Saturday, June 21, 2008

Governance models for countries

Not sure how I came to thinking about this this topic morning (its early Saturday morning here in Sri Lanka) but I think the governance model that Norway has is quite interesting as a way to execute democracy.

Several years ago, on a flight back from London, I met Vidar Helegesen, the then Deputy Foreign Minister of Norway. He was then working towards establishing a peace deal between Sri Lanka and the LTTE, the terrorist group operating in Sri Lanka. Yes, he did manage to get a cease fire agreement in place but unfortunately no permanent deal was sorted out and of course we're back at war. But that's not the point of this blog entry!

Vidar was a very impressive guy. Upon chatting with him I was surprised to hear that he was not elected but rather appointed. The amazing thing was that not only the deputy ministers but also the minsters were actually professionals who were appointed to do the job! He himself was a lawyer who had done various international things before that and then became appointed as deputy foreign minister. Most people who take up these positions do not do it for ever- they take the job, finish it and go do other things later.

I think the Norwegian governance model may be the only really good way to execute democracy.

In the Norwegian govenance model, the people (basically, the shareholders of the country) elect a parliament (basically, a board). Getting elected to parliament doesn't mean you know how to execute foreign policy, build better roads or run the health system - it means you are responsible to the people to set policies that they want. So the parliament (board) goes out and hires a set of set of hired guns to do the actual execution (basically, a management team).

So in effect these professionals are the management team of the company called the "government" which is overseen by the board called the "parliament". If the execs don't do their job, the board can fire the CEO or whoever and appoint a new team.

Why do I like this model? First of all, the management team has continual accountability. In the normal democratic model where a politician takes over execution, they often screw it up because while they may be able to orate their way into getting elected, those skills don't get them through setting up and running large scale organizations. So what happens is that they can run amok for some number of years until its time for another election. Then they dust off their oratory skills and talk their way back into power. As a result, the only thing the politicians care about is doing just enough to win the next election and not things that are designed for true long term growth. Sri Lanka has had this nonsensical system for 60+ years and, frankly, that's what has got us the mess that we're in today. (Local optimization decisions which isolated the Tamil minority to the point of giving birth to a strong terrorist movement.)

Of course publicly traded companies have a similar illness in the maniacal focus the market places on quarterly results. The problem of course is that focusing on quarterly results is like local optimization - and any person who's done a bit of numerical analysis can tell you that that's not the way to get to the globally optimal solution. What is the globally optimal solution for a country? A strategy which moves the country forward on a national scale on a long term basis. With the traditional democractic model (as practiced in many countries) the politicians who become the executive team of the country simply have no incentive to work towards global optimization.

Of course I'm generalizing and there are some really great politicians who've been far thinking and done the right thing. And I also agree that politicans get a bum rap - most defects in a country can be traced to failure by the professionals in the country to stand up and challenge political nonsense. Most certainly in Sri Lanka I blame the administrative service of the country too. On the other hand, they too are not incentivized properly because they are not compensated based on performance. They are basically tenured employees who have no motivation to do better - just hang around. Only those who have personal passion to excel do so - any given any large group of people only a few have such passion .. other need to be motivated and managed.

The US system is a somewhat interesting mix of the Norwegian system and say what's practiced in Sri Lanka or UK. When the president wins an election he or she appoints essentially the entire management team for the country. However, given the way the US government has managed to destroy its global position due to short term neo-conservative objectives (and stupidity), its clear that their system isn't optimizing globally nor humming along like a well-tuned engine either.

The problem in the US system IMO is that the president is elected and hence heavily partisan. As such the management team he brings in is brought in with the objective to help the president win another election or his party win another election. Um, who watches out for the best long term interests of the country? Not these guys!

I think the ideal governance model has a professional management team who are properly incentivized to deliver long term results .. which can only be done by giving them "options" in the stock of the country and then holding them accountable to deliver results. Their performance is reviewed regularly by the board and of course the policies they must execute to are decided upon by the board. If they don't perform, the board can fire the whole team or whoever they want and reset.

I'm no expert in governance models or the Norwegian system or the US system. However, I do happen to think the democratic system we have here in Sri Lanka has failed the country and its shareholders (the people) miserably and in fact that democracy in that form is fundamentally broken.

Plus this is my blog and I can write whatever stupid idea that comes to my head early morning :).


Ayanthi Anandagoda said...

Quite obvious that the representational democracy model has failed the country miserably..
..To convince the majority to allow people with rational ideas run things, and still make them feel they are in charge.., is not wishful thinking. But will need a few leaders...

Anonymous said...

Your commentsbare reminescent of Canadian first nation governance structure....which is all estimations failing the citizens miserably and at the same time creates a have & have not society on reserve. At the same time allowing for chiefs and councils to operate with out care for the community and citizens but for self indulgence and the lining of pockets. I appreciate you candor and i to am frustrted.....i do find a light at the end of tunnel in the Norway governance model.....i am studying the structure and wish to incorporate such a model in the development of our constitution. Tnx u marcel