Freebie Model of Governance

Freebie Model of Governance

Subject: Economy

Section: Fiscal policy

Freebies that are usually distributed include goods like bicycles, smart phones, TVs, Laptops and waivers on bills (water, electricity, etc.).Freebies and poll promises are different from subsidies which are required for the proper functioning of a government to fulfill peoples’ needs and may not be a part of government poll promises. However, it is sometimes confused with freebies.

Why?

Political parties promise to offer free electricity/water supply, monthly allowance to unemployed, daily wage workers and women as well as gadgets like laptops, smartphones etc. in order to secure the vote of the people.

Impact:

Arguments in Favor of Freebies:The model is neither sustainable nor economically viable.

• Essential for Fulfilling Expectations- helps win election
• Balanced regional growth -With the states that have comparatively lower level of development with a larger share of the population suffering from poverty, such kind of freebies become need/demand-based and it becomes essential to offer the people such subsidies for their own upliftment.
• Reduce inequality of income and wealth
• Increase consumption and thus standard of living of masses
• Reduction in poverty
• Economic Push: They help increase the demand that prevents the rate of growth from declining further. Free education and health are anyway justified because they are cases of ‘merit wants’ and increase productivity of labor.

Associated Issues With ‘Freebies’:

• Rise in fiscal deficit: This places a huge economic burden on the exchequer of the state as well as centre.
• Rise in inflation-demand exceed the supply
• Unproductive expenditure-no multiplier effect to increase producive capacity of the economy
• Against Free and Fair Election: The promise of irrational freebies from public funds before elections unduly influences the voters, disturbs the level playing field and vitiates the purity of the poll process.
• It amounts to an unethical practice that is just like giving bribes to the electorate.
• Against Equality Principle: Distribution of private goods or services, which are not for public purposes, from public funds before the election violates several articles of the Constitution, including Article 14 (equality before law).
• Burden of financing-increase tax or debt.
• Distort market determined pricing system
• Wastage of resources/Inefficient allocation of scarce resources.