An economic crisis and an election; a growing dichotomy between economic imperatives and politico-electoral compulsions. The current Sri Lankan condition is symptomatic of the intensifying contradiction between the dominant economic belief system and the dominant political belief system, between neo-liberal economics and democratic politics - a globalised contradiction which will be a determinant factor in the trajectory of the 21st Century.

The Sri Lankan economy is in an extremely severe crisis caused by structural factors (internal and external) and government misdirection and mismanagement. The proposed economic remedies can be summed up in one single phrase: "belt tightening" i.e. — more of what is contained in the Agreement with the IMF — depressing mass demand/consumption to curb inflation; less subsidies and other cost cutting measures (including paring down free health and education) to control budget deficit; and tough labour laws/less regulations of any sort to attract investment.

But this is the election season. The demands of the majority of the electorate (irrespective of party affiliations) will be completely at variance with the economic remedies proposed by macro entrepreneurs, economic managers and professionals, local and foreign. The masses would demand some immediate economic relief — lower prices for essentials, some improvement in consumption and income levels, no reduction of subsidies and more (not less) economic security. Since in a closely fought election no politician can afford to ignore these demands totally, the manifestos of the PA and the UNP will contain proposals to provide some immediate economic relief to the masses.

Such economic irresponsibility would prompt the advocates of "belt tightening" to shudder with horror, albeit needlessly because those promises would be forgotten once the election is over. This is in the main because both the PA and the UNP leaders are adherents of what Thomas Friedman call the "golden straitjacket" — the neo-liberal policy regimen of balanced budgets, less subsidies/regulations etc. This "narrows the political and economic choices of those in power to relatively tight parameters thereby effacing the difference between ruling and opposition parties." (The Lexus and the Olive Tree).

This generalized acceptance of an economic dogma which entails the placing of a disproportionate share of economic costs on those least able to bear them, forces democratically elected politicians to act in direct contravention of the interests and demands of the majority of the electorate. Therein lies a contradiction which constitutes a defining characteristic of post-socialist capitalism (in both the centre and the periphery) — the contradiction between the fundamentals of neo-liberal economics and the imperatives of multi-party, electoral democracy.

Democratic political parties handle the resulting dilemma either by refusing to make concessions to popular economic demands even during elections; or making such promises which are violated when elections are over. Thus neo liberal economics can retain its pre-eminence (particularly in the countries of the periphery) only by debasing and nullifying the very basis of political democracy; the dominant economic commonsense can remain dominant only by making a mockery of political democracy.

Laissez Faire economics, minoritarian democracy

This tension was present in pre-socialist capitalism. The political corollary of laissez faire economics was not manhood suffrage. Historically laissez faire economics went hand in hand with minoritarian democracy based on property based franchise. After all, the Constituent Assembly of Revolutionary France in its law of December 22, 1789 restricted voting rights to property owners; and the revolutionary constitution of 1791 (while establishing a free market in labour and forbidding the formation of trade unions) denied around 3 million Frenchmen with no property (passive citizens) the right to vote. Manhood franchise was demanded only by the radical left and was approved only after the insurrection of 1792. In fact it was the popular classes and the left/socialist and labour movements all over Europe which demanded manhood suffrage (the Chartist Movement is a case in point). And it was achieved through a protracted struggle (including revolutions, riots and insurrections).

Universally representative democracy was thus not axiomatic with capitalism, still less with the laissez faire version of it. This seeming anomaly was based on sound "economic logic." The poorer classes constituted the majority of the populace while their needs, interests and consequently demands were by definition at variance with the fundamentals of laissez faire economics. Thus property based franchise was necessary to prevent democratic politics from undermining laissez faire economics. Demands of property-less classes such as a shorter working day, better wages and working conditions were anathema to laissez faire economics on the (still familiar) ground that any kind of intervention by the state/society would destroy a country’s competitive advantage in the global market; the problem was not the absence of regulations but the incomplete application of laissez faire economics and the only way to improve the living conditions of the masses was to remove all regulations.

Consequently in 18th Century England several laws which helped maintain the living standards of the labouring classes were annulled and a minimum wage bill was defeated in parliament under the influence of laissez faire economics; even philanthropists hesitated to help ameliorate the sufferings of the masses because of this "intervention would make things worse" belief fostered by laissez faire economics.

With the advent of post-socialist (neo-liberal) capitalism this old (pre-socialist) contradiction between laissez faire economics and democratic politics has resurfaced, turning universally representative democracy from asset to liability. Since a reversion to property based franchise is impossible, the relatively greater electoral power of the popular classes is being negated by the creation of a "new economic consensus" (Friedman’s "Golden Straitjacket"). This is really the "old economic consensus" of pre-socialist capitalism, abandoned because it became politically unaffordable during capitalism’s epic struggle with socialism. With economic neo-liberalism depicted as the only economic truth, the Washington Consensus has become the new economic commandments, which a government contravenes at its peril. The voters thus have little or no choice in matters economic - except that of "better" or "less better" management.

"The straitjacket policies are supported by most voters, it seems, but not with much enthusiasm. There is a recurring sense of bowing down to forces more powerful than liberal democracy — the markets, the multinationals, the WTO and the IMF. That disenchantment is in itself a kind of democratic failure." (The Economist - 29.9.2001). This failure is discernible in many parts of not only the Third World but also the First World — manifested in low voter turn out and less interest in politics (the voter turnout in the recent UK elections was lowest in 80 years). This is because an increasing segment of the electorate feels that multi-party democracy and periodic elections are extrinsic to their lives (as opposed to the earlier belief of these being vehicles for advancement) resulting in a gradual loss of confidence in "really existing democracy."

Really existing democracy

In Sri Lanka this "democratic failure" was one of the main reasons for the political instability of the last few months. And as the economic crisis grows, the pressure on the two major parties to comply with the dominant "economic commonsense" would intensify — despite the fact that it can only widen the gap between the political/economic rulers and the ruled. The only way out is the kind of creative synthesizing in economic thinking which Ranasinghe Premadasa engaged in and successfully implemented. Because as the President of the World Bank James Wolfenshon said: "Central to conflict prevention and peace building must be strategies for promoting social cohesion and inclusion, ensuring that all have opportunities for gainful employment, that societies avoid wide income inequalities that can threaten social stability and that poor people have access to education, health care, basic services such as clean water sanitation and power." (International Herald Tribune — 6-7.10.2001).

Premadasa’s successful synthesising of a number of concepts and considerations regarded as mutually contradictory/exclusive by orthodox economics of all varieties is specially necessary today because the deflationary nature of the impending global recession is causing a crisis in the neo-liberal model of export led growth. However the blame for the absence of such an approach to development cannot be placed entirely on Chandrika Bandaranaike Kumaratunga and Ranil Wickremesinghe because it has no place within the existing neo-liberal dogma (any more than it would have had under the previous statist dogma).

According to the Economist the IMF should seriously avoid letting itself be seen as running the country, giving the government instructions and telling workers and voters to get lost (29.9.2001).

But I am sure Mr. Nadeem Ul Haq would respond that if order is not kept, Third World countries like ours would give into politico-electoral compulsions and abandon the "belt tightening" policies - and that would never do. The PA and the UNP can make promises; but a disenchanted electorate know that these lack credibility. Consequently neither party will be able to tilt the electoral balance in its favour by advocating a different (and less oppressive) brand of economics. In such a context they will see only two ways of gaining the upper hand — through propaganda gimmicks and unfree/unfair practices, making violence unavoidable, inevitable.

And if the economic dimension of the much needed consensus between the PA and the UNP is located within the parameters of the "golden straitjacket," it will be more damaging than helpful — because it will be exclusionary in economic terms and would be used to impose unpopular economic remedies on an unwilling electorate. Consequently even if such a consensus help achieve political stability in the short term it will result in systemic instability in the medium term. This will be particularly so if it banishes the JVP to the margins of polity, once again to occupy the role of permanent agitator/opponent; and also to become the main beneficiary of the attempts by the policy makers to stabilize the economy by further depressing the consumptions levels of the masses by reducing their real and monetary income (through a combination of higher indirect taxes, lower wages and less welfare and reduced employment security). Such an opening of a "second front" in the South will help only the LTTE and its Eelam project.

Thus in Sri Lanka the growing contradiction between neo-liberal economics and democratic politics would ensure not only a violent election but also a protracted and increasingly intractable crisis, the consequences of which may include a Third Insurgency in the South and a separate state in the North and East.