Economic Reforms, Electrol Politics A Welfare

The introduction of economic reforms often hurts entrenched vested interests, which had prospered under state-led evelopment. For the ruling political party that introduces reforms, alienating such interests results in loss of political support and jeopardises re-election prospects. One approach (labeled the “electoral politics” approach) suggests that the ruling party should be nimble enough to create new coalition partners, composed of the beneficiaries of the reforms process, to counter those who lose from the process. The experiences of Argentina and Mexico of employing this strategy are discussed and contrasted with the Indian experience. The paper criticizes this approach on the grounds that following such a strategy ushers in no change from the state-led strategy: interest group politics continues to dominate to the exclusion of vast sections of the population, who may not benefit from the reforms process. An alternative approach (labeled the “public interest” approach) to economic reforms suggests that the ruling party/government is imbued with public interest and is not merely concerned with electoral survival. This approach is criticised as being naïve since it ignores the political/electoral compulsions of the ruling party. Even though governments may pursue public interest, the question is what they would do in the face of severe erosion of political support. The approach suggested in this paper seeks to integrate the electoral politics approach with the public interest approach. A model of political support is proposed which sets out the conditions under which distancing itself from interest groups and pursing public interest does not jeopardise the ruling party’s re-election prospects. This model is tested using Indian data.