24 September, 2020

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Social Market Economy Or Political Manipulation Of Market?

By Laksiri Fernando

Dr. Laksiri Fernando

Dr. Laksiri Fernando

It is always better if political parties explain to the people on what basis that they plan to manage the economy if they come into power. If they don’t, then it is up to the people to uncover their policy frameworks. This can be done on the basis of analysing their manifestos or past practices. Of course there can be a difference between what they say and what they actually (intend to) do.

United National Front for Good Governance (UNFGG) has come up with the concept of ‘social market economy’ (SME) quite commendably as its policy framework for its proposed Five Year Plan. There is no such a pronouncement from the United People’s Freedom Alliance (UPFA). The recent interview of Mahinda Rajapaksa at ‘Rata Saha Heta’ (country and future, 5 August 2015) on Hiru TV was a mumble on the subject. In the past (2005 and 2010), it was a personalized thinking of Mahinda Rajapaksa called ‘Mahinda Chinthana.’ It didn’t mean much as a policy framework apart from a personal determination to control or intervene in the economy.

However, going by the practice of the Rajapaksa regime, particularly between 2009 and 2014, it could be named as the ‘political market economy’ or more correctly ‘political manipulation of market’ (PMM). This was the case whether it was the stock market, mega projects, other government contracts, bond market or even export-import trade. What actually was the practice before (2005-2009) is a difficult question to answer as the situation was blurred by the war situation. What was clear nevertheless was the political manipulation of arms trade or deals. Some of the tendencies even preceded the Rajapaksa era.

Policy Evolution

At independence in 1948, Sri Lanka inherited primarily a ‘liberal market’ policy from colonial masters both internally and in respect of import-export trade, accompanied by some commendable welfare measures. As the framework was not sufficient for development or equity, ‘mixed economic policies’ became promoted since 1956 (i.e. Ten Year Plan) with reversals back to liberal policies during certain periods (i.e. 1965-70). What it meant was a dual-economy of the State and the private sector.

The country opted for ‘radical state interventions’ and rather a ‘closed economy’ during 1970-1977, accompanied by import substitution industries and nationalizations. Subsequently, a reversal to an ‘open economy’ was somewhat inevitable in 1977 given both domestic and international conditions. On the international front, first it was the ‘new international division of labour’ (NIDL) and then the ‘globalization.’ Although there was an effort to give a ‘human face’ to the ‘open economy’ after 1994, the inevitable reality was the continuation of purely liberal market policies until well into 2005 or even thereafter.

All these could be considered experiments or different stages of development. Then came the strange animal, the Rajapaksa economy.

Rajapaksa ‘Economy’

It is extremely difficult to visualize a personalised thinking like ‘Mahinda Chinthana’ as a policy framework for any democratic or decent country. Exceptions of course are, Mao Tse-tung’s China or Kim Il-sung’s Korea. Although the ‘Mahinda Chinthana’ name tag is now unceremoniously dropped, the thrust is the same. It is undoubtedly a peculiar social, political or class phenomenon. It is not the traditional ‘national bourgeoisie’ that the Marxists talked about. But some salient features were abundantly there in a corrupt manner. It is definitely not the ‘pancha maha balavegaya’ (five great forces) of the traditional SLFP, except for vote gathering.

It was a parasitic elite or class, greedy of wealth and power. Either they themselves were politicians or their cohorts. The emergence of this parasitic class was possible primarily under two conditions: (1) civil war and military conditions and (2) connections with certain sections of the new business elite/classes in China. When considered within the policy frameworks of post-independence Sri Lanka, Rajapaksa economic policy (PMM) was an aberration, with certain traits from state interventionism of past SLFP regimes.

It was however different to traditional state interventions. It was not the ‘institutional state’ or the legitimate bureaucracy that intervened in the market, but the politicians or political elite. The motive of course was profit or wealth. During this period, business rules and regulations were bended in many economic deals; and institutional frameworks were dismantled or brought under political control (BOI, CES, SEC etc.). In certain respects, the usurpation was reminiscent of feudal acquisition of wealth.

It is on the above basis that the Rajapaksa policy framework could be named as PMM. The political class that benefitted from this PMM also had a particular ethnic bias. It was by and large ‘Sinhala only.’

Rationale for ‘Social Market Economy’

Qualified market economies are undoubtedly important for growth and development under the prevailing circumstances in Sri Lanka and internationally. Even this is accepted by the ‘communist’ China today. To accelerate growth and development, competitive markets are important, both internally and externally. For Sri Lanka to ‘take off’ in a real sense, it should have a growth rate beyond 10 percent with social development. Or at least, that should be the target. Rajapaksa period achieved some growth due to favourable external conditions i.e. Asian resurgence etc. However, it was not only minimal but also overestimated due to unrevised measurements. For a proper growth and social development, political manipulation of market mechanisms should end. This is true even on the labour market.

Ravi and RanilIt is also obvious and well accepted that pure market mechanisms or development do not ensure social equity or broader social justice. There should be parallel measures going beyond traditional liberal welfare-ism. This is particularly relevant in a plural developing country like Sri Lanka where ethnic frictions prevail. There is an economic underbelly in the ethnic conflict. As we have seen from the Rajapaksa experience, even ‘development’ per se would not bring social harmony or ethnic reconciliation. Equitable social policies are important cutting across the ethnic/religious divide.

UNFGG has come up with a policy framework of ‘social market economy’ whatever the attendant or other weaknesses. It was the framework that Germany employed for post-war reconstruction period. The common post-war scenarios between the two countries could be coincidental. There are other theoretical validations for the concept although in recent times some economists have become somewhat oblivious on the subject. Anthony Nicholls used the title “Freedom with Responsibility” (1994) in tracing the concept in the German context. It should however go beyond ‘responsibility,’ towards broader social justice.

Basic Tenets

In understanding the basic tenets of the concept, what might be useful is the following quote from Rudiger Dornbusch in his “Stabilization, Debt and Reform: Policy Analysis for Developing Countries” (Prentice Hall, 1993).

“The right to own property is acknowledged by the culture and protected by a well-functioning system.

Competition – both within and across borders – is accepted as the basic rule in markets. Competition is enforced by allowing entry into all and any market, by vigorously opposing monopolization, and by opening the economy to world trade. Competition makes the most resources.

Equity is a distinct social objective and need not emerge from the operation of competitive markets. The government promotes equity through a tax system that strikes a balance between equity and efficiency, and above all, by investing in education and health, which are key determinants of economic advance.

Government action needs to be bound by institutions so that there is less need for individuals to assume a defensive posture against possible government action.”

Of course a social market economy is capitalist. That is why the right to own property is accepted and protected. Sri Lanka is hardly in a position to move beyond capitalism in some form at this stage. In respect of the market, on the premise that ‘competition makes the most resources,’ competition is not only allowed but promoted.

Most important is the principle or conception on equity. Social market advocates believe ‘equity as a distinct social objective.’ It does not need to emerge from the operation of competitive markets. Of course it doesn’t. What it tries to do is to ‘promote equity through a tax system that strikes a balance between equity and efficiency.’ It is by doing so, that it intends to invest in education and health.

If we make a slight diversion from the main discussion, it is interesting note the utter failure of the Rajapaksa regime to sustain a viable tax system. Even the proposed tax reforms were not implemented. No need to say that their investments in education or health were most pathetic. That is how the university teachers’ demand for 6% GDP investment in education emerged.

In understanding the UNFGG program or way of thinking, the last paragraph of the quote is also important. As it says, ‘government action needs to be bound by institutions.’ That was not the case during the past regime. The result was not only that people had to ‘assume a defensive posture against government action,’ but it was repressive. The situation was extremely repressive in the case of minority communities or rights advocates. It could have been the same case of some investors, entrepreneurs or business personnel. The situation was not merely a case of corruption.

What I wish to show is that in moving away from a ‘politically manipulated market,’ the proposed ‘social market economy’ has a major relevance for both social justice and good governance. Both aspects also could be improved further.

A Sri Lankan Variety?

What we have at present in Sri Lanka is a basic sketch of a ‘social market economy.’ Dr Harsha de Silva in assuming duties as the Deputy Minister for Policy Planning and Economic Affairs emphasised the concept in January. Thereafter, the idea has gone into the drafting of the UNFGG election manifesto also called a framework for a future five year plan. As Ceylon Today reported, (24 July 2015) speaking at the inauguration of that Manifesto, Ranil Wickremesinghe has said “the UNFGG Government will create a social market economy where the social security of the people and environment is protected while encouraging competition.” Therefore, the ‘social security’ and ‘environment protection’ are the main principles that RW has emphasized, on the social side, while ‘encouragement of competition’ undoubtedly would take a major boost on the market side.

What Ven. Madualuwawe Sobitha said at the same meeting is also important. “It is time that people rally behind an idea instead of sticking to a political party” he has said. He also added saying “Since independence up to now what we did was voting one political party out and voting another in. Now people want a change, they should support a vision.”

If there had been some academic focus on these issues in recent times, to my knowledge, it was in the Professor Buddhadasa Hewavitharana Felicitation Volume on “Economic and Social development under a Market Economy Regime in Sri Lanka” (2011). Particularly, N. Balakrishnan has focused on ‘efficiency and equity issues’ although in a limited sector of secondary and tertiary education. There are also others who have discussed the problems associated with ‘efficiency and equity’ but stopping short of proposing something like a ‘social market economy.’

‘Social market’ concept undoubtedly is a dual formula. Some say, ‘freedom and responsibility’ and others ‘equity and efficiency.’ I have also seen Harsha de Silva saying it is a balance between ‘economic liberalism’ and ‘political liberalism’ which might not be totally correct. Ven. Sobitha or his movement (NMSJ) along with other civil society organizations have emphasised the ‘social’ side as ‘social justice.’ I or any other might prefer a balance between ‘liberalism’ and ‘socialism,’ if at all possible or eventually.

Striking a balance between any two sides or concepts is not an easy task especially in managing an economy. As some have pointed out, it could lead to a ‘trade-off’ undermining one or the other. Traditionally, there had been two main tendencies in socio-economic thinking in Sri Lanka or elsewhere: (1) those who emphasise the market or efficiency side and (2) those who promote equity and social side. According to some that was the traditional difference between the UNP and the UPFA. However, this has dramatically changed, primarily because of the interregnum of the Rajapaksa regime, and its political manipulation of the market.

UNFGG’s conception of ‘social market economy’ has emerged as a synthesis of the traditional two tendencies of the socio-economic thinking in the country. That is why a ‘national government’ is most appropriate in implementing the UNFGG program or its proposed Five Year Plan. Any move beyond the present contours of the proposed ‘social market economy’ might depend on the role of the JVP, responsive trade unions and the civil society organizations. Another advantage of the conception might be its relevance or conduciveness to ethnic reconciliation as indicated in the course of the discussion. Another Rajapaksa regime would be completely inimical.

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Latest comments

  • 4
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    Meduluwewa Sobitha must be even smarter than Karl Marx and Keynes .

    That is if we go by these learned professors, who brag how good this Yahapalana Economy is .

    And how cool these Political Economists who are going to give our inhabitants Yahapaanaya like they have never seen before.

    As Dr Godahewa the ex SEC boss said the other day, Rajapaksa Regime gave us the best ever development phase in their 9 years of rule.

    And I am sure he has a PhD too…

    This development is phenomenal considering the fact that over 30 % of all Govt Revenue had to be allocated to eradicate Tamil Terrorists.

    They did that and increased the per caipita income to near USD 4000 from a miserly 1150 in 2005.

    Pity these Professors can’t or don’t want to see that.

    And carries on about Batalanada Ranil and his Band Wagon as if they are the best God has given us since Adam .

    Wonder whether Sobitha will force his disciples to wear Cyanide Capsules like Praba did, to keep them straight.

    After all didn’t Sobitha say if his chosen ones are crooks or thugs , they should all die by poisoning themselves..

    Batalanada Ranil , Mahendran and Galleon must be clean as a whistle and straight as an arrow..

    What do you reckon folks…

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      KASmaalam K.A Sumanasekera

      What is your question?

      You are not even smart at dropping names leave alone economics.

      My Elders told me a few days ago that there are things that you ought to familiarize with before you sit in front of a computer if you intent to confuse yourself:

      Conditionality

      Sap Office

      Quantitative Easing

      Quantitative performance criteria (QPCs)

      Transfer pricing

      Rational choice

      Asymmetric information

      Invisible hand

      Allocation of resources

      Free rider

      Rent seeking

      Hangers on (I think they had you in mind)

      Regulated Market

      Anti competition regulatory framework

      Permanent income hypothesis

      Prisoners dilemma (Dr Mervyn Silva trying to snitch clan)

      Insider dealing (for details please contact Dr Godahewa the ex SEC boss)

      Pareto analysis (problem solving)

      I can’t remember everything that they told me. I will come back to you some other time. In the mean time feel free to drop these words middle of your Vellala bashing which hopefully will give you an extra edge on discussions. Make sure you know what you are talking about.

      Read and benefit, political economy for dummies:

      Socialism: You have 2 cows and you give one to your neighbour.

      Communism: You have 2 cows; the Government takes both and gives you some milk.

      Fascism: You have 2 cows; the Government takes both and sells you some milk.

      Nazism: You have 2 cows; the Government takes both and shoots you.

      Bureaucratism: You have 2 cows; the Government takes both, shoots one, milks the other and throws the milk away..

      Traditional Capitalism: You have 2 cows. You sell one and buy a bull. You herd multiplies, and the economy grows. You sell them and retire on the income.

      A American Corporation: You have 2 cows. You sell one, and force the other to produce the milk of four cows. Later, you hire a consultant to analyse why the cow dropped dead.

      A French Corporation: You have 2 cows. You go on strike because you want three cows.

      Japanese Corporation: You have 2 cows. You redesign them so they are one-tenth the size of an ordinary cow and produce twenty times the milk. You then create a clever cow cartoon image called Cowkimon and market them Worldwide.

      A German Corporation: You have 2 cows. You reengineer them so they live for 100 years, eat once a month, and milk themselves.

      A British Corporation: You have 2 cows. Both are mad.

      An Italian Corporation: You have 2 cows, but you don’t know where they are. You break for lunch.

      A Russian Corporation: You have 2 cows. You count them and learn you have five cows. You count them again and learn you have 42 cows. You count them again and learn you have 2 cows. You stop counting cows and open another bottle of vodka.

      A Swiss Corporation: You have 5000 cows. None of which belong to you. You charge others for storing them.

      Chinese Corporation: You have 2 cows. You have 300 people milking them. You claim full employment, high bovine productivity, and arrest the newsman who reported the numbers.

      An Iraqi Corporation: Everyone thinks you have lots of cows. You tell them that you have none. No one believes you and they bomb your ass. You still have no cows, but at least now you are part of a Democracy…….

      Counter Culture: ‘Wow, dig it, like there’s these 2 cows, man, grazing in the hemp field. You gotta have some of this milk!’

      Surrealism: You have two giraffes. The government requires you to take harmonica lessons.

      Fatalist: You have 2 doomed cows…

      Hong Kong Capitalism: You have 2 cows. You sell 3 of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so that you get all 4 cows back, with a tax deduction for keeping 5 cows. The milk rights of 6 cows are transferred via a Panamanian intermediary to a Cayman Islands company secretly owned by the majority shareholder, who sells the rights to all 7 cows’ milk back to the listed company and proceeds from the sale are deferred. The annual report says that the company owns 8 cows, with an option on one more. Meanwhile, you kill the 2 cows because the feng shui is bad.

      An Arkansas Corporation: You have 2 cows. That one on the left is kinda cute.

      An Indian Corporation: You have 2 cows. You worship them.

      An Australian Corporation: You have 2 cows. Business seems pretty good. You close the office and go down the pub to celebrate.

      Courtesy of Sickipedia.org:

      • 0
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        I’m not much about economic theories about from Pro Madamulana and Pro Batalanda but can remember, last presidential election at USA, repablican candidate say 48% American people getting government social benefits and these people cast their vote for Obama. We have to understand even with best economic theories poverty and police failing can visible everywhere….

  • 1
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    Rajapaksa’s Political Manipulation of Market pertains more towards Singapore’s model. But Singapore used the prosperity of the regional oil and gas money. It didn’t need to take on loans from other places, and was able to work within its own capacity. Also Singapore has always had the support of the West, and in times of insecurity, always had their assistance.

    The obstacles in Rajapaksa’s model would possibly be the insecurity of tying-up too intensely with China, and stoking up a system too precarious in event of global flux.

    Singapore was a brand new national model, whereas Sri Lanka was an ancient history of governing bodies in continuum of dynasties, with the new dynasty chopping of the heads of the previous ones – hence the glitch in modern day governing, and the need to improvise.

    Singapore, being a new country, has so far had one continuous political party. Not so with Sri Lanka with her dynamic history of democratic institutions and too many oppositional forces that will ensure regime change if needed.

    It is time for Sri Lanka to follow the model Laksiri Fernando prescribes of ‘market-liberalism’ and ‘socialism,’ otherwise we would fall into lethargy of indifference, only exacerbating failure (as is evident in similar countries around the world).

    If Rajapaksa does come back, we hope he will realize the vicissitudes of Sri Lanka’s political structure and her global-positioning in this modern era, and follow to a greater detail, Laksiri Fernando’s suggestions that are meant for UNP.

    Ps. Germany‘s “right to own property is acknowledged by the culture and protected by a well-functioning system,” mostly related to the Germans that were domiciled in Germany at the time. The Jews were well settled in other lands, and most did not even dare come back. So, the implication of the concept’s tenant involved mostly Germans.

  • 0
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    Appreciate Dr. Laksiri is writing in depth in Sri Lanka situation. Please write about CB bond scam too. Future how Australian politician those who think they are the people running five star democracy but same time have high travel expenses such as helicopter rides and luxury class air travel too. Then our layman can understand local situation more broadly.

    • 0
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      Mr. Somawansa,

      I did write on the CB Bond Scam very critically. Please see “Awoth Atha Thamai: Cabraal Is No Excuse for Mahendran” (Colombo Telegraph, 23 April 2015).

      Laksiri

  • 0
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    Capitalism or what ever economic plan cannot succeed with out honest and honourable men and women in charge. What we are having today is a predatory govt and a predatory elite whose economic policies are to steal the wealth of the country and expect the poor and future generations to pay for it. It is nothing more than enslavement. The question is whether RW and his henchmen and MR and his henchmen are honest and honourable. The only way some control can be exerted is by demanding accountability. To start with let us get the wealth declaration of the politicians and their families from 1977 when this rot started under the watch of the evil man JRJ

  • 0
    1

    “They (the Rajapaksa regime)…. increased the per caipita income to near USD 4000 from a miserly 1150 in 2005”.
    Per capita income is a meaningless concept and has been abandoned as a social indicator by all serious socio- economic thinkers as well as ordinary informed members of the public. It has been replaced by newer social indicators like the Physical Quality of Life Index (PQLI). Rajapaksa was boasting about this on his recent TV interview, as did Nivraad Cabraal loudly during his disgraceful tenure as the governor of the Central Bank. The per capita income these people are talking about is nothing more than the extent to which the political class of the former regime and their business acolytes profiteered at the expense of the people.

  • 0
    1

    How about Sri Lankan crony capitalism?

    You sell two cows that belong to the people of the country to the Chinese. You open a personal account in the name of your drug lord buddy in the Seychelles and deposit the money there. The Chinese milk the two cows to death and move on to Zimbabwe to buy two new cows there.

  • 1
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    “Traditionally, there had been two main tendencies in socio-economic thinking in Sri Lanka or elsewhere: (1) those who emphasise the market or efficiency side and (2) those who promote equity and social side. According to some that was the traditional difference between the UNP and the UPFA. However, this has dramatically changed…”

    This may have changed for the UPFA but has it changed for the UNP? Ranil’s promise to make the minimum wage rs 10,000 is an indication, these seem to be peripheral measures to give the appearance of being socialist, whereas the core is free market economy for businesses to get richer and richer.

    I would prefer the large handouts that the UPFA is promising, they will not win? A minimum wage of Rs 40,000 would be what I would like to see but that would be bad for business, or bad for business men.

  • 1
    1

    I hope that the good professor is aware that the rate of taxation in the SME countries is very high. In most Continental social market economies, people pay 40% to 45% of the national income in taxes.
    In Sri Lanka it has come down to less than 15 percent.If the govt can raise more taxes there can be development with equity without importing a German brand of development which is also dependent to a great extent on cheap immigrant labor.

  • 0
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    Just look at this sentence from at the learned DOCTOR: ”How ever going by the practice of the Rajapaksa Regime, particularly between 2009 and 2014, it could be named as the political market economy or more correctly ‘Political Manipulation of Market’.This was the case whether it was the stock market, mega projects, other government contracts, bond market or even export-import trade”.

    • 0
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      Does Gigurawa mean nonsense?

  • 0
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    Dr. Fernando seems to promote a ‘national government’ as the most appropriate format “in implementing the UNFGG program or its proposed Five Year Plan.” I cannot accept this.

    I don’t believe that social equity and profit-driven economics are reconcilable, particularly in the present state of the world economic & political climate. Also, in my view, political manipulation of the market is perfectly alright as long as the state is dedicated to the scientific planning of a ‘fully-fledged welfare state’. I think, that’s the way to eradicate poverty and create a stress-free, happy society. Today’s technological achievements have created the conditions to reach this goal far better than greed-based competition, though there are ways to ‘manipulate’ small businesses for ordinary masses’ benefit.

    Trouble with the SLFP regimes so far has been this: They were trying to politically manipulate an imperialist-dominated market to arbitrarily promote the national bourgeois interests of the Sinhala elite, and in Mahinda’s case his own family & friends too (sic).

    In contrast, a legitimate people’s government will ‘politically manipulate’ the market to a) establish a ‘fully-fledged welfare state’ and, b) develop science & technology. Those are the two central areas that would serve the interests of the ordinary people.

    However, always remember that ‘scientific planning’ should, in my view, be the new paradigm of economic development, not greed-based competition.

    • 0
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      Let me express my view on what Vasantha Raja has raised.

      First I was not opposing state regulation of market or even state intervention. ‘Political manipulation’ I was talking about was very specific to the Rajapaksa regime even with some experience as a former Director of the Colombo Stock Exchange. If a ‘state is dedicated to scientific planning’ then the correct policy or procedure should be ‘regulation or intervention’ but not ‘political manipulation of the market.’ Political manipulation by nature goes for the advantage of a group or family.

      The way to eradicate poverty is not by ‘political manipulation’ of the market but by undertaking parallel measures for social welfare partly based on ‘income, profit or even asset taxes’ as appropriate, and in my opinion without damaging the efficiency of the market at the current stage of Sri Lanka. Efficiency of the market or even ‘freedom with responsibility’ is important to develop the underdeveloped productive forces in the country including technology. There can be other ways of eradicating poverty through education, training, awareness building and projects aiming at income generation by the poor. That also can mean bringing the poor and their products into the market.

      Of course I agree with Vasantha (if I understand him correctly) that under the overall technological achievements internationally, there are creative ways of promoting markets or economies without ‘greed-based competition.’ I would promote ‘non-profit making’ companies or ‘reasonable profit making’ companies. This means the products of these companies will be cheaper and accessible to the poor and also any remaining profits could be utilized for re-distribution of income. However, I cannot understand why particularly, ‘the small businesses’ should be manipulated, as he advocates. On my part, I would promote more flexibility and even assistance to the small businesses than the big ones.

      On some of the propositions that he advocates, such as a ‘legitimate people’s government,’ ‘establishment of a fully-fledged welfare state’ or ‘scientific planning,’ I don’t have much of a disagreement. But I hardly think those are at issue at the forthcoming elections. We are far from them.

      On the other hand, my opposition to ‘political manipulation of the market’ has a democratic connotation at present which Vasantha Raja has completely ignored. With market manipulation went political manipulation and vice versa. Therefore, his advocacy of the legitimate ‘political manipulation of the market’ would favour not democracy but it’s opposite. Our disagreement on a ‘national government’ is insignificant in this context!

  • 0
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    In response to Laksiri Fernando’s reply, let me explain what I meant by ‘political manipulation of the market’ within a socialist model. The state, for instance, could ENCOURAGE small businesses & farming communities to play a specific role for the benefit of the ordinary masses. A people’s state could do this by creating a well-paid workforce that would trigger the demand for SOCIALLY USEFUL things. The state will do this by totally eradicating poverty and creating a society without billionaires and without unemployment. Let me explain this kind of ‘political’ intervention within a socialist framework:

    A socialist economic model can instantly wipe out poverty by introducing scientific planning of a fully-fledged welfare state where healthcare, education, housing, electricity, childcare, public transport, water, communication etcetera are available free of charge. [At present, healthcare and education is somewhat free in Sri Lanka, though in a half-baked manner. There are some cities in the world where public transport, electricity & gas distribution, communication, childcare etcetera are free of charge though in piecemeal forms. But this is not good enough.] The correct way to do this is to nationalise banks, industries and national services under public ownership and introduce rational planning of infrastructure development targeting universal common welfare.

    Since, in a socialist setup, the entire working population no longer has to spend their income on basic needs, each one of them is now in a solid position to contribute to state coffers according to each person’s ability. Also, the workforce will have enough money to trigger a massive demand for many socially useful things. Consequently, there will obviously be thriving small businesses benefitting from the fully-fledged welfare state. Thus, they also can generously pay taxes to the state as beneficiaries of the unprecedented welfare services available for them.

    In addition, the state has the ability to plan and fund, short, medium & long term projects – related to the development of infrastructure along with science & technology – via the publicly owned central bank. ‘Quantitative easing’ or printing money may be one option whose value can eventually be realized.

    Moreover, Since a genuine socialist state will invariably withdraw from all wars and stop wasting money on expensive weapons and armies, a substantial amount of funds will readily be available for the state to fund social services and developmental projects for all citizens’ benefit.

    [ Note: What I propose here (the socialist model) goes far beyond the Scandinavian model. In single countries the socialist vision will only work as a temporary arrangement enacted by a workers’ state anticipating the world revolution – kind of “a mark-time project”. The Nordic welfare systems are mainly funded through taxation. Therefore they have to promote a thriving capitalist class in order to finance their welfare- system. Now that world capitalism is disintegrating Nordic systems are increasingly becoming vulnerable.]

    Making the rupee unaffected from currency fluctuations of world capitalism and taking control of imports & exports are crucial for the socialist model. But then what about much needed foreign exchange? In my view, the potential of Sri Lanka’s scenic & cultural beauty should be creatively tapped in this respect, along with other exports of course. In other words, tourism should become Sri Lanka’s biggest foreign exchange earner. Rational planning of infrastructure development would play a big part in attracting tourists.

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