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This chapter explains the nature and limits of monetary power using Minsky's idea of the survival constraint. This is the idea that all agents, including the state, need ‘cash’ to survive. The constraint binds more or less depending on the acceptability of a unit's liabilities. Banks accept borrower liabilities if they deem them solvent; citizens accept a state's liabilities, bonds and money, if they deem it legitimate. Political mutualisation drives super-acceptability, giving the state's bank disproportionate market power rather than untrammelled coercive power (‘fiat’). This enables the state's bank to bend the survival constraint much further than other domestic private entities.
(Neo-)Chartalism misreads this as pure coercive power. Since illegitimate coercion ceases to be state action and becomes a ‘crime’, state coercion is limited by legitimacy in principle. Put differently, brute coercion is less effective than legitimate violence, so a ‘state’ engaged mainly in brute coercion will be less effectively mutualised and therefore issue a poorer form of money.
Monetary power is the ability to modulate the survival constraint of other units, imparting elasticity or exerting discipline on a credit system. For the state and its bank, acceptability qua legitimacy forms one of its outer limits.
Capitalism is a cash nexus: we all need whatever is cojuncturally defined as ‘cash’ to fulfil our basic material needs. Minsky's ‘survival constraint’ is a Banking School rendition of this axiom. Most of us sell our labour power in order to avail ourselves of cash, which represents an ‘outside asset’ to us. By whatever method—earning, selling, borrowing—we must arrange our personal balance sheets to ensure that cash-in is greater than cash-out. This is what Minsky called the ‘survival constraint’: an economic unit cannot survive without positive cash flow; often it has to incur debts to get it.
Given that the state is itself embedded in capitalist relations of production, we will demonstrate how the survival constraint applies to the state itself albeit within much wider bounds. Political mutualisation at scale enables the state to bend the survival constraint further than any other domestic entity. The robustness and scale of a particular political mutualisation effort determine where the state sits in the international hierarchy of money.
The very logic of credit requires acceptance; this is another expression of the survival constraint. Chartalists assume away the problem of acceptance applied to the state because they have an inadequate conception of sovereignty.
At the stroke of the midnight hour on August 15, 1947, the world slept while India awoke to life and freedom. The Indian economy, however, would not be free of its structural deficiencies and uneven developments from colonial rule – even after achieving political sovereignty. The primary task facing Nehru and his advisors on the eve of independence was clear: India needed to grow at a fast pace and achieve industrial development to catch up with the rest of the world while breaking away from its economic dependency on Britain and other superpowers. The tricky task facing the government was how they intended to achieve these goals while facing constraints of capital resources and accommodating the diversity of economic interest groups that existed in the country. In this chapter, I will explain the economic development goals of the Indian economy after independence and the choice of policies to achieve them. This explanation will include studying the historical context of these policies, the internal and global contestations around these policies, and the role of contingent events in shaping them. While the institutions of colonialism and its critique paved the direction of the development trajectory, historical contingency and the impossibility of balancing contradictory and antagonistic interest groups and global politics eventually shaped the application and impact of these policies. It is important to be mindful of these circumstances to appreciate how Nehruvian policies have both shaped the institutions and trajectory of India's future economic growth but also passed on the deficiencies and imbalances that existed within the economy. It is not the mandate of this book to evaluate whether the policies were right or wrong; instead, I hope to show the multiple and contradictory forces that shaped the policy choice and simulate the reasoning behind these choices.
Inheriting the Colonial Economy
The new government had adopted an economy shaped by almost two centuries of colonial rule. The agricultural sector was highly unequal in terms of land ownership and access to capital. The majority of the population was dependent on the vagaries of the monsoon and markets and caught in webs of debt. The added pressure of an increasing population with limited land meant that the majority of peasants were poverty-stricken, with no opportunity to increase the productivity of the land. The landlord class thriving within ancient feudal hierarchies had little incentive to improve production.
Sovereignty is misconstrued by Chartalism. A state theory of money implies a theory of politics, yet Chartalism lacks one. The politics of money, as we have seen, operates at two levels: the broad ‘social contract’ and the granular, institutional instantiation of the political settlement.
While both are missing from mainstream Chartalism, Ingham addresses the latter. While his Weberian or conflictual account of politics is central to his theory, Ingham ultimately downgrades politics to datum, something that sits oddly with his invocation of Weber. This ambiguous position omits legitimacy as foundational to states, provincialises capitalist money despite its technical superiority and world-historical dominance and ignores the material nature of the state's survival constraint.
Having learned so much from Ingham, we presume to invert him in this chapter. His contingent datum we read as universal—namely the conflictual politics that define the ontology of all institutions including money. This gives us a richer account of sovereignty and supplies the missing explanation of variety and hierarchy in money.
Clearly, the state has a central role in monies both past and present, but nailing down the exact nature of the state's role in money has been a troublesome task. This chapter seeks to do this through a critique of the State Theory of Money as outlined by Ingham. A ‘state’ theory of money necessitates at least an outline of a theory of politics: this distinguishes a political theory of money from a state theory of money. Again, we see politics operating at two levels: the agglomerative level of the ‘social contract’ and the institutional level instantiating a particular political settlement.
While both these understandings of politics are missing in Chartalism, Ingham is extremely attentive to the second understanding, showing how the rise of capitalism in early modern England was precipitated by a balance of power between capital and state forces leading to a new, hybrid form of sovereignty and a consequent mutualisation of public and private credit. He therefore has an account of politics only to suppress it as contingent history rather than fundamental logic. Ingham suppresses or downgrades his Weber-inspired conflictual account of politics, we argue, in order to foreground the salience of coercive power in the establishment of money as a unit of account, itself a move in his case against the neoclassical position.
The state owns some part of each one of us, but we also own some part of it and, through its intermediation, some part of one another.
—Mehrling (2000a)
Monetary systems are clearly hierarchical, but why? One answer comes from Chartalism: the state has sovereignty and can therefore impose itself on the monetary system. We have already seen why this is a very limited answer based on a too-thin reading of the politics of accepting credit. We will explore these limitations further through a close reading of Ingham's work in the next chapter. We have also seen earlier that a residual Chartalism can be paired quite consistently with the Banking School in terms of a ‘fiat’ or legal-tender understanding of outside money, ‘currency’ that then comes to be deployed within a system of inside money complete with its own creditary dynamics, namely ‘inherent instability’.
Mehrling gestures towards a non-Chartalist account of hierarchy. He seems uncomfortable with the Banking School's residual Chartalism without fully abandoning it. In line with Banking School practice, Mehrling brackets the ontology of outside money to focus on the economists’ level of abstraction, the evolution and control of credit system dynamics, rather than the ontology of money. He develops the difference between money and credit into a unique vision of hierarchy stitched together by market-making, but he does not say why money is better than credit. ‘Credit’ points to the system's unstable but endogenous elasticity while ‘money’ refers to the discipline of the survival constraint.
Yet Mehrling makes an initial step towards a political theory of money by rendering politics and the state within the logic of balance sheets to defeat the argument from fiat and coercion. This enables us to see different types of social bonding, economic versus political, leading to more or less money-like liabilities. This then opens up a pathway to a non-Chartalist account of hierarchy and heterogeneity in money.
As we saw in Chapter 4, the Banking School does not really need to have a complete theory of the ontology of money: all it has to assert is that there is some qualitatively distinct ‘currency’ which originates outside the credit circle (that is, not the liability of an ‘internal’ operator) which ‘credit’ is a promise to pay.
If you have reasons to suspect that in any area due to any organised movement, the religion is not being truthfully returned, you should record them as actually returned by the respondent….
—Census of India, 2011: Instruction Manual (Government of India [GoI] n.d.14: 6.52)
Introduction
We have so far analysed various errors in Jammu and Kashmir's (J&K) census and discussed their larger political context. We showed that some of the errors cannot be accounted for by conventional demographic and non-demographic explanations and are likely to be driven by politically motivated intervention. This chapter examines the legal and administrative contexts of data collection to understand the checks and balances in the process of enumeration. This is mostly ignored in academic as well as governmental discussions on data quality. We will discuss the constraints that circumscribe data collection exercises because of which the punitive provisions of law have failed to prevent the manipulation of the census in J&K and other states.
The chapter first introduces the legal framework determined by the Census Act, 1948, and the Census Rules, 1990, and discusses the administrative machinery that is mobilised to conduct the census. It then explains why erring respondents and enumerators cannot be punished for deliberate errors and argues that it is neither desirable nor practical to provide security to enumerators. We will argue that the punitive measures of the Census Act, 1948, serve as a hollow threat because governments are unwilling to strain their relationship with people and public servants for conducting a once-a-decade exercise. As a result, punitive measures are rarely enforced even though the fines are mild. This is also true of several other common-law countries. The chapter then discusses the implications of the absence of provisions in the Census Act, 1948, and the Census Rules, 1990, for the correction of data. So not only is the Office of the Registrar General of India (ORGI) ill-equipped to deal with mass subversion of the exercise, but it is also unable to correct the data afterwards. The decline in the availability and quality of metadata provided by the ORGI has, however, meant that users do not have adequate background information to assess the quality of census data.
The Census Act, 1948
In colonial India, a temporary legislation was introduced before every decennial census that lapsed after the completion of the exercise (Maheshwari 1996: 137–39; see also S. Subramanian 1960: 112).
The Nehruvian policy regime was focused on industrial development and self-reliance. The state channelized its resources towards the development of key infrastructural and heavy industries through the public sector. It institutionalized the planning mechanism to ensure coordination with private industries, protection from foreign competition, and subsidization of imports. The focus on developing a self-reliant heavy industry-intensive form of capitalism came at the cost of reduced public investment in the agricultural sector. Further, the lack of redistributive policies under the Nehruvian government translated into increasing rural inequality, as the gains in the sector were made by the landowning classes. The alarming aspect of Nehruvian policies – especially one aiming for self-reliance – was its heavy dependence on foreign aid. External assistance increased from INR 6 crore in 1955–56 to INR 822 crore in 1966–67, which translated into 90 percent of the BOP deficit being funded by foreign aid (Figure 3.1).
The crisis of 1965–66 was a consequence of the development trajectory followed under Nehru and was indicative of the instabilities within the choice of policies. The crisis was itself triggered by a spectacular fall in agricultural production and private consumption due to two extensive droughts in 1965– 66. India, having lost an expensive war with China and amidst another crucial one with Pakistan, did not have the resources to import food without serious consequences to budgetary surplus. It was at this crucial juncture that the USA government started negotiating conditions tied to its PL 480 aid program. In the meantime, India had no other choice but to import food grains to compensate for the losses caused by the drought; lower supply led to higher agricultural prices and, consequently, unleashed crippling inflation upon the lower-income classes in the country. These imports severely damaged India's BOP position and undermined the state's effort to maintain an overvalued currency to protect imports. At this crucial juncture, Nehru passed away, creating a leadership void in the INC and providing the opportunity for multiple vested-interest groups to struggle for control. The crisis had not only destroyed the dynamics of the Nehruvian policies but also created the conditions for political change. In the next section, I will argue that the policy changes in the Indira Gandhi regime were an outcome of conditions created by the crisis of 1965–66.
How Was the UPA Different from Other Coalition Governments?
The UPA, which formed the central government after elections in 2004, was a unique coalition built on the back of secularist opposition to the BJP government. The INC won slightly more Lok Sabha seats than the BJP but gained powerful coalition partners to get a clear majority. The three largest coalition partners were the left with 43 seats, Uttar Pradesh-based Samajwadi Party with 36 seats, and the Bahujan Samaj Party with 19 seats. A few powerful regional parties also supported the coalition, such as the Telangana Rashtriya Samiti in Andhra Pradesh, the DMK from Tamil Nadu, and the National Congress Party from Maharashtra. Coalition governments had become the norm in the 1990s, but the UPA was different from the earlier coalitions in composition. First, the main opposition party, the BJP, had a significant number of seats which gave more impetus for the coalition members to stick together. Second, few of the coalition members had significant seats in the Lok Sabha, making them an important part of the coalition. Third, the coalition member had different political and ideological stances which meant that there was no straightforward economic plank which they could agree upon. These differences determined the mode of policymaking under the UPA government.
Ruparelia (2005) reviews theories about coalition politics and argues that there is a consensus regarding principles that lead to successful coalitions: parties that share policy goals are more likely to form a coalition, and diverse coalitions that fail to devise explicit pacts to accommodate their differences are vulnerable to sudden events which may trigger their demise. This knowledge may be common sense, but it foregrounds the fact that the UPA coalition was not a match of ideologies or political mandate but one of convenience – based on keeping the BJP out of government. But for the INC, to make the coalition work would require keeping members happy through cabinet berths, including partners in policy discussions and finding a plank on which everyone agrees. The author adds that historical failures of coalition governments – of the Janta Dal in 1977, the V. P. Singh government in 1989, the NDA in 1996 – faced severe cleavages which could not be overcome. In 2009, the UPA came to power again.
Although the census is no alternative to self-determination, the local government employees must discharge their duties honestly to defeat the RSS– BJP [Rashtriya Swayamsevak Sangh–Bharatiya Janata Party] designs to change the demography of Jammu and Kashmir.
—Syed Ali Shah Geelani, Tehreek-e-Hurriyat (New Indian Express 2010)
Who in the UT [union territory] doesn't know that the population of Jammu province is more than Kashmir and that the figures of all the censuses held in and after 1961 were fudged to ensure Kashmiri domination over Jammu province?
—Hari Om, former dean, faculty of Social Sciences, University of Jammu (Hari Om 2021c)
[T]he rulers of Kashmir are anxious to pass off the District [Ladakh] as a Muslim majority one…. [We fear] the Buddhists would be officially relegated to the position of a minority in the Census of 1961.
—Bakula (1953: ii)
Yesterday [Ghulam Nabi Azad] was proudly saying that earlier there were more Buddhists in Ladakh and now Muslims are more. I have to say with regret that you tried to finish off Buddhists in Jammu and Kashmir by misusing Article 370.
—Jamyang Tsering Namgyal, member of parliament, Ladakh (Lok Sabha 2019: 160)
The Buddhists of Leh feel that they are dominated by Muslims in the J&K [Jammu and Kashmir] state. But Kargilis feel the same discrimination. The state government thinks we are Muslims, but Shias. The centre thinks we are Ladakhis, but Muslims.
—Asgar Ali Karbalaie, former member of legislative assembly, Kargil (Donthi 2019)
The Kashmiri Pandits with their population of 75,000 are represented by a Minister and a Deputy Minister in the Government of the State and in the Indian Parliament too, they are duly represented. But to the Buddhists the Kashmir Ministry like the Indian Parliament is forbidden ground….
—Bakula (1953: vi)
If 80,000 Ladakhi Buddhists can be given a hill council, why 7 lakh Kashmiri Hindus cannot be given a homeland?
—Panun Kashmir (n.d.2: 27)
Numbers games begin in the teacher's mind. Kashmiri teachers are not serious about enumerating our [Gujjar and Bakarwal] community…. We do not trust [the] census.
—Gujjar activist (interview, 4 December 2019)
Our present population is about one lakh but we claim three lakh. If Gujjars and Bakarwals can claim 25 lakh, why can't we?
—Tribal leader (interview, 5 December 2019)
[T]here is a longstanding and honourable tradition of cooking up figures in J&K [Jammu and Kashmir]….
Elinor Ostrom was the first woman to win the Nobel Prize in economics and her achievement has generated renewed interest in the Bloomington School research program in institutional economics and political economy.
These new essays showcase Ostrom's extensive and lasting influence throughout economics and the wider social sciences. They contextualize the Bloomington School within schools of economic thought and show how Ostrom's distinct methodology is used in policy-making and governance. Case studies are used to illustrate the value of civic involvement within public policy, a method pioneered by Ostrom and the Bloomington School.
The book provides a valuable resource for those keen to understand Ostrom's approach, especially when applied to policy-making and wider application in the social sciences. Readers new to the Bloomington School will be introduced to its central areas of research while those already familiar will appreciate its subtle connections to other disciplines and research agendas.
We explain and document state-level fiscal developments in American Southern states from 1820–1910, focusing on their main source of revenue, progressive property taxes borne primarily by economic elites. The fourteen states in our analysis were characterized by severe economic exploitation of the enslaved and later politically repressed African-descended population by a small rural elite, who dominated the region both politically and economically. While rural elites are thought to be especially resistant to taxation, we offer a set of conditions that explains the emergence of progressive taxation and provides a coherent account of the fiscal development of these states over this period. Using an original, archival data set of annual tax revenues and select expenditure items, we show that the economic interests of these rural elites and the extent of their formal (over)representation played a critical role in shaping the observed fiscal patterns within and across these states over this period. This title is also available as Open Access on Cambridge Core.
Bartels reviews recent research on political inequality, with particular emphasis on the grounding of empirical analyses in democratic theory. He distinguishes two types of inequality – of policy congruence and of influence – and surveys a variety of conceptual and methodological challenges arising in attempts to measure them. Congruence is the extent of agreement between citizens’ preferences and politicians’ choices, and assessing it requires careful calibration on both sides. Influence is the causal impact of citizens’ preferences on politicians’ choices, and assessing it raises much the same plethora of challenges involved in any complex causal inference. While research based upon these concepts is at an embryonic stage, studies in a variety of countries employing a variety of research designs suggest that inequality of influence is common and substantial, while inequality in congruence is generally more modest – a situation sometimes characterized as “democracy by coincidence.”
Do highly educated politicians adopt different public policies than less-educated politicians? Existing research disagrees about this question. While some recent studies argue that highly educated politicians deliver better performance, others find no effects of education on economic or public policy outcomes. This article studies this question using a comprehensive dataset with information about the education, age, and gender of elected local politicians in Spain and fine-grained economic and fiscal data collected between 2003 and 2011. Applying a fuzzy regression discontinuity design, we find that when parties with more-educated councilors narrowly win the election, governments do not perform better on a number of valence indicators. However, further analyses reveal that local governments led by more-educated politicians have lower levels of capital spending and capital transfers per capita. Our findings suggest that educated and noneducated politicians differ on preferences rather than on ability and call into question that education can be used as a proxy of the “quality” of politicians.
Since the 1990s, economic inequality has risen in just about every affluent democracy in North America and Western Europe. But the last three decades have also been characterized by falling or stagnating levels of state-led economic redistribution. These two contemporaneous trends pose a puzzle for students of political economy. Why have democratically accountable governments not done more to compensate the large majority of citizens with low and middle income for rising top-income shares? Our introductory chapter begins by describing this puzzle of rising inequality and noting some nuances that most accounts regularly miss. We then examine two groups of explanations for the puzzle of rising inequality: one set that focuses on voters and their demands for redistribution, and another that focuses on elites and unequal representation that is biased against less-affluent citizens. This volume seeks to contribute to explaining the puzzle of rising inequality by bringing these two groups of explanations into dialogue with each other. We describe the contributions of the individual chapters to these efforts and suggest directions for future research.
With economic reforms in the 1980s, the opening up of political space and the end of war in the early 1990s, Mozambique embarked on a decentralisation process. As in other sub-Saharan Africa countries, the impact of the decentralisation reforms on local development and the strengthening of democracy has been modest. How can this be explained? This chapter addresses this question analysing how institutional dynamics shaped their results. The main argument is that the nature of the political system shaped reform results, in the context of institutional dynamics. Of these, those linked to state capacity and independence from private interests, stand out. Reforms are implemented according to group interests, particularly political parties’ interests, which capture the state and use them for maintaining and bolstering political power. Rather than being a means of improving the provision of public goods and strengthening democracy, decentralisation reinforces state control and panders the elite. Probably the biggest challenge facing decentralisation, this makes it a fundamental issue in any reform, within the context of strengthening democracy and promoting local development.