GOTA’S ECONOMIC WAR?

A serious contender for the next President to be, Gotabaya Rajapaksa presents a new alternative economic model. Is it any different from what we have seen so far?

“An economy grows not on the research data presented by economists; but on the contribution of masses who work at factories and fields for eight hours.”
– Gotabaya Rajapaksa (at Viyath Maga)

I am a business writer, not a political one. Echelon is a business magazine, not a political one. Your interests, as far as I know, are more business than political oriented. Still, there are instances when we all have to step out of our cocoons and look around. Happenings in political spheres are sometimes so enormous that they have a direct impact on business. Gotabaya Rajapaksa’s much publicized speech at the Viyath Maga (The Path of Intellectuals) Annual Convention in May was, I guess, one such event that screams for our attention.

Retired Lieutenant Colonel Nandasena Gotabaya Rajapaksa needs no introduction. His profound roles in ending the 30-year-old civil conflict and transforming Colombo are legendary. They are recognised with respect even by his opponents. He held no political office. But as a senior bureaucrat he was once more authoritative than perhaps half of the then cabinet combined. Calling him the second most powerful individual in the land once may be an exaggeration, but his outstanding popularity, at least in the south, is undeniable. Now his name appears first among the shortlisted contestants of the largest monolithic political force for the 2020 presidential election. Let’s not kid ourselves. We may be discussing the next President of Sri Lanka. That makes his utterances comment-worthy.

Rajapaksa’s Viyath Maga speech was brief, and to the point. Done without presentation slides, he took only a little more than 20 minutes. It was as explicit as a political speech could be. Sadly, the interpretations that followed were misleading. Many saw it as ‘neo-liberal.’ Yes, there were a certain amount of neo-liberal aspects. There was also a radical deviation from the familiar populist policies. Still, it wasn’t neo-liberalism that Rajapaksa preached. Minister Malik Samarawickrama’s claims that the speech was just a photocopy of the current economic programme too should be taken with a pinch of salt. While the approaches weren’t chalk and cheese, Rajapaksa used at least few words that distinctly demarcated the two. Surprisingly, nobody seems to have noted. Instead, they have pigeonholed it. By their superficial analysis, the political pundits have deprived this speech of the prominence it really deserved.

To start, the system Rajapaksa proposed was said to be a ‘Social Market Economy,’ a neo-liberal compromise. No. The term he used was: ‘Socialist Market Economy’(please note the word ‘samajavadi’ in the speech.) For those who are not familiar, this was a term that became popular in the mid-1980s following the economic reforms in China under Chairman Deng Xiaoping, though the official use was much later during the 14th National Congress of the Communist Party of China in 1992. A ‘socialist market system’ is based on the predominance of public ownership and state-owned enterprises within a market economy. It is the same system described by western authors as ‘state capitalism.’ Following its implementation, this economic system has supplemented (and somewhat replaced) the centrally planned economy in the People’s Republic of China, with high growth rates in GDP. Within this model, privately-owned enterprises have become a major component of the economic system alongside the central state-owned enterprises and collective/township village enterprises. This was the model Rajapaksa referred to. Such a system has never been fully practiced in Sri Lanka so far, though there were attempts during the last few years of the previous government. Perhaps this comes as a logical continuation.

To start, the system Rajapaksa proposed was said to be a ‘Social Market Economy,’ a neoliberal compromise. No. The term he used was: ‘Socialist Market Economy’(please note the word ‘samajavadi ’ in the speech.)

Rajapaksa takes China seriously. He predicts China surpassing the US economy by twofold in 2030. He sees the world’s economic focus returning back to Asia with India, Japan and Indonesia becoming the third to fifth largest economies by then. Is Sri Lanka ready for taking on the new challenges in this environment? Development (he perhaps paraphrases Chairman Deng’s very words) is nothing but the continuous and rapid increase in GDP. The achievement, he says, will come through ‘effective and productive strategies.’ He admits that openness is important, but not at the cost of losing the country’s sovereignty and culture. After a few political remarks, which we can safely ignore, he emphasizes the need to change the current economic structure. He talks about former achievements of the same model. He could have spoken in the singular. While Vietnam too follows more or less the same model, it isn’t strictly a developed nation. China is so far the only success story. But I guess that’s a success story big enough.

Some remarks of Rajapaksa could have come from a hardcore neo-liberalist. He correctly identifies (1) we are not adding value to our imports; (2) absence of a knowledge-based economy; (3) our inability to fully exploit skilled labour; (4) transient nature of the global economy; (5) the significant role played by the private sector including SMEs; (6) the need to remove the regulatory barriers in industry; (7) the need to introduce more Free Trade Zones; (8) the need for education reforms; (9) unprecedented developments in science and technology elsewhere but not in Sri Lanka; and (10) the need for R&D. Don’t we all agree? Robotics, artificial intelligence, big data, biotechnology, Internet-based business, technical Innovations and smart society. These are some of the buzzwords he uses. They may appear fresh to many in that partially politically-oriented Viyath Maga audience, but certainly not to seasoned professionals in Colombo’s business circles. These are the terms we hear repeatedly at every business conference. Rajapaksa concludes by emphasizing the need for strategic industries in place of the traditional. Do I hear neo-liberals clap? Minister Samarawickrama’s anxiety does not surprise me. At this point it looks more like a replicate of the current policies.

Interestingly, just like our own neo-liberals, Rajapaksa fails to demonstrate how we can overcome the barricades on the path to this end. A knowledge-based economy needs knowledge workers and not non-skilled or low-skilled labour. Sadly, our present supply is the reverse. How do we improve the knowledge worker numbers? Does he suggest opening of job markets and bringing them from India or China (the relatively easier path) or nurturing them locally (can be a cumbersome and time-consuming process that needs considerable investment)? Does he propose more free trade pacts with Asian neighbours (opposed by others in his own camp)? Then what do we do with the millions of our unskilled workers? Will China offer them job opportunities en masse? I would have liked more precise answers, but this is not an area usually treaded by local politicians. Perhaps it is unfair to expect all the answers at this stage.

Then, in my opinion, Rajapaksa makes the weakest point in his entire speech by stressing the importance of agriculture. He may have his own political reasons but this thinking,  coming from the days of Prime Minister D. S. Senanayake, is hardly apt today. Why not at least talk about commercially viable agricultural products rather than traditional ones? And where exactly does agriculture fit in Chairman Deng’s economic model?

What earns my respect most in the entire speech: Rajapaksa underlining the need for profitable state ventures. Such candid remarks are rare to come from local politicians. Lossmaking state ventures are, as a previous minister has quipped, the biggest monsters in our economy. SriLankan Airlines, Ceylon Electricity Board, Water Board, Sri Lanka Railways and Ceylon Transport Board are well known for passing their losses to the treasury though many of them operate in monopolistic markets. The losses made by state institutions are also a key reason for the increasing public debt, another concern raised by Rajapaksa. They are too big to be swept under the carpet particularly in a more state-centric model. It is great that we have a leader who publicly admits this harsh fact and guarantees his commitment. The materialization, as happened in Singapore, is yet to be seen.

What earns my respect most in the entire speech: Rajapaksa underlining the need for profitable state ventures. Such candid remarks are rare to come from local politicians

Winding up, the four characteristics we all love any economic system to guarantee: (1) Individual freedom; (2) Individual economic freedom; (3) Rule of law; and (4) Justice. How far will the proposed Socialist Market Economy ensure these? We can only look for the answer in China. Despite its recent economic achievements, China is least known for democracy and human rights. Human rights groups have publicized issues in China that they consider the government to be mishandling, including the death penalty; one-child policy (now abolished); the political and legal status of Tibet; and neglect of freedom of the press in mainland China. Other areas of concern include the lack of legal recognition of human rights; absence of an independent judiciary, rule of law, and due process; the near nonexistence of worker’s rights; the absence of independent labour unions; allegations of discrimination against rural workers and ethnic minorities as well as the lack of religious freedom. It would be unfair to correlate all these negatives to its economic system. What we wish should be a system free from these malaises, irrespective of its economic efficiency. Sri Lanka, particularly in the post-conflict period, has now matured adequately to move forward balancing its economic development with human rights and freedoms. So I see no serious concerns in a so-called socialist market system clashing head-on-head with individual freedoms or rule of law and justice.

My last and perhaps the biggest concern is how a pro-China economic system works in the middle of South Asia. Given its supreme regional political power and its position as a global economic giant, how would India react to a bright red dot in its backyard? Will the big brother just sit and watch or insist on a more balanced approach? These are questions to be answered at future Viyath Maga seminars.