Economics of a Familial State
These are hard times, globally, and Sri Lanka is not immune to the general contagion. The country is struggling with a weak rupee, a falling rate of savings, a huge debt burden, high levels of youth unemployment and bulbous inequality. None of these are signs of a healthy economy or indications of popular wellbeing.
In addition, Sri Lanka is also plagued by policy problems and attitudinal malaises which are sourced in the familial nature, of Rajapaksa rule.
Mihin Lanka has reportedly lost Rs.8877 million in just four years.
This is an unforgivably criminal waste at a time funds are scarce and the government is pushing the country ever deeper into the debt-mire just to make ends meet. Mihin Air is irrational from the point of economic logic; it is contrary to national development and popular wellbeing. It makes sense only from the point of personal glory of the President and the personal advancement of his coterie. Mihin Lanka continues to thrive despite monumental losses because it bears the President’s name and is a lucrative playpen for some of his favourites.
Mihin Air is a symbol of Rajapaksa economics, of its blatant disregard for economic logic, of the primacy it accords to Rajapaksa whims and fancies over and above the interests of national development or popular wellbeing.
In his May Day speech, the President said that the greatest achievement of his government was changing the “self-centred mindset of the people. Usually the thinking of an average person is: first himself, then the family, village and last the country. But this government has changed that sentiment and a majority of Sri Lankans now think ‘Country First’. That is why such a large crowd has gathered at the Town Hall grounds in support of the government” ( Daily Mirror – 2.5.2012).
Keeping Mihin Lanka afloat by using scarce national resources which should have been spent on such essentials as education or health or upgrading the Sapugaskanda oil refinery can be considered putting the ‘Country First’ only if Sri Lanka is equated with the Ruling Family and national interests with Rajapaksa whims.
‘Family First’ Economics
Last week, the prices of gas, milk powder and cement went up; more such price hikes are bound to happen in the coming weeks as the regime struggles to meet IMF conditionalities in order to qualify for the final tranche of the IMF loan.
A regime which puts the ‘Country First’ will not impose the burden of reducing the budget deficit solely on the already bent backs of ordinary people. A regime which puts the ‘Country First’ will not hike taxes on essential commodities in order to fund rulers’ extravagance and waste. A regime which puts the ‘Country First’ will ensure that the burden of sacrifice is distributed in a just manner and that rich and powerful politicians do not get a free ride at the expense of the poor and the middle classes.
Sri Lanka has the largest and the most pampered bunch of ministers ever. That is a good place to begin the necessary exercise of cost-cutting, if the regime truly puts the ‘Country First’.
Alternatively, the regime can begin by curtailing those ‘prestige projects’ which have a minimal impact on economic development or popular wellbeing, whose sole raison d’être is a whim or a fancy of some Rajapaksa or the other.
Mihin Lanka is a pre-eminent example of a prestige project which imposes a mammoth burden on the populace year after year. The much vaunted Magampura Mahinda Rajapaksa Port is another case in point. In order to make this icon of waste less unprofitable, the regime is compelling all vehicle importers to use it instead of the Colombo Port. Indeed, the vehicle import issue is symbolic and symbiotic of both Rajapaksa economics and Rajapaksa governance. This is gross and short-sighted state intervention in market economics not for the sake of poverty alleviation or combating inequality but for the greater glory of the Ruling Family. This measure will not benefit the people; it will not promote social-justice or any other socio-economic goal. In fact by increasing prices it will make it harder for the ordinary man to purchase even a motor cycle. Its aim is nothing other than keeping the Magampura Mahinda Rajapaksa Port in business.
So, not only is Sri Lanka addicted to ‘prestige projects’; Lankan leaders impose irrational economic policies on the private sector in order to keep those prestige projects going.
Everything is subsumed into familial needs, interests and desires.
For all its roseate-hued rhetoric, a familial state cannot deliver development because its main concern is perpetuating the power and the prosperity of the narrow group of stakeholders – the family and the clan. There can be times when familial interest dovetails with national interest but such times are rare and when the two contradict familial interest will win, even at enormous cost to the country and the people.
This growing gap in living conditions is exacerbated by an official policy which seeks to heap ever more favours on the privileged while ignoring the plight of the underprivileged. The most recent evidence of this imbalance, this injustice is in the regime’s dual approach to vehicle imports. The recent increase of duties on vehicle imports, including three wheelers and motor cycles, hadn’t affected ‘privileged imports’, which accounted for a substantial percentage of the total annual imports…..” (The Island – 3.4.2012). Even as crippling taxes were imposed on imports by ordinary Lankans, this privileged caste of politicians and top officials are to receive permission to import duty-free vehicles. Moreover, “over the years, duty free vehicle entitlement granted to members of parliament had been gradually increased from $10,000 to $50,000 (ibid).
The regime boasts regularly of its economic prowess, using statistics with extremely doubtful provenance to back their extravagant claims. But the gap between claims of economic miracles and a less salubrious reality is indicated occasionally, by a revealing event or development. For instance, the government which is building South Asia’s tallest tower and spent millions in a vain effort to become the host nation for 2018 Commonwealth Games has not been able to make Samurdhi payments on time: “The government admitted yesterday that Samurdhi recipients had not been paid their allowance this year and gave an assurance that they would pay the Samurdhi allowance for the first quarter of the year in March” (Daily Mirror – 11.2.2011).
The regime which has no money to modernise the Sapugaskanda oil refinery or to set up adequate processing facilities for locally produced milk is spending unmentionable sums not only on defence but also on such extravaganzas as night races in crowded cities under the patronage of this or that Rajapaksa offspring. Such economic obscenities are inevitable when the line of demarcation between the state and the ruler (and his family) is deliberately effaced.
‘Country Last’ Economics
The bad economic news continues to accumulate.
According to the Annual Report of the Central Bank, national savings declined from 25.4% (of GDP) in 2010 to 22.1% in 2011. In consequence the resource gap jumped from 2.2% in 2010 to 7.8% in 2011. And pawning credit as a percentage of total credit has increased.
If this trend continues Sri Lanka and (most) Sri Lankans will be compelled to borrow (at increasing interest rates) to maintain basic investment and consumption levels.
According to media reports, the government is planning to curtail the number of Samurdhi recipients by 20%.
Youth employment is high: “One in five young people in the labour force are unemployed in….Sri Lanka”, according to ILO’s Asia Pacific Labour Market Update (April 2012). That is a youth employment rate of 20%. “The gender gap in youth employment was….an alarming 11.7% in Sri Lanka….” So is income inequality: “Among countries with higher income inequality (measured by a Gini Coefficient of 40 or higher) the ratio in…Sri Lanka increased significantly by….7.8%”.
Sri Lankan economy continues to grow; but this growth going hand in hand with high levels of inequality and youth unemployment. Extant problems such as high levels of child malnutrition are bound to exacerbate with the recent spate of price hikes.
A nation is not an abstract. A nation is not the state; it is the people. If a policy regimen endangers the present and undermines the future of a people, that policy regimen is anti-national. The Rajapakse rule is coming perilously close to that point. A continuation of present trends will create a nation that is suffering from endemic under-nourishment and ill health and burdened by a future generation that is malnourished and lacking in educational and professional capacities.
In his May Day speech President Rajapaksa talked about “certain people without a name or an address (who) arrive in Sri Lanka in a bid to disrupt and destabilise the country with their anti-national campaigns” and on countries which “assist them in the hope of a regime change” (Daily Mirror – 2.5.2012).
Thanks to Rajapaksa economics, Sri Lanka will not need foreigners sans names and addresses to sow the seeds of disruption and destabilisation. Her leaders are already hard at the job.
Imagine a man who spends a large component of his limited income to buy weapons, borrowing increasingly, often at extortionate rates, to finance his gun-habit. If his gun-habit is accompanied by a mania for exhibitionist practices, he may neglect a leaking roof or faulty plumbing to get a Jacuzzi installed. That man will have less and less to spend on his family’s health, his children’s education and essential home-repairs, even as he accumulates debts. To elude bankruptcy he will mortgage his house and sell all his ancestral lands. Eventually, when bankruptcy arrives, he and his family will find themselves with nothing to show for years of ‘high-living’.
That will be the fate of Sri Lanka.