by Prof.Tissa Vitarana
The massive crisis that has affected the lives of nearly all classes in our society, specially the poor and middle, in Sri Lanka is not new to us or to most other countries. It is an inherent cyclical feature, occurring at about seven year intervals, due to ‘boom and bust’ nature of the global market driven capitalist economic system brought on by over production. Periodically it may get out of control, like the Asian crisis of 1997 when a whole region was badly affected.
The affected countries that overcame the crisis by their own effort have learned to tide over these crises with minimal disruption. At an international conference in Cairo I had the good fortune to have a lengthy chat with Dr.Mahathir Mohamed (facilitated by us both being doctors turned politicians). He advised against succumbing to IMF pressure at any cost. This was because it is committed to the Prof. Friedman neo-liberal doctrine which facilitates the exploitation of our countries through an import dependent open economy that USA-led Imperialism controls.
The loans given lead to a debt trap which is the root cause of our situation. Sri Lanka’s foreign debt has reached US$ 52 billion and debt servicing last year was six billion dollars and this year seven billion. Hence the shortage of dollars and of essential imports like fuel, gas, chemical fertilizer, medicines and food items. To ensure that at least six months of these imports are obtained the Foreign Exchange Reserve (FOREX) has been maintained at US$ seven to eight billion. Now it is down to zero, and thus causing this severe crisis.
The answer is the development of a national economy with maximum self-sufficiency which is Government regulated in the real interest of all the people, not a few super rich. This was done by Dr. N.M. Perera as Minister of Finance in the 1970/75 SLFP-LSSP-CP coalition government. Since the neo-liberal UNP Government led by J.R.Jayewardene took power in 1977 the country has gone into a situation of economic crisis. While the rich have got richer, the poor have got poorer.
Now it is estimated by nutritionists that about 70% of all families are living below the poverty line and have inadequate food and other essentials. The level of malnutrition has gone up above 20%. It is with great difficulty that the adults of many of these families survive on one meal a day, and provide two meals for their children. Many go to bed at night hungry. The productivity of the economy has gone down and, due to the economic crisis the closure of factories and other work places, has led to massive pay cuts and job losses.
The farmers harvest outputs have dropped due to the shortage and high cost of fertilizer and other inputs. Due to the fall in the import of fuel the shortage and high price has disrupted the transport system, the operation of factories, and the use of machinery in agriculture and in the fishing industry. The economy is on the verge of total collapse.
In the midst of such crisis where the system itself is collapsing, clearly the country and the world requires a system change. Unfortunately those in power are content to tinker with the existing system and make both minor and some major changes, but the outcome has not been adequate. It is my opinion that there needs to be total change of the system that benefits the whole of society and not the few who can manage with the limited but expensive tinkering process.
Society itself needs to be driven not by the profit motive which largely benefits the rich but also by being re-organized to provide the needs of everybody. That is a society based on socialist principles. For instance the high cost of food (due to the massive food inflation) is an outcome of the profit motivated production, distribution and marketing system that exists today. Further, in Sri Lanka for instance due to the high cost of inputs the farmer has to take large loans to cover his cost. He gets into debt and at the time of harvest he has to pay the capital cost along with the interest.
The farmer generally takes big loans from the trader or from institutions (like banks) that provide credit. Many poor farmers in this country find it easier to obtain credit from the traders thereby avoiding the red tape they have to face when they go to institutions that provide credit. But this leads to further problems as the trader often demands that the produce is sold only to him at an amount below the prevailing market price. At times this does not even cover the actual cost of production. And the farmer gets caught up in a cycle of debt from which he has no escape. A majority of the farmers in this country are deeply in debt. They are trapped in a situation of perpetual poverty.
The same problem is faced by small and medium scale entrepreneurs. As a result value added industries too do not develop in the rural sector. There must be a new system which gives the farmers and the entrepreneurs the necessary credit, if possible at no or very low interest at the time that he needs it. This will have to be done by the Government which should ensure that bureaucratic pressures such as the taking of bribes is firmly eliminated.
The LSSP favours a truly cooperative system. There should be producer cooperatives and consumer cooperatives, and they should directly deal with each other without any intermediaries. In the prevailing private enterprise system the producer is exploited by a series of middlemen who jack up the price, so that the consumer has to pay a far higher amount than what the producer gets. This middleman system must be eliminated and the transaction should be directly between the producer cooperatives and the consumer cooperatives.
Thus the consumer will only have to pay the cost incurred in taking the produce between the two without any profit. Such a cooperative system is not a dream but it works in many countries abroad, specially those in Scandinavia. But this has already worked in Sri Lanka too, during the time that Dr.N.M.Perera was Finance Minister in the Government of Mrs. Sirimavo Bandaranaike. Unfortunately the cooperatives that are still functioning in this country are cooperatives only in name operated by mudalalis. All the members of the producer and consumer cooperatives must meet and elect reliable office bearers who will function properly at all times. This system change is vital to bring down the cost of living and end hunger and poverty.
(theisland)