Economics in Sri Lanka: Giant leap backwards
Copious volumes are being written about the path we have to take in order to develop ourselves economically, by increasing GDP, GNP, FDIs, etc. but the fundamental issue that I raised in my article “Development Dilemma” published earlier in the Business Times has not been resolved. I feel that without a solution to this problem it is just futile to look at other formulas.
A vegetable market in Colombo.
The basic premise is that one cannot profitably operate in a low income economy goods or services from a high income economy as I explained in my earlier article with two examples. This brings to mind what that eminent politician and economist Dr. N.M. Perera said, “We cannot power a whisky economy on an arrack income”.
This is supported by Sam Samarasinghe`s article too in the Daily Island (09-02-2015. Economics of the Colombo Port City Project) wherein he states that the Sri Lankan GDP of US$ 4000 cannot support the facilities affordable by Dubai which has a GDP of $60,000. The arithmetic / economics are the same.
Can underdeveloped countries continue to purchase and install equipment (electric turbines, cars, highways, locomotives, IT projects, hospitals, schools with teachers from UK, etc) and provide our people with their needs and continue to maintain these in optimum condition providing replacements as and when they become necessary by recovering the investments?
Empirical data should be applied to show how to bridge the gap in either of my two examples or to any other example. All I see around me are garbage trucks that should be in garbage dumps but are still working, street lights, etc not maintained, loco engines over 50 years old still hauling, roads and drains not being repaired in time, schools lacking basic facilities where children are taught under trees, the Galle Fort (and so many such projects) – fixed and forgotten, traffic lights not being replaced or fixed in time. The list is endless. All this is because of the inability to raise funds when needed to maintain them on account of the imbalance in the cost of project and recovery of funds from such projects. Then we even have the urban poor buying only a fraction of the medicines on the prescription. Why?
Coming to (Purchasing Power Parity – PPP), a McDonald burger in the US is $1.00 which is 1/2000 the average monthly wage there while in Sri Lanka it is, say, $3.00 – Rs 390 (maybe more) which works out to 1/25th. So the Sri Lankan economy has to toil 80 times more to afford the Mac!
Here a pound of seer costs Rs.1000 (1/10th of monthly wage). If Salmon costs $200 a lb. in the US there would be street riots! A kilo of papaw costs Rs. 140 and a pine costs Rs.120/kilo.
Now the average hourly wage here is Rs. 10,000 (monthly wage) divided by 160 hours (hours per month) which is Rs.62.50. Thus the Sri Lankan economy must labour 16 hours (2 day’s wages) to provide just a lb. of seer for a family for the day; add to this the other three meals, clothing, transport, education, healthcare and housing. Even if the economy labours 24 hours a day we cannot procure our essential needs for the day!
This gives us a clear picture of the sheer impossibility for the Sri Lankan economy to survive on the average wage of Rs.10,000 and to continue in this manner. The well will soon run dry!
As for globalisation which many an economist offers as a panacea for our problems, a wag once said that we will eventually end up being the street sweepers in the global village. How true it has become. And here I would like to quote from the editorial of the Daily Mirror of August 23, 2013:
“This new global strategy is described by independent Third World analysts as economic neo-colonialism. The US, the EU and other rich countries are working out their economic neo-colonial agendas, mainly through the World Bank, the International Monetary Fund and the World Trade Organisation, the third being the most powerful in what is widely seen as the unholy trinity.
While these three organizations are like the Supreme Allied Commanders, the plunder of the Third World`s remaining wealth and resources takes place mainly through a multitude of Trans-National Corporations which operate vigorously……”
I might add that once the resources are gone we could openly proclaim that we are the” hewers of wood and drawers of water” that we already are though not admitting it.
Let`s get back to numbers ; In order to provide lower wages to make our goods “competitive” (whatever that might mean) we have to pay our workers below subsistence wages (as explained above). We have to provide travelling at below viable rates (a train trip from Colombo to Galle in an imported carriage, drawn by imported locos running on imported rails laid on imported concrete sleepers, costs Rs.100), sell him electricity (from the imported turbine) at below cost of recovery tariffs. Now we export a product manufactured by these workers. Where does that leave us? Will the profits from the exported products cover the investments on infrastructure that is necessary to get the worker to the factory?
Foreign exchange is being spent on super luxury products here when basic essentials are beyond just about everyone’s reach. The easy facilities being offered to purchase cars makes one wonder if this country is mad. Can an inventor or entrepreneur get facilities from a lending institute quite as easily?
Are our domestic workers being ill-treated, raped, assaulted and killed to prop up this system? After all it is their earnings that are bringing in the dollars to maintain this lifestyle. Are they slaving to make the industrialized countries prosperous?
We swallowed hook, line and sinker the bait of the developed nations that fooled us with the Free Trade Zone into opening out our economy. The US$ that was at Rs. 6 before liberalisation is now at Rs.135.- and we are now in a system when every tinkle of the cash register, even in the remotest part of Sri Lanka is hurtling us backward.
We are faced with a dilemma: On the one hand Sri Lankans living in abject poverty and on the other all the fancy/high tech luxury items enticing them. Many a strong willed person will wilt. The solution? Corruption!
Can someone explain how we can fight this losing battle?
