is neo-colonialism in disguise
By The Free Thinker
The debate on the most appropriate model for the national economic
policy continues to heat up and the cross-fire between the supporters
of the two proposed models continues. This article evaluates these
two models, not from an economic textbook perspective, but rather
from a “systemic” perspective. “Neoliberalism”
is nothing else but “neo-colonialism” in disguise. Market
fundamentalism lacks a human face. Unrealistic GDP growth does not
make much sense if it marginalises major segments of the community
and erodes social values.
party wins the Presidential and likely general elections, the challenge
remains the same - to address issues concerning economic, political,
social, cultural and technological development in a holistic manner.
The absence of this would result in instability and an inability
to provide a better future for all Sri Lankans.
It came as no surprise that the UNP is yet again pursuing an economic
policy based on the ideology of “neo-liberal economic globalisation”.
While the term ‘neo-liberal’ is not used explicitly,
the core elements of UNP’s economic strategy leave no doubt
that it has indeed been based on neo-liberal (where the primary
focus is on economic growth through liberalisation of the market
and the reduction of government intervention) economic ideology,
despite being couched in populist pro-poor sentiment. As expected,
large sections of the Sri Lankan business community (often the biggest
beneficiaries from free market economic policies) gleefully welcomed
it as the panacea for all the nation’s ills.
UNP is advocating a “top-down” approach with accelerated
economic growth eventually ‘trickling down’ as benefits
to the masses. Central to the election pledge is the commitment
for the creation and sustenance of a GDP growth rate of 10% over
the next 10 years. High levels of economic growth do not automatically
generate social and environmental benefits. In fact experience in
most less developed nations has proved that all too often the converse
is true. Besides, GDP does not measure quality of life, social progress,
poverty eradication, human development or environmental quality.
It is clear that the UNP has yet again failed to empathise with
the masses and the almost 43% of Sri Lankans who live on less than
US$ 2 per day.
drivers of neo-liberal economic policies effectively redistribute
wealth from the already impoverished to the rich, aggravating poverty
and inequality, thus preventing the implementation of pro-poor poverty
alleviation, human development and national development strategies.
Democracy will also be eroded, as wealth, and thus power is concentrated
in fewer and fewer hands. This is a threat to social cohesion, since
if possession of capital equates to possession of power, then the
minority (often urban) elite would ultimately control and conceivably
coerce the thinking, beliefs, knowledge and behaviour of the impoverished
(often rural) majority, creating a vicious cycle of being captured
in the poverty trap.
pledge to restore peace and harmony may only be wishful thinking
if it continues to advocate economic policies which are responsible
for creating economic disparities and socio-economic marginalisation
in the first place.
History shows that the UNP’s open economic policies (post
1997 and 2002/2004) have left the country very dependent on the
global economy and with a heavy debt burden. The disparity in wealth
distribution has widened. The UNP policies are antithetical to the
interests of the poor, both urban and rural. The ‘middle-class’
in this country has almost disappeared. The rich have got richer
(much richer) at the expense of the helpless poor. The private sector
has a very narrow base (heavily weighted towards the large and mega
sectors) and the country is still awaiting the so-called “trickle-down”
effect, which the UNP has been speaking about since 1977.
The primary problem with reducing the government’s control
however is that democratically elected governments are accountable
to its citizens. The market, foreign investors, large multi-national
corporations, and multi-lateral development banks are NOT. It is
evident that yet again, the UNP has been misled by the architects
of global economic hegemony, the global financial institutions institutions
(IMF and World Bank).
of the main arguments in support of the neoliberalistic approach
is the ‘win-win’ theory of comparative advantage –i.e:
that countries will benefit by investing in industries in which
they produce goods most efficiently. This however is also its most
significant flaw. The reality is that in this ‘information
era’ which facilitates the rapid ‘mobility of capital’,
it is increasingly difficult for ‘less developed nations’
(those with consequently unstable economies, low productivity and
poor infrastructure) to attract or retain mobile investment capital.
is the law of the jungle, where the strongest (in this case the
more developed nations) not only survive but are also the only winners.
The prevailing form of neoliberal economy reduces the self-reliance
of nations and encourages a high dependence on the global economy.
It results in a loss of economic, political and social independence.
It is thus inappropriate for less developed nations who will remain
economic slaves of the West forever.
The UNP believes that an open-door policy towards FDI, and the ability
to offer competitive terms to attract investors, is one of the major
factors contributing towards economic growth. While this is not
totally incorrect it must be understood that harnessing domestic
resources for development is a more sustainable path towards development.
It is also wrong to assume that the capital inflow is substantial.
A big portion of the capital is borrowed from local banks.
SLFP pledges to implement the “carrot and stick” approach.
Providing enough carrots to attract investors, but using the ‘stick’
when investors try to create a win/lose scenario in their favour.
FDIs do not come as a matter of charity; they come to make profits,
to make use of local resources, to take advantage of cheap or skilled
local labour, or to capture the local markets against other foreign
competitors, indeed even against local enterprises. In Sri Lanka
we have seen this in the very successful local beverage (soft drinks)
market, where household names such as “Elephant House”
were replaced by the likes of Coca Cola and Pepsi. FDI therefore
has to be attracted on more fair and equitable terms that create
a win/win situation for both the investors and the host nation.
The fundamental rationale behind privatisation is that the public
sector is corrupt and inefficient. This may be true. However to
assume that the private sector is totally honest and efficient is
an understatement and a seriously flawed assumption. In Sri Lanka
we have witnessed fall-outs of unregulated privatisation. Six privatised
companies (Mattegoda, Veyangoda, Kantalai, Hingurana, Bogala Graphite,
and Kahatagaha Mines), were totally abandoned by their new owners
– some of them by stripping their assets. The case of Kabool
Lanka Textile Mills is another case in point. The investors left
with the bank’s having to shoulder a very high debt burden.
The privatisation of our education system has created a very dangerous
trend too. It has created social segregation and an erosion of our
The liberalisation of capital markets can have very damaging effects
on local markets and increase the volatility of the economy. The
Asian financial crisis was a prime example when this occured. The
sudden and unexpected “flight of capital” depleted the
reserves of nations overnight and resulted in wide spread social
When a nation is ‘down and out’ the IMF recommends Market-based
Pricing, a bureaucratic term for increasing the prices of food,
water, and utilities. This cruel policy tightens the noose around
the neck of an already suffering nation. The result of IMF removing
food and fuel subsidies in Indonesia in 1998 created civil commotion.
It almost appears that the IMF predicts this scenario but pursues
this strategy nevertheless for obvious reasons. The fact is that
while there are losers, there are winners too. Multinational corporations
then move in and pick off valuable assets at throw-away prices.
Debt burdened government’s are advised to implement radical
austerity measures designed to reduce the need for assistance and
increase the government’s ability to pay off debts. In practice
however this generally means cutting spending on education, health
care and social welfare. Lacking proper educational opportunities
and healthcare, low income people suffer. Lack of education, poor
health and nutrition also inhibits domestic economic growth. This
leads to a vicious cycle in which debt reinforces poverty and poverty
increases dependence on external aid which increases debt levels.
with a human face
The role of Government should not be restricted to supporting the
business community alone. The business community does not have to
deal with unemployment, the national education and health systems,
the next generation, foreign policy, extremist groups or sociological
development. It is the government’s role to look after the
interests of all stakeholders and this is the responsibility that
the SLFP is committed to, in addition to being a ‘business-friendly’
government. The SLFP has vowed to establish a system of governance
that is fair, equitable and sustainable, while maintaining the highest
level of responsibility, accountability and transparency.
SLFP is committed to delivering what is best suited for economic
growth. But growth must have a human face. It must benefit the majority
of the people, and this is what they intend to achieve. GDP growth
alone does not alleviate poverty or reduce uneployment. The ‘delivery
mechanism’ is more crucial than the debate over the interpretation
of the various economic models. It is results that matter, and the
electorate judges government’s by performance and not rhetoric.
The SLFP’s economic policies differ from that of the UNF in
that it is not the “one-size fits all” neo-liberal model,
but rather a more customised business-friendly model that suits
Growth and development are not the same thing. Growth can take place
without development and vice-versa. Growth, strictly speaking, is
an increase in size or number. There are numerous examples of companies
(or indeed people and nations) that have grown exponentially but
have not developed. They are vulnerable and lack the internal capability
to resist threat or challenge. Development on the other hand is
not a condition or state but a process. It is an increase in capacity,
ability, desire and potential. It is more a matter of psychological
maturity, motivation, knowledge, understanding and wisdom. It is
about the freedom of choice and physical and mental emancipation.
“The fact that globalisation has come does not mean we should
sit by and watch as predators destroy us” -- Mahathir Mohamed,
Ex-Prime Minister of Malaysia. These powerful words capture it all.
Malaysia experienced an attack by predators in 1997. It was only
the wisdom of Dr. Mahathir that saved that nation from the fate
that befell countries like Indonesia and Thailand who blindly followed
the IMF advice.
neo-liberal economic globalisation may suit developed nations with
competitive advantages, it is totally unsuitable for a less developed
nation such as Sri Lanka. This inflexible approach has proved particularly
difficult for many less developed nations wishing to build up infant
industries, promote local employment, protect cultural diversity
and/ or restrict resource exports. This approach is very ‘extremist’
and therefore conflicts with sustainable sociological development.
It leads to an increasing concentration of wealth and power in the
hands of the few, and the marginalisation and impoverishment of
would make Sri Lanka puppets in the hands of vested Western interests
and plunge us deeper into the whirlpool of aid dependence. The over-dependence
on the global economy, could result in turning Sri Lanka into a
“Banana Republic” (remember the mostly American banana
growers who manipulated the governments in South America), with
large multi-national conglomerates controlling our domestic and
foreign policies with total disregard for our people.
We seem to forget that it is the flawed policies of the neoliberal
model that fuelled social unrest in this country, namely the rising
of the JVP and the LTTE in the post-1997 era. This approach creates
‘tunnel vision’. The lack of a holistic approach to
the national economic policy could have far reaching negative implications
for the country.
economic liberalisation has its merits of course, and it is not
suggested that we “throw the baby out with the bathwater”.
What is being proposed is that this model be customised to meet
the specific strategic needs of this country based on its competitiveness
and stage of development. This is exactly what the SLFP intends
to do. The answer is the “balanced economic” model.
The challenge is thus to create an environment that balances sustainable
economic growth complemented with social development.
(Note: The author sent us a 5,800 word article which had to be reduced
due to lack of space)