Competitive bidding for non-existent resources!
View(s):Poverty is so important for democratic elections so, we must maintain poverty to sustain competitive democracy with elections. The level of poverty and hardship of the nation has played a key role in election campaigns throughout the Sri Lankan history.
In the midst of instability, the tea sector is one of the most stable industries in Sri Lanka.
If we examine Sri Lanka’s election history, we may understand the importance of these issues in voting some politicians to power as well as in overthrowing some of them out of power. It is not about eliminating poverty and hardship by directing people to do productive work and to become rich, but by keeping them poor and directing them to come after the politicians.
Rice protest in 1953
For example, the rice protest in 1953, known as “rice hartal” is a major incidence in Sri Lankan political history, which occurred just after five years of gaining Independence from Britain. During the time World War II, a rice ration scheme was initiated under the British government in order to face the shortage of rice and the resulting price hikes.
At that time, rice production was not enough to meet local consumption requirement so, about half of it was met through imports. As imports were disrupted due to the World War, the British government introduced a rice ration scheme to provide rice at subsidised price to the entire population of the country.
The war ended in 1945, but the rice ration scheme continued. By the early 1950s, one-third of the government budget was required to finance the rice ration. The Minister of Finance then proposed to abolish it. In response to this decision, the then opposition political parties organised rice protests all around the island resulting in about 10 people dying in the protests.
Finance Minister J.R. Jayewardene was criticised, and the Prime Minister Dudley Senanayake had to resign. Hartal ended and the rice ration to every citizen at subsidised price continued.
Rice from the moon
The second attempt to revise the rice ration scheme was again initiated by Dudley Senanayake who became the Prime Minster for the second time during 1965-1970. The decision was to reduce the rice ration in an effort to cut government expenditure as the cost of the rice subsidy had increased by a nearly 50 per cent due to higher world prices. Public unrest supported by the opposition against the rice ration issue was so profound that it was cited as a major reason for the defeat of the government at the subsequent 1970 elections. The outgoing Prime Minister famously remarked that he had “lost the election in the kitchen”.
At the election campaign, the opposition leader Sirimavo Bandaranaike declared that she would bring “rice from the moon” if it is not available on earth. In fact, people voted her to power. And she quickly reinstated the rice ration to its previous levels, fulfilling one of her major election promises. Nevertheless, during her tenure the country experienced a severe supply shortage of food and other basic needs.
Increased poverty and hardship of the people was the major cause of the defeat of Sirimavo’s 1970-1977 government, giving a landslide victory to the UNP government led by J.R. Jayewardene. However, he too had a “free handout” to the electorate, promising to give “eight measures of grain per week” to the people.
Nevertheless, it was during his time in 1978, that the rice ration scheme was replaced with a targeted “food stamp” system which was also later transformed to a cash subsidy scheme.
Customised handouts
The point that I want to get across is not about the need for a “social protection” policy, but the political competition for grabbing the power by promising handouts from “unavailable” resources.
And any attempt for more robust policies to deal with the fiscal issue was cracked down with unrealistic promises deceiving the people and dragging the economy into trouble. The end of the competition was the unsustainable government expenditure patterns that were irreversible but extended until the economy collapsed.
Today, faced with an economic crisis, majority of the people need more of the free handouts than ever before. The higher the level of poverty and more severe the hardship that people undergo, the greater would be the space for “auctioning unavailable resources”.
This time, Sri Lanka’s poverty and vulnerability levels are also at their highest level. Having faced with Sri Lanka’s unparallel economic crisis as well as the immediate “austerity measures” to answer the crisis, majority of people from the lower income groups as well as middle income groups feel the hardship of poverty.
Since poverty implications of economic crisis are the most important social issue of the country, an unprecedented opportunity has been unveiled this time for auctioning unavailable resources: identifying different social segments as per different criteria, “free handouts from unavailable resources can be auctioned” by customising them targeting the specific needs of different social segments.
Social segments
There are farmers, who should be given a “fair price” for their produce by raising the prices. Farmers should also receive a fertiliser subsidy from the government. When you turn the other side, there are consumers who should also be given a “fair price” by reducing the prices. How do we lower the price for consumers, while raising the prices for producers?
There are fishermen and they must receive fuel subsidies, which may be extended to tuk-tuks and school vans. In addition, teachers and school children should be a special category for government patronage. Female school children are another sub-category whose special needs must be taken care of by the government.
Cash subsidies to the poor must be increased too, as one-fourth to one-third of the Sri Lankan people are officially poor now. Government employees are another category to receive pay hikes. In fact, there are unemployed graduates, who should be given jobs immediately; of course, these jobs must come from the government.
Diversified social segments of the population and the customised free handouts are just a snapshot of a wide range of election promises. This time, however, their economic implications are detrimental.
Pulling the wool
I am not sure if people subscribe to such election promises or laugh at them, although the habit of “pulling the wool over people’s eyes” has not come to an end. After all, they know that they have been hearing them for the past 75 years. However, this time the delivery of customised election promises is a problem more than ever before.
First and foremost, the stringent fiscal boundaries do not allow an increase in government expenditure without tax hikes. Besides, cutting down on taxes is also a promise!
I am not sure how realistic it is to cut down government’s tax revenue and to increase government spending simultaneously. Both are only possible with a medium-term plan which is out of the election rhetoric. Moreover, money printing is not possible, and borrowings are still too difficult.
Everybody seems to have forgotten that Sri Lanka should be prepared for repaying foreign debt in the coming years. In spite of all that the country is under a four-year IMF programme which does not permit politicians to play with taxpayers’ money as they did 16 times in the past.
By the way, all plans are for someone else’s money. I would suggest that politicians who keep promising a bulk of free handouts should ask first and foremost the taxpayers consent to spend their money so lavishly! I think that before everything else, this time the priority should be on maintaining the country’s economic recovery and ensuring its long-term economic progress. It is the priority need of the country to avert the next economic crisis.
(The writer is Emeritus Professor of Economics at the University of Colombo and can be reached at sirimal@econ.cmb.ac.lk and follow on Twitter @SirimalAshoka).
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