Sri Lanka's crisis will get worse, contingency planning for relief must start now

The country faces two crises - an economic crisis and a political crisis.

The government has lost its public legitimacy but the country’s system of presidentialism makes power sharing with opposition parties difficult resulting in a deadlock. Political dysfunction will delay a coherent response to the economic crisis. Structural reform is complicated by the many vested interests. Many politicians view reforms as a threat to their wealth and ambitions.

High food inflation, currency depreciation, production shortfalls and a collapsing economy mean many poor Sri Lankans face hunger. Higher global pries have made the problem acute. With the public finances in disarray there is limited scope for state assistance. The distribution of relief is hamstrung by the absence of a social registry. To avert a humanitarian crisis the country should work with the UN to structure a relief programme that can deliver basic necessities to people. Humanitarian aid for Sri Lanka will not solve the country’s fundamental problems, will help mitigate the impact on the poorest.

The Office for the Coordination of Humanitarian Affairs (OCHA) of the UN Secretariat is responsible for coordinating responses to emergencies. It does this through the Inter-Agency Standing Committee, whose members include the UN system entities most responsible for providing emergency relief.

Sri Lanka may be heading to what the OCHA calls a “slow-onset emergency” one that does not emerge from a single event but one that emerges gradually over time. In parallel to the work on the economy the Government should start talks with the OCHA to conduct a proper needs assessment to gauge the extent of the problem and to design a contingency plan that can be activated if the situation worsens.

The people are already suffering, a responsible government should be trying to prevent matters from getting any worse.

On the LLRC Report

This is something that I stumbled across while cleaning out some old folders. It was written sometime in 2012 when the LLRC report was first published. 

The Jathika Hela Urumaya, a partner of the Government has criticised the Lessons Learned and Reconciliation Committee report, for, amongst other things, exceeding their mandate. While this writer has little sympathy in general with the positions of the JHU it is necessary in this instance to admit that they do have a point. To reproduce the rather vague mandate of the LLRC :

• To inquire and report on the following matters that may have taken place during the period between 21st February, 2002 and 19th May, 2009, namely ;
• The facts and circumstances which led to the failure of the ceasefire agreement operationalized on 21st February, 2002 and the sequence of events that followed thereafter up to the 19th of May, 2009.
• Whether any person, group or institution directly or indirectly bear responsibility in this regard;
• The lessons we would learn from those events and their attendant concern, in order to ensure that there will be no recurrence;
• The methodology whereby restitution to any person affected by those events or their dependants or their heirs, can be affected;
• The institutional administrative and legislative measured which need to be taken in order or prevent any recurrence of such concerns in the future, and to promote further national unity and the reconciliation among all communities, and to make any such other recommendations with reference to any of the matters that have been inquired into under the terms of the Warrant.

The Commission's mandate is restricted primarily to inquiring into the reasons for the failure of the ceasefire, who was responsible and what lessons can be learned. There is a small catch-all clause at the end: to recommend measures to promote national unity and any other recommendations with reference to the matters that have been inquired into.

Into this relatively minor clause the commission has stuffed a lot of recommendations, indeed almost everything of value in the report falls under this category, hence the JHU's annoyance that the commission has missed its primary purpose.

What exactly was that purpose? Was it really to learn lessons on the failure of a ceasefire?

To begin with, it took the Government a whole year after the end of the conflict to decide that it was necessary to set up a commission to inquire into the causes of the failure of the ceasefire, by then a largely irrelevant matter. Commissions of inquiry take many months to do their work (the report was published two and a half years after the end of the fighting) so if they were serious about learning lessons what took them so long to appoint the commission?

Critics have claimed that the commission was purely set up to forestall an international inquiry and its timing, a month before the formation of the UN Secretary General's Panel of Experts supports this view. Thus we have a commission that was set up to defer an international inquiry (which it did not) given a vague mandate to inquire into a matter that was largely irrelevant. If the Government does not appear to be serious about the commission, should anyone else be?

It is a difficult question. The commission heard a lot of useful testimony which they have reproduced at length. It can provide a useful starting point for some discussions on matters post-war, which seems to be the consensus amongst the Government's critics. What then of the Government's position?

We have seen plenty of pictures of the President reading the report at leisure, dressed in a sarong and seated in a planters chair, but we are yet to hear if the Government is pleased or displeased and what, if any, recommendations they intend implementing. The report was released two months ago and while various parties including foreign Government's have stated their positions the official view on the report can only be guessed at.

The official news website of the Government carries a detailed road map of Monetary and Fiscal Policies for 2012 and beyond, there is clearly pressure on the finances but nothing on the LLRC. The Defence Secretary warned last week, at some length, that the country is surrounded by enemies, within and without. Some lessons it appears, are yet to be learned.

Some thoughts on public finance and debt

 Sri Lanka is now entering the jaws of a debt crisis. The issues were present for decades but started to crystallise over the past two years. Sri Lanka’s debt rating was downgraded several times and commentators warned of the problem but all these were brushed off. Now that some of the symptoms are becoming evident the debate is hotting up. The problem is not easy to grasp, how should we think about this?

The simplest way to think about public debt is to consider it as postponed taxation. The Government wants to spend money but instead of raising this money through taxes it borrows the money. Raising taxes is politically challenging, citizens will start to ask questions as to why taxes are being raised. After some time if the benefits that were promised when taxes were raised are not visible further questions can arise.

Those in power, especially those who court public popularity are tempted to look for simpler ways to fund spending. Debt is an attractive solution – we can spend now and worry about repayment later. For the public, few questions arise when borrowing takes place – they feel no immediate impact from this exercise and depending on how the money is spent, may even see some benefit from it.

What happens when the debt has to be repaid? As long as a Government maintains its credibility with financial institutions it is always possible to roll it over. Governments can then opt to raise new debt to repay the old debt. The public still feels no impact, the good times continue, the Government keeps spending and no one is worried. 

As the debt accumulates, so does the interest on the debt so Governments borrow again, not only to repay the principal amounts due but also the interest. Things keep snowballing and everybody; Governments and citizens remain blissfully unconcerned until a point is reached when the debt levels get to a stage where the lenders start to worry about getting repaid. When that happens, the party stops and citizens awaken to a rude shock.

When lenders stop refinancing a Government’s debt it is then confronted with the problem it has postponed and may even have forgotten – how to repay the debt. Recall that debt is postponed taxation.

The Government should have been raising taxes over the years to repay the debt it was taking but for convenience it chose not to. After years, even decades of indulgence it is now forced to confront the problem repaying everything within a short space of time.

Government revenue that should have been raised over many years or decades must now be raised within a few years. This is the austerity that accompanies a debt crisis. Governments must cut expenditure or raise taxes sharply. Had this been done over the long periods that the debt was accumulating there would be far less pressure, but when it has to be raised within a short period of time it creates a huge shock.

It is important to note that while the debt crisis is single debilitating event, the problems are those that have accumulated over a long time. None of this is recalled when the crisis breaks, the public eye is focused only on the aftermath, not the causes.

In a crisis countries call on the IMF to help. The benefit of having the IMF is that by underwriting a Government’s plans it lends credibility to the restructuring. Recall that the reason the Government is confronted with a debt crisis in the first place is because the lenders have lost confidence in the Government and refuse to lend it any more. Thus the IMF becomes necessary for an orderly restructuring process.

Depending on how bad the situation is the IMF can also lend money to the Government, these funds can help the Government tide over the immediate problem and reduce the pain of the adjustment. The IMF money provides a cushion which allows a longer period over which expenditure can be cut and/or taxes raised. 

People tend to associate the IMF with the austerity measures that become necessary when the debt problem crystallises and they are blamed for the problems. The fact is even without the IMF the Government would still be faced with the same problem of raising taxes or cutting expenditure.

This, in a nutshell is the problem that Sri Lanka faces. The country has borrowed to meet its recurrent expenditure (including interest payments) as well as infrastructure. The infrastructure projects have not yielded an adequate enough return to finance the debts, which is why it becomes a burden on the taxpayer. 

Now that the crisis is breaking there is little that can be done except manage it sensibly with a view to minimising the damage. Postponing the problem will only make it worse.

More importantly, what can be done to prevent it from recurring? Following the crisis of 2008 the EU put a framework for economic governance consisting of three pillars; monitoring, prevention, correction.       

“The European Union’s economic governance framework aims to monitor, prevent, and correct problematic economic trends that could weaken national economies or negatively affect other EU countries.”

The key areas that need to be monitored are the budget deficit and the means by which it is financed – either debt or money creation by the Central Bank. 

In the EU the monitoring of member states public finances is done by the European Commission, the preventive measures are found in the Stability and Growth Pact (which sets budget targets) and the corrective mechanism is the Excessive Budget Procedure/Excessive Imbalance Procedure. The EBT requires member states that run excessive budget deficits of more than 3% of GDP, or which fail to reduce their excessive debts (above 60% of GDP) at a sufficient pace to follow a particular set of rules to correct the problems.

Oversight

For Sri Lanka the monitoring would need to be done by Parliament and its oversight committees, the Committee on Public Accounts (COPA) and the Committee on Public Enterprises (COPE). The scrutiny of finances is carried out by the Auditor General (AG). These key bodies need to be independent and competent. Both suffer from a lack of capacity which needs to be addressed separately from the institutional reforms. The mandate of the AG should be modeled on the National Audit Office of the UK.

Sri Lanka requires rules to control

a) the budget deficit,

b) levels of debt,

c) money creation by the Central Bank.

The foundation for (a) is available in the Fiscal Responsibility Act of 2002. This needs to be strengthened along with the adoption of Medium Term Expenditure Frameworks for spending (the EU works with Medium Term Budget objectives). These would replace the annual budget process. Some amendments to the Central Bank Act and operating procedures will be required.

Botswana's success and inclusive institutions: excerpts from 'Why Nations Fail'

I have written something before about, 'Why Nations Fail,’ an excellent book by Daron Acemoglu and James A. Robinson. This is another excerpt, this time they try apply their ideas to explain Botswana's success. The story of successful management of natural resources in Botswana is well-known, the question is why did it take place here, but not in, say, Sierra Leone, or Zimbabwe?

A few short excerpts below summarise their argument:

"Early stages of independence would play out very differently in Botswana, again largely because of the background created by Tswana historical institutions. In this, Botswana exhibited many parallels to England on the verge of the Glorious Revolution. England had achieved rapid political centralization under the Tudors and had the Magna Carta and the tradition of Parliament that could at least aspire to constrain monarchs and ensure some degree of pluralism. Botswana also had some amount of state centralization and relatively pluralistic tribal institutions that survived colonialism…..

…..At independence the Tswana emerged with a history of institutions enshrining limited chieftaincy and some degree of accountability of chiefs to the people. The Tswana were of course not unique in Africa for having institutions like this, but they were unique in the extent to which these institutions survived the colonial period unscathed…..

….The first big diamond discovery was under Ngwato land, Seretse Khama’s traditional homeland. Before the discovery was announced, Khama instigated a change in the law so that all subsoil mineral rights were vested in the nation, not the tribe. This ensured that diamond wealth would not create great inequities in Botswana…..

…...Another facet of political centralization was the effort to unify the country further, for example, with legislation ensuring that only Setswana and English were to be taught in school. Today Botswana looks like a homogenous country, without the ethnic and linguistic fragmentation associated with many other African nations. But this was an outcome of the policy to have only English and a single national language, Setswana, taught in schools to minimize conflict between different tribes and groups within society. The last census to ask questions about ethnicity was the one taken in 1946, which revealed considerable heterogeneity in Botswana.

….Botswana broke the mold because it was able to seize a critical juncture, postcolonial independence, and set up inclusive institutions. The Botswana Democratic Party and the traditional elites, including Khama himself, did not try to form a dictatorial regime or set up extractive institutions that might have enriched them at the expense of society. This was once again an outcome of the interplay between a critical juncture and existing institutions."

I have reproduced the chapter in full below. Its a fascinating book that I would recommend to anyone interested in understanding this question.

ON SEPTEMBER 6, 1895, the ocean liner Tantallon Castle docked at Plymouth on the southern coast of England. Three African chiefs, Khama of the Ngwato, Bathoen of the Ngwaketse, and Sebele of the Kwena, disembarked and took the 8:10 express train to Paddington Station, London. The three chiefs had come to Britain on a mission: to save their and five other Tswana states from Cecil Rhodes. The Ngwato, Ngwaketse, and Kwena were three of the eight Tswana states comprising what was then known as Bechuanaland, which would become Botswana after independence in 1966.

The tribes had been trading with Europeans for most of the nineteenth century. In the 1840s, the famous Scottish missionary David Livingstone had traveled extensively in Bechuanaland and converted King Sechele of the Kwena to Christianity. The first translation of the Bible into an African language was in Setswana, the language of the Tswana. In 1885 Britain had declared Bechuanaland a protectorate. The Tswana were content with the arrangement, as they thought this would bring them protection from further European invasions, particularly from the Boers, with whom they had been clashing since the Great Trek in 1835, a migration of thousands of Boers into the interior to escape from British colonialism. The British, on the other hand, wanted control of the area to block both further expansions by the Boers (this page–this page) and possible expansions by Germans, who had annexed the area of southwest Africa corresponding to today’s Namibia. The British did not think that a full-scale colonization was worthwhile. The high commissioner Rey summarized the attitudes of the British government in 1885 clearly: “We have no interest in the country to the north of the Molope [the Bechuanaland protectorate], except as a road to the interior; we might therefore confine ourselves for the present to preventing that part of the Protectorate being occupied by either filibusters or foreign powers doing as little in the way of administration or settlement as possible.”

But things changed for the Tswana in 1889 when Cecil Rhodes’s British South Africa Company started expanding north out of SouthAfrica, expropriating great swaths of land that would eventually become Northern and Southern Rhodesia, now Zambia and Zimbabwe. By 1895, the year of the three chiefs’ visit to London, Rhodes had his eye on territories to the southwest of Rhodesia, Bechuanaland. The chiefs knew that only disaster and exploitation lay ahead for territories if they fell under the control of Rhodes. Though it was impossible for them to defeat Rhodes militarily, they were determined to fight him any way they could. They decided to opt for the lesser of two evils: greater control by the British rather than annexation by Rhodes. With the help of the London Missionary Society, they traveled to London to try to persuade Queen Victoria and Joseph Chamberlain, then colonial secretary, to take greater control of Bechuanaland and protect it from Rhodes.

On September 11, 1895, they had their first meeting with Chamberlain. Sebele spoke first, then Bathoen, and finally Khama. Chamberlain declared that he would consider imposing British control to protect the tribes from Rhodes. In the meantime, the chiefs quickly embarked on a nationwide speaking tour to drum up popular support for their requests. They visited and spoke at Windsor and Reading, close to London; in Southampton on the south coast; and in Leicester and Birmingham, in Chamberlain’s political support base, the Midlands. They went north to industrial Yorkshire, to Sheffield, Leeds, Halifax, and Bradford; they also went west to Bristol and then up to Manchester and Liverpool.

Meanwhile, back in South Africa, Cecil Rhodes was making preparations for what would become the disastrous Jameson Raid, an armed assault on the Boer Republic of the Transvaal, despite Chamberlain’s strong objections. These events likely made Chamberlain much more sympathetic to the chiefs’ plight than he might have been otherwise. On November 6, they met with him again in London. The chiefs spoke through an interpreter:

Chamberlain: I will speak about the lands of the Chiefs, and about the railway, and about the law which is to be observed in the territory of the Chiefs … Now let us look at the map … We will take the land that we want for the railway, and no more.

Khama: I say, that if Mr. Chamberlain will take the land himself, I will be content.

Chamberlain: Then tell him that I will make the railway myself by the eyes of one whom I will send and I will take only as much as I require, and will give compensation if what I take is of value.

Khama: I would like to know how [i.e., where] the railway will go.

Chamberlain: It shall go through his territory but shall be fenced in, and we will take no land.

Khama: I trust that you will do this work as for myself, and treat me fairly in this matter.

Chamberlain: I will guard your interests.

The next day, Edward Fairfield, at the Colonial Office, explained Chamberlain’s settlement in more detail:

Each of the three chiefs, Khama, Sebele and Bathoen, shall have a country within which they shall live as hitherto under the protection of the Queen. The Queen shall appoint an officer to reside with them. The chiefs will rule their own people much as at present.

Rhodes’s reaction to being outmaneuvered by the three African chiefs was predictable. He cabled to one of his employees, saying, “I do object to being beaten by three canting natives.”

The chiefs in fact had something valuable that they had protected from Rhodes and would subsequently protect from British indirect rule. By the nineteenth century, the Tswana states had developed a core set of political institutions. These involved both an unusual degree, by sub- Saharan African standards, of political centralization and collective decision-making procedures that can even be viewed as a nascent, primitive form of pluralism. Just as the Magna Carta enabled the participation of barons into the political decision-making process and put some restrictions on the actions of the English monarchs, the political institutions of the Tswana, in particular the kgotla, also encouraged political participation and constrained chiefs. The South African anthropologist Isaac Schapera describes how the kgotla worked as follows:

all matters of tribal policy are dealt with finally before a general assembly of the adult males in the chief’s kgotla (council place). Such meetings are very frequently held … among the topics discussed … are tribal disputes, quarrels between the chief and his relatives, the imposition of new levies, the undertaking of new public works, the promulgation of new decrees by the chief … it is not unknown for the tribal assembly to overrule the wishes of the chief. Since anyone may speak, these meetings enable him to ascertain the feelings of the people generally, and provide the latter with an opportunity of stating their grievances. If the occasion calls for it, he and his advisers may be taken severely to task, for the people are seldom afraid to speak openly and frankly.

Beyond the kgotla, the Tswana chieftaincy was not strictly hereditary but open to any man demonstrating significant talent and ability. Anthropologist John Comaroff studied in detail the political history of another of the Tswana states, the Rolong. He showed that though in appearance the Tswana had clear rules stipulating how the chieftancy was to be inherited, in practice these rules were interpreted to remove bad rulers and allow talented candidates to become chief. He showed that winning the chieftancy was a matter of achievement, but was then rationalized so that the successful competitor appeared to be the rightful heir. The Tswana captured this idea with a proverb, with a tinge of constitutional monarchy: kgosi ke kgosi ka morafe, “The king is king by the grace of the people.”

The Tswana chiefs continued in their attempts to maintain their independence from Britain and preserve their indigenous institutions after their trip to London. They conceded the construction of railways in Bechuanaland, but limited the intervention of the British in other aspects of economic and political life. They were not opposed to the construction of the railways, certainly not for the same reasons as the Austro-Hungarian and Russian monarchs blocked railways. They just realized that railways, like the rest of the policies of the British, would not bring development to Bechuanaland as long as it was under colonial control. The early experience of Quett Masire, president of independent Botswana from 1980 to 1998, explains why. Masire was an enterprising farmer in the 1950s; he developed new cultivation techniques for sorghum and found a potential customer in Vryburg Milling, a company located across the border in South Africa. He went to the railway station master at Lobatse in Bechuanaland and asked to rent two rail trucks to move his crop to Vryburg. The station master refused. Then he got a white friend to intervene. The station master reluctantly agreed, but quoted Masire four times the rate for whites. Masire gave up and concluded, “It was the practice of the whites, not just the laws prohibiting Africans from owning freehold land or holding trading licenses that kept blacks from developing enterprises in Bechuanaland.”

All in all, the chiefs, and the Tswana people, had been lucky. Perhaps against all odds, they succeeded in preventing Rhodes’s takeover. As Bechuanaland was still marginal for the British, the establishment of indirect rule there did not create the type of vicious circle playing out in Sierra Leone. They also avoided the kind of colonial expansion that went on in the interior of South Africa that would turn those lands into reservoirs of cheap labor for white miners or farmers. The early stages of the process of colonization are a critical juncture for most societies, a crucial period during which events that will have important long-term consequences for their economic and political development transpire. As we discussed in chapter 9, most societies in sub-Saharan Africa, just as those in South America and South Asia, witnessed the establishment or intensification of extractive institutions during colonization. The Tswana would instead avoid both intense indirect rule and the far worse fate that would have befallen them had Rhodes succeeded in annexing their lands. This was not just blind luck, however. It was once again a result of the interplay between the existing institutions, shaped by the institutional drift of the Tswana people, and the critical juncture brought about by colonialism. The three chiefs had made their own luck by taking the initiative and traveling to London, and they were able to do this because they had an unusual degree of authority, compared with other tribal leaders in sub- Saharan Africa, owing to the political centralization the Tswana tribes had achieved, and perhaps they also had an unusual degree of legitimacy, because of the modicum of pluralism embedded in their tribal institutions.

Another critical juncture at the end of the colonial period would be more central to the success of Botswana, enabling it to develop inclusive institutions. By the time Bechuanaland became independent in 1966 under the name Botswana, the lucky success of chiefs Sebele, Bathoen, and Khama was long in the past. In the intervening years, the British invested little in Bechuanaland. At independence, Botswana was one of the poorest countries in the world; it had a total of twelve kilometers of paved roads, twenty-two citizens who had graduated from university, and one hundred from secondary school. To top it all off, it was almost completely surrounded by the white regimes of South Africa, Namibia, and Rhodesia, all of which were hostile to independent African countries run by blacks. It would have been on few people’s list of countries most likely to succeed. Yet over the next forty-five years, Botswana would become one of the fastest-growing countries in the world. Today Botswana has the highest per capita income in sub-Saharan Africa, and is at the same level as successful Eastern European countries such as Estonia and Hungary, and the most successful Latin American nations, such as Costa Rica.

How did Botswana break the mold? By quickly developing inclusive economic and political institutions after independence. Since then, it has been democratic, holds regular and competitive elections, and has never experienced civil war or military intervention. The government set up economic institutions enforcing property rights, ensuring macroeconomic stability, and encouraging the development of an inclusive market economy. But of course, the more challenging question is, how did Botswana manage to establish a stable democracy and pluralistic institutions, and choose inclusive economic institutions, while most other African countries did the opposite? To answer this, we have to understand how a critical juncture, this time the end of colonial rule, interacted with Botswana’s existing institutions.

In most of sub-Saharan Africa—for example, for Sierra Leone and Zimbabwe—independence was an opportunity missed, accompanied by the re-creation of the same type of extractive institutions that existed during the colonial period. Early stages of independence would play out very differently in Botswana, again largely because of the background created by Tswana historical institutions. In this, Botswana exhibited many parallels to England on the verge of the Glorious Revolution. England had achieved rapid political centralization under the Tudors and had the Magna Carta and the tradition of Parliament that could at least aspire to constrain monarchs and ensure some degree of pluralism. Botswana also had some amount of state centralization and relatively pluralistic tribal institutions that survived colonialism. England had a newly forming broad coalition, consisting of Atlantic traders, industrialists, and the commercially minded gentry, that was in favor of well-enforced property rights. Botswana had its coalition in favor of secure procedure rights, the Tswana chiefs, and elites who owned the major assets in the economy, cattle. Even though land was held communally, cattle was private property in the Tswana states, and the elites were similarly in favor of well-enforced property rights. All this of course is not denying the contingent path of history. Things would have turned out very differently in England if parliamentary leaders and the new monarch had attempted to use the Glorious Revolution to usurp power. Similarly, things could have turned out very differently in Botswana, especially if it hadn’t been so fortunate as to have leaders such as Seretse Khama, or Quett Masire, who decided to contest power in elections rather than subvert the electoral system, as many post independence leaders in sub-Saharan Africa did.

At independence the Tswana emerged with a history of institutions enshrining limited chieftaincy and some degree of accountability of chiefs to the people. The Tswana were of course not unique in Africa for having institutions like this, but they were unique in the extent to which these institutions survived the colonial period unscathed. British rule had been all but absent. Bechuanaland was administered from Mafeking, in South Africa, and it was only during the transition to independence in the 1960s that the plans for the capital of Gaborone were laid out. The capital and the new structures there were not meant to expunge the indigenous institutions, but to build on them; as Gaborone was constructed, new kgotlas were planned along with it.

Independence was also a relatively orderly affair. The drive for independence was led by the Botswana Democratic Party (BDP), founded in 1960 by Quett Masire and Seretse Khama. Khama was the grandson of King Khama III; his given name, Seretse, means “the clay that binds together.” It was to be an extraordinarily apt name. Khama was the hereditary chief of the Ngwato, and most of the Tswana chiefs and elites joined the Botswana Democratic Party. Botswana didn’t have a marketing board, because the British had been so uninterested in the colony. The BDP quickly set one up in 1967, the Botswana Meat Commission. But instead of expropriating the ranchers and cattle owners, the Meat Commission played a central role in developing the cattle economy; it put up fences to control foot-and-mouth disease and promoted exports, which would both contribute to economic development and increase the support for inclusive economic institutions.

Though the early growth in Botswana relied on meat exports, things changed dramatically when diamonds were discovered. The management of natural resources in Botswana also differed markedly from that in other African nations. During the colonial period, the Tswana chiefs had attempted to block prospecting for minerals in Bechuanaland because they knew that if Europeans discovered precious metals or stones, their autonomy would be over. The first big diamond discovery was under Ngwato land, Seretse Khama’s traditional homeland. Before the discovery was announced, Khama instigated a change in the law so that all subsoil mineral rights were vested in the nation, not the tribe. This ensured that diamond wealth would not create great inequities in Botswana. It also gave further impetus to the process of state centralization as diamond revenues could now be used for building a state bureaucracy and infrastructure and for investing in education. In Sierra Leone and many other sub-Saharan African nations, diamonds fueled conflict between different groups and helped to sustain civil wars, earning the label Blood Diamonds for the carnage brought about by the wars fought over their control. In Botswana, diamond revenues were managed for the good of the nation.

The change in subsoil mineral rights was not the only policy of state building that Seretse Khama’s government implemented. Ultimately, the Chieftaincy Act of 1965 passed by the legislative assembly prior to independence, and the Chieftaincy Amendment Act of 1970 would continue the process of political centralization, enshrining the power of the state and the elected president by removing from chiefs the right to allocate land and enabling the president to remove a chief from office if necessary. Another facet of political centralization was the effort to unify the country further, for example, with legislation ensuring that only Setswana and English were to be taught in school. Today Botswana looks like a homogenous country, without the ethnic and linguistic fragmentation associated with many other African nations. But this was an outcome of the policy to have only English and a single national language, Setswana, taught in schools to minimize conflict between different tribes and groups within society. The last census to ask questions about ethnicity was the one taken in 1946, which revealed considerable heterogeneity in Botswana. In the Ngwato reserve, for example, only 20 percent of the population identified themselves as pure Ngwato; though there were other Tswana tribes present, there were also many non-Tswana groups whose first language was not Setswana. This underlying heterogeneity has been modulated both by the policies of the postindependence government and by the relatively inclusive institutions of the Tswana tribes in the same way as heterogeneity in Britain, for example, between the English and the Welsh, has been modulated by the British state. The Botswanan state did the same. Since independence, the census in Botswana has never asked about ethnic heterogeneity, because in Botswana everyone is Tswana.

Botswana achieved remarkable growth rates after independence because Seretse Khama, Quett Masire, and the Botswana Democratic Party led Botswana onto a path of inclusive economic and political institutions. When the diamonds came on stream in the 1970s, they did not lead to civil war, but provided a strong fiscal base for the government, which would use the revenues to invest in public services. There was much less incentive to challenge or overthrow the government and control the state. Inclusive political institutions bred political stability and supported inclusive economic institutions. In a pattern familiar from the virtuous circle described in chapter 11, inclusive economic institutions increased the viability and durability of inclusive political institutions.

Botswana broke the mold because it was able to seize a critical juncture, postcolonial independence, and set up inclusive institutions. The Botswana Democratic Party and the traditional elites, including Khama himself, did not try to form a dictatorial regime or set up extractive institutions that might have enriched them at the expense of society. This was once again an outcome of the interplay between a critical juncture and existing institutions. As we have seen, differently from almost anywhere else in sub-Saharan Africa, Botswana already had tribal institutions that had achieved some amount of centralized authority and contained important pluralistic features. Moreover, the country had economic elites who themselves had much to gain from secure property rights.

No less important, the contingent path of history worked in Botswana’s favor. It was particularly lucky because Seretse Khama and Quett Masire were not Siaka Stevens and Robert Mugabe. The former worked hard and honestly to build inclusive institutions on the foundations of the Tswanas’ tribal institutions. All this made it more likely that Botswana would succeed in taking a path toward inclusive institutions, whereas much of the rest of sub-Saharan Africa did not even try, or failed outright.  

Successful contact tracing and the purpose of lockdowns

Sri Lanka's has experienced a spike in Covid-19 detections since early October and the authorities have responded with a series of localised curfews, shutting down parts of the country, mostly in the Western province. While the centre of the city is now open some suburbs (eg Dematagoda, Borella) have been under curfew for about three weeks while parts of the Western province (eg Negombo) have been under curfew for a month, if not longer.

A lockdown suppresses the disease for a while and slows its spread. While it does not eliminate the disease it buys time while measures to increase public health care capacity (procuring emergency hospital space, breathing ventilators, medical protective equipment, and testing kits) are put in place. It also allows contact tracing to take place.  

"if you can find infected cases, isolate and treat them, and trace the close contacts who they might have infected, and isolate them too, then you can keep much of the infection out of the general population."

This of course is most effective when the caseload is low, if the number of cases is high then the number of contacts to trace multiples which means many more contact tracers have to be employed and much more tests need to be done. Sri Lanka's strategy has been largely about tracing and isolating contacts which has been done with the assistance of the military intelligence and other service units.  

If all contacts are traced and properly isolated then the spread can be slowed or even perhaps stopped completely but this requires specialised skills. 

"Case investigation and contact tracing is a specialized skill. To be done effectively, it requires people with the training, supervision, and access to social and medical support for patients and contacts. Requisite knowledge and skills for case investigators and contact tracers include, but are not limited to:

• An understanding of patient confidentiality, including the ability to conduct interviews without violating confidentiality (e.g., to those who might overhear their conversations)
• Understanding of the medical terms and principles of exposure, infection, infectious period, potentially infectious interactions, symptoms of disease, pre-symptomatic and asymptomatic infection
• Excellent and sensitive interpersonal, cultural sensitivity, and interviewing skills such that they can build and maintain trust with patients and contacts
• Basic skills of crisis counseling, and the ability to confidently refer patients and contacts for further care if needed
• Resourcefulness in locating patients and contacts who may be difficult to reach or reluctant to engage in conversation
• Understanding of when to refer individuals or situations to medical, social, or supervisory resources
• Cultural competency appropriate to the local community"

Public trust is essential for contact tracing to work. People need to volunteer information so that potential cases can be tested and their contacts traced. If people are fearful then they are less likely to visit hospitals or volunteer information. There are a number of reasons why I believe this is low.

First, the worry uppermost in people's mind is that they will be shipped off to harsh quarantine centres with little in the way of facilities. The authorities have supposedly said that people can now isolate at home instead of being sent to a centre but given the lack of consistency in policy how many will believe this?

Second, the sensationalist approach by the media that portrayed this like a cricket match; daily scores of  infections and deaths accompanied by gleeful comparisons with other countries to show that we were 'winning the match'. The public bought into this and seem quite obsessed with the whole issue. 

Third, this approach leads to an 'us' v 'them', mentality, the disease is the enemy and the campaign as a war. This meant that victims became the enemy and were stigmatised. The guide emphasises how patient confidentiality needs to be maintained:

"to protect patient privacy, contacts are only informed that they may have been exposed to a patient with the infection. They are not told the identity of the patient who may have exposed them."

It is the medical professionals who should do the contacting, not the potential patient. In Sri Lanka the authorities paste posters on people's houses warning the public of potential infection which creates stigma while the public helpfully circulates lists of potential contacts leaked from various sources or concocted from somewhere.

Given this environment how many will seek treatment in a hospital for a cough or a sniffle? How many will voluntarily provide information on all their contacts? They may delay treatment until acute symptoms set in.

Undoubtedly the military intelligence are well experienced in extracting information from people but can they get all the information needed? 

The authorities are cremating the bodies of victims but Muslims say this practice is against their religious beliefs. Will this dissuade them from seeking treatment or divulging information? 

For successful contact tracing what percentage of the contacts need to be successfully identified and isolated? I don't have an answer but it is a complex task.

"Another consideration is whether the system identifies most – if not all – contacts an infected person has had during their infectious period. People may not recall (or choose not to reveal) their contacts. It is also not straightforward working out who has had significant contact. The current definition assumes “significant” to mean close proximity (less than 2 metres) and prolonged contact (more than 15 minutes). These are arbitrary thresholds.

Contact tracing is also laborious and time consuming. A study of contact tracers in Sheffield reported that each interview with an infected person to identify their contacts took around 80 minutes. The average number of significant contacts identified for each person infected with COVID-19 – around 30 contacts per case – was also high. Consequently, the workload involved is significant."

The logistics of this become well-nigh impossible if the caseload is large. In sum, even with extensive curfews, the process of contact tracing may fail to identify sufficient numbers of potential victims which means the curfew can only provide a temporary suppression in transmission.

There will be increases in the number of cases following the easing of curfew but the response should be calibrated within the framework of containment, not resorting to repeated curfews. Norman Loayza of the World Bank  warns that:

“Worse than a lockdown is a series of repeated and uncertain lockdowns. The risk of second and third waves of infection is large in populations with low immunity. The prospect of repeated and uncertain lockdowns can devastate the economy and worsen human suffering beyond comprehension.”

    

 

 

The recent increase in COVID cases needs a pragmatic response

Sri Lanka’s most recent outbreaks of Covid are spreading panic. The authorities have reacted with limited curfews and heavy handed isolation; rounding up suspected contacts and bundling them away into inhospitable quarantine camps. Activists have complained of a militarised approach to a public health problem. Similar stories were reported from China. Are the authorities are simply following a Chinese model?

There is also a lot of ire directed towards Brandix, where the first new cases were detected.

Lets try and put the issues in perspective.

People seem to have panicked because they believed the country to be free of the disease. It’s ‘sudden’ reappearance seems to have caused a shock. Were we really free of the disease? I think this was largely a case of wishful thinking. This is not a problem that will simply disappear, however hard we may wish otherwise.

Dr Ranan Eliya of the Institute of Health Policy said as much in March this year and in April warned of community spread.

He also touched the core of the current issue when he said “A competent public health response cannot blame people for its failure – it only indicates the policy itself was badly designed. Blaming the public is an admission of failure.”

What we see now is victims of the disease being blamed for spreading it and being treated as enemies, to be rounded up and imprisoned to keep the public safe.

This approach (even ignoring all the other associated problems) can only work if the disease was eradicated in the first place. Prof. S.B. Agampodi, Professor of Community Medicine, at the Rajarata University also raised the problem of community spread in an interview this week.

“All indicators are that community transmission has been around in the country for some time and it would be very difficult to pinpoint whether the infection started in the Minuwnagoda factory of Brandix Apparel Limited or outside,”

“he explains that when looking at the numbers, there simply cannot be 1,000 positives within the factory in two weeks”.

A response based on short-term knee jerk reactions is not good enough. It’s good politics to ‘show’ quick results but not good policy. This adhocracy is unfortunately only too familiar to observers of economic policy.

The worry is that the government imposes another wide-ranging curfew.

I have wondered before whether lockdowns are an appropriate containment measure for the pandemic in poorer countries. A recent paper (that has not been peer reviewed) also posits that they are not.

One of the aims of a lockdown is to buy time - to allow the capacity of the health care system to be expanded. The problem in poor countries is that the healthcare systems may already be overstretched which means that there is little likelihood of being able to reduce the caseload to a level that is within the capacity of the healthcare system. (ie an already overloaded system cannot cope even with a reduced caseload).

"The healthcare systems in poor countries have few hospital beds and ventilators per capita, and are predicted to be unable to absorb a rapid influx of COVID-19 patients. This means, however, that flattening the curve of the disease to fall within the capacity of the healthcare system may not be feasible, no matter the extent of the lockdown or mitigation efforts employed."

Sri Lanka seems to face this issue, there are only around 500 ICU beds. A recent gift of 200 ventilators from the US has expanded this but capacity seems low. Not much attention seems to have gone into its expansion either.

A lockdown does slow the spread of the disease but the consequence is that the resultant reduction in economic activity results in income losses. Richer countries try to compensate for this with increased welfare payments. Poorer countries with weak social protection schemes are unable to do this, so a greater part of the population suffers.

"Many more workers in poor countries are self-employed or in the informal sector and depend on daily wages to feed their families. In the absence of strong social protection and insurance, the cost imposed by social (and economic) distancing may be large in terms of immediate deprivation and hunger. As a result compliance rates with lock-down orders or social distancing guidelines may be lower in countries with weaker enforcement capacity."

The Labour Force Survey for 2019 (p37) estimates that around 57% of Sri Lanka’s workforce is informal. How did these people survive the curfew? There is no published data but I believe some development agencies did a few surveys and it would be good to have some data to go on.

The few informal conversations that I had with people, I was told that they survived by borrowing money together with what limited handouts they received. The question is, if they are to be subjected to another curfew, will it push them into deeper debt? Could this lead them into a poverty trap? A long term cycle of poverty? The longer the lockdown, the greater the likelihood of debt accumulating. Considering that we already endured eleven weeks of curfew there is a real danger of this. Could another extended curfew condemn a large section of the population to permanent poverty? Policymakers must not ignore this question and in the event a curfew is contemplated adequate relief needs to be provided.

With relief, the government faces two problems – the first that there is no proper mechanism to deliver relief. Samurdhi, highly politicised and poorly targeted, is thought is thought to reach only half the intended beneficiaries. There is a need to build a proper social registry, something the Yahapalanya regime started with World Bank assistance but which is probably yet incomplete. It may not include the whole of the informal sector either. Completing this should be a priority.

The other, perennial problem is the lack of funds – large budget deficits and already elavated debt, both problems made much worse by tax giveaways last year. The solution would be to look to aid, concessionary finance (where available) or resort to money printing, in that order.

In weighing costs and benefits I have been trying to think of this in terms of mortality rates and the costs of livelihood disruption, which is similar to the approach by Barnett-Howell and Mobarak-(but they use a proper model for this, of which more later).

If we look at the mortality rates, the highest in a country not in a war zone seems to be Mexico (10.2%) followed by Italy (9.1%), Ecudor (8.1%). Taking the worst case, assuming the entirety of the population is infected then 10% will die. A prolonged lockdown may save the 10% but it will disrupt the lives of the 100%. Of those disrupted, the 43% in the formal sector will suffer less.

Assuming people in the formal sector keep their jobs (not all will) they will probably be paid some part of their salary (as far as I know only the bank staff and government servants received full pay, others were paid reduced amounts) so they are better placed to survive.

The 57% in the informal sector will suffer more, many may have no income. So to save 10% at least 57% must suffer. If it is a temporary suffering and does not result in permanent increases in poverty perhaps this can be justified. There needs to be a proper assessment of these trade-offs.

It may be an idea to turn to the methodology used by the authors of the paper I mentioned previously. Perhaps either they or someone else could run the models that they used with local data?

To determine the relative value of suppression strategies in rich versus poor countries, we embed estimates of the country-specific costs of mortality developed by Viscusi and Masterman (2017) into the influential epidemiological model developed by the the Imperial College London COVID19 Response Team that predicts mortality from the spread of the virus (Ferguson et al., 2020; Walker et al., 2020)

One reason for the higher mortality rates in rich countries is the higher proportion of elderly (an average of 17.4%) than in poor countries (average 3%). The elderly are more vulnerable so deaths in countries with an ageing population are likely to be much higher than in a country with a younger population, other things being equal.

Thus in poorer countries with younger populations deaths are likely to be less, other factors being equal. Lockdowns therefore will save proportionately less lives in poorer countries.

Sri Lanka stands in-between, it has an ageing society although not as elderly as some of the richer countries.The population over 60 was 12.4% in 2016, which is closer to the older countries than to the younger ones. (For comparison, the elderly account for 22.8% of the population of Italy, 18.3% in the UK and 16% in the US).

The ageing argument therefore not as important a factor in Sri Lanka but for reasons of climate, lifestyle or greater immunity - the BCG vaccine being a possible (but not proven) cause, the death rate does not seem to be very high. Again we don’t have good data, the official statistics being impaired by limited testing but we don't appear to be experiencing a very visible massive increase in deaths.

How should we think about policy for Sri Lanka?

For a start policymakers should have been be gathering data on the costs of the curfew, how livelihoods were affected to assess the costs associated with the exercise. They should also be looking to simple, measures that reduce risks without unduly disrupting livelihoods, the paper suggests some measures:

1. Masks and home-made face coverings are comparatively cheap. A universal mask wearing requirement when workers leave their homes is likely feasible for almost all countries to implement.

2. Targeted social isolation of the elderly and other at-risk groups, while permitting productive individuals with lower risk profiles to continue working. Given the prevalence of multi-generational households, this would likely require us to rely on families to make decisions to protect vulnerable members within each household.

3. Improving access to clean water, hand-washing and sanitation, and other policies to decrease the viral load.

4. Widespread social infl uence and information campaigns to encourage behaviors that slow the spread of disease, but do not undermine economic livelihoods. This could include restrictions on the size of religious and social congregations, or programs to encourage community and religious leaders to endorse safer behaviors and communicate them clearly.