Developing More Inclusive Eco-Political Institutions Through Constitutional Reform: The Case of Sri Lanka

Abstract

Purpose - Exclusive eco-political institutions are rife in many developing countries, where rent-seeking activities are often politically and institutionally entrenched. Based on recent politico-economic literature, we suggest that, for countries which as a value judgment prefer democracy, inclusive institutions are a precondition for sustainable economic growth, essential to achieving Millennium Development Goals (MDGs); and highlight constitutional reform as a means of achieving prosperity through inclusive politico-economic institutions. At the very least, prior resolution of collective action problems is required. Approach and Findings - Using Sri Lanka as a case study, we demonstrate how constitutional reforms have rendered Sri Lanka – hitherto a well-established democracy – less democratic, and how they have helped to create non-inclusive institutions. Implications - Assuming Sri Lanka seeks to remain more democratic than dictatorial, we highlight the need for reversing constitutional reforms in recent decades to facilitate economic development through more inclusive institutions in Sri Lanka, to better seek to achieve its MDGs. Originality/value - Acemoglu and Robinson (2012) have argued that ‘inclusive institutions’ make some parts of the world richer and are the ‘secret’ to sustainable economic growth and prosperity, while ‘extractive institutions’ make other parts of the world poorer. We disagree, largely because of the evidence on the Chinese experience, and suggest modifying the Acemoglu and Robinson thesis to the conditional form: if, as a value judgement, a society prefers a genuine social democracy, then more inclusive eco-political institutions are a precondition to sustainable economic development and growth. We extend the logic of the argument by pointing out how constitutional provisions affect the inclusiveness of institutions and their governance, which in turn affect economic growth, income distribution, and the achievement of MDGs.