The Sunday Times Economic analysis

Note on economy before you vote

By the Economist

It's an economic choice of very serious proportions. The country is in dire economic straits and the global economy is in recession. We have not had any effective economic management in the past year. Hard times are ahead. Hard choices and strong economic management is the need of the hour.

What are the needed ingredients of the new regime? First of all the country requires a government that could pursue clear-cut economic policies without hindrance from within. A coalition that consists of parties that have divergent views would be a disaster. This is especially so if the economic programmes of such parties are driven by strong ideological considerations. 

A coalition is workable only if it is based on a common programme that has been accepted prior to the election. A coalition, where the government's power is dependent on a minority support that requires it to pursue policies that are in contradiction to its own policies, is the worst type of coalition for economic performance. A government that is constituted by a single party, or a coalition with an agreed economic programme is essential. 

The second need of the hour is a team of good managers of the economy. Economic performance has much to do with the effective implementation of policies as with the kind of policies pursued. The inability to choose the correct personnel to head institutions, monitor performance of economic activities and to remove bottlenecks as they arise, are deficiencies that could render even the correct economic policies of little use. 

The effective implementation of economic policies by a political regime capable of handling the management of the economy is vitally needed. The merit of the 1977 regime was not merely the fact that it pursued pragmatic economic policies, but that it had a cabinet with a capacity to implement its economic policies.

A third requirement in the present international context is a pragmatic approach to economic policy determination. 

Ideological considerations based on the philosophies and doctrines of the past would serve no purpose. The reality of local and global conditions must be accepted and the policies pursued must bring results. 

For instance, globalization is an economic reality. It is essential to develop a competitive capacity to benefit from the globalization and mitigate the adverse effects of globalization. 

We must be realistic to accept that foreign investment is a vital need to faster economic growth. We must be realistic to accept that a small economy with a limited raw material base and small domestic market can progress only through an effective linking with the international economy. We have to pursue economic policies that would encourage more and better foreign investors. 

This requires not merely incentives for investment but the creation of an environment conducive to foreign. The latter is far more difficult to achieve than the provision of incentives such as tax concessions and infrastructure. 

Only a stable government that is clear in its long-term policy stance and inspires confidence could provide a hospitable climate for foreign investment. 

Security conditions, political stability and law and order are important determinants for inducing foreign investment. A regime that is not corrupt is also vital for rapid economic growth. This requirement is not merely an ethical one. It is a pragmatic consideration as corruption distorts economic decision making, increases costs of economic projects and ultimately results in poor economic performance. 

An important feature of a new government must be its capacity to take unpopular decisions for long-term economic growth. 

Pandering to the public to gain popularity could ultimately vitiate economic policies and performance. Hard economic decisions that are unpopular need to be taken, if the country is to pull itself out of the present rut. Much needed decisions to reform the administration, education and health services, among others, would be unpopular. But they must be taken in the long run interests of the country. Will the newly elected government shun these responsibilities?

These are some of the considerations over which we must ponder before casting our votes. If these issues are neglected and emotive and political considerations alone determine our judgement, then we may face a disastrous economic scenario from which it may be difficult to extricate ourselves. The December 5th decision of the electorate will indeed be a historic economic decision disguised in the form of a political decision.