Prime Minister and neo-liberalism

Wednesday, 4 March 2015 00:00 -     - {{hitsCtrl.values.hits}}

Prime Minister Ranil Wickremesinghe is often accused by my leftist friends, who will be annoyed with me for writing this, of being a “neo-liberal stooge of the West”. Speaking, however, to a group of businessmen last week, with the President by his side, this is what he had said, as reported by Nisthar Cassim, in the Daily FT of 27 February 2015 ( He had said: “We were committed to winning and ensuring good governance, a competitive economy and equitable prosperity for the people.” He has further said: “We will reward entrepreneurship and applaud good initiatives. That is the future we promise.” This is not empty rhetoric. These words are pregnant with meaning. It is up to the pundits to show the connection with this statement and neo-liberalism. I have been a student of ‘good governance’ since my encounters on the Board of Directors of the Asian Development Bank, Manila Philippines, representing Sri Lanka and several other Asian countries. Good governance If I recall correctly the official definition of ‘good governance’ was first introduced by the OECD, with a view to ensuring aid effectiveness. The World Bank Board passed a resolution in 1994 and as usual, the ADB Board included it on its agenda, I believe a few months later. Even though the post of ADB President is by consensus, held continuously by Japanese national, basic policy is determined in Washington, followed by other OECD members. When the subject came up at the ADB Board, the developing country ‘Caucus’ led by China and India, of which Sri Lanka is a member, protested saying that this is an introduction of ‘politics’ to ADB policies. I had a different view. I was from the time I was head of the National Planning Department keen on disciplining politicians with regard to project funding. Through a speech I made at the Caucus meeting, which was described by the Philippine Director Jayme, as my ‘Gettysburg Address’, I was able to obtain consensus by narrowing down the definition to ‘good public administration’. The resolution was passed by the Board and as an act of gratitude President Sato sent a team of experts led by Dr. Hilton Root to assist the Sri Lanka Government with regard to administrative reforms. What happened to that initiative, though very interesting, could be told only on another day. The concept of good governance, however, is not confined to good public administration, even though it is a vital component. Its role and functions are described in the diagram developed by me to teach students following my MPA program at the PIM. It appears on this page. But first let me get back to the Prime Minister’s statement. It has four components which are worthy of deep study: “Good governance, a competitive economy, equitable prosperity and entrepreneurship”. All these components are symbiotically linked. This will be clear when we examine the diagram. Competitive economy What is most significant and unique in the PM’s statement is the introduction of the concept of the competitive economy. The opposite is monopoly capitalism or its developing country variety, crony capitalism which we experienced in full flow during the last regime, though the origins could be traced to the 1960s when state intervention in the economy started growing. What it does is to distort market signals and consumer preference and allocate resources according to those who wield state power and patronage. I was studying in the Soviet Union when the Government under Khrushchev was trying to extricate itself from the shackles of a totally State-owned economy. Things went well as long as the consumer market did not matter very much and production was geared to developing heavy industry. However, when consumer prosperity and demand started growing the country had to first try market simulation methods through mathematical models incorporated into comprehensive planning, which failed disastrously. Later when everything exploded in the 1990s a system of crony capitalism developed, which no doubt promoted economic growth but denied ‘equitable prosperity’. This is why I am flabbergasted when my leftist friends still consider State-Owned Enterprises sacrosanct. These enterprises have become havens of cronyism and corruption at the expense of the people. The only rationale for State ownership (that too under rules of good governance) is the existence of natural monopolies, which makes it inaccessible or unviable for small investors. But natural monopolies are giving way to competitive conditions with the development of technology, a case in point being the field of telecom. Role of good governance The diagram was developed by me to indicate the role of good governance in the development process. The fundamental premise is that the principles of good governance are not only moral and ethical concepts but are, most importantly, technical imperatives of development. It is now well accepted that governance is not just government but the way society organises itself to produce welfare for its members, in which the government plays the key role. It is, in a narrower sense, the way in which the government, private sector and civil society collaborates with each other to ensure ‘equitable prosperity’ mentioned by the Prime Minister. As I perceive it, the concept of ‘equitable prosperity’ is very close to the concept of ‘inclusive growth’. Need for a holistic approach It is not possible to explain in detail the various elements shown in the diagram, which are symbiotically linked, due to lack of space. What it tries to depict, however, is the need for a holistic approach to achieve development, which is indicated by the roof – the ultimate objective. Good governance is the foundation on which all development activity will have to be conducted. Good governance is based primarily on the principles of equity, transparency, accountability and predictability. Equity is not equality. It is equal opportunity to participate in development and enjoy the benefits according one’s own contribution. Transparency and accountability are the bases of social (government, private sector, civil society) participation. Predictability is also important for effective participation and conceptually linked to the Rule of Law. A good Cabinet structure The present Government’s declared intention of abolishing the 18th Amendment establishing more meaningful commissions is a vital step towards promoting good governance. But this has to be reinforced by a good Cabinet structure. Unfortunately, the current structure is extremely irrational from the point of view of development management. It could be justified only in terms of the expediencies of the 100-day program. The Cabinet structure must be based on the sectoral principle or classification, in order to facilitate development management. Each sector could be sub divided into sub-sectors which could be distributed among deputy ministers. State ministers under the Premadasa regime were glorified deputy ministers, serviced by State secretaries, who had demarcated functions to perform. Cabinet ministers would be responsible for policy formation, ideally in consultation with State ministers, but they should not interfere in the administrative functions of the State ministries. Coordinated approach to development A Planning Council is extremely important if there is to be a coordinated approach to development. The seven pillars of the Greek Temple depicted in the diagram are symbiotically linked and they cannot be properly coordinated without the assistance of a Planning Council. If the essence of good governance is participation, the Planning Council should have representatives of the private sector and civil society as fully fledged members, appointed on the basis of accepted principles. The Prime Minister’s statement augurs well for good governance. What is important is to give it substance and consistency. [Dr. Lloyd Fernando (Msc, Moscow; PhD, Sussex, 1979) retired in 1993, as State Secretary Ministry of Policy Planning and Implementation and Director General National Planning (posts held concurrently) and proceeded to Manila, Philippines to take up the position of Alternate Executive Director at the Asian Development Bank. On return to Sri Lanka, he held the position of Chairman Marga Institute (premiere socio-economic research institute in Sri Lanka) for a period of five years. He was the Founder Director of the Institute of Policy Studies. He is currently Program Director-Public Policy at the Postgraduate Institute of Management of the Sri Jayewardenapura University. He was until recently a member of the National Economic Council and the National Administrative Reforms Council. He also served as a member of the former Salaries and Cadre Commission. His research publications cover, mostly, macroeconomics, development planning, public policy and administrative reforms.]

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