Learning Racial Harmony: Fiji Needs New Constitutional Rules
by Wolfgang Kasper
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The situation in Fiji has deteriorated to the point where new constitutional ground rules seem the only way to overcome irreconcilable positions.

The citizens of Fiji, like most others in the South Pacific, have not done all that well over the past generation in fulfilling their aspirations for peace and prosperity. FijiÕs good start at independence as a peaceful, well-administered, medium-income country was not followed by sufficient economic growth. Now the very fabric of a racially harmonious, just and secure country is in jeopardy. Backsliding, fear and pessimism prevail in Fiji, whereas many citizens in countries that were poorer than Fiji a few decades ago are now participating confidently and profitably in the globalised economy. It is little wonder that violent civil conflicts and rebellions erupt periodically.

The various communities of Fiji face a critical challenge. No longer is it an option to cling to traditional institutions and big government, to drift and be left behind. The only viable path forward is constitutional rejuvenationÑmodernising some of the ground rules of community lifeÑin order to prosper and become secure and peaceful. The initiative for this has to be taken by the people of Fiji. The time has long passed when constitutional concepts could be imposed from outside. All an outside observer can do is offer ideas that have worked elsewhere and that may help, if properly adjusted to FijiÕs conditions.

Economic freedom, material progress, institutions and racial harmony

One of the central lessons to emerge from the study of economic development is that sustained improvements in living standards depend on appropriate adjustments in the fundamental institutions (rules) that govern social and economic interaction. What has worked well at the village level may be a handicap when competing in the world at large. We now have overwhelming evidence that the quality of the Ôeconomic constitutionÕ and of the guarantees of freedom correlates directly with the level and growth of real incomes.1 The citizens of Fiji were able to discover some of the benefits of freer economic institutions for themselves after 1987 when deregulation and greater economic freedom brought economic growth for a while.

Apart from promoting economic growth, a constitution that guarantees basic economic freedoms has at least two important non-economic benefits. First, it fosters civil and political freedom and favours democratic forms of government. It also controls arbitrary political power. It is no coincidence that the open capitalist economies of East Asia not only grew fast, but also became vibrant new democracies. By contrast, communities that lack fundamental economic freedom live in poverty and are often plagued by political discord.

Second, people of different social and racial backgrounds who interact voluntarily and as equals in markets tend to do so peacefully because this is in their mutual interest. When everyone has a stake in the market, habits of constructive compromise are learnt. Trading overcomes traditional enmities and leads to mutual familiarity, first in business, then in other walks of life. Mutual distrust is turned into win-win cooperation andcompanionship, as people develop a selfish interest in the prosperity and enterprise of their neighbours and partners.2 In contrast, coordination by government requires the formation of factions and coalitions in which power and coercion, winners and losers, are the name of the game. It should be noted here that socialism and the suppression of market activity in Sri Lanka and the former Soviet Union paved the way for subsequent racial polarisation and civil war.

Small government

A flourishing market order requires small, rule-bound government. Most human interactions should therefore be left to voluntary exchanges in markets. What collective action remains should then be concentrated on protecting property rights and the freedom of contract, whilst avoiding all discrimination. When most coordination of social and economic life is left to markets, the prize of holding political office is of limited material value to those who win (temporary) control of government. Politics is then not so divisive.

Government works better if it is modest. Top-down political coordination should be confined to where it has clear-cut advantages over more decentralised forms of coordination. Market coordination is an effective way to economise on scarce administrative talent and the governmentÕs limited resources to enforce central decisions. Markets are also effective controllers of corruption and a training ground for the skills and attitudes that Fijians will need to earn their place in the global economy.

At independence, Fiji inherited a fairly statist colonial tradition of big, benign and centralised government. In the Mara era, government was made to produce and provide a large variety of services and to act as the arbiter between ethnic Fijians, who owned most land and were poor, and the Indo-Fijian population, who had the most business, professional and farming skills, and who leased the land for export crops, most notably sugar.

Hand back land rights to the Fijian owners

An essential component of the economic ground rules in any culture is the definition and protection of property rights; namely, the rights to use, benefit from and dispose of the assets one owns. In traditional societies and developing countries, property rights to land are the key to development and modernisation. Where farmers have full, legally enforced property titles, they are able to mortgage the land, raise credit, become self-reliant and entrepreneurial and participate fully in the venture of modernisation. Many of the sons and daughters of landowners can benefit from land ownership to equip themselves for urban and professional careers. Where property titles are negated or insecure, there is resentment, discord and stagnation.3 Property rights are not just a Western concept. They matter in all cultures.

When Marxist theorists declare land ÔinalienableÕ and denigrate the Ôcommodification of landÕ, they argue in reality for excluding poor, traditional villagers from their most promising access to the modern world.

Irrespective of tradition and culture, farmers and poor people, who enjoy genuine property rights, can free themselves of their poverty. Modern, well-administered land titles are therefore the key that the rural and urban poor must be allowed to grasp to become prosperous participants in the global economy. Modernising the property rights system and the economic constitution does not mean that people have to jettison their culture. Rather they need to adjust traditional systems to gain more useful knowledge and to create the material means to realise their diverse aspirations better.

FijiÕs land rights do not meet modern requirements. It seems to this observer that enhancing Fijian ownership is the key to future prosperity and harmony.

It was probably sensible a few generations ago to establish a bureaucracy to protect Fijian clans and villages from exploitative or deceitful land buyers by formalising traditional land rights. Fijians nominally own about 83% of the land, and have always done so through family groups, clans or clubs (mataqali). Similar small group ownership is customary in many parts of the world and works successfully on two conditions. First, the owners have to face the full costs and benefits of their decisions and must be free to decide. Second, they need to have clear internal arrangements on how to make their decisions and share the benefits.

These essential conditions have not prevailed in Fiji, at least since the colonial government under Atlee subjected Fijian land rights in the 1940s to the dictates of the central authority of the paternalistic Native Land Trust Board. This amounted to a de facto socialisation and part-expropriation of tribal land. The BoardÕs bureaucrats have little incentive to explore better land uses; indeed they appear inconvenienced when the true owners want to experiment with new land uses. This restrictive administrative control does not make economic sense at the start of the 21st century. Fijians are now informed about possible land uses, are educated to manage their own clanÕs land, and are in a position to evaluate the costs and benefits of alternative land uses intelligently and responsibly.

The centralised control of the costs of leasing land by a bureaucracy has been a source of serious friction. Fijian land owners feel disenfranchised and Indo-Fijian tenants experience great insecurity. A central prize for winning government is the control of land rents and other conditions of contract. Indian sugar farmers want government to fix low rents and long tenure (and to negotiate inflated sugar prices with the European Union); Fijians want government to raise land rentals and complain about the high administration fees that the Native Land Trust Board charges. Such normal economic conflicts of interest are best solved by removing politicians and bureaucrats from the equation and letting owners and tenants negotiate directly and responsibly with each other.

All bureaucratic control of native land should therefore be abolished, and unfettered full property rights should be handed back to the mataqali owners themselves. Without effective direct control of their most valuable material assets, Fijians will never be able to make the best use of them and thereby learn to be enterprising. Only when land is taken out of centralised political control will Indians be able to feel secure.

Preferential racial discrimination not the answer

A liberal economic constitution with secure property rights and enforceable contracts is always endangered by redistributive politicking. Governments that promise to solve problems of inequality by confiscating and redistributing wealth to poorer or politically influential groups destroy the creative and peace-making capacity of markets. Such positive racial discrimination is sometimes referred to as the ÔMalaysian modelÕ, because it was tried there in a major way.

From the standpoint of constitutional economics, preferential discrimination clashes both with the protection of private property and the principle of non-discrimination. The state cannot protect private property and at the same time confiscate it for coercive redistribution to another group. The world over, preferential interventions undermine incentives to work, save, take risks and innovateÑthe very drivers of economic progress. They invariably politicise communities, corrupt political life and lead to group confrontation.4

In the case of Malaysia in the 1970s, preferential access to loans, education and easy government jobs for Malays led to direct interventions in industry, a proliferation of government bodies, and limitations of economic freedom. By the late 1970s, established Chinese and European businesses went on an Ôinvestor strikeÕ. Capital flight set in, and the currency weakened. Even copious spending of oil and gas revenues could not overcome the harm that the new interventionism inflicted on growth.

In response to the loss in growth momentum, the Malaysian government dropped most direct industry interventions in the early 1980s. Nonetheless, the official target of raising Malay capital ownership could not be realised other than by the subterfuge of counting big public investments in business as Ôon behalf of the Malay communityÕ. In reality, a large part of the Malaysian economy was socialised and an exclusive coterie of political cronies and bureaucrats took control of huge business assets. This in turn has corrupted political life, the legal system and the formerly independent press.

Transferring this model to Fiji would be perilous. First, Fiji does not have a dynamic, well-connected and diversified business community, such as the Chinese in Malaysia, that could withstand substantial redistributive interventionism. Nor does it enjoy the dynamic neighbourhood of ASEAN. Second, the Fiji government cannot rely on bountiful oil and gas revenues or the international credit of Malaysia with which to prop up a redistribution experiment. Third, administrative talent to monitor and enforce the proper productive use of preferential credit and subsidies seems even scarcer in Fiji than in Malaysia. Finally, what may still have been possible in the 1970s is no longer feasible in the 21st century. The economic consequences of racial discrimination are now signalled more speedily and assessed more critically, as the Malaysian government discovered in the Asian financial crisis of 1997-98 when it was forced to peg the exchange rate and impose harmful capital controls. Malaysia now has a mostly unfree economy, which tends to be the harbinger of slow growth ahead.

One has to conclude that the Malaysian model of preferential racial discrimination would only be a blueprint for political divisiveness and economic decline in Fiji.

Globalisation, federalism and constitutional constraints

What feasible constitutional solutions does international experience suggest?

First, we should note that neither the model of the nation state, which was developed in distant Europe two centuries ago, nor colonial models of centralised governance seem good guides to FijiÕs future. The communications revolution and other aspects of globalisation now de-emphasise the nation state and empower local communities. All around the world, small, cohesive and well-governed local communities attract much mobile capital, expertise and enterpriseø øand thrive. In turn, local identity and cohesion in small jurisdictions now benefit from exposure to information, knowledge and competitive impulses from the global economy.5

Many of those powers of governance that cannot be handed over to marketsÑthe very source of sovereigntyÑshould therefore be shifted to small regional entities, which one might call ÔcantonsÕ. Cantons could be organised at the local, district or provincial level, based on traditional and existing bounds and discontinuities and including residents of all races.

This would reflect the traditions of pre-colonial Fiji, including government by confederated tribes (matanitu). At the local level of government, traditions of village democracy and traditional allegiances can be drawn upon to control and inform local political choices. The various cantons should be self-reliant and free to compete with each other in offering different styles of administration. Many of FijiÕs seemingly intractable problems would thus be decentralised, and alternative administrative solutions could be tried out in different cantons to suit local residents.

The cantonal system is an adaptation of the model of Ôcompetitive federalismÕ that works well in nations such as Switzerland and the United States. In Fiji, where there are diverse local problems and where no one knows the solutions to big national problems, the political and economic competition among cantons would be a promising discovery procedure for constructive administrative solutions.

For the model of competitive federalism to work, it is essential that there is little overlap between national and cantonal governments (exclusive assignment of tasks); most tasks of government have to be devolved to local government; cantons need to be bound to finance the tasks they take on from taxes and debts that they raise themselves (fiscal equivalence); free trade and exchange throughout the nation must be guaranteed, and Ôsubsidy warsÕ between cantons prohibited.6 To limit the size of government, anew Fijian constitution should also contain formal constraints on the proportion of national and cantonal taxation and debts in production, similar to what Economics Nobel Prize winner James Buchanan has been advocating for the United States.

Citizen-initiated referenda

An important supplement to controlling the power of politicians and to giving people an active stake in political life is the citizen-initiated referendum. Direct democracy based on such referenda is practised to various degrees in Swiss cantons and parts of the United States, among others. Citizens who have the right to overturn legislative and administrative actions enjoy a greater sense of participation. They tend to vote for less government and lower taxation but for more education expenditure than jurisdictions without citizen-initiated referenda.7

FijiÕs political life would greatly benefit from this instrument of direct democracy, because all citizens would ultimately have a direct say in politics, irrespective of which racial or other group controls political power in a canton and the nation. Discrimination against a particular group is much less likely when all citizens participate directly in politics and reflect on the many consequences of discrimination. The citizen-initiated referendum turns inhabitants into true citizens and the people into the ultimate sovereign. The model has worked well in fostering harmony and prosperity in previously strife-torn and small-scale states such as Switzerland.

Nowadays, modern computer technology offers cheap and flexible ways for citizens to vote in citizen-initiated referenda. Fiji could well leapfrog into the 21st century if tamper-proof computer terminals were installed in primary schools and were made accessible after school hours to all resident voters.

Conclusion

The ideas outlined here draw on the insights of constitutional economics and the sort of constitutionalism that considers citizens as individuals with inalienable rights to determine their lives, either on their own or in association with others. This seems the best guarantee for avoiding the pitfalls and conflicts of race-based, top-heavy politics and coercive interventions. It would also equip the Fiji population of all backgrounds for success in the open global economy of the 21st century.

The political and economic situation in Fiji can be turned round by innovative thinking. There is no reason why Fiji should cling to big centralised government. Nor should the constitution be seen merely as an instrument for shifting political powers between groups and protecting the minority from abuses of the government of the day. A more promising path seems to be constitutional innovation: de-emphasising collective power, devolving much of it to private action in markets, and dispersing what remainsÑas far as possibleÑto local government. Constitutional ground rules then become a platform for experimentation, providing a valuable framework in which to learn racial harmony, trust and cooperation.

Endnotes

1 J.D. Gwartney and R. Lawson, Economic Freedom of the World (Vancouver: The Fraser Institute, 2000); 2001 Index of Economic Freedom (Washington/New York: Heritage Foundation/Wall Street Journal, 2001); W. Kasper and M.E. Streit, Institutional Economics: Social Order and Public Policy (Cheltenham, UK/Northampton, US: Edward Elgar, 1998), 452-456; W. Kasper, ÔTransitions and Institutional Innovation, Reflections on the Current Economic CrisisÕ, Malaysian Journal of Economic Studies (June-December 1997), 5-14.

2 A. Rabushka, A Theory of Racial Harmony (Columbia, South Carolina: University of South Carolina Press, 1974); T. Sowell, The Economics and Politics of Race: An International Perspective (New York: W. Morrow & Co., 1983). With regard to Fiji in the 1980s see W. Kasper, J. Bennett, and R. Blandy, Fiji: Opportunity from Adversity? (Sydney: The Centre for Independent Studies, 1988), 34-39.

3 Well-known Peruvian development economist, Hernando de Soto, analysed this fundamental problem in a great variety of countries. He demonstrated that clarifying fuzzy property rights and making them cheap to enforce was the key to solving social discontent, civil and religious conflicts and revolution, irrespective of culture. See H. de Soto, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (New York: Basic Books, 2000).

4 For an excellent and exhaustive investigation see T. Sowell, Preferential Policies: An International Perspective (New York: William Morrow, 1990).

5 J. Naisbitt, Global Paradox: The Bigger the World Economy, the More Powerful its Smallest Players (Sydney: Allen and Unwin, 1986).

6 W. Kasper, Competitive Federalism: Promoting Freedom and Prosperity (Perth: Institute of Public Affairs, 1995), and Competitive Federalism Revisited: Bidding Wars, or Getting the Fundamentals Right? (Perth: Institute of Pubic Affairs, 1996); G. Q. de Walker, ÔTen Advantages of a Federal ConstitutionÕ, Policy 16: 4 (Summer 2000-01), 35-41.

7 G. B. Frey, ÔDirect Democracy: Politico-Economic Lessons from Swiss ExperienceÕ, American Economic Review 84:2 (1994), 338-348; B. Frey and R. Eichenberger, The Democratic Federalism of Europe: Functional, Overlapping and Competing Jurisdictions (Cheltenham, UK/Northampton, US: Edward Elgar, 1999). See also G. de Q. Walker, Initiative and Referendum: The PeopleÕs Law (Sydney: The Centre for Independent Studies, 1987).

Wolfgang Kasper is Emeritus Professor of Economics (UNSW)and Senior Fellow,The Centre for Independent Studies (CIS).This is an adaptation of a recent CIS Issue Analysispaper: Towards Racial Harmony:A New Constitution for Fiji.

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