1 June, 2023


Economy Needs A Major Overhaul: Mahinda Chintana Or NM Chintana?

By Team Anik Pituwa –

The 1972 Constitution, the plantation takeover, and Pieter’s housing reforms are major changes made by the 1970 coalition government; in retrospect they have also been controversial to varying degrees. Surprisingly, what in Team Anik Pituwa view is the most significant achievement of the coalition, has received less attention, though its importance is less disputed on both sides of the political divide; we refer to NM’s 1971 to 1974 budgets. He pulled the country’s external finances out of the abyss they were staring into, corrected major structural defects in the internal finances, and thirdly NM put in place financial systems to support development and growth. It is open to debate whether the austerity measures went too far, but sound long-term management of the economy in the public interest, not cheap populism, was his guiding lodestar.

What a contrast from today! The national economy is in shambles; the mess in the external finances has resulted in devaluation, a dangerous decline in foreign reserves, and frightening rising sovereign indebtedness. There is no credible structure in place internally to support and promote a systematic programme of economic development and growth – touting seeni-bola tourism and praying for foreign direct investment is all that the Central Bank and Finance Ministry are capable of.  The government has cut its own previous 8.3% growth forecast for 2012 to 7.2% but we think it may end up even lower, and the rupee has already fallen over 15% to the dollar, which means inflation may reach double-digit levels later this year or in 2013.

Some Left leaders who misled their supporters describing the Rajapakse regime as being pro-poor and anti-neo-liberal have been eating their words. The government is taking directions from the IMF and has oriented itself along a business friendly, foreign investment dependent line, and loading considerable burdens on the poorer class of society. The trade unions and the middle classes are angry and restless. The upper classes of society are supportive of this belt-tightening for the masses in order to provide a supportive environment for capitalist policies. The financial pages in the newspapers and seminars by business leaders manifest support for the new business friendly policy turn of the government and express hope that devaluation, increasing the price of oil products and consumer items, and wage restraint, will work, and there will be growth on a capitalist basis. Mass struggles and conflicts with the working class are on the way and these will decide the eventual outcome.

Professor Buddhadasa Hewavitharana in his book on NM’s policies as finance minister and Dr Saman Kelegama in a review of the book in the Daily News of 6 January 2007 have explained how NM refused to bow down to the IMF, but at the same time kept his cool, knowing that as a small country we faced limitations, and still he managed to chart a forward looking economic course. It was a terrible period he had to navigate; Sri Lanka’s terms of trade (comparative price of our goods in international markets) declined 44% from 1970 to 1975, because of the 1973 oil-shock petroleum product prices rose five-fold in this period, the 1971 insurgency disrupted the economy and 1974 was a severe drought year. The point to understand is that, like the present period, the coalition government also went through a difficult international scenario, and what is worse, is that at that time global neo-liberalism was on the rise and threatening, while today neo-liberalism is in global decline.

The government must change economic direction if it wants to survive. Yes, it is correct that market competition can help in efficient resource allocation and enhance enterprise efficiency; but it has to be managed to ensure social fairness and ensure that the poorer classes receive a basket of basic commodities and essential services at affordable prices. Yes, bureaucratic state enterprises with political interferences are a disaster; professionalism is essential. But the Administration has lost its head and its sense of balance on both these matters.

On the macroeconomic front we do not oppose foreign investment or the expansion of local capitalism, far from it, a country at Sri Lanka’s stage of development needs help from all sides. However the state must have long term economic vision; it needs policies to generate adequate domestic resources and it must lay down programmatic foundations for the sustained development of the domestic economy. The government has abandoned a strategic economic role of this nature. It has tied itself up in an absurd excess of infrastructure projects, some useful some wasteful white elephants, instead of engaging itself in a well thought out and comprehensive strategic economic development programme.

At this time, in Sri Lanka, when the left movement has been letting its identity slip, and when many people do not see the difference between the left and the SLFP or the UNP, it is good to reflect on NM’s approach to rescuing and rebuilding Sri Lanka’s economy during a previous dark era. In this perspective we can better see what a mess the present Administration is making, and get an idea of how to correct the mess. Of course after 40 years many details of NM’s programme are no longer relevant; what is important is his way of thinking.

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Latest comments

  • 0

    UPFA is no different to UNP capitalism reaching a slow death in the world.

    What we need is a Socialist System with honesty & Integrety, A True Socialist not bogus socialist party like the LSSP,CP, JVP.

    Recently JVP too went down under capitalists, now lets watch the birth of Frontline Socialist Party, the dissidents of JVP.

    • 0

      Jim, tell me where Socialism has been a success, where the regimes survive through sheer surpression of the masses and not with enmasse support?

  • 0

    The policies being followed are not that of a free market. They are of heavy state intervention and, where private parties are involved, closed-door, back room deals.

    This is called “crony capitalism” where a few parties get favoured deals, the workings of which are hidden. This is well known in places, especially in Africa.

    Improving transparency is the best way to eliminate these things, what is open to scrutiny tends to be clean.

  • 0

    Jim, did not Russia and China practice Communism and Socialism respectively to the letter? What do you see in these two countries? The highest number of Rich Capitalists are found in these two countries today, contrary to the doctrines preached in either case, as there is no place for Capitalism in both systems. 1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

    2. What one person receives without working for, another person must work for without receiving.

    3. The government cannot give to anybody anything that the government does not first take from somebody else.

    4. You cannot multiply wealth by dividing it!

    5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.

  • 0

    The best definition of a Politician I have come across is that, ‘A person who will do anything on earth for the workers except become one’. I have a photograph of NM in suit travelling in a Rickshaw then. What struck me was, the violation of the first principle of Communism, Man exploiting man. This was the Golden Brain of Giridera Mills fame. I do not know of any good they did but the damage caused is immense for this Nation.

  • 0

    I’m not saying that infrastructure projects are “white elephants” (far from it), nor am I disputing Mr Rajapaksha’s role in ending the 30-year war which indisputably boosted the economy. But what I’m saying is that these guys are invariably tethered to their laurels, and just go on lauding about the greatness of their policies and finger-pointing. Mind you, this is what the opposition does too!

    I’m a complete novice in politics, and I do not wish to entangle myself in policy or ideology. I also don’t want to see “another Singapore” in Sri Lanka like capitalist J. R.’s envisioned, because copy-catting another economic success isn’t going to go far.

    But the present leaders need a balanced approach, a Third Way centrist approach that balances the needs of both the poor and the businessman. Isn’t it true that “businessman” isn’t a word limited to the rich-class corporations in the city, but also the honest boutique owner in the village?

    What this government has done is entangle itself with corporations and vested interests abroad, while at the same time vociferously sanctifying nationalism to populist absurdism! The solution isn’t really caving into the mass demands: solution transcends the shortcomings of Democracy and taking decisions which are RIGHT, not merely what is DEMANDED. That was the quintessence of Dr N. M.’s policies: thought leftist in nature it was a pro-active approach, extended even to the arts.

    They didn’t have such large-scale infastructure projets then, saving a few, but still they managed this country, and not just with vulgar nationalism.

    What Ms Bandaranayaka did was transcend vulgar nationalism WHILE being proud of Sri Lanka. What our lackeys today are doing is feeding the poor with extolled virtues of “Maathrubhumi” and “Eksesathbhawa” while at the same time hanging onto vested interests.

    And mind you, this applies to the opposition as well!

    I mean, being Sri Lankan is a pride, but being tethered to past laurels is tantamount to regression.

    Leaders, please follow Dr N. M.’s vision and do more while talking less, heeding not the vested interests we have today in Trade Unions, University Unions etc.

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