Peace for the World

Peace for the World
First democratic leader of Justice the Godfather of the Sri Lankan Tamil Struggle: Honourable Samuel James Veluppillai Chelvanayakam

Saturday, November 18, 2017

Political Democracy, Progressive Economics and Social Liberalism: The Essential Triad


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Nobel Laureate Jose Saramago

Tisaranee Gunasekara- 

"Fear a too unequal division of wealth resulting in a small number of opulent citizens and multitude of citizens living in misery."

Denis Diderot (Quoted in A Revolution of the Mind by Jonathan Israel)

The latest Global Wealth Report is out. Its most salient finding is that the richest 1% owns 50% of world’s wealth.

In ‘Raised from the ground,’ his semi-autobiographical novel, Nobel Laureate Jose Saramago wrote, "There can be no justice when some have everything and others nothing..." No stability either; such imbalances are breeding grounds for discontent and conflict. As American entrepreneur Nick Hanauer warned his fellow plutocrats in an open letter, "Some inequality is intrinsic to any high functioning capitalist economy. The problem is that inequality is at historically high levels and getting worse every day... If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us."i

This month, the pitchforks were out, in Poland. The far right, in their tens of thousands, disgorged on to Warsaw’s streets, their metaphorical pitchforks aimed not at plutocrats, but at the racial/religious ‘Other’. They demanded a pure Poland and a white Europe, dedicated to God. Inquired about the fascist overtones of the march, Poland’s right wing Interior Minister said, it was a beautiful sight.

Poland is a classic case of what happens when economic growth and income equality head in opposite directions. According to a study conducted in 2010, most Poles were unhappy with the growing income disparities and wanted the government to implement ameliorative measuresii. There was no racial/religious taint in their discontent, not then. But the government’s failure to alleviate the imbalance caused a gradual erosion of trust in national institutions. The far right stepped into the resulting breach and used it as a path to power.

Martin Luther King once warned about politicians who feed their constituents with "the stale bread of hatred and the spoiled meat of racism."iii In 2017, the bread of hatred and meat of racism is enticingly fresh. The failure of the moderate centre to understand the essential nexus between political democracy, social liberalism and progressive economics is strengthening racial extremism and religious fundamentalism across the globe. Democrats and liberals have conceded the space of popular economics to fascists. The rollback of basic political and social rights, the undermining of democracy itself, would be the price of that abandonment.

Budget 2018: Something Good, Something Not

This month, more than 15,000 scientists from 184 countries issued a second letter to humankind (the first was in 1992), warning of the bleak fate awaiting us if environmental degradation continuesiv. Last week, people of Delhi caught a glimpse of that future when the Indian capital became enveloped in a toxic smog. Schools closed, construction work stopped, some areas of the city was banned to vehicles and the United Airlines cancelled all its flights until the air turns ‘less lethal’. A desperate government is hastening to do what it should have done years ago: introduce cleaner, less toxic fuelsv.

Mangala Samaraweera’s first budget is timely in this important sense. It is environmentally friendly, and unabashedly so. As the Indian experience proves, saving environment is a public good, a goal from which all of us, including those who are opposed to such measures, will benefit. If Minister Samaraweera’s green policies are implemented, they might save Colombo from the fate of Delhi (and of Beijing).

Minister Samaraweera’s budget also addresses, to some degree, socio-economic preconditions for genuine reconciliation. Monies have been allocated to provide housing for those affected by the war, and for those living in line houses. Relief has been promised to those mired in debt in the North and the East (the tragic story of a badly indebted mother who poisoned her children and committed suicide is emblematic of the plight of the poor in war-torn areas). The budget also includes measure to help young people and empower women economically.

The new budget is green; it is inclusive. But these progressive measures are built on shifting sands. The budget contains within it a fatal flaw which can undermine it – and the government. It has failed, attitudinally and actually, to move away from the path of extractive taxation – indirect taxes which harm the poor and the middle classes and widen income disparities. Minister Samaraweera has not even tried to escape the trap of Rajapaksa economics. His budget, progressive and forward thinking in many ways, continues to maintain the highly punitive 20:80 ratio between direct and indirect taxes.

The problem with such an imbalanced ratio is far from an esoteric one. It has immediate and real socio-economic-political consequences. Such heavy reliance on indirect taxes "shifts the burden of taxation onto the poor," the UNDP warnedvi the Rajapaksa government four years ago. "As long as the revenue from direct taxation remains low, this ratio will prevail and this in turn means that the bulk of the burden of indirect taxation will be felt by the poor people." Dr. Saman Kelegama, the then head of the Institute of Policy Studies, pointed out.vii The ideal ratio of direct to indirect taxes would be 40:60, he maintained.

Sri Lanka experienced high levels of economic inequality in the mid 1980’s. The poorest 10% accounted for only 0.4 of the income while nearly 50% of the income was bagged by the richest 10%. The JVP manipulated the resulting discontent, giving it an anti-minority, anti-devolution form. Income disparities lessened during the Premadasa years, but his efforts to create a more balanced economy was abandoned after his assassination. The gap between the rich and poor started widening again, reaching alarming levels by 2013. "This trend can undermine economic sustainability and threaten social cohesion," the ILO warnedviii.

The Rajapaksas ignored the warnings (including a very perceptive one from Minister DEW Gunasekara) and continued with their strategy of extracting wealth from ordinary Lankans through indirect taxes to maintain a wasteful, extravagant and obese state. The 2013 budget gave a 300% tax break to super racing cars. The 2014 budget gave tax breaks to designer goods. Both budgets increased existing taxes or imposed new ones on essentials including wheat flour, vegetables, fruits, mosquito coils, gauze, cement, sprats, chickpeas, green grams, canned fish, Maldive fish, dried fish and coriander. VAT exemptions on paddy, rice, wheat, some spices, rubber, coconut, tea, rice flour, eggs, milk, tractors, machinery for tea and rubber industry, plant and machinery for firms, and some pharmaceutical preparations were removed.

The result was a scissors-crisis in living conditions of ordinary Lankans, caused by falling real incomes on one hand rising prices on the other. According to the Department of Census and Statistics, 53% of the urban population, 73% of the rural population and 81% of the estate population did not receive the minimum income necessary to pay for food and other basic needsix. By late 2014, the electorate was hurting, hopeless and ripe for change.

The CPA’s 2014 opinion survey, Democracy in Post-War Sri Lanka, created a word-picture of this mood of discontentx. 42.7% of Lankans (and 43.1% of Sinhalese) said that they had to cut back on the quantity/quality of the food they purchased. 54.1% Lankans (and 54% of Sinhalese) thought their own household economy got little or lot worse in the last two years. 45.1% of Lankans (and 43.5% of Sinhalese) thought that the national economic situation got little or lot worse in the last two years. 66.3% of Lankans (and 67.4% of Sinhalese) thought that the government should prioritise cost of living.

The Rajapaksas did not prioritise cost of living. They thought wrapping themselves in the lion flag and Buddhist flag, and scapegoating this or that minority would suffice. They were wrong, fortunately so. A majority of Lankans opted for hope over fear. They believed the vision of a democratic, progressive and inclusive society held aloft by Maithripala Sirisena and Ranil Wickremesinghe. They voted for change, for betterment. By clinging to Rajapaksa economics, the Sirisena-Wickremesinghe administration is failing them. Minister Samaraweera’s budget, for all its positive features, is, most seminally, a symbol of this failure.

Two Economies, Two Existences: Recipe for Political Disaster

Ray Dalio, billionaire founder of Bridgewater Associates, recently made a comment which should be memorised by every democratic politician. "We talk of the economy. Recognize that you can’t talk about the economy. There are two economies. If you look at the economy of the bottom 60%, it is a miserable economy.... so we have two parallel existences."xi

In Sri Lanka, the gap between these parallel economies and parallel existences are growing fast, not least because of environmental factors. According to official sources, close to two million Lankans are severely affected by the crippling droughts. Poverty and indebtedness are growing in tandem with failing harvests; hunger is on the rise as are school dropout rates and internal migration. Measured against this reality, spending billions on new expressways – which incidentally might create new environmental problems and force more people into poverty/debt trap – seems unimaginably unrealistic and unforgivably self-defeating. It is the kind of tone-deaf inanity the Rajapaksas excelled at, which should have been laid to rest with their ouster.

Political progress and social progress are not sustainable if accompanied by retrogressive economics. A democratic polity and an open society needs an economy which doesn’t marginalise large swathes of people and generate simmering despair. "...Inequality can undermine progress in health and education, cause investment reduction, political and economic instability and undercut the social consensus required to adjust in the face of shocks and thus it tends to reduce the pace and durability of growth," warned a famous IMF study titled, Redistribution, Inequality and Growthxii.

It is an old myth, that of rich Tamils, rich Muslims and rich Christians, all of them crafty, all of them preying on poor naive Sinhala-Buddhists. The myth, probably rooted in the Dharmapalian resurgence, was used to justify the disenfranchisement of Up-country Tamils (depicted by populist Sinhala politicians as ‘privileged’), Sinhala Only, Black July and the rising tide of anti-Muslim hysteria. The Rajapaksas made use of this myth to stay in power. They will return to this myth to regain power.

That the government is unwilling to face local/provincial elections is no secret. The UNP and the SLFP are not alone in their trepidation. Rajapaksa-led JO too would be nursing its own set of anxieties. At the next Local Government election, the UNP is likely to come first in terms of total number of votes (albeit with a much depleted tally, compared to its 2015 performance). The JO will have to jostle not for the first position but for the second position. Even if the JO wins the contestation with the SLFP – which seems possible – for the Rajapaksas it will be a pyrrhic victory. It will give the lie to their constant boast that the electorate is waiting for a chance to vote the Family back to power.

So for the Rajapaksas, the best and the fastest route to power would be via a change in parliamentary balance: engineer defections from the SLFP and the UNP, make Mahinda Rajapaksa the Prime Minister, impeach President Sirisena, repeal the 19th Amendment, and, Abracadabra, the Family would be back in control. This non-electoral route is preconditioned on an explosion of popular discontent. SLFP and UNP parliamentarians will change sides only if they see a tempest of popular anger against the administration. Hopefully, the planned labour reform in the budget will not ignite just such a situation. If flexible working hours is an Orwellian term for lengthening the working day, massive strikes and demonstrations will ensue. Faced with the wrath of the workers, what would the government do? Create another Roshain Chanaka (the FTZ worker gunned-down while demonstrating against the Rajapaksa pension plan) and, in doing so, inflict on itself a mortal political wound?

i https://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014

ii http://gini-research.org/system/uploads/450/original/Poland.pdf?1370090614

iii https://www.vogue.com/article/roy-moore-martin-luther-king-this-week-washington

ivhttps://www.washingtonpost.com/news/speaking-of-science/wp/2017/11/13/thousands-of-scientists-issue-bleak-second-notice-to-humanity/?utm_term=.ebffe8342a69

vhttps://www.theguardian.com/world/2017/nov/15/india-to-introduce-clean-fuels-faster-to-combat-delhi-smog-crisis

vi Sri Lanka – Human Development Report - 2012

vii The Island – 9.6.2013

viii Asia Pacific Labour Market Update – April 2012

ix Question Time reveals colossal waste of public funds while masses struggle – Chandani Kirinde – The Sunday Times – 27.7.2014

x http://www.cpalanka.org/top-line-survey-results-democracy-in-post-war-sri-lanka-2014/

xi https://www.cnbc.com/2017/11/07/billionaire-ray-dalio-for-many-in-the-us-its-a-miserable-economy.html

xii http://www.imf.org/external/pubs/ft/sdn/2014/sdn1402.pdf