By Shyamon Jayasinghe –

Shyamon Jayasinghe

“The practice remained a constant reminder of dysfunction in Sri Lankan politics and economics.”

Doom and Gloom

Amidst the doom and gloom vibes that Donald Trump’s economic measures have given countries like Sri Lanka, there emerges some fall outs that bring more than a smile on our faces. Here is one and let us celebrate: the oppressively unfair practice of bequeathing the politico elite with duty free permits for luxury cars will go. This is among the latest series of policy decisions by government in a war to cut down our import bill in order to save the rupee.

Pernicious Practice

This pernicious practice has been on for many decades now. The public has been forced to tighten their belts in the face of a high cost-of -living that is only set to rise and keep rising. During just one term in office, politicos keep getting repeated permits, which they sell at unconscionable prices to vested interests. Even the JVP politicos, who claim monopoly rights to anti-corruption, have been happy to receive these permits and sell them although they say, the money goes to the party fund. I believe the practice, in more prudent format, has been extended to high-level government and State Corporation personnel and to even monks and priests of that order. The whole business smells of social injustice and fouls the atmosphere. 

The Luxury Car attraction also constitutes the priceless bait that attract corrupt politicos to parliament. If that wasn’t there, and the avenues for commissions and bribes go amissing, I am sure these corrupt and creepy men and women of the underworld would not think of coming to parliament. We will see more stability in our politics and more honesty. The practice remained a constant reminder of dysfunction in Sri Lankan politics and economics. In these cars, our politicos roam about and show their feathers psychologically imidating the ordinary villager into meek submission and genuflection.

Theoretically, a yahapalanaya government should have been able get rid of this blight; but how could it when it needed the perks as lure for MPs to cross-over, or come over in order to swell the numbers needed to bring in essential legislation?

Trump Policy

Initially at least, emerging economies are fall -outs from the aggressive Trump trade policies. Trump’s personal blemishes have attracted media criticism; but the fact is that, true to promise, Donald Trump seems to be making America great again. Surely, he will be re-elected. Trump has extended himself unnecessarily in the wrong direction by opting for a kind of isolationism. On the other hand, he is stopping America from being taken for granted and screwed right and left by other countries. China, for instance, enjoyed much of its economic boom by America’s free trade practices. While that country entered a goodly range of its products to US with no duty, it cannot do that now.China’s currency is one of the the first to fall against the US dollar. This has impacted adversely on emerging economies like Sri Lanka’s. On the other hand, the US dollar is on a big rise. The rise in the price of petrol has also been partly due to the rise in the American dollar.

Two Ways of Living above Means

The upshot of America’s new push is that all those countries which violated the basic principle of living according to means have become vulnerable. The violation is on two fronts. Firstly, by having our import bill in excess of our export earnings. This is as a result of recurrent trade deficits. Non-essential imports like luxury cars for politicos have added considerably to the trade deficit. Ever since independence, Sri Lanka  has had only four years of surplus in the trade balance. The resultant adverse impact on the balance of payments brings down rupee value in global trading. Sri Lanka is an import -dependent economy that inevitably caused national debt problems that further compounded the hunger for dollars in order to service debt in dollars. For many years, we foolishly set the exchange rate in our favour. That was like blocking one’s anus during dysentery!

Fiscal Deficits, Typically Lead to the Fall of the Rupee.

The second type of violation of the rule of living within means comes when we have recurrent fiscal deficits, meaning an excess of public expenditure over income. This contributes indirectly, but surely, to a fall in the rupee. When that expenditure is on non-capital and non-dollar earning  projects like salaries and recurrent expense then the money needed for good capital projects that can save the dollar or bring in new dollars become less and less. We, then, commonly resort to foreign funding for such projects and this means we have to payback the dollars and payback interest in dollars. The upshot is an attack on the rupee’s value.

Bad Past Practices Leading to Chronic Fiscal Deficits

Several past policies and practices have caused recurrent deficit budgets and have ruined fiscal management and:

For many years our stupid governments gave free rice to each citizen. Mrs Bandranaike went on record saying that she will even get down rice from the moon to give free to the people. When Prime Minister Dudley Senanayake, honest man, wanted to withdraw this outrageous practice, the Marxist socialists organized the great Hartal that resulted in Dudley leaving his seat.

Sri Lanka’s experiments with socialism were also predicated on a violation of the principle of living within means. Well-managed private sector undertakings were taken over overnight and run and ruined by the state bureaucracy. This made the government bigger and bigger and the expenditure burden on the national budget heavier and heavier.

Government should never undertake business ventures as that is sure to turn profitable ventures into unprofitable ones. As a child, I remember the bus services run by the Soyzas. How well they were run! SWRD nationalised that service and proudly heralded the disastrous event, with kavum and kiribath, as a “victory for the people!” Since that, a good number of  businesses or trades were nationalised. Even schools were nationalised. 

Government’s stupid foray into retailing was reflected when it tried to sell vegetables via a state institution called the Marketing Department. The practical way for state to help marketing of vegetables would have been to create marketing infrastructure or encourage  the creation of that infrastructure, which includes the setting up of cold rooms, encouraging refrigerated transport, encourage wholesale markets and so on. What a pathetic show it was when the Marketing Department, renamed euphemistically as the Department for Developing of Marketing, ran retail outlets! I had personal experience of this failed practice when I took over as the Commissioner once.  

The sacred theory hyped then was that the ‘middle man, must be eliminated.’ What a myth that was! Anybody who knows the elements of marketing will tell you that the middle man is a necessary value-adding link in a marketing process. What I witnessed during my days in the Department was a system where state bureaucrats acted as middlemen in place of the more efficient and less corrupt official.

It was the same hype about the middleman that led to the formation of the CWE. Only politicos profited. 

All these taken-over undertakings became inevitability the hapless recruiting ground for the growing unemployed. Our unemployment was disguised.

Focus on Economics

Now, in the face of global pressures Sri Lanka will have no alternative but to learn to live within means both by reducing our imports and by cutting public expenditure. If the means aren’t enough for a desired lifestyle, then one must expand the means by investment and business in order to get the cashflow. This is simple economics that have failed us and turned us into a banana republic.

The central problem is that our politicos have ignored economics and have found tribal and identity issues as of foremost importance. Economics is central to our sustenance whether as Sinhalese, as Tamils, or as Muslims etc. It is our media’s responsibility to implant economics-consciousness in the minds of our people.