The road to fiefdom?

At its core, democracy enables freedom. We believe that the role of government is to protect and facilitate our people’s freedom to flourish. Our role, therefore, is to be champions of freedom bound by accepted rules that are agreed through democratic means – Pic by Shehan Gunasekara

By the Holy Spirit of Democracy  

Just over a year ago, the foundations of democracy were shaken when the legally siting prime minister of the Socialist Democratic Republic of Sri Lanka was sacked by the President in an unprecedented move against the people’s mandate. What has Sri Lanka learnt from this ordeal? Has it opened debate on our rights which are at the mercy of a few, or has the public accepted their grim future? 

Why democracy?

At its core, democracy enables freedom. We believe that the role of government is to protect and facilitate our people’s freedom to flourish. Our role, therefore, is to be champions of freedom bound by accepted rules that are agreed through democratic means.

We believe that the government of, by and for the people is the one that builds from the bottom up and not from the top down.  We believe in the power of individuals to voluntarily self-organise, in businesses, charities, and other community groups for their own self-fulfilment. We believe that all individuals are of equal moral worth, and deserving of dignity and protection of their rights, no matter their caste, creed, religion or ethnicity When it’s difficult to self-organise, we need a state, limited by rules and with the capacity to execute its functions effectively.  

We support inclusive democratic political institutions to guarantee political freedom. This requires both a broad distribution of political power, such as democratic elections, rule of law and written constitutions. It also includes inclusive economic institutions such as property rights, competitive markets, a dependable legal system, ease of doing business and the freedom to engage in an occupation of their choice. This enables economic freedom.

Inclusive institutions strengthen each other. More economic freedom we have, the more political freedom we will have, and vice versa. Extractive political institutions, however, work in the opposite direction. They encourage economic institutions that protect the interests of the elite against new entry from competitors. Such cycles encourage the creation of authoritarian states, and make them even larger and more repressive. Such episodes likely result in violence as rival elites fight over the reins of power or the rulers want to demonstrate their superiority by suppressing other groups. Whilst authoritarian states could generate bursts of growth, these episodes will be short-lived. For sustained growth established elites need to be disrupted by new ideas, products, and ways. Authoritarian states resist this type of ‘creative destruction’.  

A society that is free, innovative and truly prosperous that can help generate opportunities that enable its citizens flourish can only happen through democratic institutions. 

Why democracy is needed for building an economy and innovation

The most democratic countries in the world are the most prosperous. This is not fiction, this is a fact. Even within a country, a state can be wealthier if democracy and liberal values are practiced together. For an instance, California is the richest state in the United States of America. If the state of California is accounted as a country, it would be fifth largest economy in the world. Most of innovation in the US comes out of California. Microsoft, Google, Tesla, Apple, Uber …. are all out of Silicon Valley, so is the US movie industry that created the Marvel and DC franchise, Swashank Redemption, The God Father and Star Wars. 

Norway is the most prosperous country on the planet and is the most democratic country as well. With excellent personal freedoms, coupled with a clear and concise legal and law enforcement standing, all Scandinavian or Hellenic countries score high on the table. 

Democracies are accountable to the public rather than the elite, they are more likely than autocracies to produce public goods, invest in human capital, maintain rule of law, and protect private property rights. Although democracies typically dampen growth through their tendency toward compulsory redistribution of wealth, in the long term they tend to produce a stable environment and positive incentives for investment, innovation, and growth. These effects become increasingly important as a country reaches higher levels of development.

• Democracy results in higher rates of economic growth over the long term because democracies have more stable and predictable institutions and tend to implement policies that are conducive to private enterprise. 
• Since they are accountable to the public rather than to elites, democracies produce more public goods, invest more in human capital, maintain the rule of law, and protect private property rights.
• Though democracies are more likely to engage in large-scale redistribution than autocracies are, the dampening effect of redistribution is offset by the fact that democracies have lower barriers to entry, promoting competition, and innovation.

Economic growth is based on huge numbers of mutually independent decisions made by vast numbers of entrepreneurs about how to invest their capital and labour in various business endeavours. Without the democracy, the ruling class crowd out the entrepreneur and creates a class of rent seeking that eats of the public.  

The incentives that influence investment decisions are crucial for explaining the growth process. These incentives are created by economic institutions, especially those related to the universal and effective protection of private property rights and unconstrained economic freedom. The better the protection of private property rights, the higher the expected returns on investment (in either physical or human capital), so economic agents invest more heavily in the factors of production, hence speeding up growth. Furthermore, the greater the protection of intellectual property rights, the greater the investment in research and development, leading to technological progress, increases in TFP (Total Factor Productivity), and accelerated economic growth.  

What can we learn from this? We fought hard to protect democracy the last time and now despite all the not-so-good news, we at least have our right to voice our opinion, our dislike and our disappointment. Come the third week of November will we lose that as well? Or should we take the fight by changing the way we look at each other or look within at ourselves for change? As politicians reflect society, we have let ourselves down. So, the time is ripe as we have to change ourselves and then we will change our future. The most potent question at the 16 November election is whether we continue with the old guard, irrespective of which side of the political divide they are perched on or maybe they are all perched on the same side. Hope you vote wisely

More economic freedom produces more opportunities for exchange and greater competition. Greater exchange in turn creates opportunity for specialisation (division of labour) and that creates greater economic efficiency. Freer competition creates competitive pressure, and that is an effective incentive for economic efficiency (both allocative and productive) contributing to accelerated growth. 

Private property rights can be violated by private predators or predators in the government sector. Public sector violations of private property rights can be illegitimate, such as corruption, or legitimate, such as excessive taxation. Violations of property rights by the public sector can be more devastating to growth than private predation. Accordingly, the priority for the government should be to protect private property rights from all types of violations. Now the question is whether a democratic government is more likely to protect private property rights and increase economic freedom compared to an autocratic one. On the other side of the argument the list of the least democratic countries and the prosperity it offers to its citizens is below. A few countries have offer trickledown effect; however, it is due to possession of large amounts of natural resources such as oil and gas. 

Sri Lanka since independence turned as said above from the model British colony to its past feudal system where a selected Walawwa and prominent families that had business interest promoted a feudal system that that guaranteed their economic, social and political future. The ethnic riots, youth uprising and civil war and post-civil war family based power system, maintained the feudal system. 

The system finally started to diminish post 2015 as basic democratic rights such as freedom of expression, right to information and an independent police commission and judiciary commenced the shift in balance of power from a few to the people.  

Post-independence feudal system timeline.

1948 – Walawwa system

1956 – Sinhala only act and tensions with the Tamil community 

1960 – crackdown of the 1960 attempted coup d’état

1972 – Marxist insurrection by the youth 

1983 – Suppression of the Tamil community 

1989 – Second Marxist revolution by the JVP

2009 – Family controlled political system 

2015 – First steps towards an actual democracy 

Democracy and the rule of law 

Democracy provides political stability and increases predictability. Although the terms of executive and legislative power are limited by elections, the timeframe of the political process is well-specified, unlike in autocracies. Furthermore, democracies are less polarised societies, because among other things everyone can freely express their own interest and politically articulate it. 

Rule of law, i.e. universal protection of private property rights (including contractual rights), is beneficial for growth. Only if private property rights are universally protected will investments take place, as investors are eager to avoid expropriation of their returns and investments. Furthermore, protection of intellectual property is crucial for investment in R&D – a source of technological progress. Finally, universal protection of contractual rights enables and encourages market exchange, and the more intensive this exchange is, the stronger the competitive pressure, creating incentives for economic efficiency. 

Conclusion 

So, what can we learn from this? We fought hard to protect democracy the last time and now despite all the not-so-good news, we at least have our right to voice our opinion, our dislike and our disappointment.

Come the third week of November will we lose that as well? Or should we take the fight by changing the way we look at each other or look within at ourselves for change? As politicians reflect society, we have let ourselves down. So, the time is ripe as we have to change ourselves and then we will change our future. The most potent question at the 16 November election is whether we continue with the old guard, irrespective of which side of the political divide they are perched on or maybe they are all perched on the same side. Hope you vote wisely.