An Unstable & Unusual New World: Survival Strategies For Lanka

By Kumar David –

The only crime that is committed in broad daylight is politics, all others are done in secret. This is true whether it be Trump’s America or the ruling cohorts of Sri Lanka. No need to elaborate, it is universally known. Trump brags about his tax evasions and encourages his compatriots to do likewise. 

This country is trapped in a strange syndrome. It argued that Ranil Wickremesinghe (RW) may be able to win over the IMF and thereby stabilise the currency, deleverage debt (make it easier to borrow from commercial markets again), improve the import-export trade (on a capitalist basis) and negotiate a compromise between the Treasury and the Central Bank (limit money printing and enforce a degree of fiscal discipline). But at the same time economic pain will be inflicted on the poor and the lower middle-class. His budget proposals include raising income tax, increasing VAT and broadening the company tax but the costs will all filter down. RW hopes to reach a primary surplus (that is excluding interest payment on state debt) of 2.3% of GDP by 2024. This involves raising fuel and electricity prices. At present a part of these are sold far below production cost since they include large subsidies to low income households. The CEB and the Petroleum Corporation show huge losses on their books – it’s all politics.

Social spending and a safety-net mitigating the impact of the current crisis on the poor and vulnerable by raising social spending is envisaged. However, inflation and high interest rates (spurred by the US Federal Reserve Bank) is beyond control in most countries, therefore achieving price stability is a pipedream. The IMF which has promised technical help and the government say they are both committed to a new Central Bank Act, reducing corruption and achieving good financial management. On the whole these plans can be called a conventional capitalist economic programme and like a curate’s egg is good in parts.  

However, here’s the rub. Batalanda Ranil has from time to time shown himself to be a ruthless opponent of democratic and human rights. In the last three months he has encouraged his goons, several times, to attack peaceful anti-government protesters, human rights campaigners and women’s groups. The Police Minister who urged the force to break up peaceful democratic protests against government policies (some democracy!) continues to ply his ugly trade. You ask me which is the real Ranil? I say both; that is the fact of the matter; that is why there is no set-piece response to Sri Lanka’s paradox. Furthermore, this needs to be placed in the context of a deeply contradictory and fractured global scene. The world is upside down and since the financial crisis of the early 2000s is mostly standing on its head.

A daunting economic scenario faces global capitalism in the wake of the financial crisis of the early 2000s. The theology of the success of uncontrolled free-market capitalism has been shattered. Capitalism is kept alive by the STATE, yes that’s right, the state has diverted trillions of dollars, Euros and Yen into keeping capitalism alive. The principal role of the state in metropolitan nations is not subsidising bankrupt state enterprises, it is bankrolling insolvent capitalism. All this is no longer disputed. In 2008 the US Congress approved a $700 billion bailout known as the Troubled Asset Relief Program and in February 2009 Obama delivered a $787 billion economic stimulus to avert a global depression. This $1.5 trillion has been supplemented by a further $5 trillion post-Covid, post supply-chain-disruption stimulus monies in the US alone. Add the other capitalist nations and the increase is substantial, but I agree that not all of it can be attributed to propping up failed capitalist market economics. 

The Great Recession began with a subprime mortgage crisis in 2006 when banks drove American households into rotten Mortgages and fake instruments known as Derivatives. The housing bubble burst and subprime borrowers defaulted. The capitalist state declared banks (Lehman Brothers, Merrill Lynch) and giant corporations (GM and insurance giant (AIG) “Too big to fail” when they turned worthless. The stock market crash of 2008 was accompanied by one of the largest points drop in the history of the Dow. Global capitalism needed to avert a second Great Depression; this is not disputed. The myth of stable free-market capitalism has been shattered; the state has been exposed as a committee to oversee the activities of the capitalist class to a degree that even Marx did not foresee. 

Free-market capitalism not only went belly-up as an economic system but we have now entered an era of extremism and social instability the likes of which we last saw in the 1930s in Europe in the period of the rise of fascism in Italy, Germany, Eastern Europe and Spain. The return of a Trump presidency, near civil war over women’s rights to an abortion in consultation with their doctors, the possible overthrow of Putin (good riddance you are entitled to say) and dangerous instability on the “eastern front” are the setting to a very unstable global situation.  Sri Lanka needs to play its cards both wisely and craftily to navigate these waters. 

The one issue that I would like to address today instead of ploughing on with generalities is the economic role of the state. Therefore, I will focus of the most important global example of state involvement in economic development at this time, China. China’s economy whether measured by a PPP yardstick or in nominal dollar is likely to surpass that of the United States within a decade. The benefits of competent state direction in the initial decades of post-colonial modernisation are bearing fruit. Decades of high single-digit and some years of two-digit GDP growth pulled 800 million people pulled out of poverty, created a middle-class whose numbers exceed the population of the USA and saw infrastructure improvement that is hard to believe. State-direction built railways, airports, highways, industries and encouraged massive soulless public housing projects by private developers. This is all known; some people call it the greatest economic explosion in history. Nevertheless . . . be patient!

Whether under the leadership of the Communist Party, or in Singapore, Taiwan or South Korea for different reasons, the directive-modernising role of the state has been paramount. Size is not the only attractor; technology, investment, military focus and other crucial aspects. The bread-and- butter technology picture is mixed. China is pulling ahead in Artificial Intelligence and hard technology for industrial expansion. Though the West is hell bent on denying it access to the best in computer-chip and military know-how there were ways round this such as joint-ventures and theft of intellectual property. Russian science-technology is no pushover; China-Russia cooperation can one day yield huge results. 

A friend and former professor at the Open University, Nawala known as Eich, sent this pessimistic note to me a few days ago: “There is a major fallacy in your (KD’s) assumptions; given the insatiable desires and greed of people (ordinary people, capitalists and political leaders) this is never going to pass. The present state of technology is sufficiently advanced to allow people to lead decent lives and engage in enjoyable occupations. If you wish to you may speculate how much longer the Chinese capitalists will tolerate the dictatorship of the CPC without taking over decision-making themselves”.

But protests are erupting in Shanghai and other Chinese cities over heavy handed Covid controls. For the first time in decades, thousands of people have defied the authorities at universities and on the streets of major cities, demanding to be freed not only from incessant Covid tests and lockdowns, censorship the Communist Party’s tightening grip over all aspects of life.

Across the country, “We want freedom” has become a rallying cry of a groundswell of protests led by a younger generation too young to have taken part in previous anti-government dissent. As numbers swelled in multiple major cities over the weekend, so too have the range of grievances. Among protesters hundreds have called for the removal of Chinese leader Xi Jinping, who has overseen a strategy of mass-testing, lockdowns, enforced quarantine and digital tracking. Crowds chanted “Give me liberty or give me death!” according to videos circulating online in vigils to mark the death of ten people in a fire in Xinjiang. By Sunday (27) evening, protests had spread to Beijing, Chengdu, Guangzhou and Wuhan, where thousands called not only an end to Covid restrictions, but remarkably, for political freedoms. Residents in some locked-down neighbourhoods tore down barriers. Protests on campuses included prestigious Peking U, Tsinghua U and the Communication University, Nanjing.

Nevertheless, there remains a nagging question. What after the dirigisme phase as served its purpose and is past its use-by date? How is post-dirigisme society, technology and innovation to organise itself? Productivity in China is falling, innovation is stifled and raises questions about the freedoms essential for the future. Society has to be set free to flourish. What was the great failure of the USSR? The state, far from withering away, became an ever more determining force. But socialism is unimaginable if men are dominated by the state. Somewhere along the road the state must wither away if as envisaged by socialists a society of plenty and freedom is to be realised. Society has to be free to flourish. The lamp illustrates the leap into the sphere of human freedom and innovation that is a precondition for socialism.

 

This brings me to my closing remarks pertaining to the role of the state in Sri Lanka. At the present time it  

Has to play a directive role in economic development but it can do so only if it not a predator in the hands of corrupt political classes. Marx speculated that “in place of the old bourgeois society, with its class antagonisms, we shall have an association, in which the free development of each is the condition for the free development of all”. Leave aside the flowery language, in the final analysis the state is only a temporary instrument, human liberation demands that eventually e must be rid of it.

A few days ago, I polled my liberal and intellectual friends about who will they would vote for in a presidential election in 2023/24. I gave them a wide choice; Sajith, Ranil, any Sajith-Ranil combo, various Rajapaksa options such as Dulles and Namal, the JVP/NPP and Peratugami (Front Line Socialists). Believe me I am not saying this because I am an NPP member, but over half choose the NPP/JVP while the other half distributed themselves all over. The challenge then is to take forward the debate within the JVP (the NPP is fine) on the longer-term economic role of the state and my “The nagging question, what after the dirigisme phase as served its purpose and is past its use-by date?” Looks like we have a busy work schedule cut out for years to come

 

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