National Prosperity and Global Impact

By Ananda Ariyarathne | Published: 2:00 AM May 15 2021
Columns National Prosperity and Global Impact

By Ananda Ariyarathne

“There cannot be any better example for the sense of frustration one would get when realising that the facts are staring in your face and the possibilities are obvious but for some inexplicable reasons we act complacently. Although we profess that ‘education is the key’, we do not seem to be honestly worried about the possible outcome. Whether we like it or not, we are living through an era of Global Desperation but pathetically, we cling on to the old traditional remedies, practices and principles which have worn out their significance in a world where matters are decided merely as really meaningful, and therefore we do not seriously consider the realities concerned. 

The whole world is screaming about the destructive forces that are ruining our planet, which is shared by the human race and still it is the same natural rule that governs where the ‘might’ is ‘right’. 

The economic evolution is nearing an inevitable climax which shall bring all the ‘nations’ to their senses. Even the signs seem to be appearing clearer, by each passing day. It shall become a Global Standard very soon to make the best use of the natural resources we have as it shall be on us before we realize that the optimum utilisation of those resources shall be the name of the game very soon.”

 Growth of Western Economies 

Human civilisations moved in isolation during the ancient times. Some civilisations grew beyond the geographical boundaries known and that engulfed or at least influenced other civilisations. People were more or less self-relying and the commerce and trading were limited to very limited articles initially. The explorers from the affluent societies saw and experienced various kinds of living standards and when they returned it was not only with knowledge but also with products and produce from those lands. 

Out of many items, it was the unique collection of spices that captured the taste-buds of all the people. Arabs who live in a very hostile region climatically were interested in looking for better environments and that was how they became the historical link that joined the Western World with the Eastern World. In their efforts to beat the Arabs to reach the East started a struggle that became a reason for the Western World to advance militarily. That led to explorations followed by efforts to colonise newly discovered regions and the struggle continued. 

After becoming more dominant, the Western countries like Portugal and Spain started a new race and we know how British ended up as the most powerful Global Nation. Late 19th Century and early 20th Century saw a world where Western Powers were in a very stiff competition that was marked with wars for control.

The struggle that was concentrate in the Continent of Africa saw First World War and almost immediately behind came the Second World War when the late comer into the fray- Germany caused a stiff competition with Italy and Japan collaborating, for seizing the power from the Western Allies who dominated the Global Economy.

 Colonisation and Global Commerce 

By that time, a third faction had started as the Soviet Union which openly supported poor countries to stand up against the Western Powers. In the struggle that became inevitable, the Western Powers managed to get the help of the Soviet Union and a new Era for the whole world started, with the Western World dominating the Global Economy, not by guns but through International Trading. 

Although, the Soviet Union was recognised as an ally during the World War II. Post war developments caused the creation of the Western World and emergence of the Eastern or the socialist block with the gradual metamorphism that converted a newly independent former colonies which tried to develop by developing their economies. The former glory that existed in the Western Countries had to be saved some-how and the economic system that existed before the World War II. 

As the main suppliers of raw materials and also the markets for the growing industrial production that developed more or less into a ‘symbiotic’ existence, that contained those raw material supplying former colonies. Out of them, only those countries which had comparatively larger populations became better off in their struggle to gain economic independence. India and China had their vast markets locally and their patriotic efforts became productive due to their larger internal markets. 

Post World War Global Economy 

Soviet Union became a military power that could not ignore by the Western Powers but the formation of the Socialist Block deprived the Western Powers of the opportunities they would have had in those countries, especially with the power of the Soviet Union which had vast resources of petroleum and gas. The new wave of Independent Nations paved way for trade with the Socialist Block in a stronger way and the better relations that grew helped the Soviet Union to support the Newly Independent nations to become selfsufficient in their own economies. The economy of People’s China grew very fast and as far back as 1960s, China was showing her presence in the newly independent nations in the Continent of Africa. The influence the Chinese started in Africa with a symbolic contribution like Tan-Zam Railway (Tanzania – Zambia Railway) can be seen more prominently now, all over Africa. The huge labour force in China boosted the Chinese Economy to what it is now. 

Within three decades from the end of the World War II. We can see the signs of the Western Powers losing control over the economic affairs of the so-called developing world and the main features could be observed as the inflation that started sending ripples towards those developing nations. The strategic control of the Petroleum Producing Nations in the Middle East led by Saudi Arabia where the operations were still under the Western Powers completed the scenario very easily through the market control and the Western Powers did not lose in their efforts. Western Controlled International banking and the petroleum trade ensured that the Western Economies did not lose at the end. 

All the countries were not like India which had the second largest population in the world and therefore the second largest consumer market. Protectionism and the development plans could work very effectively there as the vast natural resources and the already established heavy industries made the difference. Industrialisation in a country like India worked more effectively as the potential market was enormous. The same strategies could not become effective in our country – Sri Lanka where the efficiencies in productivity could not be achieved in the same kind of strengths. It could not be developed further as the opportunities were not globally opened. The secret in success in industrialisation is the productivity achieved. 

It is true that any industry producing some product can flourish only if it can be run at the optimum production capacity as it is the only way to keep the standards high while keeping a contented work force. Unlike in the case of India, Sri Lankan market had a very limited potential. When the economy was opened after 1977, the local products had to compete with better quality and cheaper products imported and that further added to the miseries of the local industries.

 If all the Sri Lankan industries could have a larger market, the profitability would have risen. The inevitable result was the downfall of the local industries. What would have happened to the concept for the Foreign Exchange conservation by effecting Import Substitution? As the exports also came down, that added to the misery of depleting Foreign Reserves.

Where and how has it When the Foreign Exchange Reserves are depleted, will it help the Sri Lankan Rupee to become stronger or weaker? If Exports also drop, will the Sri Lankan Rupee get stronger or weaker? In the meantime, due to the rising cost of production, the paddy cultivation also will be affected adversely. Then, when the paddy production is low, the rice becomes more expensive and that adversely affects the cost of a meal of a citizen. That starts sending ripples in all the directions and the costs of everything will become dearer. Imagine the fate of some workers who have come from some remote villages to find a living in the cities. On one hand the workers are calling for better revenues and better benefits. 

The industries that cannot cope up will start cutting corners, and try to achieve unachievable targets with disheartened workers. It is a downward trend starting separately in different environments to start first slipping, then getting momentum to slide faster in contributing towards a National Avalanche. Only way to stop such a destructive motion is to start treating at the points where each such can be given concentrated attention with a view to stop them from slipping. 

Where and how has it gone wrong? 

All of us can be wiser after we have been exposed to a situation or two. We can now see a very clear pattern setting in creating an environment of no escape. The former colonies were bound by the agreements and accords that kept them in the same orbit and the wealth created within those economies either stagnated or simply deteriorated. In Sri Lanka, after 1956, the ‘nationalisation’ became the new hope and the answer to the shortcomings. It is true that served the purpose to a certain extent but absolutely. But the tendencies that followed left enough avenues to mismanage and the result was that those enterprises stopped being profitable anymore with the politicians using such nationalised services as well as statutory establishments to provide employment to those who supported at their election. The downfall of the CTB is a glaring example. 

When the Depots and Branches could not generate enough revenues, the Government Treasury had to rescue. It became worse after the so-called change and the free market that recognised the freedom of the investors to venture into anything that might have shown some positive signs about the profit. That affected very negatively the productivity of the industries and commercial ventures while the finance companies that sprang up started dealing in investment loans.

 Valuable government enterprises like Paddy Marketing Board and the trading bodies that gained in markets had to lose before the more efficient private sector companies that moved in. The restricted imports became a part of the history and the so-called ‘open general licence’ allowed an importer to import anything under the sun that did not come under the restricted items. On one hand, the Banks became busy in opening Letters of Credit and even allowing imports under Collection and Documents on Acceptance Schemes. 

That ensured the unhindered channel for the outflow of foreign exchange. Investors started losing interest as Sri Lanka stopped being an attractive place for cheap labour and that sealed the fate of foreign exchange through exports and through Import Substitution. We have a market filled with imported items and that covers even the traditional vegetables that came from the traditional gardens.

 We have become a very smart nation that openly advocates ‘Guaranteed Prices’ for Paddy and allow traders who maximise their profit margins by way of manipulations and consequently the ultimate consumers have to pay more. But, despite all that the country is borrowing to keep on safeguarding the Open Economy. The only answer is to mobilise the rural Human Resources and produce food for a global market on one hand and offer more efficient and productive Human Resources so that those export oriented ventures can be revived. 

To be continued.

By Ananda Ariyarathne | Published: 2:00 AM May 15 2021

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