Featured image courtesy president.gov.lk

Editor’s Note: This piece is in response to Sunil Bastian’s “Some Thoughts on Current Orthodoxies”, which can be read here.

I very much like Sunil Bastian’s critical perspective on the current Sri Lankan policy agenda “Some Thoughts on Current Orthodoxies,” dated 14 March. Let me support his case, from an historical perspective.

When Maithripala Sirisena won the Presidential election just over a year ago, there was a great deal of highly justified celebration. At the same time, plenty of people have observed, both on Groundviews and elsewhere, that current political arrangements are fragile. Much needs to be done to re-embed democracy and create more effective and inclusive government. How to do that? There is one recipe, emanating routinely from international organisations, that is very attractive to Lanka’s more prosperous, educated, cosmopolitan and Anglophone citizens. That recipe combines economic and political liberalism – more democracy, more market competition, more ‘opening’ to the outside world in almost every sense – with a more pro-Western foreign policy. See, for example, Razeen Sally’s ‘A Chance to Close Sri Lanka’s One-Family Show’ in the Wall Street Journal. The recipe is attractive because it represents a reversal of the key features and policies of the Rajapakse regime: political liberalism in place of autocracy; economic liberalism in place of a relatively ‘closed economy’ model; and a pro-Western in place of a pro-Chinese foreign policy.

I am happy with the political liberalism. I have more of a problem with a pro-Western (and pro-Indian) foreign policy and a more market-oriented economic policy. It is not that these things are inherently wrong. In limited doses, they will be useful. But they are either infeasible in the longer term (foreign policy) or miss the point (economic policy). In broad terms, Razeeen Sally is providing the same advice that ‘the West’ has been giving Sri Lankan governments since Independence over half a century ago. The advice remains unpalatable to much of the electorate. In the current ‘Asian century’, it is often impractical or irrelevant. And it also has a poor track record. This was the strategy eagerly embraced by the UNP government led by J. R. Jayawardene after the 1977 general elections. This apparent hero of democratic renewal quickly established the Executive Presidency, and did more than any other single national leader to undermine democratic political institutions and provoke violent Tamil separatism. Similarly – and despite good performance in some areas – the 2001-4 UNP government led by Ranil Wickremesinghe fell in large part because of its conspicuously pro-Western foreign and pro-market economic policies. Sri Lankan voters expect their political leaders to directly address their material needs, and to share their ways of understanding and representing the world. They have never had much faith in the benevolence of ‘markets’. Their distrust of ‘the West’ is greater now than at any point in recent history. Building on a rich repertoire of Sinhalese Buddhist nationalist narratives and myths, the Rajapakse regime convinced many Sinhalese that ‘the West’ supported Tamil separatism, with the objective of weakening the country to allow foreigners to exploit its resources; that ‘human rights’ issues were a cloak for Western interests; and that only firm Rajapakse political leadership can guarantee national sovereignty. To the outsider, these beliefs sound paranoid and seem absurd. It is many years since the Western nations had significant political or economic interests in Sri Lanka. But suspicion or hostility toward markets, capitalism, the West (and still, to a lesser extent, India) provided the ideological fuel for armed JVP insurgencies in 1971 and 1987-89 and remain major features of the Lankan political and electoral landscape.

Electoral democracy in deeply embedded in Sri Lanka’s political culture. A primary motivation for many voters in January and again in August last year was dislike of authoritarian rule. But many of the people who voted for a return to pluralist democracy and constitutionalism were not voting for a pro-Western (and pro-Indian) foreign policy or a more market-oriented economic policy. The government they brought to power has to deal with the world as it is, and not as it appears through the narrow lenses of a believer in the ‘Western ideology’ (i.e. in the tight interdependence of capitalism, competitive markets, prosperity, democracy, constitutionalism and the interests of the US and other Western powers).

The new government has sensibly and deftly sought ways to diffuse tension with the West over human rights and the issue of alleged war crimes – without leaving itself too vulnerable to the charge of having caved into Western pressure. It is also less close to China than the Rajapakse regime was in its later years. But the dominant foreign policy relationships in the longer term will be with the sources of most potential new investment and most geo-military-political pressures: especially with China and India, but also Indonesia, Japan, Malaysia, Myanmar, Singapore, Thailand, Vietnam and the Asian Development Bank. It is likely to be a changing mixture, but dominantly Asian. A pro-Western foreign policy would be a mistake if it were to conflict with better relationships with Asia.

In economic policy, it would be an error for the current or any future government to give high priority to a policy of economic and market liberalism. There is certainly a case in principle for more pro-market policies. But it is not so urgent as to crowd out other considerations. The Lankan economy has been growing fast – around 7% annually – despite the anti-market policy that economists deplore. The economy is likely to continue to grow, not least because of its prime location along key sea transport routes in a regional economy that, despite its problems, continues to do well. In the Asian context, Sri Lanka has become a piece of prime real estate. Investors want it as a location for a wide range of activities and investments. Many Lankans will do well materially. But many won’t. And those who don’t will decreasingly be willing to believe that the government has their interests at heart. The biggest long run threats to political stability in Lanka – and to the shorter term electoral popularity of the current government – lie in a combination of (a) growing economic inequality and (b) the declining effectiveness of the Lankan state in remedying some of the economic inequalities generated by (capitalist) economic growth.

The Sri Lankan state used to be very good at this latter task. From the 1940s through to the late 1970s, it achieved this through three main channels. First, it taxed relatively heavily and spent much of the proceeds on public health and education systems that brought real benefits to most people most of the time. Second, it subsidised the price of basic staples – mainly a varying mix of rice and wheat flour – through a well-administered ration system that ensured that most of the benefits went to poor people. It was the Jayawardene government elected in 1977 that began seriously to deconstruct the food ration system, with the eager assistance of the World Bank and various aid donors. The quality and coverage of the public health and education systems have deteriorated more slowly. Observe a few fiscal trends since the late 1970s:

  • The tax system has been allowed to decay, such that the proportion of GDP raised from taxes, that exceeded 20% in the late 1970s, now stands at only 11%.
  • The number of people in civilian public service posts has increased steadily, leaving less and less public money to equip each public servant to do any productive work.
  • Military spending increased from an extremely low base, but stayed high when the war ended.
  • The food ration system was replaced by a series of increasingly-politicised so-called anti-poverty programmes (Million Houses, Samurdhi, Diva Neguma etc.) that generated jobs for political appointees but had smaller and smaller budgets and did less and less for the poor.

Public spending on health and education has declined. As a proportion of GDP, public education spending is probably lower now in Sri Lanka than in any other country of South Asia. If there is a surprise, it is that this sustained fiscal attack on poor people over more than three decades has generated so little political reaction. Some of the reasons for this quiescence are evident. The separatist war mobilised voters around other issues. The politicians who might have taken the lead in mobilising the poor have either been suppressed by force or penned up, toothless, as honourable ministers enjoying high pay but little power. However, things are unlikely to stay this way forever. The more remote the separatist war and the memory of violent repression of political dissent, the more likely it is that grassroots politicians will return to mobilising voters around demands that the government address the needs of the poor as well as those of the wealthy and well-connected.

Sri Lanka needs a return to ‘class politics’. It also needs a government willing to increase taxation so that it can again fund public programmes to effectively distribute real material resources to the poor. Sri Lankans – especially richer Sri Lankans – are now significantly under-taxed by international standards. The easiest and most effective way to address the needs of the poor probably would be to introduce some variant of the conditional cash transfer programmes that have proven their worth in a number of other middle income countries. These kinds of messages are unlikely to be forthcoming from Washington, Wall Street, Beijing, or any of the many other overseas power centres that offer advice to Sri Lankan governments. The voices emanating from those power centres will reflect the views of investors, lenders and players in Asian regional geo-strategic rivalries – whose understanding of Sri Lankan politics and governance is as frail as their opinions are confident. They are unlikely to appreciate the importance of policies – and policy styles – that help re-establish a sustainable social contract between the Sri Lankan state and its poorer citizens.