ECONOMYNEXT – Arthashasthra is a treatise on statecraft, supposedly written by Kautilya, also known as Chanakya, in the time of Chandragupta Maurya (321–297 BCE). The column does not intend to revive Kautilya’s thinking. The intention is to catalyze new thinking on the statecraft needed for present-day challenges in Sri Lanka.
Arthashasthra is a treatise on statecraft, supposedly written by Kautilya, also known as Chanakya, in the time of Chandragupta Maurya (321–297 BCE). The column does not intend to revive Kautilya’s thinking. The intention is to catalyze new thinking on the statecraft needed for present-day challenges.
Kautilya wrote for the sovereign of his time. I write for the sovereigns of our republic, the people. Not all the advice that was proffered was acted upon. I expect the same.
Why new thinking?
We are being governed by an incapable state. Gradual improvements in the lives of our people since the Great Depression and the malaria outbreaks of the 1930s may no longer be sustainable in the face of a global economic crisis and climate change because of a severely weakened state that is proving incapable of exploiting the opportunities, let alone minimizing the harms.
Contrary to common perception, things have not been going downhill in Sri Lanka in an absolute sense (though we are certainly falling behind in relative terms on many dimensions of development). People now live longer than they did in years past. Average life spans are now in the 70s, almost double the life spans prior to independence. There is a phone is almost every home, even though less than half have Internet access. This compares well with 300,000 plus waiting lists at the start of the reforms.
Electricity penetration is close to 100 percent. Personal modes of transport, even if not of cars and vans, have exploded in recent times. Despite the resulting congestion, travel times to certain locations have been reduced.
These are real achievements, though achieved through a combination of ad hoc measures and unsustainable debt and not through articulated, well-considered policies. With few exceptions, no attention has been paid to increasing economic productivity and building state capacity.
As was witnessed in former regional leaders with comparatively high levels of human development such as Venezuela and Zimbabwe, protracted economic downturns can erode living conditions quickly.
Rather than talk about catching up with Singapore and South Korea, we now must worry about being overtaken by Bangladesh.
Declining state capacity
Warren Buffet once said that it is only when the tide goes out that you discover who has been swimming naked. As the world economy faces the greatest contraction since the Great Depression of the 1930s, Sri Lanka’s fragility is becoming increasingly evident. Inadequately diversified merchandise exports will increasingly face difficulties due to contracting demand in some sectors.
Earnings from service exports, including tourism, are likely to take time to recover to pre-COVID19 levels. Rolling over debt by taking more debt as has been the custom of successive governments is becoming difficult with credit ratings being lowered due to perceptions of policy instability.
Facing a crash in export earnings, the government has responded with ill-considered import restrictions driven by simplistic mercantilist thinking which holds all imports to be bad and bilateral trade deficits to be serious economic indicators. Little do they understand that in today’s economy, imports are almost always needed for exports. Even the familiar tea exports require fertilizer and packaging-component imports.
The response is that approvals will be given on a case-by-case basis. This results in uncertainty, delay and opportunities for corruption. Giving even greater discretionary authority to government officials who are not the most efficient is a recipe for failure.
It appears to most observers of the Sri Lanka state that state capacity or the ability of state functionaries to efficiently execute tasks is declining. One reason for the widespread perception of state failure may be observer bias. Unpleasant memories tend to get repressed. Also, we may not be comparing like with like.
Nine Provincial Councils annually processing seven million plus motor vehicles is qualitatively different from what occurred in the “good old days” when motor vehicle ownership was in the thousands. But in certain sectors such as telecommunications, both the volume of transactions and their efficiency has increased.
The introduction of competition and the conversion of the state monopolist into a commercial entity with hard budget constraints have combined to yield this happy outcome.
Almost all state organizations are monopolies. Unhappy applicants for driving licenses cannot go to a supplier who will treat them better. For the most part, state organizations lack the discipline of hard budget constraints.
In only a few instances have reforms been initiated internally. In most state organizations, state capacity has not kept up with increasingly complex demands, resulting in deteriorating quality of services provided.Captive “customers” have been unable to communicate their unhappiness in an impactful way.
The state is doing little to ensure the quality of its human capital and continually upgrade it.
The foundation of a high-performance organization is the efficacy of its recruitment process, in the form of multiple interviews and tests. Those responsible worry about the quality of applications and are proud of the rejection rate. But rigorous interviews and tests are the exception in state organizations now.
Mass recruitments of graduates or those identified by political authorities are the norm. Even when interviews are conducted, the emphasis is on mechanical aspects such ascounting years of experience and ensuring the authenticity of certificates.
The cost of an employee is not limited to salary and benefits. Those who bid on projects know this and routinely mark up the direct costs. Various facilities, such as computers and workspace, must be provided for the employee to be productive. But the costs are not limited to tangible things. The costs of periodic reviews, the development and implementation of training plans, participation in continuing professional development activities, etc. must be factored in. Some organizations place so much weight on these upgrading activities that they are documented in annual reports.
When the half life of knowledge is short, it is foolish not to spend money to maintain, if not enhance, the quality of human capital that is the principal asset of the organization.
Professor Mick Moore, a long-time observer of the Sri Lankan state, has shown that the per-capita amounts spent on supporting state employees has declined over time, while the number of employees is increasing. All sorts of controls exist to hold down the salaries paid and the expenditure of state funds on training (while devising workarounds for some, such as the infamous duty-free vehicle permits).
There is money for buildings, but not to pay decent salaries tothe people who work in them. As a result, the human resource that is the core asset of state organizations is severely degraded. No action is taken to align individual incentives of state employees to organizational needs for superior performance. Increments are routine, performance reviews are perfunctory.
When under-resourced organizations employ too many people with misaligned incentives, squabbling for the limited pie is a natural outcome. The leaders’ energiesare diverted to keepingthe peace (the primary performance indicator in government). Serving external constituencies becomes secondary. There is little time left for proactive initiatives, strategy formulation and consistent implementation.
Much of the activities of these organizations is reactive, in response to a Minister’s whim or an outrage reported in the media. To engage in ad hoc responses, Ministers and officials seek and obtain even more discretionary authority. But exercising discretion requires capacity too.
The outcome is declining state capacity.Preoccupied by meetings and form filling, leaders have even less time for proactive initiative. With the next crisis, the cycle repeats and decline accelerates.
At a meeting of civil-society leaders I emphasized the need for a Constitutional architecture that would allow decisions to be taken and implemented. I was asked what is wrong with a weak state. A parallel may be found among a subset of libertarians whose thinking was encapsulated by Ronald Reagan as “Government is not the solution to our problem; government is the problem.”
The counterpoint is the conception of a state that does a few things well; a state that seeks to give stability to the public, not excluding those who create wealth for others.
Somewhat surprisingly, businesspersons are not natural supporters of state efficacy. The prevalent business culture is that of the deal, where money is made by getting the state to create opportunities for making profits (preferably supra-normal) and to bludgeon competitors.
Those with political authority use their positions to accumulate wealth and power in alliance with officials and business cronies. The malfunctioning state serves the interests of all three groups.
Kleptocracy is a word we will increasingly have to use.
Demise of Diyasena
Based on the successful dismantling of the license raj administered by the Ministry of Industries in the 1990s and the rescue of the Sri Lankan economy from the contraction of 2001, Ranil Wickremesinghe was seen as a competent manager of the economy. This reputation was seriously damaged in 2015-19.
Based on the successful conclusion of the war against the LTTE and the visible improvements to the city of Colombo, Gotabaya Rajapakse was seen as a doer. This was the gist of his successful election campaign. His first year as President has tarnished that image.
It is easy to blame individuals for system failures. But the fault lies in degraded state capacity.
The state machinery that Wickramesinghe used to bring the economy out of negative growth was already creaking. The difference in 2015-19 was that he lacked the flexibility to work around the moribund parts of the state apparatus as he did in 2001-04, and even the outsiders he brought in failed to deliver.
In Rajapaksa’s case, command-and control methods effective in narrowly defined domains are proving inappropriate for the more diffuse systemic problems a President must solve. Degraded state capacity is the root cause. It is failing to deliver, with the result that the President keeps falling back on current or former military officials as others did with schoolmates, only to find that the skill sets do not match the tasks.
No individual can save Sri Lanka. For too long, Sri Lankans have clung to the myth of Diyasena, the prince who will make all things right.
Rajasimha I (1581-1593 CE) came close, but failed to defeat the invader. Rajasimha II (1629-1687 CE), the most successful of the Kandyan kings, will always be associated with the saying “inguru deela miris gaththa vage,” exemplifying the outcome ofhis Dutch alliance.
SWRD Bandaranaike, fortunate to assume leadership 2500 years after the birth of the Buddha, was the modern politician most closely associated with the Diyasena myth. We all know how that ended: the seeding of ethnic conflict, the beginnings of economic decline and the assassination of the man himself.
A myth that failed to deliver even in the primitive economies and absolutist polities of the 16th and17th Centuries has no meaning in today’s complex economy and republican polity. Not learning from the Bandaranaike debacle, our people kept hoping for a redeeming Prince. More than 60 years after the Buddha Jayanti, it is time to bury the Diyasena myth for good.
The solutions are institutional, not centered on individuals. No single person can remove the barriers that hold us back from exploiting the opportunities of the resurgent Asia and help us manage the threats of the pandemic, demographic transition and climate change.
There is no alternative to reforming government systems and fixing the state. But the entire state cannot be shut down and restarted (even if some components may have to be, in very specific circumstances). State employees cannot all be sent home and replaced by a new lot (where is the new lot to found from?).
Reforming the state is like repairing a moving ship. Arthashasthra intends tocatalyze thinking on the challenging task of devising statecraft appropriate for 21st Century Sri Lanka.
Rohan Samarajiva is founding Chair of LIRNEasia, an ICT policy and regulation think tank active across emerging Asia. He is a member of the UN Global Pulse Advisory Group on the Governance of Data and Artificial Intelligence. Information lives of the poor: Fighting poverty with technology which he co-authored in 2013 had been published in Burmese, English, French and Spanish. Samarajiva was Policy Advisor to the Ministry of Post and Telecom in Bangladesh (2006-09).
Samarajiva was Team Leader at the Sri Lanka Ministry for Economic Reform, Science and Technology (2002-04) responsible for infrastructure reforms, including participation in the design e-Sri Lanka Initiative. He was Director General of Telecommunications in Sri Lanka (1998-99), Visiting Professor of Economics of Infrastructures at the Delft University of Technology in the Netherlands and Associate Professor of Communication and Public Policy at the Ohio State University in the US. (Colombo/Jan04/2021)