Tuesday, March 13, 2012

Democratic Dividend: Lessons from UP election

When political parties face intense electoral competition, they are forced to focus on growth and governance. Or they may continue to pander to identity politics, and risk becoming politically irrelevant. This is the lesson from the recent assembly election in Uttar Pradesh. The contours of Indian politics are beginning to change, as the significance of identity politics in India begins to diminish. I suggest that this political shift is opening up the need to explore new policy options. This was published in the Asian Wall Street Journal on 13 March 2012, titled "India's democratic dividend".

The consensus view for most of the past decade in India held that good economic policy did not make for good politics. New Delhi's trade and investment openings since 1991 mostly benefited the middle class, while the poor in rural areas kept voting for corrupt politicians who promised more handouts.

Last week's election results in five Indian states turned the conventional wisdom on its head. Voters, especially in India's most populous state of Uttar Pradesh, resoundingly favored parties that promised development. The elites are still in a state of shock.

Actually a few states started voting in this direction five years ago, but the verdict in UP confirmed the trend. Fifteen years ago, the state typified the problem elites had with Indian democracy. In the late 1980s, after the Congress Party lost dominance, political parties started competing, but their first instinct was to fragment along caste and religious lines.

The Bharatiya Janata Party (BJP) initially won power by appealing to hardcore Hindu voters, especially in the wake of the demolition of a famous mosque and Hindu-Muslim riots in 1991-92. The Samajwadi Party's base used to be lower castes and Muslims. And the Bahujan Samaj Party (BSP), led by the fiery Ms. Mayawati, was India's first party of Dalits, a section of the population whom the higher caste Hindus considered to be Untouchables.

From the mid-1990s till 2007, every political party failed to expand its appeal. UP is India's democratic laboratory because, like the country, its population of 200 million has tremendous religious and ethnic diversity. Neither the hardline Hindu base nor the Dalit base by itself can be dominant enough to ensure electoral victory. Keeping in mind India's first-past-the-post electoral system, a winning party has to secure the support of diverse voting blocks.

The party that understands this reality will win. In 2007, the Samajwadi Party didn't get it. It had been ruling in UP since 2004 by the sheer caprice of its ministers. The party fielded mafia dons as legislators, destroying the administrative machinery of the state and making voters nervous about law and order. When state elections came in 2007, Samajwadi campaigned by pandering to Muslims and its lower-caste base. Presuming these voters were economically backward, it played up the politics of envy by clamoring against modern technology and English-language education.

Ms. Mayawati's BSP, on the other hand, decided that it would have to go beyond Dalits. This base constituted just over 20% of the vote in the state. It had become clear that even if the whole group stayed loyal to the party, it would still not add up to around 30% of the popular vote, which is necessary to have a realistic possibility of winning a majority of seats. So Ms. Mayawati consciously promised law and order as a way to expand her appeal. Defying the pundits, she won.

Ms. Mayawati may have succeeded in 2007 by promising much, but she failed to deliver. Yes, the general law and order improved in leaps and bounds, which helped the state grow 7% annually in her term. But two issues failed to convince voters she had true pan-UP appeal.
First, she emphasized her Dalit identity, building memorials to Dalit icons at huge cost to the taxpayer. This reminded voters of her second problem—a penchant for marquee public-sector schemes. Big projects like a Formula One racecourse tainted her with cronyism. By 2012, her party was most identified with the allegation of corruption in the National Rural Health Mission, where ministers and senior officials were accused of misappropriation of funds, and many functionaries connected to the scheme died under suspicious circumstances. Meanwhile, Ms. Mayawati failed to undertake governance reforms.

Samajwadi, desperate to come back to power, hammered these issues in the 2012 campaign and beat the BSP. Moreover, it learned from its pre-2007 mistakes. Its young leader Akhilesh Yadav, now set to become chief minister, played the aspiration card. Using both traditional rallies and new social media, he emphasized how Samajwadi would promote law and order (no more mafia dons as ministers) and push modern education (by offering free laptops and tablets), while not pandering exclusively to certain castes. Mr. Yadav apologized for the party's previous errors.

Mr. Yadav knows his party can only survive by pushing the singular message that appeals to everyone in UP: growth and governance. The next five years will tell if Mr. Yadav can live up to his promises—if he fails, another party will win by taking the growth-and-governance message to the next level.

It is also worth noting that while the regional parties realized the need to adopt a more inclusive strategy, the larger national parties, the BJP and Congress, both played the divisive caste and religion card. They failed, and they will have to change or risk becoming irrelevant.
This political churn is significant because it's clear now that competition forces parties to focus on good economics. My analysis of India-wide voting patterns and growth rates in the past decade shows that when parties get re-elected by too wide a margin, they don't focus on development. But when political competition increases, and the prospect of electoral defeat looms, the parties pay much more attention to growth.

Indians often wonder why their country didn't grow as fast as Western liberal democracies did in the 19th century. The answer is that though India became a pluralistic democracy in 1947, vigorous competition among parties only started in the late 1980s. Since then, as the economy has seen the best performance in its history, democracy finally started paying dividends.

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