The Sunday Times Economic Analysis                 By the Economist  

The Presidential poll: Political and economic choices
All eyes are on the Presidential election. The main issues that would determine the outcome are unlikely to be economic policy issues. Yet economic policy and outcomes are most momentous for the community. The reasons for this are several. The issue of national integrity, ethnic conflict, and peace are the current dominant concerns.

The fact that it is often described as the "national question" itself indicates its overriding importance. There can be no doubt that it is the predominant issue and that economic performance is very much dependent on the attainment of a durable solution that ensures peace throughout the country.

The insecurity of terrorist attacks must be eliminated to ensure a sense of security and confidence in the country. Such an environment would provide the needed background and climate for rapid economic development. It is not a sufficient condition, but a necessary and essential one.

Many of the constraints to better economic performance have been due to the cost and burdens of the war and its impact on investment. The budget deficits of successive years and its accumulation in the soaring public debt that is now in the region of 106 per cent of GDP, the resultant annual high debt servicing costs and the consequent distortion of public expenditure have been fundamental causes for macroeconomic instability and the incapacity of the government to play a vital role in infrastructure investment to promote growth.

Therefore the vital importance of resolving the national question for economic growth is indisputable. That it should be the focus of the election is beyond question. What is at issue is whether the policies adopted by the candidates would lead to such a solution. More pertinent is the issue whether the electorate would determine the policy stance of the respective candidates on a careful and rational basis.

The emotional tirades, misinterpretations and invectives of the opposing candidates' positions and the misinformation generated on the run up to the elections, have hardly assisted in the formation of a sober and considered view of the question. Therefore the election could very well turn out to be counter-productive with the solution receding further. In which case the pressing problems of poverty, unemployment and low incomes would persist and social tensions would remain a part of national life.

The predominance of the political issues means that the choices are made on these bases and economic policy would in a sense be a by-product of the response to the ethnic issue. That is an unfortunate situation as the economic policies of the candidates announced by them are likely to be very different. So the country may be selecting economic policies on the basis of their position on the ethnic issue. Just as much as the resolution of the national issue is critical for the economy, the economic policies and their performance are a critical determinant of the country's overall well-being.

This discussion should not lead to the conclusion that economic policy issues are totally absent in the political debate. In fact the tragedy is that these are discussed with a lack of understanding and sometimes with a conscious misleading of the public. A good overall indicator of this is that in an economy with serious problems, there is little mention of the difficulties in resolving the problems facing the economy.

There are no leaders who promise nothing but, "blood, sweat and tears." The promises are of handouts, free or subsidized goods or services, lower prices, providing government employment to the unemployed and the unemployables. In short the promise is of an era of great prosperity. The fiscal burdens are not mentioned leave aside discussed. Surprisingly despite decades of broken promises and some unsustainable promises kept for a short period, people still appear to be gullible. They do not ask the question: How will the government give these?

The people have several misconceptions in economics that influence their thinking and politicians pander to them. Three of these misconceptions are: that the government has inexhaustible resources that could be given freely to people; that privatization is a taking of the people's assets and giving it to capitalists; and that the government should subsidize the production of goods and the provision of services.

There is over dependence on the government with an expectation that it should do everything for them. These misconceptions are at the root of the problem of people's choice at elections. The extravagant promises and impractical bad economic policies of parties are due to these.

Without an education for people in the fundamentals of economics, these can never be obliterated. Regrettably only the few, a very few understand the realities of economics. We can only hope that whatever the people's choice that the winning candidate would look at economic issues in a manner that has the objective of economic growth uppermost.

The term of office of a President is six years and neglect of resolving fundamental problems will surely lead to their aggravation at his term's end.

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