The politics of Gotabaya-economics

Tuesday, 18 February 2020 00:00 -     - {{hitsCtrl.values.hits}}

 President Gotabaya Rajapaksa
 

 

  • “Great catastrophes often creep up on us in tiny steps” – Eric Vuillard (The Order of the Day)

By Tisaranee Gunasekara

In his path-breaking book ‘Thinking Fast and Slow,’ Daniel Kahneman, psychologist and Nobel Laureate in Economics, divides our thinking process into two systems. System I is automatic and intuitive. System II is conscious and deliberative. We need and use both types of thinking, fast and slow. Which type is apposite depends on the circumstances. 

The classic example Prof. Kahneman uses for situations that demand System I thinking is a fire fighter captain in action. But what works for fire fighters don’t necessarily work for political leaders. When the Queen of Hearts in Alice in Wonderland shrieks, Behead that Dormouse! (or when President Donald Trump uses the twitter to announce a policy change that takes even his own administration by surprise) that is resorting to System I thinking for a situation that demands System II thinking. 

A successful policy decision (or at least a policy decision that is not an unmitigated disaster) requires ingredients different from gut reaction and speed. Facts and figures won’t be a bad idea; throwing in some analysis would make sense. 

Three months into Gotabaya Rajapaksa’s presidency, it is clear that his policy making is sourced in System I thinking. The across the board the tax cut, which covered a slew of direct and indirect taxes, was a classic case in point. The loss of revenue for 2020 is estimated at a massive Rs. 500 to 600 billion. That such a massive tax cut would create a revenue shortfall of immense proportions should have been obvious to anyone who bothered to think. And yet the government seemed both unprepared for the fiscal hole of its own making and clueless about what to do with it. 

The demand that banks and finance companies implement a one year debt repayment moratorium for loans up to Rs. 300 million was even more of a coup de foudre. Once again, there was no discussion with stakeholders, no analysis of consequences; just an order to the banks. This was followed up by another dictat, ordering banks to disregard CRIB reports in approving loans for 2020. 

More reactive policy decisions followed, when the immediate fiscal impact of the tax cuts became evident. Reactions included withdrawing its own circular regarding a pension increase and asking China for an emergency loan. And yet, despite the financial crisis, the government is going ahead with two politically motivated programmes. One would provide public sector employment to 50,000 graduates – with recruitment age set at 45 years by a presidential fiat. The other would train and recruit 100,000 youths from low income families who have failed the OL exam and find them jobs mostly in schools and hospitals. This programme is to be run by the military. What the costs of these two programmes would be, and how those costs would be met when the government is reduced to beg for foreign loans to manage existing expenditure is anyone’s guess.

When the Fitch Agency downgraded Sri Lanka’s sovereign credit rating from stable to negative in December 2019, following the new tax measures, one of the dangers it warned of was “rising risk to debt sustainability.” This month, Prime Minister Rajapaksa publicly requested India for a three-year debt relief on bilateral loans. That public request alone might suffice to deter potential new investors and render credit more costly. 

In a strongly-worded response to Fitch Agency, Sri Lanka condemned the rating downgrading as “hasty and inconsiderate of facts on the ground.” Hasty and inconsiderate of facts on the ground were exactly how taxes were slashed and the debt moratorium imposed. Not to mention the decision to remove permit requirements for transportation of sand, soil and gravel. Cleary more forethought went into ordering a 1,000 song playlist for private buses than for any of the policy decisions. A committee was actually appointed to pick suitable songs and bus operators given more warning than bankers.

More illogical decision making is on the cards, going by what the President said in his Independence Day speech. “We must re-examine the need to obtain licenses for things that affect the day-to-day lives of the people… Outdated laws, regulations, taxes and charges that prevent people from freely undertaking self-employment, traditional industries or businesses need to be revised swiftly.” Like most of his populist counterparts across the world, President Gotabaya Rajapaksa’s economic views seem to consist of a ragtag of deregulation, protectionism, and overconfidence, the whole caboodle informed not by facts, but by politico-personal considerations. In a country with weak institutions and a growing fear psychosis, this path cannot but end badly.

The undesirability of dissent

When a wildlife officer refused to bow to the illegal demands of a blustering minister, her courageous and principled behaviour turned her into a national heroine overnight. Devani Jayathilaka is a heroine. Her action, and the public’s reaction to it, is also symbolic and symptomatic of our lamentable national condition. In a halfway law abiding country, her stance would have been normal, and not exceptional, ordinary rather than heroic. 

There are three other takeaways from this incident, all of them boding ill. 

The first is Minister Sanath Nishantha’s dismissive attitude to environmental considerations (Sri Lanka is a small island that can’t be bothered with eco systems because we need houses, roads, and playgrounds, he said) and the government’s non-repudiation of that attitude. Many expected the President to go public, criticising the minister and praising the official. He did neither. According to the pro-government website, Lanka C News, the president called the minister and told him not to get into unnecessary conflicts with public officials. No reprimand yet, for trying to bully a public official into breaking a national law; and for his stupid statement about the unimportance of environmental factors.  

The second takeaway is the monumental ignorance displayed by Jayatilake’s vocal detractors at the meeting, the ones who seem not even to know what oxygen is. These are voters who help decide the country’s fate. Appearing on Stephen Colbert’s The Late Show days after Donald Trump’s victory, astrophysicist Neil de Grasse Tyson said that the task for the next four years is to make America smart again. Making the electorate smart again is an even more vital task here in Sri Lanka. 

The third takeaway is the deafening silence on the part of other government officials present at the meeting. Instead of supporting Jayathilaka, they acted as if they were divorced from the drama happening before them, aiming for carefully blank expressions. 

Perhaps their pretended indifference had something to do with this particular minister’s noxious past. Sanath Nishantha and his brother, a former chairman of the Arachchikattuwa Pradesheeya Sabha, have been charged before the Chilaw High Court of assaulting the then Arachchikattuwa Divisional Secretary, obstructing his official duties and exerting criminal force when he was inspecting a storage facility in 2007. The minister’s veiled threats to Jayathilake in a subsequent interview should be considered in the light of this past. Minister Nishantha’s mafia-like threats and the government’s failure to reprimand him send a dangerous message about undesirability of dissent. 

The undesirability of dissent was also a (not so subtle) theme in President Gotabaya Rajapaksa’s Independence Day Speech. “I’m bound to protect the needs of the people of this country. That is my duty and responsibility. In implementing that I don’t expect any obstacles from public officials, the legislature or the judiciary.” This was precisely the point Minister Sanath Nishantha was making about Devani Jayathilaka – that she was obstructing him from doing his duty; that her obduracy is making it impossible to fulfil the developmental needs of the people. 

According to the website, SL Story, an attempt is made to resuscitate an old complaint against Jayatilaka by a Buddhist monk. The complaint has been heard, and Jayatilake exonerated, but the website reports that powerful politicians in the area are trying to revive it and get her transferred. If the story is accurate, the purpose would be not just to punish a courageous public official but also to make an example out of her, to send a message to all other public officials that compliance is their best and only option.

Where dissent is labelled as unpatriotic, and dissenters condemned as traitors, the result is that there is no one to warn about the possible consequences of uninformed and illogical policymaking until disaster strikes, as happened in China with the Covid-19 crisis.

Covid-19 and costs of unfreedom

When the whistleblower Chinese ophthalmologist Li Wenliang died of the very disease he tried to warn his country about, several internet commentators suggested that a statue be built in his honour and named The Rumourmonger. Spreading rumours was what the Chinese authorities accused him of when he tried to warn about a new virus. He was threatened and forced to sign a statement pledging not to discuss the disease further. 

Under the Presidency of Xi Jinping, a frighteningly Orwellian system of total control has come into being in China. That system was successful in silencing Dr. Li and his colleagues who identified the danger of Coronavirus epidemic long before it became an epidemic. But it had no impact on the virus itself. In fact, by dismantling natural early warning systems, it enabled the virus’s rapid spread. . 

Economist and Nobel Laureate Amartya Sen has demonstrated conclusively that famines can happen only in closed systems where there is neither freedom of expression nor of information. Clearly such closed systems are also more vulnerable to epidemics. Had freedom of information been present in China, people would have heard at least rumours about the new and highly contagious respiratory disease and taken their own precautions. The clampdown on information rendered the people ignorant, incapable of looking after their own safety and vulnerable to the contagion. 

Even as the virus was taking an increasingly firmer grip on Wuhan, the city hosted a potluck banquet to win a world record. More than 40,000 families participated in the event. Had the health officials been consulted, they would have warned about the inadvisability of holding such a public event. Had the people known about the contagion, they would have stayed away from the spectacle. But thanks to the closed nature of the system, the political leaders could do what they like, until the abyss intervened. 

The criminal wrongdoing done to Dr. Li and the story of the Covid-19 is a warning about the dangers inherent in trading basic freedoms for the illusive hope of safety and security. It is a fate that should interest us because that is the trade-off President Gotabaya Rajapaksa and his family are offering Sri Lanka. 

Not only has the government used selective repression to quieten general dissent. It is also planning to introduce new laws to curb the internet, one of the few spaces open for critical voices. In late January 2020, the Defence Ministry announced its intention of drafting new laws “to prevent the publication of articles in social media that denigrates people of high positions” and to develop a mechanism to remove such people from social media (Citizen.lk). If this measure goes through, it will have a devastating effect on freedom of expression and of information. It will enable the government to draw a roseate veil over ugly facts, fudge disobliging figures, and present to the people the illusion of an almost-utopia. The government will also be able to accuse its critics of any crime, while denying them the opportunity of saying a word in their defence. 

The Rajapaksa government is intent on establishing more coal power plants, despite the disastrous consequences of (the always-breaking-down) Kerawalapitiya. Probably no one but Chinese would want to build them. China is now trying to move away from coal in its own land, but being the world’s largest coal producer, it needs markets for its coal. Getting its financial dependents addicted to coal would therefore make economic sense. In the meantime, Russia has offered to build a nuclear power plant in Sri Lanka. It is not hard to see not just the Rajapaksas, but politicians of every stripe, jumping at the offer. Anyone raising questions, assuming someone does, would be accused of obstructing development, of trying to harm the nation. 

When the tax cuts came, when the loan moratorium was imposed, tax experts and bankers expressed concerns about possible fallout, but always anonymously or in private. Three months into Gotabaya Rajapaksa presidency, the practice of speaking truth to power is almost dead. If the government gains its two-thirds, and the planned clampdown on the internet goes through, the suppression of dissent would become near total. What will remain is the single official narrative about a rapidly developing land and a happy people, until disaster strikes. And disaster will strike, because crimes and errors grow in darkness until they burst forth as crises to claim their wages.

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