Sri Lanka’s Emerging Fiscal Cliff: Are We To Fall Off The Cliff Or Fly Over It?

By W.A Wijewardena -October 19, 2012

Dr. W.A. Wijewardena

Dr Jayasundera: Large government is not a problem

Sri Lanka’s top most policy administrator, Dr P.B Jayasundera, Secretary to the Treasury and Secretary to the Ministry of Economic Development, has for the first time admitted in public the daunting challenges he faces when balancing the purse of the country’s government.

Addressing the 30th Annual General Meeting of the Sri Lanka Administrative Service Association in Colombo last Tuesday, he is reported to have said that he does not believe in the pitfalls of a large government which, according to him, has not been proven by empirical economic evidence, but only the pitfalls of a complex administrative system that prevents the bureaucracy from delivering what it should deliver to the people efficiently and effectively.
Two days after this, delivering the prestigious Sujatha Jayawardena Memorial Oration again in Colombo, Dr Jayasundera is reported to have said that the 2013 Budget is being prepared by the Government under trying conditions because there have been adverse local and global developments that stifle the nation’s high growth momentum and, despite that, many want the government to give them more and more concessions presuming that the government has access to an enormous pool of resources.

A Large Government should be paid for by the citizens

Ironically, these two views expressed by the veteran economist appear to be contradicting each other. A large government is a large government despite its adherence to simple procedures demanding the lion’s share of a nation’s resources and those resources used by the government are a loss to the rest of the nation. In economics, what is lost by one has to produce more in the hands of its gainer if it is to justify its transfer from the first party to the other. Hence, a large government that does not produce more cannot justify its existence to society. As this writer has argued in the previous articles under this series, the tendency of the bureaucracy is to multiply itself because of certain inherent weaknesses in the relationship between the bureaucracy and the citizens. In a democracy, citizens’ interests are to be looked after by elected representatives but when there is poor governance in the system, the citizens are hit by double jeopardy, in the first instance by elected representatives and then by bureaucrats who will collude to work for their own benefits ignoring those of their principals. However, at the end of the day, the bill on account of the enlarged government and the enlarged bureaucracy has to be paid for by the citizens.

Small government multiplies by itself Read More