Do the Personal Characteristics of the Prime Minister Affect Economic Growth?

Lekha Chakraborty | September 17, 2012

by Lekha Chakraborty

India has recently turned to a debate over the effect of the Prime Minister’s personal characteristics on the country’s growth and development outcomes. Do political leaders’ personal characteristics affect economic growth? It is an elusive empirical question.

One of the most robust findings of a recent treatment of this topic is that leaders do matter for economic growth and, in particular, more educated leaders generate higher growth. The paper, titled “Do Educated Leaders Matter?,” appeared in The Economic Journal in 2011, by Timothy Besley of the London School of Economics and co-authored by Jose G. Montalvo and Marta Reynal-Querol. They examined this issue in a new context of how the educational attainment of a political leader affects a country’s economic growth during the leader’s tenure in office. The study also finds a strong negative effect on growth of a random exit of the Prime Minister from his office.  “[I]ntelligence is central to the Platonic view of leadership,” they write, “so the idea that more educated citizens could be better leaders would come as no surprise.” This finding naturally leads us to the question of who should be appointed as Prime Minister. In India, we currently find a well-educated technocrat in that position.

With the recent controversial article by Simon Denyer, the New Delhi bureau chief of the Washington Post, the focus on the potential personal impact of the Prime Minister on reform policies or economic growth has reached its peak.  This has unveiled a growing concern over the link between corruption, the fall in the rupee, plummeting economic growth, and a seemingly “silent” Prime Minister. “Silent” is used here with caution, especially when the Prime Minister once clarified that “It has been my general practice not to respond to motivated criticism directed personally at me. My general attitude has been, ‘My silence is better than a thousand answers; it keeps intact the honor of innumerable questions.’” This takes me to Niall Ferguson’s Civilisation: The West and the Rest, where he aptly resorted to a Thelonious Monk quote in response to those who might complain about the omissions in his book:  “Don’t play everything (or every time); let some things go by … What you don’t play can be more important than what you do.” Down the line, what the present Prime Minister has not played would be more important than what the future Prime Minister would play in India—or will India’s “silent” Prime Minister become “a tragic figure in our history” as claimed by Denyer?

The quality of the Prime Minister matters when it comes to the broad-based economic and political objectives he sets for the nation. Some leaders focus on the macro objectives of economic growth and development rather than promoting narrow communal or sectional interests. Would his potential successors engage a whole nation in prolonged and strained debates on communal or sectional interests, or would the nation continue on a path of seeking broad-based growth?

It is generally emphasized that the “silent” Prime Minister failed to tackle foreign institutional investors, the rupee collapse, and falling economic growth. There is a beauty in each of these debates with which our nation engages, as citizens’ discussions and concerns today are focused not on prolonged communal or sectional conflicts, but the overall economic growth of the nation. Unpacking each of these concerns against the personal characteristics of the Prime Minister, one could analyse the intricacies of how silence is correlated with these outcomes. “Silence” is defined in this case as refraining from engaging in a highly shrill parliamentary debate, and/or clarifying each step in the fall of the rupee or in economic growth as being more of a cyclical or exogenous outcome, rather than emanating from the policy designs enabled by the government run by the Prime Minister. Cabinet Ministers often appear in electronic and print media and debate India’s sectoral concerns in detail, while the Prime Minister believes in a less vociferous and “more deeds, less words” approach to dealing with political and economic matters. When we define the personal characteristics of the Prime Minister, we need to go beyond his education and political affiliation, and examine the position and influence of the Prime Minister within the ruling party/cabinet, especially in times of coalition governments.

If India is focusing on debates related to economic growth and development, this is good. How much economic growth fell due to the personal characteristics of Prime Minister and how much of it is due to cyclical and structural factors— both internal and external—is an empirical issue. Linking the rupee fall to the personal characteristics of the leader leads us again to a healthy debate over whether the technocrat perceived that attempting to stabilize the currency would have had worse consequences than leaving it as such. If he has decided to consider “hot money” just as “hot money,” does it reflect the quality of the leader or his indifference?

If India is talking about corruption and engaging in identifying institutional mechanisms to tackle the problem, this is good. It does not mean that corruption sprouted for the first time during the current government’s tenure; nor that the current government is the most corrupt of post-independence India. Attempts have been made to put accountability mechanisms in place, and we are getting results, unlike the invisible systematized corruptions we hardly deciphered in previous regimes. Public action, civic upheaval, judicial activism, and the consequent attempts by the government to strengthen the accountability mechanisms made the cases more visible.

The focus of the debate is now primarily on the personal impact of the Prime Minister on economic reform policies or economic growth. The debate should move ahead to considering the impact of the Minister of Finance and heads of other key Ministries. We should ask, for instance, whether the personal characteristics of the Finance Minister affect the size of the fiscal deficit. The political economy of fiscal deficits and the role played by finance ministers are analysed mainly in the context of national governments in the European Union. Those analyses revealed that the personal characteristics of finance ministers significantly influenced budgetary performance, especially in times of fiscal stress. When institutional and political factors partially determine the size of government and economic growth, the personal characteristics of the Ministers cannot be ignored. However the position of the Prime Minister within his own cabinet is the elusive empirical issue.

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