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Role of neoliberalism in UNP economic policies

2018-09-18 00:00:00
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The United National Party (UNP), the oldest political party in the country, recently celebrated its 72nd anniversary. 


It doesn’t matter which political party is, the ability to come and remain in power is completely dependent on the manner in which they manage the economy. Hence, it could be seen that not only the UNP-led governments but also the Sri Lanka Freedom Party-led coalition governments prioritized economics, in order that they can develop the nation and satisfy the voters at the same time. 


However, questions arise when they try to please the voters rather than developing the nation. Even though this is a common factor in Sri Lankan politics, this article is to ascertain how the UNP economic policies that were made of neoliberal ideologies, contributed towards the economic growth and development in the country. 


UNP General Secretary Akila Viraj Kariyawasam addressing a media briefing held in connection with their anniversary stated, “Although we have been unable to come to power since 1994, we are confident that we would be able to form a united UNP government by means of the forthcoming presidential election.”


In my view, politics and economics are just like two sides of the same coin. Accordingly, only those who properly manage the economy can remain in power. In other words, right economic management results in sustainable politics. 


What can be observed in the UNP-drafted economic policies has been that they are highly mixed with neoliberalism and aimed at economic growth more than economic development. Consequently, people’s reactions to those policies also have been different from time to time. It is better to get an idea of neoliberalism, before going into the details of economic policies. 

 


Neoliberalism 
Neoliberalism is an economic ideology that advocates for liberalising the economy but differs from liberalism. This was firstly practiced by Augusto Pinochet in Chile, by Margret Thatcher in Britain and thereafter by Ronald Reagan in the USA. Due to its popularity as an ideology that paves the way for faster economic growth, many countries began adopting neoliberal policies as their economic agenda, having been further motivated by the International Monetary Fund and World Bank.  


Rule of market is a salient feature of neoliberalism. The state must minimize its intervention in the economic activities as much as possible, restricting its role to be the facilitator. Whenever the state gets involved in the economy, it opens a can of worms. Therefore, all it should do is to prepare the ground for the private sector to play well. 


Furthermore, the government should cut its expenditure on welfare, as it is identified as a waste of public finance. Nevertheless, it doesn’t hesitate to promote tax concessions and other subsidies given to the private sector because it will encourage entrepreneurs to produce more.
Privatizing state-owned enterprises is also accepted under neoliberalism. The government ought not to be engaged in businesses, so that efficiency and productivity at public organisations will be positive. Individual responsibility is promoted rather than government responsibility at the end of all these implementations.

 


Policies 
The UNP is a party that introduced policies making lots of changes in the economy, having started following neoliberalism by opening the economy in 1978. What they did through an open economic policy was mainly trade liberalization. Businessmen were allowed to be freely engaged in imports and exports. Consequently, people’s living standard was uplifted.


However, many local industries were challenged to survive, owing to the inability to compete with the imported items. Neoliberalism is against the fact that protectionism policies are implemented to protect the domestic industries. Accordingly, the UNP government let the market decide things in which only a few local businesses could survive, beating the market competition. 


Even though it is true that the UNP has been a pioneer to carry out some welfare measures like the ‘Janasaviya’ and ‘Mahapola’ scholarship schemes and free school uniforms, which in fact make a significant contribution to mitigate social inequality even today, then the UNP government under the leadership of President J.R. Jayewardene took strict actions to oppress trade unions by depriving the July strikers of their employments. This is really what was recommended by neoliberalism, as powerful trade unions distort the labour market by demanding higher salaries that lead to higher labour cost for companies. 


Privatizing public enterprises is the way for eradicating their inefficiency, as pointed out by neoliberalism. The private sector, being the engine of the economy, should be given opportunities to unleash their maximum potential without any limitation. Even under this government, they made several attempts to disconnect public ties with the corporate sector. 


Even if Finance Minister Mangala Samaraweera in his budget speech proposed that Bank of Ceylon and People’s Bank would be listed in the Colombo Stock Exchange (CSE), it has not been put into action thus far. Though low taxes for businesses are promoted under neoliberalism, the current government has not been able to meet that requirement, due to the higher taxes in the economy. 


The fuel price formula recently introduced is also a sign of neoliberalism. The government must minimize its intervention in the economy by letting the private sector play. This is actually what the government wants to do by way of a fuel price formula. However, reduced government intervention will not ensure welfare for the public. 

 


Practice 
The culture in Sri Lanka is somewhat different from that of other countries; it is something that must clearly be understood before implementing westernized policies in the country. The public has been welfare-oriented throughout the history, emphasizing the fact that whenever the government attempts to accelerate the economic growth by cutting welfare expenditure, people change the government. The history says well, how welfare delayed economic growth in the country. 


Even though neoliberalism is an economic ideology that can accelerate the economic growth by facilitating the private sector to produce more, it has been popular only among the business community, not among the public, especially in Sri Lanka. This is the reason for slower economic growth in the country. 


For an instance, irrespective of political party, every manifesto presented by main political parties at election times consists of welfare-oriented promises that will please the public. These are to win elections at any cost. The UNP seems to have tried to avoid this trend and implement radical neoliberal policies for faster economic growth. As long as the ground is the same, changing players will not deliver the expected results. That’s why, even if the government proposed to list some public enterprises at the CSE, it is not yet put into practice, due to the objection by trade unions. 

 


Mismatch 
Neoliberal policies cannot be, in my view, considered policies suitable for countries like ours. Welfare expenditure can be reduced in a situation where people can afford to buy at least basic things. Otherwise, that will create a chaos in the country. Countries like Singapore, Malaysia and South Korea that were behind us have now become developed by their own home-made policies. 


It has to be noted that some neoliberal policies recently implemented have pressurized the public. For example, measures like converting fertilizer subsidy into cash vouchers, converting school uniforms into cash vouchers and introducing a fuel price formula cannot be appreciated in a Sri Lankan context because they hurt the poorest. 


Even though it seems that being more welfare-oriented and ruralised will pave the way for power, it is not sustainable, ultimately leaving a mountain of debt to be settled. What the UNP leaders are expected to do is to have a balance between welfare and economic growth. 
(Amila Muthukutti is an economist)


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