Rise of Populism: Fiscal Price of Political Failures
Asia News Agency
With all political parties are indulging in populism and offering freebies to win votes, economists are worried about the fiscal burden on the public exchequer.
Merit and non-merit subsidies
Economists and policymakers have long debated the merits and demerits of subsidies, writes Sanjaya Baru (political commentator and policy analyst). Conclusions of the debate have justified merit subsidies on grounds of welfare and efficacy. Those that were regarded as regressive from both an economic and a social perspective, were dubbed non-merit subsidies.
A government in any civilised society, writes Baru “is expected to tax the rich and subsidise the poor. Civilised societies also subsidise or provide free certain public goods like school education and public health. There are good economic, social and political justifications for such public provisioning.
“There is, however, no justification for political parties offering freebies that are either no more than electoral bribes or that the government’s exchequer cannot afford. When political parties promise free television sets, kitchenware and suchlike, they are using the taxpayer’s money to bribe voters. When they promise free electricity, water or other scarce resources, they are merely borrowing from future generations to reward present ones.”
Mounting fiscal burden
The real question, says Baru is, “why are such promises made? Apart from the desire and desperation to win an election, by fair means or foul, there could be a larger and more worrying social and political factors behind this mounting fiscal burden on the state exchequer. Consider the challenge of the falling credibility of the political process and of politicians in general. The desperation to win political power so as to be able to get hold of public funds and assets, especially land, have contributed to a sharp escalation of the freebie promise and the equally sharp decline in the credibility of the political system.
"Freebies become the fig leaf that corrupt politicians and political parties….Political power offers a fast track to private wealth….”
At another level, the rising share of public spending on subsidies, both merit and non-merit for several years now, “has emerged as a major policy concern not only because of the fiscal constraint that governments, the Union and the states, are facing, but also because such public expenditure now competes with the renewed demand for increased capital spending.”
To return to an eight per cent growth trajectory, reversing rising unemployment, “public investment has to pick up. This requires balancing spending on subsidies, especially non-merit subsidies, with that on public investment, including in infrastructure, public transport and defence."
This may be a tall ask, as the country approaches 2024 - the year for general elections.
