 People who grew up in the fifties through to the seventies and even eighties had it comparatively easy. Most have had free university education and have enjoyed house price inflation, safe jobs and final salary pensions (via the government for state sector and certain firms for private sector employees).
For a relatively poor country, we have also been generous with free healthcare (with all its shortcomings). Unfortunately, all these great benefits have come at a rather staggering bill for the average taxpayer, especially those who are unfortunate to be young enough to be below 40 years who will bear the brunt of the bill.
This is a really simple equation. We have got an entire generation (predominantly those born between the years 1945-1970) hooked on the idea of getting certain benefits from the government. While the government promised a range of services, they are fast discovering that the expenditure is far greater than income from tax receipts as people have begun to live longer.
 Meanwhile the tax base shrunk as a result of a stagnant economy due primarily to the war. This becomes less of a problem if the government had the luxury of a continuously growing population from which to increase its tax base. However, decades of successful family planning initiatives indicate that Sri Lanka’s population should plateau this decade.
This leaves the younger generation facing a difficult paradox; pay large taxes to fund the benefits to their parents and grand parents, but also bear the burden of being self sufficient themselves as falling population numbers mean there won’t be yet another generation to fund their own benefits. Examples of this monumental transfer of responsibilities are all around us to witness.
Defined benefit schemes, where employees were guaranteed a pension for life has given way to the EPF/ETF schemes, clearly transferring the responsibility to the individual and performance from markets for future retirement incomes. The sole exception being a bloated public service, which will create its own unique social tensions in the years to come as battlelines between private and public sector employers become more visible.
While not completely relinquishing responsibility for education and health care the rise of private schools at every junction around Colombo along with the parallel rise in private hospitals is a clear indicator that the government expects people to look after their own affairs. Most of these developments happened in the backdrop of a government seeking to fund a difficult war. Consequently it has permanently changed the expectations from the government by the average citizen. This is actually very good news, as people have the ultimate freedom to choose their provider.
Unfortunately lack of regulatory oversight has lead to sub par outcomes courtesy of the private sector. For example, a little known fact outside the insurance and medical industry is that most private hospitals refuse to take in critically ill patients. Many are transferred to government hospitals as their condition worsens. Private providers are worried about the negative PR and above all else the steep rise in insurance premiums with increasing mortality. This situation is not unique to Sri Lanka, and prevails in the private health care systems around the world which coexist with a public system, promising universal (or near universal) coverage.
As for schools, the fact that a house built on a 10 perch property can hang a shingle calling it an “international school” says it all. The government’s desire to allow private universities is further evidence of its want to relinquish even more responsibility.
One place where dysfunctional and inactive government policy has really helped is in keeping property prices under some control. Although it is now impossible for anyone making a median salary in Sri Lanka to own property in Colombo or its immediate suburbs, things could be a lot worse had we got the sort of perverse political incentives in planning laws as found in countries such as the UK and Australia.
The previous generation for all their wants have some good qualities about them. Many help young people get on the housing ladder, get into jobs and build up savings. Parents and grandparents already fund full education, provide free childcare and will bequeath assets - a partial answer to the inter-generational issue, albeit one that discourages social mobility.
Intergenerational equity is much more than passing on a country that is economically strong. It is also about passing on an environment less polluted and exploited than what our parents inherited. It is about future generations having it better than us. While the future hasn’t looked brighter for Sri Lanka, for all the progress in technology in my generation, my parent’s generation had some things better than we ever did or will. It is incumbent on us to not repeat that mistake.
(Kajanga is an Investment Specialist based in Sydney, Australia. You can write to him at kajangak@gmail.com) |
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