## Sunday, July 21, 2013

### What platforms might work in Indian politics?

High GDP growth has led to structural transformation, with dramatic change in the composition of the labour force. The latest data from the CMIE Consumer Pyramids database pertains to December 2012, and shows the following occupation structure of the Indian workforce:

 Occupation Share (Per cent) Small farmer 13.39 Organised farmer 8.69 Agricultural labourer 8.70 Industrial worker 7.92 White collar worker 8.44 Manager / supervisor 0.53 Support staff 6.93 Businessman 7.91 Small trader / Hawker 3.32 Self-employed professional 4.92 Home-based worker 1.50 Wage labourer 27.75

How might this influence political platforms?

### The success and stagnation of the Left

The Left caters to the interests of tenured employees of manufacturing firms. They were very successful in influencing policies. To a great extent, the Congress stole the Left's thunder by pampering organised labour, and every political party in India treats them as holy cows.

This success undermined Left thinking as a political force. Left-influenced policies hobbled organised manufacturing, and we see only 7.92% of the workforce in Industrial worker', which most closely fits the support base of the Left. It is ironic that the very success of the Left in shaping the Indian State has marginalised the Left as a political force. The price we pay for being a liberal democracy is the sacrifice of large-scale labour-intensive manufacturing.

The aristocracy of workers in organised manufacturing is grossly overpaid. What matters to their take now is not GDP growth or their marginal product, but their ability to use their privileged position to extract a rent out of the firms that have no choice but to deal with them. Hence, their interest in GDP growth is relatively low.

### The role of agriculture

The farm lobby is not a monolithic bloc with unified interests. There are kulaks who seem to correspond to Organised farmers' and are 8.69% of the workforce. And there are others (Small farmers' at 13.39% and Agricultural labourers' at 8.7%) who add up to 22.09% of the workforce. CMIE defines wage labourer as `Wage labourers are those who seek daily wages from non-agricultural sources. Typically, these are industrial workers who work in factories or companies but are not employed on a regular basis in these. Wage labourers also include construction site workers and those working in other non-agricultural activities. This includes a taxi driver who operates the owners' taxi' and hence this excludes agricultural labour. Policies that favour producers of agricultural products in broad terms would thus benefit 30.78% of the workforce (and hurt everyone else, who buys agricultural products). Policies that are more narrowly focused on the interests of kulaks, such as the old-school fertiliser subsidy, are good for 8.69% of voters and bad for everyone else.

India's structural transformation is giving a rapid decline in the share of the workforce in agriculture. While the CMIE data for December 2012 shows 30.78% of the workforce is in agriculture, the oldest available data, for December 2010, shows 32.68%. This is a decline of 1.9 percentage points in just two years. If we guess that on average, in each year, there is a decline of 0.75 to 1 percentage points, then in a decade, we will get to the range of 20.8 to 23.3 per cent of the workforce in agriculture.

Ordinarily, we would expect politics to favour the interests of buyers of food (69.22% of workers) trump the interests of producers (30.78%). Why is agriculture so prominent in Indian politics?  I can conjecture three explanations:
• As with Industrial workers, the priorities of Indian politics reflect the failure of imagination of the gerontocracy.
• The redistricting process is slow and for a long time had stalled. This has given an exaggerated emphasis to constituencies where agriculture is important. That Indian politics is a gerontocracy despite rapid economic and demographic change may partly be a consequence of slow redistricting.
• As with Industrial workers, once unequal policies create a focused beneficiary of distortions, these beneficiaries have a focused interest in lobbying in favour of the status quo. The costs of these policies are dispersed across society and the others don't have an incentive to mobilise politically.
In this context, it is interesting to see that in places like the US, Japan and Europe, there are strong agricultural lobbies that have achieved highly distorted policies even though their vote share has dwindled away to almost nothing. Brad Plumer in the Washington Post has some insights on how this comes about, and suggests that it is a combination of sharp interests of agriculturists in marginal constituencies.

### How might competitive democracy construct an interest-based politics

Indian politics has come up with two ideas that transcend caste and religion : catering to agriculture and catering to industrial workers. Both these interest groups are not that salient in today's India. It is interesting to look at the table and puzzle over what might work.

Congress is pursuing the goal of setting up big welfare programs that target agricultural labour (8.7%) and wage labourers (27.75%), adding up to 36.45%. While this is a big chunk of votes, it isn't big enough to close the deal, particularly as in fast-growing India, many individuals within these two interest groups actually want to escape from poverty and welfare programs. Many of them would be interested in a platform that shows a roadmap out of poverty, instead of offering dole while perpetuating it. If even a small fraction comes to mistrust the strategy of dole, it undermines the extent to which this platform will win elections.

I think there is more possibility in a platform of public goods + growth when compared with the conventional wisdom. By definition, public goods (e.g. law and order or the infrastructure of transportation and communications) benefit all. There is no need to split up the vote and pursue narrow constituencies in this. A pro-growth stance is directly good for many sub-components: Organised farmers (8.69%), White collar workers (8.44%), Managers (0.53%), Businessmen (7.91%), self-employed professionals (4.92%), adding up to 30.49% which is similar to the size of the old-fashioned agriculture lobby (at 30.78%). Looking forward, this group will grow while those interested in either agriculture or dole will shrink.

In addition, a large chunk of the remainder of the workforce -- which may have only a weak interest in a pro-growth platform today -- aspires for a better life, particularly the young. The wage labourer of today wants to be a small trader tomorrow, and the small trader of today wants to be a businessman tomorrow.

I would hazard the following guesses:

 Occupation Share (Per cent) Dole Public goods Growth Small farmer 13.39 Weak Yes Weak Organised farmer 8.69 No Yes Yes Agricultural labourer 8.70 Yes Yes Weak Industrial worker 7.92 No Yes Weak White collar worker 8.44 No Yes Yes Manager / supervisor 0.53 No Yes Yes Support staff 6.93 No Yes Weak Businessman 7.91 No Yes Yes Small trader / Hawker 3.32 Weak Yes Weak Self-employed professional 4.92 No Yes Yes Home-based worker 1.50 Weak Yes Weak Wage labourer 27.75 Yes Yes Weak Total 100.00 36.45 100.00 30.49

It seems to me that a public goods + growth platform would work better than most people in Indian politics think. Public goods are interesting to all, and the constituency that would strongly favour growth is 30.49% and growing. In contrast, a dole strategy is interesting to 36.45%, and is shrinking.

None of this is relevant if the question that is posed to the electorate is about religion, English, or social conservatism. It may well be the case that the 2014 elections will be fought purely on these questions. But in time, the competitive dynamics of democracy will favour platforms that reflect the interests of the populace, and then these kinds of considerations will matter more.

LaTeX mathematics works. This means that if you want to say $10 you have to say \$10.