Picking a wrong week for a serious topic:Economic rationale for the beleaguered Provincial Councils

by Rajan Philips-September 2, 2017, 7:01 pm 

This is hardly the week to start a new line of advocacy for the beleaguered Provincial Councils. A quick glance of the headline stories during the week gives a bewildering menu of options to pick a topical theme for weekend comment. I have chosen to stay with a premeditated theme despite the risk of being overlooked among other sexier and excitingly gossipy political pursuits. But let me start with a short list of the week’s headline stories as a warm up to a somewhat esoteric theme.

The week began with the usual hullabaloo over yet another constitutional amendment, this one involving provincial council elections. The government is divided over the 20th Constitutional Amendment for postponing elections to three provinces that are due this year. The critics of the government are over the moon that there would be neither a two-thirds majority in parliament nor unanimous support among the provinces to ensure passage of 20A. The week ended with the government being put on notice that it is going to be toppled over its handling, or mishandling, of the SAITM matter. It’s that serious. And it is the ultimate ultimatum after a series of penultimate ultimatums by the congenitally sick and strike-driven GMOA. The wag would like to know which part of the government is going to be toppled by members of the learned profession: the part that supports 20A, or the part that opposes 20A but started the whole SATIM mess as part of a former government whose heads are now part of the Joint Opposition. There are too many bloody (not bleeding) parts (and heads) for the good of the country as a whole.

Even the military is in parts – with two former chiefs battling in public over war crimes allegations after an intrepid international busybody filed war crimes lawsuits in Brazil and Columbia, with more to follow in Argentina, Chile and Peru. And those who insist on war crimes accountability, not so much for reconciliation as for eye-for-an-eye and tooth-for-a-tooth retaliation, are also embattled and divided in their own provincial house. The one Province that is the root cause for the creation of the provincial-council system in the country has its first elected council hopelessly divided and dysfunctional. The Chief Minister of the Northern Provincial Council tired after venting hotheaded resolutions is now in a mode of firing and hiring ministers to keep his cabinet of four going. Fortuitously, the constitution limits provincial cabinets to four ministers only, unlike the national cabinet that can constitutionally limits its size and then ‘un-limit’ it at whim.

One headline story yesterday was about the JO’s ire at the American diplomatic presence in a candle light vigil in Colombo to mark the UN Day commemorating Victims of Enforced Disappearances. The JO spokesman may have protested a bit too much about the transgression of diplomatic norms. A more cutting exception would have been to draw contrast to the torch-lit and hate filled White Supremacist march in Charlottesville, Virginia, that the American President chose to justify and not condemn it unreservedly. Yet in his own way, and quite inadvertently, Donald Trump has become a teacher for negative revulsion of racism in any and every form, in his own country and hopefully everywhere else. That is a whole different story in itself.

Economic rationale for devolution

My pre-meditated theme for today is a follow-up to my article two weeks ago on the august/August ruling of the Supreme Court that it is legal and constitutional to advocate a federal form of government within the present unitary constitution. While acknowledging the symbolic and substantive significance of the court ruling, I also pointed out that the ruling by itself does not address the political difficulties and administrative challenges in achieving a successful system of devolution, let alone federalism, in Sri Lanka. At the same time, whether anyone likes it or not, the country has a system of provincial governments and it makes no sense to let that system go on at great cost without letting it do what it is supposed to do. What are provincial governments supposed to do? This question has been flogged more than enough from political, legal and constitutional standpoints, but not enough at all from the standpoint of devolution economics.

The economic rationale for devolution and decentralization is the normative proposition, called the ‘Decentralization Theorem’ in the literature, that in the absence of economies of scale and the need for national level co-ordination, public goods and services are better delivered at sub-national levels for lower costs and higher benefits than they would be at the national level. Wallace Oates, the University of Maryland Economist, who formulated this theorem, has also differentiated between the political/constitutional approach to devolution and decentralization, or more generally to federalism, on the one hand, and the economic approach to them, on the other. To the economist, the entire public sector has a vertical structure with an inherent scope for national/sub-national decision making regardless of whether or not there are formal constitutional arrangements for such decision making.

The question that obviously arises is why formal arrangements would be needed if such devolved decision making could go on inherently, so to speak. The answer is that such decision making is invariably impeded or constrained both in the absence of formal arrangement, as well when formal constitutional arrangements are in place. The challenge is in finding a balance between governance structure and the assignment of goods and services, as well as policy decisions, between different levels of government. The governance structure must be broadly understood to include not only the legislative and executive branches at the national and sub-national levels, but also the judiciary, and the organization and function of political parties in the electoral process. As for the bundle, or ‘vector’, of goods and services, as well as government policies, there should be flexibility for these components to move ‘up’ (to national/supranational levels), or ‘down’ (to provincial/local levels) within the vector.

Historically, few constitutions, if any, have come into being following an economic assessment of the governance structure and the distribution of government functions. A rare exception could be the European Union which at once embodies both ‘supranational integration’ and ‘subsidiarity decentralization’ of the functions of independent European states. What is remarkable about the EU is the emphasis on the principle of subsidiarity and the practical success in its application. While EU has run afoul of many national governments on account of its ‘supranational growth’, it has also cultivated much support at local levels within each European country by providing local communities a new voice in political decision making and new protection for local products in the context of globalization. In a sense, the European Union embodies both the ‘coming together’ and the ‘holding together’ processes of federalism that I referred to in my article on the Supreme Court ruling on federalism.

In other situations, the two processes lead to different institutional challenges in achieving a good balance between national and sub-national assignment of responsibilities and decision making. In the ‘coming together’ situation, where pre-existing units decide to set up a federal system, new federal institutions are created and invested with powers and resources overarching existing ‘state’ (as in the US) or provincial institutions. On the other hand, in the ‘holding together’ cases, that better represent the Sri Lankan situation, new (provincial) institutions are created in between existing national and local government institutions. India’s colonial experience was in itself a quasi-federal experience that encompassed not only government administration but also the organization of the anti-colonial struggle, including especially the organization of the Congress Party itself. Not surprisingly, the Indian constitutional experience is seen by some as ‘federal’ with strong unitary features, and by others ‘unitary’ with strong federalist features.

In Sri Lanka’s case, its colonial and post-colonial experiences are not conducive to successfully implement the new provincial-government system. In terms of the Decentralization Theorem that I referred to earlier, the goods and services that are most amenable to delivery at the sub-national level include education, health, municipal services including waste management, local and regional transport etc. And they are provided for in the Provincial Council List of powers in the Thirteenth Amendment. But the newly created provincial governments cannot take over these tasks unless they are progressively handed over to them by the national government. Even the present government, while vociferously promising constitutional changes to improve the system of devolution, is undercutting its own mission in daily decision making in each and every area that should properly be left to the provinces.

There are other obstacles as well among the different components of a decentralized governance structure which, as I noted earlier, include the judiciary as well as political parties and the electoral system. My current refrain is that the Supreme Court ruling on federalism is indicative of positive legal thinking. But it cannot take the project of devolution any further than the premises of the court unless there are corresponding changes in the political and administrative spheres. These changes cannot be brought about by waving constitutional magic wand. The economic approach that I am suggesting here needs to be taken further to identify and overcome roadblocks and bottlenecks that have emerged over time – from Donoughmore to JRJ and beyond, in each of the powers and functions that the 13th Amendment has assigned to the provinces, but on which none of the provincial governments have been able to make any headway for nearly 30 years.