An alternative development paradigm for SL

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Patali Champika Ranawaka sounded the alarm on both Government supporters and critics who welcomed the recent IMF staff-level agreement. He tweeted that the agreement is contingent on approval from the IMF Executive Board and restructuring negotiations with Sri Lanka’s creditors. He acknowledged that the agreement itself was, and is, a necessary first step, or to quote his words, “the successful completion of the first concrete step in the process.” There is obviously much to do, but much has already been done.

The question now isn’t whether the IMF is needed. Whether it is needed or not, we have opted for it. There are some choices we can make, and some we can get out of. The IMF is not one of them. With the benefit of hindsight, one can say that even critics of the Fund, who argued forcefully for an alternative economic paradigm, misread the situation in two ways: they assumed the Government would listen to them, and also believed that politics was a variable they could dispense with in their scheme of things. Now they are paying the price: whether we like it or not, we will have to swallow the IMF pill.

This is not to say or suggest that their prescriptions were or are wrong. Quite the contrary. Economists like Howard Nicholas, and economic analysts like Shiran Illanperuma, have been sounding the alarm on Sri Lanka’s inability to industrialise for months, and in Nicholas’s case, years if not decades. Sri Lanka is a classic case study of a small State touted as a trading entrepot that produces next to nothing and imports almost everything. The situation is so serious that import restrictions, far from ameliorating the balance of payments crisis, have been justifiably deplored by the business community for crippling local industries, since the country depends on the import of intermediate raw materials.

It is this inability or unwillingness to industrialise that has incapacitated Sri Lanka and has prevented it from graduating from its present middle-income status. In such a situation, the island faces the prospect of downward, not upward, mobility. Its production capacity is low, as is its export base. Over time, particularly in the face of external shocks like the crisis we are seeing through, its growth prospects can only diminish. And for the record, it is. The IMF notwithstanding, reviving local industries, within practicable limits, would thus have to be a priority for our policymakers, commentators, and intellectuals in the long term.

Yet, the mistakes of the past cannot and should not be repeated. Proponents of Sri Lanka’s industrialisation may have got the solution right, but the means to the end, wrong. To begin with, their seeming lack of regard for the political dynamics of the country, which ironically is the same mistake that advocates of untrammelled free markets, who refuse to factor in the realities of political patronage in Sri Lanka and their impact on market reforms, commit, blinded them to the most important question regarding their proposals: whether, or not the present political system is amenable to their economic model.

Supporters of Gotabaya Rajapaksa doubtless, thought they were seeing through a local production revolution in the country. Yet barring cosmetic gestures, such as the turmeric ban, which did benefit local, particularly Jaffna farmers, there was no attempt to capitalise on import restrictions and move into actual local manufacture. Journalists and ad agencies froth at the mouth whenever a foreign manufacturer signs an agreement with local vehicle retailers, but these deals are for assembly, not manufacture. Sri Lanka, in other words, has become a hub for putting together parts made by other countries. This has been so for the last 30 years, which by any reasonable yardstick should be cause for shame.

The class forces that made possible Rajapaksa’s victory at the polls in 2019 were diverse and to a considerable extent, contradictory. However, they were all wedded to the idea of Sri Lanka carving out its own path, whether on the foreign policy front or the economic front. Rajapaksa’s manifesto addressed these concerns, and to be fair, with appointments like W. D. Lakshman as the Governor of the Central Bank, it seemed as though the SLPP would do what successive SLFP and UNP Governments had failed to. Yet the reforms they saw through suffered from two defects: they benefitted a section of Colombo’s parasitic corporate class and were wholeheartedly opposed by an elite import merchant class.

More than anything else, Gotabaya Rajapaksa did not attune himself to the realities of the contradictions that had made him President in the first place. The country needed a full-fledged Bonapartist figure, comparable perhaps to his brother, Mahinda. Yet what it got wasn’t a Napoleon, but a Louis-Napoleon: the nephew, instead of the uncle. Crippled by his lack of political experience – a limitation that had ironically secured him a majority from a country that had grown dissatisfied with establishment politics – he let his brothers rule the roost and listened to advice that led from one catastrophe to another. The ban on chemical fertilisers figures in as arguably the biggest catastrophe among them.

All these could only lead to one outcome: a volte-face. At a mass rally in Anuradhapura early this year, Rajapaksa stood by the fertiliser ban, claiming it was needed for the country’s farmers. Yet, two months later, in the face of mass resistance, he went back on his original stance on the IMF. Admitting to his mistakes, he sought to undo what he had done. Yet by now it was too late: neoliberal austerity, of the sort idealised by free market think-tanks and policymakers, had fast made a comeback, while proponents of local industry had to take a backseat. What made Gotabaya Rajapaksa possible – calls for local industrialisation – have thus subsided in favour of calls for market reforms, including privatisation and welfare cuts. This has only legitimised the inevitable: a Ranil Wickemesinghe presidency.

To make possible Sri Lanka’s industrialisation, we need a strong Left and Opposition. Yet, the main Opposition, the SJB, has itself been swallowed up by neoliberal paradigms, while the Left, led by the JVP and the FSP, is yet to make it a part of their policy plank. Sri Lanka is far away from where it should be, as far as industrialisation is concerned. With the impending IMF agreement and bailout, it may sink even deeper and go even farther. What it needs now is an alternative development paradigm, at least as a backup: in case IMF reforms invite the sort of mass resistance that can trivialise even the Gotagogama protests.

The writer is an international relations analyst, researcher, and columnist who can be reached at [email protected]

By Uditha Devapriya