Financial Inclusion for Inclusive Growth in India

Financial Inclusion for Inclusive Growth in India Amartya Sen (2000) convincingly argued that poverty is not merely insufficient income, but rather the absence of wide range of capabilities, including security and ability to participate in economic and political systems. Franklin Roosevelt, the popular president of United States of America in 1932, referred to the American poor as the forgotten man at the bottom of the economic pyramid. Today the term `bottom of the pyramid refers to the global poor most of whom live in the developing countries. These large numbers of poor are required to be provided with much needed financial assistance in order to sail them out of their conditions of poverty. Joseph.E.Stilglitz opines that, if economic growth is not shared throughout society then development has failed. Accordingly, there is felt a need for policy support in channeling the financial resources towards the economic upliftment of resource poor in any developing economy. This study is an attempt to comprehend and distinguish the significance of Financial Inclusion in the context of a developing country like India wherein a large population is deprived of the financial services which are very much essential for overall economic growth of a country. Our understandings and analysis on the topic are presented here below in the following sections. In Section-II, the importance of `Finance for economic growth has been established with adequate literature review. In section III, Inclusive Growth and its significance for achieving sustainable growth is discussed. Section-IV brings to fore the Financial Inclusion and its dimensions in detail. In Section-V, the importance of financial inclusion for achieving Inclusive Growth in India is detailed with a statistical analysis. Section-VI contains the Recommendations and the Conclusion is presented in Section-VII. II. FINANCE AND GROWTH The earlier theories of development concentrated on labor, capital, institutions etc as the factors for growth and development. The leading works hardly include finance as a factor for growth. Since then there has been numerous research analyzing how financial systems help in developing economies. A wide agreement exists among economists that financial development prompts economic growth. According to Rajan and Zingales (2003), development of the financial system contributes to economic growth. Empirical evidence time and again emphasizes the relationship between finance and growth. According to the works of King and Levine (1993a) and Levine and Zervos (1998), at the cross-country level, evidence indicates that various measures of financial development (including assets of the financial intermediaries, liquid liabilities of financial institutions, domestic credit to private sector, stock and bond market capitalisation) are robustly and positively related to economic growth. Other st udies also establish a positive relationship between financial development and growth at the industry level, like the one by Rajan and Zingales (1998). Since the groundbreaking contributions of King and Levine (1993a, b), economists have shown renewed interest in the finance-growth nexus. It is indeed irrefutable that considerable part of the differences in long run economic growth across countries can be elucidated by disparity in their financial development (King and Levine, 1993a; Levine and Zervos, 1998, Demirguc-Kunt and Maksimovic (1998) and Rajan and Zingales, 1998). Beck, Demirguc-Kunt, Laeven and Levine (2006) use Rajan and Zingales (1998) approach, which provides supplementary evidence that financial development increasingly props up the growth of smaller firms which constitute largely the priority sector lending in the case of Indian Financial sector. Recent survey evidence suggests that access to finance has a direct nexus with faster rates of innovation and firm dynamism consistent with the cross-country finding that finance promotes growth through increase in productivity (Ayyagari, M., Demirgà ¢Ã¢â€š ¬Ã‚ ¡-Kunt, A. a nd Maksimovic, V, 2007, Levine, 1998, 1999). Further, it has also been revealed that financial development plays a significant role in moderating the impact of external shocks on the domestic economy (Beck, T., Lundberg, M. and Majnoni, G, 2006 and Raddatz, C, 2006). Besides debate concerning the role of finance in economic development, economists have also debated the relative importance of bank-based and market-based financial systems for a long time (Golsdmith, 1969; Boot and Thakor, 1997; Allen and Gale, 2000; Demirguc-Kunt and Levine, 2001). Joseph Schumpeter argued in 1911 that banks play a pivotal role in economic development. According to this view, the banking sector alters the path of economic progress by affecting the allocation of savings and not necessarily by altering the saving rate. Largely, the Schumpeterian view of finance and development highlights the impact of banks on productivity growth (Schumpeter, Joseph A, 1934). Banking sector can wield a positive influence on the overall economy, and hence is of broad macroeconomic importance (Bonin and Wachtel, 1999, Jaffe and Levonian, 2001, Rajan and Zingales, 1998). It is established that better developed banks and markets are closely associated with faster growth (Levine, Loazya a nd Beck, 2000; Loayza and Ranciere (2002); Christopoulos and Tsionas, 2004). Improved functioning of banks can be able to boost resource allocation and hasten growth (Boyd and Prescott 1986; Greenwood and Jovanovic 1990; King and Levine 1993a; Levine, R. and S. Zervous 1998). Correspondingly, by aiding risk management, improving the liquidity of assets available to savers, and by lowering trading costs; banks can enliven investment in potential economic activities (Obstfeld 1994; Bencivenga and Smith 1991; Greenwood and Smith 1997). Banks do exercise significant and causal impact on productivity growth, which feeds through to overall GDP growth. The long-run association between prioritised banking and both capital growth and private savings are more tenuous (Levine, Ross; Loayza, Norman; and Beck, Thorsten, 1999). It is also ascertained by some researchers that the size of the banking sector can be safely considered a good predictor for future growth, especially when focusing on lon g term projects (Andrea Vaona, 2005). The research so far has not only looked at how finance facilitates economic activity but also social aspects like poverty, hunger etc. The consensus is that finance promotes economic growth but the magnitude of impact differs. Financial inclusion is intended to connect people to banks with consequential benefits. Ensuring that the financial system plays its due role in promoting inclusive growth is one of the biggest challenges facing the emerging economies. We therefore advocate that financial development creates enabling conditions for growth through either a `supply-leading (financial development spurs growth) or a `demand-following (growth generates demand for financial products) channel. Access to safe, easy and affordable credit and other financial services by the poor and vulnerable groups, disadvantaged areas and lagging sectors is recognised as a pre-condition for accelerating growth and reducing income disparities and poverty. Access to a well-functioning financial system, by creating equal opportunities, enables economically and socially excluded people to integrate better into the economy and actively contribute to development and protects themselves against economic shocks. III. INCLUSIVE GROWTH Development economists and states have often been for a long time interested in the relationship between financial development and economic growth especially in the period which is known as the era of the Washington Consensus. A growing GDP is an evidence of a society getting its collective act together for progress. As its economy grows, a society becomes more strongly organised, more compactly interwoven. Growth is good, Sustained high growth is better and Sustained high growth with inclusiveness is best of all. Inclusive growth in the economy can only be achieved when all the weaker sections of the society including agriculture and small scale industries are nurtured and brought on par with other sections of the society in terms of economic development. The major development challenge is to make the growth inclusive. Policies for inclusive growth are vital components of majority of government strategies for sustainable growth. Commission on Growth and Development notes that inclus iveness-a concept that encompasses equity, equality of opportunity, and protection in market and employment transitions is an essential ingredient of any successful growth strategy (Commission on Growth and Development, 2008). Three pillars of inclusive growth are; (i) Maximise economic opportunities (ii) Ensure economic well being and (iii) Ensure equal opportunities to economic opportunities (Ifzal Ali, 2007). An inclusive growth strategy encompasses the key elements of an effective poverty reduction strategy and, more importantly, expands the development agenda. Developing inclusive financial systems which are financially and socially sustainable, as a poverty reduction strategy, should be given priority (Amit K. Bhandari, 2009). Levine, (1998), (1999) and Beck, Demirguc-Kunt and Levine (2007) have noticed a positive effect of finance on poverty reduction. Economies with higher levels of financial development experience faster reduction of poverty. This has been explained by an extensive body of literature including Deininger and Squire (1998), Dollar and Kraay (2002), White and Anderson (2001), Ravallion (2001) and Bourguignon (2003). In an often cited cross-country study, Kraay (2004) proves that growth in average incomes explains 70 percent of the variation in poverty reduction (as measured by the headcount ratio) in the short run, and as much as 97 percent in the long run. Lopez and Servà ¢Ã¢â€š ¬Ã… ¡n (2004) suggest that for a given inequality intensity, the poorer the country is, the more vital is the growth component in explaining poverty reduction. Thus, equitable growth is indeed an imperative for inclusive growth. IV. FINANCIAL INCLUSION Importance of financial inclusion arises from the problem of financial exclusion of nearly 3 billion people from the formal financial services across the world. The review of literature suggests that the most operational definitions are context-specific, originating from country-specific problems of financial exclusion and socio-economic conditions. Thus, the context-specific dimensions of financial exclusion assume importance from the public policy perspective. The operational definition of financial inclusion, based on the access to financial products or services, also underscores the role of financial institutions or service providers involved in the process. Furthermore, the operational definitions have also evolved from the underlying public policy concerns that many people, particularly those living on low income, cannot access mainstream financial products such as bank accounts and low cost loans, which, in turn, imposes real costs on them -often the most vulnerable people (H. M. Treasury, 2007). Thus, over the years, several definitions of financial inclusion/exclusion have evolved. In the Indian context, Rangarajan Committee on Financial Inclusion in India (2008)) defines it as: Financial inclusion may be defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost. The financial services include the entire gamut savings, loans, insurance, credit, payments etc. The financial system has to provide its function of transferring resources from surplus to deficit units but both deficit and surplus units are those with low incomes, poor background etc. By providing these services, the aim is to help them come out of poverty. Measurement of Financial Inclusion is not universally the same. Different countries adopt different indicators to measure financial inclusion. Definitional Aspects of Financial Inclusion / Exclusion and their indicators as recommended by United Nations, World Bank, Committee on Financial Inclusion in India (Chairman: C. Rangarajan), Asian Development Bank [ADB] and Treasury Committee, House of Commons, UK are presented in Table-1 in Annexure-1. Global Experiences In the developed countries, the formal financial sector serves most of the population, whereas in developing countries, a large segment of the society, mainly the low-income group, has modest access to financial services, either formally or informally. Consequently, many of them have to necessarily depend either on their own sources or informal sources of finance, which are generally at high cost. According to Peachy and Roe (2004) developed countries have experienced good levels of inclusion (99 per cent in Denmark, 96 per cent in France, 96 per cent in Germany and 91 per cent in the USA) have bank accounts. However, it is reported that (ADB, 2007), in the developing countries, formal financial sectors serve relatively a small segment, often not more than 20-30 per cent of the population, the vast majority of who are low income households in rural areas Recent data (Table-2 in Annexure-2) shows that countries with large proportion of population excluded from the formal financial system also show higher poverty ratios and higher inequality. Further, it is observed that, often countries with low levels of income inequality have a propensity to have lower levels of financial exclusion, whereas high levels of exclusion are associated with the least equal ones. According to Kempson (2006), for example, While in the case of Sweden, lower than two per cent of adults did not have an account in 2000 in Germany, it was around three per cent. In comparison, less than four per cent of adults in Canada and five per cent in Belgium, lacked a bank account (Buckland et al, 2005). Countries with high levels of inequality record higher levels of banking exclusion. To illustrate, in Portugal, about 17 per cent of the adult population had no account of any kind in 2000 (Kempson, 2006). Policy Response to Financial Exclusion Country Experiences The policy responses to such exclusion have been varied. Two major kinds of policy responses have been implemented by central banks in response to financial exclusion: codes of practice and specific legislation. Table-3 (Annexure-3) presents the financial inclusion initiatives in different countries. Table-4 (Annexure-4) illustrates the extent of financial inclusion in some select countries. Initiatives for financial inclusion in India The broad strategy for financial inclusion in India in recent years comprises the following elements: (i) encouraging penetration into unbanked and backward areas and encouraging agents and intermediaries such as NGOs, MFIs, CSOs and business correspondents (BCs); (ii) focussing on a decentralised strategy by using existing arrangements such as State Level Bankers Committee (SLBC) and district consultative committee (DCC) and strengthening local institutions such as co-operatives and RRBs; (iii) using technology for furthering financial inclusion; (iv) advising banks to open a basic banking `no frills account; (vi) emphasis on financial literacy and credit counselling; and (vii) creating synergies between the formal and informal segments (Thorat, 2008). V. FINANCIAL INCLUSION AND INCLUSIVE GROWTH IN INDIA The importance of this study lies in the fact that India being a socialist, democratic republic, it is imperative on the policies of the government to ensure equitable growth of all sections of the economy. With only 34% of population engaged in formal banking, India has, 135 million financially excluded households, the second highest number after China. Further, the real rate of financial inclusion in India is also very low and about 40% of the bank account holders use their accounts not even once a month. It is universally opined that the resource poor need financial assistance at reasonable costs and that too with uninterrupted pace. However, the economic liberalization policies have always tempted the financial institutions to look for more and more greener pastures of business ignoring the weaker sections of the society. Some of the features of financial exclusion in India are captured in Figure-1 (Annexure-12). It is essential for any economy to aim at inclusive growth involving each and every citizen in the economic development progression. It is in this context that a study has to be made to understand the importance of priority sector lending in ensuring the inclusive growth in the Indian context. Select macro-economic and financial indicators of Indian economy are presented here below in Table-5 (Annexure-5). Analysis Based on the well accepted approaches for evaluation of the coverage of financial inclusion and to assess its impact on inclusive growth the study endeavors to analyse the following: Spatial Distribution of banking Services Regional Distribution of Banking Services Impact of Financial Inclusion on Inclusive Growth 1. Spatial Distribution of banking Services In order to analyse the spatial distribution of banking services in the country, data for the periods 1991 and 2005 has been verified. Further, bank offices in the country have been classified into Rural and Urban areas. This has been considered in order to get a clear understanding about how the spread of formal banking services has been affected in different parts of the country. The total number of saving accounts, considered to be a better indicator of banking penetration than other deposit accounts, as per cent of number of households, was 137 in rural areas and 244 in the urban areas on the eve of reforms in 1991. By 2005, despite the reforms, the differential continues to be similar. In the case of credit accounts, the situation have deteriorated for rural households while showing significant improvement in the urban areas (Table-6 in Annexure-6), corroborating the very significant increase in retail credit. 2. Regional Distribution of Banking Services An effort has been made to analyse the extent of financial inclusion in different regions of the country such as Northern, North-Eastern, Eastern, Central, Western and Southern regions apart from All India level. A purposeful analysis is made by comparing the data for the period from 1991 to 2005. Further, this data has been further split into rural and urban areas in the country in order to get an exact view about the distribution services in these areas. Further, the analysis is made in terms of population coverage per bank office, Number of Savings accounts per population of one hundred and Number of Credit (loan) accounts per population of one hundred. Table-7 (in Annexure-7) captures the data related to Financial Inclusion, Poverty levels, Population density and Literacy. Table-8 (in Annexure-8) presents the data related to Bank Branches, Workers, Population of Scheduled Castes and Percentage of Households with bank accounts in India. This data is largely sourced from the websit e of Census India and Reserve Bank of India publications. In terms of financial broadening, the scope for improvement remains. Table-9 (in Annexure-9) illustrates the level of financial inclusion in India with region wise statistics. It is discernible that Southern and Northern regions have population coverage below the national averages. All the other regions in the country have coverage well above the national average calling for urgent improvement in the population coverage of the population. Again in terms of rural and urban areas there has been a distinct progress in the coverage of the population by the bank branch offices. Table-9 provides further clarity by providing a break-up of the deposit accounts. Both the deposit and credit accounts are lower in rural households than urban households. Hence despite the rural-push, the rural population has not come forward and avail even basic banking services Impact of Financial Inclusion on Inclusive Growth In order to involve a comprehensive measure of financial inclusion in the Indian context, we consider Priority Sector Lending as a measure of financial inclusion. We are of the opinion that, mere opening of bank account would not be a true indicator of financial inclusion, but availment of financial services, more importantly; the much needed credit for the excluded sections of the society would definitely depict the measure of financial inclusion. Further, this measure would meet the requirements of the definition for measurement of Financial Inclusion provided by United Nations, wherein it is said that the indicator should measure the Access to credit, insurance, savings and payment services. Priority Sector Lending as an indicator in our study addresses all the above aspects. In view of this an attempt has been made to establish the relationship of priority sector lending (as a measure of financial inclusion) with the indicators of inclusive growth such as rural poverty. Rural pov erty is considered to portray inclusive growth as more than 70 percent of India lives in rural areas. The required data for the analysis is obtained largely from the most reliable and official sources such as Reserve Bank of India website, NABARD website, India Development Report 2008 and other related sources. Economic Reforms in Indian economy were initiated in the year 1991-92. As such, to cover equal number of years of priority sector lending and inclusive growth during pre and post-Liberalisation period, data for the period from 1974-75 to 2007-08 has been analysed for understanding the trends. For the purpose of analysis the most popular statistical measure Multiple Regression (OLS) Analysis is used (Andrea Vaona, 2005, Andrea Vaona and Roberto Patuelli, 2008 have also used the same kind of analysis for similar studies). The objective of this section of the paper is to recognize the determinants of Inclusive Growth which can be captured in Rural Poverty (RU_POV) (measured in percentage against that of the total population in rural areas and these figures are provided by the Census of India data) in India and ascertain the impact of Priority Sector Lending (PSL) on rural poverty in India. Priority Sector Lending in the Indian context refers to the bank credit under the directed lending towards the private firms and individuals which is an important parameter that determines the measure of development that can significantly contribute to inclusive growth (Andrea Vaona, 2005). Domestic Savings (SAV) (measured in Rupees in Crores) is included as a determinant in order to account for the argument that savings propels economic activity in the system at large and helps in inclusive growth process (Beck, Levine and Loayza 2000). Rural Employment is one of the significant measures of economic development and consequently of inclusive growth. A greater level of rural employment can be taken as evidence of greater economic development (Cole Shawn, 2007). In recognition of this argument, Employment in Rural Primary sector (EMP_RP) (expressed in million numbers) is included as one of determinants to study their impact on inclusive growth. Agricultural Production is another important determinant that affects the inclusive growth process in rural India. As a large population of weaker sections of the society still depends to a large extent on agriculture, Agricultural Production (AGRI_PRO) (expressed in Kilograms/hectare) determines their upward movement in the income ladder (Andrea Vaona, 2005 also considered production as an important variable in a similar study). Accordingly, agricultural production is also considered as a determinant in the analysis. There is also an indisputable argument that overall credit has profound impact on inclusive growth process (Andrea Vaona, 2005). In view of this, Credit to Gross Domestic Product (CRED_GDP) (measured as a ratio in percentage to GDP) is included as a determinant. If there is an increase in Per Capita Income (PCI) (measured as per capita NNP at factor cost expressed in Crores in Rupees) there certainly will be an increase in inclusive growth process. As such, Per Capita Income (as used as a determinant in a similar analysis by Andrea Vaona and Roberto Patuelli, 2008, Srinivasan 1994, Streeten 1994, and Sugden 1993) is commonly accepted measure of standard of living of people and consequently is a major factor that enhances inclusive growth and hence it is included in the analysis. The regression model can be; Y = à   + à ¡1X1 + .. + à ¡nXn + à ¦ -> Accordingly, Rural Poverty can be better explained and estimated with the following version of equation; RU_POV = f (PSL, SAV, EMP_RP, AGRI_PRO, CRED_GDP, PCI) + à ¦ > In order to control for other factors associated with economic growth not linked to financial development, the regression results are presented by using a simple conditioning information set, including the constant, the logarithm of all explanatory variables. Due to potential nonlinearities, the natural logarithms of the regressors are considered (Levine, Loazya and Beck, 2000). Accordingly, when we log-transform this model (also called a log-log, double-log) we obtain: Log (RU_POV) = à   + log (PSL, SAV, EMP_RP, AGRI_PRO, CRED_GDP, PCI) + à ¦ > `à   represents the `Y intercept, à ¡1,?n represent the respective regression coefficients for explanatory variables X1 .. Xn and `à ¦ represents the error term. Where, `Y represents the `RU_POV , i.e, Rural Poverty and `X1, `X2 , ., `X14 represent the predictor variables and `à ¡1 , `à ¡2, .., `à ¡n represent the partial regression coefficients of `PSL i.e, `Priority Sector Lending, `SAV-Savings, `EMP_RP-Employment in Rural Primary sector, `AGRI_PRO-Agricultural production, `CRED_GDP-Credit to Gross Domestic Product and `PCI-Per Capita Income respectively. `à ¦ represents the `error term. The results of analysis are presented in Table-10 (Annexure-10) for the period from the year 1977 to 2007. Inferring from the results of this analysis, it can be concluded that Priority sector lending has significant impact on rural poverty. Graphical presentation of the trend of priority sector lending in the pre liberalisation period from 1974-75 to 1990-91 and post liberalisation period from 1991-92 to 2006-07 is illustrated in Figure-2 (Annexure-13). It is clearly evident from the figure that priority sector lending has taken a gradually upward moving curve indicating a steady rise in the post liberalisation era. Further, the Nature and strength of the impact of the various determinants on Inclusive growth are captured in Table-11 (Annexure-11). A graphical presentation of the trend of the inclusive growth in India is presented in Figure-3 (Annexure-14). It is orchestrated by the rhythmic forward movement trends of the above discussed determinants during the study period. Rural Poverty is on a declining trend more pronouncedly during the post liberalisation period. Findings of the Study The study found that Priority Sector Lending has a very high significant impact on inclusive growth, which is in line with the findings of Kraay (2004) and Beck, et all (2007). Domestic Savings (in line with the conclusions of Levine, Ross; Loayza, Norman; and Beck, Thorsten, 1999), Credit to Gross Domestic Product (as established by Ayyagari, M., Demirgà ¢Ã¢â€š ¬Ã‚ ¡-Kunt, A. and Maksimovic, V, 2007, Narasimham, 2002, Obstfeld 1994; Bencivenga and Smith 1991; Greenwood and Smith 1997) and Per Capita Income (as stated by Levine, 1998, 1999) are found to have significant impact on reducing rural poverty in India. The model developed in the study explains the trend of rural poverty (Lopez and Servà ¢Ã¢â€š ¬Ã… ¡n, 2004) to the extent of 93.5 percent involving the important determinants such as Priority Sector Lending (Rajan and Zingales 1998), Savings, Employment in Rural Primary sector, Agricultural Production (Andrea Vaona, 2005), Credit to Gross Domestic Product (Andrea Vaona, 2005 ) and Per Capita Income (Andrea Vaona and Roberto Patuelli, 2008, Srinivasan 1994, Streeten 1994 and Sugden 1993). Further, it is also demonstrated (Figure-2) that financial sector reforms have indeed had a positive impact on reduction of rural poverty. VI. RECOMMENDATIONS AND POLICY CHOICES Based on the outcome of the above analysis, we present here below our recommendations. Strategize the Provision of Bank Credit Need is felt to strategize the provision of bank credit to the rural farmer households. Majority of the marginal farmer households are not at all covered by the formal finance. As such public sector banks and the co-operative banks in the rural areas have to sensitize about the need for provision of timely and cheaper credit to these segments. Reserve Bank of India in consultation with NABARD should come out with a comprehensive strategy for revitalizing the quiescent rural credit mechanism. Cover the Poor It is imminent to encompass the tenant farmers, oral lessees and share croppers, marginal farmers with small un-economical land holdings, agricultural laborers, rural artisans and people involved in making handicrafts and also majority of weavers in handloom Sector. Extensive use of Co-operatives The large number of PACS and primary cooperatives under the parallel Acts located in rural areas are not functioning effectively. Many of these cooperatives are in districts where the DCCBs are defunct or moribund. Such PACS could provide valuable services to their members if they get access to a commercial bank. In view of these there is a need to revitalize these cooperatives as per the Vaidyanathan Committee recommendations and use them extensively for financial inclusion in the rural areas. Undoubtedly a Greater Role for NABARD NABARD ha to play a pro-active role by partnering with the rural credit institutions in the field and identify new initiatives that will contribute to effectively improving the extent of financial inclusion involving SHGs, MFIs, etc. Procedural / Documentation Changes It is inevitable on the part of the regulators to find out an easy way of procuring the documents for opening of bank accounts and availing loans. The present guidelines are more tedious and result in huge costs for the poor in accessing the banks for any kind of services. Exemption from Stamp Duty for Loans to Small and Marginal Farmers, Simplifying Mortgage Requirements, Saral Documentation for Agricultural Loans. Proactive Role of Government State Governments should asked by the Centre to play a pro-active role in facilitating Financial Inclusion. Issuing official identity documents for opening accounts , creating awareness and involving district and block level functionaries in the entire process, meeting cost of cards and other devices for pilots, undertaking financial literacy drives are some of the ways in which the State and district administration have involved themselves. A role for Rural Post Offices Post Offices in rural areas can be asked to provide their services in accelerating the financial inclusion activity. In view of the postmans intimate knowledge of the local population and the enormous trust reposed in him post offices can be good use in the process of financial inclusion Effective use of Information Technology Solutions Financial Inclusion initiatives. Adequate Publicity for the Project of Financial Inclusion In a huge country like India, there needs to be huge publicity for popularizing the concept and its benefits to the common man. In this direction, a comprehensive approach has to be developed involving all the concerned at all levels to impress upon the need for financial inclusion for accelerating th

Political Party Essay

1. Political Party: group of individuals who seek to control government through winning elections. 2. Plurality: the largest number of votes cast for the office 3. Incumbent: current officeholder 4. Splinter Parties: those individuals who have split away from one of the major parties 5. Major Parties: American Politics, Republican and Democratic parties 6. Bipartisan: two major parties find common ground, in this endeavor. 7. Electorate: the people eligible to vote. 8. Precinct: smallest unit of election administration; the voters in each precinct report to one polling area. 9. Partisanship: secure commitment to a political party is the source for government action. 10. Pluralistic Society: contains of several diverse cultures and groups. 11. Ideological Parties: those based on particular sets of beliefs. 12. Two-Party System: in an election, only Republican or Democratic Party’s candidates have a realistic chance of winning public office. 13. Consensus: a general agreement among various groups- on fundamental matters. 14. Single-issue parties: concentrate on only one public-policy matter. Questions 15. What is the major function of a political party? – Political parties serve four essential functions; and in serving these functions, the parties allow the United States to more closely approach the ideal of democracy. The first and most important function of an American party is to organize elections by nominating candidates and seeking office. 17. Briefly explain two ways in which American Government is government by party? – One reason for the two party systems is that the Electoral College is winner-takes-all, preventing 3rd parties from gaining power. Another one is to ensure the voters that they can take action towards the government through their selected party. 20. How is the ideological consensus of the American electorate reflected in the membership of the major parties? – Since the beginning of the USA there has been a general consensus on many of the major issues. This is not to say that Americans have always agreed on every matter. The nation has been deeply divided for many years at a time. 21. (a) Which political party was the first to appear in the new United States? (b) Who was its leader and what type of government did it favor? -Hamilton and other leaders who wanted a strong central government banded together to put over their policies. In 1787 they began calling themselves the Federalists. This was the first United States political party. 24. What unusual feature characterizes the present era of political party dominance? – The Democratic Party hired organizers chosen by the state parties in every state, so democrats could win the elections. 25. Briefly describe the four types of minor parties. – The four types of minor parties consist of the ideological parties, the single-issue parties, the economic protest parties and the splinter parties. 26. Historically, what have been the most important roles of minor parties? Briefly explain one of these roles. -To give more freedom of expression and to make sure that there is not one party stronger than another. The Election of 1912 Roosevelt created The Progressive Party a.k.a. the Bull Moose Party. 27. Why is the party in power more cohesive than the opposition party? -Republicans all believe the exact same thing word for word, making them far more cohesive, and brainwashed, then the democrats who have their own individual opinions and beliefs. 29. List and explain four factors that have contributed to the present weakened state of the major parties. – A sharp drop in the number of voters willing to identify themselves as republicans or democrats, and a growing number who regard themselves as independents. – A big increase in split ticket voting-voting for candidates of different parties for different offices at the same election. – Various structural changes and reforms that have made the parties more â€Å"open,† but have also led to greater internal conflict and disorganization. These changes range from the introduction of the direct primary in the early 1900s to the more recent and far-reaching changes in campaign finance laws. – Changes in the technology of campaigning for office-especially the heavy use of television and of the Internet, professional campaign managers, and direct-mail advertising Ch.7 15. Nomination: the naming of those who will seek office 16. Closed Primary: party nominating where declared party members can vote 17. Precinct: a voting district 18. Soft Money: used for party building activities given by the local state. 19. General Election: regularly scheduled elections at which voters make the selection of officeholders 20. Open Primary: any qualified voter can take part in this nomination 21. Ballot: a device were voter registers a choice in a election 22. Hard Money: campaign money that is subject to regulation by the FEC 23. Caucus: is a group of like-minded people who meet to select the candidates they will support in an upcoming election. 24. Absentee Voting: voting by those unable to attend the polling place 25. Political Action Committee: political groups which have a major take on public policy 26. Direct Primary: is an intra-party election 27. Coattail Effect: when a strong candidate helps other candidates in the election by parties ticket. 28. Subsidy: grant of money from the government Questions 12. What are the five broad categories that describe the way most nominations are made? – Self-announcement – Caucus – Convention – Direct primary – Petition 15. Explain the arguments for and against the closed primary. -The arguments for a closed primary believe that the votes will be fairer and against the closed primary believe it violates the Constitution, which I personally believe it does. 16. What is the overall purpose and importance of election law in the American political process? -The overall purpose is that all people have an equal chance to participate in the political process equally. 20. Describe recent technological advances and changes that make it easier for Americans to vote. – Major technological advancements that have affected musical performances include the Compact Disc, the television, and most of  all, the radio. 21. Briefly describe the role and importance of money in the election process. -Financial donations to a candidate’s campaign allow the campaign to purchase advertising, signs, and to travel for campaigning. 22. (a) Identify five types of private donors to political campaigns. (b) Why might these individuals and groups wish to contribute money to political candidates? -Donors to political campaigns are PACs, 527’s, parties, interest groups, and private citizens. ACs work by raising money from people employed by a corporation or in a trade union. These are called â€Å"connected PACs† and they rarely ask for donations from the general public although legally they are free to do so. 23. Outline the limitation placed on individual and PAC contributions to the federal candidate and political parties. -No person can give more than $2,100 to any federal candidate in a primary election, and no more than $2,100 to and federal candidate’s general election campaign. Also, no person can give more than $5,000 in any year to a political action committee, or %26,700 to a national party committee. The total of any person’s contributions to federal candidates and committees now must be limited to no more than $101,400 in an election cycle. 24. (a) How does a candidate for President qualify for public funding? (b) What rules must candidates follow if they accept public funds? – To qualify for public funding, Presidential candidates and party convention committees must first meet various eligibility requirements, such as agreeing to limit campaign spending to a specified amount 25. Identify and explain the three major loopholes in today’s federal election-money statues. -Campaign finance loopholes include â€Å"soft money† contributions to parties by unions and corporations, independent expenditure is spending by someone outside a campaign that is not coordinated with the campaign and volunteer activity. Ch. 8 29. Public Affairs: politics, public issues, and making of public policies 30. Public Opinion Poll: devices that attempt to collect information by asking questions 31. Sound Bite: snappy reports that can be aired in 30 or 45 seconds or so 32. Public Opinion: those attitudes help by a significant number of people on matters of government 33. Sample: a representative slice of the total universe 34. Mass Media: communication that reaches large widely spread audiences simultaneously 35. Random Sample: probability slice of the total universe 36. Interest Group: private organizations whose members share certain views and work to shape public policy 37. Quota Sample: sample deliberately constructed to reflect several of the major characteristics of a given universe Questions 11. Why is it incorrect to say that public opinion represents the single, undivided view of the American people? – Public opinion is a complex collection of the opinions of many different people. It is the sum of all of their views. It is not the single and undivided view of some mass mind. 12. Why are the influences of education and family so powerful in development of political attitudes? – The influence of education and family is so powerful because these are our most basic and strong concerns in this type of society. 13. Besides education and family, what other forces help influence public opinion in American society? – There are many other forces, including mass media†¦ especially internet and cable T.V. They have a great influence currently. I find that particularly interesting that these influences have co-opted some more traditional elements of the culture, especially books, newspapers, and face-to-face interactions within primary groups. 14. Name at least three ways in which public opinion can be expressed. -Radio, newspaper, television 17. What is the most reliable means of measuring public opinion? – The Sample Survey is regarded as the best way to measure public opinion today, although it has its faults and detractors. Most people today use the internet to give their opinion so no one can really measure the exact number. 20. What factors can make a public opinion poll less than completely accurate? – Polls get less accurate if there are lots of possible answers to a question instead of a simple yes/no. A good example of this is asking people which one of the dozen or so presidential candidates in each party they support. The error margin will be a higher for this question than for the Bush question above. 21. (a) What are the four major sources of political information in the United States? (b) List at least one advantage of each source. -Television: broadcasts nation-wide to the American people -Newspaper: generally carry political news, and news of independence -Radio: exposed the American people to national and international politics as never before. -Magazines: generally devoted to literature and the social graces 23. Explain the impact of the mass media on the public agenda. – The mass media can impact public agenda by selectively reporting news and covering only one side of a story. 24. What is the impact of the mass media on electoral politics? -Most of the media wish to get rid of the Electoral College due to the idea that we no longer need someone else to vote for us. Thus, deciding the president of the United States. 25. What factors limit the impact of the mass media on American politics? -Language may be seen as a political factor in mass media, particularly in instances where a society is characterized by a large number of languages spoken by its populace. The choice of language of mass media may represent a bias towards the group most likely to speak that language, and can limit the public participation by those who do not speak the language. Ch. 9 38. Public Policy: goals for the government and pursues at it attempts to realize these goals 39. Propaganda: a technique of persuasion aimed at influencing individual or group behaviors 40. Trade Association: segments of the business community also have their own interest groups 41. Lobbying: usually defined as those activities by which group pressures are brought to bear on legislators 42. Labor Union: an organization of workers who share the same type of job or who work in the industry 43. Public-Interest group: a group that seeks to institute certain public policies Questions 12. Why are interest groups sometimes called â€Å"pressure groups† or â€Å"special interests†? – Generally, because they represent a specific segment of the overall population. Not everyone is handicapped, so an interest group representing them would be a â€Å"special† interest group because bills/policies affecting them would not affect the general population 16. How do interest groups add an element to the checks-and-balances feature of the political process? – They keep close tabs on the work of various public agencies and  officials and thus help to make sure that they perform their tasks in responsible and effective ways. 18. Into what category do most interest groups fall? – Interest groups use advocacy and lobbying to influence public policy without seeking election to office. This puts them under the category of lobbyist. 19. What is the difference between private and public –interest groups? -Public interest groups are those whose membership and, in some cases, investments are open to the general public. Private are essentially clubs with closed memberships and whose transactions are shielded from both public and government scrutiny. 20. (a) On what kinds of issues do labor groups generally agree? (b) On what kinds of issues might labor interests have different points of view? -Wages, Health Insurance, Family Leave, etc. Most labor groups may want to have certain rights of their unions before they work for a higher salary, while other groups may value a raise in salary more. 23. What are the goals of a propagandist? – Propagandists (i.e. advertisers, persuaders and even brainwashers) are interested in influencing others to agree with their point of views. 25. At what stages of policymaking must lobbyists be involved? -Lobbying is done at later stages of policy making. The lobbyist imparts her information with the help of graphs, charts, polls, and reports that she has hunted up or created.

The Constitution(Jefferson) vs The Communist Manifesto(Marx)

Thomas Jefferson was a member of a colonial government during a time of turmoil and heated politics. Karl Marx was a Prussian philosopher and journalist with radical ideologies. Though living in different time periods (Jefferson during the 18th Century, Marx during the 19th Century), both writers have something in common. Directly or indirectly, Thomas Jefferson and Karl Marx both sparked a revolution by their writings. Jefferson†s piece The Declaration of Independence proclaimed the freedom of the original Thirteen Colonies from England, which lead to the American Revolution. Vladimir Lenin embraced Marx†s work The Communist Manifesto and eventually overthrew the Russian monarchy in the Russian Revolution. Though the contexts of the writings are different, both writers emphasized parallelism (Jefferson in paras. 5-29, Marx in paras. 24-30) to present their grievances in an effective way. In The Declaration of Independence, Jefferson attacks King George III (by using the adverb â€Å"He†) and his management of the colonies. The delegates of the colonies, including Jefferson, knew that with this document they are showing rebellion against England and have put their political careers as well as the welfare of the colonies in jeopardy. In the years leading up to this point, the British have taken away the colonies† identity, its rights to govern the land and imposed unfair taxation on the citizens. Jefferson believed that the break between England and the colonies was inevitable, and was justified by the inequitable policies of British rule. Thus the American Revolution began. The Communist Manifesto is Marx†s attempt to propagate Communism as the perfect solution to pauperism. Unlike Jefferson, Marx was not writing about the flaws in government; rather the Manifesto exposed the flaws in a Capitalist economy. Marx believes that Capitalism is just an upgraded version of a feudal society, with civilians placed into two main classes, the bourgeois (modern Capitalists) and the proletarians (wage laborers). He defines the characteristics of the bourgeois and tries to explain its faults. Marx also wrote a 10-point Communist measure that would provide for an ideal socialist economy, as well as reasons why socialism is the utopian society nations should strive to become. Lenin exploited Marxist ideals to connect with the Russian citizens, and convinced most of them that a socialist society was better than the Czar†s government. Thus the Russian Revolution began. Though addressed to different audiences, the writings of Jefferson and Marx both stressed the equality of individuals and freedom from the bondage of tyranny. Jefferson used the Declaration of Independence to stir up the colonists into action against the British. Marx hoped that the Communist Manifesto would stir up a wider audience, mainly the poverty-stricken wage laborers of Capitalist governments. Not until after his death had this happened, with Lenin in Russia in 1917. I believe that the writings of both authors were significant in their time, but it was the Declaration of Independence that brought forth a democratic government, which has shown to withstand the test of time. With the collapse of the Soviet Union and the pitiful conditions of the remaining Communist nations in the world, I think Marx†s proletarian-based economic system is unsuitable for this world. Though Marx†s ideals were logical, I believe humanity will never achieve a fully socialist society due to man†s greed and competitive nature.

The United States Of America - 1222 Words

The Southern States of America was made up of the following, Georgia with Atlanta as the Capital of the new union, Alabama, Arkansas, Florida, Mississippi, South Carolina, Louisiana, Tennessee and Kentucky. Although, Kentucky wasn’t a sure bet at this point, there was still a lot of work to do in that state. They wanted Texas, but Texas had formed its own country and the SSA wasn’t strong enough militarily to challenge them at this time. Missouri was in play and it looked good that they would be joining the SSA within the next few months. North Carolina, Virginia, and West Virginia were starting to recover from the event, but at this time they had no interest in joining the SSA, that was primarily because of the large US Military†¦show more content†¦He felt that given the right type of Army, he could build one that could take on the United States Military and even win, he was an optimistic. President St. Michaels and Parliament have given him a free hand to do what he needed to do, to make the SSA a success. Although General Grayston had done an admirable job of pulling together a coalition of former states to join the SSA there were still pockets of resistance, even in Georgia the home state and capital of the republic. Fort Benning and Fort Stewart, two United States Army posts refused to surrender, there wasn’t much the new SSA could do about it at this time. They were too strong to confront, General Grayston didn’t have the manpower or the firepower. He had been successful at overrunning many of the various states National Guard Armories and Reserve components, but in most cases they were too late. They had bugged out and were now safe and sound under the protection of the United States Army or were on the run headed that way. They were able to pursue some of them and caught them flatfooted, they captured an Artillery Battalion that was heading to Fort Stewart, first battalion of the one hundred eighteenth Fi eld Artillery. They captured twenty M109A6 Paladin’s, but with no ammunition for them. Of course with them came the other individual weapons that came with each Soldier, M-4’s and M-16’s as well as various types of pistols. However, like the Paladin’s, there was noShow MoreRelatedThe United States Of America1536 Words   |  7 PagesThe United States of America is well known throughout the world for tis democracy ant the freedoms of its citizens. Since declaring its Independence from Great Britain rule in 1776, the United States of America has undergone a continuous effort to maintain law and order. In order to create a strong federal government with a system of check and balances the Constitution was proposed and ratified. The Constitution of the United States became the Supreme law of the land. 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