Going left is taking backward steps!

By Dr. P. E. Perera

It is election time and if you have been watching TV you see more people wearing red shirts and preaching their economic and political remedies now than before. Even if they don't wear red when they talk, you hear sounds "very red and very left". Of course, they utter the word free-markets now and then, but the rhetoric is about planning. Essentially, what they are saying is that they can "plan" to develop our country. According to them, "Planning at the centre" then is the panacea for all our problems! It seems like the renaissance of the left!

I believe these people are mistaken a lot! If our country is going to be shaped according to their left policies we will be going backward and not forward! What I mean is that the country's resources will be wasted, employment generation will be reduced and the people will continue to remain poor if not poorer! Moreover, people would lose their individual freedom as well as get exploited by the state! These people would replace the incentive mechanisms which the free-markets use so well to bring the best out of an economy with a planning system under a central authority that should result in the stagnation of the economy.

We have seen such things happening in the 60's and 70's in many parts of the world as well as in our country! Why repeat these same mistakes! Let me elaborate why their policies will make us go backward and make our people poor.

Free markets

First of all let me point out that free markets and planning are poles apart. People who intend planning at the centre cannot also have free markets. "Free-markets" are where you have the freedom to produce and sell as well as buy whatever you want. It is not a place where the "centre" tells you what to produce, what to sell and what to buy. In this global marketplace we will not be able to decide which markets we want to have as free markets and which we want to protect! Remember, our country is small and we are poor! If we still want to think we can do it forget about our exports! Unless we have open markets for their exports they will not have open markets for our exports. That means less production, less employment and less income for our people! So, don't be fooled by these people who think we can plan economic activity to benefit our people unless you want to remain poor!

Second, it is time we realise the world is moving in one direction, a direction which is market-friendly, open and free. Most countries in the world will not move in this direction unless there are clear benefits to their people by having markets free. Of course, the left might say this is due to imperialism of the west and for the benefit of the multinational corporations! The point is, if we can become less poor even though they become richer, shouldn't we adopt free-markets? Yes, we can fight against imperialism and multinational corporations, but we will be only wasting our resources as well as miss opportunities to develop. The end result would be the same. Remain poor!

Third, we should realise which countries give us the most loans and grants. Definitely it is not the socialist or the left oriented countries or the poor. It is the west and the rich country governments and their private institutions that grant these. In the 60's and 70's, the moratoriums imposed on loans granted by the private banks in the west by the more centrally planned economies in the poor countries have made these banks still suspicious about any government that is aligned with or towards the left. If you believe obtaining loans from foreign countries is a must for our country's development and for our people to become less poor, then being far away from "the left" is the best way to get these loans unless you want to remain poor!

Foreign investment

Fourth, we should realise that with foreign investment, there is an increasing number of jobs created in the economy. One of the fundamental factors that decide such investments is the business environment in the country. If the business environment is conducive for investment, more foreign money will come into the country which ultimately leads to more income and employment to the people! It is universally understood that the freer the markets, it is more likely that the business environment would be favourable! Any situation that does not lead to such favorable investment climates would hinder foreign capital inflows to the country. With the left parties or any alliance with them, it is difficult to persuade the foreigners to bring in money for investment! Primarily, the foreigners would be concerned about the safety of the money and the assets they bring. They will be concerned about the repatriation of their profits, whether the unions would prevent the smooth functioning of the firms where their money is invested and other regulatory impediments. Even if we promise such things will not happen in Sri Lanka, the credibility of the left parties in other countries has taught foreign investors not to trust the left parties! This is a fact! The end result would be less foreign investment, less jobs and less income for the people! Once again, our people will be poor!

Fifth, "the left" parties would be bound to strengthen the unions in the country if they are in a position to influence the government. They are bound to ask for increases in the minimum wages! Such policies are temporarily good for the people who are already employed, but not for the unemployed! In the long run, it is bad for both! If you take the temporary situation, the firm may be put under pressure with higher wages if the unions ask for higher wages. This squeezes the profit margins the firms earn which are dependent on demand conditions. The problem is that firms cannot increase the prices whenever they want because the consumers decide how much they want to buy based on prices! Though there are people outside who are willing to work for a lesser pay, firms are unable to hire them because of the minimum wage laws. As a consequence, in the long run, firms have to close down as they don't earn enough profits. The end result is more unemployment and less income for the people! Hence, without jobs, people remain poor!

Sixth, "the left" is always suspicious about the private sector and the firms. Their rhetoric is that the private sector firm will always try to exploit the worker. Little do they realise that 70% of the jobs in the economy are in the private sector. The private sector has played a major role in our economy in the past and it has played this role very successfully. If people want to progress, get jobs, earn enough to lead a comfortable life, then the private sector should be nurtured. This is the best chance that the people of this country have in uplifting their lives! As mentioned earlier, with "the left", the chances of a smooth and friendly relationship between the worker and the owners of the firm are untenable! In recent times, some local firms have decided to establish operations in foreign countries that have much more worker-friendly environments! If locals lose jobs to foreigners in this manner, who loses at the end? Our people and they will remain poor!

Left ideologues

Seventh, the ideology and the proposals of the left cannot work successfully with the institutions that are tailor-made for the private sector to operate! The limited liability company, the property rights and the commercial laws that exist in this country are unsuitable for left oriented economic development, if there is such a thing. The institutions that are in place for the private sector to work are not based on left oriented ideologies! It is like using a hammer to turn on a screw.

However, much you try to hit the screw on the sides, the screw won't turn. If "the left" policies are adopted, the same screw-analogy would apply! This is one reason why success stories never emerge from "the left" side! It is better to use time tested free-market policies of the successful economies unless we want to make our people poor!

Eighth, the country's resources would be siphoned, wasted and destroyed by the left much more than ever before! As it is, some politicians and some bureaucrats siphon out money and resources from programmes that are meant for the common good of the people.

Newspapers carry numerous stories of such happenings! With planning, very much more economic activities would be under the control of the politicians and the bureaucrats with the result that more money and resources would be plundered! Even if money resources are not plundered, unsuccessful economic programmes would certainly be made bigger since these programmes are funded by the state and they are intended for the common people! This happens because it is human nature that people do not want to admit that they are failures! If these same economic activities were funded by the private sector, these programmes would end and the resources used in another activity. Why waste resources that can benefit the poor?

Ninth, the people would lose their economic as well as political freedom and would be subjected to exploitation by the state. Now, people have the freedom to eat and drink what they want and work where they want. Under planning, more and more goods we consume now would be manufactured by the state. Variety would be absent! We will have to drink and eat what the state wants! Unions will prevent people getting jobs even if they want to work for a lesser pay hence people will get exploited! The poor are more likely to be in this category than any other. Hence, not only the poor will get poorer, but they would also sacrifice their individual freedom!

Credibility factor

Tenth, we should not forget the "credibility factor". Neither the left parties nor their leaders have been successful in implementing economic development policies in the country let alone talk about their successes! They simply do not have a track record! The biggest left party has experience only in "violence", and as a result, the poor has suffered the most!

I suggest that people should seriously think about the following question: Are we in a stage where we can experiment with "the left" where almost all "the left" experiments have failed in the world? The mistakes that can be made with "the left" are so dangerous that we will not be able to undo them for decades and invariably the weakest link in our society, the poor, will suffer the most! Do we want to remain poor forever?

Clothes stores a-buzz amidst polls

By Diana Mathews and Sonali Siriwardena

The advent of December always brings high expectations of increasing activity by consumers and this trend is being maintained this season although in the midst of an election campaign.

"There is no change in our sales even with the elections around the corner," said Otara Chandiram, Managing Director of Odel - one the leading fashion stores in Colombo, which launched its "Brightest ideas around town" campaign last week.

"We were affected by the many disasters that took place recently, such as the airport attack and the attacks in the US. So we cannot say which incident had the greatest impact on us," she said. "There is definitely a drop in sales following these attacks, but there is no great change in sales due to the elections," she added.

Chandiram got a personal boost when she was picked as the Sri Lankan Entrepreneur of the Year 2000 in an islandwide competition that concluded last week.

With Christmas around the corner many promotions are being launched, she said. Fashion shows, carols and many more seasonal events are in store for the Odel clientele, she said.

Chandiram said there are plans to expand into the international field and open up stores overseas. "There were plans to expand in the Middle East but these plans are on hold because our partners there were not able to maintain the standards expected by us," she said, adding that the company planned to open at least one store overseas next year.

At the House of Fashions, a major competitor to Odel, its Managing Director Preethi Jayawardena is also optimistic about good seasonal sales. "There is no change in our sales when compared to the previous years. Neither have we been affected by the upcoming elections," he said, speaking a week after the Colombo store began its traditional festive seasonal sale.

"We launched the latest promotion, 'Non-Stop Vasi' on November 19 and this would go on till the 31st of December," said Neelamani Jayawardena, Director of House of Fashions and Preethi's wife. They said that they had achieved a 25 percent growth this year.

The Jayawardena couple were quick to counter the rumour in the garment trade that the company had sold a 50 percent stake in the business to the EAP group.

"These are unfounded rumours which have absolutely no basis," said Mr. Jayawardena who added that their sales have not been adversely affected by such rumours.

When asked if they hoped to continue with the day and night shopping facility made available to consumers last December, they said the 24-hour shopping concept is not on this year as they have always concentrated on introducing novel promotion techniques and this year is no exception.

The general consensus among retail clothes storeowners is that consumer buying is unlikely to be affected by the elections and the gloomy economic outlook.

They exuded optimism and expected an increase in sales during this festive season, quite oblivious to any possible change of government. But stores are also conscious of the likelihood of sales falling marginally this week immediately before and after Wednesday's election, considering the violent pre-election campaign.