Feb 4: The independence and beyond

• With cradle to grave free health care, free education and a Westminster Parliamentary system, Ceylon should have evolved into a happy society. However, the pitfalls that the country would run into in the future is also engrained into its fabric from the very beginning

 1 February 2022 

Sri Lanka celebrates the 74th Independence Day this week under the most precarious conditions in its independent history. This is by far the economically weakest hour in recent memory, and the countries options to dig it out of the hole are narrowing with every passing day of political vacillation. Rather than lamenting the spilt milk, or ravishing the good old days- which never existed- these turbulent times should be the moment to take stocks of the past and plan for the future.   

Most accounts of Sri Lanka (then Ceylon) at its independence is overly rosy. Every other pundit would say the newly independent island nation had the second-highest per capita in Asia at the time. But that was because, some other successful British colonies such as Malaysia, or Singapore, which left the Malay federation had not yet gained independence. Many commodity economies in Africa, such as Ghana, Ivory Coast and Kenya, which were still colonies also had higher GDP per capita per se. However, the strength of Ceylon at the independence was the overall wellbeing of the people in a functioning welfare state, with social indicators well above most nations, a feat that Sri Lanka has managed to sustain even now, though the relative loss of these achievements against better economically performing countries is becoming increasingly clear.   

With cradle to grave free health care, free education and a Westminster Parliamentary system, Ceylon should have evolved into a happy society. However, the pitfalls that the country would run into in the future is also engrained into its fabric from the very beginning.   

Multi-ethnicity or multiculturalism is not necessarily an asset, but not all could be a crippling burden either. Though the ethnic differences in Sri Lanka were not intractable, they were made so by the persistent ethnic biddings by the political elites. Many blame the Sinhala Only Act of 1956 being the watershed event of ethnic polarization, which is only partially true. The Northern Tamil political elites were opposing the Sri Lankan state from its very independence. The stubborn fact, though politically unpalatable for some, is that the incipient new state was a hotbed for one of the most intractable forms of Dravidian ethno-political nationalism, which had a much larger geographical scope, from language riots in Tamil Nadu, ethnic troubles in Singapore and Malaysia.   
Also, political calculations were intertwined in ethnic biddings. For instance, the Ceylon Citizenship Act disenfranchised all but 100,000 of 700,000 Tamils of Indian origin at the time. While the measure might be described as travails that new nations encounter in the nation-building process, overt political calculations of the then prime minister D.S. Senanayake was to exclude a large part of the estate Tamil constituency that overwhelmingly voted for leftist political parties.   

While the Northern Tamil elites and their campaign was a drag on the Sri Lankan state, they were not the primary problem for the country’s meagre economic achievements for the next three decades. Many elders are nostalgic of the better days in the 1960s, but in truth, it was the time, that Sri Lanka gradually squandered the advantages it inherited from the British. For the first decade since independence, the GDP per capita grew by only US $ 20 from US$ 80 at the independence. Another disastrous economic experiment under Sirimavo Bandaranaike’s left-leaning government saw GDP growth dropping to an annual 2% during 1970-77.   

No time in the past, up until 1977, the Sri Lankan leadership had a sense of urgency for economic development.   
However, J.R. Jayawardene who liberalized the economy failed to keep momentum. Instead, the country was engulfed in two insurgencies; one metamorphosed into a maximalist terrorist campaign. Sri Lanka’s opportunity to leapfrog in economic growth dissipated into thin air.   

There is also a thought-provoking point: Why did Sri Lanka, with a history of regular elections and peaceful transfer of power become a subject of repeated violent insurgencies. First by the leftist youth against the most left-leaning government of all times. Another by Tamils who could pass a resolution supporting cessation and then get elected to Parliament and become the main opposition by euphoria created by the Vaddukkottai resolution. Do that in Singapore or Malaysia, that would have warranted a life in prison.   

That was possible because Sri Lanka was a democracy. However, popular political mobilization in Sri Lanka since the independence overwhelmed, and constrained, the institutional empowerment of the state. Instead, independent institutions could not keep track of mass empowerment and that created a disjuncture. Had the economy performed well enough, some of the unintended consequences could have been avoided. That effectively created permissive and cost-effective conditions for the disaffected groups, with a perceived grievance to challenge the state in the most lethal means. When the state later resorted to death caravans in the South or enforced disappearances in the North, it had already been forced to the wall and had been fighting for survival.   
 Even the measures to strengthen the state against many forms of peripheral opposition has been lopsided. JR’s executive presidency created a vacuum of legitimacy which was exploited by the disgruntled parties.  Gotabaya Rajapaksa, the incumbent president, dismantled the 19th amendment and concentrated the powers of the state at the expense of many independent institutions. Then, with one overnight arbitrary decision, he decimated the livelihood of 1.8 million local farmers, just like Velupillai Prabakaran ruined the lives of his captive Tamils.   
Today, nearly 45 years after the liberalization of the economy, Sri Lanka stands penniless, a looming case of debt default. Its export basket has not changed since 1995, and countries such as Vietnam, which exported as little as Sri Lanka did in the 90s, are now global manufacturing powerhouses. Decades of economic indecisiveness and political calculations that overwhelmed the long-term national interest have their toll. While some of the usual culprits are more inclined to blame the free market economy for the plight, the primary fault lies with not liberalizing fast enough to keep up with the global changes. Each free trade agreement or liberalizing initiative have hotly opposed by a minority of privileged groups who by their persistent opposition to change has created a captive market at home. Sri Lankan economy is one large wheeler-dealing exercise, not because of liberalization, but due to lack or near absence of it.   

After JR and the short-lived administration of R. Premadasa, Mahinda Rajapaksa is the only leader who realized the urgency of economic development. Notwithstanding some of the vestige projects, Mr. Rajapaksa changed the infrastructure landscape in the country. However, simply putting up ports and highways have not created the desired impetus for the investors. Sri Lanka has failed to develop software- investor-friendly legislation, land reforms, modernizing education. Instead, the country has plummeted from 82 in 2012 to 99 in 2019 in ease of doing business.   

 This is time to face the music. It is the seven decades of economic indecisiveness, and persistent opposition to reform that ail the country. There is a historical analogy across the Palk Straits. In 1991, India confronted a world-class foreign exchange crisis which resulted in New Delhi shipping its gold to London to obtain a temporary credit relief. That moment of truth finally compelled the Indian leadership to liberalize the Indian economy and dismantle licence, Raj. Sri Lanka, the first South Asian nation to open its economy is sadly in a similar predicament today. That should also be the case to speed up economic reforms for good.