Do governments manipulate the economy to win the elections?
Do governments manipulate the economy to win the elections?
Studies show that governments have manipulated their economies since time immemorial to ensure they are voted back into power. Governments have been known to manipulate taxes and development activities close to elections to woo voters (Canes-Wrone, Park 2012). Modern political parties use manifestos to inform the populace of their vision for their time in office. These documents have elaborate social and economic development agenda and projects that the parties promise to deliver. Manifestos have long had the effect of dangling carrots in front of a horse and have been successful in luring voters and ensuring electoral victories in many cases (Simmons, Dobbin, & Garrett, 2006). Incumbent governments struggle to deliver on their star projects as stated in their manifestos to have a competitive advantage over their competition (Canes-Wrone & Park 2012). So how exactly does the government go about manipulating the economy to lure voters? Governments have two tools to control the economy. First, the fiscal policy gives the president and the House of Representatives the power to control taxes and government spending. Second, monetary policies are the tools used by the Central Bank of a country to control the money market in the country. Fiscal Policy enables the government to leverage taxes and government spending and is an effective inflation regulation tool. Inflation causes the cost of living to go up and devalues the currency. Striking a balance between taxation and government spending regulates inflation, increases the rate of jobs creation, and ensures the global strength of their currency.
To understand how it is possible for governments to manipulate the economy to lure voters, it is important first to look at the functions of the president and Congress, and the central bank in stimulating and slowing down economic growth. The president and Congress influence economic stimulation through the fiscal policy. A countries economy is an intricate mix of taxation and public spending. The key to enhancing economic stimulation is to leverage taxation rates and public spending with the objective of striking a balance. A balance between the two results in inflation regulation increased jobs creation and regulating the global strength of the national currency. Economic stimulation is largely the effect of market forces. The president and Congress use fiscal policy to reign in the effects of runaway economies. The fiscal policy effectively does this by regulating the amount of money available in the economy. When there is a lot of money in the economy, and there is not enough supply of goods and services, the economy is faced with a high demand. This causes the prices of commodities to go up although the value of the commodities remains constant.
These dynamics result in increased inflation rates due to the devaluation of the currency because consumers will need to pay more for less value (Barber 2009). The president and Congress also use the fiscal policy to influence fair compensation for employees and the amount of dispensable income available to family units. By influencing the minimum wage rate and reducing taxes, the president, and Congress can effectively raise the living standards of citizens. The government is the biggest consumer and employer in the country. This makes government spending a critical part of the economy. The government carries out significant projects that require significant amounts of funds and manpower to complete. The president and Congress can use the fiscal policy to reduce government spending while maintaining taxes or sometimes increasing them. This leads to the government generating more revenues than it is spending on projects effectively contacting the economy through a reduction of their budgetary deficit.
The central bank compliments the president and Congress’ strategies through the monetary policy to ensure the economy is healthy. The Monetary policy gives the Central Bank the mandate and powers to regulate the nation’s money supply. Regulation of the money supply ensures that inflation is kept in check. The Central Bank accomplishes this by regulating the borrowing and lending institutions. The Central Bank uses some tools to this end, first, they set and hold reserve requirements for member banks. These monies are a percentage of the deposits that banks have to their clients and act as insurance against liquidity. Raising the reserve requirements stimulates lowers interest rates by increasing banks’ ability to lend more. The reverse would reduce banks’ lending power and increase interest rates effectively reigning in the economy (Tufte 1980). Second, the Central Bank regulates the industry’s lending rates by setting base lending rates through their discount rates. The discount rate is the amount of interest the Central Bank charges banks on the loans it avails to them. Raising this rate causes banks to adjust their lending rates upwards to maintain profitability and effectively slows down the economy. Reductions are met with similar cuts in consumer lending rates and encourage borrowing effectively expanding the economy. Third, through the Capital Market Committee (CMC), the Central Bank can influence the supply and demand dynamics for money in the country (Dickens 2016). The CMC acts as the government’s stockbroker and stimulates the economy through repurchasing government assets and securities effectively reducing interest rates. This is because the buyback injects significant amounts of money into the banking system and increasing the supply of money in the economy. The reverse results in slowing down of the economy. The Central Bank also regulates the ethics and accountability of bank operations to ensure fair and quality service to citizens.
Elections are like a game of seduction between governments and the electorate (Alesina & Paradisi 2014). Close examination of the spending of most governments around their election periods identifies two trends. First, about half way through with their term, governments usually increase taxes on both essential and non-essential goods and decrease spending on significant projects mainly in infrastructure and defence (Bove & Efthyvoulou 2013). Secondly, as the elections draw closer, the governments know how to reduce taxes and pick up the pace on the delivery of promised developments, in a period known as political business cycles. Campaigns require significant sums of money to ensure their effectiveness and efficiency in delivering votes (Simpser 2013). The sheer numbers of people necessary to make a political campaign a success makes campaign budgets and logistics a nightmare for political parties. Travel costs for candidates and their campaign staffs normally add up to the millions each day of the campaign. Since campaigns cover significantly large geographical areas, and the campaign team meets with many people, they are exposed to countless hazards and perils on their journey to woo voters. Campaigns, therefore, invest significant sums of money to get the services of professional security personnel. This is necessary to complement the security that candidates are provided for by the state since it is usually not sufficient. Campaign teams need to have multiple teams in simultaneous locations a lot of times to ensure efficiency and security. Security and campaign teams scout out locations on the campaign trail days and even weeks in advance (Simpser, 2013). Scouting ensures that when the candidate arrives everything is set for his presentations and that the venues he will be visiting and living out of are secure. Communications and consultations are other areas of heavy spending for political campaigns. Communication enhances campaign coordination efficiency and effectiveness and effectively ensures security. It also ensures that voters have access to the campaign’s agenda and its candidate.
Taxes are a government’s main source of income. By raising taxes on commodity goods, they can ensure that their coffers experience an increase in income inflows. These incomes are instrumental in running their programs and financing their campaigns. This is the major reason it is increasingly hard to unseat an incumbent president and government. Governments are unwittingly able to fundraise for their campaigns through their citizens. Their large sources of funding ensure they have an almost endless supply of campaign funds and ensure their success. Due to heavy legislation and regulation on the ethics of campaigns, competitors and oppositions might be left with little wiggle run for raising funds. This translates to their campaigns lacking sufficient money to carry out all their planned activities effectively. It also denies their candidate enough airplay and access to voters. Since political campaigns are run on the same principles that marketers use for products and brand, the more visibility a candidate gets, the more likely he is to gunner more votes. Visibility creates a lasting impression in the minds of people and has been known to get one vote even from opposing voters. Many candidates have been known to lose elections because their competition ran many elaborate ad campaigns that stuck in the electorate’s head like a jingle or rhyme.
Cutting back on spending and execution of development projects allows the government more resources to focus on few projects. Most administrations have been known to increase spending on their flagship projects. These projects are usually large, and have a wider reach and are based on basic social needs like education or health. These projects are targeted at improving the lives of the common citizen. Research indicates that the bulk of voters in many countries come from the common citizens. These people take their duty to vote seriously and will take their time to go and vote for the leader whom they think will best address their problems. Flagship projects are high profile and get a lot of coverage and hype in the media and social circles (Seravalli 2015). This provides free marketing and advertising for the government and plays a significant role in ensuring their re-elections. Most governments use their successful programs as practical yardsticks to show voters that they can deliver while passing off failures as teething problems in new areas. The competition on the other hand mostly campaigns based on theories and the hypothetical, and mainly rely on the personal, professional achievements of their candidates (Boix & Janoski 1999).
At least 16 months to an election, governments’ projects, and spending will gain momentum. These increments are calculated and strategic and are aimed at increasing the government’s visibility while silencing the opposition’s increasing criticism of the government (Franzese 2002). This period, mostly considered in the same vein as a football match’s injury time, is critical to setting the tone of any political campaign. This is the time that whatever can go wrong usually does. This period is characterized by the high alertness of voters and the opposition and the actions of the government during this time are always fresh in the minds of voters come the campaign period. Governments have been known to initiate significant projects, especially in infrastructure. No matter the size of these projects, they will be commissioned with pomp and glamor and will be widely covered by the media. This is especially true in developing countries where governments have been known to use such tactics to “bribe” voters (Lindberg 2006). Road construction and improvement contracts will be awarded en-mass and contractors ordered to take equipment and materials to the sites. This endears the masses to the government while also ensuring that the government will have a large campaign fund from the donations contractors usually make towards their campaigns (Shulika, Muna & Mutula 2014).
In some cases, this increase in development and expenditure is usually an elaborate smoke screen to hide the significant embezzlement and losses in public expenditure. The government can raise a significant amount of campaign funds by withdrawing public funds and channelling them towards their campaign accounts. The books of accounts are then cooked to reflect the money went to one development project or the other in a capacity that will not raise many audit queries, like consultation fees. Increased spending also gives the outgoing government the chance to clean up its act and balance its books on the off chance that they are not reelected, and the new government finds faults in their accounting (Simpser, 2013). This would lead to indictments and prosecutions for abuse of office, corruption, and misappropriation and has been documented to be especially rampant in developing countries. Increased spending is however not only concentrated on infrastructure projects but governments also usually experience a significant increase in their labour overheads. Governments have increased recruitment and hiring close to elections. Jobs creation enhances its resume and their record of accomplishment on delivery on pledges and promises. It also ensures that the government has more voters whose votes they have a high likelihood of getting.
Many administrations the world over has struggled with salary issues with their public servants. Governments usually adapt a hard lining stance against all possibilities of increasing the salaries of their employees citing budgetary deficits and inadequacy of funds. This usually leads to worker strikes and boycotts, which brings facilities like hospitals and schools to a standstill. Governments provide employment to hundreds of thousands if not millions of people. This is a considerable percentage of the entire voter register. Over the years, salary negotiations around election times have been handled with a lot of diplomacy on the government’s side. Most of the time government cave to pressure and increase their employees’ salaries. Elections inspire politicians to be creative and innovative, and they accomplish much more over the last days of their terms than on the first days. Monies that the government said was unavailable or insufficient suddenly becomes enough to cater for salary increments. Accepting the demands of worker unions serves two significant roles. First, the government can ensure that a large portion of the civil servants will cast their votes in the favour and ensure their re-elections and maintenance of power. Second, the government can unwittingly use the civil servants to enhance its campaigns increasing the campaigns effectiveness and efficiency and keeping overheads low.
Increasing salaries increase the motivation and morale of civil servants. Happy employees are more eager to please their boss than disgruntled employees. Though this is largely considered abuse of office, many governments progressively, find ways to operate in the gray area in between the two extremes and managing to stay on the right side of the law. Governments have been known to use civil servants to further their political agenda and campaigns (Seravalli, 2015). Staff can be put on the campaign trail to assist with functions of planning and administration. Since out of station trips attracts significant daily subsistence allowances, staff will go along with the campaign. It should, however, be noted that most of the time they are unaware of the role they are playing in assisting the government in its campaigns. Salary increments are also an effective propaganda tool for the government. The ripple effect that increasing the salaries of public workers has is significant. An increase in salaries ensures that the households of the public servants have higher dispensable incomes and improves their quality of life. The government also uses fiscal policy to influence the wages and salaries of private employees by setting and enforcing minimum wage limits. This strategy endears the masses to the government, and they can use it as an advantage during their campaigns and ensure their successful re-elections.
Globalization has interlinked markets and economies. Regional and global integration have always been a key factor in the success of a government. Foreign investments are a significant contributor to economic development. Foreign investment brings both capital funding and advanced modes of production. Foreign investments create many jobs. The companies and projects that are set up are normally big and require a significant supply of labour. These firms employ a large number of local citizens and help the government significantly address unemployment. They also produce quality goods that compete favourably in local, regional and global markets. These goods control good market prices and earn the companies’ considerable revenues and profits. This increases government revenues from taxes and campaign funds through gifts and donations. Governments use international policies to make strategic alliances. Other than the economic advantages that these alliances bring with them, there is the exchange of technical knowledge that also results. This knowledge is helpful in making processes more efficient and reduces wastage. With favourable international economic policies, foreign governments and firms also get a personal stake in the re-elections of the incumbent government (Tufte, 1980). This increases the manpower, funding, and expertise of the government’s campaign. With stronger allies, the government gets the benefits of better analytical and survey teams. This enables them to carry out efficient campaigns featuring practical and targets specific strategies. It is also crucial to swaying the diaspora vote. Partnerships and alliances between countries receive significant media coverage. This allows diaspora citizens to see the work their government is doing and earn their vote. This is also an effective propaganda tool since the diaspora citizens will lobby for the government to their friends and family back home. In some countries, governments have been known to bribe voters with money from the increased campaign funds.
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