Short-term economic policies sacrificing long-run growth?
It is unfair and not possible to gauge the policies of the new government in the few weeks it has assumed office. Nevertheless, there is a lurking inescapable danger that the coalition government is most likely to adopt a short-term approach to economic policy.

At the best of times, democracies are known for short-term economic policies and a want of a longer view of development. This is almost an inevitable cost of democracy, that could only be overcome by statesmen, who are willing to take decisions in the long-run interests of the country, irrespective of short-term consequences. Such statesmanship has been woefully lacking in our country.

Consequently, economic burdens are passed on to future governments, needed economic reforms are not implemented and unpalatable decisions that are for the greater good of the country in the future are not taken. A government that is not secure of its tenure beyond a year is more prone to adopt policies that are popular and would bring in votes at the next elections. The instability of the present government, both owing to its reliance on other parties, as well as the lack of homogeneity in economic thinking within its own ranks, makes these dangers very likely.

Some conceivable illustrations of these would be the subsidies to sectors that are of electoral significance, such as the large rural community. We are not saying that agriculture should no be subsidised. The particular subsidies that are given may not be economically rational or indeed in the best interests even of the rural community itself. More rational economic policies in the long-term interests of agriculture and the rural community are politically less attractive. Costly subsidies popular in the short-run are likely to heap burdens on the public purse without necessarily reaching the intended beneficiaries or benefiting the rural community in the long run.

Another example is the expenditure on Samurdhi that the UPFA has promised to increase. At one time this programme covered 58 per cent of households in the country. Currently nearly one half of households receive Samurdhi benefits. Yet much of this assistance does not reach the really poor.

Poorly targeted programmes such as these have had little effect on alleviating poverty, but are costly to the public and help political parties in power. Therefore it is most likely that the costs of this programme would rise and its burden would add to the budget deficit. The benefits will reach only a few of the deserving poor.

Public expenditure would also rise, if the government's promise of providing employment to all university graduates and those with a secondary education were implemented. Such a quick fix solution to the unemployment problem means that most of the unemployed would be given a stipend without their being productive. The inflationary impact of such a policy would have to be once again borne by the public.

It is also very unlikely that the government would raise kerosene and diesel prices in line with the increased price of crude oil. This once again means that the government would be incurring losses that would have to be made good through the budget.

Many of the educational and other reforms that have been envisaged are not likely to be implemented. Educational reforms are vital to ensure that the country's educational systems are geared to modern requirements and provide productive employment opportunities.

No doubt the President attaches much significance to the educational reforms. Her retaining the Education portfolio and having two Deputy Ministers for Education is evidence of this.

However, the constituent parties of the government are backward and parochial in thinking and would drum up opposition to these reforms by interpreting them as being inequitable. Such opposition would negate the SLFP's stance on these reforms. Consequently, the long run capacity of the economy for growth would be sacrificed.

In many ways the public finances of the country would face severe strains. In the current political context the policies pursued are likely to result in a large budget deficit, inflationary pressures and increases in the public debt. Much needed expenditure for capital development and social infrastructure are likely to be sacrificed. Economic, administrative and educational reforms are likely to be shelved.

An unstable coalition government in a democratic set up such as ours is not likely to take the decisions that would lead to economic growth and development. Once again immediate political imperatives are likely to postpone policies for economic growth.

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