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Sri Lanka state worship, socialism, a British legacy

COLOMBO (EconomyNext) – Sri Lanka’s lagging economic performance and state worship was a result of socialist ideas that were prevalent in Britain at the time of independence, which were absorbed by university teachers who studied there, economists and analysts said.

"Many Sri Lanka academics in the post-independence period were influenced by Harold Laski, a Marxist economist who taught at the London School of Economics," economist R M B Senanayake said.

"That was one of the main reasons for the support for socialist policies."

Senanayake was speaking at a gathering of Sri Lankan of business executives, economists and young start-up entrepreneurs who gathered to discuss the setting up a Bastiat Society in Sri Lanka, named after Frédéric Bastiat, a 19th century French economist and liberal theorist.


Marxian philosophers had a belief that that capitalism – a dynamic competitive system of private enterprise and innovation that emerged in Europe along with property rights and the breakdown of a feudal order – had to give way to socialism eventually as if by voodoo or divine design.

In socialist countries that were created through Marxian revolution, property such as land whose ownership had passed from the King to merchants, peasants, serfs and former slaves when the feudal order broke down, was re-taken by the State.

The nation-state created some of the conditions that existed in the feudal and Mercantilist eras, but with a much worse system of taxation and inflation.

In Britain, The Fabian Society founded by those with Marxian beliefs, spread a philosophy of socialism and also backed the British Labour Party, which engaged in vicious acts against citizens such as expropriation.

Britain during that time set an example for political entrepreneurs who became rulers of newly independent states, to use an efficient taxation and a law-making machinery set up by the colonial administrators to mistreat and oppress their citizens in the same fashion.





Britain shook off post-war socialism and became a strong low-inflation nation again only in the early 1980s, after Margaret Thatcher followed the ideas of Friedrich August von Hayek, who ironically taught at the London School of Economics and challenged John Maynard Keynes in his lifetime.

Hayek was awarded the Nobel Prize in the mid 1970s as the flawed Bretton Woods system of soft-pegs broke up with the world and hundreds of millions of poor burning in high inflation.

The Great Fiction

Modern European style governments gives something to citizens by only by taxing the same citizens, borrowing and burdening yet to be born children, or by printing money which generates inflation and currency depreciation, which is not understood by many people.

"The government is the great fiction, though which everyone tries to live at the expense of everyone else," Bastiat pointed out.

Senanayake said countries like China which went down the socialist path for a while had had realized before other countries in Asia the practical advantage of free markets, and swiftly changed tack.

Some economists however say China is going through a partially Mercantilist phase and many pure capitalist firms have emerged in Vietnam in an environment of freer trade and zero state support.

Laski in Britain is also believed to have influenced Jawarhalal Nehru who implemented Soviet style 5-year plans in India, backed by money printing, condemning India into the so-called Hindu rate of growth, high inflation and currency depreciation.

Only one economist B R Shenoy in a note of dissent warned against the danger of state planning and money printing while all others applauded the 5-year plans.

Shenoy was vindicated in 1991 when many socialist interventionist policies were abandoned following a balance of payments crisis and many freedoms were restored to citizens ending licensing allowing entrepreneurial and capitalist spirits of Indian citizens to be unleashed.

Dharma Dheerasinghe, former Deputy Governor of Sri Lanka’s Central Bank said key concepts in economics such as ‘opportunity cost’ were developed from ideas originally articulated by Bastiat.

Capitalist industrial companies brought many ‘luxuries’ that were earlier consumed only by the nobility within reach of the workers who worked in the factories itself.

Freedom for Poor

In the 19th century Bastiat had to battle an increasingly interventionist state as well as vested (non-capitalist) nationalist or Mercantilist business interests that wanted to exploit poor consumers by limiting competition through high import duties.

One such involved the Candlemakers’ petition, where Bastiat showed the absurdity of protecting ‘domestic industries’ at the expense of the general public by penning a petition by candlemakers’ asking the state to block off sunlight so that they could sell more candles.

In Sri Lanka especially in tile, steel, electricity cables and other building materials, big business and the rulers have conspired to raise import duties and make it more difficult for homeless Sri Lankans to build a shelter over their heads.

The Bastiat Society in Sri Lanka is an initiative of Aruni Shapiro, a Sri Lankan who is now resident overseas, who serves as the proposed society’s advisor and Ishara Gamage, who is based in Colombo. Shapiro writes a regular column in Randora.lk, an online business news portal.

"We believe that the world is getting better because peaceful and profitable business create wealth for everyone, Shapiro wrote in Sri Lanka’s Ceylon Today newspaper.

"Without knowledge of how wealth is created, bringing about peace and prosperity is untenable. The Bastiat Society Sri Lanka is an independent society with the same belief.

"We invite those who create wealth, the entrepreneur, the business owner and the private sector employee to learn more and work with us to bring lasting peace and prosperity…"

Economist Anushka Wijesinghe said though Bastiate was heavily against taxation and a large government he himself worked in a taxation commission.

But he said by advising government on better policies that advanced freedom he hoped to provide opportunities for ordinary Sri Lankans to improve their living standards.

Sahan Bakmiwewa, founder of E-Silk Route Ventures (Pvt) Ltd said the Bastiat Society hoped to translate books including those written by Austrian economists and publish them in Sinhalese language so that ordinary people can also become wealth creators.

Sandali Handagama, another start-up entrepreneur said the society hoped to have public events to provide an opportunity for Sri Lankans to debate ideas about free markets and capitalism.

Tom G. Palmer, author and Cato Institute fellow is to speak in Colombo on March 31 as the organization’s first international speaker. He is schedule to speak at the Sri Sambudda Jayanthi Mandiraya, Colombo 05.

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