17th December 2000
C. S. looks at the bourgeoisie contribution in colonial times
In 1915, at the height of the riots, Sir Ponnambalam Ramanathan spoke in the Legislative Council on behalf of the Senanayake brothers who were held in detention. The Senanayakes belonged to the newly emerging business class with close associations to the Buddhist Revival Movement. Their wealth and their influence with the people was resented by the feudal officials serving the colonial government, the Mudliyars. Sir Christoffel Obeyesekere, a representative of this class, who was the appointed member in the Council to represent the low-country Sinhalese replied to Ramanathan, referring to the Senanayakes as "nobodies trying to be somebodies".
This is the title of the book by Kumari Jayawardena on the rise of the new elite during the colonial period. It is a welcome addition to the other books, dealing with the gestation of a new elite in the l9th and early 20th century, with their conflict with the old elite, the Mudliyars, and with their influence in politics, leading to the independence movement. The book complements E.F.C. Ludowyke's Modern History of Ceylon, The University of Ceylon's History of Sri Lanka, Vol. III, the British Period, Lennox Mills' Ceylon Under British Rule 1796-1832, K.M. de Silva's History of Sri Lanka and the Biography of J.R. Jayewardene, H.A.J. Hulugalle's Biographies of D.R. Wijewardene and D.S. Senanayake, Yasmin Gunaratne's Relative Merits, James Manor's The Expedient Utopian: Bandaranaike of Ceylon, I.O.S. Weerawardena's Politics of Ceylon 1931-1946, and the many contributions of Michael Roberts.
The beginning of the elite formation goes back to 1833 when the British government implemented the recommendation of the Colebrooke-Cameron Commission. Until then, all economic activity in the island was controlled by the colonial government. The Government had a monopoly on cinnamon, arrack and salt. Colebrooke and Cameron recommended that the government withdraw, increasingly from economic activity and that that activity be open to development by private capital. The government's role was to create the enabling environment for the private sector to operate. Colebrooke hoped this would encourage British and Indian capital to develop Sri Lanka. He also recommended that Rajakariya be abolished, thus freeing the labour market, and that crown land be made available for plantations.
The British government accepted these recommendations and this was the start of laissez-faire capitalism in Sri Lanka. The development of plantations through private capital brought about an economic boom. As a result, many Sri Lankan businessmen were able to climb up the economic ladder. Many 'nobodies' became 'somebodies'. But this is inherent in any capitalist system. The free market competition offers opportunities at all times. Those who grasp these opportunities succeed. The tide when taken at the flood always leads to fortune. It is an on-going process. Both Alfred House and House of Fashion tells the same story. Nevertheless, a study of this period is important because this emerging group had a bigger influence fashioning modern Sri Lanka than any succeeding class.
Unfortunately, this book deals with only one aspect of money making. How the money was made by the process of renting out from the colonial government the annual right to collect tolls on the roads and ferries, to purchase, distribute and retail arrack, to collect paddy, fish and salt. Renting together with retail trade, construction and trading with Indians were the only activities available to the local traders. They utilised these means to accumulate capital. But it was a long process. The 1840s coffee boom and subsequent plantation boom enabled many to make their fortunes. Some were ready, with capital accumulated from renting and other activities to go into new fields. Others used it as an additional source of money which was oh-so welcome, when there were problems of liquidity.
Services needed to open up plantations, such as collecting coffee beans from the smallscale village farmer, labour contracts, transport, retail trade in the new bazaar towns, shops in Colombo and Kandy, the construction trade, ship chandlering, bullock driven checckus, padda boats and legal services were many of the avenues that were opening up to the local capitalist. The plantations processed agriculture products for the European and American markets, where good prices and higher profits were obtained. Such profits were further supplemented by a plumbago industry to supply the ever increasing demands of the West. This industry was dominated by the local capitalists, all of whom put their money back into plantations. Nearly a million acres of land was opened in a little over half a century, the largest extent in the history of the country, much more than the lands cleared for the Mahaweli programme. These lands were planted with coffee, tea, rubber and coconut, all bringing in high European prices.
Plumbago was another source of good prices, as were the construction of roads, railways, towns and a harbour. More and more steamships were calling in at Colombo which was a main port on the way to the Orient or Australia. Many fortunes were made in this environment. It could only be compared to the boom which took place a century later when the economy was liberalised in 1978. Rs. 55 billion was spent in 12 years to construct the Mahaweli Scheme. This brought in money to many local contractors and sub-contractors. New businesses sprang up to service and supply the Mahaweli programme. A new apparel industry emerged, similar to the plantation industry a century back. The earnings from garments increased from a few million rupees in 1978 to Rs. 170 billion by 2000. Remittances from foreign employment increased from zero to Rs. 80 billion in 20 years. The construction of free trade zones, hospitals, universities, hotel, road, harbour resulted in a booming stock market. The privatisation and development of state enterprises brought in a great deal of money in a short time to the economy. This in turn enabled many to make a fortune. A parallel which makes it possible to understand how the first group to become 'somebodies' made their mark.
Charles Henry de Soysa's grandfather, Jeronis Joseph Soysa initially made his money by establishing a cartel to control the bullock cart transport on the Kandy Road. This monopoly proved lucrative until the rail-road was built. Then he put his money into coffee plantation. Jeronis Soysa and C.H. de Soysa also belonged to a cartel which controlled the arrack rents in the Central Province and parts of the Western Province. After some time he left the cartel of the renting business. Certainly the income from renting would have been welcome when he had to tide over the coffee blight and until his tea, coconut and rubber plantations matured into bearing. Therefore he concentrated on plantations.
Don Charles Attygalle worked for the Botanical Gardens. He also supplied plants to European planters and businessmen. One day while searching for extra plants in Dodangaslanda, he came across a rich vein of graphite. Attygalle started Sri Lanka's first graphite mine in Kahatagaha. There was no looking back. He made his money and also invested in coconut plantations. His three daughters married F.R. Senanayake, John Kotelawala, the father of Sir John, and Col. T.G. Jayewardene, the uncle of J.R. Jayewardene.
Another plumbago merchant who put his earnings back into plantation was Don Spater Senanayake, the father of F.R. and D.S. He specialised in surface mining. The Senanayakes were experts in graphite mining. D.S. Senanayake was a member of a team sent by the colonial government to Madagascar to advise them on starting a graphite industry. Their work laid the basis for a flourishing graphite industry which carries on even today. Jacob de Mel also made his money on graphite. He started the Ragedera Mines. Then he planted the surrounding areas of Hiriyala and Mawathagama with thousands of acres of coconut. Melsiripura is named in his memory.
Tudugalle Don Philip Wijewardene made his fortune from timber. With the opening up of further plantations, the price of timber fell rapidly. Don Philip cornered this market. He even undertook to clear the plantations thereby reducing his purchase price further. He dominated the clearing of plantations in Hatton, Maskeliya, Talawakelle, Yatiyantota, Avissawella. The logs were transported to the Kelaniya River and then floated down to Sedawatte. This reduced his transport costs subtantially. These logs were then processed in his factory. He became the chief supplier of timber to the Government. He provided the timber for the Colombo breakwaters and sleepers for the Railways. He supplied timber to all the Mudliyars who were breaking down their old Dutch mansions and building houses of British design. He even supplied masts to the ships that sailed into Colombo. He invested these profits in coconut plantations from Minuwangoda to Kalawewa. The plantations were situated close to the Puttalam canal or the railway, thereby reducing transport costs.
Don Carolis Hewavitharana was another who made his money in timber. He was also able to purchase timber cheap, but he went in for value addition. Hewavitharana set up a new furniture factory to provide the furniture needed during a big boom both for houses and businesses. The firm was named H. Don Carolis. The profit from this business were re-invested in plantations in the South. This included Southern tea. Hewavitharana's huge furniture business financed Buddhist philanthropic activities. His son Anangarika Dharmapala used his share of the fortune to start the Maha Bodhi Society.
There were many others who made their money in the South from tea and plumbago. These included the Wijesinghes, Ranaweeras, Mudliyar Samarawickrema and Ratnayake families, to mention a few. The second generation also ventured into many other businesses. Richard Peiris started the company of the same name which is today a leading business organisation. A.E. de Silva, Cyril de Zoysa, Leo Fernando, B.J. Fernando, M.U. Hemachandra, Mudliyar Madananayake were some of those who went into the motor transport sector. Cyril de Zoysa started the Associated Motorways Group. D.P.A. Wijewardene expanded his father's timber trade and finally ended up owning a ship. One brother DL went into oil mills and industry while the other brother DR started the Lake House Newspapers. Upali Wijewardene continued into the third generation starting the Upali Group.
The Sri Lankan capital- ists' decision to invest in plantations has drawn adverse comments. They were criticised for lacking vision and dynamism. While their Indian counterparts went into industry, Sri Lankans did not have the benefit of economies of scale and large markets, neither did they have local resources such as coal, iron ore and cotton. But this criticism derives from the fashionable thinking of British socialist economists who regarded plantations as agriculture. But Gunnar Myrdal, the author of Asian Dilemma among many others, has always categorised plantations as a part of the modern economy, and as a part of the industrialisation process. Plantation required high capital and management skills and technology. The agricultural product had to undergo processing before it reached the market. While Europe industrialised its manufacture, Asia industrialised its agriculture. European agriculture remained a peasant agriculture until the 1960s. According to the first ten-year plan prepared after independence by the Ceylon National Planning Council, the output for an active worker in the plantation was several times higher than in all other sectors including agriculture and industry. Even in India in 1955-58, the rate of gross profit on total capital employed in the plantation companies listed in the Stock Exchange was 15% higher than the 8% of the listed companies. Indian industrialisation started from the late 1920 for three different reasons:
(1) The Swadeshi movement to locally produce goods started by Mahatma Gandhi with the backing of local businessmen.
(2) A discriminatory tariff imposed by the British government to keep the Japanese out of the Indian market.
(3) The commencement of an armament industry during World War II to supply the Allied forces in India and Asia. But even at Independence, industry had only a small share of the Indian economy. It was left to Nehru to start the industrialisation of India. In the 20th century plantations benefited from three boom periods which gave high prices. These were World War I, World War II and the Korean War. In the 40 years between 1914 and 1959, Sri Lankan plantations had 16 boom years, and five years of depression. The plantations flourished and the revenue from plantations paid for the Land Colonization Scheme and the Gal Oya Scheme of D.S. Senanayake, the building of the Colombo harbour, roads, telecommunication. More than all these, the revenues also financed Free Education and Free Health.
At a time when the colonial government did not set aside money for charitable and religious work, this elite contributed a part of their fortune for these activities. Otherwise there would have been no religious and charitable activity in Sri Lanka in the late 19th century and the 1st half of the 20th century. The Ruwanwelisaya and the Kelaniya Raja Maha Vihare were rebuilt through private donations. Many new temples, kovils and churches were built. Much money was also endowed to orphanages and homes for the aged as a means of acquiring merit. A number of hospitals were built in rural areas. The De Soysa family contributed both the De Soysa Maternity Hospital in Colombo and the Prince of Wales College Moratuwa and the Soysaramaya.
A large share of these private donations was channelled into education. A large number of vernacular (Sinhalese and Tamil) schools was built in the villages enabling rural students to obtain an education. The government gave a grant to every vernacular school to cover the cost of teaching. Therefore even before the C.W.W. Kannangara reforms, education in those schools was free. The local businessmen and landowners both big and small provided the buildings, equipment and the books. It was their contribution which made an extensive local network of schools possible.
They also funded the establishment of many of the leading schools today such as Ananda, Visakha, Nalanda, Dharmashoka, Mahinda, Rahula, Maliyadeva, Dharmaraja, Girls' High School, S. Thomas', Ladies', Bishop's, Trinity, Richmond, Wesley, Methodist, St. Joseph's, St. Peter's, St. Benedict's, St. Bridget's, Joseph Vaz, Hindu College, Jaffna College and Zahira College, to name a few.
Even the initiative to build the University of Ceylon was taken by the local capitalists, educationists and professionals. In this instance there was no division between nobodies and somebodies. They divided on the location of a site, Colombo or Peradeniya. The chairman of the successful campaign for a Peradeniya site was Maha Mudliyar Solomon Dias Bandaranaike, the chief campaigner was D.R. Wijewardene and their spokesman in the State Council was D.B. Jayatilleke. Whichever site they backed, all of them made substantial contributions in money and in libraries to the New University. The University Halls are named after these benefactors.
Both the Indian and the Sri Lankan independence movement was backed by the local capitalists. The contribution these Sri Lankans made to the independence movement cannot be belittled.
They funded both the Temperance movement and the Independence movement. They gave money to establish the Vidyodaya, Vidyalankara and the Bellagalle Pirivenas. They funded Ven. Hikkaduwa Sri Sumangala, Migettuwatte Gunananda. The Lay Council of the Ramanya Nikaya was headed by a member of the Senanayake family until the death of Dudley Senanayake in 1973. The Anagarika Dharmapala and the Hewavitharana family funded the Maha Bodhi Society.
By this time many had moved to plantations and other businesses which required more sophisticated systems of management and earned larger profits. The colonial government became apprehensive of the new elite and attempted to crush them. After the 1915 riots, all the properties belonging to wealthy Sinhalese within the Colombo Municipality were assessed and a levy made on them as compensation for riot damage. D.E. Pedris, the son of a wealthy shipchandler and a member of the town guard was executed before a firing squad. But this did not stop the agitation for reform. It was strengthened by the mass circulation newspapers of Lake House which took the message to every corner of the island. Many Sinhalese writers such as Martin Wickremesinghe, D.B. Dhanapala, Piyasena Nissanka and E.R. Sarathchandra all worked at one time at Lake House. The novels written by them were published by M.D. Gunasena.
The political campaign of the Ceylon National Congress was funded by the plumbago mines. It was said that the profits from plumbago were invested in the independence of Sri Lanka. One of the last events prior to independence was a dinner hosted to the Soulbury Commission by Justin Kotelawala. D.S. Senanayake had decided to boycott the Commission saying that the demand for self-governing Dominion was non-negotiable.
D.S. Senanayake dealt with the Commissioners through D.R. Wijewardene and Oliver Goonetillake. The dinner was arranged at his insistence by Justin who was the brother of the Minister of Public Works John Kotelawala, a Minister boycotting the Commission. According to D.B. Dhanapala, the Commissioners were bewildered by the lavishness of hospitality as the champagne flowed freely and the music kept rhythm with the merriment. Not a word was spoken about politics and the Constitution in the making. But, it is said, that each Commissioner was, in turn, offered the Governor Generalship in case the Commission happened to recommend a Dominion Constitution.
By the time of World War II in 1939, the newly emerged local elite enabled Sri Lanka to obtain a large share of the colony's economy. They dominated the coconut plantation, they had a large share of rubber and Southern Province tea. Thanks to C.H. de Soysa, they had made inroads into the Nuwara Eliya and Badulla tea estates. They controlled plumbago, the motor transport and retail trade, the construction trade, property development, the printing trade and the newspaper business and they went into Insurance. After the depression the Sri Lankans had also formed their own banks including the Bank of Ceylon. Only few countries in Asia had an independent capitalist class capable of influencing the economy and political developments. Sri Lanka was one of them. The other three were Japan, China and India.
The achievement of the Sri Lankans has to be recognised because they succeeded in spite of not having the economic advantages of the larger countries. The war destroyed the Japanese capitalist. The Communist Revolution forced the Chinese capitalist to relocate in Taiwan, Hongkong, Singapore and the rest of South-East Asia. The Sri Lankan capitalist made money from the war supplying rubber, tea, coconut, plumbago, timber and a host of services. After the fall of South-East Asia, Sri Lanka was the only country supplying rubber to the allied cause.
After independence, capital was required to build the national economies of the new Asian nations. All non-Communist countries set about promoting the private sector and capital formation. The Japanese showed the way by re-building after the war. The World Bank advised Asian countries including Japan and Sri Lanka. Sri Lanka was told that industry had no future and that we should focus on agriculture. The Japanese were advised not to go into the automobile industry. In ten years, the Japanese had created a successful export- led industrialisation spearheaded by transistor radios, toys, and automobiles. With the liberalisation of international trade in the l960's following the Kennedy round of talks and the General Agreement on Trade and Tariff, the way was cleared for the smaller Asian nations in East, South East and South Asia to industrialise and develop. In many of these countries, small capitalist classes had developed. Combined with foreign investment, state assistance and promotion of private industry, these economies took off and did not look back.
In Sri Lanka it was a different story. The local capitalists were targeted for destruction by forces behind a new government which believed that the capitalists formed the backbone of the UNP. They believed that without their funding, the UNP would collapse. So successive anti-UNP coalitions led by Mr. and Mrs. Bandaranaike, the 'somebodies' brought in legislation to destroy the 'nobodies'.
They acquired bus transport, the Colombo harbour, the private schools, the Bank of Ceylon, the insurance, the import export trade, the retail trade, the lorry transport, the textile factories, the tile factories, the plantations, the other agricultural lands and houses, the Lake House Press, cinema, even Hotel de Buhari, a hotel specialising in Muslim food. A ceiling was imposed on capital in 1970. Monthly income was limited to Rs. 2,500/. Ownership of car tyres was limited to two tyres a year. A century of capital formation was broken in a decade and a half.
The UNP survived to win the elections of 1977 but the national economy was largely destroyed. The damage could not be repaired easily. The other Asian countries, many who were poorer than us, had overtaken us.
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In 1977 J.R. Jayewar–dene had to invite foreign investment and obtain foreign aid to develop the economy. As a result many new opportunities arose. Those who had lost their capital started the process of reaccumulating capital. But more than that a large number of new people came up the ladder. 'Nobodies' once again began to become 'somebodies' - from village level businessmen some who earned their capital from Middle East employment became multi millionaires in the garment trade and the share market. President Premadasa pushed it even further. As a deliberate policy, he created a new capitalist class. The construction industry and the 200 garment factories were tools of that policy.
In 1994, the UNP administration came to an end. The third Bandaranaike became the head of Government. But Chandrika Bandaranaike Kumaratunga did not follow the footsteps of her parents. She had learned by their experience. The world was changing. Free markets and collaboration were the order of the day.
At last the 'nobodies' and the 'somebodies' were on the same wavelength. But the people paid a heavy price for that learning curve.
Per capital GDP (US$) comparison 1970 1982 Sri Lanka 252 314 Indonesia 91 643 Malaysia 405 1853 Thailand 177 755 Philippines 179 731 Singapore 896 6368 Korea 275 1893 Taiwan 426 2631
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