Sri Lanka to boost family incomes through social market economy
COLOMBO (EconomyNext) – Sri Lanka’s new administration will follow policies that will increase family incomes based on a ‘social market economy’ framework, planning and economic affairs deputy minister Harsha de Silva said.
"The core aim of our policies is to provide the benefits of economic advances to the households," planning and economic affairs deputy minister Harsha de Silva said.
"If a person can say we have saved some money for his daughter’s wedding this year, he can say he has made some advancement."
De Silva, an economist with a doctorate who has worked in over 20 countries as an advisor with the World Bank and Asian Development Bank said he was now able to do the same in his own country.
De Silva said academics, university professors, engineers and others were prepared to help.
"We will take this country forward through a market based economy," he said. "But it will be through a market economy with social justice. We call it the social market economy (samajer welander polar arthikaya)."
A true market economy means the state and rulers will not be able to intervene in people’s decisions on how to best spend their money.
No gate keepers can be put on the pockets of citizens to buy goods from domestic producers who enjoy the patronage of rulers through import duties allowing them to amass wealth at the expense of reduced disposal incomes of the entire population especially the poor, analysts say.
A Nazi-style ‘Ernährungsautarkie’ has to end to provide cheaper food especially inexpensive protein such as milk for malnourished children of the poorer people in particular to grow up stronger in their early years.
In Sri Lanka farmers and land-owners are a powerful lobby group and analysts say any administration will find it difficult to establish free trade in foods and forcing farmers to move to more efficient and higher yielding crops as their counterparts have done in East Asian countries.
De Silva said a 100-day program of the new administration will be co-ordinated through his ministry. The minister is Ranil Wickramasinghe.
The office will also help with devising long-term economic plans, he said.
Under the 100-day program import taxes on several key foods is due to be reduced.
The administration has also promised to introduce better farming techniques and crops which will need more resources to be put into agricultural extension services.
A German style ‘social market economy’ that emerged after the defeat of Nazi self-sufficient economics in Germany under Konrad Adenauer and Ludwig Erhard also means that the currency has to be strong and inflation low or negative.
A strong currency is the best protection against the inflationary expropriation of salaried workers earnings and savings from high spending rulers and export promoters.
To protect income gains households make each year Anglo-Saxon style devaluationist and inflationist currency depreciation and inflationary policies have to be abandoned in favour of a strong currency that preserves the incomes of wage earners, rich and poor. Export promotion through destruction of wages of factory workers thorugh currency depreciation will also have to be abandoned to create a ‘true social market economy’.
Permanent currency depreciation also destroys lifetime savings of all citizens in held in banks unlike sovereign default and sovereign hair-cuts which only reduce the real value of government debt holders.
Analysts say the spending plans of the 100-day administration carries risk for the exchange rate and inflation, which may need higher interest rates to counter.
With the country now heavily exposed to international capital markets, it can no longer take the fiscal risks taken in the past.