James Carville, campaign manager for former US President Bill Clinton, had the last word on the relationship between the economy and elections. In the 1992 election, Clinton's opponent was George Bush, who had seen a surge in popularity due to Iraq's attack on Kuwait and the Gulf War in 1991.
However, within a year, Bush's popularity plummeted, mainly due to an economic recession characterised by high inflation and job insecurity. In response to questions about why voters would choose Clinton over Bush during such challenging economic times, Carville succinctly stated, "The economy, stupid."
The significance of the economy in elections became evident earlier when Ronald Reagan defeated Jimmy Carter in 1981. At that time, the US was grappling with a severe recession, and global inflation added to the pressure. The rejection of Carter by the people marked the beginning of a strong connection between the economy and elections. This phrase, coined 31 years ago, has since become a staple in the political lexicon.
As the US approaches another election with Joe Biden as the president, discussions about the economy have resurfaced, emphasising its crucial role in winning elections. Larry Bartels, an American political scientist, conducted research showing that for every one per cent increase in GDP growth, votes for the ruling party tend to increase by one per cent.
The influence of the economy in politics is not exclusive to developing countries; it also plays a significant role in developed nations. However, additional factors, such as extreme nationalism and globalisation, have come into play. A study on election results in 15 European countries revealed that nationalist political parties gained more votes in areas with intense competition from cheap Chinese commodities.
In the 2016 US elections, researchers from Oxford University, Carl Benedikt, Thor Berger, and Chinchih Chen, found that Donald Trump garnered more votes in regions heavily affected by job displacement due to automation and technological advancements.
In Michigan, Pennsylvania, and Wisconsin, where automation was more pronounced, Trump secured victory. The absence of automation was projected to benefit Hillary Clinton in these states.
Issues such as automation, the value of homes, and globalization are pressing concerns in developed countries. Various studies have explored the fundamental indicators of the economy, with Nobel-winning economist William Nordhaus of Yale University gaining fame for his 1975 theory on the "political business cycle."
He said the government increases expenditure to please voters during the election year. Various taxes are waived. AS a result, the budget deficit also increases. For expending money in such a way, the inflation may increase, which the governments ignore. It is also seen in the study that if the ruling party is rightist, it gives priority on controlling inflation while the leftist gives priority on employment generation.
Interest tends to focus on additional expenditure during election years, and researchers have observed the political business cycle more prominently in developing countries. Several factors contribute to this phenomenon in developing nations.
For example, the media in such countries remain under the government's control or the government curb their freedom and the citizens do not get adequate information. Moreover, the central bank remains weak. As a result, the financial sector is controlled or used arbitrarily.
The economic landscape during elections in Bangladesh seems to deviate from established patterns observed in research conducted by renowned political scientists and economists. Bangladesh Bank's governor expressed concern over the unsettled state of the economy, noting that it was unprecedented in his 36-year career.
High inflation, dollar-crisis, fall of foreign reserves, slump in investment, energy crisis, fiscal imbalance -- crisis is prevalent in all sectors. Although the US dollar’s exchange rate--which was Tk 86-- is said to be Tk 110, the rate in actuality has shot up to Tk 125. The reserve is decreasing by USD 1 billion every month. The reserve has halved in just two years. A major deficit in financial account has appeared for the first time in 10 years. Inflation is around 10 per cent on average.
Export income had some room of contentment, but deficit appeared here too for last two months. Acute energy crisis invariably indicates less employment and high living cost. The growth in remittance inflow is also negligible despite many steps being taken. Add political instability and insecurity with all these problems.
As per the Bangladesh Bank governor, the economy has hit the rock bottom. But the question is why such an economic condition is not becoming an agenda to the voters and any political parties that are taking part in the elections.
In any scenario, an economic situation marked by uncertainty and challenges is far from ideal for winning votes. The ruling party is unlikely to feel at ease when facing an election amidst such economic conditions. Surprisingly, discussions on economic matters have been put on hold, creating an atmosphere where the consequences are seemingly deferred until after the election.
Let’s take the example of our neighbor India. It has slapped ban on export of rice first and then on onion recently. The decision is political. The decision has been taken with Lok sabha election in mind. Modi government does not want prices of essentials to be an issue in the election. Because, there is even instance that the price of onion led to fall of regime in India.
Failure to rein in the price of onion was one of the main reasons behind the downfall of Janata Dal, which was the first government outside Congress party, in 1981. After emerging victorious, Indira Gandhi termed that poll as ‘Onion Election’.
In 1998, onion price was behind the BJP’s defeat in Delhi. It is said that the foremost agenda in India’s election is ‘TOP’, that is Tomato, Onion and Potato prices. That means winning elections becomes much easier if you can control the prices of these items.
In contrast, the price of onions has soared to over Tk 200, coarse rice has stabilised at Tk 48 for an extended period, and unusual fluctuations have occurred in the price of potatoes. However, these economic challenges seem to have little impact, as it is rare, especially in the democratic world, for the heat of the kitchen market to reach the political kitchen without causing significant concern for the ruling party.
Bangladesh's democracy, while flawed in many aspects, used to function as an electoral democracy. However, the current situation suggests otherwise. Elections now happen without genuine competition, votes are cast in the night, and negotiations play a more significant role than the voters themselves. So in case of Bangladesh ‘it’s not the economy, stupid’.
It's important to note that not all problems will vanish after the election. While some relief may be observed with the easing of the electricity crisis with the advent of winter and a slight decrease in vegetable prices, these are temporary solutions. The recent disbursement of the second tranche of the International Monetary Fund (IMF) loan offers a short-term respite, but it does not address the underlying issues.
Despite promises from the Bangladesh Bank governor that the economic crisis will be resolved by March, skepticism prevails due to the recurring nature of such assurances. He does not have any magic wand. Neither any political will has been visible. So no matter how oblivious we remain about the economy before the election, addressing these issues must become a top post-election priority. Otherwise this could lead us to impending danger.