THE INCLUSION of the role of the “State” in the conventional framework of Economics brings us to the domains of what is termed as the New Political Economy, the positive side of which very clearly defines the role of the State in terms of “rent-seeking activities” and “directly unproductive profit seeking activities.( also known as DUPE activities). These activities, in fact, survive on their own and work against the smooth and economically efficient functioning of the economy.
Beyond that they lead to many adverse effects offering strong barriers in the way of the trickle-down (or percolating) process, thereby setting in motion a highly complicated vicious circle of rent seeking. In other words, these activities amount to leakages in the national income, which not only corrode the whole growth process, but also adversely affect the trickle-down process but even if growth takes place otherwise, its benefits do not reach the masses essentially because of the rent-seeking and other vested activities of the State and its components. The rent-seeking activities, therefore, provide the initial impulse to the failure of the trickle-down effect, which, in turn, accentuates the already existing poverty levels including, unemployment, and income gaps. The more acute is the poverty, more is the marginalization of the poor, and greater is, thus, the propensity to conceal poverty through various means like, borrowing and crime-related activities, both of which beget easy money to the stake holders.
Such impetus to crime strengthens the mafia links and also encourages organized crime, and even extends to the higher strata of society that includes, amongst others, the basic role players in the guise of political entrepreneurs (both ruling and non-ruling) and their supporters (both administrators and voters) in the whole game. Such nexus and linkages give a further boost to rent-seeking and other related activities.
The vicious circle, thus, gets completed, and rent-seeking leads to further rent-seeking, and this chain reaction goes on unabated, viciously trapping the economy in a deadlock situation. This complicated vicious circle, apart from being interlocking in itself and leading to further rent-seeking through a variety of factors, is also anti-growth, anti-equity, and anti-saving. It goes on unabated and generates, at increasing rates, rent-seeking leakages essentially, horizontally and diagonally, crime in all its manifestations, private debt trap and mafia nexus/linkages to the advantage of the major role players in the whole game.
Although this is a purely hypothetical scenario devoid so far of any empirical studies in its support, yet it is observed to exist in different countries, though in different degrees. It has also started to emerge in certain other countries, where the trickle- down process has utterly failed because of a variety of reasons, and, as a result of this failure nothing positive (in terms of economic and social provisions) ever gets percolated to the masses in general, and the equity considerations, if any, have their focus more at the macro level, and nothing much is done at the grass root levels.
The root cause of this depressing scenario is the vested interests of the so called political entrepreneurs and their supporters, that get exhibited in the form of rent-seeking and other nefarious activities, which are subject to increasing returns because of their self-generating capability, larger involvement of the stake holders, and above all, because of the inefficient legal system. In order to break this vicious circle of rent-seeking the very best way out is to minimize or eliminate, if possible, such activities of the political entrepreneurs and their supporters. But the political experience of countries completely negates such a solution.
We have, therefore, to depend on the second best solution that relates to the efficacy of the legal system. The basic rules of jurisprudence to tackle such situations are always available in almost all the countries, but the reality is that these rules are not effectively and timely used by the concerned authorities to curb the given situation and the role players, thus, keep on playing their game of manipulation and maneuver for their own benefit in terms of enhancing their electoral support, and reaping political mileage to the detriment of the whole economy. The judiciary should, in fact, take matters in hand and ensure that the major role players of the State do not resort to their clever stratagems.
This perhaps is the only effective way to break the given vicious circle of rent-seeking, and bring back the economy to its normal functioning. There is also a third best solution that can perhaps reduce both the extent and intensity of marginalization of the poor by the richer sections of the society, which, is a crucial link in the operation of the said vicious circle.
This solution relates to well focused urban policies. It is seen that marginalization in urban areas (or urban apartheid) has become increasingly extreme in most of the countries, and challenges the fight against poverty Urban policies, therefore, have to be tuned to ensure, apart from other things, the common social ethos of the rich and poor, so that income-based, caste-based, class-based, and even racial-based discrimination and intolerance is at least reduced, if not completely eliminated from the urban areas, thereby weakening the operation and the impact of the vicious circle of rent- seeking.
