Friday, March 1, 2013

Moving away from populist politics

Narendra Modi has faced considerable criticism of his leadership and vision (or the supposed lack of one), in recent times. (He is likely to contest for the Prime Minister’s post in the 2014 elections). While Justice Katju’s is the most vitriolic criticism of the lot, other critiques have predictably focused on issues such as education and health standards in the state and of course, the marginalization of muslims. Modi’s defenders have been quick to point fingers at the Congress lead UPA government’s misdeeds in its reign. Media has given ample space for this war of words and at times has even taken sides. In this melee, what no one seems to have highlighted is a fundamental shift in the way Indian politics is likely to play out in the near future - with possibly Modi at the forefront (Modi, because I have not heard of anyone else working on this model in their constituencies/states).

For a country whose political class has long survived in power doling out subsidies and freebies by the dozen, Modi’s transformation of Gujarat seems unbelievable and even threatening. For he has managed to match (and outgrow) most states on many parameters with little subsidy or freebies. Given our burgeoning fiscal deficit, India has little option but to stop giving freebies sooner or later. (If India were a company, it would be shut down even before it started doing business, is what one chartered accountant friend told me). But to do that, one needs to create a culture where people want to work towards their sustenance and freebies and other entitlements are looked upon as charity and not one’s birth right. How do you do that?

Through needs assessment. In marketing parlance, needs assessment refers to understanding customer aspirations. This can further be broken down into stated needs, real needs, unstated need, delight need, secret need etc. Let us apply this to the existing set of voter aspirations in a relatively under developed state. Assuming the voter is a man aged 30-35, these are roughly what his needs could be.

• Stated need – More income (possibly to buy TV/ fridge/ car and other items)

• Real need – Better/ additional opportunities for employment and wealth creation

• Unstated need – A steady source of income that helps beat inflation to some extent and allows him to save money

• Delight need – Infrastructure provided by the government to support him in achieving this objective. Eg: assuring public safety, better transportation, emergency healthcare support, skills up-gradation through subsidized programmes and courses etc.

• Secret need - To be respected by his family/ community as a successful/ prosperous individual who has not employed dubious means for growth.

I am aware that it is not that simple to segregate voters and their needs, but that is what political think tanks and governments should be doing. A poor man cares less for religion and politics and more for his next meal. But what he will respect a political leader/ state for is providing him a with a means to earn that meal. This is perhaps the reason why Nitish Kumar has been more successful than most other Chief Ministers of Bihar.

An economy that grows through job creation is less volatile than one that runs on freebies. Such an economy is also able to ensure relatively equitable distribution of wealth among its people over time. Developed countries around the world follow this principle of limited subsidy and reservation, allowing them to bounce back from adverse economic conditions. The US offered dole money of $1000 a month for upto 18 months to citizens who had lost jobs during the recession. After 18 months, not a penny more was offered and those who lived off the money without looking for jobs had to fend for themselves in the job market. In Europe, everyone earning an income (irrespective of the income level, age, religion or community) is taxed and in return many facilities such as healthcare and education are subsidized heavily. Technically, you still have to contribute something to become eligible for a range of government provided subsidies.

Narendra Modi is subtly trying to encourage such a model to enable growth. Perhaps we should give this model a chance. After all, Robinhood economics has not benefittted the country in the last 60 years that it has been subtly practiced.