Economic Woes Of Post-Civil War Sri Lanka Are Due To Lack Of Neo-Liberalism: A Rejoinder To Ahilan Kadirgamar

By Muttukrishna Sarvananthan -September 8, 2013 

Dr. Muttukrishna Sarvananthan

Ahilan Kadirgamar terms the economic policies and programmes of the current regime in Sri Lanka “neoliberalism” in his polemical piece entitledSecond Wave of Neoliberalism: Financialisation and Crisis in Post-War Sri Lanka. He also indirectly suggests that the current “second wave of neoliberalism” is a continuation of the open economy policy introduced in 1977 by the then government and the latter coincided with the armed struggle of Tamils militants. The insinuation is that the armed struggle of the Tamil militants was caused or aggravated by the open economic policies pursued in 1977 onwards and that the current “second wave of neoliberalism” could also potentially renew a conflict between the state and the minority communities, especially the Muslim community which has become the target of a hate campaign by fringe but hyper active groups of deviant Buddhist clergy in the past year or so. 

Ahilan Kadirgamar is not the first one to suggest causation between open economic policies and the civil war in Sri Lanka. To my recollection it was Charles Abeysekera and Newton Gunasinghe (jointly) were the first ones to suggest such causation in 1987. It was followed by David Dunham and Sisira Jayasuriya in 2001. None of the foregoing convinces this author.

It is a misnomer and a figment to term the present economic regime neoliberal for the following reasons:

• Firstly, the regime of President Rajapaksa has not only avowed NOT to privatise any state-owned enterprises but gone further and reversed few major privatisations (total or partial) undertaken during the previous Kumaratunga government such as the privatisation of Air Lanka (partial privatisation to Emirates Airlines) and Ceylon Gas Company (total privatisation to Shell Gas Lanka). In addition, few privatisations such as the Sri Lanka Insurance Company and Lanka Marines were reversed on the order of the Supreme Court. Only the partial privatisation of Sri Lanka Telecom under the Kumaratunga regime survives renationalisation to date.
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• Discretion That Leads To Policy Inconsistency Is The Biggest Enemy Of A Central Banker

  

  By W.A Wijewardena -September 9, 2013 

  

  Dr. W.A. Wijewardena

  Principles of Central Banking 3

  Difference between a programmed computer and a central banker

  If one asks the question “who is the biggest enemy of a central banker?”, the answer plainly hits on the discretionary powers given to central bankers by the statutes under which central banks have been established. It is not because discretionary powers are unnecessary or harmful, but because those powers have been mishandled by those within as well as outside central banks.

  There is a fundamental difference between a programmed computer and a central banker. A programmed computer will work according to a set of established rules and will not deviate from them until its final target is achieved. In other words, there is no possibility for a programmed computer to abandon its mission midway through if the ground conditions become unfavourable to its work. Thus, the client of the programmed computer can depend on it for delivering the desired result, come rain or shine.
  

  Changing environment permits central bankers to change too

  A central banker too starts his work with a set of rules to guide him. For instance, if he is to bring inflation down to a certain value, he starts with a money supply target based on his best projection of the growth in the economy, how will the external sector look like and how the government will behave in the forthcoming period. However, whilst on this mission, he is given powers to deviate from the rules and pursue a mission completely different from his original mission. These powers known as the discretion of a central banker have made central bankers in the eyes of their clients totally unreliable and undependable. If there is anything that has caused central bankers to lose their face, credibility and reputation it is nothing but the use of these discretionary powers for serving the interests of powerful groups.                  Read More