Karu Jayasuriya's second somersault

By Sumanasiri LIYANAGE

JAN. 2007: Karu Jayasuriya takes oaths as Minister of Public Administration and Home Affairs before President Mahinda Rajapaksa.

DEC. 2008: Karu Jayasuriya addresses the press after taking over as the Deputy Leader of the United National Party, in the presence of the Leader, Ranil Wickremesinghe.

Karu Jayasuriya made his second somersault a couple days ago. He justified his first big jump over the fence saying that the President's hand should be strengthened in order to defeat and eliminate terrorist threat to national unity posed by the Liberation Tigers of Tamil Eelam. Now, after the second somersault, he says that the left the Government to achieve another objective, improvement of the economic management. In this endeavour he seems to think he should support Ranil Wickremesinghe, the Leader of the Opposition. One may wonder whether Jayasuriya quite the Government because he thinks that his objective of joining the Government, namely, `defeating terrorism' had come to an end. Or does his resignation mean that this previous objective is supplanted by a new objective, the management of the economy. What he said at the press conference at Sirikotha indicates that he goes with the second argument. I do not wish to ennage in a discussion whether defeating terrorism is more important than the management of the economy or vice versa. I focus on different questions. Does the past record indicate that the UNP possesses a better ability and capacity in managing the economy? Can it be said that the UNP presents better industrial policies for the development of the island's economy? Is Ranil Wickremesinghe a better manager? If one can answer these and associated questions in affirmative, whatever lacuna exists in his argument, his second somersault may be justified in the long run. However, I answer those questions in negative. Economic management at macro level includes articulation of macro-economic policies including the industrial policy, the modalities of implementation and the way in which different regulatory mechanisms are integrated. If I put it in a very simple language, I posit that that on the first and third levels, the UNP economic policies in general and policies of the UNP under Ranil Wickremesinghe in particular are much worse than the economic policies of the current administration, my multiple criticisms over the current administration notwithstanding.

The current state of the Sri Lankan economy is an outcome of the incorrect economic policies in the post 1977 period. The Governments led by the two main parties adopted the same policy framework and followed the dictate of the IMF and the World Bank. This is not to say that all the components of this policy package are bad and wrong, some are necessary irrespective of the policy framework that is being adopted. Let me cite one example. Constant and continuous deficit in the Budget and the trade balance may be detrimental to any economy so that relevant corrective measures be taken. Cuba experienced massive budget deficit and sluggish economic growth in the 1990s. The policy makers understood that budget deficit should be reduced and the inflationary pressure of the economy be contained. Cuba corrected those economic ills and was able to increase its economic performance irrespective of the continuous economic blockade by its 'big neighbour' the US. There is no doubt that over-regulation of the Sri Lankan economy in pre-1977 period generated high unemployment, low level capital accumulation and sluggish economic growth. In that context, some steps towards deregulating the economy were imperative for the economy to come out of that impasse. Reactivation of the market was, in such circumstance, a step in right direction. However, the successive governments were governed not by 'market as servo-mechanism', but by market fundamentalism. By market fundamentalism, I mean reduction of the total regulation of the economy to one principle, namely, the market mechanism.

The idea is that deregulated market brings about economic growth, high employment and lower inflation. Sri Lanka since 1977 has not followed the steps of the 'developmental State' in East and South East Asia, but like parrots, repeated mantras of the free and unregulated market constantly chanted by the international financial institutions. Not a single country was able to develop its economy following this free, unregulated market model. Moreover, the current financial crisis that the Western capitalistic countries have been going through is a direct outcome of the deregulated capital markets (See my article in www.lankadissent.lk). Ranil Wickremesinghe tried to implement this market fundamentalist model in Sri Lanka in 2001 more than any of his predecessors.

He and his colleagues continuously argue that infamous 'Regaining Sri lanka' provides the basis for the resolution of all the ills in our economy. I have my serious suspicion over the justification given for the first somersault, but I have no doubt that his justification for the second summersault is absolutely wrong.

When President Mahinda Rajapaksa informed in the introduction to his budget proposal that "the neo-liberal gloablisation process that was followed by (Sri Lanka) for over 30 years paid economic dividend only to a small element of our society", he was absolutely correct. So an alternative policy paradigm that ensures interlocking balance and congruence of market, State co-operative and political regulatory mechanisms is needed to achieve high and balanced economic growth depending on carefully selected "Growth Augmented Economic Activities" (GAEA).

Economy cannot be developed by promoting any market-oriented economic activities or blindly following flawed theory of comparative advantage. Innovative thinking is need to identify "growth augmented economic activities", i.e., economic activities that are characterised by increasing returns, technological growth and cluster effects.

Economic incentives, protection from foreign competition and making those measures performance based are the most important aspects that the Government and the private sector jointly work out. One may question the activities identified by the present government, but the UNP does not even have such a perspective. UNP stands for non-productionist, trade based economy.

Ranil Wickremesinghe knew very well that Jayasuriya's argument to re-join the UNP is not adequate so that at the same press conference he tried to add that building Sri Lanka entails not only economic development , but also a different value system.

Nice words! The way in which new posts of the party were allocated by the 'leader' showed very clearly what he means by this new value system, a system that lacks transparency, accountability and inner-party democracy.

One may also refer to the Supreme Court judgement on Dockyard case filed by Vasudeva Nanayakkara to get some idea about the UNP's economic management.

(The writer teaches political economy at the University of Peradeniya.)