National Prosperity Contradicting Principles National Productivity Vs Free Economy

By Ananda Ariyarathne-2018-01-25

The ability of a citizen to acquire anything with ease within the commercial environment where he or she lives, depends on the financial ability on one hand, while on the other hand, the products and services desired are easily available at costs affordable, make it a prosperous society. Prosperity is a status that can vary from one society to the other as the wants also vary in their importance, relatively.
Therefore, the 'National Prosperity Level' of a country shall depend on the availability of goods and services and their affordability in that particular country. It does not end there as it ultimately depends on the 'buying power' of citizens. That in turn shall depend on the 'Real Per Capita Income' in that country and not the 'Per Capita Income' that so-called economists who hide behind such 'Arithmetic Magic Shows' for the simple reason that it shall be only a few who can survive.

National Productivity

National inputs and outputs within a specific period shall give us an idea about achievements only if we have specific goals or targets set according to the ideally recognized for the optimization capacity. In the absence of such to be used as 'guidelines,' the 'National Productivity' is reduced only to its meaning in English.

The resources of a nation have to be identified first and it is the only way to assess how far a country can benefit by those resources. Natural Resources are what have been gifted by 'Nature' and they shall remain useless until such time 'Human Resources' have become empowered and have gained the capacity required to mobilize man-made resources to convert all the other resources to become ultimate resources with a commercial value that would enhance the wellbeing of people in general.
Although knowledge about all types of resources is there, the plans for commercial utilization are yet to come. As the utilization of any such resources so far has been very sporadic and not seriously analyzed, we are not in a position to assess whether such utilizations have given us the best benefits. As a result, the contributions that could have come from the resources already utilized or are being utilized, cannot be identified in order to assess whether they have a direct bearing over the citizens of this country.

While we can easily identify areas where the citizens of this country are not benefited, we can see that there are no indications about disciplined approaches to ensure better benefits to citizens. One such great resource we have is the 'Mineral Sands,' and its importance could be guessed by the establishment of a State Sector Corporation to promote development.

Although it was a clear-cut example, it has now become only a name while private sector operators have started exploiting it in a big way. The allegations that need verification is that some private sector operators are exporting 'sand' to Singapore for building construction, and also that 'mineral sand' is being smuggled out. At the same time, although it attracted attention some years back, Petroleum Resources in the Mannar Basin seem to have been forgotten.

Does it mean that India has been allowed to make the best use of that while Sri Lankan Authorities have decided to play dumb? We all know petroleum and petroleum products could turn Sri Lanka's whole economy into a better position. Such potential would have generated enough wealth for our nation to embark on better and more effective projects but ironically they do not seem to exist even.
As the quality of human resources in Sri Lanka has not been effectively understood and as ineffective attempts have been made to plan projects that could bring both direct as well as indirect benefits, the position that we have no proper basis to have our goals set is further proved.

As a result, whatever is achieved has remained naturally insignificant. The main reason for that is the absence of an effective 'Framework of National Strategic Planning.' That has ended up reducing line agencies including ministries, departments as well as competent authorities to end up as facilitators to attract 'Foreign Investments' and as regulating offices to provide the needed encouragement to foreign investors who would be reaping the benefits.

Free Economy

If a careful study is done of the period after 1977, the turning point in national productivity, we shall see enough evidence about the deterioration in the whole economy. It had started negatively affecting all the productive sectors in the Sri Lankan economy.

Misunderstood open economic policies have affected the general caution our governments had in encouraging and conserving foreign exchange. The efforts made in generating valuable foreign exchange and preserving what was earned through local productions that developed based on 'Import Substitution' went out of control, when it became possible for anyone to import anything other than high security items.

All those local entrepreneurs who mobilized local resources and provided even employment to considerable numbers started facing stiff competition with the better quality products imported from other countries. That was a very negative development that took place destroying local entrepreneurs while indirectly supporting and nourishing similar entrepreneurs in a country like India, which occupied easily the opportunity and in place of a 'manufacturing' process, trading became more effective in capturing the consumer markets.

If checked with the Industrial Development Board, enough evidence can be collected to show how many small industrial projects just collapsed and more and more opportunities for local human resources to be benefited, slipped by.

The emergence of a new trading class that opted to promote imported products consolidated the downward and negative trend that started slowly encroaching into the national industrial and agricultural capacity of this country.

And the silliest position experienced is the meaningless bragging and promises about the development of the Sri Lankan Economy. How can such be materialized?

The free economy allowed enough artificial fertilizers and pesticides into the local agricultural scene. The intrusions by the seed suppliers captured virtually all the cash crops except for traditional and indigenous spices.

Destructive Import policies

Especially in the agricultural sector, the largest impact on the local scene can be seen. The government that grants subsidies by offering guaranteed prices ensure rice farmers are encouraged. The artificially increased prices lift market prices for rice and thus compel the consumer to pay more for rice needs and then when the prices rise, the next measure is to import rice from India to bring down local consumer market prices.

We are concerned about the necessity to raise national prosperity levels but the rice example alone shows how baseless the government policy that encourages it, is. It has been observed that rice farmers in Sri Lanka are approximately about 30 % and that means that the 'non rice farmers' are around 70%. That means, now 70% of the consumers have to pay more for their rice needs.
As the raised prices shall never be brought down, look at the number of other negative developments that would take place.

It takes only a very small period before rice farmers fall back to the same position where they cannot meet their requirements due to the increases in other prices. One of the unavoidable developments is some farmers giving up rice cultivation as it becomes cheaper for them to purchase imported rice in the open market. That drags farm workers into a difficult corner. They lose their opportunity in farm work and not having other opportunities they opt to look for livelihood in other areas and that reduces the number of farm workers in rural areas where rice is cultivated. The chain reaction is that rice land owners cannot find the farm labour they need, and the result is more paddy lands going fallow.

This affects the others who make a living in the agricultural field. Due to the high cost of production the onion farmers have to raise their prices and the free economic process does not come to save onion farmers. In order to control the consumer markets, onions are imported from India. Onion farmers are hit from two angles and the consumers gets hit from all the angles.

Although 'chillies' are a very safe cash crop, it is also affected by unrealistic policies, topped by 'Non Interfering Free Economic Policies,' a false picture is created. It is a produce that can be preserved if allowed to ripen into red chillies which can be dried and stored safely.

Consider the three examples and note the impact all those crops can have on the consumer market, and the desperate remedial action on the part of the government is to intervene and the end result is the 'Out-Flowing Foreign Exchange. Imagine how negative it can become when the export oriented activities had come down on the contrary.

End of the world?

Yes, if it continues like this. But, there is no barrier for new thinking.

As a country, we must wake up from this silly dream of being open. Be open only where it is necessary. That does not mean becoming against free economic principles. The principles of private enterprises shall continue and even taxation can become investment friendly. Tax rebates and concessions can be granted to all private sector companies which are interested in encouraging import substitution and export promotion activities.

Even the foreign investors can be encouraged in market related activities and in food processing.
Such a pro-active programme can generate more local employment and that means more effective utilization of human resources. The possible participation of Sri Lankan companies in international marketing can contribute immensely to development and national prosperity.

It is in the hands of the government to start reforming all the line agencies, especially in general policy making and development planning that is the only way to bring an end to the existing kind of contradictory principles in planning and implementing them.

What we are going through is a clear case of ignorance in logical application of policies to make use of the available resources.

(Writer is a Graduate from the University of Ceylon, Peradeniya and reads for an MBA at the PIM, is a Management Consultant, specialized in 'sick unit rehabilitation' has four books already to his credit, and three more being readied for publishing, serves as a Visiting Lecturer and an Examiner at SLIDA)