Blockbuster Populism

The perceived ‘game changer’ Food Security Bill, is set to be introduced in the Monsoon session of the Parliament and finds little opposition from the political parties. Inspite of a widespread belief that the Bill is bad economics, it nevertheless appears to be ‘good politics’. Parties already are engaged in ‘competitive populism’ by pitching for more freebies that offered in the bill. Thus debate on sound economic foundations is giving way to competitive populism. Even in the past, parties have chosen populism over economic feasibility, moral hazard or even the long term welfare of the population.

In fact the current United Progressive Alliance (UPA) government has surpassed all other governments in the recent past in terms of offering what one can term ‘blockbuster’ entitlements. Like a redux of heydays of socialism of the past, today we seem headed to an entitlement centric economy. Given the repercussions of the entitlement centric regimes, the current paper explores the possible reasons behind the reluctance of the political parties in opposing these bills.

We take refuge in the game theory and more particularly Prisoner’s Dilemma in seeking answers. Exhibit I demonstrates the game between political decisions and the citizenry.

Source: Developed by the author

When government focuses on reforms resting on consumer and entrepreneurial freedom of choice, growth rates and consequent multiplier effect will ensure the economy taking great strides. A citizenry informed about the choices and persuasive towards entrepreneurial motivations is likely to benefit further. Yet unequal access to information often makes citizenry unable to grasp the policy implications.

Furthermore, conditioned for years in a dole centered economy, discontents emerge creating obstacles for smooth implementation of the reforms. While citizens in an environment of free choice and progress based on sound economic principles, populist policies are unlikely to receive support. Besides, any apparent tinkering with economic freedom might result in a backlash. Populist schemes that restrict choices result in choice dictatorship and also impact productivity. Incomes may increase, but there may not be linked to production and this may just increase disposable income without corresponding increase in the output.

Further freebies may even distort traditional preferences. Supplying rice for ₹ 1/- in Northern Karnataka is likely to see a shift towards rice consumption and the implications for jowar farmers are untested. Yet such populist rarely get opposed and in fact competitive populism results among the political actors.

Faced with barrage of populist schemes, the behavior of the political parties starts to center on its self survival. Exhibit II represents the choices political parties (particularly the opposition) have when the ruling party chooses to exhibit increasing degree of populist tendencies.

Exhibit II

Source: Developed by the author

Decisions based on sound economics may imply hard times for the citizens at least in the transition period. When discontents emerge, the political opposition would be more than keen to harness this ‘anger’. Its own cost benefit analysis would suggest irrespective of benefits to economy, its personal growth rests on opposing these decisions. It is no wonder that we find the opposition at its destructive best during debates on bills that rest on strong economic foundations. Even otherwise, support to these decisions would only help the ruling party to corner all the credit for itself in the long run.

Suppose the ruling party comes up with a ‘blockbuster’ populist scheme. Examples abound from NREGA to Food Security Bill. Both these and in other cases, opposition becomes tame and allows the passage of the bill. The opposition finds itself in a catch. The ruling party wants to corner the credit for the bill and exploit the accompanying electoral dividends. Blind support thus would not ensure the opposition getting the credit.

Opposing the bill gives the ruling party and opportunity to hammer home the non-cooperation of the opposition in implementing ‘people friendly’ measures and thus perceivably generates even greater electoral benefits. Implied, the strategy of the opposition is to play a minimax game. In other words, minimize a possible worst case scenario. Thus the opposition comes up with a competitive populist idea and try go one up over the ruling party. The political one upmanship might hurt the economy in the mid to long run but short term costs and benefits may become too import to ignore for the political forces.

Moreover, the relative information asymmetry between the political policy makers and the citizenry and apparent inability of the citizenry to evaluate long run losses enables the ruling party to get away with economically populist measures leaving the job of cleaning the economy to some future government. As John Keynes once remarked, in the long run we are all dead, why worry about the future. Maybe this is the unintended consequence of this statement.

It may be worth noting while there may exist few dissenting voices; they are unlikely to succeed in their pursuit for sound economic policies. To borrow from Mancur Olson, the costs for these dissenters is likely to concentrated among the few while the possible benefits will be diffused in the large section.

Yet the opposite would be true for populists. The coalition generates concentrated short term benefits for influential and decisive voter groups yet spreading the costs among a larger base of the country’s population. Unless this is reversed, wherein the reformists become a strong votebank of its own, the situation is unlikely to change.