24 May, 2019

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Governance & Institutions Are Needed To Check The Big Government

By W.A Wijewardena

Dr. W.A Wijewardena

Dr. W.A Wijewardena

In a society of robbers, good governance is robbing

In the previous part published last Monday, it was shown how a society would start decaying when robbers and cheaters are worshipped by everyone as heroes. The good governance in such a society is to rob and cheat others. If someone refrains from cheating and robbing, he is considered as freak or odd. He is condemned and ridiculed as a person who is practising bad governance.

One malady which a society should avoid, it was also mentioned, is having a big government which uses scarce resources of a society without giving it back a matching amount of benefits. Since societies are unable to control big governments, it is also a licence for those in power to rob from people.

Robbing can be either illegal or lawful

The robbing can be done in two forms, ‘illegal robbing’ and ‘lawful robbing’. In the first case, those who are inclined to rob and cheat would use their positions and powers to grab resources belonging to others against the law. In the latter case, Parliament or the Executive would allow some selected group to rob others by enacting facilitating laws or introducing enabling rules and regulations.

Illegal robbers use discretionary powers to rob others

In the illegal grabbing, known as bribery or grafts, no option is given to the other party in a transaction to choose. It is a ‘take or leave proposition’ as economists would call it. If you make the illegal payment, you get it.

If you don’t, you lose it. If you do not pay, you are made to undergo many obstacles and hassles before you get it. At the end, when you get it, you are totally tired out and frustrated. That is because you have to wait longer and spend more money to get the approval. Consider the case of discretionary powers given to top bureaucrats or politicians to grant or reject approvals. The bureaucrat or politician in this case becomes the master who would frame the rules of the game.

Those rules which are informal and unwritten but widely known by everybody are framed not to facilitate the delivery of the service under reference. They are framed to facilitate them to get the maximum amount possible by way of illegal grafts. When society starts treating such illegal payments as normal, they get imbedded in society’s culture represented by its values, beliefs and ethos.

Governments facilitate lawful robbing to selected parties

But there is lawful robbing and cheating too. That happens in two ways. First, a government may use its majority power to grab private businesses and properties without the consent or approval of the citizens concerned. The private properties acquired by Sri Lanka’s government in 2011 through an expropriation law labelling them as underperforming and being underutilised are a classic example for this. After they were taken over, instead of making them financially self-supporting, they had to be maintained at a huge cost by the taxpayers of the country. Thus, it was a case of a double robbing.

The second instance arises when politicians and bureaucrats are given extraordinary perks like duty free motor vehicle permits. The objective of the permit system is to facilitate easy mobility of politicians and bureaucrats. Thus, the government agrees to forgo a good part of the import duty revenue for increasing the efficiency of these two categories of citizen servants. But in actual practice, many of these car permits have been resold, as reported in the media, thereby robbing a good part of the tax revenue from the government. The government itself facilitated the robbing by permitting the permit holders to transfer the vehicles immediately after they have been imported for their private use.

When robbing is tolerated, everyone will become a robber

When a society tolerates and uphold such illegal or lawful robbing by a section of its members, an important economic law, known as Gresham’s Law, gets activated. The Law is attributed to advice given by the 16th century financier, Sir Thomas Gresham, to Queen Elizabeth I on the folly of debasing the metal of the circulation coins to earn bigger profits for the Crown. Gresham is said to have informed the Queen that when such bad money – money whose metal content was less than its face value – was released into circulation with good money – money whose metal content was equal to its face value – people would hoard the good money for its metal value and release only the bad money to circulation.

Thus, over the time, bad money which is now tolerated will drive out good money filling the whole economy with only the debased bad money. Though it was not Gresham who said so first – there had been many who had said so before him including Copernicus – the Law has been named after Gresham. It is now applied by economists to any situation where a bad thing is tolerated by society: dishonest people will drive out honest people, criminals will drive out law-abiding people, robbers will drive out non-robbers and so on.

Accordingly, when society accepts robbing and cheating as good governance, it will invariably drives out those who do not rob and cheat. Eventually, the whole society will be filled with people who uphold robbing and cheating as good governance. This is where Sri Lanka stands today.

Put a stop to living on other people’s earnings

The corollary of accepting this view as normal is that it incentivises people to live by robbing and cheating and not by putting honest work. The opportunities created for making such easy and unproductive money gives rise to another unsavoury economic condition known as ‘rent-seeking’.

Its danger is that it gives a wrong signal to people that innovation, hard-work and self-development are unnecessary for creating wealth in society and attaining prosperity. Thus, governance principles are relegated to an unimportant position through they are needed for sustainable economic prosperity due to a number of reasons.

Good governance also means accepting the rights of others

First, the governance principles followed by society should be conducive to the continuous and long term sustainable economic prosperity. It requires the members to accept the right of others: the right to live, the right to hold property, the right to dispose of the property in an exchange of their choice and the right to self-improve. When these rights are guaranteed by an effective enforcement system without discrimination and foul play, each member of society has the incentive to develop his property, both human and physical, because at the end he knows that he can benefit from such developments.

If, on the other hand, what is developed by one person is acquired by coercion by the state or by another who has the support of the state, it gives a bad signal to all. In such a society, members will desist from developing themselves since at the end they stand to lose everything they have built. Hence, the most important requirement which the governance principles should underlie for a sustainable system is the motto, ‘live and let live.’

Freedom of expression and thought are the pillars of innovation

Second, freedom of expression and freedom of thought are essential requirements of continuous innovation and new discoveries which are the cornerstones of economic prosperity. If members are in fear of losing their occupations or lives because they speak the truth or what they feel as correct, then, they do not have the correct mindset to get into innovations and new discoveries. The advancement of science and knowledge has taken place throughout the history by dissent and not by agreement.

All great innovators and creators in the world did so by critically questioning the existing knowledge. This means that toleration of opposing views is a must, if a society is desirous of spawning innovations and new discoveries.

Law and order ensures fair play

Third, the maintenance of law and order and observation of rule of law should be a part and parcel of the legal structure of society. When law and order are maintained, it prevents people from forcefully taking over the property belonging to others. This applies to the state as well. In order to maintain law and order, the state has been given power to take away the right of a person to live, that is, to impose capital punishment on wrong doers. But, this right has to be exercised by the state by following an accepted moral code and not arbitrarily and unjustly.

Kautilya advised on just punishments

Kautilya, the 4th century BCE Indian Statesman and Guru, repeatedly admonished in The Arthashastra that punishments awarded must be just. He proclaimed that ‘only the Rule of Law can guarantee security of life and the welfare of the people’. According to him, ‘the maintenance of law and order by the use of punishment is the science of government’. He further said that ‘it is the power of punishment alone which, when exercised impartially irrespective of whether the person punished is king’s son or enemy, that protects this world and the next’.

Kautilya said that a king who metes out unjust punishments is hated by the people whom he terrorises. About punishing innocent people, Kautilya had a wonderful recommendation: ‘An innocent man who does not deserve to be punished shall not be punished, for the sin of inflicting unjust punishment is visited on the king.’ To free the king from the sin, Kautilya advised the king to pay compensation as high as 30 times the original punishment. He also said that though previous sages had recommended cruel capital punishment, simple death penalty without cruelty shall be exercised if death penalty has to be imposed. It meant that even the man condemned to death has a right to die honourably.

Hence, the punishment system to be enforced by a society desirous of attaining sustainable prosperity should be fair, just and free from arbitrariness.

Coercion is not the answer

Many governments have used coercion to have private property transferred to the state. Such coercive laws will give only a temporary benefit to the government. This is because when people realise that the fruits of their labour are being robbed by the state without compensation, as pointed out previously, they do not have incentive to develop their enterprises or human skills. Hence, the forced transfer of resources from individuals to the state gives only a very temporary solace and cannot be sustained in the long run.

Hitler’s war economics was short-lived

Economic historians have found that, as revealed in war crime trials in Nuremberg, Adolf Hitler had coercively got the resources belonging to the Jews transferred to the Nazi regime.

According to historians, Hitler had robbed Jews at four different stages. First the movable property belonging to the Jews such as money, financial assets, clothes, human hair and even the gold teeth in their mouths were confiscated. Second, all the immovable property such as land, buildings, factories, etc. was acquired. Third, in a somewhat horrible manner, the accumulated calories of the Jews were used by feeding them with food less than the needed daily requirement for a healthy life. Finally, when the Jews died of overwork or ill health, their skins were tanned as leather, body fats were used for manufacturing soap and bones for making artefacts or fertiliser.

One may argue that Hitler was a good economist because he followed the principle of zero waste policy, a policy which is advocated by many environmentalists today. But, in reality, Hitler got only a temporary benefit because he could not sustain a continuous flow of work and innovation with dying Jews after one generation.

Coercion also affects the long term health of an economy and therefore, the long term economic prosperity as well, because it does not tolerate opposing views. People who are coerced will rise against the rulers, thereby endangering social stability. The social instability is the killer of hard work, innovation and new discoveries which are the essential requirements of long term economic prosperity.

Treat opponents with honour

It is, therefore, essential to build up a tolerant society as a prerequisite of generating sustainable economic prosperity. ‘Treat Opponents with Honour’ advises Emperor Ashoka. In this regard, it is pertinent to quote Amartya K. Sen, the first and only Nobel Laureate in Economics from Asia.

Sen in his The Argumentative Indian published in 2005 highlights the value of a tolerant society: Sen says that, ‘it was indeed a Buddhist Emperor of India, Ashoka, who in the third century BCE, not only outlined the need for toleration and the richness of heterodoxy, but also laid down what are perhaps the oldest rules for conducting debates and disputations with the opponents being ‘duly honoured in every way on all occasions’. Sen’s remark and Emperor Ashoka’s advice are a good eye opener for all of us.

*W.A. Wijewardena, a former Deputy Governor of the Central Bank of Sri Lanka, can be reached at waw1949@gmail.com.

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Latest comments

  • 1
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    ” Emperor of India,” It is not right to say Emperor of India But it is ok to say an emperor in India. He did not rule south India. He tried to invade south India in disguise of Buddhism. Buddhism spread in South India but not Asokan’s authority. So they tried to in invade-landing as refugees and did not succeed then landed in Sri Lanka and captured Sri Lanka through the means of betrayal. Betrayed queen Kweni and captured sri Lanka. And tried to get into Tamil land through marrying Pandya princess but did not succeed. The tactic Using religion to conquer land has been used by Emperor Asoka prior to the europians using the same technique.
    if the Asoka storey is True did he really reconciled with the people of Kalinga. If so why can’t the Singhala Buddhist war crimers follow the same.

  • 0
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    Robbing can be either illegal or lawful

    It is the part and partial an art of ruling and all the tradition and rules permit it. That is how people like Douglas became billionaires. It is a reward for the selfless service.

  • 2
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    Sir,

    The recent unseemly scramble for cabinet positions and Presidential favours by tried and tested incompetents and crooks, while worthy candidates have been side-lined, has been a disappointing set back to all who had hoped for better things following a workable mandate from the people.

    That the President and Prime Minister should have succumbed to the machinations of these devious forces leave us to worry that we will end up with many of the same old crooks that ruined the country with the last regime.

    O woe, when will our bad luck end?

  • 3
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    Where were you when the “great robbery” took place under the previous regime.The legal dept of the central bank was closed down to safeguard the robbers

  • 1
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    Dear Dr. W.A Wijewardena, I applaud your view, and your article.

    What we need is a Sri Lanka Institute for Good Governance (SLIGG), with its monthly reports and concerns.

    Too bad, we could have had a Ministry for Good Governance, headed by

  • 1
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    Yes, good governance & monitoring institutions are Needed to Check the big government from robbing the country.

    One of the primary justifications for the hefty commissions on procurements is the high cost of parliamentary elections. Hence, passing the 20th amendment limiting the size of each constituency and the ways & means of spending money to influence the voters must be passed by a parliament full of rogues.

    The second aspect is strengthening the procurement procedure by establishing limits of authority for incurring expenditure. The presence of representatives of the Treasury & the National Procurement Council for procurement of goods & services above a specified value is a necessity.

    The role of the FCID to investigate allegations of bribery & corruption is another necessity, to minimise this evil practice.

  • 0
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    Dear Sir,

    I am a regular reader of your contributions to Colombo Telegraph.

    I know that there has to be an enabling environment to ensure good governance. I believe that the tax payers have a role to play in contributing to good governance. Sad to say that the Sri Lankan tax payers are behaving as if they are deaf and blind. The ruling party politicians under the previous regime spent billions without any justification about purpose for which they were spending. You may well remember how that Cabrall, Namal Rajapakse and Indika Karunajeewa et al spent billions on making an unsuccessful bid to host Commonwealth Games in Sri Lanka.
    In some countries tax payers get an annual return explaining how their tax contribution has been spent by the government. It is essential that the tax payers are organised in forming a Tax Payers Alliance in the line of the ones find in Western Europe. I think that good governance activists like Mr Chandra Jayaratne and your self can take the initiative in this regard. Vigilant tax payers can play a pivotal role in promoting good governance. Other wise, even the Ministers in the new government which include those who ruined the CWE etc will make enough hey for generations in the absence of WISTLE BLOWERS.

  • 0
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    Dr Wijewardena, obviously you are writing for fun, without regard to how the thieving governance is adversely affecting us in Sri Lanka today. In erudite circles this is referred to as intellectual masturbation.

    Kautilya may be useful as a moral guide to governance, but I do believe it is folly to think his 2500 year old writings can be used as a manual for the day to day administration of Government in this day and age, in the context of the population explosion, mass migration, and technological advances. By the way, quite unnecessarily, and disgracefully, you have repeated the unsupported Zionist lie, that Adolph Hitler sent to the tannery, the skins of dead Jews, or of those that he had killed in the gas chambers (another lie), to the tannery. Read: https://en.wikipedia.org/wiki/Lampshades_made_from_human_skin . Watch: https://www.youtube.com/watch?v=ybCR875RJgE

    In part 1 on August 31st you wrote ““The solution is, therefore, to place only the minimum quantity of honey on the tip of those who have to deal with public funds. That again should be done only in unavoidable cases.” That advice is crazy, and if it is followed, the world’s population will be reduced by 50% in five years through starvation and disease – heard of mass murder? See my comment to your article of the 31st August.

    In this part 2 you are writing an ‘educational treatise’ on robbers and good governance. The sub-titles and the words in your paragraphs indicate you are totally confused – conveying a blind admiration for Kautilya, at the same time being unable to comprehend him.

    It looks like your suggestion is that punishment should not be harsh or unjust, which conveniently for you, you have left undefined, the term “harsh or unjust”. The law, as it exists today, defining an offence and prescribing a punishment, is not open to interpretation as just or unjust. That discussion should have taken place at the time the legislation was being debated. If you do not accept that, there is no government, no governance, and nothing to discuss.

    Your suggestion punishment should not be harsh or unjust is contradicting what you have said about Kautilya. I quote from your article: “According to him, ‘the maintenance of law and order by the use of punishment is the science of government’. He further said that ‘it is the power of punishment alone which, when exercised impartially irrespective of whether the person punished is king’s son or enemy, that protects this world and the next.’”

    You do not realize that in Kautilya’s time there was no independent legislature, passing laws, defining crimes and prescribing punishment. So Kautilya’s statement “punishments awarded must be just” is totally irrelevant for our time.

    Despite the laborious pontification, you have failed to provide the answer, even a suggestion, how to eliminate or control the “robbery” facilitated by the Government and carried by those within the government and without.

    Please read my answer provided in my comment to part 1 of your article which obviously you have not read:

    “The solution is to prescribe and enforce the death penalty and very long prison sentences on “The Kings Servants” for dishonesty and misappropriation. The concept of “proof beyond reasonable doubt” should be abrogated, and it should be accepted that accused’s guilt will be pronounced on a “balance of probability”. Judges should be hanged in public, on the slightest suspicion of complicity. This system will guarantee that individuals with a serious urge to steal public funds will keep away from accepting tempting positions. In the long run, the population will get used to the norm “Good Governance is NOT robbing and cheating”.

    Of course it is a given that the above punishments should be promulgated through the due process of legislation.

    There is no other way, although I am aware, the solution requires the thieves and robbers to pass legislation against themselves.

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