Empirical evidence suggests that the market place for a popular mandate in a democracy is highly competitive. The just-concluded Bihar election saw as many as 20 political parties try their hand at winning a popular mandate, either by themselves or in alliance with others, for the 243 seats that were up for grabs. It was not very different from the Lok Sabha elections held in May 2014 which, again, saw as many as 10 political parties try their luck with voters.
The contestable nature of the market is a given. There really is no entry barrier — or, at least, the threshold level is low enough for many aspirants to try their luck at winning a majority mandate. Cynics might argue that it is very expensive to float a political party, run it and fight elections. That is true. But, as we can see, this is really not such an insurmountable barrier as it may seem.
Different proposition
Just as there are ‘venture capital’ or ‘angel’ investors for fledgling entrepreneurs in start-up ventures, so too are there financial backers for political parties. In the case of start-ups, the business idea must appear to be promising enough to succeed in the market place. Similarly, in politics too, the founder’s vision must appear promising enough to capture the voters’ imagination for financial backers to punt on the new party gaining some traction.
Of course, the expectation of returns these ‘angel’ investors nurture is an altogether different proposition. Suffice it to say that they are not so different from what such investors expect in the real world of commerce and business. That their actions raise some fundamental questions of ethics is not in doubt. But as students of management, it is enough if we look at the process purely from the standpoint of management theory and not worry about how it looks when seen through a moral prism.
Three lessons
So, therein lies the first lesson. In the product market of electoral politics, political parties are the numerous suppliers, and the voters their ultimate consumers. It is also a highly contested area, with very low entry barriers for potential and new entrants. Now, are there others lessons to be had as well?
There seem to be at least three. In a well-contested market, consumers skim away all surpluses, leaving producers with just enough to break even. In politics, it gets worse. In a situation where elections are won or lost on the principle of ‘first-past-the post’, the losers do not even enjoy the luxury of being able to break even. Even as one party emerges victorious, others are consigned to the margins.
In the commercial world, producers strive for consolidation through amalgamation and mergers as a strategic response to the debilitating effects of competition. But competition law acts as a constraint on the degree and extent of such consolidation. If a merger or amalgamation is not feasible, or there is a natural reluctance to submerge one’s identity, there is another alternative.
Producers could come to some informal understanding aimed at carving out specific territories for themselves, in such a way that each will have a dominant say in one geographical segment. Competition law in most countries tends to frown at such business arrangements. However, producers are clever enough to cover their tracks so as to not fall foul of regulations aimed at fostering competition. Fortunately for political parties, there are no injunctions against collusive behaviour.
So, pre-poll alliances are an answer to the politics of ‘destructive competition’.
Strategic co-operation
There are huge payoffs to be had from entering into arrangements of strategic cooperation (pre-poll alliances), as the Bihar election results have shown us. In the Parliamentary elections of 2014, the three parties — Congress, Rashtriya Janata Dal (RJD) and Janata Dal United (JDU) — not only fought against the Bharatiya Janata Party (BJP) but also against one another. The BJP had the advantage of an alliance with two minor regional parties. The BJP alliance, with a market share of 36.5 per cent of the popular votes, swept 31 (a little over three-fourths) of the total 40 seats on offer, while the Congress, RJD and JDU had to settle for a mere eight among them.
The coming together of these three in the recent Assembly election demonstrated what strategic cooperation can achieve in terms of seats won. The three-party alliance scored four percentage points fewer in terms of votes polled (41.7 per cent, against the earlier aggregate of 45 per cent in the Lok Sabha elections in 2014) in the latest Assembly elections. But that was enough to win them nearly 80 per cent of the seats. A strategic cooperation thus fetched handsome ‘synergy’ gains.
So, why do parties not strive to achieve some understanding among themselves, so that the electoral market presents a perfect ‘duopoly’ structure? Unlike in the world of business, where there can be a semblance of multitude of players but which operates essentially as a monopoly, the electoral market, by its very nature, is structured to represent a ‘duopoly’ (two-party fights or fight between two alliances).
For strategic cooperation among competing political parties to come to fruition, two pre-conditions must be satisfied. One, the parties must be convinced that a monopoly claim on profits is not a realistic outcome, either in the present or in the near future. In the event, the choice is between the certainty of extinction (political irrelevance) and mutual accommodation. It is remarkable how, when the trade-offs are presented thus, the mind is able to see merit in mutual accommodation and a consequent outcome favouring the sharing of profits.
The second condition that must be fulfilled is that the parties must have an objective framework for slicing the market among themselves. In the business world, this usually takes the form of dividing the market in proportion to the productive capacity of each player. Alternatively, it could be divided in proportion to the success achieved in marketing the product in competitive conditions.
Both represent an attempt at equitable distribution of the spoils generated by cooperation. For the Congress-RJD-JDU combine, the respective vote shares in the Parliamentary election offered a fair and, more importantly, objective benchmark for seat-sharing. The Congress vote share of 8.6 per cent represented 40 per cent of the RJD’s vote share. So it is only fair that they get 40 per cent of the seats allotted to the RJD.
Slicing the market
In the case of the JDU, though its vote share in the Parliamentary election is only 16 per cent, in Nitish Kumar they had a chief ministerial face that has been recognised all over and, hence, must be given some additional weight. This is analogous to installed capacity being reckoned as a parameter for slicing the addressable market in the industrial world. The objective framework thus consists of a combination of actual production and installed capacity, which worked out very well for all three parties concerned.
Of course, all this implies that producers offer near identical products so that customers can gravitate from one to the other because producers have chosen to slice the market among them in such a way that there is only the product available in a market. Think of a product like cement where, if ‘Ultratech’ (Grasim) cement is not available, customers would gravitate towards Sankar (India Cement) cement. But it is difficult to see a prospective customer for Rolex gravitating towards Titan watches just because the former is not available.
In the three-party alliance comprising the Congress, the RJD and the JDU, each of them represented, in varying degrees, certain common product attributes, such as ‘social inclusion’, ‘development’ or ‘parochial identity’, which matter a lot to a large number of voter-consumers. So, if in a particular Assembly segment, the RJD and the Congress were absent because of the electoral alliance, the voters had no difficulty in choosing the JDU, the party that was available to choose from, and they did so.