By Ameer Ali –

Dr. Ameer Ali

The rejected presidential candidate Ranil Wickremesinghe has come out of the woods and demanding the new president and his interim cabinet to increase the salaries of about 1.2 million public servants out of a total 8 million wage earners. According to RW, that increase was approved by the government under his presidency. It has now come to public knowledge that although the former government approved the increase the necessary financial allocation was not provided. Besides, if 1.2 million were to be given an increase what would happen to the income of the balance 6.5 million workers in the private sector? In short, the issue of pay increase to public servants was a calculated political stunt engineered by RW to win his presidential contest. Now, as polling date is approaching for a General Election, he is bringing that issue back to campaign platform to secure at least a majority of the postal votes. Anura Kumara Dissanayake and NPP need not swallow RW’s bait but consider the issue as part of an overall strategy to revitalize the economy and explain that strategy and benefits accruing from it in a language which ordinary voters could understand. However, the next budget can do what is feasible and affordable under the current financial situation.

Apart from the economic argument that any salary increase should be related to productivity, what really matters is not the amount of money income that one earns but the purchasing power of that income or real income. When prices of goods and services keep on increasing with short intervals fixed income earners would be the first to feel the pinch. In a free-market economy if the price of rice for example increases frequently it would be either because of increase in demand or fall in supply or both. Studies reveal that in Sri Lanka it is more the fall in supply than the rise in demand that has caused rice price to increase. The reasons for this could be natural factors such as droughts, floods and so on or improper techniques of cultivation, or artificial rigidities caused by millers, hoarders and black marketeers. Therefore, the solution to the unaffordability of rice cannot be solved simply by increasing the money income of consumers. It requires a total overhaul of the agricultural sector including marketing so that the supply of rice could be increased, which would bring down the price and keep the purchasing power of money income steady. Therefore, the issue of salary or wage increase not only for public servants but even for other workers should be approached more from the point of view of economic productivity and as part of a larger economic strategy to maintain a steady real income rather than as a catching up money income exercise which is inflationary. That had been the history wages and salaries in this country. The defeated parties, their leaders and campaigners would naturally continue picking on promises made by AKD before he was elected as president and his failure to honour those promises since then. But those promises were made as part of an undertaking to change the existing system which covers even the economy. NPP should make this point clear to the voter.  Incidentally, many trade unionists and working-class activists fight for a minimum wage, but ironically no one talks about a maximum wage. Why not a maximum limit for executive officers and politicians?

The country needs an economy restructured on the edifice of open competition and free markets but sufficiently resistant to the irrational swings of a failing oligarchic world order.  IMF economists and advisors are aware of this danger as the latest IMF World Economic Outlook report highlighted. In a world where economies are hijacked by financiers and banks, where markets are hijacked by mega-oligopolies, where political institutions are hijacked by billionaires, and all this in the midst of an impending climate catastrophe as predicted by leading scientists what safeguards do small countries like Sri Lanka have in keeping their doors wide open to the free entry of foreign capital, pressure from foreign governments and their influence peddling institutions? Small economies need protection from the tyranny of financial capitalism overseen by institutions like IMF. That should be the primary concern of every responsible political leader trying to govern his/her country. The aragalaya generation no doubt would understand this agonizing issue as their international counterparts do. NPP, which represents this generation must not be distracted by criticisms from a nitpicking opposition but concentrate on restructuring the economy to make it more productive and resilient to the vagaries of an inequitable international economic system. The yawning gap between the rich and poor both globally as well as nationally compels system change.

On the issue of salary increase for public servants the new system must introduce a mechanism to measure the productivity of this unaffordable civil army. A digitalized economy could produce such a mechanism and AKD is on the right track in appointing a top industrial expert as advisor on digitalization. However, between digitalization and productivity there is also the need to create opportunities for employment to a growing young and educated population. The public sector should not and cannot be the automatic asylum for job seekers. That unfortunately had been the tragic history behind the growth of public sector employment in this country, which allowed politicians to sell jobs at a price. NPP’s policy towards creating a public sector based on meritocracy and efficiency while promoting the growth of a vibrant private sector should get rid of this scandalous development.

In conclusion, the long-term solution to the clamour for higher salaries and wages lies in shifting the aggregate supply curve to the right by developing an innovative economy shared by a productive and efficient public sector with an equally productive and competitive private sector. The new regime is not an enemy of private enterprise or free market as critics try to portray. But it demands that enterprise and market to be willing partners of a national struggle to achieve economic prosperity without sacrificing equity.  Sri Lanka is in for a path breaking experiment with a new generation of political leaders. Will the voters give a clear mandate for this regime?