Vanish the capitalists!
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The export of tea has grown as a added-value item under the open economy policies of the country.
On October 7 (Thursday), there was an “unusual” birthday party that I had to attend. It had been organised by Prof. Hal Hill of the Australian National University (ANU) in Canberra, Australia together with his colleagues. It was an “online” birthday party which was attended by people from all around the world to celebrate the 70th birthday of Prof. Prema-Chandra Athukorala. It was also a surprise birthday party for him, because he was unaware of the event until the last minute.
There was a birthday present too and it had also been arranged secretly – an e-book containing a beautiful collection of 96 chapters as testimonies written by Prof. Athukorala’s friends and students all over the world and was compiled by Dr. Dayaratna Silva. The birthday gift made the webinar a felicitation event and a book launch too.
Import substitution
It was the time of my undergraduate studies at the University of Colombo and I was studying for my bachelor’s degree in Economics. We had to carry out our studies in the midst of a shortage of lecturers. It was in this set up that in 1984 a visiting lecturer from the University of Sri Jayewardenepura was appointed to teach us the subject called Economics of Planning; he was the young Dr. Athukorala, who had just graduated with his PhD from La Trobe University in Australia and returned to his university profession in Sri Lanka. It was my first encounter with Prof. Athukorala who was “serious” about what he taught us as a university lecturer.
As I was serving as an Assistant Lecturer in the same Department, a few years later we all heard the sad news (for the country) about Dr. Athukorala – he had gone back to Australia! Many years later, he told me that “if I stayed in Sri Lanka, I would not have done even ‘one-tenth’ of the work I did after returning to Australia”.
It was not a surprising statement for me as I have seen the “competitive” academic environments in many other countries, where your academic performance is challenged constantly! If you are involved in an “import substitution activity, protected by regulations and import controls”, it doesn’t matter whether you are producing commodities or knowledge – the outcome is the same.
Anti-export bias
After Prof. Athukorala taught me for my undergraduate studies, I missed him for a long period of time which may be nearly about 15 years. During this time, I had completed my Master’s and PhD degrees in the Netherlands. For this, I had to read literature on international trade and development policies in the world. One of the authors among many prominent international economists whom I often had to refer to was Prema-Chandra Athukorala. By that time, he had completed many studies in East Asian and Southeast Asian countries and published extensively.
For the developing world, it was the period of transition from import substitution policies to export-oriented policies paving the way for the hot debate between the proponents of both sides; we have discussed this transition in this column in the last two weeks. As a beginner just tasting the flavour of the debate, I was flung to and fro by the arguments of proponents and opponents of both sides.
For Sri Lanka too, it was about 12 years after opening the economy in 1977. I had to read Sri Lankan writings too because I was doing my postgraduate research on Sri Lanka. While some were still lamenting about the collapse of domestic industries by the open economy policies, others were predicting the future of Sri Lanka as a newly industrialised country (NIC) of the second generation; the first generation NICs included Singapore, South Korea, Taiwan and Hong Kong.
I titled my Master’s research as “Anti-Export Bias in the Export-Oriented Economy of Sri Lanka” because I found the country was still suffering from a policy bias against exports, which had to be eliminated in order to accelerate Sri Lanka’s economic development. In the absence of policy reforms after the mid-1990s, I presume that Sri Lanka’s anti-export bias worsened; perhaps, the source of all economic problems that we are faced with today!
Bread for the village
It was only after I returned to Colombo, I met Prof. Athukorala again. He was happy to see me and congratulated me on my Masters and PhD degrees. He had seen both my Master’s and PhD research works which had been published by the Free University Press in Amsterdam. On his invitation, in 2001 I visited as a visiting fellow to his University – ANU in Australia. The couple of months I spent there with him, was unforgettable! He often talked about the Sri Lankan development episode, adding flavour from his own experience.
Recalling one such incident from his own village in Sri Lanka, he explained how the supporters of the United Front (UF) government were shouting the slogan “Dhanapathi Bhanga Wewa!” (which literally means “vanish the capitalists”) after they won the 1970 general elections. The UF government was a coalition of three political parties; centre-left Sri Lanka Freedom Party (SLFP), Trotskyist Lanka Sama Samaja Party (LSSP) and Communist Party (CP). Then he said: “In my village too, people gathered at the junction shouting this slogan and lighting firecrackers.”
He continued the story: “The bakery at the junction belonged to a so-called ‘capitalist’ so people set fire to the bakery. After that, for many months we didn’t have bread for the village!”
House without foundation
After returning from the ANU, I started collecting historical episodes from the import substitution era of Sri Lanka (1956-1977). These stories included supply shortages, queues of the cooperative shops, business acquisitions, quality of local products, politicians as job-providers, paying salaries without work, family politics and many more.
It is sad that these stories which would be buried as time passes as they are the real-life experience of the people of our older generation who faced the reality of import substitution in Sri Lanka. It is already happening now so that those who do not know economic hardships and injustice of import substitution era would tend to romanticise import substitution policies and think of returning to that era.
By the way, the import substitution regime – particularly its stringent phase of 1970-1977 under the UF government – should receive credit for one good thing: It prepared the country for policy reforms! Without any obstacle, Sri Lanka had an overnight transition to an open economy. However, the UNP government that initiated policy reforms in 1977, in spite of having an overwhelming majority in the parliament, utterly wasted the opportunity! It’s true that it established the open economy but it was like building a house without a foundation!
Sorry, we need you!
Recently, I heard that unlike in our neighbouring countries Sri Lanka does not have a home-grown “capitalist class” in order to take our development forward. In fact, it is a widely held argument that has been documented in our post-independent development literature as well. Isn’t it hilarious that first we vanish (dismiss) it, and then complain that we don’t have it? After paralysing the emerging capitalist class in our post-independent history, now we remember that we cannot move forward without a capitalist class.
It is even more hilarious to hear that we should build it or re-build it, by protecting it with import substitution policies. In fact, it was with these policies that we made the domestic capitalist class vanish in the past.
(The writer is a Professor of Economics at the University of Colombo and can be reached at
sirimal@econ.cmb.ac.lk and follow on Twitter @SirimalAshoka).