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UNP economics Greek to Sri Lankans

By Rajpal Abeynayake

(May 23, Colombo, Sri Lanka Guardian) Besieged UNP leader Ranil Wickremesinghe, to his acolytes (Samaneravaru) is a man who even if he cannot win elections, could do other wonderful things.They say, after all, he can run the economy, and knows history, geography, and Erskine May like the back of his hand.

At this point in time, however, he hardly has any acolytes at all, so therefore, it appears that some of these earlier assumptions about the UNP leader’s abilities merit a reappraisal.

Recently, just before the presidential election - - or was it the general election? — Ranil Wickremesinghe was quoted as saying that if the UNP is returned to power, he would try to raise the salaries of workers as soon as possible, perhaps within the first year of his assumption of office.

Wickremesinghe then curiously said that he could not offer any such relief the only time he was in office as prime minister, because the economy had not recovered far enough for him to begin giving relief during his over one year tenure at the top.
The inside story from the UNP reveals that Wickremesinghe’s plan was to erase the budget deficit, and make it ‘0’ per cent of the GDP, consequent to which salary increases for public servants would be made!

Curiously, all of this shows that the UNP’s conventional wisdom would have been disastrous, and that the economy would have in fact plummeted if more of the Ranil Wickremesighe type of nonsense was to continue.

Overrated

More than all, the above narrative shows that Ranil Wickremesinghe is in fact highly overrated, and knows next to nothing about the intricacies of modern economics, particularly because his economic game plan hinges upon just one thing, which is that it goes strictly according to the neo-liberal IMF diktat. Ranil Wickremesinghe’s economics means one thing, which is that the country gets tons of foreign money, on IMF conditions. These conditions generally prescribe austerity, slashing of salaries, disposal of the national crown jewels (i.e.: sale of key state owned enterprises to private ownership...) and other such drastic measures.

What this kind of external meddling has done, and is continuing to do to countries such as Greece, should be an object lesson on how not to run economies.

Today, Greece, having ostensibly overspent and mismanaged her finances, has been given a bailout by the German government. However, Greece which does not have a sovereign currency, being part of the Euro-zone, is now compelled to accept stark austerity measures against which Greek citizens have protested, causing street riots.

The fact is that austerity measures are the worst recipe for economic recovery —- a sure way, in fact, to ensure that the Greek economy would not recover to a point that the country’s debt can be paid off.

But Greece does not have a choice, not having its own currency, and therefore not being able to print money or adjust its currency in a way that money could remain in people’s pockets, giving a chance for the economy to grow...

The good example for Greece to follow would have been Argentina, which turned its back on the IMF austerity recipe, and defaulted on the country’s loans, which then meant that nobody would lend to the Argentineans, resultant of which the economy was left to its now devices.

But on their own, and sans austerity measures, and with the minimum help that could be got from friendly countries, Argentina turned around the economy, in a way that Greece which has swallowed the bitter austerity pill, can only now dream of now.

All of this shows that the conventional wisdom followed by Ranilista economists of “tying our wagon to the world economy’’ ( i.e.: keeping the economy subjected to the diktat of the IMF and the donor nations) is an absolute disaster.

The fact that the Rajapaksa government come to power, and did not lay a premium on reducing the size of the deficit, and did not follow the IMF diktat, was fortuitous for the country.

Money remained in people’s pockets, at least to a reasonable extent during a bad time of war, and the economy was able to maintain an even keel.

Prudent economic upkeep

People did not have to wait for Ranil’s economic Godot i.e: “I will raise salaries when I balance the budget.”

It is true that the Rajapaksa administration could go too far, overspend, neglect public utilities and neglect spending on public services such as health, which would mean that there would be less money coming into the economy, thereby seriously impeding growth.

It is true that if the current administration does not keep an eye on spending, we could go the way of Greece, in theory, but in reality, most probably we would not, as we have our sovereign currency, and would be able to make the necessary currency adjustments to meet any adverse circumstance.

That’s no excuse for bad economic management or corruption of course - - it’s only hoped that there would be prudent economic upkeep and more concentration on public utilities and services.

But the point being made here is that Ranil Wickeremesinghe would have been very bad for the Sri Lankan economy, contrary to conventional wisdom. His being kept out of power therefore was fortuitous, two-fold — the country was able to get rid of the LTTE, and was able to avoid the IMF bitter pill, the sort of medicine that is now getting countries such as Greece into deep trouble, and has previously almost ruined economies such as those of Argentina, which managed to do a last minute recovery act by rejecting the IMF prescription out of hand.

The conventional wisdom is almost always wrong, and has certainly been proved wrong when Ranil Wickremesinghe has been seen to be applying it.

In the meanwhile, it also has to be underlined that the UNP’s so called economic experts - - Harsha de Silva among them - - - are such laughable ignoramus even in their own field. All that can be said about them is that they are so full of themselves, they are bad news for the UNP. With Ranil Wickremesinghe, if ever he goes, the UNP should get rid of his long caboose-line of charlatans if the party hopes to stage any kind of credible recovery that counts.

The middle ground is not hard-wired

Malinda Seneviratne replying to my column of four week’s back (Daya Malin and Demala - April 25th), in the Lakbimanews issue of May 2nd under title “The middle ground is named ‘real’’ and not ‘fantasy’’’ — — states that devolution should be eschewed at any cost because “we should not begin at the point of a frill.”

Forgive my delayed reply to Malinda due to exigencies of time, but for those who are not familiar with the exchange, the suggestion in my column was that national policy makers should hug the middle ground in terms of the “Tamil issue’’, perhaps by thinking in terms of a referendum on devolution.

I think a few paragraphs would suffice to state my reasonable difference of opinion with Malinda at this point in time. I am of the view that even if devolution may be redundant -- even if the devolution debate is “done’’ as Malinda states elsewhere - - there is also the need to cater to perception in global and local realpolitik.

And sometimes the perception indeed matters more than the reality, and if we are to tarry with the idea of “devolution’ just so that we can keep the baying international interlopers and local diaspora propelled elements at bay, we may still want to do that.

I think there is not much point in self-flagellation and perhaps risking eventual conflict and anarchy in the hot pursuit of what’s perceived to be a hard though intangible “reality,’’ i.e: that devolution is passe. We live in an illusory world in many senses of the word! Having said that, I am not an advocate of devolution in the many forms that the idea is already structured in this country; I am saying we should look at the idea of devolution among other ideas also, and see if it sails, before it’s too late perhaps, for anything.

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