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Tuesday, 29 November 2016 00:01 - - {{hitsCtrl.values.hits}}
By Devaka Gunawardena
When economic experts in Sri Lanka talk about policymaking, especially the proposed Budget, they often call for market-led policies that they claim will promote “growth” and boost “investor confidence”. The vast majority of the country’s citizens are either unaware or excluded from these conversations. As a result, the experts shape the economic direction of the country with little critical scrutiny or oversight from the public. Far from being a conspiracy, however, this is the normal way in which policy is designed and implemented in almost all countries around the world.
Nevertheless, economic policymaking in Sri Lanka should be open to a much broader debate. We should analyse the struggles people face in order to sustain their livelihoods. Here we reach another impasse. There is apathy toward engaging in economic debates, combined with the inherent challenges of organising and mobilising.
Many people struggle with the day-to-day question of how to survive. If major problems do arise, activists and intellectuals tend to concentrate on one or two aspects such as the cost of living index or individual cases of political corruption. We also need to look, however, at the big picture of the economy and the Government’s spending priorities.
This family in Thotalanga struggles to make ends meet on a daily basis. Economic policymaking in Sri Lanka should be open to a much broader debate. We should analyse the struggles people face in order to sustain their livelihoods – Pic by Shehan Gunasekara
The capitalist system has demonstrated resilience in the face of economic and financial crisis around the world because it compartmentalises people’s frustrations. A person might see his or her economic challenges as an individual issue, such as an increase in the cost of fertiliser if they are a farmer, rather than part of a whole system. Still, there is always the possibility that the bubble will burst.
If the public feels the effects of a crisis, then there are political repercussions. Across the US and Europe, for example, people are taking to the streets or voting in leaders who promise, for good or bad, to break the system. They realise that the Government’s policies have long aided bankers and economic elites. These policies ignored the needs of the vast majority of people, and resulted in precarious work. Many have little prospect to achieve the middle class life they had been promised.
In contrast, in Sri Lanka, the vast majority, from export industry workers to farmers to pensioners, are encouraged to lower their expectations. They are told to bear the burden and accept the Government’s claim that the country needs to “develop” in order to achieve better material living standards for all. Working people and their representatives focus on survival. They become preoccupied with particular demands such as addressing the cost of living.
Still, the bigger question remains: when are people going to decide the economic burden is too much to bear, and demand an alternative to the current system?
Those who engage in the debate should think about ways to shift the discourse. We must create the conceptual space for an alternative. This includes policy areas such as budget-making. To accomplish this goal, we must critique the apparently irresistible belief that the Government’s only role is to get out of the way for private business.
This logic is reflected in this year’s decline in expenditures on public services, resulting in an “austerity budget,” in addition to increased allocations for Public-Private Partnerships. Economic experts say that the budget should support investors. They argue that the emphasis on private investment will generate employment for the masses. The alternative, they say, is an entrenched bureaucracy, sucking up public funds and resulting in stagnation.
We need to question this dogma. Not only has it been proven wrong in practice that growth for growth’s sake is good for society, the market itself is an indirect and inefficient mechanism for allocating resources. Economists frequently talk about “scarcity,” but much of the scarcity in society is engendered by the market. We need a better system of distribution. The question then is, how can the expert line of thinking and the policies it inspires, such as those proposed in the austerity budget, be challenged? How do we keep ordinary people’s needs in mind when allocating resources?
The main issue we need to tackle is the assumption that policy making, including the budget, should first and foremost be concerned with market relations of exchange. As Marx pointed out long ago, the exchange of goods on the market hides the real process that determines how people survive, which is production. The Belgian economist Ernest Mandel took forward this basic idea. He argued that we have a choice between either indirect (market) or direct (planning) mechanisms for allocating resources.
In the case of budget-making, we can observe the process through which the Government makes conscious decisions about how taxes and other revenue collected should be spent on public services. The greater the role ordinary people and their representative organisations such as trade unions have in determining the budget, the better an idea we get of what an alternative society could actually look like.
The problem is, the Government obtains most of its revenue, over 80%, by burdening everyone with the same indirect taxes, such as VAT. Corporations and rich individuals are taxed less in Sri Lanka than in many other countries. While aware of the decline in Government expenditure-to-GDP ratio, now barely above fifteen percent, economic experts still argue that investors need “stability” and “fiscal consolidation.” These terms imply generating incentives for the wealthy, cutting spending or reallocating it to private enterprises.
There is an added compulsion behind this year’s Budget because of the talk about a debt crisis. Still, the same basic assumption holds true throughout any given year. The question for us should be not so much whether the Government should spend, but how and in which areas. Experts pretend to be above “populist” demands such as price controls for essential goods. They are more than willing, however, to promote subsidies for large businesses such as Public-Private Partnerships.
When the Government and experts talk about cutting social spending or reallocating expenditure to support private investment, they rely on the market model of allocation. The vast majority of people survive, however, according to the public services to which they have access, along with wages and other income.
Assuming that if corporations earn higher profits they will provide accessible services and create more jobs is an indirect and inefficient way of addressing people’s needs. Capital is often invested in sectors with the highest rates of profit, such as finance. This process does not necessarily generate cheap services or employment. It may even actively harm the whole society in the event of a financial crisis based on speculation and short-term capital flight.
In addition to cutting public services, the consensus view among experts is that Sri Lanka needs to boost its exports. The argument is that the country should be further integrated into the global market, which will enable people to have access to cheaper, more reliable goods. In order to achieve this goal, experts argue that Sri Lanka must “attract” Foreign Direct Investment. The logic is circular: boost investor confidence by allocating incentives to investors. Instead of this roundabout process, why doesn’t the Government just invest in production here? There is no good answer.
The main argument experts make is that import substitution, for example, did not work in a poor global environment during the 1970s. Meanwhile, they ignore the fact that State-sponsored development was critical to the success of many East Asian industries. They do not explain why one example outweighs hundreds of others. The Sri Lanka Association for Political Economy recently came out with a statement noting that calling for trade liberalisation makes no sense without an industrial policy. The problem, however, is that the market has become our common sense. It limits our vision of an alternative.
Ultimately, we need to consciously turn to planning in areas such as the budget if all Sri Lankans are going to have access to real opportunities. This process is two-fold: increasing revenue from corporations and the richest individuals to pay for better public services for all, and investing in production in the country so that people have a greater say in economic decisions, including strengthening labour rights. Of course, capitalists and their allies in Government will likely oppose these measures. The political question in the future may very well be whether the State itself contains inherent limits to creating a better system.
For now, experts use the example of the regime of Sirimavo Bandaranaike during the 1970s to beat market critics into submission. They cursorily mention long queues for basic goods and inefficient state-run enterprises. Yet if the pictures from austerity-hit Greece demonstrate anything, the market can be just as much if not more inefficient than even indirect fixes, such as price controls and state management of businesses.
The question remains whether we can directly allocate resources in society. The more free time people have, liberated from mundane tasks or at least enjoying all of the necessities they need to survive, the greater attention they can give to collectively solving problems in society; as opposed to leaving the answers up to a narrow group of experts.
We need to become aware of the inherent class bias when experts discuss economics. We should create spaces and organisations where more people will have the opportunity to bring their relevant life experiences, to think of ways these can become the basis for universal demands. First and foremost, we have to generate enthusiasm to initiate this process.
Unionists, researchers, activists, intellectuals, and others must become aware that economic debates on issues such as the budget are not just abstract discussions of statistical indicators. They are reflected in the day-to-day challenges facing the vast majority of this country’s citizens. In order to expand the debate, we can only criticise the experts and politicians so much. It’s now up to the rest of us to learn the concepts and engage.
