India has been a functioning democracy since Independence, so why does it not have a higher standard of living? Why haven’t Indian voters opted for the kind of wealth-maximizing policies that have vaulted Singapore to a much higher standard of living? Have they in recent times, or are Indian voters especially irrational among democracies?
Here are a few hypotheses:
1. The real economic problem is local. Good policy at the national level won’t solve India’s fundamental problems, which include poorly defined property rights and corruption. Indian voters choose good leaders, but real change will require much slower piecemeal reforms at the micro-level.
2. Indian voters are just simply, plain, flat, downright irrational.
3. Indian voters seek to perpetuate the Gandhi-Nehru dynasty in some form. This leads them to choose from a narrow subsection of the elite. Indian economic policy has improved as this elite has moved away from socialism and has had greater exposure to market-based ideas.
4. Centrist Indian voters have evolved into rationality. Indians once elected socialists, but the current Indian Prime Minister, Manmohan Singh, is arguably the best man in the world for the job [TC: he wasn’t exactly directly elected…]. India does not improve more because Singh is constrained by other parties, which court irrational views at the fringes.
5. Singh is an accident, and India will likely return to leaders who reject the idea of wealth creation [but do note that Rao and Rajiv Gandhi were also pro-market reformers to some extent].
6. The real democratization story concerns the rise of “lower-caste” politicians in the 1990s, and the waning power of the Anglicized Brahmin elites. This will mean either:
a) The lower castes will choose future leaders unwisely and pursue a politics of resentment.
b) The lower castes will be forced to “own” Indian government to a greater extent. Their politicians also will be led toward pro-market reforms, given the nature of the problems they will face. India will become stronger and more unified in the long run, thereby making market reforms more wide-ranging and also more durable.
Yes many of these are contradictory but can they all be true?