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Thursday, April 8, 2010

dir="ltr">From times immemorial, politics and business have been inextricably linked together. Clean politics needs clean money. Good and sustainable business needs political support.

Wise and mature statesmen always accepted money from business, but kept policy making and governance beyond its reach. Gandhiji accepted business support, but evolved his own strategies for national liberation. Patel declined large contributions when there was even the slightest hint of seeking favours. Jimmy Carter put all his personal wealth in a blind trust so that his private interests would not influence his public policy, and emerged out of White House as a pauper who lost all his assets.

In India, politicians have, over the years, developed inexhaustible appetite for illegitimate funds. With increasing disconnect between politics and people, voluntarism is dead, and mercenaries have to be hired even for simple political activities. With vote increasingly disconnected from the outcomes and public good, the voter has to be persuaded with money, liquor and other inducements. The first-past-the-post electoral system -- where marginal vote is all important for determining victory -- exacerbated vote buying. In AP, Karnataka and Tamil Nadu, an expenditure of Rs. 5 crore for an Assembly candidate is pretty common.

During license-permit-quota raj, rent-seeking and arbitrage became very common. Power begot money, and money is spent to obtain power. As in economics, a Gresham’s law operates in politics too: bad politics drives away good politics. Politicians, who earlier depended on business money and in turn doled out favours, increasingly enriched themselves with State power. Now many of them have become enormously wealthy to finance elections and buy businesses. The more enterprising among them demanded equity in return for favours, launched businesses that required State patronage (broadcast licenses, spectrum allocation, liquor shops, government contracts), and appropriated precious natural resources (public land, mines). Recognizing the critical advantage media control offers, they bought or started big media chains. With the control of politics, business and media, the politician’s radical monopoly has became complete.  A Klepto-plutocracy has thus come into existence in much of India.

Politics becoming big business, and business controlling politics are the new, pernicious dangers to the system. Bloomberg in New York city and Corzine in New Jersey were elected because of their wealth and campaign expenditure, but they are public-spirited men with idealism, and their wealth was a passport to public service.

The crisis is deep, but by no means intractable. We should remove the remnants of license-permit-quota raj, and ensure transparent, competitive bidding for allocation of all natural resources and award of projects – from mining to gas allocation, and spectrum to SEZ approval. If there is a windfall profit in any sector on account of monopoly over natural resources, there should be automatic mechanisms to transfer a large part of surpluses to the public exchequer through windfall profit taxes and progressive royalty shares. Monopolies in media and natural resources should be firmly curbed through institutional mechanisms. We should reform the electoral system to eliminate dependence on, and unhealthy competition for, marginal votes. Some form of proportional representation will change incentives in politics, eliminate the role of marginal vote, root out illegitimate money from elections, and transform our public life.

All these can, and must be implemented fast. But for this we need strong political will, sustained media focus, and informed assertion of a vigilant public.

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