Crowding Out Or Bailing Out?
Dhanusha Pathirana
Impoverishment Of Masses And Their Alienation – I
Economists since recently apart from the ones at the Central Bank heed to the view that large scale government spending financed by even larger public borrowings which depletes the capital available for the private sector is at the heart of Sri Lanka’s economic contradictions. They believe its impact permeates over all sectors of the economy with overwhelming influence and ultimately leads to deterioration of external competitiveness, balance of trade deficits, rise in internal price levels, higher domestic interest rates, etc., and in the end towards mass impoverishment. The process is called the “crowding out effect”. Economists such as Harsha De Silva, R. M. B. Senanayake and W. A. Wijewardene in addition to this ‘effect’ have also protested about the inaccuracy of figures 
published by the Central Bank on the growth rate of the economy, the foreign exchange reserves position etc., But nevertheless haven’t uttered a word about how the economy is actually functioning. For instance, let the Sri Lankan economy grow 30% and suppose this time CBSL got their facts right while that of say the advanced capitalist economies grew 1/2 percent. Does this mean that Sri Lanka is closing in with them? Are the Germans for instance growing in the same lines as we do such as imports and domestic trade, tourist hotels, casinos, tea, garments, electronic assembly, massage parlours, condominiums, finance and so forth despite their rate of growth being close to zero? Is it at least remotely rational to consider the growth rate of Sri Lanka as a yardstick of development worth mentioning, regardless of the accuracy of the facts which economists now question? We shall dwell on this point later, however it has been commented on in detail in our earlier reviews. (see )
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