Devolution and development

DEVOLUTION of government authority from the federal and provincial levels to the organs of the state at the lower levels — levels that are closer to the people — is one of the more innovative policy reforms to date of the Pervez Musharraf presidency. Will this be a lasting legacy of the general’s rule and will it help to address the economic needs and political aspirations of the majority of the country’s population? The answer to this question will depend upon a number of things — on the answers to a number of follow-up questions.

Why should devolution of authority receive the full attention of the state and the citizenry if some of society’s more intractable problems are to be seriously addressed? Is the system devised by the Musharraf administration bringing about change that is needed in the way the government should work in a country as large and as diverse as Pakistan?

How receptive are some of the powerful segments of society to this change, especially those who see some loss of power by them? How well is the system currently working and how well is it managing to deliver on its promise? How should the system further evolve, taking advantage of the lessons that should be learnt from its working since its inception? How should the system be protected from being changed in a way that it begins to deviate from its original concept and purpose?

I will begin to lay the analytical ground for answering these important questions by first discussing some new developments in economic thought. These have begun to put a great deal of emphasis on the development of all manner of institutions.

Fuller answers will come after my colleagues and I have done some serious survey work over the next several months to assess how well the system launched in 2001 is working. Such work is needed in order to ensure the system continues to evolve in a way that it meets the needs of what institutional economists call “societies and economies with low levels of friction”. (If my readers have some thoughts on the subject and have some views on how the current system of local government should evolve they are welcome to contact me at the email address given at the end of this article.)

To get back to the subject of the article today: one important difference between classical economics and what is generally referred to as development economics is that while the former adopts a static approach, the latter looks at the world in a dynamic sense. Classical economics became a discipline when its pioneers started to speculate on how an economic system works. Development economics, on the other hand, is a discipline that attempts to understand how an economy should evolve in order to meet certain objectives.

While intuition was the tool used by those who did pioneering work in classical economics, development economists based their findings on empirical work. Their discipline has developed and will continue to develop on the basis of lessons learned.

Among the more interesting evolutions in economic thought in recent years is the importance that is now attached to the creation and/or development of what they call institutions. This is the way institutional economics acquired the salience it now has in economic theory and practice.

Those who have broadened their view of the economic world by looking at institutions have reached the conclusion that institutions matter in particular if the policymakers’ objective is the reduction in the incidence of poverty. This objective cannot be realised without first creating an appropriate institutional base. Such a base, if it exists at all in Pakistan, needs a great deal of strengthening at many levels. Without a strong institutional foundation at the local level, Pakistan will not be able to address the problem of poverty no matter how rapidly its economy expands.

The world, including Pakistan, continues to struggle with the problem of poverty. In spite of rapid growth in many developing countries — in particular those in East and South Asia — large numbers of people continue to live in what is called “absolute poverty”. This is commonly defined as an income of one dollar a day or below.

Even with such a conservative definition of absolute poverty, more than one-fifth of the population in the developing world lives in this almost unimaginable state. Both the proportion and the number are much higher if a more realistic definition is adopted — that of $2 a day. About one-third of the Pakistani population lives in absolute poverty, about three-fourths is poor if we use the less conservative measure. These are large proportions. Their reduction should be the focus of public policy.

There is an intense and honest debate these days in Pakistan about the extent of poverty, about the rate at which its incidence has declined in recent years as a result of the respectable expansion in the economy, about the increase in income inequality as a result of the recent growth spurt, and about the appropriateness of Islamabad’s policies aimed at these problems.

Some of the debate took place in the various forums convened to discuss the budget for the financial year 2007-08. Some occurred in a discussion at the Mahbubul Haq Centre for Human Development on the occasion of the launch of its annual report.

However, it is quite striking that one important feature of a viable programme for redressing poverty was not touched upon by most participants in this debate, no matter in which forum it took place. This relates to the importance economists have begun to attach to the development of institutions for handling all economic problems within a society — any society, developed or developing.

It was the Nobel Prize winning economist Douglas North who first incorporated institutions within a cogent theory aimed at explaining how economies function and how they grow. His definition of “institutions” went beyond the need for having organisations in place that were needed to run an economic system.

Such structures include the various government ministries and departments that manage economic affairs, the central bank that manages monetary policy and dozens of regulatory institutions that oversee the working of various aspects of the national economy.

Also included in the organisational structure are the legal and judicial systems that ensure the smooth working of the economic system. Any hitches that develop in economic operations are addressed by the legal and judicial systems. This belief informs many people who are currently engaged in the struggle between the judicial and executive systems.

Organisations work at various levels within a political system. They work at the national level and at the sub-national — the provincial and the state — levels. They also work at what is commonly called the local level. It is important to recognise that the citizens interact with the structures at all levels of government.

Not only that, policymaking is not the preserve of the state operating at the national level. It takes place at all levels. Generally, policymaking in the areas that concern daily life is devolved to local institutions.

In mature economic and political systems, the government at the national level concerns itself with larger issues of statecraft — how people should pay for the services they receive from the state, what should be the state’s relations with the world outside, how should the state defend the country in case of foreign aggression, how should the state ensure that the movement of goods and people in the country is not obstructed by the governments operating at the sub-national levels. The overall political structure ensures that the institutional structures operating at various levels don’t get in each others way. This is ensured by a constitution which, in the case of conflict among the various levels of government, is interpreted and enforced by an independent judiciary.

All the structures mentioned above operate in the public arena. But there are also institutions in the private part of an economic system. These include various types of financial institutions such as banks, insurance companies and brokerage houses. Businesses are also a part of a society’s institutional structure.

These take various forms. They can be public companies with some of the capital invested in them held by the people. Or they can be entirely privately owned. The space within which businesses operate is constrained by a system of laws enforced by an institutional structure that also operates at various levels of the state.

Enforcement of laws is an important aspect of the institutional structure within a state. It is often said that the coercive power rests with the state. What is meant by that is that once a decision has been taken to adopt certain laws or a court has decided that the laws already on the books will be interpreted in a certain way, it is the responsibility of the law enforcement agencies to ensure compliance. That that does not always happen is illustrated by an incident in our history when, during the struggle between the executive and the judiciary during the premiership of Mian Nawaz Sharif, there was some doubt whether the Supreme Court’s decision would be carried out by the executive branch of the government.

Douglas North extended the definitions of institutions way beyond structures and organisations. “Institutions are the humanely devised constraints that structure human interaction. They are made up of formal constraints (rules, laws, constitutions), informal constraints (norms of behaviour, constraints and self-imposed codes of conduct), and their enforcement characteristics,” he wrote in the lecture given while he was being honoured as a Nobel laureate.

Before “institutional economists” began to focus the attention of their colleagues and also that of the policymakers on the importance of institutions on the working and growth of economies, traditional economics had simply ignored the subject. They had assumed that transactions are cost-free in economies.

But North and his associates demonstrated that was not the case in real economies. Working on the data for the United States they concluded that transaction costs accounted for as much as 45 per cent of the gross national product. They also maintained that an institution-rich society had low transaction costs and by implication a higher rate of growth in the economy.

In underlying the importance of institutions for understanding the working of an economy and for developing it in a certain direction, North put great emphasis on learning from experience. “Institutions form the incentive structure of a society and economic and political institutions in consequence are the underlying determinants of economic performance. Time as it relates to economic social change is the dimension in which the learning process of human beings takes shape and the way institutions evolve. That is the belief that individuals, groups, and societies hold which determine choices are a consequence of learning through time — not just the span of an individual’s life or of generation but the learning embodied in individuals, groups, and societies that is cumulative through time and passed on inter-generationally by the culture of a society.”

This is one reason why it is necessary to carefully review the performance of an institutional innovation such as the devolution of authority to local governments by way of government decree in 2001.

Email: SJBurki@gmail.com

An exit strategy for the military

MILITARY regimes are quintessentially patriotic and unforgiving on the question of national ideology. While they mean well for their country, their understanding of the complex political issues is always limited and their record of performance often falls short of declarations.

Military regimes see democracy as a means of managing political turbulence, and not as an organic institution addressing the needs of a sustainable pluralistic society. They associate themselves with the stability and strength of the state in the fashion of l’état c’est moi. Any criticism of the military regime is seen not as an audit of the government but as an attack on the state itself.

Under military rule, the state is both too strong and too weak. A military regime continuously tries to make the state stronger. The regime also has an insatiable appetite to control and improve governance. It tries to collect more taxes, clamps hard on dissent and uses force to resolve intricate political issues. States under military regimes are inherently weak because they lack a genuine functioning democracy.

The history of military rule in Pakistan is, however, not as gloomy as often painted. In its 60 years of independence, four of Pakistan’s presidents came while serving in the army. Compared to this period, Nigeria has had more coups than Pakistan and none of its military rulers did as much for the country’s economic development as the generals in Pakistan. In Argentina during 1930 to 1983 (a total of 53 years) 14 military presidents governed the country. It is not unrealistic, therefore, to expect that Pakistan will eventually move to a civilian democratic rule without military interference.

The question arises about how to find an exit strategy for a military regime, irrespective of whether it is directly involved in politics or is using proxy parties to leave political power to a successor regime which is genuinely democratic.

The first is the scenario of a military regime going to war with another country and facing defeat, including foreign occupation. This happened in Japan after the Second World War; in Pakistan after the emergence of Bangladesh; in Greece in 1974 when to safeguard the institutional unity and prestige of the army, a faction of the senior military officers overthrew the losing junta and handed over power to a civilian caretaker government; and in Argentina where a similar defeat at the hands of the British in the Falklands war led to elections and a change of guard in 1983.

The second is the scenario of a military regime being so corrupt that even the country’s armed forces feel embarrassed about it and withdraw from power when an opportunity presents itself for change. This is precisely what happened in Nigeria when after the sudden death of General Sani Abacha in 1998, his successor, General Abdul Salami Abubakar, organised free and transparent elections in Nigeria within one year of his presidency and transferred power to an elected president.

The problem with this scenario is that not all military regimes are corrupt. In fact some are cleaner and far more responsible than the democratic administrations they replaced. General Mobutu’s notorious and incompetent reign brought as much tragedy to the former Zaire as has President Mugabe’s misrule to Zimbabwe. Ironically, Mugabe has won successive elections in his country and is not a commissioned military officer, even though he fought the war of Zimbabwe’s independence in the trenches as a comrade.

The general dissatisfaction of people against inefficiency and bad governance by an elected government in Fiji led to a military takeover in 2006 which could well have been avoided if the warning signs were read and addressed in time by the civilian government. It was also the same story that led to the 1999 coup in Pakistan.

Another scenario in the exit strategy is free and transparent elections in which the military agrees to give up power if the parties that support the regime lose the election. In doing so, the outgoing military regimes ensure that legal formalities are completed before their departure to deprive the successor democratic governments of a chance to question the laws and ordinances promulgated during military rule. This scenario applied to Uganda and Chile in the 1980s, and to Pakistan in 2003 when parliament incorporated a major portion of the Legal Framework Order in the 1973 Constitution under the Seventeenth Amendment.Sometimes a military regime may hold elections but in the aftermath of the results not being to its liking, bar the winning party from taking power. This was witnessed in the Burmese elections in 1990. In 1992, the Algerian military invalidated the first democratic elections because the party that won the majority was not ‘kosher’ by the army’s standards.

This volte-face results in weak democracies where the army is not reconciled fully to an entrenched democratic process.

There are examples of countries which had a weak tradition of democracy, such as South Korea and Taiwan, going to elections with military-backed parties and retaining power through free elections.

In this process, the military-backed parties subsequently went through political renewal and became considerably independent over time having a civilian leader, as in Taiwan. After two successive elections, the military-backed parties ultimately lost the majority in these countries and the military accepted the verdict of the people in a democratic process they could not control.

Another scenario that is not entirely democratic but allows the military to leave politics in return for a limited institutional role in the governance structure is made possible through a constitutional arrangement assuring the military a number of seats in the legislature.

The Ugandan constitution, for instance, allows the army to send a fixed number of officers to parliament under a reserved quota for the armed forces.

Pakistan has also sought to give the military an institutional role in politics through the introduction of the National Security Council which includes on its membership the chiefs of the three armed forces as well as the chairman of Joint Chiefs of Staff committee. Although the NSC is a forum for consultation, it is regarded by the opposition political parties as an unnecessary extension of the parliamentary process.

In countries coming out from the shadow of military rule, the transition to democracy takes place in two phases. In the first phase, multi-party elections result in the formation of civilian governments. These governments either retain an allegiance to their military predecessors or exhibit signs of authoritarianism which they experienced in their political struggle under the military regime.

Sometimes in the first phase of democracy a handful of powerful people exercise control over the political process and economic decision-making in the form of an oligarchy.

Democracy’s second phase is about recognising the political division of labour and respecting professional and institutional specialisations. The more specialised a body politic, the greater chances there are for it to become a stronger democracy.Specialisations lead to checks and balances. These include separation of powers between the three branches of government; separation of religion and state in all spheres of political, economic and social activity; separation of civil society from government; separation of elected representatives in the legislature and the executive from the partisans of those bodies who elect or replace them; separation of responsibilities and functions between the national government and local governments; and separation of facts from values and the vision a country has for its future.

These separations are also sometimes referred to as functional competencies. Under this arrangement, national parliaments delegate more powers to expert administrative bodies in the areas of their competence, but with due public oversight and a strict accountability regime. The acquiescence by parliament gives these bodies sufficient democratic legitimacy to function independently.

Applying this principle to new democracies, especially those in the first stage of transition, one can build a model of democracy where parliament can entrust the armed forces with certain nation-building tasks where they have a comparative advantage over the civilian sector; i.e. building new cities, developing communications infrastructure, supporting the industrial base with R&D and filling the gaps in the security, supply and knowledge sectors in society. The military establishment can thus become an invaluable tool of development while remaining subservient to the institutions of democracy.

The writer is a former special adviser for political affairs in the Commonwealth Secretariat, London.

Illegal migrants’ plight

STAND with your back to the Swift meat-packing plant in Greeley and you can see the snow-capped Rockies rise over fields of lush farmland. You are 775 miles from El Paso, the nearest crossing to Mexico.

But on December 12 last year the border came to Greeley. Dozens of armed immigration agents supported by local police in riot gear stormed the factory. After rounding up the workers they divided them into two groups – the documented and the undocumented. Simultaneous raids at Swift plants in Iowa, Minnesota, Nebraska, Texas and Utah netted around 1,300 undocumented workers.

Homeland security and immigration and customs enforcement (Ice) agents claimed the raids were prompted by an inquiry into identity theft. But less than a quarter were charged with using false security cards – the rest were deported. Ice's assistant secretary, Julie Myers, said Operation Wagon Train had dealt a major blow in the "war against illegal immigration".

The border is no longer just a physical space that separates the US from Mexico. It has become a political space that reproduces itself throughout the country. While immigration officials are mounting raids, local councils across the country are passing ordinances preventing undocumented immigrants from settling.

Last month, voters in the Dallas suburb of Farmers Branch voted 68 per cent to 32 per cent to ban landlords from renting to illegal immigrants. Nine months ago, Hazelton in Pennsylvania went further, also banning the hiring of undocumented workers and declaring English the town's official language. The legality of both decisions is dubious and being challenged. But the political momentum they represent is unmistakable. More than 100 municipalities around the country are considering or have passed similar laws.

Not all are hostile. City officials in New Haven, Connecticut, approved a plan last week to offer undocumented immigrants identification cards so they could open bank accounts and use other services. But most immigration-related laws currently sit before all 50 state legislatures, with most aimed at restricting the rights of undocumented workers.

The Americans for Legal Immigration Political Action Committee, an anti-immigrant group, has launched Operation City Walls. "We are prepared to take this country back from the grassroots up," says Alipac's president, William Gheen. "We are ready to re-establish citizen control."

While the physical border marks a geographically fixed, if historically fluid, area (160 years ago Colorado was part of Mexico), the political border is more arbitrary. It divides families and terrorises communities, and cannot be effectively enforced without ethnic profiling. "I can tell an illegal just by looking at them," a Minuteman, from the anti-immigration vigilante group, once told me in New Mexico. "It's like wild dog versus tame dog. They just don't have the same kind of look."

The strictures and structures of this omnipresent border owe more to economic expediency and political opportunism than either law or order.

"They took the workers out in cuffs," says Roberto Cardova, a Chicano activist and member of Latinos Unidos. "Why didn't they take the bosses? Why don't they raid the expensive ski resorts of Aspen or Vail? Why don't they raid Las Vegas? Those places would fall apart without undocumented workers, but then rich people would complain."

Marginalising immigrant communities is not just the effect of the political border. It is its purpose. With 12 million undocumented workers in the country, picking them off 1,000 at a time is no solution - particularly when some of the deported Greeley workers were back within a week. But as a sop to anti-immigrant campaigners it can make life less bearable for the migrant labourers already here. "We don't need to deport them," said Randy Graf, a Republican candidate for an Arizona border district, before congressional elections last year. "All we have to do is enforce our employment laws and pretty soon they won't be able to get a job and will self-deport."

There are two key problems with this plan. First, it ignores how integral illegal immigration is to the US economy. According to a recent paper by Gordon Hanson, of the University of California, San Diego, the undocumented comprise a quarter of farmworkers, 17 per cent of cleaners and 14 per cent of construction workers. After Colorado passed tougher anti-immigrant laws last year, migrant labourers fled and crops rotted. In March, the state's department of corrections proposed getting prisoners to pick melons, onions and peppers at 60 cents an hour.

Second, this nativist populism has proved not quite as popular among the natives as its advocates imagined. They are vocal and committed but have struggled to give that voice electoral expression. Graf, a Minuteman, stood in a seat where Republicans won 60 per cent of the vote in 2004. He lost in November with just 42 per cent, primarily because his anti-immigration views were regarded as too extreme. The likes of Graf cannot win, but nor can they be ignored.

The result has been legislative paralysis, which saw yet another immigration bill stall in the Senate last week. The bill would have fortified the border, provided a costly pathway to citizenship for the undocumented workers already in the US, and shifted the emphasis for future migration from family ties to professional qualifications. It would have also seen the introduction of "guest worker" visas, allowing some immigrants to work in the US for two years and then return home.

Bush backed it, as did big business. Democrats and progressives mostly supported it with reservations. The public were ambivalent – according to a Pew poll last week a third backed it while 41 per cent were opposed. But Republicans hated it. Two senators from South Carolina and Georgia were booed at their respective Republican party conventions two weeks ago for having favoured it.

––The Guardian, London