By Hema Senanayake –

Hema Senanayake

The word precept means ‘a general rule intended to guide or regulates behavior or thought.’ In his inaugural speech, the Honorable Chief Minister Mr. Wigneswaran has set seven precepts for the elected officials of the NPC. He said “At this juncture, I consider it appropriate to put forward Seven Principles that are emphasized in public life.”

Those are (1) Selflessness, (2) Integrity, (3) Objectivity, (4) Accountability, (5) Openness, (6) Honesty and (7) Leadership.

He also gave the reference where he took them. He explained “When John Major was Prime Minister of Britain, he appointed a Committee headed by Nolan to examine and to report to him about principles that those engaged in public life should adhere to. The Committee studied the issues and submitted its First Report in 1996. The above principles were the unanimous conclusions and recommendations of that Committee.” By citing the reference he tried to intimate that those principles are well accepted in the West.

I agree that those principles or precepts are good. However when comes to governance at provincial or at national level there is one more essential precept. I name it as the “collective intelligence.” Democracy and governance usually fail due to lack of it.

French Philosopher Pierre Lévy defines collective intelligence as, “It is a form of universally distributed intelligence, constantly enhanced, coordinated in real time, and resulting in the effective mobilization of skills. I’ll add the following indispensable characteristic to this definition: The basis and goal of collective intelligence is mutual recognition and enrichment of individuals (knowledge).”

Democracy and the governance would be at best at least as long as “collective intelligence” of elected officials prevails because they need to vote in the house. This can be easily understood when the opposite meaning of the term, which is “collective ignorance” is used. For an example, the U.S. is a nation committed to democracy. But its government was temporarily shut down due to the continued debt-ceiling crisis. Is this an example for the collective-ignorance? Perhaps!

At the core of governance there is one important technical subject that is essential for every body’s wellbeing; that is economic governance. This is where the best collective-intelligence should prevail. But unfortunately this is exactly where the most “collective-ignorance prevail”. Many would advise the Chief Minister to get the maximum funds from the central government and get more foreign funded projects and the economy would be okay. No, it is not going to be okay, because economic efficiency and the distribution of distributable output is not purely depended upon the expenditure incurred by the NPC or the infrastructure projects done by foreign funds. The economic efficiency and the efficiency of the distribution of distributable output are the two factors that determine the true wellbeing of the populace. The concept of good governance would do no good if “collective ignorance” prevail in regard the said two factors. The most important precept that matters in this regard is the “collective-intelligence.” Let me give you a historic example on this point.

Soviet revolution is still regarded as the greatest revolution ever witnessed by human kind. It was collapsed mostly due to the collective-ignorance prevailed over the said two economic factors; efficiency of production and distribution of distributable output. Soviet Russia saw its first massive inflation within ten years from the revolution. In early 1930s Stalin banned the use of money; and they argued when there is no money there is no inflation. Can you imagine the level of collective-ignorance of the Soviet government? Even though they reintroduce “money” in mid 1930s, it was not a kind of money which can be used as a common measure of value of each and every economic produce.

Leon Trotsky saw the danger of banning the use of currency that poses to economic efficiency and distribution. Writing his best thesis “The Revolution Betrayed” he pointed out “Market and credit mechanism serve the cause of socialism than better than capitalism.” Trotsky was killed and the ignorance of economic governance prevailed and finally the Soviet system collapsed due to severe economic difficulties.

Perhaps you might think this was history. No, look at Venezuela and how it is governed today with having over 40% inflation. Also, look at Japan which is hitting over 230% of debt to GDP ratio. The problem of economic governance is a little more complex than mainstream economists, IMF and socialist-thinkers think. Efficient production does not guarantee the efficient distribution of distributable (consumable) output and equitable distribution of consumable output does not guarantee the economic efficiency.

Sometimes, some people would think that NPC is to take care of only a province not a country, so that high technicalities of macroeconomics might not be necessary. Such views are far from truth. Why? Let me give you a quick example here. The general poverty, child poverty and the poverty of senior citizens are going to be subjects of NPC. Economically this is a question of the distribution of distributable (consumable) output. Now NPC has to do it while ensuring the economic efficiency or ignoring that factor. Those who do not understand the technicalities of economics might think that when we talk about economic efficiency it means the reduction of welfare. It is the quiet opposite.

Let me cite another example. Sooner or later NPC would have to decide on the collection of provincial taxes. As far as I know, Provincial Councils (PCs) cannot collect taxes. Please correct me if I am wrong. If Provincial Councils are not authorized to collect taxes then NPC has to negotiate about it with the center to have certain flexibility in the area of taxation. If the powers of taxation are already entrusted with PCs then NPC has to determine how such powers are used to enhance both economic efficiency and the efficiency of the distribution of distributable output.  Unless the “collective intelligence” is improved on the subject of taxation NPC would most likely ignore the efficiency factor if it already has powers to tax; or if such powers do not exist then chances are there that they might lose at the negotiations. NPC cannot afford to allow either situation. Why?

Tax is the amount allocated in the economy to produce products or services of common interest. NPC has to produce certain such services. Line ministries of the central government provide funds to produce certain amount of such services like education and health-care etc. NPC cannot be limited to the imagination of the center. If NPC wants to be creative then it must have a creative arrangement in regard to the allocation of funds in order to produce the common interests that it think crucial for the wellbeing of the its populace.

This is why I always argue that commonsense understanding is irrelevant in economic governance. The same point I explained in my book titled “Indispensable Bad Debt” as follows.

“As it goes on in today’s politics, managing a country’s economy is a matter of good expectations and being uncorrupt. Political parties when in opposition might feel that way. When they come to power, they immediately realize that matters do not work that way” (page 68). I wrote this in 2008.

President Barak Obama realized this at first hand. In 2006 when he was in the U.S. Senate, they were debating a bill forwarded by the Republican government in order to increase the borrowing limit (debt-ceiling) of the government.

Voting against the bill Democratic Senator Obama said “Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘‘the buck stops here.’’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.” Nice words but far from reality. At the time, Senator Obama was urging not to tolerate an increase that would bring the debt ceiling to $9 trillion. Under President Obama, the debt ceiling has been raised to $16.7 trillion as at now.

However President Obama later commented “That was just an example of a new senator making what is a political vote as opposed to doing what was important for the country. And I’m the first one to acknowledge it.” This is good advice for newly elected officials of NPC; do not play petty politics in economic governance. Therefore I would suggest all elected officials of the NPC to take one additional precept which is being committed to improve collective-intelligence preferably as was defined by Pierre Lévy.