T C A Srinivasa-Raghavan: State funding of elections

LINE & LENGTH

If it is meant to tackle corruption, it won't work. Best to drop the idea

It is reported that the government is considering a proposal for state funding of elections so that political corruption can be eliminated. The more realistic objective would be to minimise it. However, because it sounds good, politicians like to talk of eliminating corruption totally""and therefore come up with policies that actually end up maximising it.

State funding runs the risk of ending up that way. My earlier article (December 17) had listed seven reasons why the existing rules of the game encourage corruption. These were:

1. Only winning matters because the winner takes all.

2. A candidate's political worth is directly proportional to the degree to which he can finance himself in an election.

3. The MP alone is responsible for his day-to-day expenses, which can be huge.

4. By and large, an MP must recoup his election expenses in the first two years and devote the next three years to generating margin money for the next election. Each MP thus needs to generate about a crore in the five years available to him.

5. Big money comes from nexus of one sort or another. Small money, which the relatively honest MPs make, gets caught on hidden camera.

6. There is no squealing because since everyone needs money, it is in no one's interest to rat. So there is no pressure from within the system.

7. In the current framework, each MP must spend more than the other, although each MP is best off spending as little as possible.

This last is a variant of the prisoners' dilemma in game theory.

The ordering of these rules by importance depends on what one wants to do. For example, it makes sense to have a common party pool from which some stipend can be paid to each MP. But Rule 3 exists because there are no positive externalities for anyone

Two other points need to be noted. One is that corruption, once exposed, is not punished by voters because corruption is an alien concept in India. The Indian term for bribes was mamul or customary payments to officials. So there is no social reason not to be corrupt.

The other is that a reduction or increase in spending has only a marginal impact on an electoral outcome as long as the election is free in the sense that the extra spending is not used for preventing people from voting freely. My worry is that with state funding, candidates will spend what they would have anyway and use the extra money to prevent free voting.

One or another, the net result is clear: incentives to spend are simply too high. Therefore, the incentives to make money are also too high. The objective should therefore be to sharply trim these incentives.

One obvious way, which proportional representation seeks, would be not to let the winner take all. But since there can't be two winners in a constituency, it is not possible to get around this aspect sensibly.

Another idea, very popular, is state funding. Attractive as that might be to the small parties, which are also the main beneficiaries of proportional representation, it will still not address the main issues.

These, as I said earlier, are of reducing the incentives to make more money than others, which is very different from spending more money during an election. That will happen regardless, as long there is no social taboo.

What we are left with, if we take into account the need to spend large amounts between elections, might be an entry criterion problem: should only rich people be allowed to contest elections or should an MP be allowed to become rich via corruption?

I know that the above ignores corruption for private gain and assumes that the money politicians make for themselves is relatively small compared to what they need for political purposes. But this is based on the assumption that no politician would like to kill the goose that lays the golden egg and will therefore resist the temptation to divert too much to his private account. In any case, politicians who use the party name for private gain pay a heavy price.

Nor can the incentives to spend be reduced by increasing the disincentives because as long as there is even, say, a 5 per cent chance of not getting caught, those disincentives will never be strong enough. It is like drunken driving. There can never be enough policemen to catch everyone.

It also doesn't make such sense to view corruption as a private tax to finance a public good like democracy. If it were that simple, Mr P Chidambaram could introduce yet another tax or cess and we would be rid of the problem.

As I said earlier, the problem is essentially that non-co-operation between contestants leads to a social welfare-reducing wrong choice by both. In other words, the payoff matrix can be altered only through co-operation, but the winner-takes-all character of the political game makes that impossible. The potential gains for the victor are simply too large.

So do we have a problem without a solution? Perhaps not.