No denying the family
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The design and scale of political capture by powerful families in South and Southeast Asian democracies is, however, altogether different. Here parties are dynastic. In Japan, on the other hand, individual Diet members are often dynastic but the main political party — the Liberal Democratic Party — is not controlled by the same family through generations. This is not the case in places like India and the Philippines, where the top leadership of most political parties comes from and stays within one family. This is the main difference between dynastic politics in South and Southeast Asian countries and places like Britain, Japan or the US. After the demise of Benazir Bhutto in 2007, Bilawal Bhutto was the natural successor to the post of party chairman. In India, some cabinet ministers in the current UPA government, who have been in politics since before Rahul Gandhi was born, take pride in appealing to the Gandhi scion to take on the mantle of party leader. Political parties in Bangladesh, Sri Lanka, the Philippines, Malaysia and Thailand exhibit similar characteristics. On the other hand, Tony Blair's prime ministership of Great Britain for 10 years did not lead to the current Labour leadership embracing Euan Blair with both hands. Similarly, George Romney's legacy as the 43rd governor of Michigan, and a candidate for the Republican Party nomination in the 1968 presidential election, could not even ensure Mitt Romney's nomination as the presidential candidate of the Republican party.
Dynastic parties persist in India and other countries in South and Southeast Asia because in economy as well as politics, "power begets power". Dynastic parties thrive because of the pervasiveness of crony capitalism. Crony capitalism is the exchange of favours for bribes and/ or party financing between business and the state. In crony capitalist systems, the state (politicians and government officials) show special favours to some businessmen by granting them privileged access to leases and permits, the sale of land, and tax breaks. In each of these cases, the holder of the permit, lease or land makes large financial gains. The nexus between business and politics in crony capitalist economies ensures procurement of assets at a low price and windfall gains thereafter.
Economic liberalisation in India post-1991 has expanded the opportunity for windfall gains by businesses. The massive infrastructure drive — building highways, expanding transportation, telecommunications, mining and the allocation of land for educational institutions, housing developments, etc, coupled with a large expansion in social sector programmes like NREGA, mid-day meals, etc — have privileged the well connected. Prior to liberalisation, the state would have undertaken these activities. Now these businesses are in the hands of the private sector (for good reason) but the state still plays a large role in deciding which businessman gets to "play" with the state. Examples abound, including the favourable allocations of Commonwealth Games contracts, 2G spectrum, natural resources (oil and gas blocks, iron and coal mines), land for townships and SEZs. The increasing presence of dynastic parties in the periods after economic liberalisation is not coincidental.
A good example is the late Ponty Chadha's empire, built on a liquor monopoly in Uttar Pradesh and Punjab, sugar mills in western UP and vast land stretches, which was the result of state-granted favours. His company's Rs 9,000 crore contract to supply mid-day meals to government schools in UP has been recently challenged in the high court on the grounds that the UP government laid down "tailor-made" pre-conditions to suit Chadha's firms and disqualify all other bidders. The rise of the Reddy brothers from Bellary in Karnataka has similar background conditions. The crony capitalist phenomenon in India is not limited to only these "rags-to-riches" stories. Raghuram Rajan, the chief economic advisor to the government of India, at an address at the foundation day of the Bombay Chamber of Commerce and Industry in 2008, highlighted that India has 55 billionaires for its $1.1 trillion of GDP, whereas Germany has the same number of billionaires as India with four times its GDP. Rajan further said, "the common perception is that these are software billionaires, but IT billionaires are not many in number. Three factors — land, natural resources and government contracts — are the predominant sources of the wealth of our billionaires. And all of these factors come from the government."
Similarly, Michael Walton and Aditi Gandhi, in a study of India's 46 billionaires on Forbes magazine's 2012 list, find that 43 per cent of the total number of billionaires, who account for 60 per cent of billionaire wealth in India, had their primary sources of wealth in rent-thick sectors (real estate, construction, infrastructure or ports sectors, media, cement and mining). Likewise, research on India's industrial sector suggests that in the period after liberalisation, firms with a past history, rather than new entrepreneurs, have remained the main actors. And India is not an exception. A study on the 1997 East Asia financial crisis suggests that at that time, the 10 largest families in Indonesia, the Philippines and Thailand controlled 57.7 per cent, 52.5 per cent and 46.2 per cent of corporate assets respectively.
It is far more convenient for business groups dealing in rent-thick sectors that depend on government largesse to deal with a dynastic party in which one individual or family exercises control. Dynastic parties are undemocratic, in that the word of the political family takes precedence over other voices. The leader and her family have the power to discipline anyone who raises voice against it. The administrative and geographic reach of political parties — that is, they have presence in many parts of the state and within many administrative bodies — makes it convenient for a rent-seeking politician to deal with one power centre. There is, therefore, a growing relationship between crony capitalists and India's dynastic parties. A large amount of money earned through rent-thick sectors finds a way into politics during elections. In dynastic parties, the power to recruit and nominate candidates, the authority to control the legislative agenda and the financial resources required for running an electoral campaign, rests exclusively with members of the political dynasty. The control exercised by the leaders also means less trouble from individual politicians for a crony capitalist.
The corruption in business and government in today's India resembles America's Gilded Age (1865-1900). However, with Theodore Roosevelt's rise to the presidency in 1901, a bipartisan fight against corruption, more honest business practices and a channelling of private wealth into philanthropy marked the progressive era. While we may keep celebrating India's "civilisational glory" and global acquisitions by a few corporations as the "rise of India", it's likely that crony capitalism and its ties to dynastic parties will stall that rise. The trouble with India is that we love to live in a world of denial. The original 12th Five Year Plan document presented at the Planning Commission meeting on September 15, 2012 stated, "discretionary allocation of natural resources, such as coal and spectrum, has led to crony capitalism". The new document has dropped the word "crony capitalism" due to objections by some members of the cabinet.
Pradeep Chhibber and Rahul Verma are at the Travers Department of Political Science, University of California, Berkeley