Post-independent weakening of pre-conditions for economic development
A striking feature of post-independent Sri Lanka is the weakening and deterioration of the pre-conditions for the nation’s development. This is especially so in the latter decades.
Looking back at the political and economic history of the country after independence, most commentators, if not all, have regretted the lower than potential economic development of the country.
Less recognised factor
Last Sunday’s column focused on one of the less recognised factors for the weakening of the country’s development: The exodus of intellectuals, scientists and skilled persons from the Island that is continuing.
Today’s column discusses the wide range of preconditions for long-run sustainable economic and social development.
Regrettably, these have deteriorated over the last seven decades. There have been short periods when these have been strengthened, only to be weakened soon after. Undoubtedly, today we have reached the nadir in conditions for development.
The pre-conditions for long-run sustained economic and social development are numerous. They include national unity, political stability, the rule of law, eradication of corruption, pragmatic economic policies and their effective implementation.
These are conspicuously absent today. The absence of these non-economic preconditions was largely responsible for the countries below potential economic performance.
What then are the preconditions for Sri Lanka to achieve high sustained economic growth and human development?
At least five preconditions are needed for the country to achieve economic development. These are a stable government committed to the long-run development of the country and ensuring the rule of law, achievement of ethnic religious and social harmony, eradication of corruption, sound and pragmatic economic policies and certainty in their continuity and effective implementation.
The absence of these non-economic factors and effective pragmatic economic policies are underlying reasons for determining economic and social development. Admittedly, there are a number of other reasons too that influence economic development such as a people’s values, work ethic, education and the political culture and milieu. Weak work ethics and indiscipline, particularly in the state sector, are important reasons for the country’s lower economic development.
National unity and social harmony
One of the key reasons for the country’s inability to achieve higher economic growth has been the periodic ethnic and religious violence. These episodes have deterred foreign investment, weakened the country’s economic capacity through waves of brain drain, increased defence expenditure, increased fiscal deficit and public debt. They have destabilised the economy.
The clearest instance of this was the July ’83 violence at a moment in time when the economy was set to take off with significant foreign direct investments.
Being the first country in South Asia to liberalise the economy, we had the potential of becoming a newly industrialised country. Multinational companies that were about to invest in the country fled after the communal riots to Malaysia, Singapore, Thailand and other Southeast Asian Countries.
This led to a severe setback to the economy till the end of the civil war in 2009. Ensuring ethnic and religious harmony will be a determining factor in achieving economic development in the future.
Rule of Law
Ensuring law and order and the rule of law is one of the most important preconditions for economic development. The rule of law means not only the enforcement of the law to ensure peace and orderly life of the community, but also equal justice for all. Without these, the economy will not take off as the investment climate will not be conducive for foreign and domestic investment.
The violations of human rights have drawn international attention and we are at a point in time when there are threats of economic sanctions. The country’s exports would be in tatters if this were to happen.
Cosmetic and insignificant legal changes are not likely to convince the international community of a restoration of human rights in the country. Unfortunately, the actions of the international community will worsen the dire conditions of people.
Eradication of corruption
Corruption has been a key factor in the underdevelopment of countries. As Imran Khan, the Prime Minister of Pakistan has said: “Countries are poor not because they lack resources but because of corruption.”
The government must eradicate corruption and be above corruption. Corruption distorts economic and social priorities, wastes public resources and leads to inefficiencies that retard economic growth.
It is well recognised that bribery and corruption have permeated all strata of the body politic and administration. Much of the success of the new government depends on achieving a relatively low level of corruption in the country.
Pragmatic economic policies
The Government must take a realistic view of the current state of the economy and adopt economic policies that are economically rational and pragmatic. Pragmatic policies are those that are effective. Ineffective economic policies based on any ideology could prove costly, as in the past. Economic reforms that are crucial for the country’s progress should be implemented without ideological considerations. The government must formulate pragmatic economic policies and not be guided by ideological policies.
Admittedly, despite the government’s majority in parliament, it would find it difficult to implement these suggestions. The political culture and milieu and ambitions of politicians and vested and parochial interests may oppose needed political and economic reforms.
That is why the country has remained underdeveloped and did not achieve its economic potential. Yet, we must hope that there would be a break from the past that would enable the preconditions for economic growth and development.
An efficient administration is crucial for the effective implementation of policies. Administrative reforms to ensure an efficient public service are a priority. Despite a comprehensive Report of the Administrative Reforms Commission of many years ago, no reforms of substance have been implemented.
Sustained high economic growth can be achieved only if the non-economic preconditions are established. These include national unity, political stability and the rule of law, and eradication of corruption.
Pragmatic economic policies and their effective implementation and economic, educational and administrative reforms are vital to enhancing the country’s economic efficiency. Unless these preconditions are established our economic development will continue to be below our potential.
Do we have the political and social framework to establish the pre-conditions for economic development?