In these columns, I have pointed out often that the pursuit of long-term growth necessarily involves focusing resources on infrastructure, better service delivery, rule of law, an investment-friendly climate, and enhancement of human capacity and productivity. However, democratic politics demands willing consent of the people to govern. Therefore, it is always tempting and easy to offer instant, transient benefits like cash transfers, free water, electricity and transport, and other bonanzas to maximise the short-term gain to the voter. But the first rule of economics is that resources are always limited, and needs are many. Prudent public financial management always involves trade-offs. Short-term appeasement of voters is inevitably at the cost of long-term growth and productivity. Not surprisingly, policies and programmes aimed at the short-term maximisation end up perpetuating poverty and misery.
The Bihar elections, once again, showed us how our politics is mired in this vicious cycle of competitive populism. By now we are all familiar with the NDA’s cash transfers to women and the MGB’s promises of one government job per family and larger cash transfers. In this populist milieu, it is a miracle that our country is somehow recording an impressive growth rate. But it is also abundantly clear that we are just one election away from chaos. Every election is fought as a life-or-death struggle, and nothing seems to be off-limits. If competing political parties broadly agree that economic growth and enhancement of productivity and incomes are vital national goals, then we are safe. Instead of vilifying and delegitimising each other, they can then offer alternative visions of improving public services and promoting growth.
There are many unmet challenges plaguing our economy and society. How do we improve school education outcomes for everybody, not just the children born in privileged families? How do we ensure quality healthcare without out-of-pocket expenditure and the resultant descent into poverty that millions face every year? How do we guarantee equal and fair treatment to all in our justice system and law enforcement? How do we promote a labour-intensive industry and ensure that the growth benefits the vast pool of workers with low skills and low wages? How do we build a sustainable, fully funded welfare system for those in the unorganised sector without a secure job? How do we compress the market chain and add value in agriculture so that our farmers get higher incomes? How do we promote growth of small towns as economic hubs to ensure in situ urbanisation and bridge the rural-urban divide? How do we address the growing challenge of urban mobility confronting every big city? How do we address the dangerous levels of air pollution that are poisoning the lungs of millions and sending them to early graves? How do we make our bureaucracy responsive and effective in public service delivery? How do we curb the ubiquitous corruption that is fleecing the poor and enriching the ‘custodians’ of public interest? How do we decentralise power and give our people a measure of control over their lives? The list goes on and on…
The central challenge our political economy confronts is that there is no electoral majority for economic growth. Our growth is real but skewed. Even skewed growth improves living conditions for all. But only some sections—about 20%—with advantages of an urban life, better education and skills, a middle-class background, a reasonable, if modest, asset base, and support systems are benefiting significantly. In large cities, probably a near majority is touched by growth significantly and has the confidence that its children’s future is going to be better.
For the remaining 70-80% of the population, growth is impacting their lives. Mobile phones, digital technology, UPI, electricity, television, and even a two-wheeler are now available. But growth is not inclusive enough to make them feel secure about their children's future. Beyond the primordial loyalties of caste etc. and the intensive political and factious quarrels, it is this insufficient inclusion in the growth process that is shaping our politics. We desperately need a consensus on inclusive growth, and we need to take concrete steps beyond cash transfers to promote such inclusion. Productivity increases, jobs, and incomes must benefit the bulk of the people who are still at the margins. Time and again we can see that in big cities and economically vibrant regions and sub-regions people are voting for growth. Elsewhere, it is the political skill, organisation, short-term cash transfers, and instant gratification that are determinants of electoral success.
Parties and media need to wake up from slumber. Political tactics and fiery rhetoric will yield diminishing returns unless there is broad consensus on inclusion, backed by definitive steps that give the unorganised sector realistic hope. We are just one election away from potential chaos and retreat. The well-heeled sections benefiting from growth should promote inclusive growth not out of compassion and goodwill but out of good sense and enlightened self-interest. Otherwise, growth will not be sustained for long. There are three dangers ahead.
First, unchecked economic populism and profligacy will soon drive us into fiscal collapse, and growth will come to a painful halt. Second, even if we somehow manage to woo the voters to vote for growth for some time, the fortunate 20% cannot forever be the engines of growth for all the population when productivity gains for the majority are marginal, and growth will slow down precipitously. Third, in a society with intensive, no-holds-barred competition for power, the majority that are not sufficiently impacted by economic growth will decisively vote for short-term maximisation and instant gratification at the cost of service delivery, infrastructure and investment in the future.
A whole agenda for an inclusive growth and productivity gains for all is untapped. Do our parties have the imagination and wisdom to embrace it and bring sanity to political competition? Or, are we so morally and politically bankrupt that a priceless opportunity to transform the lives of the bulk of the people will be squandered?
The author is the founder of Lok Satta movement and Foundation for Democratic Reforms. Email: drjploksatta@gmail.com / Twitter@jp_loksatta
