Former Finance Minister and UNP parliamentarian Ronnie de Mel`s pre election leap to the ruling camp has yielded intended results. However, his appointment as an economic advisor to President Mahinda Rajapakse is not totally a gesture of gratitude. Ronnie was the UNP`s Finance Minister, when Sri Lanka`s economy was prised open in 1977. His pro capitalist standing, which he makes no bones about, has endeared him to the business community, the chief beneficiary of his economic policies during the UNP regime. His presence is, no doubt, reassuring to the capitalist class, which looks askance at the economic policies of the new government.
The Colombo Stock Exchange, it should be recalled, responded negatively to the news of Mahinda`s election. The UNP wouldn`t have been able to bust so much of money on its election propaganda but for the funds prominent businessmen showered on it with a view to furthering their interests through a UNP victory. The share market may not be a very reliable economic barometer. (Cynics say it tumbles even when UNP leaders contract a common cold!) It is argued that other indicators such as property value etc. should be taken into account in determining how an economy fares. Nevertheless, the fact remains that Mahinda is not the darling of the captains of commerce and the success of his economic policies hinges on his ability to carry the business community with him. Mahinda appears to have seen the investor friendly Ronnie as a medium through which to reach out to the business community. He has, on the face of it, exuded pragmatism and political horse sense.
A reconciliation of the two forces that have rallied round Mahinda and his detractors is a prerequisite for developing the country?shall we call them the kurakkan brigade and the wheat flour brigade? (Wheat flour is commonly known as `American` piti in this country.) The former believes in evolving an autochthonous economic model based on Sri Lankan value systems while the latter advocates unbridled economic liberalisation and an anglicised society. The recently concluded presidential election was, in fact, a battle between those two forces, one holding on to Mahinda`s kurahan saataka and the other one clinging on to Ranil`s denim jeans.
The country cannot afford this kind of polarisation and the two camps have to reach middle ground. The sooner, the better! The 1970-77 era saw the country pushed to an economic extreme while the post 1977 period witnessed its opposite. In economics or politics as in life, success requires our ability to avoid extremes. That is also the way forward for the country.
Neither a closed economy nor an open economy could be discarded altogether in real life, notwithstanding political rhetoric. Both models have their pros and cons. Before 1977, the local industries thrived and the foreign debt was kept at manageable levels despite the economic hardships the people had to face and the absence of a spectacular economic growth, and after liberalisation, the economy grew, the local industrialists were driven to suicide and foreign debt went through the roof. In both cases, we blundered badly by throwing the baby with the bath water?we adopted one system to the total exclusion of the other thus losing in the process the advantages which would otherwise have accrued to us. The time has come for the past mistakes to be corrected and the economy to be repositioned in a way that suits this country.
The huge fertiliser subsidy has been a real boon to the local agricultural sector, though it has led to a question of feasibility in the long run. Food security is an integral part of national security as could be seen from the emphasis the developed world has placed on increasing food production through heavy subsidies while advocating the opposite to the rest of the world. Similarly, the interests of the businesses community also need to be looked after to keep the economy moving if the socio-economic benefits to the less fortunate are to be sustained. This is a balancing act, which most of Mahinda`s predecessors failed to perform. Economic growth rates and allied indicators, however impressive they may be, are deceptive as regards a country`s development unless the economic gains trickle down to the bottom of the pyramid. Mahinda will have to not only achieve economic growth as promised but also live up to the expectation of the poorer sections of society through equitable distribution of wealth in keeping with his kurahan ideology.
Mahinda`s maiden budget, to be unveiled today, will give us an idea as to the direction the economy is going to move in: And we will also get a foretaste of the ratio in which he is going to mix kurakkan with wheat flour.