15 December, 2017

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Wigneswaran’s Seven Precepts And The Missing One

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.

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Latest comments

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    The Seven Principles together with elimination of corruption,wastage,nepotism,favouritism and good accounting practices will be sufficient for good governance.
    I beleive that NPC has all of them.
    Their “Collective Intelligence” too,should be good.
    But,
    The central government must allocate sufficient funds just like what happens in other PCs.
    There was a report that the implementation of Uthuru Vasanthaya was to be transferred to the NPC.
    If this happens,the NPC’s efficiency will be under scrutiny.
    These are early days yet,but a start has to be made soon.

  • 0
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    Very good point. But it is a subset of LEADERSHIP.

    PP

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    It is a good precept but cannot be expected from our diverse parties. Even the center fails on this precept. So do the other PC’s. So why only the North.

    Lack of unity and consensus is a disease plaguing many countries resulting in failure on the economic and development fronts. People love to disagree and fight over insignificant matters. The whole nation suffers as a result. The poverty of the intelligent fools.

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    We are at present governed by ‘Selective Stupidity’ instead of ‘Collective Intelligence’, at all levels of society. The State is of course the trend setter and catalyst for the emergence and consolidation of this phenomenon.

    Dr.Rajasingham Narendran

    • 0
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      Dear Hema Senanayake and Dr R Narendran;

      As I do not have a broad knowledge of Economics,
      Mr Hema, as you said,
      Venezuela governed today with having over 40% inflation.
      Also, Japan which is hitting over 230% of debt to GDP ratio. The problem of economic governance,
      all of developed and developing economies with out guaranteeing the Economic efficiency.

      How the heck, this Central bank Boss says,
      ” We are heading for the Economic Growth of the 21st centaury with the Leadership of a experienced, honest politicians like Rajapassas”. {Finance with Mahendra, and Economic development with Basil].

      This is our STORY;
      [ only we can do accounts on our Grocery purchases, even that is also become a problem now,
      Because,
      as we are trying to compare and trying to manage those with the Minister Bandula Gunasekcara’s Budgeting Economics,
      And unless I have to meet get advises from Great Economists, Honorable Maha Minister Bandula Gunawardhana and Mahamanya Bank CHKKARABORTY Niwad Cabaral to get out of this Mess of living On 2500 Rs,
      otherwise,
      I will be Thrown out of my Home, and even my Dog TEkiya will not care me for a red cent because of This Economic Gilmart].

    • 0
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      Doctor:

      You said it. While we certainly would not expect the NPC to indulge in “grand-standing” I believe the NPC would emerge as a model of both political and economic governance. Hema could not be faulted for expressing a view that predominates the environment and culture that he is from. We have faith in Sampanthan and Wigneswaran in sound and effective governance.

  • 0
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    This is a long winded argument for fiscal devolution? This is what 13th Amendment plus is about.
    Good economic governance is about transparency and it would be necessary to have a properly MONITOR-able poverty alleviation program with cash transfers to vulnerable households in Northern Province. Wigneshwarana should work out a special POVERTY REDUCTION STRATEGY for Northern Province with World Bank and ADB – based on a CASH TRANSFER PROGRAM for poor and vulnerable families, and special funds for development of remote poor villages by negotiating directly with ADB and WB.
    The current national level DIvi Neguma poverty reduction is a CORRUPT political patronage stunt of Mr 10 percent Basil Rajapassa and not a poverty reduction program at all. Hence northeast which has high war related poverty needs a SPECIAL POVERTY REDUCTION PROGRAM and should work with experts agencies (ADB and WB) in the field on this..
    In the United States one plays, state income tax as well as federal income Tax. In Lanka Federal (or tax payed to central Govt) income tax should be waived for the Northeast which is a post-war economy which needs boosting.. and affirmative action in economic sphere.

    There should only be State or Provincial income tax – to be used for distribution of goods and welfare services to the people of the province.

  • 0
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    Hema Senanayaike,

    Excellent article!

    But

    I disagree when you say,”The economic efficiency and the efficiency of the distribution of distributable output are the two factors that determine the true wellbeing of the populace”

    Why I say so is because you are only looking at the input side when you refer to efficiency, What is much more important is effectiveness.

    Efficiency does not mean Effective- Outcome-Benefits

    The entire infrastructure projects if not properly focused may be efficiently utilized, but will have no impact on the people’s life unless it creates economic benefits to the needy.

    Further the distribution of distributable output even if efficiently undertaken will perpetuate poverty and encourage dependency syndrome.

    What is important is not mere distributive efficiency, but empower people to independently pursue economic activities and to be independent of the state in the long run.

    Handouts will hardly have an impact on poverty. it only postpone and encourage dependency!

    The Provincial councils have power to levy and collect taxes.

    There are 19 items in Para 36 of the Provincial Council list of the 13 Amendment dealing with the areas earmarked to the Provincial councils for levying taxes.

    It includes
    • Business Turn Over Tax,
    • Betting Taxes,
    • Arrack and Toddy Rents,
    • Motor vehicle license fees,
    • Court fines,
    • Stamp duties.
    • And so on

    What the Provincial Councils have to do is to pass statutes to collect taxes in term of 154 G of 13A.

    But even if the Provincial Councils collect all the taxes stipulated in 13A,it could meet not even 10 % of the recurrent requirements of the Provincial Council.

    Even the Western Provincial Council-the most prosperous council can meet only about 40% of their recurrent expenditure from the taxes collected.

    Other Provincial Councils are in a pathetic situation.

    It is an unsatisfactory arrangement.

    In fact all the eight Provincial Councils had already established their own Provincial Inland revenue departments and Provincial Councils are rewarded with funds in the form of Matching Grants to encourage tax collection efficiency.

    However in the last budget the government had introduced measures to unfairly and illegally to collect taxes like BTT by the center bypassing the Provincial Inland Revenue Departments.

    The Provincial Councils have to depend on the Grants from the Center recommended by the Finance commission established interms of 154R to meet their day to day expenses as well as Capital expenses.

    When these grants are recommended the Finance commission deduct any taxes collected by the Provincial Councils and recommend only the balance amounts resulting in the power to collect taxes as a farce.

    What this mean is that the entire Fiscal devolution should be looked into to make devolution or 13 A effective.

    • 0
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      Sri,

      Thank you for the information on PCs powers to levy taxes and for the contribution made to increase “collective intelligence” because “The basis and goal of collective intelligence is mutual recognition and enrichment of individuals (knowledge).”

      As at now I just say that the efficiency of the distribution of distributable output means not just mere distribution instead it supports to meet the demand-and-supply equilibrium at increasing total output levels; that is how economic growth is ensured. This is the very reason I used the term “distribution of distributable output” instead of the word “distribution.” Thanks.

      Hema

  • 0
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    Besides all the precepts, collective intelligence included, It would be great to have a team of councillors who are humble toward the citizen.

  • 0
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    Economic theorists, proponents of economics and adherents of economic principles in Sri Lanka must try to understand that rather simple inadequacies in governing principles impact on the public the most.

    For example, galloping inflation would be directly related to and a consequence of corruption and bribery, the demand for commissions and gross inadequacies in the implementation of management principles and accountability.

    Elaborate discussion of economic theory does little to educate the public on these basic realities.

    • 0
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      Why not change the current reality ?
      Young civil servants and young politicians can be encouraged to change the rules of the game.
      That’s how any society improves.

  • 0
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    I hope TNA will digest this important article with Sr’s correction.
    TNA needs a committee of volunteers to deal with 13A at the beginning.

  • 0
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    Hema,

    I am not an expert on the Sri Lankan Constitution but I hope you find the following useful.

    Taxes in India are levied by the Central Government and the state governments. Some minor taxes are also levied by the local authorities such as the Municipality.

    The authority to levy a tax is derived from the Constitution of India which allocates the power to levy various taxes between the Centre and the State. An important restriction on this power is Article 265 of the Constitution which states that “No tax shall be levied or collected except by the authority of law.”[1] Therefore each tax levied or collected has to be backed by an accompanying law, passed either by the Parliament or the State Legislature. In 2010-11, the gross tax collection amounted to INR 7.92 trillion, with direct tax and indirect tax contributing 56% and 44% respectively.)[2]

    Wigneswaran’s Seven Precepts And The Missing One.

    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.

    Sadly in Sri Lanka Democracy and Good Governance are non existent and they fail not because of lack of Intelligence but due to lack of willingness on the part of the Majority to devolve power to the North and as things stand Mr.Wigneswarans hands are tied.
    We have a long way to go before achieve Parity with the South but things are moving in the right direction.

  • 0
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    Self determination towards ,to the least conferdaration of NE should be #8

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