23 October, 2017

Characterisations Of Rajapaksa-Regime Political-Economy

By Kumar David

Prof Kumar David

Characterisations of Rajapakse-regime political-economy: Futility of dated economic categories

LSSP leader Professor Tissa Vitarana has since the IMF began to underwrite economic policy described it as a trend to neoliberalism. More recently he has taken a harder stance: the PBJ-Basil-Amunugama-Mahinda economic model, drafted in consultation with the IMF, is a substantial, if not wholesale capitulation to neoliberalism. I can’t recall public domain pronouncements by Tissa, but it is no secret that he has argued this position forcefully in the LSSP Central Committee and Political Bureau. I am aware that the views of the Communist Party are similar; while Vasudeva’s position is nuanced; he believes the Rajapakse regime has not capitulated to neoliberalism but that there are forces within the government pulling that way; he thinks there is a tussle whose outcome remains to be seen.

A similar debate has spread in the business community and economic pages of newspapers and journals. Bourgeois analysts refrain from lefty terms like neoliberalism, populist-capitalism, but grumble that the government does not encourage the private sector, is not market friendly or growth oriented, and the like. The terminology, like all argot, is the vehicle of an ideology – I say this without prejudice. In recent weeks we have also had a debate between Ahilan Kadirgamar and Muttukrishna Sarvanandan in the Colombo Telegraph website, the former laying the blame for our economic woes on neoliberalism and ‘financialisation’, the latter arguing that the government is not neoliberal enough. “(T)he lack of neoliberalism” is the cause of Lanka’s “economic and political” downfall; maybe that’s what a naughty succubus keeps whispering in Sarvi’s ear.

Another perspective

There is a need to intervene in this debate from an entirely different perspective since the categories in which left leaders, the business community, bourgeois economists, Ahilan and Sarvi, speak are dated, dead and irrelevant. Crucially, tangible neoliberalism no longer survives anywhere in the world; its classic form died when the IMF abandoned hard positions in the early 2000s and it was finally buried by the global New Depression that commenced in 2008.

The core of neoliberal economics, privatisation of primary economic activities and the public goods sector (electricity, railways, the telecommunications backbone, water supply, public education and universities) has stalled and is no longer preached as creed by any serious economist. Aggressive anti-working class legislation (pseudonym, ‘labour market reforms’) has been abandoned for a soft more inclusive approach for fear of a backlash of strikes and protests that can unseat governments. Corporate and personal income tax reductions, and capital gains and inheritance tax concessions, have been scaled back to balance revenue requirements to sustain subsidies and social services be it India, Brazil and sub-Saharan Africa. Neoliberalism has been toned down by the IMF and developing country governments into a shadow of the belligerent proclamations of two and three decades ago. The struggle has been costly. In Bolivia alone thousands paid with life and limb before multinational raptors encouraged by IMF programmes, who tried to seize and profit from the people’s water were driven off. Waliveriya is a faint echo.

This is not to deny that the income gap between the top quartile and the lower 50% has widened in developing countries – the middle classes have sometimes gained and sometimes lost, comparatively. However, everywhere this has been accompanied by an improvement in mass living standards thanks to absolute growth till 2010. In China some 680 million people have been pulled out of poverty in three decades and economic growth in sub-Saharan Africa (thanks to the rejection of neoliberalism) has been encouraging. (En passant. The World Bank proclaims that more than a billion people have escaped from poverty since 1980; it fails to add that 680 million are in just one country!) Neoliberalism as in Pinochet’s Chile, Sukarno’s Indonesia, Banana Republic South America and JR’s Lanka has been defenestrated by determined opposition. Michelle Bachelet in Chile, Brazil’s Lula and Rousseff, Hugo Chavez, Susilo Bambang Yudhoyono, Manhohan in full retreat, and the cranky Rajapakse regime, are living manifestations of the rolling back of neoliberal pipedreams all across the developing world. Tissa, the CP (and Ahilan) are wrong to say Lanka has capitulated to neoliberalism; the creature has died a natural death. The pinning of the bourgeoisie and Sarves for full throated neoliberalism is futile; they seek for the resurrection of the dead. There was a pronounced drift in that direction for a long time from the late 1970s, the Regan-Thatcher era, but the point is that this was resisted and turned back in subsequent decades.

The developed world

Thus far I have focussed on neoliberalism in relation to the political-economy of developing world. If you want a watershed, the defeat in 1996 of Congress where Manhohan Singh served as Finance Minister, or the Chavez presidency starting 1999 are turning points – I think the former more significant. The demise of neoliberalism in the economically advanced countries, however, did not happen in the same way; mass protests and working class mobilisations did not materialise in the last quarter of the Twentieth Century or the first decade of the Twenty-first. Rather, capitalism caved in on itself; the motion of its own internal dynamics spiralled into calamity. Capitalism self-destructed; neither workers nor protesters had the gall or the power to checkmate it. Marx will be disappointed with his chosen class; but can take comfort from the validation of his theories beyond expectation. The New Depression (2008-date) is not of anyone’s doing; it was as unavoidable as an earthquake when pressure in tectonic plates builds up beyond endurance.

Regan-Thatcher-Blair style neo-capitalism, market genuflecting economic neoliberalism, and neoconservative politics (think Bush-Blair and the obscenity of Iraq) soon got into trouble. The rise of China, the Clinton nuance, the dotcom bubble-burst, nine-eleven, defeat in Iraq and alarming increase in public and private debt, signalled a twist. It was not neoliberalism but capitalism that crashed in 2008; it has still to rise from the ashes. As a consequence of the catastrophe, capitalism threw itself at the feet of the state and begged intervention. Gone was the panegyric to the miracle of the free market and on capitalism’s funeral pyre neoliberalism found an incendiary niche. State capitalism rose from the ashes. State intervention saved the American (and later the EU) banking system, pulled Detroit out of bankruptcy and bailed out three of the largest mortgage and insurance houses in America; ‘Fannie May’ (assets $3 trillion), ‘Freddie Mac’ (assets $2 trillion) and AIG (assets $500 billion). Fannie and Freddie, the two largest in the world, are US government sponsored but publicly traded companies with private sector cultural ethos.

The point of all this is that the great debate between intellectual giants, decrying or championing neoliberalism, is a tussle over a coffin. The schism concerns the innards of a vacuum. Neoliberalism is not the reason for Lanka’s economic predicament since it is not on the menu, and it is not the way out either, unless you believe in Easter Sunday and the resurrection of the dead.

What has not changed in the rich world, despite the New Depression, is the supremacy of finance capital, and the abandon with which it continues to craft risky instruments and derivatives. Some regulatory provisions have been introduced but clearly inadequate; critics warn of a second crash to come. This is not neoliberalism per se, but the stratosphere of finance capital; as such it is not relevant to the purview of this essay.

What is Rajapakse-economics?

Instead of dated labels (neo-liberal, not neo-liberal-enough) let us concretise, as best as we can, the economic potpourri of the Rajapakse state. What concoction makes up the PBJ-Amunugama-Basil-Mahinda model? The IMF occupies only a part of the storyline.

a)      It is, to a degree, a populist model because the regime is reluctant to impose austerity and enter a confrontation in political space. But for how long?

b)      It will become a capitalist austerity model in the coming years, because, the regime agrees with the IMF that mounting debt, a budget deficit that it cannot control, and an external trade deficit that shows no sign of turning round, spells disaster in the medium term.

c)      Pipe dreams of making Colombo a global financial centre in the image of Singapore, Hong Kong and Tokyo to the east and the Gulf cities to the west is the hallucination element in the model.

d)      It is a model embroiled in a serpentine relationship with China that will entail desperate begging for more concessions from the PRC when debt servicing and interest payment grace periods run out.

e)      It was an attempt to install a Corporatist State under Rajapakse hegemony, but the signs are that this strategy has suffered a setback in recent months due to international pressure against authoritarianism, and to a lesser degree, due to local opposition.

f)       The economic model is so deeply interwoven with corruption, abuse of power, and political impunity for cronies, that it is not sustainable in the long-term without a near dictatorial whip. For so long as the devotion of the Sinhalese electorate in gratitude for the defeat of the LTTE holds, however, the regime can survive with moderate abuse of the electoral system, holding back from blatant dictatorship.

It is absurd to stick inappropriate labels on this political entity. ‘Neoliberal’, ‘not neoliberal enough’; can’t these chaps, I mean they’re younger and brighter than I, do better? There is no one-shot label to stick on this creature; it is a model without a name. It is an ad hoc economic order, cut, patched here and there, and tailored to suit the venality, corruption and power hunger of the leaders. It must simultaneously induct sufficient populism without which it is impossible to retain power. There is an international dimension too which conditions the model. The West and human rights lobbies are breathing down the neck of the government about war crimes; hence there is an enforced special relationship with China without which the regime would already have been badly burned. All the commentators I have referred to say that the government will have its feet held to the economic fire soon; but they analyse the roasting differently.

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    Liberalism is against neo-liberalism. Neo-Liberalism is only thinking on economic growth without democracy ,democratic values and human rights application. Neo-liberal economic policies were implemented by conservative political parties as British Conservative Party and USA Republican Party not by Liberal parties in the world.

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    What is Rajapakse-economics?
    Simply it is simplay kopi kadestyle econimic managent.

    1. Make roads, higways, ports, airports in Hambanthota.
    2. ALl the investments comes thro 4 brothers if possibly giving them shares in the business or a cut.
    3. No economic plan. No focus. It is managing kopi kade style.
    4. No focus on SME development.
    5. Give fertiliser subsidy and develop agriculture to develop by its own.
    6. Central bank blame the private sector not participation in investment, development.

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    Good analysis of the current economic situation. Probably we can survive debt at the expense of becoming a sattelite of PRC. The amounts involved are negligible for PRC. Look forward to more chinese projects and a Rajapakse blasting into space.

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    “..It is absurd to stick inappropriate labels on this political entity. ‘Neoliberal’, ‘not neoliberal enough’; can’t these chaps, I mean they’re younger and brighter than I, do better? There is no one-shot label to stick on this creature; it is a model without a name. It is an ad hoc economic order, cut, patched here and there, and tailored to suit the venality, corruption and power hunger of the leaders. It must simultaneously induct sufficient populism without which it is impossible to retain power. There is an international dimension too which conditions the model. The West and human rights lobbies are breathing down the neck of the government about war crimes; hence there is an enforced special relationship with China without which the regime would already have been badly burned. All the commentators I have referred to say that the government will have its feet held to the economic fire soon; but they analyse the roasting differently..”

    Very interesting analysis. Prof Kumar David, is there any possibility that you can propose an ideal economic model for Sri Lanka or the whole world for that matter so that you may add further and real value to your criticism?

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    “international pressure against authoritarianism” is designed to bring Sri Lanka back to Western fold through a change in policy and if not by regime change and installing a friendly regime.

    This is not working at the moment resulting in deepening of Chinese influence which has now elevated the relationship to a ‘strategic relationship’ whatever it means.

    The ‘international pressure’ requires effective opposition to succeed. The current opposition is so weak and pathetic in mass mobilisation under a promising alternate political programme and effective leadership, the ‘international pressure’ might need to first work on changing the oppposition leadership.

    In order for the country to become a global hub, it requires certain fundamental building blocks in place. Country possess certain comparative and competitive advantages to support such a direction. However the existing policy framework and surrounding corruption, abuse of power, and political impunity for cronies, doesn’t provide a condusive environment in realising such a dream (hence it is a pipe dream). But it provides a great opportunity for the opposition if they are wise enough to grab it intelligently.

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    Pronouncements such as: “It was not neoliberalism but capitalism that crashed in 2008”, is not only a sweeping generalization but it mixed up the two, i.e. what is actually being crashed in 2008 and the capitalism. What was crashed in 2008 was the financial industry- only one intermediary of the capitalistic system- not the capitalistic system itself. Capitalism is much grander and encompassing than how the financial industry fare (for sure at least in the philosophical perspective).

    It is boneheaded to claim that capitalism is crashed in 2008. Most countries of the world are still governed by capitalistic system whose major premise is the private ownership of the properties. No other governance mechanism was emerged after 2008 with entirely different property right system that coordinate resource allocation decisions in the economy. If capitalism was crashed and dysfunctional since 2008, what is that other system of the governance in operation?

    To most of us, capitalism is not entirely defined by how “financial industry” operates (whether belly up or a well-oiled machine). Any given industry could go through crises or flourish based on the economic incentives and constraints operate to circumscribe that industry. As Professor David highlighted: “State intervention saved the American (and later the EU) banking system, pulled Detroit out of bankruptcy and bailed out three of the largest mortgage and insurance houses in America; ‘Fannie May’ (assets $3 trillion), ‘Freddie Mac’ (assets $2 trillion) and AIG (assets $500 billion)” are just apparatus of the U.S. financial industry, just that, however large these are.

    It is true that capitalistic system to an enormous degree intertwined with global commerce and international financial system. Thus any strains on these twin pillars could dent the capitalistic system. These strains circa 2008 were created by the greedy “criminals” in the U.S. corporate world (see the movie “inside job”). They knowingly push the entire financial system to the edge of the cliff, in their pilfering of the others wealth.

    Capitalism operates in an “institutional milieu” which defines the rules of the game. Robbery is not sanctioned (by law as well as by acceptable business behaviour) in that institutional milieu. For in order capitalism to operate, transferable property rights of the agents must be honoured. Robbery is not an acceptable mechanism of transferring property rights. What causes U.S. financial system to crash is a sophisticated robbery by the most amazingly brilliant minds; nonetheless it is a robbery. Such uncouth elements are an aberration than the norm. Could one claim that the legal system has collapsed, when a few homicides happen? It is a sweeping generalization and no difference to Professor Kumar’s sweeping generalization that in 2008 capitalism crashed. What happen circa 2008 mainly around Wall Street is a few “homicides”; one still cannot claim that system governing fundamental economic relationships crashed.

    The “spontaneous order” (as Hayek very thoughtfully characterised the capitalistic system) among the billions of independent economic beings in their consumption and production decisions are definitely a much better alternative to “collectivistic” planned economy where some egomaniacs (save a few like Castro) of the communist party telling me what to do and what to eat. Throwing away the “capitalistic” baby with the “rouges in financial industry” bath water is the primary pursuit of dated “socialists” such as Professor David. But I think sanity will prevail among many nations of the world. I think Professor David should read the recent Report on World Happiness Index and try to figure out what is common in the first 10 countries in that ranking.

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    Thugs are in control in Sri Lanka. It’s a wonder of Asia for thugs, because they get paid well, all the freedom to commit any crime, full support, protection and respect from the Rajapaksa regime.

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    KD says: “The core of neoliberal economics, privatisation of primary economic activities and the public goods sector (electricity, railways, the telecommunications backbone, water supply, public education and universities) has stalled and is no longer preached as creed by any serious economist. Aggressive anti-working class legislation (pseudonym, ‘labour market reforms’) has been abandoned for a soft more inclusive approach for fear of a backlash of strikes and protests that can unseat governments. Corporate and personal income tax reductions, and capital gains and inheritance tax concessions, have been scaled back to balance revenue requirements to sustain subsidies and social services be it India, Brazil and sub-Saharan Africa.”

    One objective of privatisation of primary economic activities under neo-liberalism would be to free government expenditure on these sectors. The other is to remove subsidies. While due to political pressure the Sri Lanakn govt. has not been able to fully privatise these sectors it has semi-privatised the electricity sector by setting up LECO. In others various moves to privatise have been floated from time to time only to be beaten back by protests of the workers. However,it has been successful in gradually removing the subsidies on electricity, telecommunication, water, and public transport passing on the burden of mismanagement, waste and corruption in the public sector to the middle class and the poor. In public education and universities the govt.is following the IMF and World Bank directives to cut down on public expenditure and promote the private sector. Under rationalization of expenditure schools servicing the poor in rural areas are squeezed out. In the university sector the arts streams which are servicing mainly the poor children from rural areas are pruned down. Allowing local private universities which is promoted by S.B. Dissanayake under the direction of the IMF and World Bank facilitated by Path Finder Foundation set up by Milinda Moragoda and serviced by economists like Sirmal Abeyratne whose motto is the ‘Shrink the State’ will severely undermine the public sector universities. This govt. also has been striving to bring anti-labour legislation and KD is correct that that opposition from the working class is holding them at bay. The regime has passed the tax burden to the middle classes and the poor while giving all the tax concessions to the capitalists local and foreign. So, this is not text book neo-liberalism as KD would want to argue. Well, we can give it a name PBJ-Amunugama-Basil-Mahinda economics as KD suggsts , but what is the outcome of the economic policies carried out by the govt. What about the indebtedness the regime is sinking the nation in?

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