Financial Times

Using market economic policies after the tsunami
By Robert Abayasekara
(Newly-formed Centre for Market Economy -CME)
Natural disasters were a common occurrence throughout history. While developed countries recover quickly; it will take decades for Sri Lanka to recover from the destruction created by the tsunami. To speed up the recovery and to rapidly move towards prosperity, we need to understand why we need foreign financial assistance which Thailand could afford to refuse.

With an early warning system, the death toll could have been kept to hundreds rather than tens of thousands. But even without such a system, the loss of life could have been minimized had we utilized the more than half a century of independence to develop our country. An economically advanced Sri Lanka wouldn't have had thousands of shanties beside the sea, and thus avoided the tens of thousands of deaths. This may be why more tourists than local residents died in Thailand, which is economically very much ahead of us. Surely our political leaders from S.W.R.D. Bandaranaike onwards who by their blind faith in socialist ideology ensured that the nation did not achieve economic prosperity, have to share the responsibility for these deaths

Should we continue believing in an ideology that had failed and keep our people in poverty and in shanties? If another tsunami was to strike the shores of Sri Lanka should tens of thousands more lose their lives because of our fascination with socialism? We deserve a nation that can rise up from this calamity. We need to come together, utilise the proven market economic policies and move swiftly towards prosperity. This and only this will ensure that at least in the future no Sri Lankan will die from calamities such as this, due to their poverty.

Japan, South Korea, Taiwan, Singapore and Malaysia have proved that within 30 to 40 years a country can be developed. Both Japan and South Korea managed to develop their countries even though they were totally destroyed by the Second World War and the Korean War respectively.

These nations relied on market economic policies to achieve economic prosperity. From 1956 unfortunately our political leaders favoured the economically stupid but politically popular socialist policies. At independence we were the second most developed economy of Asia after Japan. But having turned our back on market economic policies we watched as one by one other Asian nations prospered while we became a beggar nation. South Korea, Taiwan, Singapore, Malaysia, Thailand and Indonesia all became economically much more advanced than us. Today after the tsunami Thailand refuses aid while we beg for it.

Sri Lankan governments, despite the success of the Tiger economies, have from 1970-77 forced the country further towards socialism to the extent that when J.R. Jayawardene won in 1977, the state controlled more than 80 percent of the economy. Although JR opened up the country, which was sealed from the world, he did not have the courage and the conviction to totally dismantle the gigantic involvement of the state in all sectors of economic activities. Had he put the country firmly on the path of market economy and privatized all the state controlled business activities in 1977, by now we could have become economically more prosperous than Thailand.

The civil war, massive corruption by ministers and officials together with the suffocating grip by the state over the economy ensured that the promise of 1977 remained unfulfilled.

While we had stops and starts towards economic prosperity the East and South Eastern nations steamed towards prosperity. The JVP utilized the continued economic deprivation to drive another generation to take arms and thereby further disrupt the economic progress of the nation.

Due to governments vacillating between market and socialist economic policies, Sri Lanka despite being one of the first countries to shift to market economic policies is yet totally dependent on foreign aid. Countries in Eastern Europe like Poland and the Czech Republic turned their backs on communism only in the 1990's but within a decade have managed to reach European Union standards. By the early1990's India and China too turned towards capitalist market economic policies.

Within a decade China has already become a world economic power. China and India kept their people in poverty for half a century faithfully following the ideology of Mao and Nehru respectively. However having realized that their much-respected leaders have led them up the wrong path these nations have given up the socialist rhetoric completely.

Socialist beliefs
The majority of Sri Lankans unfortunately still believe that socialism is the path towards economic prosperity. Despite the examples from the four corners of the globe, Sri Lankans refuse to accept that market economic policies are the key to economic prosperity. They refuse to accept that China's phenomenal growth is due to market reforms. They refuse to accept that North Korea, Cuba and Myanmar the last set of major countries that yet follow Marxist / Socialist economic policies are among the most impoverished nations of the world.

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