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About Amit Varma

Amit Varma is a writer based in Mumbai. He worked in journalism for over a decade, and won the Bastiat Prize for Journalism in 2007. His bestselling novel, My Friend Sancho, was published in 2009. He is best known for his blog, India Uncut. His current project is a non-fiction book about the lack of personal and economic freedoms in post-Independence India.




Bastiat Prize 2007 Winner

Recent entries

Two Dreams

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The GST Rhymes

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The Fall Guy (and the Stampede)

This is the 51st installment of Rhyme and Reason, my weekly set of limericks for the Sunday Times of India…

A Few Thoughts on Limericks

The 50th installment of Rhyme and Reason, my weekly set of limericks for the Sunday Times of India, appeared today.…

Mentally Deranged

This is the 50th installment of Rhyme and Reason, my weekly set of limericks for the Sunday Times of India…

22 September, 2017

The Paradox of Democracy

This is the 42nd installment of Lighthouse, my monthly column for BLink, a supplement of the Hindu Business Line.

Many political parties are great at campaigning and winning elections. They all botch up governance. Here is why.

I just finished reading How the BJP Wins, an excellent book by the journalist Prashant Jha on the BJP election machine. It left me in awe of Narendra Modi’s political talent and Amit Shah’s management skills. Between them, they crafted a narrative that had wide resonance, constructed a masterplan based on reconfiguring caste alliances, and put together a ground game with booth-level granularity that won the BJP election after election. They redefined political campaigning in India, and the book deserves to be a case study on how to win elections. And as I finished the book, I was left with a disturbing question:

Why is it that the same group of men who are so good at campaigning are so bad at governing?

This is not a partisan question. Every party that has ever been in power in India has aced the campaigning (after all, they won) and provided appalling governance. The problem here is not competence: the BJP showed immense intelligence, ingenuity, will power and hard work on the campaign trail. The problem here is incentives.

The incentives of a party fighting elections are straightforward: they want to win the elections. The spoils of power are tempting, and everyone works hard. But once they come to power, their incentives are not quite so straightforward.

Consider the two things they needed to come to power: money and votes. Let’s start with money. All democratic politics is about the interplay between power and money. You need humungous amounts of money to win elections. Special interest groups or wealthy individuals provide this money. They do it as an investment, not out of benevolence. And when their horse wins, they want an RoI. They used money to buy power; now they want the power to be used to make them money.

So the first incentive for a politician is to make money for the people who gave him money. It’s as crude as that. In a local election, this could mean that a contractor funds a party so he gets pothole repair contracts from them once they come to power. (And of course, he messes up the repairs so he gets another contract the next year.) At a national level, it means policies that affect crores of people get framed to benefit certain funders.

For example, small traders have traditionally been a strong support base of the BJP. What do small traders want? They want to be protected from competition. How does this reflect in the BJP’s policies? They have traditionally been against Foreign Direct Investment (FDI) in retail. What is the impact of keeping FDI out of retail? Less competition, and therefore less value for consumers. So this notional value that the consumer loses, where does it go? To the small trader, naturally. Basically, the government redistributed wealth from common consumers to a special interest group, all no doubt with rhetoric that sounds noble.

At an individual level, think of the big industrialists who backed this government, and the many ways in which the government pays them back will become obvious: the infrastructure projects, the defence contracts, and a million little invisible favours.

Besides funders, the politician in power has to keep voters happy. Specifically, he has to please those particular vote banks that brought him to power. This can happen through direct patronage. It can happen through policies that seem to benefit the vote bank in question. Note that policies that appear compassionate might actually be harmful in the long run.

For example, farmers are a big vote bank. But the average farmer will prefer mai-baap benevolence to deep structural reforms. Imagine a politician telling a farmer: “I will remove the minimum support price, remove all price controls, and abolish APMCs. Like it?” Ya, I know. Forget it and give the loan waiver already.

All politics, therefore, amounts to bribery. Whatever you do in terms of governance is not to make sure the nation is better off, but to give RoI to your investors, and inducements to your voters. Governance does not sell.

Government, of course, does not consist only of politicians but also of bureaucrats. Their incentives are aligned towards increasing their own budgets and power. To the extent that they are rent-seekers, they want to expand the scope of that as well. Why would anyone stop a gravy train they are on?

This, then, is what I call the Paradox of Democracy. A party that needs to win elections can never govern well because it needs to win elections again. And it does this by redistributing wealth from all of its citizens to some of them. I rarely quote myself, but I can’t resist ending this column with a limerick I once wrote:

POLITICS

A neta who loves currency notes
Told me what his line of work denotes.
‘It is kind of funny.
We steal people’s money
And use some of it to buy their votes.’

*

Also read:

Politics = Bribery
The Great Redistribution

Posted by Amit Varma in Economics | Essays and Op-Eds | India | Lighthouse | Politics

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