Big plate of supply-side up: Why economies can’t redistribute their way to prosperity
redistribution, or dial up its focus on boosting infrastructure investment and maintaining tax incentives to encourage private investment.
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Advocating for one policy over the other involves either political arguments — the electorate has expressed its preference for A or B via the EVM — or economic ones — whether or not a certain course of action would be better for growth. Frustratingly, this is often presented as a trade-off.
Poll outcomes have consistently favoured incumbents when the trailing macro backdrop is moderate-to-high growth with moderate inflation. For instance, when you consider the trends in the government's revenue deficit (a measure of its redistribution efforts) in the run-up to the polls, an elevated level of revenue deficit is not usually associated with the incumbent government staying in power, like in 2004 and 2014.
Consider another metric: real growth of incomes for the bottom 20% of the population. Data from the World Inequality Database shows that over 1999-2003 and 2009-13, real incomes for India's bottom quintile grew by 1.3% CAGR.
By contrast, between 2004-08 and 2014-18, growth rates were 3.4% and 5%. History shows us that excessive redistributive policies, and poor implementation of such policies, do not contribute to lifting growth or enhance job opportunities
