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The celebration of 68 years of independence three days ago had an additional significance. It was also a celebration of regaining democracy, the rule of law and freedom from autocratic rule a little over a year ago. This significant political change is an opportunity to pursue pragmatic policies to achieve the nation’s full economic potential and enhance human development. However we celebrated it at a time of economic instability and uncertainty.

Post-independent development
A considered view of the country’s economic development since independence is that while much has been achieved in the post-independent period, the country has not achieved its full potential. Many countries in Asia that were less developed than ours at the time of independence have overtaken us by far. These include Malaysia, Singapore, South Korea, and the Republic of China (Taiwan). Their per capita incomes, levels of poverty and unemployment are significantly better.

However, while we have fallen short of the economic achievements of these countries with their much higher living standards, we could take some satisfaction that our human development indicators are good as or better than some higher income countries. Our Human Development Index (HDI) is much better than India’s and Pakistan’s. It is comparable to those of higher per capita incomes. The country’s achievements in primary and secondary education, low maternal and infant mortality rates and a life expectancy of 74 years account for this achievement.

Dissatisfaction
However, there is reason for dissatisfaction with the country’s economic and social performance as it could have been much better as the initial conditions at the time of independence were very favourable. Donald Snodgrass, who wrote a comprehensive work on the Sri Lankan economy titled “The Transition of an Import Export Economy” in 1967 has since then considered the Sri Lanka economic performance as a “Tale of missed opportunities”.

At independence
Snodgrass has pointed out that “When Sri Lanka, then known as Ceylon, achieved independence in 1948, it was regarded by many, with the flawed foresight common in these matters, as one of Asia’s most promising new nations. The island had escaped World War II unscathed. It had practiced limited self-rule based on universal franchise since 1931. Levels of literacy and educational achievement were high relative to those in other parts of Asia. The transition from colonial rule had been peaceful. There was a smoothly functioning export economy that provided commodities urgently demanded by the world market. What more could a newly independent nation want?”

Destabilising factors
Nevertheless Snodgrass himself points out that there were significant destabilising factors. “Only a few observers saw that there were factors for the destabilisation of the economy. The advantages that the plantation economy conferred during the war years and the subsequent Korean boom was to be closely followed by a downturn in international prices of these three primary export crops that the economy was highly dependent on and also dependent on imports of basic requirements, including food.

conomists also pointed out that productivity was low and population was growing rapidly and that the existing economic structure would be unable to support the growing population at its current standard.”
Most pertinent is Snodgrass’ observation that there lurked factors of political and social stability that was little recognised at the time of independence and soon after that had the severest impact on the country’s economic development. The undercurrents of ethnic conflict lay hidden under a veneer of communal unity among the few.

Ethnic differences
One of the few economists of the time, who had the perception to realise that the management of ethnic differences were crucial for the country’s development, was Professor Theodore Morgan, Deputy Governor of the Central Bank, who considered the ensuring of communal harmony as a prerequisite for the country’s progress in as much as the control of population. We succeeded in containing population growth after two to three decades of high growth, but failed in the containment of ethnic tensions.
The prospect of communal disharmony made Morgan make the perceptive observation that the success of the country’s development would “depend upon early settlement of communal quarrels and firm control of extremist elements.” This is as valid an observation today as in the ‘fifties.

Debilitating factor
Communal disharmony has been the most debilitating factor in our economic development. The return to peaceful conditions nearly nine years ago once again gave the opportunity to ensure ethnic harmony and mobilise her entire resources for economic and social development. Once again societal peace and harmony are crucial to usher in rapid economic and social development.
It is now blatantly clear that mismanagement of ethnic tensions, and sometimes the fanning of ethnic prejudices, were the foremost factor in retarding the country’s development. The inability to settle communal differences and have firm control of extremist elements has been a severe cost to development.

Even as we celebrate 68 years of independence and reflect on the serious setback to the economy of communal tensions and conflicts, the ugly head of communalism is rearing its head. Communalism must be nipped in the bud for economic development. Much of the future progress of the country would depend on ensuring harmony among all peoples who are nationals of the country. As in the past, there is no doubt that the country’s economy could progress only with the settlement of this national question.

Other factors
While national harmony is an essential perquisite for development, there are a multitude of other actions needed to stimulate economic growth. There is scepticism that the new regime does not have a pragmatic strategy of economic development and that the coalition lacks a single minded approach to economic issues. The eye to political popularity is derailing correct economic decision making.

Policy stance
There are many examples of a lack of a firm coherent economic policy stance. The Budget for 2016 lacked economic credibility.
The November Economic Statement is still hardly implemented and inappropriate appointments continue. Overall, there is no conviction that the government has a consistent economic strategy. It is still wandering hither and thither seeking a magical solution from foreign economists.