ECONOMYNEXT – Sri Lanka’s smuggling of ulundu (vigna mungu) triggered by import controls and high taxes apparently initiated in a nationalist autarky drive came under fire from an opposition legislator representing the minority community.
Protectionist taxes to give unfair profits to import substituting domestic producers have tended to drive smuggling, under in-voicing and corruption of customs authorities.
Export Non-Competitive Domestic Production
“There is no permission to import ulundu or greengram,” opposition Chanakyan Rasamanikkam told parliament.
“The reason given is that to increase domestic production imports are restricted. We do not see an increase in domestic production. What has increased is the price.
“Today a kilogram of ulundu is about 1,500 rupees. Ulundu can be bought from India for the equivalent of 200 Sri Lanka rupees. When you tax it can be sold for 400 to 450 rupees. Freight cost is about 10 rupees.
“So for 600 or 650 rupees or even less. Due to the 1,500 price there is a large mafia.
“If you look at people who eat ulundu it is in the North and East and Tamil people estate areas. All over the country there are people who eat ulundu and green gram. By blocking the import of these cereals a mafia has arisen.”
“Like the rice mafia, today the ulundu mafia is also a result of controlling imports.”
However Rasamanikkam also spoke against a planned import of rice by the trade minister, claiming harvests of Batticaloa farmers would be hit.
Due to years of protection, Sri Lanka does not produce export competitive, globally traded grades of rice like in East Asia.
As a result a bumper harvest does not lead to increased foreign exchange earnings and lower prices for the poor, but calls for the continuation of higher-than-world prices.
The Nazi Autarky
Countries that pursue economic nationalism through protectionism, characterised by Hitler’s Nazi Autarky, automatically create cronies or mercantilist oligarchs who profit from taxes diverted to their pockets (tax arbitrage), commonly known as ‘mafia’ in Sri Lanka, while triggering bad foreign relations.
Autarky (self-sufficiency) itself is driven by foreign exchange shortages in many countries.
Hitler called on the country to ‘export or die’ as the Reichsbank printed money in complicated ways (through Mefo bills) making it difficult to import industrial raw materials and oil driving the Nazi state to strike barter deals and invent substitutes. ( )
Protectionism in Germany dates back to German Historical Economics, with advocates like Friedrich List who introduced the idea to Europe (National System of Political Economy), laying the groundwork for a slippery slope of nationalism and minority oppression.
German nationalists then extended an idea originally devised by Alexander Hamilton for short term protectionism to relatively newly invented industrial goods to foods grown for thousands of years, allowing the farming lobby and collectors to profit from hunger and malnutrition.
The economic nationalism spread by the urban intelligentsia and university dons, eventually provided a fertile foundation for Nazism to grow, philosophers who tracked how targeting foreigners naturally turned to targeting domestic minorities in Austria and Germany found.
“In a world in which people have grasped the meaning of a market society, and therefore advocate a consumer’s policy, there is no legal discrimination against Jews,” explains economists and philosopher Ludwig von Mises.
“Whoever dislikes the Jews may in such a world avoid patronizing Jewish shopkeepers, doctors, and lawyers.
“On the other hand, in a world of interventionism only a miracle can in the long run hinder legal discrimination against Jews.
“The policy of protecting the less efficient domestic producer against the more efficient foreign producer, the artisan against the manufacturer, and the small shop against the department store and the chain stores would be incomplete if it did not protect the “Aryan” against the Jew.”
Rasamanikkan revealed Sri Lanka’s price control office was raiding supporters of his party and harassing them, while others were left alone.
Mises has pointed out that the ideology of state interventionism, regulations and the apparatus of economic nationalism set the groundwork and legal tools enabling minority oppression in Europe and it did not happen because everyone was naturally racist.
“The members of the linguistic minority are treated like foes or like outlaws,” Mises explains. “They apply in vain for licenses, for foreign exchange under a system of foreign exchange control, or for import licenses under a quota system.
“Their shops and plants, their clubhouses, school buildings, and assembly halls are closed by the police because they allegedly do not comply with the rules of the building code or with the regulations for preventing fires. Their sons somehow fail to pass the examinations for civil service jobs.
“Protection is denied to their property, persons, and lives when they are attacked by armed gangs of zealous members of the ruling linguistic group. They cannot even undertake to defend themselves: the licenses required for the possession of arms are denied to them.
“The tax collectors always find that they owe the treasury much more than the amount shown on the returns they have filed.”
Meanwhile Sri Lanka’s Trade Minister Nalin Fernando said the restrictions on the import of Ulundu was not not his idea and he will try to remove them as soon as possible.
“Because this is smuggled through the port, neither does the state get taxes, nor is the farmer protected,” Fernando said.
“Actually we should admit that. The decision to control imports was taken in 2020. But we have not decided to free the trade still. From my side I have told to allow the import with some taxes, of green gram, cowpea.
“There is a big problem with ulundu, which is a big part of the food required by the Tamil people. I promise that within a week we will somehow take a decision. The Finance Ministry had taken this decision. I will talk to them and the agriculture ministry and take a take a decision in a week.”
Sri Lanka’s food nationalism comes in a time of poverty and a rise in child malnutrition after the central bank printed money to cut rates and triggered a collapse of the rupee and sovereign default.
The main characteristics of nationalism is not only the lack of reason and logic but also the lack of compassion, critics say. (Colombo/Dec02/2023)