Social contours of the COST OF LIVING CRISIS

The cost of living crisis in Sri Lanka is a real one. It is also serious. Otherwise a majority of the people would not be complaining about it on a daily basis. At the same time, this is a problem with no simple solution that the government can come up with, because it is structurally rooted and needs to be addressed through a process of long term economic restructuring. But this is easier said than done.

An increasing proportion of the labour force has moved away from productive activities over the last several decades. As a result, today, a majority of the gainfully employed people are engaged in non-productive service activities. This has happened without a corresponding increase in labour productivity. America produces a large agricultural surplus which is exported but, with only 3% of the labour force employed in agriculture. We do not produce an exportable surplus of food though about a third of the employed are in agriculture. As is well known, we still import a significant part of our food items. Sri Lanka is not an industrial country either. Our industrial exports are still mostly labour intensive products like garments. Industrial employment is still very limited, about 16% of the labour force. A majority of employed people in the country are in the service sectors such as education, private transport, health, security forces, telecommunication, construction, etc. We do not produce an agricultural (food) surplus. We produce few industrial commodities besides readymade garments. Almost all industrial goods are imported. Everybody has one or more mobile phones in hand but none is produced here. All the TV sets, and other household gadgets are imported. Almost all the vehicles on the roads are imported from East Asia, India and Europe. Most of the medicines are imported from outside, including life saving drugs. School leavers generally move into unproductive activities like driving three-wheelers, pavement hawking, construction work, controlling traffic and sweeping roads. Graduates want government jobs which are also mostly unproductive. Most of the large companies are also in such areas as buying and selling, retail trade, banking and finance, tourism, and telecommunication and do not directly contribute to commodity production.

Most of the non-agricultural goods consumed in the country are imported. Their prices go up due to increasing import duties, the depreciation of the rupee, etc. The price of local goods also goes up due to rising wages, transport costs, increasing price of intermediate goods such as agricultural inputs, transport equipments and energy. People who provide various services such as doctors, engineers, lawyers and shop keepers also increase their fees contributing to the already increasing cost of living. As is well known, most parents send their children to tuition classes and the cost involved is substantial. The same is true for health care.

Faced with the unbearable cost of living, more and more people want to work outside Sri Lanka. Nearly two million Sri Lankans, over 20% of the labour force, are employed abroad. Over 750 billion rupees sent to the country by immigrant workers add to the money supply, with no corresponding addition to local production. The result is higher prices for goods and services.  



Sri Lanka has no choice other than the diversification of the economy. But labour intensive industries may not be feasible due to the already low unemployment rate and higher wages. The education system needs to be revamped so that children will be leaving schools with skills, not just glorious examination results. University graduates need be retrained to equip them with skills that are necessary to increase productivity in various sectors. School children should be encouraged to acquire scientific literacy and life skills and move away from the present obsession with superstition and religious rituals. R-D investments should be increased rapidly so that scientists in all areas will have resources to develop new products and processes. We also need to look at the larger picture more critically and find out where we are as a country in an increasingly competitive world. How did countries with more diversified economies in Asia and elsewhere get there? What have they done to achieve what they have achieved? We need to be more modest and more honest and learn from the others, not only in the area of economic management but also in managing other public issues in a rational and reasonable manner. We may have to return to national planning, at least to figure out where we are and where we want to go.