NO MORE THAN HOBSON’S CHOICE?

Tharindra Gooneratne wonders whether democracy and growth complement or contradict each other

“The best argument against democracy is a five minute conversation with the average voter…” When Sir Winston Churchill uttered these words, there were undoubtedly several gasps in the crowd. After all, here was a man who witnessed the downside of dictatorship and led Britain in a campaign against a brutal dictator.

But the gasps would have been louder if the audience knew that his American counterpart during that campaign Franklin D. Roosevelt himself once stated that “democracy cannot succeed unless those who express their choice are prepared to choose wisely.”

In that context, how has Sri Lanka fared as a democratic nation?

In 1931, Sri Lanka became one of the first countries on Earth to introduce universal suffrage (it was much later that the concept reached nations such as Australia, Canada and the US). As a democracy, Sri Lanka achieved many other firsts as well – including electing the world’s first female head of state in 1960.

That becoming a democracy has delivered many benefits to Sri Lankans is beyond debate.

It enabled a farmer’s son to be elected president and a teacher to be appointed prime minister. And it provided a voice to all Sri Lankans regardless of their gender, race or religion. Occasionally, when rulers became too comfortable in their ivory towers, it provided a stark reminder of how any government is fallible.

One benefit it has failed to achieve however, is enable the country to reach its true economic potential.

Sri Lanka is ranked 71^st in the World Economic Forum’s latest Global Competitiveness Index and 110^th in the World Bank’s Doing Business rankings. Many factors have led to Sri Lanka’s economic woes but the question remains: Is being a democracy supporting or suppressing our nation’s economic growth prospects?

As things stood in April, over 40 percent of the Members of Parliament in Sri Lanka haven’t passed their O-Level examinations whilst less than 15 percent are armed with a graduate degree. It is unfortunate that many of our representatives who vote for the national budget have probably never heard of the fiscal multiplier whilst not everyone who argues for and against trade agreements knows the difference between the current and capital accounts.

Corruption is prominent among the ruling elite as well. Sri Lanka recently ranked 95^th in Transparency International’s Corruption Perceptions Index.

Incompetence and corruption are deeply rooted in Sri Lankan politics today. Therefore, even though in theory the Sri Lankan voter does have a choice, in reality it is nothing more than a Hobson’s choice – i.e. between accepting this harsh reality or doing nothing.

Another factor that prevents Sri Lanka from reaping the full rewards of democracy is the high degree of income inequality, as well as the low level of political and economic awareness amongst the populace.

In terms of income inequality, Sri Lanka’s Gini coefficient was higher than India, Pakistan and Bangladesh in 2013 (a higher coefficient indicates higher inequality). As for education and awareness, Sri Lanka’s ‘knowledge score’ was 84^th in the world in the latest Global Democracy Ranking.

High levels of inequality and low levels of awareness create the ideal environment for irrational and populist policies to be implemented at the expense of sustainable long-term development. The best example of this is Sri Lanka’s current fiscal woes.

The national debt stands at almost 80 percent of GDP – and even more alarmingly, 90 percent of government revenue is currently utilised to settle existing debt obligations.

As Fitch identified in a recent report, one of the main downward pressures on Sri Lanka’s current sovereign credit rating is weak public finances and strained external liquidity position (to put this into perspective, Rwanda and Uganda currently have the same sovereign rating as Sri Lanka).

Despite this, there is no sustainable plan in place to improve government finances and curtail the debt burden. For example, Sri Lanka’s tax revenue as a percentage of GDP was about 12 percent in 2015, which was lower than both the world average (15%) as well as in countries such as Rwanda (14%).

This unwillingness to fix government finances and devise a sustainable solution to the debt crisis is a classic example of the myopia that has festered in Sri Lankan politics today. After all, it is easier to win an election by promising more subsidies than by vowing to improve government finances that would only benefit the country 20 years down the line.

Even though democracy has been pivotal to the growth story of many Western nations, it is noteworthy that most Asian countries that rose to global prominence (e.g. Singapore, Malaysia, South Korea and China) did so under either dictatorial or quasi-dictatorial regimes.

So the question remains: Has democracy placed a cap on Sri Lanka’s economic progress? Even if so, is it the only sensible option for the country, given the inherent risks associated with dictatorial regimes? Or is a hybrid form of government a viable alternative?

Perhaps it’s time we gave some serious thought to Churchill’s words.