National Prosperity: The Organic Way is the Best
By Ananda Ariyarathne
Let us try to understand the background of all the approaches made in a simplified manner so that one does not have to be a scholar in serious economics to understand the logical approaches, we have always missed.
The main aspect that directly affects real income is the purchasing power of a currency unit. In a simple society where people have answers to their daily food needs and other requirements, money has in such a society a very minimum level of influence. That is why the impact of inflation, in a rural economic environment, is not felt hard on life. People will need money only for special essential things and in that way, the impact is not as disastrous as in a modern urban society where the medium is money.
In a free economy, the money is the medium that rules everything and as long as the available money is enough to meet the expenses, life becomes and stays smooth. Money available becomes not enough only when the available amount of money cannot meet the need. In a society, all members need money and the level of prosperity is measured by the ability of the people to acquire what they need. The difference between what money can buy decides its strength and it represents income. A loaf of bread is standard and can satisfy hunger and if the money is not enough, the person foregoes a meal.
Basic needs can be listed according to their level of importance and they are food, clothing, shelter and medical facilities. Other things like education, transport and entertainment follow. No one can live without food but the other important feature is that one must have a way of earning money. No employment means no money and no money means that one can’t acquire one’s needs. It may be possible that there are many ways of earning an income but what one can do with the earnings depends on the purchasing ability of the monetary unit. Real income is measured by what can be achieved with the income. When the prices go up the real value of money shall be lost. We identify that phenomenon as inflation.
Factors affecting real income
Real income is the strength of a currency. Income is used to buy products, produce and services. The prices shall determine the ability of the citizens to buy. When citizens cannot afford to buy because of their limitations to buy, they will have to forego some of their needs as they are compelled to somehow get only most essential items. If the prices of the most essential items go up what will happen to these consumers? They will be compelled to spend less for eating and clothing while being compelled to use clothing till it runs threadbare. They will see only restrictions in every direction. Now imagine the plight of the people when the price of rice goes up!
Why has the price of rice increased? It is not that complicated to understand. When the costs of inputs go up, the cost of the final product also goes up. When prices go up, what the income can afford to buy is also affected. The real income can become stronger only if our currency becomes stronger.
For our currency to become stronger, we have to earn more foreign exchange and that means increasing the export-based earnings. In order to realise such a status, our prices have to be more attractive: And, that means the efficiency of our inputs will also have to go up. When that happens, it means we have increased our efficiency. In that way, when the costs are less, we shall have more and more export orders. When we increase exports, we will build reserves of foreign exchange and that means we will have more dollars to pay for our imports. This situation can be further improved by increasing produce and products for import substitution.
What can we say, when we have a system to give guaranteed prices for rice to encourage paddy farmers who constitute 30 per cent of the population. It looks very fair because the rice farmers stand to gain. What happens to the balance 70 per cent of the population who are compelled to pay more for their rice?
Then, how about farmers getting into debt to purchase fertilisers and chemicals that is the key feature of their cultivation? Farmers get into debts without being aware of the consequences and the interest they pay becomes a silent killer. The big hearted tycoons have no hesitation to pay high prices for paddy. The rice miller tycoon triangle who dominate the market and the fertiliser suppliers who have wound their noose round the paddy farmer’s neck, happily rake in the money at the cost of the paddy farmer.
Then, the rice millers hoard their stocks and start selling only after they are certain they can obtain the prices they want. Unlike the poor farmer they never at the losing end, distributing only when the prices can be applied. Then we have a bright Minister who imports rice from other countries to teach a lesson to the rice miller tycoons to bring down the rice prices. See how bright we are. First, the rice prices were increased which benefitted the rice miller tycoons. Then the hard earned foreign exchange is wasted in importing rice from other countries.
This contributes towards the escalation of prices and the cost of the upkeep of the human resources base increases. This has a far reaching ripple effect. Investors become disinterested owing to the high cost of our human resources which in turn reduces our forex earnings. The high cost of the staple diet affects all. Will this help our economy?
We continue spending on essential items such as petroleum and material required for infrastructure development. As we do not either conserve or generate foreign exchange in a planned manner, we have to get more and more credit facilities. This causes the prices to continuously rise. In the meantime, the Government has to manage the revenue for that also has to be created. The obvious alternative is taxation and those indirect taxes cause the prices of other items to go up. In this way the soup is cooked while ignoring simple solutions. Too many cooks and too many recipes spoil the soup.
How to control them
National food security is the most important issue, and it can help the Government to overcome its present difficulties. By strictly following the principle of making all the arable land productive, we shall first be able to stabilise paddy cultivation on a cost-reducing formula with the aim of avoiding fertiliser imports. This helps us to reduce cultivation costs in a large way and it also benefit farmers to have an effective margin even without a guaranteed price, and it also stabilises paddy prices. By selecting better varieties, this sector can be turned into a major foreign exchange earner. Making use of bio-fertiliser from community dairy and poultry centres can become a dependable source for low cost fertiliser and avoid bio-fertilisers imports.
The graduated plan to reduce dependency on imported fertilisers on a national scale can become a logical solution by increasing the number of community dairy centres each having a minimum of fifty cows. A base for bio-fertiliser at Grama Niladhari level can be developed. The 14,022 Grama Niladhari Divisions shall be the national potential. The cow dung, urine and remains of cattle feed that can be sent to the Bio gas pits will help in creating a bio fertiliser base .It can help in conserving valuable foreign exchange. Community Dairy Centres in the plantation regions can contribute towards bio fertilisers for the estates too, that way adding value for bio tea.
In the same lines, the creation of Community Poultry Centres can provide opportunities for unemployed youth to offer their services as members of Village Vocational Labour Societies. Most of the poultry production can be used for exports into Middle Eastern markets and the Maldives where they have to import.
By creating a Cooperative Vocational Labour Societies Programme, the required farm or agricultural labour can be organised to ensure a more productive human resources base in the country based on the principles of cooperative movement. The creation of a human resources base shall require only organisational efforts and the base created to recognise the labour as the contributing capital of the workers shall pave the way for a very productive option which can create not only economic stability but also respectability to the people at the bottom level in our society.
Our Nation should wake up from the drowsiness created by this economic ‘Beri-Beri Disease’. If we open our eyes we will see the opportunities we have around us. This is the best way to come out of this self inflicted drowsiness as it is not something that needs enormous capital inputs. What we need is only commitment and good guidance.