Economic grants and democracy

The fruits of globalization are unequally shared by countries particularly the developing ones and income disparities have grown over time. Growth does not necessarily imply equal distribution of income and wealth. Thus, equity can be a worthy goal of economic policies because of its strong link with social justice. Right to equality is inextricably associated with democracy. Grants based social schemes, helpful in promoting equity are now a days gaining importance in economic policy making. But these schemes are taking the shapes of freebies in Asian and Latin American countries making ways to the election agenda of political parties. Such populist excesses by political parties tend to mobilise the support of a large mass of people somewhat undermining democracy. The paper argues through game theoretic approach, that the ruling parties tend to familiarize such social schemes and once initiated by a political party before the elections is followed by the others to increase their respective vote shares, consequently weakening the power of democracy. Also mounting pressure of non- developmental expenditures due to fiscal profligacy by the governments causes them to fall into a debt trap.