Showing posts with label Elections. Show all posts
Showing posts with label Elections. Show all posts

Friday, November 9, 2012

French Revolution and 2014 India


In one of my previous blog I have explained how economics affect the outcome of elections. but here I am going to digress a bit and see what exactly causes revolutions and what is that makes people raise up against status quo and demand change

French Revolution, when my high school History teacher asked us why the revolution occurred in France? We all replied back with usual bookish reasons like Feudalism, Societal inequality, Monarchical despotism, etc. But he replied back by asking why did it happen in France and not elsewhere in Europe. In 18th Century Europe, Eastern and Southern Europe were far more feudal than France, the plight of the commoner in Russia, Poland or in central European states was far worse than that of France. Then why did the revolution occur in France?

Now one might wonder what the French Revolution has got to do with the present situation in India. Why am I even bothered about some ancient piece of history that occurred in a place thousands of miles from India. But I'll take that up later, for now let us closely examine on why French revolution occurred, what were the major causes that were responsible for the downfall of Louis XVI regime.

France in 1785 was one of the richest and most powerful nations of Europe. France under the reign of Louis XIV had reached the pinnacle of its power in Europe, only later to be over shadowed by Napoleon's conquest. France was the dominant power in Europe. Economically also France in 1787, was one of the most economically capable nations of Europe. Here is what Wikipedia says about the economy of France on the eve of the revolution.

"The French population exceeded 28 million; of Europe's 178 to 188 millions, only Imperial Russia had a greater population. France was also among the most urbanized countries of Europe, the population of Paris was second only to that of London (approximately 500,000 v. 800,000), and six of Europe's thirty-five largest cities were French. Other measures confirm France's inherent strength. France had 5.3 million of Europe's approximately thirty million male peasants. Its area under cultivation, productivity per unit area, level of industrialization, and gross national product  (about 14% of the continental European product, excluding Russia, and 6–10 percent above the level elsewhere in Europe ) all placed France near the very top of the scale. In short, while it may have lagged slightly behind the Low Countries, and possibly Switzerland, in per capita wealth, the sheer size of the French economy made it the premier economic power of continental Europe."

 
Surprising isn't it, if the average Frenchmen was better off then majority of his European peers. What really made him raise up and revolt? To answer the question, we need to look at the real underlying cause for the revolution to occur in France. And it was that the rising aspirations of the emerging middle class consisting of tradesmen, merchants, artisans and prosperous farmers was being throttled and restricted by the rigid aristocratic regime that was ruling France. As the noted French historian Alexis de Tocqueville noted, people revolt not when the situation has become desperate but when things starts to look better. France on the eve of the revolution had seen tremendous improvement in the standard of living of Frenchmen, and resulted in increased economic mobility, but the regime was not ready to accept this and bring about the changes to emancipate social and political mobility. Rising urbanization and the new emerging middle class had created an aspirational class who were not ready to wait and suffer due to ineptitude of the ruling aristocracy. So when the debt crisis erupted in 1786, people were not ready to listen to the reforms and solutions that were being offered by the regime. They wanted a far more revolutionary change to be brought in line with their growing aspirations. When the French nobility failed to do so, the country erupted.


This might surprise some people who might hold the misconception that revolutions occur when a country is depraved and its citizen’s rise up when they no longer take the hardships. In fact this is generally not the case, rarely has any such repressive country witnessed an uprising. Russia just before World War 1 had seen a rise in Industrialization and growing economy. Russia witnessed similar urbanization with growing numbers of peasant villagers who migrated to and from industrial and urban environments, but also by the introduction of city culture into the village through material goods, the press, and word of mouth. Then again this created an aspirational class among the new inhabitants of the city, mainly industrial workers and also the slightly better off peasants. Their growing ambitions were not met fast enough by the ruling aristocratic regime. Then finally the disastrous WW1 campaign brought out the ineptitude of the Romanov regime, finally resulting in the Russian revolution and the creation of the Soviet Union.

 

But a even suitable example could be Tiananmen Square uprising in China. In the late 1970s, the Chinese leadership of Deng Xiaoping abandoned Maoist-style planned collectivist economics, and embraced market-oriented reforms.  The reforms started in 1970s had given the chinese a small taste of economic and social freedom. This had finally unleashed the hidden aspirations of the Chinese trampled for decades by Mao's brutal regime. But the pace of the reform was not fast enough to satisfy the ballooning ambitions of the growing chinese middle class. Due to the rapid pace of change, by the late 1980s, grievances over inflation, limited career prospects for students, and corruption of the party elite were growing rapidly.The prevalent corruption and lack of opportunity to the youth created widespread dissatisfaction among them which finally sparked into an uprising, which sadly was crushed by the regime.

We can see similar incidences throughout history, fall of Berlin wall and communism in Eastern Europe again can be correlated with stagnation of the Warsaw pact countries and people's dissatisfaction with the pace of the reforms that were being introduced by Gorbachev. 

There seems to exist a precedent in history, that when the people of a nation have witnessed improvement in their standard of living possibly after a long time of stagnation and deprivation, raises aspirations tremendously for upward social, economic and politically mobility. And when this improvement slows down or stops due to external or intrinsic factors. The unmet aspirations make the people impatient for the desired change to occur. If the existent establishment is not able to carry out the required reforms at a pace to satisfy the need for change by the people. Then generally, people raise up, either in a non-violent peaceful manner or in a violent brutish revolution.

Now coming to point about the relevance of the above historical precedent to India. India post independence was subject to a gruelingly slow rate of growth of around 3-4% called "Hindu rate of growth". The liberalization of 1991 removed some of the shackles on the economy and created a post liberalization boom in the economic development of the country. This created a growing middle class whose aspirations have ballooned in the past two decades. There is whole generation of Indians who have not witnessed the sense of helplessness that was faced by their parents. The part of population born post liberalization has come to believe that high economic growth is their legitimate right. 

But the present UPA regime with its dithering, corrupt governance and economic mismanagement has managed to stifle the economy. The subsidy regime utilized to dole out to bribe voters is the very anti-thesis of the reforms required for double digit economic growth. With the aspirations set high, people are impatient today for change.

The climate is very similar today in India, to what it was in 18th century France. If the ruling government cannot bring about the required change, revolution is bound to occur. The Anna Hazare movement is one of the manifestations of such a revolution. The revolution need not be of the violent kind; in fact revolution can be purely political in nature.

Hence it is my belief that Narendra Modi currently has the greatest chance to become the next PM of India contrary to popular perceptions. Because what people crave for is for the reformation of the system to remove the obstacles that are preventing their aspirations from being met. This would certainly entail the removal of the current "Establishment" from the governing heights of the system and would look for someone outside the "Establishment" to bring about the desired change. Narendra Modi perfectly fits the profile for such a person, Modi is outside the current corrupt political/business/media establishment in Delhi and Modi has a proven record of delivering the changes aspired by the people. Hence 2014 possibly presents the Best chance for Modi to become PM. if he doesn't exploit this opportunity, it would be tough for him to get such an opportunity again.
Because if people's desire for change can overcome oppressive and dictatorial regimes, then surely it can overcome such " imagined" barriers to elect the man who can bring about the change that is being so desired by them.

Note: I would like to add some caveats,
1. No one can predict the future and as Nassim Nicholas Taleb elaborates in Black swan, to base the future on the past is a futile exercise
2. Narendra Modi need not be the only person, anyone who can promise or make the masses believe that he/she can bring about the changes that the people desire, can certainly succeed in this endeavor
3. Finally even if the situation demands so, no one can ever know when the spark for the fire will be lighted or whether it will be lighted at all

Sunday, October 14, 2012

Can economics affect Indian election results - an analytical perspective


It is common knowledge in India, that elections are decided by more important factors of caste, regional and other identity based parameters. Does the state of the economy really matter when an ordinary voter is deciding on whom to vote?
The link between the economic performance of the government and the electoral performance of the ruling and opposition parties is a highly researched subject in the West, but till now the answer to the relation between elections and economics is still ambiguous in nature. But there is enough research literature to suggest that on a stand alone basis there is a high correlation between Real per capita GDP (RCGDP) growth rates and vote share of political parties.
Two papers with regard to the Indian context also hint at the existence of a similar correlation in India. A paper by Arvind Virmani (July 2004, ICRIER) on the 2004 National elections and another paper by Poonam Gupta and Arvind Panagariya (Columbia Program on Indian Economic Policies) on the 2009 National Elections do suggest that a part of anti and pro incumbency swings can be attributed to RCGDP growth rates.
Carrying on this interpretation, I have here tried to analyse how the present economic downturn in India will affect the fortunes of the ruling party.

I will elaborate on how I have calculated the relative swings that will manifest, when the elections are held in 2014.
The basic premise is that, electoral swings can be correlated with the relative swing in RCGDP growth rates during the incumbents reign in power.

Let us begin our analysis with the results of  the 2004 national elections. The weighted average RCGDP growth rate stands to be 4.10% for the period 1994-98 and 2.96% for the period 1999-2003. Hence the change in RCGDP growth rate is -1.14%. The electoral swings in 2004 national elections are given below,
 
NDA Swing-3.76%
UPA Swing7.10%
BJP Swing-3.39%
Congress Swing0.88%

Similarly, if we analyse the results of the 2009 national elections, the average RCGDP growth rates for the period 2004-2008 is 7.37%. The change in RCGDP turns out to be +4.40%. The electoral swings in 2009 national elections are given below,

NDA Swing-4.88%
UPA Swing3.96%
BJP Swing-3.36%
Congress Swing2.02%

We can clearly see that there is a correlation between the change in RCGDP growth rates and the electoral swings.

Now, let us forecast the possible electoral swings, when the national elections are held in 2014. I have utilized the latest IMF and World bank forecasts for the GDP growth rates in 2012 and 2013.
Year20122013
GDP Growth Forecast5%6%

The Weighted average RCGDP growth rate for the period 2009-13 comes out to be 5.16%. This is a decline of -2.2% as compared to that of the previous period average of 7.37%.
If we were to forecast the probable swings based on these numbers, they turn out to be,
NDA Swing1.68%
UPA Swing-6.53%
BJP Swing2.44%
Congress Swing-7.25%

(I have skipped on how these numbers have been calculated, but they are based on simple mathematical ratio analysis)

The actual vote shares turn out to be
BJP 20.33%
Congress22.60%
NDA 26.85%
UPA30.62%

The recent India Today Mood of the Nation  opinion poll suggests similiar vote shares and electoral swings.

NDA Vote Share27.50%
UPA Vote Share30.30%
NDA Swing1.80%
UPA Swing-5.40%
Source: India Today

The accuracy of this mathematical model's forecast seems to be decent based on the opinion polls results. Even if the quantum of the changes turns out to be different in 2014, we can safely say, that economic factors do matter in Indian elections.

Now consider, if the economy continues to go downhill, and the GDP forecasts turns out to be optimistic. Then the reverse electoral swing faced by this government will truly be historic in nature. Time for the government to wake up.

1998200320082013
Weighted Avg RCGDP growth Rates4.1%3.0%7.4%5.4%
Change-1.1%+4.4%-2.0%
NDA Swing-3.8%-4.9%+1.7%
UPA Swing+7.1%+4.0%-6.5%
BJP Swing-3.4%-3.4%+2.4%
Congress Swing+0.9%+2.0%-7.2%