President Mahinda Rajapaksa Might Need A Lesson On Economics
Hema Senanayake
With due respect, I think President Mahinda Rajapaksa needs a lesson on economics. By profession he is a lawyer and we do not expect him to know everything about economics, but since he being the Commander in Chief in regard to the nation’s economy holding the portfolio of the Minister of Finance, the nation expects him to know a little bit about economics when he interpret economic policy. This is a challenge for any president who is not an economist by profession. When the former U.S. president Richard Nixon who was a lawyer too by profession decided to abolish the Breton Woods Agreement unilaterally, he convened a summit of his economic advisers at Camp David. He carefully listened to opposing views, perhaps which is the easiest way that anybody could study a subject that he or she is not familiar with. That was a huge economic decision with global impact. Nixon learned much about economics and once he said that “We all are Keynesians now”, that was to interpret that his administration was to abandon the formally favored less-interventionist-policies.
When President Mahinda Rajapaksa declared opened the Mattala Airport he said that previously Sri Lanka borrowed from foreign countries to “eat bread” but his administration is borrowing to build infrastructure like the Mattala Airport. When I heard it I thought it was just a slip of tongue of a political leader. But he reiterated the same point a few days ago when he declared opened the new Water-Break of the Colombo Harbor. This made me to think that his opinion is not just a slip of a tongue instead it is an economic theory and policy of the government.
In economic terms what the president tries to insist is that borrowing for consumption (to eat bread) is not what he is doing; he borrows to build infrastructure which is considered as investment. His economic conclusion might be that borrowing for consumption is bad and borrowing for so called investment is good. If this was his conviction then it appears to be right but unfortunately non-revenue generating expenditure made on infrastructure is economically considered as consumption – And moreover, the expenditure made on lost making commercial ventures with borrowed money is the worst form of consumption. Read More
