2 April, 2023


The Social Cost Of Economic Reform

By Uditha Devapriya

Uditha Devapriya

“Their morals, their code; it’s a bad joke. Dropped at the first sign of trouble. They’re only as good as the world allows them to be. You’ll see. I’ll show you. When the chips are down these, uh, civilised people? They’ll eat each other.” The Joker, “The Dark Knight”

It’s a sign of the times that Sri Lankans are less worried about the pandemic than the economic fallout. While news outlets were full of reports on COVID-19 measures this time last year, now they are busy making predictions about the economy.

In this they are reflecting the concerns of the people. Back then the call of the hour was to enforce lockdowns; now the prospect of a virus frightens them, not so much over the risk of contracting it as the knock-on effects on their jobs, businesses, and lives.

Certainly, much has happened in these last six months which pales almost everything that have taken place over the previous nine. It is not a coincidence that we’ve fared the worst during the third quarter, with the economy contracting by 1.5 percent. What with inflation, food and fuel shortages, and power cuts, we’ve got too much to worry about.

Perhaps that is why news of the Omicron variant did not seem to worry people as much as news of the Kent and Delta variants did. How can it, when gas shortages have given way to the prospect of exploding gas cylinders? How can it, when fertiliser bans have opened the country to the possibility of a food crisis? How can it, when Fitch keeps to its time-honoured tradition of rating us down, bringing us closer to bankruptcy?

Arguably the most interesting development to come out of all this is the fiery debates that have ensued about what the State should do now. These are split between those who think that it is not doing as much as it should and those who believe its role must be reduced. For the latter the State remains ineffective, and it should thus play a smaller role.

That the pandemic and the crisis point at the ineffective nature of the government confirms liberal narratives about the dangers of political power and the need to strap in the Executive Presidency. And yet, there is a contradiction here. While many economic liberals urging the government to let the proverbial free market decide argue that the pandemic weakened the State, many political liberals contend that it actually strengthened it.

However, while some may see a contradiction here, I do not. Under the strain of a systemic crisis, it is possible for an authoritarian regime to also be fragile. Thus, while the government gives the impression of being strong, behind the facade the unity that once underpinned it is fast unravelling. That its cracks took a little over two years to show should confirm that even the 20th Amendment hasn’t pacified the regime’s security complex.

The pressures of the pandemic, therefore, have weakened the State while also reinforcing a false sense of security. We are seeing these developments more in the government’s foreign policy volte-faces than in domestic politics: from snubbing Japan and India, it is now turning to them, no doubt to get much needed dollars wherever it can. Such reversals of fortune are ironic, and would be amusing if they weren’t so tragicomic.

What is more intriguing is that a regime that came to power promising to never sell assets, lease lands, or go to the IMF, has owing to external conditions gone back on what it pledged and imposed austerity measures. Though far from the neoliberal paradigms recommended by SJB MPs, the SLPP has enforced austerity and made it a part of life. This explains Mr Basil Rajapaksa’s declaration that no one will be hired to the public sector the next year, and that further restrictions will have to be imposed on imports, especially of luxuries.

These have already generated much unrest, though Sri Lankans are a resilient lot and they are, to borrow a Sinhala saying, “biting their teeth” (dath miti kanawa). Elsewhere we have seen full-scale riots rather than the peaceful protests we have been seeing here until now. To be sure, the latter have far exceeded in strength and size what we saw in the yahapalana era, given that even those generally opposed to strikes and protests have throw in their lot with demonstrators: the suburban middle-class, no less than the rural peasantry.

And yet, despite the time-bomb that’s ticking louder and louder, these campaigns have been relatively peaceful. What explains this contradiction, between the crisis and the nature of the protests it has unleashed? I am no social scientist, but I suggest that the reason has to do with our public services: in particular, our schools and our hospitals.

Despite the severe constraints the pandemic has imposed on them, our public services continue to function as they were meant to, keeping the less well off content, particularly through the provision of education and healthcare. One cannot discount the armed forces here: as an economic analyst pointed out to me, though it attracts much censure Sri Lanka’s military plays an unappreciated role in cushioning unemployment in villages, unemployment that may otherwise have spiralled out of control and fuelled disenchantment.

That is as much a tribute to Sri Lankans as to the welfare system in place from the later days of colonial rule. Far from yielding to systemic pressures, our public services are coping well. It is true that government hospitals are nowhere near the state-of-the-art institutions you get in the private sector. But public hospitals are run on the basis of equity, not profit. One can say the same of our schools and universities: while much needs to be reformed, these have ensured access for everyone. This is a point that gets lost in political debates, but one which Sri Lanka’s much maligned student activists underscore frequently.

In Christopher Nolan’s The Dark Night, the Joker likens madness to “a little gravity… all it takes is a little push.” Dayan Jayatilleka has related the story of Dudley Senanayake telling the UNP’s rank-and-file that he did not wish to reduce spending on welfare today only to increase spending on defence tomorrow. Senanayake would have learnt his lesson during the hartal of 1953, a lesson learnt more gravely by J. R. Jayewardene, whose regime didn’t just smash workers’ strikes but also deployed firepower against rights activists, a point the likes of Ratnajeevan Hoole have noted in their accounts of that period.

The UNP’s sense of hubris did not survive for long. Over the next decade, the Jayewardene regime realised that liberalisation had to be accompanied by a cushioning of the social and political costs of dismantling the welfare state. It also came to realise that all it took to pitch the country down an abyss was just “a little push.” Under Ranasinghe Premadasa, the UNP implemented policies that were more aware of the need for equity, though the UNP which came to power after his assassination eventually abandoned them.

The point I am trying to make here is that the thin line dividing Sri Lankan society from anarchy is its public services. It is these services that keep Sri Lankans connected to the State, that have so far prevented the State from losing control. Any party that tinkers with them will not just lose the confidence of the people, but also turn them away from more democratic forms of dissent, perhaps towards a third insurrection.

Political parties can ignore the costs of “letting go” of the public sector only at the risk of electoral marginalisation, which may be why the SJB, certain MPs of which are known for their advocacy of public sector pruning, has not gained the popular support the JVP has gained. We are seeing a seething wave of discontent from public sector workers, including teachers, nurses, railway workers, and CEB employees. Can a party strategising or banking on such discontent really afford to cut their numbers down?

I really don’t know whether advocates of reform are aware of this. But the line they and their allies draw, between economic reform and the social repercussions of such reform, is to me a patently artificial one, which does not stand up to reality. Like ostriches basking in the sand, they seem to think politics and economics occupy separate domains. They do not, as even a cursory evaluation of the 1980s should make clear.

2021 was a year to forget, more than 2020. I do not look forward to 2022, but if I do, it is because of my hope that, come what may, our public services and welfare state will not be pruned radically in the interests of “economic restructuring.” Sri Lanka being Asia’s oldest democracy has much to do with these services, in particular healthcare and education. To reduce them today in the hopes of more growth tomorrow would be inadvisable.

To be sure, the country’s political class deserves as much censure as they are going to get for putting us through this quagmire. But that does not mean ordinary people have to pay the price for the sins of others. I hope we will not see them being forced to, because I do not want to live through the convulsions which are sure to follow such a policy.

*The writer can be reached at udakdev1@gmail.com

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Latest comments

  • 2

    Uditha, ol’ chap,

    Yesterday is dead and gone, tomorrow is yet to arrive, we are in the here and now, what’s ye point, A, B or C?

    This crisis is not made in the past but totally Rajapakse-made.

    Learn to take the shortest route to call a spade a spade.


    • 2

      “This crisis is not made in the past but totally Rajapakse-made.”
      A totally partisan statement.
      The current crisis has roots in both the Planter Raj and the 1977 reactionary renaissance. The Planter Raj, until its teeth were extracted by the plantation nationalisations of the 1970s, bared them at the slow but ongoing efforts at industrialisation and peasant emancipation in the 1956-77 period. Following the victory of compradore forces in 1977, the Planter Raj reconstituted itself as the Trader Raj, a nexus of the state with cartels of importers (as opposed to plantation companies).
      Whereas the manufacturing sector had grown from 5% of GDP in 1955 (mainly plantation factories) to 22% in 1977, the post 1977 years saw its rapid collapse to 13% by 1983 (World Bank figures). The key machinery and electronic sectors were the main losers, replaced by quota-dependent garment industries.
      On the other hand, the post-1973 expansion of the mid-east economies enabled Sri Lankans to migrate thither to work as domestic aides or as artisans, which provided large amounts of foreign exchange to the economy, driving development at the village level, and (more so) the development of the financial and import sectors.
      With this set-up, the productive sectors of the economy (Agriculture and Manufacturing) shrank to a collective 20% or so of the economy, while services ballooned to over 60%. Hence the country became unable to pay for its imports.

      • 0

        Totally partisan gibberish!

        Learn to take the shortest route to call a spade a spade.

        • 0

          This shameless old fart, who has never done a honest day’s work in his entire life …….. without doing a favour to humanity and dying …….. is still trying to dish out lies …….. to freeload off the hard work of the poor struggling housemaids in the Middle East!


          OC, Native, chiv …….. haven’t you noticed ……. some new guys are suddenly in the forum with the same talking-points ……… to put the blame all the way back to 1978 ………. a bright spark of Basil’s one of 7 brains, perhaps! :))

          The Rajapakses’ last straw? :))

  • 2

    Uditha Devapriya speaks much of the contribution of our Public Services sector. There is no dedication in them. The present day lot serve the politicians, not the country. Our Civil Servants of old were a class of dedicated public servants, running the country all by themselves. Allowing no room for political interference.

    • 1

      Misuse of the public sector since 1977 has led to a grave deterioration of the capacity of employees, including an all-pervasive sense of corruption. However, this is not limited to the public sector. Corruption in the private sector is just as bad, if not worse.
      On the other hand, the civil servants of old were recruited from the compradore elite. They served, not the democratically-elected political masters, but the needs of the Planter Raj, the fortunes of which were intricately linked to the state machinery – ever since the same officials responsible for expropriating the peasants’ common and forest land under the Crown Lands (Encroachment) Ordinance, also purchased that self-same land at vastly undervalued prices. The compradore elite, along with foreign planters, took part in the depradation of common and forest land – fully 1/3 of land grants went to locals, as against 2/3 to foreign planters.

  • 1

    The UNP came to power to a great extent in 1977 using the grievances of the poor, especially of government employees, by promising an abundance of goods and a free ration of 8 pounds of cereal. They then proceeded to cut the existing rations entirely and decimated the public service. The SJB could well utilise the same tactic now. What it says in English, aimed at foreign donors and the upper classes, may not reflect their propaganda at the grassroots. For example, during the Yahapalana regime, the state coffers were used to provide goods to UNP grassroots activists, a far cry from cutting government spending… but very similar to tactics used by fascists to bolster their base.

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