Archive for: September 2015

What’s in a name? Quite a lot, actually

The fault line in Bihar’s recently cobbled ‘Grand Alliance’ is obvious: it was too grand for its own good. It had so many artificial legs it could not walk.

A name is a tricky thing. You never know when you might have to live up to it.
Political parties, wisely, choose to be safe rather than sorry. Bharatiya Janata Party, Indian National Congress or Samajwadi Party are minimalist definitions of maximum objectives. You might wonder what precisely is Marxist about CPI(M), but that is a trivial quibble. Wisely, there is similar plain-speaking when a moniker is needed for those fluctuating realities called alliances. National Democratic Alliance and United Progressive Alliance are both a reasonable statement of intent.
The fault line in Bihar’s recently cobbled “Grand Alliance” between Nitish Kumar, Lalu Yadav, Mulayam Singh Yadav, Sharad Pawar and Sonia Gandhi is obvious: it was too grand for its own good. It had so many artificial legs it could not walk.
Memory is short, but not that short. The starting point was a “grand merger” of what is nostalgically called the old “Janata Parivar”, with Mulayam as its patriarch. It was announced to the wild beating of drums, and collapsed even before the echoes had faded. A less than sublime alternative was offered: they would contest the Bihar elections together. Then, on an otherwise calm day, Lalu Prasad Yadav and Nitish Kumar announced the allotment of seats: 100 each to the Big Two, 40 to a meekly quiet Congress, and three left to any ally who might care to pick them up. No one thought Mulayam or Pawar were worth consultation. Talk of putting a cat among pigeons: this unleashing a lethal carnivore into a coop of some very furious birds. At the moment of writing anger management is underway. Mulayam has asked for 10 seats from the Congress list, which is as wily a finesse as there ever was.
We shall see what happens, but as far as the voter is concerned, the message is clear: this is patchwork, not unity. It cannot offer the basic requirement of good governance, stability.
For those who want to check the direction of electoral behaviour, here are some relevant indicators.
1: Watch the migration. There is no perfect distribution of seats in either a single party or alliance; but note on which side the turbulence ebbs, and where it induces a switchover. Frontline leaders have begun to exit the principal parties of the “Grand Alliance”.
2: Watch the opinion polls, but not quite in the way they are advertised. Leave space for scepticism when seat projections are announced. The world’s most sophisticated psephologists are in Britain, and they got this summer’s general election so wrong they are still picking up little pieces of ego lying in television studios. Opinion polls are meant to reflect opinions of voters, but quite often indicate only the bias of analysts. What you should note carefully, however, is the graph of support for any political party through the many polls that are done in an election season. The periodic fluctuations may be slight, but they will register. There will be upward mobility on one side, and downward slide on the other. The party that inches up has the winning breeze on its tail.
3: Watch the language. Not your own, which one hopes will always be calm and collected, but that of political leaders. Leaders who start to lose their cool are suffering from heat on the ground. Nitish Kumar got irritable and cantankerous at a public meeting; the clip showing this went viral on social media. This dangerous invention called a mobile camera has removed deniability as an option.
4: Watch the eyes. The size of crowds at a rally of course matters. Voters do not generally go to jeer an opponent; they go to cheer their man. The numbers, mostly made of the young, at Prime Minister Narendra Modi’s meetings were massive, but that was only a part of the story. The real story is in the eyes. Their eyes were alive with belief; the spark was contagious.
5: Watch the marginals. Of course you need to be a bit of a political junkie to get into such detail, but this is where true revelation lies. Check what is happening in those constituencies where the past difference between victory and defeat was 5,000 votes or less. A swing of 1% will be sufficient to change the result. When the force is with you, a seat that would have been lost by 5,000 votes, will be won by 3000.
I could add a sixth, but this would be entirely for candidates: Watch your pocket. Yes, you need money to fight an election, but money does not win an election. Candidates under pressure begin to chase a chimera with their wallets. All that happens is that lots of hangers-on benefit; ground reality remains unaffected. People do not vote for one day’s high jinks, they vote for a better life. And make sure you represent an alliance with a simple name.

Intellectual Post
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Intellectual Post

Impact of Inequalitay on Growth

It is a wise man who said that there is no greater inequality than the equal treatment of unequals. The worst form of inequality is to try to make unequal things equal.

Inequality is one of the most discussed political agenda in most of the countries in the world. On 14th June 2015, Hillary Clinton, the well-known democratic party presidential candidate to succeed Barack Obama as president of the United States, made inequality, the keynote of a dominant campaign speech. Pope Francis delivered an encyclical, a high-level Vatican pronouncement, which addressed the problems related to global inequality, among other issues on June 18th, and on June 15th economists at the IMF issued a study determining the reasons  and result of increasing inequality. The authors take into account that while inequality could be the reason of all sorts of problems, governments should be particularly concerned about its effects on growth. They evaluate that a one percentage point increase in the income share of the top 20% will pull down growth by 0.08 percentage points over five years, whereas a rise in the income share of the bottom 20% actually lifts up growth. But how does inequality impact economic growth rates?

It is believed that some inequality is needed to shoot growth. If there are no large financial rewards, risky entrepreneurship and innovation would refrain from expanding. In 1975 Arthur Okun, an American economist, debated that societies need to decide the mix of equality and efficiency, it is not possible to have perfect equality and perfect efficiency at the same time. While most of the economists keep on holding the view, the recent growth in inequality has aroused a new look at its economic costs. Inequality could hinder growth if those with low incomes suffer from poor health and low productivity as a result, or if, as evidence indicates, the poor struggle to finance investments in education. Inequality could also imperil public confidence in policies related to growth-boosting, like free trade, says Dani Rodrik of the Institute for Advanced Study in Princeton.
More recent work implies that inequality could lead to economic or financial instability. In a book published in 2010, Raghuram Rajan, governor of the Reserve Bank of India, debated that governments often reply to inequality by easing the flow of credit to poorer households. According to other recent research, American households borrowed massively preceding the crisis to reinforce their consumption. But for the increase in household debt, consumption would have languished as a consequence of poor wage growth. Economic eminences such as Ben Bernanke and Larry Summers feel that inequality may also help to the world’s “savings glut”, since the rich are less likely to incur the expense of  an additional dollar than the poor. As savings accumulate, interest rates fall, boosting asset prices, advocating borrowing and making it more difficult for central banks to manage the economy.
Concocting a response to rising inequality is treacherous, however. A part of the negative impact of inequality on growth can be accounted on poor government policies in extensively unequal countries. In Latin America, for instance, egalitarian pressure for excessive state economic control seems to lessen the average duration of growth spells. Yet in temperance, redistribution seems to have benign effects—perhaps by lessening the dependence on risky borrowing within poorer households. Over the past generation or two inequality has risen most in places where gradual policies, such as high top tax-rates, have been depleted. A bit more redistribution now might upgrade the quality and quantity of economic growth—and lower the demand for more aggressive state interventions later.


Anirvan Mukherjee
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Anirvan Mukherjee