Every five years or so, around election time, one asks these questions: What makes politicians choose good or bad policies? Why do they waste money on populist projects? Why cannot they instead invest in areas that would create jobs instead of handing out doles that don’t last? With crumbling political alliances, these matters have regained importance.
The received wisdom is that politicians splurge blindly to enhance their re-election prospects. In fact, political parties and coalitions spend the penultimate year of their government tenure in implementing innovative—and financially ruinous—populist schemes. Often, this bid to renew their mandate to govern fails, leaving the incoming party in government with few resources. Then begins a new cycle of consolidating government finances that are required to be frittered away in the final years, once again in an effort to secure a victory at the hustings. That is the substance of anti-incumbency. That is, perhaps, the reason for institutional disarray in Indian states and at the Centre.
There is, however, a mirror argument: It has been said, most recently by economist Arvind Subramanian, that anti-incumbency gives rise to profound and perverse disincentives for politicians. If a political party and its leadership know that they have a poor chance of being re-elected, they will do their best to milk the exchequer dry. The bleeding of resources leaves little for investment in economically viable projects. Corruption and its entrenchment in state institutions is the inevitable result of this process.
Both arguments have the force of logic and cannot be seen in an either/or frame. Both need empirical examination. Take your pick.
Is there a middle way, one that links government performance with enhanced chances of re-election? Yes. Of late, political parties with leaders who have focused attention on governance and development have been re-elected. Sheila Dikshit, Narendra Modi and Naveen Patnaik are examples of this trend. They have bucked the trend of a party being in power for five years and then in the wilderness for the next five. All three have strong leadership qualities and the vision to overcome short-term temptations. There are, of course, other reasons for their re-election, but eschewing populism is certainly a factor in their success.
Does anti-incumbency give rise to perverse incentives? Tell us at email@example.com