Political Incentives – Modi’s Indian Election Bribes Will Have To Be Paid By Next Government

We can, if we wish, tut and mutter about how India’s government is lashing out spending and tax reliefs as the election approaches but this is just how politics is done – spend other peoples’ money on other people. That’s rather the point of the process. Further, the political incentive is always to promise such in order to gain the votes of those select constituencies whose support is being bought with that other peoples’ money. Finally, of course, the bill is going to land in the lap of whoever is in government after the election, not the necessarily the one hoping to win it.

That is, the promises of spending now – even if the spending is delayed the promises are not – are costless to the government currently trying to win election. The costs occur to whoever wins it – thus the incentive is to promise whatever in order to win that election, isn’t it?

That Narendra Modi is perhaps less prone to this than some state level governments in India doesn’t change this basic setup. Elections are things won by promising goodies to the right groups of voters:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] A series of vote-catching measures planned by Prime Minister Narendra Modi as he braces for a difficult general election may cost more than 1 lakh crore rupees, two sources with direct knowledge of the matter told Reuters. Much of the cost of the extra spending or revenue losses would have to be borne by the government that will take charge after the election due by May. The spending is also likely to delay plans to reduce the government’s budget deficit, a key indicator of the nation’s economic health. [/perfectpullquote]

Sure, who doesn’t know that politics works this way?

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]A series of vote-catching measures planned by Prime Minister Narendra Modi as he braces for a difficult general election may cost more than 1 trillion rupees ($14 billion), two sources with direct knowledge of the matter said.[/perfectpullquote]

Further, we’ve this other truth too. The time horizon of the politician trying to win election is that election itself. For without winning it nothing else particularly matters. Promises that might bankrupt the country, certainly those that will leave it worse off, who cares? The aim is to win the election and only to do so.

Which is, of course, why politics is such a lousy manner of running things. The decision and implementation cycle of, say, the railways, or roads system, the oil business, these are things with decades long horizons. A new rail track pathway, a new conventional oil field, these are things that will still be in operation in 30 and 40 years. Yet the decisions over them are to be entrusted to someone uninterested in anything beyond March? That’s not a system that’s going to work out well, is it?

Of course, it’s also true that democratic politics is the least bad way of running the country. But the above deficiencies in it do mean that we want as little as possible to depend upon politics – so that we can have the decisions made by people facing the right incentives and time horizons.

Politicians are making costly promises in order to buy votes and win an election? Heavens to Betsy, that is a surprise.