27 October, 2020

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All Fallow Lands To Be Cultivated!

By Hema Senanayake

Hema Senanayake

Hema Senanayake

I am an economic analyst and a macroeconomic researcher. If anybody wants to see further than others on any subject he or she has to do one thing. This was eloquently told by Sir Isaac Newton the great scientist. He said that, “If I have seen further it is by standing on the shoulders of giants.” This quote is from a letter written to fellow scientist, Robert Hooke in February 1675. The phrase is understood to mean that if Newton had been able to discover more about the universe than others, then it was because he was working in the light of discoveries made by fellow scientists, either in his own time or earlier.” This is what I always try to do in regard to economics.

Does the president or Prime Minister do this in regard to economics? I do not think so. And most importantly, there is no necessity for them to do it. They are politicians elected democratically to hold the most important public offices. They have to perform many duties. Among them what I consider most important are; “(1) activating and mobilizing citizens into participating in political decisions and transforming their opinions into viable policy options and (2) channeling public opinion from citizens to government.” (This quote is from The Electoral Knowledge Network).

Now, if the president or Prime Minister tells something wrong in regard to the pursuing of economic policy or part of it, what should I do? What their economic advisors should do? I am serious about this question. Why?

Around the world, many politicians elected to governments believe that they know better than economists. This happens even in many advanced countries. A few years ago, for an example, about seventy or so congressmen in the United States proposed to have a constitutional amendment which makes it mandatory to have a balance budget on the Federal Government. This was proposed to stop the ever increasing public debt on the federal government. If the budget is required to be balanced by law, there is no necessity to borrow for the government. In the event, public debt cannot go up.

Luckily, the congress and the senators consulted many leading economists who advised as to why the common sense proposal for balance budget was bad for the country. Finally, politicians gave it up. In fact, most of the common sense proposals of politicians do not work in the economic system. One of the most ridiculous proposals was submitted by Stalin to stop using money in Russia in early 1930s. There was inflation by that time in Russia. Stalin’s argument was simple. In order to combat inflation he argued that, “when there is no money there is no inflation.” His economic advisors defended Stalin’s policy. Are our advisors different? I do not know.

Recently, I heard that the Government of Sri Lanka is to launch a campaign to cultivate lands which did not use for cultivation. State owned lands which have not been cultivated will be used for food production in the future. If uncultivated lands are owned to private individuals then land owners must cultivate those lands or those lands would be temporarily taken away for cultivation by authorities. The objective is to cultivate all empty lands with whatever the food that can be grown locally without importing them. The idea seems simple and noble but unfortunately uses a wrong approach. Why I say so?

Before I answer the above question let me tell you a small story. One time there was a Director General (DG) heading the Sri Lanka Samurdhi Authority (SLSA). By that time SLSA was receiving a certain amount of money from the Treasury for development projects out of which most funds had been allocated for income generation projects for Samurdhi recipients. This DG had struck a wonderful idea. He had said that SLSA must justify the use of treasury money. In order to do that SLSA must prove the contribution it made to increase GDP (Gross Domestic Product) by utilizing that money. He did not stop there. Subsequently he came up with a creative idea. It is interesting.

He ordered to provide agricultural seed pack worth of certain amount of money to each household of Samurdhi recipients. Let us say one seed bag worth Rs.50/=. When seeds are planted they would get a certain harvest. Now the harvest was valued at market prices even though the harvests were intended to consume by the beneficiary households. The valuation of harvest came to a staggering amount. Somebody told me that the value came to be around Rs.27 billion but the funds used for seeds was a fraction of that amount. The said DG was happy and assumed that SLSA had increased GDP by contributing Rs.27 billion. He did not stop there either.

He wanted to share his findings with the then Treasury Secretary. He presented his calculations to GDP. Treasury secretary being an economist gave him one simple comment. He said that, what is grown in home gardens and consumed by the household is not taken into the GDP calculation but the cost expended in buying seeds would. The DG was a highly educated man in the field of management. But his commonsense GDP calculation was an arrogant mistake.

Similarly, the government can force cultivation of bare lands. The government can temporarily acquire privately owned uncultivated lands and handed them over to others for cultivation. But unfortunately this effort is not sustainable and would not help economy to grow and would not contribute to increase GDP in a sustainable manner. Here, the objective is really good but the approach is wrong. The government must forgive me for airing my genuine opinion.

In the economy there is a certain definition to define a growing economy. Also there are definitions to explain stagnant and recessionary economies too. Let me explain it as simple as possible.

In the economic system a certain amount of goods and services are sold. In a practical sense the selling means “the supply” of goods. This point is clear. Now, you can’t sell something if somebody is not buying it. The act of buying means “the demand” on real time. Therefore, it is now commonsense to understand that the demand and supply must be in equilibrium always. It must be in equilibrium at total output level. Let us use this knowhow to develop a definition for a growing economy. It is simple.

“When the demand-and-supply equilibrium takes place at increasing output levels year after year, we will have a growing economy with continuing GDP increases.” This definition is simple, clear and precise. Isn’t it? Now, let us define the stagnant and recessionary economies too.

“When the demand-and-supply equilibrium takes place at decreasing output levels, we have a recession” – And “when the demand-and-supply equilibrium takes place at constant output level we have a stagnant economy.”

Let us apply this simple economic definition for our cultivation of uncultivated land program. I will submit it as follows:

“If the cultivation of uncultivated land program could ensure that the demand-and-supply equilibrium takes place at increased output level, then we will have a growing economy with increased GDP.” It justifies the program.

However, the demand and supply equilibrium takes place when the selling and buying takes place. This means the growing/cultivation must be demand driven or in other words there should be market for the produce. If there had been a proper market for agricultural produce, then none of these uncultivated lands would have been there being empty. What does this mean?

This means, the problem though appears as a problem of cultivation, the real problem is market arrangement. Hence it requires a shift in the approach of this program. However we now know that the unsold produce is not taken into the calculation of GDP here too.

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Latest comments

  • 3
    0

    “Around the world, many politicians elected to governments believe that they know better than economists.This happens even in many advanced countries”. So says Hema Senanayake

    I am also in the same boat as these stupid politicians.

    What is common among us is ignorance of economics?

    We do believe that we know better than the Economists,but actually we are stupid!and we don’t know that we are stupid!
    .
    The economists know how to compute GDP. They leave out certain items in the computation of GDP and claim that their GDP is the actual measure of growth!

    The economy is stagnant!

    Is it really so?

    The Samudri recipients may not have contributed to the GDP, but have they not produced goods and thereby contributed to the economic benefits to themselves?

    Has not this DG justified the expenditure on purchase of seeds?
    .
    The economists are poorer by not having accurate statistical tools to measure the real growth.

    Or is it lies!, damn lies! and statistics!

  • 3
    1

    Hema Senanayake,

    Your economics are based on the outdated ultra-capitalistic economic structure of Western nations. More than ever, does Sri Lanka need to go into the post-modern financial structure of traditional environmental and heritagal protection, that even the West is gradually trying to implement for themselves at this time. In trying to stoke up our GDP figures at this time, over the needs of the masses, we are outdated, yet again!

    The last thing we need is the outdated copy-cat Chinese model of building Western-mega-cities for the sake of having temporary uplift in GDP figures, and taking over from the West.

    It is time to consolidate what is good and proper for the masses, and even if it goes slow on the GDP-amounts, it will be a sustainable economy.

    In Stalin’s time, socialism/communism was an impossibility to implement(although it was in dire necessity). But after these many decades, and greater understanding, fraternity and consolidation amongst like-minded countries, getting rid of Chinese-wannabe of Western-currency is a very good idea indeed. It is a very good idea for economists to start working on this.

  • 2
    0

    I just want to mention my experience about cultivation. At one time they gave a publicity to a farmer who grew ginger,and sold his stock for a big amount,at the rate of Rs1200 per kilo of GINGER.Most farmers who wanted good returns switched to ginger growing.It takes 10 months to reap the harvest.I just tried my luck in this venture in a small land of 40 perches,the land situated just close to a popular road way.I and my son went to the agriculture experts in our area.They gave me every detail one by one.We never used chemical fertilizers.After some time the land was named as “Iguwatte” It was a wonderful seen to the passers by and even when one wanted to get down from bus they used to say to stop at Inguruwatte.After about 10 months the ginger plants show the signs of harvesting.It was a Herculean task to uproot,clean and pack ginger into bags which cost lot of manpower.At last we managed to get a good harvest as expected, but the price was only Rs 120 per kilo. We contacted famous elephant house,as they announce that they buy at Rs.1200 a kilo.(dried) to dry them it takes more time and labor .At least there must be a ration of 8 kilos to make 1 kilo of ginger.They accept only super dried and not inferior.By this time government approved importing ginger while there were enough stockpile of ginger.The theory of supply and demand is not applicable for farmers.From this experience we came to know the plight of the farmers who had to wait 10 months dumping their money for agriculture ventures that does not even cover their investment.

  • 2
    0

    When a farmer decides not to cultivate, it is the economist in him that is at play. He knows full well that it is uneconomical to cultivate paddy. Why then does he cultivate? He is aware that the opportunity cost of his labour is nil. So it is with the needed extra farm labour. Cultivator is under compulsion to monetize that labour, which otherwise would remain idle.

    Vagaries of weather unkind in one season may be merciful in the next has always been a hope. The wiles of the market showering a fortune in the coming season is yet another wishful thought. When both fail successively, he loses his options. The land is laid fallow.

    Never to meddle with market forces was what the writer urged in his article of January 14, 2014 in CT. It was sarcastically captioned ‘Sri Lanka’s Perpetual Surplus and Perennial Shortage’. ‘Surplus’ to boost the image of the government and ‘Shortage’ to benefit the trade.

    • 0
      0

      S,Sivathasan,

      Paddy-cultivation, local food-production and traditional enterprise should not be at the mercy of global market forces meant for Western industries such as fashion-industry, science-industries, and education industry.

      Country’s staple resources should be a vital and integral part of the post-modern movement that does not involve currency.

      Vagaries of weather unkind in one season that may be merciful in the next, can be countered by global insurance/altruistic schemes that like-minded post-modern countries will develop, away from the currency system meant for fashion-industry et al.

      Global currency systems can be toned down by those of the fashion-industry et al, who will involve themselves as guardians of traditional staple industries (they will pay their taxes for traditional industries to sustain).

      (Westerners were almost on the threshold of this new post-modern age, but for China building unnecessary environmentally-degrading mega-cities to counter them).

      • 0
        0

        The market pitch in SL is queered by the government. World market prices have little to do with the miniscule local market.

        • 0
          0

          S,Sivathasan.

          The article is about the uselessness of local rice-production vis-a-vis keeping up Lankan GDP in line with global GSP. Hence I say it should never be the case.

      • 1
        0

        ramona mother therese fernando

        A friend of mine has some land in Mahaweli river project H area. Due to shortage of labour and increased cost of production he now plans to call it a day.

        Would you like to help him in his vegetable garden?

        • 0
          0

          NV,

          If you paid your taxes so I could get a correct wage, I would be very glad to uphold the vegetable market industry.

  • 1
    0

    Pantaleon

    The villain of the piece at all times for decades on end has been the government. ‘The powers that be’ know all too keenly that governments are elected and kept by seats, the latter by votes, CONSUMERS are always in a majority and never the producers.

    Contrast the power of the peasantry here with the power of farmers and dairymen in France, US and Japan. In Sri Lanka production declining perpetually will be inflated incessantly by a failing officialdom much to the glee of politicians who never study in depth or comprehensively.

  • 0
    0

    Agriculture is dead.

  • 0
    0

    Mr Sivathasan

    If the country is miniscule, then the world market prices will prevail whatever action is taken by a miniscule country

  • 0
    0

    Hello Sir. Isaac Newton,

    Aren’t you the the same Sir. Isaac who gave a speech in NYC at a Sri Lankan community meeting when President Sirisena arrived in the U.S. It sounded like you were begging for a SL government job! I hope they have contacted you. What Sri Lanka needs is more economic analysts on top of the crooked politicians and 100s of ministers we have. Politicians will keep robbing the economy and the economists will argue on the economic theories. I have yet to meet two economists who agree on anything.

    This article doesn’t make sense. SL imports tons of food,If farmer cultivate the land and fill his stomach with the harvest, it helps the country/economy. Look at where the Ruppee is heading with the ricing trade deficit? The author also assuming that the markets are efficient. The land could haven sitting empty for many reasons, like to government owning vast amount of land in SL. Just look at SL food import bill!

    I would rather have common sense politicians running the U.S. than a bunch of economists who are trying to prove their theories. If a country starts spending beyond its means there are repercussions like what will happen to an individual or a family. Look at Greece and this is the direction SL is leading if they do not start controlling their expenditure, particularly the government expenditure (not investment). If we had a balance budget amendment, we would have thought twice before invading Iraq or Afghanistan! Too much money in the hands of the politicians is like getting them intoxicated on alcohol or drugs. The last businessman to run the U.S. was Herbert Hoover! That should tell you something!

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