Home > opinion > Delhi’s own Hugo Chavez

The biggest impediment to prosperity is government policy favouring interest groups, for interest group politics comes at the cost of individual economic freedom crucial to achieving higher living standards. In recent years, India’s crony capitalists have been at the receiving end for tuning government policy to their favour. With the election of the Aam Aadmi Party (AAP) in Delhi, it is interest group politics tilted more towards the lower classes that may be in store.

Much of public attention has been focused on AAP’s election promise of providing freebies. Yet, a core belief of AAP, in the superiority of decentralized, participatory democracy over the more top-down administration of today, has been ignored. AAP leader Arvind Kejriwal’s 2012 book Swaraj spells out his detailed plan for the country that primarily revolves around the ability of local administrative units (Gram sabhas and Mohallah sabhas) to be more responsive to the choices of local people.

If only Kejriwal’s case was to decentralize power and let smaller communities decide their own local policies, there would be great merit to his case. But while creating hopes of replicating such a model of smaller states competing to offer greater economic freedom to citizens, Kejriwal elaborates on a vision where policy is more reflective of the desires of an important interest group: the common masses.

Former Venezuelan President Hugo Chavez’s tenure over a decade is known for its elaborate social security provisions for the poor funded by the country’s rich oil revenues. An equally significant aspect was the decentralization of power to the level of communes which decide issues ranging from simple local level public administration to the nomination of judges in the Supreme Court.

Much alike, Gram sabhas in Kejriwal’s participatory model would influence policy making at the national level. Through the ballot, citizens at the local level would regularly vote on issues to draft policies for the whole country. As Kejriwal claims, with a number of examples, local level participative democracy could also bring in better accountability in the implementation of government schemes.

Indeed, as with many alternative visions, this could have some positives as compared to the current system that is far from ideal. Forcible land acquisition, for instance, is one issue that is unlikely to pass the test of voters especially in rural areas. But take issues like retail investment by foreign supermarkets that could disrupt the livelihood of local shops but crucial to creative destruction, and the prospects of economic growth under participative democracy don’t look too good.

Landowners may be saved from the tyranny of state-led acquisition of land to serve the demands of crony business groups. But the same landowners are unlikely to find much support from Gram sabhas that insist on community voting to decide on whether they can part with their land to WalMart. What AAP, in effect, wants to replace the current system with is simply tyranny of a different kind.

It is not as if Kejriwal is unaware of such real problems that participatory democracy poses. In his book, he recognizes the threat from Khap panchayats to certain groups, only to say that Gram sabhas will not be allowed to create laws—a job that he believes should be left to the judiciary. But this merely goes to show that participatory democracy will not always be very different from majority rule.

In any economy, vested interests of the majority are often likely to be entrenched well into the system. This prevents change that is fundamental to the achievement of general economic prosperity. AAP, with its version of participatory democracy, will only be transferring damage that such interest groups already cause from higher levels of government to the more local levels.

Natural Order runs every Monday, with a libertarian take on the world of economics and finance.

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