In memory of Professor A.D.V De. S. Indraratna, this is a republication of the article initially published in Mirror Business in 2011under the ‘Sri Lanka’s Prominent Economists’ series
He has a long name – Alutwala Domingo Vithanage de Silva Indraratna – but to his friends, he is just fondly “ADVdeS” or “Indra”, and to others, the revered “Prof” in short or “Professor Indraratna” in full.
Heritage of Mila Niyaaya
I was introduced to this revered university don in late 1960s through his popular textbook on microeconomics in Sinhala titled Mila Niyaaya meaning Price Theory. In fact, there were several textbooks on economics in Sinhala at that time, but his was the first text that had covered the whole subject including more complex areas like the indifference curve analysis, the theory of the firm and factors of production at the university level.
He published this book at a time when the universities had started to teach economics in Sinhala without making available any standard textbook on the subject to students. Hence, Professor Indraratna was the trailblazer in popularising the study of economics in Sinhala medium. Over the years, his text became so popular that students started to personalise Price Theory as “Indraratna’s Mila Niyaaya”.
Guru of gurus
Professor Indraratna was guru to thousands of students in both Sri Lanka and Sierra Leone during his active teaching career that spanned from 1952 to 1982. Of this, except the short stint at the University of Sierra Leone as its Professor of Economics from 1978 to 1982, he spent teaching economics first at the University of Ceylon, Peradeniya and later at the University of Ceylon, Colombo.
His students in turn became gurus to many thousands of students, as teachers at schools, as lecturers at universities and as mentors at work places. He was like the ‘Keynesian multiplier’ that produces many subsequent beneficial outcomes from a single intervention made in a system from outside.
I met this guru of gurus at his humble residence in Colombo.
It was a gloomy day raining outside, but the octogenarian academic and intellectual was in his usual cheerful disposition sporting that serene smile on his face all the time. His wife, Swarna, whom he calls “Ammi”, was at her consultation practice dropping in occasionally to consult him, but without disturbing us, on some important household matters.
Choosing economics was also an economic decision
I was curious and asked as to what prompted him to interest himself in economics? He laughs and says that it was more economic than any in-borne love for the subject.
“I did Sinhala, Pali, Latin and Geography for my Higher School Certificate exam at Dharmasoka, Ambalangoda and did economics for the first time for my intermediate exam at the university,”
“In fact, I did better in geography at that exam than in economics and the university even offered me a scholarship if I chose that subject for my specialisation. But I thought why I should waste four years in specialising in geography when I could specialise in economics in three years and find a job one year earlier.”
Economic man within guides him continuously
So the economic man inside him gave the prompt reply. Not stopping at that, the economic man continued to prompt him. When the university started to offer accountancy as a new field of specialisation within the broader economics field, he immediately changed from money and banking to this rare field because it assured him a better job.
But, why did he choose a university teaching career when the vogue at that time was to join either the civil service or the newly established Central Bank? I ask him. “I loved teaching and specially teaching at the university” he reflects soberly. Did the economic man fail him there? No, because the pleasure of work is the key to subsequent success in life than the big money earned in the initial stages of an unpleasant career. On the contrary, it would make him better off in the long run if one is at a job which he enjoys. So, without much thought, he remained behind the university, while his other colleagues left for more lucrative and powerful jobs outside.
Lecturer in applied economics and accountancy
So, after passing out from the university with second class honours in 1952, he immediately started teaching applied economics and accountancy to undergraduates. He says, “Both these subjects were new subjects introduced to the university curriculum. Regarding accountancy, it was totally a new field because the students did not have facilities to learn it at schools and it had been confined at that time to polytechnics and technical colleges. So, I had to take a big challenge in teaching this subject to students.”
In 1955, he proceeded to the University of Birmingham in the UK to read for an M.Com degree because it was one of the leading universities that offered his chosen field of specialisation, namely, accountancy, at postgraduate level. He completed Birmingham’s Graduates’ Diploma in Commerce as a prerequisite prior to undertaking research for the M.Com degree.
Influence of Alan Walters
There at Birmingham, he met Alan Walters, the young lecturer in statistics just one year senior to him by age, who later became the Professor of Econometrics first at Birmingham and later at the London School of Economics, went to serve Margaret Thatcher as her economic advisor in 1980s and was subsequently knighted.
Professor Indraratna talks of Walters very fondly. “He was a rare academic with an unusual academic brilliance,” he says. “I was indeed fortunate to study economic statistics and transport economics under him.” Walters subsequently proved Indraratna correct. By using his wisdom on econometrics, he proved that the long-run cost curve is flat or even declining for many industries; in a separate study, he said that money should be tackled cautiously and should not be manipulated for political ends.
The first finding has the implication that, apart from the so-called natural monopolies, which require high initial capital expenditure and with falling average costs in each subsequent unit of output, all firms have the potential for becoming monopolies. A notable example from today’s world is Microsoft. The second finding was borne out in 1970s in high inflation in the developed world and in hyperinflation in Latin American countries.
This latter wisdom, imparted by Walters, remains ingrained in Professor Indraratna to date. He has always advocated, following Walters, a cautious approach to using both money and public finances for stimulating economies.
Researching in development economics
What did he do for his research at Birmingham? I ask him. He runs up the stairs to his library on the upper floor and rushes back with a thickly bound dissertation. I read the title: ‘The Economic Development of a Primary Producing Export Economy: Experiences and Possibilities of Ceylon’.
“In this thesis, which I completed in 1957, I have argued that Ceylon’s economic growth primarily depended on its ability to transform the economy into an inclusive development,” he starts to explain.
“First, the subsistence agriculture should be modernised and developed to ensure food security and generate a surplus which can be transferred to modernise industry and services. At this initial stage of development, industry should focus on developing small and medium enterprises side by side with mega industries.
It not only ensures the development of a growing entrepreneurial class, which will later turn out big entrepreneurs, but also helps the country to attain inclusive growth in which all will participate in the development process and share the benefits. This is the key to social stability which is the prime requirement for a country to attain long-term sustainable development.”
Talking of inclusive growth in 1950s
I find Professor Indraratna has spoken of inclusive development nearly four decades before it became a catchword among development economists. But his recommendation of developing subsistence agriculture would have been prompted by Ceylon’s bad experience of having to import much of its food requirements and the disastrous food riots of 1953 which would have been fresh in his memory.
Does he still hold the same view, especially when one finds that foods can be imported cheaply out of the high export earnings from other sectors and when SMEs have the limit of growth if they supply only to the local market and not to the export market?
Why food security?
“Yes”, he says seriously. “Food is the essential part of life and food security is the biggest relief which a nation can have. Like democracy, no one can give a value to food security when you have it. But the moment you lose it, its overall cost on a society is horribly felt with chaos, street riots, mass-scale looting and social destruction. We saw how unstable it was during 1970 to 1977 without enough food and how we were able to wade through the recession in 2007 and 2008 because we didn’t have a serious food problem.
About your concern of SMEs, they can be upgraded to supply to the export market with a little technology transfer and training. This is what Japan and Hong Kong did in their early stage of economic development and what China is doing even today. Many of the Japanese and Hong Kong small firms later became giants in their respective industries.
So, for a nation to develop its entrepreneurial potential, this is the best way. That is called growing within the economy so that the growth does not become alien. Also, it will be profitable for big export companies to rely on small sub-contracted suppliers as a way to cut costs. All that is necessary is to establish quality standards and maintain them properly.”
Concept of an all-inclusive private sector
“Doesn’t it mean that we are promoting a plethora of inefficient small enterprises?” I ask him. He answers the question promptly. “No, what I mean by developing agriculture is getting them to use new techniques and methods of cultivation and raise their yields and shift to greater value addition than having in primary or raw form. It’s an economy consisting of not a few large corporates, but a large number of small but solid enterprises which can withstand better against many an external shock that hits a country.
I don’t dismiss the large corporates off hand. They should also be there side by side. But the backbone of the economy, at least in the initial stages, should be these small and medium size entrepreneurs. I could define this as a “participatory” economy with a wider or an inclusive private sector.”
A follower of Regnar Nurkse?
Professor Indraratna, in an article titled ‘The Development Problem of Underdeveloped Countries’ and published in The Ceylon Economist in 1958 has made an argument in similar lines. Following Regnar Nurkse, who published a path-breaking book titled ‘Problems of Capital Formation in Underdeveloped Countries’, he has said that the best method to build up the capital base of poor countries is to transfer the surplus labour from the agricultural areas and employ them in producing all kinds of capital goods like roads, buildings, reservoirs, irrigation schemes, etc.
Since these people in their current jobs do not produce any worthwhile output, they can be removed without reducing the current level of income. Though this was possible in economies of 1950s and 60s, today it is not possible to transfer them to capital
“Can this be practised today?” I ask him. His response is quick and forceful. “Sri Lanka is no longer an underdeveloped country. It is a low middle-income country. Therefore, Nurkse’s model would not strictly apply to Sri Lanka. That is why I say that the surplus output in the agricultural sector should be transferred instead of surplus labour.
In money economies which we have today, we don’t have to force people to move. We convert the physical surplus output in agriculture into money and use those financial resources to effect a voluntary movement of people to productive enterprises through a better incentive system.”
New role of the government
Does Professor Indraratna dismiss the government altogether? I wonder. “So, you think that there is no role for the government in your model. Don’t you?”
He makes a hearty laugh and raises his hand showing me four straightened fingers. “I firmly believe that the government should be a small government, which is again a relative thing. But the government should play four important roles in an economy,” he emphasises with the four straightened fingers.
I cast an incredulous look at him. How can he have a small government and four roles for the government at the same time? Aren’t they trade-offs meaning that if he wants to satisfy one, he has to sacrifice the other necessarily? I reflect on.
But he is firm and clear in his thoughts.
Government as a provider of public goods
“In my model,” he starts to explain. “The government should be a provider of public goods in the first place. You know that public goods are goods which the private sector has no incentive to produce because the required lumpy investment and high private costs and because it cannot charge a price and deny the availability of the good to the consumer.
So, the private sector, which has to make profits for its existence and survival, will have no incentive to produce them. But, these public goods like parks, roads, basic research and eradication of epidemics and so on are needed and should be provided to society. It’s only the government which can supply them.”
Government as a facilitator
“The second role for the government is to be a facilitator to the private entrepreneurship. The government should maintain law and order and observe the rule of law to create an environment conducive for private people to do business. In addition, the government should introduce enabling rules, laws and so on to reduce hazards for the private individuals to hire people and restructure businesses if it is warranted. It also should exhibit good governance. Without these, the private sector cannot be induced to undertake economic activities with
Government as a moderator
“The third role is to function as a moderator, which is also very important. This is the role the government has to play in reconciling different conflicting interests either between individuals or groups in the private sector or even between the government and the private sector. For instance, traders want to sell their products at the maximum price, while the consumers want to buy them at the lowest price. These are two conflicting interests.
So, when there is a shortage, the traders want to raise the price to such high levels so that many of the buyers will not be able to consume those products. This leads to social and political conflicts and is not good for the health of society. At the other extreme, when there is a glut, the consumers may push down the prices to levels which cannot sustain the producers.
If it happens, the consumers may be benefited now but will have to suffer tomorrow when the producers are removed from the scene and no goods are supplied to the market. I just mentioned only one example, but there are many more. This is like the role of the parents with respect to their children. If children don’t study, parents have to politely pull them up, but if they overdo it, without devoting any time for exercise or hobbies, they have to get children to
Government as a mediator
“Now we are left with only the fourth one. That is functioning as a mediator. This is similar to the previous facilitating role but there is a difference. Being a mediator means handling conflicts among local business enterprises or between local and foreign enterprises. Signing bilateral trade agreements with foreign governments enabling the private sector individuals to do business with foreigners or foreign businessmen to do business with local fellows is a good example. This is also a very important role which a modern government has to play.”
I wonder how Professor Indraratna could reconcile these roles of the government with a small government which he advocates. Obviously, when one assigns the above roles which are very extensive to a government, one cannot have a small government. I am puzzled and I direct my puzzle at him. “With all these extensive functions, how do you propose to establish a small government?”
“In my model, you would remember, I advocated the inclusive private sector development. When SMEs function side by side with big corporates, many individuals get jobs in the large private corporates and small enterprises. Besides, a large number of people now become self-employed looking after themselves.
So, the government will not be required to function as the employer of last resort. It means that the government is not called upon to expand its services for the sake of providing jobs to people and this will put a stop to unwarranted public sector expansion. Therefore, there is no internal pressure for a big government.”
He pauses for some time and his argument is very clear. If the private sector can meet the expanding job requirements, then, the government does not have to burden itself with that responsibility. But can that alone reduce the size of the government? I wonder.
He starts to talk as if he has read my mind. “Since the governments are confined to the four important functions, there is no necessity to have far too many ministers, many ministries, many departments or many bureaus or institutions. Like parents who decide to have a smaller, manageable family, the governments also must decide to control their expansion. This is a must, if governments do not want to become a burden to their citizens.”
“We must learn lessons from countries like Greece, Ireland, Portugal and even Great Britain on the one hand and India and China on the other. There is a limit to governments’ expenditure beyond which they cannot move forward any more, and there is no other choice but to restrict themselves.”
Essential budgetary reforms
“I can tell you what a government should do,” he begins his explanation once again.
“In the first place, the government should cut down its budget deficit. No government can continue to run high budget deficits without running into economic problems. History has provided ample evidence to support it. To finance the budget deficits, the governments have to borrow money or print money. Both will drive an economy to chaos in the long run. When you borrow, you add up to your public debt and you will come to a situation where you have to issue additional debt to pay interest and repay the principal. This is the classic ‘debt trap’ which economists have spoken about.
Then, when you print money, it will cause inflation upsetting every economic variable conceivable, wages, exchange rates, input prices and interest rates are some of the examples. So, there is no choice, the government has to cut down the budget deficit. In Sri Lanka’s case, it should be brought below 5 percent of the GDP within the next few years and the ultimate aim should be to bring it down to a tolerable 3 percent by the end of the medium term.”
“Two other beneficial results coming from this are the reduction in the public debt and shrinking of the size of the government. So, the ‘small’ government objective is automatically realised by maintaining
Monetary policy consultative committee
Then, it occurred to me that he was the Chairman of the Monetary Policy Consultative Committee, the Central Bank’s novel method of getting private sector’s inputs in the conduct of monetary policy. He held this position for four years from 2007 to 2010. What was his experience in chairing the meetings of the committee?
“You were the Chairman of the Central Bank’s Monetary Policy Consultative Committee for four years. What is your experience on the committee?” I ask him.
“Though I was the Chairman, I always allowed the other members to express their ideas freely and I didn’t try to force my views on them. There were discussions, debates and disagreements. But I consider them as healthy signs of good governance and good democratic practice. My contribution to the committee was based on my belief that the government has four roles to play and the government sector should be as small as possible in the long run. I also believe that excessive money supply increases lead to inflation.
So, we tried to moderate developments in the best interest of the country. It was a novel and very interesting experience for me to work with private sector big “wigs”. I consider it as an important break for me because throughout my career as an economist, I hadn’t got an opportunity to practice in the monetary policy area. This gave me the opportunity of debating issues in this area for four long years until the end of 2010.”
Reforms at University of Ceylon, Colombo
I now started to talk about the reforms he carried out at the University of Ceylon, Colombo.
What became the University of Ceylon, Colombo in late 1960s was earlier the Colombo Campus of the University of Ceylon located in Peradeniya. Professor Indraratna was the Head of the Economics Department of the Colombo Arts Faculty for many years. In 1967, it was decided to upgrade the Colombo Campus to a separate university called the University of Ceylon, Colombo. Professor Indraratna was the first Dean of the Faculty of Social Sciences in addition to being the Founder Professor of Economics there.
The new university broke its traditional Faculty of Arts into two, the Faculty of Humanities and Faculty of Social Sciences. Along with this change, the degree programme too was changed. The traditional General Degree was redesignated BA (Minoring) and the traditional Special Degree, BA (Majoring), both completing in three years.
In the fourth year, similar to Honours Degrees, which many other universities offer, a new postgraduate degree called Bachelor of Philosophy or B.Phil was introduced for those who have completed the BA (Majoring) Degree. Along with these changes, a continuous assessment system with annual examinations and an expansion of the curricula were too introduced. In the Economics Department, three new degree programmes called B.Com, Public Finance and Taxation and Quantity Surveying and Valuation were also introduced.
Professor Indraratna was the live wire behind these reforms.
I ask him what made him to go for these reforms.
He says, “I had completed a study tour of several new universities in the United Kingdom while I was on sabbatical leave such as the University of East Anglia, York, Lancaster, Warwick and Essex. All these universities were new universities established in the UK in mid-1960s and were in the process of modernising themselves. I wanted to use the knowledge I gathered from these universities to modernise and update the new curriculum. Besides, there was the necessity for going for a quick change in the university system in order to establish our credentials and reputation.
So, with the help of other heads of department and the staff in the faculty, I went for the change. It worked successfully for the first five years, but after I had left the university, I was told that it lost steam and the new University of Colombo abandoned it.”
Is he angry at it? “No” he says. “Reforms can’t be continued for a long period, unless you have dedicated champions to carry them forward. In most cases, such champions lose interest because the environment which had been beneficial for the reforms earlier too changes. So, you can’t expect the changes to continue in the long run too.”
“Has it affected the modernisation of the university system in the country?” I ask him.
He nods his head. “Yes, it may have slowed down the upgrading,” he says. “We might have lost a valuable opportunity to upgrade the curricula and the relevance of our education in social sciences. The university system has to have a corporate plan and champions to carry such reforms forward.
Stint at University Grants Commission
Wasn’t Professor Indraratna attached to the UGC from 1982 to 1994? Couldn’t he push these reforms from there?
“I was there, true but only as its Director of Planning and Research. During that period, we made important decisions relating to the country’s university system. We decided that we should not open new universities ad hoc, but first work toward the consolidation of the existing universities. So, we stuck our action to that decision and didn’t open new universities. But that too was changed subsequently and a host of new universities were established without, in my view, proper planning.
During my period as the Director of Planning and Research, we introduced corporate planning to universities with five-year corporate plans and annual implementation plans and released UGC’s statistical handbook annually. That helped somewhat to introduce professionalism to universities in Sri Lanka. After I left the UGC, the Planning Division was abolished.”
Professor Indraratna made his views on university reforms known, when he delivered the Fifth J.E. Jayasuriya Memorial Lecture in 1995 under the title ‘Higher Education for Sustainable Development’. While noting that the public universities in Sri Lanka were short of the required funds, he suggested that the universities should try to be entrepreneurial to raise additional resources. The ways he suggested were the linking with the private sector and obtaining funds for industry based research, getting the support of the alumni for the improvement of the facilities, forming consultancy consortia or research companies, hiring university facilities to the private sector and appointing a special officer for fund raising for the university.
His conclusion was that the state alone will not be able to meet the enormous volume of funds needed by universities to improve their conditions and become institutions of worth. Hence, universities in Sri Lanka should establish suitable state university – private sector links in order to augment their resource base.
It is to the credit of Professor Indraratna that the suggestions he made in 1995 have been received well by the present government.
Other professional activities
Professor Indraratna has been the live wire in many professional programmes. He was elected the General President of the Sri Lanka Association for the Advancement of Science in 1998, President of the Sri Lanka Economic Association in 2004 to date and President of the Organisation of Professional Associations in 2010.
“Do you have enough time for all these activities?” I ask him. He nods his head in confirmation. “Whatever I do, I do it with pleasure and total dedication. So, I don’t feel any unhappiness or exhaustion about overwork.” he says.
In addition, he demonstrated his love for academic excellence and the science of economics by setting up with his own money, the A.D.V. de S. Indraratna Foundation for promoting Academic Excellence in Economics.
The services Professor Indraratna rendered to the nation have not gone all together unnoticed. In recognition of his yeoman services to the country’s higher educational sector for more than four decades, he was awarded an Honorary D.Sc Degree by the Sabaragamuwa University and a D.Litt by the University of Colombo. Sarvodaya, a voluntary movement in Sri Lanka, too honoured him by awarding him its highest accolade for distinguished services, ‘the National Award’.
Life philosophy of an academic
What is his life philosophy? I ask him. He becomes very sober and humble at that question. He assumes his broad and glowing smile on his face before answering it. He does not have to use spoken words to give me an answer. That smile tells everything one needs to know. Yet, he breaks the silence speaking very softly.
“I never harboured unachievable ambitions in me and made my life complicated. I was always happy with what I have got. It was a frugal life that I lived in the past, am living at present and will be living in the future. My requirements are very limited. That is my life philosophy.”
His frugal life is visible everywhere in his house. It is neat, clean and comfortable but not luxurious by modern standards. The Martin Wickramasinghe-type arm chair with one broken arm that he uses to sit in when he works on his computer is a testimony to the frugal life this revered academic has been living all this time.
He has also maintained his health well though he is now in his 80s. He wakes up early, does daily exercises, drives his car, plays tennis in the evening and reads and writes profusely.
Why didn’t his children follow his path and end up as economists? I ask him. He has a simple answer. “I allowed my children to choose their future careers. The eldest, Kanishka, followed mother and became a consultant Anaesthiologist and is working at the Sri Jayewardenepura Hospital. The second, Buddhima, followed neither father nor mother and became an engineer and he is Senior Professor in Geo-technical Engineering at one of the Australian universities. The only daughter, Sumangali, followed mother’s footpath halfway and opted to specialise in pharmacology. She is now on the staff of the Pharmacology Department of the Imperial College of Science and Technology, London University. They chose these paths because they did not find at that time great career prospects in economics.” It is a fairly diversified family company which has not put all their eggs in one basket. So, the guru of thousands of children in the country has been the invisible guru of his children as well.
His wife, Swarna, a reputed medical practitioner in the city, was intermittently listening to us amidst her practice, with an enormous sense of content.
With no economists around, does Professor Indraratna feel lonely at home? No, because someone else has joined the family from outside to keep him company. That is his daughter-in-law, Yuthika, who is an economist at the Central Bank.
He has, therefore, at least one person in the family who speaks his language and who understands what he says. What else does this respected and revered octogenarian need
(W.A. Wijewardena can be reached at email@example.com)