Democracy, devolution and development
Empowering the regions
At a time when Sri Lankans are debating the merits and demerits of devolving power, in a democratic system and the unit of devolution, whether it should be the village, an existing local government unit, the administrative district, the province or a combination of provinces, it would be useful to look at some examples from other parts of the world for comparative purposes.
The first issue to sort out is what we mean by a democracy. Unfortunately some rulers interpret a democracy in a narrow sense to mean a ‘Ballot-O’cracy’. Just by the winning one or more contests for the ballot, one cannot claim to be democratic. Unfortunately many ‘democratic’ rulers like Ergodan of Turkey and Morsi of Egypt think that winning the majority of the ballot means they are virtual dictators until the next election.
Ergodan, in the face of massive public demonstrations against his policies, keeps repeating ad nauseam that he has got a mandate from the voters, not once but thrice! He brands his opponents who are taking on tear gas and pepper spray mixed water cannons on the streets as looters and vagabonds. Politicians have to realise that voters’ views change and sensible rulers are sensitive to the voters’ changing views and keep abreast of them.
Brazil and Egypt
Brazil is another example. The ‘beautiful game’ of football is the national obsession. The Brazilians won the coveted right to host the 2014 World Cup with much fanfare. But the ordinary man in Brazil, the proverbial ‘Man on a Bus to Ipanema,’ was aghast at the corruption in the construction of the World Cup Stadiums to International Football Federation (FIFA) standards, the largesse, extravagance and corruption of the politicians with taxpayers’ money and the low quality of public and social services.
A small rise in the public transportation charges in Sao Paolo set off riots and public demonstrations, which made the panicked politicians backtrack hastily and rescind the transport fare increase. However, the protesters were on a high. The Confederation Cup, football’s second biggest tournament after the World Cup, was on in Brazil, but even at the final, in which Brazil beat Spain convincingly, the protestors were on the streets. They chanted: “Schools and hospitals to FIFA standards,” mocking the standards to which FIFA wanted the World Cup stadiums in Brazil to be built at a massive cost.
The Egyptians thought that they had ousted Dictator Mubarak and installed a democratic form of government when Mohamed Morsi of the Muslim Brotherhood, historical oppositionists in Egypt, was installed as president, in what seemed a somewhat free and fair election. However, what they did not expect was that Morsi would try to ‘Brotherhood-ise’ Egypt, installing Muslim Brotherhood sympathisers into dominant positions.
Demand for freedom
What was misunderstood was that the Arab Spring, which started in Tunisia and spread to Libya and Egypt, was not only a demand for democracy but also a demand for freedom. The distinction between the two is crucial. Freedom is the very antithesis of absolute power, which some rulers think a win at the ballot gives them – a Ballot-O’cracy. Freedom on the other hand means limits on absolute power, checks and balances, equal treatment before the law, the rule of law and not of people, an independent judiciary, a free press and media.
This issue has been well articulated by the Peruvian economist Hernando De Soto, who has written extensively of the need to regularise informal systems into the formal legally-recognised institutional process if economic and social development is to be achieved. He took a team to Tunisia and found out that the man who kicked off the Arab Spring by self-immolating, Mohamed Bouazizi, killed himself after corrupt policemen confiscated his fruit seller cart and the pair of second-hand scales which Bouazizi used to sell fruit, alleging that he had no license because he would not pay them a bribe.
Bouazizi realised that once he had antagonised the police in his area of operation, his normal selling point, he had no hope of restarting is business and that there was no hope to make an honest living. He set himself on fire after dousing himself with petrol. The issue was one of lack of legal protection of rights. Bouazizi’s right to sell fruit after obtaining a license, without paying bribes at his normal location, could not get the protection of the law. There was no rule of law, the local corrupt cops ruled! Hernando De Soto’s team found out that all over North Africa and West Asia, during the Arab Spring, Bouazizi inspired over 60 other cases of people taking their lives or attempting to do so, due to the issue of not being able to get legal protection for their rights.
De Soto’s team found that to open a small bakery in Egypt under Mubarak, it took more than 500 days of interaction with the bureaucracy. The applicant had to deal with 29 agencies of the state. Governance was nonexistent. One had to virtually bribe your way through at every stage. The average citizen of an Arab state had to present four dozen documents and endure two years of red tape to become a legal owner of a land or an enterprise. If you don’t have the resources to endure and survive this, you are condemned to operate in the shadow of the real economy – the black market – and be condemned for ever to be exploited by corrupt officials and politicians. This is what the freedom component of a democratic nation state is all about.
Ease of Doing Business
Experts, including those at the IMF, World Bank, ADB, the Davos World Economic Forum and their acolytes in nation states, structure this as ‘An Index of the Ease of Doing Business’. They make the grandmother of all cacophonies in trumpeting of how their countries move up in this ‘Ease’ index – but the reality is that Mohamed Bouazizi and 60 other residents of Arab and North African and West Asian states did or tried to self-immolate in protest at being trapped in this insidious web of black market trading, corruption and deceit, notwithstanding all the ‘Ease of Doing Business Indicators’.
De Soto in evidence before the US Congress said that the world had totally misread the Arab Spring. What the demonstrators were after was freedom, not only a Ballot-O’cracy. The lack of protected and defensible rights and the protection of those rights.
Former Prime Minister of Britain Margaret Thatcher once put it this way: “Being democratic is not enough – a majority cannot turn what is wrong into right. Freedom depends on the strength of institutions: law and order, a free press, the police and the army that serves the government rather than supervises it.”
The facade of democracy is too easily reduced to a mere Ballot-O’cracy; it is the strength of institutions that decides the fate of citizens of a nation state. Institutions which are subject to law, are independent, whose conduct is monitored by an independent media and a autonomous judiciary, where at the final judgment it is the law and not any one person, which is supreme, decides the fate of a nation and its citizens.
Centralised and decentralised responsibility
This as a good point as any to bring in the issue of centralised and decentralised responsibility and accountability. Centralised power is remote from the people. It is the classic scenario in which a win at an election can bring in the Ballot-O’cracy syndrome. The winner takes all. Until the next election. He subverts all state institutions and imposes strangling limitations of non-state players, so that no one can oppose him. Media and the press is cowed, the judiciary, police and army, the opposition political parties are subverted. The law is ignored. Even the next election can be subverted by the consolidation and abuse of untrammelled power in the centralised power player.
However, there is a strong argument that if power and accountability is decentralised, in accordance with the principle of subsidiarity, it will avoid the consolidation of power in a central authority and diffuse accountability and responsibility to a level less remote from the people. Basically subsidiarity means that as much as possible of the subject and functions of government should be the responsibility of local institutions and only national level functions should be centralised. Matters ought to be handled by the smallest, lowest and least centralised competent authority. The central authority in a nation state should have a subsidiary function, performing only those functions which cannot be performed effectively at a more immediate or local level.
The story of India’s recent economic development makes a strong case for the devolution of responsibility for economic development. India is a nation of much diversity. There were huge divisions in the performance of individual states. Initially it was the southern states of Tamil Nadu, Kerala, Andhra Pradesh and Karnataka that were the high economic performers. The Cow Belt in North Central India was condemned to stagnation – Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh.
The acronym of BIMaRU states was the label given and these states were home to the violent Maoist revolutionaries, it is also called the Red Corridor. However after the 2002-’11 economic boom times in India, it was states like Gujarat, Maharashthra, Punjab and Haryana which became rich. Gujarat and Maharashthra are largely industrially driven and account for a large amount of India’s exports. Punjab and Haryana are referred to as India’s bread baskets, producing 50% of India’s rice and wheat. Karnataka became an information technology hub. Tamil Nadu got into the industrial development route through hosting manufacturing industries.
BIMaRU states are also being transformed. Individual state governments have implemented policies which have really made a difference in the standard of governance. The Gross State Product (GSP) of Bihar and Uttar Pradesh has grown at an average rate of 10% per annum. Rajasthan and Madhya Pradesh grew at average rates on 8.5% and 9.2% respectively. The turnaround of the BIMARU has been due to the greater investment autonomy and government enterprise at the state level, in Bihar in particular the turnaround has been facilitated by better governance.
Chief Minister Nitish Kumar began with the restoration of the rule of law – around 50,000 people have been convicted of various crimes in an all-out effort of eradication of criminality in the state over the past five years and corrupt bureaucrats have been taken to task. To improve social development, Chief Minister Kumar has introduced special schemes to ensure the full participation of women, including a provision that 50% of seats on local bodies be reserved for women.
Chief Minister Narendra Modi in Gujarat has achieved average economic growth rates of 9.6%. This is notwithstanding an unfortunate weakness for the ‘Ballot-O’cracy syndrome’ (he has won three consecutive elections) and some controversy over his benign attitude towards anti-Muslim communal riots under his watch by Hindu extremists.
Modi has aggressively courted heavy industry into Gujarat. When the Tata Nano vehicle plant was driven out of West Bengal, Modi invited them to Gujarat and the new plant was up and running in record time. Modi introduced a five-year export policy for the state, the first of its kind at the sub national – state level – the aim was to increase Gujarat’s share of India’s total exports from 25% to 30% in a five-year period.
India’s donors also have put their investments into states which could produce results. Laggards were not supported; states began to compete against each other, the business acumen of the Maratha people, in Maharashthra, the Sikh Sardari farmers of Punjab, the long history of scientific research establishments in Bangalore from the days of the British Raj, the entrepreneurship of the Tamilians, were all given the space and full play by the state governments.
Could this have happened under a highly centralised regime? The Indians joke that under Prime Minister Pundit Nehru, when Congress dominated governments at both at the national and state level, India was under the shade of a huge tamarind tree, nothing else grew under it, because the sunlight never got through! But with regional parties taking power in the states, and the Indian central government being weakened by reliance on coalition politics, dependent on the support of regional parties which controlled states, the principle of subsidiarity came into full play and state governments were really able to flex their muscle, in a development sense, devoid of the stifling influence of the Delhi’s Planning Commission and the national politicians and bureaucrats.
In fact and in law, India has federalised. The Indian Constitution nowhere refers to federalism. India is formally called the ‘Indian Union of States’. But the author of the Indian Constitution Dr. B .R. Ambedkar did not anticipate the later political reality of regional parties gaining power in the states and controlling weak coalitions at Delhi. Also the Indian Supreme Court in the famous Bommai case placed limitations on the central government’s power to dismiss state governments and gave the state politicians legal protection from the machinations of national politicians in Delhi. India today, is more and more looking like a federation of states, albeit with Hindutva characteristics.
There is an analogy with China’s development story here. When Deng Hsiao Ping first unleashed the economic power of the southern coastal states, around Hong Kong and Macau, they took off as a location of outsourced manufacture of labour intensive industrial goods based on cheap migrant labour. No one could match the China price. The old state heavy owned industries in the interior provinces were condemned as the Rust Belt.
But when China’s one child policy kicked in and farmers were allowed to grow crops and raise livestock and sell a part of it themselves in an open market, without being compelled to hand over all the farm’s output to the state at a fixed price, the interior provinces also took off in an economic sense. Factories in the coastal provinces had to relocate in the interior to recruit part time workers off the farms, as farmers were not willing to leave their lucrative farms to migrate to the coastal provinces and live in dormitories and work long hours, leaving their families behind in the village.
The basic factor which made a difference in both China’s and India’s development story was that of diversity, regions being permitted to compete fully against each other and providing space for the diversity of the abilities of their citizens and the opportunities history, geography, education and skills, provided to be fully exploited. Sri Lanka also should seriously look at empowering its people by granting power and responsibility to the periphery, to break the Colombo centric, national planning dominated uneven and unbalanced development.
The final word seems to be that sustainable economic development takes root in nation states in which, firstly, there is good governance, where democratic processes are in place with independent institutions, the judiciary, the media, a neutral civil service, army and police, all operating in a depoliticised free environment, where the rule of law prevails, not in what has been described above as ‘Ballot-O’cracies’.
Secondly, an important factor seems to be that economic policy making and governance has to be devolved to small, peripheral units of government, which will have the freedom to put in place policies which would maximise the special characteristics and attractions of their regions, and not be bound to some top down centralised national template for economic development, of which the region has no ownership.
What exactly the unit of regional self government would be would depend on each nation state’s special characteristics geography, history and political development. The capacity of the people and the literacy and numeracy level and overall social development level would be important factors in determining the unit of devolution.
(The writer is a lawyer, who has over 30 years of experience as a CEO in both government and private sectors. He retired from the office of Secretary, Ministry of Finance and currently is the Managing Director of the Sri Lanka Business Development Centre.)