ECONOMYNEXT – Liberal market economics cannot be practised in a third world country like Sri Lanka and even the United National Party has been forced to accept it, Health Minister Rajitha Senaratne said.
“In a liberal market economy the market forces will shape the market. Those things cannot be done here (evar karanne bahar mehe). Even the United National Party accepts that liberal procedures cannot be done in third world countries like this.”
“If you look at the cabinet decisions this week you can see that there is no liberal economy.”
He said one cabinet decision related to a state company that rents machinery will be re-built. He said state is supporting several companies making tinned fish.
“That is not a market economy. There is no neo-liberal economy. We cannot give the market to control everything.”
“Other than a few Western countries most others intervene in the economy.”
Though economic policy is deteriorating and becoming illiberal and interventionist, some classical liberal principles are being restored by the current administration in improving rule of law and justice analysts say.
Several moves have been made the judiciary independent. An independent judiciary was a key victory for liberalism where the executive and judiciary was separated, where people were given freedom from injustice.
A battle between Governor Maitland and Chief Justice Lushington in resulted in greater independence for the judiciary with the Charter of Justice in 1810.
In independence Sri Lanka the judiciary was progressively undermined and freedom from injustice was progressively reduced.
Sri Lanka’s economic policies became liberal in the during the heyday of liberalism in Europe, the so-called golden age of liberalism in the 19th century, before nationalist hate and Marxism rose up in Europe.
Liberals ended the feudal ‘wedawassam system’ and in 1844 slavery was finally abolished. Legislative reforms are brought which ended in universal adult franchise.
Sweeping economic freedoms were given after the Colebrook-Cameron reforms ending the privileges and trade controls on the people which dated back to the Dutch East India Company.
By independence from British rule, Sri Lanka’s economy was head of many other Asian countries.
But many economic freedoms were taken back from the people, by the state, and illiberal interventions and controls proliferated after independence.
Even Britain the former colonial power regressed after World War II influence by economic illiberalism influenced by the so-called Fabian school, while the defeated Germany practised liberal economics and became a German Economic Miracle.
Economic liberalism was restored in Britain only in the late 1970s making the country strong again.
Trade controls much worse than that practiced by VOC were imposed after independence even in basic foods, and multiple state enterprises were built by rulers with money taken from the people. State enterprises were given monopolies to exploit the people just like the Dutch firm.
Unlike the Dutch and later British East India Company which had priviledged trading rights and monopolies, many state enterprises made losses, eating up money taxed from the people.
The trade controls and especially licenses allowed a few state as well as private firms to import and control the market and exploit the people or avoid tax and make large profits or both.
Licensing is starting in several areas under the new administration now including in the import of gold.
A central bank was established to print money in 1951, (the Rix dollar was a very strong currency under the Dutch) resulting in currency depreciation of unprecedented level, reminiscent of the early British rule when fiat Rix dollars were printed in paper leading the first documented balance of payments crisis.
The currency fall led to capital controls and draconian exchange controls and finally a fully-controlled economy in the 1970s after the Bretton Woods system of dollar soft-pegs broke down.
Sri Lanka is now experiencing another balance of payments crisis, with the rupee already falling to 144 to the US dollar from 131 to the US dollar with one failed float in September 2016.
The current UNP-led administration however has promised at least one key liberal economic principle of expanding free hold land of the people by giving full ownership of land and property which now has state involvement. (Colombo/Jan29/2016)