State Capitalism: Revitalising under performing businesses the Mussolini way

The factory of Sevanagala Sugar Industries Limited. Government supporters have stormed and occupied the factory earmarked for nationalisation under a controversial law. PHOTO/ THE ISLAND via Haveeru Online

The media these few days, especially the English media, provides unusually high anti government coverage to the government’s latest move to push through a bill, classified as urgent. Titled “Revival of the Under performing and Under utilised Assets Bill”. This bill sent many stories spinning round Colombo circles. More politically savvy circles talked about pressure on the government from permit holders for spirits and the politicians who control those permits. Eau de Cologne is not the issue, eau de Kelaniya is what matters, the spin caught fast and over 35% of the countries consuming alcohol is outside official production it said. There was also talk of political vengeance, but then why Harry, asked the same confused talk.

Meanwhile the bill came under the scanner of the business community. Usually competing and undercutting businessmen, put a bold face with a common voice meeting the President to say, they don’t much like it. The president was clear. No withdrawing of bill, but he assured the business community on 05 counts. The bill is one off, only intention is to revive the 37 listed companies, not meant for targeting land, reviving through private sector and present owners could also submit proposals for reviving of assets.

But the first serious attempt at de constructing the legality and investment content of the bill was done by one time business chamber boss, Chandra Jayaratne, who now plays the role of a good governance lobbyist. Jayaratene’s criticism made from his speciality area of good governance, business and investment. This urgency and secrecy he said, smacks of any that could be talked of as good governance. His apprehension was that the bill had little reason for a hurried passage through parliament and thus leads to practices in reversing good governance. Then he warns that such State interventions with no clear defining of what an under performing or under utilised venture is, and with enormous powers given to the government, would kill future investments. It would erode investor confidence, both local and foreign, he argued.

Yet with politics taking cheap slander, Opposition and UNP Leader Ranil Wickremesinghe challenged the government to bring in legislation to acquire all assets which belongs to the LTTE all over the world, instead of laws to take over enterprises of Sinhalese businessmen.

Speaking at a media briefing the next day, UNP parliamentarian from Kurunegala district, Dayasiri Jayasekera, also tried to play racist and backed his leader saying, there is a plot to smash Sinhalese businesses by this government with this move. The government is probably trying to create a sugar shortage, he also claimed, playing with fear politics.

These men in baseless opposition politics, playing “clowns” to a gallery of Sinhala “subjects”, think they could rake in some Sinhala votes at the next elections, trying to project this regime as anti Sinhala. Elections to the parliament would take another 04 years the least, if this opposition could survive with clowning. The opposition, the UNP to be very precise, fail to understand the importance of framing their policies clear, when criticising the government and opposing policy based, interventions of the regime.

What the opposition, if sane, should have brought out is the political aspect of the proposed bill, that goes far beyond petty Sinhala racist slander the UNP leadership is comfortable with. This intervention in re taking once privatised business ventures, does provide this regime an opportunity to grab prime land, they are very much greedy of, never mind what presidential assurances mean. But this is not just land grab only. This also shows a political shift in the regime, with due approval by IMF and the World Bank. Or the other way round. This regime given the nod by the IMF and the WB to strengthen State capitalism to a degree, where private capital comes under much stringent scrutiny than now.

There is reason for that. On a global scale, the validity of staying put with neo liberal economies is over. If Obama can not survive in a neo liberal economy in his own America, the Rajapaksas certainly can not, in Sri Lanka. All the blue whales in corporate America, had to be bailed out with public money. Gordon Brown while in office had to draw up the British recovery plan, also backed by public funds. Neo liberal economic policy on either side of the Atlantic, ran into huge melt downs that had to be helped through tax payer money, in total contradiction to neo liberal economies.

What then is the option, or the alternative ? From the side of capitalist powers, one, the State has to be saved without compromise, in keeping the markets open for the corporates to wean of their bankruptcies. Two, new resources have to be brought in to make their economies sustainable or at least feasible, for the future. Together, they indicate the interest and the importance the US and the NATO members pay on oil rich countries, in the Arab world and North Africa. To their advantage lies the situation in that part of the world. They can with less world opposition, steer native civilian opposition in societies that have not got their political alternatives ready against despotic regimes. They work towards having new but unstable collectives as governments, depended on their military might and economic deals and interventions. Interventions that give them stronger access to oil, bartered for democratic opportunities that are never certain to work. But they still help throw out despotic regimes.

Egypt is one great shift that with a democratic people’s movement, removed a military dictator, to install a military government in transit that is wholly funded by the US. Libya is the other with a long existing despot who controlled his country’s oil, who was removed alive and left dead with an armed rebellion led by a minister who was in his cabinet. Gadaffi no more, a transitional government was installed, that would finish off all deals on oil, before moving on. Tunisia is also within the over all schema that is being tried out in the oil rich North Africa.

In that emerging new world where Super Powers run around bailing out their corporate partners with public money, continuing to maintain a wholly open market would not bring much foreign investments to SL as Jayaratne would expect with good governance. That rough path can only be tried out by nations like India, where they have a strong and independent nationalist capitalist class. An ambitious investor class edged on with a growing new middle class market, and one that can dictate terms to invest on their own. One time IMF economist, Dr. Manmohan Singh in India is one who is trying to engineer such a path with difficulty and rampant heavy corruptions.

This creates a new world order that provides opportunities for State centred economies with petty nationalistic regimes, to compromise with Western capital. That seems the path the Rajapaksas in Sri Lanka can opt for. A new nationalist shift with State capitalism, with  shrinking democracies. This “Revival of the Under performing and Under utilised Assets Bill” in Sri Lankan context, therefore is one tool that provides for strengthening of the State in economic terms.

This kind of economies, with “Statification” of business ventures, often get their social sanctification through opposition from politically illiterate right wing political leaders, who misinterpret them as “socialist policy”. Sajith Premadas thus rushed to say the bill has to be opposed for its “nationalisation”. A term, Rajapaksa would wish to peddle with as “progressive”, within his “patriotic” politics. A term that in no way explains this political shift, in the Rajapaksa regime.

It was similar politics, that made Benito Mussolini, the Fascist pioneer and head of State of the Italian republic, different to Hitler. Rejecting “socialism” as a dead doctrine, his Italian nationalism, mixed with a strong State planned and owned economy from especially 1925 allowed him in one hand to control the Italian peasantry with 5,000 new farms that were established with five new agricultural towns and control the urban economy with government control of businesses, by 1935.

What needs to be discussed is, how this Rajapaksa regime could, manage such a Mussolinian economy, even with Sinhala businesses given a lead, as appealed for by the UNP and its vocal campaigners. In fact, the UNP is only worried about businesses of their own men being listed. They would go with this bill, if the regime agrees to take out Daya Gamage’s Sevanagala Sugar Company and Harry Jayawardne’s Pelwatte Sugar factory from the enclosed list. That was also what the joint business community was concerned about.

Given that compromise works with the Rajapaksas, there is no logic in what the government says the bill is for and in what the UNP is not challenging the government on. It is that same political factor which made Mussolini’s fascism an economic failure with State controls that the government says, they could use to revitalise under performing and under utilised assets. Such States and political regimes can not manage economies and businesses.

Senior Minister DEW Gunasekara,who chaired COPE investigations on 249 State enterprises, vouches for such failure. Their loss totals 19 billion rupees. The reasons as concluded by Minister Gunasekara are due to “appointment of unqualified people to top management posts on political grounds and the lack of financial and administrative disciplines had ruined many of the public enterprises. One of our strong recommendations will be to appoint educated and professionally qualified people to the top management at these institutions”.

For minister Gunasekera, the conclusions are positive and fine. So will it be, for evening middle class banter. The fact from Mussolini’s fascist rule nevertheless remains stubborn and unchanged. These regimes can not afford to go with such civilised and professional recommendations and conclusions. They have to live with the political culture and with the men who make that culture, for political survival. Mussolini had the nationalist middle class who joined his “Black shirts” the “Squadristi”, managing agricultural farms and urban business. It is they who mobilise the paramilitaries and lumpens, fund them and get on platforms and campaign to keep the regime going. They are an integral political part of the regime and these State ventures in a way, help sustain them.

Will the Rajapaksa regime be different ? Will they, who by now have proved they can not manage public enterprises and account for losses running into billions of rupees, revitalise the under performing and under utilised assets ? Who would buy that argument of revitalising, to say “yes” to the bill ? Yet, they would have to go with it. If not in whole, at least in part, for the next phase to complete the shift to State focused capitalism from neo liberalism. Well, State capitalism suits Rajapaksas better, for that gives more and direct space for crony capitalism as well. SO, the bill will stay, despite grumblings by the businessmen.

  • dinuk

    Thanks for this analysis – State Capitalism and brand advertizing seems to be the model that draws from China and Burma. The fact is the state capitalism is also a bout military dictatorship and policing the boundaries of inequality and social exclusion.
    Democracy is now merely a facade in Lanka and the rise of the Gotabaya Rajapakse military dictatorship is quite apparent, with Mahainda Rajapakse as the civil facade. Gotabaya is a former military man. They are following the military-business model of governance as in Pakistan and Indonesia under Suharto. Protests against the Underutilized assets bill will be broken by the military – meanwhile Ranil is jaunting off in Europe rather than dealing with the crisis in Lanka.
    The latest is that the Army will establish a development and construction company which will no doubt also run the expropriated assets. The new company aims to assist the government to undertake development; infrastructure constructions such as highways, bridges, buildings, playgrounds, parks etc. and offer services in transport and agriculture. The Army claims to have made a profit of Rs. 370 million but this is fiction since the Army is funded and subsidized to the tune of trillions of rupees by tax payers money – through the budget! Do these people think that Sri Lankans are morons to be believe that the army is a profit? making business?
    Meanwhile the Rajapakse dictatorship are expecting trouble these days after the murder of Bharatha Luxman and with the economic bubble bursting, gas prices and COL going up, people are getting restive. Colombo city is full of military and they are suppressing websites. It seems that a Libiya-like situation may follow sooner than we expected!

  • MV

    A refreshing read for a change.

  • http://www.hotmail.co.uk cyril

    I think the Rajapaksa regime is transforming the State into a patrimonial State and the objective of the Bill is to create crony capitalists.

  • P. Jayagoda

    I strongly support the argument by Kusal Perera and Cyril.

    It is very important for us to analyze the neo-comprador rule under Rajapakse in an era where some pro-Rajapakse intelelcts like Dayan Jayathilake and Sumanasiri Liyanage are criticizing the democratic and emancipatory politics of the day, ironically by using radical political theories of Zizek, Gramsci, Althusser and Alain Badiou, mostly out of context and in misinterpreted way.

    For instance, in this week’s Ravaya, Sumanasiri Liyanage has published an article, crtiticizing anti-Rajapakse activists, titled “Enemy is Democracy”, which is an absolute nonsense in a country under an authoritarian rule.

    Against this pro-Rajapakse pseudo-radicalism, we, all anti-neoliberal and capitalist activists, should say bravely today that, “enemy is authoritarian neo-liberal capitalism embraced by Rajapkse and his henchmen including pseudo-radicals like Liyanage” and that “yes democracy, in its emancipatory meaning, is the solution”.

    • http://www.hotmail.co.uk cyril

      Rajapaksa’s enemy is democracy and that is precisely why he brought in the 18th amendment and ushered in an era of ‘all power to the Rajapaksas’