The 65,000 Housing Question: Disaster capitalism arrives in Jaffna

ArcelorMittal Headquarters in Luxembourg City

by Rajan Philips

Let us call a cage, a cage, and not a steely home in a palmyrah grove! The controversial US$ 1 billion contract with ArcelorMittal to build 65,000 steel houses in the north smacks of all the vices of corrupt global capitalism and none of the virtues of a free market economy. ArcelorMittal is the world’s largest steel producer, the outcome of the 2006 takeover of Arcelor (itself a conglomerate of Spanish, French and Luxembourg companies) by India’s Mittal Steel, and subsequent gobbling up of steel companies in different parts of the world. Why would the world’s largest steel company be interested in building houses in Jaffna? One billion US dollars are not a small amount even for ArcelorMittal with annual revenue in excess of 100 billion dollars. But it is a huge amount for a Sri Lankan contract and an astounding amount for the people of Jaffna to pay for 65,000 houses. And what they will be getting is nothing like the simple ‘stone houses’ that they were used to – with modest gardens sealed with a privacy fence, open verandahs, through ventilation and raised foundations to keep the monsoon floodwaters away.

Prof. Priyan Dias and Dr. Ranjika Halwatura of the University of Moratuwa, and Architect Varuna de Silva have done great public service in drawing attention to the structural and architectural flaws, and the inappropriateness of the proposed houses to the climate and living circumstances of Jaffna. And they are not coming cheap. Each steel house of 550 square feet will cost Rs 2.1 million, compared to Rs 550,000 that was the cost of a house for the 50,000 masonry houses built under the Indian government programme. At nearly four times the cost, the steel house will have half the life span of the masonry house. The citizens of Jaffna do not like these houses and community organizations in Jaffna and elsewhere have expressed their opposition to them. For once, the Northern Province Chief Minister and the TNA leadership are on the same page. They are both opposed to the one billion dollar, 65,000-steel-house boondoggle of the yahapalanaya government. The TNA Leader, R. Sampanthan, has written a polite letter to the President and the Prime Minister, but raising pertinent questions concerning the tender process, the life span and suitability of the proposed habitat structure, the exorbitant cost, and the likely non-involvement of local labour in the construction of the steel habitats. Mr. Sampanthan is pleading with both the President and the Prime Minister to undertake a review of the proposed initiative before it is too late. Will the government listen? Has it learnt nothing from and forgotten everything about the boondoggles of the previous government?

The Ministry of three R’s – Rehabilitation, Resettlement and Prison Reform (one must wonder what the portfolio connection between the first two ‘R’s and Prison Reform is), that seems to be sponsoring the project, and perhaps the contract, has provided only unconvincing explanations. One, the advantage of time: 65,000 steel houses can be built in four years, but apparently it would take 10-15 years to build them as masonry houses. The argument doesn’t hold water because it is not impossible to organize the community to build regular houses at a much faster rate. Moreover, with traditional economic activities like farming and fishing seriously disrupted, involving the local people in housing construction would be both socially meaningful and economically productive. The second reason touted in favour of the steel-house initiative is that metal houses will not require scarce materials such as timber and sand that are integral ingredients for masonry houses. This argument is even worse, because steel is not something you can peel off palmyrah trees in the plains of Jaffna, despite the karpaha fecundity of the Borassus genus! For the amount of $1 billion that is going to be used to import prefabricated metal, you can import more than enough timber if necessary. And it will not take quarries of sand to build modest houses like what you will need to fill the waterhole for the Port City.

Late arrival of Disaster Capitalism

From where and how did this contract materialise for Jaffna? That is the one billion dollar question. It has been reported that the deal has been cooking for nearly a year – from August 2015. God only knows if the gestation had started even earlier – before January 2015. Or, to permit myself a not unreasonable speculation, could there be a connection between this contract and the mystery investor from Belgium, not far from Luxembourg, who not long ago happened to ‘park’ one billion dollars in Lanka’s dollar deposits to help the government defend the national currency? Who knows? When governments do not come clean, they bring speculations in their wake. But it would not be speculation on my part to suggest that the ArcelorMittal deal is an instance of disaster capitalism arriving late in Jaffna.

Naomi Klein, Canadian author and anti-globalization activist, wrote a whole book in 2007 called “The Shock Doctrine” to describe what she called “the rise of Disaster Capitalism” in the world. Her theory is about the “shock doctrine” that captains of industry in connivance with their governments have apparently employed to push through otherwise unpopular economic measures in countries and among peoples devastated by war, terrorist attacks, or natural disasters. Ms. Klein provides chapters of examples from the aftermaths of American invasion of Iraq, the tsunami sweep of Southeast Asia, and Hurricane Katrina in the jazz heart of America. One chapter is devoted to the post-tsunami transformation of Arugam Bay on Lanka’s east coast pitting the livelihood interests of the local population against the demands for surfing, tourism and military gentrification. Ms. Klein sweeps wide, assembles several dots, and attempts to connect them to explain the explosion of current global capitalism – from the (Milton) Freidman school of economics in Chicago, to the Pinochet coup in Chile, the Falkland War, the collapse of the Soviet Union, the Asian Financial crisis, to the war in Iraq and the Asian tsunami. Her book was published just before the great recession hit the western financial world. Whether Naomi Klein succeeded in providing a plausible hypothesis, let alone a theory, is debatable. But there is no debate about the globalized infrastructure of finance capital and industrial production and its multi-pronged reach everywhere. In such a situation, it is reasonable to suggest – to paraphrase the infamous words of Donald Rumsfeld, “stuff happens.” Yes, economic and investment stuff can happen anywhere. And stuff, like the ArcelorMittal contract for Jaffna.

It is not that steel houses in Jaffna would ever have been discussed in the Luxembourg Boardroom of ArcelorMittal, although the giant steelmaker has not been totally innocent of shady deals and unfulfilled contracts. The company was once convicted and fined by the European Union for price fixing in collusion with 16 other steel makers. More recently, it reneged on a US$ 2.2 billion contract in Senegal, was sued by the government of Senegal, and ended up paying a paltry $150 million damages to the African country. Nor is it that, ArcelorMittal is targeting Sri Lanka as part of its efforts to get out of the deep slump that the global steel industry is now going through. The human toll of that slump has been particularly devastating in China which accounts for six of the world’s ten largest steel manufacturers. The way stuff happens is through simple human agency primarily involving aggressive global sales pushers and eager local commission agents. And the global infrastructure is there to make deals happen.

There is nothing wrong with stuff happening globally, so long as the governments of countries at the receiving end of globalization prioritize their people’s interests and put in place checks and balances to protect and promote those interests. If anything, the late 20th century has demonstrated that the stuff happening in market economies is more efficient and environmentally friendly than what happened in planned economies. But market economies cannot be given a free ride without risking externalities and the sufferings that come with them, not to mention the corruption that go with them. Everything, and obviously so, that is non-traditional in Sri Lanka’s economic production has come from abroad. Beginning with the colonial plantation industry and the infrastructure it spawned, the island has been the recipient of industrial corporations from the Soviet Union, dams and hydro-power stations from the West and Japan, and more recently ports and power plants from China, highways from Japan and South Korea, railway from India, and a leaking hydro-power tunnel from Iran.

Without discounting the exploitative effects of plantation capitalism, it is fair to say that the infrastructure components that came with it – the road network, the railway, the tunnels and the port, did not only pay their way through, but have also stood the test of time. The ARs and the FRs of government bureaucracy that were cultivated alongside made sure that stuff happened properly. The dismantling began after 1977, some would argue it began much earlier, but my point is primarily in regard to the technical oversight of and tender procedures for public infrastructure projects and government contracts. The housing projects after 1977 broke every AR and FR applicable at that time. Not that blunders did not happen earlier, such as in the import of Rumanian rail coaches, but blunders after 1977, and more particularly after 2005, became more the rule than the exception.

Readers familiar with this subject would appreciate that one could go on at length on this to fill a whole book. But I have neither the luxury of time nor the Sunday space for it. What is supremely frustrating is that informed professionals and the general public expected the yahapalanaya government to start doing stuff differently. We expected too much, and we are not protesting enough at the cavalier betrayals of the Sirisena-Wickremasinghe government. This, I submit, is the background and the context to the proposed ArcelorMittal contract for Jaffna. Going by past stubbornness, the government cannot be expected to change its mind or course. But there’s a new rub. How far will the TNA go with it? Can the people of Jaffna be sold on the deal that steel houses are a firm footing for national reconciliation?

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