The Bad Economics of Democracy: Why Horse Trading is More Than Just a Moral Problem
If you follow Indian politics, chances are you expect news of political horse trading every major election cycle. Horse trading is the phenomenon of elected representatives switching their party affiliations, often in exchange for money or roles in government. When there are simultaneous elections in several states, and the time that lapses between elections less, the machinery of all our political parties is devoted to churning out strategies for winning. And this makes the partisan system of our politics the elephant in the room, but an invisible one.
Horse trading has been around for as long as Indian democracy, yet we always view it as something that morally corrupts the ideal realm of politics every other season. In reality, it is a result of the incentives created by the institutional structure of our polity.
Partisanship has come to be seen as a default in contemporary politics, but this was not always the case. Moreover, it is not viewed as a source of our political problems per se, because both political action and analysis obscure the incentives that it gives rise to.
In ancient Athens, eligible adult male citizens could vote on laws and contest to lead (though this criterion wasn't ideal). Throughout medieval India, there existed one form or another of republican government, some of which continued into the modern period at smaller levels. When the United States was being formed, the Founding Fathers too wanted to insulate the spirit of republicanism from the tensions inherent in a democratic setup. James Madison famously argued about the threat factionalism posed to citizens’ rights. s
In a republic, the constitution is supposed to place institutional checks on the government and places power with the individual. In a democracy, it is the people, the majority, from whom flows the power to govern and make laws. A democratic system is supposed to supervene upon a republican framework, not overwhelm it.
But once elected, a democratic government may escape the checks placed on it constitutionally. This issue is magnified in the case of India, whose constitution already tilts more towards a unitary state than a federal one. Even China boasts a greater degree of decentralization (albeit with its own set of drawbacks). But primarily, it is the capacity of this democratic ideology to generate partisan political factions that allows it to upend the power given to voters.
First, it is important to wrest the romance associated with democracy and the election process. The way in which people exercise their votes is itself highly opaque and ethically fraught. Several scholars like Garett Jones, Bryan Caplan and Jason Brennan have studied this in detail.
Once we have a nonromantic view, it can be extended to the contestants of the election process. Unlike voters, those who contest for representation end up competing for votes as well as factions/parties. A win/loss in one space sends out corresponding signals in the other. In fact, this is exactly how a democracy draws out and maintains the voter-legislator distinction, which is normatively absent in a republic.
Horse trading, a metaphor that originated from the untrustworthy market for horses during the so-called Gilded Age in the US, is indicative of the lack of market mechanisms (profit/loss and pricing) to discipline immoral behavior. It is apt for an institutional environment that creates a ‘market’ for politics, but not where it may be useful.
In other words, it is the voting mechanism that needs to be supplemented with improved knowledge, but it is large, powerful political parties that become the principal buyers and sellers. They shape outcomes and trade the stamp of their identity and partisanship with politicians. Often, politicians are not identified by the policies they espouse but by their party-based identities. This completely misses the fact that governance and representation are services provided to citizens, not just marks of social status.
There are two ways to overcome such partisanship: by creating a single party state, and by creating an altogether nonpartisan state. The former requires a strong, authoritarian, top-down structure, which is incompatible with the essential freedoms of individuals. The latter is the way to go forward. Nonpartisan politics do not entail that we get divided into tiny republics. For Madison too, it was the opposite. To go beyond narrow-minded factionalism, one needed to be politically positioned in a larger national sphere. In our times, the challenge he grappled with is even more critical. Polarization and partisanship still loom large, even if they are not dramatically high. But this is exactly the context in which an institutional intervention becomes vital.
This kind of intervention ought to be Hayekian in a sense, as it would be aimed at shifting the rules of the game to make it more conducive to catallactic action. In his famous essay, “The Use of Knowledge in Society,” Hayek cautioned against the seductive power of the belief that civilizational phenomena are produced and maintained through some sort of conscious ordering.
Thus, recognizing the shortcomings of ideological democracy does not go to suggest that the republic is the best political fix. It is to draw attention (especially in the Indian context) to why we constitutionally call ourselves a ‘republic’: to preserve our ability to have an individual political life within the socioeconomic collective, and continuously check the centralizing institutional orientation of democratic politics.
We ought to bend away the channels for partisan tendencies to get concentrated at the top. It is a matter of urgent political reform to reimagine the service of governance as equivalent to any other essential good or service, not as something that sits outside the economy.
The conventional view that compares opportunistic political transactions to greed-infested, bad-faith ‘markets’ gives us a simplistic description, not an analysis of the causes. It presumes that democratic politics exists in an ideal realm, and its flaws are the imperfections of humanity.
On the other hand, the institutional view underlines how, when certain rules of the game have ossified, general economic behavior can have corrupt outcomes. The economist James Buchanan said this best in his 1986 Nobel Prize lecture:
The relevant difference between markets and politics does not lie in the kinds of values/interests that persons pursue, but in the conditions under which they pursue their various interests.