A 'Dhivehi' Welfare system

The government's earnest generosity in the provision of social goods can be attributed to the “richness of our nation” and the success of our luxury Tourism Industry; these two aspects of our economy mitigate the risk of excessive debt incurred by this generosity. This phenomenon blossomed after the constitution of 2008, which guaranteed political pluralism, where the competitors presented various social welfare policies to attract voters. Since then, Rajje has been turning into a full-fledged welfare state. 

After being elected in 2008, President Mohamed Nasheed expanded the then existing National Health Insurance, Madhana, rebranding it as Aasandha. He also introduced a lifetime Basic Pension in 2010, which is paid to all Maldivian citizens over 65 who reside in the Maldives, with the Basic Pension Amount now at MVR 5,000 (USD 324). In most countries, workers drive social protection policies as we saw after the French Revolution and World War periods, as workers share a common concern and hold higher leverage in demanding social reform through their collective bargaining. As such, the Maldives passed its first Labor Act, institutionalizing workers’ protection by law. The People’s Majilis then passed the Goods and Services Tax Act (Number 10/2011) to compensate the emerging welfare system. Furthermore, the government has been committing itself to run a broad variety of infrastructure projects, sustainable or not, raising the debt ratio of the state. The current government went even further by introducing the “Free Bachelor Degree” scheme, along with Minimum Wage and Income tax for the first time in the Maldives. The burden of these social schemes is shouldered by taxpayers.

The idea behind a regulated welfare system is to ensure the social protection of the citizens. The welfare system is based on a Redistributive Policy, and such a policy yields greater social Equality when it is designed on Progressive Taxation. The current welfare system, however, is based on extremely regressive taxation in many ways. 

GST introduced in 2011 is extremely regressive that it is borne by the final consumer, regardless of the social stratum. Secondly, “Pension Tax”, as I prefer to call it, extracted in the form of the Retirement Pension Scheme (MRPS), can be considered as indirect taxation based on where the pension revenues are invested by the Maldives Pension Office. 

In 2021, The Pension Office invested 88 percent of its Retirement Pension revenues in Treasury Bills and Treasury Bonds - to finance the government expenditure. Considering the retirement pension is extracted regardless of the social stratum of the worker, the pension contribution remains the same. Hence, the burden of financing government projects is borne ultimately by the all the people. Investing such an amount might not be a huge burden for the rich, yet the poor are destined to invest as much as them. As the state pursues a welfare system to enhance the social condition of its people, this policy contradicts itself.  

The redistribution becomes unfair when a significant amount of public money is invested in a specific region. While the revenues are extracted from the economy as a whole, the redistribution of these revenues should be equal in a moral sense, regardless of location. However, we have witnessed brutally unfair allocations in recent history such as when the government made the investment to invest heavily on the Sinamalé Bridge.

Construction cost USD200 million, of which USD 116 million was given as free aid and USD 72 million as a loan by China. The Maldivian government, on the other hand, spent MVR 12 million on the project (The Edition 2018). Over MVR 56 million was allocated in the State Budget 2019 to establish a toll system for the Sinamale’ Bridge along with MVR 13 million for maintenance.

However, the Bridge can still be used free of charge. Had a fee levied on the usage, the amount invested on the bridge can be compensated and returned back to the public treasury. The investment not only drained the public treasury, but it also incurred a direct debt of USD 72 million on the general population for which everyone, from Thuraakunu to Addu City, is responsible for generations. Apart from partisan politics, our centralized public financial system is responsible for such “redistributive crimes”.

Financial benefits provided by the Privileges and Protection for Former Presidents Act and various other legal instruments for former presidents and members of People’s Majilis should not be missed as we discuss social injustice. Vast spending of public money on certain individuals without any economic productivity, does not only widen the gap among various social groups but also does not fit into any sense of “a government for the people”. 

Burdens levied on the state’s welfare system due to various social protections and investments has become more vivid with the looming state debt ratio, the bulk of which will be spread to future generations. Central government debt increased by 47.3 percent compared to pre-pandemic levels while the national output decreased by 10.7 percent over the same period of time. As of 2021, the government's outstanding debt stands at 103.8 percent of the GDP (Pension Office MV, 2021).

The government’s mode of extraction and excessive spending as redistribution on this welfare system has been gradually increasing and becoming worse election after election. I call this  lack of any coherent strategy, let alone a cohesive and coherent philosophy of social justice, a partisan welfare system. Statutes devised to build a strategic welfare system do not provide a fair welfare system, in extraction as well as redistribution. We have statutes to make sure that the strategic welfare system is beyond the reach of partisan politics, however, the system became inherently unfair and yet partisan. In 2019 we have witnessed an increase in Basic Pension as promised upon a Presidential Election as I have already mentioned. 

In this article, the least advantaged portion of our society include those who are marginalized due to their social conditions, such as youth who are embroiled in criminal justice system. They need utmost care from the government’s welfare to be productive assets for our society.

In need of a Dhivehi Social justice philosophy

John Rawls’s contribution to devising a philosophy of social justice based on “differentiating principle” would be helpful in devising a philosophy of Dhivehi welfare system:

Social and economic inequalities are to satisfy two conditions: (a) They are to be attached to positions and offices open to all under conditions of fair Equality of opportunity; and (b), they are to be to the greatest benefit of the least advantaged members of society (Rawls, 1973).

In order to build a Dhivehi distributive justice based on Rawls’s philosophy, we must first admit that we are not pursuing a policy of radical egalitarian policy on one extreme, and secondly, we are not overlooking the least advantaged portion of our society. I do not believe that Equality in terms of wealth is a condition of fairness; equal access to opportunities is the threshold of fairness. This “access” can be activated at the expense of the better-off portion of the society while giving them greater freedom; progressive extraction of revenues. Therefore, inequalities, as Rawls contends, can be tolerated for the sake of equal access to opportunities. 

There is no moral ground for rigid Equality within the society. Meanwhile, the moral foundation for equal access for the least advantaged in society is found in the philosophy of the Social Contract. The least advantaged give up a part of their liberty to be part of the society upon which the rest of the society bears a responsibility. This responsibility is fulfilled with a redistributive welfare system, assisting them to be well off than they might have been otherwise. Based on this, we need to rearrange our welfare system; devising a system of more direct extraction which minimizes the burden borne by the least advantaged by means of regressive taxation as I have discussed earlier, thereby building more progressive extraction.

The redistribution of these revenues should be based on creating access to opportunities rather than making people rich without any economic productivity. This includes introducing Wealth Tax based on the concept of Zakat Al-mal rather than expanding Income Tax, supporting youth entrepreneurship, decentralized higher education, rehabilitating youth who are embroiled in our criminal justice system and building a merit-based bureaucracy. This whole system needs to be balanced between Efficiency and Equality. Seeking rigid Equality might disrupt economic productivity while rigid Efficiency will sink down a part of the population below the poverty line. Furthermore, what we can observe from our welfare system is amessy combination of partisan political whims. My take is not to making people rich by the government’s financial giveaways, but to provide equal opportunities for people; so, the people will work, contribute to the economy, and being rich or wealthy should be an “economic process”.

Tax on Wealth will work more fairly than income tax. Wealth is what the taxpayer ultimately owns rather than what he/she owns consecutively such as income. Therefore, Tax on Wealth will boost the economy by releasing hoarded money into the economy while maintaining the economic incentive for income creation thereby increasing wealth.

We need a philosophical backing for our societal existence, which will in turn provide raison d'etre for the governance. Despite its intensity, the unfairness in governance is dimmed if we lack a coherent political philosophy to devise our political “world view”. This vacuum is then filled by partisan whims which yield nothing except economic mismanagement and social injustice. 

Editor's Note:

Ibrahim Nahushal is currently studying master's degree in International Relations and Cultural Diplomacy in Berlin, Germany. His research interests include Geopolitics, International Law and Institutions.