Populism at any cost



Populism in the sense of what the majority wants is to be expected to dominate policy decisions in a democracy.

But the problem is that the majority of the population often wants immediate gains, even if it is at the expense of greater losses in future. It is because they, including many well-meaning social activists, do not understand the trade-off. The knowledgeable among the politicians who can see the connection would still go for the ‘short-termism’ as that fetches votes in elections. As a result, the policies which they support (as being in longer-term interest) when in power are opposed the moment they are in the opposition. Examples are allowing FDI in retail and reducing oil subsidy which BJP supported while they were the major partners of the NDA government but now object to while sitting in the opposition.

All political parties want government money to be spent on all kinds of subsidies, even if it costs the economy growth of output, jobs and incomes in the longer run. In other words, short-sighted policies may often win over longer-term visions of economic prosperity and equity.

Following the same tradition, just a few months before the elections Rahul Gandhi has suddenly realised that the people need 12 cylinders of LPG a year to cook and suggests that the quota of subsidised cylinders be increased from 9 to 12. The UPA government immediately accedes to the suggestion, throwing to the wind all the meticulous arguments put forward by various expert committees and ministries over the years. In addition, Rahul Gandhi now argues for job reservation for SC/ST candidates in large private sector firms, even if it would benefit mostly the offsprings of already affluent SC/ST families who are sufficiently educated/qualified for such jobs.

The BJP PM candidate Narendra Modi, not to be outdone, proposes that if he comes to power he would set up one IIT and one IIM in every state. Either he has no idea of the state of affairs in many of the newly set up IITs and IIMs suffering from acute shortage of quality faculty and bringing down the brand image of even the better ones or he simply does not care.

 In any case, if Advani could create communal havoc in the country with his Rath Yatra to mobilise the masses to build a Ram Temple in Ayodhya, thereby helping BJP to come to power, what is wrong with a far more benign proposal to set up IITs and IIMs in each state? Or, for that matter Rahul Gandhi taking a helicopter trip to some tribal villages and declaring himself the sipahi of the tribals fighting for their cause in opposing mining in Niyamgiri Hills, after Vedanta has spent some Rs 50,000 crore for an aluminium plant in Orissa.

Compromise solution

After Gandhi’s public stand, is there any space left for any compromise solution? The farmers in Singur, after helping Mamata Banerjee to come to power in Bengal riding on the crest of the Singur agitation, have not yet got back their lands much of which has already been destroyed for agricultural purposes by flyashes and other construction materials thrown in. On the other hand, they did not get jobs or other spillover benefits of the Tata Nano car factory, either.

Aam Aadmi Party, vowing to fight corruption and provide a clean, responsive administration, is going for the easy and the immediately popular option of supplying free water and subsidised power, financed from government revenue, to mostly the middle class households which is the major support base of the AAP. Most of the really poor do not have piped water and hence would still have to depend on the water tanker mafia. Subsidy to power consumers up to 400 units of electricity per month (which means the vast majority of households, not just the poor by any means) even before undertaking any audit of the power distribution companies in Delhi has already started the race for competitive populism in reducing power tariffs with government subsidy in other states (like in Maharashtra). In all such cases the government is footing the bill for reduced tariff, not the power companies. Even for fighting corruption, the AAP leaders are spending more energy on targeting individuals based on hearsays or information supplied by locals, instead on building appropriate institutions.

One can only hope that many of the populist stands of the political parties competing for votes and the over-enthusiastic responses of people tasting power for the first time will be tempered over time. Here one can take the leaf out of the book of the Mamata Banerjee government in Bengal. She is gradually learning the hard way that populist promises of not allowing any increase in bus fares, despite steady rise in diesel prices over time, is only forcing bus owners to withdraw buses from roads, aggravating the misery of the ordinary commuters.

The auto rickshaw unions are unilaterally charging extra fares from passengers which the government is not able to control. No new investment worth mentioning has come into Bengal since TMC came to power. Amit Mitra, the former secretary general of FICCI and the finance minister of Bengal, has now replaced Partha Chatterjee as the industries minister to woo investment from private industrialists by following age-old methods. Mamata has now given up the habit of passing judgment on criminal cases even before the police complete their investigation.

The laws of economics and governance can not be ignored for ever.

(The author is a former professor of economics at IIM, Calcutta)

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