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Challenge of economic development

During his election campaign President Mahinda Rajapakse promised eight percent economic growth. He also promised a pro-poor strategy for economic development.

Such a strategy would have to go beyond the framework of the hitherto practised neoliberal policies. President J. R. Jayawardene introduced the open economy, which turned out to be nothing more than crony capitalism. President Chandrika Bandaranaike promised an open economy with a human face.

Now after nearly three decades of the open economy both with and without the human face we see the poor poorer and the rich richer. Nor has the country witnessed a dramatic rise in growth rates in comparison with the preceding period. In fact the human face is yet to be seen.

While economists, politicians and financial bureaucrats dangle statistics of GDP growth, per capita income etc. the people suffer, especially in the hinterland and in the estates. The development is so skewed that beyond 25 miles of Colombo city or even within that limit appalling poverty strikes the eye.

The emphasis was on export-oriented growth. Yet export of commodities could hardly produce a surplus for the national economy. Though non-traditional exports like garments topped the export list the local input was a bare minimum with so many import inputs going into their production. Only the export of human capital - majority domestic workers, did bring in sizeable foreign exchange for the country.

The more one exports the less the revenue one gets due to the unequal terms of trade in the world market. Developed countries are maintaining subsidies for their industry and agriculture while pressurising the developing countries to open their markets for foreign goods. This has led to the collapse of many an indigenous industry and has made agriculture non-sustainable.

The new government will have to face all these challenges if the economy is to grow at eight percent. This requires bigger investment. Yet investments cannot be attracted without large development of both physical and social infrastructure.

The private sector, which is supposed to be the engine of growth under the open economy, has failed to invest in physical infrastructure due to high outlays and slow returns. On the other hand the World Bank and other institutions at the helm of the Washington Consensus do not favour increased public spending on social infrastructure like health and education.

The downsizing of the government and the contraction of the public sector have its own repercussions affecting the people adversely.

Unless there is a radical departure from these fatalistic policies one cannot foresee rapid economic development. Infrastructure development must be given top priority and the state has to finance the bulk of investment in this field.

If we do not invest in the development of technology whatever gains derived from enhanced production would be swallowed by the uneven terms of trade in the world market. This could be overcome only by developing cutting-edge technology in sectors of the economy like the tea industry, gems and jewellery manufacture in which possibilities exist for us to become world leaders.

This would require increasing the expenditure on Research and Development and encouraging innovation in science and technology. One must not limit oneself to expecting technology transfers from the developed countries but must strive for indigenous development of technology based on the development of information technology and other recent developments in the world. Our Universities and research institutions should be integrated so that resources could be more rationally used for this purpose.

Our external relations should focus on the development of regional integration and the development of alliances with forward moving countries of the South that charter alternative paths of development that secure better prospects for developing countries.

One last word, the National Question has to be solved if we are to seriously think of developing the economy rapidly and ensuring a better tomorrow for our people. Only then would we be able to reduce the huge defence outlays that have become a drag on the economy.

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