Lankan economy will stay flat for now

The Mafia-State must be rooted prior to economic consolidation


by Kumar David

For both domestic and international reasons the economic prospects for Lanka remain flat for the short and medium term periods ahead; short-term is the 100-Day duration of President Sirisena’s Action Plan and I use medium-term to denote the two-year transitional national government envisaged for the subsequent phase. It needs no great political acumen to make these two forecasts, the first is self-evident but some light may be shed by probing why this will be the case in the medium-term.

De facto, the January 8 Presidential Election was a Single-Issue contest between the incumbent and a Common Candidate challenger; no significant economic or social changes can be implemented in the few months before the dissolution of parliament earmarked for 23 April. The immediate task was the defeat the incumbent and now the obvious post-Rajapaksa imperative is to emasculate the Executive Presidency, put a new a constitutional system in place and revamp the electoral system – how many first-past-the-post, how many proportional etc. In general, success will depend on the degree of mass mobilisation achieved in the next few weeks to take crooks, power abusers and drug lords to the cleaners. The blackguards who ruled the roost for the last nine years have created a Mafia-State and nothing akin to normality can re-emerge until the slow and difficult task of cleansing this root and branch is done. Pity capital punishment for mega-corruption is no longer in vogue!

The mopping up and locking up of brigands will of course have salutary long-term benefits but it is not going to turn the economy round, pronto, or in the medium-term. The benefits of good governance filter into the economy only gradually and the repair work of mending the damage that has been done is a challenging intermediate task. The unpredictable outcome of the pending general election will be a severe a complicating factor. For example, will Ranil or an SLFP leader be the next Prime Minister?

The Mafia-State

The concept of the mafia-State was developed to denote a phenomenon creeping across ex-Soviet Bloc Eastern Europe (especially Bulgaria, Kosovo and others), Africa (Guinea-Bissau and Zimbabwe), Asia (Burma and Seychelles) and Latin America. Moises Naim, a scholar at the Carnegie Endowment in the US, describes the Mafia-State as follows.

"In recent years, a new threat has emerged: the Mafia-State. Across the globe, criminals have penetrated governments to an unprecedented degree. The reverse has also happened; rather than stamping out criminal gangs, some governments have instead taken over their illegal operations. In Mafia-States, government officials enrich themselves and their families and friends while exploiting the money, muscle, political influence, and global connections of criminal syndicates to cement and expand their own power. This fusing of governments and criminal groups is distinct from the more limited ways in which the two have collaborated in the past. In a Mafia-State, high government officials actually become integral players in, if not the leaders of, criminal enterprises, and the defence and promotion of those enterprises’ businesses become official priorities. Mafia-States integrate the speed and flexibility of transnational criminal networks with the legal protections and diplomatic privileges enjoyed only by states".

The state that evolved in the Rajapaksa period fits this description well as evidence now coming to light confirms. A chaotic situation in which, post election, government and law enforcement agencies are struggling to gain control is evident. Crooks and crookedness has become ubiquitous and it is tough to get on top of the situation. Up to this time of writing although the newspapers are filled with horror stories of container loads of loot and arms, fleets of hidden and lost vehicles, millions stashed away and the like, not a single arrest has been made. The offices of the bribery commission and the CID are flooded with names and details of robbery by the ‘family’, political hangers-on and big-time corporate rogues. Some government offices have been sealed but no arrests have been made; some siblings and family have been allowed to abscond; millions of dollars are moved around each day. The Sirisena-Ranil government seems to be paralysed but should be given another month to complete inquiries, make arrests and file action.

This is because we are not up against a few dozen criminals but confronted by institutionalised and semi-institutionalised criminals who claw their way back into the replacement structures. For example Duminda’s tentacles reach into the UNP via the financing he offers some of its politicos. Newly appointed Ministry Secretaries are Janus faced and an open door for old power-brokers to return. Crooks are fighting their way back.

The JVP, TNA, and to the best of my knowledge the JHU, are the only political parties that are not compromised and can confront the still powerful Mafia that infests and infects the state. But even their efforts will not achieve much without heightened public vigilance, mobilisation and involvement. Sri Lanka is far from out of the woods; January 8 is a small clearing that the nation fought its way into; completely rooting out the Mafia-State is still a long journey into the future.

The general election

One reason why the SLFP jettisoned Mahinda Rajapaksa in haste was to present a united SLFP to the voters at the elections. If there are two SLFPs (CBK-Sirisena and a Mahinda-rump) both will be crushed by the UNP and lose seats to the JVP. Now that the SLFP is reunified it is too early to say how the electoral calculus will pan out, but there is reason to believe that it will win a number of seats. Rajapaksa won two Provinces (Southern and Sabaragamuwa) and five Districts (Kurunegala, Uva, Kalutara, Matale and Anuradhapura) and a majority of the Sinhala electorates. Though defeat at the January 8 elections will have a debilitating effect on its prospects and continuing exposure of corruption will deliver crushing propaganda blows, it is not possible to say how the SLFP will perform relative to the UNP in the forthcoming general elections.

This is a pity. Though I am not a UNP supporter I do believe that unless the SLFP is banished to the wilderness for a spell it will be an obstacle to cleansing society of the Mafia-State. Flushing out scoundrels throughout the country and state and corporate sectors - not just Paksa family and cabal - and the denial of opportunities for graft for a long period is an essential catharsis in rooting out the state mafia. This is not merely a call for personal vengeance against the vermin who crawled around the previous regime; what I have in mind is the imperative of cleansing structures themselves. If the SLFP creeps back, if not into power even as a major player in a future national government, it will be as if the robber barons took a vacation and returned to thievery with renewed vigour.

Therefore it is imperative to minimise the number of SLFP MPs in the next parliament and to replace them with JVP, TNA, JHU and UNP members. It would also be useful to eliminate garbage, that is to exclude Tissa Vitarana, DEW Gunasekara and Vasudeva. Likewise the Frontline Socialists, Siritunga’s party and the Linus Jayatilleke led NSSP rump should decamp to the Planet Mars where they may find a more productive role to play than on this planet.

A directionless economy

This introduction is necessary background for meaningful comments about prospects for the economy. Apart from my stress on the Mafia-Sate which will subvert political will and policy, it seems that a ‘hungish’ if not actually hung parliament is impending. This does not bode well for the economy. There will be no clarity, firmness or political will to pursue a well defined economic strategy whether populist or capitalist-market oriented. Readers who are inclined to a favour pro-capitalist or neo-liberal outlook will appreciate the point if I put it like this: What if Ranil fails to get parliamentary support after the election to secure the Prime Ministership? What if Nimal Siripala is the next PM? I am not asking which is more likely, that’s a separate matter, I am drawing attention to uncertainty and its implications. Were the SLFP to form the next government I will predict with certainty that despite having thrown out the leading family of thieves and brigands the dismantling of the Mafia-State will be blocked.

The pro-capitalist market driven approach that a Ranil led UNP government will pursue can be summed up in a few key-words. It is not necessary to spell them out because the discourse is well known. The key components are: (i) An investment climate attractive to local and foreign capital, (ii) legislating structural reforms, particularly curbs on working class activism, welfare concessions, supporting the share market, banking policy to support both big capital and small and medium enterprises, and of course wholesale regulatory reform. I cannot see any of this pro-capitalist strategy having a ghost of a chance if Ranil and the UNP, in coalition with the TNA, SLMC, CWC and the JHU, fail to win a parliamentary majority. This is leaving to one side fundamental concern of breaking up the Mafia-State to which I devoted the first part of this piece.

A mixed international scene

China will be pleased to see the last of the Rajapaksas and the end of projects inflated to two and three times real cost; ladling out graft on this scale is an embarrassment for any foreign government. Economic relations with India and the West will improve. The diaspora will create a better international environment and will bring in a certain amount of investment. In all these respects the economic environment will improve but cleaning the mafia out of the state is a precondition.

The downside is that prospects for the global economy and global capitalism in general are not good. Except the US the remainder of the world economy is forecast to suffer a lousy year. The IMF and Christine Lagarde are pessimistic about prospects for the EU in particular and the rest of the world as well. China’s decision to consolidate rather than grow wildly is good news for the Chinese people but it will have depressing consequences for the world economy. The collapse in oil prices is a forerunner of a downturn in Russia, Brazil and Mexico and will result in sharp lowering of global demand. This year (2015) is not going to be a happy one for an export oriented growth strategy for Lanka which is just what we should be aiming at. Year 2015 can be one of political consolidation and cleansing and if we sort out these rudimentary tasks there is hope for the economy after that.

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