The Sunday Times Economic Analysis
By the Economist

Wanted : Home grown economics
Economists rarely agree. Disagree ment and controversy are the very stuff of economics. Sri Lanka's economists who met for their Annual Sessions on June 15, exemplified this. Views on the theme " Policies for Accelerated Economic Development in Sri Lanka" drew some sharp disagreements. Two schools of thought were clearly evident. The one echoed the "Washington Consensus". The other pleaded for a middle path. In the process of this controversy a view emerged that there was a need for a home grown economics.

The "officials" who presented papers predictably echoed the views of the Washington institutions. They preached reform on the lines of the IMF and World Bank. Privatisation, more privatisation and liberalisation of this that and the other. The academics were critical of this approach. They criticised the dependence on, and uncritical acceptance of, the doctrines of the Washington gurus - "The Washington Consensus" (WC). The Doyen of Sri Lankan economists Dr. Gamani Corea, the Patron of the Sri Lanka Economics Association and guest of honour for the occasion, pleaded a middle path. He argued that there must be a balance between free trade and protection.

He argued that the classical economists "infant industry argument", of protecting your industries and agriculture for a period till they found their feet, had a relevance for developing countries like Sri Lanka.

He pointed out that even the developed countries that preach free trade practice protectionism in selected sectors of their economies. He urged the need to adapt theory to our purposes and conditions, pointing out that many economic theories were based on assumptions that were non existent in our particular economic context. The view of the former Secretary General of UNCTAD, Corea, was that the World Trade Organisation's new framework was not sufficiently adapted to developing country needs. He went on to point out that liberalisation was not equal to optimisation in developing countries and that our development was not only based on our own efforts, but also on what happened in the world outside. Professor W.D.Lakshman, former Vice-Chancellor of the University of Colombo was strongly critical of the Washington Consensus contending that " IT PUT PROFITS BEFORE PEOPLE". He argued that the IMF policies were negative: deregulate and eliminate.

Deregulate the financial sector; eliminate price controls and tariffs and so forth. It did not care for the condition of poor people. Efficiency and growth, WC contends would in due course reduce poverty, but how long that would take did not matter. Most of the poor of today would be dead, he contended. Professor Lakshman made an insightful observation that institutional reforms must also look at the indigenous institutions, not merely the central organisations; that they must not ignore the structure of indigenous organisations and supportive institutions. " There must be institutional adjustments and adjustments to institutions", he argued. This controversy found a response among the economists. What was required was not merely the WC reforms but reforms in thinking.

Sri Lankans were either wildly critical of the WC or accepted the dictates of the WB and IMF without examination of their appropriateness. Consequently the country lacked skills in negotiating with the multilateral institutions and donors. WC policies were therefore thrust upon us and we adopted them without adequate contextual consideration and their appropriateness.

Economists in Sri Lanka, an economist argued, had not developed a body of economic thought based upon the factual situation in the country and appropriateness for our economic and social structures and aspirations.

A home grown economics, appropriate for our conditions, it was pointed out, was a crying need.

The question that now remains is whether we could expect the Sri Lanka Economics Association, with its galaxy of economists, to perform this task, or at least to make a start in this direction, before its next Annual Sessions next year.

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