Testing a mixed economy
A foreign specialist working for an international agency, in an informal conversation, said the other day that a fully liberalised economy may not be the panacea for all ills in economies like Sri Lanka.

In fact in some World Bank corridors in Washington, there is talk of a mixed economy model to resuscitate economies devastated by war, strife and poverty. Another reasoning for this argument is that democratic models are under threat from semi-radical elements and their growing popularity.

The Sri Lankan case is a good example. Both the UNP and the SLFP-one following the other in liberalized economic policies - have failed the people. Thats why people are looking desperately for a third force that came this time in the form of the JVP and the JHU. Another point that was proved is that the peace process alone will not feed farmers, the rural poor and their children. One needs a balance between peace and taking care of family needs.

How does one balance globalisation with a human face-the kind of doctrine that President Ranasinghe Premadasa once practiced? The mixed-economic model proposed mainly by the JVP though giving the jitters to the Colombo-based business community may turn out to be just what the doctor ordered if-and that is a big “IF”- it is tempered with the reality of globalisation.

The other day the first question a J-Biz personality asked me as we met in a Colombo cinema was … “we are in trouble, no?” The mostly-Colombo based elitist business community is terrified about the policies of a government that would have a strong JVP input. Their biggest concern is whether they could make the same high level of profits, evade taxes (in the case of some businessmen through various means including tax amnesties) and simply live a life of glitter and glory.

There is no national interest in the pursuit of these goals whatever J-Biz statements may try to make out. The UNP, despite a praiseworthy peace process, didn't succeed with its top-down approach to development where development funds were to be invested in the private sector and then expected to trickle down to the grassroots. The UPFA government is doing the reverse- making sure rural communities are comfortable before urban societies reap the benefits of development.

Whether it would succeed or not remains to be seen but this is the model that is to be practiced, which will undoubtedly run into some opposition from the World Bank and the IMF as state spending rises and budget deficits go off targets set during the UNF regime.

New Finance Minister Dr. Sarath Amunugama has also made it clear that the Treasury will not be “obsessed” with fiscal-deficit targets and spending cuts but development-oriented policies.

Spending is expected to rise under this government with privatisation proceeds drying up as a revenue measure, due to the new policy of suspending privatisation of the bus sector, state banks, etc. The government is faced with the complicated task of raising revenue under a spending-restricted 2004 (UNF) budget which, according to Amunugama will continue to function till the end of the year.

One thing is however clear. If the JVP has its way, small and medium industries will thrive in this country creating wealth at the rural level in incomes, new jobs and better living standards. This would however be at the expense of the urban elite whose days when they made money at random will be a thing of the past.

The country's wealth doesn't lie in Colombo's five-star hotel circuit, casinos, shopping malls and fast food restaurants. It is there in the rural countryside. Agriculture will always be the backbone of the economy while millions of simple, hard-working women rake in petro-dollars for the country working in plantations, garment factories and households in the Middle East. In most cases it is a glorified life of slavery as a series of features in The Sunday Times this week shows.

What have we given them in return for their toil? Nothing other than attempts to cut wages through increased productivity without any improvement to their living standards other than the superficial changes “proudly” claimed by governments, past and present.

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