Neo-liberalism 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.

Whichever 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.

UNPs neo-liberalism
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.

The 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.

The 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.

Social cohesion
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.

UNP’s 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.

Wealth distribution
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.

State intervention
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).

One 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.

It 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.

Western dominance
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.

The 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 core values.

Capital market liberalisation
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 unrest.

Market-based Pricing
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.

Curbing state spending
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.

Development 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.

The 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 Sri Lanka.

Growth and development
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.

While 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 the many.

It 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.

Neoliberal 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)

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