Capitalism with a Socialist heart for a sustainable future? By Raj Gonsalkorale

Socialism as pronounced by the likes of Karl Marx and others has failed. History tells us that. Maybe it failed because it was at odds with fundamental human characteristics and behaviour where given the opportunity, the desire of most human beings to accumulate and put way wealth to the extent they could. Mankind did this for different reasons, some more noble than others. However, most did it given the opportunity.

Some country’s that claim to have socialism as their governing creed, like Vietnam, the Communist Party of Vietnam maintains that the socialist-oriented market economy is consistent with the classical Marxist view of economic development and historical materialism, where socialism can only emerge once material conditions have been sufficiently developed to enable socialist relations.

Originating in the Chinese economic reforms initiated in 1978 that integrated China into the global market economy, the socialist market economy supposedly represents a preliminary or “primary stage” of developing socialism. Despite this, many Western commentators have described the system as a form of state capitalism.

Sri Lanka must choose its own path. A path that is suitable for its culture, its ethnic and religious mix, the long history of the country and its economic strengths and weaknesses.

Neoliberalism, the dominant ideology of the past four decades has been in retreat, weakened by the global financial crisis: coronavirus could bury it. The father of neoliberalism, Nobel Prize winning economist Friedrich Hayek once said that social justice was “a mirage”. Hayek’s great disciple, former British prime minister Margaret Thatcher, who once produced her copy of Hayek’s Constitution of Liberty and proclaimed, “This is what we believe”, and famously said there is “no such thing as society”.

Who would echo Hayek or Thatcher now? It appears that COVOID 19 has managed to undo what many neo liberal economists and leaders of countries tried to do, the dismantling of society, social responsibilities and replacing that with individualism and the survival of the fittest mentality. The response in every country affected by the Corona virus has shown that it is societal values of looking after others, be it in health services, food and medicine supply chains, unprecedented income support initiatives and several other essential services that have saved many countries from a total catastrophe as experienced during the Spanish flu of 1918 that killed more than 50 million people in a world with a population of1.8 billion.

A fundamental premise hopefully would be that the country has a capitalistic development model that recognises the economic and social disparities that exist, and how the gap between those who have perhaps more than what they need and others who don’t have what they need, may be narrowed.

While the inequality between the haves and have nots may never be completely bridged, at least education, health and economic opportunities, along with efforts to empower those at the bottom end of the heap to move towards freedom from poverty and to enjoy a decent quality of life should become the cornerstone of the Sri Lankan ideal.

The Sri Lankan model should recognise the role of the State in economic activity, and not diminish it, but improve on it. A measure for government owned undertakings could be that they do not run at a loss, even if their profitability is limited to a reasonable return on the investment that the State has made on behalf of its people, as after all, the wealth of the country belongs to the people. Hybrids of such models is always possible, and should not be ruled out.

The fall in revenue will be the key challenge that will confront Sri Lanka as it will impact all countries in the world. This in turn will lead to a vicious circle that could result in mass unemployment. In Sri Lanka, the two primary foreign exchange earners, remittances from overseas workers and earnings from tourism will dwindle. With it, the return of hundreds of workers employed in many parts of the world, primarily in the middle east, and hundreds directly and indirectly employed in tourism, will add to the burden of the government arising from such a twin attack on its economy.

What could Sri Lanka do in these circumstances which everyone hopes will be temporary phenomenon? Firstly, it will have to conserve the money it has and do so by stopping most unessential imports. This is something the government has already done. However, from the perspective of life style changes that the country should embrace, some imports should be completely stopped or severely contained.

Burgeoning unemployment and loss of livelihoods

Besides the fall in foreign exchange earnings, the aftermath of COVOID 19 could exacerbate the unemployment and loss of livelihood catastrophe to an unimaginable extent, and unless something is done about this, the resulting social disorder could become unmanageable.

Sri Lanka has historically been an agricultural economy and while the country’s food requirements were met with locally produced crops. Tea, rubber and coconut and other produce like cinnamon, and other spices provided the foreign exchange for the country.

Unfortunately, this foundation had been impacted at different times by policies pursued by political ideologies, vagaries of weather conditions, world market prices and production methods that had not heeded the cost of production. While the writer cannot say for sure, lack of research activity into improving strains of these agricultural products may have contributed to the negative impact on this industry.

Agriculture must become the cornerstone of the Sri Lankan economy, with the concept of value adding becoming an essential component of the industry. Agriculture research that helps maximisation of land and water use and the efficiency and effectiveness of crop yield through new strain development would provide many opportunities to those with entrepreneur skills.

Besides agriculture, a knowledge based economy will have increasing opportunities in all sectors of the economy. COVOID 19 has helped to shift the traditional work patterns in many areas of activity, whether it is health, education and in several service sectors such as banking. Working from home would become a norm rather than the exception in many such sectors, and technology developments that improves the efficiency and effectiveness of such services will provide many economic opportunities.

Transportation is an area of economic activity that should receive priority, to transport people and to transport goods. Sri Lanka is chocking with motor vehicles of all description, and this is one area where growth should be discouraged as among other reasons, it pollutes the air, it clogs the roads as very evident to everyone, and it drains the country’s foreign exchange to import these vehicles and to import petroleum products that are needed to run them.

The area where growth is needed is in public passenger transportation systems, whether it is by bus, boat or train, and a rail network to transport goods.

Underpinning all areas of economic activity hopefully will be the protection of the environment, and limiting factors that impact on climate change. In fact, no new major economic initiative should be engaged in unless it passes a strict environment impact study. Re forestation, and moving towards a higher target of forest cover should become national imperatives. Before a mutant of COVOID 19 arrives and kills more people, climate change and its effects could kill people in direct and indirect ways. 

Environmental protection and containment of climate change also offers substantial economic opportunities. Increase in utilisation of renewable energy sources to meet the energy requirements of the country has a dual advantage as it would safeguard the climate and it would save valuable foreign exchange that is now needed to import oil and gas to meet the country’s energy requirements.

These are some thoughts on economic activities that the country could engage in as priority areas. No doubt there are many more and only a few areas where the focus is the conservation of foreign exchange has been noted. It is more than opportune, in fact imperative, that the State, and the private sector accelerate discussions on how an economic model that is appropriate for Sri Lanka could be formulated. Such a model should have short term targets, particularly on account of the immediate fall out from COVOID 19, and medium to long term targets that are consistent with the direction the country wishes to travel into the future.

Contrary to what Margaret Thatcher said, human beings do live in a society, with other people, and other living beings and in interdependence with each other. A human being cannot survive outside a society, a society where everyone lives with compassion and consideration towards others, and to the extent possible, be satisfied with needs rather than yearning after wants.

COVOID 19 might acknowledge that globalisation and easy travel all round the world that was a consequence of Friedrich Hayek’s neoliberalism, helped the virus to have free ride all over the world infecting more than 2.3 million people and killing more than 160,000 people so far and leaving behind a trail of economic destruction. Of course, at the same time, opening the eyes of many people about the unsustainable trajectory being taken by mankind without realising they were marching towards the cliff of no return.

The full article published in the Daily FT in Sri Lanka is available via http://www.ft.lk/columns/Capitalism-with-a-socialist-heart-for-a-sustainable-future/4-699021