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Thursday, 23 December 2010 00:51 - - {{hitsCtrl.values.hits}}
What have we learned in 2,065 years?
“The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt.
People must again learn to work, instead of living on public assistance” – Cicero, 55 BC
So, evidently, nothing... Certainly not Sri Lankan leaders. This simple wisdom has escaped the attention of our leaders, especially the coterie of arrogant high officials, academics and business leaders who regularly surround our supreme leader.
The readers may judge the veracity of the above pronouncement by reviewing a synopsis of a discussion that took place amongst some business leaders at a recent dinner party..jpg)
The business leaders, led by one who openly boasts of his network power to the throne and the key string instrument players around the leader, acknowledged in chorus how well the recent budget proposals, the ‘Mahinda Chinthana’ based infrastructure developments, the empowerment of the private sector as the engine and single minded implementation of policy/plans within a cavalier governance style leads the nation’s growth and prosperity and towards the goal of being the miracle of Asia.
The business leaders praised the recent Budget handouts and the benefits of infrastructure investments in the power sector, roads, airports and seaports. The network leader then highlighted the four aces of the governance card pack, who drive this nation to future glory, irrespective of any weaknesses in the administration elsewhere (i.e. the four critical players who have the ear and the respect of the leader who in fact run the country ignoring the elected legislators holding ministerial ranks!).
The sceptic amongst the group raised six critical risks in the system which threatens the high hopes articulated. These risks were highlighted as the high level of the national debt, international relations led isolation from countries that provide markets and access to technology, the uncompetitive exchange rate regime, collapse of the rule of law and justice systems, centralisation of power in the centre under the executive ignoring the legislature and local governance and forgetting to effectively address the causes that led to the national crises in the north/east and even the south.
The network powered business leader who also warms the seats of the supreme monetary authority closes all arguments with a proverbial wave of the magic wand, stating that those in charge of the nation, duly advised by a demand-driven brilliant young team of professionals, know so well all impacting issues in making key decisions and only the treacherous traitors of the nation highlight potential systemic risks.
He announces that the war is over and the investors and tourists are flocking in and consistent growth over 8%, a dream of the past, is now well within grasp and the per capita GDP will double in the next five years.
The transformation of the nation now embedded with a safe and attractive profile is heralding in new investors willing to pay billions in hard cash for land, whereas earlier they were given land free or at next-to-nothing costs as long-term leases.
He sums up that all is well in this nation, now rocketing to growth and development under the present regime and states that even UK has a debt of 120% of GDP whilst in Sri Lanka it is only at 80%.
A professional macroeconomist, if present, would have said: “The ego and hero worship blinds those who advise on economic management, as they ignore the global signals and case studies of the impact of excessive debt and wrong exchange rate policies and lay little emphasis on the comparative differences in the structure of the economy and debt of UK and Sri Lanka, as they use statistics without due analysis.”
Our leaders have not learnt the lessons from ancient and recent global history! Unfortunately they do not also favour intellectual debates and open and transparent public reviews of the emerging risks and long-term policy impact of current macro economic and social policies, public infrastructure investments supported by commercial short term debt vs. public private partnerships and strategies for development and growth with risks mitigated, assuring equity and equality for all citizens.
One plea from a caring independent citizen’s voice: “Leaders please read the recent Newsweek special edition with a cover page title ‘The Key To Power’ – for countries, companies and consumers, the critical question in the coming year is this : Can you handle your debt?”
The Newsweek carries an interview with George Papandreou, the Greece’s American born Harvard-educated Prime Minister, a Socialist, where he outlines the following reform measures, adopted since negotiating a Euro 120 billion international bailout for his debt ridden nation, aimed at slashing debt and reigniting growth, and importantly using the crisis as an opportunity to clean up the Greece’s corrupt politics and deregulate its uncompetitive economy, noting that the financial crisis highlighted reforms not attempted and implemented for decades, which led to mismanagement of the country:
Papandreou sums up stating that “a successful reform isn’t about market orthodoxy and it is all about good governance, about changing the structure of government and making it more transparent, effective and efficient”.
Why do we not hear such articulations by our leaders, key administrators, and chamber, academic and civil society leaders?
Daniel Gross in the Newsweek article ‘The New Freedom – Borrowed Trouble’ states: “Until now, power has been defined largely by military strength, by control of vital resources or by the ability to embrace a form of supper charged capitalism. But in 2011 and coming years, the ability to manage debt may be the best indicator of where global economic power lies... Now the No. 1 issue has become freedom from crippling debt and restoring fiscal balance in the developed world.....debt is a huge spur to freedom, debt is leverage and a force multiplier... Debt can also limit one’s freedom – it’s a shackle, a contract.”
Joseph Stiglitz however in the Newsweek article ‘The Way out of Debt? Spend, Spend, Spend,’ targeting mainly the US economy, suggests: “What is required is more spending on high-return investments. Public investment spending will increase GDP – and tax revenues – in both the short term and the long... This, then, is the ultimate irony: by increasing America’s indebtedness now, and spending the money on high return investments, we will be both increasing society’s wellbeing and reducing our long term national debt. We can have our proverbial cake and eat it too.”
Mac Margolis in the Newsweek article titled ‘Welcome to Welfare 2.0 – For the World’s Poor’ states: “Whether developing nations can care for their needy and also avoid the bomb of public debt that has staggered developed economies will be central challenge for decades to come. Yet never has the developing world been so ready to shoulder the burden... While fighting inequality and helping the neediest has long been on the docket of third world leaders, most previous attempts have been sabotaged by inefficiency, corruption, and stagnant or dysfunctional economies... Developing countries must innovate programmes that are efficient and cheap alternatives to pouring taxpayer’s money in to unwieldy and porous welfare bureaucracies, where waste and corruption are often rife. Thanks to improved census taking, countries are now able to pinpoint the extreme poor and zoom in on the neediest communities.”
He quotes Eswar Prasad of Brookings Institute: “Though emerging market economies are growing very fast, growth is not evenly distributed around the economy, and now there is strong pressure to include those left out. For these countries to reach the next step of their transformation, they require better safety nets. Delivery of social welfare is a challenge – sometimes you have to buy out the old vested interests to implement innovative methods.”
In conclusion the leaders of our nation must refresh their future action strategies based on two recent quotations:
“It is not the political leadership who tried to derail us, but a morally bankrupt coterie of political appointees who felt exposed naked under the gaze of our scrutiny of their actions. If I am to give a message to the political leadership of this country, I have many, but the first would be to take cognisance of these corrupt individuals who mislead the political leadership for their personal gain. Let us not forget that thieves cannot advise their masters not to rob but to rob more and share the ill-gotten wealth,” said the outgoing Executive Director of Transparency International Sri Lanka J.C. Weliamuna.
Brad Adams, Executive Director of Human Rights Watch’s Asia division: “I’m not saying imminently. But the evidence is so strong, and they’re so unpopular internationally, that a time will come when no one will be there to protect them.”
Let us end with a prayer: “May the leaders have the wisdom to reflect on the six risks highlighted by the independent voice, promote open and transparent intellectual debate and refresh the action focus remembering the two quotes above and the action steps articulated by the Prime Minister of Greece.”
(The writer is a former Chairman of the Ceylon Chamber of Commerce.)
