The Debate over the Continuity of Policies When Governments Change and Implications

Is it Necessary to Discontinue Policies of the Predecessors when Governments Change?

You might have read in the news about the decision of the Current Government in Andhra Pradesh, a state in India, to cancel the grandiose plans for the capital of the state chosen by the previous government and instead, go in for decentralised development.

Despite widespread protest and all round opposition, the present government, is going full steam ahead to shift the capital from Amravati, the place chosen by their predecessors.

While one might debate the advantages and disadvantages over the centralised versus decentralised development, the larger question that one needs to ask is whether reversing of policies when governments change is in the longer term interests of the country and the respective states as investors and entrepreneurs would be hesitant to invest in regions where there is no guarantee of their investments coming undone midway.

Indeed, given the fact that the current government is also reviewing the PPAs or the Power Purchase Agreements signed by the previous government (against the advice of the central government) gives rise to the suspicion that this is nothing but a brand of vindictive politics at work.

Therefore, it is legitimate to ask whether policies and decisions taken by a particular government have to be continued or whether democratic norms dictate that change of governments’ means that such continuity goes out along with the losing side.

Policies Can Be Changed in Case of Corruption and Bad Decision Making

Having said that, there are also some valid criticisms about whether the change in government should continue the policies of their predecessors, if there are allegations of fraud and malfeasance.

Indeed, the beauty of democracy is that elections, more often than not, become referendums over the performance or non-performance of the incumbent government.

This is the reason why political pundits keep talking about Anti Incumbency Factor at the time of the elections.

In addition, if there are allegations of corruption and fraud in the decisions taken by a particular government and if such instances become election issues, the incoming government is well within its rights to review and if not, render such policies null and void.

This is the advantage of a democracy where people have the right to vote for a different party whenever they feel that the present ruling dispensation has erred in taking decisions, against the interests of the public.

Moreover, it is not anybody’s case that decisions that are tainted by allegations of corruption should be continued defeating the very purpose of transparency and accountability that is another hallmark of democratic societies.

The Impact on the Business Community and the Investor Sentiment

On the other hand, think about the investors, the businesspersons, and the entrepreneurs who would have invested huge sums of money in the projects under a particular dispensation, only to see such investments become Dead Capital or Go Up in Smoke, when the government changes.

What is the message that is being sent out to the larger business community when such policies are undone?

Indeed, in the present case of Amravati, many international business consortiums and even the World Bank and the Asian Development Bank have invested Millions of Dollars and more in the pipeline.

Where would such investments go and what happens to the reputation of the state or the country when every change of government leads to the cancellation of policies and decisions taken by the predecessors.

Therefore, there must be serious debates over whether the business community ought to seek guarantees from all the political parties about their prospective investments and whether they have to be assured that their investments are safe even if a different party comes to power.

Need for Bipartisan Consensus for Important Policy Decisions

In the case of Andhra Pradesh, the way in which the present government is going ahead by annulling most policies taken by the previous government has set off alarm bells in the corridors of the business communities and this is reflected in the dipping Investor Sentiment.

This is the reason why important decisions must be taken only after all round consensus from all the parties.

Again, this is not limited to AP or India, but happens world over as well as we have seen in the recent past where even in the United States, President Trump is rolling back most of the policies initiated by his predecessor, President Obama.

This is the reason why a Bipartisan consensus is needed whenever important decisions are taken like in the case of building a capital in AP.

Of course, this is also the reason why the business community often seeks sovereign guarantees as well as insures its investments due to Political Risks that are often the case in democracies.

On the other hand, while one might be tempted to say that authoritarian countries such as China are better for business as there would the assurance of continuity, there are pitfalls as well as some insiders are now coming out with how highhanded officials sometimes reverse some business policies.

Conclusion

Last, while the business community seeks stability and continuity, it is also the case that the people are supreme in democracies and hence, wherever there are doubts about the continuity of policies, they must be made election issues so that there is greater legitimacy for the politicians to discontinue or cancel the policies of their predecessors.

Already there are calls for a referendum in AP on the issue of Amravati and though, we do not advocate such an option, nonetheless, there is some merit in the suggestion.

To conclude, change of government need not lead to cancellation of policies arbitrarily and such decisions must be taken only on the merits and demerits of the policies.