Embracing Globalisation: The Case Of Sri Lanka

By S. P. Chakravarty –August 26, 2016

Prof. S. P. Chakravarty

Some of the new economic initiatives announced by the Sri Lankan government about integrating the economy with the wider world, initially acquiring land to create special economic zones where large scale investment projects from India and China are to be invited to locate, are a refreshing departure from an economically dysfunctional post-independence mindset of nationalist pre-conception of the national interest as a zero sum game with the world beyond: their gain is our loss and our gain is their loss. Sri Lanka at the time of independence boasted an economy more prosperous, a population that was better educated and a society which was largely free of the worst dysfunctional aspects of religion which characterize the neighbouring countries of the sub-continent. Yet the country became ensnared by angst over identity and suspicious of opening up the economy to the world at a time when development was fueled by trade. The changed mindset informing recent economic initiatives holds out prospects for greater prosperity.

There is danger of a reversal in the political climate unless the problem of the distribution of economic gains from globalization are addressed. The result of the recent British referendum on continuing membership of the European Union is a warning sign that even those that benefit from an economic policy may vote against their own economic interest by rejecting that policy. They do so if they perceive their benefit to be an unfair share of the total benefit accruing to society. This is what experiments on what psychologists call ultimatum games demonstrate. Unfortunately, a valid disquiet amongst the electorate about unfair distribution of gains from globalization can be exploited by the purveyors of simplistic solutions invoking the false narrative of an imaginary glorious past.

Britain has become more prosperous since the start of the collapse of the empire. The economic opportunities for the masses in Britain were held back during the heyday of the empire, but glorified in the narrative of English nationalism. The retarding impact of the nationalism of the past on economic prosperity for the masses in Europe began to be realized during the second half of the 20th century, but the post-war trend is unfortunately in danger of being derailed by the failure to take adequate account by governments of the distributive consequences of globalization.

It is in the context of an analysis of this development that I wish to comment on the new direction of Sri Lankan economic policy. If I sound critical on occasion, it is not because the policies are not laudable. It is to warn against complacency about fairness in the distribution of gains in the details of the design of policy. Analyses of the Brexit vote suggest that many of those who voted to leave the European Union lived in poorer areas of the country, and would suffer from their chosen outcome of the referendum as economic growth slows down due to uncertainty about the future direction of the economy. The burden of economic decline falls disproportionately on the poor. Notwithstanding headlines in the press suggesting immigration as the issue, some of these Brexit voters live in communities where the percentage of foreign-born people is considerably below the national average. People living in these communities have been left behind as others have prospered. Unfortunately, their plight cannot be addressed by pining for a glorious past that never was when the British public were alleged to be in control of their destiny.

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