Economic nationalism and its impact on business

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Nationalism and economic nationalism Nationalism is defined as “patriotic feeling, principles, or efforts – an early consciousness of nationalism and pride”. This is further elaborated as “devotion to the interests or culture of one’s nation,” “the belief that nations will benefit from acting independently rather than collectively, emphasising national rather than international goals” and “aspirations for national independence in a country under foreign domination”. Wikipedia quotes that “Roosevelt made the case for what he called the ‘New Nationalism’ in a speech delivered on 31 August 1910. The central issue he argued was for government protection of human welfare and property rights. He also argued that human welfare was more important than property rights. He insisted that only a powerful federal government could regulate the economy and guarantee social justice and that a President can only succeed in making his economic agenda successful if he makes the protection of human welfare his highest priority. Roosevelt believed that the concentration in industry was a natural part of the economy. He wanted executive agencies (not the courts) to regulate business. The federal government should be used to protect the labouring men, women and children from exploitation. In terms of policy, Roosevelt’s platform included a broad range of social and political reforms advocated by progressives.” Investor Dictionary describes “economic nationalism” as “policies which are guided by the idea of protecting domestic consumption, labour and capital formation, even if this requires the imposition of tariffs and other restrictions on the movement of labour, goods, technology and capital. It is in opposition to Globalisation in many cases, or at least on questions the unrestricted good of free trade. It would include such doctrines as protectionism, import substitution, mercantilism and planned economies. Economic policy shifts in Sri Lanka Every business chamber and business leader, following a review and critique of the Prema-Chandra Athukorala and Sisira Jayasuriya paper titled ‘Economic Policy Shifts in Sri Lanka; Post Conflict Development Challenge’ should develop action strategies, risk mitigation strategies and engage in advocacy initiatives aimed at optimising private sector led sustainable growth.

The Abstract of the above paper reads: “The end of the long civil war in Sri Lanka in 2009 generated widespread expectations of a peace dividend that would enable the country to embark on a period of sustained economic growth. Recent developments have dampened that optimism, however, rekindling fears that Sri Lanka’s tale of missed opportunities may continue. After showing remarkable resilience during decades of war and conflict, the Sri Lankan economy has failed to capitalise on the window of opportunity presented at the end of the military conflict. In the aftermath of the military victory, there has been a sharp reversal of trade liberalisation and a marked shift back towards nationalist-populist state-centred economic policies, reflecting the pressures of resurgent nationalism, an unprecedented concentration of political power in a small ruling group, and influence of some powerful vested interests. Unfortunately, a return to the failed past policies of inward-oriented development strategies, offers no viable solutions for the problems confronting small, capital- and resource- poor countries in today’s globalised world. Sri Lanka must change both its political practices and economic policies drastically and urgently to cope with the huge development challenges facing it in an environment of global economic turbulence.” Flashing amber lights? Athukorala and Jayasuriya’s paper referred to earlier makes it incumbent upon Business Chambers, as well as business and civil society leaders to take note of the following issues of significant relevance to all Sri Lankans, especially to the business sector and minority ethno-religious and social segments of society; 1. Revival of economic nationalism and consequential impact (para 4) 2. Pronouncements and proclamations of government and the leaders of strong assertion of Sinhala Buddhist hegemony in socio political life of Sri Lanka (para 4) 3. The sentiments referred to in 2 above, being also mirrored in the economic statements of government with a strident economic nationalist rhetoric that harked back to the populist programs of 1960s and 1970s (para 4) 4. Populist policies receive strong backing from an anti liberalisation lobby with strong vested interests and ideological support from a senior academic economists (para 4) 5. In highlighting the importance of economic policies, underestimating the need for a political process that addresses the legitimate and deep seated grievances of the minority Tamil population to ensure a sustainable peace that is essential for economic development (para 6) 6. The strident assertion of Sinhala Buddhist pre eminence in Sri Lanka having contributed to a deepening sense among minority Tamils that they will be treated as second class citizens despite the rhetoric of reconciliation and equality of treatment (para 6) The research paper has not clearly touched upon the potential impact and risks of the resurgence of economic nationalism on other minority groups, consisting of Muslims and Tamils of Indian origin, Sri Lankan diaspora, and even the impact on foreign investors, foreign citizens resident in Sri Lanka (some with property ownership), multi-nationals and even Sri Lankans whose forefathers came from other countries. Could these groups be the next target of economic nationalists and extremists, in addition to the Tamils and non-Buddhists? The research paper has further not touched upon four other significant areas of concern for the future economic prosperity of the nation, business and people and these relate to; 1. The significant erosion of Individual citizen’s rights and freedoms in regard to the practice of religion, expression, right to property, equality in the sharing national resources, and corruption/nepotism free operating environment 2. The lack protection under Rule of Law, Independent and Impartial Justice, and Equality before the law 3. Appropriate foreign policy and international relations 4. The significant risks of the ballooning external debt and expanding fiscal gap caused by unwise and egoistic public investments It is most unfortunate that chambers and business leaders are not critically reviewing the potential risks in the emerging business environment. Will the flashing amber lights turn red? The annual Independence celebrations in this country take many shapes and forms. Beginning with religious observances and the formal military parade and gun salute to the nation, it extends to several cultural events thereafter. These celebrations are held on a provincial basis. These events are all linked to and focus on celebrating our independence as a nation, being relieved of the rule of our past colonial masters and since the end of the war in the north, the elimination of the menace of terrorism. The Independence Day celebrations will be followed by a period leading to the provincial council elections in the Western and Southern Provinces (possibly in the remaining other provinces as well) and thereafter by Geneva Human Rights Council meeting and the Victory celebrations. In the international arena, the role of key economic partner nations in a moving a possible resolution against Sri Lanka in Geneva, the political rhetoric of the Indian elections and the consequential potential Southern State’s leadership role in central government of India on one hand and the consequential impact of US monetary policy shift regarding quantitative easing and any delays in economic revival of the Western world, will certainly be grounds for a resurgence of economic nationalism in Sri Lanka. These likely risks will pose some challenges to the monetary stability and sustainable growth of Sri Lanka and Sri Lankan business. The usual risks the country is exposed to due to weather conditions, unexpected commodity and petroleum price changes, runaway public spends and lower than expected expansion in exports and tourism earnings may add to the woes of the nation in the short term. Recently observed behaviours, leadership actions and rhetoric, of nationalists, extremist and ideologically restrictive groups, (some of whom who hold high office in governance or have close network relations with those in high office of governance), have effectively prevented, blocked,

restricted or pressurised and some times, even damaged and destroyed the peace, harmony and the rights of ethno-religious and non national minorities. These minority segments have also faced challenges from nationalists, even in regard to activities carried out in their places of business, their property rights, freedom of religious worship, freedom of association, meeting and recreation, in dedicated halls and cultural sites, their socio-cultural and business practices and engaging in individual trades, professions, business as well as religious observance and cultural and language usage and expression of beliefs/faith rights have been challenged by the extremists. These extremists and violent individuals may in their next phase commence focusing on businesses, business leaders and those who are foreigners, non nationals and persons with nationality of origin outside this country and in the least subject them to abusive verbal rhetoric. This rhetoric may soon even extend to a repeat of some similar rhetoric of the past, advocating that the benefits of this country and its resource use are restricted only to perceived original inhabitants and their progeny, especially those who have embraced the majority language and religion. If these risks were to crystallise how will the required foreign direct investment be sourced in meeting the investment gap? Will doors to markets, technology sourcing and tourism flows be negatively impacted? The first signs of the emerging environment may be witnessed through the potential risks of further reverberation by nationalists and extremists of the Independence Day pronouncements linked to sovereignty, nationalisation of key private businesses, foreign invaders, and international criminal charges, identification of traitors and patriots, non surrender before challenges. Election platform and protests organised against movers of resolutions in Geneva and protests against South Indian political slogans may be trigger points for risk crystallisation. Recently published article urging Sri Lanka’s name be changed to “Sinhale” may be a sign of risk triggers to emerge. Such a scenario will send clear disastrous signals that the identified minority groups have not, in fact, gained full independence within this nation, as enjoyed by the powerful segments as well as those enjoyed by majority ethno religious population. Misrepresented media headlines? Patriotism? Or confusion? The media in the recent weeks have reported that ‘Business confidence rebounds – LMD,’ ‘82% of CEOs (65% of sample comprised of CSE Top 100) expects the economy to steadily grow,’ ‘Chambers see a positive 2014 with confidence in the country’s economic prospects,’ ‘Lankan business environment main attraction for FDIs,’ ‘Bloomberg’s relative optimism though they remained below the Central Bank’s overly ambitious estimates,’ ‘Sri Lanka’s business confidence remains tepid: StanChart’. Are these mixed signals due to misrepresented headlines? Or patriotic rhetoric? Or confused statements sans effective risk analysis? Risk assessment and mitigation Risk assessment and mitigation are fundamental tools of effective business leadership and management. Buddhism too promotes the practice of risk assessment; and so many other religions too. Taking either the most optimistic scenario or the worst case scenario as a given and planning for it will lead to disastrous business results. The business environment scenario assumed for planning must be the most likely one taking a balanced view on risks. Risk assessment best practices must be followed and risk mitigation action plans must be in place as business face up to a challenging short to medium term business environment in the next 12 months. Accountability and voice of business Economic nationalism and extremism being systematically embedded in the operating environment, business leaders will need to take pragmatic and strategic steps to scan the environment for emerging risks and prepare contingency plans to counter any possible ill effects. Effective advocacy, strategic alliances and timely pre-emptive strategic action may also be a priority. (The writer is a former Chairman of the Ceylon Chamber of Commerce and a good governance activist.)

Economic nationalism and its impact on business

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