Take a look in the mirror – CB Deputy Governor

Sri Lanka enjoys the highest ranking in Asia with its double digit rate of inflation, which is no doubt on the way up as you read this article. While the general blame is put on the successive governments which have administered the country in the last few decades, it appears that the general public or the consumer may have had and continues to contribute significantly to their own economic woes.

These thoughts and much more came up at an interactive discussion between W. A. Wijewardena, Deputy Governor of the Central Bank of Sri Lanka and members of The Sunday Times Business Club including invitees from across the private sector, at the monthly meeting of the Club held last month.

An authority on economics and the author of a column in The Sunday Times aptly titled “Economic Wisdom for Babies”, Wijewardena addressed the gathering on economic issues generally ignored by the general public and which is generally thought to be of concern only to the academic types.

He said, “The economic man is within us and we need to come out of the shell that we have withdrawn into”, citing the importance of the common man having the correct understanding on economics.

In the era immediately following independence, the ideology existed that the government should do and take care of all matters in the country. While most saw the government as the savior, the private sector during the same time was looked at as a “bad” influence by many. Thus over time, it became a burden on the government to provide for all and to become the sole economic driver. Citing an example, Wijewardena vividly explained his point of departure at the local airport in the 1950s era, when the customs check on his baggage took a staggering 45 minutes, due to the strict regulations in place by the government at that time, to ensure the least amount of resources were taken out of the country. Wijewardena was proceeding to the United Kingdom for higher studies at that time.He also noted that there is a segment of society that are masters in economics and this segment is definitely not academic and of the so called “educated” class. Wijewardena said, “throughout my career at the Central Bank, I have observed that the traders in the Pettah market, are the most experienced economists that I have ever seen” describing their amazing ability to predict and guide market conditions. While the consumer associates and condemns the term “Middle Men” with traders and also with corruption, this is no doubt due to the limited understanding the consumer has with regard to economics.

The Deputy Governor also paid a tribute to the housewives. “Economists around the world have learnt most of what they know through the practices adopted by the housewives, by analyzing how they handle the economy at home,” he said. He also pointed out the “Law of the large numbers” to an attentive audience. Wijewardena noted “Mix a pebble of salt in a glass of water. Then mix the same pebble of salt in a large tank of water. Will the result be the same?” The answer to this is obvious.
The success story of Singapore has been spoken about by many at various forums. However, Sri Lanka is yet to learn from this experience and take appropriate action towards prosperity. One little realizes the status in the global economy which Sri Lanka has lost by losing the hub status of trading activities to a country like Singapore, which was ironically built based on the model which existed way back then – in Ceylon.

The Deputy Governor further noted that ‘While the visionaries in Singapore adopted a policy of the citizens paying the actual cost of services provided by the government, Sri Lanka initiated free services in terms of healthcare, education and other various services.’ “The concepts and the end results of free services have got distorted over the years,” he said pointing out that the current inflation levels and the woes in the economy may be created by the consumers themselves. In the case of free education, it is nothing more than community provided education. Every service has a cost and it is generally paid for by the tax payer - the consumer.

In the current free education system as an example, the tax payer has no claim on the services provided, while the teacher is not adequately remunerated in order to give quality education. While the parents have little voice in the standard of education eing provided, the children themselves do not know what should be expected as good quality education. Wijewardena said, “In the end, the employer is the ultimate casualty, as the quality of the end product is far from the employer’s need, resulting in the employer having to invest heavily in both time and finances, to obtain the quality that is required”. “It also brings us to the realization that the employer needs to provide what the consumer requires, however the consumer is not willing to pay the price of the quality that they require in the first instance,” he added, in an interesting discourse on understanding simple economics.

Prosperity cannot be created by money, but only with hard work. This is the economic miracle of Singapore, which Sri Lanka is struggling today to achieve. Wijewardena who has a career spanning over 35 years in economics and with the Central Bank of Sri Lanka, is also a creative writer having recently published a collection of short stories titled “My Little Princess”, which is an effort by him to show realities of life through creative writing. While he strives to show the “Realities of Economics” through his regular column in The Sunday Times, the audience present at the meeting was further drawn into these realities.

While the rich segment of society does not complain of inflation due to them being adequately self sufficient in wealth, the poor does not complain either simply because they do not have the power to do so. However, the middle income class is different altogether – simply due to their demand on various services and expectations. Although consumers have a right to demand services for what they earn, consumers should also be conscious about the fact they need to pay for the actual value of the services they demand. “Given the current conditions that all middle class consumers complain about including the rising cost of living, it may be well for us to have a good look at ourselves in the mirror.

We may ultimately realize that the person in the mirror suffers twice in an endless cycle. We expect and demand authorities to provide services where we don’t want to pay the actual cost of such services. Ultimately we end up paying taxes, as the authorities need to finance the services demanded by the consumers,” he noted.“Economic Wisdom” is applicable not only to academics and those at the helm in the public or the private sector. It is applicable to all and the more that the consumer is aware and makes sincere attempts to gain an understanding of economic realities, things will turn for the better for the consumer, society and ultimately, the country.The Sunday Times Business Club is hosted by the Cinnamon Grand, Colombo.