15 December, 2018

Blog

Developing Poverty

By Ranil Senanayake

Dr Ranil Senanayake

The national psyche seems to have been summarized well by a past national ‘leader’ whose words of advice to aspiring young politician was “ R…., you must understand, the people are nothing but cattle , I lead they follow !”. Though repugnant, there must have been some truth to the statement as today,

in a bovine manner, we follow backward ‘leaders’, whose sole understanding of economic development has been a unidirectional push towards increased consumption and the growth of financial transactions. More often than not, these transactions are based on a high value being placed in the consumption of fossil energy. Concomitantly there is a very low value placed on social, health or biological cost of such consumption, the result has been a dramatic decline in primary productivity, an increase in the state of dependency, a loss of sustainability and of human health. But we are told ‘This is development’ and prostituting the future for loans to pay yesterday’s debt and todays greed, becomes the political imperative.

Usually, one finds that this destructive model of development is promoted by persons with vested interests in either amassing personal fortunes or getting a nation into debt as a part of their ‘official’ work. The level of consumption marked as ‘progress’. Consumptive development or ‘idiot development’ is marked by the importation of anything as long as the market demands it and by injecting money as loans into the local economy and spending it through massive projects.  The construction of roads that the majority of the population can never use, big expensive building projects, usually white elephants whose only purpose is to enrich the ‘developers’ and to place a nation in debt. The falling rupee being daily evidence of this folly.

This type of ‘development’ encourages both urban sprawl and the growth of resource and energy dependent cities. The mad rush at constructing cities worldwide, has led to a call for new visions in urban consumption, waste, and space management.

Cities have always grown on the capacity of the natural system to support them. Often, in human history these capacities have been exceeded and the loss of that city follows. The examples from the Middle East, Central China and Middle America bear testimony to that fact. Our headlong rush to create Mega Cities is evidence of this stupid hubris.

Planning for urban growth without considering the limits of the environment to supply the basic needs of its inhabitants is indeed shortsighted and irresponsible by the future inhabitants, both urban and rural.  This ‘misdirected growth’ is often promoted to enrich the people with power or capital and creates a class of ‘super rich’ which rapidly widens the inequality gap between rich and poor.  This widening of the gap should be a reason for national concern. The reason why we should all be vigilant to the phenomenon of a widening inequality gap between the rich and the poor is very lucidly explained in a very informative and eye opening book ‘The Spirit Level’ by two Epidemiologists, Richard Wilkinson and Kate Pickett.  A review in the Guardian states:

The authors point out that ‘the life-diminishing results of valuing growth above equality in rich societies can be seen all around. Inequality causes shorter, unhealthier and unhappier lives; it increases the rate of teenage pregnancy, violence, obesity, imprisonment and addiction; it destroys relationships between individuals born in the same society but into different classes; and its function as a driver of consumption depletes the planet’s resources. With the result that everyone suffers – even the most well off.’ Inequality in their view isn’t just bad for the poor; it’s also bad for the rich.

Analyzing data primarily from 21 developed countries and also the different American states, they present evidence of a correlation between the level of inequality in each country (or state) and a range of outcomes: levels of trust, mental illness, life expectancy, infant mortality, obesity, children’s educational performance, number of teenage births, murders, imprisonment rates and social mobility. More inequality goes with lower trust, more mental illness, higher murder rates and so on. It has nothing to do with total wealth or even the average per-capita income. On almost every index of quality of life, or wellness, or deprivation, there is a gradient showing a strong correlation between a country’s level of economic inequality and its social outcomes.

What has all this to do with where Sri Lanka is heading?

We have gone back to the old ‘formula of ‘borrow as much money as you want for very large projects, the commissions are very attractive and the feasibility of the project is not very important’. It began with the Mahaveli and the current path of progress and development that we are moving towards today seems to be exactly what the big lenders always wanted. John Perkins in his book ‘Confessions of an Economic Hit Man’ states that His job was “to convince countries that are strategically important to the United States to accept enormous loans for infrastructure development and to make sure that the lucrative projects were contracted to U.S. corporations”. He further states that economic hit men as “highly paid professionals who cheat countries around the globe out of trillions of dollars. They funnel money from the World Bank, the U.S. Agency for International Development (USAID), and other foreign ‘aid’ organizations into the coffers of huge corporations and the pockets of a few wealthy families who control the planet’s natural resources.

Knowing the degree of education and experience with mega projects that is required to launch such projects and when we compare it with what we have, it is obvious that there is no one with any smarts to develop even anything close to a credible project from within either regime, then where do these grandiose ideas and schemes come from ? who prepares the studies and financial projections to the satisfaction of the international lenders ?

Are there a bunch of shadowy ‘hit men’ of various colours in this town, abetted by a bunch of the greedy locals, leading us like a bunch of ignoramuses to a debt ridden future marked by social inequity and financial slavery?

This is the process gives rise to ‘Crony Capitalism’. Using Italy as an example Dr. Luigi Zingales of the University of Chicago points  out that  ”Even emergency room doctors gain promotions on the basis of political affiliations. Instead of being told to study, young people are urged to ‘carry the bag’ for powerful people in the hope of winning favours. Mothers push their daughters into the arms of the rich and powerful seeing it as the only avenue of social promotion. The nations talent-selection process is broken : one routinely finds highly intelligent people employed in menial jobs while mediocre people hold distinguished positions

The worst consequence of crony capitalism is political. The more a system is dominated by cronies, the more it generates resentment. To maintain consensus, the insiders must distribute privileges and subsidies – and the more they dole out, the greater the demand becomes.

In order to ‘dole it out’, massive projects are mooted so that the politicians and their cronies take out their commissions and move their lesser cronies into management, ensuring that the project can never be a success.

These types of massive infrastructure based development projects, that brings in no return and no possibilities of payback, is a prime factor creating the woes due to economic inequality that Wilkinson and Pickett described. In Sri Lanka today the widening inequality gap between the rich and the poor is obvious to any observer. This type of crony capitalism, may create a fortunate future for a few, but it will produce a dismal future for the rest of us and our children.

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    The falling rupee being daily evidence of this folly.

    People who go through difficult war times MR said you can see a light at the end of the tunnel, after the war where is the light, don’t shout the dreams out, let it be done by your deeds.

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      Ranil thanks good stuff – keep it coming!
      You are dead right about US Economic Hit men drafting Bondscam Ranil’s economic policies including Vision 2025 to benefit America First and the Global 1 percent. Bondscam Ranil, Mangala the Hairdresser and Avant Guard crook Tilak Marapaona all dance to IMF-WB, ADB and MCC i.e. Washington’s tunes.
      The right wing US govt, Millennium Challenge Corporation and its fake experts got RW to set up the economic subcommittee to by pass Cabinet oversight of economic agenda, and also Mangala Yapaps Agency for Economic Development to promote US-Japan and Singapore FTA agenda of deregulation and financialization and insurance rackets to asset strip all sectors of the economy and environment.
      Also. today Lankas Foreign policy is designed to please Tumpland in its trade war against China and Iran that runs on lots of fake news.
      Recall the Fake news NYT story about Chinese loans (which are only 10 pecent +Who appointed the Hair dresser Mangy who dances to IMF-WB, ADB and MCC i.e. Washington’s tunes? Bondscam Ranil whose economic and policies are designed by Washington in order to put America First! Not Sri Lanka.
      SL Foreign policy is designed to please Tumpland in its Fake news and trade war against China and Iran. Recall the Fake news NYT story about Chinese loans which are only 10 percent, and far less than ADB WB and IMF and JICA loans, being reason for Lanka’s Debt trap!
      Now out of box thinking is needed to stop crash of rupee:
      1. Iran is arguably Lanka’s most important trade partners because it sells oil and buys Lankan tea. Oil prices going up is one of the big reasons that rupee crashed also because of US sanctions on Iran. EU has decided to ignore US sanctions and continue to trade with Iran. So too, it is in the best interests of Lanka to continue oil imports and tea exports to Iran.

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    I believe not everyone can be rich. Sorry but that’s my opinion. Not everyone can be a neuro surgeon, not everyone can be a successful stock broker. Same way, not everyone can come out of poverty.

    A little bit of poverty is a healthy phenomenon in a market economy. Why do you think Central Banks across the world hike interest rates? Because they want to create some amount of poverty. Because they know that their actions will cause some people to go bankrupt.

    If there was no poverty, an apple may cost $25 and a condom would cost $15. Imagine that. Inflation would be uncontrollable.

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