26 June, 2022

Blog

Scrutiny Of Gota’s Economic Experiment

By Ameer Ali

Dr. Ameer Ali

What Sri Lanka experiencing now is the total collapse of an amateurish economic experiment shaped by policies on the run from an ethno-religious nationalist president Gotabaya Rajapaksa, who has now been recognized as Srilankatheeswara Padma Vibhushana, a unique and prestigious title ever awarded to any political leader by the Sangha community. No sooner this president was elected to office in 2019 he got himself surrounded by a power cartel or Viyathmaga consisting of handpicked but ideologically aligned technocrats, professionals and business magnates, declared to protect Buddha’s Sasana and Sinhala Buddhists (even at the expense of other religions and communities if needed), and decided to embark on a development experiment to lead Sri Lanka to “vistas of prosperity and splendour” within a “disciplined, virtuous and lawful” society. With a diehard group of politicized Bhikkhus ready to back him to the hilt, even if he turns into another Hitler, and with a military dragged from the barracks not only to provide internal security to his regime but also civilian administrative services, all that GR wanted to complete his mission was an unchallenged dictatorial position where all checks and balances embedded in the country’s democratic constitution would lose their substance. The parliament’s suicidal passage of the 20th Amendment, thanks to the betrayal of Muslim Judas, accomplished the task. The ground was thus set to experiment what GR’s former CB chief Professor WD Lakshman described as the “alternate way” to development.

The most salient feature of this so-called alternate way and its experiment has been the focus on homemade solutions to problems of an economy that is inescapably intertwined with vagaries of an interconnected global world, while remaining at the same time trapped within an island that is strategically situated in one of the busiest international waterways, the Indian Ocean. Sri Lanka is an island only in a geographical and territorial sense, but otherwise a community in a global village. What this means is that Sri Lanka’s domestic policies cannot operate in isolation without impacting and being impacted upon by changes taking place outside the country. GR and his team seem to have been oblivious to this crucial fact and too much hope on the efficacy of their homemade solutions. After two years of amateurism the alternate way hit the rocks. Nowhere was this failure demonstrated more clearly and painfully than in the economy itself.

The economy of the alternate way was structured on the exaggerated strength of three important pillars: self-sufficiency in food production through organic farming; a hybrid monetary policy; and IMF-free economic management.

The first of these is laudable in principle, because self-sufficiency in food via regenerative farming would not only help reduce the country’s widening trade deficit and simultaneously narrow the same in balance of payments, but would also protect the environment. The problem however, was in the methodology of its implementation. The dictatorial GR thought that an overnight ban on imports of certain food items would automatically perform the trick. That was the logic behind his ban on the import of palm oil, which caught bakery owners totally unprepared. A far more ruinous measure was GR’s ukase to ban the import of chemical fertilizer which has now driven the country to the brink of a famine. Without any preparatory work done to minimize immediate damages, without the provision of alternatives, and without consultation with experts on the field, GR just assumed that his diktats would yield desired results. Even though both bans have been lifted the damage done is immense and would cost more and take long to repair.

The second pillar was meant to provide adequate liquidity to a shrinking economy hit by a global depression triggered by the pandemic. It is worth recalling a meeting GR held with members of CB after appointing Professor W. D. Lakshman as the new Governor, where he demanded the Monetary Board to help implement HIS economic policies. On that day a constitutionally empowered and the most supreme economic institution in the country lost its independence and became a tool in the hands of an autocrat. The CB chief, a respected academic, was pathetically caught between protecting his academic integrity and serving a political master. Contrary to what Keynes thought where “practical men who believe themselves to be quite exempt from any intellectual influence, are usually slaves of some defunct economist”, the CB economist became the slave of an autocratic political leader. The monetary policy he implemented was a hybrid product of the Modern Monetary Theory (MMT), which is meant for economies with reserved currencies like that of USA. The essence of MMT is that monetary authorities could go on printing money regardless in the name of providing liquidity without the fear of inflation. The rupee is not a reserved currency and the inflationary effect of excess money supply became unavoidable. But the CB chief quite skillfully removed food prices from his calculation and showed a manageable but “worrying” rise in inflation. This is pure art of lying with statistics. Lakshman’s conscience must have pricked him and caused many a sleepless night. He finally tendered his resignation without serving his full term. Now, his successor, an accountant by training and schooled in politics, has no qualms in continuing the same trickery.

The third pillar of IMF-free economic management was chosen with the hope that with financial assistance from friendly countries, by way of currency swaps and loans, the alternate way would reach its desired destination. The shortsightedness of this strategy lies in two areas. Firstly, as more and borrowing is resorted to the ratio of debt to GDP would rise and with an economy shrinking or growing at snail pace servicing the debt would become burdensome. CB chiefs of past and present proudly advertised that the country has an unblemished record of honouring debt repayment. What is crucial here is not the past record but the rising credit riskiness as the above ratio rises. This is the reason why international credit agencies like Fitch has downgraded Sri Lanka’s credit risk to CC, which means the cost of borrowing would rise and foreign investors would be discouraged to invest funds in Sri Lana. IMF participation would send different signals to international agencies and inject some confidence among foreign investors. Secondly, the hunt for help from friends and neighbours, such as the latest economic and financial package from India to the tune of $1.9 billion and China’s credit for $1.5 billion, is not free of foreign policy implications. Sri Lanka’s economic misery has driven it deeper and deeper into Indo-China geopolitical tensions, which in the context of an undeclared cold war between US and China has even wider foreign policy dimension. With or without this assistance, Sri Lanka is destined to pay a price for just being strategically situated in the Indian Ocean. IMF involvement in the economy would indirectly help reduce at least some of the pressures emanating from Western quarters and India.

Thus, of the three pillars on which GR’s economic experiment was structured, one became inoperable because of practical difficulties and the other two lacked theoretical soundness. On top of these there were several other problems like internal corruption, the political power of a market mafia, lax tax administration, a disunited cabinet and so on. Apart from these, there is one issue which has not received adequate attention from economic analysts.

Even if shortcomings in all of the above could be rectified, how could the economy prosper and develop without the active involvement of at least one third of the country’s population? GR’s sole commitment to protect and advance the status of Sinhala-Buddhists is an open endorsement of a claim from ultra-nationalist monks that the country belongs only to Sinhala Buddhists and that other communities are only long-term tenants. This is virtual devaluation of the citizenship of minorities. It is surprising that neither GR nor his brother Prime Minister and for that matter not any from either the government or opposition has denied so far, this dangerous claim. The only one who dared to refute it is no more with us. At the same time, the tolerance shown by GR to blatant injustices committed by his ultra-nationalist supporters against minorities and the president’s own preparedness to trample on human rights of minorities and his political opponents shows that he is a partisan President acting in the interest of ultra-nationalists. How then could economic development succeed with a disunited and mostly disgruntled population?

The current economic disaster carries the seal of President Gotabaya Rajapaksa, and unless some radical change in economic thinking takes place the current economic pain endured by the people would continue in 2023.

*Dr. Ameer Ali, School of Business & Governance, Murdoch University, Western Australia

Print Friendly, PDF & Email

Latest comments

  • 9
    0

    ………Sri Lanka is destined to pay a price for just being strategically situated in the Indian Ocean…….
    Not really. It is not just that, but our politicians and top advisors, not having the farsightedness nor astuteness to maximise this very valuable potential. Singapore realised this and they have capitalised on their geographic position.
    We have actually wasted away a freely given natural resource.

  • 10
    1

    “………. how could the economy prosper and develop without the active involvement of at least one third of the country’s population? GR’s sole commitment to protect and advance the status of Sinhala-Buddhists is an open endorsement of a claim from ultra-nationalist monks that the country belongs only to Sinhala Buddhists and that other communities are only long-term tenants.”

    One-third of the population is comprised of Indian Tamils, Ceylon Tamils, Muslims, Christians, Catholics, Malays and Burghers (There is some overlap here). Lee Kwan Yu would have included them in all political, economic and social processes but Hitler would have excluded them. Unfortunately, the Buddhist monks, especially the Maha Sangha, have given the wrong advice by asking the president to emulate Hitler instead of Lee Kwan Yu.

    Why did they do that? The answer is simple, they are just frogs living in the bottom of a very deep well! Ok, so what makes them frogs in a well? They only know dead languages like Pali, Prakrit, and Sanskrit, that have writings devoted mostly to fairy tales and mythology, while Sinhala is the only living language they know; but Sinhala has a very, very limited coverage of knowledge, not amounting to more than a few measly terabytes!

    • 2
      0

      Captain Morgan “..how could the economy prosper and develop without the active involvement of at least one third of the country’s population? “

      I made a similar observation to one of the blogs some time back…I was more blunt and said that the successive Sinhala govts have shut off the NE form any economic development since independence.

      what is more striking is that this neglected one third i.e the NE ran its own govt for more that 30 years and developed land, sea and air power from scratch & used modern ITC and agricultural development.

      If the talent of the neglected NE was harnessed and developed from independence Ceylon would have been a Singapore indeed ……instead this talented community was militarily destroyed

    • 0
      0

      CM
      “..how could the economy prosper and develop without the active involvement of at least one third of the country’s population? “
      Does this suggest that the active involvement of just over a third will do?
      *
      I wonder if what was intended was “with the exclusion of at least one third of the country’s population from active involvement “

  • 5
    0

    So it’s like:

    1. Motherland is to achieve self-suffiency.

    2. China is to take care of glossy infrastructure via Port-City for Motherland to have the glossy Western look.

    3. Motherland is to become Myanmar-like, but with sky scrapers, superhighways, and modern cars and other capitalistic glossy things.
    ——
    Caveats to the above:

    1. America and China promote capitalistic economies that do not promote self-sufficiency. Their masses work for the state apparatus.

    Such systems can never be isolationist, and need the rest of the globe to uphold non-self-suffiency for the good of these superpowers. Sri Lanka will not be exempt.

    Current SL gov. is upholding Trump’s isolationist policies for US. It will be for US alone (for White hegemony of the traditional style)……all the other countries will have to work very hard for the US to uphold its $$$ value.

    China will follow suit, for if they go the non- isolationist, global liberal-democratic way, their economic system will collapse under the weight of American exceptionalism with all of its war-heads. Either way Chinese will never have global or even shared global hegemony.
    ——-
    Warnings:

    In short, Motherland is at a stalemate with an economic system geared for Sinhala-Buddhist hegemony. And we will be at a very great loss indeed.

    Gotabaya, you cannot play chess games (GOT-style) with the Motherland.

  • 2
    0

    Shall we be REALISTIC of the economy of Sri Lanka at this moment? Pl. visit the following link.

    https://www.youtube.com/watch?v=qkldB8feLHc

    A very analysis by Dr.Nishan De Mel with SLVLOG conducted by Ms.Abisheka on 5-01-22. I am amazed how this Professional explains it in Sinhala to be understood by any ordinary person. This is the type of Social Media presentation we need now.

    I am making arrangements to put this on view to my “Kadamandiya” club in a day or two.

  • 0
    1

    Dr.Ameer Ali.

    Prof: Lakshman envisaged an alternate way to development by replacing Pizzas with Hoppers.
    One is international the other is hopelessly local.,and that too in an Island state.
    I always suspected that these Viyath Maga guys are plonkers.

  • 0
    0

    Of things that made a GR presidency possible are the total mess created by the Yahapalanaya regime and the designing of the 19th Amendment to exclude a certain individual other than MR from contesting.
    They wanted to keep it in the family, but GR was not the preferred option at the time.
    One can be clever, but being too clever can easily backfire.

    • 1
      0

      SJ

      “Of things that made a GR presidency possible are the total mess created by the Yahapalanaya regime and the designing of the 19th Amendment to exclude a certain individual other than MR from contesting.”

      Racist saffrons campaigned for racist president as Racist Dayan demanded in 2015 majority of the majority to vote for the president in order to validate presidency.

  • 2
    0

    Rajapaksas are very schematic opportunistic family able to use every opportunity to maximise their benefits and maximise the debt of the country where any other government cannot improve the economy as they did in 2015. They borrowed billions of dollars from China to invest on unproductive infrastructures and investments like Matala airport, Hambantota harbour, Hambantota cricket stadium and carpet roads and handed over to the next government. The next government couldn’t do anything other than settling debt or extending the deals with China. Even now they do the same. They are now accumulating their wealth to use it again.

  • 1
    0

    Excellent analysis. I have translated the article into Tamil for publication and ciculation. A country must be run by professionals and technocrats in their chosen field. Not by semi-literate politicians.

    There was a time when CCS personnel provided scholarly advice to their Ministers. They virtually ran the Ministries. Now the SLAS is paralysed. I can understand their frustration. Their places have been taken by military men in uniform.

    Sri Lankan foreign service is in ruins. It is now filled with cronies and nincompoops by those wielding power. I was curious to check the academic qualification of Finance Minister Basil Rajapaksa. He has none. It looks like he is a school drop. No member of the ruling Rajapaksa dynasty has gone anywhere near a University. Is it then any surprise Sri Lanka is sliding into bankruptcy?

Leave A Comment

Comments should not exceed 200 words. Embedding external links and writing in capital letters are discouraged. Commenting is automatically disabled after 5 days and approval may take up to 24 hours. Please read our Comments Policy for further details. Your email address will not be published.