Economic liberty missing in Sri Lanka’s policy mix: Sally

COLOMBO (EconomyNext) – Sri Lanka has seen a reduction in ethnic chauvinism, political repression, a re-balanced foreign policy since elections in January but economic liberties have to improve to allow the country to progress, a top economist has said.

The last 10 years saw a renewed illiberalism in economics, politics, ethnic chauvinism and another bias towards China in foreign policy, Razeen Sally, Associate Professor at the Lee Kwan Yew School of Public Policy at the National University of Singapore.

“Since the election I think we have seen a welcome reversal in three aspects of policy; more political liberalism, a re-balanced foreign policy, at least the beginnings thereof, and a re-balanced attitude towards minorities, at least the beginnings there of,” he said.

“But we haven’t seen in that quartet, is a move back to economic liberalism. If anything we have seen more illiberalism, since then, in this in-between period.”

Sri Lanka had presidential elections in January, and parliamentary elections are expected later this year.

China catch me if you canSally was addressing a meeting of Sri Lanka’s Bastiat Society, about capitalism in Asia. The Society is named after a French liberal philosopher and economist, which is engaged in improving economic literacy

“And as a classical liberal one would hope, beyond the election, that in addition to further movements in those other aspects of that quartet that we will see – to round it up and complete it – a decisive shift to economic liberalism,” Sally said.

His comments came as the new administration slammed retrospective taxes, almost doubling the income tax rate for some large firms and price controls were slapped on a series of small enterprises including hopper makers.

Meanwhile legislation has been brought not just to set a minimum wage (at a low enough level which may some say may not kill low wage businesses and therefor jobs, or drive them into underground sweatshops as it had done in the US) but also increments.

Sally said despite bouts towards more liberal policies from time to time, the policy quartet had been ingrained in the country for a long time after independence, with weak macro-economic management (high inflation and currency depreciation) thrown in to the mix.

From independence until 1956 the broadly the earlier system had continued.

“Then a radical about-turn in four respects,” Sally said. “Political illiberalism, ethnic chauvinism – Sinhala only – and in that lurch of course economic illiberalism.

“And to me – others would disagree – they are all of a piece. They are related.”

R M B Senanayake, a Sri Lankan economist said the country has been in the grip of socialist ideas for several decades and while there were enough criticism of free markets very few who knew the value or free markets or capitalism.

“This is where ideas matter,” Sally said. “These ideas are simply not out there in the policy space. And those arguments need to be made.”

“Because what we have had since independence is collectivist ideology brought to this country, by Govigama’s (high cast) with mansions in Colombo and Walauwa’s outstation.”

Sally said in a book by Harry Hopkins who came to Sri Lanka in the 1950s there was a chapter about what was then Ceylon, where he had interviewed Phillip Gunewardene, who had brought Marxism to Sri Lanka from Europe.

Gunewardene had reportedly told Hopkins that he grew up with the proverbial silver spoon and he had to go to the West to learn about the common man, and what to do about the common man.

Sally said the collectivism is no longer the preserve of the elites in Colombo but it has now been democratized to street thugs and the petit bourgeoisie.

Marx himself did not use the word ‘capitalism’, but ‘capital’ in Das Capital, Sally said.

The word capitalism was mentioned by Werner Sombart, of the German Historical Economics School.

“One of his books which is about a 100 years old now – I don’t think it was ever translated into English – has the word capitalism in the title (Der moderne Kapitalismus),” Sally said.

“Werner Sombart ended up as a Nazi in the 1930’s by the way”

Other liberal philosophers and economists had pointed out that ideas of the German historical school including that of self-sufficiency, involving the discrimination of foreign nationals automatically led to the discrimination against national minorities in Germany.

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