We know from observation that some democracies intervene deeply in their domestic economies while others adopt a more laissez-faire approach. Can we explain these differences solely with ideology, or are other political influences also at work? I argue in this paper that elected leaders sometimes opt for hefty economic regulation purely to generate sources of patronage that can be used to maintain their political positions. Leaders are most tempted to take this approach, I contend when their political parties are not stably linked to sources of electoral support. By far the most frequent explanation for relative government involvement in economic affairs is political ideology. Leftist leaders are said to be more likely than their rightist counterparts to intervene in the economy, driven by suspicion of the free market’s ability to advance social justice. By contrast, rightist, and especially liberal, governments are understood to prefer a more laissez faire approach that is consonant with their understanding of individual initiative and the efficiency of free enterprise. While ideology undoubtedly plays an important role in the proclivity of governments to take on an expansive economic role, it is unlikely to be the sole determinant of this important policy choice. Indeed, an increasing number of studies have attributed variation in state economic intervention to the nature of a country’s political institutions. They have highlighted the role played by electoral system, executive-legislative relations, party system, and other institutional factors in channeling social pressures into public policies. Past research indicates, for example, that when electoral systems are proportional, executives are stronger, and party systems are less fragmented, political decision-makers will be better able to resist social pressures for patronage. Scholarly studies associating party organization with economic policy, however, are much scarcer. Mainwaring (1999) argues that Brazil’s low level of party system institutionalization has crippled its economic stabilization policy. In a similar vein, McGillivray (2004), Nielson (2003), and Hallerberg and Marier (2004) associate party centralization with trade and fiscal policy choice in democracies. Nevertheless, these studies, while shedding light on the relationship between parties and economic intervention, do not address the potential impact of party electorate linkage characteristics. In many democracies, parties are the key political institutions connecting voters with government, and I argue here that these linkages are an important determinant of a state’s role in the economy. In this paper, I focus on the stability of a party’s linkages to the electorate. Parties that enjoy stable electorate linkages can depend on reliable voting support across elections and are therefore unlikely to fade away. When electorate linkages are unstable, by contrast, political parties lack the secure vote bases that ensure them reasonable support from election to election. Unstably linked parties must, therefore, live in constant fear of catastrophic vote losses; their long-term viability is by no means certain. Linkage stability may be associated with a variety of factors, among the most important of which is party institutionalization. When a political party has a well-functioning institutional structure, with party representatives present in locales across a country, its electorate linkages are more likely to be stable. Stable party-electorate linkages can also be associated with the depth of a party’s relationship to particular cleavages in society. Parties that are deeply rooted in highly salient social cleavages are more likely to enjoy stable voting support. What effect might linkage stability have on state intervention in the economy? Economists have long contended that more state involvement in the economy will result in more opportunities for patronage. I argue here that unstably linked parties will be tempted to shore up their shallow electoral support by providing economic patronage to influential groups. Their leaders will tend to have very short time horizons, focusing on the immediate objective of avoiding massive vote losses in the next election. As a result, unstably linked parties will be less concerned with the potential future damage that a patronage-based policy may inflict on their national economy. When electorate linkages are stable, by contrast, political parties will be less focused on their short-term viability and have longer time horizons, other things equal. They will, therefore, be averse to market interventions that may cripple their country’s long-term economic performance. Stably linked parties, after all, will be more likely to survive to reap the political benefits of circumspect economic policies and will have less need to pay off influential groups to avoid electoral disaster. They will be better able to resist the short-term political pressures that arise from the dislocation of economic reform, and more likely to survive to reap the benefits of higher growth. Of course, even stably linked parties will sometimes succumb to the use of patronage for political gain. In a majoritarian system, for example, where two stably linked parties are competing for the votes of a small group of undecided moderates, there may be a strong incentive to use patronage. Nevertheless, the greater electoral security enjoyed by stably linked parties will prevent them from using government largess on the same scale as would similar parties without stable linkages. Parties that do not enjoy stable electoral support rely almost exclusively on patronage to ensure their electoral prospects and are in constant danger of massive vote losses. By contrast, stably linked parties have other means to build support and, moreover, the long-term consequences of economic policy choices are more central to their thinking. Indeed, even parties that are stably linked to protectionist interests will have an incentive to moderate potentially damaging economic intervention to preserve patronage for future use. To evaluate the proposed relationship between party linkage stability and economic policy, I present here an examination of Indira Gandhi’s India. I argue that the de-institutionalization of the country’s dominant party, the Indian National Congress, during Indira Gandhi’s tenure as prime minister helped drive the Indian state’s role in the economy. Put simply, I suggest that Gandhi was forced to generate new sources of economic patronage in order to shore up her shallow support in the electorate. While it is difficult to evaluate the motivations of political actors, I seek evidence for my contentions in the timing and nature of Prime Minister Gandhi’s economic initiatives. I make use of process tracing to evaluate the presence of causal linkages connecting electorate linkage instability with economic intervention.
Keywords: Political Parties, India, Economic Policy, Process Tracing,
Economic of Indira Gandhi
Charles Robert Hankla