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| Sunday, 5 December 2004 |
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Solemn Thoughts Debt salesmen and economic holocaust in Sri Lanka - Part 3 : Fate of usury vs. reformed banking by Wendell Solomons Nehemiah continues his exhortation during the rebuilding of Jerusalem: '... I pray you, let us leave off this usury.' '... Then I shook out the fold of my garment and said, "So may God shake out each man from his house, and from his property, who does not perform this promise. Even thus may he be shaken out and emptied." ' (Nehemiah 5:5-13 NKJ) The decay of a city and impoverishment of its population to a degree when families could be traded as slaves - that helps us reason why money lending was tabooed by Nehemiah and also spurned by Siddartha Gautama when he taught in that very era. In time, the exhortation of Nehemiah was to see drama in Jerusalem. A split in the ranks of powerful money lenders could cause a split in community. In 70 AD, the rebuilt Jerusalem was split through inner warfare, in which two Jewish leaders supported two competing coins, one - silver and the other - copper. Roman General Titus Flavius Vespasianus waited outside the city for the two sides to weaken each other. He then walked into Jerusalem and captured it. Regulation of credit and interest That discussion must now propel us rapidly through history to the British period. The British period reached its maturity when transport and communications did not hinder the maintenance of a common money and credit system. A private Central bank was allowed by English statute in 1694 . The Bank of England group did not rock the boat in which they were seated. In that context, they set one and the same interest rate country-wide. The Bank of England was devised as a financial coalition or society of the financial clans that entered Britain from Southern Europe via Holland with the sanction of the debaucher and wastrel, King Henry VIII. In his day the Uncle-Niece married finance clans sunk anchor and became a powerful force behind the throne. Yet, executive power in England was farmed out to a Prime Minister. The position of the Prime Minister and positions of Members of Parliament had to be won at elections every four years. In contrast to the absolute monarchy, this led Britain into improved social balance between town and country. As a result of these and other state and civic arrangements, usury and loan sharking declined. Britain became manufactory to the world, prospered in overseas trade and conquest. It is in such new circumstances that today's giant banking systems arose and re-tracked the world. The Ceylonese experienced the reformed system of banking of the 20th Century and became interested in having access to it. Sir Andrew Caldecott and his predecessor Governor Sir Reginald Stubbs supported this interest. Reformed credit system and island Ceylon In the early 1950s, if Chettiars and Afghans charged 10 per cent and upwards per month, the Bank of Ceylon was granting commercial loans at around 4 per cent per annum. You see a world of difference in the rates, the first a monthly rate and the latter - an annual one. After the Bank of Ceylon commenced business in 1939, larger events arose in the world. World War II arose. Then came a sea of change following the 1948 grant of independence to the island. Though the difference between rates of interest was manifestly clear, the Bank of Ceylon, transferred to local management by the British, was not opening branches to multiply the benefit for business development. The reasons for sluggishness on the part of its first local management need separate investigation. However, there was a senior banker at the Bank of Ceylon, its Inspector of Branches, who was prepared to attend to the technical groundwork of setting up another bank. A man of diverse interests, Wilmir H. Solomons, scholar, sportsman, organist and lay preacher, accepted an appointment in 1961 as General Manager to set up a proposed alternative, state-owned bank. He drew several other banking professionals to the new People's Bank. Dozens of branches came up and then in a few years, hundreds. This expansion released the energies of bankers at the Bank of Ceylon. Today both state banks have expanded to above eight hundred branches. No other service organisations have spread as rapidly as the banks did in the island. If taken in relation to population size, speaking internationally there was record activism visible - and in the state sector (shadow-boxed from 1976 by spin-doctor Milton Friedman.) With the rise of banking, several manufacturing and trading businesses were founded. At that time, speaking internationally, there was opportunity for the island economy to develop using the formula of East Asia. The most rapid means known for economic development then was the formula of priority for manufacturing industry so vividly illustrated by Japan's rise from the ashes of World War II. Rapid growth followed the use of manufacturing industry shortly afterwards in Hong Kong, Taiwan, Korea, Malaysia and Singapore. |
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