UNIVERSITY OF KENT

SCHOOL OF ECONOMICS

Indias Rural Lobby

EC832
Susanna Clare Pearson

December 2011

In policy formation there are many factors as well as complex social and historical influences behind why they have been applied. However, the political economy framework, although it may not explain every aspect, provides a useful perspective in terms of the participants involved and the individual motivations that determine their involvement in collective choice and the form this takes. I intend to look at Indias rural lobby and analyse the motivations of individuals in their choice to participate and whether this corresponds to the theory. First however, I will outline key aspects of the political economy theory. It has only been in the past 40 years or so that politics has been examined in light of economic analysis. This has advanced by the seminal writings of Anthony Downs (1957), whereby he reasoned that policy implemented by government is determined as in any other market - by the forces of supply and demand. Voters are assumed to behave as any other rational economic agent, to pursue their own selfish interests in order to maximise their individual welfare. In doing so, they assess policy proposed by political parties in terms of what yields the greatest utility income. They then express these preferences through their voting decisions. Similarly, the role of politicians is no longer seen as a vocational, self-sacrificing role. They too wish to further their own agenda, that being the gain of office which purportedly brings income, prestige and power (Downs, 1957, p.137). Maximising their utility occurs when they gain office as opposed to being in opposition. Consequently parties will weigh up the political costs and benefits in terms of votes to maximise their likelihood of election. This was put bluntly by Downs (1957) whose central hypothesis was that political parties in a democracy formulate policy strictly as a means of gaining votes (Downs, 1957, p.137) The implication is that these decision processes are not mutually exclusive. Government action and actions of private decision-makers are interconnected, so creating the political market, where parties compete to carry favour and votes from constituents. This process is further complicated however. Social choice theory has shown that aggregation of individual preferences into a societal decision that fulfils desirable conditions being either a Pareto efficient allocation or another socially acceptable alternative allocation is incredibly difficult. This results in there being no discernible social optimum that can provide government with the best prescription for policy formulation. This was formalised in Arrows Impossibility theorem which states; no rational method of maximising social welfare can possibly be found unless strong restrictions are placed on the preference orderings of the individuals in society. (Downs, 1957, p.137) Under the assumption of perfect information, each individual can decisively cast their vote so all are equally valued by political parties. However, once subject to imperfect information, it is not in the interest of rational individuals to become fully informed of which party maximises their utility, due to the costly nature of doing so. Consequently, some individuals will have more political influence (votes) due to their ability to persuade others. It therefore becomes politically beneficial to pursue those that hold comparatively more power over the vote than to simply seek the policy that would benefit the greatest number of
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constituents. Downs (1957) identified that specialists will evolve in the political market that will stand as the electorates representatives. They act simultaneously as intermediaries informing government of public opinion and as persuaders to influence public opinion, thereby commanding more than proportional political influence. Furthermore, it becomes in the interest of parties to accept bribes to finance their electoral campaigns and educate ignorant individuals to win votes. Within this context it can clearly be advantageous for individuals to group together to further their own agendas through appealing to voters selfinterest and governments need for votes. Downs views lobbying in a democracy [as] a highly rational response to the lack of perfect information, as is governments submission to the demands of lobbyists (Downs, 1957, p.141) There is considerable variation within India, between states in terms of population, poverty, sector composition, economic growth and social divides. Characteristic of most developing countries, agriculture employs around 58% of Indias total workforce, but its GDP share has decreased from about 60% in the 1950s to approximately 20% today. In the 1960-70s the New Agricultural Strategy marked the beginning of the gradual increase of agrarian interests in the national policy agenda. This saw the decision to concentrate resources on high yielding varieties of seeds and complementary inputs. These green revolution technologies aided by input subsidisation of fertilisers, irrigation and electricity and higher procurement prices (essentially a price floor) by the government led to big increases in the wealth of a small group of farmers. These interventions stimulate rent seeking behaviour among farmers. Rent seeking is defined as attempting to use the political process to allow a firm or group of firms to earn economic returns in excess of their opportunity costs (Stevens, 1993, p.187). It was Srinivasans (1985, quoted in Abler & Sukhatme, 1998, p.196) view that it was the desire to retain these policycreated rents that was the key force behind the emergence of a farm lobby. There have been many theories offered to explain membership of these groups. From the Pluralist view people with similar interests tend to form groups. Mancur Olson highlighted the importance of material benefits, where rational individuals would join only if these benefits outweigh the costs of participation. He reasoned from this perspective that the larger the group the smaller the portion of benefit an individual receives and the less influential their participation seems, making them less incentivised to participate and more likely to free-ride. He concluded that small groups would be more efficient and effective distributing proportionally greater benefits to members; organisation costs would also be lower in comparison to large groups. The material benefits to wealthy farmers were clear, but these policy-created rents were not beneficial to small subsistence farmers. However during the 80s however it wasnt just the wealthy farmers that were mobilising. It seemed there was a much wider united movement including the poor peasant workers lobbying for greater subsidies and protection from urban-bias. As support from government would mainly accrue to the wealthy and the peasants represent such a large group, rewards would be small if any and no individual would make any ascertainable difference to the outcome all suggesting the free-riding outcome.
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How have so many voluntarily invested their time when according to theory this seems illogical? In Olson considers participation as a cost-benefit analysis, but there are many examples where reality deviates from this neat summation. People participate even when no tangible incentives are given. Other theories have attempted to explain this irrationality in terms of Indias peasantry. I think there are three main reasons why they were motivated to participate. Purposive benefits are an intangible reward associated with an ideological or value oriented goal. (Stevens, 1993, p.193) The rural lobby represented demands such as minimum wages and fairer treatment of rural workers by allowing them equal access to government jobs. By supporting social reforms, not just for the individual but for future generations, individuals would feel the benefits of (or avoided the guilt of not) having supported such social improvements. There are also solidarity benefits, the social rewards for being part of the process of working toward goals or outcomes (Stevens, 1993, p.193). These could be significant for Indian peasantry given their impoverished standing in society. Given that an individuals vote may seem inconsequential, to actively represent ones preferences through participation would be empowering. Furthermore, Salisbury stressed the role of the interest groups organiser, the entrepreneur, in explaining how groups form and become effective (1969, quoted in Stevens, 1993, p.192) Tikait was identified by Bentall & Corbridge(1996) as one of these charismatic leaders with his ability to personify a wider group and take on their collective identity (Bentall & Corbridge, 1996, p.42) and present himself as a representative farmer. The wealthy farmers used populist rhetoric along the lines of rural community unity as the visability of the rural-urban divide allowed the [farmers lobby] to promote a rural constituency that included landless labourers and which transcended some of the real divisions of caste and class(Bentall & Corbridge, 1996, p.44), enabling them to mobilise mass support. This rural lobby with its power to mobilise and command the support of millions of farmers pressed for increasing subsidies and output prices. This rural power was demonstrated regularly, first in 1978 where 1 million farmers marched to Deli (known for its agricultural pricing influence) protesting that the government had betrayed their interests. Political parties felt they could not afford to ignore their demands. Many mainstream politicians were eager to capitalise on the large rural vote bank that the [rural lobby] was assumed to control (Bentall & Corbridge, 1996, p.32). They therefore felt compelled to reformulate their programmes in support of these demands, so farmers movements asserted themselves as strong pressure groups in India. In fact by 1990 the biggest single subsidy made over by the Indian exchequer was the subsidy paid to the domestic fertilizer industry. (Bentall & Corbridge, 1996, pp.36-37) The fact that the movements were selective about prioritising some demands (lower input prices, higher food prices) over others (minimum wage for agricultural labourers,
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investment in rural development) highlighted a distinct bias towards wealthier marketoriented farmers. I believe that although solidarity and purposive benefits, ideology and inspirational leadership encompass strong reasons for the initial participation of members, and give incentives to continue, that Olsons rationale of tangible benefits becomes more dominant in the decision of maintaining that participation. Once demands of lower castes were continually not met it is reasonable to believe they become disenfranchised in their initial incentives to participate, Bentall & Corbridge (1996) state that successful and long lasting social movements must continually mobilize their supporters and provide them with tangible reasons for active participation (Bentall & Corbridge, 1996, p.44). Particularly considering the methods of lobbying used, predominantly marches or blockades, it is understandable that active participation dwindled and free-riding increased. The rural lobby was highly heterogeneous; not only reflecting the wealth divides but those of the population as well. This bias was further highlighted by the rise of the caste based political parties. Some appealed to electorates such as backward castes and scheduled castes giving the hope of overcoming social divides. Others appealed to the more elitist castes who wanted to maintain these divides. The previous clear political ideology of the rural movement, once it had become politicised, created political divides along the ethnic and communal lines, weakening their bargaining power as an undivided farmer group which then split into separate farmers and peasant lobbies. This diluted the political obligation for the parties to appeal to the farmers demands. Coinciding with this split in the early 90s major political reform was implemented and industrialisation came to the forefront of the political agenda. Within this new order, the peasant lobby, without the coercive influence of the wealthier farmers, had little ability to amount any meaningful action to express the intensity of their preferences and consequently posed a weak political voice. Being large in number makes it difficult to efficiently organise, reduces the portion of benefits each member is likely to receive and heightens the prospect for individuals to free-ride. However, although the farmers lobby has demonstrated less ability to mobilise protests, it still has a clear voice in the political market and exerts influence through other means such as sitting on pricing boards and making donations to political parties. In fact in some states, farmer lobbies have held on to their subsidies even after the 1991 reforms. With a small group they are able to decisively set their agenda and efficiently organise with lower costs. Each member gets a greater proportion of the benefits so is faced with greater incentive to participate. In conclusion, the united rural lobby eventually failed due to the heterogeneous nature of the group, Olson (1982) does argue that collective action will be more likely to succeed if organised in relatively homogenous groups. The different ideologies and subversion of benefits to the few wealthy meant the poor masses became disenfranchised with the movement. The resultant sub groups wield political clout as suggested by the political economy theory. I think this has proved to be an interesting case study of the factors that motivate those to join interest groups and has demonstrated the paradoxical exploitation of the great by the small.(Smith, 1937, p.579)

References
Abler, D. G. & Sukhatme, V. (1998). The Determinants of Wheat and Rice Policies: A Political Economy Model for India. Journal of Economic Development, Vol. 23, No. 1 (June 1998), pp.195-215. Bentall, J. & Corbridge, S. (1996). Urban-rural relations, demand politics and the new agrarianism in northwest India: the Bharatiya Kisan Union. Transactions of the Institute of British Geographers, New Series, Vol. 21, No. 1 (1996), pp. 27-48 Downs, A. (1957). An Economic Theory of Political Action in a Democracy. Journal of Political Economy, Vol. 65, No.2 (Apr. 1957), pp.135-150. Olson, M. (1982). The Rise and Decline of Nations. New heaven and London: Yale University Press. Smith, A. (1937). An Inquiry into the Nature and Causes of the Wealth of Nations. (1776) Reprinted 1937. Edwin Canaan (ed.). New York: Modern Library. Stevens, J. (1993). The Economics of Collective Choice. Boulder, San Francisco, Oxford: Westview Press.

Word Count: 2087 - References(492) = 1595.