21 January, 2022

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Economic Shock Therapy Will Ensure An Enhanced Explosion & A Military Takeover

By Dayan Jayatilleka

Dr. Dayan Jayatilleka

Final Rejoinder to Hema Senanayake

The reason I write a final rejoinder to Hema Senanayake is that this country has seen far too much turmoil and bloodshed, and I have been in and around too much of it, that I tend to fight against anything that would cause more of it.

Economics is not a hard science. There are no scientific axioms in economics that can be universally accepted. It all depends upon the economic paradigm or episteme one operates with and within.

Economic policy is a matter of choices. There is no one, single, correct answer that is self-evident. It all depends on where you are coming from and want to get to.

Unlike in the case of hard science, where the correct methodology applied to the data points you in a certain direction, in the case of economic policy the choices you make can take you into the minefield of civil war.

In economics the kind of dogmatism that Hema Senanayake and his co-thinkers display, is profoundly risky. This rightwing liberal school of economic thought has never figured out what happened to the periods of Ceylonese/Sri Lankan history they approved of:

1. The UNP of the 1950s, which ended with the hartal of August 1953 and Sinhala Only 1956

2. The UNP of 1965-1970 which ended with the rise of the armed JVP and a two-thirds majority for the SLFP-led coalition;

3. The UNP of 1977-1988 which led to a massive Southern insurrection and the near-decapitation of the UNP (and had to be rescued by Premadasa through a shift to a very different economic paradigm);

4. The UNP of 2001-4 which ended with the Presidential ouster of the PM and the electoral victory for Mahinda Rajapaksa;

5. The UNP of 2015-2020, which ended with the electoral extinction of the UNP.

This is why I do not trust for a moment, the prescriptions of those who belong to that same school of economic thought and have made no public criticism of and rupture with the policies of those times.

When these successive experiments have ended in sociopolitical backlashes, it would be suicidal to approach the same doctors for the same diagnoses and prescriptions.

Sri Lanka has experienced twin disasters:

A. Statist closed economy/low growth (SLFP 1970-1977, SLPP 2019-) and

B. Open economy/rapid growth/trickle-down/free-market fundamentalism (UNP)

The JVP-NPP’s discourse and printed proposals so far, take as a starting point the denunciation and rejection of the Open Economy of 1977. That alone tells us that they cannot offer a solution to the present crisis or a better future for Sri Lanka. the JVP’s rejection of the Open economy instead of a progressive reform OF the Open Economy will lead us to the kind of abyss that has given socialism a bad name as an economic system.

Thus, three options we are offered, namely the current regime’s policy which is a throwback to that of Sirimavo Bandaranaike -NM Perera, the Ranilist UNP’s economic policy –summed up in the ‘IMF First!’ approach—and the JVP’s rejection of the Open economy, are all disastrous.

Based upon empirical evidence, it is only the paradigm of President Premadasa that gave us high growth including rapid industrialization, high inflows of foreign investment, a lively stock market and zero-socioeconomic polarization/backlash, because it also witnessed rapid decline in inequality. I do not trust anyone who fails to recognize that fact.

That is also why I insist that any discussion of exits from the crisis and an economic strategy for Sri Lanka’s future, takes as a start-line, the economic paradigm and policies of President Premadasa.

It is only that combination of ‘growth with equity’; of state-led social and economic intervention and an Open Economy, that can avoid social instability and ensure a better future. That is what Sri Lankan Social Democracy looks like.

Thanks to the Rajapaksa regime’s policies we are poised on a volcano. The wrong policy prescription will make the coming explosion far worse than it needs to be. The problem is not the IMF as such. The problem is the austerity program that will be presented as a solution either by the IMF or this Government or its successor.

Where should the cutbacks be? Where should they land? Those are choices. Who will make them and for what reasons? To put it bluntly, who should carry the burden of the crisis and the so-called solution? Is it the 99% of the citizenry or the 1%?

There are no axiomatic solutions. Take the issue of State-Owned Enterprises. From the neoliberal right to the regime’s tough Ministers such as Dilum Amunugama, there is an advocacy of privatization, but is this the only solution? The unions can help identify where the cuts can come.

Any attempt at slashing public expenditure without consultation and the coming storm will turn into a tornado. This in turn could provide the opportunity for the installation of military rule.

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Latest comments

  • 5
    5

    Dayan should stick to what he knows and economics is certainly not his expertise.

    1. The UNP of the 1950s, which ended with the hartal of August 1953 and Sinhala Only 1956

    That is not the fault of the UNP. In most countries the language of the majority is the only official language. Anyway going to happen. UNP-ACTC partnership was a bigger root cause for its defeat in 1956 than economics.

    2. The UNP of 1965-1970 which ended with the rise of the armed JVP and a two-thirds majority for the SLFP-led coalition.

    JVP activities started since 1965 and it was banned. Sirima’s crack down on defence expenditure budget since the 1960s coup is the reason for the rise of violent groups.

    3. The UNP of 1977-1988 which led to a massive Southern insurrection and the near-decapitation of the UNP (and had to be rescued by Premadasa through a shift to a very different economic paradigm)

    This was because the Sirima government in 1971 did not eliminate the JVP leadership. It happened in 1989 and no more insurrections. Also in 2009. No more war.

    4. The UNP of 2001-4 which ended with the Presidential ouster of the PM and the electoral victory for Mahinda Rajapaksa.

    This is not economics. CFA destroyed the UNP.

  • 2
    1

    “Based upon empirical evidence, it is only the paradigm of President Premadasa that gave us high growth including rapid industrialization, high inflows of foreign investment, a lively stock market and zero-socioeconomic polarization/backlash, because it also witnessed rapid decline in inequality. I do not trust anyone who fails to recognize that fact”.(extract from the article) Q. Looks like a magic bullet? Need expansion of this model. What changes did Premadasa made in the economic policy and programs different from JR’s? Starvation of the population by way of austerity measures(following Sirima model) is not suitable for the current time. State itself has to be reformed to make it less expensive,more responsive to people’s needs and make state institutions drivers of economic growth and social well-being. Attitudes of polis and poublic servants also have to change dramatically to be poeople-friendly. The problem in governance in Lanka is that people are taken as cardboard cut outs rather than living,thinking and acting individuals-a colonial construct-still followed by the current rulers. empowerment of the people at grassroots level(psychologically,economically,politically) is the key for the victory of any progressive political formation.

  • 6
    1

    “Economic Shock Therapy Will Ensure An Enhanced Explosion & A Military Takeover”
    Of course it will. Our people are used to a feudal democracy, where the paternalistic state gives them everything. This cannot work when the state runs out of money. Our economic philosophy is “clean suit empty pocket” . Unlike those cheap Indians, we have imported toilets, cars, fancy highways, towers, etc, all done with loans. Our workers are better paid, but not required to actually work (except those in the FTZ’s, which JR set up as a different country).
    Even Premadasaism won’t work without money.
    “there is an advocacy of privatization, but is this the only solution? The unions can help identify where the cuts can come.”
    The unions themselves are a large part of the problem. Will they allow Srilankan to be sold off? The railway is already a loss, but its employees make it worse. We have no money to buy fuel, but self-interested unions object to the LNG deal. Even if the Army steps in, it will do no better, because it is 98% Sinhala Buddhist. I have it on good authority that there is rampant smuggling of things like turmeric and fertilizer with the connivance of the military.

  • 7
    1

    Dude, I am already getting goosebumps, stop tickling. You keep writing right/left wing, middle path, open/closed economy, social democrazy —–blah blah. Whereas my 95 year old mom, only remembers corruption, deception, race/religion wing —-., who to believe ???

  • 11
    1

    DJ, lets look at real facts. 1)Lankans who never wanted to share power within, are now readily willing to share with China, India , U.S and anyone willing to loan to join the party. So much so, the foreign policy we never had is now replaced by LOAN policy. Imagine if Nigeria, Iran oblige to Rajapaksas request for desperate loans, soon they too may own property in Bankrupt Lanka.You still pretend that there is a foreign policy and you are an expert in that. My humble advise to you is to get rid of business suit, before going out with that begging bowl. 2) You say there was two schools of economy SLFP, UNP which is now replaced by Rajapaksas own school of economy ( written specially by Basil/Cabrrral). That covers the whole post independence period and the outcome of it is, failed bankrupt nation pleading Iran, Nigeria ,Bangladesh for funds to buy essential food items. 3) In the mean time Rajapaksas are yet trying to scrap every $ out of banks and public by offering extra 10 LKR, knowing well, LKR’s further depreciate to junk.4) As long I remember there is no right/left wing economic policy, other than family kleptocracy and public clamoring for fallen crumbs.

    • 5
      2

      A china chinese Global Television Reporter Beng Lim posted on the internet now deleted all indians are niggers. Also posted when queried Beng Lim commented that sinhalas are not niggers and that africans are not niggers. Also china chinese CCP members CANNOT believe in religion but my daily ceylon news on You Tube (which shows MISERY in sinhala country that gladdens my heart – like israel / jews I believe in revenge) showed chinese diplomats with “Pottu” and Veshti praying in Nallur temple. These duplicitous comments and duplicitous approach for CONTROL purposes which is reflective OF TRUE china chinese duplicitous views of sinhalas including the human faeces fertilizer debacle and china chinese government approach and interference in what is a basic commercial transaction with a commercial china chinese entity, forebodes exciting times in sinhala country when the sinhalas will experience second class citizenship when the Rajapaksas (depart to the USA or maybe italy or Uganda with their looted wealth) and hand over sinhala country to the china chinese

  • 4
    0

    Gotabhaya will stage a coup to throw himself out.

    Soma

    • 4
      1

      Soma,
      Do you mean another Bomb Blast?

    • 2
      0

      He’s better off doing another 1939, 1958, 1977, 1981, 1983 or a 2009. The incumbent party always won following those events!
      Guaranteed victory!

    • 1
      0

      soman

      Happy European New Year.

      Dinesh Gunawardane warned the minorities if North East is merged again there would be rivers of blood on the streets, seas, rivers, skies, …………….under the sofa, inside kitchen, …. cemetry, ….

      Has he been organising a mother of all riots as he finds no excuses to divert voters anger against rulers, crooks, clan, …. state, functionaries?
      Are you helping him organise one this time too?
      Don’t forget Elle whose valuable experience in the past might help you enormously.

      It is sad you have to manage without Cyril Mathew.

      • 0
        0

        Native
        I have been always wondering why North Provincial Council and East Provincial Council corporate among themselves , execute projects jointly, reduce unnecessary expenditure jointly like reducing the number of Ministers , in effect function as a defacto one Council? I mean if they are so desirious of merging.
        Is there a constitutional restriction in two Councils working together,?


        Soma

        • 1
          0

          soman

          “I have been always wondering why North Provincial Council and East Provincial Council corporate among themselves , execute projects jointly, reduce unnecessary expenditure jointly like reducing the number of Ministers , in effect function as a defacto one Council? “

          You must be joking.

          The provincial councils do not have powers to act on their own.

          They don’t generate enough revenue independently, therefore they rely on Central government, which does not want Councils working together.

          I am told the state functionaries as usual with other provincial councils do not like to work, work more than what they do now, very little.

          These functionaries do not like experts, do not like to learn, do not like to upgrade their knowledge and skills.

          They cannot see beyond their nose, ….no vision, …

      • 0
        0

        NV
        There will be rivers of tears when Tamils outside NE are asked to join their brothers in NE.
        Remember when arrangements were made for the Tamils in the upcountry to relocate themselves to India so that they can live as equal citizens among their own kith and kin in an environment of their own language, religion and culture they protested and demanded to continue that pathetic life in Sri Lanka. To this day they are happy here than going back to super power India.
        Any comments?

        Soma

        • 1
          0

          Soma,
          “this day they are happy here than going back to super power India.
          Any comments?”
          I doubt very much if that is currently applicable. When the opportunity was offered, the SLR was 2 INR. Now the INR is 3 SLR. A 600% appreciation. I think , if the opportunity came again, a lot of Sinhalese wouldn’t mind migrating to Taminadu.
          Why don’t you look at the smuggling opportunities? Turmeric is only 300 SLR per kg over there. You can get 4000 for it here.

  • 3
    2

    All this talk of military takeover is spread by people who have vested interests.Sri lanka will struggle on in the democratic path come what may.We are not an idiotic people as some imagine us to be.

    • 2
      0

      Don’t forget riots and arson are an essential part of Sorry Lankan democracy. Without these the course of SL would have been different.

      • 2
        1

        gatam

        what happenned to SWRD who looked the otherway while riots took place?Instead of a great political career he went into an early grave.
        What happenned to the UNP which not only looked the otherway but ministers like cyril mathew actively took part in it?All its leaders went to an early grave and like a headless chook without leaders it ended up as a minor party with 250000 votes.
        That is democracy.

        • 2
          1

          Also gatam what happenned to the rajapakshes in 2015 after they looked the otherway while gnanasera went after the muslims in aluthgama.

          what happened to sirisena and ranil after they looked the otherway while the digana riots were taking place.
          what is hppeneing to gota now who benefited immensely from the easter bombings?

          This is democracy.It s like a train going through a dark tunnell which ends at some point and there is light and brightness and beautiful scenery and then it enters another tunnell.

  • 3
    2

    Thero explains everything, but his explanations have not made any change of how his time, at UNHRC, failed to bridge with UNHRC, which is the main throat choking issue to ask help from IMF, not the austerity conditions IMF would enforce on Lankawe as Thero and his Aanduwa cabals would like to interpret. (Pls Read my explanations here: https://www.colombotelegraph.com/index.php/one-family-one-set-of-looters/comment-page-1/#comments)
    Today’s Lankawe problem stems from the fact that Appe Aanduwa could not bring war to an end and put it behind, Thanks for Thero’s effort in 2009. Yes, of course no more Sinhala Buddhist Rapist Army is dying, but no change in Tamils’ case or CBSL-Treasury’s case; they both still pay the war time price.

  • 2
    2

    In 2009, instead of resolving War Crime issue, Thero separated Lankawe from its main trading partners, The West, and tied it to China. In other words, Lankawe was enslaved to every criminal nation, Tom, Dick & Harry, by reducing it as a subservient to the Pariah Nations, not being able to freely maneuver. Thero wrongly calculated, that he is escaping from accounting for UN on his Human Right violation. Now it is GLP’s job (though, naturally, he is ever enchanted to do those) to take off his pants and fall in front of every country’s ambassador to ask for vote in UNHRC, and dollar or a pound to buy Biryani Parcel for lunch. The, hereto the proud Sinhala Buddhists’ Annual Celebration of Pogroms from 1956 are turned into semi-annual pilgrimage to Geneva, after Thero locked Lankawe at UNHRC. An erudite man who understands his or her problem, solves it forever, does not leave it for heritage inheritance for the future progenies.
    Thero’s basic argument is, the IMF will make you sell Government corporations. That will bankrupt the local politicians’ income. So, let us sell Thero’s Amude & Sinhala Buddhist lands to China, that will boost the income of his masters.

  • 2
    2

    He misunderstands the scientific nature of the subject of Economics. He mistakenly quoted that Economics is only about options and choices. Rather it is science, used to make decisions. Say: If the Rapist Army makes bombs with the new budget 2022 money at their factory, in order to save the Sovereignty of Lankawe from non-existing Tigers, then 10% of them go dud. On the same theory, if an economist or meteorologist predicts something using their science, 10% turn out to be right. It is only a difference in the percentage of accuracy, which is only an indicator of the maturity status of that particular science. Remember, the scientists in Meteorology and Economics are not that they are 90% wrong, but they have figured out 10% correct; that is what counts. This is not related to 50:50 coin tossing. Those scientists used their science to predict 10% right.

  • 1
    2

    That was a difficult part for Thero to understand, who bite the tip of the grass in the name of political analysis. Economics & meteorology are science, which can create new choices, those were not existing for the decision maker when he/she started the process.
    Valaiththodam Sr used Thero’s enemy, LTTE, to get rid of India. Sinhala Buddhist used LTTE to get rid of Valaiththodam and celebrated it with firecrackers.

    Read my lib: I guarantee if IMF loan comes – Old King, the master of all games, goes in. Sinhala Buddhists, thus take your pick.

  • 0
    1

    As far as Srilanka’s work ethics is concerned , private sector excels in productivity .
    Needless to explain why . On the other hand , Hard work is a rare commodity to the
    public sector . Here too , no need to go on explaining why but one thing must be said
    that the public sector is an ” orphan .” Its productivity is only about one third of what
    private sector achieves . Let us now come to the point how a Military rule can turn
    these long standing work culture into an advanced one ! And especially the public
    sector ! And first of all , prove that Military is free from corruption as corruption is the
    main element in the failure or lack of productivity in public sector services . Military
    has nearly nothing to dictate to the private sector for more efficiency because it
    already is breaking the backbone of the work force for productivity , without Military
    intervention ! Go to a Garment industry unit and spend a half an hour in there , see it
    for yourself . Go register yourself as a supplier to the Army at the army Head Quarters
    and go through the tender procedures for a first hand experience !

  • 1
    0

    soman

    Happy European New Year.

    Dinesh Gunawardane warned the minorities if North East is merged again there would be rivers of blood on the streets, seas, rivers, skies, …………….under the sofa, inside kitchen, …. cemetry, ….

    Has he been organising a mother of all riots as he finds no excuses to divert voters anger against rulers, crooks, clan, …. state, functionaries?
    Are you helping him organise one this time too?
    Don’t forget Elle whose valuable experience in the past might help you enormously.

    It is sad you have to manage without Cyril Mathew.

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