The new political entrepreneurs

The new political entrepreneurs

There is little that is common between the Reddy brothers of Bellary, Karnataka, and Madhu Koda of Singhbhum, Jharkhand—save one thing. They have access to mining resources: the Reddys as private extractors of iron ore and Koda as a chief minister who presided over a mineral-rich but lawless state. Call it political rent-seeking.

The result, however, is identical: trouble. In the case of the Reddys (Janardhana, Karunakara and Somasekhara), it is the B.S. Yeddyurappa government that has been roiled. In Koda’s case, the problem is more personal. Income-tax department officials claim to have found evidence of illegal transactions and investment to the tune of Rs2,000 crore. One such investment was in, of all things, Liberian mines. Such money is also useful for contesting elections and engineering legislative majorities where none exist.

It is hard to pin such behaviour onto a single category. In one case, it is a combination of corruption and abuse of authority. In the other case, it is the use of money to acquire political power for personal ends, way beyond the relaxed standards that prevail today.

In both cases, however, it is rent-seeking of a new kind. Traditionally, rents earned from getting licences for business and resource extraction were used to make money. Private players would seek them and governments give them. Now, these rents are being used to seek political power and use that power to further one’s business interests, often illegal. This is very different from rent-seeking as it is usually understood. In that case, the damage is primarily economic. The resources are not used productively and are wasted. In the new situation, the political system is under threat. The problem is more acute in a country such as India. Democracy of the Indian variant is expensive: It takes huge sums of money to get elected to public office. If a few individuals with enormous resources can fund large numbers of candidates for elections to state assemblies and Parliament, then they have a virtual stranglehold over governments. Such accusations have been made against certain business houses in the past. But given that the primary interest of any businessman is making money, the potential for damage is always limited, if it existed at all. Not in this case: The danger is much greater, given all the imperfections that accompany democracy in India.

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