Party Time at the Stock Market!

Party Time at the Stock Market!


Ganga Prasad G. Rao
http://myprofile.cos.com/gangar
http://gprasadrao.blogspot.com/


A party at the stock market? Which stock? Which scrip? When? Try stocks of political parties traded on the stock exchange much like the common stock of firms? Incredulous? Why? Is it that outrageous? Political parties exist for a purpose – to serve the public in matters of politics (equity), policy, administration or governance. They have leaders, an executive board besides officials and members. They are governed by rules, traditions, and elections. Their goal, arguably the seat of power, or more appropriately, as many seats and as much power as possible, is analogous to the pursuit of profits by entrepreneurs. Clearly, our constitutional fathers presumed, much like Keynes did, that the invisible hand would ensure that the larger national cause is served even while political parties pursued their private goals. Six decades later, the answer – depending on one's political viewpoints – varies from prevarication to a resounding 'No'. If our nation has progressed so much in such a short span of time, it is despite the political parties, not because of them.

The root causes underlying this failure are quite obvious. Politics is the route to power, the power to change policies and the fortunes of various industries. Industrialists court leaders of political parties, whether ruling or in the opposition in the pursuit of industry-friendly policies. The lure of holding on to that power induces even the most astute politician/leader to give in to short-run policies of appeasement ignoring their long-run deleterious impact on the nation. Vested interests corner concentrated benefits in the immediate term even as costs are distributed broadly and imperceptibly across time and space. Politicians have perfected the art of enriching themselves with money and power while granting 'pork chops' to the industry and distributing peanuts among supporters and constituency voters. This 'please all' and 'bleed the future to enrich the present' strategy turns the nation economically and environmentally unsustainable. Nation building indeed!

Wouldn't it make matters worse if we turned our political parties in to publicly traded stocks? (I presume they are already invested in the stock markets anyway, and not in the retail section going by the PSU IPOs sanctioned!) Not if their strategies are anticipated and the system designed properly. Consider political parties – ruling and opposition - incorporated as 'holding companies' much in the fashion of Berkshire Hathaway and 'endowed' (on a matching grant basis?) with a representative basket of stocks, like the Nifty 500 Index, or better yet, a combination of 10-year futures on Nifty 500 and 30-yr bonds, in equal or some proportionate manner. The opposition parties would be endowed with either the same basket of stocks, or conceivably, another self-chosen combination of stocks and bonds more appropriate to their ideology. The stocks of these political entities would then trade on the stock market perhaps as a distinct category in itself.

Foremost, this proposal would bring about a mechanism in which investors – small, large, domestic, FIIs and pension funds – could signal their 'vote' on government policies and party positions by their purchases and sales of the stocks of political parties. Thus, political parties would find it attractive to differentiate themselves policy-wise to attract different classes of investors. Second, it'd be a convenient tool to 'legalize' and internalize the monetary benefits that a political party receives by way of its decisions and parliamentary votes in the running of the government. Third, the market 'price' would serve as a signal to party leaders to gauge their policy performance as well as investor and voter perceptions on the economy. Policies and the choice of leaders could be evaluated in the stock market (Hell, If I can speculate on coffee beans and tea leaves, I can do so with the fortunes of my country as well. Right?). Voters and investors need no longer wait years to opine on matters – a wait so long that many forget what it was all about. Under the proposed system, investors could short the stock of the political party that hoists a leader with a dubious record, delivering an immediate verdict – one that both punishes the party and prods it in to taking corrective action. Relative price movements would also reveal the change in the odds of winning at the ballot box at any particular instant – a substitute to the opinion polls that is currently in vogue. Expectations of political moves, choices, strategies and policies would be reflected in market volumes and prices.

One might argue that while recourse to the stock market provides a mechanism to internalize the long-run impact of current policies, it still does not internalize non-market affects like HDI, communal peace and environmental sustainability. A 'non-market social index' that reflects these and other parameters could be published weekly so investors take account of this information as well in making their political investment (to the extent they do not reflect in the price of long bonds). Trading the fortunes of political parties provides a means for voters and investors to judge party performance from a long-term perspective on an ongoing basis – a distinct attribute of the stock market and something that is sadly lacking in the current system driven by short-term electoral contingencies. It'd radically change the political landscape, empowering the common man, voters and indeed the international investor with a stick to use on the mortifying politics that characterizes our nation.

And a means for our parties to test waters on various issues, choices and policies. Party on!


Elections are round the corner
Next month, or is next year?
I used to have a say
(that coalition of ours was quite shaky!)
now its them -the World Bank and the G-9!
(if money talks, big money barks)
Alliances I seek, votes by the block
try groups of all kinds
unions, social, religious, sports, even online ones
It does beat door-to-door canvassing
by a mile and a half!
(Standing through the sun roof has its risks,
and I don't mean the oppressive heat!)
A leader of politics I am
Astute and aggressive

My opponents have ganged up
I must counter-attack
Shall I court leftist unions in their pocket
and trade my minorities in?
Shall I switch positions on SEZ
now that the tide is turning?
(I hear the GEF has money to invest
Yes, easements we have heard of!)
Shall I promise job reservations, subsidies,
two eggs for mid-day meals,
topped it with an iron tablet or two
That'll qualify for some gender money,
and community insurance funds will come handy
But the JNURM fund accounts?
Surely, you don't expect me to keep!
A leader of politics I am
Astute and aggressive

The digital age is upon us
It ain't that friendly no more
Tons of email to trash
Many an online column to ignore
No, not those opinion polls again
I take them but with a grain of salt
I must counter-attack,
I'll must do one better
Let's celebrate our mentor's birthday
A congregation blocking traffic, blaring music?
Yes, the perfect backdrop for my plans
Have the industrialist approach me
I just might gladden him during my speech
with a populist policy or two!
A leader of politics I am
Astute and aggressive!

Silver screen heroes,
Come, try your hand at politics
In these days of multiple degrees
earn your political halos too!
(Instant mass recognition
who else can boast of?)
My ideals you will embody
my memory will you cherish
my followers you will keep
(your fans are welcome too)
A leader of politics I am
Astute, aggressive
(and now ready to retire!)