People follow anti-elite leaders, be it Trump or Modi, who go beyond the economy narrative to connect with the masses
Economists are confused about the health of the Indian economy. Firstly, statistics of the economy are unreliable. Methodologies for measuring growth and employment have been changed. Comparisons with the past are no longer straight-forward; trends cannot be gauged accurately.
Secondly, the incumbent government’s remarkable victory in the recent election has confounded economists. Most economists are convinced the economy is not doing well, regardless of what the government’s official numbers say: not enough jobs are being created, demonetisation was a body-blow to MSMEs, farmers’ incomes are low and uncertain, corporate investments are slack, and exports are declining.
If it is “the economy, stupid” that matters to voters above all else, as Bill Clinton, a very astute politician, had famously declared, then how come Modi and his government have been returned to power with an even larger majority if the economy is not doing well? Economics alone cannot explain this.
Confused, some economists have turned around: instead of using economics to explain election outcomes, they are trying to understand what is going on in the Indian economy by analysing the elections. For example, a prominent commentator on the Indian economy writes, “Modi’s rising rural votes show talk of agrarian crisis is much exaggerated”. Economists in India are not alone.
Economists everywhere — even in countries where statistical frameworks are robust — are finding that economics alone cannot explain why voters have turned away from the economic and political establishment towards the political fringes. This is disconcerting for economists; and for policy-makers who rely on economists for guidance. Different lenses are required to understand all that matters to citizens, which the discipline of economics does not provide.
Economists’ tool-kits are dominated by quantitative methods. Economists need numbers to run their equations. Economists assume that human beings’ motivations are purely rational, and self-interested. Conditions that cannot be easily quantified, such as emotions and trust, are difficult to accommodate in their models and equations. However, numbers can never tell the whole story as every good writer (and reader) knows.
Limitations of economists
Economist Albert O Hirschman had pointed to the limitations of economists’ quantitative models in explaining politics, in his book Exit, Voice, and Loyalty, fifty years ago. Hirschman said, to understand the real story, people’s voices and feelings must be heard too. He noted Nobel Laureate economist Milton Friedman’s difficulty in accepting the notion that people should desire to express their views to make them prevail.
Friedman described people’s desire to be heard as a resort to “cumbrous political channels”. He would much rather they resorted to “efficient market mechanisms” and use their money rather than their mouths to make their opinions known. With ‘big data’ analytics becoming ubiquitous now in business and economics, we further risk confusing real understanding with data.
People follow leaders who have compelling stories on their lips, not numbers on their fingertips. Modi sensed very well what citizens wanted. Not just the economy: other things mattered to citizens, perhaps more. They wanted a strong leader with drive to get things done, even matters that experts in economics wound not consider priorities, such as providing toilets, or would not recommend, such as demonetisation.
They also wanted a leader who could put India on the international map, which Modi seems to have with his personal diplomacy. In the US, Hillary Clinton’s policies made more sense to economists: Donald Trump’s made no sense to them at all. Feisty Trump touched a chord within many voters’ hearts that cool Clinton’s calculations could not. Like FD Roosevelt who had spoken directly to American citizens in his fire-side chats, Modi spoke directly to people in India’s heartlands with his weekly ‘Man Ki Baat’.
Modi is a master communicator, who finds evocative words for what could be on people’s minds. With his catchy phrases, he stirs up latent thoughts. To whip up further support for himself in the recent election, he coined the expression, ‘Khan Market Crowd’, to describe India’s elite, liberal establishment — corresponding to the coastal elites in America that Trump stood against.
Around the world, liberal elites promoting the globalisation agenda have a shared view of what is good for everyone. They understand each other, even though they live across national boundaries. However, they have become emotionally disconnected from people in their own countries. When Modi fought his first national election in 2014, he wanted people to know he was a common man — a ‘chai-wallah’.
A Congress politician (an economist from Cambridge) arrogantly tried to turn the tables on him, deriding him as no more than a chai-wallah. In the US, in the run-up to the elections, Hillary Clinton described Trump’s loyal supporters as ‘white trash’. They did not forgive her. An anti-globalisation, and anti-elite, uprising of people from both sides of the political spectrum — Left (socialist) and Right (nationalist) — is squeezing the incumbent political establishment in many countries — the US, Italy, France, UK, Hungary, and India too.
Good leaders comprehend systems shaped by the combination of many forces — not just economic and technological, but social and political too. They listen well to what is happening in people’s minds, not just the numbers. People follow such leaders because they trust them.
During his first term Modi did not implement the bold reforms many economists had recommended, such as reducing the size of government’s social support programmes, even the size of the government, which would have pleased financial markets. A few die-hards are asking him to do it now that he has an even stronger mandate. However, Modi seems set to continue the expansion of welfare and social security measures, following the strategies of John Maynard Keynes and FD Roosevelt, rather than Milton Friedman and Ronald Regan — the heroes of the die-hards.
When first elected, he propounded a slogan ‘Minimum government; maximum governance.’ Wisely, he is now focussed, not on the first half, but the second half of it.
The writer is a former member of the Planning Commission. (Through The Billion Press)