ELECTION ECONOMY

ECONOMIC IMPACTS OF THE ELECTION ECONOMY IMPLEMENTATIONS IN TURKEY AND THEIR RESULTS

 

In a scrutiny of election economy, we must handle it as pre and post elections. To define it in this sense, election economy is the direction of the economy by the politicians in power prior to the elections in the manner that they would be re-elected. In the literature, this  state is defined as the “political conjecture movements.” The politicians in power may apply the economy policies in the fashion that they would provide them with votes before a general election. Election economy appears in general as the implementation of the expansionary economy policies prior to an election. That is to say, expansionary finance and money policies can be applied for such purpose. Accordingly, reduction of taxes, increase of public expenditures, application of increases in the prices of the goods and services produced by the state, and increase of money supply can be in question before an election period.

 

In particular, public expenditures and tax policies might be manipulated in the way they bring along votes. Economy policies applied before elections in a fashion  that they bring along votes can cause economic results like the decrease of unemployment in a short term and decline of interest rates, whereby causing reanimation in the economy. However, in the long term, they cause fluctuations in economy and yield negative results. Most significant result is that the public expenditures increased before an election can cause budget deficits. As a consequence of it, the problem of financing the budget deficits increasing after the election is encountered. Accordingly, either the tax rates are increased or price increases that could not be performed before elections are conducted or restrictions in some public expenditures are applied.

 

The party that is presently in power is making statements very often that they would not apply election economy. However, regardless of what government it is, it is inevitable to apply such policies more or less before a general election because being in power once again requires the application of policies that might look good to the voters who think for a short term. For example, permanent employment with contracted teachers and postponement of tenders within the privatization applications are the indicators of election economy application. Election economy reflects into the budget negatively after elections. Even though politicians say, “We do not apply them,” they are certainly applied. Similar applications are encountered before almost all elections.

 

The solution that might reduce the election economy implementations in representative democracies is to determine the rules that the political powers are obliged to obey in their economy policy applications; that is to say, it is the determination of the “rules of the game.” In particular, the powers and authorizations of political powers in the fields of taxation and public expenditures can be restricted through the provisions to be included in the Constitution. Election economy applications are also encountered in the world. In the empirical analyses conducted in this field, it appears that, especially in the developing countries, political powers steer the economy policies in the way that they will bring votes to them before an election. Hence, the general tendency in the world today is toward the determination of the rules that the governments will be obliged to comply with in their finance policy applications and of the rules that will ensure transparency in the financial administration of the public.

 

The political factors behind the directions regarding elections and economic fluctuations are related with the theory of “political conjecture.” The basic indicator of this is the economic activities of the governments wanting to be re-elected, which might be contradicting each other before and after elections. Accordingly, politicians struggle to create the most suitable economic conditions as soon as possible before elections. The objective of it is to gain premium and acquire the necessary support for winning the elections as a result of the economic implementations that the public opinion would like. No doubt, the power will have higher chance of winning the elections pro rata its achievement of such application.  Before elections, public officers and laborers are given high wage increases, supportive prices for the agriculture sector are maintained high, interests are reduced, and the public enterprise price increases are completely suspended.

 

In order to realize all these, money flows must be opened. Credit money released on the market increases. Present government tries to avoid such incidents.  In the election economy applications qualified with various policies within the contents of incentives, driving of economy by the party in power by way of expansionary policies creates a deceptive and artificial conjecture. In the periods where the economy experience hardships, election economy becomes on the agenda as a rectification of the shrinkage of the political  base of the political power. The election economy process depicting a state that voters seek for and want to see at all times includes the activity of creating an artificial base of votes.

 

The party in power is awarded by the voters lacking the capability of seeing the future as it serves for the short-term interests. A conjecture that is not wanted in economical grounds has started accordingly. When the politicians attach importance to the present expenditures of  voters and overlook type of their future tax burden, this paves the way for the creation of the election economy policies.

 

1. Very high wage increases are granted to officers and laborers.

2. High level of supporting amounts is presented and a large resource is transferred to the agriculture circles.

3. Credit campaigns of the public resources increase.

4. Attempt is made by the Central Bank to keep interest rates low and taps of money are turned on.

5. Tax reduction or postponement is applied. This sometimes includes tax amnesty.

6. The incentives granted to various circles in the economy are increased.

7. New provinces and districts are established, which is particularly widespread in Turkey.

8. New employment opportunities are presented to the unemployed people and employment is increased at least until the election is held.

9. It is possible to apply amnesty for the people dropped out of university by failing.

In both cases, the fact that the burden of the election economy would be charged on voters shows itself in the following applications.

The wage increases granted to the officers and laborers prior to the election are started to be taken back by means of suppressed price increases and appearance of the deferred ones (the inflation rate will start to increase) – Central Bank attempts to keep the interest rates high and turns off the money taps (they try to shrink the money supply) –Creative applications like additional taxes, new taxes, nonrecurring taxes or increases in the current taxes become on the agenda (attempt is made to increase the public revenues) – supportive grants have been given to the agricultural products prior to the election. However, farmers are unable to receive the return of their crops after the elections – fulfillment of the infrastructure and utility services of the new provinces and districts established before the election can be suspended, price increases of the employed circles can be discontinued, and reduction in the new employment opportunities can be applied in the public sector (attempt is made to reduce the public expenditures). General  elections are reflected into the economy as a high level of costs. Such costs are distinguished as the visible and invisible costs.

 

Absolute cost of an election economy is the expenditure that is directly related with an election and that is legally spent by the governments and political parties. These are the state aids granted to political parties, allowance to the High Election Board, remunerations of those who take charge in the election, and the costs in the election materials like painting and other matters. Absolute and indirect cost is the extraordinary current and transfer expenditures caused by the relations between voters and political parties that intensify before elections spent by  the government considering them as a political investment. Conversion of districts into provinces, visits of the ministers to the election regions, official ceremonies and inaugurations, wage-remuneration increases for the officers and labors; hence the expenditures like additional budget allowances, can be considered among the absolute-indirect expenditures.

The invisible costs of an election economy are the expenditures that are not easy to be proven and that do not even take place in registers most of the time, the expenditures made from the discretionary fund of the Prime Ministry, the promotions that the parties and candidates present to the voters, and the promotional materials like posters and flags. The first thing that is manifestly apparent in an economy entering an election process is the increase of the total expenditures. Such expenditures are realized by all the political parties. General tendencies for increasing the public expenditures and reducing tax rates to guarantee the re-election of politicians and maximize their votes constitute the basis of the economic problems and the corruptions within the economic structure. Fulfillment of the increasing public expenditures by way of emission and loans is one of the sources of chronic budget deficits and chronic inflation.  Economical problems are no doubt restricted with budget deficits and inflation. The parties winning the election become obliged to fight such problems they have created artificially. For example, they intervene with the economy in the ways like increasing the prices of the goods and services produced by the State or increase of the tax ratios right after winning the election for fighting inflation and closing the budget deficits.

 

This election economy strategy referred in the public preference literature as the ‘‘Political Conjecture Movements” create total savings, total investments, and resulting negative circumstances in the national economy in the long term. In the pluralistic democracies, it appears that when a political election period is started, a harsh competition among the political parties starts. In compliance with laws, all political parties are granted some certain amount of  funds from the budget of the State for conducting their propaganda. The legal amounts allocated by the State for propaganda are more for the parties in the government than others. The parties in power have a powerful source of spending like the budget in addition to their share of propaganda that is more than other parties are granted by laws to them within the election periods.

Such resources are used  as expenditures in the election periods in order to impress the preferences of voters. In economic classification, expenditures are divided into two as ‘‘real’’ and ‘‘transfer’’ expenditures. In the Turkish budget terms, economic classification is distinguished in three as current, investment, and transfer expenditures. Current Expenditures: Current expenditures are the expenditures on services and non-durable goods that will be consumed in a year’s time.

The benefit of the current expenditures disappears in the period in which they are made. The expenditures of the public institutions for consumption are within this group. A large portion of it is oriented to the personnel. Training and health  expenditures are also within the scope of the current expenditures in public accountancy as they have current impact on humans in view of the future periods. Governments can conveniently be impressive on the voters thanks to their powers in current expenditures in electoral periods. Increase of the wages of the public officers is an example of it. In addition, grant of premiums to the workers employed in public is a similar political approach.

 

Transfer Expenditures: Transfer expenditures are the transfer of the purchase power of the public authority to the legal or natural entities gratuitously, without return. As the expenditures without return, the transfer expenditures are extremely appropriate expenditure items for the election periods. The payments of wages and remunerations made to employees in the case of current expenditures can be made to the retired, widowed, and orphaned people when it comes to transfer expenditures. This way, creation of an impact on the voter preferences would be inevitable. Investment Expenditures: Investment  expenditures are the expenditures made in order to increase  production   capacity. It is necessary at this point to scrutinize the Public Economic Enterprises additionally.

Public Economic Enterprises are the general name for the institutions of the State, producing commodities and services in the  economical field..  Public enterprises are established for political reasons in addition to the social and economic ones. Public enterprises established for political reasons have some objectives such as the realization of the economy policy followed by the political institutions governing the State, satisfaction of the goals of the political pressure groups, and realization of some interests. 

Assit.Prof.Dr. MEHMET NACİ EFE

© Doç.Dr. MEHMET NACİ EFE

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