How To Cure The Cancer Of Money-Power In Our Democracy

The Money-And-Power Problem

The problem is familiar to us and undisputed, so I won’t waste time with figures. Here are the contours. It takes enormous money to fight an election. This figure keeps rising, as parties keep raising their spending to compete with others, and their opponents respond by raising it even further. The discretionary spend becomes a hygiene factor. The race to the top becomes a race to the bottom.

There are three main consequences of this.

1. The entry barriers to politics become huge. This affects the class and intent of people who enter the fray.
2. Money seeks a return on investment, and there is always some quid-pro-quo involved for whatever interest groups do fund elections.
3. When citizens see that money plays such a big role in elections, and the process is so corrupt, they lose faith in democracy itself and become apathetic.

The Traditional Solutions Are Misguided

I will argue in this column that the conventional thinking around this subject is mistaken, in both description and prescription. In the popular imagination, we think of politicians as venal, political parties as corrupt mafia gangs and voters who take bribes as apathetic and bad citizens. This is true at the surface level of their behaviour, but the behaviour is a symptom, not an underlying cause.

Also, I disagree with most of the traditional solutions that are offered in response. Devesh Kapur and Milan Vaishnav, in their excellent book Costs of Democracy, sum up the traditional scholarly thinking on this by asking the following four “central questions”:

“First, what is the institutional and regulatory context governing the flow of money in politics? Second, what are the sources of political finance? Third, what do the campaigns spend on and why do they spend such vast sums? Fourth, how does money operate at, and interact with, different levels of government?”

In my view, the first three questions should not concern us at all and are irrelevant to solving the problem. The fourth one is relevant, again, at the level of symptom, not disease.

All That Matters Are Incentives

If our politicians are not evil, and our voters are not immoral and apathetic, why do they behave in such deplorable ways? Here’s the answer: they are rational human beings responding to incentives. And the incentives are wrong.

Consider the structure of the problem here. Money chases power so that power can generate money. RoI. Vicious circle.

Unpack that. Why does money have the incentive to chase power? It is because power can generate so much money in India. This is the core problem with our Republic: the state has too much power. It doesn’t do the few things that are its legitimate functions. There is no rule of law for most people in India. And it has far more discretion and control in areas where it should simply be absent.

As a result, we have a predatory state with enormous rent-seeking powers. Fans of HP Lovecraft will understand what I mean when I say that the state is Cthulhu – a normalised Cthulhu.

If the discretionary powers of the state are reduced, the incentives for money to chase power are reduced. One example: if the government cannot distort markets, big corporations will have less incentive to contribute to political parties so that the government can protect them from competition later.

We will only solve this problem if we change the incentives involved. Limit the power of government. That will make it less lucrative for corporates and special interests. If the only power that the government has is the power to serve the citizens, then the kind of politicians who will be drawn to politics will be those who care about public service. It is as simple as that.

There are other structural ways to change incentives. For examples, voters are apathetic today because they feel their vote carries no power. If we make government as local as possible, right to the level of a mohalla, then voters will feel empowered, with more of a stake in the system. They will be less likely to sell their vote. Another possibility: a proportional system of government instead of first-past-the-post will disincentivise mad spending in individual constituencies.

Beware Of The Blunt Tools Of The State

Many of the intuitive solutions in popular imagination would not work. For example, putting a limit on campaign spending. There are three reasons this will not work.

• There is no state capacity to enforce this.
• If such state capacity did exist, it would be captured by the party in power, thus worsening existing imbalances.
• We are the nation of jugaad, and we would find a way around it anyway, as indeed we do now.

I will also go against popular opinion and say that transparency of political funding is also a terrible idea. Political funding should be anonymous for the same reason voting should be anonymous. You don’t want political parties in power to punish people on the basis of how they vote. Similarly, you don’t want the party in power to punish corporates and individuals who donate to their opponents. Transparency in political funding, in a situation where the state has so much coercive power, will deepen imbalances in the system towards the party in power.

The Question Of Rights

My argument so far has been based purely on instrumentality. We will get the consequences we want by tackling the problem at the level of incentives. Coercive solutions by the state will not work. That argument stands on its own.

I will add here, though, that coercive solutions by the state also carry a moral cost, and threaten liberty. In a liberal democratic republic, an individual should have the right to say what she wants, do what she wants, spend money as she wants, as long as she does not infringe on the rights of other individuals. All voluntary exchanges are kosher. This is as true of groups of individuals as it is of individuals. That includes political parties.

That is why limiting government spending, or insisting on transparency about the source of funds, would be an attack on liberty and free speech. We can and must insist that the state is transparent to us, for it is funded by our money and is accountable to us. We have no right to ask that of any individual or group of individuals. If we allow for such coercion, it will inevitably be misused by whichever party holds the reins of the all-too-coercive state.

Let’s sum it up. One, the interplay of money and power is a cancer for our society. Two, this does not mean that politicians, interest groups or voters are bad. They are human beings responding to incentives. Three, we can only solve the problem by changing the incentives. Four, the key incentive is that the state has too much discretionary power, and can generate an RoI for anyone who invests money in politics. If we reduce the power of the state, we reduce these incentives. Five, there are other structural ways to affect incentives, and we should consider them. Six, coercive solutions attempted by the state are doomed to fail. Seven, this argument works at the level of both consequences and morality.

Don’t you wish the men and women who framed our constitution understood the power of incentives?