Tag: tax

Before we go to the ballot box again, we must understand why the first elected government was so short-lived. Some point to Nasheed’s activist personality, others to Gayoom’s control over the judiciary, and many cite political opponents’ impatience to attain power. All these highlight the dominance of personalities in our political landscape, and the lack of institutionalism in political behavior and state affairs. One underlying factor, that has received little attention in the public domain, but is emerging as Waheed’s ministers dissect Nasheed’s policies, is the economy.

Incumbents generally avoid talking about sovereign debt, budget deficits, and budget cuts, unless they are criticising their opponent’s budget in a campaign trail. And the few times that a sitting president talks about his own budget, it is a glossed over version of how well the economy is doing, how the GDP will double in the coming year, how inflation is expected to fall, and how food and fuel prices will drop to affordable levels. The electorate is usually unaware of how serious the budget deficit is, and ignorant of the perplexities involved in budget cuts under a democratic government. So it is no surprise that the electorate judges its government unfairly when it comes to economic management. Most accept the hollow promises, and expect results, but governments that are strapped for cash, more often than not, cannot deliver.

This poses big problems for a developing country struggling to implement democracy. First, the pressure on incumbents to deliver in times of deficits threatens democratic institutionalisation. Nasheed, who was up for re-election, tried to deliver at any cost, and chose to bypass democratic practices to achieve quick results. Take for example the airport lease. To meet budget needs, Nasheed chose the bidder who offered the largest sum up front, not the bidder with the best plan. When the airport board resigned, he put together a new board overnight to force the deal amidst allegations of foul play. The opposition was no doubt disloyal and irresponsible under Nasheed, and attempted to block and discredit his administration on all fronts. Nasheed tackled these problems by choosing to interpret laws and regulations in his favor, which meant there was little conformity in the state of affairs. Alas, the process of democratic institutionalization was nipped in the bud.

But the deeper problem for democracy in Maldives is not this.

Corrupt practices, and the dominance of personalities over institutions are merely manifestations of a problem that runs deeper: It essentially boils down to the dilemma of maintaining democracy without its protectors, saviors, and messiahs, in other words, a middle class; a middle class that will prop up democracy because it is the most conducive system to protecting its economic interests, and values of individual autonomy and self-expression.

If a middle class exists in Maldives, it has neither the numbers, nor the voice, to stand up for democratic principles.

Agents of Democracy

Middles classes are central to democratic analyses for two reasons: they install democracy, and ensure that it is “the only game in town” and there to stay.

Historically, democracy was born out of revolutions led or hijacked by the bourgeois, the land-owning middle class. In the UK, democracy followed the Glorious Revolution of the 17th century where the bourgeois who had accumulated wealth over time, gained enough power in the Long Parliament to demand that the king trade some political power in return for the right to tax. Likewise, in France, a revolution planted the seeds of democracy. In the 1700s, the French bourgeoisie, aided by a peasant revolution, formed the Constituent Assembly in opposition to the Estates General, abolished feudalism, and established the first French Republic.

Several centuries later, the salience of the middle class for democracy is not lost on us. Political Scientist Francis Fukuyama wrote a paper recently asking, “Can liberal democracy survive the decline of the middle class?” In it, he argues that one of challenges to democracy today is the left’s inability to articulate a realistic agenda that has any hope of protecting a middle-class society.

A multiparty election in 2008 in Maldives was not a result of a mass movement, or a middle class led revolution. It was as much a coup from within against Gayoom by his own ministers, and pressure from outside by a group of courageous and determined individuals, and by foreign governments. For a short key duration, this medley of actors took upon themselves, the responsibilities of a middle class, and installed democracy in Maldives.

The Middle Class Dilemma

If the role of the middle class as initiators has been lacking in second and third wave democracies, its absence is all the more apparent in the aftermath of the first free and fair elections. Political scientists concede that the statement “No bourgeois, no democracy,” holds true in most cases. The theory goes that, industrialisation sets in motion a process of modernisation that penetrates all aspects of life, “bringing occupational specialisation, urbanisation, rising educational levels, rising life expectancy, and rapid economic growth.” In short, industrialisation sets in motion modernization that gives birth to a middle class that at once demand “their right to have rights.” The order is important: development leads to democracy, because it creates a middle class in whose self-interest it is to support democratic values. The history of democracy in the West suggests that the growth of a middle class must precede the successful installation of democracy.

This sequence of events- industrialisation, modernisation, democracy- poses a grave problem for us.

To create a middle class, there has to be development. But fostering development within a democratic framework is a serious challenge in low-income countries. Nasheed was handed this gargantuan task when he came to power in 2008. Indian Scholar Ashutosh Varshney explains India’s struggle to do the same: “India is attempting a transformation few nations in modern history have successfully managed: liberalising the economy within an established democratic order.It is hard to escape the impression that market interests and democratic principles are uneasily aligned in India today. The two are not inherently contradictory, but there are tensions between them that India’s leaders will have to manage carefully.”

Why? Because “market-based policies meant to increase the efficiency of the aggregate economy frequently generate short-term dislocations and resentment. In a democratic polity, this resentment often translates at the ballot box into a halt or a reversal of pro-market reforms.” Successful western democracies, the US, the U., and France installed democracies after their countries transitioned to capitalist modes of production and modernised. They liberalised their markets before universal suffrage.

Nasheed’s struggle

Absent development or a revolution that transforms the economy in favor of the many, the onus of creating a middle class falls on the nascent democratic government. Nasheed’s policy objectives were in line with creating a middle class. Whether he implemented market reforms because of serious budget deficits or because of a genuine concern with redistribution, is beside the point. Head on, and fully aware who held the reigns to campaign funds, Nasheed tackled the loaded question of how to shift from an economy that enriches a few, to one that increases the pie and divvies it up more equally.

All said and done, and numerous controversies over lease agreements, minimum wage bills, and the right to strike, his tax reforms were a revolutionary break with the past. It was a first attempt at usurping the status quo. There were more. The barter system- trading an island for a harbor, a sewerage system, or a housing project- drove down the value of uninhabited islands, threatened to increase supply, and drive down the value of existing tourism products. Not only did Nasheed increase supply, but islands were handed left and right to new entrants to the tourism industry, threatening the existing oligarchy. In short, if there was a democratic revolution in Maldives, it was during Nasheed’s administration, encapsulated in his controversial market reforms that attempted to usurp the status quo, and re-distribute wealth. It was messy, it was fraught with corruption, but it was the closest we came to one.

Whereas market reforms disproportionately affect the poor in neighboring India, the unique Maldivian economy dictated that the grand oligarchy, the tourism tycoons, bore the brunt of market reforms in Maldives. A backlash was to be expected.

Nasheed’s mistake

Nasheed administration’s struggles demonstrate the dissonance in democratic theory when applied in a postindustrial world. But he also made calls that were unnecessary, and aggravated the problem of consolidating democracy without a middle class.

One of Nasheed’s biggest mistakes was in trying to modernise the masses overnight, before his policies yielded results. In a parallel process (to his market reforms), and too late in the game, Nasheed attempted to modernise through rhetoric (the likes of “Medhumin Rally”), poor decision-making (SAARC monuments), and behavior that cast him as not Islamic enough. He challenged the majority’s most dearly held identity, which is growing to be a stronger Islamic identity. The process of modernising a people is a carefully measured process that requires a special focus on reform in the economic and social realms, so that wealth and intellect are distributed more equally. And it takes time.

So it is no surprise that despite building several harbors, installing a health post on every inhabited island, increasing housing units in urban areas, and implementing a tax system, people in the outer islands, who benefited more under Nasheed than Gayoom, continues to support Gayoom’s party over the MDP. In the local council elections, which served as a referendum on the MDP government, the MDP lost most of the council seats in the outer islands, despite a well-organised campaign, and over 100 island visits by Nasheed himself.

Given such realities, the next elected government should expect no immediate rewards from the masses at the ballot box contingent on policy successes, and must be wise enough to withstand a backlash from the wealthy in the face of controversial yet necessary market reforms. The next government we elect will face the same challenges Nasheed’s did, but it can avoid ad hoc and impulsive decision-making that contributed to his accelerated downfall.

Fostering development that creates a middle class within a democratic framework is a serious challenge, perhaps one that has very few success stories. But one thing is for certain: it requires a strategising leadership that is strong enough to stand up to the business elite, yet thoughtful enough to understand the nuances dictating democratic consolidation.

The way things are moving in Maldives, I doubt we will have an election before 2013. But a bigger threat for democracy in Maldives is, come Election Day, we may not have a strong and serious leadership to vote for. If the focus is only on an election date, we are giving our politicians a free ride to power, and passing on a second chance at democracy.

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