Populism is the political mantra of the day. For many, the government’s inability to raise fuel prices and its arm-twisting of banks to keep giving loans to farmers for expensive farm equipment are clear indicators of this. Yet, what we are witnessing may be something qualitatively different.
To be sure, there are precedents of throwing some money at the electorate as elections approach. This, along with other assorted spending, was labelled “populism” for many years. The premise for such spending was that voters would be favourably inclined towards the party in power. In return, the money spent by state agencies for political ends would be recouped in future: It being nothing more than future earnings forgone in the present. It worked well for a time.
Things may be very different in future. Post-peak oil crude prices will touch the stratosphere. They will not plateau as they did after the oil shocks of 1973 and 1979. If the underlying crude prices remain near constant, an increase in post-election price of refined output can restore the financial health of the oil companies. But with a massive rise in crude prices, demand for a scale-back can’t be ruled out in future. The result is likely to be very different from a mere loss of revenue.
The story is similar in case of banks lending to farmers for tractors that lie idle. Credit default after loan waivers is just one problem; an incumbent government leaving the mess to be cleared by future governments and banks to bear the losses on their own is a political problem.
When seen together, these are akin to poisoning the fountainhead of economic governance. Forget privatization, this is arm-twisting to the point of fracturing these companies and banks. More ominously, it will give similar “bright ideas” to future governments when they are about to face the electorate.
At hand is the problem of how incumbent governments view their re-election prospects. A better way to improve those chances is to tighten governance, the law and order and justice delivery mechanisms. That’s the way back to power, instead of throwing money in the manner of guests at the head of a marriage procession.
Has populism mutated into a different, more dangerous, variant? Write to us at email@example.com