By W A Wijewardena –
With the breakdown of markets during COVID-19 pandemic, both locally and globally, a strong public opinion is now being mooted for restoring self-sufficiency and independent existence. Markets had nourished people for centuries unfailingly, making them an essential part of modern human living. They were so neatly woven into living that it was unthinkable to have an existence without them. But that has now come to an abrupt end due to restrictions imposed by governments on public gatherings, movements and usual face-to-face acts of social intercourse.
The voluntary or enforced self-isolation with a new norm of social-distancing even within an individual household has reignited the dream which people always had with them to be independent and self-sufficient. This is an unsalutary development since no one can be self-sufficient or independent either individually or as a nation. A good example is that our self-isolation is being supported by mobile traders who visit our doorsteps with goodies that we need for survival and existence. If they do not come, we will perish.
The modern hat-seller and monkey story
In Sri Lanka, the nostalgia being harboured has been to a return to the times of Sirimavo Bandaranaike who ruled the country as its Prime Minister from 1960 to 1977 except the period from 1965 to 1970. This nostalgic claim reminds us of the modern ‘hat-seller and monkey story’ as narrated by Kaushik Basu, formerly Chief Economist of the World Bank and presently, academic at Cornell University in his 2010 book titled ‘Beyond the Invisible Hand: Groundwork for a New Economics’.
Old story where monkeys were tricked
The old story that we had learned in the primary school goes as follows. A hat-seller travelling from place to place to sell his hats had fallen asleep under the shade of a tree when he lay down for a brief rest. When he woke up, he found that all his hats, except the one he was wearing, had disappeared. On looking up, he had seen a group of monkeys wearing his hats and mocking him from the branches of the tree.
Since it was impossible to climb up the tree and recover the hats from monkeys, he had played a trick on them. He had taken his hat off to be seen by monkeys and thrown it away. Monkeys in a bid to imitate him had done the same. The hat-seller had collected the hats promptly and hurriedly gone on in his business to the disappointment of monkeys.
Modern story where monkeys had learned from past mistakes
Kaushik Basu, has created the modern ‘hat-seller and monkey story’ by taking it two generations forward. In this second part, the grandson of the hat-seller, following the footsteps of his Grandfather, had chosen selling of hats by travelling from place to place for a living. He too had travelled along the same route and had slept under the same tree to take a brief respite. Then, a group of monkeys had come down from the tree and liberally appropriated the hats for themselves as it had happened previously.
On waking up and having seen the monkeys on tree-tops wearing his hats, he had remembered how his grandfather had tricked them to recover the hats. He had taken his hat off and thrown it away. Monkeys, instead of imitating him, had got one of the monkeys to come down, collect the hat and walk up to where he was lying down. The monkey is said to have slapped the hat-seller hard and told him: “Do you think only you had a grandfather?” before joining the other monkeys.
Moral: Don’t follow forefathers blindly
The moral of the story is that intergenerational learning – wisdom and knowledge passed from one generation to another through stories, direct teaching and imitation – takes place and if we do not learn it properly, we are set in for disaster.
If we follow our forefathers blindly without learning from the mistakes they have made, we are to make a bigger mistake now since our circumstances are different from those faced by our forefathers. The danger is that in a competitive world in which each person is a player of a game, we cannot guarantee that the other player will not learn from the mistakes which his forefather has made and do something innovative to make us lose. This was ably done by the later generation monkeys in the previous modern monkey story.
Former Malaysian Prime Minister Mahathir Mohammad had put it aptly when he said that we should learn history not to dwell on it but to avoid making the same mistake which our forefathers had made.
Sirimavo’s creditable actions
The present campaign for a return to Sirimavo Bandaranaike era is one such instance. Sirimavo Bandaranaike should earn our respect for many other things she had done for the nation, but not for the way she managed the economy.
She was a leader who had thought of social inclusion from the very beginning. Accordingly, she effectively removed the glass door that had been erected to prevent those who had studied in Sinhala or Tamil medium from joining the public service, police service, armed forces, state banks or the Central Bank.
As a person, she conducted herself honourably. She is reported to have told the class teacher of Anura Bandaranaike, when the former had slapped the latter for his unruly behaviour, why he did not slap Mallo, the pet name for Anura, on the other cheek as well. When one of her personal aides had stormed the exchange control department of the Central Bank and demanded preferential treatment by way of a higher foreign exchange quota for her because she was on Prime Minister’s staff, Sirimavo, on being contacted by phone in the presence of exchange control officers, is said to have ordered her to follow the Central Bank rules.
She had the courage not to yield herself to the pressure coming from a section of Buddhist monks to ban Martin Wickramasinghe’s Bavatharanaya on the ground of claimed insultation to the Buddha.
Her credentials in the international arena had been well beyond a third world country leader. One such story relates to how she, like a true stateswoman, handled a case relating to Libyan leader Muammar Gaddafi during the Non-Aligned Movement’s Summit in Colombo in 1976. In this instance, a security contingent of Gaddafi had arrived in the Colombo Airport before their leader had landed without visas or passports but fully armed to the teeth. Sri Lankan security officers had been scared of taking any action against them since Gaddafi had been a leading figure in the non-aligned movement at that time. But Sirimavo had ordered that they should be packed into the same plane and deported to where they had come.
Gaddafi who had come later had not made any fuss about it and behaved as if nothing had happened because Sirimavo’s charming personality had shone more brightly before the eyes of other world leaders than his soldierly rough appearance garbed in military fatigue.
Contrast between Sirimavo and Lee Kuan Yew
Both Sirimavo Bandaranaike and Lee Kuan Yew became leaders of their respective countries around the same time. But their economic policies were a way apart from each other.
Sirimavo had chosen to follow the economic model which had been adopted by the Soviet Union, China, India and some of the newly independent African countries. According to this model, the West was considered a conspirator that was eagerly waiting to swallow newly independent countries. It was claimed that they did it through a system of neo-colonialism in which the countries in the Third World were brought under their domination not directly but indirectly. The dependence on them was considered similar to being infected by a virus.
A popular slogan uttered by the intelligentsia that propagated this view was that when USA got a cold, countries like Ceylon got pneumonia. Hence, similar to the ‘social distancing’ being practiced today, Sirimavo chose to practice ‘economic distancing’ with the West. This was practiced to an extreme by taking over foreign owned oil companies, insurance companies, privately run schools, plantation companies and so on.
With the nationalisation of the Bank of Ceylon and the creation of the Peoples Bank in 1961, foreign banks operating in the country were prohibited to accept new customers thereby giving a monopoly status to the two state banks. They enjoyed this position till 1977 when the banking sector was open for international banks of repute. At the same time, there was no trust in the domestic private sector. Hence, the state sector was expanded to the exclusion of the domestic or foreign private initiatives and enterprises.
Foresight of Lee Kuan Yew
Lee Kuan Yew followed the opposite in Singapore. He was continuously advised by some that he should rely mainly on his two giant neighbours to the north and the south, namely, Malaysia and Indonesia. But after assessing the economic prospects with these two giants, he realised that nothing substantial cannot be attained by Singapore by relying on them. Hence, his policy was to ‘leap-frog’ over these giant neighbours to the West in all directions: Japan, Australia, New Zealand, Europe, and North America.
To fill the savings-investment gap and acquire the necessary export market access and technology, foreign direct investors of repute were invited to Singapore. To encourage the experts from Western countries to come and work in Singapore, the whole country was converted to a ‘Western Oasis’ in which all local services in the government, education, transportation, roads, health services etc were upgraded to Western standards.
The Singapore universities were forced to adopt English as the medium of instruction and get affiliated with the best of the best universities in USA such as MIT, Harvard and Chicago. In this manner, the local universities were brought up to the level of the top US universities known as Ivy League universities. These universities in turn developed local technology and with that, Singapore could not stop moving fast along the development path.
As the first finance minister Goh Keng Swee pronounced proudly, that old regime had not believed that ‘no one owes a living to Singaporeans’. Singapore should stand on its own feet and work hard to deliver prosperity to people. The accepted motto was that there was no such thing as a free lunch.
Sri Lanka’s leaders: The rest of the world owes us a living
Sri Lanka’s government in contrast blamed the Western world for the pity state the country’s economy had been undergoing. Contrary to this, when the British left Ceylon in 1948, they had left a huge foreign exchange reserve sufficient for meeting 17 months of future import requirements of the country. The Ceylon Civil Service was such an exemplary institution by itself that it was the envy of many emerging countries at that time.
But after independence, the whole nation was converted by local leaders to a nation of beggars who always believed that it was always possible to enjoy a free lunch without incurring the relevant costs. The expansion of public expenditure increasing the size of the government in turn increased the aggregate demand. In the absence of a corresponding increase in the aggregate supply, there was pressure for prices to increase, on one side, and creating a sizable deficit in the current account of the balance of payments, on the other.
Making mistakes one after the other
Instead of addressing the issue at the root by curtailing the public expenditure programs and improving the productivity in the economy, a series of mistakes were committed one after the other mainly after 1970. To suppress the price inflation and pressure for the rupee to fall, an economy wide price controls and a strict regime of exchange and import controls were introduced. This created a shortage of goods and to solve that problem, essential goods were distributed through a system of rationing.
Since the rationing could not be implemented through private businesses, an empire of government owned wholesale and retail businesses were established. It created long queues in front of those State-owned retail shops for day to day goods consumed by people and long waiting lists for other consumer durables. Both were inefficient methods of distribution since it imposed a heavy transaction cost of acquiring goods – a phenomenon known as ‘deadweight losses’ because it was a loss to those who had to incur the transaction cost but no one else in the economy gained out of it.
The working of the licence-raj in house construction
I have the personal experience of how this system worked in relation to the construction of my house. The plan of the house had to be approved by the Assistant Government Agent of the area first. Then, a dozen of blueprints had to be taken to be presented to each of the government authority concerned: to Cement Corporation for cement, Timber Corporation for timber, Ceramic Corporation for sanitaryware and roofing tiles, Building Materials Corporation for electrical items, fixtures and fittings, State Trading Corporation for household items like ceiling fans etc and the Steel Corporation for steel.
This involved spending long hours in these places just to get a licence and those licensees had to pay gratifications to those in the organisation to alert them when the goods were available. We as consumers could not choose and had to accept what was given. Only bricks and sand were available from the market. Today, anyone building a house can get what he needs just by going to the market.
Complicating even simple market transactions
The government had to build this empire because it did not trust the private initiatives. Imports were under strict controls and they had to be necessarily handled by government organisations. This led to inefficiency, corruption, waste and high transaction costs.
Just as an example, to issue an ordinary electrical switch, Building Materials Corporation had to employ about six people: one to authorise the sale after checking the plan, another to record it in its register, a third to write the bill, a fourth as the cashier, a fifth to issue the switch and a sixth at the gate to check whether all the documentation was in order. It took long hours to complete this whole process. This is a simple sale where only one person would handle it in an ordinary electrical shop anywhere in the country within a few minutes.
Instead of destroying markets, let’s rebuild them on modern lines
We have destroyed the markets through government’s counter action in the present COVID-19 pandemic. Of course, it is a good cause. But it does not mean that we should revert to the old system after the pandemic is eradicated without learning the mistakes our forefathers had made. Let’s reconstruct the markets from a scratch on modern lines so that it would continue to nourish people efficiently.
*The writer, a former Deputy Governor of the Central Bank of Sri Lanka, can be reached at firstname.lastname@example.org
jehan / April 20, 2020
Can u compare the economic decision making of a house wife with a oxford graduate like Lee. There is no comparison. We were not fortunate to have educated brilliant leaders,we have had lawyers who could not practice, qualified but no wisdom.
now we have a junta like myanmar, which will lead to another war. Civil war against muslims /tamils and christians. we can see it coming.
Amarasiri / April 20, 2020
Dr. W S Wijewardena,
“”Since it was impossible to climb up the tree and recover the hats from monkeys, he had played a trick on them. He had taken his hat off to be seen by monkeys and thrown it away. Monkeys in a bid to imitate him had done the same. The hat-seller had collected the hats promptly and hurriedly gone on in his business to the disappointment of monkeys.“
Thanks got the monkey story. What about the imbecile stories?
The imbeciles, mean measured IQ 79, are throwing away their votes to cunning crooks, and will do so again, on June 29, 2020, based on today’s announcement.
They have been mesmerized by Para-Sinhala Para-“Buddhism “ , that is an insult to the Buddha and a corruption of Buddhism.
ROHAN JOHNPILLAI / April 20, 2020
Mr W.A. Wijewardena –
this to me is one of the finest humorous articles that you have ever penned.?
I was in my best elements while scrolling through it and was educated by the doings of the world’s first lady or woman prime minister.
from now on thanks to you, I will be having a thoroughly different opinion about her.
since 1956 this once rice exporting a pleasure to live on the island has now become one of the biggest Lord Buddha’s begging bowl carrying a cursed nation to one and all.
even monkeys and all the other animals that thrive on living in this along with us have made us look like the planet’s biggest dumbos.?
I can safely predict that after this curse which has been China’s gift to the globe, sad sorry shitty Lanka will be in a bigger doldrum.?
at this moment when one and all are in a topsy turvy, all that the power greedy rajapuka’s are only interested in holding a general election to try and obtain a 2/3rd majority to play many a bandu pandu.
this if allowed will enable Lanka to become a never to recover deliberately bankrupted by them the rajapuk’s we will have to depend on the MONKEY’s to run the beleaguered island.
if given the opportunity I am confident that they will do a fantastic job.
I am eagerly awaiting the next release of those who have by their own choice chosen not to be citizens of the USA.
once when released, we are able to ascertain that the kallathoni is still an Americano what will be the next step or two that can be taken to get rid of him and woe to all his unworthy criminal maestro of an elder brother will become the acting president till an election is held.?
Amarasiri / April 21, 2020
Dr. W A Wijewardena has described in a different format, what Amarasiri had been articulating. The imbeciles, mean measured IQ 79, prostrating to saffron clad monks, insulting the Buddha, distorting Buddhism etc.
Same story, same conclusion.
When will the imbeciles learn? As long as they prostrate to monks, they won’t learn.
Need separation of state and religion .
JD / April 20, 2020
If you say Economists are RILAW I would agree. Because, Rilaw are imitators of others and most of the times (politician economists) they steal what ever they can. Monkies are not like that. I say Economists are RILAW because, they never talk of something which is practical. Instead, they always talk about Capitalist model. Sri Lanka is a country which lives mostly on imported stuff and the money comes remittances because I do not think the low wages earned semi-skilled service jobs of Tourism will not earn much money.
Anyway, what Mrs B did is the right direction but she may have done with lot of mistakes. For example, there LAKSHAPANA batteries and we had to take the old batteries to but new ones. what happened to LAKSHAPANA. No more. Why ?
It Capitalism and Neoliberalism that has destroyed the world. Economists are not allowed to talk the reality. but, economists continue to talk Capitalism and probably Neo-liberalism goo. but, conventional Capitalism is bankrupt all over the world and now they proved they can not look after their citizens too. but, Rilaw continue to follow the route.
Old codger / April 20, 2020
If you actually used Laxapana batteries in the 70’s you wouldn’t be praising them now. Even for that era, the technology was primitive. Loose cardboard jackets. Leaked chemicals after use. Very short life.There was very little locally produced which was up to world standards. Naturally all the state factories collapsed when imports came in. Who will prefer a kerosene-scented shirt to one made of Japanese material? Not even you would.
JD / April 20, 2020
OLd Codger. Not at all an intelligent argument when the company is not around for 50 years.
Kerocene smell from Batiks. How about heavy metals and pesticide residues in rice because of chemicla including fertiliser which is another chemical.
Old codger / April 21, 2020
You don’t live in Sri Lanka, do you?
antiRajaforever / April 21, 2020
Indians would nt allow all the items being imported, but our BPs do.
They attack UNPrs today but whole lot of banned agro chemicals were imported into the country by BP Rajapakshes and ended up being making a KDNEY patient -rich farming community for no reasons.
If BPs ever had some knowledge in that area, while some country never allowed them in, but to go for it is more or less like being caught by CHINESE debt trap number one trick played only on the hand-picked tribal leader in Africa and Asian continent. That they named after – CHINESE INVESTMENTs. But we know what brought that to the country in volumes ? Not a single gigantic project completed und BP Rjaakseh brought any good but inflation of sky high.
That is why today the dichotomy of rich and poor is very high in the country. I argued once why some people are still on HUTs, though hidden by local news – one expert made me very clear, it was BP Rajakahse politics wanted to show the shining side of the nation only to further mislead the hard hit nation.
I dont wish anyone be dead by CORONA but Rajaakshes.: Not cynical but to save this nation from the clutches of Rajaakshe mafia.
Ranjith Abeysiri / April 20, 2020
We are a nation where we are very proud of the following achievements:
1.Increasing public sector from 700,000 to 1,500,000 people and considering it a major achievement. Govt salaries are supposed to be approx Rs 70-80 billion per month.
2.Failure to understand that we have been living beyond our means
3.A country where we are happy to print money to keep the national airline flying when it makes a loss of Rs 41 billion in 2019 and now considering whether we can spend Rs 6,000 to do a corona test
4.About 40% of households are on Samurdhi indicating that they are below poverty levels
5.People are queueing up to collect USD 30 (Rs 5,000) and creating havoc
Will we ever learn?
Native Vedda / April 21, 2020
“We are a nation where we are very proud of the following achievements:”
Aren’t we proud about the 72 year sordid story of killing, counter killing, mass killing, all kind of injustices, riots, race riots, bribes and scams, first female Prime Minister, arson, rape, child abuse, heroes out of mass murderers, multiplication of saffron clad thugs, …………….. nepotism, ….. people with highest literacy rate among developing country without wisdom, …. elections were on who gave what sort of freebies, …. ?
K.A. Sumanasekera / April 20, 2020
I like Dr Wije’s Monkeys and the Hat Merchant Story..
I don’t think some of our Monkeys are as smart as the Second lot of Monkeys in the Book.
Otherwise the Yahapalana Merchants who sold our Lands, Collected Santhosams, Received free Car Permits, lived in Tax Payer Funded Houses and still living there even after losing the jobs , wouldn’t come back again, promising to give them the Goodies again even in the midst of this terrible Corona Plague…
Old codger / April 20, 2020
Much as I admire your ability to make silk purses out of sow’s ears, I would remind you that it was your Mahinda Deviyo who first sold Port city to the Chinese. Be that as it may, I am all for selling land , no matter who does it.
It puts off the day you have to sell your wife to finance your expensive habits.?
Native Vedda / April 21, 2020
“It puts off the day you have to sell your wife to finance your expensive habits.”
Who told you KASmaalam is married?
We should meet the unfortunate women and console her.
Old codger / April 21, 2020
I wasn’t talking about KAS personally. I know he can afford Black Label, so his lady is safe I suppose.
Native Vedda / April 21, 2020
“I know he can afford Black Label, so his lady is safe I suppose.”
True as long as the lady has a separate debit/credit card.
K.A. Sumanasekera / April 21, 2020
I would rather have a Cup of Dilama’s BOP than those Johnny Walker Stuff..
Having said that the new JW Green Blend has a nice smokey flavor . And it is a blend of decent quality Single Malt which they source from the Highlands ..
But my Thlal Toddy Buddy Native from Valvettithurai wouldn’t have a clue about what I am talking…..
Old codger / April 22, 2020
But Thal Attack is good.
So you aren’t a fan of of those wet blankets at ADIC or GMOA ?
K.A. Sumanasekera / April 21, 2020
Why do you want to buy those silly comments of an Old Codger..
How can UNP Boys console women?…
Prof. Lalith Goonatilake / April 20, 2020
Very good article. Sirimavo B -very principled lady. No chance of seeing such leader now or in future.
Of course there was the import substitution policy- the practice then in all “socialist” countries. Steel Corporation, Tyre Corporation, Paper Corporation, Textile Corporation etc. They florished under import bans.
There was a hidden benefit from the state corporations. TECHNOLOGY TRANSFER. Though technology came from USSR and Eastern Europe (Outdated technology), a lot of Sri Lankans were trained overseas (USSR satelites). I think 600 sent to Russia for Tyre Corporation training. Many acquired rubber technology skills and is a key contributor to the success we have in exporting rubber products now. State enterprises failed all over- key weaknesses: state managed (political objective) No concepts of quality and cost accounting applied. No competition- Monopoly
They florished under import bans.
Also we had a few monopoly mudalalis patronised (DASA Group) that made a killing. India too had their PERMIT Rajs. After- liberalisation the cost of ACs /fridges in India halved. Just imagine the money the RAJ s made.
Currently we also protect a few PRIVATE industries with very heavy import protection. (Ceramic, Electric cables and switches. ) They enjoy monopoly status and make huge profits with the protection.
We also have those here who are shouting to re-establish some old State enterprises such as the paper corporation, SEC etc. Not possible. The industry technology, heavy capital investment, product quality demanded, minimum market size etc , what is the Competitive advantage etc. need to be looked at first.
JD / April 21, 2020
Prof Lalith Gunathilake:
The easiest thing is to criticize. But, there was a beginning. If you know quality is also relative. Korea, China began just the same way.
But, Sri Lanka, after 1977 went a different way.
It is the international community that want a country to supportive the mindset and the crooked parliament since 1977 was doing that. Those who opposed it had to go.
Economists are just milking it.
Native Vedda / April 21, 2020
Prof. Lalith Goonatilake
“Sirimavo B -very principled lady.”
How, why, when was she a very principled lady?
Are you talking about the same weeping widow?
Please read the article
“At The Last Gasp Sirima Chose UNP & Family Over Her Own Party”
by Uvindu Kurukulasuriya
APRIL 17, 2016
You should revisit her life story between 1954 and until her death in 2000.
“No chance of seeing such leader now or in future.”
Mallaiyuran / April 21, 2020
The essay’s main focus was to rebuild the economy battered by the virus. So it looking at the hat merchant & his business.
But the general nature of learning is, it is for everybody in everything. By the lesson of Hiroshima and Nagasaki America and USSR avoided the cold war turning into a hot war. In science we have learned to jet into space and explore planets. After British, French and American last few centuries of experiments, now countries do not want Monarchs or emperors or dictators. We don’t have medine yet for Corona. But we have medicine for many forms of cancers. Ivan Pavlov showed us, in his psychological researches, how the animals are learning the environment around them (Complex conditional learning).
Dom Juan gave the Kingdom, in exchange for a Portuguese servant girl. Ranil and Old Royals sold the country’s sovereignty for foreign bank accounts deposits. Lankawe could not learn anything from past from 1948, but it keeps going backward to Lala Country’s wild life. In Tamil they say “By the greatness of the penance the mother did, thanks god, her child which was walking (in 1931) is now starting to crawling(Dictatorship).”
Lal de Mel / April 21, 2020
This is a timely article, when our politicians are saying self reliance is the best way to face the repercussions of Covid-19. I do not expect much growth in the economy after the general election with the increased support for a public sector led pre-77 economic policies.