What Ails the Economy?

CEYLON TODAY | Published: 2:00 AM May 20 2021

The ease or difficulty of living reflects the soundness or otherwise of the economy of a country, from a layman’s point of view.

In this country it was not difficult for people to live even during the food-shortage days of the Second World War up to the mid-1940s as a measure of rationed rice per week to each person at 25 cents and other food items were distributed through the cooperative store.

While rice was on the coupon all other provisions that, one would get at a supermarket today, except vegetables and local fruits were available there.

Two unforgettable items of food were dehydrated mutton and dehydrated carrots out of which delicious curries could be made. There was Australian green apples and green grapes, tinned IXL jam, butter and cheese and South African sardines in tomato sauce that are considered luxuries today.

All other essential food items such as sugar, wheat flour, dhal, gram, green gram were around 25 cents a pound.

This price structure and incomes and salaries remained basically unchanged up to the introduction of the open economic policies after 1977.

The economy based on the export of plantation produce namely tea, rubber and coconut ran into difficulties because of shortage of rice in the international market by 1952. However, the country was able to tide over the crisis owing to the Rubber-Rice Agreement signed with China.

In 1953, very strangely, despite the possibility of selling rationed rice on the coupon at 35 cents, to which it had been increased by then, the price per measure was increased to 70 cents, triggering the Hartal that caused the deaths of 12 participants.

S.W.R.D. Bandaranaike who came to power in 1956 with backing of the leftist forces, in accordance with the self-sufficiency philosophy enunciated in his thesis ‘Spinning Wheel and Paddy Field’ was aiming at an economy of import substitution.

Again, after 1965 it was the accent on self-sufficiency in rice that prompted the Green Revolution. The unseen hand of 1953 was again at work denying rice to hospital patients replacing it with a measly meal of a few pieces of boiled sweet potatoes thrown on the plate!

In 1970 there was a repeat of 1956, again with the left forces to follow in earnest an economic policy of import substitution. It went on very well for five years the people making great sacrifices practicing stoic austerity with young blood in charge of land reform following up on the post-1956 Paddy Lands Act of the Oxonian patriarch who told the BBC with immaculate diction: “I made the language of over seventy per cent of my people the official language”.

The spectre of feudalism that failed five years ago, this time succeeded in throwing the leftists out resulting in two years of chaos making it opportune for the open economy to come in with a vengeance.

While the 1956-1965 Ten Year Plan for economic development had gone awry with the demise of SWRD it was said after 1977 that there will be a planning economy rather than a planned economy.

Professor Sumanasiri Liyanage in a speech delivered recently appearing in Ceylon Today of 29 January 2021 has set out the performance of the open economy in the following terms: “An economist who thinks in terms of per capita income as an indicator of the economic situation would say the present crisis began in 2013 and continues thereafter. Hence, the crisis predates the COVID-10 pandemic that of course has exacerbated it. If one thinks ‘longue duree’ (long term) then it began in 1978 with the introduction of the open economic policies and the crisis is an outcome of the neo-liberal economic policies that was seen at the time as a panacea for all the economic ills Sri Lanka had faced under the import substitution growth strategy. The post-1977 period is marked by two major trends. The first trend has been the inconsistency in performance of the Sri Lankan economy… during these 42 years, the rate of growth has exceeded the magical 7 per cent level only in six years. The most important and critical issue is not achieving a high rate of growth, but the capacity to sustain the continuity of the process. Sri Lanka was able to maintain a growth rate of above five per cent for a continuous five-year period in only two clusters of years during this period, namely, during 1978-1982 and 2003-2007. The second cluster may be extended until 2012 with the growth rate slowing down during the intensified internal armed conflict in 2008 and 2009 but bouncing back after the victory over the LTTE. Both clusters are characterized by State-led infrastructure development: infrastructure investments during 1978-1982 were financed by lucrative foreign assistance while resort to foreign loans occurred during 2007-2012…regular fluctuations in the percentage rates of growth convey the impression that a growth dynamic was not embedded in the 1978 policy package despite isolated years of prosperity. Therefore, it stands to reason that the future is likely to be bleak if the same policies continue.”

CEYLON TODAY | Published: 2:00 AM May 20 2021

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