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By Bumbu

A developing country’s policy to promote development rests on many factors. One factor is the economic arguments for and against the policy. This comes up often in debates about whether developing countries should be liberalising their economies and committing to free trade or not. Another important factor is the domestic political situation. Here I describe a few examples of how domestic politics can influence the desirability of a policy. Generally the political factors mentioned are to do with the distribution of costs and benefits from a policy. Even if the country expects to benefit overall from the policy in an economic sense, distributive concerns can present reasons against the policy.

A government’s decision to protect certain industries from import competition may reflect the pressure of business lobby groups representing the import competing industry. It may be that the protection concentrates benefits onto producers in the import competing industry, while diffusing much larger costs over the rest of the population, perhaps in terms of higher prices faced by all consumers[1].

We might suppose that the political parties in a system of representative government will act to maximise overall gains for the country, or might pursue policies which win over the ‘median voter’. However, these parties need large campaign funds if they are to have any success in elections. Special interest groups are the major sources of such funds. Political parties or individual politicians will likely be willing to trade off some overall welfare for greater campaign funds. Obviously, they cannot trade off too much of the overall welfare, lest they lose significant amounts of voters. However, some reduction in overall welfare may have little effect on the number of voters if the costs are widely diffused or are hidden. There is a tendency for protectionist trade policy to be captured by special interest groups such as import competing firms.

This is the case, for example, with respect to protectionism by developed countries in selected sectors such as agriculture and textiles. Developed country protections in these areas raise domestic prices or substantially increase fiscal expenditure without a corresponding benefit for the economy as a whole. The beneficiaries are generally very small in number. For example, farmers constitute a small proportion of most developed countries’ populations. In the US farmers constitute only about 2% of the work force, yet their well organised and politically influential lobby allows them to drag trade policy in their favour (Krugman and Obstfeld 2003: 232). Developed country protection of agriculture and textiles has been a major sticking point in recent multilateral trade negotiations with developing countries.

It is often argued that governments seeking to pursue protectionist policy for the overall benefit of the country tend to become captured by special interest groups. While certain protectionist policies would be most desirable on strictly economic grounds in a given case, some propose that this should be avoided for practical, political reasons. In practice, the position goes, the protectionist policy will end up benefiting certain special interest groups at the cost of general consumers rather than being to the overall advantage of society. As a result, it may well be to the overall detriment of society in a cost benefit analysis. Advocates of this position say that free trade should be advocated without exception (even if it is not the best option in some cases on strictly economic grounds), so as to avoid protectionism being used as a tool to benefit small groups of special interests (Krugman and Obstfeld 2003: 221).

In many cases, social movements opposed to development and growth are opposed to particular policies. Particular policies undertaken in the process of development are bound to include an element of economic reasoning about the usefulness of the project for the region or the country, as well as an element of politics in its distribution of costs and benefits. There are systematic reasons why poor and marginalised groups, especially in developing countries, will end up bearing the bulk of the cost of development projects while special interest groups - perhaps business groups or powerful voting blocs – will reap the concentrated rewards. Elements of corruption, poor news media, unequal power and resources to make one’s case to the public and to politicians are all factors in this distribution of costs and benefits. These are important factors which can serve to perpetuate oppression, marginalization and poverty of the global poor which relate to the implementation of development projects and the concrete pursuit of economic growth. The criticism in these cases need not be of the underlying economic theory. It may instead be of the political and social factors, both systematic and contingent, which inevitably accompany the implementation of the policies. Let me briefly run through some examples of these factors.

Some parts of the population may be pandered to by politicians at the expense of others. For example, an urban middle class voting bloc is likely to be relatively well courted by politicians when compared to the urban and rural poor in many developing countries. The well courted voting bloc is likely to seek government support for projects which benefit them and which happen to have few benefits or even substantial harms for the marginalised. Entire regions in a country can become left behind if their votes or other political and financial clout matters insufficiently to the rulers.

Special interest groups and business lobbies will seek to capture government policy regardless of whether it is protectionist. Firms seek concessions from the government, such as places to build factories, public funding for infrastructure, concessions for inputs, incentives to invest in this country rather than in some other, or in one region of the country rather than in another. Means by which business interests can pursue their ends include campaign contributions, political corruption and bribery, slick campaigning (to politicians and to the voting public) to ensure that their assessment and presentation of costs and benefits from a project (rather than that of affected groups) capture public or decision-makers’ minds.

The political factors can involve not only domestic agents and institutions but also foreign or global ones. Pogge, for example, highlights the role of the resource and borrowing privileges, the poor policing by developed countries of the bribery practices of their large corporations and the international arms trade (the majority of which is tied to the US and other developed countries) in encouraging corruption and partisanship in the domestic politics of developing countries (see for example Pogge 2002: 113-6 and Pogge 2005: 336). Political context in a developing country can also be affected by the political, diplomatic or military intervention of a foreign government. A foreign government may intervene on behalf of a special interest lobby which has interests in the developing country.

Marginalised groups in developing countries are particularly vulnerable when special interest groups pursue their agenda. Often, they have neither access to national news media to make their plight known, nor the wherewithal (in terms of literacy, experience, organisation, wealth, leisure) to make their case effectively to courts, politicians or bureaucrats. In India, for instance, tribal peoples (collectively referred to as Adivasi peoples), Dalits and the landless are among the most marginalised groups. Adivasis comprise roughly 8% of the country’s population, yet compose more than 40% of persons displaced as a result of development projects. Dalits and other landless people together constitute a similar proportion of displaced persons (Bandopadhyay et al 2008: 15)[2].

Consider an example. Suppose an entrepreneur wants to open up a new car manufactory in a developing country. It will petition politicians for a favorable location - close to highways, suppliers and ports. It will petition for subsidies on inputs – including basics such as cheap electricity and water, as well as industry specific inputs form other industries. It will petition for land not merely for the factory, but perhaps also for housing and other facilities for some of its employees and guests. This is especially the case if the development is some distance from established urban centres, as a certain level of facilities is required to entice skilled workers from urban centres to the rural setting.

There are various possible benefits to the region and to the country more generally of the construction of the factory. These include the creation of exportable goods, creation of relatively high-skilled jobs, an influx of technology into the economy, a spur to complementary industries in the region (especially if the location is relatively undeveloped or rural in nature).

First, however, some land must be acquired. In many cases, the private agent will not negotiate individually with the very large numbers of inhabitants in a densely populated urban or rural region in a developing country. This may be very costly for the private agent. This may be in money terms or in terms of reputation or legal consequences if the land acquisition encounters collective resistance or turns violent[3]. There may also be legislative restrictions on private agents buying land from certain populations in developing countries. Indigenous and tribal populations, for example, are sometimes protected in this way. This is to address the imbalance in bargaining power and familiarity with law and regulation between these groups and corporations which makes unfair deals very likely.

The land acquisition may require displacing existing inhabitants and users of the land. The gross product of the country, and perhaps also the local region, may well benefit from the building and operation of the factory as compared to a status quo use of the land. Nonetheless, the displacement may be very costly. One might think that compensating the displaced for their land might solve the issue.

However, it can be extremely difficult to arrive at a satisfactory valuation for land. In some cases, the government may want the land for uses the market will not value highly. For example, consider the ongoing controversy over the Sardar Sarovar mega-dam project in India. Many villages are expected to be submerged by the large reservoirs which result from the dams. If this expected future use of the land is known, the market price at the time is likely to be untrustworthy (Ray 1998: 157).

Even if a market price is clear, it may not reflect the cost imposed on the displaced. Costs of displacement include, but are not limited to, the following. This list of eight processes that lead to impoverishment is taken from Cernea 1995 (pp251-2)[4].

·        Landlessness is costly in that land is often the foundation for productive systems, commercial activities and livelihoods.

·        Joblessness affects not only urban displaced but also rural people – landless labourers, service workers, artisans and small businesspersons. Creation of new jobs can be difficult and unemployment may last well beyond relocation.

·        Homelessness may be temporary but may also be chronic. There is also a sense of cultural homelessness.

·        Marginalization occurs when families lose economic power and slide downwards. It can begin well before displacement, as condemned land becomes devalued, new investments are prohibited and social services are undercut.

·        Increased morbidity results from relocation-related diseases and from increased stress and trauma. Vulnerability to disease is increased and unsafe water supply and waste systems contribute to spread of infectious disease.

·        The risk of food insecurity rises as sudden drops in food availability and in income are certain during relocation.

·        Loss of access to common property is a substantial matter for the landless and otherwise assetless poor. Relocation can mean loss of access to forests (a source of food, medicine, construction material), water bodies, grazing lands. Since these are common property or are not thought of as property at all, these losses generally escape compensation calculations.

·        Social disarticulation involves dismantling of a community’s social organization, and the dispersion of formal and informal networks, associations, local societies and so on. This can include some very tangible losses. For instance, traditions within a community may have meant that an individual could rely on the free labour of their fellows in certain projects like the construction of a house. Again, these losses generally escape accounting in compensation calculations.

Whether or not the announced compensation reflects the value of the land to the displaced, it may not even eventuate. Compensation may not be possible until after the project or reform has occurred and has had time to generate revenue. Yet, by then, the issue of compensation may have left the attention of the news media or the politician who promised the compensation may have left office. The incumbent politician may see no reason to carry through the promise if they judge that there will be no punitive public outcry as a result. Even when effected, compensation can be whittled away by corruption as it moves from politicians, bureaucrats and officials to the displaced.

Estimates in a report by the Indian government suggest that almost 75% of those displaced since 1951 (until 1996, when the estimate was released) were still awaiting rehabilitation (National Policy for Rehabilitation [Govt. of India] cited in Sainath 1996: 71). Moreover, these figures represent only those directly displaced by land acquisition. They do not include, for instance, landless laborers, fisherfolk or artisans or people outside designated ‘project affected areas’ whose livelihood depends on the resources or the economy in the affected area (Sainath 1996: 71-3). Only a third of persons displaced for the sake of development projects have been resettled (Bandopadhyay et al 2008: 15).

Another reason behind systematic bias against the marginalised and the poor lies not in their relative influence on politicians, but rather in their lack of influence on news media. Visibility in major news media and the ability to effectively voice one’s criticisms in news media can determine the issues which reach public consciousness. Whether a government can get away with helping a special interest group at substantial cost to a marginalised group depends a great deal on whether the cost will become widely known among the section of the public which is crucial to re-election. A public outcry among this section can be devastating to chances of re-election. The route to, and the effect on, wide public consciousness often depends on the amount and type of coverage given by major news media. This is especially the case where the marginalised group does not have significant interaction with the politically influential section of the population in the normal course of things. This may be because of geographical distance, or because of prejudice, or other, less pernicious, social norms.

The seriousness with which a government carries out consultation and impact assessment (of the costs of a policy) and the credibility which is properly attached to this is also important. Expecting that not all affected groups will be able to influence politicians or make their voices heard, consultation by a government can seek out the views of those affected and an impact assessment can try to objectively weigh the costs against expected benefits. As a regrettable matter of fact, governments, especially in developing countries, are not always good at doing this. Possible reasons for this include cost of adequate research, difficulty in conducting the research (geographical, security of access to conflict areas) and political corruption.

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