The arguments in the media, including those by the UNP, that the current economic woes are the result of waste and corruption, are very weak. The situation is much more serious.The problem here is not that policy is being implemented inefficiently, or that corruption is feeding into expenditure.
The failure lies with the policies themselves, and the perspective of Mahinda Chinthanaya. Many of the economists who are critical of the government now, for the balance of payments problems, are in favour of its economic policies. In fact they believe that the government has not gone far enough with liberalization.
Indeed, they believe that the neo liberal prescription of the IMF, World Bank and other institutions should have been taken much earlier. But the problem lies with the neo liberal economics of global capitalism. Mainstream neoclassical economists, who provide legitimacy to neoliberal policies and ideology, are the culprits.
They disregard the economic life of the people, and focus on an abstract economic equilibrium in the “long run” which they claim will solve the crisis in the market. The lives of the people are sacrificed for this grand future. If they struggle, brutal state terror will be used against them. In the meantime, sections of the national elite and global financiers continue to accumulate wealth during the prolonged crisis, while the larger population is dispossessed and impoverished.
Size of the economy
Because of its size and structure, the Lankan economy is particularly susceptible to global market forces. This was true in 1953 and is more so today. The question is what steps the government took to reduce the impact of such forces on the economy, and particularly the economic lives of the people. Unfortunately, the Mahinda regime opened the floodgates for imperialist global market forces.
After the end of the war and beginning with the second term of Mahinda, neoliberal policies consisting of tax reform, trade liberalization and privatization were accelerated, creating an initial appearance of prosperity. Such neoliberal policies were encouraged by and earned the support of the IMF and international finance agencies.
The problems are the very same barriers that were brought down to invite finance capital which today are facilitating capital flight.
In November, Mahinda boasted in his Budget speech: “Despite global uncertainties, our country has been able to sustain an 8 percent growth momentum... our country enjoys a per capita income of US$ 2,800.” But what does the economic report card look like now? Devaluation, restriction on wages and over time, cuts in social welfare, subsidies and safeguards. So the terms on which the government has been assessing the economy have become meaningless.
The point is that with infrastructure development of this kind, high economic growth and per capita income become abstract economic data that mean little to the people’s economic lives. In the months ahead, Mahinda will increasingly be at the mercy of the IMF, who will demand greater cuts in subsidies and more burdens on the people. Mahinda will be compelled to use state terror on protests and demonstrations.
These are necessary consequences of neo liberal policies to open the economy. Corruption and wastage is only a part of it. And this is where the bourgeoisie economists who are critical of the government but subscribe to neo liberal policies, become indirect helpers of the corrupt oppressive regime.
This crisis is a necessary outcome of class conflict. Obviously these cost of living increases will hardly affect the elite. If we look at the fuel price hikes, the largest increase was for kerosene. This has devastated the fishing communities; where Northern fishing communities repressed for years by militarization have also decided to strike in solidarity with Southern fishing communities.
According to Census and Statistics data, 16% of the estate population and 14% of the rural population do not have electricity and use kerosene for lamp lighting. Furthermore, 15% of the urban population uses kerosene for cooking. Therefore, the most affected are the poorest. Workers both urban and plantation have come together to demand higher wages and compensations.
A positive sign has been the swift and defiant protests by the masses. VV protests of the opposition were accepted by the masses. In a moment, Mahinda’s economic programme of mega projects, beautifying cities and expanding the tourist industry have been exposed for what they are: Far removed from the daily economic concerns of ordinary people.
The widespread anger at the Mahinda regime expressed in VV protests is symbolic of a people coming together for their social and economic interests. When dissent and consciousness is raised by people protesting in the streets, it will open the door for a proper political expression. The protests must mount and confront the inevitable State terror and brutal repression, for that alone can change the disastrous Mahinda regime.