The democracy trap.

Couple of years back people were talking about the rise of emerging nations and ' convergence ' with rich countries. Brazil, Russia, India and China were lumped together as BRICS nations. Our ministers were strutting around the world, drunk with hubris. The only argument was about when India will overtake the US to become the richest country in the world. No longer. Growth rates of emerging nations have tumbled from 8.7% in 2007 to 4% in 2013. Only China grew at 7.7% but even here there are doubts about how long the Chinese can continue to stimulate growth with debt, especially in the shadow banking system. Now the talk is of a ' middle income trap ' in which a poor country grows up to a certain level, often based on high commodity prices, and then stops growing or sinks back into poverty when conditions reverse. Perhaps it would be better to call it a ' democracy trap ' where politicians refrain from undertaking reforms needed to continue growth for fear of losing elections. It is easier to distribute largesse to the poor under the umbrella of ' inclusive growth ' which helps in winning elections. Slowing growth in China and falling commodity prices have slowed growth in Brazil. The Bovespa stock index has fallen by 20% in the last 12 months and the Real has fallen 8.63% in the last 3 months. This has been blamed on broad concerns over economic fundamentals, erratic policy implementation and heavy-handed government meddling in the private sector. " I want to emphasize that we will not be weak on inflation," said Dilma Rousseff, President of Brazil. " Today, the stability of our currency is a central value of our country," she said at the World Economic Forum at Davos. That is where our most revered Finance Minister has gone as is his wont. But that is where the similarity ends. Our ministers have shrugged off all responsibility by blaming the slowing economy on ' external factors ', have allowed inflation to increase out of control by pressuring the Reserve Bank not to increase interest rates and have increased government expenditure recklessly on social schemes. Instead they have passed on responsibility to private companies in the form of the Corporate Social Responsibility Act. However, the recent defeats in state elections have come as a sudden jolt to the Congress which is now trying to present free handouts as health schemes. They may call it what they will but it is definitely unhealthy for the nation.