Читать книгу The Political Economy of the BRICS Countries - Группа авторов - Страница 17

All five BRICS economies show high levels of income inequality and poor socio-economic indicators despite periods of high growth. In China, Brazil, India, and South Africa, income inequalities and levels of development are such that government intervention and subsidies are required to ensure maintenance of even minimum living standards among the poorest sections of society. Even Russia, relatively the most developed of the five economies with the highest per capita income, is impacted negatively by reductions in government spending on social welfare programs in times of economic crisis. What explains the high levels of income inequality and the failure of all five countries to ensure more sustained and inclusive economic growth? While there are undoubtedly country-specific reasons for this failure, there is one factor that is common to all five countries — high levels of corruption and political capture of government policy which impedes both the effectiveness and inclusiveness of growth. Political capture and corruption lead to non-inclusive growth in diverse ways. Political capture often leads to governments taking decisions which benefit a few firms or individuals to common detriment. It often leads to significant loss of government revenue as natural resources or assets are transferred at less than its true value. Corruption leads to inefficiencies in implementation of social welfare programs and raises social welfare costs significantly.

In India, the nature of state–society relations is such that personal relationships, particularly those related to caste, kinship, and social class, play an important role in government decision-making (McCartney and Roy, 2016: 589). This often leads to political capture of government policy that has a detrimental impact on the quality of growth. An analysis of the rise in the number of billionaires in India illustrates the effect of political capture on income inequality. The number of billionaires in India increased from two in the mid-1990s to 46 in 2012. Of these, 20 billionaires controlled firms involved in sectors considered ‘rent-thick’. Between 2003 and 2008, the share of national wealth held by these billionaires increased from 0.9% to 9.9%. These sectors included mining, infrastructure, telecom, media, and real estate, all of which were heavily regulated. Most of these billionaires were from social groups who were traditionally associated with business and none from groups which were at the lower end of the caste spectrum (Gandhi and Walton, 2012: 10–11). These are also some of the sectors where numerous instances of corruption in award of licenses, which led to significant revenue losses, have been detected by the national auditor. Corruption has also been one of the biggest problems which has hindered effective implementation of social welfare programs in India, especially in the provision of subsidized food (Jha, 2014: 228).

China, because of Communist Party rule, has not developed formal legal and market institutions that limit government power through review by an independent judiciary. Personal relationships, the guanxi, still play a major role in government decision-making process, making policy vulnerable to political capture (Li, 2008). With the advent of economic reform, the instances of ‘high-level’ corruption spread to higher levels of the Chinese government while corruption at lower levels remained more or less then same as before (Wedeman, 2004: 920–921). The process of liberalization and opening up also brought it with the rise of ‘princelings’ in China, the children and sons/daughters-in-law of high ranking officials who came to occupy high positions in the Chinese Communist Party (Choi, 2012: 971). The current anti-corruption campaign by the Chinese President Xi Jinping has stressed the importance of the drive to achieve economic objectives. It was driven in large part by a realization that public perceptions of corruption were affecting the legitimacy of the Communist Party. A PEW Poll in 2016 found that corruption ranked higher in the public’s concerns than income inequality, crime, food adulteration, and pollution (Chen and Zong, 2017). The anti-corruption campaign has resulted in 9% of the membership of the Central Committee of the Chinese Communist Party being detained on corruption charges between December 2012 and October 2017. More than 150 top-ranking officials in the bureaucracy, military, and private-sector businesses have lost their jobs because of the campaign (Mitchell, 2017). In particular, the campaign is likely to help small entrepreneurs increase their investment since corruption is often one of the biggest hurdles to additional investment for them (Gianetti et al., 2017).

Brazil and South Africa are countries that have long suffered from political capture of economic policy by the elites. Brazil — even when it was modernizing and industrializing — still remained dominated by feudal structures centered on agricultural landownership. The political culture that developed enabled elites to influence the direction of economic policy and maintain their dominance over the poor. Prolonged periods of military rule and the lack of an effective party system meant that the political system was always dominated by the elites (Wilkin, 2008: 99). The mechanisms of economic policymaking that developed revolved around distribution of patronage. This did not change significantly even when military rule was replaced by democratic governments. Federal fund transfers to the regions, especially to the poorest communities, remain prone to such capture, further skewing resource distribution and entrenching income inequalities (Mendes, 2005: 440–441). Though the Brazilian Workers Party of President Lula came to power promising an end to elite domination and corruption, it too soon found itself mired in accusations of corruption in government programs and procurement contracts (Michener and Pereira, 2016: 480). Given the fragmented nature of the Brazilian Parliament, the government could effectively function only by distribution of government patronage. The impeachment of Lula’s successor as President, Dilma Rousseff, and Lula’s own imprisonment on corruption charges illustrate the enduring power of such patronage systems in Brazil. The collapse of the Brazilian Workers Party government has also raised concerns about the continuation of many of the social welfare programs that they had implemented. It also illustrates how persistence of political capture can destabilize governments and threaten even successfully functioning social welfare programs.

South Africa inherited a deeply flawed economic system when it became a democratic country in 1994. Poverty was widespread, society was deeply divided, and the government bureaucracy and infrastructure that the new government inherited were designed to serve only a minority of the population (Pillay, 2004: 588). Policies enacted to address the problems of economic inequality afflicting the country further entrenched rather than reduced inequality. Government policy initiatives stressed a system of racial preferences in ownership and employment that easily lent itself to political capture. An increase in black ownership of firms was achieved through debt-funded purchases of equity by a small number of black entrepreneurs (Handley, 2005: 220). Many of these entrepreneurs were closely connected to the ruling African National Congress. In the absence of sufficient number of blacks with the requisite skills to take advantage of the opportunities provided by BEE legislation, the positive impact has been more in terms of number of blacks in senior board positions rather than in employment. The major benefits in terms of BEE legislation have accrued to a newly emerging ‘black middle class’, which has benefited from increased opportunities for employment, rather than to poorer blacks (Horwitz and Jain, 2011: 314; Iheduru, 2004).

Russia presents a broadly similar picture. The privatization of state enterprises by the government of Boris Yeltsin following breakup of the Soviet Union was marked by the sell-off of state assets cheaply to crony capitalists. About 34 of the 84 Russian billionaires earned their wealth through the privatization in the 1990s (Triesman, 2016: 238). This period of ‘chaotic capitalism’ was replaced by the ‘state-led capitalism’ of Yeltsin’s successor, President Vladimir Putin, under whom many of these assets were renationalized. Putin stressed political centralization, seeing nationalization of previous privatized assets as a means of reasserting state control and eliminating the political threat posed by the ‘Russian Oligarchs’ who had benefited from the privatization. Centralization of political power has not resulted in an increase in the efficiency of state agencies. On the contrary, it has led to persistence of corruption and continuing low levels of efficiency in the government (Robinson, 2011: 13–14).