Sri Lankan capitalism has not future without help from global capitalism
by Vasantha Rajah
In countries like Sri Lanka, capitalism did not organically evolve from feudalism as happened in Europe. Capitalism was arbitrarily imposed by colonialists on a feudal society. Therefore, it is not surprising at all that its feudal past is still alive. The feudal consciousness continues to persist in various forms. The Sinhala politicians’ pathological failure to politically solve the Tamil Question is partly a result of that.
Sri Lanka’s capitalist economy and its state are invariably intertwined and dependent on the global capital serving rich countries’ interests. Sri Lanka’s capitalism has no future without direct help from global capitalism. Thus, the formation of a fully-fledged capitalist class with a commitment to democratic values fails to take roots; and the greed ‘for a few dollars more’ with foreign blessings becomes the sole interest. In the absence of a strong capitalist class, the state plays the major role in profit-sharing with the global capital. The political elite have become indistinguishable from the business circles, and corruption inevitably has become the hallmark of political power.
During the past few decades, easily available global credit facilitated Sri Lanka’s economic and political survival. The US-led global capitalism had no choice but to pump in mountains of paper money – using a deregulated banking system – to keep the poor afloat – which is essential for their own survival.
There’s no viable internal market in Sri Lanka for a capitalist class to thrive on. So the SL state had to orientate the country towards “dollar-earning” activities: garment industry, tourist industry etc. Expanding tea exports, ‘exporting’ labour to foreign countries (particularly to the middle-east), along with textile exports and tourism, (all of them major foreign exchange earners) have been the central pillars of the SL economy. The service sector, including construction related industries, has been closely linked to them.
But here’s the rub: The mainstay of Sri Lankan economy during the past few decades has been thoroughly dependent on colossal amounts of global credit that was part of the global credit bubble that recently collapsed.
I explained all this for a reason: to show that the Sri Lankan economy is very much a tiny part of the global economy, and what happens to the SL economy is directly linked to what’s happening in the global economy.
The global economy’s existing format is going to change dramatically in the foreseeable future. The recent G20 summit in London has given important clues in this regard, and before addressing how Sri Lanka should economically orientate towards the onrushing changes let me briefly mention how the global world-order may look like in the near future. [Read the top articles in Global Economy, Global Politics and Global Vision sections of www.lankaeye.com ]
The global leaders, including China and Russia, will take decisive action to launch a new global currency that is independent of any single country’s domination. [China proposed this in no uncertain terms. US President Obama didn’t like the wordings. This is excusable for the time being. Considering the entrenched western prejudices against such radical views the politicians like Obama will have to move slowly. However, this is essentially the project the G20 leaders finally agreed to.]
Also, a global central bank - that has immense power to create money for the purposes of global economic development – seems to be very much on the agenda. All banking outlets, in the final analysis, will have to be part of this new order. The financial anarchy that existed prior to the global credit crunch will have to go.
The ongoing bailout efforts may turn out to be mere ad hoc efforts to postpone a social chaos on a global scale. The governments fear the immediate political and social repercussions if the big banks and industries are allowed to collapse overnight. Pumping trillions of tax-payers money into these bankrupt institutions is not going to solve anything. G20 leaders know this, and they know the old system will have to be fundamentally transformed.
The hitherto existed US domination, dollar domination and western domination will have to go. Global institutions of supranational nature that are democratically accountable to nation-states will have to play the dominant role within the new world-order. Only a highly regulated private sector will have to be allowed to operate within the framework of such global parameters.
Surely, changes of such magnitude will not happen overnight. But, that is the direction things are heading. And, these new realities should be taken into account in planning Sri Lanka’s economic and political future.
Firstly, immediate steps should be taken to radically transform its constitution that, in the final analysis, is the main culprit of Sri Lanka’s conflicts. There cannot be any economic prosperity without a constitution and a new political framework that tally with Sri Lanka’s social realities.
Secondly, a viable economic vision – that is attractive to all communities - should be in place. Such a vision should be firmly based on the fast developing global realities I outlined above.
The first step in this regard is to discard some existing nationalist prejudices: In the context of the emerging democratically globalized future we must not think in terms of national self-sufficiency. Instead, we must learn to relate to the global economy in the most efficient way possible.
Considering the wide variety of geographical and cultural assets Sri Lanka has, no doubt there are many ways of contributing to a globally harmonized ‘One World’. But, in my view, Sri Lanka’s scenic and cultural beauty comes on top. Thus, tourism should become the central plank in planning the state’s blueprint for islandwide infrastructure.
Remember, planning of infrastructure that include roads and railway networks, energy distribution, communication networks, education, health, housing and welfare networks and so on should be the task of the public sector. A regulated private sector should operate within the parameters of an islandwide economic vision of such calibre. Negotiating funds for infrastructure projects designed to dramatically increase Sri Lanka’s productivity as part of IMF’s future funding for global development is, I believe, bound to be fruitful.
In conclusion I argue that there should be a united front of Sri Lanka’s Left primarily based on two central tenets: One, a political programme to transform Sri Lanka’s constitution and the institutions that is unambiguously appealing to all communities. Two, an economic programme based on common welfare that is equally beneficial to all communities and all regions.
(This is a contribution to the discussion initiated by Kusal Perera in his article “Sri Lanka:Non-existing Capitalist and Working Classes and growing “Sinhalaisation”of Business Community”.)
2 Comments
There is little doubt where the preferences of the author lies in terms of the once Capitalist and Socialist economic divide. While the exasperation of almost the entire world in the astonishing near total-collapse of the current financial system is reflected in the article, I wonder how many would buy the author’s theory the present US$-dominated financial system is finished and must go. While this is desirable in favour of a more stable and sustainable form of international financial currency and dealings which of this will be the ideal candidate today? What is the basis of one that can be called a global currency? The advantage surely must lie with a country or group of countries that is the largest and most resourceful contemporary player in the global market. Today, the economies of the world are more integrated than ever before to the extent countries ideologically on the opposite divide as China and Russia have willingly joined the US$-dominated economic system or better still, they have by careful and considered choice made heavy investments in the US economy - although both these Marxist societies have been vocal proponents of a new financial order. The cash-rich Arab countries too have most of their investments in US$ related ventures. It is believed the Saudi Royal family alone has investments over a trillion US$ (2006 estimates) in the US economy. Until a few decades after WW2 the prime currency was the British Sterling Pound that held sway for over a century till then buoyed by the immense wealth of the combined British Empire. It made way to the dominance of the USA. Already there are signs that some of the repair work done by the Obama administration are showing results. Some leading US banks have regained their profits with some even strong enough to pay back bail-outs from the US Govt under the TARP programme. Leading players in the IT industry have posted encouraging results in their Q1 balance sheets. The recovery will be slow albeit painful but very likely on course. Those economies that paid fancy wages to their own workers largely as a result of adventurism on the part of Trade Unions will have to soon learn to come to earth. It is likely the earlier boast of the Detroit auto industry-TU sources some of their blue-collar workers earn US$80 per hour for an year long 40 weeks a day will be less likely in the future because this is one factors that lead to the collapse of the US auto industry whose void was filled by Asian and European auto makers. Economies that lived on “fictitious capital” and on perennial deficit budgets will have to readjust. The validity of Keynesian economics - discarded by many Capitalist countries in recent years at the dictate of world financial bodies - will re-emerge particularly in the developing economies. So we probably will have to stay within the existing system until the arrival of the next Karl Marx.
Ilaya Seran Senguttuvan
There is little doubt where the preferences of the author lies in terms of the once Capitalist and Socialist economic divide. While the exasperation of almost the entire world in the astonishing near total-collapse of the current financial system is reflected in the article, I wonder how many would buy the author’s theory the present US$-dominated financial system is finished and must go. While this is desirable in favour of a more stable and sustainable form of international financial currency and dealings which of this will be the ideal candidate today? What is the basis of one that can be called a global currency? The advantage surely must lie with a country or group of countries that is the largest and most resourceful contemporary player in the global market. Today, the economies of the world are more integrated than ever before to the extent countries ideologically on the opposite divide as China and Russia have willingly joined the US$-dominated economic system or better still, they have by careful and considered choice made heavy investments in the US economy - although both these Marxist societies have been vocal proponents of a new financial order. The cash-rich Arab countries too have most of their investments in US$ related ventures. It is believed the Saudi Royal family alone has investments over a trillion US$ (2006 estimates) in the US economy. Until a few decades after WW2 the prime currency was the British Sterling Pound that held sway for over a century till then buoyed by the immense wealth of the combined British Empire. It made way to the dominance of the USA. Already there are signs that some of the repair work done by the Obama administration are showing results. Some leading US banks have regained their profits with some even strong enough to pay back bail-outs from the US Govt under the TARP programme. Leading players in the IT industry have posted encouraging results in their Q1 balance sheets. The recovery will be slow albeit painful but very likely on course. Those economies that paid fancy wages to their own workers largely as a result of adventurism on the part of Trade Unions will have to soon learn to come to earth. It is likely the earlier boast of the Detroit auto industry-TU sources some of their blue-collar workers earn US$80 per hour for an year long 40 weeks a day will be less likely in the future because this is one factors that lead to the collapse of the US auto industry whose void was filled by Asian and European auto makers. Economies that lived on “fictitious capital” and on perennial deficit budgets will have to readjust. The validity of Keynesian economics - discarded by many Capitalist countries in recent years at the dictate of world financial bodies - will re-emerge particularly in the developing economies. So we probably will have to stay within the existing system until the arrival of the next Karl Marx.
Ilaya Seran Senguttuvan