Economic Governance and Budget Accountability

John Samuel

The Budget of a government is the reflection of the policy and political priorities of those who control and manage a government machinery and apparatus at a given time. Budgets do not operate in a political or economic vacuum. Budget on the one hand reflects the dynamics of power within an economy and on the other hand reflects the policy and political choices of those who control and manage the government. Budget is not only a document that is indicative of policy priorities but also a political document that indicates the power dynamics within an economy. Hence, budget is a part and parcel of the economic and political governance of a country.

Economic governance denotes a larger arena beyond the conventional confines of government finance or public finance.  Economic Governance is a process of managing power dynamics within the larger economy of a society or country with institutional arrangements, fiscal policies, laws, process and management of natural, social and economic resources. The ongoing economic crisis and prolonged recessions in the major economies in the world raise serious questions about the dynamics of economic governance and who control the economic governance of a given country. It is increasingly clear the ‘free-market’ economy is  hardly ‘free’ and often controlled by the big corporate interests in the finance market as well as in the larger markets of goods and services. Hence, there is a new call to action for states and governments to play an optimal role in the market to ensure more accountability and transparency and also to decrease the inequality (economic, social and political) within a given society. There is also a larger concern about the link between sustainable environment and sustainable economies. The dogma of economic growth even at the cost of environmental sustainability is increasingly questioned within governments, market as well as civil society. The world is also facing an unprecedented level of economic and social inequality and these pose great challenges for the future of democracy itself.

Within a democratic context, budgets are expected to be formulated and passed through a consultative process and through discussions in the legislature or parliament. The budget revenue is directly or indirectly contributed by the people and in this sense budgets actually belong to the tax payers. The sovereignty of a democratic state is derived from the sovereignty of its people and the legitimacy of a government is depended on the approval of the people who elect their representatives to represent their interest and perspectives in the parliament and assembly. It is in this context, accountability of the government to the people and transparency of the whole process of governance become cardinal to the genuine function of democratic governments. However, there is a significant gap between the real normative and value framework of democracy and the actual functioning of the governments. In spite of the principles of a representative democracy, governments in practise are often run by an entrenched nexus of bureaucratic and political elites in the government. In theory, a Cabinet selected among an elected majority in a democratic process is the political executive. However, in practise the government executive is largely run by bureaucratic elites with support of government staff who more often command and control the process of governance through control of information, process and delivery of services on the ground. A government often operates and exerts power through ‘law’ (and ‘order’) and the money it controls through budgetary process. Though laws are developed through legislative process, the real implementation is in the hands of the government bureaucracy. And it is the same with the budgetary process. Though the budget is expected to be discussed, debated and passed through a legislative process, in reality the implementation and proposals of budgets are in the hands of a government bureaucracy. While the Right to Information and a vigilant fourth estate play an important role in lifting the ‘veil of secrecy’’ within the bureaucratic structures of governments, there is an increasing concern about the effectiveness and efficiency of budget management and also the entrenched corrupt nexus that drains the resources from the government as well as people. It is in this context Budget Transparency and Accountability become a very important means to truly democratize governments and the process of governance.

Budget Accountability and Economic Governance:

Political Economy of Budgets

Accountability denotes the rights, responsibilities and duties that exist between people and various institutions that affect their lives. Accountability and legitimacy are two sides of the same coin. Lack of accountability will result in lack of political legitimacy. Lack of legitimacy will result in democratic deficit and the consequent abuse of power by decision makers and power-holders. From the perspective of democratic governance, people and citizens are the owners and the shapers of the State. The sovereignty of the Sate is derived from the sovereignty of the citizenship. Hence, all institutions of the state and governments are duty bound to be accountable to citizens. However, power is no longer the monopoly of the state or governments. Increasingly big transnational corporations, media, various public and private institutions, political parties, civil society formations and NGOs wield power and control resources and take actions and decision that affect the lives, choices and livelihood of people. Hence there has to be broader understanding, politics and ethics of accountability. 

The big players in the markets like transnational corporations, big financial operators, including the banks and big media corporation increasingly tend to shape the boundaries of the state and lives and choices of the people. These unaccountable and powerful actors can become the biggest threat to Just and Democratic Governance in their quest for profit, unbridled free market, and accumulation of wealth and information.

Democratic Accountability is both political and ethical. Accountability also denotes legal, social, economic and managerial aspects. Accountability is about answerability and enforceability. Answerability means the right to get information and clear response from any institutions or authority and the obligation of such institutions to provide information and response to such stake-holders. Enforceability denotes the capacity to ensure that a redressal is done or action is taken to correct a wrong action, wrong policy. Empowerment of people in terms of information, knowledge and mobilization is a prerequisite to demand any form of effective accountability.

Budget Accountability involves the responsibility of the governments to answerable to the people/tax-payers about how their money is spend and why the money is spend or what kind of difference did budget priorities and implementation made on the ground or in the lives of people. While most of the governments tend to stress the new promises and proposals in the budgets, there is hardly any initiative that stress on the performance of the budget.  The very formulation of the budget or budget proposals often ignore the long term or short term need of a society, though there is no dearth in popular promises. The increasing gap between the budget proposals and performance on the one hand and performance and impact on the other hand raise questions about budget accountability.  The increasing gap between the budget estimates and revised estimates and the relative lack of transparency on how such revisions take place also raise questions about budget integrity.

Though there are some positive efforts in few states like Kerala to consults civil society organisations, social movements, citizens groups and associations of marginalised people during the formulation of the budget process, the general tendency in India at the Union level and state level is to only consult the rich and powerful such as FICCI, CII or other vested interest lobbies.  Within the Indian context there is also an increasing concern about the link between election and political party funding by big corporate companies and consequent reduction of taxes in the business areas that affect a particular corporate house. This nexus between big corporate companies and bureaucratic and political elites with connivance of media companies controlled by big business interest raise series issues of budget integrity as well as democratic deficits. So while there is indeed a tendency to have new proposals on social protections and popular budget proposals, the question is who actually influence the underlying political economy of a budget.

It is in this context that Economic Governance of a country become crucial. Economic Governance is a much broader concept that public finance.  In democratic contexts, there is a need to extent the accountability narrative to all institutional arenas within a given society. Economic governance will have implications for how inflation is managed, how prices of commodities and goods are managed, how natural and human resources are managed. In a democratic context, democratisation of economy is as important as the democratisation of politics. Governance is deeply political as governance is also about the negotiation of power within and beyond institutional arenas of state, market and civil society. One of the key concerns in a democratic discourse is that while there is an increasing stress for democratization of political governance, there is a tendency to leave the economic governance to ‘market forces’ and here the ‘market forces’ often mean the big Multinational corporations or big corporate houses that tend to dominate the power dynamics and growth of economy. The big players in the stock market, finance /currency markets and banking sector can often create semblance of a  ‘vibrant market’ creating speculative practices and artificial growth.

  Multi-dimensional Inequality and lack of accountability in economic and political governance became the centre stage of political and policy discourse in the world. People and citizens across the world in more than ninety countries protested against the increasing lack of accountability in governance and particularly in the arena of economic governance. Movements like ‘occupy wall street’ and the protests in different parts of the Arab world were not only about the lack of accountability of the governments but also against the nexus of political and economic elites that controlled the economy and state.  All most all the recent studies in economics and politics pointed out the grave dangers of unprecedented inequality in almost all the countries of the world and also the new links between economic, social and political inequalities. Hence, there is an increasing need for states to play much more pro-active role in the political economy to ensure there is more transparency and accountability not only in all aspects of governments but also among the major actors who controls the dynamics of economy and market. This also means pro-active steps to decrease the alarming inequalities within a given country and society. Hence, there is a need to have wider debate and discussions within the society and among policy makers to strengthen accountability and transparency in the arena of economic governance in general and budget accountability in particular