27 June, 2022

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An Economic Roundtable Towards A Consensus: Response To Dr. Dayan Jayatilleka

By Hema Senanayake –

Hema Senanayake

At the very beginning prejudices should be shunned away. Based on scientific experiments, behavioral economists show that there are strong biases in human mind. Due to these biases, humans sometimes make decisions that would harm themselves. Therefore, if there is going to be an economic roundtable, we should go and sit there being free from biases as much as possible.

I think there are philosophical and ideological biases too and such biases are dangerous because those biases could lead to ignore facts and evidence. As Dr. Dayan Jayatilleka correctly identifies these biases could create dangerous consequences. True. Then, Dayan says that I make such a dangerous postulation when I write that, “In economic reforms, there is no middle path I can ever think of. There is only one way to do it, at least when we consider macroeconomic fundamentals on which the progress of whole economy rest upon.” Dayan begs to differ because, he says “… of the dangerous consequences of Mr. Senanayake’s supposition.” If my supposition is wrong Dayan is right.

Then, he argues, “Firstly, the call for the Middle Path eschewing the extremes was made by one of humanity’s most advanced minds, namely Gautama, the Buddha. He was postulating the Middle Path as a universal truth. No realm of human activity or life was exempt from it. Not even economics.” This is a philosophical and religious misinterpretation, I guess. The Buddha said there is one and only path to nibbana, that is the noble eight-fold path, no other paths. One can arrive at this path by eschewing extremes but eschewing extremes itself is not the path.

Likewise, eschewing two extremes of capitalism or its variants and socialism or its new variants do not set the economic middle path to get out of this grave economic crisis. I suggest, forget the economic middle path, as the postulation is prejudice. Let the truth prevail or let the truth arise at the economic roundtable logically and freely. In chemistry, there is no middle path, just known truth prevails. So is in physics. In brief all subjects of natural sciences there are scientifically truths. Why not in economics?

You might argue that economics is not a science. Yet, like in science, economics study an object. Its object is the social structure or according to J.S. Mill, is the sphere of man’s action that is involved in the pursuit of wealth. However, I do not venture into this discussion because what is important at the roundtable is to unfold the economic “truth” or the path that is available for Sri Lanka that we all can agree upon to get out of this crisis. If we move on this path, then we will begin with economic axioms. These axioms or self-evident truths help us to arrive at a consensus. For example, I argue that “the growth of economy depends mainly on two factors. One is the increasing allocation of money for capital formation and the other is the increasing allocation for consumption, out of which a part will become taxes… The money allocation for capital formation and consumption originates from total national proceeds…The total national proceeds or sellable output originates from entrepreneurial activity, nowhere else…Then what should we do?… we have to expand the entrepreneurial base.” This understanding is a self-evident truth which has the potential to unify the country and all parties at the roundtable.

Contrary to this method, Dayan says that he “would use the markers ‘Keynes’, ‘Roosevelt’, ‘Social Democracy’, ‘East Asian model’ and ‘Premadasa’ to demarcate the third space in economics and economic policy; the Middle Path which Sri Lanka should follow.”

I guess none of these “marker” models bring any self-evident economic truth to the roundtable that helps us to arrive at a consensus. But if we think beforehand that these models represent the Middle Path and “middle path” is the Golden Mean, Sri Lanka would not make any progress at the roundtable.

Further, Dayan says, “At a moment when the JVP’s Anura Kumara Dissanayake and the FSP’s Pubudu Jayagoda and Duminda Nagamuwa have attacked the IMF as a solution and given that these parties drive a powerful union movement, I would renew my call for an Economic Roundtable to arrive through consultation at a broad consensus, based on mutual trade-offs, so as to manage the economic crisis.”

I beg to disagree because I have watched that Sunil Handunneththi of JVP talking at a TV program, did not reject going to IMF but what he strongly insisted is that the IMF should not allow the corruption creep into the pricing so that prices will be lower and would reflect the true market value. This is a good point. In fact, corruption increases cost of doing government businesses which will affect prices and if the corruption is staggering it has the power to change the national current account negatively creating a balance of payment crisis which in turn causes to seek IMF support. Therefore, Hudunneththi’s point makes sense.

However, rejecting IMF or deciding to go to IMF is not an economic axiom. Perhaps at an Economic Roundtable or at an open public discourse the leaders of SJB, JVP, FSP and other political parties may well understand their lack of understanding of the fundamentals of modern macroeconomics. The government by their actions has already proven their lack of understanding of everything from economic governance, agriculture to single entrepreneurial activity of gas distribution.

Therefore, I would unite with Dr. Dayan Jayatilleka to call for an Economic Roundtable and let’s begin with economic axioms. Our people would be relieved from economic suffering within months.

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