Govt performance shows strong leadership no guarantee for good economics

The data and the feel after six years under PM Modi prove a strong leader doesn't necessarily give us decisive economic leadership unmindful of immediate political risks

It’s time we analysts of Indian politics made two confessions. First, that we’ve been debating the wrong question for some time. And second, that we’ve been peddling the wrong answer as well.

The question on top of the mind ever since the 1991 reforms has been: Does good economics make for good politics? Translated: Can you reform the economy, shrink the government and bureaucracies to cede some power to the markets, generate growth, and get re-elected? And if not, what is it that you need?

The answer has been, get a strong leader who isn’t afraid to take political risks. That is the only way to get good economics. Such a strong leader will have the political capital to ride out the unpopular side-effects of economic reform such as a rise in inequality and creative destruction of capitalism. Eventually, he will be a winner. As would be the rest of us.

The lived reality of recent political history demonstrates how we’ve been wrong on both counts. We are into the sixth year of our strongest leadership since Indira Gandhi. Some, particularly Narendra Modi’s supporters, might in fact argue he’s been way stronger than her. He has, after all, taken risks and made decisions she didn’t at her peak even if she would have wanted to, like abrogating Jammu and Kashmir’s special status.

Or, as External Affairs Minister S Jaishankar, a rare genuine scholar in this Cabinet, said earlier this week at the annual conference organised by New Delhi-based Centre for Policy Research (where ThePrint was the digital partner), through these decades, successive governments had been “kicking the can down the road” on many contentious issues. The Modi government has shown the strength to decide on these. Bell the cat, bite the bullet, take the bull by the horns, you can choose your metaphor.

So far so good, and the feeling might indeed be heady if you were a loyalist, which is a sufficiently large number of Indian voters to give Mr Modi’s BJP its second full majority. But some questions follow. First up, if India’s strongest and most audacious leader yet is practising good politics, has it led to good economics? Or just moderately better economics than under his weaker predecessors? Or at least, to steal a popular Americanism, less worse than before?

We are not asking you to start regretting who you voted for. Many considerations and motivations, not all economic, determine who you vote for. As also for your preference of an all-powerful, strong leader. There can be culture, nationalism, religion, oratory, charisma, and all of the above. The argument is about whether strong leaders make for good economics, even if the methods and ends they pursue may be profitable for them, in terms of getting re-elected.

Mr Modi’s re-election with an even larger majority in the summer of 2019 proved two things. One, that he played good politics. And two, that while his economics was all getting twisted up, with stalling growth, rising deficits and record unemployment, voters didn’t bother.
 

That is why we said we had got our first question wrong all these years: Does good economics make for good politics? It should have instead been: Does good, successful politics need to even bother about economics? The answer is obvious: If you know your politics, hit the right emotional buttons, deliver some tangible, populist benefits at the doorstep of enough people, they will overlook unemployment, stalling growth, stagnating farm incomes, and so on.

In any case, his many voters don’t even look at economic data. Particularly, when other instruments might be more effective in giving them a “feel-good” feeling. This “feel-good” is precisely the emotion which the Vajpayee government was hoping to ride in that ill-fated 2004 election on the slogan of “India Shining”.

Having admitted that our basic proposition was flawed, we move to the next. That a strong leader necessarily gives us what we desire: Decisive economic leadership unmindful of immediate political risks and beneficial for all. Neither the data, nor the feel of the economy today brings us that comfort.

All economic indicators have turned negative and been so for some time: Growth, deficit, trade (exports and imports), investment, savings, employment, and so on. The only area where you see some good news is hard infrastructure. Never since 1991 has the Indian economy had such a sustained growth slowdown or stagnation in its economic data. Could it then be that the rise of a strong leadership is not a guarantee of good, bold economics?

The thing most difficult to find to substantiate what is, at best, an opinionated analysis, and, at worst, a subjective one, is data. We are fortunate, however, to find this gem, thanks to Quartz.com geopolitical reporter Annalisa Merelli, who’s reported in detail on a study conducted by Stephanie Rizio and Ahmed Skali for the Royal Melbourne Institute of Technology and Victoria University. The study has been published in the journal Leadership Quarterly and you can read Merelli’s report here.
 

These researchers studied the political and economic history of 133 countries from 1858 to 2010 (152 years) and concluded that strong leaders were “either damaging or inconsequential for their economies”. What, then, about “benevolent dictators” like Singapore’s Lee Kuan Yew or Rwanda’s Paul Kagame, you might ask?

The study concludes that it is by sheer chance that the pantheon of strongmen may produce the odd good one. That they will have a negative impact on their respective economies is the rule by and large. “Strongmen mostly leave a country’s economy worse than they found it, or simply ‘ride the wave’ of an economic growth that would’ve happened” nevertheless, Merelli reports from the study.

Not all of these leaders are dictators. Many rise in democracies and must face frequent elections. Why don’t the voters then punish them faster, why are they more forgiving towards them than to the leaders they see as weaker?

In the Indian context, think about how, in less than three years of throwing Indira Gandhi out because of the Emergency, the voters brought her back? What is this irresistible pull of a strong leadership? We lean on the Melbourne researchers again, even though what they say isn’t particularly flattering for the voters anywhere — though personally I adore monkeys. “In time of hardship,” Skali told Merelli, “primates tend to accept, and follow, the authority of an alpha male”.

This proves how, just as we were wrong in raising that first question — is good economics good politics — we were equally wrong in our answer, that strong leaders equal good economics. Look back on Mr Modi’s years now. The boldest — and in my view the most welcome and reformist — step he had initiated, the new land acquisition bill, has been the only major decision he has retreated on.

At the peak of his power and popularity, he baulked at this risk. The only time he has done so in nearly six years. The worst and the most reckless, demonetisation, he persisted with. It also benefited him politically, at least in the Uttar Pradesh elections, which followed immediately thereafter because it reaffirmed his strong and decisive image.

One thing I never imagined as a backer of free-market reform, fair competition, low tariffs, freer trade, moderate taxes and minimum government, is that I might end up borrowing from Thomas Piketty to round off an argument, however complex it might be. His first book, I thought, was a nut-job. In the second now, Capital & Ideology, however, he is making sense. “Inequality is neither economic nor technological,” he writes, “it is ideological and political.” And it is bound to persist as long as strongmen leaders thrive in spite of it, riding their domineering politics and ideology.

By special arrangement with ThePrint