As politicians dismantle the levers of power, whether it is subsidies, allotment of land or spectrum, etc, they fear the prospect of losing the power of patronage much more than the power to extract rents therefrom, says Sonali Ranade
We have cut down many a forest to accommodate the torrent of advice that pundits and columnists direct at politicians, arguing about the superiority of one set of policies over the other. We take it as axiomatic that politicians, whether in power or not, will weigh one against the other and choose the optimum, if not the best. At some basic level, our faith in the politician's ability to make discerning choices is almost childlike. If politicians don't follow the right prescription, then either they are ignorant, or they are corrupt.
We assume ignorance and corruption distort the choices politicians make, leading to sub-optimal policies or processes. Rarely do we step beyond clichés to examine what considerations really weigh with politicians while they make their decisions or what their motivations are.
The fact is, politicians are highly talented people and must be assumed to make rational decisions. The intriguing question then is -- why don't politicians make the right choices even when they are so obvious to us, and to them?
When the United Progressive Alliance 2 took office in 2009 with an enhanced majority, I remember the Bloomberg terminal that I use light up in delight. The stock market opened with an eight per cent gap up. Soon the greatest bull of all, Rakesh Jhunjhunwalla, was on air saying all the stalled reforms held up by the Communists would now get through. Nirvana was at hand and the atmosphere was electric, bordering on euphoria.
Yet, three years later, reforms are stalled as never before; there has been considerable slide-back in fiscal rectitude, a massive proliferation of subsidies, and a balance of payment crisis reminiscent of the early 1990s looms.
A grim policy paralysis grips the government; the ship of State appears to have to no one at the helm, and the atmosphere of doom and gloom is pervasive. What went wrong?
Yes, corruption scandals eroded the legitimacy of UPA-2; there was a world financial crisis to contend with, much of the world is in recession for over three years, and the Marxists in Sonia Gandhi's National Advisory Council hijacked the government's agenda.
No one quite knows who is in charge, assuming somebody is. Nevertheless, it is hard to fathom why the political classes as whole, who aren't a suicidal bunch, are rushing lemming-like over the cliff. Is there a method to their madness?
The question really boils down to, what makes a modern politician tick? What is his or her motivation as he/she goes about his/her job? It is wise to eschew some of the obvious clichés and myths built around politicians and reinforced by the State through decades of deification of past leaders.
We will not deal with saints but ordinary mortals here because mortals are all we have beyond the deliberate mystification of the powerful. Also, disregard the excessive rhetoric used to castigate politicians. Politicians are no more venal or morally challenged than us.
On the other hand, it takes an extraordinary amount of courage, fortitude, tolerance for ambiguity and self-confidence to emerge with a modest amount of success in politics. We are dealing with highly talented, if differently talented and motivated, bunch of people. So the explanation for their behaviour, no matter how strange, has to lie beyond the usual hackneyed clichés. We can do no better than to the greatest political scientist of them all, Niccolo Machiavelli, for insight into what makes politicians tick.
Machiavelli's most famous quote says it all. 'The first duty of a prince is to preserve his principality,' said the master strategist. That is as true today, as it was in his time. As with any quote as pithy and profound as this, we can read it at many different levels. But perhaps the most insightful of all, and the one we are programmed to ignore, is this: The first duty of a prince is to preserve his power over his principality. For if the prince has no power, or is gradually losing it, then he can do no good and will soon be out of power.
This is as true of ordinary individuals and institutions as it is of politicians. Self-preservation comes before all else. A little thought will show that it simply cannot be otherwise. As we say -- Jaan hai toh jahaan hai. If, and only if, you have your life, then the rest of the world exists for you. In short, if you chose to be a politician, then the first, if not the only, rule of the game is to preserve and enhance your power. The rest matters, but only after you have ensured your power is intact. And what you accomplish must be directed to the goal of enhancing your power. It is a closed vicious circle.
If the insight offered by Machiavelli appears trivial, it is because we tend to apply it to trivial cases trivially. So let us turn to UPA2 and apply Machiavelli's insight. What has it been doing? Preserving its power, of course, though not with much success. Consider this:
UPA2's overriding strategic goal has been to somehow restore its hold over the masses that it lost after Rajiv Gandhi's fall from grace following the Bofors scam which it never quite recovered since.
The Congress has always relied on the Nehru/Gandhi mystique to provide a mascot around which it puts together a centrist coalition of power-brokers and regional satraps. Rajiv Gandhi's demise left it without a mascot who could also serve as a prime minister.
So the party and the government's overriding strategy has been to groom Rahul Gandhi for the job and to install him in office as the leader of the party and government. To achieve that goal, UPA2 lurched heavily to the left, introduced a plethora of populist schemes designed to woo the poor in rural areas, expanded subsidies to the middle class and put all tough reforms on hold.
It was able to follow such a disastrous course for two reasons. First, the very success of past economic reforms created a spurt in economic growth, which gave the government disproportionately larger tax revenues and a surplus that it was free to deploy in populist schemes. In a sense, reforms became the casualty of their own success. Second, the resilience shown by the economy following the 2007 crash led the politicians to believe the economy was in a new growth orbit that could be taken for granted. That was a dangerously mistaken assumption for which the current slump is the price we have to pay.
But it is not the UPA2 alone, but the political class as whole, that resists economic reforms no matter what they say. Again Machiavelli comes to our rescue. Every reform involves the politician shedding some element of discretionary power in favour of the impersonal market. As politicians dismantle the levers of power, whether it is subsidies, allotment of land or spectrum etc, they fear the prospect of losing the power of patronage much more than the power to extract rents therefrom.
In short, the loss of power per se is more important to them than the money they can make. If that is not obvious, think of it this way. As far as personal compensation and political funding go, the politician's ability to extract that is limited only by human ingenuity. Think fodder scam, for instance. They will find those avenues whether we reform or not. But while reforms reduce avenues for corruption and enhance economic choice and efficiency for us mortals, they reduce the ease with which politicians can retain power.
Politicians resist reforms to preserve their power and themselves. The principle works down the line. The Union will not shed power to the states, the states will not shed power to cities and the more powerful politicians will not delegate to their lesser brethren. Preservation of power trumps all as Machiavelli so pithily explained.
So why hasn't Rahul Gandhi been installed in power? Having paid such a terrible price in economic terms, that should be a trillion dollar question by now. I have no clues to offer and must leave that to the durbar's journalists. As I said, I don't buy the politicians are fools or venal theory. So why don't politicians see reforms are in their interest as well?
By and large, reforms have been implemented when there was no other option but. It was the bankruptcy of 1990-91 that led to the IMF-dictated reforms in the '90s.
Despite their enormous success, politicians have not been able to articulate an overarching vision of how to compete for power in the changing milieu. The game they play is something of a prisoner's dilemma. The party of reforms, by reforming, loses the power of patronage and is opposed by a populist backlash while the opposition gains electorally by fanning populist opposition. The first mover loses unless the opposition, regardless of which party, also moves in the same direction. So obviously, nobody wants to make the first move.
The dilemma as posed permits no easy solution unless one is prepared to transcend the game and look at forging new constituencies that benefit from reforms in an obvious way and will therefore fight for it politically. One obvious way to cut the Gordian knot is planned urbanisation. That is a humongous economic multiplier that touches the ordinary lives of ordinary people and is self-financing in a way that reinforces economic growth.
Imagine a small town in Uttar Pradesh, where you took all the savings of the people and promised them in return modern, well-built apartments, with toilets, modern sanitation, clean wide roads, etc. Is that rocket science? Will it not motivate people if given a credible plan? Creating constituencies for reforms is as easy as that. But for it to work, politicians must follow Machiavelli at a higher plane of thought. To preserve power, you have to create a constituency for reforms or perish.
Hopefully, we will be bankrupt again by this year-end.
Sonali Ranade is a trader in international markets
