27 January, 2023

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An Unstable & Unusual New World: Survival Strategies For Lanka

By Kumar David

Prof. Kumar David

The only crime that is committed in broad daylight is politics, all others are done in secret. This is true whether it be Trump’s America or the ruling cohorts of Sri Lanka. No need to elaborate, it is universally known. Trump brags about his tax evasions and encourages his compatriots to do likewise. 

This country is trapped in a strange syndrome. It argued that Ranil Wickremesinghe (RW) may be able to win over the IMF and thereby stabilise the currency, deleverage debt (make it easier to borrow from commercial markets again), improve the import-export trade (on a capitalist basis) and negotiate a compromise between the Treasury and the Central Bank (limit money printing and enforce a degree of fiscal discipline). But at the same time economic pain will be inflicted on the poor and the lower middle-class. His budget proposals include raising income tax, increasing VAT and broadening the company tax but the costs will all filter down. RW hopes to reach a primary surplus (that is excluding interest payment on state debt) of 2.3% of GDP by 2024. This involves raising fuel and electricity prices. At present a part of these are sold far below production cost since they include large subsidies to low income households. The CEB and the Petroleum Corporation show huge losses on their books – it’s all politics.

Social spending and a safety-net mitigating the impact of the current crisis on the poor and vulnerable by raising social spending is envisaged. However, inflation and high interest rates (spurred by the US Federal Reserve Bank) is beyond control in most countries, therefore achieving price stability is a pipedream. The IMF which has promised technical help and the government say they are both committed to a new Central Bank Act, reducing corruption and achieving good financial management. On the whole these plans can be called a conventional capitalist economic programme and like a curate’s egg is good in parts.  

However, here’s the rub. Batalanda Ranil has from time to time shown himself to be a ruthless opponent of democratic and human rights. In the last three months he has encouraged his goons, several times, to attack peaceful anti-government protesters, human rights campaigners and women’s groups. The Police Minister who urged the force to break up peaceful democratic protests against government policies (some democracy!) continues to ply his ugly trade. You ask me which is the real Ranil? I say both; that is the fact of the matter; that is why there is no set-piece response to Sri Lanka’s paradox. Furthermore, this needs to be placed in the context of a deeply contradictory and fractured global scene. The world is upside down and since the financial crisis of the early 2000s is mostly standing on its head.

A daunting economic scenario faces global capitalism in the wake of the financial crisis of the early 2000s. The theology of the success of uncontrolled free-market capitalism has been shattered. Capitalism is kept alive by the STATE, yes that’s right, the state has diverted trillions of dollars, Euros and Yen into keeping capitalism alive. The principal role of the state in metropolitan nations is not subsidising bankrupt state enterprises, it is bankrolling insolvent capitalism. All this is no longer disputed. In 2008 the US Congress approved a $700 billion bailout known as the Troubled Asset Relief Program and in February 2009 Obama delivered a $787 billion economic stimulus to avert a global depression. This $1.5 trillion has been supplemented by a further $5 trillion post-Covid, post supply-chain-disruption stimulus monies in the US alone. Add the other capitalist nations and the increase is substantial, but I agree that not all of it can be attributed to propping up failed capitalist market economics. 

The Great Recession began with a subprime mortgage crisis in 2006 when banks drove American households into rotten Mortgages and fake instruments known as Derivatives. The housing bubble burst and subprime borrowers defaulted. The capitalist state declared banks (Lehman Brothers, Merrill Lynch) and giant corporations (GM and insurance giant (AIG) “Too big to fail” when they turned worthless. The stock market crash of 2008 was accompanied by one of the largest points drop in the history of the Dow. Global capitalism needed to avert a second Great Depression; this is not disputed. The myth of stable free-market capitalism has been shattered; the state has been exposed as a committee to oversee the activities of the capitalist class to a degree that even Marx did not foresee. 

Free-market capitalism not only went belly-up as an economic system but we have now entered an era of extremism and social instability the likes of which we last saw in the 1930s in Europe in the period of the rise of fascism in Italy, Germany, Eastern Europe and Spain. The return of a Trump presidency, near civil war over women’s rights to an abortion in consultation with their doctors, the possible overthrow of Putin (good riddance you are entitled to say) and dangerous instability on the “eastern front” are the setting to a very unstable global situation.  Sri Lanka needs to play its cards both wisely and craftily to navigate these waters. 

The one issue that I would like to address today instead of ploughing on with generalities is the economic role of the state. Therefore, I will focus of the most important global example of state involvement in economic development at this time, China. China’s economy whether measured by a PPP yardstick or in nominal dollar is likely to surpass that of the United States within a decade. The benefits of competent state direction in the initial decades of post-colonial modernisation are bearing fruit. Decades of high single-digit and some years of two-digit GDP growth pulled 800 million people pulled out of poverty, created a middle-class whose numbers exceed the population of the USA and saw infrastructure improvement that is hard to believe. State-direction built railways, airports, highways, industries and encouraged massive soulless public housing projects by private developers. This is all known; some people call it the greatest economic explosion in history. Nevertheless . . . be patient!

Whether under the leadership of the Communist Party, or in Singapore, Taiwan or South Korea for different reasons, the directive-modernising role of the state has been paramount. Size is not the only attractor; technology, investment, military focus and other crucial aspects. The bread-and- butter technology picture is mixed. China is pulling ahead in Artificial Intelligence and hard technology for industrial expansion. Though the West is hell bent on denying it access to the best in computer-chip and military know-how there were ways round this such as joint-ventures and theft of intellectual property. Russian science-technology is no pushover; China-Russia cooperation can one day yield huge results. 

A friend and former professor at the Open University, Nawala known as Eich, sent this pessimistic note to me a few days ago: “There is a major fallacy in your (KD’s) assumptions; given the insatiable desires and greed of people (ordinary people, capitalists and political leaders) this is never going to pass. The present state of technology is sufficiently advanced to allow people to lead decent lives and engage in enjoyable occupations. If you wish to you may speculate how much longer the Chinese capitalists will tolerate the dictatorship of the CPC without taking over decision-making themselves”.

But protests are erupting in Shanghai and other Chinese cities over heavy handed Covid controls. For the first time in decades, thousands of people have defied the authorities at universities and on the streets of major cities, demanding to be freed not only from incessant Covid tests and lockdowns, censorship the Communist Party’s tightening grip over all aspects of life.

Across the country, “We want freedom” has become a rallying cry of a groundswell of protests led by a younger generation too young to have taken part in previous anti-government dissent. As numbers swelled in multiple major cities over the weekend, so too have the range of grievances. Among protesters hundreds have called for the removal of Chinese leader Xi Jinping, who has overseen a strategy of mass-testing, lockdowns, enforced quarantine and digital tracking. Crowds chanted “Give me liberty or give me death!” according to videos circulating online in vigils to mark the death of ten people in a fire in Xinjiang. By Sunday (27) evening, protests had spread to Beijing, Chengdu, Guangzhou and Wuhan, where thousands called not only an end to Covid restrictions, but remarkably, for political freedoms. Residents in some locked-down neighbourhoods tore down barriers. Protests on campuses included prestigious Peking U, Tsinghua U and the Communication University, Nanjing.

Nevertheless, there remains a nagging question. What after the dirigisme phase as served its purpose and is past its use-by date? How is post-dirigisme society, technology and innovation to organise itself? Productivity in China is falling, innovation is stifled and raises questions about the freedoms essential for the future. Society has to be set free to flourish. What was the great failure of the USSR? The state, far from withering away, became an ever more determining force. But socialism is unimaginable if men are dominated by the state. Somewhere along the road the state must wither away if as envisaged by socialists a society of plenty and freedom is to be realised. Society has to be free to flourish. The lamp illustrates the leap into the sphere of human freedom and innovation that is a precondition for socialism.

This brings me to my closing remarks pertaining to the role of the state in Sri Lanka. At the present time it  

Has to play a directive role in economic development but it can do so only if it not a predator in the hands of corrupt political classes. Marx speculated that “in place of the old bourgeois society, with its class antagonisms, we shall have an association, in which the free development of each is the condition for the free development of all”. Leave aside the flowery language, in the final analysis the state is only a temporary instrument, human liberation demands that eventually e must be rid of it.

A few days ago, I polled my liberal and intellectual friends about who will they would vote for in a presidential election in 2023/24. I gave them a wide choice; Sajith, Ranil, any Sajith-Ranil combo, various Rajapaksa options such as Dulles and Namal, the JVP/NPP and Peratugami (Front Line Socialists). Believe me I am not saying this because I am an NPP member, but over half choose the NPP/JVP while the other half distributed themselves all over. The challenge then is to take forward the debate within the JVP (the NPP is fine) on the longer-term economic role of the state and my “The nagging question, what after the dirigisme phase as served its purpose and is past its use-by date?” Looks like we have a busy work schedule cut out for years to come

 

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Latest comments

  • 3
    6

    “China is pulling ahead in Artificial Intelligence and hard technology for industrial expansion. Though the West is hell bent on denying it access to the best in computer-chip and military know-how there were ways round this such as joint-ventures and theft of intellectual property.”
    The author cannot let go of the ‘theft of intellectual property’ cliche.
    Some of us cannot imagine intelligent life on the planet without the West leading the way.
    The US tried everything to block China racing ahead of it, and failed. It has been a campaign of slanderous lies all along ever since.
    How gullible can some intellectuals be!

    • 6
      3

      KD: so you are finally coming to your senses and see that the West that has Neocolonized Sri Lanka in collusion with its corrupt politicians and a Lankan business elite whose ‘captains of Industry’ are colonized by Amchem and make underwear (Underarmour) for US marines and Victoria’s sSecret for the girls while running after white tourists– this is the extent of innovation of the great ‘Business Community’ that thrives on political handouts!
      So, after 75 years of Lost Independence and Neocolonialism Sri Lanka will celebrate thanks to Western Fake Aid and “Donors” to De-develop and de industrialize the country next February 2023!
      Yes, a State-led development plan to take back Sri Lankans Ocean and valuable mineral resources and leverage them. Industrializaton is what SL needs following the China State led development model.
      Today France is looting Sri Lanka’s valuable Fisheries resources and the Germans, Japanese and Aussies the valuable mineral resources and Rare Earth Elements. Germany is looting high grade Graphite also used in mRNA injections.

      • 5
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        All the secret contracts to Sri Lanka’s exploit ocean and mineral resources between Euro-American corporations and corrupt Fisheries and Minerals Ministers, NARA and GSMB officials should be reviewed and cancelled to enable the country to harvest its resource wealth, INDUSTRIALIZE and grow the Economy and get out of the UD dollar default debt trap.
        Sri Lanka is being Gang Raped by ISB traders led by BlackRock and IMF at the Colonial Club de Paris on the Eve of 75 years of Lost Independence Day celebrations…
        The new scam is the Green Bond Scam that Ranil Rajapakse is preparing with the IMF and UNDP with the Green Mask (like the WHO’s Covid-19 Mask) , mortgaging strategic lands, ocean areas as Marine Protection Areas (MPA), so that local farmers and fishers and indegenous communities cannot accesss their lands and ocean resources under the “environment conservation” narrative is the new Greenbond Scam planned for paltry 1 billion USD,.
        Although at Cop 27 the Global South called for the Rich Industrial West to pay up for Climate “loss and damage” Washington’s “Force” backed Economic Hit Man, Ranil Rajapakse, is rushing to further ensure Western Asset Stripping of Lanka with the new Green Bond Scam…

        • 1
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          Dinuk: While agreeing and appreciating what you said, I too say that we are a nation that lost sight and control of our own resources including those of our talents and capabilities. Having said that, I too agree that it was a daunting task to get on, on our feet after domination under foreign powers for a few centuries. However, our “Leaders” (both political, and social) had a “VISION” and a “DIRECTION” to “REBUILD” we could have definitely avoided this calamitous situation that we are faced with at present.

          Anyway, it is better late than never. We have to make a START. There are a few initial steps in this process: (1) A New Constitution that brings people together (2) A change in the “Political Culture” (3) A new “Economic Structure” that maximizes the value and use of all our Natural Resources including the “People” (4) A fair and equitable discharge of a Justice System (5) A well structured “Foreign Policy” based on Dignity, Equilibrium and Resolute. That is the FOUNDATION for a NEW BEGINNING.

  • 0
    7

    An interesting picture of Kumar David.

    • 1
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      It seems that none with a red thumb noticed when Uyangoda stood in for Kumar David.

  • 5
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    ‘Ranil has from time to time shown himself to be a ruthless opponent of democratic and human rights’.
    The impression was that Ranil is more democratic than the other politicians. Were we wrong all along? Or, has he adopted it anew now?
    My choice would be difficult for you to swallow!
    .
    As regards to the controversial comment that Free-market capitalism has gone belly-up as an economic system, the evidence is not yet definitive.
    I had stressed in the past that greed cannot be suppressed by anything but capitalism.
    .
    On being asked, about who will they would vote for in a presidential election in 2023/24, over half choose the NPP/JVP.
    You know why? You polled your liberal and intellectual friends. Both those groups do not take into account human greed, when they theorise!

    • 2
      1

      Nathan,
      “As regards to the controversial comment that Free-market capitalism has gone belly-up as an economic system, the evidence is not yet definitive.”
      Free market capitalism is almost back to its brutal 19th century form. The only thing that kept it under a semblance of control was the threat of Communism. I don’t think the various welfare systems in place in the West would have been put in place if not for unfavourable comparisons with the Eastern bloc. Even outright colonialism and colour discrimination became untenable after WW2.
      You may remember the unabashed Australian demands for proof of 50% European ancestry from immigrants.
      When there were 2 blocs, they fell over each other to give us goodies. Nobody bothers nowadays.

  • 2
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    Prof KD, All Marx predicted from his deranged mind was of no use even to him. He died a beggar in the heart of capitalism in London, which generously permitted him to live there even though he criticised them so much.

    • 1
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      dtg
      Nastier things can be said about every pillar of the Christian faith.
      Your comment it so cheap and low so that any sane person would not bother to rebut it.

    • 1
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      Dinuk: While agreeing and appreciating what you said, I too say that we are a nation that lost sight and control of our own resources including those of our talents and capabilities. Having said that, I too agree that it was a daunting task to get on, on our feet after domination under foreign powers for a few centuries. However, our “Leaders” (both political, and social) had a “VISION” and a “DIRECTION” to “REBUILD” we could have definitely avoided this calamitous situation that we are faced with at present.

      Anyway, it is better late than never. We have to make a START. There are a few initial steps in this process: (1) A New Constitution that brings people together (2) A change in the “Political Culture” (3) A new “Economic Structure” that maximizes the value and use of all our Natural Resources including the “People” (4) A fair and equitable discharge of a Justice System (5) A well structured “Foreign Policy” based on Dignity, Equilibrium and Resolute. That is the FOUNDATION for a NEW BEGINNING.

  • 1
    0

    “Believe me I am not saying this because I am an NPP member, but over half choose the NPP/JVP while the other half distributed themselves all over.”
    Is this a declaration of membership of the NPP?
    There is something called “validity of sample” for data based on a limited sample to be representative of a population.
    *
    Such declarations of evidence of support can only lull parties and leaders into a sense of complacent stupor.

  • 0
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    In your poll with your liberal and intellectual friends , you find majority of them
    going for JVP / NPP ! Congratulations KD ! I am a man of no colour and I have no
    reason to find my refuge somewhere else ! But my research for fact finding took
    me to this : The FTZGWU , the Commercial , Industrial and General Workers
    Union , And the Inter Company Workers Union Controlled by JVP , supported
    Govt and Corporate attacks on jobs and wages during the pandemic. The World
    Socialist Website reported ! On Global Economic issues , the ground reality is ,
    people are managing with adjustments in their lifestyles so that Govts have less
    pain to deal with , especially Developed Nations !

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