Harvard magic in SL take-off
View(s):Will the Harvard magic combined with George Soros prescriptions work in Sri Lanka’s favour in the widely-expected economic take-off? No one denies the need to leapfrog the development path to catch up with more developed nations some of whom were far behind this country 50 years ago. No one also denies that Sri Lanka must get the best advice and brains possible, either locally or foreign, in its path to progress. And, there is little doubt that the combined strength of the country’s two main parties under a Maithripala-Ranil administration is the best bet for such a take-off.
These economic initiatives however are fraught with new challenges with the global economy facing a crisis. Stock markets are down (one of the reasons why the market in Colombo has been subdued over the past year), oil prices have crashed (which puts Sri Lanka in a Catch 22 situation because West Asian consumers have less wealth to buy tea), China’s economy is facing major hurdles and an improving US economy with higher interest rates means ‘hot’ foreign money in Sri Lanka will head westwards. Foreign funds are pulling out of the Colombo bourse with recent sales of Commercial Bank and Cargill stocks, among others.
The policy strategy is now focused on a 3-year plan being put together by a team of foreign and local experts driven by Harvard University academics led by Prof. Ricardo Hausmann, keynote speaker at the Sri Lanka Economic Forum held in early January. This entire process is funded by the Open Society Foundation chaired by billionaire investor George Soros, who was also one of two main participants at the forum along with Harvard economist and Nobel Laureate Prof. Joseph Stiglitz. Yet, ‘are we going the right’ way is the question being asked by the public with more confusion emerging when Sri Lankans plug holes in the latest prescriptions to being followed, which could be dubbed the ‘Harvard Doctrine”. For the past two to three weeks, economists and social scientists have challenged the new theories being espoused (rather old according to them) and said the message is not new.
In the melee comes another costly disaster: two teams from the Prime Minister’s Office and the Finance Ministry are heading for a Harvard study programme with either side unaware of the existence of the other. Plain and simple, the PM’s Office – which is handles the subject of economic policy planning – is unaware that the Finance Ministry is sending a team of officials for the same February 7-12 study course at the US-based Harvard University. On the other hand, the Finance Ministry is unaware of the planned trip by the PM’s office. The names of ministers and officials in both teams are given in the Business Times’ main story today. Apart from the Rs.6.5 million costly adventure by the Finance Ministry, there are other costs attached like airfares and allowances for the six officials which could add up to a tidy total of Rs. 10 million or more.
In the case of the PM’s team, Harvard University had offered placements to a delegation from the PM’s Office which includes tuition fees and accommodation. However it is unclear as to which side (Harvard or Prime Minister’s Office) is paying for these air fares. This raises the issue of transparency, one of the fundamentals along with accountability and good governance promised by the one year-old government before its entry. Serious transparency issues are creeping into the administration and in many cases, the public’s right to know (as espoused by now ruling party politicians when they were in opposition) is quietly forgotten. Information about the Sri Lanka Economic Forum came to the public domain at the last minute while the Harvard exercise is one in secrecy since no announcement has been made so far, a practice which prevailed during the last regime.
Government politicians, the first to demand transparency during the last regime, are now frowning on media glare of any issue, literally walking in the shadow of the Mahinda Rajapaksa regime. Be that as it may, former Central Banker and economist W.A. Wijewardena was the first to sound the alarm on the Harvard panacea for development, followed by the Business Times columnist Sirimevan Colombage and adding fuel to the fire this week is Australian-based, Sri Lankan economist Prema-chandra Athukorala. Says Prof. Colombage, also a former Central Banker; “Regrettably, Hausmann’s address at the Economic Forum appears more like a defensive power-point presentation of a postgraduate student, rather than a vigorous initiative to spearhead policy reforms for the ailing Sri Lankan economy, which is supposed to be the very purpose of inviting these foreign experts to the island at this juncture.”
The columnist has also picked holes in Nobel Laureate Stiglitz’s theories, saying: “The views expressed by Prof. Joseph Stiglitz at the Forum are no better, as I already pointed out in the previous column of this series. Instead of suggesting robust policy alternatives geared to growth acceleration, Stiglitz has presented some scattered ideas on the role of the government in steering the economy and lessening income inequality through taxation”. Prof. Athukorala says Hausmann’s recommendations are based on the ‘product space’ analysis developed and popularized by him and his co-researchers at the Centre for International Development at Harvard University, which is “a fundamental limitation as policy guidance in this era of economic globalisation, even though their ‘ pictures’ (product space diagrams) look very impressive and have a great appeal to policy makers who take them at face value”.
Social scientist Ahilan Kadirgamar, in a recent column in the Hindu newspaper, says the Harvard show in Sri Lanka was disappointing to say the least. “With little understanding of the country’s political-economic challenges and outright ignorance of its history, a team of experts led by Ricardo Hausmann of Harvard along with economic reformers such as Montek Singh Ahluwalia, among a number of international panellists, did little more than provide ideas from comparative situations; mere ideas found in textbooks of economics and popular economic magazines with little relevance for the path of development in Sri Lanka,” he wrote. For all purposes, the Harvard show in Sri Lanka has become a no-show as far as some local economists and social scientists are concerned and whose expertise the Government needs to garner to make sure the country gets the best. Rather than putting all the eggs in the Harvard policy basket, the Government – if it is determined to go ahead with the Soros-funded Harvard initiative – must at least resort to a hybrid model – local and foreign input in equal measure.