to state elections in November, he should be expected to play along with the experiences of the past.
In this part on populist measures, I will discuss two main topics. The first is a more general economic discussion on populist policies and the J-Curve. Parts of this will be coming from the discussions on the topic held in class including some the new terminology that was coined by my fellow classmates. The next part pertains more to India and specifically Andhra Pradesh. It goes into the nature of politics in India along with the powerful groups and lobbies that exist. It also discusses the issues that have been important in Indian elections and the populist policies that have been carried out in other states of India and Andhra Pradesh.
The J-Curve
Economists have shown that the model of economic reform resembles a J-Curve such as the one shown in Figure 1. According to this model, after reforms (at time t0), economic welfare of the state goes down and the country enters the "Valley of Sacrifice". The government is willing to enter this valley because it realizes that after a certain time, the reforms are going to pay off and the people as a whole will be better off. So after time t1, the economy gets out of the valley and starts climbing the mountain.
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This model holds in the assumption that the government is implementing
policies that will be beneficial to the country in the end. It has also
been seen that sometimes governments try to implement policies that will
avoid the "Valley of Sacrifice" and go straight to better economic
welfare. So while the J-Curve might be coined the Castor Oil policy,
reforms that never bring hardship might be called the Holy Grail policy.
In this context, the inverse can also be held true. Often, politicians try to implement policies that bring better welfare immediately after reforms but as time goes along, they find the welfare going down. This is usually done in two circumstances, with the second one being of more importance to this essay. In the first case, some politicians try to go for the Holy Grail but fail and see the economy crashing. In the other scenario, the politicians announce such measures just before elections so that the people are better off and more likely to vote in their favor. Populist policies have gained the notoriety of being such Cotton Candy policies that might appeal initially but hurt more than they help in the long run. We saw such measures be announced just before the last elections in Andhra Pradesh and as I argue, should see again. This I will discuss in the next section. |
Another option remains open for Naidu and other politicians. We must understand that this J-Curve while holds in theory and for most cases, it is not a curve carved in stone and one that every economic reform must go through. Actions can be taken by politicians to smoothen the curve or even make it go straight up, the Holy Grail as I have mentioned before. However, this is not easy and in the absence of certain measures to ensure such a scenario, the J-Curve will show up for proper economic policies (one which would ultimately better the economic welfare). Theorists have pointed out a couple of things that can ease the transition. One of the most basic underlying things is the government’s credibility and the people’s trust in it. Only when the people as a whole trust the policy makers and their wisdom, will they believe that prosperity is around the corner. Also, such credibility is needed for certain policies to work. Often it is seen that the government would try to attract investment into the country or state by providing incentives to new industries and services. However, if businesses are unsure about the government delivering on its promises, then they might not ‘bite the bait’. Hence the policy would have failed and things might actually end up worse off. Related to this general idea of trust and credibility is the concept of a central bank which is removed from politics and its pressures. However such a bank does not apply in Naidu’s case and so I will not discuss it any further than saying that one can expect an independent bank to be more credible when it comes to sticking to decisions. Finally one last thing that is pointed out is the idea of having safety nets in place so that people are not suddenly worse off because of some reforms. Such a system applies very well to Naidu because he plans to restructure the government offices and industries to make them more efficient. However, this will push quite a few people into the ‘valley’ since they would most probably be out of a job as a result. To prevent that, Naidu must have another mechanism in place that can either absorb these workers and government employees or provide them with unemployment benefits such as those exist in certain Western countries.
We can say with certain surety that Naidu is considered to be pretty credible when it comes to the business community. Although no hard data exists on this claim, on the basis of the number of new industries setting up office in Andhra Pradesh and Naidu’s popularity amongst the media, I can claim that Naidu is seen to be sincere in his policy decisions. As far as a safety net for the people is concerned, implementing social security benefits is out of the question for Naidu. There is no way that the state exchequer could finance such a system, let alone one only for those displaced due to the reforms (which would be disastrous for Naidu during elections). So the other option is for Naidu to absorb displaced workers. An option remains for him to hire these workers in the many industries that Naidu plans on having AP set up to develop infrastructure.
So finally, it seems that the best time for economic reform would be immediately after elections when there will be enough time for the country to come out of the valley and be better off before voting again. With this mind, Naidu should be expected to take no further actions which might push the state into another valley and at the same time perhaps even implement policies which make the state better off initially.
The Bane that is Indian Politics
To even try to make some sense of Indian politics seems to be like a futile endeavor. However, after going deeper than the common stereotype of the Indian politician, one can begin to identify certain variables that have become important in the Indian democracy. Certain institutions and powerful lobbies have arisen that political parties can no longer chose to ignore. Also, in recent times, it has become clear that the situation at the time of the elections heavily influence the decision of the voters, sometimes even more than the past deeds of the government. While this section deals with political variables in India as a whole, Andhra Pradesh seems to fall into this model and so the arguments are held for the state as well.
Soon after independence, India under Nehru embarked on a path of socialism and a system of government that became highly reliant on a large bureaucracy. Socialism created large factories that employed a considerable number of workers and the bureaucracy kept increasing in size. Soon, these groups became powerful lobbies that due to their sheer size could influence the government’s decision. The best way for the labor unions was to go on strike and no strike is as famous as the great Railways Strike led by the current defense minister George Fernandes. One can imagine the problems that would be created by the world’s largest employer being under strike. The bureaucracy while may not go on strike, it can influence the government in other ways. For example, they may chose to provide biased or false information to the ministers or even take actions on their own. Lastly, one must not forget that these people too are citizens and so vote in every election. However, they may also end up voting as one group and influencing the result of the elections in a drastic way. For example, a trade union might actually declare a sort of a ‘whip’ to its members and oblige them to vote for a certain party. Other political groups exist as well that vote as one. The best example of that is the Muslim vote bank in India. All parties are aware of the power that this vote bank carries and the influence that their votes can have on the election results. So even though they might be a minority, the very fact that the head priest of India’s largest mosque (the Jama Masjid in Delhi) announces who to vote for makes this group a powerful voting lobby. Other groups exist such as the lower castes of Hindus who also vote as one occasionally.
Another factor that plays an important decision making role in Indian politics is the situation at the time of elections. While examples may be found in India to show that Indian voters have a long memory, for most part, memories are often very short and it is the current economic situation that plays on the minds of the voters. Two good examples may be seen in India. The first one is the euphoria that existed after India tested its nuclear devices in May last year. At that time, although the other economic situations did not exist to make the government a favorable one (after all, it had only been a couple of months since they came to power), it was widely believed that had elections been held right after the tests, the ruling BJP would have emerged with a huge majority. On the other hand, soon after that were the elections for the Delhi government, a place where the BJP had great power. But at that time, there was unusually high inflation especially amongst agricultural goods such as onions and potatoes. So, even though Delhi had always been a BJP stronghold, the incumbent BJP completely lost the elections to the Congress Party. Now there are some speculations that the Congress actually hoarded onions and potatoes to drive up prices fully aware of the effect that it would have on the elections. But how does all this affect Andhra Pradesh and Chandrababu Naidu?
We can say with relative confidence that all these peculiarities of Indian politics apply also to a state level and to Andhra Pradesh. So Naidu must keep in mind before elections these factors and take his decisions accordingly. For example, Naidu and his party (the Telugu Desam Party) have traditionally gathered their support from the poorer people in Andhra Pradesh, people like coastal fishermen and rural farmers. However, with Naidu’s ambitious plans of modernizing and computerizing the state, he might come to be seen as an elitist and a supporter of the higher classes. There is also a fear amongst the blue collar labor and lower-rank bureaucrats that computers and their wide-spread use might make their jobs redundant and cause them to become unemployed. This has obviously not gone down well with them and they have been on the forefront of opposing Naidu’s reforms (Shireen, Rediff). Yet another place that Naidu faces great opposition from is the bureaucracy as a whole. Naidu in an effort to make the entire government working efficient, has tried to make the bureaucracy more transparent and corruption-free and so the current bureaucrats are not too happy about that. So while the clerk is certainly not happy about the farmer not having to come to him anymore, the other bureaucrats are also worried that through transparency, their own scams in dealing with money would come to light.
Yet another thing that Naidu has to keep in mind is the voter sentiment at the time of elections. If Naidu continues his current policies, the voters might not be so happy with him at the time of elections and he just might have to accept being in the opposition. So it seems that Naidu would have to accept taking a few populist measures to excite the basic voters in that state. However, before I continue, in all fairness to Naidu it must be mentioned that he has already implemented some good social programs for the benefit of the poor. I will discuss these in the next section. Getting back to the populist measures, a number of them have been taken in the past already by different governments. A great example is one declared by Naidu himself when he was campaigning during the last elections. He declared that he would implement a prohibition on alcohol in Andhra Pradesh. This went down very well with the women voters because there always exists the problem of drunken husbands and family members. However, soon after coming to power, he cancelled that plan, and the reason why is easily demonstrated by the state of Haryana where a similar action was taken. It proved highly successful with the women voters of the state but the prohibition led to a drastic decrease in industry and new investments. Even factories being constructed stopped because they were afraid of not getting workers in the state. All this of course added to the revenue already lost from taxes on alcohol. In the central government as well, populist measures are taken. Subsidies provide the best example where things consumed by the poor such as diesel and electricity to be used in farms are heavily subsidized.
With this introduction and description of populist measures, I will start to discuss what Naidu has already done in the state followed by what one can expect him to now do.